1 SANACORP PHARMAHOLDING AG Interim Financial Report for the period 1 January to 30 September 2012
2 Interim Financial Report 1 January to 30 September 2012 Sanacorp Pharmaholding AG 2 Interim Management Report Dear Shareholder, this interim report provides information on the business performance of Sanacorp Pharmaholding AG for the period 1. January through 30 September As Sanacorp Pharmaholding AG is a pure holding company, its net income depends almost entirely on the amount of income received from long-term equity investments. At the present time, the Company only holds one equity investment an interest in Sanastera S.p.A., Bologna, Italy. In turn, Sanastera S.p.A. holds equity investments in pharmaceutical wholesale companies in Germany, France and Belgium. The dividends paid by Sanastera S.p.A. to Sanacorp Pharmaholding AG are dependent on the profits generated by these operating companies. This interim report therefore not only gives an overview of the business performance of Sanacorp Pharmaholding AG, but also provides information on the performance of the operating companies as well as the Sanastera Group for the period from 1 January 2012 to 30 September Sanastera S.p.A. has already paid a dividend to the Company s two shareholders during the second quarter of In accordance with the resolution of the general meeting, the distribution amounted to a total of 19,450 thousand. Sanacorp Pharmaholding AG received income from long-term equity investments amounting to 9,725 thousand in line with its shareholding of 50 %. This equated to an increase of 75 thousand over the dividend income received by Sanacorp Pharmaholding AG in the first half of 2011 ( 9,650 thousand). The operating costs of Sanacorp Pharmaholding AG for the first nine months were also completely in line with the expectations of the Management Board. Due to lower expenses and increased income from equity investments, the result from ordinary activities of Sanacorp Pharmaholding AG improved during the period from 1 January 2012 to 30 September 2012, rising from 9,026 thousand in the prior-year period to 9,219 thousand in the current year period. The business performance of the pharmaceutical wholesale companies who work for the German/French joint venture Sanastera S.p.A. can also be regarded as predominantly positive for the nine months. Although Sanacorp Pharmahandel GmbH, which operates in Germany, suffered a slight decline in sales, the package of measures that had been introduced and the new remuneration structure for pharmaceutical wholesalers led to a noticeable stabilisation of profitability. It was possible, particularly due to the increase in sales recorded in France, to exceed the profit performance expected by the management of CERP Rouen SAS at the beginning of the year. General information Sanacorp Pharmaholding AG is a listed financial holding company with a co-operative backdrop; its main shareholder is Sanacorp eg Pharmazeutische Großhandlung. Sanacorp Pharmaholding AG holds a 50 % equity investment in Sanastera S.p.A.; this company is domiciled in Bologna, Italy. The joint holding company Sanastera S.p.A. unites pharmacist-controlled pharmaceutical wholesalers in Germany, France and Belgium under one umbrella. The operating companies that are grouped under this Italian holding company, Sanacorp Pharmahandel GmbH in Germany, CERP Rouen SAS in France and CERP SA in Belgium, supply more than 16,000 pharmacies with medicines and healthcare products in these countries.
3 Interim Financial Report 1 January to 30 September 2012 Sanacorp Pharmaholding AG 3 Projects and Events In the summer, Sanacorp Pharmahandel GmbH, together with participating pharmacies, was delighted to receive two awards from two independent institutions for its mea meine Apotheke cooperation program. Top marks were received for service and advice. The cooperation was formed by Sanacorp in Sanacorp continues to support the cooperation participants with training, advertising and marketing campaigns, continuous optimisation of over-the-counter and behind-the-counter product selection and various tried and tested additional services. The initial feedback on the new individual medicine dosage system for patients in smaller and medium-sized care homes or nursing homes, developed by Sanacorp Pharmahandel GmbH and its French partner, is also pleasing. In addition to its function as a pharmaceutical wholesaler supplying the full range of medicines to pharmacies, Sanacorp Pharmahandel GmbH will in future be significantly expanding its offering to the pharmaceutical industry. For this purpose, as an initial step, a subsidiary has been set up by the Company. This subsidiary will take over and expand the manufacturer logistical services which are occasionally now already being offered by Sanacorp Pharmahandel GmbH. A similar model is already being implemented in France by Sanacorp s French partner. As a result of the pleasing sales performance and in order to provide the best possible supply to the pharmacies, CERP Rouen SAS is building a new branch near Nantes and expanding capacities at its existing Limoges site. Once the new branch in the Nantes region has been opened in the first quarter of the 2013 financial year, the Company will close its current sites in Nantes and St Naziere. Other investments were made to improve cooling technology and warehouse logistics. As part of the complete overhaul of the Internet offering of the Sanacorp Group of companies, a separate website was set up for the shareholders of Sanacorp Pharmaholding AG. At interested parties can from now on find all the information relating to Sanacorp Pharmaholding AG in a clearly structured format. An expanded service offering is available to customers of Sanacorp Pharmahandel GmbH at Results of Operations During the period from 1 January 2012 to 30 September 2012, Sanacorp Pharmaholding AG received income from long-term equity investments of 9,725 thousand. This equated to an increase of 75 thousand over the prior year comparative period. As in the previous year, income from long-term equity investments resulted exclusively from the dividend share the company received from Sanastera S.p.A. in the second quarter of 2012, which was for the previous financial year. In addition to the higher income from equity investments, a slight reduction in costs and improvement in net interest income also contributed to an increase in the result from ordinary activities. For the time period from 1 January 2012 to 30 September 2012, the result from ordinary activities amounted to 9,219 thousand, compared to 9,026 thousand for the comparative period. No income taxes were incurred during the reporting period because the only income received was income from equity investments. Net income for the period thus also equated to 9,219 thousand. In contrast to the market as a whole (+0.40 %), sales generated by Sanacorp Pharmahandel GmbH in Germany in the period from 1 January 2012 to 30 September 2012 declined slightly. At 2,715,619 thousand, sales were 1.14 % lower than in the corresponding period of the previous year ( 2,746,975). Following the change in the Sanacorp pricing model at the start of financial year 2012, sales reported for the current reporting period also include fees that have sales characteristics. These fees had previously been recognised under other operating income. The new remuneration model in force since the start of the year, as well as the change in reporting, led to an improvement in the Company s gross margin when compared to the prior year period. It rose from 5.43 % to 6.33 %. Excluding the reclassification, the gross margin for the first nine months of 2012 was 5.93 %. In addition to the stabilisation of the core business, the first positive effects of the optimisation programme which had commenced in the previous year as well as a slight improvement in the financial result contributed to the positive performance of the result from ordinary activities of the Sanacorp Pharmahandel GmbH sub-group during the reporting period. It rose from 845 thousand to 18,467 thousand. Net income for the period from 1 January 2012 to 30 September 2012 amounted to 11,836 thousand. For the comparative period of the previous year, a loss for the period of 136 thousand had been reported. The CERP Rouen SAS Group, which operates in France and Belgium, was also able to carry its successful performance from the previous quarters into the third quarter of financial year At 2,760,664 thousand, sales generated by the group of companies were 1.03 % higher than in the corresponding prior year period. In the French market
4 Interim Financial Report 1 January to 30 September 2012 Sanacorp Pharmaholding AG 4 in particular it was possible to markedly exceed market performance. The pleasing sales performance, together with an internal savings program, was fully able to compensate for the effects of the new pricing regulations that have applied in France since the start of the year. The gross margin improved and rose from 4.37 % to 4.45 %. The result from ordinary activities (under IFRS) rose to 22,725 thousand in the reporting period and was therefore 1,924 thousand more than in the corresponding prior-year period. Net income for the period from 1 January 2012 to 30 September 2012 amounted to 14,343 thousand (previous year: 13,285 thousand). Net assets During the third quarter of 2012, Sanacorp Pharmaholding AG performed an offset of the Group financing clearing accounts. The Company s current assets reduced as a result. At the 30 September 2012 reporting date, total assets of Sanacorp Pharmaholding AG amounted to 330,927 thousand. At the prior year balance sheet date, they were 339,820 thousand. Total assets of Sanacorp Pharmahandel GmbH as at 30 September 2012 amounted to 700,809 thousand and therefore exceeded the amount at the previous year s balance sheet date by 72,631 thousand. In addition to the stocking up of merchandise, the reason for the increase was the complete transfer back of receivables that had been transferred out under a factoring scheme. As a result, trade receivables increased significantly. Financial Position Cash Pooling at Group financing level has a significant impact on the cash flows of Sanacorp Pharmaholding AG. As already explained, the existing clearing accounts were offset during the third quarter. This resulted in a reduction in liabilities to affiliated companies. Compared to the position at the previous year s balance sheet date, Sanacorp Pharmahandel GmbH had markedly expanded its liabilities to suppliers at the 30 September 2012 reporting date. The resulting liquidity was used to transfer back the existing factoring scheme in its entirety as well as to reduce bank borrowing. The reduction in the securities portfolio of the CERP Rouen SAS Group was mainly utilised to reduce bank borrowing. Employee Development Sanacorp Pharmaholding AG did not employ any employees of its own during the reporting period. At the 30 September 2012 reporting date, the operating companies of the Sanastera Group employed a total full-time equivalent of 4,443 employees. This represents a reduction in employee numbers of 224 (4,667) compared to the prior year reporting date. The decrease arose due to personnel reductions in all the national operating companies. The investment in the new construction of the branch near Nantes mentioned above and the investment in the modernisation of existing sites resulted in an increase in fixed assets in the balance sheet of CERP Rouen SAS. Above all, a reduced securities portfolio led to a decrease in current assets. At the 30 September 2012 reporting date, total assets amounting to 922,697 thousand were reported in the balance sheet of CERP Rouen SAS, which represents a reduction from the position at the previous year s balance sheet date ( 980,592 thousand).
5 Interim Financial Report 1 January to 30 September 2012 Sanacorp Pharmaholding AG 5 Sanastera S.p.A.-Group Pro-forma income statement of the Sanastera-Group (in accordance with IFRS): 1 JAN 30 SEP 12 1 JAN 30 SEP 11 THOUS. THOUS. Sales revenue 5,476,283 5,479,374 Other operating income 52,615 58,752 Cost of materials 5,181,723 5,210,919 Gross profit 347, ,207 Personal expenses 169, ,827 Amortization and depreciation expense 22,514 19,958 Other operating expenses 113, ,391 Operating profit 41,323 25,031 Net financial income 1,357 2,932 Profit before income tax 39,966 22,099 Income taxes 14,196 8,039 Net profit for the period 25,770 14,060 Sales generated by the Sanastera Group national operating companies totalled 5,476,283 thousand during the period from 1 January 2012 to 30 September This equates to a slight reduction of 0.06 % on the prior-year period. While sales in France increased, there was a small reduction in sales in the German market. The sales growth in the French market as well as the fundamental reorganisation of the pharmaceutical wholesale remuneration model in Germany led to an improvement in gross profit. The gross profit of the Sanastera Group rose from 327,207 thousand to 347,175 thousand. The gross margin was 5.38 %. In addition to the stabilisation of the core business, the optimisation and profit safeguarding measures pursued by the national operating companies also contributed to the fact that it is possible to report a positive performance overall for the Sanastera Group for this first part of financial year However, it must be noted that the situation in the German market remains tense. Even if the internal restructuring and cost savings programs that have been introduced have the desired effect, they can only compensate for part of the losses caused by the Gesetz zur Neuordnung des Arzneimittelmarktes (AMNOG German Pharmaceutical Restructuring Act). The result from ordinary activities achieved by the Sanastera Group during the period from 1 January 2012 to 30 September 2012 amounted to 39,966 thousand and was therefore 17,867 thousand more than in the corresponding prior-year period. An improvement in net interest income also contributed to this. Net income for the same period was 25,770 thousand, compared to 14,060 thousand in the comparative period. Pro-forma cash-flow statement of the Sanastera-Group (in accordance with IFRS): 1 JAN 30 SEP 12 1 JAN 30 SEP 11 THOUS. THOUS. Cash flows from operating activities + 32, ,679 Cash flows from investing activities 19,612 14,813 Cash flows from financing activities 38,132 9,337 The cash inflow from operating activities of 32,775 thousand was mainly affected by the repayment of the factoring scheme and higher liabilities to suppliers. Cash outflow from investing activities was 19,612 thousand. Loan repayments resulted in a cash outflow from financing activities of 38,132 thousand.
6 Interim Financial Report 1 January to 30 September 2012 Sanacorp Pharmaholding AG 6 Report on Post-Balance Sheet Events There were no important events after the end of the reporting period up to the time of the preparation and signing of this interim management report that significantly affect the financial position, cash flows and profit or loss of Sanacorp Pharmaholding AG. Risk and Opportunities Report The explanations concerning the risk profile of Sanacorp Pharmaholding AG contained in the management report of the 2011 annual financial statements remain unchanged and continue to apply. As of today, there are no indications of any risks that either individually or collectively jeopardise the continuation as a going concern of Sanacorp Pharmaholding AG, Sanastera S.p.A, or the companies operating at a national level. Sanacorp Pharmaholding AG is indirectly affected by the operating performance of the pharmaceutical wholesale companies in Germany, France and Belgium through its equity investment in Sanastera S.p.A. Intervention in the health system by respective governments is the main risk in the pharmaceutical market. Among other things, historical and future financing of welfare systems is important in this context, as are the developments in health care costs. Basically one has to assume that an economic slowdown will lead to a rise in unemployment and the associated burden on social security systems. The Company does not assume that the fundamental reorganisation of the financing of health services in Germany, which is once again under discussion, will take place during the current legislative period. At the same time, further short-term cost measures by the legislator remain a possibility. Like the Gesetz zur Neuordung des Arzneimittelmarktes (AMNOG German Pharmaceutical Restructuring Act) or the new regulations passed by the French government at the end of December 2011, these can have an adverse direct or indirect effect on pharmaceutical wholesalers in the respective markets. Outlook In view of the performance to date of Sanacorp Pharmaholding AG, the Management Board is confident that the Company will also be able to report a slight increase in the result from ordinary activities for the full year. Moreover, based on this forecast, the Management Board expects to once again be able to pay a dividend to the shareholders of Sanacorp Pharmaholding AG amounting to 0.94 per ordinary share and 0.99 per preference share. During financial year 2012, both Sanacorp Pharmahandel GmbH and CERP Rouen SAS each made distributions of 10,000 thousand from the net retained profits of financial year 2011 to Sanastera S.p.A. As a result of these distributions, Sanastera S.p.A. will also be able to pay a dividend to the shareholders of the Company for financial year If this is the case, Sanacorp Pharmaholding AG should also in financial year 2013 receive income from equity investments that equates to the previous year s level. Assuming that the performance in the final quarter of the current financial year is in line with expectations, the Management Board of Sanacorp Pharmaholding AG expects that the CERP Rouen SAS Group will be able to slightly improve its result for financial year 2012 from the previous year. In view of the stabilisation of the core business observed in Germany, Sanacorp Pharmahandel GmbH will also generate a result in financial year 2012 which will allow a distribution to be made to Sanastera S.p.A. at the prior-year level. Apart from changes in the legal framework, future developments concerning the level of competition have the most impact on profitability. The fundamental changes in the remuneration of pharmaceutical wholesalers in Germany, introduced on 1 January 2012 with the second stage of the AMNOG, led to an alignment of the pricing models of all market participants. Furthermore, AMNOG sets a legal limit for all market participants on the amount of discount that may be granted because the fixed remuneration is not discountable. The new remuneration models may also contribute to improving the competitiveness of German wholesalers in relation to the direct selling by the pharmaceutical manufacturers.
7 Interim Financial Report 1 January to 30 September 2012 Sanacorp Pharmaholding AG 7 Balance Sheet of Sanacorp Pharmaholding AG ASSETS 30 SEP DEC 2011 THOUS. THOUS. THOUS. Fixed Assets Financial assets 330, ,221 Total fixed assets 330, ,221 Current assets Receivables and other asset Receivables from other long-term investees and investors Other assets 701 8,899 Total current assets 701 9,598 Prepaid expenses 5 1 Total assets 330, ,820 EQUITY AND LIABILITIES 30 SEP DEC 2011 THOUS. THOUS. Equity Subscribed capital 24,638 24,638 Capital reserve 98,934 98,934 Other revenue reserves 186, ,500 Net retained profit 13,196 11,808 Total equity 323, ,880 Total provision Liabilities Trade payables 1 Liabilities to affiliated companies 7,243 17,474 Other liabilities 52 Total liabilities 7,295 17,475 Total equity and liabilities 330, ,820
8 Interim Financial Report 1 January to 30 September 2012 Sanacorp Pharmaholding AG 8 Income Statement of Sanacorp Pharmaholding AG 1 JAN SEP 12 1 JAN SEP 11 THOUS. THOUS. Other operating income Gross profit Personnel expenses Other operating expenses Operating profit Income from long-term equity investments 9,725 9,650 Other interest and similar income Interest and similar expenses Profit from ordinary activities 9,219 9,026 Income taxes Net profit for the period 9,219 9,026
9 Interim Financial Report 1 January to 30 September 2012 Sanacorp Pharmaholding AG 9 Notes and other disclosures Accounting Policies The accounting policies applied in this 9-month interim report are the same as those applied in the last annual financial statements. The interim financial statements were prepared in accordance with the provisions of the Handelsgesetzbuch (HGB German Commercial Code) and the Aktiengesetz (AktG German Stock Corporation Act) as amended at the time of the preparation of the half-yearly financial statements. The present interim report was reviewed by the Audit Committee of the Supervisory Board and discussed with the Management Board on 12 November The interim report was not subject to a separate external audit and respectively. The closing price at the end of the reporting period was Other Disclosures At 30 September 2012, the shareholding of members of the Supervisory Board had reduced to 1,794 Sanacorp Pharmaholding AG preference shares. The reason for the reduction was Jürgen Funke s retirement from the Supervisory Board. The shareholding of the members of the Management Board was unchanged from the last balance sheet date; it amounted to 91 preference shares of the Company. Sanacorp Shares Sanacorp Pharmaholding AG shares continued their sideways movement during the third quarter of financial year During the period from 1 January 2012 to 30 September 2012, the highest and lowest share prices were 125 % 120 % 115 % 110 % 105 % 100 % 95 % 90 % 1 Jan Sep 2012 Sanacorp CDAX SDAX GSX Sanacorp share vs. CDAX, SDAX, GSX in % (1 Jan 30 Sep 2012)
10 Interim Financial Report 1 January to 30 September 2012 Sanacorp Pharmaholding AG 10 Significant Business Transactions between Related Parties Related party disclosures 1 JAN SEP 12 1 JAN SEP 11 THOUS. THOUS. Revenue and income from services, loans and amounts charged on Purchase of services, loans and amounts charged on 164 1,845 Receivables from related entities 702 9,644 Liabilities to related entities 7,296 17,399 Relationship with the Management Board Revenue 1, Receivables from the Management Board 127 Relationship with the Supervisory Board Revenue 11,721 11,581 Receivables from the Supervisory Board 1,152 1,138 Relationship with other related parties Revenue 1,705 1,635 Receivables from other related parties Remuneration of managers in key positions comprises the remuneration of the active Management Board and the Supervisory Board. This did not change materially from the last annual financial statements. The disclosures on sales to and receivables from the Management Board, the Supervisory Board and other related parties relate to the operating company in Germany. Sanastera S.p.A. distributed a dividend of 9,725 thousand to Sanacorp Pharmaholding AG during the reporting period. Planegg, 14 November 2012 Sanacorp Pharmaholding Aktiengesellschaft The Management Board Dr. Herbert Lang Klaus Edelmann Karin Kaufmann Erwin Zattler
11 Upcoming events 28 March 2013 Release of the financial report for the financial year May 2013 Release of the interim report for the period 1 January to 31 March June 2013 Annual General Meeting for the financial year 2012 Sanacorp Pharmaholding AG Hauptverwaltung Semmelweisstraße Planegg Germany Tel Fax