A fall in first-quarter pre-tax profits at Galen to £2.87 million sterling (€4.5 million) from £5.2 million masks a strong performance by the pharmaceuticals group.

Revenue and operating profits, before interest and amortisation of goodwill and intangible assets, doubled compared with the previous first quarter. Gross and operating profit margins increased. The results were boosted by the inclusion of the $300 million (€322.3 million) Warner Chilcott acquisition in September.

Earnings per share were 34 per cent ahead at 5.14p when the amortisation charges were stripped out. Galen shares responded to the strong results, rising 15 cents to €13.40 in Dublin while, in London, they closed 35p ahead at £8.60. Headline profits were pulled back by a £5.97 million charge for the amortisation of goodwill and intangible assets compared with a £460,000 charge in the previous first quarter and a sharp rise in interest charges to £5.2 million from £280,000.

Reporting quarterly operating results for the first time, executive chairman Dr John King explained that any acquisitive company inevitably built up goodwill which now had to be written off through the profit and loss account under new accounting rules.

The higher interest charge arose because Galen took over a high coupon $200 million bond when it acquired Warmer Chilcott, he said. Galen is looking for further acquisitions: "We are looking at options to acquire both product and organisations in the US and in Europe," Dr King said. But he added that opportunities in Europe were "few and far between".

Stating that the integration of Warner Chilcott was now complete Dr King said its financial performance had "exceeded our expectations". "We would have expected e.p.s. growth of about 20 to 25 per cent without Warner Chilcott but the 34 per cent outcome shows that the acquisition was strongly earnings accretive," he said.

In the three months to the end of December 2000, total revenue at the Northern Ireland-based company was 94 per cent ahead at £41.8 million sterling. Product revenue was up 130 per cent to £28.2 million and service revenue up 46 per cent to £13.6 million. Operating profits were 114 per cent ahead at £12.8 million before interest charges and amortisation of goodwill and intangibles.

Operating margins improved to 30.58 per cent from 27.66 per cent. Gross profit margins were up to 65.3 per cent from 47.9 per cent because the higher margin product revenue contributed over two-thirds of total revenue.

Earnings per share slipped to 1.29p from 3.47p when the goodwill and intangible assets amortisation is included. But when the £5.79 million charge is stripped out, adjusted earnings were up 34 per cent to 5.14p a share.

"We are encouraged by our performance thus far and approach the remainder of the fiscal year with enthusiasm for our prospects," Dr King said.