A year of transformational growth

It’s been another year of strong growth at UDG Healthcare and I am pleased to report that our Group is excellently positioned to continue to improve, transform and grow as we enter 2018.

Healthcare companies, from niche biotech to healthcare providers to large pharmaco’s, are continuing to show an increasing appetite to outsource specialist and non-core activities to global players who have strong service, regulatory and compliance track records like ours. The transformation we have made in the past year has helped position UDG Healthcare to fully capitalise on these sectoral changes.

2017 can be characterised as a year of transformational growth, driven by good underlying growth and supplemented by six strategic acquisitions. This places us in a strong position for 2018. 

Overall, we made significant progress in the execution of our strategy and this enabled us to deliver on our financial targets. We delivered operating profit growth of 17% on a constant currency basis, which contributed to adjusted diluted earnings per share (EPS) growth of 23% on a constant currency basis. This was ahead of our guidance of between 17% and 19% constant currency EPS growth for the year.

Improving, Transforming, Growing

In line with our strategy of expanding into higher growth and higher margin areas, 2017 saw us commit more than $270 million to acquisitions. We have now redeployed over two-thirds of the net proceeds we received in 2016 from the sale of the United Drug supply chain business to McKesson.

These key acquisitions add further capabilities for our healthcare clients and are a strong strategic and cultural fit with our existing businesses. The six acquisitions included:

  • STEM Healthcare, a leading global provider of commercial, marketing and medical audits;
  • A pharmaceutical-grade packaging facility in Pennsylvania, US;
  • Sellxpert, a German and Swiss contract sales outsourcing business;
  • Vynamic, a US-based healthcare management consultancy;
  • Cambridge BioMarketing, a US-based communications agency focused on orphan and rare diseases; 
  • MicroMass Communications, a US-based communications agency specialising in behavioural change.

As well as successfully executing these acquisitions, we remain focused on investing in scalable infrastructure across HR, finance and IT. In April 2017, we launched our Workday human resource information system and commenced the implementation of Ashfield’s new Oracle Fusion finance system which will be rolled-out on a phased basis over the next 18 months. These crucial investments will ensure we have the right infrastructure to deliver long term sustainable growth and will also ensure the seamless integration of acquired businesses.

Capitalising on Disruption

Our FY2017 acquisitions represent an investment in a global healthcare industry that is concurrently facing significant ‘disruption’ as technological advances change the way the healthcare industry does its business.

Our diversity of approach, our breadth of capabilities, that often have a digital component throughout the service provision, together with our patient-centred focus will ensure we are well positioned to capitalise on both the current and future disruption in the healthcare industry.

In addition, an increase in the number of new products being approved and the rise in demand for specialty products places us right at the heart of emerging growth opportunities. As healthcare companies outsource specialist activities to trusted partners, we will continue to invest in our business to take advantage of these opportunities.

Our mission is to use our ingenuity and expertise to improve the lives of patients around the world every day. This is no small or easy mission; and it can only be achieved if we continue to transform and adapt our business, through technology or otherwise, to embrace the opportunities presented by both this disruption and the ever-changing healthcare landscape.

Divisional Highlights

Reflecting in more detail on the performance of each of our divisions: 

Ashfield

Ashfield is a global leader in advisory, communication, commercial and clinical services. Benefiting from both good underlying growth and acquisitions, the division delivered a strong financial performance during the year with operating profit increasing by 16%.

Ashfield Commercial AND Clinical

Ashfield Commercial and Clinical delivered good underlying net revenue and operating profit growth of 17% and 5% respectively during the year.

This growth was principally due to strong growth in the German business and a good performance in the US, driven by increased activity on contract wins from 2016. The acquisition of Sellxpert has further strengthened Ashfield’s capabilities and established it as market leader in Germany.

Ashfield’s North American operations also completed the move to a new facility in Fort Washington in the US. This facility is 60% larger than the previous site, enabling continued expansion in the strategically important US market.

On the acquisitions front, Sellxpert will significantly enhance Ashfield Commercial and Clinical’s presence and capabilities in Germany and enhance Ashfield’s leading market position in Europe.

Ashfield Advisory and Communications

Ashfield Advisory and Communications delivered strong growth during the year. Including the benefit of acquisitions, net revenue increased by 39% and operating profit increased by 31%. We focused on building up Ashfield Advisory in 2017, and fuelled by the acquisitions of STEM Marketing and Vynamic, our advisory capability is now not only significant within the Group but provides more differentiated services and solutions to our global clients.

Ashfield Communications had a solid year and its capability was further strengthened by the acquisitions of Cambridge BioMarketing, which brings deep experience in the orphan and rare disease segment of the healthcare market, and MicroMass Communications, which develops evidence based solutions to change behaviour and improve healthcare outcomes. In positioning ourselves for future growth in the communications field we also doubled the size of our office in Scotland, and opened new offices in Japan and Ireland.

Changes in the Ashfield Leadership Team

In September 2017 our leader in Communications, Viv Adshead, announced her intention to retire in 2018. Viv has been working in the communications business for over 25 years and joined UDG Healthcare through the acquisition of KP360 in 2014. During her short tenure with UDG Healthcare and Ashfield, Viv was at all times the supreme professional and a talented leader of people. We will miss her and wish her every success in the next chapter of her life.

We also had a number of other leadership changes which will further strengthen our team and help drive future performance. In May 2017 we were delighted to announce the appointment of Jez Moulding – the new Executive Vice President of Ashfield and COO of the Group. We appointed a new head of Ashfield US and a new head of Ashfield Japan. 

The broadening of Ashfield’s value proposition enables us to expand our offering to clients and deliver a full complement of end-to-end advisory, communications, commercial and clinical capabilities to our clients. This enables us to offer clients innovative solutions and provides us with excellent opportunities for growth in collaboration with our global and regional clients.

Sharp

Sharp is a global leader in commercial packaging and clinical trial supply services. Sharp delivered another good performance in 2017, with operating profit growth of 8%.

Sharp US Commercial

Sharp US delivered a good performance with underlying operating profit growth of 5% with biotech delivering particularly strong growth.

Last year saw the completion of the fit out of Building 4 in our Allentown Campus. This 13-suite facility is fully dedicated to our biotech clients and has further room for expansion.

Despite the delay in the enforcement date for serialisation, Sharp continues to actively engage with its clients and is well positioned to benefit from the anticipated demand due to come on-stream in November 2018.

Sharp Europe Commercial

We are increasingly optimistic about the prospects for the Sharp Europe business. The business had a solid year generating a small profit following a number of years of operating losses. The relentless focus on, and investments in the provision of high quality services and business development is now coming to fruition. We experienced significant client wins in 2017 particularly in the biotech and biosimilar sector, and this will lead to further momentum over the coming years.

Sharp Clinical

Sharp Clinical continues to build on strong foundations for future success with the investment in two new facilities; a new clinical facility in Bethlehem, Pennsylvania and a greenfield site in South Wales, more than tripling the size of the current UK facility. These capacity expansions will improve our offering to clients to take advantage of on-going growth in demand for our end to end clinical trial formulation, development, packaging and distribution services.

Aquilant

Aquilant is a leading expert in and provider of outsourced services to the medical and scientific sector. The division had a challenging year largely due to negative currency movements. Underlying operating profit growth was solid at 4% and the division continued to trade in line with overall expectations.

 

Culture

Our values of Quality, Partnership, Ingenuity, Expertise and Energy continue to influence how we operate. Sustained employee engagement is a long-term commitment for the business and we have some critical initiatives underway, including a comprehensive leadership development programme and group-wide employee engagement survey. The attraction, development and retention of quality people is a critical success factor and continues to underpin the future of the Group. Following the disposal of the United Drug supply chain business in 2016, UDG Healthcare is now a relatively young organisation with over 9,000 people delivering services across 50 countries. We have a diverse, engaged and energetic group of employees and I would like to thank them all for their work in 2017. It has meant that UDG Healthcare delivered another strong set of results and positions us well for further growth and delivery of our strategic objectives for the years ahead.

Outlook

In 2017, we made significant progress in the execution of our strategy. We are improving our capabilities, transforming the breadth of services and growing our geographic diversity. These changes mean that we are growing; not just in terms of revenues and profits, but also in long-term sustainable shareholder value. The market opportunity for UDG Healthcare remains robust and we are well positioned for future growth and value creation as we enter 2018. 

Brendan McAtamney
Chief Executive