UDG shares surge after strong full-year guidance

Healthcare service provider acquiring US and UK companies for up to $106m

UDG Healthcare chief executive Brendan McAtamney. Photograph:  Dara Mac Donaill/The Irish Times

UDG Healthcare chief executive Brendan McAtamney. Photograph: Dara Mac Donaill/The Irish Times

 

Shares in UDG Healthcare surged by more than 8 per cent by mid-morning on Tuesday after it upgraded full-year guidance to reflect two acquisitions.

The Dublin-headquartered healthcare service provider said it expects earnings to grow by between 5 and 7 per cent on a constant currency basis for the full year.

That reflects UDG’s purchase of two consultancy businesses for up to $106 million (€95 million), which helped boost its share price on Tuesday. Shares in the company had fallen 30 per cent in the 12 months up to Monday’s close.

Asked about the share price fluctuation over the past year, chief executive Brendan McAtamney said the company’s market fundamentals are still “very, very attractive” but that the stock market can be “very fickle”.

UDG is buying US-based strategic management healthcare company Putnam and UK-based policy and communications consultancy Incisive Health. Putnam is being acquired for a total consideration of up to $88.6 million, $60 million of which is being paid up-front, while Incisive is being acquired for £13.6 million (€15.5 million) including an initial consideration of £8 million.

Both transactions will be financed from the company’s existing cash and debt facilities. Davy analysts Allan Smylie and Andrew Young said the acquisitions are both “excellent strategic fits”.

“Putnam strengthens our growing advisory pillar in the US, adding significant expertise in product commercialisation, pricing, reimbursement and market access strategy. Incisive Health adds specialist capability in the growing area of public health advocacy, supporting clients to secure market access for their brands, in addition to wider communications services,” said Mr McAtamney.

Other targets

He said the company had completed due diligence on two other companies so far this year but walked away. “We’re hopeful we’ll get another one in by the end of the year,” he added. Since 2012, UDG has acquired 21 companies and spent more than $850 million.

Meanwhile, the healthcare service provider posted falling net revenues and a small rise in profit on the back of the disposal of its Aquilant unit last year and adverse currency movements.

Net revenues fell 4 per cent in the six months to March 31st to $656.6 million (€588.9 million) while operating profit rose just 1 per cent to $34.1 million Like-for-like revenue, which discounts those currency movements and the Aquilant sale, rose 6 per cent.

During the six-month period, UDG incurred an exceptional charge of $15.2 million related to two legal matters. The majority of the charge relates to the €407 million sale of its drug distribution business to US company McKesson. There are no more liabilities in respect of the sale, Mr McAtamney said.

London-listed UDG also announced an increase in its interim dividend by 5 per cent to $4.46 a share.