Chairman’s Report
up a strong UK footprint
“ W in e the have last built
18 months and those businesses
are now successfully integrated and
delivering growth to the Group
”
Dear Shareholders,
This was the first year where the benefit of Uniphar’s move in
providing services to manufacturers in the larger UK market had
an impact on results. Uniphar delivered a strong performance,
trading well over the 12 months, with operating profit increasing
from €8.4 million to €9 million in the period. We finished the year
with an EBITDA of €24.7 million, up from €21 million in 2015.
Net debt at the end of the period was down significantly to
€46.1 million, bringing our gearing ratio well into line with blue
chip norms.
This result was achieved despite a major blow to the Retail
Services business in the second half of the year, when the
negative impact of the agreement between Irish Pharmaceutical
Healthcare Association (IPHA) and the Government on the
pricing of pharmaceutical products took effect. The Group
was able to absorb this impact due to the strength that has
been restored in the underlying business in the last seven years
and the Group’s growing activity in the provision of non-core
services to the pharmaceutical sector by our Manufacturer
Services business.
We made the strategic acquisitions of Star Medical Limited and
Dialachemist Limited in the UK in 2015 and added the Irish
ostomy business from Murray’s Medical Equipment Limited in
May 2016. These, when combined with Allphar, PharmaSource
and Point of Care businesses, create a portfolio of activities and
expertise which allows us to take full advantage of the growing
strategic imperative amongst pharmaceutical, biopharmaceutical
and medical device companies to outsource non-core services
to trusted service providers of scale and reach.
We have built up a strong UK footprint in the last 18 months and
those businesses are now successfully integrated and delivering
growth to the Group. We have benefitted greatly from the
accumulated trust built up between Uniphar and pharmaceutical
manufacturers over many years of strong service delivery in
pre-wholesale supply chain, to grow the UK businesses
successfully and quickly. These strong relationships with our
supply chain partners will, we believe, enable us to expand
and become a pan-European business in a 5 year time frame.
4 | Annual Report 2016
By far the biggest change to the domestic market environment
occurred in April 2016, when UDG Healthcare plc disposed
of its supply chain and wholesale businesses to McKesson
Corporation, who are also owners of Celesio, the parent
of Lloyds Pharmacy Group. This change of ownership has
created significant channel conflict, which has been
further exacerbated in February 2017 when the Lloyds
pharmacy group was moved directly under the control
of the wholesale business.
Uniphar has always sought to avoid channel conflict with its
customers. During 2016, we began the process of selling, on
a phased-basis, Uniphar-owned Allcare stores and restoring
them to independent ownership. By year end, 11 pharmacies
had been sold back to the independent community pharmacy
sector for proceeds (including deferred consideration) of just
under €19.3 million, with four more pharmacies at an advanced
stage in the sales process. Selling the pharmacies fulfils two
of Uniphar’s aims: it strengthens the independent community
pharmacy sector and allows Uniphar shareholders to recover
some value from the IPOS scheme. The stores were sold as
part of the Allcare franchise group and the new owners benefit
from the same business and marketing support, competitive
pricing and access to market intelligence as all the other 80
pharmacies under the Allcare brand.
As always, in 2016, corporate governance was a primary
consideration for the Board. In conjunction with our advisors,
we are working towards meeting all the demands of the
Combined Code and have made considerable progress in
the last year. We expect to have completed the remaining
preparations in 2017 and be in full compliance by year end.
In Manufacturer Services,
we now have a portfolio
of activities and expertise
which allows us to take
full advantage of the
growing strategic
imperative amongst
manufacturers to
outsource non-core
services to trusted
service providers of
scale and reach.
Finally, I am pleased to announce the appointment of Padraic
Dempsey, Managing Director of the Manufacturer Services
Division, to the Board with effect from 29 March 2017. Since
joining the Company in 2014, Padraic has made a significant
contribution to the growth of Manufacturer Services and I wish
him well in the role.
Outlook
Looking to 2017 and beyond, Uniphar has a firm financial
and operational foundation on which to build an international
business. Our wholesale business remains a cornerstone of what
we do and we will continue to work hard to support independent
community pharmacy. In a global pharmaceutical industry, we
believe that there is a broader international market for services;
our closeness to pharmacists and hospitals with its consequent
understanding of their needs and challenges, coupled with
our innovative use of technology, puts us in a strong position
to develop the robust, flexible, value add services required for
success in the pharmaceutical sector.
Maurice Pratt
Chairman
With our UK activities key to our European growth strategy,
the Board has been monitoring the effect of the Brexit vote in
June 2016 on the business. So far, there has been no negative
impact on trade, though the decline in Sterling has an impact
on the value of UK revenues and net assets when translated
into Euro. While it would be unwise to predict at this early
stage what the eventual effects might be, we remain cautious
but optimistic in relation to its net impact on the Uniphar Group
over the medium term.
Annual Report 2016 | 5