Galenica : Half year report - full version

Half year report 2018

of the Galenica Group

Galenica - the first choice for health, beauty and wellbeing

Key figures

Key figures(unaudited figures)

Net sales1)2)

in million CHF

Health & BeautyServices

EBIT adjusted1)3)

in million CHF

745.7 1,177.1

Health & BeautyServices

54.3 22.3

in million CHF

Net sales1)2)

Health & Beauty Services

EBITDA adjusted1)3)4)in % of net sales

in million CHF

EBITDA1)4)

Health & Beauty Services4)

EBIT adjusted1)3)4)in % of net sales

EBIT1)4)

Health & Beauty Services4)

Net profit adjusted3)4)

Net profit4)

Investment in property, plant and equipment and intangible assets

Employees at reporting date (FTE)

Equity ratio

Capital contribution reserves Net debt

Share information

in CHF

Share price at reporting date

Stock exchange capitalisation at reporting date in million CHF Shareholders' equity per share at reporting date

Earnings per share 1.1.-30.6.

Earnings per share adjusted 1.1.-30.6.3)

Employees

as at 30 June 2018

Galenica Ltd. 38

Health & Beauty 4,639

Services 1,651

1.1.-30.6.2017

1,552.4

727.5 1,166.9

97.06.3 %

91.960.2 38.7

76.64.9 %

71.549.5 28.7

62.1

57.9

33.5

4,844

31.12.2017

47.9 % 560.9 301.3

• 1)Key figures are reported for each Segment not taking into account Corporate and eliminations

• 2)Due to the new IFRS 15 accounting standard, which came into effect on 1 January 2018, the sales for the prior-year period were recalculated

• 3)Excluding the effects of IAS 19

• 4)2017 incl. CHF 7.0 million one-off effects, at net profit level CHF 6.3 million

Change

+0.9 %+2.5 % +0.9 %

-2.9 %

-2.7 %+5.2 % -15.3 %

-2.3 %

-2.0 %+9.5 % -22.1 %

-2.7 % -2.4 %

-36.2 % +1.0 %

Change

-14.4 % +16.4 %

Content

Half year report 2018

2 Key figures

4 Foreword

6 Health & Beauty Segment

7 Retail Business sector

10 Products & Brands Business sector

12ServicesSegment

• 13 Services Business sector

• 14 Consolidated interim

• financial statements 2018

Galenica Group

Foreword

Result andprofitabilityimproved

Jörg Kneubühler, Chairman of the Board of Directors,

Dear Shareholders, Ladies and Gentlemen,

Jean-Claude Clémençon, CEO

The first half of 2018 was challenging yet successful. Thoughour sales growth was slowed by additional price reduction measures for medications, which were significantly higher than originally announced by the authorities, we were still able to considerably improve our result and profitability (see page 5).

Growth through expansion of offering and acquisitions

Our pharmacy network reached the 500 points of sale barrierfor the first time in May 2018. Since July 2018, the pharmacywith the highest sales figures in Switzerland, the Bahnhof Apotheke in Zurich main station, has also been fully part of this network.

We also expanded the range in our online shops, which nowcomprises 16,000 products, more than half as many again asat the end of 2017. Acquired at the beginning of 2018, the company Careproduct also strengthens our knowledge and market position with respect to online sales. In addition, its specific offering also expands the pharmacies' portfolio.

Generic substitution: an active contribution to reducting healthcare costs evolution

The range of services offered in our pharmacies is constantlyexpanding. Both the Amavita and Sun Store pharmacy formatshave introduced the Generics Check, advising customersabout which of their medications can be replaced with gener-ics. Galenica makes an active contribution to reducing healthcare costs evolution through generic substitution. On a comparable basis, sales of generics thus rose again in the first half of 2018 (+8.3 %). The substitution rate for medica-tions forwhich a generic is available and for which substitu-tion is alsopossible increased from 68 % to 70 %.

Sustainable innovations expand market presence …

Customers nowadays expect access to healthcare advice and products at all times, wherever they are. In addition to existing points of contact, such as in pharmacies or online, demand for in-home care is also growing. Besides personalhome visits, Mediservice offers an increasing number of ser-vicesin distance healthcare, such as video nursing, which provides services from a central location via a screen to chronically ill patients at home.

… and increase drug and patient safety

Galexis commissioned a new, optimised refrigerated box thatguarantees the required temperature of transported goodsfor 30 hours instead of four, making a further important con-tributionto drug safety.

An important contribution to patient safety is the E-medica-tion solution Documedis®from HCI Solutions, which was con-firmedas a Class I medical device by the Swiss Agency for Therapeutic Products Swissmedic.

The new photovoltaic system on the roof of the Alloga build-ing in Burgdorf should also be noted as an innovation. With a surface area of some 10,000 m2, it will be one of the largestsystems in the region and demonstrates the Galenica Group's commitment to sustainable energy generation.

Foreword

Over the course of 2018, Medifilm will roll out a new gener-ation of blistering machines that will double the number ofblistered units per hour. The machines are also more precisethan the current equipment and can produce sachets labelledin three languages. Initiated in 2017, the project to switch toa new ERP (Enterprise Resource Planning) system is advanc-ing according to plan, and a start with initial pilot customers is scheduled in early 2019.

Investing in improving efficiency

New member of the Board of Directors

The first Annual General Meeting of Galenica Ltd. followingthe IPO in 2017 took place on 9 May 2018. Shareholders approved all the proposals put forward by the Board ofDirectors and elected Bertrand Jungo as a new member of the Board. Bertrand Jungo is CEO of media marketing com-pany Admeira and was previously CEO of department store group Manor for 11 years. His expertise boosts retail and digitisation know-how at the highest level of management in our company.

Positive outlook

Due to the aforementioned price reduction measures, we expect sales for 2018 to be at the lower end of the salesforecast range of +2 % to +3 % communicated in March 2018.

Thanks to improved profitability, we expect EBIT to be at leastat the same level as in 2017, which, excluding the one-offeffects in 2017, corresponds to an operational increase of atleast 5 %. Consequently, the outlook for dividend payments remains unchanged, and we aim to propose a dividend of atleast at the same level as the prior year at our second AnnualGeneral Meeting in 2019.

We would like to thank our employees for their tireless com-mitment and you, our shareholders, for your trust.

Bern, 7 August 2018

Key figures for the Galenica Group, first half of 2018

The Galenica Group increased consolidated net salesby 0.9 % to CHF 1,566.1 million in the first half of 2018.

Sales growth was slowed by additional price reductionmeasures for medications, which were significantly higher than originally announced by the authorities.The impact of the pleasing expansion effect of the Retail Business sector, consolidated at Group level,was also lower than expected because all pharmaciesacquired were already supplied by Galexis before acqui-sition.

Excluding one-off effects from the prior-year period (CHF 7.0 million) that did not recur in the period under review (sale of rights of the medical practice software Triamed®and a non-operational building in Schönbühl), and excluding the effects of IAS 19, EBIT rose by 7.5 %, and return on sales (ROS) improved from 4.5 % to 4.8 %. Taking into account one-off effects, earnings before interest and taxes (EBIT) declined by 2.0%to CHF 70.1 million, and excluding the effects of IAS 19, by 2.3 % to CHF 74.9 million.

Excluding the one-off effects from 2017 (CHF 6.3 mil-lion) and the effects of IAS 19, net profit increased by 8.2%. Taking into account one-off effects, net profit declined by 2.4 % to CHF 56.5 million, and excluding the effects of IAS 19 by 2.7 % to CHF 60.4 million.

Investments totalled CHF 21.4 million (prior-yearperiod: CHF 33.5 million including acquisition of the Merfen®and Vita-Merfen®brands) and were made, among other projects, in the new ERP system in the Services Business sector and the renovation and con-struction of pharmacies.

Jörg Kneubühler Chairman of the Board of DirectorsJean-Claude Clémençon CEO