Annual Report 2007 Report Annual on Focus growth United Drug plc plc Drug United
United Drug plc Annual Report 2007
Telephone: +353 1 459 8877 Telephone: Facsimile: +353 1 459 6893 Email: [email protected] www.united-drug.ie Website: United Drug House Magna Drive Magna Business Park Citywest Road Dublin 24 Contents
Our vision 1
Financial highlights 2007 2
Divisional structure 4
Directors’ and other information 6
Chairman’s statement 9
Chief Executive’s review 13
Finance review 19
Corporate social responsibility 22
Consolidated financial statements 25 United Drug plc
Our vision is to be a dynamic, leading international healthcare services company, fostering enhanced patient outcomes through partnerships with healthcare manufacturers, government agencies, providers and payors.
Focus on growth
Pharma Medical & Supply Chain Wholesale Scientific Services Craig & Hayward Endoscopy UK Blackhall
Sangers Intrapharma Budelpack plc Drug United
United Drug Wholesale Intraveno MASTA
JVA Analytical Pemberton
Mantis Surgical Pharma Logistics Contract Sales 2007 Report Annual Investments Outsourcing New Splint TD Packaging Alliance Healthcare Information Presearch UniDrug Distribution Ashfield In2Focus Pyramed Group (UDG) Ashfield Ireland Ulster Anaesthetics United Drug Distributors Ashfield USA Unitech Procon Financial highlights 2007
IFRS Intangible IFRS Intangible based amortisation Adjusted based amortisation Adjusted 2007 2007 2007 2006 2006 2006 €’000 €’000 €’000 €’000 €’000 €’000 Increase
Revenue 1,583,622 - 1,583,622 1,466,979 - 1,466,979 8%
Operating profit 60,038 6,554 66,592 54,517 2,410 56,927 17%
Profit before tax 55,773 6,554 62,327 51,776 2,410 54,186 15%
Diluted earnings per share (cent) 20.81c 2.21c 23.02c 19.14c 1.08c 20.22c 14%
Dividend per share (cent) 7.30c - 7.30c 6.35c - 6.35c 15%
United Drug believes that the adjusted operating profit, adjusted profit before tax and adjusted diluted earnings per share are more appropriate measures of the underlying group performance than those measurements set out in the primary financial statements, as this information is in a format communicated to and reviewed by the investment community. Annual Report 2007 United Drug plc
Compound average annual growth rates
% % % % 5 year 10 year 15 year 20 year
Revenue 10 15 20 19
Profit before tax 17 21 20 21
Earnings per share 15 19 14 16
Dividend per share 15 15 13 14
The information contained in the above table is based on Irish GAAP, as all historic information was not restated for IFRS.
Financial diary
Preliminary announcement of results Issued 21 November 2007 United Drug plc plc Drug United
Annual report Issued 25 January 2008
Annual General Meeting To be held 26 February 2008 2007 Report Annual
Interim dividend Paid 13 July 2007
Final dividend Payment date 27 February 2008
Divisional structure
Pharma Wholesale Contract Sales Outsourcing
United Drug Wholesale Ashfield In2Focus/Ashfield Ireland/Ashfield USA/ Provides time-critical pharmaceutical delivery Alliance Healthcare Information services, together with complementary pharmacy Provide contract sales outsourcing and sales products to retail and hospital pharmacies, and marketing services to pharmaceutical throughout the Republic of Ireland. manufacturers in the UK, the Republic of Ireland and in the USA. Sangers Provides time-critical pharmaceutical delivery Procon services, together with complementary pharmacy Provides conference services for UK products to retail and hospital pharmacies, pharmaceutical companies. throughout Northern Ireland. Medical & Scientific Craig & Hayward Unitech/Intraveno Provides time-critical delivery services of specially Provide contract distribution services, sales and prepared products manufactured to meet specific marketing and technical support to medical and patients’ prescription requirements throughout scientific equipment and consumable manufacturers the UK. in the Republic of Ireland. Supply Chain Services Unitech UK/Ulster Anaesthetics United Drug Distributors Provide contract distribution services, sales and Provides contract distribution and other services to marketing and technical support to medical and pharmaceutical and animal health manufacturers in scientific equipment and consumable manufacturers the Republic of Ireland. in the UK.
UniDrug Distribution Group (UDG) Presearch Provides contract distribution and other services to Provides contract distribution services, sales and pharmaceutical and animal health manufacturers in marketing and technical support to laboratory the UK. instrumentation and consumable manufacturers in the UK. Pemberton/Blackhall Provide sales, marketing and contract distribution Endoscopy UK services to consumer products and health and Provides medical distribution services, specialising beauty manufacturers in the Republic of Ireland. in the sales and technical support of flexible endoscopy equipment. MASTA Healthcare service provider in the travel field, Pyramed Annual Report 2007 specialising in the sale and distribution of vaccines, Provides medical distribution services, specialising medical information and provision of clinical in surgical products in the cardiology, radiology, services. neuroradiology and cardiothoracic sectors.
TD Packaging/Budelpack/PLI JVA Analytical
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Ronnie Kells Liam FitzGerald
Barry McGrane Peter Gray Karen Geoghegan
Directors’ and other information
Directors Auditor Ronnie Kells Barry McGrane R. Kells (British) KPMG Chairman Finance Director (Chairman) Chartered Ronnie Kells is Chairman and non-executive Barry McGrane joined United Drug plc in L. FitzGerald Accountants director of United Drug plc. Ronnie was 1993 and held various senior finance roles (Chief Executive) 1 Stokes Place appointed Chairman on 5 October 2005 having in the Group, including that of Company B. McGrane St. Stephen’s Green served as a non-executive director since Secretary, before being appointed Finance (Finance Director) Dublin 2 1999. Prior to joining United Drug plc, Ronnie Director in 2001. Formerly, Barry worked with C. Corbin (British) Solicitors was Group Chief Executive of Ulster Bank. Reflex Investments plc and Andersen, Dublin. A. Flynn Ronnie is also a director of Readymix plc and Arthur Cox P. Gray a number of other companies. Peter Gray Earlsfort Centre G. McGann Annual Report 2007 Earlsfort Terrace Appointed a non-executive director in 2004, K. McGowan Dublin 2 Liam FitzGerald Peter is Chief Executive of ICON plc, the J. Peter (British) Chief Executive Irish based multinational pharmaceutical Bankers development services company. Prior to Chief Executive and director of United Secretary Ulster Bank Group joining ICON plc as Chief Financial Officer, Drug plc, Liam was previously Managing George’s Quay Peter held senior positions in a number K. Geoghegan Director of United Drug Distributors having Dublin 2 of Irish public companies, including Elan joined the Group in 1993. Prior to joining Corporation plc.
United Drug plc Registered office Stockbrokers United Drug plc, Liam worked in Dimension United Drug House Marketing Limited and Jefferson Smurfit Karen Geoghegan Magna Drive Davy Group plc. Liam is currently a non-executive Company Secretary Magna Business Park 49 Dawson Street director of C&C Group plc, Chairman of Dublin 2 Citywest Road Traidlinks, and is a former Chairman of Karen joined United Drug plc in 2004 and held Dublin 24 the Marketing Society. various positions in the Group finance function before being appointed Company Secretary on Registered number 29 August 2007. Formerly, Karen worked with 12244 PricewaterhouseCoopers, Dublin. John Peter Dermot Egan Gary McGann
Chris Corbin Kieran McGowan Annette Flynn
John Peter Gary McGann Kieran McGowan Appointed a non-executive director in Appointed a non-executive director in Appointed a non-executive director in
2005, John Peter is an executive member 2004, Gary McGann was appointed the 1999, Kieran McGowan was formerly plc Drug United of the Board of Solvay UK Holdings Limited, Senior Independent non-executive Director Chief Executive of IDA Ireland. Kieran is responsible for co-ordinating Solvay’s on 20 November 2007. Gary is Group Chief Chairman of CRH plc and his directorships business in the UK and Ireland. John was Executive of the Smurfit Kappa Group and include Elan Corporation plc and Irish Chief Executive of Solvay Healthcare in Chairman of the Dublin Airport Authority. Life and Permanent plc. Kieran is also the UK from 1992 to 1 January 2008 and Before joining the Jefferson Smurfit Group Chairman of the Governing Authority previously held various senior positions in in 1998 as Chief Financial Officer, he held of University College Dublin. research and development, international various senior executive positions in Irish Annual Report 2007 Report Annual marketing and business development in industry. Gary is also a director of Anglo Annette Flynn Europe and the US. Irish Bank plc and Aon McDonagh Boland and a member of the European Round Appointed a director of United Drug plc in 2004, Annette took responsibility for Dermot Egan Table of Industrialists (ERT). the Supply Chain Services division during Dermot Egan was appointed a non-executive Chris Corbin 2006, having previously been responsible director in 1992 and retired from the for implementing and developing group Board on 20 November 2007. Dermot is a Appointed a director of United Drug plc in strategy. Annette joined United Drug director of the National Concert Hall and an 2003, Chris founded Ashfield Healthcare plc in 1996 and prior to this held senior Adjunct Professor of Dublin City University in 1997 and is Managing Director of this positions with Kerry Group plc working in Business School. Formerly, he was Deputy company, which merged with a fellow group their Irish, UK and US operations. Chief Executive of AIB Group. He is a past company during 2007 to form Ashfield Chairman of the Irish Management Institute In2Focus. Prior to setting up this company, and Past President of Cothú – the Business Chris held sales management positions Council for the Arts. with Parke Davis, Fisons, Astra and May & Baker. Chris is Chairman of Leicestershire Business Awards 2007 and 2008, Patron for SETPOINT Leicestershire and a member of Derbyshire Magistrates Bench. FOCUS ON GROWTH United Drug has delivered double digit earnings growth for each of the 22 years it has been listed as a public company. We are committed to continuing this performance. Annual Report 2007 United Drug plc
Chairman’s statement
Ronnie Kells Chairman
Financial performance vision to develop United Drug into an international This has been a significant year for United healthcare services company, an important Drug. The year marked our first acquisitions in strategic objective for us is to continue developing Continental Europe and subsequently in the US significant businesses in areas that will benefit and, for the first time in our history, in excess of from this trend. 50 per cent of our profit was earned from outside During 2007, we made further progress towards our domestic market. I have referred to this trend that vision through the acquisition of businesses in previous statements and I will elaborate more in Continental Europe, the US and the UK, which on the strategy we are following to develop the complement our service offering to pharmaceutical Company into an international healthcare services and healthcare companies. Our Supply Chain company. Firstly, let me outline our results for the Services division acquired two pharma packaging year, as they provide the clearest evidence of the companies, Budelpack in Belgium and PLI in The significant progress that has been achieved. Netherlands. These businesses together with
Pre-tax profits before intangible amortisation our existing UK packaging business will create increased by 15% to €62.3 million in the year a strong platform for the development of this service. In the UK, we acquired Pyramed, a high under review. Equally encouraging was the cash plc Drug United generation in all of our divisions that enabled us quality medical equipment distributor and this to make four acquisitions during the year while business has now been fully integrated into our retaining a relatively low gearing ratio. Basingstoke headquarters. Also in the UK, our Pharma Wholesaling division acquired Craig & Dividend Hayward, a distributor of special medicines. In
October 2007, we acquired Alliance Healthcare 2007 Report Annual This strong financial performance has enabled your Information, a company based in Philadelphia, in Board to propose a final dividend of 5.33 cent per the US, providing a range of services supporting share. Together with our interim dividend of 1.97 the sales and marketing efforts of pharmaceutical cent per share, this represents an increase of 15% companies. This is our first acquisition in the US over the previous year. and we believe we can generate further growth International acquisitions within this company by broadening our service offering and developing customer relationships The outsourcing of non-core activities to specialist that will provide us with a valuable platform, from firms is a growing trend among international which to grow in this market. pharmaceutical and healthcare companies. Against this background and in line with our Chairman’s statement (continued)
In each of these companies we have acquired strong Board management that will be supported by members of I would like to take this opportunity to thank Dr. our own management team as we integrate them into Dermot Egan who has retired from the Board after the Group, providing a framework to accelerate their 15 years’ service. As the Senior Independent non- growth. executive Director, he has made an exceptional contribution to the effectiveness of the Board Irish Government and the HSE and to the Company, not only as a non-executive The reduction in the price of off-patent branded director and a Chairman of sub committees, but medicines with generic equivalents agreed between as a facilitator for the executive strategy sessions. the Irish Government and the pharmaceutical I have very much appreciated his sound counsel companies came into effect on 1 March 2007. The and assistance. We wish him a long and happy transition to this new pricing regime was very well retirement. I would also like to take this opportunity managed by our Pharma Wholesale division and the to thank all the non-executive directors for their reduction in growth in the market was in line with work in what was a very busy year. our expectations. Looking forward The Irish Health Service Executive has declared We are a well diversified healthcare services its intention to reduce the amount of their group, not overly dependent on any one customer reimbursement for drugs sold through pharmacies. or service. Our strong cash flow and low gearing This will impact on pharmacy profitability provides us with the scope to vigorously pursue countrywide and if it is introduced inappropriately our international strategy while at the same time may result in closures thus affecting access to enhancing our service offering to our customers in medicines and the level of service to patients. existing and new markets. Corporate governance This position gives us particular confidence that Your Board remains committed to the highest we can continue to achieve strong revenue growth standards of corporate governance and we support in all of our divisions, both organically and through the Combined Code on Corporate Governance. acquisitions. A detailed statement setting out our key governance principles and practices is set out on pages 30 to As a result, your Board believes that the Company 35 in this report. We are satisfied that appropriate is well positioned to deliver solid earnings growth in systems of internal control are in place throughout the coming year. the Group.
People Ronnie Kells What gives me most confidence in our future are the Chairman people that make up United Drug, and in particular the commitment of our management team, led by
Annual Report 2007 Liam FitzGerald. This commitment is self evident in the way they have managed the increased challenges facing the business in a competitive marketplace and maximised the opportunities of our rapidly growing business. I am truly grateful to them and to all of our people for their work in maintaining the high
United Drug plc standard of customer service and relationships that have been at the core of taking the Company to the 10 success it is today. FOCUS ON DIVERSITY United Drug is a diversified healthcare services group providing services to a broad range of healthcare clients and end-customers across five geographies. United Drug plc plc Drug United Annual Report 2007 Report Annual
11 FOCUS ON CUSTOMER SERVICES
We recognise that customer service is central to our future growth. Each of our divisions puts service to customers at the core of its offering. We invest in best-in-class people and infrastructure to develop our services to customers continuously. Annual Report 2007 United Drug plc
2 Chief Executive’s review
Liam FitzGerald Chief Executive
During the 2007 financial year, United Drug Pharma Wholesale made significant progress in its development as 2007 has been another year of strong performance an international healthcare services company. from our Pharma Wholesale business with sales, Strong performance from our well managed Irish profits and market share all increasing over the and UK based businesses has been enhanced year. The Pharma Wholesale division continues to by strategically important acquisitions in high provide a top-quality, customer focused service to growth areas enabling us to broaden our service our independent pharmacy customers and gives offering to international healthcare manufacturers. them access to a full range of support services This year has seen us take our first steps into enabling them to compete effectively in the Continental Europe with acquisitions in both marketplace. Belgium and The Netherlands in our pharma contract packaging business and since the end of Our Republic of Ireland based pharmaceutical the financial year we have added to our contract wholesale business, United Drug Wholesale sales and marketing services in the United States (UDW), has further enhanced its position as the with another bolt-on acquisition. leading wholesaler supporting independent retail pharmacy in the growing Irish pharmaceutical These developments have helped to deliver further market. In the Irish retail pharmacy market, plc Drug United record results for the year as we continue to deliver UDW’s dynamic owner managed, independent double-digit profit and earnings growth. Group customers continue to outperform the corporate € revenue for the year of 1.58 billion is 8% ahead of owned pharmacies of our wholesale competitors. 2006. Headline profit, before intangible amortisation As a result, we have again been able to further € and tax, is 62.3 million, an increase of 15%, and increase our market share in a market that fully diluted earnings per share, measured on the continues to show good volume growth. A 2007 Report Annual same basis, increased 14% to 23.02 cent. significant focus for UDW during the year has been Government intervention in the market. A The Company remains committed to rewarding new four year agreement on drug prices in the shareholders with improved dividend payments and Republic of Ireland market, announced in 2006, this is reflected by a proposed final dividend of took effect on 1 March 2007. The new price 5.33 cent per share, an increase of 15% over the agreement reduced growth in the market, in line 2006 final dividend. When combined with the interim with our expectations. The transition to the new dividend of 1.97 cent per share, the proposed final pricing regime was very well managed within our dividend brings the total dividend payable for 2007 Pharma Wholesale business and provides certainty 13 to 7.30 cent per share, an increase of 15% on the on pricing until late 2010. 2006 total dividend. Chief Executive’s review (continued)
On 17 September 2007, after completing its review amount of time and effort has been spent in of the Irish Pharmaceutical Wholesaling sector, the Sangers during 2007 in amending our IT and Irish Health Service Executive (HSE) announced general business processes to allow us to change its intention to reduce the reimbursement price our business model to successfully adapt to this it pays to community pharmacy for any medicines change in the market. We are already servicing that it funds via various HSE schemes. Discussions this market in Northern Ireland and, as the leading continue in relation to this matter but the player in the market with the most efficient and announced measure will result in a reduction in the flexible business processes, we are well placed profitability of community pharmacy in Ireland. to benefit further from this change in market structure. We have again invested in automation within our businesses during 2007, to further improve In May 2007, we acquired Craig & Hayward, an productivity levels and to continue to drive Oxfordshire based distributor of specials medicines. reductions in our key cost to sales ratios. This has A ‘specials medicine’ is a specially prepared been a consistent focus within our business and product manufactured to meet specific patients’ allows us to manage the significant forecasted prescription requirements. Craig & Hayward act as volume growth without significant cost growth, and a ‘one stop specials shop’ for the retail pharmacy to continue to provide the best possible service to sector in the UK. our customers. Craig & Hayward has performed well since Within the UDW business, niche areas such as acquisition and the management team is now Ostomy supplies and our OTC supplies business, focusing on leveraging the Group’s existing Profitlines, have performed well during the year. customer relationships to further expand its They form part of a broad range of support business base. services for our independent community pharmacy Each of the three business units within the Pharma customers. Services such as these supplement Wholesale division have had a very successful our core offering which is a top-quality, customer- year, and despite operating under different market focused wholesale service at a competitive cost. conditions, each has increased sales, profits and On 1 October 2007, we commenced supply to the market share during the period. Overall, despite Boots pharmacy chain of 43 shops in the Republic exposure to markets which are the focus of of Ireland. This will substantially increase sales and ongoing Government cost saving initiatives, there volumes within the business. is very strong underlying growth in our markets driven by increasing and ageing populations and In Northern Ireland, our Sangers business has had the increased demand for the medicines and another good year with sales, profits and market services we supply. Within these growth markets, share all increasing and significant cash flows our business units are well placed to continue to being generated. In an environment of ongoing prosper based on our strong market positions, our Government cost saving interventions in this focus on efficiency and our customer relationships. market over recent years, strong underlying volume Annual Report 2007 growth continues to underpin value growth in the Supply Chain Services market. Sangers continues to thrive within this The Supply Chain Services division is focused market, through a continuous focus on customer on providing outsourced logistics and related relationships and cost improvement. services to pharmaceutical, biotech and veterinary During the past year, a number of pharmaceutical manufacturers. Development in this division is United Drug plc manufacturers in the UK market have introduced based on adding a range of high value-add, higher margin services in growth areas that 14 a variety of ‘Direct to Pharmacy’ schemes through which the manufacturer seeks to develop a closer are complementary to the core logistics offering relationship with community pharmacy. A significant in existing and new markets. The division has recorded strong revenue and profit growth during The Supply Chain Services division is well the year and is well positioned to exploit future positioned to continue to provide value-added growth opportunities. solutions for customers and to grow earnings for shareholders. During the year, this division strengthened its position as a comprehensive supply chain solutions Medical & Scientific provider for the pharmaceutical industry. The The 2007 financial year has seen continued strong acquisition of two contract packaging companies, growth and significant development in the Medical Budelpack in Belgium and Pharma Logistics & Scientific (M&S) division, both in Ireland and the Investments (PLI) in The Netherlands, were UK. The growth is based on a focused provision of significant milestones as they represent the Group’s best-in-class sales, technical services and back- first businesses in Continental Europe. These office support to high quality, technology-driven, acquisitions add to our successful UK packaging medical equipment and devices manufacturers. The business, TD Packaging, further enhancing the range development comes through broadening the range of packaging solutions we provide and placing the of clinical areas that we service, both organically Group in a good position to capitalise on the growing and through acquisition. European Pharma contract packaging opportunities. M&S Ireland produced another year of record Our specialist supply chain solutions provider for profits for the division. Particular areas of success vaccines in the UK, MASTA, performed very well included the introduction of a comprehensive during the year. MASTA offers route-to-market range of infection control products from Molnycke services to the vaccine manufacturer as well as Healthcare and continued expansion of our hyper administering vaccines to the travelling public immunoglobulins products business, sourced from through wholly owned and partnered clinics. Our Biotest. Strong sales in the year saw us build commitment to the specialist distribution area was on our position as a leading supplier of infusion further demonstrated in Ireland by the investment devices and associated consumables, representing in, and successful operation of, the national vaccine the Alaris product from Cardinal Health. The contract for the HSE and the acquisition of an Scientific and Clinical Diagnostics business unit interest in Temperature Controlled Pharmaceuticals delivered another strong performance, built around (TCP). TCP is a cold-chain logistics and specialist the product offerings of Sysmex and Tosoh. home care provider. In Northern Ireland, the combined businesses
Our pre-wholesale business in Ireland, United Drug plc Drug United of Vector Scientific, Primacare and Ulster Distributors, had a solid performance during the Anaesthetics continued strong sales and profit year, benefiting from efficiencies accruing from growth. Particular successes were the first UK high class infrastructure, while operating in a placements of the new Sysmex analyser, the highly competitive environment. A smaller part of CS2100, resulting in increased market share. this division is our consumer products business, trading as Pemberton. Considerable time has been In the UK, our endoscopy business, Endoscopy UK 2007 Report Annual invested in this business in the current year and (EUK), had a very successful year. Our offering of it has now been restructured to produce a more advanced products combined with strong clinical streamlined and efficient operation. support continues to be well received in the private hospital sector. 2007 saw significant breakthroughs In the UK, our joint venture with Alliance Boots, into the mainstream NHS sector, driven, in part, by UniDrug Distribution Group (UDG), had an excellent a programme of increased cancer screening and year. UDG provides full logistics services to also by improved market coverage. EUK is confident pharmaceutical manufacturers and continues to of building on this position. strengthen its position in the growing outsourced 15 pharma logistics market in the UK. Chief Executive’s review (continued)
Our core UK businesses of Mantis Surgical and profits. The strategy for the division is to continue New Splint continued their growth trend during to grow and develop the existing businesses the year, with both companies expanding the size while broadening the revenue streams both and scope of their sales teams. New Splint hosted geographically within CSO and by diversification into a revision knee-surgery symposium in June 2007 selected complementary service offerings. where over 50 specially invited orthopaedic 2007 has seen the successful integration of the surgeons spent two days in the presence of existing UK CSO businesses, Ashfield and In2Focus. an eminent orthopaedic faculty discussing the The combined entity, now re-branded as Ashfield management of this highly specialised area of In2Focus, provides a comprehensive service surgery. The symposium was also attended by offering to pharma manufacturers and is now a senior management from LINK, our manufacturer more efficient organisation. Ashfield In2Focus partner. remains as the supplier of choice for the provision M&S UK was further strengthened by the of field based sales and nursing services in the UK acquisition of Pyramed in February 2007. Pyramed pharma marketplace. represents a range of clinically differentiated In the UK, pharmaceutical manufacturers continue surgical products in the cardiology, radiology, to restructure their sales efforts and seek the neuroradiology and cardiothoracic sectors. increased inbuilt flexibility which is achieved via During the year both Pyramed and Presearch, our the use of a CSO. During 2007, companies such Analytical Chemistry business, were successfully as Pfizer, Sanofi Aventis and Janssen-Cilag integrated into our Basingstoke headquarters, significantly downsized their in-house sales forces thereby benefiting from cost efficiency while in the UK market and replaced much of that sales gaining access to a quality administrative and effort with outsourced sales solutions. Many other logistics infrastructure. companies are known to be actively considering new Our investment in expanding our clinical training business models, to take advantage of the flexibility resource in support of the daVinci surgical robot offered by CSO. was validated by strong sales growth in the We expect this trend to continue, potentially year. Of particular note was the purchase of two resulting in fewer representatives directly systems in Ireland, in the Gynaecology and Urology employed but with a much higher proportion specialities, which for the first time offers Irish outsourced. Ashfield In2Focus is well positioned to patients direct access to the significant patient benefit from this trend, with the most sophisticated benefits of this surgical approach. and extensive offering. During the financial year, Once again, the M&S division is well placed to deliver new business has been won with AstraZeneca, further sales and profit growth for the year ahead. Pfizer, Nycomed, Solvay, Roche Diagnostics and Daiichi Sankyo. Contract Sales Outsourcing Ashfield In2Focus Professional Nursing Services The Contract Sales Outsourcing (CSO) division has continued to develop strongly, with a move
Annual Report 2007 provides flexibility to pharmaceutical manufacturers towards more innovative programmes tailored to in the deployment of their sales effort. This the individual and local needs of both our clients flexibility is provided by delivering excellence in the and the NHS. The first ever industry sponsored recruitment, training and administration of sales service redesign programme was launched in July representatives and nurse advisors and through in partnership with Schering Plough, and we have solutions that add value to the manufacturers’
United Drug plc had significant business wins with AstraZeneca, sales efforts. The Division, which comprises market Sanofi Aventis and Convatec for the provision of leading businesses in the UK and Ireland along with bespoke nursing services. 16 a small US operation, performed well during the year and recorded very good growth in revenue and The marketplace within Ireland continues to be The Company has a well developed physical buoyant, which coupled with Ashfield Ireland’s infrastructure, a strong management talent continued focus on business development and pool and access to significant capital resources diversification of service offering has led to enhanced by strong internally generated cash another strong performance with the company flows. The ability to leverage each of these assets exceeding targets. Notable business wins include and pursue a range of exciting opportunities Schering Plough, Boehringer Ingelheim, Recordati within the healthcare services arena leaves us and Astellas. Ashfield Ireland is also developing its very confident in our ability to continue to produce Sales Force Effectiveness (SFE) function, which strong growth in the business, continuing our long has been successfully pioneered in the UK, and has term successful track record. enjoyed recent success in this area with Janssen- I would like to extend my sincere thanks and Cilag, AstraZeneca, MSD and Schering Plough. appreciation to Dr. Dermot Egan on his retirement Our SFE offering continues to enjoy international from the Board of United Drug, following 15 years success and this year our largest ever event was service. Dermot’s contribution to the growth of the held in Japan, which accommodated 1,000 people. Company over the years has been immense, and he We have now held events in 13 different countries. has been a source of great guidance and advice to me personally. I would like to wish him well in the The USA continues to be well positioned to future. deliver growth in what is a large and somewhat underdeveloped contract sales marketplace. This year we have won a new sales contract team with Liam FitzGerald Pam Labs and has introduced two new services to Chief Executive the US market. The new SFE programme has been well received by the US pharmaceutical and device companies and this year we have run ten different SFE events within six different pharmaceutical companies. Additionally, we have started a new nurse adviser service and have secured two new contracts with Novartis.
Another important development for the CSO
division occurred just after the end of the financial plc Drug United year with the acquisition of Alliance Healthcare Information in the US. Alliance provides a range of solutions to support pharma companies’ sales and marketing efforts in the US market. This acquisition will allow us to bring additional scale to our existing
US business and to broaden our service offering 2007 Report Annual and customer relationships in the US market.
Group Development and Outlook During the 2007 financial year the Company further broadened the range of services available for our healthcare manufacturer customers in existing and new markets and enhanced its offering to our retail pharmacy customers. The Company now has a more diversified earnings base and will continue 17 to pursue its ambition to be a dynamic, leading international healthcare services organisation. Annual Report 2007
FOCUS ON ACQUISITIONS United Drug plc We recognise that acquisitions are an ongoing part of our growth 18 story. The Group is committed to continuing to find acquisition opportunities that will strengthen our position in key markets. Finance review
Barry McGrane Finance Director
Results Earnings growth 2007 has been an excellent year for United Drug. Earnings per share for the year grew by 14% In financial terms some of the highlights of the to 23.02 cent. This growth in earnings is driven year include further record results, with continued by the 15% growth rate in pre tax profits, being double-digit profit, earnings and dividend growth, diluted slightly by the issue of some new shares a continuation of the trend of increasing margins during the year. A total of 4.76 million new shares across the Group and all of this complemented by were issued during the year. 375,939 of these very strong cash flows leaving us with a strong shares were issued as part consideration for one balance sheet at the end of the year. A detailed of the acquisitions completed during the year with review of the businesses within the Group and the the remainder issued under the Company’s scrip factors impacting on the financial performance is dividend share scheme and other share schemes contained in Liam FitzGerald’s Chief Executive’s and the exercise of share options. review. The Group’s key financial performance indicators are discussed in the following paragraphs. Dividends The final dividend proposed for 2007 is 5.33 cent Profit growth per share, an increase of 15% over the 2006 final
Profit before tax and amortisation of intangible dividend. The final dividend along with the interim plc Drug United assets increased by 15% to €62.3 million. Within this dividend paid of 1.97 cent per share gives a total pre tax profit growth, operating profit, again before dividend for the year of 7.30 cent per share an amortisation of intangible assets, has increased increase of 15% over the 2006 total dividend. The by 17% to €66.6 million. Operating profit growth is dividend is covered 3.15 times (2006: 3.18 times) driven by strong organic growth in each of our four by earnings per share.
divisions complemented by accretive acquisitions. 2007 Report Annual In accordance with International Financial The 2007 results include a first time contribution Reporting Standards the final dividend proposed from Pyramed, Budelpack, Craig & Hayward and PLI, is not provided for in our balance sheet as at 30 each of which was acquired during the financial year. September 2007. This proposed dividend does not become payable until approved by shareholders at € The net interest charge for the year was 4.3 our Annual General Meeting. million an increase of €1.5 million over the 2006 charge. The increase in the net interest charge Cash flow reflects the additional cost of financing the recent The Group has generated strong cash flows acquisitions and an increase in interest rates on 19 from trading activities during the year. Before short term borrowings. Interest cover for the year acquisition expenditure the Group recorded a was 15.6 times (2006: 20.8 times). Finance review (continued)
cash inflow of €47.9 million, up from €42.9 million Liquidity risk management in 2006. The strong cash flow performance is as The Group ensures that it has sufficient financing a result of tight working capital management and facilities available through cash flow generated limited capital expenditure requirements across the from operating activities, loan notes issued, business. Expenditure on acquisitions completed committed banking facilities and access to equity during the year and deferred consideration markets to meet its projected short and medium payments on acquisitions completed in prior years term funding requirements. amounted to €64.0 million (2006: €40.6 million). The Group recorded a net cash outflow of €16.1 million Interest rate risk management after the acquisition expenditure. The Group finances its operations through a mixture of retained profits and bank borrowings. Group financing The Group’s policy is to borrow in the desired € Year end net debt amounted to 68.3 million (2006: currencies at both fixed and floating rates of € 51.7 million). This amount is made up of gross interest and use interest rate swaps to generate € debt of 125.8 million and short-term cash deposits the desired interest profile and to manage the € of 57.5 million. Most of this debt is repayable after Group’s exposure to interest rate fluctuations. more than one year and a significant proportion is repayable after more than five years. A more Currency risk management detailed analysis of this debt is included in note 22, United Drug’s reporting currency and that in which financial instruments, to the financial statements. its share capital is denominated is the euro. Given At the end of the year our gearing (debt/equity) the nature of the Group’s businesses, exposure ratio was 20.6% (2006: 18.3%). arises in the normal course of business to other currencies, principally sterling. Shareholders’ funds The majority of the Group’s activities are € Shareholders’ funds increased by 47.8 million, conducted in the local currency of the country € to 331.1 million, at 30 September 2007. The of operation. The primary foreign exchange risk increase in shareholders’ funds is as a result arises from the fluctuating value of the Group’s net of the retention of profits after tax and dividend investment in different currencies. Borrowings, to payments. finance acquisitions or major capital expenditure programmes, are made in the currency of the Financial risk management country of operation. The management of the financial risks facing the Group is governed by policies reviewed and Where sales or purchases are invoiced in other approved by the Board of Directors. These policies than the local currency and there is not a natural primarily cover liquidity risk, credit risk, interest hedge with other activities within the Group, the rate risk and currency risk. The primary objective policy is to eliminate at least 50% of the currency of the Group’s policies is to minimise financial risk exposures through forward currency contracts. at reasonable cost. The Group does not trade in A proportion of the Group’s operating profits are financial instruments. denominated in sterling and, where appropriate, foreign currency hedges are put in place to The Group uses financial instruments throughout minimise the related exchange rate volatility. its businesses: borrowings and cash resources are used to finance the Group’s operations; trade debtors and creditors arise directly from Barry McGrane operations; and interest rate swaps and forward Finance Director United Drug plc Annual Report 2007 foreign currency contracts are used to manage interest rate and currency risks and to achieve the 20 desired currency profile of borrowings. Further details of financial instruments used by the Group are given in note 22 to the financial statements. FOCUS ON INNOVATIVE specialist supply chain solutions 2007 Report Annual plc Drug United
Our clients are continuously challenging us to develop new supply chain solutions around specialist products and services to meet their emerging needs. Our packaging and distribution services focus on innovating continuously around the challenges presented to us by our clients.
21 Corporate social responsibility
United Drug recognises the importance of Corporate Health and Safety Social Responsibility (CSR) in the way it manages United Drug is committed to providing a safe and its business and it is imbedded throughout the comfortable working environment, with the highest Group. We understand our responsibilities to our regard for the health and safety of employees, stakeholders who are; our employees, our customers customers, suppliers and the community at large. and suppliers, our shareholders, the environment and the community at large. The Group is committed We ensure compliance with relevant statutory to the highest professional and ethical standards requirements and best practice guidelines issued when interacting with our stakeholders. The Group’s by national health and safety authorities, and reputation and the trust of its stakeholders are the implement and promote appropriate safe working foundation of its success and are of fundamental practices throughout the Group. importance for the future of the organisation. Marketplace Employees We play a leading role in the provision of healthcare We recognise that our clients and customers services and work closely with independent experience the quality and professionalism of our pharmacists and local healthcare providers to services through the people they encounter on advise and inform the communities we serve. Our a day-to-day basis. Consequently we believe our business contributes to supporting the best level of employees are our greatest asset. care to patients and acts in their best interests.
Our Human Resource policies focus on ensuring The Group is committed to providing the highest equal opportunities for all and to promote diversity quality services and developing and maintaining throughout our workforce to the greatest possible long-standing relationships with our customers and extent. We are committed to harnessing the suppliers. strength which this brings to the Group. As part of our commitment to quality, we have made We aim to engage with employees in a way that will significant investment in ensuring our facilities assist all to achieve their maximum potential. As a meet the highest industry standards for packaging, Group we are investing in and developing talent so storage and delivery of product, and we ensure our that our people are a driver for growth. people maintain the highest quality standards.
People by Geography Environment
JH6) We are committed to the conservation of the 7ZcZajm+ GZejWa^Xd[ environment in its broadest sense and recognise >gZaVcY') that certain resources are finite and must be used responsibly. We ensure that relevant statutory requirements and the highest standards are adhered to and apply good environmental practice in providing services to our customers.
We constantly seek to limit energy use in each J@++ facility. We also aim to maximise the life of all
Annual Report 2007 refrigeration equipment and to minimise the risk of gas emissions by ensuring best environmental People by Division practice. United Drug plc and re-use and recycle as much as possible. We actively participate in the Irish Repak packaging 22 waste management and the Waste Electrical and Electronic Equipment (WEEE) schemes. We also operate programmes to collect, and safely dispose Hjeean8]V^c of, non-recyclable waste, ensuring controlled and HZgk^XZh() licensed neutralisation and disposal in collaboration BZY^XVaHX^Zci^[^X+ with regulators. Students at Ashby Willesley Primary School learning through an interactive whiteboard funded by Ashfield In2Focus under their Corporate Citizenship programme. Secondary school Headteacher Vivien Kellar-Garnett said: “Ashby School is incredibly fortunate to have such a forward-thinking and progressive company as a partner. The support we’ve received on all levels has been second to none.” Community We believe that a responsible approach to developing relationships between companies and the communities they serve is a vital part of delivering business success. Therefore, we support local community and charity initiatives both financially and by the sharing of our time and skills. The Group also actively encourages and supports participation by employees in such projects. Education and the welfare of children is an important focus for the Group. During the year the Group facilitated employees participating in the Schools Business Partnership programme. Sangers and Ashfield In2Focus also strengthened relationships with schools in their local communities through their Business in the Community and Corporate Citizenship programmes respectively. Conclusion In April 2007, the Group seconded an employee United Drug believes in the value of good corporate to ‘Goal’, an Irish humanitarian NGO, for one social responsibility practices for the Group and year. This secondment demonstrates the Group’s for all stakeholders. We are committed to continue commitment to assisting the wider community. improving our CSR programme. The Group also supports Liam FitzGerald in his role Details of our Group policies and activities are also as Chairman of Traidlinks and in his capacity as a available on the Group’s website www.united-drug.ie Board member of the Barnardos’ ‘Learning through Poverty’ Campaign. The Group will be a primary corporate supporter of Tedfest ’08, Ireland’s ‘Father Ted Round Ireland Milk Float Push’ in aid of Down Syndrome Ireland and their sister group, Down Syndrome Association of Northern Ireland, scheduled to commence later this month. United Drug plc plc Drug United Annual Report 2007 Report Annual Liam FitzGerald addressing coffee growers in a village in the Rwenzori Mountains, Uganda, through Traidlinks, a not-for-profit organisation, which aims to facilitate business development of African companies through a mentoring process whereby Irish companies offer support and technical advice and expertise to build their business. 23 FOCUS ON RESpONSIBIlITY We are committed to the conservation of the environment in its broadest sense and recognise that certain resources are fi nite and must be used responsibly. Annual Report 2007 United Drug plc 2 Consolidated financial statements Year ended 30 September 2007 Contents Directors’ report 26 Directors’ statement on corporate governance 30 Report of the Remuneration Committee on directors’ remuneration 36 Statement of directors’ responsibilities 41 Independent auditor’s report 42 Group income statement 44 Group statement of recognised income and expense 45 Group balance sheet 46 Group cash flow statement 47 Significant accounting policies 48 Notes forming part of the Group financial statements 56 Company statement of recognised income and expense 88 Company balance sheet 89 Company cash flow statement 90 Notes forming part of the Company financial statements 91 United Drug plc plc Drug United Annual Report 2007 Report Annual 25 26 United Drug plc Annual Report 2007 as treasury shares in the Group balance sheet in accordance with the requirements of Irish Company Law.Company Irish requirements of the with accordance in sheet balance Group the treasuryin sharesas 7,528,066hold to treated continued been haveLimited they Company Drugordinaryredeemableand shares Company.the 2007,Septemberof ordinary30 redeemableAt capital share and ordinarycapital share Dublin the of split for1 7 shareholdersCompany’s a approved the 2003, September 30 ended year the During cancelled. thereafterwereimmediately and 1990, Act,Companies the of 207 Section and Company the of Association of Articles the of 3A Company,Article with accordancethe reserves in of distributable the and each cent 32 ordinaryof sharesnew 1,150,000 of market the in placing a of proceeds the of out both value markettheir at redeemedwere each cent 32 ordinaryredeemableof shares these of 1,150,000 2002, January 29 On each. cent 32 ordinaryredeemableof shares into ordinaryconverted wereshares these acquisition, the to Subsequent ordinarycapital. shareissued Company’s the of represented9.84% of consideration forLimited Company Drug Dublin acquiredGroup the 1998, September 30 ended year the During Treasuryshares notes.related and 44 page on statement income Group the in out set areyearforresults the the of Details Results 40. to 36 directors’pages remunerationon on Remuneration Committee the of Report the in directors’remunerationprovidedof arerespect in Details business.Company’s the to relation in significant was which and interested materially was Company the directorof a which in yearof, end financial the the at orduring, undertaking subsidiary any or Company the arrangementorcontractwith any been not has There 2007.August29 Secretary on Company as appointed was Geoghegan K. Ms. and 2007 July 20 Secretaryon Company as resigned Heeley C. Ms. 2007.November 20 on BoardDr.retired the fromEgan D. forre-election.offereligible,themselves being and, Associationof Articles the Mr.Flynn, Ms.A. P. Gray, with accordanceBoard,Mr. in retireMr.the fromand will McGrane McGann B. G. secretaryDirectorsand proposed is shareper cent 5.33 of dividend year the during paid was shareper cent 1.97 of dividend interim An Dividends review.Finance Executive’sand review Chairman’sChief the statement, in contained are commentaries Europe.Detailed Continental and UK the Ireland,in distribution and sales Scientific & Medical and Outsourcing Sales ContractServices, Chain Supply Wholesaling,Pharmaceutical of areas the in providerserviceshealthcareinvolved leading a is Drug United business of Review 2007.September 30 ended yearfor the statements financial audited and reportdirectors annual theirpresentThe report Directors’ cent each in United Drug plc which had a nominal value of value nominal a had which plc Drug United in each 32 cent € 11,726,031, which at the date of its acquisition held 2,225,438 ordinaryof shares2,225,438 held acquisition its of date the at which 11,726,031, (2006: 4.64 cent per share) per cent 4.64 (2006: € 706,431 and at the date of their acquisition acquisition their of date the at and 706,431 (2006: 1.71 cent per share) per cent 1.71 (2006: . . A final final A . United Drug plc Annual Report 2007 27 - 8,000 8,000 6,215 47,320 124,123 420,188 158,200 162,780 363,329 1,779,735 (or (or date of 1 October 2006 Ordinary shares Ordinary of the issued appointment if later) - 8,000 8,000 6,215 48,007 397,050 144,123 673,619 158,200 166,211 365,979. These 365,979. shares have also (2006: 3.30%) 1,810,160 € Ordinary shares Ordinary 1.01. € 30 September 2007 held by the Group do not dividend rank for and have (2006: 7,623,066) K. McGowan B. McGrane J. Peter K. Geoghegan C. Corbin D. Egan* A. Flynn Gray P. G. McGann R. Kells L. FitzGerald share share capital of the Company or Group companies between 30 September 2007 and 8 January 2008. Except as disclosed held above, no or secretary any director other interest in shares of any Group company Details during of and the share optionsdirectors’ secretary year. are set out in the Report of the Committee Remuneration on on remuneration pages directors’ 36 to 40. * Dr. D. Egan * from the retired Dr. Board on 20 November 2007 B. McGrane exercised share options Mr. thereby increasing the number of ordinary On 21 November 2007, shares held by The 40,000. price per share option exercised was There have been no further changes in the interests of the the and secretary directors, their families in the ordinary and ordinary share capital redeemable ordinary of the Company. Interests of and directors secretary in the families their and secretary the directors, of the owned, beneficially were of which all interests, The follows: as were 2006 1 and October 2007 at 30 September companies Group or Company of the capital share Company Law. shares treasury The 7,623,066 been excluded therefore from the weighted number of average shares in issue used in the calculation of as earnings per share, set out in note 7. 3.23% shares represented treasury At 30 September 2007 the 7,623,066 During the year ended 30 September 2005, a subsidiary Ashfield undertaking, Healthcare Limited, acquired 95,000 shares in on ordinary the the Company, open market, at a cost of been treated as shares in treasury the Group balance sheet in accordance with the of requirements Irish 28 United Drug plc Annual Report 2007 n n n n n n below.performancenoted are Group’sthe on impact largest the have to currentlyarejudged which uncertainties and risks The Board.the to report a of subject the is and Committee Audit the by approved and reviewed also registeris risk regular consolidated basis.a directors The on executive the by reviewed and updated arerisks identified the address to plans and Group the within division each by maintained registeris risk process.Group’s detailed business the A of part integral an is management Risk face.they which uncertainties and risks principal the of description a give requiredareto Company the law,and Groupcompany the Irish Under uncertainties and risks Principal yearof 7.30 cent per share atthe AnnualGeneral Meeting, of 5.33 cent per share Groupwas Groupwas 2007. Theshare price at the end of the 2007 financial year was sharesranged between TheCompany’s shares are listed on the London and Irish Stock Exchanges. Theprice of the Company’s ordinary price Share them. by owned beneficially not areshareholdings these that states notification Each Limited IrelandManagement Asset of Bank Limited Corporation/FidelityInternational FMR CorporationAmerica of Bank Limited Nominees Ireland of Bank capital: ordinaryshareits in interestsfollowing the of notification received had Company the 2008, January 8 at As interests Substantial report Directors’ be affected. be could profitability and volumes sales chains, supply its to disruptionsor facilitystorageor packaging a of profitability. affectadversely could which costs compliance increased in result could these in change significant statements. financial the to 22 note in detailed is risks these of management The Group.the affectadversely theseagreements renewedbewill expire,theywhenprofitability. salesand decline in a to whichcouldlead decline.may profitability and share Should the Group not be able to fulfil the demand for its products due to circumstances such as the loss the as such circumstances to due productsfor its demand the fulfil to able be not Group the Should any and regulations quality and medical (IMB) Board Medicines Irish stringent to subject is Group The Group.the affectadversely mayratesinterest higher foreign and ratescurrencyin exchange Movements sectors,may pharmaceutical and healthcare the in particularly regulations,government in Changes thirdDistributionof partyproducts Group thecurrentlyby is agreement.by certaintyTherenothat is successfully,compete marketto fails it if and markets various its in competition strongfacesGroup The € € 893million. Thedirectors have proposed afinal dividend for 2007, subject to shareholder approval 749million. On 8January 2008, the share price was € 3.28and (2006: 6.35 cent) 6.35 (2006: (continued) € 4.25,with an average price of . (2006: 4.64 cent) 4.64 (2006: € 5.00% 6.01% 7.71% 19.04% 3.28and the market capitalisation of the € € 3.90and the market capitalisation of the 3.85during the year ended 30 September ,thereby giving atotal dividend for the United Drug plc Annual Report 2007 29 Group Group IT facilities could be subject to hacking which or viruses, could result in downtime, which in turn The success of the Group is built upon a strong effective management team committed to achieving a superior performance a in superior performance each of The our divisions. loss of key personnel could a for time have a significant impact on business performance. could lead to a decline in sales and profitability. Director 8 January 2008 On behalf of the Board R. Kells Director L. FitzGerald in note 25. Auditor In accordance with Section 160(2) of the KPMG, Accountants, Companies Act 1963, Chartered the auditor, will continue in office. Subsidiaries The significantGroup’s subsidiary undertakings as at 30 September 2007 are detailed in note 40. Important events since year end The details Group has of acquired three additional which companies are disclosed since 30 September 2007, providing providing adequate to resources the financial The function. books of account are maintained at United Drug House, Magna Drive, Magna Business Park, Citywest Dublin Road, 24. Political donations the During Group and the Company year, did not make any donations disclosable in accordance with the Act 1997. Electoral The principal key indicators used performance by the Group to are detailed measure performance in the Finance review on pages 19 and 20. Accounting records The believe directors that they have complied with the of requirements Section 202 of the Companies Act 1990 with to regard books of account by employing accounting personnel with appropriate expertise and by Financial risk management As also by required Irish the company financiallaw, risk management objectives and policies of the Group and including the hedging Company, and the exposure of the Company and the Group to financial risk are set out in the Finance review on pages 19 and 20 and in note 22 to the financial statements. The Group has a comprehensive system of risk management and internal controls as detailed under ‘Internal controls’ in the statement Directors’ on governance on corporate pages 34 and 35, which are intended to deal with and mitigate such risks and uncertainties. n n 30 United Drug plc Annual Report 2007 n n n n directors: non-executive the of any whether alia, interfactorsincluding, many consideredBoard the conclusion, this at arriving In independent. were all period, reporting the throughout that, determined has directorsand non-executive its of each of independence the evaluated has Board The 7.2007,and 6 pages director.on out non-executive set area Dr. details Biographicalretiredas Egan D. Novemberdirectors. 20 On non-executive six and fourexecutive year,of the comprised BoardDuring the Membership provided.also are briefings ongoing and appropriate as arrangedare management senior with briefings and businesses Group to relevant.wheretrainingVisits as well as operations its and Group the on documents briefing directorswith providedareall appointment, On necessary,Group’sprofessionalif advice,expense.the independent directors at take required.as BoardIndividual the by Group’s forprofessionalThe consultation availableareadvisers with. complied areregulations and rules applicable that and followedare proceduresBoard that forresponsible ensuring is Secretarywho Company the of services and advice the to Board.directorsformatteraccess the haveAll a Secretaryis Company the of removal and appointment The management. day-to-dayperformanceoverall and for its accountable is and Group’splan strategicthe delivering and forresponsibledeveloping is shareholders. Executive Chief The with interactionappropriateensures also information.accurateHe and directors timely receivethe that and Group the facing risksstrategic key the considersBoard the that forresponsibleensuring is He Board.the of working efficient and effective the forresponsibilityoverallensuring has Chairman them. The between responsibility of division clear a with separateare Executive Chief and Chairman of roles The below.out set are which of details Committees,Board to responsibilities its of some delegates also Boardbusiness. The the of aspects forindicatorsall risk performanceand key includes which basis, timely a on information monthly with providedBoard. is Boardthe The to information management forprocesscomprehensivereporting a has Groupappointments. The management senior and expenditure significant investments,contracts,majortransactions,property ventures,significant joint in investments disposals, and acquisitions corporatesignificant budgets,plans, statements, financial annual the of approval the alia, interincluding,review for its items reservedcertain has Board The framework.reportingcentralised a within effectively and efficiently business the run to flexibility sufficient management operating allowing while control effective and full retains and decisions strategic significant all Group,takes the of properforresponsiblemanagement the is Board The directorsof Board provisionsareGroup.Codethetheapplied by of becameapplicable forOctoberGroup the1 on2007. relevant thestatementThishow outsets principles and versionCorporateCombinedtheonCode of GovernanceLondonStockExchanges Irishandthe (‘theCode’) of directorsThe arecommittedmaintaining to highest thestandards corporateof governance. updatedThe Directors’statementcorporateon governance has close family ties with any of the Group’sadvisers,the directors of employees; senioror any with ties family close has director’sfee;a than otherGroup remuneration receivesthe from Group; the with relationship business material years,threea last the within had orhas, Group; the of employee an been has United Drug plc Annual Report 2007 31 Egan Egan D. holds cross-directorships or has holds significantcross-directorships links with through involvement other directors in other a represents significant shareholder. companies or bodies; or In particular, the Board considered the position of Dr. D. Egan in the context of the Combined Code. Dr. Code. Combined of the context in the Egan D. Dr. of position the considered Board the In particular, for its for The consideration, the Senior Independent results of non-executivewhich were satisfactory. Director also met with the other non-executive to directors review the of performance the Chairman. Performance evaluation Performance The Board conducts an annual review of its own and performance that of its committees and of each During the year this individual review was director. primarily achieved through discussions held by the Chairman with on directors both an individual and group basis and a detailed questionnaire was also In completed addition,by each the director. Chairman also independently met with the non-executive The Chairman summarised the directors. results of the evaluation processes and reported them to the Board business needs. Details of attendance directors’ at these meetings are set out in the table on page 35. The Chairman sets the agenda each for meeting in consultation with the Chief Executive and the Company The agenda and which board papers, provide the with Secretary. directors to relevant information, enable them to fully consider the agenda items in advance, are circulated prior to each meeting. letter letter of appointment is available from the Company on Secretary request. It is Board policy that non- executive are normally appointed a directors for period of Noticethree years. periods of executive directors do not exceed a period of than greater one year. Meetings The Board routinely meets at least six times a year and additionally as as required a result of time critical that each must director submit themself re-election for at the Annual General Meeting at least every three appointed Directors by years. the Board must submit themselves re-election for at the first Annual General Meeting following their appointment. All over the directors age of seventy must submit themselves re- for election at the Annual General Meeting on an annual basis. The non-executive are engaged directors under the terms of a letter of appointment. A copy of the standard on 20 November 2007. Mr. G. McGann is Mr. available to who which shareholders have for concerns, contact on 20 November 2007. through the normal channels of Chief Chairman, have Executivefailed to resolve or or for Finance Director, which such contact is He inappropriate. is also available to meet on major shareholders request. of appointment Terms Articles The of Association Group’s provide that one third of must by directors retire rotation each year and been a period of considerable growth and development. development. and growth of considerable a period been All of the non-executive bring key directors judgement to resources, bear on performance, issues of strategy, appointments The and Board considers that standards. between them, the bring directors a range of skills, knowledge and experience necessary to lead the Group. D. G. Egan McGann and retired was Dr. Mr. appointed as the Senior Independent non-executive Director was appointed to the Board in 1992 and as his length of service exceeded nine years, the Code provides that that provides Code the years, nine exceeded of service length as his and in 1992 Board to the appointed was independence the considered Board The independence. his concerning to shareholders be made an explanation Through Group. of the independent financially was Egan D. Dr. doubt. to be beyond Egan D. of Dr. integrity and has what in Board to the contribution unique and a valuable he made experience, business considerable his n n 32 United Drug plc Annual Report 2007 standards. accounting with compliance and policies accounting systems, procedures,controlmanagement risk internalannouncements, company statements, financial the Group.of reviewthe include affairs of These financial the to relatingmatters reference, any of termsexamines written Committee Auditthe its Under Mr.that determinedexpert. has P.financial Committee Committee The Auditthe Gray is 35. page on out set is meetings at Attendance times. six year.review,underyearmet a the Committee During the times three of minimum a meets Committee The discussions. forChairmanindependent the to access direct has and meetings attends also auditorexternal meetings. The InternalGroupall Auditor attends meetings. The its attend to invited be may Mr.but Committee Auditthe of membersMcGrane, B. not are Director,Finance Mr.directors.the Executive, and FitzGeraldnon-executive Chief are L. The whom of all Mr.Mr.(Chairman),year,of McGowan the comprised K. P.During Committee Auditthe Dr.Grayand Peter,J. Committee Audit shareholders.from answerquestions to availableare and Meeting General Annual the attend committees these of each of Chairmen35. The page on table the in out set are meetings at attendance of Details report. this in out set Secretary.is Company committee each of membership The the fromrequest on referenceavailableare of terms which specific has committee Each responsibilities. its of aspects specific on focus which membersBoard of committees by assisted is Board The committees Board resolution. hasbeen dealt with, details will be given of the level of proxy votes lodged and the balance for and against that aresent to shareholders at least 21 working days before the meeting. Atthe meeting, after each resolution assessmentof the Group’s position and prospects. Theannual report and notice of AnnualGeneral Meeting reportand financial statements and other shareholder communications provide abalanced and understandable theGroup including half year and annual results and other announcements. Thedirectors believe that the annual Acquisitionsare notified to the market and the Group’s website, www.united-drug.ie, presents information about beissued in accordance with requirements under the EU Directive 2004/109/EC (‘the TransparencyDirective’). October after the closing of each reporting period end and going forward Interim Management Statements will Resultsannouncements are sent out promptly to all shareholders. Tradingstatements are issued in Apriland ended.formalhaveproceedings the after them with meet directorsto availablearethe and meeting the during questions ask to invited are directors.all Shareholdersby attended normally is shareholders. Meeting General institutional Annual The of concerns and views the on briefed subsequently results.yearis Board half The and annual the of release the of time the at presentationsgeneral as well shareholdersas institutional directorsand executive the shareholders.to informationprovidebetween regular to dialogue is Thereplace programme relationsin investor established an has and shareholder communications of importance the recognisesGroup The shareholderswith Communication Exchange. Stock Irish the and Authority Listing UK the by published Rules Listing the in out set as Code Model the of terms the adopts policy management. seniordirectorsThis and all to applies that shares in dealing on policy a has Group The 27.page on out directors’set areshareholdingsof Details dealing and ownershipShare governance corporate on statement Directors’ (continued) United Drug plc Annual Report 2007 33 McGowan and Dr. J. Peter. On 20 November 2007, Dr. D. Egan retired from the Remuneration Committee Committee Remuneration the from retired Egan D. Dr. 2007, On 20 November Peter. J. Dr. and McGowan K. audit its own firm’s work; make management decisions the for Group; have a mutuality of financial interest with the Group; or be put in the role of advocate the for Group. reviewing reviewing the external audit plan as presented by the external auditor in advance of the audit, which reviewing a report from the post-audit external auditor including confirmation of their independence; reviewing the internal audit work plan and all by reports prepared the Auditor; Group Internal reviewing the results of the risk Group’s identification and assessment process. reviewing the Group’s preliminary announcement reviewing the preliminary of Group’s annual results, report, trading statements and half included an assessment of the scope of the work to be performed; year year results prior to Board approval; also oversees the of preparation the Report of the Committee Remuneration as set out on pages 36 to 40. The Committee is empowered to use the services of external independent consultants to advise on all compensation and matters as remuneration required. agreed. The Committee meets at least once a year and attendance at meetings is set out on page 35. on page out is set at meetings attendance and a year once at least meets Committee The agreed. The Committee Remuneration determines the terms and conditions, including annual and remuneration bonus of awards, the executive and directors advises on the of remuneration The senior management. Committee also makes recommendations in respect of the of remuneration the Chairman and the non-executive which are ultimatelydirectors, decided by The the Committee Board. is reviewing all responsible for share incentive schemes and approving the grant of options under the Executive Share Option The Plan. Committee The Remuneration Committee consists solely of non-executive directors of the Company and during the during and Company of the directors of non-executive solely consists Committee Remuneration The G. McGann, Mr. R. Kells, Mr. (Chairman), Egan D. of Dr. it comprised 2007, 30 September ended year Mr. of this a member is not L. FitzGerald, Mr. Executive, Chief The Chairman. appointed was G. McGann Mr. and and is discussed remuneration own his where those except meetings, its to attend be invited may but committee The Committee also reviewed the practices in Group’s respect of the hiring employees of of former the external auditor and is advised in advance of any such appointments which might be proposed. statements. 3 financial to the in note out set are year the during auditor external to the paid of amounts Details Committee Remuneration namely that the auditor shall not: n n n n The Audit The Audit Committee monitors the extent regularly nature, and scope of the non-audit services provided to the Group by the external auditor in to order ensure that this does not impair their independence and It Audit Committee is objectivity. policy current that where it is deemed to be in the best interests of the beyond alternative advisers, are professional engaged Group, the to incumbent provide external auditor, non-audit services. Four key principles underpin the provision of non-audit services by the external auditor, n n n n audit services It by also the the reviews external auditor. effectiveness of the internal audit Group’s function and approves the annual internal audit plan. The Committee discharged its obligations during the year by: n The Committee is monitoring responsible for the effectiveness of the external audit process and making recommendations to the Board in relation to the appointment, re-appointment and of remuneration the It is ensuring responsible for external auditor. compliance with the policy Group’s on the provision of non- 34 United Drug plc Annual Report 2007 either prevented or detected within a timely period. timely a within detected orpreventedeither errorsmaterial recordedirregularitiesorarethat properlyand and safeguarded,authorised transactions are assets that assuranceabsolute, not reasonable,providescontrolinternalthough of Group’s system The Committee. the by consideredmatters significant on Board the to reports Committee Audit the of Chairman function. The audit internal the and security controls,system computer accounting alia, inter including,Group’s systems controlinternalthe of adequacy the to as itself satisfies Committee AuditThe forareasimprovement. any identify to and Group the of operations the into management risk and controlinternal embed further to taken are steps that ensures management register.basis, ongoing an On Group’srisk the of production the in culminates process this and level, group at faced risksother and risks, these discuss to annually twice meet who management, executive by compiled is informationlevel. This desired the to risks those manage to taken being actions and occur do they if occurring,impact theirrisks those of probability the risks, key its identifies registerwhich risk a producing unit business each on based is managed. arebeing This risks these how on the AuditCommittee reportsto and business, the facingrisks key the identifies which process management risk a operatesGroup’ssigned.were management The statements financial the which on date the to up and reviewunderyear the during place in been has which Group the by faced risks significant the managing and evaluating forprocess identifying, continuous a is There loss.or misstatement material against assurance absolute not but reasonableprovide can controlsinternal objectives, pursuingthese In objectives. business achieve failureto of risk manage,rathereliminate,the than to designed is controlinternal of system management. The executive to system this of implementation controls.the directorsthese delegated haveThe of effectiveness forthe reviewingand subsidiaries its and Company forcontrolinternalthe of system directorsforresponsibilityoverallthe haveThe controlsInternal 23. and 22 pages on summarised are activities and Group’spolicies responsibilitycorporateThe social responsibilityCorporatesocial 35. page on out set areyear the during held meetings at attendance of Mr. P.Gray,required. as yearDetails Mr.the Mr.and during McGrane.McGann meets B. G. Committee The 2007,September 30 ended year the Mr.Mr.(Chairman),of Kells Flynn,FitzGerald, Ms.comprised R. A. L. during and acquisitions to relatingmatters on Board the advises Committee Finance and AcquisitionsThe Committee Finance and Acquisitions 35. page on out set areyear the during held meetings at attendance required.of as Details candidates forsearchsuitable the facilitate to consultants independent of services the use to empowered also is process.Committee planning Group’s The succession the oversees Committee sub-committees.Additionally, Nomination its the and Board the to forappointment candidates suitable of identification the on advises required.also as It changes recommends and composition and membership,size Board’sthe considers required.Committee as Nomination additionally The and yearper once least at meets Committee Nomination appointments.board The all on Board the advises Committee Nomination The Dr.committee.retiredthis fromEgan D. Dr.Mr.Egan, D. P. Gray, Mr.2007,November FitzGerald, Mr.20 Mr.L. On and McGowan. G.McGann K. 2007,SeptemberMr.(Chairman), 30 of Kells ended yearcomprised R. the Committee During Nomination the Committee Nomination governance corporate on statement Directors’ (continued) United Drug plc Annual Report 2007 35 - - - - 6 6 6 6 6 4 5 and finance Acquisitions - - - - - 1 1 1 1 1 1 Nominations - - - - - 2 2 3 3 3 3 Remuneration - - - - - 6 6* 6 6 6* 5 * * Audit 4 7 7 5 6 7 7 6 7 7 7 Board internal internal financial controls are documented and updated on a basis regular within the financial systems Board approval is required for all Board approval is for major capital required projects; the Audit Committee considers all significant internal control matters; the existence of an independent internal audit function; and an organisational structure an with organisational structure clearly defined lines of responsibility and delegation of authority; the approval by the Board of comprehensive annual budgets, and the monthly monitoring of performance and control manuals. against these budgets; J. J. Peter * In attendance only P. Gray Gray P. G. McGann K. McGowan B. McGrane R. Kells L. FitzGerald C. Corbin D. Egan (i) A. Flynn No. No. of meetings (i) Dr. D. Egan (i) from the retired Dr. Board on 20 November 2007. Attendance Attendance at scheduled Board meetings and Committee meetings during year ended 30 September 2007 is set out below: The directors The have made directors enquiries and are satisfied that the Group has adequate to resources continue in operational consider it existence appropriate the to for future and foreseeable adopt accordingly, the going concern basis in preparing the financial statements. Attendance at Board and Committee meetings Compliance statement During the the Board has period taken under review, the necessary steps to ensure compliance with the provisions set out in Section 1 of the Code. Going concern n The confirm directors that they have reviewed and are satisfied with the effectiveness of the system of internal financial control which operated during the period covered by the financial statements and up to the date on which the financial statements were they signed. In have considered particular, the significant risks affecting the business and the way in which these risks are managed, controlled and monitored. n n n Key procedures that have been established and are designed to provide effective internal financial control are: financial control internal effective to designed provide and are been that established have Key procedures n n 36 United Drug plc Annual Report 2007 period. Performance targets have to be achieved in respect of total shareholder return by comparison with shareholdercomparison returntotal by of respect in achieved be to Performancehavetargetsperiod. three-yearfora annually set aretargets which underFebruary 2007 27 shareholders on by approved was Executive Chief forthe plan new a plan, incentive special previous the of conclusion the Following 2007.30 September ended yearfor the scheme the in directorsparticipating of respect in statement income Group the in years.threeof charge within Group A the leave employee the awarded,should shares the forfeitureof of risk the primarily restrictions, to subject are scheme the under employees senior to allocated awardedSharesand achieved.aretargets financial set annually superiorwheresalary basic of 20% of maximum a to up of value a with shares executives, senior the awardto basis, contingent a on can, Group the scheme,Group’s the shareholders.the of terms of the Underthose with intereststheir align to also and individuals these retain to designed is scheme executives. seniorThe and report, this in outlined are which of details plan incentive special a has who Executive Chief directors,the forexcluding executive 2007 September 30 ended year financial the during introduced was scheme performanceincentive sharerelatedA scheme incentive Share 3 2 1 categories: salary,following basic the of to relate30% and 20% between awardof potential maximum a with performancetargets.performanceannual targets,primary each The defined clearly formeeting achieved be may salary basic of 60% of maximum a to up bonus a plan incentive performancecash relatedthe Under plan incentive Cash performancebonus relatedAnnual directors. executive to payableare fees No operation. of area the in practicemarket competitive and responsibilities in performance,Groupand/orchanges divisional step performance,personalregardhavingdirectors to annually reviewedare executive of salaries basic The benefits and salary Basic directors’remuneration Executive ofall categories who are shareholders in the Group through the Employee Share Participation Scheme. TheGroup also operates an employee share participation scheme. In total there are in excess of 450 employees shareholders’interests.with identification encourage to Group the across executives senior to schemes, option share executive approvedunderGroup. the options, sharegrantsGroupperformance of The overall the performanceand individual on based scheme, incentive share a and plan incentive cash a through directorsannually.reviewedare performancebonuses,relatedexecutive annual of paysGroup salaries The scheme.basic The option share executive the in participation and pension awardshareelement, and cash a of comprised performancebonus relatedannual benefits, and salary basic of consist Remunerationpackages Remunerationpolicy performance.individual corporaterewardsand to link they that requiredand quality the directorsof motivate and retainattract, will they that and competitive areremuneration packages that ensure to aims RemunerationCommittee The RemunerationCommittee The remuneration directors’ on Committee Remuneration the of Report Group profitability and cost performance. Challenging targets are set each year.each performance.set aretargetscost Challenging and profitability Group year.each performance.set aretargetscost Challenging and profitability Divisional year.the of start the at agreedare plans action and performance. Individual priorities Strategic € 44,000 has been recognised been has 44,000 United Drug plc Annual Report 2007 37 65 55 55 60 55 902 720 327 494 440 150 ’000 Total ’000 Total 2006 2006 2,443 € € 807 405 626 65 55 55 60 55 ’000 Total 2007 440 150 € 1,145 2,983 ’000 Total 2007 € 82 53 46 57 238 ’000 € 20 10 10 15 10 expense payment payment 170 105 fees ’000 Other € Share-based Share-based 63 97 183 178 521 ’000 € 45 45 45 45 45 45 Pension 60,000 in respect of this appointment. 270 fees ’000 € Basic € contribution 93 300 187 157 737 ’000 € bonus Annual 2 18 17 28 65 ’000 € in kind Benefits 185 298 552 387 ’000 Basic € 1,422 salary 80,000 has been recognised in the Group income statement the for year ended € K. McGowan J. Peter D. D. Egan* Gray P. G. McGann Non-executive directors R. Kells Executive directors L. FitzGerald C. Corbin A. Flynn B. McGrane Other Other fees non-executive for include Chairman and for directors remuneration Board Committee work. the L. Chief FitzGerald acted Executive, as Mr. a non-executiveDuring of 2007, director C&C Group plc. During the year ended 28 2007 February he retained fees of * Dr. D. Egan * from the retired Dr. Board on 20 November 2007. The pension contribution on C. behalf Corbin is of to Mr. a defined contribution pension scheme. Details of directors’ and secretary’s shareholdings and share options are shown on pages 27, Details 39 shareholdings and of and and share optionsdirectors’ secretary’s 40. are shown on pages 27, remuneration Directors’ will attract individuals with the necessary experience and ability to make a substantial contribution to the and affairs reflect Group’s the time and demands travel of The their Board duties. non-executive directors do not participate in incentivethe Company’s performance-related plans or share schemes. and remuneration interests in Directors’ share capital Details of the for individual remuneration year ended directors’ 30 September 2007 are provided below. 30 September 2007. The amounts accrued under the previous plan have been paid 30 in September 2007. full. No charge in relation to the previous plan was charged to the income statement in the financialcurrent year. Non-executive remuneration directors’ The Committee Remuneration makes recommendations in respect of the of remuneration the non-executive which is directors, decided by The the fees paid Board. to non-executive are set directors at a level which a peer group, a growth in peer group, earnings per share and the strategic development The of total the maximum Group. annual earnings potential is 40% which of takes basic the salary, of form a conditional of award shares in A charge of the Company. 38 United Drug plc Annual Report 2007 Accrued pension shown is that which would be paid annually on normal retirementnormaldate. on annually paid be would which that is shown Accruedpension follows: as are scheme pension benefit defined directorsthe under executive existing to attributable benefits pension The benefits Directors’pension (continued) remuneration directors’ on Committee Remuneration the of Report A. Flynn A. McGraneB. FitzGerald L. Flynn A. McGraneB. FitzGerald L. Increase in accumulated in Increase Increase in accumulated in Increase (excluding inflation) (excluding (excluding inflation) (excluding accrued pension accrued accrued pension accrued during the year the during during the year the during € € 2007 2006 ’000 ’000 42 11 24 33 11 17 7 5 Transfervalue Transfervalue of increase of of increase of € € 2007 2006 ’000 ’000 436 127 242 311 109 162 67 40 Accumulated accruedAccumulated Accumulated accruedAccumulated pension at year end year at pension pension at year end year at pension € € 2007 2006 ’000 ’000 234 125 183 35 74 27 59 97 United Drug plc Annual Report 2007 39 ------€ 4.15 3.40 market market date of price at average average exercise exercise Weighted Weighted ------20 June 2017 20 June 2017 20 June 2017 20 June 2017 20 June 2017 20 June 2017 20 June 2017 20 June 2017 20 June 2017 20 June 2017 € 0.69 0.91 price average average exercise exercise Weighted Weighted Latest exercisable date Options exercised during year - € 3.04 3.16 3.16 4.06 2.67 2.11 4.06 2.60 2.28 3.40 2007 at 30 average average Weighted Weighted September September option price 30 2007 5,000 20,000 187,500 465,000 170,000 175,000 603,500 698,000 463,500 170,000 1,002,500 1,955,000 September September 20 June 2012 20 June 2010 ------Currently exercisable Currently exercisable Currently exercisable Currently exercisable Currently Currently exercisable Currently exercisable Currently exercisable Currently exercisable Currently in year (35,000) (285,000) (250,000) Exercised Exercised Earliest Earliest exercisable date 5,000 in year 80,000 40,000 40,000 40,000 45,000 45,000 45,000 20,000 Granted Granted 205,000 100,000 255,000 - - 30 2006 147,500 797,500 130,000 135,000 385,000 848,000 418,500 125,000 593,500 1,985,000 September September C. Corbin A. Flynn B. McGrane K. Geoghegan A. Flynn B. McGrane K. Geoghegan Second tier options L. FitzGerald Basic tier options L. FitzGerald C. Corbin A. Flynn B. McGrane K. Geoghegan Second tier options L. FitzGerald C. Corbin C. Corbin A. Flynn B. McGrane K. Geoghegan Basic tier options L. FitzGerald Executive share option exercise dates available available to the executive is directors set out in note 21. Executive share option schemes A summary of share options outstanding to and directors the under the secretary provisions of the United Drug plc executive share option schemes An are as explanationfollows. of the various tiers of options 40 United Drug plc Annual Report 2007 Director McGann G. RemunerationCommittee the of behalf On Meeting.Generalforthcoming Annual the at forinspection available be secretarywill the directors and to outstanding options share all of Details n n February2002: 13 aftergranted options covers which scheme, second the to respect With n n scheme: this UnderFebruary 2002. 13 including and to up granted options covers scheme first schemes. The option share two operatesGroup The totalled options these of respect in statement income Group the in recognised expense paymentshare-basedschemes. The option 8,398,026) (2006: 8,056,181 of maximum fora subscribe to options had management key other certain 2007 September 30 At 2008. June 24 to priorexpire options the of None n n either: of period forexercisablearea options These (continued) remuneration directors’ on Committee Remuneration the of Report (4) (3) (2) (1) options), or options), exercised. be may options no case which in index, ISEQ the on listed companies of position midpoint the Below basis; line straight a on increasesexercised be may which options the of proportion the case which in index, ISEQ the on listed companies of 25% top the and midpoint the Between exercised; be may options the of half case which in index, ISEQ the on listed companies of position midpoint the In entirety;their in exercised be may options these case which in index, ISEQ the on listed companies of 25% top the In Company: the places period same the overgrowth EPS if exercised be only may options tierrequirement, second this to addition In options. the of granting the to subsequent years five least at of period a overcompounded, 10% by Index Price options. the of granting the to subsequent yearsthree least at of period a over compounded 5% by Index options. the of granting the to subsequent years five least at of period a over index ISEQ the on quoted companies the options. the of granting the to subsequent yearsthree least at of period a over Index Price Consumer Irish the Second tier options are exercisable only when EPS growth exceeds the growth of the Irish Consumer Irish the of growth the exceeds growth EPS when only exercisableare options tier Second Price Consumer Irish the of growth the exceeds growth EPS when only exercisableare options tier Basic forgrowth EPS of quartile top the within is growth EPS when only exercisableare options tier Second of growth the exceeds growth (EPS) shareperearnings when only exercisableare options tier Basic options). tier (second grantedwere options the which on date the anniversaryof fifth the fromyears five tier (basic grantedwere options the which on date the anniversarythirdof the fromyears seven ordinary shares in accordance with the terms of the United Drug plc executive share executive plc Drug United the of terms the with accordanceordinary in shares Director Kells R. € 888,000 (2006: (2006: € 769,000) . United Drug plc Annual Report 2007 41 L. FitzGerald Director make judgements and estimates that are reasonable and prudent; and the prepare financial statements on the going concern basis unless it is inappropriate to presume that select suitable accounting policies and then apply them consistently; the Group and the Company will continue in business. Director The directors are responsible for the The are responsible for maintenance directors and integrity of the and corporate financial information included on the Group and the Company’s website. Legislation in the Republic of Ireland governing the and preparation dissemination of financial statements may from legislationdiffer in other jurisdictions. On behalf of the Board R. Kells any time the financial position of the Company and enable them to ensure that its financial statements comply with the 1963 Companies Acts, to They 2006. are also taking responsible for such steps as are reasonably open to them to the safeguard assets of the Group and to prevent and detect fraud and other irregularities. Under Irish Company law and the of requirements the Listing Rules issued by the Irish Stock Exchange, the are also preparing a directors Report and responsible for Directors’ reports relating to directors’ and governance remuneration that corporate comply with that law and those Rules. n n keeping books The are responsible for of proper directors account that disclose with reasonable accuracy at position and of performance the Group and the Company; the 1963 Companies Acts, to 2006 provide in relation to such financial statements in that the references relevant part of these Acts to financial statements giving a true and to view fair their achieving are references a presentation. fair In preparing each of the Group and Company financial to: statements, the are required directors n year. Under that law to the the are required prepare year. Group financialdirectors statements in accordance with IFRSs as adopted by the EU and have elected to the prepare Company financial statements in accordance with IFRSs as adopted by the EU and as applied in accordance with the provisions of the 1963 Companies Acts, to 2006. The financial statements by are required law and IFRSs as adopted by the EU to present fairly the financial The directors are responsible for preparing the Annual The are responsible for Report directors and the Group and Company financial statements, in accordance with applicable law and regulations. Company the law to Group and requires directors prepare Company financial statements each for financial Statement of directors’ responsibilities in respect of the Annual Report and the financial statements 42 United Drug plc Annual Report 2007 any other information.other any to extend not do responsibilitiesOur statements. financial the with inconsistencies material or misstatements apparent any awareof become we fordirectors’if reportour remuneration. implications We the consider on RemunerationCommittee the of Report the corporateand governanceon Directors’ statement the Executive’sreview,review,Chief Finance statement, responsibilityCorporatethe the social the statement, Chairman’sDirectors’the report,the only comprises informationotherstatements. The financial audited the with consistent is it whetherconsider and Report Annual the in contained informationother We the read procedures.control and risk proceduresgovernance its or Group’scorporatethe of effectiveness the on opinion controls,formoran and risks all covercontrolinternal on Board’sstatements the whetherconsiderrequired We to not. not are does it if report we and Exchange, Stock Irish the of Rules Listing the forby reviewour specified Code Combined FRC 2006 the of provisions nine the with compliance Company’sdirectors’ the remuneration,on reflects Remuneration Committee the of Reportcorporate the governance,on directors’including We statement the whetherreview report.our in information such include practicable,whereand, disclosed not regardingis directors’transactionsExchange remuneration and Stock Irish the of Rules Listing the orlaw by specified informationif, any you opinion,our to report in We also account. of books the with agreement in is sheet balance Company the whether and audit, our of purposesfor the necessary explanations and information the all obtained have we whether state we addition, In statements. financial the with consistent is Report Directors’the in given information the whether and 1983; Act,(Amendment) Companies the of 40(1) Section under Company the of extraordinary an meeting generalof convening the requiring situation financial a exists theredate, sheet balance the at Company; the by kept been have account properof bookswhether; to as opinion our you to reportRegulation.WeIAS also the of 4 Article and 2006 to Acts,Companies 1963 the properlywith accordancepreparedbeen in have and 2006, to Acts,Companies 1963 the of provisions the with accordance in applied as Company the of case the in and, EU the by adopted as IFRSs with accordance in fairview and true a give statements financial the whether to as opinion our you Weto report Ireland). and (UK Auditingon Standards Internationalrequirements and regulatoryand legal relevant with accordance in statements financial the audit to is responsibilityOur 41. page directors’on responsibilitiesof statement the in out set are EU the by adopted as (IFRSs) StandardsReporting Financial International and law applicable with accordance in statements financial the and Reportdirectors’for Annual the preparingresponsibilitiesThe auditor directorsand of responsibilities Respective formed.have we opinions body,fororreport,the a forwork, this foras members Company’saudit our the and Company the than other anyone to responsibility assume or accept not law,do by permittedwe extent purpose.otherfor no and reportauditor’s To an in them fullest to the state required areto we matters those membersCompany’s the to state might we that so undertaken been has work audit Our 1990. Act,Companies the of 193 section body,with accordancea members,Company’s in as the to solely made is report This therein.accountingpoliciesouttheset CompanyStatementsFlowrelatedCashthe and notes. statementsThesefinancial haveprepared been under StatementsRecognisedof Expense,Incomeand Group theCompany andBalance Sheets, Group the and foryearSeptembertheended30 whichcomprise2007Groupthe IncomeStatement, Group theCompany and WehaveauditedGroupthe Companystatements andfinancial ‘‘financialstatements’’) (the United Drugof plc plc Drug United of members the to report auditor’s Independent United Drug plc Annual Report 2007 43 the financial statements have in been prepared accordance with properly the 1963 Companies Acts, to the Group financial statements give a in true and accordance with view, fair IFRSs as adopted by the EU, the Company financial statements give a in true and accordance with view, fair IFRSs as adopted by the the Company’s affairs the as Company’s affairs at 30 September 2007; and 2006 and Article 4 of the IAS Regulation. of the state of as the affairs at Group’s 30 September 2007 and of its profit the for year then ended; EU and as applied in accordance with the provisions of the 1963 Companies Acts, to 2006, of the state of Registered Auditor Registered Dublin, Ireland 8 January 2008 require the require convening of general meetingan extraordinary of the Company. Accountants Chartered sheet is in agreement with the books of account. In our opinion, the information given in the report is directors’ consistent with the financial statements. The net assets of as the stated Company, in the Company balance sheet on page 89 are more than half of the amount of its called-up share capital and, in our opinion, on that basis there did not exist at 30 September 2007 a financial situation which under Section 40 (1) of the Companies (Amendment) Act, 1983 would n have We obtained all the information and explanations which we considered necessary the for purposes of our audit. In our opinion books of proper account have been The kept Company by balance the Company. In our opinion: n n considered considered necessary in to order provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by or fraud or other irregularity In our opinion, forming we also evaluated error. the overall adequacy of the presentation of information in the financial statements. Opinion the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgements made by the in directors the of preparation the financial statements, and of whether the accounting policies are appropriate to the and consistently Group’s Company’s circumstances, applied and adequately disclosed. planned We and our audit performed so as to obtain all the information and explanations which we Basis of audit opinion conducted We our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing An Practices audit Board. includes examination, on a test basis, of evidence relevant to 44 United Drug plc Annual Report 2007 for the year ended 30 September 2007 September 30 ended yearfor the statement income Group Director Kells R. Board the of behalf On Diluted Basic shareperEarnings to equity holders of the Company the of holders equity to attributable year financial forthe Profit expense tax Income beforetax Profit expense Finance Finance income Finance profitOperating tax after profit ventures’ joint of Share expenses operatingOther expenses Administrative expenses Distribution profitGross sales of Cost Revenue Director FitzGerald L. Notes 11 10 7 7 4 4 5 3 1 (1,352,186) 1,583,622 (161,617) 231,436 55,773 60,038 20.81c 20.96c (8,443) (5,821) (6,554) (6,372) 47,330 1,556 3,145 € 2007 ’000 (1,266,916) 1,466,979 (141,797) 200,063 51,776 42,896 54,517 19.14c 19.31c (8,880) (3,916) (2,410) (3,704) € 1,175 2,365 2006 ’000 United Drug plc Annual Report 2007 45 26 178 ’000 (666) (199) 2006 1,692 € (1,429) 42,697 42,896 ’000 (241) (330) 2007 € 1,926 6,461 (7,211) 47,000 47,330 (1,265) 14 14 19 19 14 Notes Actuarial Actuarial gain/(loss) Movement in deferred Movement tax in deferred Effective portion of cash flow hedges Movement tax in deferred Group Group defined benefit pension schemes: Foreign currency translation adjustment Foreign currency Group cash flow hedges: Items of income/(expense) recognised directly within equity: Net expense recognised directly within equity Profit the for financial year recognised income and expense the for Total year attributable to equity holders of the Company for the for year ended 30 September 2007 Group statement of recognised income and expense 46 United Drug plc Annual Report 2007 as at 30 September 2007 September 30 at as sheet balance Group Director Kells R. Board the of behalf On Totalliabilities and equity Totalliabilities Totalcurrentliabilities Provisions liabilities Currenttax Tradepayablesother and borrowingsInterest-bearingand loans overdraftsBank Current Totalnon-currentliabilities Deferredliabilities tax Derivative financial instruments financial Derivative instruments financial Derivative benefits Employee Provisions payablesOther Interest-bearing loans and borrowingsInterest-bearingand loans Non-current Liabilities Capitalandreserves attributable toequity holders oftheCompany earningsRetained reservesOther premiumShare Equity share capital share Equity Equity Totalassets Totalcurrentassets equivalents cash and Cash Tradereceivablesother and Inventories Current Totalnon-currentassets Deferredassets tax ventures joint in Investment assets Intangible Goodwill Property,equipment and plant Non-current Assets Director FitzGerald L. Notes 22 17 16 15 15 19 22 21 17 16 15 14 14 14 14 13 12 19 11 10 9 8 775,877 444,808 286,369 331,069 223,965 103,473 775,877 498,979 279,550 161,882 276,898 148,544 337,125 107,683 28,810 74,873 11,801 20,857 39,404 68,093 (8,170) 57,547 6,568 6,915 8,000 9,525 6,334 9,161 € 7,574 2007 ’000 463 216 - 678,379 395,142 286,378 268,964 108,764 283,237 181,005 678,379 463,365 262,785 154,668 215,014 123,018 12,930 81,683 94,439 45,912 11,563 18,955 15,661 56,658 (3,770) € 4,463 4,811 5,016 2,764 3,479 3,684 1,453 5,535 2006 ’000 360 722 United Drug plc Annual Report 2007 47 - 18 (63) 375 134 921 ’000 2006 7,014 7,305 2,566 1,395 4,741 1,175 3,916 2,410 € (7,429) (2,764) (8,122) (5,123) (3,878) (5,215) (1,175) (2,365) 38,032 43,148 45,912 43,148 28,103 51,776 11,997 19,905 54,517 (24,757) (13,449) (28,070) (15,073) (14,434) 70 ’000 (809) (331) 2007 7,761 7,414 € 1,002 1,556 1,313 1,628 5,821 8,171 6,554 1,126 57,547 (8,000) (9,636) (1,015) (6,350) (8,828) (9,589) (1,556) (3,145) (3,449) 43,148 49,547 49,547 22,535 21,662 54,847 55,773 60,038 13,011 (11,727) (69,095) (51,467) (12,020) 6 8 4 4 8 3 11 11 20 11 10 21 14 Notes Cash at bank and short term deposits Bank overdrafts Cash and cash equivalents at beginning of year of beginning at equivalents cash and Cash Cash and cash equivalents at end of year Cash and cash equivalents are broken down as follows: Proceeds Proceeds from issue of shares (including net share premium thereon, of scrip dividend) Cash flows from financing activities Net increase in cash and cash equivalents translation adjustment Currency Increase in interest-bearing loans Increase in and interest-bearing borrowings in Increase/(decrease) finance leases Dividends paid to equity holders of the Company Net cash inflow from financing activities Investment in joint ventures Dividends received from joint ventures Net cash outflow from investing activities Deferred acquisition Deferred consideration paid Cash flows from investing activities Interest received plant and Purchase of equipment property, plant Proceeds from disposal and of equipment property, Acquisition of subsidiaries (net of cash and cash equivalents acquired) Increase Increase in inventories Increase in trade and other receivables Increase in trade and other payables Interest paid Income taxes paid Net cash inflow from operating activities Amortisation of intangible assets Charge in respect of share entitlement scheme Profit before Profit tax before Finance income Finance expense Operating profit Share of joint ventures’ profit after tax Cash flows from operating activities Depreciation Depreciation charge (Profit)/loss on plant disposal and of equipment property, Share-based payment expense Group cash flow statement the for year ended 30 September 2007 48 United Drug plc Annual Report 2007 n n n itemswhicharemeasured fairat valueor grant fair date value: GroupTheCompanystatements andfinancial are prepared historicalabasisexcept costforon following the preparationof Basis statements. financial Company orGroup the on impact material a have to expected not is Interpretation10 IFRIC and 1 IAS to Amendment the of Application standards.both of focusdisclosure the nature,measurementgiven and recognition a of be not will amendments these statements, financial Group the accompanying notes information segment and instruments financial the to amendments in result will 8 IFRS and 7 IFRS of application the Whilst dates. effective respectivetheirfrom effect with statements financial Company and Group the of purposesfor the applied be interpretationswill and standards These n n n n Group:forthe effective yet not areinterpretations that and standards following the issued have (IFRIC) InterpretationsCommittee Reporting Financial International the and IASBstatements. The financial Company and Group the preparationof the in early,applied adopt been to have chosen has group the which 11, IFRIC 2007,September 30 on of effective wereexception that the and with EU the by adopted were that IFRS members.its to presented statements Group’sfinancial the fromstatements, financial Company approved the of formpart that notes related and statement income Company the exclude to together statements financial Group and Company its publishes that company a permits which 1963, ActCompanies the of 148(8) Section in contained exemption forthe except 2006 to Acts,Companies 1963 the with accordance in applied as and EU the by adopted as IFRS with accordanceprepared in been have statements’) financial (‘Company Company the of statements financial individual (IASB).BoardStandards InternationalThe Accounting the interpretationsby approvedand standards comprises which EU the by adopted as (IFRS) Standards Reporting Financial International with accordanceprepared in been have statements financial Group The compliance of Statement below.out set are 2007 30 September ended yearfor the statements financial the preparationof the in applied policies accounting The 2008. January 8 directorson the by forissue authorised were Company the of statements financial Group and individual The accounting. of method equity the using undertakings venture joint in interest Group’sthe show and Group’)referred(together ‘the subsidiaries as its to and Company the of statements financial individual the consolidate 2007 September 30 ended yearfor the statements Group’sfinancial Ireland.incorporatedin and The domiciled company limited public a is Company’) (‘the plc Drug United 2007 September 30 ended yearfor the policies accounting Significant share-basedpaymentarrangements. pensionobligations;and instruments;derivativefinancial 2006). November 1 afteror on beginning periods financial date: (effective Impairment and Reporting Financial Interim Interpretation10 IFRIC and 2007); January 1 afteror on beginning periods financial date: (effective Disclosures Capital 1 IAS to Amendment 2009); January 1 afteror on beginning periods financial date: (effective Segments Operating 8 IFRS 2007); January 1 afteror on beginning periods financial date: (effective DisclosuresInstruments: Financial 7 IFRS United Drug plc Annual Report 2007 49 . Interests in Joint Ventures contingent liabilities in a business combination and relates to the future economic benefits arising from assets which are not capable of being individually identified and separately recognised. Business combinations All business combinations are accounted by for applying the purchase method of accounting. Goodwill Goodwill is the excess of the consideration paid over the value fair of the identifiable assets, liabilities and are included in the financial statements using the equity method of accounting, from the date that joint control control joint that date the from of accounting, method equity the using statements financial in the included are the profit, in operating reflects statement income Group The ceases. control joint that date the until commences 31, IAS with in accordance ventures joint of its tax after of profit share Group’s at sheet balance Group in the ventures in joint as investment is included assets net in its interest Group’s The the plus at acquisition assets net identifiable of the value fair of the share Group’s the representing an amount ventures. joint of the losses or profits retained acquisition of post share Group’s evidence of impairment. Unrealised gains arising from transactions with equity accounted joint ventures are eliminated against the investment to the extent of the interest. Unrealised losses Group’s are eliminated in the same way as unrealised gains, but only to the extent there is no evidence of impairment. by contractual established control, joint has Group the activities whose over entities those are ventures Joint ventures Joint decisions. operational and financial strategic for consent unanimous requiring and arrangement indirectly, to govern the financialindirectly, and operating policies of an entity so as to obtain benefit from its activities. In assessing control, potential voting rights that are exercisable or convertiblecurrently are taken into The account. financial statements of subsidiaries are included in the Group financial statements from the date that control commences until the date that control ceases. balances Intragroup and any unrealised gains and losses or income and expenses arising from intragroup transactions are eliminated in preparing the Group financial statements, except to the extent they provide The Group’s The financialGroup’s statements include the financial statements of the Company and all of its subsidiaries and joint ventures. Accounting subsidiaries for and joint ventures Subsidiaries are entities controlled by the Control exists Group. when the directly or Group has the power, Functional and presentation currency The consolidated financial statements are presented in euro and rounded to the nearest thousand, which is the Company’s functional currency. Basis of consolidation where where assumptions and estimates are significant to the financialGroup’s statements, relate primarily to accounting definedfor benefit pension schemes, financial share-based payments, provisions, instruments, plant and equipment, property, intangible assets, goodwill tax impairment and and deferred are documented in the relevant accounting policies below. The accounting policies set out below have been applied consistently by all of the subsidiaries Group’s and joint ventures to all periods presented in these financial statements. The preparation The of preparation financial statements in with conformity IFRS the requires use of certain critical accounting estimates. In addition, it management requires to exercise judgement in the process of applying the accounting The Group’s policies. areas involving a high degree of or areas judgement or complexity, 50 United Drug plc Annual Report 2007 Freehold land Freehold valueusing apre-tax discount rate that reflects current market assessments of the time value of money and the andvalue in use. In assessing value in use, the estimated future cash flows are discounted to their present Therecoverable amount of anon-financial asset or cash generating unit is the greater of its net selling price recoverableamount. its to down written is asset the and out carried is test impairment an exists, indication such annually.reviewedany is If which for goodwill except be, maythere that indicates transaction or event an when impairment of indication any is therewhetherdeterminerecoverability), to reviewedare on based recognisedare (which deferredassets, and tax value) realisable net and cost of lower the at carriedare (which inventories, than otherassets, Group’snon-financial the of carryingamounts The testing reviewsImpairmentand profit. operating in included are and carryingamount the with receivedproceeds the comparing by determinedare disposals on losses annually.reassessedand is Gains assets of life useful the and insignificant, not if assets, of retirement.value residualof The month the of end the to up disposals on and commissioning following month the of day first the fromeffect with additions on provided is Depreciation buildings and Land rates: annual following the using lives useful anticipated their over off property,equipment write and to value,residualplant estimated less cost on basis line straight a on calculated, is Depreciation asset. the of acquisition the to attributable directly is that expenditure includes Cost losses.impairment and depreciation accumulated less cost at reported is Property,equipment and plant Property,equipment and plant asset. the of nature the on depending years eight to two fromranging periods over amortised are assets Intangible assets. intangible the of lives useful estimated straight-linethe overa basis on statement income the to charged is Amortisation impairmentlosses, when separable or arising from contractual or other legal rights and are reliably measurable. Intangible assets, that are acquired by the Group, are stated at cost less accumulated amortisation and assets Intangible 1. IFRS by permitted as business the of disposal the on loss or gain the of formpart not will disposal, subsequent any on and,earningsretained against offset permanently been have to considered is goodwill this 2004 October 1 at sheet balance GAAP.Group’sIrish IFRS the preparinghistorical underpermitted In policy accounting of matter a as acquisition reserveson against eliminated was 1999 October 1 to prior acquisitions on arose which Goodwill investment. the of carryingamount the in included is goodwill of amount carryingventures,the joint of respect In losses.impairment accumulated any less cost deemed or cost at year.stated each is Goodwill time consistent a forat impairmentannually tested is and units generating cash to allocated is Goodwill 1. IFRS by permitted as 2004 October 1 at sheet balance IFRS Group’sopening the preparingreconsidered in been not has 2004 October 1 occurredto priorthat combinations business of treatment accounting GAAP.recordedand Irish underamount historical representsclassification the The which 2004, September 30 to up acquisition since amortisation accumulated less cost original i.e. cost, deemed its of basis the on included is goodwill 2004, October 1 to prior completed acquisitions of respect In policies accounting Significant Motor vehicles Motor equipment Computer equipment and Plant buildings Freehold not depreciated not 20 - 33% - 20 20% 10% 2% (continued) United Drug plc Annual Report 2007 51 foreign exchange foreign rate ruling at the date of the transaction. Non-monetary assets and liabilities carried at historic cost are not Non-monetary subsequently assets re-translated. carried at value fair are subsequently at re-measured the exchange rate at the date value fair was Monetary determined. assets and liabilities denominated at in currencies the foreign balance sheet date are translated into functional at currencies the principle and includes all expenditure which has been in incurred the normal course of business in bringing the products to their present location and condition. Net realisable value is the estimated selling price of inventory on hand less all costs expected to be in incurred marketing, distribution and selling. Foreign currency are translated into in currencies the foreign functional of currency the Transactions related entity at the Leases where a significant portion of the risks and of rewards ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are charged to the income statement on a straight line basis over the term of the lease. Inventories Inventories are valued at the lower of cost and net realisable value. Cost is based on the first in, first out The corresponding The rental obligations, corresponding net of finance are included loans charges, in and interest-bearing The interest element of borrowings. the finance cost is charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability each for plant and The equipment period. property, acquired under finance leases are depreciated over the shorter of the useful life of the asset or the lease term. All impairment losses are recognised in the income statement. Leases plant Leases and of equipment, property, where the Group has substantially all the risks and of rewards are classifiedownership, as finance leases. Finance leases are capitalised at the inception of the lease at the lower of the value fair of the leased asset or the present value of the minimum lease payments. remaining remaining financial assets are assessed collectively in groups that share similar credit risk characteristics. An impairment loss, other than in the case of goodwill, is if reversed there has been a change in the estimates used to determine the amount. An recoverable impairment loss is only reversed to the extent that the amount asset’s carrying does not exceed the amount carrying that would have been net determined, of depreciation or amortisation, if no impairment loss had been recognised. more more events have had a negative effect on the estimated future cash flows of that asset. An impairment loss in respect of a financial asset measured at amortised cost, is calculated as the difference between its amount carrying and the present value of the estimated future cash flows discounted at the original An effective impairment loss interest rate. arising on financial assets is recognised in the income statement. Individually significant financial assets are tested impairment on for an individual The basis. generating units that are expected to benefit from the combination’s synergies. An impairment loss is recognised recognised is loss impairment An synergies. combination’s the from benefit to expected are that units generating amount. recoverable estimated its exceeds unit generating cash its or asset an of amount carrying the if Goodwill is tested impairment at for each balance sheet date. A financial asset is assessed at each reporting date to determine whether there is any objective evidence that it A is financialimpaired. asset is considered to be impaired if objective evidence indicates, that one or risks specific to the asset. For the purpose of impairment testing, assets are grouped together into the smallest smallest the into together grouped are assets testing, impairment of purpose the For asset. the to specific risks or assets other of inflows cash the of independent largely are that inflows cash generates that assets of group cash to allocated is combination a business in acquired Goodwill unit”). generating “cash (the assets of groups 52 United Drug plc Annual Report 2007 sheetdate onhigh quality corporate bonds that have maturity dates approximating theterms oftheGroup’s currentandprior periods; less thefair value ofanyplan assets. Thediscount rate istheyield atthebalance presentvalue oftheamount offuture benefits that employees have earned inreturn for their service inthe obligationinrespect ofdefined benefit pension plans iscalculated, separately for each plan, byestimating the definedA benefit planpost-employment isa plan other thandefined a contribution plan. TheGroup’s net statementasincurred. Obligationsfor contributions todefined contribution pension plans are recognised asanexpense intheincome contributionsintoseparate a entityand will have nolegal or constructive obligation topayfurther amounts. definedA contribution pension planpost-employment isa benefit plan under which anentitypays fixed obligations Pension benefits Employee Allborrowing costs are recognised intheprofit or loss using theeffective interest method. profitor loss, using theeffective interest method. Finance expenses comprise interest expense onborrowings. Financeincome comprises interest income onfunds invested. Interest income isrecognised asitaccrues in expenses and income Finance Group.the by earned commission of amount net the is recognisedrevenue the transaction, a in principal the as ratherthan agent an of capacity the in acts Groupcontract. servicethe relatedWhen the on exist obligations further no when fully orcontractrelated the of completion of stage the to proportion in statement income the Group.in recognisedrenderedservicesfromRevenuethe is to flow will benefits economic the that probable is it and reliablymeasured be transferredbuyer,can been the haveconsideration to the ownershiprewards of and risks significant the when statement income the in recognised is returnsand and fordiscounts allowances after and tax added value of exclusive is sales of fairperiod.value reportingThe financial the in customers party third to providedservices and products of fairrepresentsRevenuevalue the recognitionRevenue guarantee.the underpayment a make requiredto be will Group the that probable becomes it as time such until liability contingent a as contractguarantee the treatsGroupsuch. The as forthem accounts arrangementsinsurance and be to these considersGroup the parties, other of indebtedness the guarantee to contractsguarantee financial into entersGroupWhere the contractsguarantee Financial sheet. balance Group the foreigncurrencyreserveto translation the in equity of component separate Translationa as presentedare 2004 October 1 fromdifferences arising date. that to subsequent foreignoperation a of disposal on loss or gain the ascertaining of purposes forzerothe to set been have IFRS) to date transition (the 2004 October 1 to priordifferences arising currencytranslation cumulative disposal. The on loss or gain overall the of part as statement income Group the currencydifferencesin recognisedaretranslationforeignaccumulated operation, a of disposal On equity.in directlyrecognisedareoperation foreigna in investment net the of translation on differencesarising exchange Foreign period. financial forratethe average exchange the at euro to translatedareforeignoperations of expenses and revenues date. sheet The balance the at rulingratesforeign exchange the at euro to translatedare consolidation, on arising adjustments fairvalue and goodwill foreignincluding operations,of liabilities and assets The equity.in directlyrecognisedare which hedges flow cash forqualifying except statement, income the in recognisedaretranslation on differencesarising exchange Foreigndate. that at rulingrateforeign exchange policies accounting Significant (continued) United Drug plc Annual Report 2007 53 . The fair value of share entitlements granted granted entitlements of share value fair The . Share-based payment or or substantively enacted at the balance sheet date. tax A asset deferred is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be tax utilised. assets Deferred are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Deferred tax is Deferred provided using the balance sheet liability differences method, temporary providing for between the amounts carrying of assets and liabilities financialfor reporting purposes and the amounts used taxation for If purposes. tax the arises deferred from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction does not affect accounting nor taxable profit or loss, it is The not amount tax recognised. of provided is deferred based on the expected manner of realisation or settlement of the amount carrying of assets and liabilities, using tax rates enacted in equity, in in which equity, case the related tax is recognised in equity. tax Current is the expected tax payable on the taxable using income tax the for rates and year, laws that have been enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years. The Group does not operate any cash-settled share-based payment schemes or share-based payment transactions with cash alternatives as defined in IFRS 2. Income tax expense Income tax expense recognised in the profit or loss the for tax. year comprises and current deferred is recognised in the Taxation income statement except to the extent that it relates to items recognised directly been met or where an employee in receipt of options relinguishes service before the end of the vesting period. vesting of the end the before service relinguishes of options in receipt an employee where or met been The proceeds received on the exercise of share options are credited to share capital and share premium. In line with the set transitional arrangements out in IFRS 2, the recognition and measurement principles of this standard have been applied only in respect of share entitlements granted after 7 November 2002. is determined by an external valuer using a trinomial valuation model. Share options granted by the Company Company by the granted options Share model. valuation a trinomial using valuer by an external is determined into taken not are conditions vesting Non-market conditions. vesting based non-market to certain subject are in expense payments share-based The date. grant as at the of options value fair the estimating when account is allocated and to vest expected of options number total of the value fair on the is based statement income the income to the charge cumulative The period. vesting the over basis line on a straight periods to accounting not have conditions performance non-market all because vest do not options where reversed is only statement Share-based Share-based payment transactions all are They Company. in the shares acquire employees allow which schemes option share operates Group The 2 IFRS under arrangements settled equity amount The in equity. increase a corresponding with statement income in the as an expense is recognised value fair The vest. that options of share number actual the to reflect is adjusted as an expense recognised recognised in the statement of recognised income and expense as they arise. arise. as they expense and income of recognised statement in the recognised related incentive Performance plans The Group recognises the present value of a liability short for term employee benefits including costs associated with related incentiveperformance plans in the income statement when an employee has service in rendered exchange these for benefits and a constructive obligation to pay those benefits arises. obligations. The calculation is performed by a qualified actuary using the projected unit method. All actuarial actuarial All method. unit projected the using actuary by a qualified is performed calculation The obligations. retained against in full recognised were to IFRS, of transition date the 2004, as at 1 October losses and gains are periods subsequent for losses and gains Actuarial 19. to IAS amendment by the as permitted earnings 54 United Drug plc Annual Report 2007 income statement. income the in immediately recognised is loss or gain any of part ineffective loss.or The profit affects transaction forecasthedged the which during periods or period same the in statement income the in recognised and equity fromremoved is loss or gain cumulative associated the hedges, flow cash Forrecognised). is expense or income interest when (i.e. loss or profit affects assumed liability oracquired asset the which during periods or period same the in loss or profit into reclassified are equity in directlyrecognisedwere that losses and gains liability,associated the financial a or asset financial a of recognition the in results subsequently forecastedtransaction a of hedge liability.ora asset If non-financial the of carryingamount otheror cost initial the in included and equity fromremoved is loss or gain cumulative associated the liability, non-financial or asset non-financial a of recognition the in resultsforecastedtransaction the When reserve.hedge flow cash the in equity in directlyrecognised is instrument financial derivative the on loss or gain any of part effective forecastedprobablethe liability,ortransaction, highly asset recogniseda or a of flows cash in variability the of hedge a as designated is instrument financial derivative Wherea hedges flow Cash forwardquoted price.the of value present the being date, sheet balance the at price market quoted theirforward is contractsof exchange counterparties.fairvalue swap The the of creditworthiness currentthe current and ratesinterestaccount into taking date, sheet balance the at swap the terminate to payorreceive would Group the that amount estimated the is swapsrateinterest of fairvalue The recognitionresultantanyof below. natureoutbeinghedged,oritemthegainset depends thelosson as of recognisedis immediatelyincomestatement.the in However, where derivativesqualifyfor hedgeaccounting, instrumentsDerivativefinancial arerecognised fairat value. re-measurement orgainonlossThe fairto value instruments.tradingfor as accounted are accounting forhedge qualify not do forinstrumentspurposes.tradingHowever, that financial derivatives derivative issue or hold not does Group treasurypolicy,its with accordancethe In activities. investment and financing operational,from arising risks rateinterest and foreignexchange to exposure its hedge to instruments financial derivative uses Group The instruments financial Derivative instruments Financial statement. flow cash Group the of purposefor the equivalents cash and cash of component a as included are management cash Group’sthe of part integralform an and demand maturity.repayableareon overdraftsmonths that Bank three than less of deposits bank including deposits, and balances cash comprise equivalents, cash and Cash equivalents cash and Cash basis.arm’slength an on determined is pricing Inter-segment structures.reportinginternal and management Group’sthe on based segment, reporting primary its as segment business the adopted has Group The differentarerewardssegments.otherfrom that and risks to subject is which segment), (geographical environment economic particular a within servicesorproductsproviding in or segment), (business services orproductsproviding in either engaged is that Group the of component distinguishable a is segment A reporting Segmental basis. net a on assets and liabilities currenttax settle to intend they but entities, differenttax on or entity tax same the on authority tax same the by levied taxes income to relate they and assets, and liabilities currenttax offset to enforceableright legally a is there if offset are liabilities and Deferredassets tax policies accounting Significant (continued) United Drug plc Annual Report 2007 55 Where share capital Where recognised as equity the is amount repurchased, of the consideration paid, including directly attributable costs, net of any tax effects, is recognised as a Repurchased deduction from equity. shares are classified as shares and treasury are presented as a deduction from total equity. time value of money the and, where appropriate, risks specific to the liability. Share capital shares are classified Ordinary Incremental costs as directly attributable equity. to the issue of ordinary shares and share options are recognised as a net deduction of from equity, any tax effects. Provisions A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be to required settle the obligation which If can the be effect is measured reliably. material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects market assessments current of the Interest-bearing borrowings are recognised initially borrowings at value Interest-bearing fair less attributable transaction costs. Subsequent other than to those initialborrowings, accounted under the recognition, for interest-bearing value fair hedging model outlined above, are stated at amortised cost with any between difference cost and redemption value being recognised in the income statement over the period of the on borrowings an effective interest basis. Effective interest rate is calculated by taking into account any issue costs and any expected discount or premium on settlement. financial assets expire or if the the financialGroup transfers asset to another party without retaining control of substantially all risks and of rewards the asset. Purchases and sales of financial assets are accounted for at trade date i.e. the date that the Group commits itself to purchase or sell the asset. Financial liabilities are de-recognised if the obligations Group’s specified in the contract expire or are discharged or cancelled. borrowings Interest-bearing Non-derivative financial instruments comprise investments trade and cash in other receivables, and equity, cash equivalents, loans and and trade and borrowings, other payables. Non-derivative financial instruments are recognised at value. fair A financial instrument is recognised if the Group becomes a party to the contractual provisions of the instrument. Financial assets are de-recognised if the contractual rights Group’s to the cash flows from the in the income statement. In any loss in on gain to addition, or the the statement. item the income hedged which is hedged attributable Where of amount in the item hedged and the reflected statement. income the risk against carrying is adjusted is the adjustment financial instrument, of amount a is interest-bearing hedged the to adjustment the carrying amortised to with the full the objective of amortisation statement by income achieving maturity. Non-derivative financial instruments transaction occurs. transaction If occurs. the hedged transaction is no longer expected to take place, the cumulative unrealised gain or loss recognised in equity is recognised immediately in the income statement. Fair value hedges as is a designated hedge of a a value of financial derivative instrument in an change the or asset fair Where reported value are to fair of the instrument hedging the re-measurement from arising losses gains or liability, When When a hedging instrument expires or is sold, or the terminated or exercised, entity revokes designation of the hedge relationship but the hedged transaction forecast is still the expected cumulativeto occur, gain or loss at that point remains in equity and is recognised in accordance with the above policy when the 56 United Drug plc Annual Report 2007 ** excluding amortisation of intangible assets and share-based payment expense.paymentshare-based and assets intangible of amortisation excluding ** of sales inter-segment of net is revenueServices Chain Supply * assets. the of location geographical the on based are assets Group’sSegment subsidiaries.the of location geographical the on based is revenue segment segments,geographical of basis the on information presentingEurope. In Continental and UK Ireland,the of Republic the being regionsgeographical principal three in operatesGroup The segments Geographical n n n n segments: primary following the into Group’sdivided areoperationsThe Europe. Continental in markets new into expanded year financial currentthe during and UK, the and Ireland both providerserviceshealthcarein leading a is Drug United segments Business period. one forthan moreused be to expected are that assets segment acquire to period the incurredduring cost total the is expenditure capital Segment note. segment relevant the after immediately aggregate in disclosed ratherbeen havebut segment a to allocated been not have they specific, segment not are which liabilities, certain of nature the to Due basis.reasonable a on allocated be can that those as well as segment a to attributable directly items include liabilities and results,assets Segment basis.arms-length an on determined is pricing Inter-segment structure.reportinginternal and Group’s management the on based is segments, format,business primary segments.geographical The and Group’sbusiness the of respect in presented is information Segmental reporting Segmental 2. principal. a as rathertransactionthan the in agent an as acts Group the whereproducts of sale the to relates income currentCommission presentation.yearthe conform with to yearprior the in revenue to income operatingotherfrom reclassified been has income Commission Revenue 1. statements financial Group the of part forming Notes Profit for the financial year financial forthe Profit expense tax Income beforetax Profit expense Finance income Finance profit Operating expense paymentShare-based analysis segment Business Totalrevenue income Commission Services forresaleGoods Amortisation of intangible assets intangible of Amortisation profit** operating Adjusted Revenue Contract Sales Outsourcing Sales Contract Scientific & Medical Services Chain Supply PharmaWholesale Wholesale 979,267 Pharma 25,887 27,040 € 2007 (349) (804) ’000 € 336,157,000. Services 399,061* 12,566 16,351 Supply (3,312) Chain € 2007 (473) ’000 Medical & Medical Scientific 101,518 12,937 14,670 (1,609) € 2007 (124) ’000 Outsourcing 1,583,622 1,479,715 Contract 103,776 98,867 5,040 8,648 9,657 € € Sales 2007 2007 (180) (829) ’000 ’000 1,583,622 1,466,979 1,363,876 55,773 60,038 95,140 (8,443) (5,821) (1,126) (6,554) 47,330 67,718 Group 1,556 € € 7,963 2007 2006 Total ’000 ’000 United Drug plc Annual Report 2007 57 ’000 ’000 ’000 ’000 Total Total (921) Total Total 2006 2006 2007 2007 € € 1,175 € € Group Group Group Group (2,410) (3,916) (8,880) 57,848 54,517 51,776 42,896 678,379 678,379 775,877 775,877 326,341 118,467 444,808 1,466,979 ’000 ’000 ’000 ’000 (560) (146) 2006 2006 2007 2007 Sales Sales Sales Sales € € 8,774 8,068 € € 91,685 81,542 92,209 25,050 Contract Contract Contract Contract Outsourcing Outsourcing Outsourcing Outsourcing ’000 ’000 ’000 ’000 (489) (103) 2006 2006 2007 2007 € € € € 84,016 11,781 31,050 11,189 105,075 129,986 Scientific Scientific Scientific Scientific Medical & Medical & Medical & Medical & ’000 ’000 ’000 ’000 (387) 2006 2006 2007 2007 Chain Chain € € Chain Chain € € (1,361) Supply Supply Supply Supply 13,429 11,681 375,753* 205,253 256,006 124,338 Services Services Services Services 281,773,000. € - ’000 ’000 ’000 ’000 (285) 2006 2006 2007 2007 € € € € 23,864 23,579 Pharma Pharma Pharma Pharma 297,676 915,525 286,509 145,903 Wholesale Wholesale Wholesale Wholesale (continued) Revenue Adjusting operating profit** Amortisation of intangible assets Share-based payment expense Segment assets Segment liabilities Segment assets Operating Operating profit Unallocated liabilities Profit for Profit the for financial year Finance income Finance expense Profit tax before Income tax expense 2. Segmental reporting Unallocated liabilities comprise amounts loans relating derivativeto and interest-bearing borrowings, financial tax current liabilitiesinstruments, tax and liabilities. deferred * Supply Chain Services revenue is net of inter-segment sales of ** excluding amortisation of intangible assets and share-based payment expense. 58 United Drug plc Annual Report 2007 financial instruments, current tax liabilities and deferred liabilities. and tax instruments,liabilities current tax financial borrowings,interest-bearing and to derivative relatingloans amounts comprise liabilities Unallocated statements financial Group the of part forming Notes The results and assets of joint ventures are included within the Supply Chain Services business segment. business Services Chain Supply the within included areventures joint of assets and results The assets. intangible and goodwill property,equipment, of and acquisition plant comprises expenditure Capital Other segment informationsegment Other reporting Segmental 2. Share-based payment expense paymentShare-based assets intangible of Amortisation expense paymentShare-based assets intangible of Amortisation expenditure Capital Depreciation liabilities Unallocated liabilities Segment Capital expenditure Capital analysis Geographical expenditure Capital Depreciation Segment assets Segment Revenue assets Segment Revenue Capital expenditure Capital (continued) Wholesale Wholesale 154,125 Pharma Pharma 24,347 € € 4,608 2,881 3,481 € 2007 2006 2006 ’000 ’000 ’000 285 349 804 - 1,022,357 1,056,039 of Ireland of Services Republic Services 102,858 390,821 475,419 39,645 Supply Supply 27,409 € € € 1,728 1,361 1,609 3,312 3,199 2,830 Chain € € Chain 2007 2007 2006 2006 2006 ’000 ’000 ’000 ’000 ’000 473 387 Medical & Medical Medical & Medical Scientific Scientific Kingdom 444,622 278,163 507,862 287,558 14,647 25,967 11,198 38,730 39,933 United € € € 1,062 1,609 € € 2007 2007 2006 2006 2006 ’000 ’000 ’000 ’000 ’000 730 489 124 103 Outsourcing Outsourcing Continental Contract Contract (continued) Europe 20,305 38,870 22,295 19,721 € € € 2,160 1,105 1,275 1,153 € € Sales Sales 2007 2007 2006 2006 2006 ’000 ’000 ’000 ’000 ’000 146 560 180 829 - - - 1,466,979 1,583,622 395,142 303,255 775,877 678,379 80,799 91,887 42,763 80,799 42,763 Group Group Group 8,171 1,126 6,554 € € € 2,410 € € 7,305 2007 2007 2006 2006 2006 Total Total Total ’000 ’000 ’000 ’000 ’000 921 United Drug plc Annual Report 2007 59 32 78 (42) 498 134 345 306 ’000 ’000 2006 2006 7,305 3,308 3,916 2,741 2,410 3,077 4,991 € € (1,175) 15 51 380 430 119 ’000 ’000 (331) 2007 2007 € € 1,929 3,826 5,821 4,265 8,171 6,554 3,893 4,581 (1,556) paid to the auditors nil) € (2006: 75,000 € - wholly after fiverepayable years Interest on finance leases Other Net finance expense Income arising from cash deposits Finance expense Interest on bank loans and overdrafts - wholly within repayable five years Finance income Foreign Foreign exchange losses/(gains) Auditor’s remuneration Auditor’s non-audit for remuneration services* Auditor’s Operating lease rentals: - Land and buildings - Other assets Operating Operating profit is stated after: plant Depreciation and of equipment property, (Profit)/loss on plant disposal and of equipment property, Amortisation of intangible assets Report Report of the Committee Remuneration on on remuneration pages directors’ 36 to 40. 4. Finance income and expense *In addition, during the year to 30 September 2007, *In an addition, amount during of the year to 30 September 2007, has been included in the value fair of purchase consideration of business combinations. Details pension of remuneration, entitlementsdirectors’ and interests in share options are set out in the 3. Statutory and other information 60 United Drug plc Annual Report 2007 The Group’s share of joint ventures’ profit after tax includes a tax charge of charge tax a includes tax after profit ventures’ joint Group’sof shareThe creditof inthe corporation tax rate in the United Kingdom and from other changes to United Kingdom legislation, Thedeferred and a tax credit for the year to 30 September 2007 includes a credit of 5. Income tax expense tax Income 5. statements financial Group the of part forming Notes Other items Other yearsprior to Adjustments rates tax Differencesin Taxventures joint from income on purposesfortax deductible not Expenses ratecorporationtax TaxationIrish on based beforetax Profit rate tax effective of Reconciliation expense tax Income Totaldeferredcredit tax items Other Intangible assets Intangible Property,equipment and plant temporaryreversaldifferences:of and Origination Deferredtax Totalexpense currenttax Current year tax on profit for the year forthe profit on Currenttax year yearsprior of respect in Adjustment Overseas year forthe profit on Corporationtax yearsprior of respect in Adjustment Ireland Currenttax statement income the in Recognised € 300,000in respect of an overprovision for deferred tax in prior years. 12.50 2007 % 55,773 (1,071) 8,443 2,188 6,972 € 2007 (393) ’000 € 139 608 € 361,000arising from a reduction 1,190,000 (continued) 10,478 (2,035) (1,514) 8,443 6,543 3,935 4,132 12.50 € 7,117 2007 2006 (2006: (2006: (423) (574) (197) ’000 (98) % € 1,012,000) 51,776 € € 8,880 1,745 6,472 8,880 9,841 4,653 4,959 5,188 4,335 2006 2006 (296) (961) (723) (149) (306) ’000 ’000 547 389 853 (89) 23 . United Drug plc Annual Report 2007 61 ’000 ’000 2006 2006 8,804 3,798 2,410 8,122 19.31 19.14 20.39 20.22 € € (4,480) 12,602 12,602 42,896 45,306 Number of shares 1,957,140 222,155,656 224,112,796 ’000 2007 € 4,465 9,636 ’000 2007 (5,218) 10,389 14,854 14,854 € 5,040 20.96 20.81 23.19 23.02 47,330 52,370 Number of shares 1,617,076 227,480,256 . 225,863,180 (2006: 4.64 cent per share) (2006: 6.35 cent) , subject to approval at shareholder the Annual General (2006: 1.71 cent) (2005: 4.00 cent) 10,385,000) € treasury shares held treasury by the Group do not dividend rank for and have (2006: 12,186,000 (2006: 7,623,066) € Interim dividend 2007 for of 1.97 cent dividends Total Earnings Earnings adjusted amortisationfor of intangible assets Profit for Profit the for financial year Adjustment amortisationfor of intangible assets (net of tax) Total dividends Total Scrip issue Dividends paid per Group cash flow statement Dividends paid Final dividend 2006 for of 4.64 cent Adjusted diluted earnings per share – cent* Number Number of dilutive shares under option number of including average shares, Weighted ordinary share options Basic earnings per share – cent Diluted earnings per share – cent Adjusted basic earnings per share – cent* Weighted average number of average Weighted shares 7. Earnings per ordinary share Earnings per ordinary 7. The directors The have proposed a directors final dividend 2007 for of 5.33 cent per share amounting to cent per share The Meeting. total dividend the for year is 7.30 The final dividend 2007 for has not been in as provided for the there balance sheet at 30 September 2007, was no present obligation to pay the dividend at year-end. 6. Dividends – equity shares metric of monitoring group performance. The 7,623,066 been excluded therefore from the weighted number of average shares in issue used in the calculation of earnings per share. *excluding amortisation of intangible assets The adjusted figures earnings per share are intended for to demonstrate the results of the Group after eliminating the impact of amortisation of intangible assets and are deemed by management to be the key 62 United Drug plc Annual Report 2007 € was property,2007,Septemberequipment in 30 and included plant assets leased of carryingamount the agreements.lease At finance of number a underproperty, equipment of and items plant leases Group The property,equipment Leased and plant below.noted assets leased of exception the with assets above the borrowingson securedareNo 8. Property,equipment 8. and plant statements financial Group the of part forming Notes At 30 September 2006 September 30 At Translationadjustment disposal on Eliminated year forchargethe Depreciation acquisition on Arising year in Additions At 1 October 2005 October 1 At Depreciation 2006 September 30 At Translationadjustment year in Disposals 2005 October 1 At Cost 2006 September 30 At 2007 September 30 At Carryingamount 2007 September 30 At Translationadjustment Eliminated on disposal on Eliminated year forchargethe Depreciation 2006 October 1 At Depreciation 2007 September 30 At Translationadjustment year in Disposals acquisition on Arising year in Additions 2006 October 1 At Cost 2,495,000 (2006: (2006: € 93,000) and related depreciation amounted to amounted depreciationrelated and Land and Land Buildings Land and Land Buildings 43,425 40,290 46,337 43,425 42,423 38,267 5,158 6,047 € 1,000 5,158 2,626 4,148 € 2007 2006 (627) ’000 ’000 986 822 180 929 (98) (13) (16) 24 - - - Equipment Equipment Plant and Plant Plant and Plant 15,700 28,002 20,599 18,557 39,156 13,272 26,690 12,302 15,700 28,002 (1,018) (1,118) € 3,328 2,146 3,970 8,903 3,790 € 2007 2006 (984) (795) (318) (421) ’000 ’000 112 84 72 € 479,000 Vehicles Vehicles (1,024) (1,385) (1,302) Motor Motor 2,834 5,698 4,499 3,403 € 1,092 1,095 2,761 5,764 2,864 1,506 2,834 3,537 5,698 € 7,902 2007 2006 (897) ’000 ’000 219 (40) (31) (2006: (2006: 5 5 - Equipment Equipment Computer Computer € 54,000) (continued) 12,238 12,106 10,488 14,593 12,238 (3,417) (1,178) (3,576) (1,429) 9,013 2,705 9,401 € 1,899 1,152 3,225 1,695 9,013 1,333 € 2007 2006 (129) ’000 ’000 (98) 43 43 26 62 . 105,501 32,705 32,705 89,363 89,363 68,093 11,591 30,669 89,470 56,658 (2,883) (1,177) (3,865) 37,408 (5,425) (5,979) 8,171 9,589 € 5,215 € 7,305 2007 2006 Total (585) Total ’000 ’000 156 340 317 United Drug plc Annual Report 2007 63 - 528 ’000 ’000 2006 2006 1,223 € € 17,890 91,700 29,567 105,128 123,018 123,018 Segment 256 ’000 ’000 2007 2007 € € 17,890 (3,202) 28,472 12,413 123,018 118,241 148,544 148,544 nil). € (2006: . (2006: 6.0%). Republic Republic of Ireland UK Translation adjustment Translation Cost At beginning of year Revisions to prior year acquisitions (note 20) during Acquired the year (note 20) Continental Europe At At end of year with publicly available data, the Group will maintain gross margins will its market share, be current maintained at levels current and that overheads will increase in line with expected levels of inflation. There was no the impairment charge for year ended 30 September 2007 extrapolated extrapolated using growth rates of between 5% to 15% based on the historical annual growth experience of individual CGUs. For the purposes of calculating terminal values, a terminal growth rate of 2% has been The adopted. cash flows are discounted using appropriate risk adjusted pre-tax discount rates averaging 7.4% The key assumptions used the for value in use computations are that the markets will grow in accordance management purposes and is not bigger than the segments determined in accordance with IAS 14, Reporting The amounts recoverable of CGUs are based on value in use The calculations. cash flow used forecasts for the value in use computations exclude incremental profits and other cash flows derived from acquisition activities.The computations use five year cash flow For individual forecasts. CGUs, between one and three have years forecasts been approved by The senior management. have remaining years’ forecasts been Goodwill arises in connection with acquisitions, including revisions of estimates of consideration as detailed in note 20. Goodwill acquired through business combinations has been allocated to CGUs the for purpose of impairment The testing. CGU the represents lowest level within the Group at which associated goodwill is monitored for Goodwill acquired through business combinations has been allocated impairment testingfor to the following Cash Generating Units (CGUs): 9. Goodwill 64 United Drug plc Annual Report 2007 nature of the asset. the of nature the on years,depending eight to two fromranginglives, useful theirover amortised are assets Intangible statement. income the in expenses operatingother to charged been has yearforcharge the amortisation The 10. Intangible assets Intangible 10. statements financial Group the of part forming Notes At 30 September 2006 September 30 At 2007 September 30 At Carryingamount At 30 September 2007 September 30 At Translationadjustment year the during Amortisation At 30 September 2006 September 30 At Translationadjustment year the during Amortisation 2005 October 1 At Amortisation 2007 September 30 At 2006 September 30 At Translationadjustment Translationadjustment year the Acquiredduring year the Acquiredduring 2005 October 1 At Cost Relationships Customer 22,527 28,049 11,532 17,088 5,522 9,733 3,873 5,341 1,799 1,538 6,158 € (150) (571) ’000 251 33 10 12,021 14,619 Names 2,598 5,928 1,615 6,986 2,323 1,058 4,665 € Trade 7,996 (363) ’000 181 872 (75) (2) 5 Contract (continued) Based 4,856 1,054 5,910 1,066 6,063 € (153) ’000 (12) ------39,404 48,578 31,147 18,518 15,661 10,823 (1,087) 9,174 6,554 2,857 2,410 € 7,664 Total (237) ’000 432 15 31 United Drug plc Annual Report 2007 65 257 809 ’000 ’000 ’000 (424) 7,098 7,429 7,735 € € 8,904 2,365 € 3,145 2006 2007 (8,266) 17,586 (1,628) 11,857 18,955 14,350 19,676 66,505 41,294 63,026 13,122 20,857 18,955 20,857 (97,339) (80,408) (11,445) At At 30 September 2006 Other current assets Other current liabilities Non-current liabilities Current Goodwill Non-current assets Non-current Cash and cash equivalents Non-current liabilities Non-current liabilities Current Goodwill At 30 September 2007 Non-current assets Non-current Cash and cash equivalents assets Other current Translation adjustment Translation At 30 September 2007 At At 30 September 2006 Investment during the year Share of profit after tax Dividends received from joint ventures At At 1 October 2005 Investment during the year Share of profit after tax adjustment Translation The investment in the joint the share of ventures represents Group’s the net assets of the joint ventures at the balance sheet date as follows: 11. Investment in joint ventures The interest in Group’s its joint all ventures, of which are unlisted, are set out below. 66 United Drug plc Annual Report 2007 Current replacement cost does not differ materially from historical cost. historical fromdiffer materially not does Currentcost replacement 2006. and 2007 September 30 ended years the during value € to amounted sales of 2007,cost In as recognised goods finished progressand in workrawmaterials, Inventories 12. ordinaryareshares. held shares All 9ML. BT6 Road,Belfast,Montgomery 44 at registeredoffice its has Limited Magir Limited Magir Normanton,Derbyshire,2FH. DE55 South Park,House, Business Amber UDG at registeredoffice its has Limited Group Distribution UniDrug Limited Group Distribution UniDrug Name Kingdom United the in tradingIncorporated and 2007: September 30 at plc Drug United of ventures joint significant the arefollowing The to contracted,amounted not but authorised, € to amounted contracted and authorised ventures joint the of expenditure capital the Group’sof shareThe Commitments Capital subsidiaries. Group’sthe in arising goodwill the to basis similar a on testing impairment annual to subject is goodwill This of carryingvalue a with goodwill is ventures joint in investment in Included ventures joint in Investment 11. statements financial Group the of part forming Notes Finished goods Finished Workprogressin materials Raw tax of inclusive expenses, of shareGroup revenue of shareGroup 1,349,749,000 expenditure capital the Group’sof sharethe 2006, Septemberdate. 30 At sheet balance the at 510,000 (2006: (2006: € 1,262,002,000) Healthcare and retail organisationretail and Healthcare productspharmaceutical of Distribution Business of Nature (continued) . There was no material write-down of inventories to net realisable net to inventories of write-down material no . was There € 550,000. € 7,735,000 25% 50% ShareGroup 426,292 429,437 161,882 158,283 (continued) (2006: (2006: 2007 2007 3,341 € € € 2007 ’000 ’000 ’000 258 € 7,098,000) 453,614 455,979 154,668 153,486 € € € 1,159 2006 2006 2006 ’000 ’000 ’000 23 . United Drug plc Annual Report 2007 67 - 70 ’000 (241) Total ’000 2006 € 6,461 1,926 1,126 2,804 € equity (7,211) 47,330 (1,265) 14,490 15,066 (14,854) 331,069 283,237 244,915 262,785 - - - - - 70 ’000 € 6,461 5,218 (1,265) 47,330 (14,854) 181,005 223,965 ’000 1,516,000 was earnings 2007 Retained € 6,394 € 13,252 ------259,904 279,550 ’000 € (6,033) (6,033) shares Treasury , which falls due after more ------’000 € 1,521 (7,211) (5,690) Foreign exchange ------18,151,000) € ’000 € 1,861 1,126 2,987 based Other Other reserves Share- payment (2006: ------566 flow ’000 (241) Cash € 1,926 hedge (1,119) ------16,440,000 € ’000 € Share (5,218) 94,439 14,252 103,473 premium ------238 ’000 € share Equity capital 11,563 11,801 Current debtors Trade Other debtors and Prepayments accrued income At At 30 September 2007 of share entitlement scheme Actuarial gain on defined benefit pension schemes tax on Deferred defined benefit pension schemes Profit for Profit the for financial year Dividends to equity holders in respect Transfer Deferred tax on Deferred cash flow hedges Share-based payment expense translation Currency adjustment At At 1 October 2006 New shares issued Scrip issue Effective portion of cash flow hedges Included in trade debtors is an amount of than one year but is part of the normal operating cycle of A the total Group. expense of recognised in the income statement during the year arising from an impairment of trade receivables. 14. Capital and reserves 13. Trade and other receivables Trade 13. 68 United Drug plc Annual Report 2007 14. Capital and reservesand Capital 14. statements financial Group the of part forming Notes At 30 September 2006 September 30 At benefit pension schemes pension benefit defined Deferredon tax schemes pension benefit defined on loss Actuarial adjustment Currencytranslation expense paymentShare-based hedges cashflow Deferredon tax hedges cashflow of portion Effective issue Scrip issued shares New scheme entitlement share of Transferrespect in holders equity to Dividends year financial forthe Profit 2005 October 1 At 11,563 11,382 capital Equity € share (continued) ’000 181 ------premium 94,439 11,313 87,606 (4,480) Share € ’000 ------(1,119) (1,429) hedge € Cash ’000 flow 178 132 ------payment Share- Other reservesOther based € 1,861 ’000 921 940 ------exchange Foreign € 1,521 1,692 (171) ’000 ------Treasury shares (6,033) (6,033) € ’000 ------(continued) Retained earnings 181,005 146,853 (12,602) 42,896 € 4,480 (666) ’000 26 18 - - - - - 283,237 240,709 (12,602) 11,494 42,896 (1,429) equity € 1,692 (666) Total ’000 921 178 26 18 - United Drug plc Annual Report 2007 69 - - - - - 2006 2006 Number 7,528,066 7,528,066 7,528,066 7,528,066 of Shares 248,471,934 256,000,000 223,735,669 231,263,735 - - - - - Redeemable 2007 2007 ordinary shares ordinary Number 7,528,066 7,528,066 7,528,066 7,528,066 of Shares 292,471,934 300,000,000 228,490,675 236,018,741 - 2006 548,500 218,880 1,618,386 1,238,564 220,111,339 223,735,669 2007 Ordinary shares Ordinary 370,270 375,939 1,355,025 1,199,808 1,453,964 223,735,669 228,490,675 . As . As permitted by Section 148(8) of the Companies Act, 1963, the income (continued) 5,084,000) € (2006: 27,772,000 27,772,000 Exercise Exercise of share options Employee share participation scheme Customer share scheme Scrip issue Acquisition consideration In issue at end of year In issue at beginning of year Allotted, called-up and shares of Ordinary 5 cent each fully paid shares of Redeemable ordinary 5 cent each In issue at 30 September Authorised shares of Ordinary 5 cent each shares of Redeemable ordinary 5 cent each Equity share capital The currency The translation comprises reserve currency all exchange foreign from 1 differences October 2004, arising from the translation of the net assets of the non-euro denominated Group’s operations, including the translation of the profits of such operations from the exchange average the rate for year to the exchange rate at the balance sheet date. The cash flow hedge comprises reserve the effective portion of the cumulative net change in the value fair of cash flow hedging instruments related to hedged transactions that have not yet occurred. Share-based payment reserve payments. in in with connection expensed the share-based statement amounts income comprises This reserve Foreign exchange reserve Company profit The profit in the financial statements of the holding Company the for year ended 30 September 2007 was € statement of the Company has not been separately presented in these financial statements. Cash flow hedge reserve redeemable ordinary shares can redeemable ordinary be redeemed by the Company with the agreement of holders of such shares, at the market price of the shares of ordinary the Company at the date of All redemption. redeemable ordinary shares are held by the Group. The holders of shares are entitledordinary to receive dividends as declared from time to time and are entitled to one vote per share at meetings All of shares rank equally the with to Company. regard the Company’s residual assets. The redeemable ordinary The shares rank pari-passu redeemable ordinary with shares in ordinary all except respects, that the 14. Capital and reserves 70 United Drug plc Annual Report 2007 15. Interest-bearing loans and borrowingsInterest-bearingand 15. loans of HealthcareLimited,subsidiary a undertaking, 95,000held redeemableordinary ofcost sharesa Company theat in SeptemberAt30 2007, DublinDrug Company Limited,subsidiary a undertaking, 7,528,066held Treasuryshares reservesand Capital 14. statements financial Group the of part forming Notes Current Non-current years five within but one After year one Within leases Finance years five After year one Within overdrafts and borrowings Bank follows:borrowingsInterest-bearingrepayableare as and loans leases Finance borrowingsBank overdraftsBank Current notes unsecuredseniorGuaranteed leases Finance borrowingsBank Non-current After two but within five years five within but two After years two within but one After € 366,000 (2006: (2006: € 366,000) . Theseshares havetreatedbeen treasury as sharesGroupthe in balance sheet. (continued) € 5,667,000 (2006: 95,000) (2006: (2006: (2006: ordinary cost sharesaCompany theat in € 5,667,000) . In addition,In . Ashfield 111,683 111,683 (continued) 74,873 69,948 36,810 74,873 42,683 30,080 36,234 36,810 28,234 4,456 1,641 8,000 € € 2007 2007 ’000 ’000 (2006: 7,528,066) (2006: 469 469 576 576 89,463 81,683 89,463 81,683 46,720 33,876 77,868 € € 3,815 4,973 2,764 1,087 7,780 7,737 7,780 2006 2006 ’000 ’000 43 43 - - United Drug plc Annual Report 2007 71 ’000 2006 2006 5,535 € 40,000 40,000 22,000 25,652 10,678 10,338 11,894 210,402 102,000 268,964 US$’000 ’000 2007 2007 7,474 € 9,161 4,675 33,276 40,000 40,000 22,000 12,378 80,000,000 of 80,000,000 228,566 102,000 286,369 € US$’000 20,000,000 of the facilities are are facilities of the 20,000,000 € 100,000,000. 100,000,000. € 68.9 million of undrawn overdraft and term loan loan term and overdraft of undrawn million 68.9 39.2 million of undrawn overdraft and loan facilities facilities loan and overdraft of undrawn million 39.2 € € (continued) 650,000 are repayable 650,000 after fiveare repayable years. € 12.5 million of these facilities were committed, with a maturity date of less than one than of less date a maturity with committed, were facilities of these million 12.5 € September 2006. These facilities were repayable demand. on repayable were facilities These 2006. September Current payables Trade income and Accruals deferred Other payables Non-current consideration Deferred 5.25% Series ‘A’ guaranteed senior unsecured notes, 2011 5.25% Series ‘A’ 5.68% Series ‘B’ guaranteed senior unsecured notes, 2014 5.85% Series ‘C’ guaranteed senior unsecured notes, 2016 Deferred consideration Deferred PAYE, VAT and social welfare VAT PAYE, 16. Trade and other payables Trade 16. uncommitted but available for drawdown by the Group. by the drawdown for available but uncommitted approximately had Group the 2006, at 30 September As Approximately facilities. at down draw for available but uncommitted were facilities remaining The date. sheet balance the from year 30 Borrowing facilities Borrowing approximately had Group the 2007, at 30 September As on demand. repayable drawn, once and uncommitted were facilities These down. draw for available of facilities total secured Group the 2007, to 30 September Subsequent 2012. in October maturing amounts all with committed, are facilities these swapped swapped into a mixture of fixed and floating rate debt to generate the desired interest profile. These loans in are repayable full on maturity. Bank on are repayable overdrafts demand. Other bank amounting borrowings to The loan notes were issued by United Drug Finance Limited, a and wholly have owned been subsidiary, guaranteed by United Drug plc and other group undertakings. The US dollar proceeds were swapped into euro and the fixed interest rates applicable to the debt were 15. Interest-bearing loans 15. and Interest-bearing borrowings During 2004, the Group completed a US$102 million debt financing in the US Private Placement Market and issued the following notes: The deferred consideration The may deferred become payable over the period 2008 from February to November 2010. 72 United Drug plc Annual Report 2007 17.Provisions statements financial Group the of part forming Notes in Dublin. These leases commenced in June 2004 for a term of twenty five years and provide forprovidereviewsrent and years five twenty of termfor a 2004 June in commenced leases Dublin. These in facilities warehouse and office of respect in areGroup the by into entered leases operating significant The period. initial the after leases the renew to potential the with period lease initial an forrun typically leases leases. operatingunderThe property, equipment certain and leases Groupplant The Group has the ability to terminate the leases in June 2019. June in leases the terminate to ability the has Group date.reviewrent the The to priorrent annual applicable the of 115% of minimum a being rent annual revised the to subject value,market open at set be shall payablerent the date,reviewrent each years.On five every future lease payments, in aggregate, that the Group is required to make under existing lease agreements.lease existing under make requiredto is Group the aggregate,that in payments, lease future below.minimum representout the amounts set These as payablearerentals lease operating Non-cancellable lessee as Leases leases Operating 18. requiredhave been recognised intheGroup income statement within administrative expenses. thatcould beachieved based oncurrent market conditions. Adjustmentstoestimates ofthelevel ofprovisions theearliest date onwhich theGroup canexit from thepremises andanassessment ofthesublet rental income bytaking into consideration thecommitted rental charges associated with thepremises, theperiod tooftime estimatesandassumptions inassessing theamount provided for excess facilities. Theprovision wascalculated therationalisation oftheGroup’s property portfolio. Incalculating these provisions theGroup made certain Otherprovisions primarily relate toseveral onerous leases that theGroup remains committed tofollowing Provisions created during the year the during createdProvisions year of beginning At More than five years five than More years five and two Between year of end At estimates to Adjustments Less than one year one than Less Current Non-current year the during Utilised provisions Other 1,699 € 2007 (248) (772) ’000 679 - Redundancy provision € 2007 (114) ’000 114 - - - (continued) 51,831 26,598 18,291 1,813 6,942 € € € 2007 2007 2007 Total (362) (772) ’000 ’000 ’000 679 463 216 679 - 54,127 30,616 17,459 € € € 2,443 1,453 1,813 6,052 1,813 2006 2006 2006 (744) Total ’000 ’000 ’000 114 360 - United Drug plc Annual Report 2007 73 - (63) Net 258 178 961 824 178 258 ’000 ’000 ’000 2006 2007 € 2006 € 2,226 2,226 € (2,757) (1,903) (3,516) (1,713) (9,534) (9,525) (1,903) (3,516) (2,757) (2,757) - - 30 September 30 September (5) ------’000 (9) 2006 12 12 1,945 € (1,903) (3,516) (5,424) (3,479) 250 241 ’000 ’000 € € Liabilities - - Translation adjustment Translation adjustment 178 263 722 ------’000 2006 2,226 2,667 € (1,945) 477 Assets ’000 ’000 (233) € € (7,782) (7,538) (1,769) (1,769) Arising on - Arising on acquisitions acquisitions (63) Net 961 824 ’000 2007 ------€ (1,713) (9,534) (9,525) (9,525) 26 204 178 ’000 ’000 (241) € € (1,265) (1,506) Arising Arising in equity in equity - - (63) ’000 2007 - - - € 1,785 (1,713) (9,534) (9,525) 98 (82) (11,310) 171 961 423 149 723 ’000 ’000 € 1,514 € 2,035 Liabilities Arising Arising - - - - in income in income 961 824 ’000 2007 - € 1,785 (1,785) Assets 87 178 258 ’000 ’000 2006 2005 € 2,282 2,226 € (2,052) (2,482) (2,165) (1,903) (3,516) (2,757) 1 October 1 October Property, plant and equipment Property, Intangible assets Employee benefits Derivative financial instruments Other items assets/(liabilities) Tax Employee benefits Derivative financial instruments Other items Property, plant and equipment Property, Intangible assets Employee benefits Derivative financial instruments Other items Property, plant and equipment Property, Intangible assets Net tax (liabilities)/assets Reclassification 19. Deferred tax 19. assets Deferred and liabilities tax assets Recognised deferred and liabilities are attributable to the following: No deferred tax No is deferred recognised on the unremitted earnings of overseas subsidiaries and joint ventures as the Group does not anticipate additional tax on any ultimate remittance. Movement in during differences temporary the year 74 United Drug plc Annual Report 2007 accrued. The Group did not dispose of any subsidiaries in 2007 or 2006. or 2007 in subsidiaries any of dispose not accrued.did Group The previously amounts of excess in goodwill correspondingyear.in increasea the in resultedduring has This of consideration review,cash this additional from Arising acquisitions. yearprior of respect in consideration of estimate its reviewed also has Group The was transactions of deferredpayable consideration estimated Including n n n n follows: as year,the wereacquiredpercentagesduring Group with together the by completed acquisitions principal The undertakings subsidiary of Acquisition20. statements financial Group the of part forming Notes Craig & Hayward Limited (100%): Limited Hayward & Craig (100%): 2007.April 11 industry.healthcareN.V. on acquired and was pharmaceutical forcompany the This specifically Hamont Budelpack February2007.2 on acquired was company (100%): Limited Pyramed company was acquired on 17 August 2007.August17 on acquired was company (100%): B.V. Netherlands.in The products,healthcareThis based and forpharmaceuticalsservices production Investments and Logistics Pharma 2007.May 4 on acquired was company € 65,760,000. a specialist UK based distributor of medical devices and equipment. This and devices medical of distributor based UK specialist a a Belgium based company providing contract packaging services designed services packaging contractproviding company based Belgium a a UK based supplier of specials medicines in the UK market. UK This the in medicines specials of supplier based UK a € 256,000 in excess of amounts previously accrued was paid was accruedpreviously amounts of excess in 256,000 specialised contract packaging company focused on packaging on focused company packaging contract specialised € 11,288,000, the total consideration for all these forall consideration total the 11,288,000, (continued) United Drug plc Annual Report 2007 75 . ’000 Total 2007 € 1,750 1,311 1,511 4,821 8,863 (7,538) (2,576) 37,288 11,288 51,467 28,728 52,732 31,147 11,591 66,016 66,016 (11,596) ------256 256 256 256 256 ’000 2007 € acquisitions Adjustments to prior year Business Combinations ’000 2007 € 1,750 1,511 1,311 4,821 8,863 (7,538) (2,576) 37,288 11,288 51,211 28,472 52,476 31,147 11,591 65,760 65,760 Total in Total (11,596) respect respect of acquisitions current year current - - - - ’000 2007 € (7,305) 31,147 23,842 Fair Fair value adjustments (continued) - ’000 (233) Book 2007 € 4,821 8,863 values 11,591 13,446 (11,596) Deferred consideration Deferred Interest Interest bearing loans and borrowings assumed on acquisition Net cash and cash equivalents acquired on acquisition Equity share capital issued Professional fees Professional incurred Satisfied by: Cash consideration Deferred tax Deferred Goodwill arising on acquisition Trade and other receivables Trade and other payables (current) Trade Net identifiable assets and liabilities acquired Inventories Property, plant and equipment Property, Intangible assets value of and the management workforce teams within the businesses acquired and the enhancement of the competitive position of the Group in the marketplace and the strategic premium paid by United Drug plc to create the combined Group. basis in respect of a number of the business combinations disclosed above given the timing of completion of these Any transactions. amendments to these values fair within the twelve month timeframe from the date of acquisition will be disclosable in the 2008 Annual Report as stipulated by IFRS 3, Goodwill is attributable to the future economic benefits arising from assets which are not capable of being individually identified The and significant separately recognised. giving factors rise to the goodwill include the The initial assignment of values fair to identifiable net assets acquired has been on performed a provisional assets and liabilities which determined in were acquired, accordance with IFRS, completionbefore of the combinations were as follows: 20. Acquisition 20. Acquisition of subsidiary undertakings None of the business combinations completed during the year were considered sufficiently material as to separate disclosure of warrant the values fair attributable to these The combinations. amounts carrying of 76 United Drug plc Annual Report 2007 were acquired, determined in accordance with IFRS, before completion of the combinations were as follows: as were combinations the of beforecompletion IFRS, with accordanceacquired,were in determined which liabilities and assets of services.carryingamounts clinical The of provision and information medical vaccines, of distribution and sale the in specialising MASTA, travelfield, of the providerhealthcare in a 100% acquiredGroup the 2006, July In equipment. endoscopy flexible of support technical and sales the in distributor,medical based specialising UK a Limited, UK Endoscopy of Groupacquired100% the 2006, May In combinations Business 2006 of revenues recordedhavetotal would Group combined the 2006 October 1 on effected been acquisitions these Had assets. intangible of amortisation of consists expenses operating*Other businesses acquired during the year: the during acquired businesses the of respect in amounts following the includes 2007 September 30 Group’sended yearforresultsThe the undertakings subsidiary of Acquisition20. statements financial Group the of part forming Notes Property,equipment and plant tax after Loss tax Income beforetax Loss Professional fees incurredProfessionalfees Inventories assets Intangible expense interest Net profit Operating expenses* operatingOther Revenue Deferredconsideration acquisition on acquired equivalents cash and cash Net consideration Cash by: Satisfied acquired liabilities and assets identifiable Net Deferredtax Trade(current)payablesother and Tradereceivablesother and expenses Administration expenses Distribution profit Gross Goodwill arising on acquisition on arising Goodwill € 1,616,503,000 and profit after interest and tax for the financial year of year financial forthe tax and interestafter profit and 1,616,503,000 (5,583) values € 2,215 4,102 1,051 2006 Book ’000 317 - - (continued) adjustments Fair value Fair (1,769) € 5,895 7,664 2006 ’000 - - - - currentyear acquisitions respect of respect Totalin 36,513 32,683 36,513 29,567 27,887 (5,691) (1,769) (5,583) € 4,102 8,626 6,946 2,215 7,664 2006 ’000 317 895 to prior year prior to Adjustments acquisitions € (continued) 10,854 26,361 50,061,000. (1,059) (2,983) (6,702) € € 2007 2006 (187) (336) (446) ’000 ’000 149 723 183 528 345 183 528 528 ------28,070 32,866 30,095 37,041 37,041 (1,789) (5,691) (1,769) (5,583) € € 2,551 5,113 8,971 2,215 4,102 6,946 7,664 2006 2006 (305) (421) (512) (491) (180) Total ’000 ’000 116 317 895 91 United Drug plc Annual Report 2007 77 132 921 ’000 2006 2006 2,330 2,462 9,601 1,783 1,594 € 86,700 100,599 161 ’000 2007 2007 € 2,579 2,740 9,183 3,163 1,652 1,126 103,215 118,339 (continued) 1,473,863,000 and profit after interest and tax the for financial year of € personnel are employed in the joint Group’s ventures. (2006: 580) 44,629,000. Wages and Wages salaries Social security contributions The aggregate employee costs the for Group are as follows: Marketing, Marketing, distribution and selling Administration Share-based Share-based payment expense The weekly average number of employees, including executiveduring the directors, year was as follows: Pension costs – defined contribution schemes Pension costs – defined benefit schemes The valuations are not available for public inspection but the results are advised to members of the schemes. of the to members advised are results the but inspection public for available not are valuations The as the at conducted 30 2006 for were June schemes the principal for valuations full actuarial The most recent The principal scheme. (N.I.) Ireland the Northern and April 2006 for schemes 1 (R.O.I.) of Ireland Republic would be higher on 2-2.5% investments of was that return the rate annual used assumption in both reviews salaries. in pensionable of than increase the rate annual contributions to All separately administered trust funds. defined benefit schemes have been closed to new entrants since 1 January 2003. obtained actuaries qualified of independent advice the with determined are schemes to the contributions The is independently scheme benefit defined Each of funding. method unit projected the using intervals at regular dependants. their and of members benefit the for trustees independent in the vested are assets the and funded (i) Defined contribution schemes The Group makes contributions to a number of defined contribution schemes, the assets of which are vested in independent the trustees for benefit of members and their dependants. (ii) Defined benefit schemes The Group also operates a number of defined benefit schemes which are funded by the payment of A further 685 € 21. Employee benefits 20. Acquisition 20. Acquisition of subsidiary undertakings Had the and acquisitions Endoscopy of been MASTA effected on 1 October 2005 the combined Group would total have recorded revenues of 78 United Drug plc Annual Report 2007 The market values of assets in the pension schemes at 30 September 2007 were: 2007 September 30 at schemes pension the in assets of values market The respectively,tables mortality forretiredmembers. (2015) 92 PMA the and (2004) 92 PMA the used scheme N.I. the and schemes R.O.I.employees. The forcurrenttable mortality (2025) 92 PMA the used schemes experience.All actual reflect and longevity forin improvementsfutureallowance prudent a retain schemes majorfor all current assumptions The obligations. scheme calculating when assumptions rate mortality certain used schemes N.I. and R.O.I. The stable.relatively be to believed are which expectations, term long on based are assumptions The were: 2007 September 30 returnat of rates expected The The principal assumptions used by the actuaries as at 30 September 2007 were: 2007 September 30 at as actuaries the by used assumptions principal The benefits Employee 21. statements financial Group the of part forming Notes Deferredassets tax obligations scheme of value Present assets scheme of value Fair Other Property Bonds Equities Other Property Bonds Equities rate Discount Net liability Net (liability) benefits Employee rate Inflation Rate of increase in pensions in increase of Rate salaries in increase of Rate method Valuation (continued) 0-2.25% 2.25% 6.50% 4.50% 5.40% 2.25% 3.50% 7.75% 2007 2007 Projected unit method unit Projected R.O.I. Schemes R.O.I. R.O.I. Schemes R.O.I. 0-2.25% 2.25% 6.50% 3.80% 4.50% 2.25% 3.50% 7.50% 2006 2006 0-2.25% 2.25% 6.10% 3.10% 4.25% 2.25% 3.50% 7.10% 2005 2005 (26,803) 21,438 16,256 (4,695) (5,365) R.O.I. 1,593 2,721 € 2007 ’000 868 670 4.75% 6.75% 4.75% 5.90% 3.40% 3.40% 3.90% 7.75% 2007 2007 Projected unit method unit Projected N.I. Scheme N.I. N.I. Scheme N.I. (14,454) (continued) 13,485 1,085 4,239 8,152 € 4.75% 6.25% 4.25% 5.00% 3.00% 3.00% 3.50% 7.25% 2007 (678) (969) ’000 2006 2006 291 N.I. 9 2.80-3.00% (41,257) 24,408 34,923 (5,373) (6,334) 2,678 6,960 € 4.50% 6.25% 4.25% 7.25% 2007 5.00% 2.90% 3.40% Total ’000 2005 877 961 2005 United Drug plc Annual Report 2007 79 193 193 856 ’000 ’000 Total Total (864) (178) (864) (124) ’000 2006 2006 1,791 2,092 1,726 1,516 1,869 1,536 € € 6,386 2,382 1,022 2,226 € 2006 27,480 32,240 40,188 45,170 22,450 32,240 (45,170) (12,930) (10,704) 92 N.I. N.I. 710 626 126 879 275 418 761 126 ’000 ’000 (347) (178) (347) (124) 56 2006 2006 € € ’000 11,108 12,924 15,209 16,410 7,963 3,875 1,030 1,046 € 2006 (3,486) (2,440) 12,924 (16,410) - - 67 67 847 764 ’000 ’000 (517) (517) 2006 2006 1,081 1,466 1,098 1,108 1,261 € € R.O.I. R.O.I. 16,372 19,316 24,979 28,760 966 ’000 2006 2,511 1,352 1,180 € (9,444) (8,264) 14,487 19,316 (28,760) 207 391 207 ’000 ’000 (454) (403) Total Total 2007 2007 € € 2,136 1,838 1,685 2,103 1,559 (7,629) (1,435) (1,435) 32,240 34,923 45,170 41,257 12 N.I. N.I. 806 605 139 344 428 815 139 ’000 ’000 (879) (454) (879) (403) 2007 2007 € € (2,068) 12,924 16,410 13,485 14,454 - - 68 47 68 ’000 ’000 (556) (556) 2007 2007 € € 1,330 1,233 1,257 1,288 1,547 R.O.I. R.O.I. (5,561) 19,316 28,760 21,438 26,803 (continued) At At beginning of year Present Present value of scheme obligations Employee benefits (liability) tax assets Deferred Net liability Equities Bonds Property Other Fair value of scheme assets Actual return less Actual return expected on return scheme assets Adjustment Translation Expected return Expected on return scheme assets Employer contributions Employee contributions Benefit payments At At end of year At At beginning of year Effect Effect of changes in actuarial assumptions Adjustment Translation Interest Interest on scheme obligations Employee contributions Benefit payments Actuarial loss on experience variations Current service costs Current At At end of year Movements in value fair of plan assets 21. Employee benefits Movements in present value of defined benefit obligations 80 United Drug plc Annual Report 2007 The expected employers’ contribution for the year ended 30 September 2008 is 2008 September 30 ended yearfor the contribution employers’ expected The (2006: is expense and income recognised of statement the in recognised loss actuarial cumulative The 19. note in disclosed is items these to relating effect tax The as follows: as is obligation benefit defined the of value present and assets plan the to loss actuarial the of Reconciliation benefits Employee 21. statements financial Group the of part forming Notes Defined benefit pension expense recognised in the income statement income the in recognised expense pension benefit Defined Expected return on schemes assets schemes returnon Expected obligations scheme on Interest Currentcosts service Expected return on schemes assets schemes returnon Expected obligations scheme on Interest assumptions actuarial in changes of Effect variations experience on (loss)/gain Actuarial assets scheme returnon expected returnActualless Currentcosts service expense and income recognised of statement in recognised gain/(loss) Actuarial € 6,598,000) . (continued) (1,547) R.O.I. 4,061 5,561 € 2007 ’000 47 2,400 2,068 € 2007 ’000 344 N.I. (12) (1,559) 6,461 € 7,629 2007 Total ’000 391 (1,178) (1,261) R.O.I. € 2006 (764) ’000 847 € 2006 (275) ’000 879 512 N.I. (92) (1,215) (1,125) (1,108) (1,098) (1,288) (1,257) R.O.I € 1,081 1,330 € (1,536) R.O.I 2007 2006 € 1,726 ’000 ’000 2006 (666) (856) Total ’000 € 1,672,000. (3,255) (4,673) R.O.I. € 1,866 2005 (448) ’000 (continued) € € 2007 2006 (437) (469) (761) (418) (815) (428) ’000 ’000 710 806 N.I. N.I. (2,114) € 1,294 1,493 2005 ’000 € 673 N.I. 137,000 (1,652) (2,103) (1,685) (1,594) (1,869) (1,516) (2,582) (6,787) 2,136 € 1,791 € € 3,160 1,045 2007 2006 Total 2005 Total ’000 ’000 Total ’000 United Drug plc Annual Report 2007 81 10 20% 3.32 3.32 0.84 3.9% 2006 € € € 1.76% 3 years 23 June 2006 Trinomial model Trinomial 6.5 4.14 4.06 0.93 20% 2.5% 2007 € € € 4.35% 3 years 20 June 2007 Trinomial model Trinomial (2006: 900,000 and 1,090,000 (continued) were granted at that time. In accordance with the terms of the relevant scheme, options are subject to criteria performance as set out in the Report of the Committee Remuneration on directors’ and remuneration; Second tier options which cannot be the exercised before expiration of five years and which are subject to criteria performance as set out in the Report of the Committee Remuneration on directors’ remuneration. Basic tier options which cannot be the exercised before expiration of three years and which are Expected dividend yield model Valuation period Vesting Exercise Exercise price Expected volatility Expected life (years) Risk-free Risk-free interest rate Fair Fair value at measurement date Share price at date of grant Grant Grant date (ii) A summary of the details in respect of share options granted in 2007 and 2006 is set out below: Basic tier stock options granted granted after 7 November 2002. The trinomial valuation method has been used to value options.is Volatility a key driver of option value. The most important indicator of the volatility is that of the share price of United Drug plc, which since the beginning of 2000, has had an annual average volatility of This 20%. percentage was average used in the valuation calculation. The contractual life of both basic and second tier options is ten Optionsyears. were last granted in June 2007 and a total of 1,495,000 basic tier and 570,000 second tier options respectively) exercisable at the market price of the underlying share on the last dealing day preceding the date of grant. The of measurement requirements IFRS 2 have been implemented in respect of share options that were shares in United Drug plc so as to provide an incentive to perform strongly over an extended period and period an to extended over strongly plc so in an Drug as United incentive to to shares perform provide of in the the outlined Report of are these schemes The terms with those of shareholders. interests align their on two of pages 36 the the to schemes, terms 40. Under remuneration on directors’ Committee Remuneration to employees: types of granted options are (i) 21. Employee benefits Share-based payment to entitle which key purchase management both settled, equity option schemes, two share operates The Group 82 United Drug plc Annual Report 2007 Analysis of share options outstanding at year end year at outstanding options share of Analysis from was prices exercise of range the 2007 September 30 At follows: as are options share of averageprice exerciseweighted and number The follows: as is statement income the in recognised foroptions shareexpense total The options stock tier Second benefits Employee 21. statements financial Group the of part forming Notes Options by exercise price exercise by Options year of end at exercisable Options year of end at outstanding Options year the during Granted expenses Administrative Vestingperiod Valuationmodel rateinterestRisk-free yield dividend Expected (years)life Expected volatility Expected price Exercise grant of date at price Share date measurement at value Fair date Grant Exercised during the year the during Exercised year the during Lapsed year of beginning at outstanding Options (continued) Weighted exercise price 2007 1.84 2.84 4.06 1.49 3.08 2.48 € 0.87 to 0.87 € of options of € Exercise Number 4.06. 11,014 11,301 (1,355) prices 3,907 2,005 2007 (937) ’000 1.01 0.99 0.87 0.69 1.90 1.84 1.99 4.06 3.48 3.32 2.83 Trinomialmodel 20 June 2007 June 20 € Number of Number 5 years 5 4.35% Weighted 1,126 € € € € exercise 2007 2.5% 2007 11,014 options 20% ’000 4.06 4.14 0.97 (continued) 1,103 1,243 1,980 1,806 1,735 1,485 7.5 1.45 2007 price 2006 932 ’000 3.32 2.48 1.54 2.57 2.27 345 140 245 Trinomialmodel € - 23 June 2006 June 23 Number of Number of options of Number 11,301 5 years 5 options 11,301 10,380 1,421 1,453 1,790 1,069 1.76% € € € € 3,621 1,990 2,156 1,990 2006 2006 2006 2006 3.9% (548) (521) 325 175 ’000 3.32 3.32 0.83 ’000 ’000 20% 921 432 490 10 - United Drug plc Annual Report 2007 83 , . ’000 2006 2,282 1,402 3,684 1,125 3,338 4,463 8,147 € ’000 2006 8,147 € 3,407,000) € 4,740,000) . € ’000 844 637 2007 € ’000 14,142 Fair Fair value liability 2007 7,574 (2006: € 6,730 5,931 6,568 14,142 (2006: 228,000) € ’000 2006 € 84,718 1,481,000 € (2006: 12,661,000 € outstanding ’000 2007 61,000 € 84,718 € Notional receivable amount of contracts 2006 102,000 USD$’000 outstanding 2007 Notional payable 102,000 amount of contracts USD$’000 hedge currency & foreign & foreign Underlying Underlying Interest Interest rate 2016 Hedge to July Period July July 2004 (inclusive) swaps Nature Nature of Derivative Instruments Cross currency Cross currency Total derivative liabilities Total Current liabilities Current Losses on cash flow hedges maturing within one year Losses on value fair hedges maturing within one year Non-current liabilities Non-current Losses on cash flow hedges maturing after one year Losses on value fair hedges maturing after one year Treasury policy Treasury policies, The treasury which are designed reviewed, Group’s are regularly to reduce the financial risk in a A cost limited efficient number of and way. cross currency interest rate swaps are undertaken periodically to hedge underlying trading and interest rate exposures. Risk exposures The multi-nationalGroup’s operations expose it to financialdifferent risks that include exchange foreign rate risks, credit risks, liquidity risks The and Group has interest rate risks. a risk management in programme place which seeks to limit the impact of these risks on the financial The of performance Board has the Group. determined the policies managing for these risks. It is a policy of the Board to manage these risks in a non- speculative manner. The fixed to fixed interest rate swaps are rate classifiedcross currency as cash flow hedges and are stated The value at fair value. of their fair these swaps at 30 September 2007 was and the effective portion of this adjustment was accounted in for the cashflowThe value fair hedge reserve. movement out of the cashflow hedge during reserve the year was The swaps are a mixture of fixed to fixed and fixed to floatingThe Group classifiesrate swaps. the fixed to floating swaps as value fair hedges and has stated them at value their fair with a opposite corresponding adjustment to the underlying debt the for risk being hedged. Both of these adjustments within are recorded the income statement and to the extent they do not offset, this the represents ineffective portion of the fair The value value fair hedge. of these swaps at 30 September 2007 was All of the above derivatives are cross currency swaps entered into as a hedge on balance sheet debt and are are and debt sheet on balance as a hedge into entered swaps currency cross are derivatives above of the All income in the be recognised will flow hedges cash of the element interest The below. detail in further described is recognised. debt hedged on the interest associated as the 2016, to 30 September periods in the statement 22. Financial instruments Derivative financial which instruments, have been recognised at value fair on the Group balance sheet are analysed as follows: 84 United Drug plc Annual Report 2007 derivatives was as follows: as was derivatives 2007,September 30 at of as effect debt Group’sthe net the reflecting after of currency profile The Currencyprofile developments.other and acquisitions operations, existing financing in flexibility provides which disposal, its at facilities debt bank resourcesand cash significant has Group The Liquidity and Funding risk. this manage currencycrossto swapsrateinterest into entered has Group The rates.interestmarket in changes of because fluctuate borrowingswill the of value the risk the being risk, rateinterestfair value to borrowingsdollarGroup’s exposed are US The environment.rateinterest the regardhavingappropriateconsideredto when risk rateinterest manage forwardto and used areagreementsrateswapsrateInterest basis. ongoing an on monitored is risk rateinterest and ratesinterest floating borrowings.at securedand Borrowings operations initially are fromgenerated cash of mixture a from financed areoperationsGroup’s ongoing the of majority The risksrateInterest asset. financial each of carryingamount the represented by is risk credit to exposure maximum risk. creditThe of concentrations significant no werethere date sheet balance the At divisions. all across basis ongoing an performedareon evaluations Credit basis. ongoing an on monitored is risk credit to exposure the and place in policy credit a has Management risk Credit short-termaddress to imbalances. necessary when ratesforeign spot currenciesselling orat buying by level acceptable an to kept is exposure net its that ensuresGroup The entities. Groupcurrencies of functional respective the currencythan other a in denominated areborrowings that and purchasessales, on currencyrisk to exposed is Group The businesses.Group’s UK the currency of principal the is Sterling euro.in is businesses based Europe continental and Group’sIrish the by conducted trade of majority The currencyForeignrisk instruments Financial 22. statements financial Group the of part forming Notes Net debt by currencyby debt Net acquisitions on payable notes Loan leases Finance Derivatives borrowingsand loans Other overdraftsBank deposits term short and bank at Cash notes) unsecuredsenior(guaranteed debt rate Floating notes) unsecuredsenior(guaranteed debt rate Fixed (continued) (96,138) (14,142) (29,086) (34,858) (35,090) 25,038 (8,000) € 2007 Euro ’000 - - Sterling 32,509 27,860 (3,604) (1,045) € 2007 ’000 - - - - - (14,142) (29,086) (34,858) (35,090) (68,278) (3,604) (1,045) (8,000) 57,547 € 2007 Total ’000 (81,439) (44,224) (38,472) 12,168 (8,147) (2,764) € 2006 Euro ’000 - - - (continued) Sterling 29,741 33,744 (3,960) € 2006 ’000 (43) - - - - - (44,224) (38,472) (51,698) 45,912 (8,147) (2,764) (3,960) € 2006 Total ’000 (43) - United Drug plc Annual Report 2007 85 - - - - - ’000 ’000 ’000 (650) Total 2006 2007 € € € (7,144) (4,200) 28,005 33,669 14,169 (47,025) 5 years (42,683) (14,028) (28,005) (51,698) (34,142) (14,678) (42,033) (44,378) (68,278) (30,925) More More than - - - - - ’000 ’000 ’000 2006 2007 € € 6,853 € (7,780) (6,853) (1,087) (2,110) (2,165) (27,915) (30,080) (21,062) (33,876) (46,720) (89,463) (42,683) (36,810) (30,080) (23,227) (111,683) Bank and 2-5 Years 2-5 other other debt ------’000 ’000 ’000 (266) (305) (845) (469) 2006 2007 € € € (2,110) (4,463) (3,113) (8,147) (5,034) (1,695) (6,568) (2,110) (1,641) (14,142) 1-2 Years 1-2 Derivatives ------’000 ’000 ’000 (576) 2006 2007 € € € (3,604) (8,000) 57,547 57,547 57,547 (3,604) 20,737 45,912 45,912 49,547 Cash at (34,858) (14,121) (24,630) deposits one year bank and Less than short term - ’000 Total € (3,604) (8,000) 57,547 (1,045) 49,547 (54,136) (35,090) (34,858) (54,136) (73,552) (29,086) ’000 € 6.00% 4.74% 4.38% 5.28% 5.16% 5.19% (continued) Effective interest interest rate Effect Effect of derivatives Total before derivativesbefore Total Total loan notes Total Loan notes on acquisitions Fixed rate debt Cash and cash equivalents Other loans and borrowings Loan Notes Floating rate debt Bank overdrafts Finance leases 30 September 2007 Cash at bank and short term deposits Between two and five years After five years Due within one year Between one and two years Between one and two years Between two and five years After five years Due within one year earlier, reprice. earlier, In respect of income-earning financial assets financialand interest-bearing liabilities, the following table indicates their effective interest rates at the balance sheet date and the periods in if which they mature or, 22. Financial instruments Maturity profile of net debt The maturity profile of the net Group’s debt is summarised as follows: 86 United Drug plc Annual Report 2007 22. Financial instruments Financial 22. statements financial Group the of part forming Notes balance sheet date. sheet balance to amounted contracted not but authorised expenditure Capital commitments Capital 23. flows. cash future discount and create to curves yield rateinterest using by instruments financial of fairyear.priorcurrentvalue the and estimates Group The the differentin materially not are liabilities and assets Group’sfinancial the of value book and fairvalue The liabilities financial and assets financial of value Fair interest.rate floating into interestrate fixed swap partially to and debt denominated euro to debt denominated dollar US swap to been has above included derivatives the of effect The term deposits term short and bank at Cash deposits Euro 2006 September 30 Bank overdraftsBank Finance leases Finance borrowings and loans Other equivalents cash and Cash Fixed rate debt rate Fixed debt rate Floating Notes Loan acquisitions on notes Loan Totalbeforederivatives Totalnotes loan Effect of derivatives of Effect interest rateinterest Effective (continued) 5.36% 2.58% 3.41% 6.38% 4.74% 3.47% 4.20% € ’000 (39,396) (38,472) (43,551) (81,828) (43,551) 44,464 43,148 (2,764) (4,828) (3,960) € 1,448 Total ’000 (43) - Less than Less one year one (38,472) 44,464 43,148 38,132 (2,764) (1,013) (3,960) (3,960) € 1,448 (340) ’000 (43) € 6,750,000 - - 1-2 Years (1,086) (1,086) (1,086) € ’000 (2006: (2006: ------€ 3,936,000) 3,936,000) 2-5 Years (23,645) (31,149) (26,374) (33,878) (continued) (2,729) (7,504) € 7,504 ’000 ------at the at More than More (15,751) (30,968) (46,719) (46,719) (15,751) 5 years 5 30,968 € ’000 ------United Drug plc Annual Report 2007 87 499 ’000 2006 3,473 3,972 € has been 710 ’000 2007 € 4,410 5,120 292,000) € 4.5 million, payable based € (2006: 459,000 € an expense of at this point in time. Share-based payment Business Combinations 16.5 million in cash, paid on completion, plus additional consideration of up to Short term benefits (salary, Short bonus, term benefitsincentives) (salary, Pension contributions Certain comparative figures have been reclassified to to conform the year presentation. current The Group is reviewing the values currently fair of the individual assets and liabilities acquired in respect of it the is above impractical Therefore, acquisitions. to provide the detailed under disclosure requirements IFRS 3 26. Comparative figures date of acquisition. the Group acquired the entire issued share On capital Analytical13 of December JVA 2007, Limited, a specialist analytical chemistry distributor based in The Dublin. consideration the for acquisition was € on achievement of agreed targets over the twenty months four subsequent to the date of acquisition. subsequent to the date of acquisition. the Group acquired the entire issued share On capital 20 of Limited, November Procon 2007, Conferences a pharmaceutical services conference company based in in Harrogate the United The Kingdom. consideration the for acquisition was Stg£4.2 million in cash, paid on completion, plus additional consideration of up to Stg£1.2 million, payable based on achievement of agreed targets over the twelve months subsequent to the 25. Events after the balance sheet date the Group acquired the entire issued share On capital 15 of Alliance October 2007, Healthcare Information Inc, a pharmaceutical sales and marketing services company based in Pennsylvania in the United States of The America. consideration the for acquisition was US$9.5 million in cash, paid on completion, plus additional consideration of up to US$1 million, payable based on achievement of agreed targets over the twelve months In accordance with IFRS 2 recognised in the Group income statement in respect of share options granted to key management personnel. Details of the of remuneration together with the individual the Group’s directors, number of United Drug shares owned by them and their outstanding share options are set out in the report on directors’ page 27 and in the Report of the Committee Remuneration on on remuneration pages directors’ 36 to 40. IAS IAS 19 also the requires disclosure of compensation paid to the key Group’s management personnel. This comprises its executive and non-executivetogether with Persons Discharging Managerial directors, Responsibility (‘PDMRs’) as defined in Section 12(8) of the Irish Abuse Market Directive (MAD) Regulations. of Remuneration key management personnel 24. Related parties The Group trades in the normal course of business with its joint The venture undertakings. aggregate value of these transactions is not material in the context of the financialGroup’s results. 88 United Drug plc Annual Report 2007 for the year ended 30 September 2007 September 30 ended yearfor the expense and income recognised of statement Company attributable to equity holders of the Company the of holders equity to attributable yearTotalfor the expense and income recognised year financial forthe Profit Net income/(expense) recognised directly within equity within directlyrecognised income/(expense) Net schemes: pension benefit defined Company equity: within directlyrecognised income/(expense) of Items Movement in deferredin tax Movement Actuarial gain/(loss) Actuarial Notes 36 29,488 27,772 1,716 1,966 € 2007 (250) ’000 € 4,632 5,084 2006 (452) (516) ’000 64 United Drug plc Annual Report 2007 89 - 820 261 360 ’000 2006 4,103 1,453 4,463 5,916 € 73,987 78,910 54,598 11,563 94,439 51,403 56,068 82,174 416,481 471,340 550,250 550,250 213,473 248,327 330,861 336,777 412 813 216 463 ’000 2007 € 3,729 2,551 2,767 60,256 64,397 61,023 11,801 52,529 75,920 56,890 22,250 307,463 107,603 187,206 103,473 369,299 433,696 433,696 243,723 189,973 27 32 28 29 30 31 32 32 32 35 36 33 33 34 35 Notes L. FitzGerald Director Total current assets current Total Current Inventories and other receivables Trade Property, plant and equipment Property, Other investments tax assets Deferred assets non-current Total Assets Non-current Total assets Total Equity Equity share capital Share premium Income tax asset On behalf of the Board R. Kells Director Total current liabilities current Total liabilities Total equity and liabilities Total Bank overdrafts loans and Interest-bearing borrowings and other payables Trade Provisions Non-current Non-current Provisions Employee benefits liabilities non-current Total Current Other Other reserves Retained earnings Company of the holders to equity attributable reserves and Capital Liabilities Company balance sheet as at 30 September 2007 90 United Drug plc Annual Report 2007 for the year ended 30 September 2007 September 30 ended yearfor the statement flow cash Company Profit beforetax Profit activities operatingfrom flows Cash Cash at bank and short term deposits term short and bank at Cash follows: as down brokenare equivalents cash and Cash year of end at equivalents cash and Cash year of beginning at equivalents cash and Cash equivalents cash and cash increase/(decrease)in Net activities financing from inflow/(outflow) cash Net Company the of holders equity to paid Dividends borrowingsinterest-bearingand in Increaseloans issue) scrip of thereon,premiumsharenet (including shares of issue fromProceeds activities financing from flows Cash undertakings subsidiary in Investment property,equipment of and disposal fromProceedsplant property,equipment of Purchaseand plant receivedInterest activities investing from flows Cash activities operatingfrom inflow/(outflow) cash Net paid taxes Income paid Interest payablesother and tradeIncrease/(decrease) in receivablesother and tradeDecrease/(increase) in undertaking subsidiary of disposal on Profit property,equipment of and disposal plant on Profit chargeDepreciation profitOperating expense Finance income Finance Net cash outflow from investing activities activities investing from outflow cash Net inventories in Increase expense paymentShare-based Bank overdraftsBank Notes 28 27 36 28 27 (248,327) 161,529 191,437 180,806 (26,893) (56,890) (56,890) (56,890) 31,645 28,027 20,375 22,250 24,096 (6,424) (9,636) (9,744) (9,661) (3,756) 3,756 € 7,761 2007 (138) (239) (398) ’000 604 138 412 18 (9) - (175,268) (160,507) (248,327) (248,327) (248,327) (173,192) (73,059) (1,108) (8,122) (8,688) (1,105) (3,343) (2,858) (7,083) 2006 € 8,359 2,858 5,576 7,014 (968) ’000 569 376 (75) (17) 62 75 - - - - United Drug plc Annual Report 2007 91 (97) (24) (33) 569 239 604 ’000 ’000 Total (142) Total 2006 2007 € 8,964 4,103 1,105 8,492 8,964 € 3,729 9,544 12,104 13,067 13,067 13,273 - - - - 78 98 60 40 153 164 ’000 ’000 2006 2007 € 3,546 3,471 3,624 3,382 3,546 3,624 € 3,684 3,644 Computer Computer Equipment Equipment 59 (97) (33) (24) 825 165 951 181 990 863 825 115 990 136 916 177 ’000 ’000 (142) 2006 2007 € € 1,093 Motor Motor Vehicles Vehicles - - - - 43 771 269 676 314 405 ’000 ’000 2006 2007 € 3,948 3,853 4,624 3,679 3,948 4,624 € 4,667 4,262 Plant and Plant and Equipment Equipment ------77 77 645 568 645 722 ’000 ’000 2006 2007 € 3,184 3,829 3,829 3,829 € 3,829 3,107 Buildings Land and Land and Buildings Eliminated on disposal At 30 September 2006 At At 1 October 2005 Depreciation the charge for year At At 1 October 2005 Additions in year Disposals in year At 30 September 2006 Depreciation Cost At At 30 September 2007 At At 30 September 2007 Depreciation the charge for year Eliminated on disposal Carrying amount Carrying At 30 September 2007 At 30 September 2006 Depreciation At 1 October 2006 Cost At 1 October 2006 Additions in year Disposals in year No borrowings No are secured on borrowings the above assets. 27. Property, plant and equipment Property, 27. Notes forming part of the Company financial statements 92 United Drug plc Annual Report 2007 28. Other investments Other 28. statements financial Company the of part forming Notes during the year arising from an impairment of trade receivables.trade of impairment an from arising year the during year.of one expense within total due A fall amounts All 31. Tradereceivablesother and cost. historical fromdiffer materially not does Currentcost replacement 2006. and 2007 September 30 ended years the in value realisable net to inventories of write-down material no were to amounted 2007,sales In of cost as recognised goods finished Inventories 30. Deferredassets 29. tax year.the during of profit a realisedundertaking.group Company fellow The a to value market at undertaking subsidiary a in interests its of year,disposed the Company during Group’sthe business the reorganisation internalof an of part As 40. note in detailed are subsidiaries significant undertakings. subsidiaryThe in investment to relate investments Other Disposals in year in Disposals year in Additions year of beginning At Cost Prepayments and accrued income accruedPrepayments and debtorsOther subsidiaries from due Amounts Tradedebtors Current goods Finished year of end At benefits Employee Temporarydifferences year of beginning At year of end At companies subsidiary of employees to granted options Share € 26,893,000 on the disposal. This amount has been recognised in the Company’s income statement income Company’s the in recognised been has amount disposal. This the on 26,893,000 € 500,000 was recognised in the income statement income the in recognised was 500,000 € 546,002,000 (2006: (2006: 251,582 (24,107) 307,463 € 73,987 60,256 50,530 61,023 504,010,000) 9,661 5,295 € € € € 2007 2007 2007 2007 (250) (158) ’000 ’000 ’000 ’000 715 412 820 (continued) 56 416,481 356,592 73,987 73,442 55,596 54,598 . There € € € € 4,042 2006 2006 2006 2006 ’000 ’000 ’000 ’000 545 251 820 118 638 64 - - United Drug plc Annual Report 2007 93 - - - 921 ’000 ’000 Total 2006 € 4,632 € 1,126 11,494 14,490 29,488 (12,602) (14,854) 248,327 248,327 209,028 243,723 213,473 93,000)) € a treasury - - - - ’000 ’000 2007 38,906,000 € € 5,218 4,632 4,480 € transferred from transferred (2006: ( 56,068 29,488 59,558 75,920 56,890 22,250 79,140 (14,854) (12,602) earnings Retained 1,861,000), € ------93,000) € 921 ’000 16,762,000) (2006: € 1,126 Other € 51,403 50,482 52,529 reserves . (2006: ------2,987,000 2,987,000 € ’000 € Share (5,218) (4,480) 87,606 94,439 14,252 11,313 103,473 premium 55,668,000) € 16,762,000 , a goodwill of reserve ( € ------(2006: 238 181 ’000 € capital 11,563 11,382 11,801 6,033,000)) € Equity share 55,668,000 € (2006: ( arising on the of restructuring group activities. 6,033,000) € 38,906,000) € Share-based Share-based payment expense At 30 September 2007 Current Current Bank overdrafts Bank loans and borrowings Dividends New shares issued Scrip issue At At 1 October 2006 Dividends Share-based payment expense recognised income and expense Total At At 1 October 2005 recognised income and expense Total New shares issued Scrip issue These balances on are repayable demand. Details of how the Company manages risk exposures are set out in note 22. the share premium account against which goodwill, arising from acquisitions in financial periods prior to 1 October 1999, is offset on consolidation and from the a income transfer statement of (2006: Details of equity share capital are set out in note 14. loans 33. and Interest-bearing borrowings Other reserves represents a represents share-based payment Other reserves of reserve of shares reserve ( and a non-distributable of reserve The Company’s non-distributable consists reserve of 32. Capital and reserves 94 United Drug plc Annual Report 2007 since 1 January 2003. January 1 since entrants new to closed are schemes benefit defined funds.trustadministeredseparatelyAll to contributions of payment the by funded are which schemes benefit defined of number a operates also Company The schemes benefit Defined (ii) dependants.their and members of benefit fortrusteesthe independent in vested are which of assets the schemes, contribution defined of number a to contributions makes Company The schemes contribution Defined (i) follows: as wereyeardirectors, the during executive including employees, of numberaverage weekly The benefits Employee 36. 17.note in provided is provisions above the of description detailed A Provisions 35. 34. Tradepayablesother and statements financial Company the of part forming Notes Administration selling and distribution Marketing, expense paymentShare-based schemes benefit defined – costs Pension schemes contribution defined – costs Pension contributions security Social salaries Wagesand follows: as are Company forthe costs employee aggregate The Current Non-current creditorsOther Accruals and deferredAccrualsand income Tradepayables Current 101,244 107,603 9,114 1,118 5,241 € € € 7,319 2007 2007 2007 2007 ’000 ’000 ’000 679 463 216 118 412 500 146 737 (continued) 64 54 82,174 77,868 € € € 1,813 1,453 5,955 4,606 3,541 2006 2006 2006 2006 ’000 ’000 ’000 360 109 376 426 182 365 765 51 58 United Drug plc Annual Report 2007 95 558 631 451 ’000 2005 2005 9,021 6,766 1,173 € 7.10% 2006 4.25% 3.10% 6.10% 2.25% 3.50% 2.25% (3,905) (4,463) (13,484) 0 - 2.25% 308 714 408 ’000 2006 2006 7,748 € 1,325 7.50% 2007 4.50% 3.80% 6.50% 2.25% 3.50% 2.25% (2,243) (2,551) 10,195 (12,746) 0-2.25% Projected unit method 2007 2007 7.75% 5.40% 4.50% 6.50% 2.25% 3.50% 2.25% 0 - 2.25% (continued) Present Present value of scheme obligations Employee benefits (liability) tax assets Deferred Net liability Equities Bonds Property Other Fair value of scheme assets Equities Bonds Property Other Rate of increase in pensions Inflation rate Discount rate The expected rates of at return 30 September 2007 were: Valuation method Rate of increase in salaries The assumptions are based on long term expectations, which are believed to be relatively stable. The market values of assets in the pension schemes at 30 September 2007 were: The principal assumptions used by the actuaries as at 30 September 2007 were: funded and the assets are vested in the independent trustees for the benefit of members and their dependants. dependants. their and of members benefit the for trustees independent in the vested are assets the and funded schemes. of the to members advised are results the but inspection public for available not are valuations The The most recent full actuarial valuations the for principal schemes were conducted as at 30 June The 2006. principal assumption used was that the annual rate of on return investments would be 2-2.5% higher than the annual rate of increase in pensionable salaries. 36. Employee benefits obtained actuaries qualified of independent advice the with determined are schemes to the contributions The is independently scheme benefit defined Each of funding. method unit projected the using intervals at regular 96 United Drug plc Annual Report 2007 Movements in fair value of plan assets plan of fairvalue in Movements benefits Employee 36. statements financial Company the of part forming Notes Mortality rate assumptions and share-based payment information are detailed in note 21. note in detailed areinformation paymentshare-based and assumptions rate Mortality follows: as is obligation benefit defined the of value present and assets plan the to loss actuarial the of Reconciliation obligations benefit defined of value present in Movements At end of year of end At assets scheme returnon expected returnActual less paid Benefits contribution Employee contributions Employer assets scheme returnon Expected year of beginning At recognised income and expense and income recognised of statement the in recognised gain/(loss) Actuarial assumptions actuarial in changes of Effect assets scheme returnon expected returnActual less variations experience on loss Actuarial year of end At assumptions actuarial in changes of Effect paid Benefits contributions Employee variations experience on loss Actuarial obligations scheme on Interest Currentcosts service year of beginning At (continued) 1,966 2,494 € 2007 (550) ’000 22 10,195 12,746 13,484 (2,494) 9,021 € € € 2007 2007 2006 (283) (283) (516) (320) (592) ’000 ’000 ’000 445 989 550 982 506 396 (continued) 22 1 1 13,484 11,678 (1,306) (1,537) € € € 9,021 7,654 2006 2006 2005 (304) (304) ’000 ’000 ’000 396 517 757 245 320 592 769 428 (14) 1 1 United Drug plc Annual Report 2007 97 443 ’000 ’000 ’000 2006 2006 2006 3,289 3,761 2,846 2,450 9,801 € € € 21,391 33,642 263,193 has been 614 ’000 ’000 ’000 2007 2007 2007 € € € 2,450 9,801 4,375 6,887 3,761 18,941 31,192 309,130 190,000) € (2006: 325,000 € an expense of Share-based payment Short term benefits (salary, Short bonus, term benefitsincentives) (salary, Management charges to subsidiaries More More than five years Less than one year Between two and five years Remuneration of Remuneration key management personnel Pension contributions Sales to subsidiaries In accordance with IFRS 2 recognised in the income statement in respect of share options granted to key personnel. Details of balances outstanding with subsidiaries are provided in note 31. IAS 19 the requires disclosure of compensation paid to the Company’s key This management personnel. comprises its executive and non-executivetogether with Persons Discharging Managerial directors, Responsibility (‘PDMRs’) as defined in Section 12(8) of the Irish Abuse Market Directive (MAD) Regulations. Transactions with subsidiaries: 38. Related party transactions The Company has related party relationships with its subsidiaries and with the of directors the Company. Details of the of remuneration the together with Company’s individual the directors, number of shares in the Company owned by them and their outstanding share options are set out in the report on Directors’ page 27 and in the Report of the Committee Remuneration on on remuneration pages directors’ 36 to 40. The significant operating leases entered into by the Company are in respect of office and warehouse facilities in These Dublin. leases commenced in June 2004 a for term of twenty five years and rent reviews provide for every five On years. each rent review date, the rent payable shall be set at open market value, subject to the revised annual rent being a minimum of 115% of the applicable annual rent prior to The the rent review date. Company has the ability to terminate the leases in June 2019. The Company plant leases and certain equipment property, The under operating leases. leases typically run an for initial lease period with the potential to renew the leases after the initial period. future future lease payments in that aggregate, the Company is to required make under existing lease agreements. 37. Operating leases 37. Leases as lessee Non-cancellable operating lease rentals are payable as These set amounts the out represent minimum below. 98 United Drug plc Annual Report 2007 * Subsidiary undertakings owned directly by United Drug plc. plc. Drug United by directly owned ordinaryareshares. held shares All undertakings Subsidiary * 24. Road,Dublin Citywest Park, Business Magna Drive, Magna House,Drug United at registeredtheirhaveoffice companies above the of All 2007.September 30 at plc Drug United of undertakings subsidiary significant the arefollowing The subsidiaries Significant 40. customers.and undertakings subsidiary certain of borrowing facilities of respect in Company the by given been haveGuarantees liabilities Contingent 39. statements financial Company the of part forming Notes Endoscopy UK Limited (3) Limited UK Endoscopy MASTA(5) Limited (3) PresearchLimited (4) Limited Packaging TD (3) Limited Surgical Mantis (3) Limited Splint New (3) Limited In2Focus Ashfield (3)* Limited Holdings (U.K.)Drug United (2) Limited Ulster Anaesthetics (1) Limited Ireland)(NorthernSangers Kingdom United the in Name trading and Incorporated IntrapharmaLimited IntravenoLimited Healthcare Limited* International Marketing Pemberton Limited (Ireland)Healthcare Ashfield Limited DistributorsPharmaceutical Blackhall Limited* Unitech DrugLimited Wholesale United Ireland of Republic the in Name trading and Incorporated Distribution of medical equipment medical of Distribution field travelhealth the provider Servicein laboratoryequipment of Distribution provider solutions packaging secondary and Primary productssurgical of distribution and Supply devices medical of distribution and Supply outsourcing sales Contract company holding Investment consumables and equipment medical of Distribution productspharmaceutical of distribution Wholesale business of Nature Distribution of consumer productsconsumer of Distribution outsourcing sales Contract productspharmaceutical of Distribution consumables and equipment scientific and medical of Distribution products pharmaceutical of distribution Wholesale business of Nature equipment and consumables and equipment pharmaceutical and medical of Distribution consumables and equipment pharmaceutical and medical of Distribution (continued) Group shareGroup Group shareGroup 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% United Drug plc Annual Report 2007 99 100% 100% 100% 100% Group Group share Group Group share Nature Nature of business Packaging solutions provider Packaging solutions provider Nature Nature of business Distribution of specialised medicines Distribution of specialised medical equipment (continued) OX10 OX10 9TA. Leicestershire, LE65 1HW. Leicestershire, This company has its officeregistered at Unit 6, Stephenson Groundwell Industrial Road, Estate, Swindon, SN25 5AX. This company has its officeregistered at Leeds, LS19 Unit 7BN. 15, MoorfieldYeadon, Close, Oxfordshire, This company has Wallingford, its officeregistered address at Thames 7 Way, Park, Lester Belfast Belfast BT23 6BL. These companies officehave their registered at Ashfield Ashby de House, Resolution la Road, Zouch, This company has its officeregistered at Klöcknerslyaat Belgium. 1, 3930 Hamont-Achel, This company has its officeregistered at Appelhof 13, The 8465 AX Netherlands. Oudehaske, This company has its officeregistered at 2 Belfast Marshalls Road, BT5 6SR. This company has its officeregistered at Maryland Industrial Estate, Ballygowan Castlereagh, Road, Name (7)* Budelpack Hamont N.V. (8) Pharma Logistics Investments B.V. Craig Craig & Limited Hayward (6) Pyramed Limited (3) Name (4) (5) (6) (3) * Subsidiary undertakings owned directly by United Drug plc. * Subsidiary undertakings owned Incorporateddirectly by United and trading Drug plc.in Europe 40. Significant subsidiaries (7) (8) (1) (2)