Weak sterling dents strong profit growth at United Drug

PROFITS AT pharmaceutical distributor and wholesaler, United Drug, topped €30 million in the first half of its financial year, the company reported yesterday.

However, sterling's weakness against the euro in the early months of 2008 blunted some of the Irish company's growth.

United Drug, whose financial year runs from October 1st to September 30th, said yesterday that in the six months ended March 31st, sales grew 9 per cent to €845 million from €773 million during the comparable period in 2006.

Operating profits were up 20 per cent at €36.6 million during the period from €30.6 million. Its pre-tax surplus increased 15 per cent to €33.3 million from €29 million. The company said that earnings per share were up 13 per cent at 12.13 cent from 10.73 cent. It is also declaring a 13 per cent increase in its dividend for the period to 2.23 cent from 1.97 cent.

United Drug chief executive Liam Fitzgerald said yesterday sterling's fall against the euro in the early weeks of this year cut earnings growth by about 2 per cent. "Earnings were up 22 per cent on a constant currency basis," he said. "But earnings growth was 20 per cent. It's a translation rather than a trading issue, and we have just got to take it on the chin and get on with it."

About half of United Drug's business is done in sterling. Mr Fitzgerald said that the group's operations in Britain were strong across the board, and delivered about 13 per cent in earnings growth, much of it from existing businesses, but with some contribution from acquisitions. In Ireland, Mr Fitzgerald said the company is continuing to gain market share. "The pre-wholesale business returned to good growth during the first half and the consumer products business also turned around," he said.

In March, the Health Service Executive cut the reimbursement price it pays to community pharmacies for providing medicines.

United Drug said yesterday an independent body is expected to recommend a new dispensing fee this month. "An increased dispensing fee should help offset some of the impact on pharmacists from the reduction in the reimbursement price of medicines," United Drug said.