UDG Healthcare looks to US for further buys

UDG Healthcare is actively looking at further bolt-on acquisition prospects to boost its contract sales outsourcing business in the US.

The Dublin-headquartered diversified healthcare services group yesterday reported a strong start to its current financial year, via a robust first quarter trading update.

Although performance in the three months to the end of December was boosted by a weak comparison for the same period last year, trading was strong in the group’s two main divisions — the Ashfield Commercial & Medical Services contract sales outsourcing unit and the Sharp Packaging Services contract packaging business.

These two arms have nearly totally shifted UDG’s (formerly United Drug) profit and revenue focus away from its drug wholesale and distribution roots in Ireland in recent years.

UDG’s Irish distribution business only contributes around 15% to annual revenues, with 70% of group profits being generated in the US and Britain.

UDG said Ashfield saw strong trading in the first quarter, with operating profit “well ahead” of the same period last year.

Sharp also had a strong start to the year, with profits “significantly ahead” on a year-on-year basis. However, while Sharp’s strong end to last year in the US has continued into the current financial year, the division still faces challenges in the European market, according to management.

UDG said it expects its adjusted diluted earnings per share for its current financial year (up to the end of next ) to show growth of between 5% and 8%, adding that if current exchange rates are sustained for the year, reported earnings per share will be higher than this range.

Profits will also be buoyed by dollar and sterling exchange rates remaining strong. The group will also take a once-off exceptional charge, this year, relating to the restructuring of its healthcare communications business.

Management said it is well-positioned to support its future growth, both organically and through acquisition. Expanding on that theme, chief financial officer Alan Ralph said UDG is not afraid of making big acquisitions and would have room to spend around €100m, per annum, on purchases.

However, he said the group’s main model is to add one or two bolt-on buys to its portfolio — at a price of €20m-€40m each — per year. He added that while no new takeover is imminent, the company is looking at a good pipeline of potential targets.

Any move is also likely to be weighted towards the US market and strengthening the Ashfield business. Growth at Sharp is set to be organic.