DGAP-News: Celesio AG / Key word(s): Quarter Results Celesio AG: Massive government economy measures depress quarterly earnings 12.05.2011 / 07:00 --------------------------------------------------------------------- Massive government economy measures depress quarterly earnings - Revenue increases slightly to 5.7 billion euro - EBITDA decreases 11.7 million to 141.5 million euro - Pressure on earnings to the sum of 29 million euro as the result of government economy interventions - Strengthening of the non-regulated service business Stuttgart, 12 May 2011. Celesio, one of the leading international service providers within the pharmaceutical and healthcare markets has, in the first quarter of 2011, slightly increased revenue by 1 per cent to 5,722.9 million euro compared to the previous year. Adjusted for portfolio and exchange rate effects, group revenue fell by 0.3 per cent. Operating profit (EBITDA) fell by 11.7 million euro (7.6 per cent) to 141.5 million euro. Government measures, in particular the reduced reimbursement rates for generics in the United Kingdom, depressed earnings by 29 million euro in the first quarter alone. However, more than half these measures have already been offset through efficiency improvements and organic growth. In addition, start-up costs associated with building up the Swedish pharmacies and the Medco Celesio joint venture depressed earnings. 'Already in the previous year, the pressures imposed by governmental measures doubled in comparison with 2009. In the current year these will further increase. The first quarter of 2011 shows clearly that the pressure from government price interventions in the pharmaceutical sector cannot be offset in the short-term by efficiency improvements either at the same time or on their own,' says CEO and Chairman Fritz Oesterle. 'We will therefore need to push forward our Agenda 2015, meaning an improvement in profitability and in particular portfolio measures designed to transform our business, with even greater emphasis. This is the only way in which we will significantly increase the proportion of our non-price regulated business as early as in the medium term. The financial latitude to achieve a balanced portfolio of price-regulated and non-price regulated business through acquisitions is in place.' Development within the divisions In the first quarter, the Patient and Consumer Solutions division generated revenue of 862.7 million euro, which is 1 per cent more than in the previous year (up 0.5 per cent when adjusted for portfolio and exchange rate effects). The division's EBITDA fell by 16.3 per cent to 49.8 million euro. This was attributable to the deconsolidation of the Dutch pharmacies following the contribution to Brocacef Holding, the planned development costs for the pharmacy chain in Sweden, as well as operational and organisational costs for the new management organisation DocMorris International Retail. On 31 March 2011, Celesio operated 2,287 retail pharmacies and therefore 14 pharmacies fewer than in the previous year. In the first quarter of 2011, Celesio opened ten pharmacies, of which eight pharmacies in Sweden. This underlines the strategy of building on the market position by opening new pharmacies to conserve capital and not expanding through acquisition. As a result, last year already 50 pharmacies were opened in Sweden. No longer included are the 63 Dutch pharmacies which were transferred last year as part of a cooperation with Brocacef Holding, in which Celesio has a minority holding. In the most important pharmacy market, the United Kingdom, revenue was maintained at the previous year's level despite weak consumer confidence and government interventions. Lloydspharmacy contributed 59.4 per cent to the Pharmacies business area's revenue in the first quarter. At the same time, an increase in the volume of prescriptions and a double-digit growth rate in revenues from non-regulated services were achieved. The new brand strategy in the Patient and Consumer Solutions division is successfully being implemented since the first quarter. Celesio will in future concentrate on two pharmacy brands: Lloydspharmacy in the United Kingdom and DocMorris outside the United Kingdom. In Ireland, rebranding of the existing pharmacies into DocMorris has already begun. The brand strategy and retail business will also be strengthened by the new appointment to the management board department for the Patient and Consumer Solutions division. Stephan Borchert will assume responsibility for this department within the Celesio Management Board at the latest by 1 September. He has broad experience in international retail. Revenue in the Pharmacy Solutions division increased by 0.9 per cent to 4,703.6 million euro. The majority of this can be attributed to the Wholesale business area where revenue increased by 0.9 per cent to 4,702.4 million euro. Adjusted for portfolio and exchange rate effects, revenue in the Pharmacy Solutions division fell by 0.5 per cent, primarily due to the government measures in Germany as well as the weak market development and the continuing pressure of competition in France. It was possible to increase the division's EBITDA by 3.3 per cent to 111.5 million euro. Adjusted for portfolio and exchange rate effects, this corresponds to an increase of 0.3 per cent compared with the previous year. The good performance in Brazil and the United Kingdom was not able to fully offset the burdens in France and Germany caused by competition and regulations. On 31 March 2011, Celesio operated 133 wholesale branches. This is three fewer than at the end of the closing date of the previous year, due to the continuous optimisation of the branch structure. Gross profit for the Manufacturer Solutions divisions remains, at 99.4 million euro, at the same level as in the previous year. In the Logistics Solutions business area, to which Movianto belongs, it was possible to increase gross profit by 7.9 per cent to 46 million euro. The Marketing Solutions business area, to which Pharmexx belongs, contributed 52.9 million euro to the division's gross profit. The division's EBITDA was 2.8 million euro (down 29.7 per cent compared with the same period in the previous year). This decline is due on the one hand to the planned start-up costs at Medco Celesio, and on the other hand due to contract losses in the United Kingdom in the Logistics Solutions business area which it has not yet been possible to offset. In the Marketing Solutions business area, EBITDA increased by 28 per cent to 2.1 million euro. Financing Given the attractive market environment, Celesio on 29 March 2011 placed a convertible bond to the volume of 350 million euro with a term of seven years. This has further secured the long term group financing and at the same time further diversified sources of financing and the investor base in the direction of the capital market. With this convertible bond, Celesio has furthermore extended the financial latitude for implementation of the growth strategy. This applies in particular with respect to the planned transformation of the business to new, cross-sector services and to a balanced proportion of price-regulated and non-price regulated activities. Profit forecast The additional government economy measures compared with the previous year will have a significant effect on earnings in the 2011 fiscal year. The currently foreseeable effects will reduce group EBIDTA by at least 100 million euro. Celesio expects, however, that the development in other divisions and the initiatives to improve profitability will succeed in offsetting these government measures to the greatest possible extent. At the same time, we assume stable exchange rate relations in comparison to the end of March 2011. With the initiatives in all growth pillars of Agenda 2015 Celesio has -despite governmental interventions in the core business - the right tools and levers to achieve both the strategic and the growth goal of Agenda 2015. At the same time, measures in the 'Portfolio Optimisation' and 'Innovation' pillars could also become crucial in terms of progression of the 2011 fiscal year. Key figures of the Celesio Group Q1 Q1 2010 2011 Revenue EUR m 5,668.3 5,722.9 EBITDA EUR m 153.2 141.5 Earnings before tax EUR m 91.2 82.5 Net profit EUR m 59.5 54.7 Earnings per share EUR 0.34 0.31 Employees* 36,433 36,424 Retail pharmacies 2,301 2,287 Wholesale branches* 136 133 Change on Change adjusted EUR for portfolio basis and currency- effects % % Revenue 1.0 -0.3 EBITDA -7.6 -7.1 Earnings Before tax -9.6 - Net profit -8.1 - Earnings per share -8.8 - *Values refer to the date at the end of the reporting period Press contact: Dr Jens Schreiber, Celesio AG, +49 (0)711.5001-380 media@celesio.com Rainer Berghausen, Celesio AG, +49 (0)711.5001-549 media@celesio.com About Celesio Group: Celesio is one of the leading international service providers within the pharmaceutical and healthcare markets. We are active in 27 countries worldwide and employ more than 36,000 employees in our three divisions Patient and Consumer Solutions, Pharmacy Solutions and Manufacturer Solutions. Approximately 2,300 of Celesio's own retail pharmacies, as part of Patient and Consumer Solutions, serve over 550,000 customers every day. In our wholesale activities, the core business of Pharmacy Solutions, around 130 wholesale branches deliver to more than 65,000 pharmacies - day in, day out. In the Manufacturer Solutions division, we offer pharmaceutical manufacturers logistics, marketing and sales solutions and operate in the area of Efficient Care Pharma. End of Corporate News --------------------------------------------------------------------- 12.05.2011 Dissemination of a Corporate News, transmitted by DGAP - a company of EquityStory AG. The issuer is solely responsible for the content of this announcement. DGAP's Distribution Services include Regulatory Announcements, Financial/Corporate News and Press Releases. Media archive at www.dgap-medientreff.de and www.dgap.de --------------------------------------------------------------------- Language: English Company: Celesio AG Neckartalstr. 155 70376 Stuttgart Deutschland Phone: +49 (0)711 5001-735 Fax: +49 (0)711 5001-736 E-mail: investor@celesio.com Internet: www.celesio.com ISIN: DE000CLS1001 WKN: CLS100 Listed: Regulierter Markt in Berlin, Düsseldorf, Frankfurt (Prime Standard), München, Stuttgart; Freiverkehr in Hamburg, Hannover; Terminbörse EUREX End of News DGAP News-Service --------------------------------------------------------------------- 124182 12.05.2011
DGAP-News: Celesio AG: Massive government economy measures depress quarterly earnings
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