United Drug plc Annual Report 2008 Supply Chain ... Sandyford Industrial Estate ... United Drug plc...

United Drug plc Annual Report 2008

From Distr ibut ion to Global Healthcare

United Drug House Magna Drive Magna Business Park Citywest Road Dublin 24

Telephone: +353 1 463 2300 Facsimile: +353 1 459 6893 Email: [email protected] Website: www.united-drug.ie

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Contents

Our vision 1

Financial highlights 2008 2

Divisional structure 4

Directors’ and other information 6

Chairman’s statement 8

Chief Executive’s review 12

Operations review 16

Finance review 24

Corporate social responsibility 26

Consolidated financial statements 29 Printed on environmentally friendly paper

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.

Pharma WholesaleCraig & Hayward

Sangers

United Drug Wholesale

Specials Laboratory

Contract Sales & Marketing ServicesAlliance Healthcare

AshfieldIn2Focus

Ashfield Ireland

Ashfield USA

BEST

UniversalProcon

Medical & ScientificEndoscopy UK

Intrapharma

Intraveno

JVA Analytical

Mantis Surgical

New Splint

Presearch

Pyramed

Ulster Anaesthetics

Unitech

Supply Chain ServicesBlackhall

Enestia

European Packaging Centre

MASTA

Pemberton

Sharp

TD Packaging

UniDrug Distribution Group (UDG)

United Drug Distributors

United Drug plc

�United Drug plc Annual Report 2008

� United Drug plc Annual Report 2008

IFRSbased

�008€’000

Intangibleamortisation

�008€’000

Adjusted�008€’000

IFRSbased

2007€’000

Intangibleamortisation

2007€’000

Adjusted2007

€’000Increase

Revenue �,683,7�� - �,683,7�� 1,583,622 - 1,583,622 6%

Operating profit 66,��0 ��,977 78,�97 60,038 6,554 66,592 �7%

Profit before tax 58,55� ��,977 70,5�8 55,773 6,554 62,327 �3%

Diluted earnings per share (cent) ��.6�c 4.09c �5.70c 20.81c 2.21c 23.02c ��%

Dividend per share (cent) 8.00c - 8.00c 7.30c - 7.30c �0%

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.

Financial highlights �008

3United Drug plc Annual Report 2008

%5 year

%�0 year

%�5 year

%�0 year

Revenue 8 �3 �0 �9

Profit before tax �5 �9 �0 �0

Diluted earnings per share �4 �7 �4 �4

Dividend per share �4 �5 �3 ��

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 �� November �008

Annual report Issued �6 January �009

Annual General Meeting To be held �7 February �009

Interim dividend Paid �� July �008

Final dividend Payment date �8 February �009

Compound average annual growth rates

4 United Drug plc Annual Report 2008

Pharma Wholesale

United Drug Wholesale

Provides time-critical pharmaceutical delivery

services, together with complementary

pharmacy products to retail and hospital

pharmacies, throughout the Republic of Ireland.

Sangers

Provides time-critical pharmaceutical delivery

services, together with complementary

pharmacy products to retail and hospital

pharmacies, throughout Northern Ireland.

Craig & Hayward

Provides time-critical delivery services of specially

prepared products manufactured to meet

specific patients’ prescription requirements

throughout the UK.

Specials Laboratory

Manufactures unlicensed medicines for the retail

pharmaceutical and hospital markets in the UK.

Supply Chain Services

United Drug Distributors

Provides contract distribution and other services to

pharmaceutical and animal health manufacturers

in the Republic of Ireland.

UniDrug Distribution Group (UDG)

Provides contract distribution and other services to

pharmaceutical and animal health manufacturers

in the UK.

Pemberton/Blackhall

Provide sales, marketing and contract distribution

services to consumer products and health and

beauty manufacturers in the Republic of Ireland.

MASTA

Healthcare service provider in the travel field,

specialising in the sale and distribution of

vaccines, medical information and provision

of clinical services.

TD Packaging/Enestia/EPC/Sharp

Provide primary and secondary packaging

solutions to the healthcare industry.

Contract Sales & Marketing Services

AshfieldIn�Focus/Ashfield Ireland/Ashfield USA/Alliance Healthcare

Provide contract sales outsourcing and sales and marketing services to pharmaceutical manufacturers in the UK, the Republic of Ireland and the USA.

UniversalProcon

Provides event management services to the pharmaceutical sector.

BEST

Provides sales force effectiveness training services to the pharmaceutical sector.

Medical & Scientific

Unitech/Intraveno/Intrapharma

Provide contract distribution services, sales and marketing and technical support to medical and scientific equipment and consumable manufacturers in the Republic of Ireland.

Mantis Surgical/New Splint/Ulster Anaesthetics

Provide contract distribution services, sales and marketing and technical support to medical and scientific equipment and consumable manufacturers in the UK.

Presearch

Provides contract distribution services, sales and marketing and technical support to laboratory instrumentation and consumable manufacturers in the UK.

Endoscopy UK

Provides medical distribution services, specialising in the sales and technical support of flexible endoscopy equipment.

Pyramed

Provides medical distribution services, specialising in surgical products in the cardiology, radiology, neuroradiology and cardiothoracic sectors.

JVA Analytical

Provides medical distribution services to Ireland’s analytical, environmental, educational and regulatory laboratories.

Divisional structure


IvylandAllentown

Stamford

Hamont-AchelHeerenveen

Ballina

Limerick

Dublin

Omagh

Belfast

Swindon

Ashby-de-la-Zouch

Leeds

South Normanton

Lydney Oxford

Basingstoke

Slough

St. Albans

Newcastle

North America

Europe

Ireland and UKIreland

Ballina

Belfast

Dublin

Limerick

Omagh

United KingdomAshby-de-la-Zouch

Basingstoke

Leeds

Lydney

Newcastle

Oxford

St. Albans

Slough

South Normanton

Swindon

BelgiumHamont-Achel

ConnecticutStamford

The NetherlandsHeerenveen

PennsylvanniaAllentown

Ivyland


Ronnie Kells* Chairman

Ronnie Kells is Chairman and a non-executive director of United Drug plc. Ronnie was appointed Chairman on 5 October 2005, having served as a non-executive director since 1999. Prior to joining United Drug plc, Ronnie was Group Chief Executive of Ulster Bank. Ronnie is also a director of Readymix plc and a number of other companies.

Liam FitzGerald Chief Executive

Liam FitzGerald was appointed a director of United Drug plc in 1996 and Chief Executive in 2000. Liam joined United Drug plc in 1993 and was previously Managing Director of United Drug Distributors. Prior to joining United Drug plc, Liam worked in Dimension Marketing Limited and Jefferson Smurfit Group plc. Liam is currently a non-executive director of C&C Group plc, Chairman of Traidlinks, and is a former Chairman of the Marketing Society.

Barry McGrane Finance Director

Barry McGrane joined United Drug plc in 1993 and held various senior finance roles in the Group, including that of Company Secretary, before being appointed Finance Director in 2001. Formerly, Barry worked with Reflex Investments plc and Andersen, Dublin.

Peter Gray*

Appointed a non-executive director in 2004, Peter Gray is Chief Executive of ICON plc, the Irish based multinational pharmaceutical development services company. Prior to joining ICON plc as Chief Financial Officer, Peter held senior positions in a number of Irish public companies, including Elan Corporation plc.

John Peter*

Appointed a non-executive director in 2005, John Peter is an executive member of the Board of Solvay UK Holdings Limited, responsible for co-ordinating Solvay’s business in the UK. John was formerly Chief Executive of Solvay Healthcare in the UK and Ireland and held various senior positions in research and development, international marketing and business development in Europe and the US.

Gary McGann*

Appointed a non-executive director in 2004, Gary McGann was appointed the Senior Independent non-executive director on 20 November 2007. Gary is Group Chief Executive of the Smurfit Kappa Group and Chairman of the Dublin Airport Authority. Before joining the Jefferson Smurfit Group in 1998 as Chief Financial Officer, Gary held various senior executive positions in Irish industry. Gary is also a director of Anglo Irish Bank plc and Aon McDonagh Boland and a member of the European Round Table of Industrialists (ERT).

Chris Corbin

Appointed a director of United Drug plc in 2003, Chris Corbin is Managing Director of the Contract Sales & Marketing Services division. Chris founded Ashfield Healthcare Limited and previously held sales management positions with Parke Davis, Fisons, Astra and May & Baker. Chris is Patron for SETPOINT Leicestershire and a member of Derbyshire Magistrates Bench and was Chairman of Leicestershire Business Awards 2007 and 2008.

Directors’ and other information

Ronnie Kells

Barry McGrane

Liam FitzGerald

Peter Gray

Gary McGann

John Peter

Directors’ and other information


Kieran McGowan*

Appointed a non-executive director in 1999, Kieran McGowan was formerly Chief Executive of IDA Ireland. Kieran is Chairman of CRH plc and his directorships include Elan Corporation plc. Kieran is also Chairman of the Governing Authority of University College Dublin.

Alan Ralph

Alan Ralph was appointed a director of United Drug plc on 19 June 2008. Alan joined United Drug plc in 1999 and held various roles throughout the Group, before being appointed Managing Director of the Pharma Wholesale division in 2005. On 1 October 2008, Alan took responsibility for the Healthcare Supply Chain division comprising Pharma Wholesale, the contract distribution element of Supply Chain Services and the Medical & Scientific businesses. Formerly, Alan worked with Banta Corporation and Price Waterhouse (PricewaterhouseCoopers).

Philip Toomey*

Appointed a non-executive director on 27 February 2008, Philip Toomey is the Global Chief Operating Officer for the financial services industry practice of Accenture. Philip has wide ranging international consulting experience and is a member of the Accenture Global Leadership Council.

Annette Flynn

Annette Flynn was appointed a director of United Drug plc in 2004. Annette joined United Drug plc in 1996 and took responsibility for the Supply Chain Services division during 2006, having previously been responsible for implementing and developing group strategy. On 1 October 2008, Annette took responsibility for the newly formed Packaging and Speciality Services division. Prior to joining United Drug plc, Annette held senior positions with Kerry Group plc working in their Irish, UK and US operations.

Karen Geoghegan Company Secretary

Karen Geoghegan joined United Drug plc in 2004 and held various positions in the Group finance function before being appointed Company Secretary on 29 August 2007. Formerly, Karen worked with PricewaterhouseCoopers, Dublin.

* non-executive directors.

Directors

R. Kells (British) (Chairman)

L. FitzGerald (Chief Executive)

B. McGrane (Finance Director)

C. Corbin (British)

A. Flynn

P. Gray

G. McGann

K. McGowan

J. Peter (British)

A. Ralph

P. Toomey

Secretary

K. Geoghegan

Registered office


Registered number

12244

Website

www.united-drug.ie

Auditor

KPMG Chartered Accountants 1 Stokes Place St. Stephen’s Green Dublin 2

Solicitors

Arthur Cox Earlsfort Centre Earlsfort Terrace Dublin 2

Principal bank

Ulster Bank Group George’s Quay Dublin 2

Stockbrokers

Davy 49 Dawson Street Dublin 2

Registrars

Computershare Investor Services (Ireland) Limited Heron House Corrig Road Sandyford Industrial Estate Dublin 18

Chris Corbin

Kieran McGowan

Annette Flynn

Alan Ralph

Philip Toomey

Karen Geoghegan Company Secretary


Financial performanceI am pleased to report once again on another year of record profits for United Drug. Despite the

difficulties in financial markets and the challenges presented by increased government regulation

each of our four operating divisions had a successful year.

Pre-tax profits before intangible amortisation increased by 13% to €70.5 million and earnings per

share by 12% to 25.70 cent. As I highlighted last year approximately one half of our profits are earned

outside our domestic market and a significant portion of these are earned in sterling. The weakening

of the sterling exchange rate against the euro during the year had a €4.0 million impact on the

translation of these profits when compared with the same period last year. On a constant currency

basis pre-tax profits before intangible amortisation are 20% ahead of 2007. A continued weakness

of the sterling exchange rate relative to the euro would adversely impact on the translation of next

year’s sterling profit.

DividendYour Board is proposing a final dividend of 5.77 cent per share. Together with the interim dividend

of 2.23 cent per share this represents an increase of 10% over the previous year.

OrganisationWe have continued our strategy of moving into new growth markets and geographies. To deal more

effectively with our evolving business and to better serve our customers we have amended our

organisational structure. The main changes are the consolidation of our packaging and speciality

services businesses into a new division and the amalgamation of our wholesale, distribution and

medical & scientific businesses into one division.

In addition, we have relocated some key members of our management team to the US to assist

with the integration and the development of our business interests there.

Chairman’s statement

Ronnie Kells Chairman


AcquisitionsDuring the year we acquired six companies. Sharp, one of the leading outsourced pharma

packaging companies in the US, will now form a core part of our new Packaging and Specialty

Services division. Alliance Healthcare in the US, BEST, Procon and Universal in the UK have been

acquired and integrated into our Contract Sales & Marketing Services division with Procon and

Universal now merged as one business. These companies each provide specialised services to the

pharmaceutical industry. JVA Analytical, a leading Irish analytical chemistry equipment distributor,

now forms an important part of our Medical & Scientific business.

Not only have we acquired growing businesses but in each one we have gained an enthusiastic

first class management team committed to the successful development of their business within

the United Drug group.

We remain committed to exercising a disciplined approach in the identification of potential

acquisitions. In building United Drug into an international healthcare services company, we will

continue to focus on those services that are not directly impacted by economic cycles where

we believe we can add value and achieve stable growth.

BoardIn February of this year, we welcomed Philip Toomey to the Board as a non-executive director. Philip

is the Global Chief Operating Officer for the financial services industry practice of Accenture. I am

confident that his knowledge of business and international markets will be invaluable to the Group.

In June of this year, we also appointed Alan Ralph to the Board as an executive director. Alan has

led our Pharma Wholesale division with great distinction and has played a key role in its successful

growth and will now lead our new Healthcare Supply Chain division.

PeopleA portion of our market value is comprised of intangible assets, incorporating the value of our

customer relationships, our governance and risk management capabilities and most importantly

our employee knowledge, experience and commitment.

These results are testimony to the commitment of the United Drug team led by Liam FitzGerald.

I would like to extend my thanks to everyone at United Drug, as it is their individual and collective

contributions that made the past year a success.

OutlookIn line with our strategy to develop United Drug into an international healthcare services company

we have now established a significant foothold outside our domestic market, in the UK, mainland

Europe and the US. We will use our presence in these international markets to continue to grow both

organically and by acquisition and we have the opportunity and finance to do so.

The current economic turmoil has had a serious impact in most countries but despite this we remain

positive about the fundamentals in our core healthcare markets. These markets are underpinned by

resilient growth drivers, particularly the demand for healthcare services and long-term demographic

trends. Against this background United Drug is well positioned to make progress in the current year

and beyond.

Ronnie Kells

Chairman

�0 United Drug plc Annual Report 2008

��United Drug plc Annual Report 2008

The fundamental drivers of our business are strong and accelerating.

�� United Drug plc Annual Report 2008

United Drug has made considerable progress this year towards its goal of becoming an international

healthcare services group focused on better patient outcomes through partnerships with healthcare

companies and government agencies.

The fundamental drivers of our business are strong and accelerating, being the increasing propensity

of pharma and healthcare manufacturers to outsource high fixed cost non-core activities, the factors

that impact demand and consumption of medicines and medical equipment that we sell, and the

need for government to have a functioning and efficient supply chain and viable community based

alternatives to hospital care. Our services are focused on creating cost and operating efficiencies

in supply chain, regulatory and sales and marketing activities for a combination of healthcare

manufacturers, retail pharmacists, and health authorities.

During the year, we combined good organic growth in our businesses with some strategically

important high growth acquisitions. We completed a deal to buy Sharp, a contract packaging

business in the US, last summer. It is our largest acquisition to date. Other deals completed during

the year include JVA Analytical, Procon, Universal, BEST and Alliance Healthcare. All acquisitions

have fitted in well and are contributing strongly. I want to take this opportunity to welcome all new

colleagues to the Group.

As the Group extends its reach in various business sectors it also expands its geographical reach. We

now operate in five geographies; the US, UK, Ireland, The Netherlands and Belgium. In 2009, the US is

expected to generate in excess of 10% of the Group’s earnings. We did not operate in this market at

all three years ago. We have been focused on acquiring businesses where we can extend or establish

leadership positions, and have then invested in those businesses to make them ‘best in class’. There

are numerous examples across the Group that evidence and substantiate our ability to do this well.

It is our intention to continue to execute this strategy, combining maximising the performance of

our core operating units, with finding and executing acquisitions that add to our market positions

in identified high growth market sectors.

Chief Executive’s review

Liam FitzGerald Chief Executive

�3United Drug plc Annual Report 2008

Our focus on growth means that we have to continue to nurture and develop existing management

talent and generate new management talent within our team. We have been focusing on attracting

good people into the organisation and on training our emerging leaders, internally, and through

some of the world’s leading business schools. We are accelerating our efforts in ensuring that we

develop our future leaders and create career opportunities for them.

Across the Group we now employ over 4,500 people. I want to thank each of them for their

contribution to what was another very successful year for the Group.

The Group has delivered over 20 years of successive double digit earnings growth without falter. In

recent years we have shown an ability to convert our earnings substantially into cash and that cash

has allowed us to invest further in our business, and to acquire other businesses. In today’s economic

climate, that focus on cash generation is critical and it will continue to be a key metric around which

we manage the business.

We are fortunate, as an industry, that healthcare is more economically resilient than most sectors

and that the general economic malaise has limited effect on the drivers I discussed earlier. That

being said, we recognise the need as a group to have a strong focus on driving cost efficiency to

the maximum, to ensure that low cost continues to be one of the cornerstones of our competitive

advantage across what we do. A focus on cost management gives us more control of revenue

variability when or if it occurs.

I am confident as we look to 2009 that our Group can continue to drive earnings, cash generation

and strong returns from our businesses and I am equally confident that we can continue to acquire

in strategically significant areas, at competitive valuations, backed by a strong balance sheet.

Liam FitzGerald

Chief Executive


In recent years we have shown an ability to convert our earnings substantially into cash.


Supply Chain ServicesThe Supply Chain Services division provides outsourced logistics and related value-added services

to pharmaceutical, biotechnology, nutraceutical and veterinary manufacturers, and continues

to broaden the range and geographical reach of services provided to manufacturer clients. The

activities of the division can be broken down into three elements: Contract Distribution Outsourcing

(CDO), Speciality and Clinical Services and Contract Packaging.

The CDO business is made up of the Irish and UK pre-wholesale and single channel supply consumer

products businesses. UDG, the UK pre-wholesale business, operated as a joint venture with Alliance

Boots, continues to win new business and market share in the growing UK outsourcing market. In

Ireland, our UDD business performed well and has grown sales and profits in a more mature market.

Our small consumer products business in Ireland is operating efficiently and trading profitably in a

market that is being impacted by lower consumer spending.

The Speciality and Clinical Services business includes MASTA in the UK and Temperature Controlled

Pharmaceuticals (TCP) in Ireland. MASTA acquires, markets, sells and distributes flu and travel vaccines

to GPs and clinics and administers travel vaccines to the general public through franchised and self-

owned clinics. The company continues to increase its penetration in the UK market and now operates

through thirty nine proprietary and partnered clinics. MASTA has produced a solid performance in

the year although down on the prior year due to a slower take-up of flu vaccinations in the UK at the

beginning of the year. TCP is a start-up business that successfully operates a number of infusion clinics

in Ireland and offers a comprehensive special logistics and nurse-led patient administration service

for pharmaceutical manufacturers and healthcare authorities. It is planned to roll out these speciality

services to the UK market, in conjunction with MASTA.

In Contract Packaging, we provide total packaging solutions for branded pharmaceutical, generic

and nutraceutical manufacturers. We have significantly increased our footprint in this market during

the year through the acquisition of one of the leading service providers in the US, Sharp Corporation.

This acquisition complements our existing operations in the UK, The Netherlands and Belgium and

positions United Drug as one of the leading international providers of outsourced packaging services

Operations review


for healthcare manufacturers. The packaging businesses have performed in line with or ahead of

our expectations in the year and provide us with a strong platform to further develop this service

for existing and prospective clients.

The Supply Chain Services division has performed strongly during the year across all businesses and

provides a solid platform from which to grow both the range of services offered and the depth of

client reach.

Medical & ScientificThe Medical & Scientific (M&S) division provides sales, technical support, logistics and back-office

services for high quality, technology-driven, medical equipment and devices manufacturers in both

the Irish and UK markets.

We have significantly increased our presence in the Irish market through the acquisition of JVA in

December 2007. JVA operates in the analytical chemistry sector supplying and servicing complex

analytical equipment analysers to pharmaceutical manufacturers and third level research facilities.

The potential synergies with our existing industrial and scientific business will allow us maximise our

position in this high-technology equipment and engineering support sector.

Our other businesses in Ireland are based in the medical and clinical diagnostics areas, selling mainly

to public and private hospitals. We also have a community business, supplying nursing homes, which is

a market leader in Northern Ireland and is growing well in the Republic of Ireland as investment in this

area continues. In our hospital-based businesses, our clinical diagnostics unit had a strong year as we

leveraged our market dominance in key clinical areas to win a number of equipment placements.

Our focus on Point of Care diagnostics solutions was rewarded with good business gains.

Our medical equipment business in Ireland, represented by Intraveno, was negatively impacted by

a slowdown in the implementation of a number of forecast capital projects in areas such as robotics,

sterilisation and infusion therapy. We believe that these projects have been delayed rather than

postponed, but there is no certainty as to when they will be completed. This is a cycle that we have


experienced before and given current healthcare budgetary pressures, we expect this portion of

the market to remain challenging in the near term. However we have retained market share and

continue to expand our presence in this sector.

In the UK, our business model is based around operating in niche, clinical specialities in areas such

as orthopaedic joint replacement, endoscopy and cardiology.

Our businesses in the UK produced a satisfactory performance, with most business units delivering

growth year on year. While the whole business produced satisfactory results, Endoscopy UK was

particularly successful as it expanded its presence in the broader NHS arena. We expect our

performance to be further strengthened by the release of a proprietary imaging system, which

will add significant value to our product offering.

Our specialist surgical team based in the Pyramed and Mantis Surgical businesses also delivered good

growth in the year. While all our UK businesses are focused on particular clinical niches, this business

unit attempts to utilise new technologies across specialist areas. Spending constraints by some

major pharmaceutical manufacturers on capital projects during the year did impact our analytical

chemistry business in the UK. This business is however well positioned to maximise opportunities as they

arise in this sector in the year ahead.

The M&S division has produced growth in revenues and profits during the year although somewhat

below our expectations. Healthcare budgetary pressures do impact on parts of this business from time to

time and given the current economic outlook in the markets in which we operate this is likely to continue

into the current financial year. Our businesses in this division have a broad spread of revenue streams and

manufacturer and client relationships and many of these should not be impacted by capital spending

constraints. We are confident that the quality product portfolio we represent combined with the

experience and expertise of our specialist sales force will allow these businesses to continue to prosper.

Operations review (continued)


Contract Sales & Marketing ServicesThe division previously referred to as the Contract Sales Outsourcing division has significantly broadened

its service offering over the last twelve months and, to better reflect the increased service offering to

healthcare clients, the division has been renamed the Contract Sales & Marketing Services division.

Through AshfieldIn2Focus, we have strong market leading positions in the provision of contract sales

outsourcing services to pharmaceutical manufacturers in the UK and Ireland with a developing

business in the US. To seek to leverage our strong relationships with manufacturer clients and the

growing trend amongst pharmaceutical manufacturers to outsource more of their non-core functions,

we have expanded our activities in this division to include a range of complementary marketing

services. The broadening of the service offering and the geographic reach has been enhanced

by a number of small bolt-on acquisitions during the year.

During the year we acquired Alliance Healthcare, a US based company which provides a range

of call centre solutions to support pharmaceutical companies sales, marketing and regulatory

requirements, including medical affairs information, patient compliance support and clinical trials

recruitment. The range of services available to our clients was also extended by the acquisition of

two companies providing conference management solutions. In November 2007, we acquired

Procon Conferences, a UK pharmaceutical conference services company providing full corporate

event management services targeted specifically at the pharmaceutical and healthcare sector.

Procon’s services include venue finding, association and secretariat membership, delegate

registration through to full event management. This capability was extended in April 2008 with the

acquisition of Universal Conference and Incentive Travel, who provide event management services

to pharmaceutical companies, both at pre and post approval stages of product development based

in the UK and US. Finally, we increased our training capacity with the acquisition of Business Edge

Solutions and Training, a company that provides a range of personal, sales and team effectiveness

training programmes for pharmaceutical companies in the UK market.


These small, bolt-on acquisitions complement our market leading and growing contract sales and

marketing operations in the UK and Ireland and will allow us provide additional value-added services

to clients in existing and new markets. Following the acquisition of Universal the event management

business of Procon has been merged with Universal to provide a more comprehensive service offering

for clients and the largest supplier of event management services for the pharmaceutical industry in

the UK.

The division has reported a very good outcome for the year, well ahead of the prior year and

continues to see a very positive business environment as manufacturer clients seek more flexible

means of deploying their sales and marketing efforts.

Pharma WholesaleThe Pharma Wholesale division provides a best-in-class service for independent retail pharmacy

customers enabling them to compete effectively in the marketplace. The division comprises market

leading, full line wholesaling businesses in the Republic of Ireland and Northern Ireland markets and

a niche specials distribution business in the UK market. The division has produced another strong

performance in 2008 with sales, profits and market share all increasing combined with strong cash

flows.

Our Republic of Ireland pharmaceutical wholesale business, United Drug Wholesale (UDW), has further

strengthened its position during the year as the market leading wholesaler supporting independent

retail pharmacy in this competitive market. UDW’s aim is to provide a top-quality customer focused

wholesale service at a competitive price. To do this the business continues to broaden the range of

services it provides to customers and to automate its operations to improve productivity levels. The

recent decision by the Irish Health Service Executive (HSE) to reinstate the reimbursement price it pays

to community pharmacy for medicines it funds under various HSE schemes should remove some of

the uncertainty from the market.

Operations review (continued)

��United Drug plc Annual Report 2008

The value of medicines consumed in the Republic of Ireland continues to grow strongly although

the rate of growth did slow somewhat in the second half of the financial year due to the uncertainty

surrounding reimbursement to retail pharmacy and the slowdown in general consumer spending

impacting on non-prescription sales from pharmacy.

In Northern Ireland, our Sangers business has also increased its leadership position as the supplier of

choice for retail pharmacists in this growing market. We continue to see a move by pharmaceutical

manufacturers to a Direct-to-Pharmacy (DTP) distribution model. Under DTP, the manufacturer

appoints a limited number of wholesalers to act as their exclusive distribution agents in the territory.

Sangers is involved in all DTP arrangements in the market. Some of these arrangements reduce our

reported revenues, as we now charge a fee-for-service rather than buying and re-selling product.

Our profitability has not been affected by this market evolution and indeed this change has helped

us to continue to increase our market share and further improve our cash flows.

In 2007 we acquired Craig & Hayward, a UK based specials distributor. A ‘specials medicine’ is a

special formulation of a product manufactured to meet a specific patient prescription requirement.

Craig & Hayward acts as a ‘one stop shop’ for any specials requirements for the retail pharmacy

sector in the UK. This business has performed very well during the year, ahead of our expectations,

as we continue to leverage Group relationships to broaden the customer base.

The Pharma Wholesale businesses operate in growing markets with growth underpinned by increasing

and ageing populations and an increasing demand for the products and services we supply. These

markets are the focus of Government cost saving initiatives as they seek to slow the increase in public

healthcare expenditure. Our businesses are well positioned to prosper in these markets based on our

strong market positions combined with our focus on efficiency and customer relationships.

�� United Drug plc Annual Report 2008

Our focus on growth means that we continue to nurture and develop existing management talent.


RevenueRevenue for the year of €1.7 billion is 6% ahead of 2007 with revenue growth reported in each of the four business divisions. Revenue growth in Pharma Wholesale was reduced by the move in our Northern Ireland business to a DTP arrangement with a number of manufacturers. Under DTP, we charge a fee-for-service rather than buying and re-selling product thereby reducing our revenue. On a constant currency basis revenue is 10% higher than 2007.

Adjusted operating profit *Operating profits are ahead of last year in each of the four business divisions. The move into higher margin activities has helped to deliver a 17% increase in operating profits from a 6% increase in revenues.

Adjusted profit before tax *Net interest costs in the year of €7.7 million are €3.4 million higher than in 2007 as we take account of the finance cost of acquisitions completed during 2007 and 2008. After these interest costs, profit before tax and intangible amortisation of €70.5 million is 13% higher than 2007.

Adjusted earnings per share *Earnings per share for the year of 25.70 cent, increased 12% on 2007. EPS growth is lower than profit growth in the year as a result of an increased tax charge, with the acquisition of businesses in higher tax rate jurisdictions, and an increase in the number of shares in issue following share issues under the scrip dividend and other share schemes.

Cash flowFree cash flow for the year, before acquisition expenditure and dividends, amounted to €45.8 million. The absolute value of the investment in working capital increased during the year but at a lower rate than revenue growth as underlying working capital levels were further reduced. Free cash flow for the year is after net capital expenditure of €24.1 million, much of this development expenditure, as we expand capacity, particularly in our packaging business. A total of €117.5 million, including debts taken over, was spent on acquiring new businesses or on deferred consideration payments due on acquisitions completed in earlier years. The net cash flow for the year results in an increase in net debt of €90.8 million.


Finance review

* before amortisation of intangible assets.


Balance sheetNet debt at the end of the period was €159.1 million giving a gearing ratio of 46.2%. Net debt levels equate to 1.8 times EBITDA for the year, or 1.65 times when EBITDA is adjusted to take in a full year contribution from acquisitions completed during the year. Interest charges are covered more than 11 times by EBITDA.

Net assets at the end of the year amount to €344.2 million, an increase of €13.2 million on the net assets reported at 30 September 2007.

Forward-looking informationSome statements in this annual report are forward-looking. They represent expectations for the Group’s business, and involve risks and uncertainties. The Group has based these forward-looking statements on current expectations and projections about future events. The Group believes that expectations and assumptions with respect to these forward-looking statements are reasonable. However, because they involve known and unknown risks, uncertainties and other factors, which in some cases are beyond the Group’s control, actual results or performance may differ materially from those expressed or implied by such forward-looking statements.

Financial risk managementThe management of the financial risks facing the Group is governed by policies reviewed and approved by the Board of Directors. These policies primarily cover liquidity risk, credit risk, interest rate risk and currency risk. The primary objective of the Group’s policies is to minimise financial risk at reasonable cost. The Group does not trade in financial instruments.

The Group uses financial instruments throughout its businesses: borrowings and cash resources are used to finance the Group’s operations; trade receivables and payables arise directly from operations; and interest rate swaps and forward foreign currency contracts are used to manage interest rate and currency risks and to achieve the desired currency profile of borrowings. Further details of financial instruments used by the Group are given in note 22 to the financial statements.

Liquidity risk managementThe Group ensures that it has sufficient financing facilities available through cash flow generated from operating activities, loan notes issued, committed banking facilities and access to equity markets to meet its projected short and medium term funding requirements.

Interest rate risk managementThe Group finances its operations through a mixture of retained profits and bank borrowings. The Group’s policy is to borrow in the desired currencies at both fixed and floating rates of interest and use interest rate swaps to generate the desired interest profile and to manage the Group’s exposure to interest rate fluctuations.

Currency risk managementUnited Drug’s reporting currency and that in which its share capital is denominated is the euro. Given the nature of the Group’s businesses, exposure arises in the normal course of business to other currencies, principally sterling.

The majority of the Group’s activities are conducted in the local currency of the country of operation. The primary foreign exchange risk arises from the fluctuating value of the Group’s net investment in different currencies. Borrowings, to finance acquisitions or major capital expenditure programmes, are made in the currency of the country of operation.

Where sales or purchases are invoiced in other than the local currency and there is not a natural hedge with other activities within the Group, the policy is to eliminate at least 50% of the currency exposures through forward currency contracts. A proportion of the Group’s operating profits are denominated in sterling and, where appropriate, foreign currency hedges are put in place to minimise the related exchange rate volatility.



United Drug recognises the importance of Corporate Social Responsibility (CSR) in the way it

manages its business and it is embedded throughout the Group. We understand our responsibilities

to our stakeholders who are; our employees, our customers and suppliers, our shareholders, the

environment and the community at large. The Group is committed to the highest professional and

ethical standards when interacting with our stakeholders. The Group’s reputation and the trust of its

stakeholders are the foundation of its success and are of fundamental importance for the future of

the organisation.

EmployeesWe recognise that our clients and customers experience the quality and professionalism of our

services through the people they encounter on a day-to-day basis. Consequently we believe our

employees are our greatest asset.

Our Human Resource policies focus on ensuring equal opportunities for all and to promote diversity

throughout our workforce to the greatest possible extent. We are committed to harnessing the

strength which this brings to the Group.

We aim to engage with employees in a way that will assist all to achieve their maximum potential.

As a Group we are investing in and developing talent so that our people are a driver for growth.

Employees by geography Employees by division

Health and SafetyUnited Drug is committed to providing a safe and comfortable working environment, with the highest

regard for the health and safety of employees, customers, suppliers and the community at large.

We ensure compliance with relevant statutory requirements and best practice guidelines issued

by national health and safety authorities, and implement and promote appropriate safe working

practices throughout the Group.

MarketplaceWe play a leading role in the provision of healthcare services and work closely with independent

pharmacists and local healthcare providers to advise and inform the communities we serve. Our

business contributes to supporting the best level of care to patients and acts in their best interests.

The Group is committed to providing the highest quality services and developing and maintaining

long-standing relationships with our customers and suppliers.

As part of our commitment to quality, we have made significant investment in ensuring our facilities

meet the highest industry standards for packaging, storage and delivery of product, and we ensure

our people maintain the highest quality standards.

Corporate social responsibility

Group 2%

Contract Sales & Marketing

Services 44%

Medical & Scientific 7%

Supply ChainServices 24%

Pharma Wholesale 23%

USA 8%

Benelux 8%

UK 58%

Republic of Ireland 26%


EnvironmentWe are committed to the conservation of the environment in its broadest sense and recognise

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 facility. We also aim to maximise the life of all refrigeration

equipment and to minimise the risk of gas emissions by ensuring best environmental practice.

Across the Group, we operate programmes to ensure the responsible disposal of packaging, and

re-use and recycle as much as possible. We actively participate in the Irish Repak packaging waste

management and the Waste Electrical and Electronic Equipment (WEEE) schemes. We also operate

programmes to collect, and safely dispose of, non-recyclable waste, ensuring controlled and licensed

neutralisation and disposal in collaboration with regulators.

CommunityWe 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.

AshfieldIn2Focus is one of the many group companies that engages in activities to support and

benefit the local community. The company operates a Worthy Causes Fund, which aims to support

local initiatives, education and young people. Funds are raised by staff and clients through

sponsorship and fundraising events. During the year this fund assisted a team of company employees

to refurbish ‘The Hub’, a charity café for the youth of the local community.

Education and the welfare of children is also an important focus for the Group. During the year the

Group facilitated employees participating in the Schools Business Partnership programme. Sangers

and AshfieldIn2Focus also strengthened relationships with schools in their local communities through

their Business in the Community and Corporate Citizenship programmes respectively.

The Group was 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, which was held during January and February 2008 and was an immense success.

The Group also seconded an employee to ‘Goal’, an Irish humanitarian NGO, for 15 months until July

2008. This secondment further demonstrates the Group’s commitment to assisting the wider community.

Additionally, the Group supports Liam FitzGerald in his role as Chairman of Traidlinks and in his

capacity as a Board member of the Barnardos’ ‘Learning through Poverty’ Campaign.

ConclusionUnited Drug believes in the value of good corporate social responsibility practices for the Group

and for all stakeholders. We are committed to continue improving our CSR programme.

Details of our Group policies and activities are also available on the Group’s website

www.united-drug.ie


We will use our presence in international markets to continue to grow both organically and by acquisition.


Contents

Directors’ report 30

Directors’ statement on corporate governance 34

Report of the Remuneration Committee on directors’ remuneration 41

Statement of directors’ responsibilities 48

Independent auditor’s report 49

Group income statement 51

Group statement of recognised income and expense 52

Group balance sheet 53

Group cash flow statement 54

Significant accounting policies 55

Notes forming part of the Group financial statements 64

Company statement of recognised income and expense 102

Company balance sheet 103

Company cash flow statement 104

Notes forming part of the Company financial statements 105

Consolidated financial statementsYear ended 30 September 2008


Directors’ report

The directors present their annual report and audited financial statements for the year ended 30 September 2008.

Principal activities, business review and future developments

United Drug is a leading international provider of services to healthcare manufacturers and pharmaceutical

retailers, with operations in Ireland, the UK, Belgium, The Netherlands and the US. The Group operated across

four divisions, Pharma Wholesale, Supply Chain Services, Medical & Scientific and Contract Sales & Marketing

Services. To better reflect the growth and changing nature of the businesses and the requirements of customers,

some structural changes are being implemented in the 2009 financial year. The Pharma Wholesale, contract

distribution element of Supply Chain Services and Medical & Scientific businesses are being combined to form

the Healthcare Supply Chain division and a Packaging and Speciality Services division has been newly formed.

Detailed operating and financial reviews and a review of future developments are contained in the Chairman’s

statement, Chief Executive’s review, Operations review and Finance review from pages 8 to 25.

Results

Details of the results for the year are set out in the Group income statement on page 51 and related notes.

Dividends

An interim dividend of 2.23 cent per share was paid during the year (2007: 1.97 cent per share). The directors have

proposed a final dividend for 2008, subject to shareholder approval at the Annual General Meeting, of 5.77 cent

per share (2007: 5.33 cent per share), thereby giving a total dividend for the year of 8.00 cent per share (2007:

7.30 cent per share).

Capital structure

The structure of the Company’s capital is detailed in note 14 to the financial statements.

Share price

The Company’s shares are listed on the London and Irish Stock Exchanges. The price of the Company’s ordinary

shares ranged between €3.20 and €4.02, with an average price of €3.73 during the year ended 30 September

2008. The share price at the end of the 2008 financial year was €3.78 and the market capitalisation of the Group

was €878 million. On 19 December 2008, the share price was €2.20 and the market capitalisation of the Group

was €512 million.

Accounting records

The directors believe that they have complied with the requirements of Section 202 of the Companies Act

1990 with regard to books of account by employing accounting personnel with appropriate expertise and by

providing adequate resources to the financial function. The books of account are maintained at United Drug

House, Magna Drive, Magna Business Park, Citywest Road, Dublin 24.

Directors, secretary and their interests

Mr. P. Toomey and Mr. A. Ralph were appointed to the Board on 27 February 2008 and 19 June 2008 respectively.

In accordance with the Articles of Association, they will retire at the 2009 Annual General Meeting and, being

eligible, offer themselves for election.

Mr. R. Kells, Mr. K. McGowan and Dr. J. Peter will retire from the Board by rotation, in accordance with the Articles

of Association and, being eligible, offer themselves for re-election.

Dr. D. Egan retired from the Board on 20 November 2007.

Details of directors’ and secretary’s share interests and interests in share options of the Company and group

companies and directors’ remuneration are detailed in the Report of the Remuneration Committee on directors’

remuneration on pages 41 to 47.


None of the directors had a beneficial interest in any material contract to which the Company or any subsidiary

was a party during the year.

Corporate governance

The Directors’ statement on corporate governance is on pages 34 to 40.

Substantial interests

As at 19 December 2008, the Company had received notification of the following interests in its ordinary share capital:

Bank of Ireland Nominees Limited 19.84%

FMR LLC and Fidelity International Limited and their direct subsidiaries 8.03%

Bank of America Corporation 7.60%

Bank of Ireland Asset Management 3.83%

Irish Life Investment Managers 3.01%

These shareholdings are not ultimately beneficially owned by them.

Principal risks and uncertainties

Under Irish company law, the Group and the Company are required to give a description of the principal

risks and uncertainties which they face.

Risk management is an integral part of the Group’s business process. A detailed risk register is maintained

by each division within the Group and plans to address the identified risks are updated and reviewed by

the executive directors on a regular basis. The consolidated risk register is also reviewed and approved by

the Audit Committee and is the subject of a report to the Board.

The risks and uncertainties, which are currently judged to have the largest impact on the Group’s performance

are noted below.

nThe Group faces strong competition in its various markets and if it fails to compete successfully, market share

and profitability may decline.

nDistribution of third party products by the Group is currently by agreement. There is no certainty that these

agreements will be renewed when they expire, which could lead to a decline in sales and profitability.

nChanges in government regulations, particularly in the healthcare and pharmaceutical sectors, may

adversely affect the Group.

nAs an international group with substantial operations and interests outside the euro zone, the Group is subject

to the risk of adverse movements in foreign currency exchange rates.

nThe Group requires access to capital to operate on a daily basis and for longer term development projects.

Lack of availability of sufficient capital resources may adversely affect the Group.

nThe Group is subject to stringent medical, quality, environmental and health and safety regulations and any

significant change in these could result in increased compliance costs which could adversely affect profitability.

nShould the Group not be able to fulfil the demand for its products due to circumstances such as the loss of a

packaging or storage facility or disruptions to its supply chains, sales volumes and profitability could be affected.

nGroup IT facilities could be subject to hacking or viruses, which could result in downtime, which in turn could

lead to a decline in sales and profitability.

nThe success of the Group is built upon a strong effective management team committed to achieving a

superior performance in each division. Should the Group not attract or retain suitably qualified employees,

this could have an impact on business performance.


The Group has a comprehensive system of risk management and internal controls as detailed under ‘Internal

controls’ in the Directors’ statement on corporate governance on page 39, which are intended to deal with

and mitigate such risks and uncertainties.

Financial risk management

As also required by Irish company law, the financial risk management objectives and policies of the Group and

the Company, including hedging and the exposure of the Group and the Company to financial risk, are set out

in the Finance review on pages 24 and 25 and in note 22 to the financial statements.

The principal key performance indicators used by the Group to measure performance are detailed in the

Finance review on pages 24 and 25.

Allotment of new shares and disapplication of pre-emption rights

At the Annual General Meeting held on 26 February 2008, the Company received the authority from shareholders

for the directors to allot relevant securities up to 33% of the nominal value of the Company’s issued share capital

and the power to disapply the statutory pre-emption provisions relating to the issue of new equity for cash. The

disapplication related to the allotment of equity securities in connection with the exercise of share options, any

rights issue, any open offer or other offer to shareholders, the allotment of shares in lieu of dividends and the

allotment of equity securities up to an aggregate value of 5% of the nominal value of the Company’s issued

share capital.

These authorities are due to expire at the Company’s forthcoming Annual General Meeting, consequently

resolutions to renew these authorities will be proposed at this meeting.

Purchase and re-issue of own shares

At the Annual General Meeting held on 26 February 2008, the Company received the authority from shareholders for

the Company and/or any subsidiary to purchase a maximum aggregate of 10% of the Company’s ordinary shares.

The minimum price which may be paid for shares purchased by the Company, or any of its subsidiaries, shall not

be less than the nominal value of the shares and the maximum price will be 105% of the average market price of

such shares over the preceding five business days.

The directors will only exercise the power to purchase shares if they consider it to be in the best interests of the

Company and its shareholders.

The authority was also received for the maximum and minimum prices at which treasury shares held by the

Company may be re-issued off-market, the maximum price being 120% of the appropriate average and the

minimum price usually 95% of the appropriate average.

These authorities are due to expire at the Company’s forthcoming Annual General Meeting, consequently

resolutions to renew these authorities will be proposed at this meeting.

Political donations

No political donations were made by the Group during the year, which require disclosure in accordance with

the Electoral Acts 1997 to 2002.

Subsidiaries

The Group’s significant subsidiary undertakings as at 30 September 2008 are detailed in note 40 to the financial

statements.

Directors’ report (continued)


Important events after the balance sheet date

Details of important events after the balance sheet date are detailed in note 25 to the financial statements.

Auditor

In accordance with Section 160(2) of the Companies Act 1963, the auditor, KPMG, Chartered Accountants, is

willing to continue in office and a resolution authorising the directors to fix their remuneration will be proposed

at the Annual General Meeting.

Change of control provisions in significant agreements

The Company has certain banking facilities which may require repayment in the event that a change in control

occurs with respect to the Company.

Additionally, the Company’s share option and equity settled incentive schemes contain change in control

provisions which allow potentially for the acceleration of the exercisability of share options and the vesting of

deferred shares in the event that a change in control occurs with respect to the Company.

Mr. L. FitzGerald may in certain circumstances be entitled to terminate his employment with the Company in the

event that a change in control occurs with respect to the Company. If Mr. L. FitzGerald’s contract is terminated

he may be entitled to receive payment equal to the basic salary and the annual bonus paid to him and pension

contribution in the year immediately preceding the termination in full and final discharge and satisfaction of all

and any claims arising in these circumstances.

Amendment of the Company’s Articles of Association

The Company’s Articles of Association may be amended by a special resolution passed by the shareholders at

an annual or extraordinary meeting of the Company. A special resolution is passed at a meeting if not less than

75% of the members who vote in person or by proxy at the meeting vote in favour of the resolution.

Annual General Meeting

The Annual General Meeting of the Company will be held on 17 February 2009. Your attention is drawn to the letter

to shareholders and the notice of meeting enclosed with this report and available on the Company’s website,

which sets out the details of the matters which will be considered at the forthcoming Annual General Meeting

and the requirement that proxies be delivered no later than 48 hours before the time appointed for the meeting.

On behalf of the Board

R. Kells L. FitzGerald

Director Director

19 December 2008


The directors are committed to maintaining the highest standards of corporate governance. This statement

details how the Group applies the relevant principles and provisions of Section 1 of the Combined Code on

Corporate Governance, June 2006 (‘the Code’) published by the Financial Reporting Council in the UK. The

Board welcomes the publication of the updated version of the Combined Code on Corporate Governance

(June 2008). Compliance with this updated version is not required during the financial year ended 30 September

2008, however, the Board has considered its implications for the Group and is satisfied that it complies with the

main principles.

Board of directors

Role

The Board is responsible for the leadership of the Group, takes all significant strategic decisions and retains

full and effective control while allowing operating management sufficient flexibility to run the business efficiently

and effectively within a centralised reporting framework.

The Board has reserved certain items for its review including, inter alia, the approval of the annual financial

statements, budgets, corporate plans, significant acquisitions and disposals, investments in joint ventures,

significant property transactions, major investments and senior management appointments. The Group has

a comprehensive process for reporting management information to the Board. The Board is provided with

information on a timely basis, which includes key performance and risk indicators for all aspects of the business.

The Board also delegates some of its responsibilities to Board Committees, details of which are set out below.

The roles of Chairman and Chief Executive are separate with a clear division of responsibility between them. The

Chairman has overall responsibility for ensuring the effective and efficient working of the Board and is responsible

for ensuring that the Board considers the key strategic risks facing the Group and that the directors receive

timely and accurate information. The Chairman also ensures appropriate interaction with shareholders. The

Chief Executive is responsible for developing and delivering the Group’s strategic plan and is accountable

for its overall performance and day-to-day management.

The Group’s professional advisers are available for consultation by the Board as required. Individual directors

may take independent professional advice, if necessary, at the Group’s expense.

Membership

The Board is comprised of five executive and six non-executive directors. Mr. P. Toomey and Mr. A. Ralph were

appointed to the Board on 27 February 2008 and 19 June 2008 respectively. On 20 November 2007, Dr. D. Egan

retired as a non-executive director. Biographical details are set out on pages 6 and 7.

All of the directors bring objective judgement to bear on issues of strategy, performance, resources, key

appointments and standards. The Board considers that between them, the directors bring a range of skills,

knowledge and experience necessary to lead the Group.

Independence of non-executive directors

The Board has evaluated the independence of each of its non-executive directors and has determined that,

throughout the reporting period, all were independent. In arriving at this conclusion, the Board considered many

factors including, inter alia, whether any of the non-executive directors:

nhas been an employee of the Group;

nhas, or had within the last three years, a material business relationship with the Group;

nreceives remuneration from the Group other than a director’s fee;

Directors’ statement on corporate governance


nhas close family ties with any of the Group’s advisers, directors or senior employees;

nholds cross-directorships or has significant links with other directors through involvement in other companies

or bodies;

nrepresents a significant shareholder; or

nhas served on the Board for more than nine years from the date of their first election.

Senior Independent non-executive director

Dr. D. Egan retired and Mr. G. McGann was appointed as the Senior Independent non-executive director on

20 November 2007. Mr. G. McGann is available to shareholders who have concerns, for which contact through

the normal channels of Chairman, Chief Executive or Finance Director, have failed to resolve or for which such

contact is inappropriate. Mr. G. McGann is also available to meet major shareholders on request.

Company Secretary

The appointment and removal of the Company Secretary is a matter for the Board. All directors have access

to the advice and services of the Company Secretary who is responsible for ensuring that Board procedures

are followed and that applicable rules and regulations are complied with.

Terms of appointment

The non-executive directors are engaged under the terms of a letter of appointment. A copy of the standard

letter of appointment is available from the Company Secretary on request. It is board policy that non-executive

directors are normally appointed for a period of three years. Notice periods of executive directors do not exceed

a period of greater than one year.

Induction and development

On appointment, directors are provided with briefing documents on the Group and its operations as well

as training where relevant. Visits to group businesses and briefings with senior management are arranged

as appropriate and ongoing briefings are also provided.

Performance evaluation

The Board conducts an annual review of its own performance and that of its committees and of each individual

director. During the year this review was primarily achieved through discussions held by the Chairman with

directors on both an individual and group basis and a detailed questionnaire was also completed by each

director. In addition, the Chairman also independently met with the non-executive directors. The Chairman

summarised the results of the evaluation processes and reported them to the Board for its consideration, the

results of which were satisfactory. The Senior Independent non-executive director also met with the other non-

executive directors, without the Chairman present, to review the performance of the Chairman.

Remuneration

Details of directors’ remuneration are set out in the Report of the Remuneration Committee on directors’


Retirement and re-election

The Group’s Articles of Association provide that one third of directors must retire by rotation each year and

that each director must submit themselves for re-election at the Annual General Meeting at least every three

years. Directors appointed by the Board must submit themselves for election at the first Annual General Meeting

following their appointment. All directors over the age of seventy must submit themselves for re-election at the

Annual General Meeting on an annual basis.


Share ownership and dealing

Details of directors’ shareholdings are set out in the Report of the Remuneration Committee on directors’


The Group has a policy on dealing in shares that applies to all directors and senior management. This policy

adopts the terms of the Model Code as set out in the Listing Rules published by the UK Listing Authority and

the Irish Stock Exchange.

Meetings

The Board routinely meets at least six times a year and additionally as required as a result of time critical business

needs. Details of directors’ attendance at these meetings are set out in the table on page 40.

The Chairman sets the agenda for each meeting in consultation with the Chief Executive and the Company

Secretary. The agenda and board papers are circulated prior to each meeting to provide the directors with

relevant information and enable them to fully consider the agenda items in advance of the meeting.

Communication with shareholders

The Group recognises the importance of shareholder communications and has an established investor relations

programme in place to provide information to shareholders. There is regular dialogue between the executive

directors and institutional shareholders as well as general presentations at the time of the release of the annual

and interim results. The Board is subsequently briefed on the views and concerns of institutional shareholders. The

Annual General Meeting is normally attended by all directors. Shareholders are invited to ask questions during

the meeting and the directors are available to meet with them after the formal proceedings have ended.

Results announcements are sent out promptly to all shareholders. Trading statements are issued in April and

October after the closing of each reporting period end and Interim Management Statements are also issued in

accordance with requirements under the EU Directive 2004/109/EC (‘the Transparency Directive’). Acquisitions

are notified to the market and the Group’s website presents information about the Group including interim and

annual results and other announcements. The directors believe that the annual report and financial statements

and other shareholder communications provide a balanced and understandable assessment of the Group’s

position and prospects. The annual report and notice of Annual General Meeting are sent to shareholders at

least 21 working days before the meeting. At the meeting, after each resolution has been dealt with, details

are given of the level of proxy votes lodged and the number of votes for, against and withheld regarding that

resolution. This information is made available on the Company’s website following the meeting.

Board committees

The Board has established four committees to focus on specific aspects of its responsibilities. The committees

are the Audit Committee, Remuneration Committee, Nomination Committee and Acquisitions and Finance

Committee. Each committee has specific terms of reference under which authority is delegated to it by the

Board. The terms of reference are available on the Group’s website. The membership of each committee is set

out in this report. Details of attendance at meetings are set out in the table on page 40. The Chairmen of each

committee report to the Board. The chairmen of these committees attend the Annual General Meeting and are

available to answer questions from shareholders.

Audit Committee

During the year, the Audit Committee comprised of Mr. K. McGowan (Chairman) Mr. P. Gray, Dr. J. Peter and

Mr. P. Toomey, all of whom are non-executive directors. Mr. P. Toomey was appointed to the Committee on 27

February 2008. On 27 August 2008, Mr. K. McGowan retired from the Committee and Mr. P. Gray was appointed

Chairman.

Directors’ statement on corporate governance (continued)


The Chief Executive, Mr. L. FitzGerald and the Finance Director, Mr. B. McGrane, are not members of the

Committee but may be invited to attend its meetings. The Head of Internal Audit and the external auditor also

attend meetings and have direct access to the Chairman and the Committee for independent discussions.

The Committee meets a minimum of three times a year. During the year under review, the Committee met eight

times. Attendance at meetings is set out on page 40.

The Committee has determined that Mr. P. Gray is the Committee’s financial expert.

The Committee’s responsibilities include:

nreviewing the interim and annual financial statements and company announcements;

nmonitoring and reviewing the external auditor’s independence, objectivity and effectiveness;

nmaking recommendations to the Board on the appointment and removal of the external auditor and

approving their remuneration and terms of engagement;

nmonitoring and reviewing the effectiveness of the Group’s internal audit function;

nreviewing the effectiveness of the Group’s internal controls and risk management systems; and

nensuring compliance with the Group’s policy on the provision of non-audit services by the external auditor.

The Committee discharged its obligations during the year by:

nreviewing the Group’s preliminary announcement of results, annual report, interim management statements,

trading statements and interim results prior to Board approval;

nreviewing the external audit plan as presented by the external auditor in advance of the audit, which

included an assessment of the scope of the work to be performed;

nreviewing a post-audit report from the external auditor including confirmation of their independence;

nreviewing the internal audit work plan and all reports prepared by internal audit; and

nreviewing the results of the Group’s risk identification and assessment process.

The Committee regularly monitors the nature, extent and scope of the non-audit services provided to the Group

by the external auditor in order to ensure that this does not impair their independence and objectivity. It is

current Committee policy that where it is deemed to be in the best interests of the Group, alternative professional

advisers, beyond the incumbent external auditor, are engaged to provide non-audit services. Four key principles

underpin the provision of non-audit services by the external auditor, namely that the auditor shall not:

naudit its own firm’s work;

nmake management decisions for the Group;

nhave a mutuality of financial interest with the Group; or

nbe put in the role of advocate for the Group.

The Committee also reviewed the Group’s practices in respect of the hiring of former employees of the external

auditor and is advised in advance of any such appointments which might be proposed.

Details of amounts paid to the external auditor during the year are set out in note 3 to the financial statements.


Remuneration Committee

The Remuneration Committee consists solely of non-executive directors and during the year ended 30 September

2008, comprised of Mr. G. McGann (Chairman), Dr. D. Egan, Mr. R. Kells, Mr. K. McGowan, Dr. J. Peter and Mr.

P. Toomey. On 20 November 2007, Dr. D. Egan retired from the Committee and Mr. G. McGann was appointed

Chairman. Mr. P. Toomey was appointed to the Committee on 27 February 2008. Mr. K. McGowan retired from

the Committee on 27 August 2008.

The Chief Executive, Mr. L. FitzGerald, is not a member of this committee but may be invited to attend meetings,

except those where his own remuneration is discussed. The Committee meets at least once a year and

attendance at meetings is set out on page 40.


ndetermining the Group’s policy on executive remuneration;

ndetermining the remuneration of the executive directors;

nmonitoring the level and structure of the remuneration for senior management; and

nreviewing and approving the design of performance related pay schemes and share incentive plans and

approving awards under such schemes.

During the period under review, the Committee determined the salaries and awards under incentive plans for

the executive directors and senior management. The Committee also approved the award of share options to

executive directors and key management under the Executive Share Option Plan. The Committee also oversees

the preparation of the Report of the Remuneration Committee as set out on pages 41 to 47.

The Committee is empowered to use the services of external independent consultants to advise on all

compensation and remuneration matters as required.

Nomination Committee

During the year ended 30 September 2008, the Nomination Committee comprised Mr. R. Kells (Chairman),

Dr. D. Egan, Mr. L. FitzGerald, Mr. P. Gray, Mr. K. McGowan, Mr. G. McGann and Mr. P. Toomey. On 20 November

2007, Dr. D. Egan retired from the Committee. Mr. K. McGowan retired and Mr. P. Toomey was appointed to the

Committee on 27 August 2008.


nreviewing the structure, size and composition, including the skills, knowledge and experience required by the

Board and making recommendations regarding any changes in order to ensure that the composition of the

Board and committees is appropriate for the Group’s requirements;

nestablishing processes for the identification of suitable candidates for appointment to the Board; and

noverseeing succession planning for the Board and senior management.

During the year, the Committee recommended to the Board, two suitable candidates for appointment as a non-

executive director and an executive director. The Committee is empowered to use the services of independent

consultants to facilitate the search for suitable candidates however such services were not required as the

Committee engaged in a formal and rigorous process to consider the requirements of each position and identify

suitable candidates.

The Nomination Committee meets at least once a year and additionally as required. Details of attendance at

meetings held during the year are set out on page 40.



Acquisitions and Finance Committee

The Acquisitions and Finance Committee advises the Board on matters relating to acquisitions and finance and

during the year ended 30 September 2008, comprised of Mr. R. Kells (Chairman), Mr. L. FitzGerald, Ms. A. Flynn,

Mr. P. Gray, Mr. G. McGann, Mr. K. McGowan and Mr. B. McGrane. Mr. K. McGowan was appointed to the

Committee on 27 August 2008. The Committee meets during the year as required. Details of attendance

at meetings held during the year are set out on page 40.

Corporate social responsibility

The Group’s corporate social responsibility policies and activities are summarised on pages 26 and 27.

Internal controls

The directors have overall responsibility for the system of internal control for the Company and its subsidiaries and

for reviewing the effectiveness of these controls. The directors have delegated the implementation of this system

to executive management. The system of internal control is designed to manage, rather than eliminate, the risk

of failure to achieve business objectives. In pursuing these objectives, internal controls can provide reasonable

but not absolute assurance against material misstatement or loss.

There is a continuous process for identifying, evaluating and managing the significant risks faced by the Group

which has been in place during the year under review and up to the date on which the financial statements

were signed. The Group’s management operates a risk management process, which identifies the key risks

facing the business, and reports to the Audit Committee on how these risks are being managed. This is based

on each business unit producing a risk register, which identifies its key risks, the probability of those risks occurring,

their impact if they do occur and actions being taken to manage those risks to the desired level. This information

is compiled by executive management, who meet twice annually to discuss these risks, and other risks faced

at group level, and this process culminates in the production of the Group’s risk register. On an ongoing basis,

management ensures that steps are taken to further embed internal control and risk management into the

operations of the Group and to identify any areas for improvement.

The Audit Committee satisfies itself as to the adequacy of the Group’s internal control systems including, inter

alia, accounting controls, computer system security and the internal audit function. The Chairman of the Audit

Committee reports to the Board on significant matters considered by the Committee.

The Group’s system of internal control provides reasonable, though not absolute, assurance that assets are

safeguarded, transactions authorised and recorded properly and that material errors or irregularities are either

prevented or detected within a timely period.

Key procedures that have been established and are designed to provide effective internal financial control include:

nan organisational structure with clearly defined lines of responsibility and delegation of authority;

nthe approval by the Board of comprehensive annual budgets, and the monthly monitoring of performance

against these budgets;

nthe approval by the Board for all major capital projects;

nthe existence of an independent internal audit function, which reviews key business processes and controls; and

nan Audit Committee, which approves audit plans and deals with significant control issues raised by internal or

external auditors.

The directors confirm 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 signed. In particular, they have considered the significant risks affecting the

business and the way in which these risks are managed, controlled and monitored.


Compliance statement

During the period under review, the Board has taken the necessary steps to ensure compliance with the

provisions set out in Section 1 of the Code.

Going concern

The directors have made enquiries and are satisfied that the Group has adequate resources to continue in

operational existence for the foreseeable future and accordingly, consider it appropriate to adopt the going

concern basis in preparing the financial statements.

Attendance at board and committee meetings

Attendance at board and committee meetings during year ended 30 September 2008 is set out below:

BoardAudit

CommitteeRemuneration

CommitteeNomination Committee

Acquisition and Finance Committee

A B A B A B A B A B

R. Kells 8 8 - - 4 4 3 3 6 6

L. FitzGerald 8 7 8 8* - - 3 3 6 5

C. Corbin 8 8 - - - - - - - -

D. Egan (i) 2 2 - - 1 1 1 1 - -

A. Flynn 8 8 - - - - - - 6 6

P. Gray 8 8 8 6 - - 3 3 6 6

G. McGann 8 7 - - 4 4 3 3 6 3

K. McGowan (ii) 8 8 8 8 4 4 3 3 0 0

B. McGrane 8 8 8 8* - - - - 6 6

J. Peter 8 7 8 8 4 4 - - - -

A. Ralph (iii) 2 2 - - - - - - - -

P. Toomey (iv) 4 4 4 4 1 1 0 0 - -

Column A details the number of meetings held during the period the director was a member of the Board and

committee.

Column B details the number of meetings attended during the period the director was a member of the Board

and committee.

* in attendance only.

(i) Dr. D. Egan retired from the Board, Remuneration Committee and Nomination Committee on 20 November

2007.

(ii) Mr. K. McGowan retired from the Audit Committee, Remuneration Committee and Nomination Committee

and was appointed to the Acquisitions and Finance Committee on 27 August 2008.

(iii) Mr. A. Ralph was appointed to the Board on 19 June 2008.

(iv) Mr. P. Toomey was appointed to the Board, Audit Committee and Remuneration Committee on 27 February

2008 and to the Nomination Committee on 27 August 2008.



The Remuneration Committee

The Remuneration Committee consists solely of non-executive directors, details of membership are outlined in the

Directors’ statement on corporate governance. The Terms of Reference for the Committee include determining

the Group’s policy on executive remuneration and considering and approving salaries and other terms of the

remuneration packages for executive directors. The Committee receives advice from external independent

consultants when necessary and the Chief Executive may be invited to attend meetings except when his own

remuneration is being discussed.

Remuneration policy

The Remuneration Committee aims to ensure that remuneration packages are competitive and that they will attract

and retain directors of the quality required and motivate them to perform in the best interests of shareholders.

Remuneration packages for executive directors generally consist of basic salary and benefits, annual performance

related bonus, comprised of a cash and share award element, pension and participation in the executive share

option scheme. The Chief Executive also has a Long Term Incentive Plan (LTIP), which was approved by shareholders.

The Group grants share options, under approved executive share option schemes, to senior executives across

the Group to encourage identification with shareholders’ interests. The Group also operates an Employee Share

Participation Scheme. In total, there are in excess of 450 employees who are shareholders in the Group through

the Employee Share Participation Scheme.

Executive directors’ remuneration

Basic salary and benefits

The basic salaries of executive directors are reviewed annually having regard to personal performance, divisional

and/or Group performance, step changes in responsibilities and competitive market practice in their area of

operation. Employment-related benefits principally relate to the use of company cars and medical insurance. No

fees are payable to executive directors.

Annual performance related bonus

Cash incentive plan

Under the performance related cash incentive plan, a bonus up to a maximum of 60% of basic salary may be

achieved for meeting clearly defined annual performance targets. The primary performance targets, each with

a maximum potential award of between 20% and 30% of basic salary, relate to the following categories:

1 Individual performance. Strategic priorities and action plans are agreed at the start of the year.

2 Divisional profitability and cost performance. Challenging targets are set each year.

3 Group profitability and cost performance. Challenging targets are set each year.

Share incentive scheme

A performance related share incentive scheme was introduced during the financial year ended 30 September 2007

for senior executives and executive directors, excluding the Chief Executive who has a LTIP. The scheme is designed

to retain these individuals and also to align their interests with those of the Group’s shareholders. Under the terms

of the scheme, the Committee can, on a contingent basis award shares with a value of up to a maximum of 20%

of basic salary where superior annually set financial targets are achieved. Shares awarded and allocated to senior

employees under the scheme are subject to restrictions, primarily the risk of forfeiture of the shares awarded, should

the employee leave the Group within three years. The cost of this scheme is recognised over the vesting period.

Report of the Remuneration Committee on directors’ remuneration


Long Term Incentive Plan

The Chief Executive has a LTIP incorporating targets for the three-year duration relating to the financial years 2007

to 2009 inclusive. Challenging performance targets have to be achieved in respect of total shareholder return

by comparison with a peer group, growth in earnings per share and the strategic development of the Group.

The total maximum annual earnings potential is 40% of basic salary, which may be received as a deferred cash

payment or in the form of a conditional award of shares in the Company. The cost of this plan is recognised over

the duration of the LTIP. There is no commitment to any payment until the end of the plan.

Pensions

Pensions for executive directors are calculated on basic salary, which excludes employment-related benefits

and incentives.

Executive share option plan

Share options are granted to senior executives across the Group, under approved executive share option

schemes, to encourage identification with shareholders’ interests. Options are granted solely at the discretion of

the Remuneration Committee. Options will not normally be exercisable until three years after the date of grant

for Basic Tier share options and five years after the date of grant for Second Tier share options and are subject

to meeting specific performance targets. The cost of these awards is recognised over the vesting period to the

extent that it is expected that the awards will vest.

Non-executive directors’ remuneration

The Remuneration Committee makes recommendations in respect of the remuneration of non-executive

directors, which is decided by the Board. The fees paid to non-executive directors are set at a level which

will attract individuals with the necessary experience and ability to make a substantial contribution to the

Group’s affairs and reflect the time and commitments of their board duties. The non-executive directors

do not participate in the Company’s performance-related incentive plans or share schemes.

Directors’ remuneration

Executive directors 2008

Basicsalary€’000

Benefitsin kind

€’000

Cashperformance

bonus€’000

Pension contribution

€’000

Shareoption

expense€’000

Total2008€’000

L. FitzGerald (i) 600 35 180 133 108 1,056

C. Corbin* 360 37 87 189 61 734

A. Flynn 208 23 65 45 55 396

B. McGrane 320 21 80 69 63 553

A. Ralph** 79 5 24 15 17 140

1,567 121 436 451 304 2,879

* The pension contribution on behalf of Mr. C. Corbin is to a defined contribution pension scheme.

** From the date of Mr. A. Ralph’s appointment as a director, 19 June 2008.

(i) LTIP: Mr. L. FitzGerald earned €240,000 in respect of his LTIP. This amount will not be realised until 1 October

2009, with forfeiture in the event of departure from the Group in certain circumstances during this timeframe.

Report of the Remuneration Committee on directors’ remuneration (continued)


Executive directors 2007

Basicsalary€’000

Benefitsin kind€’000

Cashperformance

bonus€’000

Pensioncontribution

€’000

Share option

expense€’000

2007Total

€’000

L. FitzGerald (i) 552 28 300 183 82 1,145

C. Corbin* (ii) 387 2 187 178 53 807

A. Flynn (ii) 185 18 93 63 46 405

B. McGrane (ii) 298 17 157 97 57 626

1,422 65 737 521 238 2,983

* The pension contribution on behalf of Mr. C. Corbin is to a defined contribution pension scheme.

(i) LTIP: Mr. L. FitzGerald earned €240,000 in respect of his LTIP, which will be settled in United Drug shares. This

award will not be realised until 1 October 2009, with forfeiture in the event of departure from the Group in

certain circumstances during this timeframe.

(ii) Share incentive scheme: Mr. C. Corbin, Ms A. Flynn and Mr. B. McGrane earned €76,000, €37,000 and €64,000

respectively under the share incentive scheme, which will be settled in United Drug shares. This award

will be deferred for three years, with forfeiture in the event of departure from from the Group in certain

circumstances during this timeframe.

Non-executive directors 2008

Basicfees

€’000

Otherfees

€’000

Total2008€’000

R. Kells 50 115 165

D. Egan (i) 8 3 11

P. Gray 50 11 61

G. McGann 50 19 69

K. McGowan 50 19 69

J. Peter 50 10 60

P. Toomey (ii) 29 6 35

287 183 470

Non-executive directors 2007

Basicfees

€’000

Otherfees

€’000

Total2007

€’000

R. Kells 45 105 150

D. Egan 45 20 65

P. Gray 45 10 55

G. McGann 45 10 55

K. McGowan 45 15 60

J. Peter 45 10 55

270 170 440

(i) Dr. D. Egan retired from the Board on 20 November 2007.

(ii) Mr. P. Toomey was appointed to the Board on 27 February 2008.


Other fees for non-executive directors include remuneration for Chairman and board committee work.

During 2008, the Chief Executive, Mr. L. FitzGerald acted as a non-executive director of C&C Group plc. During

the year ended 29 February 2008 he retained fees of €65,000 in respect of this appointment.

Directors’ pension benefits

The pension benefits attributable to existing executive directors under the defined benefit pension scheme are

as follows:

Increase in accrued pension during the year

(excluding inflation)2008€’000

Transfer valueof increase

2008€’000

Accumulated accrued pension

at year end2008€’000

L. FitzGerald 28 291 158

B. McGrane 12 139 89

A. Flynn 8 77 45

A. Ralph 1* 7 17

49 514 309

* Represents increase in accrued pension between date of appointment as an executive director, 19 June 2008

and 30 September 2008.

Increase in accrued pension during the year

(excluding inflation)2007

€’000

Transfer valueof increase

2007€’000

Accumulated accrued pension

at year end2007

€’000

L. FitzGerald 24 242 125

B. McGrane 11 127 74

A. Flynn 7 67 35

42 436 234

Accrued pension shown is that which would be paid annually on normal retirement date.

Share incentive scheme

Restricted shares

No. of shares at30 September 2007

‘000

Awards of restricted shares during 2008

‘000


‘000

ReleaseDate

C. CorbinA. FlynnB. McGraneA. Ralph

----

19,5089,487

16,41011,026

19,5089,487

16,41011,026

13 March 201113 March 201113 March 201113 March 2011

- 56,431 56,431

The shares awarded during 2008 relate to entitlements earned in respect of the financial year ended 30 September

2007. These shares were purchased on 13 March 2008 at €3.90 per ordinary share and will be held in trust during

the vesting period.

No awards were granted under the share incentive scheme relating to the financial year ended 30 September 2008.



Long term incentive plan

Deferred shares


‘000

Awards of deferred shares during 2008

‘000


‘000

ReleaseDate

L. FitzGerald - 61,538 61,538 13 March 2011

- 61,538 61,538

The shares awarded during 2008 relate to an entitlement earned in respect of the financial year ended 30 September

2007. These shares were purchased on 13 March 2008 at €3.90 per ordinary share and will be held in trust during

the vesting period.

Executive share option schemes

A summary of share options outstanding to directors and the secretary under the provisions of the United Drug

plc executive share option schemes is as follows. An explanation of the various tiers of options available to the

executive directors is set out in note 21.

Options exercised during year

30September

2007 (or date of

appointment if later)

Grantedin year

Exercisedin year

30September

2008

Weightedaverage

option priceat 30

September2008

€

Weightedaverageexercise

price€

Weightedaverage

marketprice atdate of

exercise€

Basic tier share options

L. FitzGerald 698,000 100,000 - 798,000 2.75 - -

C. Corbin 463,500 45,000 - 508,500 2.42 - -

A. Flynn 170,000 45,000 - 215,000 3.49 - -

B. McGrane 603,500 50,000 (70,000) 583,500 2.40 1.01 3.56

A. Ralph 246,000 55,000 - 301,000 3.22 - -

K. Geoghegan (secretary) 20,000 35,000 - 55,000 3.93 - -

2,201,000 330,000 (70,000) 2,461,000

Second tier share options

L. FitzGerald 465,000 80,000 - 545,000 2.84 - -

C. Corbin 187,500 40,000 - 227,500 3.18 - -

A. Flynn 170,000 40,000 - 210,000 3.29 - -

B. McGrane 175,000 40,000 - 215,000 3.28 - -

A. Ralph 152,500 45,000 - 197,500 3.44 - -

K. Geoghegan (secretary) 5,000 5,000 - 10,000 3.95 - -

1,155,000 250,000 - 1,405,000


Executive share option exercise dates

Currently exercisable Within 1 year

Between 1-2 years

Between 2-5 years

Basic tier share options

L. FitzGerald 63% 11% 13% 13%

C. Corbin 73% 9% 9% 9%

A. Flynn 37% 21% 21% 21%

B. McGrane 76% 8% 8% 8%

A. Ralph 52% 15% 15% 18%

K. Geoghegan (secretary) - - 36% 64%

Second tier share options

L. FitzGerald 45% 5% 5% 45%

C. Corbin 23% 11% 13% 53%

A. Flynn 17% 12% 14% 57%

B. McGrane 16% 12% 12% 60%

A. Ralph 9% 13% 13% 65%

K. Geoghegan (secretary) - - - 100%

These options are exercisable for a period of either:

nseven years from the third anniversary of the date on which the options were granted (Basic Tier options), or

nfive years from the fifth anniversary of the date on which the options were granted (Second Tier options).

None of the options expire prior to 10 June 2009.

At 30 September 2008 certain other key management had options to subscribe for a maximum of 8,192,769

(2007: 8,056,181) ordinary shares in accordance with the terms of the United Drug plc executive share option

schemes. The share-based payment expense recognised in the Group income statement in respect of these

options totalled €951,000 (2007: €888,000).

The Group operates two share option schemes. The first scheme covers options granted up to and including

13 February 2002. Under this scheme:

nBasic Tier options are exercisable only when earnings per share (EPS) growth exceeds the growth of the Irish

Consumer Price Index over a period of at least three years subsequent to the granting of the options.

nSecond Tier options are exercisable only when EPS growth is within the top quartile of EPS growth for the

companies quoted on the ISEQ index over a period of at least five years subsequent to the granting of

the options.

With respect to the second scheme, which covers options granted after 13 February 2002:

nBasic Tier options are exercisable only when EPS growth exceeds the growth of the Irish Consumer Price Index

by 5% compounded over a period of at least three years subsequent to the granting of the options.



nSecond Tier options are exercisable only when EPS growth exceeds the growth of the Irish Consumer Price

Index by 10% compounded, over a period of at least five years subsequent to the granting of the options. In

addition to this requirement, second tier options may only be exercised if EPS growth over the same period

places the Company:

(1) In the top 25% of companies listed on the ISEQ index, in which case these options may be exercised in their

entirety;

(2) In the midpoint position of companies listed on the ISEQ index, in which case half of the options may be exercised;

(3) Between the midpoint and the top 25% of companies listed on the ISEQ index, in which case the proportion

of the options which may be exercised increases on a straight line basis;

(4) Below the midpoint position of companies listed on the ISEQ index, in which case no options may be exercised.

Details of all share options outstanding to directors and the secretary will be available for inspection at the

forthcoming Annual General Meeting.

Directors’ interests in share capital

The beneficial interests, including family interests, of the directors and secretary in office at 30 September 2008 in

the ordinary share capital of the Company were as follows:

30 September 2008Ordinary shares

1 October 2007(or date of

appointment if later)Ordinary shares

R. Kells 144,123 144,123

L. FitzGerald 673,619 673,619

C. Corbin 1,862,681 1,810,160

A. Flynn 169,553 166,211

P. Gray 8,000 8,000

G. McGann 8,000 8,000

K. McGowan 48,558 48,007

B. McGrane 477,576 397,050

J. Peter 5,000 -

A. Ralph 78,689 78,689

P. Toomey 77,924 76,690

K. Geoghegan 10,469 6,215

The directors and secretary have no beneficial interests in any Group subsidiary or joint venture undertakings.

There have been no changes in the interests of the directors, the secretary and their families in the share capital

of the Company or group companies between 30 September 2008 and 19 December 2008.

On behalf of the Remuneration Committee

G. McGann R. Kells

Director Director

19 December 2008


Statement of directors’ responsibilitiesin respect of the Annual Report and the financial statements

The directors are responsible for preparing the Annual Report and the Group and Company financial statements,

in accordance with applicable law and regulations.

Company law requires the directors to prepare Group and Company financial statements for each financial

year. Under that law the directors are required to prepare the Group financial statements in accordance with

International Financial Reporting Standards (IFRSs) as adopted by the EU and have elected to prepare the

Company financial statements in accordance with IFRSs as adopted by the EU and as applied in accordance

with the provisions of the Companies Acts, 1963 to 2006.

The financial statements are required by law and IFRSs as adopted by the EU to present fairly the financial position

and performance of the Group and the Company; the Companies Acts, 1963 to 2006 provide in relation to such

financial statements that references in the relevant part of these Acts to financial statements giving a true and

fair view are references to their achieving a fair presentation.

In preparing each of the Group and Company financial statements, the directors are required to:

nselect suitable accounting policies and then apply them consistently;

nmake judgements and estimates that are reasonable and prudent; and

nprepare the financial statements on the going concern basis unless it is inappropriate to presume that the

Group and the Company will continue in business.

The directors are responsible for keeping proper books of account that disclose with reasonable accuracy at

any time the financial position of the Company and enable them to ensure that its financial statements comply

with the Companies Acts, 1963 to 2006. They are also responsible for taking such steps as are reasonably open

to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.

Under Irish Company law and the requirements of the Listing Rules issued by the Irish Stock Exchange, the directors

are also responsible for preparing a Directors’ Report and reports relating to directors’ remuneration and corporate

governance that comply with that law and those rules.

The directors are responsible for the maintenance and integrity of the corporate and financial information

included on the Group and the Company’s website. Legislation in the Republic of Ireland governing the

preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

The directors confirm, to the best of their knowledge and belief, that

nthe Group financial statements, prepared in accordance with IFRSs as adopted by the EU, give a true and

fair view of the state of the Group’s affairs as at 30 September 2008 and of its profit for the year then ended;

and

nthe Directors’ Report includes a fair review of the development and performance of the business and the

financial position of the Group, together with a description of the principal risks and uncertainties that it faces.



Director Director


We have audited the Group and Company financial statements (the ‘financial statements’) of United Drug plc

for the year ended 30 September 2008 which comprise the Group income statement, the Group and Company

statements of recognised income and expense, the Group and Company balance sheets, the Group and

Company cash flow statements and the related notes. These financial statements have been prepared under

the accounting policies set out therein.

This report is made solely to the Company’s members, as a body, in accordance with section 193 of the

Companies Act, 1990. Our audit work has been undertaken so that we might state to the Company’s members

those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest

extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and

the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditor

The directors’ responsibilities for preparing the Annual Report and the financial statements in accordance with

applicable law and International Financial Reporting Standards (IFRSs) as adopted by the EU are set out in the

statement of directors’ responsibilities on page 48.

Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory

requirements and International Standards on Auditing (UK and Ireland).

We report to you our opinion as to whether the financial statements give a true and fair view in accordance with

IFRSs as adopted by the EU and, in the case of the Company, as applied in accordance with the provisions of

the Companies Acts, 1963 to 2006, and have been properly prepared in accordance with the Companies Acts,

1963 to 2006 and Article 4 of the IAS Regulation. We also report to you our opinion as to; whether proper books of

account have been kept by the Company; whether at the balance sheet date, there exists a financial situation

requiring the convening of an extraordinary general meeting of the Company under Section 40(1) of the

Companies (Amendment) Act, 1983; and whether the information given in the Directors’ Report is consistent with

the financial statements. In addition, we state whether we have obtained all the information and explanations

necessary for the purposes of our audit, and whether the Company balance sheet is in agreement with the

books of account.

We also report to you if, in our opinion, any information specified by law or the Listing Rules of the Irish Stock

Exchange regarding directors’ remuneration and transactions is not disclosed and, where practicable, include

such information in our report.

We review whether the Directors’ statement on corporate governance, including the Report of the Remuneration

Committee on directors’ remuneration, reflects the Company’s compliance with the nine provisions of the 2006

FRC Combined Code specified for our review by the Listing Rules of the Irish Stock Exchange, and we report if it

does not. We are not required to consider whether the Board’s statements on internal control cover all risks and

controls, or form an opinion on the effectiveness of the Group’s corporate governance procedures or its risk and

control procedures.

We read the other information contained in the Annual Report and consider whether it is consistent with

the audited financial statements. The other information comprises only the Directors’ report, the Chairman’s

statement, the Chief Executive’s review, the Operating review, the Finance review, the Corporate social

responsibility statement, the Directors’ statement on corporate governance and the Report of the Remuneration

Committee on directors’ remuneration. We consider the implications for our report if we become aware of any

apparent misstatements or material inconsistencies with the financial statements. Our responsibilities do not

extend to any other information.

Independent auditor’s report to the members of United Drug plc


Basis of audit opinion

We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the

Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and

disclosures in the financial statements. It also includes an assessment of the significant estimates and judgements

made by the directors in the preparation of the financial statements, and of whether the accounting policies are

appropriate to the Group’s and Company’s circumstances, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we considered

necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements

are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion,

we also evaluated the overall adequacy of the presentation of information in the financial statements.

Opinion

In our opinion:

nthe Group financial statements give a true and fair view, in accordance with IFRSs as adopted by the EU,

of the state of the Group’s affairs as at 30 September 2008 and of its profit for the year then ended;

nthe Company financial statements give a true and fair view, in accordance with IFRSs as adopted by the EU

and as applied in accordance with the provisions of the Companies Acts, 1963 to 2006, of the state of the

Company’s affairs as at 30 September 2008; and

nthe financial statements have been properly prepared in accordance with the Companies Acts, 1963 to 2006

and Article 4 of the IAS Regulation.

We have obtained all the information and explanations which we considered necessary for the purposes of our

audit. In our opinion proper books of account have been kept by the Company. The Company balance sheet

is in agreement with the books of account.

In our opinion, the information given in the directors’ report is consistent with the financial statements.

The net assets of the Company, as stated in the Company balance sheet on page 103, 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

2008 a financial situation which under Section 40 (1) of the Companies (Amendment) Act, 1983 would require

the convening of an extraordinary general meeting of the Company.

Chartered Accountants

Registered Auditor

Dublin, Ireland

19 December 2008

Independent auditor’s report to the members of United Drug plc (continued)


Group income statementfor the year ended 30 September 2008

Notes 2008€’000

2007€’000

Revenue 1 1,683,712 1,583,622

Cost of sales (1,423,978) (1,352,186)

Gross profit 259,734 231,436

Distribution expenses (178,185) (161,617)

Administrative expenses (6,741) (6,372)

Other operating expenses 10 (11,977) (6,554)

Share of joint ventures’ profit after tax 11 3,389 3,145

Operating profit 3 66,220 60,038

Finance income 4 3,121 9,477

Finance expense 4 (10,790) (13,742)

Profit before tax 58,551 55,773

Income tax expense 5 (8,346) (8,443)

Profit for the financial year attributable to equity holders of the Company 50,205 47,330

Earnings per share

Basic 7 21.81c 20.96c

Diluted 7 21.61c 20.81c



Director Director


Group statement of recognised income and expensefor the year ended 30 September 2008

Notes 2008€’000

2007€’000

Items of income/(expense) recognised directly within equity:

Foreign currency translation adjustment 14 (25,908) (7,211)

Loss on hedge of net investment in foreign operations 14 (3,806) -

Group defined benefit pension schemes:

Actuarial (loss)/gain 21 (5,361) 6,461

Movement in deferred tax 19 402 (1,265)

Group cash flow hedges:

Effective portion of cash flow hedges – movement into reserve 818 (2,380)

Effective portion of cash flow hedges – movement out of reserve 105 4,306

Effective portion of cash flow hedges 14 923 1,926

Movement in deferred tax – movement into reserve (102) 297

Movement in deferred tax – movement out of reserve (13) (538)

Movement in deferred tax 19 (115) (241)

Net expense recognised directly within equity (33,865) (330)

Profit for the financial year 50,205 47,330

Total recognised income and expense for the year attributable to equity holders of the Company 16,340 47,000


Group balance sheetas at 30 September 2008

Notes 2008€’000

2007€’000

Assets

Non-current

Property, plant and equipment 8 109,923 68,093

Goodwill 9 187,627 148,544

Intangible assets 10 54,671 39,404

Investment in joint ventures 11 19,630 20,857

Employee benefits 21 11,720 -

Total non-current assets 383,571 276,898

Current

Inventories 12 165,697 161,882

Trade and other receivables 13 313,951 279,550

Cash and cash equivalents 85,032 57,547

Total current assets 564,680 498,979

Total assets 948,251 775,877

Equity

Equity share capital 14 12,002 11,801

Share premium 14 116,409 103,473

Other reserves 14 (36,191) (8,170)

Retained earnings 14 252,010 223,965

Capital and reserves attributable to equity holders of the Company 344,230 331,069

Liabilities

Non-current

Interest-bearing loans and borrowings 15 217,201 74,873

Provisions 17 7,821 9,377

Employee benefits 21 17,569 6,334

Derivative financial instruments 22 11,376 7,574

Deferred tax liabilities 19 10,212 9,525

Total non-current liabilities 264,179 107,683

Current

Bank overdrafts 15 1,266 8,000


Trade and other payables 16 308,296 278,895

Current tax liabilities 4,441 6,915

Provisions 17 11,535 7,937

Derivative financial instruments 22 544 6,568

Total current liabilities 339,842 337,125

Total liabilities 604,021 444,808

Total equity and liabilities 948,251 775,877



Director Director


Group cash flow statementfor the year ended 30 September 2008

Notes 2008€’000

2007€’000

Cash flows from operating activities


Finance income 4 (3,121) (9,477)

Finance expense 4 10,790 13,742

Operating profit 66,220 60,038

Share of joint ventures’ profit after tax 11 (3,389) (3,145)

Depreciation charge 8 10,167 8,171

Profit on disposal of property, plant and equipment 3 (193) (331)

Amortisation of intangible assets 10 11,977 6,554

Share-based payment expense 21 1,430 1,126

Transfer in respect of share entitlement scheme 14 32 70

Increase in inventories (1,825) (3,449)

Increase in trade and other receivables (15,938) (12,020)

Increase in trade payables, employee benefits and other payables 13,449 13,011

Interest paid (9,389) (6,350)

Income taxes paid (13,335) (8,828)

Net cash inflow from operating activities 59,206 54,847

Cash flows from investing activities

Interest received 1,613 1,556

Purchase of property, plant and equipment 8 (26,845) (9,589)

Proceeds from disposal of property, plant and equipment 2,744 1,313

Acquisition of subsidiaries (net of cash and cash equivalents acquired) 20 (100,590) (51,467)

Deferred acquisition consideration paid (7,921) (11,727)

Investment in joint ventures 11 - (809)

Dividends received from joint ventures 11 2,735 1,628

Net cash outflow from investing activities (128,264) (69,095)

Cash flows from financing activities

Proceeds from issue of shares (including share premium thereon, net of scrip dividend) 7,119 7,761

Purchase of treasury shares (617) -

Proceeds from interest-bearing loans and borrowings 135,929 22,535

Repayments of interest-bearing loans and borrowings (21,379) -

(Decrease)/increase in finance leases (627) 1,002

Dividends paid to equity holders of the Company 6 (11,318) (9,636)

Net cash inflow from financing activities 109,107 21,662

Net increase in cash and cash equivalents 40,049 7,414

Translation adjustment (5,830) (1,015)

Cash and cash equivalents at beginning of year 49,547 43,148

Cash and cash equivalents at end of year 83,766 49,547

Cash and cash equivalents is comprised of:

Cash at bank and short term deposits 85,032 57,547

Bank overdrafts (1,266) (8,000)

83,766 49,547


United Drug plc (‘the Company’) is a public limited company domiciled and incorporated in Ireland. The Group’s

financial statements for the year ended 30 September 2008 consolidate the individual financial statements of the

Company and its subsidiaries (together referred to as ‘the Group’) and show the Group’s interest in joint venture

undertakings using the equity method of accounting.

The individual and Group financial statements of the Company were authorised for issue by the directors on

19 December 2008.

The accounting policies applied in the preparation of the financial statements for the year ended 30 September

2008 are set out below.

Statement of compliance

The Group financial statements have been prepared in accordance with International Financial Reporting

Standards (IFRS) as adopted by the EU which comprises standards and interpretations approved by the

International Accounting Standards Board (IASB). The individual financial statements of the Company (‘Company

financial statements’) have been prepared in accordance with IFRS as adopted by the EU and as applied in

accordance with the Companies Acts, 1963 to 2006 except for the exemption contained in Section 148(8) of

the Companies Act 1963, which permits a company that publishes its Company and Group financial statements

together to exclude the Company income statement and related notes that form part of the approved

Company financial statements, from the financial statements presented to its members.

IFRS that were adopted by the EU and that were effective on 30 September 2008, have been applied in the

preparation of the Group and Company financial statements. The IASB and the International Financial Reporting

Interpretations Committee (IFRIC) have issued the following standards and interpretations that are not yet

effective for the Group:

nIFRS 8 Operating Segments (effective date: financial periods beginning on or after 1 January 2009);

nIFRS 2 Share-based Payments - Vesting Conditions and Cancellations Amendment (effective date: financial

periods beginning on or after 1 January 2009);

nIFRS 3 Business Combinations Revised (effective date: financial periods beginning on or after 1 July 2009);

nIAS 1 Presentation of Financial Statements Amendment (effective date: financial periods beginning on or

after 1 January 2009);

nIAS 23 Borrowing Costs Amendment (effective date: financial periods beginning on or after 1 January 2009);

nIAS 32 Financial Instruments Presentation Amendment (effective date: financial periods beginning on or after

1 January 2009);

nIAS 27 Consolidated and Separate Financial Statements Revised (effective date: financial periods beginning

on or after 1 July 2009);

nIAS 39 Financial Instruments Recognition and Measurement Amendment (effective date: financial periods

beginning on or after 1 July 2009);

nIFRIC Interpretation 12 Service Concession Arrangements (effective date: financial periods beginning

on or after 1 January 2008);

nIFRIC Interpretation 13 Customer Loyalty Programmes (effective date: financial periods beginning

on or after 1 July 2008);

nIFRIC Interpretation 14 IAS 19 The Limit on a Defined Benefit Asset, Minimum Funding Requirements

and their Interaction (effective date: financial periods beginning on or after 1 January 2008);

Significant accounting policiesfor the year ended 30 September 2008


nIFRIC Interpretation 15 Agreements for the Construction of Real Estate (effective date: financial periods

beginning on or after 1 January 2009);

nIFRIC Interpretation 16 Hedges of a Net Investment in a Foreign Operation (effective date: financial periods

beginning on or after 1 October 2008); and

nIFRIC Interpretation 17 Distributions of Non-cash Assets to Owners (effective date: financial periods beginning

on or after 1 July 2009).

These standards and interpretations will be applied for the purposes of the Group and Company financial

statements with effect from their respective effective dates.

Whilst the application of IFRS 8 will result in amendments to the segment information note accompanying the

Group financial statements, these amendments will not be of a recognition and measurement nature, given

the disclosure focus of the standard.

The revised IFRS 3 introduces a number of changes to the accounting for business combinations that may impact

the amount of goodwill recognised on future acquisitions, the reported results in the period when the acquisition

occurs and future reported results.

The application of the revised IAS 1 will result in some presentational changes to the Group financial statements.

Application of the other standards and interpretations is not expected to have a material impact on the Group

or Company financial statements.

Basis of preparation

The Group and Company financial statements are prepared on a historical cost basis except for the following

items which are measured at fair value or grant date fair value:

nderivative financial instruments;

npension obligations; and

nshare-based payment arrangements.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting

estimates. In addition, it requires management to exercise judgement in the process of applying the Group’s

accounting policies. The areas involving a high degree of judgement or complexity, or areas where assumptions

and estimates are significant to the Group’s financial statements, relate primarily to accounting for defined

benefit pension schemes, financial instruments, share-based payments, provisions, property, plant and

equipment, intangible assets, goodwill impairment and deferred tax and are documented in the relevant

accounting policies below.

The accounting policies set out below have been applied consistently by all of the Group’s subsidiaries

and joint ventures to all periods presented in these financial statements.

Functional and presentational 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

The Group’s financial statements include the financial statements of the Company and all of its subsidiaries

and joint ventures.

Significant accounting policies (continued)


Accounting for subsidiaries and joint ventures

Subsidiaries are entities controlled by the Group. Control exists when the Group has the power, directly or

indirectly, to govern the financial and operating policies of an entity so as to obtain benefit from its activities.

In assessing control, potential voting rights that currently are exercisable or convertible are taken into account.

The financial statements of subsidiaries are included in the Group financial statements from the date that control

commences until the date that control ceases.

Intragroup balances 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

evidence of impairment. Unrealised gains arising from transactions with equity accounted joint ventures are

eliminated against the investment to the extent of the Group’s interest. Unrealised losses are eliminated in

the same way as unrealised gains, but only to the extent there is no evidence of impairment.

Joint ventures are those entities over whose activities the Group has joint control, established by contractual

arrangement and requiring unanimous consent for strategic financial and operational decisions. Joint ventures

are included in the financial statements using the equity method of accounting, from the date that joint control

commences until the date that joint control ceases. The Group income statement reflects in operating profit,

the Group’s share of profit after tax of its joint ventures in accordance with IAS 31, Interests in Joint Ventures. The

Group’s interest in its net assets is included as investment in joint ventures in the Group balance sheet at an amount

representing the Group’s share of the fair value of the identifiable net assets at acquisition plus the Group’s share

of post acquisition retained profits or losses of the joint ventures and goodwill arising on the investment.

Business combinations

All business combinations are accounted for by applying the purchase method of accounting.

Goodwill

Goodwill is the excess of the consideration paid over the fair value of the identifiable assets, liabilities and

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.

In respect of acquisitions completed prior to 1 October 2004, goodwill is included on the basis of its deemed

cost, i.e. original cost less accumulated amortisation since acquisition up to 30 September 2004, which represents

the historical amount recorded under Irish GAAP. The classification and accounting treatment of business

combinations that occurred prior to 1 October 2004 has not been reconsidered in preparing the Group’s

opening IFRS balance sheet at 1 October 2004 as permitted by IFRS 1. Goodwill is allocated to cash generating

units and is tested annually for impairment at a consistent time each year. Goodwill is stated at cost or deemed

cost less any accumulated impairment losses. In respect of joint ventures, the carrying amount of goodwill is

included in the carrying amount of the investment.

Goodwill which arose on acquisitions prior to 1 October 1999 was eliminated against reserves on acquisition as a

matter of accounting policy permitted under historical Irish GAAP. In preparing the Group’s IFRS balance sheet at

1 October 2004 this goodwill is considered to have been permanently offset against retained earnings and, on

any subsequent disposal, will not form part of the gain or loss on the disposal of the business as permitted by IFRS 1.

Intangible assets

Intangible assets, that are acquired by the Group, are stated at cost less accumulated amortisation and impairment

losses, when separable or arising from contractual or other legal rights and when they are reliably measurable.

Amortisation is charged to the income statement on a straight-line basis over the estimated useful lives of the

intangible assets. Intangible assets are amortised over periods ranging from two to ten years depending on the

nature of the asset.


Property, plant and equipment

Property, plant and equipment is reported at cost less accumulated depreciation and impairment losses. Cost

includes expenditure that is directly attributable to the acquisition of the asset. Depreciation is calculated, on

a straight line basis on cost less estimated residual value, to write property, plant and equipment off over their

anticipated useful lives using the following annual rates:

Land and buildings

Freehold land not depreciated

Freehold buildings 2%

Plant and equipment 10% - 20%

Computer equipment 20% - 33%

Motor vehicles 20%

Depreciation is provided on additions with effect from the first day of the month following commissioning and on

disposals up to the end of the month of retirement. The residual value of assets, if not insignificant, and the useful

life of assets is reassessed annually. Gains and losses on disposals are determined by comparing the proceeds

received with the carrying amount and are included in operating profit.

Impairment reviews and testing

The carrying amounts of the Group’s non-financial assets, other than inventories, (which are carried at the lower

of cost and net realisable value) and deferred tax assets, (which are recognised based on recoverability), are

reviewed to determine whether there is any indication of impairment when an event or transaction indicates

that there may be, except for goodwill which is reviewed annually. If any such indication exists, an impairment

test is carried out and the asset is written down to its recoverable amount.

The recoverable amount of a non-financial asset or cash generating unit is the greater of its net selling price and

value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using

a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific

to the asset. For the purpose of impairment testing, assets are grouped together into the smallest group of assets

that generates cash inflows that are largely independent of the cash inflows of other assets or groups of assets

(the “cash generating unit”). Goodwill acquired in a business combination is allocated to cash generating units

that are expected to benefit from the combination’s synergies. An impairment loss is recognised if the carrying

amount of an asset or its cash generating unit exceeds its estimated recoverable amount.

Goodwill is tested for impairment at each balance sheet date.

A financial asset is assessed at each reporting date to determine whether there is any objective evidence that

it is impaired. A financial asset is considered to be impaired if objective evidence indicates, that one or 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 carrying amount and the present value of the estimated future cash flows discounted at the original

effective interest rate. An impairment loss arising on financial assets is recognised in the income statement.

Individually significant financial assets are tested for impairment on an individual basis. The 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 reversed if there has been a change in the estimates

used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s

carrying amount does not exceed the carrying amount that would have been determined, net of depreciation

or amortisation, if no impairment loss had been recognised.

All impairment losses are recognised in the income statement.



Leases

Leases of property, plant and equipment, where the Group has substantially all the risks and rewards of

ownership, are classified as finance leases. Finance leases are capitalised at the inception of the lease at

the lower of the fair value of the leased asset or the present value of the minimum lease payments. The

corresponding rental obligations, net of finance charges, are included in interest-bearing loans and borrowings.

The interest element of 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 for each period. The

property, plant and equipment acquired under finance leases are depreciated over the shorter of the useful life

of the asset or the lease term.

Leases where a significant portion of the risks and rewards of 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 principle

and includes all expenditure which has been incurred in 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 incurred in marketing, distribution and selling.

Foreign currency

Transactions in foreign currencies are translated into the functional currency of the related entity at the foreign

exchange rate ruling at the date of the transaction. Non-monetary assets and liabilities carried at historic cost

are not subsequently re-translated. Non-monetary assets carried at fair value are subsequently re-measured at

the exchange rate at the date fair value was determined. Monetary assets and liabilities denominated in foreign

currencies at the balance sheet date are translated into functional currencies at the foreign exchange rate

ruling at that date. Foreign exchange differences arising on translation are recognised in the income statement,

except for qualifying cash flow hedges and a financial liability designated as a hedge of the net investment in

a foreign operation which are recognised directly in equity.

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on

consolidation, are translated to euro at the foreign exchange rates ruling at the balance sheet date. The

revenues and expenses of foreign operations are translated to euro at the average exchange rate for the

financial period. Foreign exchange differences arising on translation of the net investment in a foreign operation

are recognised directly in equity.

On disposal of a foreign operation, accumulated currency translation differences are recognised in the Group

income statement as part of the overall gain or loss on disposal. The cumulative currency translation differences

arising prior to 1 October 2004 (the transition date to IFRS) have been set to zero for the purposes of ascertaining

the gain or loss on disposal of a foreign operation subsequent to that date.

Translation differences arising from 1 October 2004 are presented as a separate component of equity in the

foreign currency translation reserve to the Group balance sheet.

Hedge of net investment in foreign operation

Foreign currency differences arising on the retranslation of a financial liability designated as a hedge of a net

investment in a foreign operation are recognised directly in equity to the extent that the hedge is effective. To

the extent that the hedge is ineffective, such differences are recognised in profit or loss. When the hedged part

of a net investment is disposed of, the associated cumulative amount in equity is transferred to profit or loss as an

adjustment to the profit or loss on disposal.


Financial guarantee contracts

Where the Group enters into financial guarantee contracts to guarantee the indebtedness of other parties,

the Group considers these to be insurance arrangements and accounts for them as such. The Group treats

the guarantee contract as a contingent liability until such time as it becomes probable that the Group will

be required to make a payment under the guarantee.

Revenue recognition

Revenue represents the fair value of products and services provided to third party customers in the financial

reporting period. The fair value of sales is exclusive of value added tax and after allowances for discounts and

returns and is recognised in the income statement when the significant risks and rewards of ownership have

been transferred to the buyer, the consideration can be measured reliably and it is probable that the economic

benefits will flow to the Group. Revenue from services rendered is recognised in the income statement in

proportion to the stage of completion of the related contract or fully when no further obligations exist on the

related service contract. When the Group acts in the capacity of an agent rather than as the principal in a

transaction, the revenue recognised is the net amount of commission earned by the Group.

Finance income and expenses

Finance income comprises interest income on funds invested, changes in the fair value of financial assets at fair

value through profit or loss, and gains on hedging instruments that are recognised in profit or loss. Interest income

is recognised as it accrues in profit or loss, using the effective interest method.

Finance expenses comprise interest expense on borrowings, unwinding of the discount on provisions, changes

in the fair value of financial assets at fair value through profit or loss and losses on hedging instruments that are

recognised in profit or loss. All borrowing costs are recognised in profit or loss using the effective interest method.

Employee benefits

Pension obligations

A defined contribution pension plan is a post-employment benefit plan under which an entity pays fixed

contributions into a separate entity and will have no legal or constructive obligation to pay further amounts.

Obligations for contributions to defined contribution pension plans are recognised as an expense in the income

statement as incurred.

A defined benefit plan is a post-employment plan other than a defined contribution plan. The Group’s net

obligation in respect of defined benefit pension plans is calculated, separately for each plan, by estimating

the present value of the amount of future benefits that employees have earned in return for their service in

the current and prior periods; less the fair value of any plan assets. The discount rate is the yield at the balance

sheet date on high quality corporate bonds that have maturity dates approximating the terms of the Group’s

obligations. The calculation is performed by a qualified actuary using the projected unit method. All actuarial

gains and losses as at 1 October 2004, the date of transition to IFRS, were recognised in full against retained

earnings as permitted by the amendment to IAS 19. The Group recognises current and past service costs, interest

on scheme obligations and expected return on scheme assets in administrative expenses in the Group Income

Statement. Actuarial gains and losses for subsequent periods are recognised in the statement of recognised

income and expense as they arise.

Performance related incentive plans

The Group recognises the present value of a liability for short term employee benefits including costs associated

with performance related incentive plans in the income statement when an employee has rendered service in

exchange for these benefits and a constructive obligation to pay those benefits arises.



Share-based payment transactions

The Group operates share option and incentive schemes which allow employees acquire shares in the Company.

They are equity settled arrangements under IFRS 2, Share-based payment. The fair value of share entitlements

granted is recognised as an expense in the income statement with a corresponding increase in equity. The

amount recognised as an expense is adjusted to reflect the actual number of shares expected to vest.

Share options granted by the Company are subject to certain non-market based vesting conditions. Non-market

vesting conditions are not taken into account when estimating the fair value of options as at the grant date. The

fair value is determined by an external valuer using a binomial valuation model. The share option expense in the

income statement is based on the fair value of the total number of options expected to vest and is allocated

to accounting periods on a straight line basis over the vesting period. The cumulative charge to the income

statement is only reversed where options do not vest because all non-market performance conditions have not

been met or where an employee in receipt of options relinquishes service before the end of the vesting period.

The proceeds received on the exercise of share options are credited to share capital and share premium.

In line with the transitional arrangements set 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.

Income tax expense

Income tax expense recognised in the profit or loss for the year comprises current and deferred tax. Taxation

is recognised in the income statement except to the extent that it relates to items recognised directly in equity,

in which case the related tax is recognised in equity.

Current tax is the expected tax payable on the taxable income for the year, using tax rates and laws that have

been enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in

respect of previous years.

Deferred tax is provided using the balance sheet liability method, providing for temporary differences between

the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation

purposes. If the deferred tax arises 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 not recognised. The amount of deferred tax provided is based on the expected manner of realisation or

settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted

at the balance sheet date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available

against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer

probable that the related tax benefit will be realised.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and

assets, and they relate to income taxes levied by the same tax authority on the same tax entity or on different

tax entities, but they intend to settle current tax liabilities and assets on a net basis.

Segmental reporting

A segment is a distinguishable component of the Group that is engaged either in providing products or services

(business segment), or in providing products or services within a particular economic environment (geographical

segment), which is subject to risks and rewards that are different from other segments. The Group has adopted the

business segment as its primary reporting segment, based on the Group’s management and internal reporting structures.

Inter-segment pricing is determined on an arm’s length basis.


Cash and cash equivalents

Cash and cash equivalents comprise cash balances and deposits, including bank deposits of less than three

months maturity. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash

management are included as a component of cash and cash equivalents for the purpose of the Group cash

flow statement.

Financial instruments

Derivative financial instruments

The Group uses derivative financial instruments to hedge its exposure to foreign exchange and interest rate risks

arising from operational, financing and investment activities. In accordance with its treasury policy, the Group

does not hold or issue derivative financial instruments for trading purposes. However, derivatives that do not

qualify for hedge accounting are accounted for as trading instruments.

Derivative financial instruments are recognised at fair value. The gain or loss on re-measurement to fair value is

recognised immediately in the income statement. However, where derivatives qualify for hedge accounting,

recognition of any resultant gain or loss depends on the nature of the item being hedged, as set out below.

The fair value of interest rate swaps is the estimated amount that the Group would receive or pay to terminate

the swap at the balance sheet date, taking into account current interest rates and the current creditworthiness

of the swap counterparties. The fair value of forward exchange contracts is their quoted market price at the

balance sheet date, being the present value of the quoted forward price.

Cash flow hedges

Where a derivative financial instrument is designated as a hedge of the variability in cash flows of a recognised

asset or liability, or a highly probable forecasted transaction, the effective part of any gain or loss on the

derivative financial instrument is recognised directly in equity in the cash flow hedge reserve. When the

forecasted transaction results in the recognition of a non-financial asset or non-financial liability, the associated

cumulative gain or loss is removed from equity and included in the initial cost or other carrying amount of the

non-financial asset or liability. If a hedge of a forecasted transaction subsequently results in the recognition of a

financial asset or a financial liability, the associated gains and losses that were recognised directly in equity are

reclassified into profit or loss in the same period or periods during which the asset acquired or liability assumed

affects profit or loss (i.e. when interest income or expense is recognised). For cash flow hedges, the associated

cumulative gain or loss is removed from equity and recognised in the income statement in the same period or

periods during which the hedged forecast transaction affects profit or loss. The ineffective part of any gain or

loss is recognised immediately in the income statement.

When a hedging instrument expires or is sold, terminated or exercised, or the entity revokes designation of the

hedge relationship but the hedged forecast transaction is still expected to occur, the cumulative gain or loss at

that point remains in equity and is recognised in accordance with the above policy when the transaction occurs.

If 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

Where a derivative financial instrument is designated as a hedge of a change in the fair value of an asset or

liability, gains or losses arising from the re-measurement of the hedging instrument to fair value are reported in

the income statement. In addition, any gain or loss on the hedged item which is attributable to the hedged

risk is adjusted against the carrying amount of the hedged item and reflected in the income statement. Where

the adjustment is to the carrying amount of a hedged interest-bearing financial instrument, the adjustment is

amortised to the income statement with the objective of achieving full amortisation by maturity.



Non-derivative financial instruments

Non-derivative financial instruments comprise trade and other receivables, cash and cash equivalents, loans and

borrowings, and trade and other payables. Non-derivative financial instruments are recognised at fair value.

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 Group’s contractual rights to the cash flows from the financial assets

expire or if the Group transfers the financial asset to another party without retaining control of substantially all risks

and rewards of 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 Group’s

obligations specified in the contract expire or are discharged or cancelled.

Interest-bearing loans and borrowings

Interest-bearing loans and borrowings are recognised initially at fair value less attributable transaction costs.

Subsequent to initial recognition, interest-bearing loans and borrowings, other than those accounted for under

the fair value hedging model outlined above, are stated at amortised cost with any difference between cost

and redemption value being recognised in the income statement over the period of the borrowings on an

effective interest basis. Effective interest rate is calculated by taking into account any issue costs and any

expected discount or premium on settlement.

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 required to settle the

obligation which can be measured reliably. If the effect is material, provisions are determined by discounting the

expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money

and, where appropriate, the risks specific to the liability.

Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares

and share options are recognised as a deduction from equity, net of any tax effects.

Where share capital recognised as equity is repurchased, the amount of the consideration paid, including

directly attributable costs, net of any tax effects, is recognised as a deduction from equity. Repurchased

shares are classified as treasury shares and are presented as a deduction from total equity.


1. Revenue

2008€’000

2007€’000

Goods for resale 1,545,519 1,479,715

Services 132,089 98,867

Commission income 6,104 5,040

Total revenue 1,683,712 1,583,622

Commission income relates to the sale of products where the Group acts as an agent in the transaction rather

than as a principal.

2. Segmental reporting

Segmental information is presented in respect of the Group’s business and geographical segments. The primary

format, business segments, is based on the Group’s management and internal reporting structure. Inter-segment

pricing is determined on an arms-length basis. Segment results, assets and liabilities include items directly attributable

to a segment as well as those that can be allocated on a reasonable basis. Due to the nature of certain liabilities,

which are not segment specific, they have not been allocated to a segment but rather have been disclosed in

aggregate immediately after the relevant segment note. Segment capital expenditure is the total cost incurred

during the period to acquire segment assets that are expected to be used for more than one period.

Business segments

United Drug is a leading healthcare services provider in Ireland, the United Kingdom and Continental Europe.

During the current financial year the Group expanded into new markets in the United States of America.

The Group’s operations are divided into the following primary segments:

nPharma Wholesale

nSupply Chain Services

nMedical & Scientific

nContract Sales & Marketing Services

Geographical segments

The Group operates in four principal geographical regions being the Republic of Ireland, the United Kingdom,

Continental Europe and the United States of America. In presenting information on the basis of geographical

segments, segment revenue is based on the geographical location of the Group’s subsidiaries. Segment assets

are based on the geographical location of the assets.

Notes forming part of the Group financial statements


2. Segmental reporting (continued)

Business segment analysis

PharmaWholesale

2008€’000

SupplyChain

Services2008€’000

Medical &Scientific

2008€’000

ContractSales &

MarketingServices

2008€’000

GroupTotal2008€’000

Revenue 998,008 448,353* 102,263 135,088 1,683,712

Adjusted operating profit** 30,226 20,299 15,978 13,124 79,627

Amortisation of intangible assets (1,709) (5,313) (3,017) (1,938) (11,977)

Share-based payment expense (575) (378) (170) (307) (1,430)

Operating profit 27,942 14,608 12,791 10,879 66,220

Finance income 3,121

Finance expense (10,790)

Profit before tax 58,551

Income tax expense (8,346)

Profit for the financial year 50,205

* Supply Chain Services revenue is net of inter-segment sales of €350,252,000.

** excluding amortisation of intangible assets and share-based payment expense.

2007€’000

2007€’000

2007€’000

2007€’000

2007€’000

Revenue 979,267 399,061* 101,518 103,776 1,583,622

Adjusting operating profit** 27,040 16,351 14,670 9,657 67,718

Amortisation of intangible assets (804) (3,312) (1,609) (829) (6,554)

Share-based payment expense (349) (473) (124) (180) (1,126)

Operating profit 25,887 12,566 12,937 8,648 60,038

Finance income 9,477

Finance expense (13,742)

Profit before tax 55,773

Income tax expense (8,443)

Profit for the financial year 47,330

* Supply Chain Services revenue is net of inter-segment sales of €336,157,000.

** excluding amortisation of intangible assets and share-based payment expense.



PharmaWholesale

2008€’000

SupplyChain


Medical &Scientific

2008€’000

ContractSales &

MarketingServices

2008€’000


Segment assets 327,754 373,186 137,467 109,844 948,251

Segment liabilities 131,617 205,888 24,781 19,170 381,456

Unallocated liabilities 222,565

604,021

Unallocated liabilities comprise amounts relating to interest-bearing loans and borrowings, derivative financial

instruments, current tax liabilities and deferred tax liabilities.

2007€’000

2007€’000

2007€’000

2007€’000

2007€’000

Segment assets 297,676 256,006 129,986 92,209 775,877

Segment liabilities 145,903 124,338 31,050 25,050 326,341

Unallocated liabilities 118,467

444,808

Unallocated liabilities comprise amounts relating to interest-bearing loans and borrowings, derivative financial

instruments, current tax liabilities and deferred tax liabilities.

Notes forming part of the Group financial statements (continued)



Other segment information

PharmaWholesale

2008€’000

SupplyChain


Medical &Scientific

2008€’000

ContractSales &

MarketingServices

2008€’000


Depreciation 4,502 3,634 794 1,237 10,167

Capital expenditure 13,059 67,436 24,770 32,881 138,146

Amortisation of intangible assets 1,709 5,313 3,017 1,938 11,977

Share-based payment expense 575 378 170 307 1,430

2007€’000

2007€’000

2007€’000

2007€’000

2007€’000

Depreciation 4,608 1,728 730 1,105 8,171


Amortisation of intangible assets 804 3,312 1,609 829 6,554

Share-based payment expense 349 473 124 180 1,126

Capital expenditure comprises acquisition of property, plant and equipment, goodwill and intangible assets.

The results and assets of joint ventures are included within the Supply Chain Services business segment.

Geographical analysis

Republicof Ireland

2008€’000

UnitedKingdom

2008€’000

ContinentalEurope

2008€’000

UnitedStates

2008€’000


Revenue 1,154,225 482,987 28,439 18,061 1,683,712

Segment assets 549,452 310,455 28,280 60,064 948,251


2007€’000

2007€’000

2007€’000

2007€’000

2007€’000

Revenue 1,056,039 507,862 19,721 - 1,583,622

Segment assets 475,419 278,163 22,295 - 775,877

Capital expenditure 3,199 38,730 38,870 - 80,799


3. Statutory and other information

2008€’000

2007€’000

Operating profit is stated after charging/(crediting):

Depreciation of property, plant and equipment 10,167 8,171

Profit on disposal of property, plant and equipment (193) (331)

Amortisation of intangible assets 11,977 6,554

Auditor’s remuneration 405 380

Auditor’s remuneration for non-audit services* 452 430

Operating lease rentals:

- Land and buildings 3,509 3,893

- Other assets 6,095 4,581

Foreign exchange losses 66 119

*In addition, during the year to 30 September 2008, an amount of €24,000 (2007: €75,000) paid to the auditors has

been included in the fair value of purchase consideration of business combinations.

Details of directors’ remuneration, pension entitlements and interests in share options are set out in the Report of

the Remuneration Committee on directors’ remuneration on pages 41 to 47.

4. Finance income and expense

2008€’000

2007€’000

Finance income

Income arising from cash deposits 1,612 1,556

Fair value adjustment to guaranteed senior unsecured notes - 3,615

Fair value adjustment to fair value hedges 1,404 -

Foreign currency gain on retranslation of bank borrowings 105 4,306

3,121 9,477

Finance expense

Interest on bank loans and overdrafts

- wholly repayable within five years (6,734) (1,929)

- wholly repayable after five years (2,456) (3,826)

Interest on finance leases (91) (15)

Fair value adjustment to fair value hedges - (3,615)

Fair value adjustment to guaranteed senior unsecured notes (1,404) -

Fair value of cash flow hedges transferred from equity (105) (4,306)

Other - (51)

(10,790) (13,742)

Net finance expense (7,669) (4,265)

As a consequence of the adoption of IFRS 7, the prior year analysis of finance income and finance expense has

been presented on a basis consistent with the current year presentation.



5. Income tax expense

Recognised in the income statement 2008€’000

2007€’000

Current tax

Ireland

Adjustment in respect of prior years 452 197

Corporation tax on profit for the year (3,606) (4,132)

(3,154) (3,935)

Overseas

Adjustment in respect of prior years 827 574

Current year tax on profit for the year (8,332) (7,117)

(7,505) (6,543)

Total current tax expense (10,659) (10,478)

Deferred tax

Origination and reversal of temporary differences:

Property, plant and equipment 136 423

Intangible assets 2,477 1,514

Employee benefits (428) -

Other items 128 98

Total deferred tax credit 2,313 2,035

Income tax expense (8,346) (8,443)

The deferred tax credit for the year to 30 September 2008 includes a credit of €484,000 in respect of an

overprovision in prior years. The deferred tax credit for the year to 30 September 2007 includes a credit of

€361,000 arising from a reduction in the corporation tax rate in the United Kingdom and from other changes to

United Kingdom legislation, and a credit of €300,000 in respect of an overprovision for deferred tax in prior years.

Reconciliation of effective tax rate 2008%

2008€’000

2007%

2007€’000


Taxation based on Irish corporation tax rate 12.5 (7,319) 12.5 (6,972)

Expenses not deductible for tax purposes (538) (608)

Tax on income from joint ventures 424 393

Differences in tax rates (2,676) (2,188)

Adjustments in respect of prior years 1,763 1,071

Other items - (139)

(8,346) (8,443)

The Group’s share of joint ventures’ profit after tax includes a tax charge of €1,403,000 (2007: €1,190,000).


6. Dividends – equity shares

2008€’000

2007€’000

Dividends paid

Final dividend for 2007 of 5.33 cent (2006: 4.64 cent) 12,186 10,389

Interim dividend for 2008 of 2.23 cent (2007: 1.97 cent) 5,150 4,465

Total dividends 17,336 14,854

Total dividends 17,336 14,854

Scrip issue (6,018) (5,218)

Dividends paid per Group cash flow statement 11,318 9,636

The directors have proposed a final dividend for 2008 of 5.77 cent per share (2007: 5.33 cent per share)

amounting to €13,416,000 (2007: €12,186,000), subject to shareholder approval at the Annual General Meeting.

The total dividend for the year is 8.00 cent per share (2007: 7.30 cent per share).

The final dividend for 2008 has not been provided for in the balance sheet at 30 September 2008, as there was

no present obligation to pay the dividend at year-end.

7. Earnings per ordinary share

2008€’000

2007€’000

Profit for the financial year 50,205 47,330

Adjustment for amortisation of intangible assets (net of tax) 9,500 5,040

Earnings adjusted for amortisation of intangible assets 59,705 52,370

Numberof shares

Numberof shares

Weighted average number of shares 230,237,796 225,863,180

Number of dilutive shares under option 2,060,526 1,617,076

Weighted average number of ordinary shares, including share options 232,298,322 227,480,256

Basic earnings per share – cent 21.81 20.96

Diluted earnings per share – cent 21.61 20.81

Adjusted basic earnings per share – cent* 25.93 23.19

Adjusted diluted earnings per share – cent* 25.70 23.02

*excluding amortisation of intangible assets

The adjusted figures for earnings per share are intended 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 metric of

monitoring group performance.

Of the 7,762,662 (2007: 7,623,066) treasury shares held by the Group, 7,528,066 (2007: 7,528,066) of these shares do

not rank for dividend and have therefore been excluded from the weighted average number of shares in issue

used in the calculation of earnings per share.



8. Property, plant and equipment

Land andbuildings

2008€’000

Plant andequipment

2008€’000

Motorvehicles

2008€’000

Computerequipment

2008€’000

Total2008€’000

Cost

At 1 October 2007 46,337 39,156 7,902 12,106 105,501

Additions in year 13,871 8,460 1,672 2,842 26,845

Arising on acquisition 15,326 13,002 230 943 29,501

Disposals in year (50) (1,800) (2,620) - (4,470)

Translation adjustment (2,157) (1,153) (349) (495) (4,154)

At 30 September 2008 73,327 57,665 6,835 15,396 153,223

Depreciation

At 1 October 2007 6,047 18,557 3,403 9,401 37,408

Depreciation charge for the year 1,306 5,552 1,550 1,759 10,167

Eliminated on disposal - (351) (1,568) - (1,919)

Translation adjustment (428) (1,331) (143) (454) (2,356)

At 30 September 2008 6,925 22,427 3,242 10,706 43,300

Carrying amount

At 30 September 2008 66,402 35,238 3,593 4,690 109,923

At 30 September 2007 40,290 20,599 4,499 2,705 68,093

2007€’000

2007€’000

2007€’000

2007€’000

2007€’000

Cost

At 1 October 2006 43,425 28,002 5,698 12,238 89,363

Additions in year 929 3,790 3,537 1,333 9,589

Arising on acquisition 2,626 8,903 - 62 11,591

Disposals in year (16) (1,118) (1,302) (1,429) (3,865)

Translation adjustment (627) (421) (31) (98) (1,177)

At 30 September 2007 46,337 39,156 7,902 12,106 105,501

Depreciation

At 1 October 2006 5,158 15,700 2,834 9,013 32,705

Depreciation charge for the year 1,000 3,970 1,506 1,695 8,171

Eliminated on disposal (13) (795) (897) (1,178) (2,883)

Translation adjustment (98) (318) (40) (129) (585)

At 30 September 2007 6,047 18,557 3,403 9,401 37,408

Carrying amount

At 30 September 2007 40,290 20,599 4,499 2,705 68,093

No borrowings are secured on the above assets with the exception of leased assets noted below.


8. Property, plant and equipment (continued)

Leased property, plant and equipment

The Group leases items of property, plant and equipment under a number of finance lease agreements. At 30

September 2008, the carrying amount of leased assets included in property, plant and equipment was €1,655,000

(2007: €2,495,000) and related depreciation amounted to €569,000 (2007: €479,000).

9. Goodwill

2008€’000

2007€’000

Cost

At beginning of year 148,544 123,018

Revisions to prior year acquisitions (note 20) 389 256

Acquired during the year (note 20) 51,738 28,472

Translation adjustment (13,044) (3,202)

At end of year 187,627 148,544

Goodwill arises in connection with acquisitions, including revisions of estimates of consideration as detailed in note 20.

Goodwill acquired through business combinations is allocated to the following business segments:

2008€’000

2007€’000

Pharma Wholesale 9,986 10,823

Supply Chain Services 65,408 45,507

Medical & Scientific 56,001 53,125

Contract Sales & Marketing Services 56,232 39,089

187,627 148,544

Goodwill acquired through business combinations has been allocated to business segments for the purpose of

impairment testing. The business segment represents the lowest level within the Group at which associated

goodwill is monitored for management purposes and is not bigger than the segments determined in accordance

with IAS 14, Segment Reporting.

The recoverable amounts of business segments are based on value in use calculations. The cash flow forecasts

used for the value in use computations exclude incremental profits and other cash flows derived from planned

acquisition activities. The computations use five year cash flow forecasts. For individual business segments, a one

year forecast has been approved by senior management. The remaining years’ forecasts have been extrapolated

using growth rates of between 5% to 10% based on the historical annual growth experience of individual business

segments. For the purposes of calculating terminal values, a terminal growth rate of 2% has been adopted. The

cash flows are discounted using appropriate risk adjusted pre-tax discount rates averaging 8.0% (2007: 7.4%).

The key assumptions used for the value in use computations are that the markets will grow in accordance with

publicly available data, the Group will maintain its current market share, gross margins will be maintained at

current levels and that overheads will increase in line with expected levels of inflation.

There was no impairment charge for the year ended 30 September 2008 (2007: €nil).



10. Intangible assets

Customerrelationships

€’000

Tradenames

€’000

Contractbased€’000

Technology€’000

Total€’000

Cost

At 1 October 2006 11,532 6,986 - - 18,518

Acquired during the year 17,088 7,996 6,063 - 31,147

Translation adjustment (571) (363) (153) - (1,087)

At 30 September 2007 28,049 14,619 5,910 - 48,578

Acquired during the year 7,466 10,429 11,533 634 30,062

Translation adjustment (2,249) (1,417) (269) (2) (3,937)

At 30 September 2008 33,266 23,631 17,174 632 74,703

Amortisation

At 1 October 2006 1,799 1,058 - - 2,857

Amortisation during the year 3,873 1,615 1,066 - 6,554

Translation adjustment (150) (75) (12) - (237)

At 30 September 2007 5,522 2,598 1,054 - 9,174

Amortisation during the year 5,744 3,027 3,173 33 11,977

Translation adjustment (713) (363) (42) (1) (1,119)

At 30 September 2008 10,553 5,262 4,185 32 20,032

Carrying amount

At 30 September 2008 22,713 18,369 12,989 600 54,671

At 30 September 2007 22,527 12,021 4,856 - 39,404

The amortisation charge for the year has been charged to other operating expenses in the income statement.

Intangible assets are amortised over their useful lives, ranging from two to ten years, depending on the nature

of the asset.


11. Investment in joint ventures

The Group’s interest in its joint ventures, all of which are unlisted, is set out below.

€’000

At 1 October 2006 18,955

Investment during the year 809

Share of profit after tax 3,145

Dividends received from joint ventures (1,628)

Translation adjustment (424)

At 30 September 2007 20,857

Share of profit after tax 3,389

Dividends received from joint ventures (2,735)

Translation adjustment (1,881)

At 30 September 2008 19,630

The investment in joint ventures represents the Group’s share of the net assets of the joint ventures at the balance

sheet date as follows:

2008€’000

Non-current assets 26,883

Cash and cash equivalents 44,639

Other current assets 90,785

Non-current liabilities (29,347)

Current liabilities (120,250)

12,710

Goodwill 6,920

19,630

2007€’000

Non-current assets 17,586

Cash and cash equivalents 41,294

Other current assets 63,026

Non-current liabilities (11,445)

Current liabilities (97,339)

13,122

Goodwill 7,735

20,857



11. Investment in joint ventures (continued)

Included in investment in joint ventures is goodwill with a carrying value of €6,920,000 (2007: €7,735,000). This

goodwill is subject to annual impairment testing on a similar basis to the goodwill arising in the Group’s subsidiaries.

2008€’000

2007€’000

Group share of revenue 406,027 429,437

Group share of expenses, inclusive of tax (402,638) (426,292)

3,389 3,145

Capital commitments

At 30 September 2008, there was no authorised or contracted capital expenditure in respect of joint ventures.

At 30 September 2007, the Group’s share of the capital expenditure authorised, but not contracted, amounted

to €510,000.

The following are the significant joint ventures of United Drug plc at 30 September 2008:

Incorporated and trading in the United Kingdom

Name Nature of Business Group Share

UniDrug Distribution Group Limited Distribution of pharmaceutical products 50%

UniDrug Distribution Group Limited has its registered office at UDG House, Amber Business Park, South Normanton, Derbyshire, DE55 2FH.

Magir Limited Healthcare and retail organisation 25%

Magir Limited has its registered office at 44 Montgomery Road, Belfast, BT6 9ML.

All shares held are ordinary shares.

12. Inventories

2008€’000

2007€’000

Raw materials 7,581 3,341

Work in progress 2,681 258

Finished goods 155,435 158,283

165,697 161,882

In 2008, raw materials, work in progress and finished goods recognised as cost of sales amounted to

€1,405,944,000 (2007: €1,349,749,00). There was no material write-down of inventories to net realisable

value during the years ended 30 September 2008 and 2007.

Current replacement cost does not differ materially from historical cost.


13. Trade and other receivables

2008€’000

2007€’000

Current

Trade receivables 284,309 259,904

Other receivables 18,756 13,252

Prepayments and accrued income 10,886 6,394

313,951 279,550

The maximum exposure to credit risk for trade receivables at the reporting date by geographical region was:

2008€’000

2007€’000

Geographic analysis of credit risk

Republic of Ireland 171,363 169,068

United Kingdom 93,705 83,583

Continental Europe 7,763 7,115

USA 11,478 138

284,309 259,904

There is no material concentration of credit risk with regard to individual customers included in Group trade receivables.

The ageing of trade receivables at 30 September was:

Gross value2008€’000

Impairment2008€’000

Gross value2007

€’000

Impairment2007

€’000

Not past due < 12 months 232,821 869 199,026 616

Not past due > 12 months 14,399 860 17,344 860

Past due

0 - 30 days 22,688 109 23,829 33

+ 30 days 18,574 2,335 23,514 2,300

288,482 4,173 263,713 3,809

All amounts included in trade receivables are part of the normal operating cycle of the Group.

The movement in the allowance for impairment in respect of trade receivables during the year was as follows:

2008€’000

2007€’000


Bad debts written off during the year (915) (3)

Increase in provision during the year 1,334 1,523

Translation adjustment (55) (12)

At end of year 4,173 3,809



14. Capital and reserves

Other reserves

Equityshare

capital€’000

Sharepremium

€’000

Cashflow

hedge€’000

Share-based

payment€’000

Foreignexchange

€’000

Treasuryshares

€’000

Retainedearnings

€’000

Totalequity€’000

At 1 October 2007 11,801 103,473 566 2,987 (5,690) (6,033) 223,965 331,069

New shares issued 201 12,936 - - - - - 13,137

Effective portion of cash flow hedges - - 923 - - - - 923

Deferred tax on cash flow hedges - - (115) - - - - (115)

Share-based payment expense - - - 1,430 - - - 1,430

Transfer to share-based payment reserve - - - 175 - - - 175

Release from share-based payment reserve - - - (175) - - 175 -

Translation adjustment - - - - (25,908) - - (25,908)

Loss on hedge of net investment in foreign operations - - - - (3,806) - - (3,806)

Profit for the financial year - - - - - - 50,205 50,205

Dividends to equity holders - - - - - - (17,336) (17,336)

Transfer in respect of share entitlement scheme - - - - - - 32 32

Actuarial loss on defined benefit pension schemes - - - - - - (5,361) (5,361)

Deferred tax on defined benefit pension schemes - - - - - - 402 402

Purchase of treasury shares - - - - - (617) - (617)

Release of treasury shares on vesting - - - - - 72 (72) -

At 30 September 2008 12,002 116,409 1,374 4,417 (35,404) (6,578) 252,010 344,230


14. Capital and reserves (continued)

Other reserves

Equityshare

capital€’000

Sharepremium

€’000

Cashflow

hedge€’000

Share-based

payment€’000

Foreignexchange

€’000

Treasuryshares€’000

Retainedearnings

€’000

Totalequity€’000

At 1 October 2006 11,563 94,439 (1,119) 1,861 1,521 (6,033) 181,005 283,237

New shares issued 238 14,252 - - - - - 14,490

Scrip issue - (5,218) - - - - 5,218 -

Effective portion of cashflow hedges - - 1,926 - - - - 1,926

Deferred tax on cashflow hedges - - (241) - - - - (241)

Share-based payment expense - - - 1,126 - - - 1,126

Translation adjustment - - - - (7,211) - - (7,211)

Profit for the financial year - - - - - - 47,330 47,330

Dividends to equity holders - - - - - - (14,854) (14,854)

Transfer in respect of share entitlement scheme - - - - - - 70 70

Actuarial gain on defined benefit pension schemes - - - - - - 6,461 6,461

Deferred tax on defined benefit pension schemes - - - - - - (1,265) (1,265)

At 30 September 2007 11,801 103,473 566 2,987 (5,690) (6,033) 223,965 331,069

Equity share capital Numberof shares

2008

Numberof shares

2007

Authorised

Ordinary shares of 5 cent each 292,471,934 292,471,934

Redeemable ordinary shares of 5 cent each 7,528,066 7,528,066

300,000,000 300,000,000

Allotted, called-up and fully paid

Ordinary shares of 5 cent each 232,521,191 228,490,675

Redeemable ordinary shares of 5 cent each 7,528,066 7,528,066

In issue at 30 September 240,049,257 236,018,741

The redeemable ordinary shares do not rank for dividend and do not carry voting rights. The redeemable ordinary

shares can be redeemed by the Company with the agreement of holders of such shares. All redeemable ordinary

shares are held by the Group.




The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one

vote per share at meetings of the Company. All shares rank equally with regard to the Company’s residual assets.

Ordinary sharesRedeemable

ordinary shares

2008 2007 2008 2007

In issue at beginning of year 228,490,675 223,735,669 7,528,066 7,528,066

Exercise of share options 694,125 1,355,025 - -

Employee share participation scheme 329,889 370,270 - -

Customer share scheme 1,405,248 1,199,808 - -

Scrip issue 1,601,254 1,453,964 - -

Acquisition consideration - 375,939 - -

In issue at end of year 232,521,191 228,490,675 7,528,066 7,528,066

Company profit

The loss recorded in the financial statements of the holding Company for the year ended 30 September 2008 was

€10,157,000 (2007: profit of €27,772,000). As permitted by Section 148(8) of the Companies Act, 1963, the income

statement of the Company has not been separately presented in these financial statements.

Cash flow hedge reserve

The cash flow hedge reserve comprises the effective portion of the cumulative net change in the fair value of

cash flow hedging instruments related to hedged transactions that have not yet occurred.

Share-based payment reserve

This reserve comprises amounts expensed in the income statement in connection with share-based payments,

net of transfers to retained earnings on the exercise of share-based payments.

Foreign exchange reserve

The currency translation reserve comprises all foreign exchange differences from 1 October 2004, arising from the

translation of the net assets of the Group’s non-euro denominated operations, including the translation of the profits

of such operations from the average exchange rate for the year to the exchange rate at the balance sheet date.

The reserve also includes all foreign exchange differences arising from the translation of liabilities that hedge the

Company’s net investment in a foreign subsidiary.

Treasury shares

Dublin Drug Company Limited

During the year ended 30 September 1998, the Group acquired Dublin Drug Company Limited for consideration

of €11,726,000, which at the date of its acquisition held 2,225,438 ordinary shares of 32 cent each in United

Drug plc which had a nominal value of €706,000 and at the date of their acquisition represented 9.84% of the

Company’s issued ordinary share capital. Subsequent to the acquisition, these ordinary shares were converted

into redeemable ordinary shares of 32 cent each.

On 29 January 2002, 1,150,000 of these redeemable ordinary shares of 32 cent each were redeemed at their

market value both out of the proceeds of a placing in the market of 1,150,000 new ordinary shares of 32 cent

each and the distributable reserves of the Company, in accordance with Article 3A of the Articles of Association

of the Company and Section 207 of the Companies Act, 1990, and immediately thereafter were cancelled.



During the year ended 30 September 2003, the Company’s shareholders approved a 7 for 1 split of the ordinary

share capital and redeemable ordinary share capital of the Company. At 30 September 2008, Dublin Drug

Company Limited continued to hold 7,528,066 redeemable ordinary shares and they have been treated as

treasury shares in the Group balance sheet in accordance with the requirements of Irish Company Law.

AshfieldIn2Focus Limited

During the year ended 30 September 2005, a subsidiary undertaking, Ashfield Healthcare Limited, subsequently

renamed AshfieldIn2Focus Limited, acquired 95,000 ordinary shares in the Company, on the open market, at

a cost of €366,000. These shares have been allocated to employees subject to the risk of forfeiture should the

employee leave the company during the vesting period. As at 30 September 2008, the balance of ordinary

shares held in the Company was 76,370 (2007: 95,000).

Share award schemes

During the year ended 30 September 2007, €377,000 was earned by senior management, excluding the Chief

Executive, under the share incentive scheme for the achievement of superior financial targets. During the year

ended 30 September 2007, the Chief Executive earned €240,000 under his Long Term Incentive Plan. On 13

March 2008, shares valued at €617,000 were acquired from the market at a price of €3.90 per share. The 158,226

shares acquired are held in Trust, subject to restrictions, primarily the risk of forfeiture should the employee leave

the Group during the vesting period.

At 30 September 2008, 7,762,662 (2007: 7,623,066) treasury shares were held by the Group, of which 7,528,066

(2007; 7,528,066) do not rank for dividend and do not carry voting rights. Total treasury shares held by the Group

at 30 September 2008 represented 3.23% (2007; 3.23%) of the issued ordinary and redeemable ordinary share

capital of the Company.

15. Interest-bearing loans and borrowings

2008€’000

2007€’000

Non-current

Bank borrowings 144,591 4,456

Finance leases 1,364 469

Guaranteed senior unsecured notes 71,246 69,948

217,201 74,873

Current

Bank overdrafts 1,266 8,000

Bank borrowings 12,603 28,234

Finance leases 1,157 576

15,026 36,810



15. Interest-bearing loans and borrowings (continued)

Interest-bearing loans and borrowings are repayable as follows: 2008€’000

2007€’000

Bank borrowings, guaranteed senior unsecured notes and overdrafts

Within one year 13,869 36,234

After one but within two years 1,822 1,641

After two but within five years 166,336 30,080

After five years 47,679 42,683

Finance leases

Within one year 1,157 576

After one but within two years 980 469

After two but within five years 384 -

232,227 111,683

Non-current 217,201 74,873

Current 15,026 36,810

232,227 111,683

During 2004, the Group completed a US$102 million debt financing in the US Private Placement Market and

issued the following notes:

2008US$’000

2007US$’000

5.25% Series ‘A’ guaranteed senior unsecured notes, 2011 40,000 40,000

5.68% Series ‘B’ guaranteed senior unsecured notes, 2014 40,000 40,000

5.85% Series ‘C’ guaranteed senior unsecured notes, 2016 22,000 22,000

102,000 102,000

The loan notes were issued by United Drug Finance Limited, a wholly owned subsidiary, and have been

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

swapped into a mixture of fixed and floating rate debt to generate the desired interest profile.

These loans are repayable in full on maturity.

Bank overdrafts are repayable on demand.

Other bank borrowings amounting to €4,450,000 are repayable after five years.

Borrowing facilities

At 30 September 2008, the Group had approximately €66 million of undrawn overdraft and loan facilities.

Of these facilities, €27 million were committed, with a maturity date of June 2011.

A 30 September 2007, the Group had approximately €39.2 million of undrawn overdraft and loan facilities

available for draw down. These facilities were uncommitted and once drawn, repayable on demand.


16. Trade and other payables

2008€’000

2007€’000

Current

Trade payables 230,322 228,566

Accruals and deferred income 53,480 33,276

Other payables 11,478 4,675

PAYE, VAT and social welfare 13,016 12,378

308,296 278,895

17. Provisions

Deferred consideration

2008€’000

Otherprovisions

2008€’000

Total2008€’000

Total2007

€’000

At beginning of year 16,635 679 17,314 19,242

Arising on acquisitions 11,053 - 11,053 11,288

Adjustments to estimates - - - (772)

Utilised during the year (7,921) (36) (7,957) (12,089)

Translation adjustment (1,054) - (1,054) (355)

At end of year 18,713 643 19,356 17,314

2008€’000

2007€’000

Non-current 7,821 9,377

Current 11,535 7,937

19,356 17,314

In the current year, deferred consideration has been classified as a provision. For consistency, the deferred

consideration at 30 September 2007 has been reclassified from trade and other payables to provisions. The

deferred consideration may become payable over the period from October 2008 to November 2010.

Payment is dependent on achieving predetermined targets based on future performance and profitability.

Other provisions primarily relate to several onerous leases that the Group remains committed to following the

rationalisation of the Group’s property portfolio. In calculating these provisions the Group made certain estimates

and assumptions in assessing the amount provided for excess facilities. The provision was calculated by taking

into consideration the committed rental charges associated with the premises, the period of time to the earliest

date on which the Group can exit from the premises and an assessment of the sublet rental income that could

be achieved based on current market conditions. Adjustments to estimates of the level of provisions required

have been recognised in the Group income statement within administrative expenses.



18. Operating leases

Leases as lessee

Non-cancellable operating lease rentals are payable as set out below. These amounts represent the minimum

future lease payments, in aggregate, that the Group is required to make under existing lease agreements.

2008€’000

2007€’000

Less than one year 7,525 6,942

Between two and five years 20,917 18,291

More than five years 25,048 26,598

53,490 51,831

The Group leases certain property, plant and equipment under operating leases. The leases typically run for an

initial lease period with the potential to renew the leases after the initial period.

The significant operating leases entered into by the Group are in respect of office and warehouse facilities in

Dublin. These leases commenced in June 2004 for a term of twenty five years and provide for rent reviews every

five years. On 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 rent review date. The Group has

the ability to terminate the leases in June 2019.

19. Deferred tax assets and liabilities

Recognised deferred tax assets and liabilities are attributable to the following:

Assets2008

€’000

Liabilities2008€’000

Net2008€’000

Assets2007

€’000

Liabilities2007

€’000

Net2007

€’000

Property, plant and equipment - (1,552) (1,552) - (1,713) (1,713)

Intangible assets - (9,301) (9,301) - (9,534) (9,534)

Employee benefits - (267) (267) 961 - 961

Derivative financial instruments - (178) (178) - (63) (63)

Other items 1,086 - 1,086 824 - 824

Tax assets/(liabilities) 1,086 (11,298) (10,212) 1,785 (11,310) (9,525)

Reclassification (1,086) 1,086 - (1,785) 1,785 -

Net tax liabilities - (10,212) (10,212) - (9,525) (9,525)

No deferred tax is recognised on the unremitted earnings of overseas subsidiaries and joint ventures as the Group

does not anticipate additional tax on any ultimate remittance.



19. Deferred tax assets and liabilities (continued)

Movement in temporary differences during the year

1 October2007

€’000

Arisingin income

€’000

Arisingin equity

€’000

Arising onacquisitions

€’000

Translationadjustment

€’000

30 September2008€’000

Property, plant and equipment (1,713) 136 - - 25 (1,552)

Intangible assets (9,534) 2,477 - (3,122) 878 (9,301)

Employee benefits 961 (428) 402 (973) (229) (267)

Derivative financial instruments (63) - (115) - - (178)

Other items 824 128 - - 134 1,086

(9,525) 2,313 287 (4,095) 808 (10,212)

1 October2006

€’000

Arisingin income

€’000

Arisingin equity

€’000

Arising onacquisitions

€’000

Translationadjustment

€’000

30 September2007

€’000

Property, plant and equipment (1,903) 423 - (233) - (1,713)

Intangible assets (3,516) 1,514 - (7,782) 250 (9,534)

Employee benefits 2,226 - (1,265) - - 961

Derivative financial instruments 178 - (241) - - (63)

Other items 258 98 - 477 (9) 824

(2,757) 2,035 (1,506) (7,538) 241 (9,525)

20. Acquisition of subsidiary undertakings

The acquisitions completed by the Group during the year, together with percentages acquired were as follows:

nAlliance Healthcare Information Inc (100%): a pharmaceutical sales and marketing services company.

This company was acquired on 15 October 2007.

nProcon Conferences Limited (100%): a pharmaceutical conference services company. This company

was acquired on 20 November 2007.

nJVA Analytical Limited (100%): a distributor of specialist analytical chemistry equipment. This company

was acquired on 13 December 2007.

nUniversal Conference and Incentive Travel Limited (100%): a provider of event management services

to the pharmaceutical sector. This company was acquired on 3 April 2008.

nBusiness Edge Solutions & Training Limited (100%): a provider of sales force effectiveness training services

to the pharmaceutical sector. This company was acquired on 3 April 2008.

nSharp Corporation (100%): a provider of contract packaging services to the pharmaceutical sector.

This company was acquired on 11 August 2008.

Including estimated deferred consideration payable of €11,053,000 and interest-bearing loans and borrowings

assumed, the total consideration for all these transactions was €120,432,000.


20. Acquisition of subsidiary undertakings (continued)

The Group has also reviewed its estimate of consideration in respect of prior year acquisitions. Additional

professional fees of €164,000 were paid during the year, as well as an adjustment of €225,000 to inventory

valuations. This has resulted in a corresponding increase in goodwill in excess of amounts previously recorded.

On the basis that this adjustment was not deemed to be material, it was accounted for in the current period.

The Group did not dispose of any subsidiaries in 2008 or 2007.

The acquisition of Sharp Corporation (“Sharp”) has been deemed to be a material transaction and separate

disclosure of the fair values of the identifiable assets and liabilities has therefore been made. None of the

remaining business combinations completed during the financial year were considered sufficiently material

to warrant separate disclosure of the fair values attributable to those combinations.

The carrying amount of assets and liabilities which were acquired, determined in accordance with IFRS, before

completion of the combinations, together with the adjustments made to those carrying values to arrive at the

fair values were as follows:

Sharp Other acquisitions

Book

values

€’000

Fair

value

adjustments

€’000

Total

€’000

Book

values

€’000

Fair

value

adjustments

€’000

Total

€’000

Total

in respect

of current

year

acquisitions

€’000

Adjustments

to prior

year

acquisitions

€’000

Total

€’000

Property, plant and

equipment 26,444 - 26,444 2,775 282 3,057 29,501 - 29,501

Intangible assets - 9,127 9,127 - 20,935 20,935 30,062 - 30,062

Inventories 6,808 - 6,808 702 - 702 7,510 (225) 7,285

Trade and other receivables 7,968 - 7,968 10,875 - 10,875 18,843 - 18,843

Employee benefit asset - 10,432 10,432 - - - 10,432 - 10,432

Trade and other payables

(current) (4,370) - (4,370) (11,188) - (11,188) (15,558) - (15,558)

Employee benefit liability - (8,001) (8,001) - - - (8,001) - (8,001)

Deferred tax - (973) (973) - (3,122) (3,122) (4,095) - (4,095)

Net identifiable assets and

liabilities acquired 36,850 10,585 47,435 3,164 18,095 21,259 68,694 (225) 68,469

Goodwill arising on

acquisition 22,013 29,725 51,738 389 52,127

69,448 50,984 120,432 164 120,596

Satisfied by:

Cash consideration 57,746 46,058 103,804 - 103,804

Professional fees incurred 1,202 1,624 2,826 164 2,990

Net cash and cash

equivalents acquired on

acquisition - (6,204) (6,204) - (6,204)

58,948 41,478 100,426 164 100,590

Interest-bearing loans and

borrowings assumed on

acquisition 8,368 585 8,953 - 8,953

Deferred consideration 2,132 8,921 11,053 - 11,053

69,448 50,984 120,432 164 120,596



The initial assignment of fair values to identifiable net assets acquired has been performed on a provisional

basis in respect of a number of the business combinations disclosed above given the timing of completion of

these transactions. Any amendments to these fair values within the twelve month timeframe from the date of

acquisition will be disclosable in the 2009 Annual Report as stipulated by IFRS 3, Business Combinations.

Goodwill is attributable to the future economic benefits arising from assets which are not capable of being

individually identified and separately recognised. The significant factors giving rise to the goodwill include the

value of the workforce and management 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.

The Group’s results for the year ended 30 September 2008 includes the following amounts in respect of the

businesses acquired during the year:

Sharp2008€’000

Otheracquisitions

2008€’000

Total2008€’000

Total2007

€’000

Revenue 8,802 45,872 54,674 26,361

Gross profit 2,227 13,143 15,370 10,854

Distribution expenses (1,554) (8,305) (9,859) (7,148)

Other operating expenses* (176) (2,306) (2,482) (2,983)

Operating profit 497 2,532 3,029 723

Net interest expense (414) (2,193) (2,607) (1,059)

Profit/(loss) before tax 83 339 422 (336)

Income tax (33) (215) (248) 149

Profit/(loss) after tax 50 124 174 (187)

*Other operating expenses consist of amortisation of intangible assets.

Had these acquisitions been effected on 1 October 2007 the combined Group would have recorded total

revenues of €1,738,069,000 and profit after interest and tax for the financial year of €50,132,000.

2007 Business combinations

During the year end 30 September 2007, the principal acquisitions completed by the Group, together with

percentages acquired were as follows:

nPyramed Limited (100%): a specialist UK based distributor of medical devices and equipment. This company

was acquired on 2 February 2007.

nBudelpack Hamont N.V. (100%): a Belgium based company providing contract packaging services designed

specifically for the pharmaceutical and healthcare industry. This company was acquired on 11 April 2007.

nCraig & Hayward Limited (100%): a UK based supplier of specials medicines in the UK market. This company

was acquired on 4 May 2007.

nPharma Logistics Investments B.V. (100%): a specialised contract packaging company focused on packaging

and production services for pharmaceuticals and healthcare products, based in The Netherlands. This

company was acquired on 17 August 2007.




None of the business combinations completed during the year ended 30 September 2007 were considered

sufficiently material as to warrant separate disclosure of the fair values attributable to these combinations. The

carrying amounts of assets and liabilities which were acquired, determined in accordance with IFRS, before

completion of the combinations were as follows:

Bookvalues

2007€’000

Fair valueadjustments

2007€’000

Total inrespect of

current yearacquisitions

2007€’000

Adjustmentsto prior yearacquisitions

2007€’000

Total2007

€’000

Property, plant and equipment 11,591 - 11,591 - 11,591

Intangible assets - 31,147 31,147 - 31,147

Inventories 4,821 - 4,821 - 4,821

Trade and other receivables 8,863 - 8,863 - 8,863

Trade and other payables (current) (11,596) - (11,596) - (11,596)

Deferred tax (233) (7,305) (7,538) - (7,538)

Net identifiable assets and liabilities acquired 13,446 23,842 37,288 - 37,288

Goodwill arising on acquisition 28,472 256 28,728

65,760 256 66,016

Satisfied by:

Cash consideration 52,476 256 52,732

Professional fees incurred 1,311 - 1,311

Net cash and cash equivalents acquired on acquisition (2,576) - (2,576)

51,211 256 51,467

Equity share capital issued 1,511 - 1,511

Interest-bearing loans and borrowings assumed on acquisition 1,750 - 1,750

Deferred consideration 11,288 - 11,288

65,760 256 66,016

Had these acquisitions been effected on 1 October 2006 the combined Group would have recorded total

revenues of €1,616,503,000 and profit after interest and tax for the financial year of €50,061,000.


21. Employee benefits

The aggregate employee costs recognised in the Group income statement are as follows:

2008€’000

2007€’000

Wages and salaries 127,643 103,215

Social security contributions 14,900 9,183

Pension costs – defined contribution schemes 3,052 3,163

Pension costs – defined benefit schemes 1,579 1,652

Share-based payment expense 1,430 1,126

148,604 118,339

The average weekly number of employees, including executive directors, during the year was as follows:

2008 2007

Marketing, distribution and selling 2,802 2,232

Manufacturing 486 390

Administration 128 118

3,416 2,740

A further 810 (2007: 685) personnel are employed in the Group’s joint ventures.

(i) Defined contribution schemes

The Group makes contributions to a number of defined contribution schemes, the assets of which are vested in

independent trustees for the benefit of members and their dependants.

(ii) Defined benefit schemes

The following amounts were recognised in the balance sheet of the Group in respect of employee benefit

schemes as at 30 September:

2008€’000

2007€’000

Employee benefit asset 11,720 -

Employee benefit liability (17,569) (6,334)

(5,849) (6,334)

The Group operates a number of schemes as at 30 September:

Net asset/(liability)2008€’000

2007€’000

Republic of Ireland defined benefit schemes (9,171) (5,365)

Northern Ireland defined benefit scheme 770 (969)

United States defined benefit scheme 10,950 -

United States multi-employer scheme (8,398) -

(5,849) (6,334)



21. Employee benefits (continued)

The Group operates a number of defined benefit schemes which are funded by the payment of contributions

to separately administered trust funds. The contributions to the schemes are determined with the advice of

independent qualified actuaries obtained at regular intervals using the projected unit method of funding. Each

defined benefit scheme is independently funded and the assets are vested in the independent trustees for the

benefit of members and their dependants. The valuations are not available for public inspection but the results

are advised to members of the schemes.

The most recent full actuarial valuations for the principal schemes were conducted as at 30 June 2007 for the

Republic of Ireland (ROI) schemes and 1 April 2007 for the Northern Ireland (NI) scheme. The principal assumption

used in both reviews was that the annual rate of return on investments would be 2-2.5% higher than the annual

rate of increase in pensionable salaries.

The principal assumptions used by the actuaries as at 30 September were:

ROI Schemes

US Scheme

NI Scheme

2008 2007 2006 2008 2008 2007 2006

Rate of increase in salaries 3.50% 3.50% 3.50% 4.50% 4.20% 3.90% 3.50%

Rate of increase in pensions 0-2.50% 0-2.25% 0-2.25% 4.50% 3.60% 3.40% 3.00%

Inflation rate 2.50% 2.25% 2.25% 3.00% 3.70% 3.40% 3.00%

Discount rate 6.10% 5.40% 4.50% 8.10% 6.60% 5.90% 5.00%

The valuation method used for all Group defined benefit schemes is the projected unit method.

The expected rates of return at 30 September were:

ROI Schemes

US Scheme

NI Scheme

2008 2007 2006 2008 2008 2007 2006

Equities 8.00% 7.75% 7.50% N/A 8.75% 7.75% 7.25%

Bonds 4.75% 4.50% 3.80% N/A 4.75% 4.75% 4.25%

Property 6.75% 6.50% 6.50% N/A 7.00% 6.75% 6.25%

Other 3.50% 2.25% 2.25% 4.85% 5.25% 4.75% 4.75%

The assumptions are based on long term expectations.

All schemes used certain mortality rate assumptions when calculating scheme obligations. The current assumptions

for all major schemes retain a prudent allowance for future improvements in longevity and reflect actual

experience. The ROI and US schemes used the PMA 92 (2030) mortality table for current employees and

the PMA 92 (2015) mortality table for retired members.

The NI scheme mortality assumptions are based on standard mortality tables which allow for future mortality

improvements. It is assumed that a member currently aged 65 will live on average for a further 22 years if they

are male and a further 24 years if they are female. For a member who retires in 2028 at age 65, it is assumed

that they will live on average for a further 24 years after retirement if they are male and a further 25 years after

retirement if they are female.



The market values of assets in the pension schemes at 30 September 2008 were:

ROI2008€’000

US2008€’000

NI2008€’000

Total2008€’000

Equities 11,437 - 4,377 15,814

Bonds 2,859 - 5,672 8,531

Property 1,177 - 992 2,169

Other 1,346 11,809 59 13,214

Fair value of scheme assets 16,819 11,809 11,100 39,728

Present value of scheme obligations (25,990) (859) (10,330) (37,179)

Employee benefits (liability)/asset (9,171) 10,950 770 2,549

Deferred tax assets/(liability) 1,146 (4,375) (215) (3,444)

Net (liability)/asset (8,025) 6,575 555 (895)

2007€’000

2007€’000

2007€’000

2007€’000

Equities 16,256 - 8,152 24,408

Bonds 2,721 - 4,239 6,960

Property 1,593 - 1,085 2,678

Other 868 - 9 877

Fair value of scheme assets 21,438 - 13,485 34,923

Present value of scheme obligations (26,803) - (14,454) (41,257)

Employee benefits liability (5,365) - (969) (6,334)

Deferred tax assets 670 - 291 961

Net liability (4,695) - (678) (5,373)

Movements in fair value of plan assets

ROI2008

€’000

US2008€’000

NI2008€’000

Total2008€’000

ROI2007

€’000

NI2007

€’000

Total2007

€’000

At beginning of year 21,438 - 13,485 34,923 19,316 12,924 32,240

Acquired during the year - 11,258 - 11,258 - - -

Expected return on scheme assets 1,625 - 773 2,398 1,330 806 2,136

Employer contributions 4,213 - 589 4,802 1,233 605 1,838

Employee contributions 72 - 126 198 68 139 207

Benefit payments (2,929) (21) (301) (3,251) (556) (879) (1,435)

Actual return less expected return on scheme assets (7,600) - (2,006) (9,606) 47 344 391

Translation adjustment - 572 (1,566) (994) - (454) (454)

At end of year 16,819 11,809 11,100 39,728 21,438 13,485 34,923




Movements in present value of defined benefit obligations

ROI2008

€’000

US2008€’000

NI2008€’000

Total2008€’000

ROI2007

€’000

NI2007

€’000

Total2007

€’000

At beginning of year 26,803 - 14,454 41,257 28,760 16,410 45,170

Acquired during the year - 826 - 826 - - -

Current service costs 1,362 65 325 1,752 1,257 428 1,685

Interest on scheme obligations 1,435 8 782 2,225 1,288 815 2,103

Employee contributions 72 - 126 198 68 139 207

Benefit payments (2,929) (21) (301) (3,251) (556) (879) (1,435)

Actuarial loss/(gain) on experience variations 1,476 - (670) 806 1,547 12 1,559

Effect of changes in actuarial assumptions (2,229) (60) (2,762) (5,051) (5,561) (2,068) (7,629)

Translation adjustment - 41 (1,624) (1,583) - (403) (403)

At end of year 25,990 859 10,330 37,179 26,803 14,454 41,257

Reconciliation of the actuarial loss to the plan assets and present value of the defined benefit obligation is as follows:

2008€’000

2007€’000

2006€’000

2005€’000

Actual return less expected return on scheme assets (9,606) 391 1,726 3,160

Actuarial (loss)/gain on experience variations (806) (1,559) (1,536) 1,045

Effect of changes in actuarial assumptions 5,051 7,629 (856) (6,787)

Actuarial (loss)/gain recognised in statement of recognised income and expense (5,361) 6,461 (666) (2,582)

Historical information2008€’000

2007€’000

2006€’000

2005€’000


Present value of scheme obligations 37,179 41,257 45,170 40,188



Defined benefit pension expense recognised in the income statement

ROI2008€’000

US2008€’000

NI2008€’000

Total2008€’000

Current service costs (1,362) (65) (325) (1,752)

Interest on scheme obligations (1,435) (8) (782) (2,225)

Expected return on scheme assets 1,625 - 773 2,398

(1,172) (73) (334) (1,579)

2007€’000

2007€’000

2007€’000

2007€’000

Current service costs (1,257) - (428) (1,685)

Interest on scheme obligations (1,288) - (815) (2,103)

Expected return on scheme assets 1,330 - 806 2,136

(1,215) - (437) (1,652)

The tax effect relating to these items is disclosed in note 19.

The cumulative actuarial loss recognised in the statement of recognised income and expense is €5,498,000

(2007: €137,000).

The expected employers’ contribution for the year ended 30 September 2009 is €2,124,000.

Multi-employer scheme

Sharp Corporation, acquired during the year by the Group, participates in a multi-employer scheme, namely the

Graphic Communications Conference of the International Brotherhood of Teamsters Supplemental Retirement

and Disability Fund.

2008€’000

2007€’000

Arising on acquisition (8,001) -

Translation adjustment (397) -

Employee benefits liability as at 30 September (8,398) -

Deferred tax asset 3,177 -

Net liability (5,221) -

The last available actuarial valuation of the assets and liabilities of the multi-employer scheme was carried out

as at 1 May 2007. The value of assets as at the date of acquisition (11 August 2008), has been independently

estimated by adjusting the 1 May 2007 value for expected market investment losses and distributions since that

date. The expected value of liabilities has also been estimated by rolling forward the liabilities and adjusting

these for changes in the discount rate between 1 May 2007 and date of acquisition.




Share based payments 2008€’000

2007€’000

Share option expense 1,255 1,126

Share incentive scheme expense 95 -

Long term incentive plan expense 80 -

1,430 1,126

Subsequent to the financial year ended 30 September 2007 it was agreed that €175,000 of accrued bonus would

be equity settled.

€431,000 (2007: €238,000) of the total share based payment expense recognised in the income statement relates

to the directors.

Share option schemes

The Group operates two share option schemes, both equity settled, which entitle key management to purchase

shares in United Drug plc so as to provide an incentive to perform strongly over an extended period and to

align their interests with those of shareholders. The terms of these schemes are outlined in the Report of the

Remuneration Committee on directors’ remuneration on pages 41 to 47. Under the terms of the schemes,

two types of options are granted to employees:

(i) Basic tier options which cannot be exercised before the expiration of three years and which are subject to

performance criteria as set out in the Report of the Remuneration Committee on directors’ remuneration; and

(ii) Second tier options which cannot be exercised before the expiration of five years and which are subject to

performance criteria as set out in the Report of the Remuneration Committee on directors’ remuneration.

The contractual life of both basic and second tier options is ten years. Options were last granted in June 2008

and a total of 1,387,500 basic tier and 1,100,000 second tier options (2007: 1,495,000 and 510,000 respectively)

were granted at that time. In accordance with the terms of the relevant scheme, options are exercisable at

the market price of the underlying share on the last dealing day preceding the date of grant.

The measurement requirements of IFRS 2 have been implemented in respect of share options that were granted

after 7 November 2002. The binomial valuation method has been used to value options.



A summary of the details in respect of share options granted in 2008 and 2007 is set out below:

Basic tier stock options

2008 2007

Grant date 17 June 2008 20 June 2007

Fair value at measurement date €0.94 €0.93

Share price at date of grant €3.85 €4.14

Exercise price €3.83 €4.06

Expected volatility 22% 20%

Expected life 6.5 years 6.5 years

Expected dividend yield 2.44% 2.50%

Risk-free interest rate 4.83% 4.35%

Valuation model Binomial model Binomial model

Vesting period 3 years 3 years

Second tier stock options

2008 2007

Grant date 17 June 2008 20 June 2007

Fair value at measurement date €0.99 €0.97

Share price at date of grant €3.85 €4.14

Exercise price €3.83 €4.06

Expected volatility 22% 20%

Expected life 7.5 years 7.5 years

Expected dividend yield 2.44% 2.50%

Risk-free interest rate 4.86% 4.35%

Valuation model Binomial model Binomial model

Vesting period 5 years 5 years

The number and weighted average exercise price of share options are as follows:

Weightedexercise

price2008

€

Numberof options

2008’000

Weightedexercise

price2007

€

Numberof options

2007’000

Options outstanding at beginning of year 2.84 11,014 2.48 11,301

Forfeited during the year 3.42 (749) 3.08 (937)

Exercised during the year 1.49 (694) 1.49 (1,355)

Granted during the year 3.83 2,488 4.06 2,005

Options outstanding at end of year 3.08 12,059 2.84 11,014

Options exercisable at end of year 2.18 4,300 1.84 3,907




At 30 September 2008 the range of exercise prices of outstanding share options was from €0.87 to €4.06.

Analysis of share options outstanding at year end

Options by exercise price

Exerciseprices

€

Number ofoptions

2008’000

Number ofoptions

2007’000

0.87 140 140

0.99 275 345

1.01 - 245

1.84 968 1,103

1.90 1,032 1,243

1.99 845 932

2.83 1,410 1,485

3.32 1,510 1,735

3.48 1,613 1,806

3.83 2,458 -

4.06 1,808 1,980

12,059 11,014

Restricted Shares

The Group operates a share incentive scheme and a long term incentive plan, which may be equity settled. The

general terms and conditions for such schemes and share awards granted under these schemes are detailed in

the Report of the Remuneration Committee on directors’ remuneration on pages 41 to 47.

Details of restricted shares at 30 September 2008 are set out below:

No. of shares

acquired‘000

Expense in income statement

€’000

At 1 October 2007 - -

Share incentive scheme 96 95

Long term incentive plan 62 80

At 30 September 2008 158 175


22. Financial instruments

Derivative financial instruments, which have been recognised at fair value on the Group balance sheet are

analysed as follows:

2008€’000

2007€’000

Non-current liabilities

Losses on cash flow hedges maturing after one year 4,946 3,121

Losses on fair value hedges maturing after one year 6,430 4,453

11,376 7,574

Current liabilities

Losses on cash flow hedges maturing within one year 64 2,707

Losses on fair value hedges maturing within one year 480 3,861

544 6,568

Total derivative liabilities 11,920 14,142

All of the above derivatives are cross currency swaps entered into as a hedge on balance sheet debt and are

described in further detail below. The interest element of the cash flow hedges will be recognised in the income

statement in the periods to 30 September 2016, as the associated interest on the hedged debt is recognised.

The swaps are a mixture of fixed to fixed and fixed to floating rate swaps. The Group classifies the fixed to floating

swaps as fair value hedges and has stated them at their fair value with a corresponding opposite adjustment

to the underlying debt for the risk being hedged. Both of these adjustments are recorded within the income

statement and to the extent they do not offset, this represents the ineffective portion of the fair value hedge.

The fair value of these swaps at 30 September 2008 was €6,910,000 (2007: €8,314,000).

The fixed to fixed rate cross currency interest rate swaps are classified as cash flow hedges and are stated at

their fair value. The fair value of these swaps at 30 September 2008 was €5,010,000 (2007: €5,828,000), and the

effective portion of this adjustment was accounted for in the cashflow hedge reserve. The fair value movement

out of the cashflow hedge reserve during the year was €105,000 (2007: €4,306,000). This fair value movement

materially represents an equal but opposite amount to the foreign exchange gain or loss recognised in the

income statement on the retranslation of underlying foreign currency debt.

Nature of derivative

instrumentsHedge period

Underlying hedge

Notional payable amount of contracts

outstanding

Notional receivable amount of contracts

outstanding Fair value liability

Cross currency

swaps

July 2004 to July 2016 (inclusive)

Interest rate & foreign currency

2008USD$’000102,000

2007USD$’000102,000

2008€’00084,718

2007€’00084,718

2008€’00011,920

2007€’00014,142

Risk exposures

The Group’s multi-national operations expose it to different financial risks that include foreign exchange rate risks,

credit risks, liquidity risks and interest rate risks. The Group has a risk management programme in place which

seeks to limit the impact of these risks on the financial performance of the Group. The Board has determined

the policies for managing these risks as set out below.



22. Financial instruments (continued)

Treasury policy

The Group’s treasury policies, which are regularly reviewed, are designed to reduce the financial risk in a cost

efficient way. A limited number of cross currency and interest rate swaps are undertaken periodically to hedge

underlying trading and interest rate exposures.

Credit risk

Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis.

Credit evaluations are performed on an ongoing basis across all divisions.

At the balance sheet date there were no significant concentrations of credit risk. The maximum exposure

to credit risk is represented by the carrying amount of each financial asset.

Interest rate risk

The majority of the Group’s ongoing operations are financed from a mixture of cash generated from operations

and borrowings. Borrowings are initially secured at floating interest rates and interest rate risk is monitored on

an ongoing basis. Interest rate swaps and forward rate agreements are used to manage interest rate risk when

considered appropriate having regard to the interest rate environment.

Funding and Liquidity

The Group believes it has sufficient cash resources and bank debt facilities at its disposal, which provides flexibility

in financing existing operations, acquisitions and other developments.

Currency profile

The currency profile of the Group’s net debt as at 30 September, after reflecting the effect of derivatives was

as follows:

Euro2008

€’000

Sterling2008€’000

USD2008€’000

Total2008€’000

Euro2007

€’000

Sterling2007

€’000

Total2007

€’000

Fixed rate debt (guaranteed senior unsecured notes) (34,984) - - (34,984) (35,090) - (35,090)

Floating rate debt (guaranteed senior unsecured notes) (36,262) - - (36,262) (34,858) - (34,858)

Cash at bank and short term deposits 45,602 34,698 4,732 85,032 25,038 32,509 57,547

Bank overdrafts (1,266) - - (1,266) (8,000) - (8,000)

Other loans and borrowings (76,156) - (80,899) (157,055) (29,086) - (29,086)

Derivatives (11,920) - - (11,920) (14,142) - (14,142)

Finance leases (332) (327) (1,862) (2,521) - (1,045) (1,045)

Loan notes payable on acquisitions - (139) - (139) - (3,604) (3,604)

Net debt by currency (115,318) 34,232 (78,029) (159,115) (96,138) 27,860 (68,278)



Foreign currency risk management

The majority of trade conducted by the Group’s Irish and Continental Europe businesses is in euro. Sterling is

the principal currency for the Group’s UK businesses. The US dollar is the principal currency for the Group’s US

businesses. Therefore the level of transactional foreign exchange exposure is not material to the Group. The

Group ensures that its net exposure is kept to an acceptable level by buying or selling foreign currencies at spot

and forward rates where necessary. As part of the Group’s net worth is denominated in sterling and US dollars

reflecting ongoing profit after tax reserves retained in sterling in the UK businesses and US dollars in US businesses,

the Group is subject to a translational foreign exchange exposure.

Sensitivity analysis

A ten percent strengthening of the euro against the US dollar at 30 September would have increased equity and

profit after tax by the amounts shown below. This analysis assumes that all other variables, in particular interest

rates, remain constant. The analysis is performed on the same basis for 2007.

Currency movement effect2008€’000

2007€’000

Equity 6,008 -

Profit after tax 188 -

A ten percent strengthening of the euro against sterling at 30 September 2008 and 30 September 2007 would not

have a material effect on equity or profit after tax of the Group.

Cash flow sensitivity analysis for variable rate instruments

A reduction of one hundred basis points in interest rates at the reporting date would have increased profit before

tax by the amounts shown below assuming all other variables including foreign currency rates remain constant.

An increase of one hundred basis points on the same basis would have an equal and opposite effect.

Effect of reduction of one hundred basis points2008€’000

2007€’000

Profit before tax 1,059 446





The following are the undiscounted contractual maturities of financial instruments, including interest payments

and excluding the impact of netting arrangements:

30 September 2008 Carrying amount

€’000

Contractualcash flow

€’000

6 monthsor less€’000

6-12months

€’000

Between1-2 years

€’000

Between2-5 years

€’000

More than5 years

€’000

Non derivative financial instruments

Bank overdrafts 1,266 1,266 1,266 - - - -

Other loans and borrowings 157,055 176,029 13,251 5,715 7,808 144,621 4,634

Finance leases 2,521 2,821 721 631 1,469 - -

Floating rate unsecured guaranteed senior notes 36,262 49,068 1,023 1,022 2,045 12,363 32,615

Fixed rate unsecured guaranteed senior notes 34,984 41,948 829 830 1,658 23,982 14,649

Loan notes on acquisitions 139 139 139 - - - -

Trade and other payables 308,296 308,296 308,296 - - - -

Provisions 19,356 19,703 8,577 3,305 3,321 4,500 -


Fixed rate hedges 5,010 5,985 118 119 237 3,577 1,934

Floating rate hedges 6,910 9,367 195 195 390 2,307 6,280

571,799 614,622 334,415 11,817 16,928 191,350 60,112

30 September 2007

Non derivative financial instruments

Bank overdrafts 8,000 8,000 8,000 - - - -

Other loans and borrowings 29,086 31,189 13,005 13,135 1,874 2,491 684

Finance leases 1,045 1,159 373 282 504 - -

Floating rate unsecured guaranteed senior notes 34,858 46,082 762 764 1,527 11,296 31,733

Fixed rate unsecured guaranteed senior notes 35,090 43,738 832 832 1,663 25,053 15,358

Loan notes on acquisitions 3,604 3,820 3,820 - - - -

Trade and other payables 278,895 278,895 278,895 - - - -

Provisions 17,314 17,314 3,275 4,662 4,877 4,500 -


Fixed rate hedges 5,828 6,856 36 35 70 4,137 2,578

Floating rate hedges 8,314 11,378 276 278 555 2,478 7,791

422,034 448,431 309,274 19,988 11,070 49,955 58,144



Maturity profile of net debt

In respect of income-earning financial assets and interest-bearing financial liabilities, the following table indicates

their effective interest rates at the balance sheet date and the periods in which they mature.

30 September 2008Effective

interest rateTotal€’000

Less than1 year€’000

Between1-2 years

€’000

Between2-5 years

€’000

More than5 years

€’000

Cash at bank and short term deposits 4.75% 85,032 85,032 - - -

Bank overdrafts 5.15% (1,266) (1,266) - - -

Cash and cash equivalents 83,766 83,766 - - -

Other loans and borrowings 4.31% (157,055) (12,464) (1,822) (138,319) (4,450)

Finance leases 7.70% (2,521) (1,157) (1,364) - -

Floating rate unsecured guaranteed senior notes 5.64% (36,262) - - (7,019) (29,243)

Fixed rate unsecured guaranteed senior notes 4.74% (34,984) - - (20,998) (13,986)

Loan notes on acquisitions (139) (139) - - -

Total loan notes (71,385) (139) - (28,017) (43,229)

Total before derivatives (147,195) 70,006 (3,186) (166,336) (47,679)

Derivatives (11,920) - - (4,448) (7,472)

Net debt (159,115) 70,006 (3,186) (170,784) (55,151)

30 September 2007

Cash at bank and short term deposits 5.16% 57,547 57,547 - - -

Bank overdrafts 5.28% (8,000) (8,000) - - -

Cash and cash equivalents 49,547 49,547 - - -

Other loans and borrowings 5.19% (29,086) (24,630) (1,641) (2,165) (650)

Finance leases 7.55% (1,045) (576) (469) - -

Floating rate unsecured guaranteed senior notes 4.38% (34,858) - - (6,853) (28,005)

Fixed rate unsecured guaranteed senior notes 4.74% (35,090) - - (21,062) (14,028)

Loan notes on acquisitions 6.00% (3,604) (3,604) - - -

Total loan notes (73,552) (3,604) - (27,915) (42,033)

Total before derivatives (54,136) 20,737 (2,110) (30,080) (42,683)

Derivatives (14,142) - - (4,922) (9,220)

Net debt (68,278) 20,737 (2,110) (35,002) (51,903)




The effect of the derivatives included above has been to swap US dollar denominated debt to euro

denominated debt and to partially swap fixed rate interest into floating rate interest.

Fair value of financial assets and financial liabilities

The fair value and book value of the Group’s financial assets and liabilities are not materially different in the

current and prior year. The Group estimates the fair value of financial instruments by using interest rate yield

curves to create and discount future cash flows.

23. Capital commitments

Capital expenditure authorised but not contracted amounted to €1,703,000 (2007: €6,750,000) at the balance

sheet date.

24. Related parties

The Group trades in the normal course of business with its joint venture undertakings. The aggregate value of

these transactions is not material in the context of the Group’s financial results.

IAS 19 also requires the disclosure of compensation paid to the Group’s key management personnel. This

comprises its executive and non-executive directors, together with Persons Discharging Managerial Responsibility

(‘PDMRs’) as defined in Section 12(8) of the Irish Market Abuse Directive Regulations.

Remuneration of key management personnel

2008€’000

2007€’000

Remuneration, excluding pension contributions 4,632 4,410

Pension contributions 648 710

5,280 5,120

In accordance with IFRS 2 Share-based payment an expense of €527,000 (2007: €459,000) has been recognised

in the Group income statement in respect of share options granted to key management personnel.

Details of the remuneration of the Group’s individual directors, together with the number of United Drug plc

shares owned by them and their outstanding share options are set out in the Report of the Remuneration

Committee on directors’ remuneration on pages 41 to 47.

25. Events after the balance sheet date

On 18 November 2008, the Group acquired the entire issued share capital of The Specials Laboratory Holdings

Limited, a manufacturer of unlicensed medicines for the retail pharmaceutical and hospital markets, based in

Northumberland in the United Kingdom. The consideration for the acquisition was Stg£20.1 million in cash, paid

on completion, plus additional consideration of up to Stg£4.5 million, payable based on achievement of agreed

targets over the twenty four months subsequent to the date of acquisition.

The Group is currently reviewing the fair values of the individual assets and liabilities acquired in respect of the

above acquisition. Therefore, it is impractical to provide the detailed disclosure requirements under IFRS 3 Business

Combinations at this point in time.

26. Comparative figures

Certain comparative figures have been reclassified to conform to the current year presentation.


Notes 2008€’000

2007€’000

Items of income/(expense) recognised directly within equity:

Company defined benefit pension schemes:

Actuarial (loss)/gain 36 (2,401) 1,966

Movement in deferred tax 300 (250)

Net (expense)/income recognised directly within equity (2,101) 1,716

(Loss)/profit for the financial year (10,157) 27,772

Total recognised income and expense for the year attributable to equity holders of the Company (12,258) 29,488

Company statement of recognised income and expensefor the year ended 30 September 2008


AssetsNotes 2008

€’0002007

€’000

Non-current

Property, plant and equipment 27 3,512 3,729

Investment in subsidiary undertakings 28 77,358 60,256

Deferred tax assets 29 662 412

Total non-current assets 81,532 64,397

Current

Inventories 30 63,328 61,023

Trade and other receivables 31 336,828 307,463

Income tax asset 984 813

Cash and cash equivalents 6,654 -

Total current assets 407,794 369,299

Total assets 489,326 433,696

Equity

Equity share capital 32 12,002 11,801

Share premium 32 116,409 103,473

Other reserves 32 53,342 52,529

Retained earnings 32 46,501 75,920

Capital and reserves attributable to equity holders of the Company 228,254 243,723

Liabilities

Non-current

Interest-bearing loans and borrowings 33 127,047 -

Provisions 35 2,378 216

Employee benefits 36 3,900 2,551

Total non-current liabilities 133,325 2,767

Current

Bank overdrafts 33 - 56,890


Trade and other payables 34 115,267 107,603

Provisions 35 2,480 463

Total current liabilities 127,747 187,206

Total liabilities 261,072 189,973

Total equity and liabilities 489,326 433,696



Director Director

Company balance sheetas at 30 September 2008


Notes 2008€’000

2007€’000

Cash flows from operating activities

(Loss)/profit before tax (9,882) 28,027

Impairment provision 5,146 -

Finance income (186) (138)

Finance expense 7,346 3,756

Operating profit 2,424 31,645

Depreciation charge 27 617 604

Profit on disposal of property, plant and equipment (14) (9)

Profit on disposal of subsidiary undertaking 28 - (26,893)

Share-based payment expense 36 601 412

Increase in inventories (2,305) (6,424)

(Increase)/decrease in trade and other receivables (25,560) 161,529

Increase in trade payables, employee benefits and other payables 6,577 24,096

Interest paid (7,346) (3,756)

Income taxes paid (221) (398)

Net cash (outflow)/inflow from operating activities (25,227) 180,806

Cash flows from investing activities

Interest received 186 138

Purchase of property, plant and equipment 27 (414) (239)

Proceeds from disposal of property, plant and equipment 28 18

Investment in subsidiary undertakings 28 (17,204) (9,661)

Net cash outflow from investing activities (17,404) (9,744)

Cash flows from financing activities

Proceeds from issue of shares (including share premium thereon, net of scrip issue) 7,119 7,761

Proceeds from interest-bearing loans and borrowings 123,241 22,250

Repayment of interest-bearing loans and borrowings (12,250) -

Acquisition of treasury shares (617) -

Dividends paid to equity holders of the Company (11,318) (9,636)

Net cash inflow from financing activities 106,175 20,375

Net increase in cash and cash equivalents 63,544 191,437

Cash and cash equivalents at beginning of year (56,890) (248,327)

Cash and cash equivalents at end of year 6,654 (56,890)

Cash and cash equivalents is comprised of:

Cash at bank and short term deposits 15,261 -

Bank overdrafts (8,607) (56,890)

6,654 (56,890)

Company cash flow statementfor the year ended 30 September 2008


27. Property, plant and equipment

Cost

Land andbuildings

2008€’000

Plant andequipment

2008€’000

Motorvehicles

2008€’000

Computerequipment

2008€’000

Total2008€’000

At 1 October 2007 3,829 4,667 1,093 3,684 13,273

Additions in year - 129 170 115 414

Disposals in year - - (37) - (37)

At 30 September 2008 3,829 4,796 1,226 3,799 13,650

Depreciation

At 1 October 2007 722 4,262 916 3,644 9,544

Depreciation charge for the year 77 303 145 92 617

Eliminated on disposal - - (23) - (23)

At 30 September 2008 799 4,565 1,038 3,736 10,138

Carrying amount

At 30 September 2008 3,030 231 188 63 3,512

At 30 September 2007 3,107 405 177 40 3,729

Cost2007

€’0002007

€’0002007

€’0002007

€’0002007

€’000

At 1 October 2006 3,829 4,624 990 3,624 13,067

Additions in year - 43 136 60 239

Disposals in year - - (33) - (33)

At 30 September 2007 3,829 4,667 1,093 3,684 13,273

Depreciation

At 1 October 2006 645 3,948 825 3,546 8,964

Depreciation charge for the year 77 314 115 98 604

Eliminated on disposal - - (24) - (24)

At 30 September 2007 722 4,262 916 3,644 9,544

Carrying amount

At 30 September 2007 3,107 405 177 40 3,729

No borrowings are secured on the above assets.

Notes forming part of the Company financial statements


28. Investment in subsidiary undertakings

2008€’000

2007€’000

Cost


Additions in year 21,419 9,661

Disposals in year - (24,107)

Impairment provision (5,146) -

Share options granted to employees of subsidiary undertakings 829 715

At end of year 77,358 60,256

Other investments relate to investment in subsidiary undertakings. The significant subsidiaries are detailed in note 40.

The additions to investments in subsidiary undertakings during the year of €21,419,000 comprises cash consideration of

€17,204,000 and deferred consideration of €4,215,000.

The impairment provision is in respect of the Company’s investment in a number of non-trading subsidiary undertakings.

The impairment provision does not impact on the Group’s results for the year ended 30 September 2008.

As part of an internal reorganisation of the Group’s business during the year ended 30 September 2007, the

Company disposed of its interests in a subsidiary undertaking at market value to a fellow group undertaking. The

Company realised a profit of €26,893,000 on the disposal. This amount was recognised in the Company’s income

statement during the year ended 30 September 2007.

29. Deferred tax assets

2008€’000

2007€’000

At beginning of year 412 820

Temporary differences (50) (158)

Employee benefits 300 (250)

At end of year 662 412

30. Inventories

2008€’000

2007€’000

Finished goods 63,328 61,023

In 2008, finished goods recognised as cost of sales amounted to €585,895,000 (2007: €546,002,000). There were no

material write-down of inventories to net realisable value in the years ended 30 September 2008 and 2007.

Current replacement cost does not differ materially from historical cost.

Notes forming part of the Company financial statements (continued)


31. Trade and other receivables

2008€’000

2007€’000

Current

Trade receivables 52,320 50,530

Amounts due from subsidiaries 280,940 251,582

Other receivables 3,410 5,295

Prepayments and accrued income 158 56

336,828 307,463

All amounts fall due within one year.

The maximum exposure to credit risk for trade receivables at the reporting date by geographical region was:

Geographical analysis of credit risk2008€’000

2007€’000

Republic of Ireland 52,289 50,530

Continental Europe 31 -

52,320 50,530

There is no material concentration of credit risk with regard to individual customers included in Company trade

receivables.

The ageing of trade receivables at 30 September was:

Gross value2008€’000

Impairment2008€’000

Gross value2007

€’000

Impairment2007

€’000

Not past due < 12 months 52,573 253 49,466 -

Past due

0 - 30 days 109 109 286 -

+ 30 days 55 55 986 208

52,737 417 50,738 208

The movement in the allowance for impairment in respect of trade receivables during the year was as follows:

2008€’000

2007€’000

At beginning of year 208 142

Bad debts written off during the year (292) -

Increase in provision during the year 501 66

At end of year 417 208


32. Capital and reserves

Equity sharecapital

€’000

Sharepremium

€’000

Otherreserves

€’000

Retainedearnings

€’000Total€’000

At 1 October 2006 11,563 94,439 51,403 56,068 213,473

Total recognised income and expense - - - 29,488 29,488

New shares issued 238 14,252 - - 14,490

Scrip issue - (5,218) - 5,218 -

Dividends - - - (14,854) (14,854)

Share-based payment expense - - 1,126 - 1,126

At 30 September 2007 11,801 103,473 52,529 75,920 243,723

Total recognised income and expense - - - (12,258) (12,258)

Transfer to share based payment reserve - - 175 - 175

Release from share based payment reserve - - (175) 175 -

New shares issued 201 12,936 - - 13,137

Purchase of treasury shares - - (617) - (617)

Dividends - - - (17,336) (17,336)

Share-based payment expense - - 1,430 - 1,430

At 30 September 2008 12,002 116,409 53,342 46,501 228,254

Other reserves represents a share-based payment reserve of €4,417,000 (2007: €2,987,000), a treasury shares

reserve of (€6,650,000) (2007: (€6,033,000)), a goodwill reserve of (€93,000) (2007: (€93,000)) and a non-

distributable reserve of €55,668,000 (2007: €55,668,000).

The Company’s non-distributable reserve consists of €16,762,000 (2007: €16,762,000) transferred from the share

premium account against which goodwill, arising from acquisitions in financial periods prior to 1 October 1999,

is offset on consolidation and a transfer from the income statement of €38,906,000 (2007: €38,906,000) arising

on the restructuring of group activities.

Details of equity share capital are set out in note 14.

33. Interest-bearing loans and borrowings

2008€’000

2007€’000

Non-current

Interest-bearing loans and borrowings 127,047 -

Current

Bank overdrafts - 56,890

Interest-bearing loans and borrowings 10,000 22,250

10,000 79,140

Details of how the Company manages risk exposures are set out in note 22.




Currency profile

The currency profile of the Company’s net debt as at 30 September 2008, after reflecting the effect of derivatives

was as follows:

Euro2008

€’000

USD2008€’000

Total2008€’000

Euro2007

€’000

USD2007

€’000

Total2007

€’000

Cash at bank and short term deposits 6,654 - 6,654 - - -

Bank overdrafts - - - (56,890) - (56,890)

Other loans and borrowings (70,963) (66,084) (137,047) (22,250) - (22,250)

Net debt by currency (64,309) (66,084) (130,393) (79,140) - (79,140)

Foreign currency risk management

The majority of trade conducted by the Company is in euro. Therefore, the level of transactional foreign

exchange exposure is not material to the Company. Part of the Company’s net worth is denominated in US

dollars and the Company is subject to foreign exchange exposure on this amount. This is addressed in the

sensitivity analysis below.

Sensitivity analysis

A ten percent strengthening of the euro against the US dollar at 30 September would have increased equity and

profit after tax by the amounts shown below. This analysis assumes that all other variables, in particular interest

rates, remain constant. The analysis is performed on the same basis for 2007.

Currency movement effect2008 €’000

2007 €’000

Equity 6,008 -

Profit after tax 6,008 -

Cash flow sensitivity analysis for variable rate instruments

A reduction of one hundred basis points in interest rates at the reporting date would have increased profit before

tax by the amounts shown below assuming all other variables including foreign currency rates remain constant.

An increase of one hundred basis points on the same basis would have an equal and opposite effect.

Effect of reduction of one hundred basis points2008€’000

2007€’000

Profit before tax 792 100




The following are the undiscounted contractual maturities of financial instruments, including interest payments

and excluding the impact of netting arrangements:

30 September 2008 Carrying amount

€’000

Contractualcash flow

€’000

6 monthsor less€’000

6-12months

€’000

Between1-2 years

€’000

Between2-5 years

€’000

Other loans and borrowings 137,047 153,091 12,811 2,811 5,211 132,258

Trade and other payables 115,267 115,267 115,267 - - -

Provisions 4,858 5,095 - 2,000 3,095 -

257,172 273,453 128,078 4,811 8,306 132,258

30 September 2007

Bank overdrafts 56,890 56,890 56,890 - - -

Other loans and borrowings 22,250 23,278 12,764 10,514 - -

Trade and other payables 107,603 107,603 107,603 - - -

Provisions 679 679 - 216 463 -

187,422 188,450 177,257 10,730 463 -

34. Trade and other payables

2008€’000

2007€’000

Current

Trade payables 91,378 101,244

Accruals and deferred income 21,213 5,241

Other creditors 2,676 1,118

115,267 107,603



35. Provisions

Deferredconsideration

2008€’000

Otherprovisions

2008€’000

Total2008€’000

Total2007

€’000

At beginning of year - 679 679 1,813

Arising on acquisitions 4,215 - 4,215 -

Adjustments to estimates - - - (772)

Utilised during the year - (36) (36) (362)

At end of year 4,215 643 4,858 679

2008€’000

2007€’000

Non-current 2,378 216

Current 2,480 463

4,858 679

A detailed description of the above provisions is provided in note 17.

36. Employee benefits

The aggregate employee costs recognised in the Company income statement are as follows:

2008€’000

2007€’000

Wages and salaries 5,676 7,319

Social security contributions 630 737

Pension costs – defined contribution schemes 301 146

Pension costs – defined benefit schemes 659 500

Share-based payment expense 601 412

7,867 9,114

The average weekly number of employees, including executive directors, during the year were as follows:

2008 2007

Marketing, distribution and selling 57 54

Administration 71 64

128 118

(i) Defined contribution schemes

The Company makes contributions to a number of defined contribution schemes, the assets of which are vested

in independent trustees for the benefit of members and their dependants.



(ii) Defined benefit schemes

The Company also operates a number of defined benefit schemes which are funded by the payment of

contributions to separately administered trust funds. All defined benefit schemes are closed to new entrants

since 1 January 2003.

The contributions to the schemes are determined with the advice of independent qualified actuaries obtained

at regular intervals using the projected unit method of funding. Each defined benefit scheme is independently

funded and the assets are vested in the independent trustees for the benefit of members and their dependants.

The valuations are not available for public inspection but the results are advised to members of the schemes.

The most recent full actuarial valuations for the principal schemes were conducted as at 30 June 2007. The

principal assumption used was that the annual rate of return on investments would be 2-2.5% higher than the

annual rate of increase in pensionable salaries.

The principal assumptions used by the actuaries as at 30 September were:

2008 2007 2006

Valuation method Projected unit method

Rate of increase in salaries 3.50% 3.50% 3.50%

Rate of increase in pensions 0 - 2.50% 0 - 2.25% 0-2.25%

Inflation rate 2.50% 2.25% 2.25%

Discount rate 6.10% 5.40% 4.50%

The expected rates of return at 30 September were:

2008 2007 2006

Equities 8.00% 7.75% 7.50%

Bonds 4.75% 4.50% 3.80%

Property 6.75% 6.50% 6.50%

Other 3.50% 2.25% 2.25%

The assumptions are based on long term expectations.

The market values of assets in the pension schemes at 30 September were:

2008€’000

2007€’000

Equities 4,863 7,748

Bonds 1,216 1,325

Property 501 714

Other 571 408

Fair value of scheme assets 7,151 10,195

Present value of scheme obligations (11,051) (12,746)

Employee benefits liability (3,900) (2,551)

Deferred tax assets 488 308

Net liability (3,412) (2,243)




Movements in fair value of plan assets

2008€’000

2007€’000


Expected return on scheme assets 771 989

Employer contributions 1,427 445

Employee contribution 1 1

Benefit payments (1,184) (283)

Actuarial loss on plan experience (828) -

Actual return less expected return on scheme assets (3,231) 22

At end of year 7,151 10,195

Movements in present value of defined benefit obligations

2008€’000

2007€’000


Current service costs 465 506

Interest on scheme obligations 681 982

Actuarial (gain)/loss on experience variations (855) 550

Actuarial loss on plan experience (828) -

Employee contributions 1 1

Benefits paid (1,184) (283)

Effect of changes in actuarial assumptions 25 (2,494)

At end of year 11,051 12,746

Reconciliation of the actuarial loss to the plan assets and present value of the defined benefit obligation is as follows:

2008€’000

2007€’000

2006€’000

2005€’000

Actuarial gain/(loss) on experience variations 855 (550) (592) (14)

Actual return less expected return on scheme assets (3,231) 22 396 245

Effect of changes in actuarial assumptions (25) 2,494 (320) (1,537)

Actuarial (loss)/gain recognised in the statement of recognised income and expense (2,401) 1,966 (516) (1,306)

Mortality rate assumptions and share-based payment information are detailed in note 21.

Historical information2008€’000

2007€’000

2006€’000

2005€’000


Present value of scheme obligations 11,051 12,746 13,484 11,678


37. Operating leases

Leases as lessee

Non-cancellable operating lease rentals are payable as set out below. These amounts represent the minimum

future lease payments, in aggregate, that the Company is required to make under existing lease agreements.

2008€’000

2007€’000

Less than one year 2,450 2,450

Between two and five years 9,801 9,801

More than five years 16,490 18,941

28,741 31,192

The Company leases certain property, plant and equipment under operating leases. The leases typically run for

an initial lease period with the potential to renew the leases after the initial period.

The significant operating leases entered into by the Company are in respect of office and warehouse facilities in

Dublin. These leases commenced in June 2004 for a term of twenty five years and provide for rent reviews every

five years. On 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 rent review date. The Company

has the ability to terminate the leases in June 2019.

38. Related party transactions

The Company has related party relationships with its subsidiaries and with the directors of the Company. Details

of the remuneration of the Company’s individual directors, together with the number of shares in the Company

owned by them and their outstanding share options are set out in the Report of the Remuneration Committee

on directors’ remuneration on pages 41 to 47.

Transactions with subsidiaries:

2008€’000

2007€’000

Management charges to subsidiaries 6,741 6,887

Sales to subsidiaries 340,700 309,130

Details of balances outstanding with subsidiaries are provided in note 31.

IAS 19 requires the disclosure of compensation paid to the Company’s key management personnel. This

comprises its executive and non-executive directors, together with Persons Discharging Managerial Responsibility

(‘PDMRs’) as defined in Section 12(8) of the Irish Market Abuse Directive Regulations.

Remuneration of key management personnel2008€’000

2007€’000

Remuneration, excluding pension contributions 4,059 3,761

Pension contributions 565 614

4,624 4,375

In accordance with IFRS 2 Share-based payment an expense of €353,000 (2007: €325,000) has been recognised

in the income statement in respect of share options granted to key personnel.



39. Contingent liabilities

Guarantees have been given by the Company in respect of borrowing facilities of certain subsidiary undertakings

and customers.

40. Significant subsidiaries

The following are the significant subsidiary undertakings of United Drug plc at 30 September 2008.

Incorporated and trading in the Republic of Ireland

Name Nature of business Group share

United Drug Wholesale Limited Wholesale distribution of pharmaceutical products 100%

Unitech Limited* Distribution of medical and scientific equipment and consumables 100%

Blackhall Pharmaceutical Distributors Limited Distribution of pharmaceutical products 100%

Ashfield Healthcare (Ireland) Limited Contract sales outsourcing 100%

Pemberton Marketing International Limited* Distribution of consumer products 100%

Intraveno Healthcare Limited Distribution of medical and pharmaceutical equipment and consumables 100%

Intrapharma Limited Distribution of medical and pharmaceutical equipment and consumables 100%

JVA Analytical Limited* Distribution of specialist analytical chemistry equipment 100%

All of the above companies have their registered office at United Drug House, Magna Drive, Magna Business

Park, Citywest Road, Dublin 24.

* Subsidiary undertakings owned directly by United Drug plc.

All shares held are ordinary shares.

Incorporated and trading in the United Kingdom


Sangers (Northern Ireland) Limited (1) Wholesale distribution of pharmaceutical products 100%

Ulster Anaesthetics Limited (2) Distribution of medical equipment and consumables 100%

United Drug (UK) Holdings Limited (3)* Investment holding company 100%

AshfieldIn2Focus Limited (3) Contract sales outsourcing 100%

New Splint Limited (3) Supply and distribution of medical devices 100%

Mantis Surgical Limited (3) Supply and distribution of surgical products 100%

TD Packaging Limited (4) Primary and secondary packaging solutions provider 100%

Presearch Limited (3) Distribution of laboratory equipment 100%

MASTA Limited (5) Service provider in the travel health field 100%

Endoscopy UK Limited (3) Distribution of medical equipment 100%

Universal Conference and Incentive Travel Limited (3)

Event management services provider100%


40. Significant subsidiaries (continued)


Business Edge Solutions & Training Limited (3) Sales force effectiveness training services provider 100%

Procon Conferences Limited (3) Pharmaceutical conference services company 100%

Craig & Hayward Limited (6) Distribution of specialised medicines 100%

Pyramed Limited (3) Distribution of specialised medical equipment 100%

(1) This company has its registered office at 2 Marshalls Road, Belfast BT5 6SR.

(2) This company has its registered office at Maryland Industrial Estate, Ballygowan Road, Castlereagh,

Belfast BT23 6BL.

(3) These companies have their registered office at Ashfield House, Resolution Road, Ashby-de-la-Zouch,

Leicestershire, LE65 1HW.

(4) This company has its registered office at Unit 6, Stephenson Road, Groundwell Industrial Estate,

Swindon, SN25 5AX.

(5) This company has its registered office at Unit 15, Moorfield Close, Yeadon, Leeds, LS19 7BN.

(6) This company has its registered office address at 7 Thames Park, Lester Way, Wallingford, Oxfordshire, OX10 9TA.


Incorporated and trading in Europe


Budelpack Hamont N.V. (7)* Packaging solutions provider 100%

Pharma Logistics Investments B.V. (8) Packaging solutions provider 100%

(7) This company has its registered office at Klöcknerslyaat 1, 3930 Hamont-Achel, Belgium.

(8) This company has its registered office at Appelhof 13, 8465 AX Oudehaske, The Netherlands.

Incorporated and trading in the United States


Sharp Corporation (9) Contract packaging company 100%

Alliance Healthcare Information Inc (10) Pharmaceutical sales and marketing company 100%

(9) This company has its registered office at 7541 Keebler Way, Allentown, PA 18106.

(10) This company has its registered office at Corporation Trust Center, 1209 Orange Street, Wilmington,

Delaware 19801.


41. Section 17 Guarantees

Pursuant to the provisions of Section 17, Companies (Amendment) Act, 1986, the Company has guaranteed the

liabilities of its wholly-owned subsidiary undertakings in the Republic of Ireland for the financial year ended 30

September 2008 and, as a result, such subsidiary undertakings are exempt from the filing provisions of Section 7,

Companies (Amendment) Act, 1986 and Regulation 20 of the European Communities (Accounts Regulations),

1993 respectively.


United Drug plc Annual Report 2008

From Distr ibut ion to Global Healthcare


Telephone: +353 1 463 2300 Facsimile: +353 1 459 6893 Email: [email protected] Website: www.united-drug.ie

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