Galenica Group

Galenica achieves solid growth in a challenging market environment

Galenica Group sales grew by 2.6% to CHF 1,900.0 million in the first half of 2024. Both the “Products & Care” segment and the “Logistics & IT” segment contributed to the sales growth, with growth of 3.1% and 3.0% respectively. As a result, Galenica Group sales developed more dynamically than the market.

Compared with the pharmaceutical market, which grew by 1.7% (IQVIA, Pharmaceutical Market Switzerland, first half of 2024) and the Consumer Healthcare market, which declined by 0.2% (IQVIA, Consumer Health Market Switzerland, first half of 2024), the Galenica Group gained market share with growth of 2.6%.

Following the 4.8% increase in Galenica Group sales at the end of April 2024, growth slowed sharply in the months of May, and particularly June 2024. While the constellation of sales days at the end of April was favourable compared to the same period of the previous year, with an estimated positive impact of around 1% on sales growth, at the end of June 2024 this effect was negative compared to the previous year, dampening growth accordingly. By the end of the year, this effect will be positive again.

A cold and rainy early summer also meant that demand for seasonal products such as sunscreen, outdoor and allergy products was exceptionally low in May and June 2024. In addition, significantly increased sales of generics and biosimilars dampened growth. This development was driven in particular by the increase in the deductible from 20% to 40%, which came into force on 1 January 2024, if patients prefer another medicine that is more than 10% more expensive for the same active ingredient. For example, in the first half of 2024, Galenica pharmacies increased the generic substitution rate from 75.2% at the end of 2023 to 80.8%, thus making a significant contribution to curbing rising healthcare costs.

Reported EBIT increased by 10.7% to CHF 102.4 million. The adjusted¹ EBIT of the Galenica Group, i.e. excluding the effects of the IFRS 16 (Leases) and IAS 19 (Employee Benefits) accounting standards, increased by 9.9% to CHF 99.1 million.

Adjusted¹ return on sales (ROS) rose from 4.9% to 5.2% year-on-year. In the previous year, the result was negatively impacted by special effects in the amount of CHF 9.8 million. Adjusted for these special effects, EBIT would have declined slightly in the first half of 2024 by 0.9%. The flat EBIT development was due in particular to the lower-than-expected sales growth. In addition, higher expenses in connection with the further expansion of the IT infrastructure to implement the “Omni-Channel” strategy, as well as temporary efficiency losses and additional burdens due to the modular introduction of the new ERP (Enterprise Resource Planning) system at Galexis that started at the beginning of the year had a negative impact on the result. Based on previous assumptions, the project completion to introduce the new ERP system at Galexis was scheduled for 2025. To minimise the risks associated with the system migration and to ensure smooth operations in the highly automated and complex distribution centres, the new system will be rolled out module by module, which will extend the project duration by one year.

The reported net profit of the Galenica Group amounted to CHF 79.3 million (+6.4%, first half of 2023: CHF 74.5 million), adjusted¹ net profit CHF 77.7 million (+5.4%, first half of 2023: CHF 73.7 million). Investments in the first half of 2024 amounted to CHF 38.4 million (first half of 2023: CHF 34.6 million). They were mainly attributable to the rebuilding and renovation of pharmacies and other operational sites, investments in the development of the digital infrastructure in connection with the strategic “Omni-Channel” programme and the introduction of the new ERP system at Galexis.

The Galenica Group’s balance sheet remained strong. Adjusted¹ shareholders’ equity increased to CHF 1,427.9 million (+5.8%) compared to 30 June 2023. Adjusted¹ net debt, i.e. excluding leasing liabilities, increased by CHF 31.2 million compared to the end of June 2023 and amounted to CHF 533.7 million, which corresponds to 2.1× adjusted¹ EBITDA. The increase in net debt can be attributed in particular to the ordinary investments in non-current assets as well as the further expansion of the strategic investment in Redcare Pharmacy N.V. (shareholding of 8.4% as of 30 June 2024).

Adjusted¹ operating cash flow before changes in current assets amounted to CHF 97.8 million (first half of 2023: CHF 87.5 million). Taking changes in current assets into account, the operating cash flow amounted to CHF 17.6 million (first half of 2023: CHF -21.0 million). The increase in net working capital is mainly due to seasonal effects. Free cash flow after acquisitions amounted to CHF -45.3 million (first half of 2023: CHF -81.7 million).

¹⁾ Excluding the effects of IAS 19 and IFRS 16. See chapter “Alternative performance measures”.