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 for today's call. At the end of today's presentation, there'll be an opportunity to ask a question. If you'd like to ask a question at this time, please press star followed by one on your telephone keypad. If at any point your question has been answered or you change your mind and would like to revoke your question, please press star followed by two on your telephone keypad. Now, it's my pleasure to turn the call over to Alan Smylie from Investor Relations to begin. Alan, please go ahead whenever you're ready.
Good morning, and welcome to Uniphar plc's interim results presentation, which covers the period from the first of January 2023 to the thirtieth of June 2023. I'm Alan 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 and 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, Alan. We start on slide 5, which gives an overview of the group. As you know, Uniphar operates across three divisions, working with over 200 of the world's leading pharma and med tech manufacturers. We serve over 160 countries and now have operations across Europe, North America, APAC, and MENA. I'm really pleased with the group's performance in the first half of 2023, with gross profit growth of 39%, 6% of which is organic. But for me, the standout performance was in Product Access, with gross profit growth of 73%. However, Supply Chain and Retail also outperformed, with gross profit growth of 34%, 8% of which is organic. We move to slide 6, which discuss our financial highlights. Operational performance has been very strong. We delivered continued growth across all three divisions, with EBITDA growth of 14%.
When we look forward to H2, we see new business wins driving further positive momentum across the group. Leverage for H1 was just below 2, and this increase, together with increase in interest rates, is now a headwind to our EPS. Our operating free cash flow was 68%, which 15% return on capital employed, both at the upper end of our guidance. From an M&A perspective, we completed the McCauley acquisition and the asset purchase of Pivot Digital Health. McCauley's enhances our market-leading retail pharmacy capabilities, and Pivot is a digital accelerator focused on delivering global hybrid health and will strengthen our pharma services platform. The three acquisitions we completed last year, Auric, Inspired Health, and Vivadesto, are now fully integrated onto our platforms and performing well. As ever, we have an active M&A pipeline.
Having 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. We'll outline in more detail how we'll 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, which remain a key focus for us as a group. The great progress we are making and have made 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, with growth across all three divisions. EBITDA growth at 13.8% was also strong, demonstrating the underlying strength of the business. Adjusted earnings per share was down to EUR 0.074 from 0.084, 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 2, at 1.95. Let's have a look at gross profit now in the next slide. Gross profit and gross margin percentages 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 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 this 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 two or more geographies. 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 2023. Product Access delivered reported growth of 73.1%, driven by M&A and complemented with organic growth of 8.5%.
The division's gross profit margin decreased from 29.3% to 14.9%, following the Vivadesto acquisition, which adds significantly to the divisional profit, but has 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 2023. Supply chain and retail once again outperformed its divisional guidance, with reported growth of 34.1% and organic growth of 7.7%. The acquisition of McCauley 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 appendix. Moving on to the next slide to have a look at net bank debt. At a high level, we finished the period with a 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 capital, acquisition and the third consideration payment of EUR 51.6 million, primarily relating to the McCauley acquisition.
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 35.9%. When adjusted for the unwind of accruals and 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. Thanks, Jim. So if you look at slide 14, you can see that we delivered on our, on our IPO commitments ahead of time. We've doubled revenue from EUR 46 to 94 million, with a CAGR of 19%. We delivered double-digit EPS growth with a CAGR of 30%. We've significantly increased our margins. 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 our return on capital employed above our target range every year since IPO. On slide 15, we demonstrate the strong performance we're making at the divisional level. In Product Access, we delivered a fivefold increase in gross profit to EUR 74 million.
We delivered 80 complex exclusive access programs and have developed a whole range of new service capabilities within this division, and can now service over 160 countries. In Commercial and Clinical, we're now active in 15 countries across Europe, up from four at IPO, now represent 83 manufacturers in two or more geographies. In Supply Chain and 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 four years, and this is why we believe we should double again from here. 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 three divisions, made possible by our investment 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. In terms of group guidance, return on capital employed, free cash flow, and leverage, it remains unchanged. In slide 17, you can see our new divisional structure, which aligns 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. No change in Supply Chain and Retail. However, from January 2024, MedTech will be reported as a standalone division.
A recognition of the strong growth we've delivered since IPO. We're now a top five distributor in Europe. Also, from January 2024, the pharma services component of Commercial and 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 life cycle, 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 and Retail. This, to us, is the foundation of our business. We've maintained and grown our leadership position, and we've increased our margins steadily since IPO.
Because of our great market position 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, and we see organic gross profit growth here in the high single digits. Our focus is on maintaining the current margins while growing through existing specialities and existing relationships into new geographies. In Pharma, we're expecting double-digit growth, and we'll do this by leveraging our global commercial platform through two things. One, bringing a range of pharma services to manufacturers across the product life cycle. Number two, to leverage this platform to provide unlicensed medicines or medicines that are otherwise difficult to source, to HCPs on a global basis. I'll now hand it over to Brian to provide some more color on each division.
Thanks, Ger. I'll 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 and 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 healthcare 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.
Through this market and 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 five specialty distributor across Europe, with an addressable market of EUR 7 billion. We believe we have the highest quality and best performing assets 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, the emergence of innovative technologies, 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 opportunity 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 four times larger, and where we see the biggest opportunity in the medium to long term.
We now operate a global business with a high value services across the life cycle 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 two key stakeholders, the pharma company and the healthcare professional. For the pharma company, we bring their medicines to global markets before, during, and after the medicine is commercially launched. We work with all top ten pharma companies and a growing list of biotechs, principally on cutting-edge therapies. For healthcare 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. So 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 a growth in demand for outsourced specialist service providers, pre and post-approval. From the perspective of the healthcare professional, access to innovative medicines is a growing challenge outside of the largest markets. As you can see on 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 four 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 offering. As a result, we are well positioned in a global market worth EUR 50 billion to deliver 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 life cycle of a product. 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 update.
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 three divisions, which 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 three 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 business. Technology is a key enabler for us, and 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 a cloud-first approach, which ensures the scalability, security, and resilience of the project. We're also focusing on scaling our platform. We're making a EUR 60 million investment in SAP to serve our enlarged businesses. We have more than a decade of successful experience in the SAP environment already and have built up a wealth of experience in this.... To further de-risk 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 next, 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 compelling market opportunity in each of our new three divisions, a favorable market backdrop, and plenty of scope for growth. Each division has an attractive competitive moat. We have a concrete plan to deliver on our ambitions with the appropriate structures in place to deliver on the new medium-term targets. In summary, we're at the next inflection point for the business, and that's a very exciting place to be. Thanks for listening.
Thank you. We will now enter our Q&A session. As a reminder, if you'd like to ask a question, please press star followed by one on your telephone keypad now. We'll pause for just a moment to compile the question to you. Our first question comes from Paul Sheridan from Numis. Paul, your line is now open. Please go ahead.
Thank you very much. I have two questions, please. I mean, firstly, on supply chain and 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'd talk through how regulations are evolving to kind of support this more kind of integrated service across Europe. Thank you.
Thanks, Paul. Listen, I'll just take the top line, and then hand over to Dermot and Brian. I think this division is gonna be very busy for the next two years. And the brunt of the ERP work will be done by supply chain retail before we roll that solution out to all the regions. So, I think you... And the answer to the latter half of our five-year cycle was absolutely upside from a guidance perspective, that we would obviously guide the market at that point.
And you're right, this division has outperformed every year since IPO, but I think as we look forward now, you know, we're into a very busy two years, and then post that, we're seeing very strong returns coming back into, you know, from supply chain retail. Dermot?
Yeah. 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 previous years. You know, I sort of believe we can continue to perform well, but as Gerard said, the big focus really is around the new DC and the ERP.
Brian?
Yeah, just so talk about the regulatory environment, Paul, it's, I suppose, the increased complexity of the regulatory environment is a benefit to outsourcing. So the more complex the environment gets, the greater the need for specialist, you know, subject matter experts such as ourselves. So the clear example there are the discussions around the new EU reform legislation, you know, linking access to medicines to the number of countries, to the patent, based on the number of countries that you're making the product commercially available. So that plays really strong 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 at the US, with things like the Inflation Reduction Act, which is going to, I suppose, ultimately lead to manufacturers having to think, you know, about their, their cost of investment and, and ensuring actually that they're, you know, partnering up with people that can actually give them the greatest value, and, and build on, I suppose, you know, prior services building through, in, into, into commercialization. So I think the regulatory environment is playing really strongly in terms of the, in terms of the platform we're building.
Super. Thank you very much.
Thank you. Our next question comes from Colin Grant from Davy. Colin, your line is now open. Please proceed with your question.
Great. Thanks very much, and good morning, everybody. I'll just start with the first question. I wonder if you could just discuss and, 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, in technology and in your new distribution facility in Greenogue. I'll just start with that one, please.
Well, Colin, for us, technology has always been a key enabler. From the very start, we put SAP into the system, into our world five years ago. We upgraded it a number of years later, and we've every year since, we've put a huge investment into technology. It's a key enabler for what we want to do. So if we were trying to build a global platform like we are now in commercial for current pharma, it's a key enabler to do that. Same with MedTech, our European platform, and when you look at what we're building here in supply chain retail. But it is a, for us, it's a step change in what we can do from a business, B2B, B2C, and ultimately, it will create a very competitive advantage for us within our business. Dermot?
Yeah, look, I think it allows us to do things much more efficiently in an Irish context. When you look forward over the next 10 or 15 years, look at the market dynamics, it allows us to deal with all of that. And I think it's. 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.
Great, thanks. Just a follow-on question, and I guess it might be related, but you, 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 in with the investments you've announced.
Well, if you look at our business, in four years, we've made dramatic progress right across each of our three platforms. So, but today, we're actually in 50 European countries, up from three at IPO. We have a truly global platform now in our pharma services business. So the opportunity is exponentially higher, and we've built the platforms, and now we want to scale these platforms. Brian?
Yes, it's exactly that. So if you look in MedTech, now 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, you know, we've also increased, I suppose, our expectation on the market we're servicing there. We see it as a EUR 7 billion market opportunity. And then it's similar in pharma services. As Gerard said, we've got a global platform there now, where we're offering high-value services right across the product life cycle of a pharmaceutical product, addressing a market worth EUR 50 billion. And again, we've seen incredible progress since IPO, where that business is 4 times bigger than where it was, where you look at the combined profits. So it's bigger platforms, bigger markets that we're now addressing.
Okay, great. Thanks very much.
Thank you. Our next question comes from Christian Sheridan from Stifel. Christian, the line is now open. Please go ahead.
Thank you. Good morning, guys. First question, just to maybe touch on each division in terms of where the, you know, 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 know, 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 got the hit from Vivadesto, but then as you add in, you know, new services there, what's the margin? Is that maybe the key division that could see the most rapid margin expansion?
I think what we look at it is in the first half of the next 5 years, we drive on with the strong organic platforms we have in Pharma and in MedTech. And in the back part, we'll put Supply Chain Retail have their investments, and you start to see strong progress coming back into Supply Chain Retail. I think right across each of the platforms where we're going to grow, and we look back at it, we're just doing what we've done for the last 5 years on much bigger platforms, as we've built out these platforms and grown. Brian?
Yeah. So if you look at the presentation on supply chain retail, we talk about moving into higher value, higher margin opportunities, such as consumer, own brand, in-licensing. 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, you know, margins of up to 60%. 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, you know, high value capabilities into a higher value proposition. So we do see the potential for margin expansion in pharma services.
Yeah, I think-
Thank you.
-around Vivadesto, again, now we have a base in Europe, and, you know, we're looking, we're looking to layer on some of our on-demand skill sets to that team in Central Europe. So that's, 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's a reference to returning on capital deployed 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 we're referring to.
Okay, thank you. 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. You know, you're gearing it sort of 1.9 times will come down a little bit by the end of the year, but what's your balance sheet firepower off your existing balance sheet for the M&A? And just a bit more color in terms of what that M&A pipeline looks like. What are the key areas you're looking for for those bolt-on deals?
... I think, I mean, we said it for the most part between EUR 50 and 100 million to do deals going forward. But as we go through our investment case and get to the latter larger 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, one or two a year. They'll be probably bigger, and as we build out our platform. So the platform are pretty much there at this point, and now what we're doing is doing very smart deals, and we need to enhance our service offering. And our medium-term focus is in our pharma services business, but as we build out that platform, that global platform.
Yeah, no, I agree 100% with you there. There, like, there's plenty of headroom in our balance sheet to drive M&A. As Gerard said, there's between EUR 50 and 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 investment both organic and inorganic over the period.
Okay, thanks. Thank you.
Thank you. As a reminder, if you'd like to ask a question, please press star followed by one on your telephone keypad. Our next question comes from Andrew Whitney from Investor. Andrew, your line is now open. Please go ahead.
Morning, gentlemen. Many thanks for, for the presentation and taking my questions. Just 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 midterm, I know the markets that you're operating in have got big structural drivers that are fueling growth, but that, that EUR 200 million, getting to that EUR 200 million, does that necessarily mean you taking market share in the sub-sectors that you operate in? Or do you think you can get a long way by, you know, benefiting from the, the, the sub-sector growth that's available? So that's, that's one question. And I think, 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 sort of on that basis, if, I think you said you'll keep leverage below 2.5x, what, is there, is interest cost, the interest cost rate environment a consideration here? What would it look like if you got up to 2.5x, running through the P&L? And I'll leave it there. Thanks.
So, Andrew, I think if you look at the opportunity we have in each of our three divisions, the addressed market is very significant. So even if we just maintain our existing shares on those markets, we will go a long way towards the EUR 200 million. So we're very fortunate to have strong, strong wind on our back as we move forward. I think we look at Supply Chain Retail, it's services that one of the fastest growing economies in Europe, and the demographics are very positive towards us. And we've built a really strong business there. And addressed the market in pharma services and in med tech are very significant, right?
Yeah. So on the med tech, you know, it's really about going into new markets so we can grow in our existing markets. You know, building on new relationships. We can also take existing relationships into new geographies. And then on pharma services, it's, you know, you look at some of the structural drivers we refer to, such as, you know, the growth in specialty. You've got the growing number of products being developed in the US 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 there's, it's, it's like sort of capturing somebody's market that isn't actually meeting unmet demand today. So huge opportunities, as we said, in each of three divisions.
I think from a deal perspective, we are focusing on building on our capabilities in, you know, Pharma Services, the division. Huge capabilities there, but over the last few years, and look, we did a few gaps where we're currently partnering with people who we'd like to build those capabilities in-house. But look, today we can still drive on. We're working with those partners, and Tim-
Yeah, yeah, an interest as is, as a consideration for the Andrew, obviously, obviously is an issue. Sorry?
Go ahead.
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 50% return after three 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.
That's very helpful. Thank you very much.
Thank you. Our next question comes from Sam England, from Berenberg. Sam, your line is now open. Please proceed with your question.
Hi, guys. Thanks for taking the questions. Can you talk a bit about your assumptions around the acceleration in P&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 are you expecting to see from the reorganization that you're doing? And then secondly, there's also obviously 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 waiting in our figures. It's gonna be higher this year through the acquisition of McCauley earlier in the year. So it's only been included in the H1 figures for five months since February. It's gonna be included for the full part of H2. But also, in that business, there's a higher H2 performance expected.
Yeah, I suppose just on the gross profit growth end, yeah, MedTech we expect to continue to be strong through the year. And then C&C, the pharma part of the business, also is coming off a tough comparison to last year, and we expect a strong H2 for C&C pharma.
Okay, great. And then maybe just, just one follow-up as well, around the reorganization that you're doing. Can you just talk a bit about how much, sort of integration work there is to do internally in bringing sort of the, the C&C and PA businesses together under the Uniphar Pharma brand? And whether there's any sort of additional investment that will be required outside of the, the technology, either in sort of advisory or consulting spend, new hires, or, or restructuring costs?
It's how we run our business today. It evolved over the last number of years, so that's how we show up and pitch to our pharmaceutical clients, so that's done. There will be a small investment in branding and rebranding of that division as we move forward, but it's very small, like very insignificant. Brian?
Yeah. So from, from the get-go, Sam, as soon as we acquire these businesses, one of the first things, you know, we do is try to cross-pollinate on their, their client lists, and for introductions in terms of, you know, from a business development perspective. So as Gerard said, really now what, what we're doing is just consolidating all those capabilities under one brand, which, you know, which is a much higher value proposition. So there'll be a little bit of investment in the, on the rebranding, you know, across the group, and part of that's already done. You can see that the, you know, MedTech is already there. Supply Chain & Retail doesn't, doesn't need anything. And then on, you know, the other recipes, just a small bit of investment on the consolidation of CRMs, but it's, you know, it's small for us.
Great. Thank you very much.
Thank you. Our next question comes from Brian White, from Shore Capital. Brian, please go ahead. Your line is now open.
Yeah, thanks very much. I've got two questions. You've been very helpful in the previous questions, so I'll probably ask some of the questions slightly differently. In slide 21, in particular, you went into depth about some of the areas of expertise you have in terms of offering a comprehensive end-to-end service to your pharma clients. And I just wondered if there's any, yeah, in that vein, are there any additional areas of expertise that are top of your shopping list? I noticed some of these are partnered just now. Would it make sense to bring some of these partnered activities in-house? And then secondly, you know, certainly in my experience, Uniphar have a very, very good expertise and history of doing off-market deals in terms of acquisitions.
I just wondered, is that still the case? If that is the case, are you seeing valuations for private companies or the expectations of valuation coming down to more recent realistic levels, given what's happening in the public markets, or are we not there yet? Thank you.
So, Brian, I'll take the second part of the question, then hand over to Brian. There's definitely a mismatch today between private multiples and public multiples. And we're not seeing that in our true growth area. Pharma services and MedTech, the multiples for those are very high. So that's why we try to do off-market deals to catch get companies which are pretty who are high growth and haven't scaled yet 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 these attractive deals, but we're still confident we can do it because of our skill set we have within the business. Brian?
Yes, 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, you know, 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, you know, talking to clients on and consolidating 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 as opposed to waiting for it to be in-house, you know, we're confident that this is something that we can partner with in order to be able to sell that end-to-end solution.
Just to have one partner for our clients, and then we, we can subcontract some of these parts, but, but it is something we'd look at adding in the house, between the short and medium term.
Okay. Thanks very much.
Thank you. We have another question from Christian Sheridan from Stifel. Christian, your line is now open. Please go ahead.
Thanks for taking the follow-up. 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 US plans? Obviously, you know, 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?
... the 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 as advised in Q4 last year that has reversed into Q1 this year, and they're 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 would, depending on the year-end, 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, you know, be fully live there, you know, by mid-January.
Then, is it an obvious kind of area where you... Not why you're going, you know, you've upgraded essentially your, your MedTech business to, from kind of mid to high, to, to now at least high. Is that US a factor in that?
No, US is not a factor in our five-year plan at this point. We definitely have a small, with a bunch of people in the US who source individual medicines, our med tech part for Europe, but the US is an opportunity in the long term. It's not, it wouldn't be in our medium term targets.
Okay, great. Thank you for clarifying.
Thank you very much. At this time, I'd like to hand back to Ger Rabbette, our CEO, for any closing remarks.
Yeah, listen, guys, we're very happy with our H1 results, nonetheless strong set of numbers, and we're very happy to give you guidance for where we see the next five years of development. So we're happy to from five years from today, we we'll be a business twice the size. So, and, we appreciate all the support, so thank you, and talk soon.
That concludes the conference, everybody. Thank you very much for joining. You may now disconnect your lines. Have a great rest of your day.