Primary Recommendation

UDG Healthcare - Healthcare firms profitability soars after sale of low margin business

January 2016

Investing in shares may lose you all or some of your money. Past performance is no indication of future performance. Some of the shares recommended here may be small company shares, which can be relatively illiquid and hard to trade and this makes such shares more risky than other investments.

One of the most exciting investment situations is where a company reinvents itself by moving away from low margin activities and into those offering far higher levels of profitability. In the case of FTSE-250 firm, UDG Healthcare, as recently as five years ago its legacy drugs wholesale distribution business, which trades on less than 2% operating margins, still accounted for 64% of group profit but following a major disposal it’s now down to just 10%. In its place the group has carefully built up two fast growing divisions sporting margins of 10-12%, which have largely been responsible for eps rising 53% to Euro 34.9 cents between 2010-2015.Ashfield Healthcare, the larger of the two, is a field sales business that takes over the p ...

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With small companies there is an above average degree of risk compared to buying blue chips. Please be aware that we have not assessed the suitability of any of these investments for you. The newsletter simply states a personal view and diarises the editor’s investment decisions. Please speak to your stockbroker or other qualified individual to ascertain whether any of these companies mentioned would form useful additions to your own portfolios. Past performance is no indication of future success.

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