Uniphar plc (UPR) Earnings Call Transcript & Summary

Good morning, and welcome to today's conference call titled Uniphar First Half 2023 Interim Results Call. My name is Ellen, and I'll be the operator of today's call. [Operator Instructions] Now, it's my pleasure to turn the call over to Allan Smylie, Investor Relations to begin. Allan, please go ahead whenever you are ready.

Good morning, and welcome to Uniphar plc's interim results presentation which covers the period from the 1st of January '23 to the 30th of June '23. I am Allan Smylie, and I look after IR here at Uniphar. Presenting our results today is Ger Rabbette, our CEO; Tim Dolphin, our CFO; and Brian O'Shaughnessy, our CCO. We're also joined on the call today by Dermot Ryan, our COO and MD of Supply Chain & Retail; and Seamus Egan, who Heads up Corporate Development. Before we begin, I would like to remind everyone that you can access the presentation either on our website under Latest Results and Presentations, or via the link sent to you when you registered for the conference call. The results presentation will last approximately 30 minutes and will be followed by Q&A. Please note the interim 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. I would now like to hand you over to our CEO, Ger Rabbette.

Thanks, Allan. Let's start on Slide 5, which gives an overview of the Group. As you know, Uniphar operates across 3 divisions, working with over 200 other world's leading pharma and medtech manufacturers. We serve over 160 countries and now have operations across Europe, North America, APAC and MENA. I'm very pleased with the group's performance in the first half of '23. Gross profit growth of 29%, 6% of which is organic. But for me, the stand out performance are the Product Access with gross profit growth of 73%. However, Supply Chain & Retail also outperformed with gross profit growth of 34%, 8% of which is organic. Moving to Slide 6, we discuss our financial highlights. Operational performance has been very strong. We delivered continued growth across all 3 divisions with EBITDA growth of 14%. And when we look forward to H2, we see new business wins driving further positive momentum across the group. The leverage for H1 was just below 2x, but this increased together with increase in interest rates is now a headwind to our EPS. Normalized free cash flow was 68% with 15% return of capital employed, both at the upper end of our guidance. From an M&A perspective, we've completed the McCauley acquisition and the asset purchase of Pivot Digital Health. McCauleys enhances our market-leading retail pharmacy capabilities and Pivot is a digital accelerator, focused on delivering global hybrid health and we've strengthened our pharma services platform. The 3 acquisitions we completed last year, Orspec, Inspired Health and BModesto are now fully integrated onto our platforms and performing well. As ever, we have an active M&A pipeline. And we've delivered on our IPO targets ahead of time. We're pleased to announce a new medium-term target of doubling our business again to reach an EBITDA of EUR 200 million within the medium-term. I will outline in more detail how we will do this later on in the presentation. On Slide 7, we outlined the continued progress we're making on our initiatives right across our 5 sustainability pillars. This remains a key focus for us as a group, the great progress we are making and have met is now reflected in our AAA rating. I'll now hand over to Tim to provide an update on the H1 results.

Thanks, Ger. I'll take you through the financial highlights for H1 now. Gross profit has grown by 28.6% to EUR 188 million, growth across all 3 divisions. EBITDA growth at 13.8% was also strong, demonstrating the underlying strength of the business. Adjusted earnings per share was down to 7.4 cents from 8.4 cents, driven by higher net bank debt and rising interest rates. Return on capital employed remains at the higher end of our target range at 14.7%. Leverage for the period was just below 2x at 1.95x. Let's have a look at gross profit now in the next slide. Gross profit and gross margin percentage are the key financial metrics we use to track profitability at the divisional level. Commercial & Clinical delivered reported gross profit growth of 6%, 1% of which was organic. Commercial & Clinical in medtech performed strongly during the period, offset by pharma, where we are investing in our platform to deliver an enhanced service offering, and we'll discuss it shortly. Geographic expansion has been a recurring feature of this division and we are pleased to say that we now represent over 80 manufacturers in 2 or more geographies here. Gross profit margin increased from 36.1% to 40.1% during the period, reflecting the strong performance in medtech. We are seeing strong momentum in this division and expect Commercial & Clinical to deliver organic growth in line with its medium-term guidance for FY '23. Product Access delivered reported growth of 73.1%, driven by M&A and complemented with organic growth of 8.5%. The divisional gross profit margin decreased from 29.3% to 14.9%, following the BModesto acquisition, which adds significantly to the divisional profit, but at a lower margin profile. We expect this margin to increase as our platform evolves. We were awarded 8 EAP programs in the first half of this year versus 5 for the same period last year. And with this momentum, we believe we will deliver double-digit organic gross profit growth in this division for FY '23. Supply Chain & Retail once again outperformed its divisional guidance. We reported growth of 34.1% and organic growth of 7.7%. The acquisition of McCauleys closed in January ahead of our expected timeline and is performing well. Gross profit margin increased during the period from 8.7% to 10.6% and the margin profile of this division has effectively doubled since IPO. We have provided a breakdown of each individual division's performance in the appendices. Moving on to the next slide to have look at net bank debt. At a high level, we finished the period with net bank debt position of EUR 178 million and this was driven by opening net debt of EUR 91.2 million, strong EBITDA of EUR 51.1 million, offset by working capital investment of EUR 34.3 million, which I'll discuss on the next slide. Total CapEx investment of EUR 14 million, which includes strategic CapEx. Acquisition and deferred consideration payments of EUR 51.6 million, primarily relating to the McCauley acquisition. And other items of EUR 38 million, which includes exceptional costs, tax, dividends, finance costs and lease payments. Our reported free cash flow for the period was EUR 13.2 million, and I'll take you through that -- the details of that on the next slide. Then moving on to free cash flow. Our medium-term target for free cash flow conversion is 60% to 70%. Reported free cash flow conversion for the period was 25.9%. When adjusted for the unwind of cumulative timing adjustments previously communicated, the adjusted free cash flow is 67.8%, which is within our target range of 60% to 70%. Ger will now take you through the new medium-term guidance.

Thanks, Tim. So look at Slide 14, you can see that we've delivered on our IPO commitments ahead of time. We've doubled our EBITDA from EUR 46 million to EUR 94 million with a CAGR of 19%. We've delivered double-digit EPS growth with a CAGR of 30% with significant increase in margins. If you look at gross profit, it's gone from 10.8% to 14.8% and EBITDA has gone from 3.5% to 4.7%. We've also delivered a return on capital employed above our target range every year since IPO. On Slide 15, we demonstrate the strong performance we are making at the divisional level. With Product Access, we've delivered a 5-fold increase in gross profit to EUR 74 million. We've delivered 80 complex exclusive access programs and have developed a whole range of new service capabilities within this division that can now service over 160 countries. Commercial & Clinical, we're now active in 15 countries across Europe, up from 4 at IPO, now represent 83 manufacturers in 2 or more geographies. And in Supply Chain & Retail, our market share has increased to 53% and our retail network now stands at 423 units, an increase of 47% since IPO. This is the dramatic progress we've made in the business in the last 4 years, and this is why we believe we should double again from here. So moving to Slide 16, we now have a new ambitious target to deliver. We want to deliver a EUR 200 million EBITDA business within the medium-term. We will achieve this target through robust organic growth across our 3 divisions, made possible by our investments in technology and infrastructure and complemented by strategic M&A. Our organic, inorganic mix going forward will be 70-30 as we leverage out our existing platforms. And in terms of group guidance, return on capital employed, free cash flow, and leverage, it remains unchanged. Slide 17, you can see our new divisional structure, which aligned more closely with our customers and our growth potentials. As you've seen, our business has grown rapidly since IPO, with a lot of change, and we now feel the time is right to put in place a new divisional structure that more clearly demonstrates the growth opportunities we have across each division. So no change in Supply Chain & Retail. However, from January '24, medtech will report as a stand-alone division, a recognition of the strong growth we've delivered since IPO. We're now a top 5 distributor in Europe. Also, from January '24, pharma services coupled with our Commercial & Clinical will be merged with our Product Access division to create Uniphar Pharma. This new combined platform will enable us to provide an enhanced service offering to pharma and biotech manufacturers across the product lifecycle, while at the same time provide patients with access to medicines on a global basis. On Slide 18, we give an overview of the key strategic objectives of each division in the medium-term. Starting with Supply Chain & Retail, this to us is the foundation of our business. We've retained and grown our leadership position, and we've increased our margin steadily since IPO. And because of recent acquisitions and the investments that we have made and are making, we see more scope to grow market share and margins and profits in this business as we go forward. Moving to medtech, this business has very attractive margins. We see organic gross profit growth here in the high single-digits. Our focus is on maintaining the current margins by growing through existing specialties and existing relationships into new geographies. And in Pharma, we're expecting double-digit growth and we'll do this by leveraging our global commercial platform through 2 things: one, bringing a range pharma services to manufacturers across the product lifecycle; and #2, to leverage this platform to provide unlicensed medicines or medicines that are otherwise difficult to source to HCPs on a global basis. And I will hand over to Brian to provide some more color on each division.

Thanks, Ger. I will now walk you through how we have developed each division since IPO and our ambition for the future. We are a leading player in Supply Chain & Retail in Ireland with 53% market share in supply chain and a retail channel of over 423 retail pharmacies through our symbol group offering. This management team have evolved the business from a pure play wholesaler into a vertically integrated platform. This has transformed the margins in a business generating over EUR 1.5 billion of revenue per annum. At the time of IPO, margins were 5.5%, and we have doubled this to 11%. This division is underpinned by strong structural drivers in Ireland, such as a well invested Health care system, a growing and aging population and the growing importance of the role of pharmacies in primary care. What excites us going forward is the opportunity to increase market share underpinned by our investments in infrastructure and technology, and to drive margin expansion by penetrating into higher margin services such as consumer at 20% margin and own brand and in-licensing at 50% margin. In this market on margin expansion, we expect our investments to deliver substantial free cash flow and strong return on capital. Moving on to medtech. We have significantly scaled our medtech division since IPO. We are now a top 5 specialty distributor across Europe with an addressable market of EUR 7 billion. We believe we have the highest quality and best performing asset in the sector, and our ambition remains to build out the leading specialist medtech platform in Europe. In this division, we act as exclusive agents for the manufacturer and focus on high value specialties where a medical consultant makes the purchasing decision. The quality of this business and value we add is reflected in the 40% margins we earn. The European market is underpinned by strong structural growth drivers, including a highly fragmented sector with a small number of companies servicing 10 or more countries, positive demographics, emergence of innovative technology, and an increasingly complex regulatory environment, all of which are in our favor. In summary, we are a leading player in a large but fragmented market and have enormous opportunities to scale. We believe we can deliver at least high single-digit organic gross profit growth over the medium-term. And finally, we move into our Pharma division, where we've seen huge growth since IPO, with profits now 4x larger, and where we see the biggest opportunity in the medium- to long-term. We now operate a global business with high value services across the lifecycle of a pharmaceutical product. And we have the foundations in place to take advantage of this EUR 50 billion market opportunity. The core to this division is providing access to medicines globally. We leverage a common global infrastructure to serve 2 key stakeholders, the pharma company and the Health care professional. The pharma company, we bring their medicines to global markets before, during, and after the medicine is commercially launched. We work with all top 10 pharma companies and a growing list of biotechs, principally on cutting-edge therapies. Health care professionals, we help them access medicines they can't source through mainstream channels. We do this in over 160 countries around the globe. We believe no other company has a depth of capability that we do. Our strategy is built on strong structural drivers in the sector, such as 80% of assets being developed are by biotech with limited infrastructure, and only 60% of FDA approved products make it to Europe. But the assets and customers that now make up the most significant part of the industry are struggling to access key markets. The result of this is the growth in demand for outsourced specialist service providers pre and post approval. From the perspective of the health care professional, access to innovative medicines is a growing challenge outside of the largest market. As you can see in the right-hand side of the slide, at the time of IPO, we were operating in sales and marketing and on-demand only. In the last 4 years, we've added significant capability in clinical development, exclusive access, medical affairs, digital, licensing and consulting. We have partnered with market access, regulatory and pharmacovigilance companies. What this means is, we can now offer a full end-to-end service offer. As a result, we are well positioned in a global market worth EUR 50 billion to deliver a step change in our business, driving revenue and increasing margins. Lastly, to bring the Pharma division to life, here you can see how our services play out across the entire lifecycle of our products. Due to the size of the market and our unique value proposition, we believe this division has the potential to be our largest division within the medium-term. I'll now hand you back to Tim for the capital allocation updates.

Thanks, Brian. Capital allocation has and remains a key focus for the group, as we adopt a very disciplined and balanced investment approach. As we have always said, we will invest in organic and inorganic opportunities across each of our 3 divisions to support our strategic objectives and deliver a return on capital employed at or above our hurdle rate of 12% to 15%. Just moving on then to the next slide to have a look at technology. When you look at the 3 divisions together, technology investment is critical to delivering our strategic ambitions. Getting the right tech in place is key to delivering EUR 200 million EBITDA plus business. Technology is a key enabler for us. We've always leveraged technology to move our business forward and have a strong track record of successful implementation of complex technology projects. Our approach to technology investment is simple. We are taking the cloud-first approach, which ensures the scalability, security, and resilience of the project. We're also focusing on scaling our platform or making the EUR 60 million invested in SAP to serve our enlarged businesses. We have more than a decade successful experience in the SAP environment already and have built up a wealth of experience in this. To further derisk the project, we are taking the opportunity to implement it in a non-live environment. And on top of this, our objective is to implement best practice cybersecurity procedures, which are essential in today's operating environment. And just to conclude on the next slide on the investment case. We are going into the next stage of growth and with a much greater number of capabilities than we had at the time of IPO. We have demonstrated a strong track record in delivering on our commitments. There is a competitive market opportunity in each of our new 3 divisions with favorable market backdrop and plenty of scope for growth. Each division has an attractive competitive mode. We have a concrete plan to deliver on our ambitions with the appropriate structures in place to deliver on the new medium-term target. So in summary, we're at the next inflection point for the business and that's a very exciting place to be. Thanks for listening. [Audio Gap]

[Operator Instructions] Our first question comes from Paul Cuddon from Numis.

I have 2 questions, please. I mean, firstly on Supply Chain & Retail, there's a lot of investment going into the new distribution center and now the software. So -- and you're still guiding to low single-digit growth in that division. So I'm just wondering whether you're leaving some potential room for upside if those investment initiatives kind of work well. And then secondly on the revised sort of pharma strategy. I'm just wondering if you could talk through how regulations are evolving to kind of support this more kind of integrated service across Europe.

This is -- I'll just take the top line and then hand over to Dermot and Brian. I think this division will be very busy for next 2 years and the approach of the ERP work will be done in Supply Chain & Retail before we roll that solution out to all divisions. So I think as we enter the latter half of our 5-year cycle of this [ are pretty ] upside from a guidance perspective, and we will obviously guide the market at that point. You're right, this division has outperformed every year since IPO. But I think as we look forward now, we're into a very busy 2 years and then post that then we'll see very strong returns coming back into -- from Supply Chain & Retail. Dermot?

Yes. I think, Paul, we've -- look, we've strong momentum in the division, and we've probably benefited from the investment that we've done in the previous years. I still believe we can continue to perform well, but as Ger said, the big focus really is around the new DC and the ERP.

Brian?

Yes, just -- so talking about the regulatory environment, Paul, I suppose the increased complexity of the regulatory environment is a benefit to outsource. So the more complex the environment gets, the greater the need for specialists, subject matter experts such as ourselves. So the clear examples there are the discussions around the new EU reform or legislation linking access to medicines to the number of countries -- to the patent based on the number of countries that you're making the products commercially available. So that plays really strongly in terms of the platform we have when you look at our expanded access program, as well as the commercial available platform we have. And then you look to the U.S., with things like the Inflation Reduction Act, which is going to, I suppose, ultimately lead to manufacturers having to think about their cost of investments and ensuring actually that they're partnering up with people that can actually give them the greatest value and build on, I suppose, prior services, building through into commercialization. So I think the regulatory environment is playing really strongly in terms of the platform we're building.

Our next question comes from Colin Grant from Davy.

I'll just start with the first question. I'm wondering if you could just discuss and potentially try and quantify the competitive advantages and the other benefits that you're going to get from the strategic investments you're making in technology and in your new distribution facility in Greenogue? I'll just start with that one, please.

Colin, for us, technology has always been a key enabler from the very start. We put stuff into the system into our world 12 years ago. We upgraded it a number of years later and we've -- every year, since we put a huge investment into technology. It's a key enabler for what we want to do. So if you're trying to build a global platform like we are in our Commercial, Product Access, and Pharma, it's a key enabler to do those, same with medtech, ERP platform. [ What we're building ] here is Supply Chain & Retail. But it is a -- for us, it's a step-change in what we can do from a business, BTB, BTC, and ultimately, it would create a very competitive advantage for us within our business. And Dermot?

Yes, look, I think it allows us to do things much more efficiently in an Irish context. So when you look forward over the next 10 or 15 years, you look at the market dynamics, it allows us to deal with all of that. I think we're building a new digital core and it ultimately will give our customers a better customer experience, which hopefully will enable us to gain more market share in the Irish market. And I think as we build that out then across the rest of the group, it obviously gives us the facility to scale and to build that sort of global operational platform that we're trying to build out.

Just a follow-on question, and I guess, it might be related, but you've obviously increased the expectations on the organic growth profile in terms of your new medtech and Pharma divisions versus the previous C&C and Product Access divisions. And I'm just wondering if you could give a little bit of color on that step-up that you're expecting in organic growth in those areas, and it possibly links them with the investments you've announced.

Well, if you look at our business, in 4 years, we've made dramatic progress right across each of our 3 platforms. So today, we're actually in 50 European countries up from 3 at IPO. We have a truly global platform now in our pharma services business. So the opportunity is explicitly higher, and we've built the platforms and now we want to scale these platforms. Brian?

Yes, it's exactly that. So if you looked in medtech and our top 5 specialty distributor across Europe, we believe we've got the highest quality, best performing asset in that sector, so larger platforms to be able to deliver the increased growth. And we've also increased, I suppose, our expectation on the market where we're servicing there. We see it as a EUR 7 billion market opportunity, and it's similar in pharma services. As Ger said, we've got a global platform there, now we're offering high value services right across the product lifecycle of a pharmaceutical product, addressing a market worth EUR 50 billion. And again, we've seen incredible progress since IPO, where that business is 4x bigger than where it was. We look at the combined profit, so it's bigger platforms, bigger markets that we're now addressing.

Our next question comes from Christian Glennie from Stifel.

First question, just to maybe touch on each division in terms of where -- you've currently laid out your current sort of gross profit margin and talk about expansion there. I mean, what should we be expecting potentially for each division? Obviously, you get some Supply Chain & Retail, you should get some efficiencies from the new facility and investment there. Medtech you did 40% in the first half, you're saying 39% [ pro forma ], but presumably, that was a larger component of the medtech outweighing the Pharma there. So could it be much more north than that? And then on Pharma now, you -- obviously, you've got the hit from BModesto, but then as you add in new services there, what's the margin? Is that maybe the key division that could see the most rapid margin expansion?

I think how we look at it is, in the first half over the next 5 years, we will drive our -- with the strong organic platform we have in Pharma and in medtech. And in the back part, with Supply Chain & Retail, having our investments made, it'll start to see strong progress go back into Supply Chain & Retail. I think right across each of the platforms where we're going to grow, and really we look back at it, we're just doing what we've done for last 5 years on much bigger platforms as we've built out these platforms and grown. Brian?

Yes, so if you look at the presentation of Supply Chain & Retail, we talked about moving into higher value, higher margin opportunities, such as consumer, own brand, in-licensing. And as you can see, we've got less than 1% market penetration in each of those areas in consumer, we believe the margin expansion could be 20% in own brand, in-licensing, margins up to 50%. And then if you think about medtech, we're delivering very strong gross profit margins at 40%, which we believe we can continue to deliver on. And then in the pharma services, it's about now combining those high value capabilities into a higher value proposition. So we do see the potential for margin expansion in pharma services.

Yes, I think, in particular, around BModesto, I mean, we now have a base in Europe, and we're looking to layer on some of our on-demand skill set to that team in Central Europe. So that's a big focus as we build out our on-demand platform.

Sorry, just to clarify the first comment on 20% growth in the Supply Chain & Retail side, what did that relate to?

I think on the slide, there is a reference to a return on capital employed of 20%. And then I think the other 20% on the slide is the potential margin -- gross profit margin potential for consumer. I'm not sure which one you're referring to.

Then -- second one then. How are you thinking about -- obviously, you've got -- majority here is organic growth, but you've got about 30% to layer on in terms of M&A. Your gearing at sort of 1.9x, it will come down a little bit by the end of the year. But what's your balance -- firepower of your existing balance sheet for the M&A? And just a bit more color in terms of what that M&A pipeline looks at? What are the key areas you're looking for those -- for bolt-on deals?

I think we still have a firepower of between EUR 50 million to EUR 100 million to do deals going forward. But as we go through our investment case and get to the latter years, that increases. So you see, we have a very strong track record of M&A. We've done 3 or 4 deals every year since IPO. But as we go forward, the deals will be -- I think, to be 1 or 2 years, to be probably bigger and as we build out a platform. So the platforms are pretty much there at this point. And now what we're doing is, doing very smart deals that really enhance our service offering, and we've -- and our immediate term focus is in our pharma services business as we build out that platform -- that global platform. Tim?

Yes. No, I agree 100% with Ger, like there's plenty of headroom in our balance sheet to drive M&A. As Ger said, there's between EUR 50 million to EUR 100 million of capacity. There's huge focus on generating cash within the business and we're generating a huge amount of free cash flow as we look out. So we'll be using that to drive the investments both organic and inorganic over the period.

[Operator Instructions] Our next question comes from Andrew Whitney from Investec.

A couple of questions. I'm just trying to think on market share. When I think about that EUR 200 million EBITDA aspiration into the mid-term, I know the markets that you're operating in have got big structural drivers of fueling growth. But that EUR 200 million, getting to that EUR 200 million, does that necessarily mean you taking market share in the subsectors that you operate in? Or do you think get a long way by benefiting from the subsector growth that's available? That's one question. And I think, it was Christian that asked about deal making. I know you've done a lot of deals in the pharma services space. Are there particular competencies you feel you need to just make your offerings completely holistic? And then on that basis, I think you said you'll keep leverage below 2.5x. With the -- what -- is there -- is interest cost rate environment a consideration here? What would it look like if you got up to 2.5x running through the P&L? I'll leave it there.

So, Andrew, I think if you look at the opportunities we have in each of our 3 divisions, the addressable markets is very significant. So even if we just maintain our existing shares of those markets, we get a long way towards the EUR 200 million. So we're very fortunate to have strong wind on our back as we move forward. I think we look at Supply Chain & Retail, it services the -- one of the fastest-growing economies in Europe, the demographics are very positive towards us, and we've built a really strong business there. And the addressable markets in pharma services and in medtech are very significant. Brian?

Yes. So on the medtech, it's really about going into new markets so we can grow in our existing markets, building on relationships, we can also take existing relationships into new geographies. And then on pharma services, it's -- you look at some of the structural drivers we refer to, such as the growth in specialty, you've got the growing number of products being developed in the U.S. are by biotechs with limited -- very limited infrastructure. Over the last 10 years, only 60% of products approved by the FDA have made their way to Europe. So it's about sort of capturing in some ways the market that isn't actually meeting unmet demands today. So huge opportunities, as we said, in each of the 3 divisions.

I think from a deals perspective, we are focusing on building our capabilities in our pharma services division. Huge capabilities there. But over the last few years, I don't think we need [ field ] gaps where we're currently partnering with people where we'd like to bring those capabilities in-house. But today, we can still [ drive out ] -- we're working with all partners. Tim, please?

Yes, interest as a consideration of deals, Andrew, obviously, is an issue. Sorry, Andrew. Interest is a consideration. But, obviously, as we've told you previously, every deal that we do, our objective is to achieve a 15% return after 3 years. Now, I can't give a specific guidance in relation to the calculation of interest into the future, but it is a consideration, and it's something that we take into account.

Our next question comes from Sam England from Berenberg.

Firstly, can you talk a bit about your assumptions around the acceleration in C&C growth that you're expecting in the second half? Are there any larger contracts that you're expecting to come through? How much disruption you expect to see from the reorganization that you're doing? And then secondly, there's also a bit of a second half weighting on EBITDA expected. So could you talk a bit around the key moving pieces in the second half profitability that will get you to where consensus expectations are for the full year?

I'll take the second part of that question, Sam. There always is a H2 weighting in our figures. It's going to be higher this year due to the acquisition of McCauleys earlier in the year. So it's only been included in the H1 figures for 5 months since February. It's going to be included for the full part of H2, but also in that business, there's a higher H2 performance expected.

Yes. And also just on the gross profit growth engine, medtech, we expect to continue to be strong through the year. And then C&C, the pharma part of the business, I suppose, coming off a tough comparative to last year, and we expect a strong H2 for C&C pharma.

Okay, great. And then maybe just one follow-up as well around the reorganization that you're doing. Can you just talk a bit about how much sort of the integration work there is to do internally in bringing sort of the C&C and PA businesses together under the Uniphar Pharma brand? I mean, whether there's any sort of additional investment that will be required outside of the technology, either in sort of the advisory and consulting spend, new hires or restructuring costs?

It's how we run our business today. It's evolved, Sam, over the last number of years, so that's how we show up and pitch to the -- to our pharmaceutical clients, so that's done. There will be a small investment in branding and rebranding in that division as we move forward, but it's very, very small, like a very, very -- very significant. Brian?

Yes, so from the get-go, Sam, as soon as we acquire these businesses, one of the first things we do is to try to cross-pollinate on their client lists and for introductions in terms of -- from a business development perspective. So as Ger said, really now, what we're doing is just consolidating all those capabilities under 1 brand, which is a much higher value proposition, so to be a little bit of investment in the -- on the rebranding across the group. And part of that's already done. You can see that the medtech is already there. And Supply Chain & Retail doesn't need anything. And then on -- the dealer investment being just a small bit of investment on the consolidation of CRMs, but it's small for us.

Our next question comes from Brian White from Shore Capital.

I've got 2 questions. You've been very helpful in the previous questions. I'll probably ask some of the questions slightly differently, and on Slide 21, in particular, you go into depth about the -- some of the areas of expertise you have in terms of offering a comprehensive end-to-end service to your pharma clients. I just wondered if there's any -- in that vein, of any additional areas of expertise that are top of your shopping list? And I noticed some of these are pharma just now, and would it make sense to bring some of these pharma activities in-house? And then secondly, in certainly my experience, Uniphar has a very good expertise and history of doing off-market deals in terms of acquisitions. And I just wondered, is that still the case? And if that is the case, are you seeing valuations for private companies or the expectations of valuation coming down to more realistic levels given what's happening in the public markets or are we not there yet?

So, Brian, I'll take the second part of the question and hand over to Brian. There's definitely a mismatch today between private multiples and public multiples. We're not seeing that in our 2 growth areas, pharma services and medtech. The multiples for those are very high. So that's why we try to off-market deals, get companies which are pretty -- who have high growth and have the scale just with great management teams who can plug into our infrastructure and help us drive our business forward. So basically that mismatch is there and it is getting more and more difficult to do the attractive deals. But we're still confident we can do it because of our skills that we have within the business. Brian?

So, just in terms of the first part of the question, Brian, about additional capabilities and then bringing capabilities in-house, so the capabilities we've set out there are what we see as capabilities required to be able to offer an end-to-end solution for our partners and this is something that we've been talking to clients on and validating for some time now. And you're absolutely right in terms of the areas of partnership. They are things that we would see ourselves bringing in-house either organically or inorganically in the short- to medium-term. But I suppose as opposed to waiting for it to be in-house, we're confident that this is something that we can partner with in order to be able to sell that end-to-end solution and just to have 1 partner for our client and then we can subcontract some of these projects. But they're something we've looked at adding in-house between the short- and medium-term.

We have another question from Christian Glennie from Stifel.

Just maybe a couple of quick ones. Just to clarify on the -- when you make the adjustment in the free cash flow around the working cap, the benefit you had last year versus the unwinding this year, just to clarify and remind us what that relates to. And then the second one was, is there any particular update at this point on your U.S. plans? Obviously, your facility there in Raleigh, any particular updates in terms of the investments there? How much that's part maybe of wider investments as well?

So, free cash flow. Thanks, Christian. I'll take the first question in relation to free cash flow. You're absolutely correct, it's purely down to timing difference, advised in Q4 last year that have reversed into Q1 this year and they are all working capital related. As you know, we have a strong focus in Uniphar on the generation of free cash flow. So there's a constant focus on it. But there are some timing differences that would happen that will -- depending on the year in, that would fall either side of the time period.

Just in relation to Raleigh, Phase 1 of that facility is now open. So our medtech logistics business is up and running, and our clinical trials packaging business will be live by the end of the year, early January. So we're on track there to be fully live there by mid-Jan.

And maybe then is that an obvious kind of area where you -- why you're going, you've upgraded essentially your medtech business to -- from kind of mid to high to now at least high, is that U.S. a factor in that?

No. U.S. is not a factor in our 5-year plan at this point. We definitely have a small -- we've a bunch of people in the U.S. who source innovative medicines that are medtech product for Europe. The U.S. is an opportunity in the long-term, if not, it would be in our medium-term targets.

Thank you very much. At this time, I would like to hand back to Ger, our CEO, for any closing remarks.

Guys, we're very happy with our H1 results, another strong set of numbers, and we're very happy to give you guidance on where we see the next 5 years of development. So we're happy to say that from 5 years from today, we'll be a bit of twice the size. So we appreciate all the support. Thank you. Talk to you soon.

That concludes the conference, everybody. Thanks very much for joining. You may now disconnect your lines. Have a great rest of your day.