Shaun Chilton, Clinigen’s (CLIN) chief executive, admitted that “there is a fine line between ambition and madness” after revealing two acquisitions and an £80m placing on the day of the group’s annual results.
On first glance, it does appear Mr Chilton may have drifted into the realms of lunacy. At $150m (£115m), CSM (the larger of the two purchases) has been valued at 21 times last year’s adjusted cash profits (Ebitda) – well ahead of the going rate for pharma outsourcing companies. It will also lift Clinigen’s net debt to 2.4 times Ebitda (even after the £80m cash injection) and comes less than a year after the group bought Quantum Pharma in a £150m cash and shares deal.
But ambition may be what’s needed to capitalise on the trend of higher outsourcing in the pharma sector. Mr Chilton thinks pharma packaging and labelling – two of CSM’s specialties – is a $1bn opportunity that will boost revenues in all three of Clinigen’s divisions. The target’s Ebitda is expected to rise 25 per cent in 2018 – ahead of the 17 per cent achieved by Clinigen in the year to June 2018 – while the combined group’s strong cash generation should reduce net debt rapidly.
| CLINIGEN (CLIN) | ||||
| ORD PRICE: | 854p | MARKET VALUE: | £960m | |
| TOUCH: | 846-854p | 12-MONTH HIGH: | 1,187p | LOW: 822p |
| DIVIDEND YIELD: | 0.7% | PE RATIO: | 37 | |
| NET ASSET VALUE: | 285p* | NET DEBT | 39% | |
| Year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2014 | 127 | 21.3 | 19.6 | 3.1 |
| 2015 | 184 | 8.3 | 6.5 | 3.4 |
| 2016 | 340 | 15.9 | 11.9 | 4.0 |
| 2017 | 302 | 14.1 | 3.3 | 5.0 |
| 2018 | 381 | 35.9 | 22.9 | 5.6 |
| % change | +26 | +155 | +594 | +12 |
| Ex-div: | 8 Nov | |||
| Payment: | 30 Nov | |||
| *Includes intangible assets of £498m, or 406p a share | ||||
