UDG Healthcare plc FY18 Interim Results Presentation London Stock - - PowerPoint PPT Presentation

UDG Healthcare plc

FY18 Interim Results Presentation

London Stock Exchange, 22nd May 2018

2 : UDG Healthcare plc

Forward Looking Statements

This Presentation has been prepared by UDG Healthcare plc and contains certain forward-looking statements, beliefs or

• pinions, including statements with respect to the Group's business, financial condition and results of operations.

They represent expectations for the Group’s business, including statements that relate to the Group’s future prospects, developments and strategies, and involve risks and uncertainties both general and specific. The Group has based these forward-looking statements on assumptions regarding present and future strategies of the Group and the environment in which it will operate in the future. However, because they involve known and unknown risks, uncertainties and other factors including but not limited to general economic, political, financial and business factors, which in some cases are beyond the Group’s control, actual results, performance, operations or achievements expressed or implied by such forward looking statements may differ materially from those expressed or implied by such forward-looking statements and accordingly you should not rely on these forward looking statements in making investment decisions. Except as required by applicable law or regulation, neither the Group nor any

• ther party intends to update or revise these forward

looking statements after the date these statements are published, whether as a result of new information, future events or otherwise.

3 : UDG Healthcare plc

Agenda

H1 2018 Overview Brendan McAtamney, Chief Executive Officer H1 2018 Financial Review Alan Ralph, Outgoing Chief Financial Officer Divisional Update Brendan McAtamney, Chief Executive Officer Outlook & Summary Brendan McAtamney, Chief Executive Officer Q&A

H1 2018 Overview

Brendan McAtamney

5 : UDG Healthcare plc

UDG Healthcare Overview

UDG Healthcare is a leading international partner of choice delivering advisory, communication, commercial, clinical and packaging services to the healthcare industry.

9,000

EMPLOYEES

TOP 30

PHARMA COMPANIES AS CLIENTS

30 YEAR+

DIVIDEND GROWTH

FTSE 250

LISTED

24

COUNTRIES 3 OPERATING DIVISIONS

6 : UDG Healthcare plc

H1 2018 Financial Highlights

+24% +17% +15% 11.8% +19% +19%

EPS NET REVENUE OPERATING PROFIT NET OPERATING MARGIN PROFIT BEFORE TAX DIVIDEND

+21% on a constant currency basis +11% on a constant currency basis Ashfield +25% Sharp -2% Declined marginally from 12.0% +16% on a constant currency basis Continued dividend growth

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H1 2018 Operational Updates

Nigel Clerkin Appointed as CFO of UDG on 1st May 2018 Doug Burcin Appointed as President

• f Ashfield Healthcare

Communications in February 2018 Rob Wood Appointed as Global President of Ashfield Advisory Services & Business Development in April 2018

INV NVESTMENTS TS

Reinvestment to support sustainable growth including: Future Fit (HR, Finance, IT) due to complete by December 2018 Sharp facility investments across the Commercial and Clinical businesses

LEA LEADERSH SHIP TRAN TRANSITI TIONS

H1 2018 Financial Review

Alan Ralph

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H1 2018 Financial Summary

H1 2017 H1 2018 Increase Con Constant t FX Incr ncrease Net Revenue

$488.0m $568.7m ↑17% ↑11%

Operating profit*

$58.8m $67.4m ↑15% ↑11%

PBT*

$52.9m $63.2m ↑19% ↑16%

EPS (C)*

16.23 20.19 ↑24% ↑21%

DPS (C)

3.58 4.25 ↑19% ↑19%

ROCE%

12.8%^ 12.9% N/A N/A

Net cash / (debt) to EBITDA

(0.32x)^ (0.28x) N/A N/A

The average H1 2018 exchange rates were $1:€0.8310 and $1:£0.7357 (H1 2017 $1:€0.9330 and $1:£0.8066) * Before amortisation of acquired intangible assets, transaction costs and exceptional items ^ At 30th September 2017

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36.4 19.2 3.2 45.6 18.9 2.9

10 20 30 40 50 Ashfield Sharp Aquilant

+25% ↗

• 2% ↘
• 11% ↘

H1 2018 Divisional Operating Profit

^ Throughout this presentation, references to underlying growth are financial metrics adjusted for the impact of currency translation movements and any acquisition or disposal activity. * Net operating margin adjusts for pass-through revenues upon which no margin is earned

• Reported operating profit growth +25%.

.

• Underlying^ operating profit growth -1% after

additional Future Fit operating costs (+6% pre-Future Fit costs)

• Net operating margin of 12.3%
• H1 2017 ● H1 2018
• Reported operating profit growth -2%. Underlying^
• perating profit growth -2%
• Good Q2 performance did not fully offset Q1

performance

• Net operating margin of 13.3%
• Underlying^ operating profit growth -19%
• Decline driven primarily by the exit of contracts

with VSI & Link

OPERATING PROFIT ($M)

NET OPERATING MARGIN*

12.6% 12.3% 12.6% 13.3% 7.0% 5.3%

UNDERLYING GROWTH RATE^

• 1%
• 2%
• 19%

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H1 2018 Profit Before Tax*

GROUP PBT ($M) +19%

(+16% CONSTANT CURRENCY)

1.4 52.9 7.0 1.9 63.2

*Adjusted for amortisation of acquired intangible assets, transaction costs, and exceptional items

+4% +13% +3%

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H1 FY18 Exceptional Items

Category Description $m H1 FY 2018

Impairm rment of

• f Goo
• odwill

Net charge in relation to the impairment of goodwill on Aquilant, in part offset by one-off payments received relating to the exit of contracts with VSI and Link in the period, for which contract termination payments were received (total contract net exit payments of $14.5m) ($49.7m) De Defe ferr rred Tax Tax Cre Credit t Gain reflecting a one-off benefit from a reduction in the Group’s deferred tax liabilities following US tax changes $9.7m De Defe ferr rred Co Conti tingent t Co Considerati tion Release in respect of Cambridge BioMarketing following a review of performance against expected earn-out targets $3.5m Ne Net exc exceptional item tems af after r tax tax ($36.6m)

The total cash inflow during H1 FY18 in respect of exceptional items was $13.5m

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Cash Flow ($m)

* Includes deferred consideration payments

EBITDA/NET DEBT 0.28x (SEPTEMBER 2017 EBITDA/NET DEBT: 0.32x);

83 13 (19) (24) (3) (12) (23) (9) (47) (24) (53)

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Capital Allocation Priorities

Strong balance sheet to support continued investment priorities Acquisitions in line with strategic priorities

ROCE of 15%+ within 3 years

Reinvestment to support continued sustainable growth

Future Fit (HR, Finance and IT) and Sharp capacity investments Capex expected to reduce from FY19

Progressive dividend policy

30 year+ history of consistent dividend growth

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Acquisitions completed since the United Drug disposal

ADVISORY

Total acquisition consideration of up up to

• $1

$135 35m Acquisition of pharmaceutical packaging facility Total acquisition consideration of up up to

• $14m

$14m

COMMUNICATIONS COMMERCIAL & CL CLINICAL

Total acquisition consideration of up up to

• $1

$130 30m Total acquisition consideration of $14m $14m

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1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Historic dividends translated at FY16 fx rate from € to $

13.3

Progressive Dividend Policy

Divisional Update

Brendan McAtamney

18 : UDG Healthcare plc

+25% ↗

19.1 17.3 36.4 28.3 17.3 45.6

0.0 10.0 20.0 30.0 40.0 50.0

Communications (including Advisory) Commercial & Clinical Totals

+48% ↗

Ashfield H1 2018 Overview

+0%

• H1 2017 ● H1 2018

OPERATING PROFIT ($M)

* Net operating margin adjusts for pass-through revenues. Pass through revenues of $90.9m in H1 2017 and $106.6m in H1 2018

NET OPERATING MARGIN*

23.6% 20.7% 8.3% 7.3% 12.6% 12.3%

UNDERLYING GROWTH RATE

+5%

• 7%
• 1%

Communications (including Advisory) now accounts for 62% of Ashfield’s operating profit Division operating profit growth +25% to $45.6m. Underlying operating profit growth -1% after Future Fit operating costs (+6% pre- Future Fit costs). Net operating margin of 12.3% (acquisition benefits offset by increased Future Fit operating costs impact)

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Sharp H1 2018 Overview

• H1 2017 ● H1 2018
• 3% ↘
• 2% ↘

OPERATING PROFIT ($M)

Underlying operating profit -2% driven by higher churn in the US commercial business during the second half of FY17 which impacted the first half of FY18 Improving momentum in Q2 FY18 vs Q1 FY18

0.2 0.5

OPERATING MARGIN

15.3% 15.5% 0.6% 1.9% 12.6% 13.3% 19.0 0.2 19.2 18.4 18.9

0.0 5.0 10.0 15.0 20.0 US EUR Totals

UNDERLYING GROWTH RATE

• 4%

+261%

• 2%

+191% ↗

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Sharp Update & Outlook

Q1 FY18 behind prior year (as per Q1 IMS) Q2 FY18 double-digit growth vs prior year Experienced higher churn in H2 FY17 & Q1 FY18 but has since reduced Project timing and ramp up delays due to FDA approvals and client timing issues Pipeline continues to improve including significant single large wins coming through

• OUTLOOK

Double digit-growth expected in H2 FY18 vs prior year However, due to slower project ramp up, mid-single digit underlying operating profit growth expected for FY18 Well positioned to deliver strong underlying operating profit growth in FY19 Reiterate medium term guidance of 10%+ underlying

• perating profit growth

SUMMARY UPDATE

21 : UDG Healthcare plc

Aquilant H1 2018 Overview

OPERATING PROFIT ($M)

Division operating profit -11% to $2.9m Underlying operating profit -19% due to the exit from higher margin contracts and higher revenues from lower margin distribution only activities Contract exit payments from two clients, VSI and Link. $13.5m of $14.5m received in H1 FY18 (remainder due in H2 FY18), leading to a $8.9m exceptional gain in H1 FY18

3.2 2.9

2 4 Aquilant

OPERATING MARGIN

7.0% 5.3%

• H1 2017 ● H1 2018
• 11% ↘

UNDERLYING GROWTH RATE

• 19%

Outlook & Summary

Brendan McAtamney

23 : UDG Healthcare plc

Market Dynamics

Sources: Medicines Use and Spending in the US, A Review of 2017 and Outlook to 2022, QuintilesIMS Institute, April 2018 EvaluatePharma – World Preview 2017, Outlook to 2022, June 2017

Global Pharma Market Growth - forecasted to increase by a CAGR

• f 6-7% to 2022 to $1.1tn

GLOBAL MARKET GROWTH

Continued increase in the number of molecules under development. At the end of 2017 was 14,872 – an 8.4% increase vs 2016

MOLECULES IN DEVELOPMENT

FDA approvals increased by 84% in 2017 vs 2016, with 46 new drugs approved

FDA APPROVALS

Increased complexity from growth of specialty and biotech. By 2021, 35% of global spending expected to be on specialty medicines

SPECIALTY & ORPHAN GROWTH

Growing trend of healthcare outsourcing. Increasing trend to outsource to larger, more global partners

INCREASED OUTSOURCING

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Growth & Guidance

* Underlying

+18-21% FY18 EPS Constant Currency Guidance

5–10% >10% 0–5%

Medium term operating profit growth outlook* Medium term operating profit growth outlook* Medium term operating profit growth outlook*

The Group reiterates its full year guidance for constant currency adjusted diluted earnings per share (EPS) growth for the year to 30 September 2018 to be between 18% and 21% ahead of last year’s EPS of 37.1 $ cent. This strong EPS growth reflects the contribution from acquisitions, along with lower interest and taxation expenses.

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H1 2018 Summary

Strong EPS growth

• f 24% (21% on a

constant currency basis) Reiterating guidance for full year FY18 constant currency adjusted diluted EPS growth of between 18% and 21% Net debt of $46.6 million at 31 March 2018 (0.28x) providing significant capacity for strategic M&A 19% increase in interim dividend to 4.25 $ per share