United Drug (LON:UDG) held a capital markets day on 27 September hosted by senior management across all divisions and regions. Below we discuss our key takeaways from this meeting.
Ashfield: Looking for gradual margin expansion
Ashfield is expected to contribute c 60% of UDG’s profits in 2016, with c 50% of business represented by the commercial and clinical segment and c 50% by healthcare communications. The UK is the most mature market with the highest outsourcing rates. The key focus is on the US, EU and Japan. Japan is the youngest market with the lowest outsourcing rates of 6.0-6.5%; UDG expects these to double by 2020/22.
Ashfield’s current operating margin of 12% after ‘pass-through’ costs is seen gradually growing thanks to the mix effect. Margins vary across businesses, with c 8-9% in commercial and clinical and mid-to-high teens in ‘comms’. Within the commercial segment, clinical solutions and call centres tend to generate higher margins and will be the focus for growth in the future.
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