United Drug reports 'successful' first quarter

United Drug said it had a "successful" fiscal first quarter and forecast pre-tax profit for the year to the end of September 2010 would be in line with the previous year, as a new deal on prices of medicines came into effect.

"Trading across the group has been good in the first quarter of the financial year with profits in line with budget and well ahead of what was a slow first quarter in 2009," the company said in a statement. "Those areas of the business that performed below expectations during 2009 are now back trading in line with budget. Internally generated cash flows continue to be strong across the group."

The company said a new agreement with the Government that will see the price of medication fall combined with investment in a UK homecare joint venture would impact profit in the current financial year.

Prices in off-patent medicines were reduced in Ireland in January 2009, bringing overall revenues for the period in line with a year earlier. A new deal with the Department of Health, which was negotiated after the Government announced the budget for 2010 and came into effect on February 1st, will see prices for off-patent medicines fall 40 per cent. This will have a further impact on wholesale revenues in the current year.

Separately, a joint venture with Medco Health Solutions to provide homecare services in the UK will incur significant start-up costs in the current year, the group said. However, United Drug promised "excellent opportunities" in a growing market, and said the venture would become a meaningful contributor to the group in the coming years.

The partnership offers prescription drug-dispensing and home delivery and on-site nursing for the administration of medicines.

United Drug previosuly said the homecare pharmacy market in the UK accounts for approximately £1 billion (€1.16 billion) of the National Health Service's spending on drugs and is growing significantly year-on-year.

In the quarter to December 31st 2009, overall profits in the healthcare supply chain division were ahead of last year, with wholesale businesses in both the Republic and Northern Ireland showing volume growth.

The medical and scientific division, which is part of the healthcare supply chain unit, performed in line with budget during the period.

"Capital spending in hospitals remains slow both in the UK and Ireland but the business is seeing good new business opportunities and has already had a positive contribution from its newly established operation in Sweden," the group said.

Meanwhile, the company said profits in the packaging and speciality division were ahead of the first quarter in 2009 as strong trading in the US packaging business continued. The European element of the business is slightly below last year as volumes in the UK business still lagged previous levels.

Profits in the contract sales and marketing services division were ahead of last year for the quarter.

However, the company is still taking an upbeat outlook, with most parts of the business "encouraging", and said it expects profit before tax for the year to be broadly in line with the prior year, on a constant currency basis.

The company also announced a change in its board, with director Kieran McGowan retiring on February 8th.