United Drug to scrap scrip dividend this year
Published 18/02/2011 | 05:00
Healthcare group United Drug is set to scrap its scrip dividend policy this summer, in a move that will eliminate a negative impact on its metrics by having to issue new shares under the scheme.
Speaking after the group's AGM in Dublin yesterday, chief executive Liam FitzGerald confirmed earlier comments by chairman Ronnie Kells that the board is currently examining the scrip dividend, which allows shareholders to receive their dividend in the form of shares.
They thereby increase their holding without having to pay commission fees, or stamp duty.
United Drug paid out €19.2m in dividends in 2010, which included the final dividend for 2009 and the interim dividend for 2010.
Of that total, €6.4m, or one-third, was in the form of over 2.8m new scrip shares issued to shareholders.
That increased the number of outstanding shares by more than 1pc. The scrip issuance reduced the cash dividend outlay for United Drug to €12.8m.
The issuance of shares under scrip schemes has the effect of adversely impacting the earnings-per-share figure. However, it also enables firms to preserve cash which can be used for other purposes.
"The scrip, more than likely, will end," said Mr FitzGerald, who added that the company, which is involved in sectors from pharmaceutical wholesaling, to event planning for drugs firms, would find other ways to enable shareholders to buy additional shares in the group with their dividends.
However, he could not say whether they would incur a charge to do so.
In a so-called drip scheme, the company buys shares on the open market for shareholders who elect to receive their dividend in the form of shares, but the shareholder pays stamp duty -- currently 1pc of the value of shares purchased.
Mr FitzGerald told shareholders the company currently earns about 60pc of its profits outside Ireland, a figure it wants to boost to 80pc within four years.
He said in the first quarter of the current financial year, United Drug's contract sales and marketing, and its packaging and speciality units, had traded strongly.
However, the healthcare supplies division reported lower revenue and profits, but increased market share.
Shares in United Drug closed down 1.35pc yesterday at €2.19.