Galenica - Annual report 2022

3. Operating segment information

The management approach is used to determine the reportable operating segments. Accordingly, external segment reporting is based on the internal organisational and management structures of Galenica and the internal financial reporting to the chief operating decision maker (CODM). The CODM of Galenica is the CEO. Galenica operates in Switzerland within two operating segments Products & Care and Logistics & IT.

The CEO of Galenica acting as CODM allocates resources and monitors performance of the Group's operating segments Products & Care and Logistics & IT on the basis of information prepared in accordance with IFRS with exception of defined benefit plans and long-service awards, which are recognised at Group level.

In the operating segment Products & Care with its large network of pharmacies the accounting for leases is of particular importance. The Group continues to prepare information as if its leases were accounted for as operating leases (e.g. in line with Galenica's accounting policies prior to the adoption of IFRS 16). Those figures are relevant for management incentive and remuneration plans. However, Galenica has determined that the figures including the effects of IFRS 16 are used by the CODM for monitoring and resource allocation decisions and therefore presents its segment reporting as below.

The operating result (EBIT) comprises all operating income generated and expenses incurred in the corresponding segments. Financial income and expenses as well as income taxes are reported at Group level only and not allocated to the segments. The assets and liabilities include all items of the statement of financial position that can be directly or reasonably allocated to a segment.

Products & Care

The Products & Care segment comprises the «Retail» business area with offerings for patients and end customers (B2C) and the «Professionals» business area with offerings for business customers and partners in the healthcare sector (B2B).

The «Retail» business area comprises the two sectors «Local Pharmacies» (point-of-sale) and «Pharmacies at Home» (mail-order and home care). Retail operates at 531 locations Galenica's pharmacy network, the largest in Switzerland. With 368 pharmacies of its own and 163 partner pharmacies, Retail has outlets throughout the country. Galenica's own pharmacies comprise the Amavita brand with 179 branches and the Sun Store brand with 92 branches. Galenica also operates a chain of 89 pharmacies in partnership with Coop under the Coop Vitality brand. Galenica's pharmacy network also covers the speciality pharmacy Mediservice, which is focused on medication for treatment of patients at home, 7 majority interests in pharmacies and 163 Winconcept partner pharmacies.

The «Professionals» business area comprises the «Products & Brands» and «Services for Professionals» sectors. These activities focus on the development and marketing of healthcare services and products via the various sales channels: in-store at pharmacies (point-of-sale), shipments via mail-order pharmacies and e-shops or at home (home care), as well as business customers. Professionals launches and distributes a complete portfolio of consumer health products which is sold to Swiss pharmacies and drugstores. The companies of Professionals launches and distributes pharmaceutical and parapharmacutical products and offer marketing and sales services to all partners in the healthcare market.

Logistics & IT

The Logistics & IT segment comprises the two sectors «Wholesale» and «Logistics & IT Services». These provide services for all those involved in the healthcare sector – pharmacies, drugstores, doctors, hospitals and care homes, partners and suppliers. Their activities focus on optimising and further developing the logistics services and service offering as well as providing innovative solutions that promote digitalisation in the healthcare market.

Wholesale plays an important role in the pharmaceutical supply chain. As a pharmaceutical wholesaler, Wholesale ensures on-schedule delivery within short deadlines to pharmacies, drugstores, doctors, hospitals and care homes throughout Switzerland.

Logistics & IT Services offers pharmaceutical and healthcare companies a broad range of specialised pre-wholesale services, from storage and distribution of products in Switzerland to debt collection. The companies of the Logistics & IT Services also offer solutions for the healthcare market. They operate comprehensive databases that provide additional knowledge for all service providers in the Swiss healthcare market and develop management solutions tailored specifically to the needs of the healthcare market. Logistics & IT Services is the leading provider of master data systems for Switzerland's entire healthcare market and publishes printed and electronic technical information on pharmaceutical products as well as complete management solutions for pharmacies. Furthermore Logistics & IT Services provides Group internal IT services.

Group Services

The activities included within Group Services mainly comprise Galenica's central operations, which include Group Management and centralised Corporate functions such as Accounting, Controlling, Tax, Treasury, Corporate Finance, Investor Relations, Insurance, Indirect procurement, Human Resources, Legal & Board Services, Communications and Transformation.

Corporate charges management fees to the group companies for the organisational and financial management services that it provides.

Eliminations

Operating activities involve the sale of goods and services between the operating segments.

Sale of goods and services between the operating segments and resulting unrealised gains are eliminated in the Eliminations column. In addition, Eliminations include adjustments recorded on Group level which mainly consist of costs for IAS 19 from defined benefit plans and long-service awards.

Segment assets and liabilities include loans and current accounts held with respect to other segments. These positions are eliminated in the Eliminations column.

Operating segment information 2022

in thousand CHF	Products & Care	Logistics & IT	Group Services	Eliminations	Galenica Group
Net sales	2,029,620	2,933,318	49,138	–997,728	4,014,348
Intersegmental net sales	–96,579	–853,674	–47,475	997,728	–
Net sales to third parties	1,933,041	2,079,645	1,663	–	4,014,348
Other income	7,156	6,265	3,123	–3,503	13,040
Share of profit from associates and joint ventures	4,255	17	–	–70	4,202
Earnings before interest, taxes, depreciation and amortisation (EBITDA)	223,288	80,518	1,759	-1,782 1)	303,784
Depreciation, amortisation and impairment	–67,015	–31,212	–2,541	294	–100,474
Earnings before interest and taxes (EBIT)	156,273	49,306	–782	-1,487 1)	203,310
Interest income					727
Interest expense					–5,273
Other net financial result					861
Earnings before taxes (EBT)					199,626
Income taxes					–33,767
Net profit					165,859

Assets	1,784,254	921,458	320,811	-413,699 2)	2,612,825
Investments in associates and joint ventures	33,975	82	–	–1,375	32,682
Liabilities	604,571	524,903	619,655	-385,765 3)	1,363,364

Investments in property, plant and equipment	14,183	24,354	2,507	–	41,044 4)
Investments in intangible assets	1,276	28,469	–	–69	29,676 5)

Employees as at 31 December (FTE)	4,104	1,399	225	–	5,728

1) Including the effects of IAS 19 from defined benefit plans and long-service awards of CHF -0.6 million

2) Of which elimination of intercompany positions of CHF -395.6 million and other unallocated amounts of CHF -18.1 million

3) Of which elimination of intercompany positions of CHF -395.6 million and other unallocated amounts of CHF 9.8 million

4) Of which non-cash investments of CHF 0.9 million

5) Of which non-cash investments of CHF 1.7 million

Geographic information 2022

in thousand CHF	Switzerland	Other countries	Galenica Group
Net sales to third parties	3,979,458	34,890	4,014,348
Non-current assets 1)	1,608,886	88	1,608,974

1) Without employee benefit assets, financial assets and deferred tax assets

Operating segment information 2021

in thousand CHF	Products & Care	Logistics & IT	Group Services	Eliminations	Galenica Group
Net sales	1,908,130	2,831,358	31,844	–936,652	3,834,679
Intersegmental net sales	–76,323	–829,775	–30,554	936,652	–
Net sales to third parties	1,831,807	2,001,582	1,290	–	3,834,679
Other income	6,158	16,939	673	–2,689	21,082
Share of profit from associates and joint ventures	7,092	17	–	–343	6,765
Earnings before interest, taxes, depreciation and amortisation (EBITDA)	225,106	90,959	–1,504	-8,724 2)	305,838
Depreciation, amortisation and impairment	–68,164	–30,470	–95	299	–98,430
Earnings before interest and taxes (EBIT)	156,943	60,489	–1,600	-8,425 2)	207,408
Interest income					738
Interest expense					–5,018
Other net financial result					–95
Earnings before taxes (EBT)					203,033
Income taxes					–34,850
Net profit					168,183

Assets (restated)	1,687,729 1)	864,050	404,017	-389,994 3)	2,565,802 1)
Investments in associates and joint ventures	31,015	66	–	–385	30,696
Liabilities (restated)	585,459 1)	515,479	641,402	-410,215 4)	1,332,125 1)

Investments in property, plant and equipment	19,205	23,022	116	–155	42,189 5)
Investments in intangible assets	4,267	13,989	–	–7	18,250 6)

Employees as at 31 December (FTE)	3,927	1,395	211	–	5,533

1) Figures restated (refer to note 2)

2) Including the effects of IAS 19 from defined benefit plans and long-service awards of CHF -7.6 million

3) Of which elimination of intercompany positions of CHF -441.1 million and other unallocated amounts of CHF 51.1 million

4) Of which elimination of intercompany positions of CHF -441.1 million and other unallocated amounts of CHF 30.9 million

5) Of which non-cash investments of CHF 0.9 million

6) Of which non-cash investments of CHF 0.8 million

Geographic information 2021

in thousand CHF	Switzerland	Other countries	Galenica Group
Net sales to third parties	3,804,076	30,603	3,834,679
Non-current assets 1)	1,511,458	85	1,511,543

1) Without employee benefit assets, financial assets and deferred tax assets