United Drug profits down 5% in tough market

TOUGH trading conditions resulted in a 5% fall in pre tax profits in the year to end September 2009 for healthcare services group United Drug.

Pre-tax profits came in at €39.1 million on sales of €1.72 billion, up 2% over the trading year.

The company pushed through restructuring in the group at a cost of €13.9m last year.

It said the move will generate annual savings of up to €10m per annum going forward.

It also saw the loss of 100 jobs in the Irish operations.

The group’s performance was affected across the island of Ireland as the authorities curbed hospital spending and insisted on lower margins on prescription drugs.

Results were in line with expectations. And brokers are expecting a modest pick up in earnings per share (EPS) of around 1% for the current year. EPS in the year was 23.4c, close to what the markets had been anticipating.

The company said two sectors, contract sales and marketing services and packaging and speciality services, delivered good performances offsetting a weaker outturn in the healthcare supply chain business, which has been affected by government spending cuts.

A full year contribution from the recently acquired US packaging business, Sharp, played a positive role in the results, the group said.

Chief executive Liam Fitzgerald described the year just ended as challenging in many ways.

Diversification has proved crucial to the group, providing it with a “big safety net”.

Without those strategic moves into US and Europe, the group would be left “facing a very different set of numbers”, he said.

Shares in the group rose modestly in early trading yesterday as the group was “positive about the growth opportunities” in the business going forward.

Fitzgerald told the Irish Examiner he has ambitions to deliver 70% of group earnings outside of Ireland within the next five years.

On his future plans for the US, Fitzgerald said: “Like Kerry and CRH, we would have similar ambitions for our group in the US.”

That implies a serious ambition to grow the US business, which has gone from 0% to 8% of profits in just three years, he said.

Currently, Ireland and Britain account for 40% of earnings each, with the US and Europe accounting for the remainder.

Future plans for Ireland are on hold, however, due to the tough trading conditions likely to prevail here for the next few years, he said.

The group has proposed an 8c per share dividend, keeping the pay out on a par with 2008, in line with group policy.