UDG Healthcare plc Investor Booklet Interim Results FY17€¦ · 2: UDG Healthcare plc Forward...

UDG Healthcare plcInvestor Booklet – Interim Results FY17

6 months to 31st March 2017

2 : UDG Healthcare plc

Forward looking statements

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


Page No.

UDG Healthcare Overview 4–6

H1 2017 Overview 7–16

Capital Deployment 17–21

Strategy & Outlook 22–28

Summary 29–30

Appendices 31–35

H1 2017 Financial Appendices 36–41

Contents

UDG Healthcare Overview


At a glance

OPERATINGDIVISIONS

Ashfield Sharp Aquilant

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

3 8,000+EMPLOYEES

TOP 30PHARMA COMPANIES

AS CLIENTS

23 COUNTRIES 30 YEARDIVIDEND GROWTH

FTSE 250LISTED


Business overview & outlook

62%

A GLOBAL LEADER IN COMMERCIALISATION SERVICES FOR THE PHARMACEUTICAL AND

HEALTHCARE INDUSTRIES

of H1 FY17 Operating

Profit

33%

A GLOBAL LEADER IN COMMERCIAL PACKAGING AND CLINICAL TRIAL SUPPLY SERVICES TO THE

PHARMACEUTICAL AND HEALTHCARE INDUSTRIES


Profit

A LEADING PROVIDER OF OUTSOURCED SERVICES TO THE

MEDICAL AND SCIENTIFIC SECTOR


Profit

^ adjusting for negative fx impact

5-year operating profit CAGR 28% 5-year operating profit CAGR 19% 5-year operating profit CAGR 2%^

Mid–term organic operating profit growth outlook (constant currency)

5–10%Mid–term organic operating profit growth outlook (constant currency)

>10%Mid–term organic operating profit growth outlook (constant currency)

0-5%

H1 17 net operating profit margin 13% H1 17 operating profit margin 13% H1 17 operating profit margin 7%

5%

H1 2017 Overview


H1 2017 Financial highlights*

Financial

↑

↑ EPS up +19%(+29% constant currency)

Proposed +5% increase in interim dividend↑

Good performance and margin expansion across both Ashfield and Sharp:↑Ashfield operating profit

+18% ahead

(+8% underlying^)

Ashfield net operating margin

12.6%

Sharp operating profit

+8% ahead

(+8% underlying^)

Sharp operating margin

12.6%

↑Operating profit up +13%(+21% constant currency)

Profit before tax up +19%(+29% constant currency)

Operating margin increased to 10.2%Net Operating margin increased to 12.0%↑

↑

ROCE increased to 13.8% from 13.5%

Financial

* Continuing Group ^ Throughout this presentation, references to underlying growth are financial metrics adjusted for the impact of currency translation movements and any acquisition or disposal activity

EPS guidance for FY17 increased by 2% to between

15% and 18% ahead of last year (constant

currency)


H1 2017 Strategic highlightsStrategic

NET CASH position of $91m at the end of March 2017 leaves the Group well placed to continue to execute strategic acquisition opportunities

↑

CAPACITY EXPANSION

New site acquired to expand the Sharp clinical business in the UK

New office facility for Ashfield Commercial & Clinical US

M&A ACTIVITY

Three acquisitions announced since the start of the financial year, deploying over $130m of capital:• Acquisition of STEM completed in October 2016 (for up

to $105m)• Acquisition of a packaging facility in the US completed

in April 2017 ($14m)• Agreement to acquire Sellxpert, a German contract

sales organisation announced in May 2017 for up to $14.4m, subject to competition clearance

Financial FUTURE FIT

HR system (Workday) launched in April 2017

Finance system (Oracle) rolling out over the next 18 months

LEADERSHIP TRANSITIONS

Appointed Jez Moulding as COO UDG & EVP Ashfield


H1 2017 Financial summaryH1 2016 H1 2017 Increase Constant FX Increase

Revenue $538.0m $578.9m ↑8% ↑15%

Operating profit (EBITA)* $52.2m $58.8m ↑13% ↑21%

PBT* $44.4m $52.9m ↑19% ↑29%

EPS (C)* 13.63 16.23 ↑19% ↑29%

DPS (C) 3.41 3.58 ↑5% ↑5%

ROCE% 13.5% 13.8% N/A N/A

Net (debt)/Cash / EBITDA (1.69x) 0.61x N/A N/A

Average 2016 financial year exchange rates were $1 = €0.9002 and £0.7045. The average exchange rates during H1 2017 were $1 = €0.9330 and £0.8066 (2016 H1 $1 = €0.9102 and £0.6787)* Before amortisation of acquired intangible assets, transaction costs and exceptional items (no exceptional items in either period)


30.8

17.8

3.6

36.4

19.2

3.20

10

20

30

40

Ashfield Sharp Aquilant

18% ↗

8% ↗

11% ↘

H1 2017 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

• Reported profit growth of 18%, underlying^ profit growth of 8%

• Good underlying profit growth across both business units

• Net operating margin of 12.6%

● H1 2016 ● H1 2017

• Reported profit growth of 8%, underlying^ profit growth of 8%

• Divisional margin expansion to 12.6%

• EU business returned to profitability

• Underlying^ operating profit up 6%

• Operating margin of 7%

OPERATING PROFIT ($M)

NET OPERATING MARGIN

12.6% 12.6% 7.0%


18% ↗

4% ↗

16.614.2

30.8

17.319.1

36.4

0.0

10.0

20.0

30.0

40.0

Commercial & Clinical Communications (including Advisory)

Totals

Division operating profit +18% to $36.4m

Underlying profit growth +8%

Net operating margin of 12.6%

Commercial & Clinical operating profit +4%

• Underlying profit growth of +8%

• Strong performance in US, largely due to increased activity levels from one client

• New US office facility in Fort Washington

• Good European growth, particularly in Germany

• Acquisition of Sellxpert announced in May 2017

Communications (including Advisory) operating profit +35%

• Underlying profit growth of +7%

• Strong H1 performance from STEM during seasonally strong first half

Ashfield H1 2017 overview

35% ↗

● H1 2016 ● H1 2017OPERATING PROFIT ($M)

* Net operating margin adjusts for pass-through revenues. Pass through revenues of $79.7m in H1 2016 and $90.9m in H1 2017

NET OPERATING MARGIN*

8.6% 8.3% 21.6% 23.6% 11.9% 12.6%


Sharp H1 2017 overview● H1 2016 ● H1 2017

5% ↗ 8% ↗ OPERATING PROFIT ($M) Division operating profit +8% to $19.2m

Underlying operating profit growth also +8%

Divisional margins improved to 12.6%

US operating profit +5%

• Underlying growth of +5% over strong H1 FY16

• Good biotech growth

• Acquired a new packaging site in April 2017 to expand commercial & clinical offering and supplement the new commercial packaging facility opened in 2016 in Allentown

• Positioning business for mandatory US serialisation from November 2017

EUR operating profit of $0.2m

• Continued improvement in business development pipeline

• Acquired new site in the UK to expand clinical business

–0.3 0.2

OPERATING MARGIN

15.3% 15.3% – 0.6% 12.2% 12.6%

18.1

-0.3

17.819.0 19.2

-1

4

9

14

19

US EUR Totals


Aquilant H1 2017 overview

11% ↘

OPERATING PROFIT ($M) Division operating profit -11% to $3.2m

Adjusting for the impact of negative currency movements, operating profit on an underlying basis was +6%

• Improved sales mix

• Benefited from new business wins in 2016

• Improving capital sales profile 3.6

3.2

0

2

4

6

8

10

Aquilant

OPERATING MARGIN

6.8% 7.0%

● H1 2016 ● H1 2017


H1 2017 Operating profit ($m) – Continuing GroupCONTINUING GROUP OPERATING PROFIT +13%(+21% CONSTANT CURRENCY)

(3.5)52.2 6.3 3.8 58.8

(8%) 13%

8%


Cash flow ($m)EBITDA/NET CASH 0.61x (SEPTEMBER 2016: 1.03x);

143

70 1

(28)

(60)(11)

(20) (4)

91

Capital Deployment


30 year history of consistent dividend growth ($ cent)

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

*Translated at FY16 fx rate from € to $

12.83


Capital deployment guidance

FY16 Continuing Group ROCE increased to 13.8%*

Target of 15% ROCE within 3 years on Capex and M&A

~30%Interest, tax & working

capital

~40%Capex

~20%Dividends

~BalanceAcquisitions

EBITDA = + + +

*ROCE includes the add back of historical amortisation on acquired intangible assets and historical restructuring costs to capital employed. Excluding these addbacks would increase Continuing Group ROCE to 17.6%


M&A

KEY FOCUS AREAS INCLUDE:

ROCE 15%+ within 3 years People & Cultural FitStrategic Fit / Capabilities

M&A REMAINS A KEY PRIORITY FOR THE GROUP:

ASHFIELD COMMERCIAL & CLINICAL

• Strengthen contract sales capabilities

• Extend clinical / nurse services

• Expand medical information and commercial call centres

ASHFIELD COMMUNICATIONS (INC ADVISORY)

• Extension of healthcare communications capabilities incorporating:

– Health Communications– Digital Solutions– Patient Focused– Market Access– Public Relations– Strategic Consultancy

– Commercial & Marketing Audits

SHARP

• Continued capacity expansion via capex

• Addition of complementary services to existing platforms in commercial and clinical packaging


Investment in scalable infrastructure and platforms

RATIONALE:

• Supporting continued delivery of sustainable future growth, both organic and M&A

• Ensure current infrastructure is fit for purpose

FUTURE FIT CAPACITY INVESTMENTS

SHARP USCOMMERCIAL

& CLINICAL

ASHFIELD OFFICES

SHARP CLINICAL UK

HR Finance IT

• HR system (Workday) launched in April 2017

• Finance system (Oracle) rolling out over the next 18 months

KEY PROJECTS INCLUDE:

Strategy & Outlook


Positive market dynamics

Growing trend of

healthcare outsourcing

Increasing trend

to outsource to larger, more global partners

Positive

product approvals outlook -

FDA approval of new drugs expected to

remain high despite lower 2016 approvals*

Global pharmaceutical market continues to

show good growthwith spending on

medicines forecasted to grow at 4-7% p.a.

to 2021 to reach $1.5 trillion^

Increased complexityfrom growth of

specialty and biotech

By 2021, 35% of global spending expected to

be on speciality medicines^

Total global volumeuse of medicines

forecasted to reach c. 4.5tr doses by 2021, up from c. 4tr doses

in 2016^

^ Outlook for Global Medicines through 2021, Balancing Cost and Value, QuintilesIMS Institute, December 2016 *Medicines Use and Spending in the US, A review of 2016 and Outlook to 2021, QuintilesIMS Institute, May 2017


Executing our strategy

DEVELOP & EXPAND MARKET LEADING POSITIONS

Our strategy is to capitalise on the increasing trend among pharmaceutical, biotech and medtech companies to outsource non-core and specialist activities on an international basis.

We aim to leverage our existing strong market positions, offer innovative solutions and create demand for our specialist services thereby driving higher levels of growth and profitability.

Geographic & Services Expansion

Client Focus & Commercial Excellence

Supplementary Sources of Growth

DRIVE PRODUCTIVITY

Operational Excellence

Margin Expansion

Capital Deployment

LEAD THROUGH PEOPLE

Talent & Leadership

Quality & Compliance

Values Based Culture


Ashfield: Positioning for Growth

Ashfield has transitioned from a Commercial & Clinical focused business (c. 80% of profits 4 years ago) to become a key commercialisation advisor and execution partner for pharma clients (Communications, including Advisory, currently accounts for c. 50% of profits)

BENEFITS OF REPOSITIONING THE ASHFIELD BUSINESS:

• Offers a complete commercial solution for pharma clients including the delivery of a full suite of advisory, communications and execution capabilities

• Higher margin, higher opportunity areas for Ashfield

ADVISORY

Advisory, commercial & marketing audits, strategic consultancy services

COMMERCIAL & CLINICAL

Commercialisation and clinical services including sales representatives, nursing services and contact centres

COMMUNICATIONS

Scientific, medical & commercial communications and patient centred services


Ashfield Commercial & Clinical Market Opportunity

* Source: BCG

• Outsourcing levels expected to continue to increase incrementally

• Sales rep remains a preferred & effective channel

• Shift to specialty and higher skilled reps

• Primary care remains an opportunity for growth in outsourcing

Increasing demand for innovative models (CSR), multi-channel offerings and multi-geography solutions

↗ Non-personal promotion channels growing (i.e. call centres) as a complement to personal promotion services

PERSONAL PROMOTION MARKET SIZE C. $3.3BN*

FORECASTED GROWTH RATES OF 3%–7%* DEPENDING ON REGION

NON- PERSONAL PROMOTION & CLINICAL EDUCATION MARKET SIZE C. $1.1BN*

FORECASTED GROWTH RATES OF 5%–8%* DEPENDING ON REGION AND SERVICE SEGMENT

↗

Clinical education / nurse services demand driven by growth of specialty care and importance of patient adherence

↗


Ashfield CommunicationsMarket Opportunity

* Source: BCG. Includes commercial and scientific communications, PR, insight and advisory, meetings and events

GLOBAL HEALTHCARE COMMUNICATIONS MARKET SIZE C. $8.8BN*FORECASTED GROWTH RATES OF 4%–8%* DEPENDING ON SEGMENT

↗ • Market growth driven by underlying spend together with incremental outsourcing

• Small and mid pharma increasing underlying spend while big pharma are outsourcing more

↗ Higher growth areas include digital and patient engagement services

Growth prospects supported by increasing numbers of new molecules being developed and approved

Ashfield’s global reach facilitates capture of larger portion of spend


SharpMarket Opportunity

COMMERCIAL PACKAGING:

US & EU COMMERCIAL PACKAGING MARKET SIZE: $5bn - $7bn

↗ ↗• Forecasted growth rates of 6%-8%

depending on region and packaging format

• Branded products 5%-7% and Biotech 8%-12%

CLINICAL SERVICES:

US & EU CLINICAL SERVICES MARKET SIZE : $6BN - $8BN

Growth in demand for outsourcing driven by lack of capacity, capability and increasing requirement to access specialist technology

Demand for end to end proposition likely to increase over the next 5 years

Forecasted growth rates of 6%-8% depending on service offering

↗

* Source: Deloitte, Market Assessment, 2017

Summary


Summary

Strong H1 performance driven by continued underlying growth, supplemented by M&A

Raised full year earnings guidance by 2% to between 15%-18% EPS growth (constant currency)

Corporate development a key focus

Continued increase in margins and ROCE

Market dynamics remain favourable

Diversified client base with limited exposure to drug pricing

Underpinned by a strong balance sheet and cash generation

Continued investment in infrastructure to deliver

sustainable future growth

Appendices


Geographic Split (FY16)

NORTH AMERICA

UK & IRELAND

CONTINENTAL EUROPE

REVENUES PROFITS

46%

37%

17%

52%

42%

6%


Ashfield

OPERATING PROFIT* ($M)

62%

26.7

41.7

57.5

68.370.7

FY12 FY13 FY14 FY15 FY16

WHAT WE DO

A global leader in commercialisation services for the pharmaceutical and healthcare industries:

• Over 300 healthcare companies as clients

• Services across 50 countries

• 6,000+ employees

Services include:

• Advisory, commercial & marketing audits and strategic consultancy services

• Scientific, medical & commercial communications and patient centred services

• Commercialisation and clinical services including sales representatives, nursing services, contact centres and meetings and events

of Operating Profit

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


Sharp


of Operating Profit

33%

WHAT WE DO

A global leader in commercial packaging and clinical trial supply services to the pharmaceutical and biotech industries

• Operations in 4 countries with packaging sites across the US and Europe

• 1,800+ employees

• Market leader in commercial packaging in multiple formats including bottling, blistering, biotech and kitting

• Growing clinical trial packaging services business from pre-clinical through to commercialisation

• Packaging labelling and design solutions

• Industry leading serialisation solutions for ‘Track and Trace’ compliance

18.820.6

25.9

34.0

38.2


OPERATING PROFIT* ($M)


Aquilant 5%of Operating

Profit

OPERATING PROFIT* ($M) WHAT WE DO

Aquilant is a leading provider of outsourced services to the medical and scientific sector:

• Operations in Ireland, the UK and the Netherlands

• Medical and scientific device sales, marketing, engineering and distribution in areas such as endoscopy, cardiology, radiology and orthopaedics

• Vision is to be recognised as the most commercially innovative, patient and client focused market service organisation for the medical and scientific sectors.

• ^ +2% CAGR excluding the impact of translational foreign exchange

7.5 7.68.0 8.3

6.9



H1 2017 Financial Appendices


Segmental overview

6 mths to March 2017 Change

Net^ Revenue $m Op Profit* $m Net^ Margin Net^ RevenueOp Profit*reported

Op Profit*Underlying

Net^ Margin

Ashfield $289.0 $36.4 12.6% +12% +18% +8% +71bp

Sharp $152.7 $19.2 12.6% +5% +8% +8% +34bp

Aquilant $46.3 $3.2 7.0% (14%) (11%) +6% +19bp

Total $488.0 $58.8 12.0% +6% +13% +8% +66bp

^ Adjusted for pass-through revenues. Pass through revenues of $79.7m in H1 2016 and $90.9m in H1 2017.

*Operating profit before amortisation of acquired intangible assets, acquisition costs and exceptional items


Ashfield segmental summary

6 mths to March 2016 2016 2016 2017 2017 2017%

Change%

Change

Net^ Revenue $m Op Profit* $m Net^ Margin Net^ Revenue $m Op Profit* $m Net^ Margin Net^ Revenue Op Profit*

Commercial & Clinical

$193.5 $16.6 8.6% $208.1 $17.3 8.3% 8% 4%

Communications (inc Advisory)

$65.7 $14.2 21.6% $80.9 $19.1 23.6% 23% 35%

Total $259.2 $30.8 11.9% $289.0 $36.4 12.6% 12% 18%

^ Adjusted for pass-through revenues. Pass through revenues of $79.7m in H1 2016 and $90.9m in H1 2017.



Sharp segmental summary

6 mths to March 2016 2016 2016 2017 2017 2017%

Change%

Change

Revenue $m Op Profit* $m Margin Revenue $m Op Profit* $m Margin Revenue Op Profit*

US $118.8 $18.1 15.3% $124.1 $19.0 15.3% 4% 5%

Europe $26.6 ($0.3) N/A $28.6 $0.2 0.6% 7% N/A

Total $145.4 $17.8 12.2% $152.7 $19.2 12.6% 5% 8%



Aquilant segmental summary

6 mths to March 2016 2016 2016 2017 2017 2017%

Change%

Change

Revenue $m Op Profit* $m Margin Revenue $m Op Profit* $m Margin Revenue Op Profit*

Aquilant $53.7 $3.6 6.8% $46.3 $3.2 7.0% (14%) (11%)^

^ Underlying operating profit growth of 6%, excluding foreign exchange translation impacts*Operating profit before amortisation of acquired intangible assets, acquisition costs and exceptional items

UDG HEALTHCARE PLC

20 RiverwalkCitywest Business CampusCitywestDublin 24 Ireland

E: [email protected]

T: +353 1 468 9000

UDG Healthcare plc Investor Booklet Interim Results FY17€¦ · 2: UDG Healthcare plc Forward...

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