“OUR GOAL IS TO CONTINUE TO INCREASE THE PACE OF INTERNATIONALISATION OF THE GROUP AND, AS PUBLICLY STATED, DOUBLE THE SIZE OF THE GROUP’S EARNINGS BY 2016. ”

Chief Executive’s Review

2012 has been a highly significant year for United Drug in terms of strategic development and earnings momentum. The Group completed five acquisitions during the summer period, each adding strongly to our strategic position in our chosen service-markets. Equally the Group saw robust performance across each of it’s divisions, with a stand-out performance from Sharp, our US based packaging business, and a notable return to strong growth within our medical and scientific businesses.

Operating Profit

€84.4m

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+10%

2011: €76.8m

Revenue

€1,830.2m

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+5%

2011: €1,746.5m


This momentum led to group earnings increasing by 11% over the previous year. We were also particularly pleased by the cash performance across the Group which led to greater than 92% of earnings before interest and tax being converted to cash. A large part of this excellent performance was driven by good working capital management in our wholesale distribution business in Ireland where we both reduced stocks and improved our receivables position.

 

Today, United Drug is a global leader in healthcare packaging solutions, a global leader in healthcare sales & marketing solutions, and a very strong regional player in healthcare supply chain solutions in the UK and Ireland.

 

Our goal is to continue to increase the pace of internationalisation of the Group and, as publicly stated, to double the size of the Group’s earnings by 2016. We took some significant steps along this road during 2012. We also have a goal to enter relevant services in the clinical trials phase of a drug’s development as well as in the commercialisation phase, where we currently concentrate. Again, 2012 saw us progress this goal through the acquisition of Bilcare (clinical trials formulation and packaging services) and Drug Safety Alliance (DSA), both of which offer services around drugs in the pre-approval phase.

 

We believe that our track record as regards quality procedures and the legislation that surrounds these procedures is of critical importance. Our track record has been strong in this regard. We subject ourselves to rigorous internal audit testing and are regularly audited by both our clients and the relevant regulatory authorities in each country of operation. We are committed to being ‘best in class’ in this area and have an ongoing investment programme to ensure that we put safety first, and demonstrate the strongest possible commitment to our clients to help us secure their trust and their business. Our understanding of and specialisation in healthcare, and the complex and rigorous standards that surround it, is, I believe, a basis of competitive advantage.

 

We have also led the way in terms of product serialisation and track & trace technologies in our supply chain and packaging businesses. Again, our goal is to be a world leader in investment by ensuring the supply chain is secure and that product provenance is maintained at all levels, to ensure patient safety. We believe commitments to the highest possible level of supply chain integrity will resonate with our clients and lead to further business opportunities.

 

There is strong business development momentum across the Group at this time. We have had significant recent contract wins in Sharp, our European Packaging business, and our pharma logistics joint venture with Alliance Boots, UDG. We have also recently been selected as a successful supplier in connection with a national tender in Ireland to treat patients requiring regular anti-biotic infusions in the community as opposed to the traditional hospital environment. This is a significant move by the Irish Health Service Executive (HSE), to allow patients to be safely treated in a way that is better for them, the patient, and in a way that is less demanding for a stretched hospital sector. We are hopeful that the HSE might seek to have other diseases requiring regular infusions or injections such as cancer, rheumatoid arthritis and multiple sclerosis, managed in a similar way in the community, with private sector engagement.

 

The key driver behind United Drug’s revenue growth lies in decisions by the healthcare industry to outsource, with increasing pace, areas of high fixed cost, non-core activity. Our goal is to offer large traditional drug and medical device companies, a more flexible and efficient way of doing things. Furthermore, we seek to offer smaller innovative companies the opportunity to enter markets with a full range of end–to-end market entry, commercialisation, and regulatory services without having to invest in costly and unnecessary infrastructure on a market-by-market basis. We believe United Drug can offer a footprint of end-to-end services in many markets that none of our competitors can match.

 

We further believe, in time, that the breadth and range of services we can lever for a company could ultimately lead to opportunities to take on a product or range of products as agents or sub-licensees across various jurisdictions where we offer a full portfolio of services, giving us enhanced margin opportunities and significant and differentiated business development opportunities.

 

It was pleasing that our healthcare supply chain division delivered earnings growth this year despite considerable regulatory headwinds both in Ireland and the United Kingdom. Within this division, our Northern Ireland wholesaling business, both contract pharma logistics (or pre-wholesaling) businesses, and our medical and scientific business, all delivered strong earnings growth. Despite the low margins and austerity risk associated with our traditional wholesaling and distribution businesses, they continue to deliver exceptional cash performance and, in some areas, are showing strong earnings growth. We remain committed to these businesses and are investing nearly €20 million in our Northern Ireland and Republic of Ireland facilities in pursuit of optimum efficiency.

 

I would like to thank all of my colleagues for the excellent job they have done this year and for their continued hard work. Between the five acquisitions we have completed this year, the subsequent integration work, and significant automation and IT projects across the Group, people have worked really hard to get results and I want to take this opportunity to really thank them for their efforts.

 

During 2013, we will be focussing on delivering value through the integration of recently acquired businesses, completing ambitious automation and IT projects and continuing to deliver earnings momentum through ongoing and targeted business development initiatives.

 

I believe United Drug has built a strong platform to continue to grow as a leading international healthcare services group, headquartered in Ireland, focused on professional, strategic, outsourced partnership with the healthcare industry.

Liam FitzGerald
Chief Executive