Galenica Group
In the first half of 2022, the Galenica Group generated consolidated net sales of CHF 1,959.9 million, representing strong growth of 5.5% compared to the first half of 2021. Adjusted for the additional sales in connection with COVID-191, which were exceptionally high in the prior-year period, growth even amounted to 8.7%.
Net sales
+5.5%
Galenica Group CHF 1,959.9 million
EBIT adjusted2
-1.4%
Galenica Group CHF 100.0 million
Employees
7,314
Galenica Group
Galenica grows strongly in the first half 2022
The lifting of the coronavirus measures had a positive impact on the business performance of the Group as a whole in the first half of 2022. A normal seasonal flu epidemic and numerous illnesses caused by the coronavirus Omicron variant led to strong sales growth in OTC cold medication. In comparison, there were practically no colds or flu infections in the prior-year period due to the coronavirus-related social distancing and hygiene measures.
Pharmacy sales at high-frequency locations continued to recover and in June 2022 were only 12% lower than in the same period in 2019 pre-coronavirus.
In addition, the extremely positive growth momentum of the previous year was continued in the first half of 2022 by the specialty pharmacy Mediservice (+16.2%) and in the «Wholesale» sector (+3.8%). Acquisitions of pharmacies, new products and service companies contributed 1.1% to growth.
By way of comparison, the Swiss pharmaceutical market grew by 7.1% in the reporting period. Due to the flu and colds, the OTC market in particular showed strong growth at 14.1%. Thanks to the strong demand for OTC medicines, the volumes sold in the overall market increased disproportionately by 12.1% (IQVIA, Pharmaceutical Market Switzerland, first half of 2022).
The adjusted2 operating result (EBIT), i.e. excluding the effects of the IFRS 16 (Leases) and IAS 19 (Employee Benefits) accounting standards, fell by 1.4% to CHF 100.0 million. The adjusted2 return on sales (ROS) fell year-on-year from 5.5% to 5.1%. Reported EBIT improved by 4.4% to CHF 103.3 million.
The lower EBIT margin compared to the first half of 2021 is due in particular to the significantly lower margin contribution from extraordinary additional sales in connection with COVID-191. Other factors also led to a dilution of the EBIT margin: on the one hand, strong sales gains were achieved in relatively low-margin business activities, whilst on the other hand, additional costs were incurred due to various initiatives to further digitalise the business, the acute shortage of skilled workers in pharmacies, and generally higher costs for transport, energy and operating materials.
Adjusted for the EBIT contributions from the extraordinary additional sales in connection with COVID-191, strong growth of adjusted2 EBIT of 19.8% was achieved year-on-year.
Net profit amounted to CHF 83.1 million (+4.5%, first half of 2021: CHF 79.6 million). On a comparable basis, adjusted2 net profit amounted to CHF 81.3 million (-1.5%).
Investments in the first half of 2022 amounted to CHF 30.8 million (first half of 2021: CHF 24.7 million). These were mainly attributable to the modernisation of the distribution centre in Lausanne-Ecublens and the introduction of the new ERP (Enterprise Resource Planning) system at Alloga and Galexis. In addition, there was increased investment in the development of the digital infrastructure in connection with the strategic «Omni-Channel» programme.
The Galenica Group’s balance sheet remained strong. At CHF 1,181.0 million (-2.1%), adjusted2 shareholders’ equity remained practically unchanged compared to the beginning of the year, even despite the fact that a dividend of CHF 104.4 million was distributed to shareholders in May 2022. Adjusted2 net debt, i.e. excluding lease liabilities, increased by CHF 7.1 million compared to the end of June 2021 and amounted to CHF 402.3 million, which corresponds unchanged to 1.6× adjusted2 EBITDA.
Due to high investments in net working capital, operating cash flow decreased significantly to CHF +13.0 million (first half of 2021: CHF +113.8 million). The high cash outflow from changes in net working capital is a correction to the exceptionally low level of net working capital as of 31 December 2021. Free cash flow after acquisition activities amounted to CHF -34.7 million (first half of 2021: CHF +55.9 million).
Outlook 2022
Due to strong growth in the first half of 2022, Galenica is adjusting its forecast for sales and EBIT for the 2022 financial year. Galenica now expects sales growth of between 2% and 4% (previously at least at the same level as the previous year). Based on adjusted2 EBIT 2021 – excluding the extraordinary results from the COVID-19 initiatives (estimated at CHF 25 million) and the sale of the property at its headquarters in Bern (CHF 9.4 million) – Galenica now expects an EBIT increase of 8% to 12% (previously 5% to 10%).
1) Sales of COVID-19 initiatives with PCR, antigen, rapid and self-testing as well as vaccinations, EBIT contributions estimated.
2) Excluding the effects of IAS 19 and IFRS 16. See chapter «Alternative performance measures».