DGAP-News: Celesio AG / Key word(s): Quarter Results
Celesio AG: Weak market environment and high government measures
depress Celesio earnings in the first half-year of 2011
11.08.2011 / 07:00
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Weak market environment and high government measures depress Celesio
earnings in the first half-year of 2011
* Revenue virtually stable at 11.5 billion euro
* EBITDA decreases by 16.3 per cent to 271.7 million euro
* Extraordinary impairment write-offs of 116.3 million euro
* Realignment of Lloydspharmacy started
Stuttgart, 11 August 2011. Celesio, one of the leading international
service providers within the pharmaceutical and healthcare markets has, in
the first half-year of 2011, achieved virtually stable revenue of 11.5
billion euro compared with the previous year. Operating profit (EBITDA)
fell by 16.3 per cent to 271.7 million euro. This decrease is fundamentally
due to additional government measures in the amount of some 64 million
euro, which also exceeded expectations and could only partly be compensated
for in a difficult market environment.
'The enormous government measures and a stagnating, in parts declining
pharmaceutical market, significantly depressed our earnings in the first
half of the year. At the same time, we face stiffer competition in some
countries, particularly in wholesale where an at times irrational battle
for market shares is being played out. This means that we will in the
future follow even more determinedly the direction taken in the past of
expanding the non-price regulated business,' says Wolfgang Mähr, the
interim Chairman of the Management Board and CEO, and who will hand over
the position to Markus Pinger on 15 August 2011.
Development within the divisions
The Patient and Consumer Solutions division generated revenue of 1.75
billion euro in the first half of the year, and therefore approximately one
per cent less than in the previous year. The reason for this was primarily
the deconsolidation of the Dutch pharmacies in 2010. Adjusted for portfolio
and exchange rate effects, revenue increased by 0.4 per cent.
The division's EBITDA fell by 25.6 per cent to 102.1 million euro. This was
in particular attributable to further government measures although there
were some compensatory effects. In addition, EBITDA was burdened as planned
by development costs for the pharmacy chain in Sweden, the operational and
organisational costs for the new management organisation within
DocMorris-International Retail and the costs of realigning Lloydspharmacy.
On 30 June 2011, Celesio operated a total of 2,291 retail pharmacies and
therefore 20 pharmacies fewer than on 30 June 2010. Since the fourth
quarter of 2010, the 63 Dutch pharmacies which were transferred to Brocacef
Holding have no longer been included in the figures. In the first six
months of 2011, 18 pharmacies (previous year 22) were opened, of which 14
in Sweden.
In the most important pharmacy market, the United Kingdom, it was possible
to increase revenue slightly, despite the high burden of government
interventions. Lloydspharmacy contributed 58.5 per cent to the Pharmacies
business area's revenue in the first half of the year. It was possible to
achieve this through an increase in the volume of prescriptions and growth
in revenue in the amount of 46 per cent in the non-price regulated service
business with institutions, for example through supply contracts with
hospitals, prisons and other institutional establishments.
Lloydspharmacy commenced with realignment measures during the reporting
period in order to expand the OTC business by better serving consumers'
needs. To this end, the product range will be purged, a price offensive
launched, opening times extended and a new website for the mail-order
business created. These investments will depress earnings by around 20
million euro in 2011.
The Pharmacy Solutions division reported revenue of 9.42 billion euro
during the reporting period, making it virtually the same as in the
previous year. The division's EBITDA declined by 6.9 per cent to 214.2
million euro. This is primarily due to the government measures in Germany
and the continuing pressure of competition in France. The number of
wholesale branches at the end of the second quarter was 133.
The intensive competition in a stagnating pharmaceutical market led to a
decline in revenue and gross profit for the French wholesaler OCP. However,
OCP has successfully managed to defend its market share since October 2010.
The British wholesaler AAH showed, as already seen in the previous year,
good earnings development. At the same time, AAH was able to increase
margin through operational improvements, for example within purchasing
terms.
In Germany, the Act for the Restructuring of the Pharmaceutical Market in
Statutory Health Insurance (AMNOG) had negative effects on earnings at
GEHE. It was not possible to pass on these burdens in the first half-year
of 2011 via reduced discounts because of the stiff competition. With a view
to the new payment system with fixed amounts which starts on 1 January
2012, GEHE has defended its market share but had to accept significantly
declining profits as a result.
Business in our wholesaler Panpharma in Brazil progressed with an increase
in revenue of around nine per cent in accordance with expectations.
The Manufacturer Solutions division generated a gross profit of 198.7
million euro, corresponding to a slight decline of 2.6 per cent. The causes
behind the 64.0 per cent decline in EBITDA in the division of 2.1 million
euro (previous year 5.9 million euro) are primarily the planned start-up
costs within Medco Celesio as well as declining earnings from Movianto.
Movianto has successfully expanded its business volume. However, contract
losses in the United Kingdom as well as start-up losses in Portugal and a
difficult market situation in Spain resulted in significantly lower
earnings than in the same period of the previous year.
Within Pharmexx, expansion of the business following the restructuring
progressed slower than expected. While it was possible to stabilise the
business in most countries, the volume of new contracts fell short of
expectations.
Impairment write-offs
In the context of an extraordinary impairment test of assets, Celesio in
July 2011 announced impairment write-offs totalling 116.3 million euro at
three business units. The impairment write-offs, which include intangible
assets, amount to 72.0 million euro at Pharmexx and 21.0 million euro and
23.3 million euro, respectively, in the wholesale business in Denmark and
Portugal.
In accordance with international financial reporting standards (IFRS), this
now compulsory extraordinary impairment test of all assets was triggered by
the fact that the market value of Celesio AG had fallen below the carrying
amount of group equity as at 30 June 2011. This impairment testing led to
impairment losses being recognised only in the case of the three business
units mentioned. The macroeconomic uncertainty in Europe as well as the
resulting weak market environment with what have become high direct and
indirect burdens from government economy measures in the healthcare sector
led to the impairment write-offs on the balance sheet referred to. The
level of impairment write-offs was also influenced by a higher discount
rate on future cash flows.
Earnings forecast 2011
In the 2011 fiscal year, additional government measures will, as already
stated, have a significant impact on the earnings of Celesio, in particular
on the pharmacy business in the United Kingdom and the pharmaceutical
wholesale business in Germany. The currently foreseeable direct effects
will also depress group EBITDA in addition to the previous year by an
anticipated 120 million euro. Celesio expects that it will be possible to
only partly compensate for these effects through the development in other
divisions and the initiatives in the context of Agenda 2015.
On the basis of the governmental measures which are known to us today,
Celesio anticipates an operating result (EBITDA) of around 600 million euro
for 2011 as a whole.
Key figures of the Celesio Group
1st half year 1st half year
2010 2011
Revenue Mio. EUR 11,508.6 11,486.2
EBITDA Mio. EUR 324.5 271.7
Earnings
before tax 1) Mio. EUR 178.3 24.8
adjusted 2) 3) Mio. EUR 203.8 151.8
Net profit 1) Mio. EUR 112.8 -30.2
adjusted 2) 3) Mio. EUR 136.8 93.5
Earnings per share 1)
undiluted EUR 0.64 -0,20
adjusted 2) 3) 0.79 0.53
Employees* 36,609 36,429
Retail
Pharmacies* 2,311 2,291
Wholesale
branches* 133 133
Change Change
on adjusted
portfolio
EUR-Basis and currency-
Effects 4)
% %
Revenue -0.2 -0.4
EBITDA -16.3 -15.2
Earnings
before tax 1) -86.1 -
adjusted 2) 3) -25.5 -
Net profit 1) --- -
adjusted 2) 3) -31.7
Earnings per share 1)
undiluted ---
bereinigt 2) 3) -32.1
1) Previous-year figures restated to reflect the treatment of the Panpharma
dividend to non-controlling interests as purchase price repayment instead
of as interest expense.
2) Adjusted for special effects which are included in the financial result.
3) Adjusted for impairment losses recognised on intangible assets
consisting of impairment losses on goodwill and brand names and the
associated tax effects on the net profit/loss.
4) The change adjusted for portfolio and currency effects (organic growth)
eliminates the effects of currency translation, consolidation changes
(elimination of all units that were not already consolidated as of 1
January of the previous year or that were deconsolidated in the period
after 1 January of the previous year), gains/losses on disposal and
impairment losses of intangible assets. The figure is also adjusted for
changes in the value of shares in ANZAG, which were held up to and
including 2010.
*Values on the date at the end of the reporting period
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 47,000 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 approximately half a million
customers every day. In our wholesale activities, the core business of
Pharmacy Solutions, more than 130 wholesale branches deliver to
approximately 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.
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Language: English
Company: Celesio AG
Neckartalstr. 155
70376 Stuttgart
Germany
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
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135233 11.08.2011
DGAP-News: Celesio AG: Weak market environment and high government measures depress Celesio earnings in the first half-year of 2011
| Source: EQS Group AG