UDG Healthcare

UDG Healthcare adds new consultancies in US and UK after solid first half

Earnings growth guidance for the year to end-September has been upped to 5%-7% from the previous 4%-6% forecast

UDG could spend up to $106mln on its two new additions

UDG Healthcare PLC (LON:UDG) posted underlying half-year profits in line with expectations and has acquired a pair of consultancy businesses in the UK and US.

The FTSE 250 group, which provides manufacturing, packaging and marketing services to healthcare manufacturers and pharmacies, unveiled the addition of US-based strategic consultancy Putnam Associates for a total of up to US$88.6mln and London and Brussels-based communications consultancy Incisive Health for up to £13.6mln.

READ: UDG Healthcare on the mend as it makes “good start” to new year

Both deals, which include earn-out elements over three years, will be financed from existing cash and debt and are expected to deliver a return on capital employed of at least 15% within three years.

Meanwhile, for the six months to 31 March, UDG reported revenue of US$656.6mln, which was down 3% on the same period last year, while net revenue allowing for last year’s disposal of Aquilant was up 6%.

Adjusted profit before tax rose 2% to US$64.5mln and adjusted diluted earnings per share grew 5% to 21.21p, with currency swings weighing on both measures.

Acquistions boost guidance

For the full year to 30 September, the board increased its guidance for constant currency EPS growth to between 5% and 7% to take into account the two new acquisitions, up from the previous 4%-6%.

Chief executive Brendan McAtamney said the two purchased businesses “are aligned with our strategy to expand into higher growth and higher margin areas, complementary to our existing service offering”.

Broker Liberum said the interim results show good underlying performance, although a worse than anticipated forex headwind means EPS undershot its forecast by around 4%.

UDG shares, having lost around 40% of their value from last year's high to a low of around 550p last month, continued their resurgence with a gain of 7% to 705p in late morning on Tuesday.

Quick facts: UDG Healthcare

Price: £7.40

Market: LSE
Market Cap: £1.85 billion

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