US top target for UDG deals after Trump tax shake-up

Dublin-based UDG has $500m (€424m) available for acquisitions, and said US tax changes mean it is now more likely to buy assets there.

US President Donald Trump’s tax package this year will boost UDG profits both this year and into the future, said UDG chief finance officer Alan Ralph.

“It does make the US more attractive,” Mr Ralph told the Irish Independent.

Previously known as United Drug, UDG’s core business now provides outsourced sales and marketing, drug distribution and packaging services to healthcare companies.

Acquisitions by its Sharp and Ashstead units will be to target higher-margin areas, including communications and advisory services, Mr Ralph said.

The Irish group has been listed in London since 2012, but reports its financial returns in US dollars reflecting the growing importance of that market. However, there are no plans to seek a market listing in the US. “It’s not on the radar,” said Mr Ralph.

Shares fell nearly 6pc to 878.50 pence each after the company published full-year results yesterday, reflecting a weaker-than-expected first-half performance at its second-largest business, Sharp.

The group “quite often sees shares come off” in the immediate wake of results, Mr Ralph said. He said the performance of Sharp had “ramped up” since the first quarter, but not enough to produce double-digit profit growth.

Operationally, new product validation and labour shortages in the US – including for relatively low-skilled packaging operatives, had hit the unit early in the year.

The company said Sharp is expected to deliver double-digit underlying operating profit growth in the second half of this year, but that will still only leave full-year growth in the mid-single digits compared to its earlier guidance of low double-digit growth.
“Given the lack of an upgrade to (overall) guidance and the short-term softness at Sharp, we would expect the shares to underperform today,” Liberum analysts said in a client note. “That said, we do not believe the softness at Sharp will persist and expect a bounceback year in 2019.”

UDG reaffirmed its guidance for constant currency adjusted earnings per share growth of 18pc to 21pc and said revenue rose 17pc to $568.7m last year.

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