United Drug set for strong growth

Healthcare services group United Drug said its full-year results will be ahead of expectations after strong growth in each of its four divisions.

In a statement to the stock exchange yesterday ahead of its full-year results due next month, United Drug said operating profit and earnings are expected to show double digit growth over the prior year.

In the year to the end of September 2006 the company reported operating profit of €52.2 million, while earnings per share were 19.4 cent.

The shares yesterday rose 6 per cent, or 20 cent, to close at €3.50. Prior to yesterday's announcement the stock had fallen 12 per cent in the past month and 22 per cent since the high of €4.25 it reached on May 23rd.

Analysts said the declines were more the result of general negative sentiment towards the pharmaceutical sector and Irish stocks rather than something fundamentally wrong with United Drug's business model.

Analysts yesterday welcomed the outlook statement, with NCB upgrading its recommendation from accumulate to buy. Analyst Orla Hartford cited the company's ability to sustain double digit earnings growth in the medium term and the significant underperformance of the stock relative to peers as the reason for the upgrade.

United Drug chief executive Liam Fitzgerald said the group's supply chain services business had performed particularly well. He said that when combined with the strong results from its Masta and UDG units, the recent acquisitions of Budelpack in Belgium and MPF in Holland will lead to significant growth at the division.

Mr Fitzgerald said the outlook for the current financial year was positive, boosted by the increased consumption of healthcare-related goods and services. He also said that changes to the drug pricing regime that started in March had reduced growth in line with expectations. He expressed concern about proposals to reduce reimbursement prices on medicines paid for by the Government.