Uniphar : Results

Uniphar plc

2024 Interim Results

Uniphar plc, an international diversified healthcare services business, announces its half year results for the six months ending 30 June 2024 delivering EBITDA growth of 6.3% and gross profit growth in each of its three divisions.

FINANCIAL HIGHLIGHTS

• Gross profit growth of 9.9% (7.4% organic3) reflecting growth across all divisions with Uniphar Pharma achieving organic gross profit growth of 20.2%.
• Continued strong gross profit margin of 15.1%.
• EBITDA growth of 6.3%, from €52.6m to €55.9m, reflecting the execution of our strategy in each division and continued innovation across the Group.
• Adjusted EPS of 8.1 cent (2023: 8.0 cent) reflective of strong EBITDA growth offset by higher financing costs in the period.
• Continuing strong free cash flow conversion of 144% with adjusted free cash flow conversion in line with our medium-term target.
• Robust liquidity with net bank debt of €143.6m at 30 June 2024 (December 2023: €149.9m) and leverage at 1.5x.
• The Board have declared an interim dividend of €0.0067 per ordinary share for the period to 30 June 2024 representing growth of 5% in the period (June 2023: €0.0064 per ordinary share).
• For the full year 2024, Uniphar expects organic gross profit growth across all divisions in line with medium- term targets and is well positioned to deliver on market expectations for the full year.

1. Additional information in relation to Alternative Performance Measures (APMs) are set out on pages 41 to 46.
2. Constant currency growth is calculated by applying the prior period's actual exchange rate to the current period's result.
3. Organic growth is calculated as the gross profit growth of the underlying business in the period adjusting for the contribution from prior period acquisitions and divestments to ensure a like-for-like comparison.
4. The definition of this APM was changed in 2023 to add back share-based payment expense as it is a non-cash expense with prior year comparatives updated accordingly.

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STRATEGIC AND OPERATIONAL HIGHLIGHTS

• Strong performance in the period delivering gross profit growth across all divisions with continued progress towards our strategic objectives.
• Organic gross profit growth of 7.4% with growth achieved across all divisions:
• • Uniphar Pharma: 20.5% gross profit growth of which 20.2% is organic. This strong performance highlights our operational capabilities in the On Demand business coupled with an excellent performance in Pharma Services.
  • Uniphar Supply Chain & Retail: 8.1% gross profit growth of which 3.0% is organic. The division continues to perform well capitalising on robust market demand and our strong customer service offering.
  • Uniphar Medtech: 3.4% gross profit growth, all of which is delivered organically. This growth is delivered on the back of a very strong comparator in 2023 with full year growth for 2024 expected to be in line with medium-term targets.
• Robust cash flow performance with reported free cash flow conversion of 144%. When adjusted for temporary working capital benefits in June 2024, the adjusted free cash flow is within our target range of 60% - 70%. The favourable working capital timing benefits arise from the growth in the Pharma Services business unit that has led to an increase in prepayments on certain programmes.
• Net bank debt fell in the period to €143.6m from €149.9m in December 2023 representing a leverage multiple of 1.5x. The Group's strong Balance Sheet provides long-term strategic and financial flexibility with a revolving credit facility of €400m together with an additional uncommitted accordion facility of €150m.
• The new divisional structure announced in 2023 has enabled the divisions to capitalise on the attractive growth opportunities in our target markets and better align with our customers and stakeholders during this next phase of growth.
• M&A remains an objective of the Group in delivering its medium-term growth targets with the Group continuing to maintain an active pipeline of opportunities. The acquisition of the McCauleys Pharmacy Group was completed in 2023 and is now integrated into the Group, delivering expected synergies and elevating our retail pharmacy offering.
• The Group's strategic capital expenditure in a state-of-the-art distribution facility in Ireland in addition to the technology investment programme continue to progress well. Once completed, the investment will provide the infrastructure to meet growing market demands by doubling existing capacity levels and future proofing the market leading Supply Chain & Retail division whilst also enabling us to scale our global pharma platform.
• Sustainability remains a key focus for the Group and progress continues to be made across the five sustainability pillars that define our approach. SBTi targets have been validated in 2024 with our climate ambition of at least a 50% reduction in our absolute Scope 1 & 2 emissions by 2030.

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Ger Rabbette, Uniphar Group Chief Executive Officer said:

"Uniphar has delivered a strong first half, with gross profit growth of almost 10% year on year. We are seeing the benefit of the hard work we have put in recently to build the foundations for the next stage of growth. The strategic investments we are making in infrastructure and IT will further improve our ability to generate organic growth and give us a stronger platform for integrating and achieving synergies from new acquisitions. We are confident that we will achieve our ambitious target of €200m EBITDA in the medium-term."

Analyst presentation

A conference call for investors and analysts will be held at 9am (BST), today, 3 September 2024. Analysts and investors who wish to participate should visit www.uniphar.ieto register.

A copy of the presentation and announcement will be available on our website at the time of the call.

Contact details

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Cautionary statement

This announcement contains certain projections and other forward-looking statements with respect to the financial condition, results of operations, businesses, and prospects of the Uniphar Group. These statements are based on current expectations and involve risk and uncertainty because they relate to events and depend upon circumstances that may or may not occur in the future. There are a number of factors which could cause actual results or developments to differ materially from those expressed or implied by these projections and forward-looking statements. Any of the assumptions underlying these projections and forward-looking statements could prove inaccurate or incorrect and therefore any results contemplated in the projections and forward-looking statements may not actually be achieved. Recipients are cautioned not to place undue reliance on any projections and forward-looking statements contained herein. Except as required by law or by any appropriate regulatory authority, the Uniphar Group undertakes no obligation to update or revise (publicly or otherwise) any projection or forward-looking statement, whether as a result of new information, future events or other circumstances.

About Uniphar plc

Headquartered in Dublin, Ireland, Uniphar is an international diversified healthcare services business servicing the requirements of more than 200 multinational pharmaceutical and medical technology manufacturers across three divisions - Uniphar Pharma, Uniphar Medtech and Uniphar Supply Chain & Retail. The Group is active in Europe, North America, APAC and MENA and delivers to 160+ countries.

The Company's vision is to improve patient access to pharmaco-medical products and treatments by enhancing connectivity between manufacturers and healthcare stakeholders. Uniphar represents a strong combination of scale, growth, and profitability.

Uniphar Supply Chain & Retail

Uniphar Supply Chain & Retail is the leading pharmaceutical wholesaler in Ireland with a growing symbol group offering of retail pharmacies. The Group's strategy for Uniphar Supply Chain & Retail is to grow our wholesale market share, our symbol group network and our own brand, in-licenced and consumer products portfolio.

Uniphar Medtech

Uniphar Medtech is a leading pan-European medical device distributor and solutions partner. The Group's strategy for Uniphar Medtech is to grow our service offering across Europe and expand our addressable market by serving new specialities and new manufacturers.

Uniphar Pharma

Uniphar Pharma operates a global business with high value services across the lifecycle of a pharmaceutical product. We enable pharma and biotech companies to bring innovative medicines to global markets and provide healthcare professionals with access to medicines they can't source through traditional channels. Our strategy is to build a leading platform to provide the specialist support and expertise needed to improve access to these medicines.

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Overview

Uniphar Group has delivered another strong performance in the first six months of 2024 achieving growth in gross profit and EBITDA. The Group grew gross profit by 9.9% which translated into EBITDA growth of 6.3%. The majority of the gross profit growth was achieved organically at 7.4% with the remainder due to acquisitions completed in the prior year. Importantly, the growth was achieved right across the Group with each division delivering organic gross profit growth.

Uniphar Pharma delivered an excellent performance with gross profit growth of 20.5% with both the On Demand and Pharma Services business units driving that growth. Uniphar Supply Chain & Retail achieved another robust performance with 8.1% gross profit growth. Excluding the impact of the McCauley Pharmacy Group acquisition, organic growth of 3.0% represents consistent growth across the division. Uniphar Medtech achieved 3.4% gross profit growth against a very strong comparator in the prior period and is confident of delivering growth in line with its medium-term target over the full year.

EBITDA has increased by 6.3% (€3.3m) to €55.9m (June 2023: €52.6m) reflecting primarily the organic growth achieved across all divisions in addition to the impact of the 2023 acquisitions. This growth at the gross profit level is partially offset with the continued investment in our teams, technology and new business opportunities which will support the delivery of the Group's medium-term objectives. Adjusted EPS of 8.1 cent is 0.1 cent (1.3%) ahead of June 2023 reflecting the increased operating profits arising from organic growth and acquisitions in the prior period partially offset by increased financing costs in the period.

Return on capital employed (ROCE) for the rolling 12-month period closed at 14.7% (June 2023: 14.7%) and is at the upper end of the Group's medium-term target of 12-15%. The reported ROCE is reflective of the investment in strategic capital expenditure that will deliver improved growth and returns in the medium term.

Technology and innovation have enabled the Group to achieve the strong market positions it has attained over recent years. Ongoing investment in technology is critical for the Group to remain the leader in our markets and deliver on our medium-term objectives. The previously announced investments in a new distribution facility in Ireland and technology upgrade programme will future proof our market leading Supply Chain and Retail division whilst enabling us to scale our Pharma platform. The project is progressing to plan with implementation scheduled to be delivered initially in a non-live environment which significantly reduces the risk on the programme.

The Group's Balance Sheet remains robust with net bank debt of €143.6m and leverage of 1.5x being well below the Group's medium-term target of not exceeding 2.5x. This strong cash performance includes the impact of favourable temporary cash flow timing movements arising from the growth in the Pharma Services business unit that has led to an increase in prepayments on certain programmes. The cash performance is notwithstanding the significant investment the Group made in strategic capital expenditure in the period. The Group's banking facility consists of a €400m revolving credit facility and €150m of an uncommitted accordion facility that supports a robust Balance Sheet to provide the Group with long-term strategic and financial flexibility.

The Group remains focused on delivering its medium-term targets outlined in 2023, specifically the ambition to double EBITDA to €200m over the period. These interim results represent progress towards that target and demonstrate the confidence and commitment of our people in achieving our medium-term objectives. Our management team have the track record of delivering on commitments and we are confident we have the right strategy, the best people and the market opportunity to continue to deliver for our stakeholders.

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Sustainability

Sustainability remains a key focus for the Group and a core principle of how we operate day-to-day. The Group has identified five sustainability pillars that define our approach and we continue to make progress against each of the pillars.

In April 2024 SBTi (Science Based Targets Initiative) validated the science-based greenhouse gas emissions reduction targets submitted by Uniphar plc to reduce absolute Scope 1 & 2 emissions by at least 50% by 2030. Furthermore, as part of our commitment to SBTi we have also submitted a target that over 70% of our suppliers (by emissions) covering purchased goods and services will have science-based targets for emissions by 2027. In order to achieve this, we have commenced an active supplier engagement programme in the period.

The Group's commitment to sustainability is reflected in our ongoing support of the 100 Million Trees project for the 2023/2024 planting season throughout Ireland. The Group also continues to focus on maintaining strong ratings from external rating agencies with our most recent ratings with CDP being "B" and MSCI being "AAA".

Current trading

Uniphar enters the second half of this year with strong trading momentum remaining confident of delivering on current year EPS expectations with the Group continuing to perform in line with the Board's expectations.

Outlook

Uniphar remains well positioned to achieve continued gross profit growth in each division in line with our medium-term targets and is confident of delivering on current market expectations for the full year.

The Group announced an ambitious target in 2023 to grow Group EBITDA to €200m over the medium-term. This target will be achieved through a combination of strong organic growth across each division complemented by earnings accretive M&A.

The medium-term targets for gross profit growth announced in 2023 also remain unchanged:

• Uniphar Pharma: Double digit
• Uniphar Medtech: High-single digit
• Uniphar Supply Chain & Retail: Low-single digit

Disciplined capital allocation remains a focus for the Group and M&A is expected to continue to play an important role in Uniphar's growth strategy. The Group has an active pipeline of acquisition opportunities to add further capability to our existing platform.

In addition to the headline EBITDA growth target, the Group's broader medium-term guidance is as follows:

• Target ROCE of 12% - 15%
• Adjusted free cash flow conversion of 60% - 70%
• Progressive dividend policy
• Net bank debt / EBITDA not to exceed 2.5x

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Acquisitions and integration update

Uniphar continues to evaluate potential acquisition opportunities and maintains an active pipeline of opportunities to further expand our capability and geographic reach. The Group maintains a disciplined approach to capital allocation and remains committed to ensuring capital is deployed in investments that deliver a Return on Capital Employed within our target range of 12% - 15% within three years.

Strategic capital expenditure

Uniphar's track record of investment in technology has been a critical enabler of the Group's transformational growth journey to date. As previously announced, the Group has commenced a multi-year strategic investment programme in an Irish-based distribution facility together with the IT platform to maximise the efficiency of the facility. This facility will incorporate the latest technologies to enable the business to drive operational efficiencies and provide the infrastructure to double current capacity levels in the Supply Chain

• Retail division. The IT investment will provide the foundation to future proof this market-leading division whilst enabling us to scale our global pharma platforms and is a key component in achieving our medium- term target of €200m EBITDA. The investment programme is progressing in line with plan.

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Principal Risks and Uncertainties

The Group's Risk Management Policy provides the framework to identify, assess, monitor, and manage the risks associated with the Group's business. It is designed to enable the Group to meet its business objectives by appropriately managing, rather than eliminating, these risks. The principal risks & uncertainties faced by the Group can be found in the 2023 Annual Report on pages 66 to 70. A copy of the Annual Report can be downloaded from our website www.uniphar.ie.

2024 Highlights

The Group continues to ensure that the risk management framework is integrated in the day-to-day activities across the business. During the period ended 30 June 2024, the Group carried out the following:

• Reviewed the Group Risk Register, updating for all the key risks facing the Group at this time; and
• Performed a review of emerging and new risks, in particular economic and geopolitical risk.

The key principal risks and uncertainties faced by the Group are summarised as follows:

Strategic Risks

• Economic and geopolitical risk - The global macroeconomic, regulatory, political, and legal environment may impact the markets in which we operate and in turn our client and supplier base. This may adversely affect the financial and operational results of the Group.
• M&A & strategic growth - Growth through acquisition and organic growth into both existing and new markets continues to remain a key strategy for the Group. Failure to integrate acquisitions successfully along with increased operational complexity in new markets may directly impact the Group's projected growth.
• Key personnel & succession planning - Failure to attract, retain and develop the skills and expertise of its people may adversely impact the Group's performance especially in constrained labour markets.
• Market perception & reputational risk - Failure to deliver in line with market expectations may result in reputational damage, impacting the Group's ability to achieve its strategic targets.
• Loss of competitive position - Failure of the Group to respond to any changes in the environment in which it operates may result in loss of market share, which may put pressure on profitability and margins.
• Environment & sustainability - The increasing global focus on environmental and sustainability governance is recognised by the Group, and by its stakeholders. Failure to appropriately assess, monitor and manage the Group's impact on the environment and the communities in which it operates may result in reputational damage, impacting the Group's ability to deliver results. Furthermore, failure to comply with mandatory reporting obligations may impact the Group's financial and operational results.
• Transformational project execution - The Group has embarked on several transformational projects that will provide the platform and capacity to grow over the coming years. Failure of the Group to effectively deliver such projects may result in cost overruns or reputational damage impacting the Group's ability to deliver strategic targets.

Operational Risks

• Cybercrime - Failure to protect against the ongoing threat of a cyber-attack could lead to a breach in security, impacting operations, financial transactions, and sensitive information. The knock-on impact from an attack on one of our business partners is also an area of risk for the Group.
• IT systems - Digital capabilities are a specific strategic offering of Uniphar. Any interruption or downtime may have a negative impact on the Group's operations, financial, and competitive positions.
• Business interruption - External factors such as natural disasters, environmental hazard or industrial disputes may result in potential lost sales and loss of customer loyalty.
• Health & safety - Failure to implement and follow proper health and safety procedures may have adverse effects on employees or patients.
• Laws, regulations & compliance - Failure to operate under any of the stringent laws and regulations the Group is subject to could result in financial penalties, reputational damage and a risk to business operations.

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Financial Risks

• Foreign currency - The Group's reporting currency is Euro. Exposure to foreign currency is present in the normal course of business in respect of the Group's operations in jurisdictions outside of the Eurozone.
• Treasury - The Group is exposed to liquidity, interest rate and credit risks. The Group is exposed to increases in interest rates and credit risks arising from changes to economic conditions.

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Business Reviews

Uniphar Supply Chain & Retail

Overview

The Supply Chain & Retail division comprises of our pre-wholesale and wholesale pharmaceutical distribution business, with approximately 1,900 community pharmacy customers and a vertically integrated model with 430 owned, franchised or supported pharmacies. Uniphar holds c.54% of the current wholesale market share and is an essential part of the national health infrastructure in Ireland.

H1 2024 performance

The Supply Chain & Retail division provides a market-leading service offering and product range to our customers which is demonstrated by another period of growth. Each of the three components of the vertically integrated business grew in the period and continues to deliver on their objectives.

Key highlights from the period include:

• 8.1% growth in gross profit of which 3.0% is organic growth.
• Continued growth in gross profit margin to 10.7% (June 2023: 10.6%).
• Good category growth in high tech and GLP-1 medicines capitalising on product category trends.
• Continued strong growth across the retail estate as the largest retail operator in Ireland.
• First year of a multi-year strategic investment programme to expand capacity in the division progressing to plan.

Supply Chain

The Wholesale business supplies critical medicines to pharmacies and hospitals in Ireland efficiently, reliably and securely to positively impact the health of patients and their families. The business performed well in the period, growing gross profit as a result of volume growth in the market combined with market share growth. Medicine shortages continue to be a feature of the market but have stabilised compared to the challenges seen in recent years. The pre-wholesale business supports pharmaceutical manufacturers with tailored and innovative distribution solutions to bring their products to the Irish market. This business performed well in the period driven by the underlying patient demand for innovative products especially high tech and GLP-1 medicines.

Retail

Our Retail pharmacy business comprises 430 pharmacies that are owned, franchised or supported by the Group. The business operates across four brands - Hickeys, McCauleys, Allcare and Life Pharmacy - and together form the largest pharmacy group in Ireland. As a vertically integrated business the Group is focused on leveraging its supplier relationships to continue to deliver market leading product offerings to meet its patient and consumer needs. The retail pharmacy business performed well in the period against the backdrop of challenging consumer sentiment. The retail business continues its digital journal with a key focus on enabling customers to fulfil their evolving healthcare needs online in a simple and easy to use manner.

Outlook

Supply Chain & Retail has consistently delivered sustained growth and innovation in recent years. The division is well positioned to deliver on its medium-term objective of low single-digit organic gross profit growth both in the current year and over the medium-term.

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