Zur Rose Group speeds up path to profitability and plans break-even at EBITDA level in 2023

Zur Rose Group AG / Key word(s): Half Year Results

18-Aug-2022 / 07:00 CET/CEST
Release of an ad hoc announcement pursuant to Art. 53 LR
The issuer is solely responsible for the content of this announcement.

2022 Half-Year Results

Zur Rose Group speeds up path to profitability and plans break-even at EBITDA level in 2023

• Revenue and profit in the first half-year 2022 within target range
• Priority on break-even at adjusted EBITDA level in 2023
• No additional cash needed for operating business
• CHF 10 million productivity improvements through new distribution centre in Heerlen
• CHF 8 million efficiency gains through integration of medpex brand into Heerlen facility
• Germany-wide roll-out of e-prescriptions to start on 1 September 2022

The Zur Rose Group launched a major break-even programme in the second quarter of 2022. This aims to improve adjusted EBITDA by CHF 130 million compared to 2021 by increasing the gross margin, structural cost savings, improving productivity and optimising marketing so as to reach the break-even point already in 2023 (i.e. one year earlier than announced in March).

No additional cash needed for the operating business
Based on the planned break-even in 2023, the operating capital requirement is covered by liquidity held. The capital required by the Zur Rose is therefore limited to refinancing existing bonds and a liquidity reserve. The Group is examining various financing options that take the interests of all relevant stakeholders into account in a balanced manner. Any capital raising measures will be considered in light of the market environment at the time.

The initial results of the break-even programme can already be seen in the first half of 2022
The Zur Rose Group increased the gross margin by 0.6 percentage points to 14.8 per cent compared to the second half of 2021. Adjusted EBITDA improved from minus CHF 86.0 million to minus CHF 49.2 million, putting it within the target range in the outlook announced for the full year. EBITDA was minus CHF 43.1 million and includes a positive effect of CHF 13.1 million from a share-price related earn-out valuation.

External revenue^[1] in the first half of 2022 amounted to CHF 963.9 million, which as planned was on a par with the previous year (and up 0.4 per cent in local currency terms). In Germany, external revenue declined 3.9 per cent in local currency terms, in line with expectations. In Switzerland, Zur Rose maintained its growth path in all business areas, increasing revenue by 9.6 per cent. In the Europe segment, the Group posted revenue growth of 2.9 per cent in local currency terms, in line with expectations and reflecting optimisation of marketing expenditure to focus on more profitable orders. The number of active customers at 30 June 2022 was 11.7 million[2] – the same level as in mid-2021.

CHF 10 million productivity improvement through new distribution centre in Heerlen
The new distribution centre in Heerlen successfully moved into operation at the end of the second quarter of 2022. The degree of automation of logistics has now risen from 50 per cent to 70 per cent, and capacity more than doubled from 12 million parcels per year to 27 million. This gives the facility sufficient capacity to scale up the number of e-prescriptions handled and process the volume from medpex. Thanks to productivity improvements from the state-of-the-art logistics, the Zur Rose Group is anticipating annual savings of CHF 10 million, with the first effects already in the current year.

CHF 8 million efficiency gains through integration of the medpex brand into the Heerlen facility
The DocMorris pharmacy will integrate the medpex brand into its operations in Heerlen and continue to run it. This step is a consequence of the planned closure of the owner-managed Stifts-Apotheke and its associated medpex online business in Ludwigshafen by the current proprietor at the end of October 2022. The Zur Rose Group is offering some 200 logistics employees and pharmaceutical technicians of the 350 employees at the Stifts-Apotheke the opportunity to continue working in Ludwigshafen and Heerlen. The logistics facility in Ludwigshafen will be retained and used by the Zur Rose Group to handle orders for non-pharmaceutical orders for the Germany segment; it has a capacity of seven million parcels per year. 36 jobs at the Zur Rose company Visionrunner GmbH providing administrative services for the Stifts-Apotheke will be cut. In accordance with its sense of social responsibility, Visionrunner is voluntarily offering these employees individual redundancy packages. Integrating the medpex brand, cutting complexity and capturing synergies will generate savings and efficiency gains totalling CHF 8 million per year.

Germany-wide roll-out of e-prescriptions to start on 1 September 2022
The trend towards using e-prescriptions is rising steadily. To date, more than 150,000 e-prescriptions^[3] have been filled. All quality criteria to complete the test phase by 31 August 2022 have therefore been met and the way is clear to implement e-prescriptions nationally. Roll-out across the country will be in stages, starting on 1 September 2022 with the Westfalen-Lippe region in the federal state of Nordrhein-Westfalen and the federal state of Schleswig-Holstein, which have a total population of 11.2 million.

Along with a hard copy of the prescription code and the e-prescription app, the Federal Ministry of Health and gematik are also looking at other ways of transmission. Amongst other things, gematik is consulting with all parties involved on how it might be possible for prescriptions to be filled using the electronic healthcare card (eGK) as an additional digital process. For reasons of non-discrimination, this option ought to be open to online pharmacies too in the EU internal market. It will be necessary to put the necessary technical framework in place. The European Association of E-Pharmacies (EAEP) is already engaged in direct discussions about this with the Federal Ministry of Health to together identify a non-discriminatory and user-friendly solution for its members' millions of customers.

Outlook
The Zur Rose Group confirms the target announced earlier this year for 2022 at the adjusted EBITDA level of minus CHF 75 million to minus CHF 95 million. EBITDA break-even (adjusted) is expected for the 2023 financial year. To achieve this target, the measures in the break-even programme are being speeded up and will lead to a reduction of external revenue in 2022 in the mid-single digit percentage range. The Group confirms the medium-term EBITDA margin target of 8 per cent.

External revenue consists of the consolidated revenue of the Zur Rose Group plus online revenues of pharmacies supplied by the Zur Rose Group, less the consolidated revenue from supplying them.

The half-year report 2022 and presentation are available at www.zurrosegroup.com under “Investors & Media”, “Publications”.

Half-year results presentation to the analysts and media
At 11 a.m. CET today we present our half-year results in English via webcast and conference call.
Dial-in numbers:
CH: 41 (0)44 580 7279 | DE: +49 (0)69 22222 5197 | UK: +44 (0)330 165 4012 | USA: +1 323 701 0160
Conference ID: 1990589
Please dial in approx. 5 minutes before the conference call begins.
Webcast link for the participants of the conference call (without delay):
https://www.webcast-eqs.com/zurrose20220818/no-audio

Alternatively, the presentation can be followed via webcast using the following link:
https://www.webcast-eqs.com/zurrose20220818

The playback of the webcast will be available shortly after the event under the same link.

Investors and analyst contact
Dr. Daniel Grigat, Head of Investor Relations
Email: ir@zurrose.com, phone: +41 58 810 11 49

Media contact
Lisa Lüthi, Group Director Communications
Email: media@zurrose.com, phone: +41 52 724 08 14

Agenda
20 October 2022 Q3/2022 Trading Update
19 January 2023 Sales 2022
23 March 2023 2022 Full-Year Results
20 April 2023 Q1/2023 Trading Update
4 May 2023 Annual General Meeting
17 August 2023 2023 Half-Year Results
19 October 2023 Q3/2023 Trading Update

Zur Rose Group

The Swiss Zur Rose Group is Europe’s largest e-commerce pharmacy and one of the leading medical wholesalers in Switzerland. It also operates the leading marketplace in southern Europe for consumer health, beauty and personal care products commonly sold in pharmacies. The company is internationally present with strong brands, including Germany’s best-known pharmacy brand, DocMorris, and employs more than 2,400 people at sites in Switzerland, Germany, the Netherlands, Spain and France. Now serving more than 11 million active customers in core European markets, Zur Rose generated external revenue of CHF 2,034 million in 2021.

With its business model, the Zur Rose Group offers high-quality, safe and cost-effective pharmaceutical care, as well as digital services relating to marketplaces, ecosystems, technology and telemedicine. In addition, Zur Rose is actively driving forward its positioning as a comprehensive healthcare service provider, with focus on building up and extending its European healthcare ecosystem networking qualified providers of products, services and digital solutions. Its ambition is to provide customer-centred health journeys so people are offered optimum supply and a range of medication and treatment options. By doing so, Zur Rose is pursuing its vision of creating a world where people can manage their own health in one click.

The shares of Zur Rose Group AG are listed on the SIX Swiss Exchange (securities number 4261528, ISIN CH0042615283, ticker ROSE). For further information, please visit zurrosegroup.com.

^[1] External revenue consists of the consolidated revenue of the Zur Rose Group plus online revenues of pharmacies supplied by the Zur Rose Group, less the consolidated revenue from supplying them.

^[2] Customers supplied by the Zur Rose Group, either directly or through its partners.

^[3] Source: gematik