A strong year of growth and development

Dear Shareholder

I’m pleased to report a very solid performance for FY2019 despite some challenges along the way.

We made two acquisitions in the second half of the year, which contributed to overall growth of 7% in adjusted diluted EPS on a constant currency basis, while net revenue growth and adjusted operating profit excluding the impact of acquisitions, which are key measures for the Board, each grew by 5%. Within this, Ashfield grew underlying operating profit by 4% and Sharp by 8%.

The Group generated strong net cash flow from operations of $129.3 million in the year, (a 26% increase on the prior year).

Our mission for many years has been to move from our low growth, low margin supply chain businesses into higher growth, higher margin businesses. 2019 demonstrates that we continue to achieve success in this mission and as we look ahead we see further opportunity to build on our new base and achieve synergies between our different services.

One of the factors in our development that I should highlight is that over 62% of our revenue was generated in the U.S. this year, which is the most dynamic and profitable pharmaceutical market in the world. This represents quite a transition from a company which ten years ago was primarily focused in Ireland and the U.K.

Return on capital employed (‘ROCE’) is another important metric for the Board. In 2019 our overall ROCE increased to 13.1%, (or 13.4% on a IAS 18 basis) compared to 12.7% last year.

Reflecting our good performance in the year, we are recommending a final dividend of 12.34c, a 5% increase on last year and a continuation of our long history of annual dividend increases. The Group’s total dividend per share for the year will be 16.80c (also a 5% increase on 2018).


When I first joined the Board of UDG in 2004, Ashfield was a contract sales business in the U.K. and a minor part of the Group. I was nevertheless concerned that this would be a challenging business for a public company to manage based on the somewhat volatile history of publicly quoted U.S.-based contract sales organisations.

The subsequent years proved my worries to be unfounded. Led by founder Chris Corbin, Ashfield built a leading position in Europe, the U.S. and Japan as a contract sales and sales support service provider. In recent years, through organic initiatives and acquisitions, Ashfield has transformed its services by adding further high growth, high margin capabilities including medical information, healthcare communications and, most recently, advisory services focused on pharmaceutical commercialisation.

While my concerns regarding the volatility within the pure contract sales business materialised from time to time (this year a significant labour law change in Germany disrupted our largest European market), the breadth and depth of the Ashfield businesses we have acquired and built have more than compensated for any such disruptions and thus have delivered good bottom-line growth year-on-year.

I am sharing this perspective with you for two reasons: Firstly, to illustrate that the suite of services we’ve been building in Ashfield have strong growth characteristics and have provided a sufficient mix of activities to mitigate local or segment specific risks. Secondly, to explain that we continue to believe that personal promotion as a sales technique will remain an important element of pharmaceutical marketing. However, the melding of this service with other sophisticated sales support techniques such as nurse advisors, call centre support, digital marketing and medical communications is the future.

Ashfield continues to develop and, while seeking to exploit synergies between the different compatible services we have been assembling, we also have a constantly evolving pipeline of interesting acquisition opportunities to increase our scale, expand geographically and add further to our menu of services.

When I joined the Board we were not in the packaging business at all. That changed with a small number of acquisitions in the mid 2000s crowned by that of Pennsylvania-based Sharp in 2008. That deal brought us a division that has been very successful and a reliable growth engine year-on-year. Capital expenditure rather than acquisition has since been the fuel for that growth, and our faith in the market and a great management team has been well rewarded. The European arm of Sharp Commercial, and the Clinical business have been less successful than the U.S. Commercial business. However with new facilities for Clinical now in place and with Commercial Europe now focused in two well invested facilities in Belgium and The Netherlands, we are confident these will make good progress in 2020 and beyond.

It will not have escaped your notice that we have had exceptional gains and charges in each of the last four years, including this year. These have been part of our journey of transformation as we’ve sold legacy businesses, closed others, and right-sized parts of the business to reflect changes in their markets. One can never declare victory but we believe the Group is now well positioned from a cost and facilities perspective.

Board and governance management

Elsewhere in this report we detail our governance activities, and the outcome of an independent Board Evaluation, so I won’t repeat them here. Suffice to say the Board exercises its governance responsibilities with diligence, but also with a clarity of purpose to help the management team create value while honouring our responsibilities to our stakeholders and society.

During the year we welcomed two new colleagues to the Board, Peter Chambré and Shane Cooke, whose bio’s are on page 61. These appointments were made in anticipation of the retirement of Chris Brinsmead and Chris Corbin, both of whom will step down at our upcoming AGM after long service. To both of them we express our deep thanks for great contributions. Chris Corbin’s Ashfield became part of the Group in 2000 and he has served on the Board for the past 17 years with great distinction. Nancy Miller Rich, one of our U.S. directors has also recently indicated that she is not in a position to go forward for re-election at the upcoming AGM due to other increasing commitments. We will miss her insightful contributions and we have begun the process of seeking a replacement.

The recent appointments were also made with my own retirement in mind. I joined the Board in 2004 and was appointed Chair in 2012. In line with good governance, it is time for me to move on. I have agreed with the Senior Independent Director that I will step down in September 2020, giving him and his fellow Board colleagues time to select a successor, whether internal or external.


2019 finished strongly, and as noted above underlying revenue and operating profit growth have been good. We expect these trends to continue in 2020. We also have access to significant capital without overstretching our balance sheet, and thus can continue to make appropriate acquisitions as the right opportunities arise. We therefore look to the future with confidence.

At the outset of this statement I noted that 2019 had had its challenges. I would like to thank the management teams throughout the Group for their hard work and commitment in successfully working through these as they arose, and wish them our support as they continue to drive the development of the Group.

Peter Gray