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Notes to the consolidated interim financial statements of the Galenica Group

1. Group organisation

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

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

3. Operating segment information

Operating segment information first half of 2024

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

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

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

5. Net sales

Net sales first half of 2024

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

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

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)

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

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

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.


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