Galenica - Halbjahresbericht 2024

1. Group organisation

General information

Galenica is a fully-integrated healthcare service provider in Switzerland. Galenica operates a network of pharmacies, develops and offers own brands and products, exclusive brands and products from business partners as well as a variety of on-site health services and tests for customers. Galenica is also a provider of pre-wholesale and wholesale distribution and database services in the Swiss healthcare market.

The parent company is Galenica Ltd., a Swiss public limited company with its headquarters in Bern. The registered office is at Untermattweg 8, 3027 Bern, Switzerland. Shares in Galenica Ltd. are traded on the SIX Swiss Exchange under securities no. 36067446 (ISIN CH0360674466).

The Board of Directors released the consolidated interim financial statements 2024 on 5 August 2024 for publication.

2. Accounting principles

Basis of preparation

The unaudited consolidated interim financial statements of Galenica have been prepared in accordance with IFRS Accounting Standards as issued by the International Accounting Standard Board (IASB), as well as the interpretations of the IFRS Interpretations Committee (IFRIC) and the provisions of Swiss law. The consolidated interim financial statements have been prepared using the same accounting principles as the consolidated financial statements for the year ending 31 December 2023 and comply with IAS 34 – Interim Financial Reporting. The consolidated interim financial statements should be read in conjunction with the consolidated financial statements for the year ending 31 December 2023 as they update previously reported information.

Galenica's consolidated interim financial statements are prepared in Swiss francs (CHF) and, unless otherwise indicated, figures are rounded to the nearest CHF 1,000.

Due to rounding, numbers presented throughout this report may not add up precisely to the totals provided. Totals are calculated using the underlying amount rather than the presented rounded number.

Foreign currencies are not material for the consolidated interim financial statements.

Estimation uncertainty, assumptions and judgments

The preparation of the Group's consolidated interim financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, income and expense, and the disclosure of contingent liabilities as at the reporting date. Although these estimates and assumptions are made on the basis of all available information and with the greatest of care, the actual results may differ.

Seasonal influences on operations

Sales in the business sectors in which Galenica operates are usually not significantly influenced by seasonal or cyclical fluctuations during the financial year.

Income taxes

Current income taxes are based on an estimate of the expected income tax rate for the full year.

Amendments to IFRS Accounting Standards

As at 1 January 2024 Galenica adopted the following amended IFRS Accounting Standards:

Amendments to IAS 1 – Classification of liabilities as current or non-current
Amendments to IAS 7 and IFRS 7 – Supplier finance arrangements
Amendments to IFRS 16 – Lease liability in a sale and leaseback

This changes have no or no material impact on the financial position, financial performance and cash flows of Galenica nor on disclosures in these consolidated interim financial statements. Galenica has not early adopted any other standard or interpretation that has been issued but is not yet effective.

Galenica has applied the mandatory exception to recognising and disclosing information about deferred tax assets and liabilities arising from Pillar Two Globe Anti-Base erosion rules income taxes. Furthermore, Galenica has reviewed its corporate structure in light of the introduction of Pillar Two Model Rules in various jurisdictions. Since the Group’s effective tax rate is well above 15% in all jurisdictions in which it operates, it has determined that it is not subject to Pillar Two “top-up” taxes.

3. Operating segment information

Operating segment information first half of 2024

in thousand CHF	Products & Care	Logistics & IT	Group Services	Eliminations	Galenica Group
Net sales	829,334	1,563,318	26,380	–519,017	1,900,014
Intersegmental net sales	–56,032	–437,739	–25,246	519,017	–
Net sales to third parties	773,302	1,125,579	1,133	–	1,900,014
Other income	3,054	3,271	1,121	–1,035	6,412
Share of profit from associates and joint ventures	1,854	–17	–	149	1,986
Earnings before interest, taxes, depreciation and amortisation (EBITDA)	112,422	42,298	417	30 1)	155,167
Depreciation, amortisation and impairment	–34,979	–16,815	–1,051	94	–52,751
Earnings before interest and taxes (EBIT)	77,443	25,483	–634	124 1)	102,416
Interest income					974
Interest expense					–6,108
Other net financial result					1,168
Earnings before taxes (EBT)					98,450
Income taxes					–19,162
Profit from continuing operations					79,287

Assets	1,848,516	1,117,124	626,045	-584,667 2)	3,007,018
Investments in associates and joint ventures	142,959	122	–	–1,775	141,306
Liabilities	622,910	702,044	826,731	-553,896 3)	1,597,789

Investments in property, plant and equipment	11,682	5,294	1,854	–	18,829 4)
Investments in intangible assets	465	19,193	–	–74	19,584 5)

Employees as at 30 June (FTE)	4,312	1,492	253	–	6,057

1) Including the effects of IAS 19 from defined benefit plans and long-service awards of CHF 1.8 million

2) Of which elimination of intercompany positions of CHF -565.6 million and other unallocated amounts of CHF -19.1 million

3) Of which elimination of intercompany positions of CHF -565.6 million and other unallocated amounts of CHF 11.7 million

4) Of which non-cash investments of CHF 0.7 million

5) Of which non-cash investments of CHF 4.3 million

Operating segment information first half of 2023

in thousand CHF	Products & Care	Logistics & IT	Group Services	Eliminations	Galenica Group
Net sales	804,364	1,518,491	25,733	–497,398	1,851,190
Intersegmental net sales	–50,846	–423,283	–23,268	497,398	–
Net sales to third parties	753,518	1,095,208	2,464	–	1,851,190
Other income	3,387	3,995	1,971	–1,183	8,170
Share of profit from associates and joint ventures	2,812	8	–	128	2,948
Earnings before interest, taxes, depreciation and amortisation (EBITDA)	107,842	34,928	1,168	–38 2)	143,900
Depreciation, amortisation and impairment	–34,098	–15,869	–1,530	118	–51,379
Earnings before interest and taxes (EBIT)	73,744	19,058	–362	81 2)	92,521
Interest income					1,057
Interest expense					–3,564
Other net financial result					–471
Earnings before taxes (EBT)					89,543
Income taxes					–15,056
Profit from continuing operations					74,487

Assets 1)	1,832,129	1,029,042	600,327	-470,546 3)	2,990,952
Investments in associates and joint ventures 1)	146,718	99	–	–2,832	143,985
Liabilities 1)	591,285	630,139	747,648	-453,317 4)	1,515,755

Investments in property, plant and equipment	11,552	5,418	1,669	–	18,639 5)
Investments in intangible assets	1,041	14,943	–	–37	15,947 6)

Employees as at 30 June (FTE)	4,081	1,445	232	–	5,758

1) Figures as at 31 December 2023

2) Including the effects of IAS 19 from defined benefit plans and long-service awards of CHF 1.5 million

3) Of which elimination of intercompany positions of CHF -472.3 million and other unallocated amounts of CHF 1.7 million

4) Of which elimination of intercompany positions of CHF -472.3 million and other unallocated amounts of CHF 19.0 million

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

6) Of which non-cash investments of CHF 3.8 million

4. Business combinations

In the first half of 2024, the scope of consolidation has changed as a result of the following transactions:

Acquisition of pharmacies. Galenica acquired 100% of the interests in pharmacies in various locations in Switzerland. Upon acquisition, the pharmacies were merged with Galenicare Ltd.

The total purchase consideration amounted to CHF 23.1 million, of which CHF 17.3 million was settled in cash. A deferred consideration in the amount of CHF 2.2 million was recognised, which is due in the second half year of 2024. The fair value of the provisional net assets amounts to CHF 5.7 million at the acquisition date. The goodwill of CHF 17.3 million was allocated to the operating segment Products & Care and corresponds to the added value of the pharmacies based on their locations. Transaction costs were not material.

Business combinations

in thousand CHF	Fair value
Cash and cash equivalents	3,465
Trade receivables	2,792
Inventories	1,425
Property, plant and equipment	45
Right-of-use assets	3,277
Other current and non-current assets	497
Trade payables	–1,510
Lease liabilities	–3,277
Net deferred tax liabilities	69
Other current and non-current liabilities	–1,042
Fair value of net assets	5,740
Goodwill	17,319
Non-controlling interests	–
Purchase consideration	23,059
Cash acquired	–3,465
Deferred consideration	–2,247
Net cash flow from current business combinations	17,347
Payment of consideration due to previous business combinations	64
Net cash flow from business combinations	17,411

Pro forma figures for acquisitions made in the first half of 2024

Since their inclusion in Galenica's scope of consolidation, the businesses acquired contributed net sales of CHF 9.0 million and a negative operating result (EBIT) of CHF 0.4 million to the Group's results. If these acquisitions had occurred on 1 January 2024, they would have contributed additional net sales of CHF 3.8 million and increased EBIT by CHF 0.2 million.

5. Net sales

Net sales first half of 2024

in thousand CHF	Sale of goods	Sale of services	Total net sales	Intersegmental net sales	Total net sales to third parties	of which sale of goods to third parties	of which sale of services to third parties
Local Pharmacies	615,327	42,271	657,597	–174	657,423	615,173	42,250
Pharmacies at Home	35,751	2,192	37,944	–	37,944	35,751	2,192
Retail (B2C) 1)	650,928	44,463	695,391	–24	695,367	650,925	44,442
Products & Brands	96,133	882	97,014	–46,862	50,153	49,320	833
Services for Professionals	33,600	7,836	41,435	–13,653	27,782	26,447	1,335
Professionals (B2B) 1)	129,743	8,704	138,447	–60,512	77,935	75,767	2,168
Products & Care 1)	778,226	51,108	829,334	–56,032	773,302	726,692	46,610
Wholesale	1,491,116	5,337	1,496,453	–408,100	1,088,352	1,084,283	4,069
Logistics & IT Services	70	77,594	77,664	–40,438	37,226	90	37,137
Logistics & IT 1)	1,491,187	72,131	1,563,318	–437,739	1,125,579	1,084,373	41,206
Group Services	–	26,380	26,380	–25,246	1,133	–	1,133
Eliminations 2)	–458,348	–60,669	–519,017	519,017	–	–	–
Galenica Group	1,811,065	88,950	1,900,014	–	1,900,014	1,811,065	88,950

1) Including eliminations of intercompany net sales

2) Eliminations of intersegmental net sales

Net sales first half of 2023

in thousand CHF	Sale of goods	Sale of services	Total net sales	Intersegmental net sales	Total net sales to third parties	of which sale of goods to third parties	of which sale of services to third parties
Local Pharmacies	599,617	40,534	640,151	264	640,416	599,893	40,523
Pharmacies at Home	36,864	2,197	39,060	–125	38,935	36,738	2,197
Retail (B2C) 1)	636,355	42,731	679,086	265	679,351	636,631	42,719
Products & Brands	89,190	808	89,998	–41,807	48,191	47,383	808
Services for Professionals	30,516	8,108	38,623	–12,664	25,960	24,303	1,656
Professionals (B2B) 1)	119,721	8,905	128,627	–54,476	74,150	71,687	2,464
Products & Care 1)	754,684	49,680	804,364	–50,846	753,518	708,334	45,184
Wholesale	1,452,285	4,999	1,457,284	–398,552	1,058,732	1,054,982	3,749
Logistics & IT Services	169	70,249	70,418	–33,942	36,477	169	36,307
Logistics & IT 1)	1,452,455	66,037	1,518,491	–423,283	1,095,208	1,055,152	40,057
Group Services	–	25,733	25,733	–23,268	2,464	–	2,464
Eliminations 2)	–443,657	–53,741	–497,398	497,398	–	–	–
Galenica Group	1,763,482	87,708	1,851,190	–	1,851,190	1,763,482	87,708

1) Including eliminations of intercompany net sales

2) Eliminations of intersegmental net sales

6. Fair values of financial assets and financial liabilities

Fair value

		30.06.2024		31.12.2023
in thousand CHF	Carrying amount	Fair value	Carrying amount	Fair value
Bond (level 1 of the fair value hierarchy)	519,807	530,814	419,871	427,050

With the exception of the bonds the carrying amounts of all financial instruments approximate to the fair value or fair value disclosure is not required (lease liabilities).

As at 30 June 2024 Galenica holds equity instruments designated at fair value through other comprehensive income including a 8.4% (previous year: 7.9%) investment in the listed (level 1 of the fair value hierarchy) company Redcare Pharmacy N.V., Netherlands, with a fair value of CHF 186.2 million (CHF 196.1 million as at 31 December 2023) and other investment in non-listed (level 3 of the fair value hierarchy) companies with a fair value of CHF 4.7 million (CHF 3.9 million as at 31 December 2023). These investments were irrevocably designated at fair value through other comprehensive income as Galenica considers these investments to be strategic in nature. Galenica recognised in the consolidated statement of comprehensive income a remeasurement loss of CHF 21.3 million (previous year: gain of CHF 10.6 million as at 30 June 2023).

Fair value of financial instruments (level 3 of the fair value hierarchy)

Fair value of contingent consideration liabilities from business combinations (level 3 of the fair value hierarchy)

in thousand CHF	2024	2023
1 January	41,507	49,180
Arising from business combinations	–	2,385
Change in fair value (recognised in profit or loss)	–1,111	–10,057
30 June / 31 December	40,396	41,507

Fair value of equity instruments designated at fair value through other comprehensive income (level 3 of the fair value hierarchy)

in thousand CHF	2024	2023
1 January	3,928	4,561
Addition	935	1,950
Change in fair value (recognised in other comprehensive income)	–183	–2,583
30 June / 31 December	4,680	3,928

Fair value and sensitivity analysis of contingent consideration liabilities from discontinued operations

Determining the contingent consideration liability in connection with the sale of Mediservice forecasted gross margin and further development of net working capital of the discontinued operation were identified as key assumptions. Galenica has recorded the amount of CHF 3.0 million as other liability based on the expected future gross margin for the years 2024-2026. The future cash outflows range between zero and CHF 3.1 million.

Furthermore, Galenica has not recorded any amount for a payment related to the further development of net working capital of the discontinued operation as per 30 June 2024 as the development of the net working capital was positive in the second half year of 2023 and first half year of 2024. The relevant period under review was extended to the first half of 2024 and a possible but not expected cash out flow would be due in the second half year of 2024. The future cash outflows range between zero and CHF 2.3 million.

Sensitivity analysis of contingent consideration liabilities from business combinations (level 3 of the fair value hierarchy)

in thousand CHF	Lifestage Solutions	Bahnhof Apotheke Langnau	Aquantic	Padma
Fair value of contingent considerations as at 30.06.2024	17,492	17,027	3,429	2,448
Minimal payout	–	–	–	–
Maximal payout	24,000	29,000	5,450	4,000
Key assumption	forecasted net sales 1)	forecasted net sales 1)	forecasted EBITDA 1)	forecasted sell out prices 1)
Year of relevance	2024	2026+2027	2025+2026	2025
Sensitivity analysis
Impact on fair value by 5% increase of key assumption	1,886	1,599	391	979
Impact on fair value by 5% decrease of key assumption	–1,886	–1,599	–391	–979

1) of the acquired business

7. Contingent liabilities and commitments

Galenica signed purchase agreements to acquire pharmacies in the next few months. The purchase prices will be fixed at the time of transfer of ownership based on net asset value and discounted cash flows. The total purchase considerations is estimated to CHF 9.2 million and are due with the closing of the transactions. These purchase rights or obligations fall due between second half of 2024 and 2025.

8. Subsequent events

The following business combinations occurred between 30 June 2024 and 5 August 2024, the date that the consolidated interim financial statements were released for publication.

Acquisition of pharmacies. Galenica acquired 100 % of the interests in pharmacies at various locations in Switzerland. The purchase consideration was CHF 2.8 million, the fair value of the provisional net assets resulting from these additions was estimated at CHF 0.9 million at the acquisition date. Since the transactions were concluded shortly before the consolidated financial statements were issued, no further information was available to disclose the additional information required by IFRS Accounting Standards.

There were no further significant events after the reporting date.

Notes to the consolidated interim financial statements of the Galenica Group