Associates and joint ventures

Investment in associates and joint ventures, almost all of whom wholesale and distribute pharmaceuticals, is an important component of our Group’s activities.

During the year, we acquired a controlling interest in two of our largest associates, Hedef Alliance and ANZAG, following which these two businesses are fully consolidated within the Group’s results and are no longer associates. Following the transfer in July 2010 of ownership of a 51% stake in our Italian businesses to a company controlled by our ultimate shareholder, AB Acquisitions Holdings Limited, we account for the remaining 49% stake as an associate.

Our share of revenue of associates and joint ventures decreased year on year by 13.0% to £3,126 million as a result of the acquisition of controlling interests in Hedef Alliance and ANZAG. For the same reasons, our share of trading profit decreased year on year by 14.4% to £113 million and our share of underlying post tax earnings decreased by 26.3% to £74 million. On a constant currency basis, adjusting for changes in associate and joint venture interests, our share of like for like revenue increased by 11.4%, our share of like for like trading profit increased by 11.6% and our share of like for like underlying post tax earnings increased by 1.9%.

The acquisition of controlling interests in Hedef Alliance and ANZAG brought the Group two new associates with operations in five countries. Hydra Pharm is a leading pharmaceutical wholesale operator in Algeria and Oktal Pharma undertakes pharmaceutical wholesaling in Croatia and also trades in Bosnia Herzegovina, Serbia and Slovenia.

In China, Guangzhou Pharmaceuticals Corporation, our joint venture established in 2008, performed well, particularly in the Guangzhou province, with good revenue growth, margin mix management and control over costs enabling the business to significantly improve profitability.

Alliance Healthcare Italia became an associate of the Group at the end of July following the divestment of 51% of our shareholding. Since then, the business has improved profitability versus the comparable period in the prior year mainly as a result of margin mix and the management of discounts.

Alliance Healthcare Portugal profitability continued to be impacted by a particularly challenging market environment, including government measures to reduce pricing.

We do not comment specifically on the performance of Galenica as it is a quoted company that separately reports its own results on a different year end. Galenica published its 2010 Annual Report in March 2011, reporting net profit (after tax) up 10.8% year on year and net sales up 6.6%. In addition to developing its international branded pharmaceuticals business and continued investment in its Swiss pharmaceutical wholesale and pharmacy operations, Galenica has established a new nephrology joint venture with Fresenius Medical Care to commercialise innovative and high quality products that improve the life of patients suffering from chronic kidney disease.