Uniphar plc (UPR) Earnings Call Transcript & Summary

Hello and welcome to the Uniphar 2019 Preliminary Results Presentation. My name is Courtney, and I'll be your coordinator for today's event. Please note that this conference is being recorded. [Operator Instructions] And I will now hand you over to our host, Brian O'Shaughnessy, to being today's conference. Thank you.

Thank you, Courtney. Good morning and welcome to Uniphar's Financial Results Presentation, which covers the year ended 31 December 2019. I am Brian O'Shaughnessy, and I'm responsible for Investor Relations and corporate development at Uniphar plc. Before we begin, I would like to remind everyone that you can access the presentation either on the Results Center section of our website under Investor Relations or via the link sent you to register for the conference call. The results presentation will last approximately 25 minutes and will be followed by Q&A. As Courtney indicated, you can place a question either by phone or on the portal, and we will deal with questions posted on the portal first. I would like to point out that the group has applied IFRS 16 in preparing its financial results. But for a meaningful like-to-like comparison, we've also included some results before the impact of IFRS 16. In these cases, we have indicated that they are pre-IFRS 16 figures. The 10-K include information on the impact after changing the current standard on the financial results. Finally, please note that the full year results presentation may contain certain forward-looking statements, beliefs or opinions, which are based on current expectations and projections about future events. Actual results may differ materially from those expressed or implied in such forward-looking statements. With that, I'd now like to hand you over to our CEO, Ger Rabbette.

Thanks, Brian. Good morning, and welcome to our first full year results call as a plc. We start on Slide 4, which is an overview of the group and give you an indication of the scale of the organization. Uniphar operates across 3 divisions, covering over 200 of the world's leading pharma and medtech manufacturers. Our workforce of over 2,200 colleagues are active across Ireland, the U.K., Benelux, the Nordics and the U.S., where we service over 160 countries worldwide. Today, over 50% of our gross profit is generated from our 2 growth divisions, namely Commercial & Clinical and in Product Access. Moving on to Slide 5. We highlight the strong financial performance of the group for the full year. What I would say is that we're really pleased that each of the 3 divisions are delivering robust gross profit growth through a combination of strong organic and inorganic growth. For the full year '19, we delivered gross profit of EUR 180 million, up 56% on prior year. Our EBITDA for the year came in at EUR 48 million, which is ahead of expectations. Our return on capital employed was a very healthy 14.7%, and we finished the year with net cash of EUR 26 million. We intend to pay a EUR 2 million dividend in respect to 2019, subject to approval at the AGM. From a strategic perspective, 2019 was a transformational year for the group. Our successful IPO in July has provided us with a capital structure we needed to double our EBITDA within 5 years, while at the same time, maintaining leverage at very low levels. We continue to grow the organization through M&A, and we completed 3 acquisitions in H2. The integration of these businesses is progressing in line with expectations. The benefits of Uniphar's scale, resources, reputation is already having a very positive impact for all 3 acquisitions. Our international credentials are obtained by the fact that 77% of the organic growth within our 2 growth divisions is now generated outside of Ireland. Looking ahead, we're very pleased, and we are well-positioned to deliver our 2020 plan with the extension of the impact of the coronavirus, which we'll discuss later. We see exciting opportunities for ourselves to win new business, grow organically and continue our international expansion. Our strategy is to leverage the scale and expertise with strong cash flows we have in supply chain to grow into higher margin areas. This strategy is now paying dividends with Commercial & Clinical delivering 15% EBITDA margins and Product Access on track to deliver 10% by year-end. Moving on, I'll now dig into each of the divisions in a bit more detail. Turning to Slide 7, Commercial & Clinical. This division provides sales, marketing and distribution solutions to both pharma and medtech manufacturers. The business is specialty focused. In pharma, we are insight-driven, and we leverage our unique multichannel complementary solution for our clients. In medtech, we deliver a niche-risk agency model, managing the entire sales, marketing and distribution value chain on behalf of our partners. We're strong in Ireland, the U.K., Benelux and the Nordics, and we remain committed to building a pan-European platform to offer our clients a one-stop-shop to Europe. Today, this market is very fragmented, reported very contemporary challenges for both specialty pharma and medtech manufacturer who wish to enter the European markets. This division was going strongly and our commitment to expansion was demonstrated to our entry in Eastern Nordics in H2 last year. Revenue for the division for the year was EUR 204 million and gross profit was EUR 77 million, delivering organic gross profit of 5%, which is in line with guidance. The revenue split was 77% medtech, 23% pharma. What we're most pleased about is that the pharma unit, which is a complementary solution, delivered over 35% organic growth -- gross profit growth year-on-year. I would also like to point out that over 45% of the gross profit of this division is now generated from outside of Ireland. Another important KPI growth on this slide is that HCP interactions, which has grown by over 70%, this clearly demonstrates the growing number of strong relationships and exchanges between our teams and the HCPs, increasing the value we deliver to our clients. Our second growth division, Product Access, is outside Irish, where we are building a global capability to, number one, source and supply medicines, which are unlicensed or short -- or in short supply; two, manage the release of specialty medicines to specific patients on behalf of manufacturers. And we see this as a huge opportunity for ourselves because of the growth of specialty and the challenges/troubles we face in funding these high-priced treatments. The division is now serving over 160 countries worldwide. The acquisition of Durbin in H2 gives us the platform we need to become a global leader in this high-growth market niche. Revenue for this division came in at EUR 132 million; gross profit of EUR 17 million, driven by a very strong organic growth of 16%, which was slightly ahead of expectations. Revenue was split 48% Exclusive Access, 52% On Demand. In 2019, we are running more than 40 exclusive patient programs, adding more than 2,000 patients alone in 2019. We believe that our digital platforms create a compelling value proposition for our partners, and we are forecasting continued strong gross profit growth for this division. On Slide 9, we talk about our great market position we have in Supply Chain. We're the market leader in the 2/3 market, servicing over 2,000 hospitals and retail pharmacies. This strong market position is supported by a network of 287 old franchise pharmacies. This division gives us high-tech distribution facilities, scale of a digital platform, longstanding manufacturer relationships, highly skilled people, deep market insight into smaller market and is highly relevant to larger markets, and a strong ability to generate cash for reinvestment. While it's an Irish-only business, the relationships -- the experience and infrastructure we have in supply chain is leveraged for the benefits of our 2 growth divisions. Revenue for this division, EUR 1.3 billion, with gross profit coming in at EUR 87 million, delivering an outstanding 8% organic gross profit growth. 73% of the gross profit share came from supply chain, with the remaining 27% in retail. We once again outperformed the market by a factor of 3, with Uniphar volume increasing by 12% versus the market growth of 4%. However, our focus in this division is to increase our net margins, which remain very low relative to the value we deliver as a critical part of the national health care infrastructure. There's no doubt that the outbreak of COVID-19 demonstrated the importance of global supply chains, which are stretched to their limits. From our perspective, this crisis has highlighted some constraints we have with demand increases exponentially for a prolonged period, something we have never seen before. Therefore, in order to continue to capitalize on the strong growth in this division, the Board has approved an EUR 8 million strategic growth CapEx investments to upgrade our regional facility in Limerick. This investment complements the ownership in Citywest and will increase our capacity by circa 20% across the 2 locations. We are running hard to have this facility operational by quarter 4 in case there is a second product spike in demand in the autumn. Our digital solutions, we would say, are a key differentiation for the group. In supply chain, we have grown our online revenue by over 25% year-on-year. It's important to point out the significant investments we've made here and within the supply chain are leveraged for the benefit of all 3 divisions. I'll now hand over to Tim to provide some more color on our financial performance.

Thanks, Ger. I would now like to take you through the financial highlights for the year. As Ger mentioned earlier, 2019 was another transformation year for the group. Strong gross profit growth across all 3 divisions contributed to strong overall EBITDA growth, resulted in a 14.7% return on capital employed. At an overall group level, we generated EUR 180.6 million in gross profit, up from EUR 115.9 million (sic) [ EUR 115.7 million ] in 2018 and EUR 58.6 million of EBITDA for the year on a post-IFRS 16 basis or EUR 48 million on a pre-IFRS 16 basis compared to EUR 32.2 million in 2018. Our gross profit growth was driven by strong underlying organic gross profit growth of 7% across all 3 divisions, with Commercial & Clinical at 5%, Product Access at 16% and Supply Chain & Retail at 8%. This strong organic growth was complemented by inorganic growth, as the company benefited from the full year contribution of 2018 acquisitions, and completed 3 acquisitions in 2019, with Durbin in Product Access, and EPS and M3 in the Commercial & Clinical division. Our gross profit margin has increased from 8% to 11%, reflecting the increase in gross profit contributed from our growth divisions, which achieved higher margins. Our infrastructure in terms of management is now in place, as we have invested appropriately to enable us to deliver on our plan and operate as a high-growth public company. Adjusted earnings per share was EUR 0.143 on the back of a strong operating profit of EUR 28.2 million. If you adjust for the impact of the shares issued in the IPO, adjust the ratios at the start of the year, this will be EUR 0.101 per share, albeit without any additional dividend in e-commerce. Just moving on to have a look at gross profit. Gross profit and gross profit percentage are the key financial metrics we use to track profitability at the divisional level. Commercial & Clinical contributed 42% of the group's gross profit for the year. Its highly recurring revenues and strong cash conversion ability provides the financial profile to enable the company to confidently continue to reinvest in this growth division. Organic growth of 5% is in line with our guidance. Reported gross profit reflects a full year benefit in 2019 of our 2018 acquisitions, along with the benefit of the EPS and the 3 acquisitions in 2019. In Product Access, the financials reflect the combination of the Product Access business fits organically by Uniphar over the years and our strategic acquisition in 2019 October. The Durbin results have been included from August 2019 when the acquisition closed. This division is growing strongly with 16% organic gross profit growth, in line with our guidance. Our 2 growth divisions account for 52% from 2019 reported gross profit. Supply Chain & Retail performed strongly as well, with 24% gross profit growth achieved through 8% organic growth ahead of our guidance, full year benefit of 2018 acquisitions and a number of acquisitions in 2019. The organic growth outperformance is predominantly related to the turnaround of the distressed asset we acquired last year. The division also had strong recurring revenues, but more importantly, it has a significant portion of its gross profit is generated through fees rather than [ markup ], given that it's a stable and robust platform as we look forward. In terms of margin, each division performed in line or ahead of expectations, and we expect this will continue as we go forward. Commercial & Clinical delivered 37.6%; Product Access, 13%; and Supply Chain & Retail, 6.5%. Just moving on then to have a look at net debt on Slide 13. At a high level, we finished the year in a EUR 26.6 million cash positive position, with the key drivers being strong EBITDA of EUR 48 million on a pre-IFRS 16 basis. Considerations relating to acquisitions came in at EUR 39.6 million, nonrecourse facility contribution of EUR 68 million and IPO proceeds of EUR 128.5 million. Other items netted out to negative EUR 17.1 million. We generated EUR 39.7 million of free cash, which equates to an 83% free cash flow conversion, which I will cover in detail in the next slide. Included in our sources of cash, I highlight that we're going to have EUR 68 million of cash by selling our government-backed debtor book on a non-recourse basis. To rationale being, our Supply Chain & Retail division generated circa of 1% EBITDA management. Unwinded, it's very working capital neutral, it was a significant investment measure. And the selling of debtors ledger on a nonrecourse basis allows us to unlock capital tied up in the Supply Chain & Retail division to deploy into higher margin opportunities and also to invest in measures to safeguard business against crisis, such as COVID-19. Excluding the impact of nonrecourse finance, leverage would still have been very low and lumpy at times. Our capital structure is well-positioned to support the execution of our strategy of doubling our 2018 pro forma EBITDA of EUR 46 million within 5 years from the date of IPO. Let's just move now to look at free cash flow. Our free cash flow conversion for the year was 83%, outperforming our expectation for the year of 40% to 50%, and our medium-term guidance of 60% to 70%. This overperformance is a result of positive timing businesses, which were expected in 2020. As such, this is not a benchmark for future conversion rates. The main timing difference is related to specific one-off credit terms negotiated in relation to the Brexit uncertainty. We expect these timing differences to align this year, resulting in a lower cash conversion for 2020. If we adjusted 2019 for these timing differences, our free cash flow conversion would have been 47% instead of 83% as reported. If these adjustments had occurred in 2020, as expected, our 2020 conversion will be approaching our medium-term guidance of 60%, with comparable adjustment will result in a conversion in the region of 40% before we include any strategic CapEx. Just moving on then to have a look at liquidity. From a liquidity perspective, the group is in an excellent position with EUR 116 million of cash and cash equivalents at year-end. The group has a strong capital structure in place, with a significant cash resources available. At the year-end 31 December 2019, it had a net cash position of EUR 26 million, made up of EUR 116 million of cash and cash equivalents and EUR 90 million of bank debt. In addition to this, we have undrawn committed and uncommitted facilities of circa EUR 55 million excluding our overdrafts. I will now hand over to Padraic, our Chief Commercial Officer.

I'll take you through the strategic initiatives section, and I love to highlight some of the key milestones that have been achieved by our group throughout 2019. Firstly, a brief reminder of the divisional objectives that we currently have in place: Commercial & Clinical, this is where we provide those sales, marketing and distribution solutions. The key focus here is building the European platform, the continued growth of our client base by adding new clients, but also working with existing clients in new geographies. And then the further development of our digital solutions to enhance our multichannel capability. Product Access, where we're delivering unlicensed and specialty medicines to patients. The key focus here is that drive for market leadership and the enhancement of our business development capability to really build out our future pipelines. We're also looking to implement our patient-centric programs, specifically into the area of exclusive access for the benefit of our manufacturer clients. And then Supply Chain & Retail, very simply driving that market share, operational optimization and then the enhancement of our retail excellence offer to add real value to our pharmacists. Ger has mentioned the 3 acquisitions that we completed in the -- across our 2 growth divisions since our IPO in 2019. A big part of the success of Uniphar over the years has been our ability to integrate acquisitions. The EPS Vascular and M3 Medical were relatively straightforward, and this is due to the significant infrastructure that we have in place in our medical device business. What was really important in both of these acquisitions was that they were fully aligned with our strategic focus on therapeutic expertise, but they also came with really strong management teams, which added experience into our interventional business units. Commercial & Clinical can now deliver services to our clients across 11 different countries. The integration of Durbin into our Product Access division, we've spoken about this on a number of occasions now. And one of the commitments we made at IPO was that we'd return this business back to a breakeven position by the end of 2019, and we're delighted to have achieved this. We've made strong investment in our IT and operational capabilities, building out the scale, and the team has worked on over 40 managed access programs throughout the year. We're gaining real credibility in this space now. We've made additional investments into our BD capability, building out our pipeline. And this is one of the reasons we're so confident about our position where we can finish 2020 for the Product Access division. The next slide just looks at our current focus for Commercial & Clinical and that consistency around scaling our European platform. We're achieving this through acquisition and organically. What's really important now, post the acquisition of EPS, is that we look at how we can bring our multichannel account management model into the Nordic territory for the benefit of our pharmaceutical clients. 2019 was a very good year from a client perspective. We've added over 10 clients into our Commercial & Clinical division. And equally as important, we're now working with over 20 of our clients in 2 or more of our markets. From a digital solutions perspective, we continue to focus on how we can align our multichannel capabilities with the needs of the key health care stakeholders in all of our geographies. The next slide, current focus on Product Access is still about that global capability. In order to attain this market leadership position that we want, we have to continue to grow this division double digit year-on-year. Most of the work that we're currently doing is in the post-licensed, pre-reimbursement phase, but we're now also starting to see some opportunities from a pre-approval phase with our clients. Much of the success that we're having in our business development is based on our expertise in areas such as central nervous system, HIV, oncology and gene therapy. And we're delighted now that we have 3 dedicated business development resources based in the U.S., and they're feeding our pipeline on a monthly basis. From a patient-focused perspective here, we're really looking at how we can apply our multichannel capabilities into our managed access programs, specifically in the area of patient education because we believe this will give us a really unique competitive advantage against our competitors. A brief look at our product life cycle focus for 2020 and beyond. As you're aware, Gerard has added to Uniphar Group's capability to deliver managed access programs, as I said, both in the post-license but also more recently in the pre-approval stage. We genuinely believe that these programs will build a strong pipeline of opportunities for our Commercial & Clinical division in the years ahead. It's one of the reasons we're so acquisitive in Commercial & Clinical is that we want to really build out our European platform, and as Gerard said, continue to deliver that fully integrated solution for our clients. Therapeutic expertise will continue to be exceptionally important because we want to be the go-to provider for certain key disease areas for our partners. And now after all these slides, I just want to include 2 very brief case studies to really explain what we do for our clients. From a Commercial & Clinical perspective, we've taken one of our global medtech companies. They have a diverse portfolio of products and interventional access, cardiac care, surgical and emergency medicine. Uniphar worked with this client now for over 20 years, and we provide sales, marketing and distribution solutions for them in the Irish market. Now we're delivering those services to them in over 6 different countries. And what's really important is we're driving their sales performance. That's obviously important to us from a profitability perspective but also really building that market share for our clients. If we take the Product Access case study, we want to highlight one of the biopharmaceutical companies that we're working with, and they're developing medicines for treatment-resistant epilepsy. We've managed to build a post-license pre-reimbursement managed access program for this particular client, and we work with them now right across Europe and the rest of the world, excluding the USA. And what do we provide? We provide controlled drug storage, patient enrollment, regulatory support, bespoke distribution and data capture and reporting. What's really interesting here and what we're really proud is that we've delivered these products to over 1,300 patients in 13 countries for this particular client. And it's one of the reasons we're so passionate about our Product Access division and making sure we continue to grow. I'll now hand you back over to Ger.

Thank you, Padraic. We're on Slide 24. As I previously said, 2019 was a transformational year for Uniphar. As we see it, we are a quality health care business that's really well-capitalized, 3 strong divisions, which provide a very strong base for continued growth in the years ahead. Trading year-to-date has been ahead of expectations. However, as we prepare for the full effect of the coronavirus in the next 12 weeks, we expect to continue to see increased volumes across the group. This will be increase in our costs to serve as we invest in additional resources to manage higher volumes, while at the same time, deal with reduced availability of manpower due to potential sick leave or self-isolation and quarantine situations. Due to weak prioritization of resources within the hospitals and other health care facilities, we are preparing for a possible delay in medtech revenue if certain nonurgent elective surgeries have to be postponed. The net impact of a 3-month disruption, should it occur, would result in a reduction in the current year EBITDA of EUR 35 million. We would, however, expect that this will be recovered in future periods as and when health care systems return to normal, but this is unchartered territory. We will keep investors informed if there is a material impact on our 2020 results, either positive or negative, as this crisis unfolds. What we would say is that we're on a strong growth trajectory for 2020, as we continue to execute on our strategic objectives, which are to complete the full integration of recent acquisitions onto our platform, grow -- and grow our client base through our focus on customer service and capabilities across our expanded footprint, increase the retailer group through expansion into new geographies. On Slide 25, we talk about our medium-term outlook, which remains unchanged. Double-digit gross profit growth for Product Access, mid-single digit for Commercial & Chemical, low single digit for Supply Chain. We remain confident that we will deliver in excess of 60% free cash flow in the medium-term, keep our return on capital employed between 12% and 15%, while keeping normalized leverage below 1.5, with a possible peak of 2.5 for a short period. On Slide 26, we talk about our capital allocation priorities, which are to invest in our existing business to continue to drive our strong organic growth. This investment is across working capital, growth CapEx, and our digital and talent infrastructure. We want to continue our great track record of bolt-on M&A to enhance our service offering and also to expand our geographic footprints. We want to pay a progressive dividend, and we want to continue delivering a really healthy return on capital employed of between 12% and 15%. On Slide 27, we outline our strong investment case. As we see it, we're a well-diversified health care services business positioned to win in growth markets. There's no doubt we have a compelling market opportunity driven by the increased demand across the globe for specialty products and a growing trend by pharma and medtech manufacturers to outsource through special providers with well-invested and proven infrastructure. In response to this, we've designed and built our integrated model, providing end-to-end solutions across the value chain throughout the product life cycle. The platform for growth is in place. We believe we have distinct competitive edge through our high-tech distribution facilities, our deep relationships with global manufacturers, our scalable technology, our highly skilled people and our strong M&A track record. And we have a great balance sheet and great ability to direct cash and a highly experienced industry team. So in summary, we're confident that we have the strategy, the market opportunity, the platform, the competitive edge and the team in place to double EBITDA within 5 years post IPO. Finally, on Slide 28, given Uniphar's important role in the wider health care infrastructure, I'll just like to touch on our response to the current crisis within our community. From day 1, we have taken all possible measures to ensure all health care stakeholders continue to receive both the medicine and medical device products and the related services that we provide with them -- to them and that they urgently reach. These actions include, but are not limited to a deep consultation and participation in strategic planning discussion with governments and regulators. We have depopulated our distribution centers and aggressively imposed social distancing from the very start. We have leveraged our significant digital infrastructure to ensure all nonoperating colleagues can work productively from home, and that we continue to engage with HCPs through our multichannel account management digital platforms. We've significantly increased communication with manufacturers, with HCPs and all other relevant stakeholders to ensure that we are working well throughout this crisis. We sourced much-needed products by leveraging our substantial sourcing platform, and at the same time, we've increased levels of inventory well across the range of much-needed products. I'm really proud of how our team has responded to this crisis, recognizing the important role we play in the health care ecosystem. Supporting HCPs to meet the need of patients is at the core of what we do. We live with these turbid times. And I thank you for listening. Stay safe. And now we'll open it up for questions.

[Operator Instructions] And our first question comes in from the line of Allan Smylie calling from Davy.

It's Allan from Davy. Firstly, congrats on a really strong set of results. I have 3 questions just to kick off. First one is for Tim and the second either for Gerard or Padraic. Firstly, with respect to the balance sheet and cash flow. You're obviously exiting '19 in the [ annual ] position of being net cash. Just as we look forward over the next year, there's quite a few moving parts with respect to deferred payments, incremental investments you've had in supply chain and on working capital in line. So I think it will be helpful if you could give us your current best guess where leverage could come in at the end of this year? Then a related question. Just given this current balance sheet strength, what is your current thinking on capital allocation into your 2 growth platforms? I'm thinking is there scope to accelerate that move within C&C into the bigger European markets? And/or do you require more headcount in Product Access in the U.S. market? And then just the final question with respect to COVID-19. As you flagged, it's obviously currently having positive volume impacts from most of your business. But if you could help us understand the dynamics, both positive and negative with respect to different parts of your med device portfolio, I think that would be helpful as well.

I think Tim will take the first question, and Pad the last. Then I'll take the middle question. Tim?

Okay. And on the free cash flow, as you would have seen from the presentation, we actually had it bit up at EUR 17 million in the working capital during 2019 from the timing difference, and this is going to have an impact on our free cash flow in 2020. As I said, if we had normalized 2019 for that adjustment, we would have had a free cash flow conversion rate of just under 50%, at 47%. If you have a look for that adjustment into 2020 and into the medium term, we're still targeting that our free cash flow conversion in the medium term will be in the range of between 60% and 70%. It will be just over 40% in 2020. So quite confident as we look forward, like, having a strong capital structure is a huge asset to the business. So our leverage is not going to exceed, as Ger said, 1.5 at any point in time, and that will all depend on acquisitions and extra investments that we have to make in working capital or in strategic investments, in line with any COVID-19 roll-up.

Risk capital allocation, Allan, after taking 10 years to get to where we are today, we retain very rigorously our capital allocation discipline. So as we see, as we invest obviously within our existing business to fast track organic growth, it's a key focus for us. And in relation to M&A, we may come up with more opportunities to craft our progress here. But ultimately, we have a pipeline of transactions, which we're working way through and we normally take a long time to do this. So we don't see ourselves changing from that process. It worked very well for us in the past and we will continue to do so. When you look across the 3 divisions, Commercial & Clinical, obviously, we're trying to build out our platform in Europe, but we also want to enhance our existing operations in both U.K. and the Nordic, and the Benelux markets. These are very significant markets, so we can see opportunities to enhance those businesses as we stand, at the same time, roll out into different geographies. And in Product Access, from our perspective, it's all about how we improve our technology. It's a big focus for us within Product Access, and also how we start to develop and build our platform in the U.S. where a lot of these opportunities are coming from. Pad?

And Allan, just with regards to the medical devices and the COVID-19 situation, obviously, as Gerard said, it's just a -- it's an incredible time, a very complex time. Where we are quite fortunate with our medical device portfolio was that we're quite well-diversified. We're seeing some positive impacts, as you can imagine, in the area of critical care and emergency medicine, and the teams are working exceptionally hard to meet that demand. It's kind of consistent on some of our essential surgical products. So if you take in our kind of interventional cardiology, radiology and neuroradiology, these are obviously procedures that have to happen. So again, the teams were working really hard to make sure that those products are made available for their customers. The big challenge for us is obviously in and around the orthopedic portfolios. These would probably be delayed over the coming months. What we're trying to look at is obviously with those procedures being delayed, it's a case of how quickly they catch up. So that's the piece of exercise that we've done and the work that Tim has done. So the guidance has been given, and that's probably the biggest area that we're focusing on. We know those procedures will happen. These patients still have to have those procedures, but it's just the timing as to when it will take place. So just probably to finish is the really key point is that the critical care guys and the interventional guys are working as hard as they can to make sure our patients continue to get access to these essential products.

The next question comes in from the line of Eoghan Reid calling from Berenberg.

Eoghan Reid here from Berenberg. Just a couple from my side, if that's okay. Firstly, just your experience with the Nordics acquisition so far. How has it gone? And is there sort of any examples you can give about how you implemented sort of some growth initiatives that you benefited from maybe the cross-selling across the group or anything like that? Secondly, on the business development pipeline in Product Access, that's grown from EUR 20 million in H1 to EUR 30 million for the full year. Next question is, how long do you think that will come -- take to come through to revenue confidence around that? And sort of where that sort of pipeline could get to in 6 months' time? Could that be EUR 40 million or EUR 50 million? And then lastly, kind of you touched on earlier, but Product Access in the U.S., what is your preferred route eventually in that market? Is that through acquisitions? And if so, kind of what sort of size are you thinking? Is it actually quite big or would you be going for a small acquisition that you could grow organically?

Okay. I'll just take 2 and hand over to Padraic. So the Nordics acquisition has gone very well. And we have a very strong template here where we basically buy good companies which we scale and we bring a lot value to them. So it's gone very well for us. In relation to the Product Access in the U.S., what we want to do is buy a company with a good management team who we can work with and we scale the opportunity. At the same time, we want to continue to enhance our IT platforms, and we will also invest in strong business development as Padraic outlined. But it's not going to be a -- we're not going to deploy a lot of capital here. We're going to deploy it into how we can buy an existing small -- smaller companies that we could scale and then deploy capital through strong organic growth within that platform. Padraic?

Yes. And I think just on the question with regards to the synergies or the cross-selling opportunities in the Nordics, we're fortunate now that we have a very strong interventional business team across Ireland, Benelux, the Nordics and the U.K. now. And we're seeing a good opportunity of bringing products from those particular markets back into our existing markets. We've also been approached by one of the major suppliers down here to -- whether we would consider organically entering into another number of European markets due to the scale. So when, obviously, EPS Vascular was acquired by a company of the size of Uniphar, that gave the manufacturer a lot of confidence, and now they're looking at what additional geographies we could work in. What I've been really excited about as well is that our pharmaceutical multichannel account management teams are now working with EPS management team, but we're also talking to a particular pharmaceutical client about bringing our multichannel account management offering into the Nordics where they feel it's going to be a very good option. So that's on the client -- on the synergy side. Eoghan, was there one other question there, I just...

Yes, just on Product Access, the pipeline. So it's up from EUR 20 million to EUR 30 million in the last 6 months. It's a 24-month pipeline, so that should convert to revenue over time. But do you -- what's the sort of percentage confidence you have of that turning to revenue? And then that EUR 30 million on sort of EUR 130 million of revenue in the division is quite a high percentage. Is that going to grow and grow and grow? Or kind of -- is that how much you can really take at the moment in terms of capacity?

So the pipeline that you talk about there is obviously in the managed access, and that's where we're really focused on, winning these exclusive access programs. In terms of -- we really judge this division on its gross margin. So what you will find actually in the revenue scale will kind of go up and down because again in terms of -- there's a particular client that we do fee-for-service on. But the realistic view, what the really important metric here is gross margin. And what we're seeing is a -- we always estimated that we could drop 10% to 15% of our business pipe -- business development pipeline into actual fees on an annual basis, and we're seeing that. We've had very good start to 2020 with a number of new programs. The reason why it's growing so much, Eoghan, is we've made those big investments now, as I said, appointing 3 dedicated business development resources into the U.S. We've had a significant success, we appointed one into Boston and now just appointed one again into Washington. So we're seeing those opportunities come. And we're seeing a big need from our clients who are really looking to use these programs. So our guidance has always been of our pipeline. We'll drop that 10% to 15% of our business development pipeline in on an annual basis, and that keeps us in line with that double-digit growth that we have to achieve for that market leadership position.

The final question comes in from the line of Martin Fahey calling from Mackenzie Investments.

Two quick questions. One, on an annualized basis, geographically, how would your revenues look in 2020? And secondly, 5 million potential cases of surgeries were postponed, and that's just based on that division. Your other division seems to be doing better than expected. I mean, is that the core message today?

All right. I'll take the second question and then maybe Tim will answer the first question. It's pretty difficult where we are today within our business. We're doing a lot of -- we've invested a lot of costs, for example, to have people on the bench, just in case we have a lot of sickness. It's a 2 or 3-week trading cycle to get these guys ready back. So we've made these investments to make sure that we keep -- to deliver the critical supply service we have. And we're also thoughtful in a lot of our products for the various governments to -- product that they need going forward, and we're in the middle of all that. Some of the products we can source, some of them we can't. And then we look at -- we have -- if elected services are[ tough ] for the nonessential items, we have that. So there's a lot of moving parts in the market within the business. But broadly speaking, the message is that we are -- the volumes are increasing. Our cost base to servicing is going up, and we have this elective surgery issue. We could try to supply the end market as you remember. It's going to take us -- we have to get through these 12 weeks to see where we land. But it's -- at the base, it's a 12-week issue that's a -- we would hope to have performed that number, Martin, but at this point, it's very difficult to firm up on that.

Okay, that's understandable. And the second -- the first question, also all your employees, they're all okay and all -- you have -- how many people you're working off-site and on-site at the moment?

We are well in excess of 1,000 people working off-site, Martin. That's a very good point. I think the other point we have is, Martin, we want to hold on to our infrastructure across our talent pool so that when we finally get through this thing, we bounce very quickly back. So we're very, very -- we remain really confident of our medium-term outlook. So we are holding onto all our people. And at this point, we're not talking about reducing headcount.

And Martin, the first question on 2020, if we were to annualize this. It's probably better to look at gross profit rather than turnover. And if you looked at 2019 figures annualize and increase in 2020, you're probably looking at our gross profit increasing from EUR 180 million up to about EUR 220 million. Group-wise, 30% of our gross profit will come from the rest of the world, excluding Supply Chain & Retail. So it's probably better to look at a gross profit indicator rather than turnover.

Okay. So there are no more questions. Thank you, everybody, for joining the first results presentation of Uniphar plc, and have a good day.

Thanks, guys.

Thank you.

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