Good morning or good afternoon, or welcome to the Uniphar Interim Results 2025 Conference Call. My name is Adam, and I'll be your operator for today. If you'd like to ask a question during the Q&A portion of today's call, you may do so by pressing star followed by one on your telephone keypad. With that, I'll now hand the floor to Allan Smylie to begin. Allan, please go ahead when you're ready.
Good morning, everyone, and welcome to Uniphar plc's interim results presentation, which covers the periods of 1 st of January 2025 to 30th of June 2025. I'm Allan Smylie, and I look after IR here at Uniphar plc. Presenting our results today is Ger Rabbette, our CEO, and Tim Dolphin, our CFO. We're also joined on the call today by Brian O'Shaughnessy, our Chief Commercial Officer, and Dermot Ryan, our Chief Operating Officer. 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 25 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. Good morning, everyone. Thanks for joining us. At slide five, we outline who we are. Uniphar is a healthcare services company whose mission is to solve problems for healthcare companies and healthcare professionals. If you are a pharma, medtech, or biotech manufacturer, the good news is that the development of new specialty products is creating big opportunities. The challenge is that their increased complexity is making it harder to unlock these opportunities. That's where we come in. We sit in the middle between the manufacturer and their stakeholders, and we help both of them to overcome problems. We've built long-term relations with our manufacturer partners, and we have a deep understanding of the challenges of getting these new specialty products to market. We've been talking for years about building platforms, and this is what we mean by it.
We're building out our capabilities and our relationships to allow us to solve the problems that healthcare is facing. If you move to slide six, you can see that as a business, we've come on a journey. We've evolved from a low-margin business to a higher-margin business. We've gone from local to global. We now have a global presence of 160 countries worldwide. We've gone from a focus on mass markets to a focus on specialty across all our divisions. This shows that our results have increased their EBITDA almost tenfold in as many years. Basically, the way we look at it, we're in the right place at the right time with the right service offering.
In an industry where complexity is overwhelming, where to get a proper return for your investment in developing either a high-tech gene therapy or a med device, you need to go beyond the big markets. That's where Uniphar is here to help as your trusted partner. We've built the platforms that allow us to solve the push problems of manufacturers who are seeking to push their new product into the global marketplace and the pull-up problems of healthcare professionals as they seek to get their hands on these new medicines for the local marketplace and for their patients. On slide seven, we show what this strategy is now doing for us in financial terms. In the first half, the group generated revenues of EUR 1.5 billion, gross profit of EUR 220 million, and EBITDA of EUR 58 million.
What's most pleasing for us was the strong organic gross profit growth of 8%, which translates into EUR 17 million. This was driven by a strong performance by each division, with Supply Chain & Retail delivering EUR 3 million, Medtech EUR 4 million, and Pharma EUR 10 million, showing a strong performance from all our teams. On slide eight, we show the group's financial highlights. As you can see, we're making good progress. In this half, we delivered organic gross profit growth of 8%, a return on capital employed of 16%, earnings per share grew by 21%, free cash flow conversion landed at 35%, with an average of 1.9x . We see these as a strong set of numbers and it puts us in a really great place to deliver strong full year results, mindful that H2 is normally greater than 50% of our gross profits. Therefore, that drives stronger operational leverage.
We're also continuing to invest in our technology, in our people, and in our infrastructure in order to deliver our medium-term EUR 200 million EBITDA target. These investments are a drag in the short term, but we remain confident that they will deliver in the medium term. As a business, we've always invested for the longer term. On slide nine, you can see that we continue to make strong progress in sustainability, maintaining our excellent scores with independent rating agencies. On slide 11, we take a close look at the progress of each Supply Chain & Retail is our legacy business, serving retail and hospital pharmacies in Ireland. It's a virtually integrated infrastructure play that represents 45% of our gross profits. Our Pharma division is high growth. It's a global business. It's focused on specialty and now represents 29% of our gross profits. Medtech is also high growth.
It's also specialty focused, but with a European footprint and now represents 26% of the group's gross profits. On slide 12, we outline how we win in Supply Chain & Retail. This business is an integral part of Ireland's healthcare infrastructure, and we continue to grow share. We are virtually integrated, linking the manufacturer to the healthcare professional with the world-class service offering. The business has a strong competitive moat, huge barriers to entry, and we have clear blue water between ourselves and our competitors in terms of infrastructure and future readiness. We also have the largest franchise footprint with 455 stores. On slide 13, we outline our Supply Chain & Retail delivered 3% growth in gross profits to EUR 298 million on a revenue base of EUR 1 billion.
Wholesale grew across both Rx and consumer, helped by the addition of 10 new pharmacies into the network, while retail saw good growth in core Rx with slower growth in consumer. This division is entering a critical phase ahead of the go-live of our new DC in July of next year. In advance of that, we're strengthening our management teams, our cybersecurity, and other infrastructure to make sure the organization is adequately resourced for the new world. In essence, we're footnoting costs to seriously upskill the business, and because of this, EBITDA was down a huge amount to EUR 22 million. These significant investments that we are making future-proof this business for 10+ years. It's both a B2B and a B2C solution. It will significantly increase our value add to our customers, transforming how we do business.
However, we have a tough 12 months ahead, but once we get through this, we do expect this division to outperform current guidance from 2028 onwards. On slide 14, we outline how our pharma business wins. As we see it, we built a global platform leveraging our capabilities from our Irish business to deliver high-value solutions to manufacturers and hospitals. Working on the push side with pharma and biotech manufacturers, we focus on providing an integrated range of services for specialty medicines, both pre and post-approval. On the post side, our key relationships are with our global hospital channel, helping healthcare professionals to access or source the treatments they need for their patients across early access, specialty medicines, unlicensed medicines, and product shortages.
If you go to slide 15, we outline the Pharma division's strong financial performance, with gross profit growing by 11% to EUR 64 million on a revenue base of EUR 345 million, with EBITDA growing strongly over 30% to EUR 30 million. The division delivered strong double-digit organic growth led by our strength in global sourcing. If you look back, this business has grown out of our original base in Ireland and is now dominated by our European and rest of the world business, which together represents over [30%] of the pharma business today. Our market-leading global sourcing platform had a very busy start to the year, servicing a strong demand for unlicensed medicines, clinical trials, and medicine shortages. We've still another PI in the mix, but you can see the short-term impact in terms of margin. That said, our direction of travel continues to be towards higher margin services.
We're also investing very significantly in our European launch and commercialization platform, which is also affecting margins, but which will give us a much enhanced end-to-end service offering in our Pharma division going forward. We are awarded six new exclusive access programs so far this year, and we continue to maintain a strong pipeline in this strategically important business. We remain confident that Pharma will continue to grow double-digit going forward. On slide 16, we outline how Medtech wins. This division had another great half. This is a high margin, high-growth business with sticky relationships. We provide a full service commercialization model to seven of the top 10 med device manufacturers. Just like in Pharma, we concentrate on specialty. We focus on high-value specialisms like diagnostic imaging, orthopedics, and intervention. We've built out the business from Ireland and the U.K. into continents in Europe.
We have a very strong relationship throughout the European hospital channel with hospital consultants who are increasingly the decision makers for the ever more complex med devices that come into the market. On slide 17, we outline Medtech's strong financial performance, with gross profits increasing by 8%, all of which is organic, to EUR 58 million on a revenue base of EUR 140 million, with EBITDA increasing to EUR 22 million. It's important to note that we have been investing upfront in business development and in other resources to facilitate strong EBITDA growth for the full year. We saw growth across all specialties during the period, and we're now entering the Nordics in the specialty areas of interventional, surgical, and orthopedics. We also entered the Austrian market organically in recent months.
We continue to see great opportunity to leverage our strong manufacturer relationships to enter new geographies with existing partners, leveraging our existing platforms and sharing resources with our pharma business as we do with any staff. We remain confident that Medtech will continue to grow at a high single-digit goal forward. On slide 19, we give an update on our investments. As well as our flagship investments in Supply Chain+ Retail in Ireland, we've invested in Pharma and Medtech platforms in the Netherlands, where we've built a world-class distribution hub to help us scale this business in Europe. At the same time, we've invested in a world-class facility in North Carolina to help us grow our pharma services specialty offering in the U.S. We plan to operationalize a similar facility in the U.K. next year.
These facilities give us the capacity we need to grow and hit our 2020-ish EBITDA target. On slide 20 and 21, we give more detail on our flagship distribution facility in Ireland. We call it Greenouge 2. As we see it, this significant investment future-proofs our strong market position in Ireland. It transforms our cost base and enables the pharmacy of the future. We now expect the investment to be 10%-1 5% higher than originally planned four years ago, reflecting both a broadening of the scope and inflation. Our current view is that it will outperform and deliver a 15% return on capital employed hurdle in less than the five years planned, growing strongly from there as we utilize this significant additional capacity. This is a huge project for us. We've over 40 of our best people out, which has been a serious drain to our managing resources.
At the same time, we've been strengthening the senior team in recent months to ensure that we will have the capacity to successfully manage the transition, including dual running post the go-live period in quarter three next year. As I said previously, once we get through this investment phase, we do expect this division to outperform current guidance from 2028 onwards. I'll hand it over to Tim to talk you through our financials.
Thank you, sir. I would now like to take you through the financial highlights for H1 2025. I am pleased to say that the group has delivered a strong performance during the period, with gross profit growth across all three divisions. At an overall group level, we generated a gross profit of EUR 219.7 million, up 6.3% from H1 2024. Excluding the impact of Inspired Health, which we saw last year, the group delivered strong organic gross profit growth of 8.1%. EBITDA has increased by 2.9% to EUR 57.5 million. On an organic basis, this was 4.9% growth. I will take you through the divisional drivers of this growth in a moment, but would like to highlight that given the phasing of some of our investments and the H2 weighting of our revenues, we expect organic EBITDA to accelerate in the second half.
Adjusted EPS is up from EUR 0.081 to EUR 0.098, representing an increase of 21%. This has resulted in a return on capital employed of 15.5%, above our medium-term guidance of 12%- 15%. Leverage for the period was 1.9x . Just looking at divisional performance now, gross profit and gross margin percentage are the key financial metrics we use to track profitability at a divisional level. To improve disclosure and help analysts and investors better understand our business, we are now also disclosing EBITDA by division. Uniphar Supply Chain & Retail performed in line with its divisional guidance, with reported gross profit growth of 3%, all of which was organic. This division has strong recurring revenues, plus a stable and robust gross profit profile. Its gross profit margin was down modestly compared to prior year at 9.8% as a result of stronger growth in the lower margin supply chain business.
EBITDA declined by 9% in the half to EUR 22.4 million and a margin of 2.2%. This reflects three factors: the investment in our management teams that Ger mentioned earlier, statutory wage inflation that we had anticipated, and investment in IT, in particular cybersecurity across the group. Uniphar Medtech delivered a strong outturn in H1 2025. The division delivered a reported gross profit growth of 7.5%, all of which was organic. This performance reflects the strength of our business, the deep expertise of our team, and the diversity across our service offerings. The gross profit margin increased during the period to 41%. EBITDA increased by 2.4% to EUR 21.7 million and an EBITDA margin of 15.4%. We invested in headcount during the period to facilitate recent business wins and expect strong EBITDA growth for H2 and the full year. Uniphar delivered gross profit growth of 10.6% and organic growth of 17.6%.
This was led by a very strong performance in our global sourcing business. The divisional gross profit margin increased to 18.6%, reflecting our continued move into higher margin activities. EBITDA increased by 32.5% to EUR 13.4 million and a margin of 3.9%. This margin reflects the continued investment in our European commercialization platform and other growth initiatives. Moving on now to have a look at net debt. At a high level, we finished the period with a net bank debt position of EUR 197.5 million, driven by opening net debt of EUR 147.7 million, strong EBITDA of EUR 57.5 million, a working capital outflow of EUR 17.1 million, partially driven by the unwind to prepayments in Uniphar Pharma that we had flagged last year. Capital, including strategic capital of EUR 21.8 million, the share buyback of EUR 35.1 million, and other items of EUR 33.3 million, including tax and finance costs.
Our strategic CapEx reflects the significant multi-year investments we are making in our new distribution center, Greenouge 2, and our new S/4 platform. Our reported free cash flow for the period was EUR 20.3 million, and I'll take you through the details of this on the next slide. Free cash flow. Here we outline our free cash flow generation and free cash flow conversion for the year. Our updated definition of free cash flow is EBITDA, less investment in working capital, less maintenance CapEx, less lease payments. For H1 2025, this translates into a free cash flow conversion of 35.3%, principally reflecting the unwind of the favorable prepayments backdrop in 2024. We continue to expect free cash flow conversion of 60%- 70% by 2028 at EUR 200 million EBITDA. Moving on now to have a look at capital allocation.
Capital allocation has and remains a key focus for the group as we adopt a very disciplined and balanced investment approach to creating shareholder value. 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 return on capital employed at or above our hurdle rate of 12%-1 5%. We maintain a prudent approach to leverage and aim to keep our net bank debt to EBITDA below 2.5x over the medium term. In addition to a progressive dividend policy, we will also look at share buybacks subject to market conditions. Just like having a movement to slide 29 now, looking at our priorities for M&A, we have a strong track record on completing M&A, with 17 acquisitions completed in the last six years across all three divisions.
We tend to work with people before we engage in any M&A discussions and now have a reputation for being a responsible owner in the market. We avoid competitive auction processes, can buy off market, and get good value. Our pipeline is mainly focused on Pharma. We are looking for acquisitions across areas like market access, as well as commercialization platforms and specialist distributors. I'll now hand you back to Ger to finish with our investment case.
Thanks, Tim. If we move to slide 30, we outline our ambitious targets to deliver EUR 200 million EBITDA by [2026]. We will achieve this target through robust organic growth across all three divisions, led possibly by our investment in technology and infrastructure, complemented with strategic M&A. Our expected organic gain on express is now 80/20 as we leverage our platforms, and we remain confident that we will deliver. On slide 31, we show our strong track record as a listed company. We've more than doubled our gross profits and EBITDA, we've increased our margins. We've delivered very substantial growth in areas we share. Finally, on slide 32, we outline our investment case. We're going into the next stage of our growth, armed with a much greater number of capabilities than we had at IPO. We've demonstrated a strong track record of delivery.
We know this industry well, and we will follow the money. There is a competitive market opportunity, a favorable market backdrop, and plenty of scope for growth in each of our three divisions. Each division has an attractive competitive moat, and we have a concrete plan in place to grow and deliver on our ambitions. Thanks for listening, and I'll hand back to the operator for Q&A.
Thank you. As a reminder, if you'd like to ask a question on today's call, please press star followed by one on your telephone keypad now to enter the queue. When preparing to ask a question, please ensure you are unmuted locally at star followed by one. Our first question comes from Colin Grant at Davy. Colin, please go ahead. Your line is open.
Great, thanks very much, and good morning, everybody. I have a couple of questions. Firstly, in terms of EBITDA growth in Medtech and Supply Chain & Retail, you mentioned that was held back by various investments that you're making. Can you give a little bit more color on the nature of those investments in terms of headcount and management teams and so on, and the benefits that you think they could bring to the business in terms of H2 onwards? My second question relates to your strategic capital investments at Greenouge 2. You mentioned you are looking at increasing the amount of spend by 10% - 15% and broadening the scope there. Can you give a bit more color on the additional areas that you're looking at investing in in Greenouge 2 and the benefits that you expect to achieve from that? Thanks very much.
Okay, Colin, I think I'm going to ask Brian to do Medtech and go over to the Supply Chain, and then I'll answer your final question.
Hi, Colin. From a Medtech perspective, fundamentally, we have a significant opportunity in this division. We look at the market and structural drivers. There are very limited options for medical device manufacturers to partner with somebody with a direct presence in 12 countries and a direct presence in 10 countries within Europe. We would see ourselves as one of the leading specialist platforms within this space. Our focus, which is well outlined, is to defend and grow our existing business and geography expansion within our five specialties. This is where all of our investment has been. Most investment goes into field specialists, which have a direct link to driving revenue, and then the back office support functions. Specifically, when we look at our diagnostic imaging business, we went live in Benelux in Q4. We're seeing full investment for the last six months in that region, which is going very well.
We've also further invested in the U.K. within that specialty due to an expanding supplier base. Within surgical, we've invested in both U.K. and Nordics due to launching new suppliers in those geographies. Orthopedics, we've invested further in Ireland due to the growth we're seeing here. We've launched into the U.K. within this space with investment in both field specialists and back office support. Ophthalmology, we've now launched in the U.K., which again requires special field teams to be invested in. On the interventional side, we've expanded our client base in the U.K. with further investment there. All of these investments are in line with our strategic objectives of taking existing suppliers into new geographies, but also launching with new partners in new geographies, which all require investment in specialist teams for growth.
Yeah, I think, Colin, on the supply chain side, as Ger mentioned earlier, we're now entering a critical period for us in terms of the run-up to go-live and obviously the post-go-live as well. With the new investment, I think it represents a whole new way of working for our supply chain business. With new functionality and technologies, obviously, we're trying to drive our operational efficiency. We've had to strengthen the team, I think, to bring in additional skill sets to complement that. We've made those hires now ahead of time to be in the best shape possible, I think, for the go-live period.
If you look at this very significant investment, we planned it eight years ago, four years planning, four years implementation. The world is very different, but the opportunity we see now is even more significant. That's why we said we'll hit our hurdle quicker than the five years from a 50% return on capital employed. We also think this division will outperform for 2028 onwards . The focus is now with our digital. How do we deliver what we call a paperless pharmacy? How do we really streamline our process, take more costs out of the system, add more value for our partners and ourselves, move up the value chain, and really ultimately gain additional share? We're even more excited now about the potential for this investment as it comes to the end.
We've decided to fast-track these initiatives to grab these opportunities quicker and really leverage the new world of digital.
Great. Thanks very much, everybody.
The next question comes from Kane Slutzkin from Deutsche Bank. Kane, please go ahead. Your line is open.
Morning, guys. Can you hear me?
Yeah, yeah.
Great, thanks. Just on the gross margins, can you maybe just touch on the three divisions, maybe particularly Pharma, obviously quite a strong margin expansion there. Just wondering how sustainable, I guess, the growth is there, but also those margins. In Supply Chain & Retail, I've noted the mix did impact the margin. Just wondering sort of what we should expect into the second half. Is that kind of, is that mix story still playing out? Just on the phasing in H2 on the working capital, you obviously had the unwind. Just wondering, 60%- 70% target is for 2028. What should we be expecting for the second half there? Thanks.
Okay, from a margin perspective, I think we're very comfortable with our metric margin. I think we're happy that that's a very strong margin. We just need to get a bigger quantum as we move into new geographies. Supply Chain & Retail, we want to increase post the current investment phase. In Pharma, I think we'll increase as the mix changes as we move away from the lower margin parallel trade business. How sustainable is the Pharma performance? By any way, answer that question, would you?
Yeah, that's what fundamentally this comes down to. The effort we've put in to connecting up our entire Pharma division. We've inorganic and organic investment in the global sourcing through acquisitions like BModesto. We've also had organic investment in areas like clinical trial supply, which is a great example of the connectivity between global sourcing and pharma services, where you look at the capability, but in particular the client base. Leveraging our existing clients into new services, the expanding, you know, significant growth there coming from clinical trial supply, driving some of that, or delivering on our organic investments, really leveraging the entire Uniphar platform within Pharma services or the Pharma division.
We have always said this is our biggest opportunity. We still believe that. This business was started organically. Leveraging our hospital channel gave these guys access to early access unlicensed medicines. Now we are leveraging our platform to build out our Pharma services business for manufacturers moving into clinical trial services. We believe this business will grow double-digit going forward and, hopefully, over time, we will outperform that. Tim, do you want to take a further question?
Yeah, there's a question around the mix in Supply Chain & Retail. In [H2], there's always going to be a higher weighting towards retail in the Supply Chain & Retail division. The mix will be slightly different, but overall, it isn't going to be too much away from what you would have seen in H1 with a stronger weighting towards retail because of the seasonality that's in it. You had a last question in relation to the prepayments and free cash flow. Our target is to have a 60%- 70% conversion ratio from a free cash flow conversion angle. I think that's still a good target for the full year of 2025.
Okay, perfect. Understood. I'll jump back in the queue, thanks.
The next question comes from Charles Weston from RBC. Charles, please go ahead. Your line is open.
Hi, thanks for taking the questions. First on Pharma again, although the parallel importing and pharmacy supply is always going to be lower margin, can you talk a bit more about the pharma services side of the business in terms of the infrastructure you've built and how much more there is to invest? On the cost side, and on the revenue side, what the business development pipeline looks like. Perhaps, over the last six months, have your expectations around pharma commercialization contracts changed? Second question, please. I'll pause there. Why don't you answer that one first?
Sure, this would be something you'll need. We've always said that the phase cycle is relatively short when you deal with hospitals. We've built this amazing platform to source a global source to move around the world in 150 countries, helping our global hospital channel to source these early access programs, specialty medicines, unlicensed medicines, and product shortages. That platform is still, we would say, immature. We see further opportunities to expand and grow that platform. That phase cycle is relatively short. What we're trying to do now is leverage that global platform to give a fully integrated range of services to specialty manufacturers across biotech and small pharma. That's a very immature business. Both of these opportunities are really, really significant. The challenge we have is the sales cycle in hospitals is relatively short, but for the manufacturers, it's relatively long. The opportunity there is very significant.
I think when you look at, I think we're starting to look at this more as a combined platform with global sourcing and pharma services. If you look at where we've been for the last couple of years with Cell and Gene, we've been at the forefront of those markets, working with some really, really large biotechs on that side. As we've built out our clinical trial supply infrastructure, we're now able to have conversations about some of their products much earlier in the lifecycle. With the EU facility and the U.S. facility, we're now able to talk to them on a global basis about some of those opportunities as well. Really around leveraging those relationships, both in the EU and the U.S., I think is where we see the pharma business going over the next couple of years.
If we're looking for a sort of a step change, I suppose, in that margin, would that really just be down to signing a few big deals on the commercialization side? Or is there sort of operating leverage to come even without a sort of a step change on the top line?
Yeah, I think when you look at the margin, it's for us, we're very confident delivering the double-digit organic gross profit margin growth. Also, in terms of that, it will deliver strong absolute growth at the EBITDA level. Looking at EBITDA margins can be skewed in terms of the mix of revenue, depending on things such as clinical trial supply, the global sourcing. When we look at commercialization like sales, the mix can sort of skew the EBITDA margins, but we see very strong growth within the absolute EBITDA number. When we look at things like commercialization, they do take investments if we're launching a new drug in Europe. We're still extremely confident in terms of the market potential for launch and how Uniphar is uniquely positioned to support our clients for that market opportunity.
Okay, thank you. If I could just squeeze in one more, just on the organic versus inorganic split for the EUR 200 million EBITDA target for 2028. How big do you think that range could be around 80%? Could it be 90% organic? Could the whole thing be done organically? Yeah, just to give us a sort of sense of where the range is.
Charles, if you look across, we always invest for the long term. We like to grow our business, as you can see, but at the same time, we're trying to practically take acorns and grow into big trees going forward. The worst case scenario for us is we miss our number by six months. Best case we could get to six months earlier, but we're confident that we'll get to the 80% organic space by [2020-ish]. It's on these investments. The opportunity is there. It's just the sales cycles can be long when you're dealing with manufacturers, which is a challenge for a PLC. The opportunity is huge, and our job is to get to [2020-ish] and be growing strongly from there.
The investments we're making now to be really delivered by 2028 are to create a very strong business and a very strong cash flow for us going forward, Charles. That's how we look at it. I don't think the range is 70%- 90%. It's far narrower than that, Charles.
Okay, thank you.
Thanks, Charles.
The next question comes from Christian Glennie from Stifel. Christian, your line is open. Please go ahead.
Great, thanks, thanks guys. Thanks for taking the questions. Three, please take them in turn. I guess on EBITDA with the divisional disclosure, I think that's helpful. I guess maybe you've obviously got, we've got point in times here with the interim disclosure, I guess. Is there any way you can give a bit of a commentary or context around where some of those margins are for each of those divisions today? Obviously, in the light of maybe some of the investments we know you're obviously putting through. Therefore, kind of where we should think about margins for each of those divisions progressing over the next few years as you go out to 2028. I mean, I'm thinking particularly maybe Pharma is probably the one division that sees potentially the most margin expansion, but maybe some commentary around that.
I think you're correct there. I think we're, as I said, we're happy with Medtech. We have increased content, but the net margin is very Supply Chain & Retail will increase post for 2028 onwards, and we can give guidance to that later on. I think Pharma services is down to the mix, but we do believe it will increase. Tim, do you want to add to it?
No, like obviously with the business, as Ryan said, like if we land some of the stuff that he's hunting, depending on the margin of those businesses, there is going to be a margin, a change. It's not something though, Christian, that we would like to predict now or give guidance on now. It'll be something that we'll give guidance closer as that mix lands.
Thank you. On maybe following up on Medtech and the BD investments, has there been a particular trigger around that? What's that been in response to? Is there focus in terms of new opportunities you're seeing in the pipeline or perhaps greater competition for new business? Just a bit more insight into the sort of timing of that investment.
Yeah, so a lot of the investment, Christian, is within our field deployment. I suppose the two sides of business development, there is attracting new clients at a macro level, but then it's also, once we land new agencies, investing in people on the ground to actually grow the business, which is, I suppose, business development in terms of converting new consultants, new hospitals. You mentioned there's an enormous opportunity within this division when you look at the structural drivers and the macros and how Uniphar is uniquely positioned. The biggest short-term opportunity we have is continuing to defend and grow our existing business, which involves investing some of that business development on the ground, converting new consultants, hospitals, delivering growth for organic investment where we're taking on new agencies over the last number of years, and then growing with existing clients into new geographies.
The macro environment is positive for us when you look at the large and emerging medical devices. On the large company side, we're seeing trends towards them creating a more focused portfolio and geographic spread. Specific examples would be Stryker divesting its spine portfolio or Philips divesting its emergency care business unit. This type of activity presents opportunity for Uniphar to support those acquired in regions where they may not have existing infrastructure. We're also seeing some of our existing clients rationalizing the countries that they're actually promoting their products in, focusing on, I suppose, the larger markets that are delivering a higher performance for them, creating an opportunity for Uniphar to take on existing countries for these clients where they want to trust the partner with proven track record within these specialties.
When we look at the emerging companies, there's a larger number of emerging medical devices being developed, and they want to operate on a standalone basis as opposed to selling out too quickly to a large company. They become more dependent on outsourced providers to accelerate their growth. When you look at things like MDR, it makes launching in Uniphar an even bigger challenge. All of that lends itself to ultimately Uniphar being in an extremely strong position in terms of a unique platform as a leading specialist provider within the medtech industry for commercializing products in Europe. We'll continue to invest in that organic investment to take advantage of those opportunities.
Thanks, Brian. Final one, please. Just quickly on the Supply Chain side and the new facility, anything? Just curious a little bit about what is actually involved on the dual, almost sort of nine-month dual running period that you'll have for the new facility versus the current one, and maybe any additional costs that are going to be obviously incurred as a result of that dual running period. Thank you.
Tim, you might take this one.
Yeah, Christian, as you can imagine, if you're moving from one facility over to another, and we're doing it on a phased basis to make sure that we reduce the risk, we're going to be running two facilities at the same time. For a period of six to nine months, there's going to be two elements of dual running. One is the first element where we're running two distribution centers. As we wind down one, we wind up the other. Once we have those two distribution centers migrated to one, the second element of the dual running is the IT support function that supports the old EC6 IT platform that we have across all our depots. We have to continue with that support as we wind those other depots or migrate those other depots onto S/4 HANA.
That will happen over a two to three-month period after the migration from Citywest to Greenogue 2 happens. You have two elements. You have a migration of a facility, and you have a migration of an IT platform onto a new platform once the first facility has been done. The second element, when you talk about the costs that will be happening, obviously, with dual running, you're going to be duplicating the amount of people for a period of time. If you take, for example, from within the supply chain operations team, there's going to be a build-up of people during that period. There will be the same in the back office because we're going to have to be accounting for a dual staff. That'll be a build-up of people.
There'll be an element of cost built into it, and we've forecasted that, and we can give you the details of that offline. That will be something that will be exceptionalized next year. It isn't going to be able to be in line with accounting practices and treatments. I hope that covers it.
Yep, thanks, Tim.
The next question comes from Beatrice Fairbairn from Berenberg. Beatrice, your line is open. Please go ahead.
Hi, thank you for taking my question. I had two, if I may. Firstly, you talk in the release about investing to drive growth in the Medtech business. How do you think about which areas to prioritize between expanding in existing geographies, adding new [Greenogue 2 ] locations, new customers, expanding existing customers, and expanding to new either product categories? On the second question, do multiples being demanded for bolt-on M&A remain elevated, and how do you weigh up the benefits of M&A versus [Greenouge] expansions like Austria? Thank you.
We have here a 50% return on capital employed within three years in the first criteria. If we look at the platform we have, we've built a lovely medtech platform in Northern Europe. We want to stick to our current specialties, and we need to get them into these geographies working with existing partners. The only drawback here is to get the team up and running quickly. We're a people business. We invest very heavily in our people. If you take on a new agency for a new territory, you must make sure you do a really good job, and that just takes time. You invest upfront, and you roll it out. Some of the people are our limiting factors.
The opportunity is very significant, but we just need to do it properly and do it well and make sure that we add the value to justify our net 50% margins in Medtech. It's just Northern Europe we have to crack. It's a big territory, big population, big opportunity. That's taken a couple of years before we then started to look at Southern Europe.
The next question comes from Brian White at Shore Capital. Brian, please go ahead. Your line is open.
Yeah, thanks for taking my questions. Just thinking about the commentary, I mean, obviously, we talk about it a lot in terms of M&A opportunities, particularly as it relates to pharmaceutical services. It's certainly my sense that we probably haven't seen as much as I thought we might have seen over the past few years. Certainly, as you want to flesh out capabilities there. I just wondered if you could give any kind of background in terms of the pipeline there, the competition you're seeing from private equity and the willingness of these kind of smaller firms to be absorbed into larger firms like Uniphar. Secondly, interesting and reassuring to hear about thinking pharma services and global sourcing as more of a combined entity. I just wondered what adjustments that you can offer your staff in the future to drive their thinking in that way as well. Thank you.
Tim, do you want to ask the question, or me take the first part? Yeah, I think I take the second part. Yeah, sorry. Yeah.
Yeah, on the first part around the competition and the opportunity within pharma services, we wouldn't really see private equity as, I suppose, competition with Uniphar. In fact, we would say we see private equity as a strong channel from a business development perspective because they've got pools of assets. We have built up quite a unique infrastructure combining our global sourcing platform as well as the high valuable skills we have throughout the lifecycle within pharma services, which enables us to support biotechs in launching in Europe. When we look at the question around competing with the being sold out, part of what has driven us to build this is built on the structural drivers within the industry. If you look at all of the pipeline within the U.S., 50% of assets now being approved by the FDA are rare disease and being developed by biotechs.
When you look over the last 10 years at the number of products approved by the FDA, only 60% have launched in Europe. It clearly shows there's a large unmet need and challenge for some of these companies launching into Europe. Some of that is driven by their traditional channel of selling out to big pharma or licensing to big pharma, which is dependent on how big the potential of their asset is. Big pharma's got so big, unless you have a potential asset that would generate EUR 600 million or more in Europe, you'll struggle for one of the large organizations to buy your asset or license it.
That means your choices are to try to build it yourself, but if you've got a single or even two assets within your portfolio, it's not enough to actually, even EUR 600 million sales wouldn't be enough to build your own infrastructure in Europe. What we have built is a unique platform where we can reach every geography in Europe to support these organizations in launching. That's leveraging both the global sourcing platform as well as the skill sets we have on the lifecycle, from clinical developments, medical, regulatory, market access, commercialization. We see very positive activity in terms of when PE invests, they don't have the infrastructure to do this, so we can support them in rolling that out.
I think the second part is probably just to touch on that again. It's just trying to build out the services and to engage in a much deeper way with existing customers and pharma clients in terms of, I think, looking at what their needs are and bringing solutions to those. I think as we've built out our services in those geographic areas, we've been able to have much deeper conversations. I think we've won business on the back of that sort of ability to offer an expanded services offering.
I think from a team perspective, we've been very successful a whole lot. The guys in acquisition management, obviously, we have a very significant health tech in place for our teams. We have a growth mindset at Uniphar. We're all here trying to how we grow our business, and people are rewarded accordingly.
Excellent. Thank you very much.
Just a reminder that staff will go on your telephone keypad. We have a question from Michele Mombelli from TP ICAP. Michele, your line is open. Please go ahead.
Hello, congrats on the results and thanks for disclosing your bid and for the very clear presentation. Very helpful for us analysts. Maybe a lot of questions that I would have asked already have been asked, but maybe a little bit, you mentioned that the fact that you have the large distribution facility in Ireland and the continental European hub expected to be fully operational in 2026. Could you update us on the timeline and the potential incremental benefits to capacity and efficiency once these projects are fully online? Maybe a little bit on geography since the Pharma division is very well diversified, you mentioned. I would like to know maybe which geography or countries currently are driving the strongest growth. You mentioned the difference within Europe and the U.S. in the launch of programs. Maybe also an update on that. Thanks a lot.
Tim, you might take the first part, would you?
Yeah, our new DC central module is due to go live in July of next year. As Ger and Dermot said earlier, the expectation is that it will generate a 15% return on capital employed over four years after that. The combination of the, or the return is going to be driven mainly from a combination of a few items, which would be a margin enhancement, increased costs more offering, and also to a higher operational efficiencies. They will obviously kick in after going live, but we will be projecting that it'll be 2027 before you see the full-year impact of all of those coming through, gradually building up into 2028, 2029.
In terms of the EU facility, it's already live, so it's already live from a Medtech division perspective. We will add our clinical trial supply packaging, bring that on stream second half of next year. We have a few pieces of work to do in relation to our licenses for our pharma storage and distribution. The [Lilly Step] facility is already live with phase I, which was Medtech.
Really, from a geography perspective, the rest of the world is still quite small for us. Obviously, our focus is on the U.S. We have a lovely business there, which is in North Carolina, is making good progress and is starting to do well in the next couple of years. The same down in Australia and New Zealand. We have a lovely business down there, which we want to scale. The opportunity for us is very significant. Today, the rest of the world is quite small for us, and we're determined to grow in the years ahead.
Thanks a lot. Thanks a lot.
With that, I'll hand back to the management team.
Thank you for attending this morning. We look forward to having a strong H2 and chatting to you again in March next year.
This concludes today's call. Thank you very much for your attendance. You may now disconnect your lines.