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 --------------------------------------------------------------------- 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. End of Corporate News --------------------------------------------------------------------- 11.08.2011 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 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 End of News DGAP News-Service --------------------------------------------------------------------- 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
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