UDG suspends interim dividend as it braces for Covid-19 impact
Healthcare services company says it expects to see effect in second half of financial year
UDG Healthcare chief executive Brendan McAtamney said the group’s balance sheet remained robust. Photograph: Dara Mac Dónaill
Healthcare services company UDG has suspended its interim dividend and withdrawn its financial guidance for 2020. In a trading update, the company said the coronavirus outbreak would hit its performance in the second half of the year, but it had a strong balance sheet and liquidity to help cushion the blow.
A mitigation plan for the pandemic has been implemented across the group, including cost-control measures such as tight control of discretionary expenditure, a recruitment freeze, reducing freelance spending, reduced working hours and furloughing of employees. The board and the senior executive team are also taking a 20 per cent cut in fees and salaries for at least the next three months.
“UDG Healthcare is a well-diversified business and we have delivered a strong first-half performance, driven by the performance of both Ashfield and Sharp. Our balance sheet remains robust and we are taking a number of decisive actions to support our people, our customers and the long-term future of our business,” said Brendan McAtamney, chief executive of UDG Healthcare.
“We have confidence in the market fundamentals that underpin our business, and I have no doubt the actions we are taking now will ensure we emerge from this crisis well placed to deliver renewed strong growth over the medium term.”
The trading update, which covers the period from October 1st, 2019, to March 31st, said the business was well ahead of the same period a year earlier.
Constant-currency profit before tax for the six months was ahead of the first half of 2019 as the business showed good underlying growth and the benefit of acquisitions made last year.
Its Ashfield unit showed operating profit ahead of the same period last year, while communications and advisory continued to perform strongly. UDG’s commercial and clinical’s operating profit was in line with the last year, while Sharp showed double-digit underlying operating profit growth during the period.
Sharp, which packages medicines, has been categorised as essential. Although the company is experiencing robust demand, the group is expecting temporary disruption to production schedules and capacity resulting from the additional health-and-safety measures, and workforce availability.
The company said it had put in place additional health and safety measures to protect staff, including providing incremental personal protective equipment, additional cleaning and hygiene services and adapting shift patterns to enable required social distancing.
The group said Ashfield had seen some project deferrals and cancellations, and in-field based activities such as meetings and events, the clinical educator business and audit services in Stem, were experiencing more significant disruption and a fall in activity. However, clients were being served remotely where possible.
“Beyond this period of uncertainty arising from Covid-19, the group’s strong and diversified business, supplemented by excellent market fundamentals and its robust financial position, leaves it well placed to deliver renewed strong growth over the medium term,” UDG said in a statement.
The group expects to issue its full interim results for the six months to March 31st on May 19th.