Uniphar Regulatory News (UPR)

Uniphar plc

2019 Preliminary Results

Uniphar plc a diversified healthcare services business announces its preliminary results for the year ended 31 December 2019.

FINANCIAL HIGHLIGHTS

· Gross profit increase of 56% to €180.6m (7% on an organic basis).

· EBITDA3 increase of 49%, from €32.2m to €48.0m.

· Return on capital employed for the year was 14.7%. (2018: 15.3%)

· Net bank cash of €26.6m as at 31 December 2019 (2018: net bank debt of €152.9m).

· Dividend of €2.0m proposed in respect of period from IPO to 31 December 2019, subject to approval at AGM.

STRATEGIC AND OPERATIONAL HIGHLIGHTS

· Strong gross profit growth across all trading divisions and geographies, with 7% organic growth.

· 52% of gross profit from growth divisions (Commercial & Clinical and Product Access): driving Group gross margin from 8.2% to 10.8%.

· IPO Complete in July 2019: successful dual listing on the Euronext Growth (Dublin) and AIM (London) markets.

· Durbin Acquisition: key strategic acquisition of Durbin4 completed providing a global platform in Product Access and integration progressing in line with plan.

· Entry into the Nordics: important milestone achieved with Uniphar's successful entry into the Nordics through the acquisition of EPS Group5.

1. Additional information in relation to Alternative Performance Measures (APMs) are set out on pages 46 to 49.

2. Constant currency growth is calculated by applying the prior period's actual exchange rate to the current period's result.

3. IFRS 16 "Leases" was adopted from 1 January 2019. For comparative purposes, EBITDA has also been presented excluding the impact of the adoption of IFRS 16.

4. Durbin plc and Durbin inc ("Durbin").

5. EPS Vascular AB, EP Endovascular AB and EPS Vascular OY ("EPS Group").

Ger Rabbette, Uniphar Group Chief Executive Officer said:

"Our 2019 results reflect a very strong performance by the Group, with €48m EBITDA in line with the Board expectations. We have achieved 56% growth in reported gross profit, 7% of which is organic. Our Product Access and Commercial & Clinical divisions continue to be the key growth engines for the Group and for the first time contributed over 50% of gross profit. Supply Chain & Retail saw strong volume growth outperforming the market.

The successful IPO of Uniphar in July provided the Group with a robust capital structure and strong liquidity at year end.

As previously advised, we continue to monitor and respond to Covid-19 developments, cognisant of the vital role Uniphar plays in the healthcare ecosystem, in terms of maintaining continuity in the supply and distribution of much needed medicines, medical devices and related services.

Our highly committed staff are managing the situation with dedication and resilience and will continue to be essential in delivering our strategy in the medium term.

Our strategic developments in 2019 have positioned us well to achieve our strategic objective of doubling EBITDA within 5 years of IPO."

Analyst presentation

A presentation for investors and analysts will be held by conference call at 9am, today, 27 March 2020. To register for the call please visit www.uniphar.ie .

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

Contact details

About Uniphar Group plc

Headquartered in Dublin, Ireland, Uniphar plc is an international diversified healthcare services business servicing the requirements of more than 200 multinational pharmaceutical and medical technology manufacturers across three divisions - Commercial & Clinical, Product Access and Supply Chain & Retail. With a workforce of more than 2,200, the Group is active in Ireland, the UK, Benelux, the Nordics and the US.

The Group'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.

Commercial & Clinical

In Commercial & Clinical the Group provides sales, marketing & distribution solutions to multinational pharmaceutical and medical device manufacturers on an outsourced basis. Active in Ireland, the UK, Benelux, and the Nordics, the Group is growing with its clients to provide pan-European solutions. Uniphar has built a fully integrated multi-channel solution that is supported by highly experienced, clinically trained teams to deliver exceptional outcomes for all clients.

Product Access

In Product Access the Group is growing two distinct service offerings: 1) "On Demand Access", which are pharmacy led solutions for sourcing and supplying unlicensed medicines to meet the needs of both retail and hospital pharmacists; and 2) "Exclusive Access", which are manufacturer led solutions for controlling the release of speciality medicines for specifically approved patient populations in agreed markets. The Group currently delivers product access solutions to more than 160 countries globally.

Supply Chain & Retail

Uniphar is an established market leader in Ireland with c.50% market share in the wholesale/hospital market, supported by a network of 287 owned, franchised and symbol group pharmacies. The business supports the diverse customer base through the provision of strong service levels coupled with innovative commercial initiatives. Supply Chain & Retail is an Irish only business for the Group, although the manufacturer relationships and infrastructure are utilised for the benefit of the growth divisions.

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 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, 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.

Overview

2019 was a transformative year for Uniphar and a significant milestone in our history. Having successfully completed our listings in Dublin and London in July, we are now well positioned to deliver the Group's strategy of doubling 2018 pro-forma EBITDA within five years from IPO.

The structures are in place for our two growth divisions, Commercial & Clinical and Product Access, and the Group has made great progress against its strategic objectives, with the acquisition of Durbin and the entry into the Nordic market. In 2019, the growth divisions delivered 52% of the Group's gross profit, increasing from 40% in 2018. Additionally, gross profit generated from outside of Ireland more than doubled in the year, with the expansion of the pan-European footprint in Commercial & Clinical, and the global platform now in place in Product Access following the acquisition of Durbin.

The Uniphar platform seeks to provide Commercial & Clinical and Product Access solutions to meet the growing needs of pharmaceutical and medical device manufacturers across the lifecycle of their products and is underpinned by the following structural growth drivers:

· More complex manufacturer needs for commercialisation and distribution of speciality pharmaceutical and medical device products.

o By 2023 speciality pharma is forecast to grow to 50% of total global pharma sales by value (from 11% in 1997 and 43% in 2017).

· Continued strong growth in outsourcing of non-core activities by manufacturers, including the commercialisation of speciality products and access to niche markets.

o The European contract sales outsourcing market is forecast to grow from €1.6b in 2018 to €2.3b in 2022.

· Highly fragmented European market for the commercialisation and supply of pharmaceuticals and medical devices.

o Individual country regulatory regimes and cultures (language etc.) make Europe a very challenging geography for manufacturers to serve.

Key to the delivery of this strategy has been;

1. The formation of a medical device operating unit within Commercial & Clinical through the acquisition of Sisk Healthcare in 2018;

2. The acquisitions of medical device distributors EPS Group and M3 Medical in 2019, adding to the acquisitions of Sisk Healthcare, Macromed and Angiocare in 2018;

3. The expansion into the Nordics through the acquisition of EPS Group; and

4. The acquisition of Durbin in July 2019, a specialist supplier of pharmaceuticals with offices in the UK and the US, providing a global platform in Product Access, delivering to over 160 countries in both the On Demand and Exclusive Access sectors.

The Group has strong established relationships with 7 of the top 10 pharma companies and 6 of the top 10 medical device companies. Following the completion of the Durbin acquisition, Uniphar has a workforce in excess of 2,200 across Europe and the US and delivers unlicensed and specialty medicine to over 160 countries.

Group revenues increased by 17% to €1,665.3m (2018: €1,417.9m). Gross profit increased by 56% to €180.6m (2018: €115.7m), driven by 7% organic gross profit growth, the full year benefit of the Group's 2018 acquisitions and a contribution from acquisitions in 2019. The improvement in the Group's gross margin, from 8.2% to 10.8% is primarily driven by the strategy of expanding into higher growth, higher margin businesses.

This has resulted in strong EBITDA performance of €48.0m (2018: €32.2m). These figures are stated excluding the adoption of IFRS 16 ("Leases"), which increases the Group's reported EBITDA by €10.6m to €58.6m. Basic EPS is now 11.5 cent per share increasing from 7.3 cent in 2018, with adjusted EPS of 14.3 cent in 2019, compared to 15.0 cent in 2018. The lower adjusted earnings per share in 2019 reflects the improved underlying trading performance of the Group, offset by the increase in the weighted average number of shares in issue during the year as a result of the IPO. Adjusted EPS for 2019 was 10.1 cent when calculated on the basis that all IPO and Sisk warrant shares are in issue for the full year, the comparable figure in 2018 calculated on the same basis would be 6.9 cent.

Return on capital employed ("ROCE") for the period was 14.7%, performing at the upper end of the Group's medium-term target.

Following a strong cash performance during the year and our successful IPO, the Group now has a positive net bank cash position of €26.6m (2018: net bank debt €152.9m).

The strategic priority continues to be on expanding the Group's pan-European commercial offering and developing its global Product Access capabilities to meet the increasing needs of speciality products and innovative medical technologies.

Current trading and outlook

Having delivered an excellent year in 2019, we are well positioned to deliver the plan in the coming year, excluding any potential disruption due to Covid-19.

While we continue to monitor ongoing Covid-19 developments, performance is ahead of our expectations for the first two months of 2020, and there has been limited disruption to our business up to now. As we prepare for the full impact of the Covid-19 crisis, we expect to continue to see increased volumes across the Group, with likely increases in cost to serve as we invest in additional resources to manage significantly higher volumes, while at the same time dealing with reduced availability of manpower due to potential sick leave, self-isolation or quarantine situations arising. Due to reprioritisation of resources within hospitals and other healthcare facilities we are preparing for a possible delay in medical device revenue if certain 'non-urgent' elective surgeries have to be postponed. Using currently available information our best estimate, of a three month disruption, could result in a reduction of 2020 EBITDA in the region of €5m. We would, however, expect that this would be recovered in future periods as and when healthcare systems return to normal.

Outside of Covid-19 preparedness, our priorities for 2020 include the continued integration of Durbin and growth of Product Access, continued integration of our Commercial & Clinical acquisitions, further geographic expansion and to further grow our market share in Supply Chain & Retail. Uniphar is well positioned to deliver continued organic growth across all divisions in line with its medium-term outlook, with the additional benefit of the full year impact of recent bolt-on acquisitions. Our medium-term divisional organic gross profit growth guidance remains unchanged:

· Product Access: Double digit

· Commercial & Clinical: Mid single digit

· Supply Chain & Retail: Low single digit

We are confident we have the strategy, the market opportunity, the platform, the competitive edge, and the team in place to double 2018 pro-forma EBITDA within five years from IPO.

Acquisitions and integration

During the year, Uniphar completed one key strategic acquisition to build a global platform for Product Access, two Commercial & Clinical acquisitions as part of the strategy to expand our pan-European footprint and the acquisition of 17 retail pharmacies in Supply Chain & Retail.

Commercial & Clinical

The acquisitions of M3 Medical and EPS Group continue the pan-European growth strategy of Commercial & Clinical and marks the Group's entry into the Nordic market.

The combination of these acquisitions and the Group's existing medical device businesses, ensures Uniphar is one of the largest independent sales, marketing and distribution companies in our targeted speciality medtech and pharma sectors. Commercial & Clinical now has a significant pan-European footprint across Ireland, the UK, Benelux, and the Nordics.

Product Access

Durbin represents a strategic acquisition for the Group, providing the platform for Uniphar to become a leading global player in the provision of On Demand and Exclusive Access services. Durbin has approximately 45 years' experience in shipping unlicensed and hard-to-find medicines and has built up significant global capability in managing access programmes for pharmaceutical manufacturers. The acquisition provides Product Access with global capabilities in particular in the areas of regulatory expertise, distribution, sourcing and sales. Through their offices in key hubs in the UK and the US, Durbin ship medicinal products to over 160 countries across the globe, Uniphar's distribution facilities in Ireland further enhances the Durbin proposition, particularly post Brexit.

Supply Chain & Retail

During 2019, the Group completed the acquisition of 17 retail pharmacies which have been operating under the Allcare and Life brands throughout the Republic of Ireland. These newly acquired pharmacies, along with the pharmacies acquired as part of the Bradley's acquisition in 2018, have achieved strong gross profit growth year on year, demonstrating the expertise, support and purchasing power which the Uniphar symbol group offering brings to pharmacies under its management.

Uniphar IPO

The Group successfully listed on the AIM and Euronext Growth markets of the London Stock Exchange and Euronext Dublin, respectively on 17 July 2019. The IPO price was set at €1.15 per share, and the market capitalisation on the day of Admission was approximately €310m. The total gross proceeds from the IPO of €139.4m will enable the implementation of the Group's medium-term strategy.

Principal Risks & 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 and uncertainties faced by the Group were outlined in our IPO Admission Document (pages 44 - 56). The principal risks and uncertainties for the current financial year are summarised below.

· Covid-19 - Business disruption arising out of the spread of the Covid-19 virus. This includes, but is not limited to, supply chain disruption, postponement of certain elective surgeries, curtailment of travel and impact on staff.

· Brexit - Uncertainty and complexities as to the future fiscal and regulatory landscape in the United Kingdom may have a negative impact on supply and trade.

· Acquisitions - Failure by the Group to identify, complete and integrate acquisitions successfully may directly impact the Group's projected growth.

· Economic & 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.

· Key personnel & succession planning - Failure to attract, retain and develop the skills and expertise of key individuals.

· Market perception & reputational risk - Failure to deliver in line with market expectations may result in reputational damage.

· IT systems - Interruption or downtime may have a negative impact on the Group's operations, financial conditions and competitive position.

· Cybercrime - Failure to protect against a cyber-attack could lead to a breach in security.

· 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 risk to business operations.

· Foreign currency - The Group operates outside the Eurozone and, therefore is exposed to foreign exchange risk.

· Treasury - The Group is exposed to liquidity, interest rate and credit risks.

· Inventory losses & provisions - Inventory losses may occur due to theft, loss, fire, spoilage of stock and obsolescence.

Operational overview

Commercial & Clinical

Overview

Commercial & Clinical provides outsourced sales, marketing and distribution solutions to pharmaceutical and medical device manufacturers. The division is focused on the commercialisation of speciality brands and on building a pan-European presence. With a workforce of over 900 across Europe, supporting more than 200 brands for 70 key pharmaco-medical manufacturer clients, Commercial & Clinical represents 42% of the Group's gross profit in 2019.

2019 Performance

Reported gross profit has more than doubled in 2019. This has primarily been achieved through:

· The benefit of a full year of earnings from Sisk Healthcare and Angiocare.

· Scaling the division and expansion in Europe, entering Benelux (2018) and Nordics (2019).

· Organic growth of 5% through focusing on growing our customer base in existing geographies and bringing existing customers into new geographies.

· Increasing the number of HCP interactions by approximately 70% in 2019 to over 580k interactions.

· Strong organic growth of 16% in pharma. This is driven primarily across Ireland and the UK with a combination of leading and emerging pharmaceutical clients.

· Growth in our multi-channel enabled solutions which is underpinned by a suite of digital capabilities (organic growth of 35% for the year in digital).

· We now represent 23 manufacturers in more than one geography.

Medtech

Uniphar provides a fully integrated solution for our clients across sales, marketing and distribution of medical devices. We are focused on building in-depth therapeutic expertise across several high value market opportunities. Medtech has grown significantly through the acquisitions of Sisk Healthcare, Macromed (UK) and Angiocare (Benelux) in 2018. In 2019, the business expanded into the Nordics through the acquisition of EPS Group. The 2018 acquisitions have been successfully integrated and are performing well, with the Nordics integration underway.

The medtech business has represented 90% of its top 20 clients for more than nine years, with significant opportunity for organic growth on a pan-European basis.

Pharma

Our pharma business unit focusses on providing insight-driven, multi-channel solutions for pharmaceutical partners. This allows Uniphar to engage with healthcare professionals in a manner which is most convenient for them and to deliver clear, targeted information that helps them to understand better how a particular specialist product might benefit their patient cohort. Uniphar's digital solutions provide a compelling alternative to in-house sales or procuring a more traditional CSO solution. In 2019, our multi-channel digitally enabled solutions grew organically by 35%.

Outlook

The expansion into Benelux and the Nordic markets have been successful and provides the opportunity to grow long-standing manufacturer partners into new geographies as well as providing a multi geography platform to new clients. In the medium term, the Group is focused on identifying further bolt on acquisitions in European markets to further grow our pan-European platform. Due to ongoing Covid-19 developments, hospitals and other healthcare facilities may reprioritise resources and as such we are preparing for a possible delay in medical device revenue if certain 'non-urgent' elective surgeries have to be postponed. We would, however, expect that this would be recovered in future periods as and when healthcare systems return to normal. In Pharma, our mutli-channel account management and digital capabilities are proving valuable and offer the Group alternatives to in-person visits across our contract sales teams.

Product Access

Overview

Product Access specialises in two primary business areas: (i) On Demand Access, i.e. sourcing and supplying unlicensed and difficult to source medicines for specialist importers and pharmacy customers, and (ii) Exclusive Access, i.e. managing the release of speciality medicines for pharmaceutical manufacturers to specific, approved patient populations.

2019 Performance

The division delivered 66% reported gross profit growth in 2019. This was driven by:

· The acquisition of Durbin in 2019 which provides a global platform for Product Access, expanding our reach to over 160 countries while adding significant capability in regulatory affairs, compliance and logistics on a global basis.

· Strong organic growth of 16% underpinned by a workforce of now more than 170, supplying more than 5 million units to over 160 countries on an annual basis.

· Managing some of the highest profile and complex Managed Access Programmes globally (over 40 MAPs).

· Uniphar's digital platform was a key growth driver for the year with now over 30,000 patients enrolled and over 7,000 products available for retail and hospital pharmacy customers to access easily.

On Demand

The On Demand service offering provides access to unlicensed or difficult to source medicines. A team of pharmacy technicians and specialist colleagues consult with customers on their requirements, providing a value-added service to pharmacists and working with them to source medicines to offer solutions to their patients. Uniphar's e-commerce platform enables this demand to be met in a highly efficient way with over 7,000 products presently listed.

Uniphar through Durbin has now positioned itself as a major supplier of unlicensed medicines to specialist importers around the globe. The integration of Durbin has given Uniphar a far reaching customer network for unlicensed medicines which enables the continued growth of our geographic footprint and global capabilities.

Exclusive Access

Uniphar's administration of MAPs allow pharmaceutical companies to provide medicines to patients when a product has not yet been licensed in a jurisdiction, or has been licensed, but is not yet eligible for reimbursement by the relevant authority.

Some of the higher profile MAPs we are currently managing include:

1. Global MAP to treat spinal muscular atrophy in infants (gene therapy).

2. Global MAP for a medicinal cannabis treatment.

3. European MAP for an epilepsy therapy early access program across Europe.

Outlook

Uniphar's ability to offer an integrated solution to manage speciality products across their entire lifecycle is a key differentiator and allows us to fill the role of a trusted global partner for manufacturers, particularly in the case of specialist and orphan drugs which tend to require bespoke solutions and a high level of expertise. The combination of strong relationships, market leading digital platforms and strong financial management capabilities, together with Durbin's excellence in global regulation and distribution, provides a compelling offering to manufacturers. Covid-19 has not had a negative impact on divisional performance to date and we continue to monitor developments closely.

Supply Chain & Retail Services

Overview

Supply Chain & Retail operates two divisions 1) pre-wholesale and wholesale and 2) retail pharmacy. Uniphar operates in a highly concentrated Irish pre-wholesale and wholesale market. We are an established market leader in supply chain in Ireland with c.50% of the wholesale market servicing retail and hospital pharmacies, supported by a network of 287 owned and franchised pharmacies and symbol group members. There are c.1,800 pharmacies in Ireland of which approximately 65% are independent. The Uniphar symbol group of pharmacies, offer a service focused on enabling community pharmacists to compete with the larger and multi-national owned chains, supporting them with services such as a B2B e-commerce hub, and a range of consumer and own brand products. Experienced teams also provide advice and support on retail category development through a strong focus on training and category management and a range of other back office support services including regulatory audit support, claims and marketing.

The Group provides an essential national service supplying medicines to pharmacies and hospitals in Ireland, the importance of which is highlighted during the ongoing Covid-19 crisis. The Group has built on its market leading position with a workforce of close to 1,200, a high-tech distribution complex of over 160,000 sq. ft., and a bespoke distribution facility of over 100,000 sq. ft.

2019 Performance

This division delivered 23.8% growth in reported gross profit for the year. This was underpinned by organic gross profit growth of 8%, outperforming our expectations. Key drivers include:

· Significant uplift in the profitability of the Bradley's chain of pharmacies which was acquired in 2018 (distressed at time of acquisition).

· Volume growth of 12%, which significantly outperformed the market rate of 4%.

· Return on investments in owned retail pharmacies and the development of select consumer brands, both of which have been successful, with retail sales growing by 142% and consumer sales growing by 27% year on year.

· Transition of back office and customer facing activities to digital platforms has been highly effective in lowering costs and improving efficiency.

· In August 2019, the Group completed the acquisition of 15 Inischem retail pharmacies, which have been operating under the Allcare brand throughout the Republic of Ireland, with the acquisition of an additional two retail pharmacies completed in Q4 of 2019. These pharmacies, along with the Bradley's pharmacies have been integrated into the Group's existing pharmacy network and have achieved strong gross profit growth year on year. This demonstrates the benefit of the expertise, support and purchasing power which the Uniphar symbol group offering brings to pharmacies under its management.

Outlook

While 2019 outperformed, we expect to return to low single digit growth in 2020 in line with our medium-term guidance. The Group's key assets - high tech distribution facilities, longstanding manufacturer relationships and scalable digital infrastructure were developed within Supply Chain & Retail or from insights based on the division's operations and experienced personnel.

The strategy for Supply Chain & Retail is to continue to leverage these key assets to maintain market leadership in Ireland, while supporting increasing service levels and managing continued operational and financial efficiency within this division.

Covid-19 has not had a negative impact on divisional performance to date and we continue to monitor developments closely. However, the outbreak has demonstrated the significance of the role Uniphar plays in the national healthcare infrastructure in Ireland and also highlighted some of the constraints when demand increases exponentially for a prolonged period. To continue to capitalise on our growth and ensure we can offer a robust service as part of the healthcare infrastructure we will invest in a regional facility in 2020.

Financial Review

Summary financial performance

Revenue

Revenue growth of 17% across all three divisions, was achieved through a combination of strong organic growth, together with the impact of the 2018 Commercial & Clinical acquisitions, and the acquisition of Durbin during 2019 in Product Access.

Gross profit

The increase in revenues, coupled with significant growth in our gross margin percentage from 8.2% to 10.8% due to improvements in our revenue mix principally in the two growth divisions, contributed to 56% growth in gross profit during the period (7% on an organic basis). The improvement is primarily driven by the strategy of expanding into higher growth, higher margin businesses, with the acquisitions completed during 2018 and 2019, in the two growth divisions, Commercial & Clinical and Product Access. Gross Profit generated from outside of Ireland more than doubled in the year, with the expansion of the pan-European footprint in Commercial & Clinical, and also reflecting the new geographies which we are operating in following the acquisition of Durbin in Product Access.

Divisional gross profit

EBITDA

Year on year, EBITDA has increased by €15.8m (49%) to €48.0m, benefiting from the increase in gross profit. The impact of the adoption of IFRS 16 resulted in a further increase of €10.6m to €58.6m.

Exceptional items

Exceptional costs incurred during the year of €5.3m are primarily due to acquisition related costs, and costs associated with our IPO, and are partially offset by the release of deferred contingent consideration following a review of the expected performance against earn-out targets. See note 3 in the financial statements for further details.

Earnings per share

The basic earnings per share amounted to 11.5 cent, increasing from 7.3 cent in 2018, with the increase driven by the improved trading performance of the Group and the reduction in exceptional costs in 2019.

Adjusted earnings per share reduced to 14.3 cent in 2019, from 15.0 cent in 2018. The lower adjusted earnings per share in 2019 reflects the improved underlying trading performance of the Group, offset by the increase in the weighted average number of shares in issue during the year as a result of the IPO.

The weighted average number of shares in 2019 was 183,546,000 compared to 119,044,000 in 2018, following our successful IPO in July. The full year dilutionary impact of the IPO on the weighted average number of shares will come through in 2020.

Impact of IFRS 16 'Leases'

IFRS 16 is effective for annual reporting periods beginning on or after 1 January 2019. The Group has applied IFRS 16 from its effective date using the cumulative catch up approach. The adoption of IFRS 16 has resulted in cost of sales reducing by €1.1m, and operating expenses reducing by €9.4m for the year ended 31 December 2019, as before IFRS 16, accounting standards required the recognition of operating lease expenses in the Income Statement.

Depreciation and finance costs as currently reported in the Group Income Statement have increased by €9.5m and €2.6m respectively, as under the new Standard the right-of-use asset has been capitalised and is now being depreciated over the term of the lease with an associated finance cost applied annually to the lease liability.

On adoption at 1 January 2019, a right-of-use asset of €80.9m has been recognised in the Group Balance Sheet included within property, plant and equipment, with a corresponding lease liability recognised for this amount in the Group Balance Sheet.

Cash flow and net debt

2019 showed a strong cash performance driven by free cash flow conversion of 82.6%, with the Group's net bank cash position being €26.6m (2018: net bank debt €152.9m).

The increase in our cash balances of €179.5m reflects the successful completion of the IPO in July 2019, and strong cash generated by our operating activities which includes the successful execution of the non-recourse financing arrangement unlocking €68.0m of cash in Supply Chain & Retail for reinvestment.

The Group has remained focused on strong working capital management, and together with the successful execution of the non-recourse financing arrangement which generated a cash inflow of €68.0m, is reflected in cash generated from our operating activities of €107.0m. Free cash flow conversion in 2019 of 82.6% is calculated excluding the impact of the non-recourse financing arrangement. The high conversion in 2019 reflects one off timing impacts which will unwind in early 2020. The Group's medium-term free cash flow conversion target is 60-70%.

The net cash outflow from investing activities consisted of acquisitions completed during the year of €38.3m, deferred consideration of €1.3m, and capital investment of €6.4m primarily in Commercial & Clinical. The Group completed one strategic (Durbin), and two bolt-on acquisitions (EPS Group, and M3 Medical), as part of our strategy to build a global platform for Product Access and expand the European footprint of Commercial & Clinical. The Group also completed the acquisition of 17 retail pharmacies in Supply Chain & Retail.

Cash generated from financing activities of €42.1m was principally due to the net proceeds from our successful IPO in July of €127.3m. This was partially offset by the repayment of banking facilities (including invoice discounting facilities), and the payment of the principal element of lease liabilities.

Taxation

The effective tax rate has increased from 13% in 2018 to 17% in 2019, primarily due the increase in profits generated from outside of Ireland in higher tax rate jurisdictions. The effective tax rate is calculated as the income tax charge as a percentage of the profit before tax and exceptional items.

Return on capital employed ('ROCE')

The Group's ROCE was 14.7% for the year (2018: 15.3%). Including the impact of IFRS 16, ROCE was 15.2%. This modest decrease in ROCE versus the prior year principally reflects the impact of the substantial acquisition spend during the current and prior year as the Group invested in the growth divisions and entered new geographies.

Dividends

The Board made a commitment at the time of IPO to pay a dividend in 2020 in respect of the period from IPO to 31 December 2019. Following another set of positive results for the Group, the Directors are proposing a final dividend of €2.0m. Subject to approval at the Annual General Meeting, it is proposed to pay the dividend to ordinary shareholders on the Company's register on 1 May 2020.

The Board intends to adopt a progressive dividend policy to reflect the expectation of future cash flow generation and long-term earnings potential of the Group.

Non-recourse financing arrangement

In December 2019 the Group entered into a new receivables purchase arrangement with its existing banking partners, which generated a cash inflow of €68.0m. Under the terms of this non-recourse agreement, the Group has transferred substantially all credit risk and control of certain trade receivables mainly within Supply Chain & Retail, unlocking the cashflow value for further reinvestment. For further detail see note 16.

IPO on AIM and Euronext Growth

The Group successfully listed on the AIM and Euronext Growth markets of the London Stock Exchange and Euronext Dublin on 17 July 2019. As part of the placing, 117,391,304 new ordinary shares were issued by the Company, at a listing price of €1.15 per share, resulting in gross share proceeds from the issuance of these ordinary shares of €135.0m. Market capitalisation on the day of Admission was approximately €310m.

Subsequently, on 16 August, the over-allotment option was exercised in respect of 3,818,004 ordinary shares in the Company, resulting in an additional €4.4m of gross proceeds being received by the Company, bringing the total gross proceeds from the placing to €139.4m.

Group Income Statement

for the year ended 31 December 2019

Group Statement of Comprehensive Income

for the year ended 31 December 2019

Group Balance Sheet

as at 31 December 2019

Group Cash Flow Statement

for the year ended 31 December 2019

Group Statement of Changes in Equity

for the year ended 31 December 2019

Notes to the Consolidated Financial Statements

Basis of preparation

The preliminary results announcement was approved by the Board of Directors. The Annual Report and financial statements will be approved by the Board of Directors and reported on by the auditors in due course. The 2019 financial information set out in this document is unaudited does not constitute full statutory financial statements. The comparative 2018 financial information set out in this document has been extracted from the audited financial statements of Uniphar plc for the financial year ended 31 December 2018. The consolidated financial statements of Uniphar plc and its subsidiaries (the 'Group') have been prepared in accordance with International Financial Reporting Standards (IFRS) and interpretations issued by the IFRS Interpretations Committee (IFRS IC) applicable to companies reporting under IFRS, as adopted by the EU. The consolidated financial statements comply with IFRS as issued by the International Accounting Standards Board (IASB), as adopted by the EU and as applied in accordance with the Companies Acts 2014.

The financial information in the consolidated financial statements has been prepared on a basis consistent with that adopted for the year ended 31 December 2018. With the exception of our accounting policy for leases under IFRS 16 which is detailed in note 1, the accounting policies applied in these consolidated financial statements are the same as those applied in the 2018 Annual Report.

The preparation of consolidated financial statements requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. With the exception of the adoption of IFRS 16 "Leases" which is discussed in note 1, the areas involving a high degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in the Group's Annual Report for the year ended 31 December 2018 in note 1 on pages 52 and 53.

The Group's consolidated financial statements are prepared for the year ended 31 December 2019. The consolidated financial statements incorporate the Company and all of its subsidiary undertakings. A subsidiary undertaking is consolidated by reference to whether the Group has control over the subsidiary undertaking. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity.

Uniphar plc is incorporated in the Republic of Ireland under registration number 224324 with a registered office at 4045 Kingswood Road, Citywest Business Park, Co. Dublin, D24 V06K.

Going Concern

The Directors have made appropriate enquiries and carried out a thorough review of the Group's forecasts, projections and available banking facilities, taking account of possible changes in trading performance and considering business risk.

In light of the ongoing Covid-19 developments, the Group has performed an impact assessment taking into account expected impacts of the pandemic. Uniphar plays a significant role in the healthcare sector and is classified as part of the critical infrastructure by the national Government, ensuring continuity in the supply and distribution of much needed medicines, medical devices and related services. We expect to continue to see increased volumes in Supply Chain & Retail, with likely increases in costs due to investment in additional resources to manage significantly higher volumes. Due to reprioritisation of resources within hospitals and other healthcare facilities the Group are preparing for a possible delay in Commercial & Clinical revenue if certain 'non-urgent' elective surgeries have to be postponed.

In preparing the impact assessment a number of scenarios were considered including the impact of the pandemic over an extended period of up to 12 months. The key assumptions within each of these scenarios include increased volumes and costs for a limited period within Supply Chain & Retail, a reduction in Commercial & Clinical revenues with no corresponding reduction in costs, and no negative impact within Product Access. In all of these scenarios the assessment indicates that there is no impact on the underlying ability to meet debt repayments, comply with banking covenants and retain sufficient liquidity to meet our financial obligations as they fall due.

There are over three years remaining on our existing banking facility, ensuring the Group has access to capital on an ongoing basis. Following our successful IPO in July 2019, together with strong cash generation, and the execution of the non-recourse financing arrangement, the Group has a robust capital structure, with unrestricted cash of €114.0m, and a positive net bank cash position of €26.6m at 31 December 2019.

Having regard to the factors noted above, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. As a result, the Directors believe that it is appropriate to continue to adopt the going concern basis in preparing the financial statements.

New Standards, Amendments and Interpretations

The Group has applied the following standards and amendments for the first time for their annual reporting period commencing 1 January 2019:

· IFRS 16 Leases

· Prepayment Features with Negative Compensation - Amendments to IFRS 9

· Long-term Interests in Associates and Joint Ventures - Amendments to IAS 28

· Annual Improvements to IFRS Standards 2015 - 2017 Cycle

· Plan Amendment, Curtailment or Settlement - Amendments to IAS 19

· Interpretation 23 Uncertainty over Income Tax Treatments.

The Group had to change its accounting policies as a result of adopting IFRS 16. This is the first set of the Group's financial statements where IFRS 16 has been applied. Changes in significant accounting policies are described in note 1. The other amendments listed above did not have any impact on the amounts recognised in prior periods and are not expected to significantly affect the current or future periods.

New standards and interpretations not yet adopted

Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2019 reporting periods and have not been early adopted by the Group. These standards are not expected to have a material impact in the current or future reporting periods and on foreseeable future transactions.

1. Changes in significant accounting policies

IFRS 16, published in January 2016 and effective on 1 January 2019, replaces the existing guidance in IAS 17 'Leases'. IFRS 16 eliminates the classification of leases as either operating leases or finance leases. It introduces a single lessee accounting model, which requires a lessee to recognise assets and liabilities for all leases with a term of more than 12 months and depreciation of lease assets separately from interest on lease liabilities in the income statement. The Group has applied the cumulative catch up approach and as a result there was no retrospective adjustment required.

The Group has assessed the impact on its consolidated financial statements resulting from the application of IFRS 16. The adoption of this new standard at 1 January 2019 had a material impact on the Group Income Statement and Balance Sheet as follows:

Income Statement

The adoption of IFRS 16 has resulted in cost of sales reducing by €1.1m, and operating expenses reducing by €9.4m for the year ended 31 December 2019, as the Group previously recognised operating lease expenses in either cost of sales or operating expenses (depending on the nature of the lease).

Depreciation and finance costs as currently reported in the Group Income Statement have increased by €9.5m and €2.6m respectively, as under the new Standard the right-of-use asset has been capitalised and is now being depreciated over the term of the lease with an associated finance cost applied annually to the lease liability.

Balance Sheet

At the transition date the Group has assessed all lease commitments outstanding at that date and applied the appropriate discount rate to calculate the present value of the lease commitment. The Group adopted IFRS 16 by applying the cumulative catch up approach as permitted by the Standard.

The Group has entered into leases for a range of assets, including property, plant and equipment and motor vehicles. The Group has elected to apply the recognition exemption for both short-term and low-value leases.

On adoption of IFRS 16 at 1 January 2019, a right-of-use asset of €80.9m has been recognised in the Group Balance Sheet included within property, plant and equipment, with a corresponding lease liability recognised for this amount in the Group Balance Sheet.

2019 Accounting policy under IFRS 16

The Group leases various properties, equipment and motor vehicles. Rental contracts are typically made for fixed periods of 1 to 30 years but may have extension options as described below. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants, but leased assets may not be used as security for borrowing purposes.

Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Group. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use asset is depreciated over the right-of-use assets useful life on a straight-line basis.

Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments:

· fixed payments (including in-substance fixed payments), less any lease incentives receivable

· variable lease payment that are based on an index or a rate

· amounts expected to be payable by the lessee under residual value guarantees

· the exercise price of a purchase option if the lessee is reasonably certain to exercise that option, and

· payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.

The lease payments are discounted using the interest rate implicit in the lease, if that rate can be determined, or the Group's incremental borrowing rate which is calculated using a portfolio approach, based on the nature of the lease. The weighted average lessee's incremental borrowing rate applied to the lease liabilities on 1 January 2019 was 3.1%.

The Group applied the following practical expedients when applying IFRS 16 to leases previously classified as operating leases under IAS 17.

· Excluded initial direct costs from measuring the right-of-use asset at the date of initial application

· Used hindsight when determining the lease term if the contract contains options to extend or terminate the lease.

Right-of-use assets are measured at cost comprising the following:

· the amount of the initial measurement of lease liability

· any lease payments made at or before the commencement date less any lease incentives received

· any initial direct costs, and

· restoration costs.

Extension and termination options are included in a number of property and equipment leases across the Group. These terms are used to maximise operational flexibility in terms of managing contracts. The majority of extension and termination options held are exercisable only by the Group and not by the respective lessor.

Payments associated with leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss.

Low-value assets comprise IT-equipment, small items of office furniture, and in-store equipment in our retail pharmacies.

Impact on the Group Balance Sheet

as at 1 January 2019

The following tables summarise the impact of the adoption of IFRS 16 on the Group Income Statement for the year ended 31 December 2019, the Group Balance Sheet as at 31 December 2019, and the Group Cash Flow Statement for the year ended 31 December 2019:

Impact on the Group Income Statement

for the year ended 31 December 2019

Impact on the Group Balance Sheet

as at 31 December 2019

Impact on the Group Cash Flow Statement

for the year ended 31 December 2019

2. Revenue

Segmental information

Segmental information is presented in respect of the Group's geographical regions and operating segments. The operating segments are based on the Group's management and internal reporting structures.

Geographical analysis

The Group operates in two principal geographical regions being the Republic of Ireland and the United Kingdom. The Group also operates in other European countries and the United States which are not material for separate identification.

The following is a geographical analysis presented in accordance with IFRS 8 "Operating Segments" which requires disclosure of information about country of domicile (Ireland) and countries with material revenue.

Operating segments

IFRS 8 "Operating Segments" requires the reporting information for operating segments to reflect the Group's management structure and the way the financial information is regularly reviewed by the Group's Chief Operating Decision Maker ("CODM"), which the Group has defined as the Board of Directors.

The Group operates with three divisions, being, Commercial & Clinical, Product Access, and Supply Chain & Retail. These divisions provide the operational and financial management structures that will allow the Group to continue to grow and develop successfully over the coming years.

· Commercial & Clinical provide outsourced services, specifically sales, marketing and multichannel account management to pharmaco-medical manufacturers, and distribution and support services to medical device manufacturers. Uniphar offer a fully integrated multi-channel account management solution that is supported through market data, insights and digital programmes. We integrate these programmes with our supply chain and distribution capability to provide a full end to end service to manufacturers.

· Product Access consists of two service offerings, being: On Demand Access and Exclusive Access. On Demand Access provides access to pharmaco-medical products and treatments, by developing valuable relationships and interactions between manufacturers and other healthcare stakeholders. This business operates in both the retail and hospital markets in both the Irish and UK markets. Exclusive Access provides bespoke distribution partnerships to pharmaceutical partners around key brands, with new programmes focused on speciality pharmaceutical products. Delivering a unique patient support programme that allows healthcare professionals to connect with patients, on a global basis.

· Supply Chain & Retail provides both pre-wholesale distribution and wholesale distribution of pharmaceutical, healthcare and animal health products to pharmacies, hospitals and veterinary surgeons in Ireland. The business supports the diverse customer base through the provision of strong service levels coupled with innovative commercial initiatives. Uniphar operate a network of pharmacies under the Life and Allcare brands. Additionally, through the extended Uniphar symbol group, the business provides services and supports that help independent community pharmacies to compete more effectively in an increasingly difficult environment.

Operating segments results

The Group evaluates performance of the operational segments on the basis of gross profit from operations.

The Commercial & Clinical revenue of €204,031,000 (2018: 102,558,000) consists of revenue derived from medtech of €157,691,000 (2018: 62,007,000) and pharma of €46,340,000 (2018: €40,551,000).

Assets and liabilities are reported to the Board at a Group level and are not reported on a segmental basis.

3. Exceptional charge

Deferred and deferred contingent consideration:

Deferred and deferred contingent consideration relates to €5,290,000 in respect of Clinical Pyramid Limited, and €546,000 in respect of Murrays Medical Limited. These amounts were released in the year following a review of expected performance against earn-out targets. Additionally, a provision of €585,000 has been recognised in respect of deferred consideration receivable on the disposal of a retail pharmacy.

4. Finance (income)/cost

5. Dividends

There were no dividends paid in the current year ended 31 December 2019, or the comparative period ended 31 December 2018.

The Directors have proposed a final dividend of 0.73 cent per ordinary share, subject to approval at the Annual General Meeting. This results in a total shareholder dividend of €2.0m in respect of the period from IPO to 31 December 2019. Subject to approval at the Annual General Meeting, it is proposed to pay the dividend to ordinary shareholders on the Company's register on 1 May 2020. This dividend has not been provided for in the Balance Sheet at 31 December 2019, as there was no present obligation to pay the dividend at year end.

6. Earnings per share

7. Intangible assets

8. Property, plant and equipment, and right-of-use assets

9. Assets held for sale

In 2018, a number of properties were acquired on completion of the acquisition of Bradley's Pharmacy Group. These properties are presented in the Balance Sheet at the lower of their carrying amount and fair value less any costs to sell. Uniphar plc acquired Bradley's Pharmacy Group from examinership in November 2018, and in accordance with the application of the examinership scheme arrangement acquired non-recourse borrowings of €4,000,000 which are secured by these properties.

During 2019, the Group disposed of €415,000 of properties which were previously held for sale. The remaining properties held for sale are available for immediate sale in their present condition subject to terms that are usual and customary for properties of this nature. The individual properties are being actively marketed and the Group is committed to its plan to sell these properties in an orderly manner.

The other assets acquired during 2019 relates to certain business assets acquired as part of the acquisition of M3 Medical Limited. These assets have been disposed of post year end in February 2020 for an amount equal to their carrying value, and the deferred contingent consideration attributable to the sale of these assets has now been paid.

10. Called up share capital

There are no "A" ordinary shares in Uniphar plc issued at 31 December 2019, or 31 December 2018.

Allotted, called up and partly paid shares are represented by issues to the Senior Management Team under the Uniphar Executive Share Incentive Scheme.

In June 2019, following the passing of a resolution at the Annual General Meeting, the authorised share capital of the Company was increased from €20,480,000 divided into 240,000,000 ordinary shares of 8c each and 16,000,000 "A" ordinary shares of 8c each, to €25,280,000 divided into 300,000,000 ordinary shares of 8c each and 16,000,000 "A" ordinary shares of 8c each.

During 2019, the following transactions took place:

· The conditions for vesting associated with 7,022,318 shares were met and the Company called €0.06 being the amount unpaid on each share. These shares are now fully paid and the Company received €422,000 in share proceeds (fully paid shares amounting to €562,000 less amount previously partly paid of €140,000).

· In May 2019, 750,000 ordinary shares were issued as partly paid at €0.02 per share under the Uniphar Executive Share Incentive Scheme.

· In June 2019, a further 118,607 ordinary shares were issued as partly paid at €0.02 per share under the Uniphar Executive Share Incentive Scheme. Collectively, the Company received €17,000 in proceeds associated with both share issues.

· In June 2019, the Company made a call in respect of unpaid share capital, being an amount of €0.06 per share, on 300,000 issued but not fully paid ordinary shares. These shares while remaining subject to vesting conditions are now fully paid. The Company received €18,000 as a result of the call, which when aggregated with the €0.02 originally paid up on each of those shares, gives a total paid up amount in respect of those shares of €24,000.

· In July 2019, the Company made a call in respect of unpaid share capital, being an amount of €0.06 per share, on 12,862,240 issued but not fully paid ordinary shares. These shares while remaining subject to vesting conditions are now fully paid. The Company received €772,000 as a result of the call, which when aggregated with the €0.02 originally paid up on each of those shares, gives a total paid up amount in respect of those shares of €1,029,000.

· In July 2019 as part of its admission to trading on the AIM and Euronext Growth markets, the Company issued 117,391,304 ordinary shares of €0.08 each as fully paid at €1.15 per share including share premium. In addition, following the receipt of a notice of exercise, the Company issued 18,782,808 ordinary shares of €0.08 each at €1.37 per share including share premium in full exercise and conversion of its 2018 issued share warrant.

· In August 2019 as part of the exercising of the over-allotment option attributable to the initial public offering, the Company issued 3,818,004 ordinary shares of €0.08 each as fully paid at €1.15 per share including share premium.

11. Employee benefit obligations

The pension entitlements of employees, including Executive Directors, arise under two defined benefit schemes and three defined contribution schemes and are secured by contributions by the Group to separate trustee administered pension funds in the Republic of Ireland. The trustees are responsible for the management and governance of the plans including compliance with all relevant laws and regulations. The benefits provided by the defined benefit plans are no longer linked to future salary inflation due to the accrual of pension benefit ceasing on these schemes in prior years. The Uniphar Superannuation Scheme wound up with an effective date of 1 October 2018. The assets of the scheme were distributed in line with members chosen options and no assets or liabilities remain. Any former members of these schemes still employed by the Group were offered membership of the Uniphar Group Retirement Benefits Scheme for future service benefits.

The defined benefit schemes are:

· The Cahill May Roberts Limited Contributory Pension Plan

· The Whelehan Group Pension Scheme

· The Uniphar Superannuation Scheme (wound up on 1 October 2018)

The pension charge for the year is €2,922,000 (2018: €1,558,000) comprising current service cost of €44,000 (2018: €185,000) and defined contribution scheme costs of €2,878,000 (2018: €1,373,000). The net finance income resulting from the scheme deficit/surplus is €15,000 (2018: net finance cost of €23,000).

Financial instruments held by the defined benefit schemes

At 31 December 2019 the scheme assets were invested in a diversified portfolio that consisted primarily of equity and debt securities. Scheme assets do not include any of Uniphar plc's own financial instruments, nor any property occupied by Uniphar plc. The fair value of the schemes' assets at the Balance Sheet date are shown as follows: