Quarterly Report • Aug 4, 2015
Quarterly Report
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| Income Statement (x 1,000 euro) | HY1 2015 | HY1 2014 | Change |
|---|---|---|---|
| Net turnover | 243,768 | 209,149 | $+16.6%$ |
| Gross margin | 161,262 | 132,945 | $+21.3%$ |
| As % of net turnover | 66.2% | 63.6% | |
| Operating costs | $-95,627$ | $-77,275$ | $+23.7%$ |
| As % of net turnover | 39.2% | 36.9% | |
| EBITDA before non-recurrent result | 65,635 | 55,670 | $+17.9%$ |
| As % of net turnover | 26.9% | 26.6% | |
| Non-recurrent result | $-2,518$ | $-2,516$ | $+0.1%$ |
| EBITDA | 63,117 | 53,154 | $+18.7%$ |
| As % of net turnover | 25.9% | 25.4% | |
| Depreciation and amortization | $-11,677$ | $-7,166$ | $+63.0%$ |
| EBIT | 51,440 | 45,988 | $+11.9%$ |
| Financial result, excluding revaluation of financial derivatives | $-14,800$ | $-10,023$ | $+47.7%$ |
| Revaluation of financial derivatives | 495 | $-613$ | $-180.8%$ |
| Profit before taxes | 37,135 | 35,352 | $+5.0%$ |
| Taxes | $-12,120$ | $-10,864$ | $+11.6%$ |
| Net profit | 25,015 | 24,488 | $+2.2%$ |
| Result from discontinued operations | 2,582 | $-17,879$ | $-114.4%$ |
| Recurrent net profit 5 | 26,072 | 26,575 | $-1.9%$ |
| Net profit per share from continued operations $(\epsilon)$ | 0.80 | 0.80 | 0.0% |
| Recurrent net profit per share $(\epsilon)$ | 0.84 | 0.87 | $-3.4%$ |
| Average number of shares | 30,909,841 | 30,604,868 | $+1.0%$ |
| Balance sheet (x 1,000 euro) | 30-06-2015 | 31-12-2014 |
|---|---|---|
| Intangible non-current assets | 644.903 | 575,252 |
| Property, plant and equipment | 63,562 | 59,969 |
| Deferred tax assets | 18,400 | 22,363 |
| Other non-current assets | 5,757 | 5,065 |
| Operational working capital | 52,237 | 44,078 |
| Other working capital | $-129.046$ | $-139,744$ |
| Equity | 171,646 | 156,948 |
| Provisions | 12,692 | 14,944 |
| Financial instruments | 2,367 | 2,862 |
| Deferred tax liabilities | 13,533 | 6,162 |
| Net financial debt | 455.574 | 448.663 |
The consolidated turnover in the first six months of 2015 amounted to $\epsilon$ 243.8 million, an increase of 16.6% compared to the first six months of 2014. Organic turnover growth amounted to 8.5%. The turnover development per segment is set out in more detail in the section 'Key figures per segment'.
| $(x 1,000 \text{ euro})$ | HY1 2015 | HY1 2014 | Total growth | CER | Total growth Org. growth Org. growth | CER |
|---|---|---|---|---|---|---|
| Fagron | 238,268 | 204.131 | $+16.7%$ | $+10.7%$ | $+8.4%$ | $+2.8%$ |
| HL Technology | 5.500 | 5.018 | $+9.6%$ | $-5.2%$ | $+9.6%$ | $-5.2%$ |
| Fagron Group | 243,768 | 209,149 | $+16.6%$ | $+10.3%$ | $+8.5%$ | $+2.6%$ |
CER = Constant Exchange Rates
The gross margin increased by 21.3% to € 161.3 million. The gross margin as a percentage of turnover increased by 2.6 percentage points to 66.2%. This increase was caused by the strong organic growth of Fagron Specialty Pharma Services and Fagron Trademarks and by the optimization of the product portfolio of Fagron Essentials.
The operating costs as a percentage of turnover increased by 2.3 percentage points to 39.2% of turnover.
The EBITDA before non-recurrent result increased 17.9% to € 65.6 million. This represented 26.9% of turnover.
The non-recurrent result remained virtually unchanged and amounted to $\text{\textless} 2.5$ million.
EBITDA increased by 18.7% in the first six months of 2015, to $\epsilon$ 63.1 million. The operational margin (EBITDA as a percentage of turnover) increased from 25.4% in the first six months of 2014 to 25.9% in the first six months of 2015.
Depreciation and amortization amounted to $\text{\textsterling}$ 11.7 million, compared to $\text{\textsterling}$ 7.2 in the first six months of 2014. Part of this increase (€ 2.7 million) was attributable to the depreciation of intangible non-current assets as the result of the allocation of part of the acquisition sum for acquired companies.
EBIT amounted to $\epsilon$ 51.4 million, an increase of 11.9% compared to the first six months of 2014.
The financial result excluding the revaluation of the financial derivatives amounted to $\text{\textsterling}$ 14.8 million. The increase compared to the first six months of 2014 was due to an increase in the net financial debt and higher exchange rate differences.
The revaluation of the financial derivatives amounted to $\epsilon$ 0.5 million. This positive revaluation was the result of an upward trend in the interest rate. This interest rate hedge does not qualify for hedge accounting according to IAS 39. As a non-cash item, it has been deducted from the financial result and is shown separately in the income statement.
The effective tax rate as a percentage of profit before taxes was 32.6%, primarily because of the high tax rate in the United States.
The net profit amounted to € 25.0 million in the first six months of 2015. The net profit per share amounted to € 0.80.
The main changes at balance sheet level can be summarized as follows.
The intangible non-current assets increased by $\epsilon$ 69.7 million to $\epsilon$ 644.9 million. This increase was mainly due to the recognition of goodwill resulting from the acquisition of US-based AnazaoHealth and due to the higher US dollar exchange rate.
Property, plant and equipment increased by € 3.6 million to € 63.6 million. This increase was due to the takeover of assets as part of acquisitions and the construction of new compounding facilities in the Netherlands and the United States.
Operational working capital increased by 18.5% in the first six months of 2015, to $\epsilon$ 52.2 million. The operational working capital as a percentage of turnover was 10.2%.
The net financial debt increased by 1.5% in the first six months of 2015, to €455.6 million. At the end of June 2015 the net financial debt/annualised REBITDA ratio was 3.21, in compliance with the covenant under the credit facility, which sets a maximum ratio of 3.25.
Net operational capex amounted to $\epsilon$ 11.0 million (4.5% of the turnover). Capex includes investments in R&D and investments in new compounding facilities in the Netherlands and the United States.
| ragion | |||
|---|---|---|---|
| (x 1,000 euro) | HY1 2015 HY1 2014 Change | ||
| Turnover | 238.268 | 204.131 | $+16.7%$ |
| RFBITDA 6 | 64.552 | 54.881 | $+17.6%$ |
| REBITDA margin | 27.1% | 26.9% |
Fagron's turnover increased 16.7% in the first six months of 2015 (10.7% at constant exchange rates), to € 238.3 million. Organic turnover growth amounted to 8.4% (2.8% at constant exchange rates). REBITDA increased by 17.6% to € 64.6 million. REBITDA as a percentage of turnover increased to 27.1%.
Fagron Specialty Pharma Services showed strong turnover growth of 60.7% (47.2% at constant exchange rates). The turnover increased from $\epsilon$ 57.4 million in the first six months of 2014 to $\epsilon$ 92.2 million in the first six months of 2015. Organic turnover growth amounted to 25.4% (14.8% at constant exchange rates). REBITDA increased by 59.0% in the first six months of 2015, to € 25.7 million.
The turnover growth was mainly driven by strongly increased demand for compounded medication in Europe, North America, South America and South Africa. The sterile activities of JCB/Fagron in the United States grew by no less than 94.1% in the first six months of 2015 (58.0% at constant exchange rates). Fagron is investing substantially in the sterile segment in Europe and in the United States in order to satisfy the growing demand from hospitals to outsource sterile compounding to Fagron Specialty Pharma Services. The antibiotics
<sup>6 EBITDA before non-recurrent result
<sup>7 EBITDA before non-recurrent result
compounding facility under construction in Hoogeveen (the Netherlands) will be fully operational in October 2015. The new 5,000 m2 sterile cGMP and FDA 503B-registered compounding facility in Wichita (Kansas, US) will be fully operational in November 2015.
In April 2015, Fagron signed an agreement for the acquisition of AnazaoHealth, based in Tampa and Las Vegas. AnazaoHealth is a leading cGMP and FDA 503B-registered compounding facility in the United States specialized in nuclear, pain and intrathecal compounding. AnazaoHealth's products are compounded on the instructions of hospitals and specialized surgical clinics and therefore fall outside the scope of the reimbursement policy. The acquisition of AnazaoHealth was completed in July 2015. Additional information on the acquisition of AnazaoHealth can be found in the press releases of 11 May and 30 June 2015.
Fagron Specialty Pharma Services represented 38.7% of Fagron's total turnover in the first six months of 2015. compared to 28.1% in the first six months of 2014. In 2016, Fagron Specialty Pharma Services is expected to generate more than 50% of Fagron's total turnover.
| . | |||
|---|---|---|---|
| (x 1,000 euro) | HY1 2015 HY1 2014 | Change | |
| Turnover | 25.551 | 22.678 | $+12.7%$ |
| REBITDA 8 | 9.109 | 7.109 | $+28.1%$ |
| REBITDA margin | 35.6% | 31.3% |
The turnover of Fagron Trademarks grew organically by 12.7% in the first six months of 2015 (11.0% at constant exchange rates), to € 25.6 million. REBITDA increased by 28.1% in the first six months of 2015, to € 9.1 million. Innovation is the driving force behind the growth of Fagron Trademarks. Fagron's R&D team of 45 researchers and more than 300 pharmacists works closely with pharmacists, physicians and universities worldwide to develop new and innovative solutions to fulfil the strong growing demand for customized pharmaceutical patient care.
Fagron has noticed a growing demand from hospitals, pharmacies and the pharmaceutical industry for readymade, safe and liquid oral administration methods. Two big pharmaceutical companies recently validated and approved SyrSpend® SF for worldwide use in clinical studies with both adults and children. The first patient studies using SyrSpend® SF will start at the beginning of 2016. Fagron has signed a contract with TKSD Pharmaceutical Co Limited for the exclusive distribution of SyrSpend® SF in Hong Kong and Macau. The first SyrSpend® SF will be supplied to hospitals in Hong Kong and Macau in August 2015.
SyrSpend® SF was developed in-house by Fagron's R&D department. SyrSpend® SF uses an innovative. patented active suspension technology that guarantees accuracy and consistency during dosing. SyrSpend® SF also contains only ingredients designated by the WHO, EMEA and FDA as safe for use in children and newborns. The largest independently conducted stability study worldwide showed that SyrSpend® SF is compatible with virtually all medicines. All in all this makes SyrSpend® SF the ideal vehicle for the compounding of oral administrations for all patients.
<sup>8 EBITDA before non-recurrent result
| $(x 1,000 \text{ euro})$ | HY1 2015 HY1 2014 Change | ||
|---|---|---|---|
| Turnover | 120.549 124.098 | $-2.9\%$ | |
| RFBITDA 9 | 29.791 | 31.639 | $-5.8\%$ |
| REBITDA margin | 24.7% | 25.5% |
The turnover of Fagron Essentials decreased 2.9% in the first six months of 2015 (-6.2% at constant exchange rates), to €120.5 million. Organic turnover growth amounted to -2.4% (-5.8% at constant exchange rates).
At Fagron Essentials, the project to optimize the product portfolio and production process was started during the second quarter of 2015. Non-strategic, low-margin products, usually with a low turnover ratio, are being phased out in 2015. Although this will have a negative impact on the turnover, the impact on profitability as a percentage of turnover and on the required working capital will be substantial.
| HL Technology | |||
|---|---|---|---|
| (x 1,000 euro) | HY1 2015 HY1 2014 Change | ||
| Turnover | 5,500 | 5.018 | $+9.6%$ |
| REBITDA 10 | 1.082 | 788 | $+37.4%$ |
| REBITDA margin | 19.7% | 15.7% |
HL Technology, the division focused on developing and introducing innovative precision components for the dental and orthopaedic industry, achieved turnover of €5.5 million in the first six months of 2015, an increase of 9.6% (-5.2% at constant exchange rates) compared to the first six months of 2014. REBITDA increased 37.4% to € 1.1 million. HL Technology has a well-filled order book thanks to the constant introduction of innovative products.
Based on the current portfolio, Fagron expects turnover of at least € 500 million12 in 2015 with a REBITDA13 margin of 26%.
On 30 June 2015, Fagron held 341,854 treasury shares. On 5 August 2015, Fagron will grant 14,094 treasury shares to the current management (former owners) of Freedom as part of the payment of the earn-out related to the acquisition of Freedom Pharmaceuticals (acquired in the second quarter of 2013). After granting the 14,094 treasury shares, Fagron NV will hold 327,760 treasury shares on 5 August.
On 5 August 2015, Fagron will increase the share capital by issuing 444,033 new shares within the authorized capital. The new shares will be used for the payment of the earn-out related to the acquisition of Pharmacy Services (acquired in the first quarter of 2014) in the United States. The 444,033 shares will be granted to the current management (former owners) of Pharmacy Services. After these shares have been granted, the management of Pharmacy Services will hold 1.38% of the share capital of Fagron NV. From 5 August 2015, the number of Fagron shares with voting rights will equal 32,111,827. The total number of voting rights (denominator) will be 32,111,827 as of 5 August. The share capital will be € 329,066,194.56 as of 5 August.
<sup>9 FBITDA before non-recurrent result
<sup>10 EBITDA before non-recurrent result
11 This press release contains data related to the future based on the current internal estimates and forecasts in addition to market forecasts. The forward-looking statements contain inherent risks and are only applicable on the date on which they are issued. There may be substantial differences between the actual results and the results cited in the forward-looking statements.
<sup>12 Based on constant exchange rates (EUR/USD 1.250 and EUR/BRL 3.100)
<sup>13 EBITDA before non-recurrent result
Ger van Jeveren (CEO) and Jan Peeters (CFO) will provide further details on the results for the first six months of 2015 today in a conference call. The conference call starts at 09:30 CET. From 5-10 minutes before the start, you can call in using the numbers and confirmation code below:
The Netherlands: +31 20 716 8251 Belgium/Europe: +32 2 400 1972 North America: +1 646 254 3373 Confirmation code: 1609060
From 10:30 CET, the conference call can be heard on: The Netherlands: +31 20 708 5013 Belgium/Europe: +32 2 789 7487 North America: +1347 366 9565 Code to listen to the call: 1609060
From 5 August the conference call may be listened to or downloaded from the corporate website of Fagron (http://investors.fagron.com/).
The trading update on the third quarter of 2015 will be published at 07:00 CET on 9 October.
In the event of differences between the English translation and the Dutch original of this press release, the latter prevails.
Fagron is a scientific pharmaceutical R&D company that is focused on optimizing and innovating customized pharmaceutical care. Fagron provides Fagron Specialty Pharma Services, Fagron Trademarks and Fagron Essentials to pharmacies, clinics and hospitals in 32 countries worldwide.
The Belgian company Fagron NV is located in Waregem and is listed on Euronext Brussels and Euronext Amsterdam. The operational activities of Fagron are driven by the Dutch company Fagron BV. The head office of Fagron BV is located in Rotterdam.
Jan Peeters Chief Financial Officer Tel. +32 475 44 24 75 [email protected] Marieke Palstra Global Investor Relations Director Tel. +31 6 10 316 464 [email protected]
| 1. Interim management report 2 | |
|---|---|
| 2. Condensed consolidated income statement 2 | |
| 3. Condensed consolidated statement of comprehensive income 3 | |
| 4. Condensed consolidated statement of financial position 4 | |
| 5. Condensed consolidated statement of changes in equity 5 | |
| 6. Condensed consolidated statement of cash flows 6 | |
| 7. Notes to the interim financial information 7 | |
| 8. Earnings per share 10 | |
| 9. Non-recurring results 11 | |
| 10. Segment information 11 | |
| 11. Long Term Borrowings 13 | |
| 12. Related parties 13 | |
| 13. Business combinations 13 | |
| 14. Discontinued Operations 16 | |
| 15. Subsequent events 17 | |
| 16. Effective tax rate 17 | |
| 17. Auditors' review report 18 |
The undersigned hereby declare that, to the best of their knowledge, the condensed consolidated financial statements for the six-months period ended 30 June 2015, which have been prepared in accordance with the IAS 34 'Interim Financial Reporting' as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit and loss of the company and the undertakings included in the consolidation as a whole, and that the interim management report includes a fair review of the important events that have occurred during the first six months of the financial year and of other legal necessary information.
Ger van Jeveren, CEO Jan Peeters, CFO
A detailed report on the first semester of 2015 can be found in the Fagron press release of 4 August 2015.
| (x 1,000 euros) | June 2015 | June 2014 |
|---|---|---|
| Turnover | 243,768 | 209,149 |
| Trade goods | (82,506) | (76,204) |
| Services and other goods | (43,754) | (33,940) |
| Employee benefit expenses | (61,177) | (45,820) |
| Depreciation and amortization | (11,677) | (7,166) |
| Other operating expenses | 799 | (898) |
| Other operating income | 5,988 | 866 |
| Operating profit | 51,440 | 45,988 |
| Financial income | 862 | 355 |
| Financial expenses | (15,167) | (10,991) |
| Profit before income tax | 37,135 | 35,352 |
| Taxes | (12,120) | (10,864) |
| Profit for the year from continuing operations | 25,015 | 24,488 |
| Profit (loss) for the year from discontinued operations | ||
| (attributable to equity owners of the company) | 2,582 | (17,879) |
| Profit (loss) for the year | 27,597 | 6,608 |
| Profit (loss) attributable to: | ||
| Equity holders of the company (net result) | 27,291 | 6,597 |
| Non-controlling interest | 306 | 11 |
| Earnings (loss) per share attributable to owners of the parent during the year |
||
| Profit (loss) for the year per share (in euros) | 0.88 | 0.22 |
| From continuing operations | 0.80 | 0.80 |
| From discontinued operations | 0.08 | (0.58) |
| Diluted profit (loss) for the year per share (in euros) | 0.88 | 0.21 |
| From continuing operations | 0.80 | 0.79 |
From discontinued operations 0.08 (0.58)
| (x 1,000 euros) | June 2015 | June 2014 |
|---|---|---|
| Profit for the period | 27,597 | 6,608 |
| Other comprehensive income: | ||
| Items that will not be reclassified to profit or loss | ||
| Remeasurements of post employment benefit obligations | ||
| Items that may be subsequently reclassified to profit or | ||
| loss | ||
| Currency translation differences | 71 | 9,800 |
| Other comprehensive income from the period | 71 | 9,800 |
| Total comprehensive income for the period | 27,668 | 16,408 |
| Attributable to: | ||
| Equity holders of the company | 27,319 | 16,399 |
| Non-controlling interest | 349 | 9 |
| Total comprehensive income for the period attributable to equity holders of the company: |
||
| From continuing operations | 24,737 | 34,278 |
| From discontinued operations | 2,582 | (17,879) |
| 27,319 | 16,399 |
| (x 1,000 euros) | June 2015 | December 2014 |
|---|---|---|
| Non-current assets | 732,620 732,620 | 662,648 |
| Intangible assets | 644,903 | 575.252 |
| Property, plant and equipment | 63,562 | 59,969 |
| Financial assets | 5,757 | 5,064 |
| Deferred tax assets | 18,400 | 22,363 |
| Current assets | 211,418 | 228,114 |
| Inventories | 70,863 | 65,181 |
| Trade receivables | 40,650 | 36,337 |
| Other receivables | 16,250 | 18,043 |
| Cash and cash equivalents | 83,655 | 108,552 |
| Assets held for sale | 82,989 | |
| Total assets | 944,038 | 973,752 |
| Equity | 171,646 | 156,948 |
| Non-current liabilities | 555,571 | 575,472 |
| Provisions | 6,541 | 8,891 |
| Pension obligations | 6,152 | 6,053 |
| Deferred tax liabilities | 13,533 | 6,162 |
| Borrowings | 526,979 | 551,504 |
| Financial instruments | 2,367 | 2,862 |
| Current liabilities | 216,821 | 220,938 |
| Borrowings | 12,249 | 5,710 |
| Trade payables | 59,276 | 57,440 |
| Taxes, remuneration and social security | 28,011 | 38,668 |
| Other current payables | 117,285 | 119,120 |
| Liabilities directly associated with assets classif directly with assets classified as held ied held for sale |
20,394 | |
| Total liabilities | 772,392 | 816,804 |
| Total equity and liabilities | 944,038 | 973,752 |
| (x 1,000 euros) | Share capital & share premium |
Other reserves |
Treasury shares |
Retained earnings |
Total | Non controlling interest |
Total equity |
|---|---|---|---|---|---|---|---|
| Balance at 1 1January JanuaryJanuary 2014 |
318,927 | (230,499) | (21,842) | 84,966 | 151,553 | 3,615 | 155,168 |
| Profit for the period | 6,597 | 6,597 | 11 | 6,608 | |||
| Other comprehensive income for the period |
9,802 | 9,802 | (2) | 9,800 | |||
| Total comprehensive income for the period |
9,802 | 6,597 | 16,399 | 9 | 16,408 | ||
| Capital increase | 733 | 733 | 733 | ||||
| Sale of treasury shares | 7,109 | 7,109 | 7,109 | ||||
| Result on treasury shares | (3,860) | (3,860) | (3,860) | ||||
| Dividends relating to 2013 result |
(22,209) | (22,209) | (22,209) | ||||
| Share-based payments | 568 | 568 | 568 | ||||
| Balance at 30 June 2014 30 June |
319,660 | (220,129) | (18,593) | 69,354 | 150,292 | 3,624 | 153,916 |
| Profit for the period | 9,629 | 9,629 | (81) | 9,548 | |||
| Other comprehensive income for the period |
(6,342) | (6,342) | (26) | (6,368) | |||
| Total comprehensive | (6,342) | 9,629 | 3,286 | (107) | 3,179 | ||
| income for the period | |||||||
| Purchase of treasury shares |
(1,642) | (1,642) | (1,642) | ||||
| Share-based payments | 1,492 | 1,492 | 1,492 | ||||
| Change in non controlling interests |
1,198 | 1,198 | (1,198) | ||||
| Balance at 31 December 31 2014 |
319,660 | (223,781) | (20,235) | 78,983 | 154,628 | 2,319 | 156,948 |
| Profit for the period | 27 | 27 | 43 | 71 | |||
| Other comprehensive | 27,291 | 27,291 | 306 | 27,597 | |||
| income for the period | |||||||
| Total comprehensive income for the period |
27 | 27,291 | 27,318 | 349 | 27,668 | ||
| Capital increase | 9,072 | 9,072 | 9,072 | ||||
| Sale of treasury shares | 4,493 | 4,493 | 4,493 | ||||
| Result on treasury shares | (3,622) | (3,622) | (3,622) | ||||
| Dividends relating to 2014 result |
(31,156) | (31,156) | (31,156) | ||||
| Share-based payments | 8,244 | 8,244 | 8,244 | ||||
| Balance at 30 June 2015 30 June |
328,731 | (215,510 215,510) | (19,364 (19,364) | 75,119 | 168,977 | 2,669 | 171,646 |
| (x 1,000 euros) | June 2015 | June 2014 |
|---|---|---|
| Operating activities | ||
| Profit before income taxes | 37,135 | 24,656 |
| Paid taxes | (14,068) | (3,273) |
| Adjustments for financial items | 14,305 | 13,194 |
| Total adjustments for non-cash items | 12,984 | 21,631 |
| Total changes in working capital | (13,818) | (9,755) |
| Total cash flow from operating activities | 36,538 | 46,453 |
| Investment activities | ||
| Capital expenditures | (11,029) | (9,826) |
| Investments in existing shareholdings (subsequent payments) | (37,469) | (161,879) |
| and in new holdings Proceeds from disposal of assets |
72,450 | 28,627 |
| Total cash flow from investing activities | 23.952 | (143,078) |
| Financing activities | ||
| Capital increase | 107 | 733 |
| Sale of treasury shares | 870 | 3,248 |
| Dividends paid | (31,360) | (22,189) |
| New borrowings | 39,321 | 221,914 |
| Reimbursement of borrowings | (86,765) | (123,608) |
| Interest received | 862 | 446 |
| Interest paid | (11,076) | (7,612) |
| Total cash flow from financing activities | (88,042) | 72,932 |
| Total net cash flow for the period | (27,552) | (23,693) |
| Cash and cash equivalents – start of the period | (108,552) | 135,412 |
| Gains or losses on exchange on liquid assets | (2,655) | 1,261 |
| Cash and cash equivalents – end of the period | 83,655 | 112,980 |
| Change in cash and cash equivalents | (27,552) | (23,693) |
| Cash flows from discontinued operations from |
||
| Cash flow from operating activities | 4,416 | |
| Cash flow from investing activities | (9,844) | |
| Cash flow from financing activities | 3,729 | |
| Total net cash flow from discontinued operations net flow discontinued operations |
(1,699) |
Fagron NV (the 'Company') and its subsidiaries (together, the 'Group') constitute of a multinational group of companies that is focused on the worldwide optimization and innovation of customized pharmaceutical care to broaden the prescriber's therapeutic scope, with the aim of fulfilling the worldwide growing need for customized medication and improving patients' quality of life. Fagron offers its products to pharmacies, clinics and hospitals in 32 countries worldwide.
The Company is a limited company headquartered in Belgium with its registered office at Textielstraat 24, 8790 Waregem. The company registration number is BE 0890 535 026. The operational activities of the Fagron Group are driven by the Dutch company Fagron BV. The operational head office of Fagron BV is located in Rotterdam.
The shares of Fagron NV are listed on the regulated markets of Euronext Brussels and Euronext Amsterdam.
The Board of Directors approved the publication of this consolidated financial statement on 3 August 2015.
This condensed consolidated interim financial information for the first half of 2015, including the comparative figures for 2014, has been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the European Union. The condensed consolidated interim financial information must be read in conjunction with the annual financial statements for the year 2014 (including the principles for financial reporting) which is available at www.fagron.com.
The accounting policies used to prepare the consolidated interim financial statements for the first half of 2015 are consistent with those applied in the Fagron consolidated financial statements for the year ended 31 December 2014.
The accounting policies were consistently applied for all periods presented.
A summary of the most important accounting policies can be found in the 2014 annual report. The annual report can be consulted through the following web link: www.fagron.com.
This condensed consolidated interim financial information has been prepared in accordance with IFRS standards and IFRIC interpretations that apply, or which are applied early, as of 30 June 2015 and which have been endorsed by the European Union.
The following new standards and amendments to standards are mandatory for the first time for the financial year beginning 1 January 2015:
The application of the aforementioned amendment does not constitute a significant impact on the financial information of the Company.
The following amendments to standards have been issued and have been endorsed by the European Union, but are not mandatory for the first time for the financial year beginning 1 January 2015:
The following new standard, amendments to standards and interpretation have been issued, but are not mandatory for the first time for the financial year beginning 1 January 2015 and have not been endorsed by the European Union:
IFRS 15 'Revenue from contracts with customers'. Companies using IFRS will be required to apply the revenue standard for annual periods beginning on or after 1 January 2018, subject to EU endorsement.
Amendment to IAS 16 'Property, plant and equipment' and IAS 38 'Intangible assets' on depreciation and amortisation, effective for annual periods beginning on or after 1 January 2016
No new standards, amendments to standards and interpretations were early-adopted. Management is currently assessing the impact on the annual statements.
| June 2015 | June 2014 | |
|---|---|---|
| Basic earnings (loss) per share | 0.88 | 0.22 |
| - from continuing operations | 0.80 | 0.80 |
| - from discontinued operations | 0.08 | (0.58) |
| Diluted earnings (loss) per share | 0.88 | 0.21 |
| - from continuing operations | 0.80 | 0.79 |
| - from discontinued operations | 0.08 | (0.58) |
The earnings used in the calculations are as follows:
| (x 1,000 euros) | June 2015 | June 2014 |
|---|---|---|
| Profit (loss) attributable to equity holders of the company | 27,291 | 6,597 |
| - from continuing operations | 24,709 | 24,476 |
| - from discontinued operations | 2,582 | (17,879) |
The weighted average number of ordinary shares used in the calculations are as follows:
| (number of shares x 1,000) | June 2015 | June 2014 |
|---|---|---|
| Weighted average number of ordinary shares | 30,910 | 30,605 |
| Effect of warrants and stock options | 138 | 351 |
| Weighted average number of ordinary shares (diluted) | 31,047 | 30,956 |
On 30 June 2015 the capital represented 31,667,794 shares, 341,854 of which are treasury shares held by Fagron NV. As result of the exercise of warrants and partial reimbursement of the purchase price 236,434 new shares have been issued.
The total non-recurring result, from continued operations, included in the EBIT amount to 2.5 million euros cost (June 2014: 2.5 million euros costs). This negative result mainly includes acquiring costs, integration costs and reorganisation costs. In addition, the revaluation of the financial derivatives constitutes a non-recurring result of 0.5 million euros cost in the first semester of 2015 and 0.6 million euros profit in the first semester of 2014. The total non-recurring result after income taxes, from continued operations, are calculated by multiplying the sum of the non-recurring costs by the weighted average effective income tax rate and come to 1.4 million euros (June 2014: 1.0 million euros).
Fagron's divisional structure is tailored to the various activities of Fagron and also supports effective decisionmaking and individual responsibility. This is in accordance with IFRS 8, which states that the operational segments must be determined on the basis of the components that the Executive Committee applies to assess the performance of the operational activities and on which the decisions are based. Since 2015 Fagron reports according to the following segments: Fagron Specialty Pharma Services, Fagron Trademarks, Fagron Essentials and HL Technology.
| (x 1,000 euros) | Fagron Specialty Pharma Services |
Fagron Trademarks |
Fagron Essentials |
Fagron Total |
HL Technology |
Total |
|---|---|---|---|---|---|---|
| Total turnover | 93,145 | 26,581 | 136,570 | 256,295 | 5,500 | 261,795 |
| Turnover between segments |
977 | 1,029 | 16,021 | 18,027 | 18,027 | |
| Turnover Turnover | 92,167 | 25,551 | 120,549 | 238,268 | 5,500 | 243,768 |
| Operating profit | 18,643 | 7,906 | 24,940 | 51,489 | (49) | 51,440 |
| Financial result | (14,305) | |||||
| Profit before income tax | 37,135 | |||||
| Taxes | (12,120) | |||||
| Profit for the year Profit for the year |
25,015 |
The segment results for continuing operations for the reporting period ending 30 June 2015 are as follows:
The segment results for continued operations for the reporting period ending 30 June 2014 are as follows:
| Fagron Specialty |
||||||
|---|---|---|---|---|---|---|
| Pharma | Fagron | Fagron | Fagron | HL | ||
| (x 1,000 euros) | Services | Trademarks | Essentials | Total | Technology | Total |
| Total turnover | 58,127 | 22,904 | 138,281 | 219,312 | 5,018 | 224,329 |
| Turnover between | ||||||
| segments | 773 | 226 | 14,182 | 15,181 | 15,181 | |
| Turnover Turnover | 57,354 | 22,678 | 124,098 | 204,131 | 5,018 | 209,149 |
| Operating profit | 12,660 | 6,343 | 26,882 | 45,885 | 102 | 45,988 |
| Financial result | (10,636) | |||||
| Profit before income tax | 35,352 | |||||
| Taxes | (10,864) | |||||
| Profit for the year Profit for the year |
24,488 |
| (x 1,000 euros) | Fagron Specialty Pharma Services |
Fagron Trademarks |
Fagron Essentials Essentials |
Fagron Total |
HL Technology |
Discontin ued |
Total |
|---|---|---|---|---|---|---|---|
| Total assets | 405,110 | 46,958 | 470,522 | 922,591 | 21,448 | 944,038 | |
| Total liabilities | 310,229 | 75,263 | 384,170 | 769,662 | 2,730 | 772,392 | |
| Capex | 5,995 | 724 | 4,310 | 11,029 | 11,029 |
On 30 June 2015, the assets and liabilities, as well as the capital expenditure (investments) are as follows:
On 31 December 2014, the assets and liabilities, as well as the capital expenditure (investments) are as follows:
| (x 1,000 euros) | Fagron Specialty Pharma Services |
Fagron Trademarks Trademarks |
Fagron Essentials |
Fagron Total |
HL Technology |
Discontin ued |
Total |
|---|---|---|---|---|---|---|---|
| Total assets | 336,779 | 57,920 | 486,277 | 880,976 | 18,527 | 74,249 | 973,752 |
| Total liabilities | 275,781 | 76,273 | 444,199 | 796,253 | 2,500 | 18,052 | 816,804 |
| Capex | 2,173 | 1,226 | 6,322 | 9,721 | 577 | 10,278 |
In the first semester of 2015 there have been no significant issues or repayments of debt securities.
The members of the Executive Committee, the CEO and the non-executive directors are considered as related parties. The remuneration policy is described in the Corporate Governance Statement which is part of the 2014 annual report. The remuneration is determined on a yearly basis, therefore no further details are provided in these interim financial statements.
In the first semester of 2015 Fagron acquired several companies. Full control was acquired of all group companies. As the acquired activities were immediately – in their entirety or to a significant degree – integrated in existing entities of Fagron, their respective contribution to the profit of Fagron have not been reported separately.
In April 2014, US company Pharmacy Services Inc. was acquired. Fagron has further strengthened its worldwide market leadership with this acquisition of compounding facilities. Through this acquisition Fagron gained the number one market position in US compounding.
The acquisition involved a payment of approximately 142.974 million euros, representing an increase in goodwill of 130.007 million euros. Expectation is that the goodwill will be fully tax deductible. The final, fair value of the acquired assets and liabilities was determined as detailed below:
| Fair value of the acquired assets and liabilities (x 1,000 euros) | |
|---|---|
| Intangible assets | 31,861 |
| Property, plant and equipment | 2,853 |
| Deferred tax assets | 1,355 |
| Inventories | 1,341 |
| Trade receivables | 4,085 |
| Other receivables | 108 |
| Cash and cash equivalents | 6,290 |
| Total assets | 47,893 |
| Trade payables | 819 |
| Taxes, remuneration and social security | 17,731 |
| Other current payables | 16,376 |
| Net acquired assets assets | 12,967 |
| Goodwill | 130,007 |
| Total acquisition amount | 142,974 |
In April 2015, AnazaoHealth Inc. was acquired. The company delivers tailor made innovative nuclear and pain preparations and also medication for performing clinical trials. This acquisition gives Fagron the leading position in the US and responds to the growing need of hospitals for outsourcing nuclear, sterile and aseptic preparations to sterile preparation facilities.
The acquisition involved a payment of approximately 36.562 million euros, representing an increase in goodwill of 30.320 million euros. This goodwill was fully allocated to the operating segment Fagron Specialty Pharma Services. The provisional fair value of the acquired assets and liabilities was determined as detailed below:
| Fair value of the acquired assets and liabilities (x 1,000 euros) | |||
|---|---|---|---|
| Intangible assets | 11,648 | ||
| Property, plant and equipment | 1,561 | ||
| Inventories | 1,037 | ||
| Trade receivables | 2,753 | ||
| Other receivables | 974 | ||
| Cash and cash equivalents | 250 | ||
| Total assets assets | 18,223 | ||
| Financial debts | 935 | ||
| Trade payables | 976 |
| Taxes, remuneration and social security | 770 |
|---|---|
| Other current payables | 9,300 |
| Net acquired assets assets | 6,242 |
| Goodwill | 30,320 |
| Total acquisition amount | 36,562 |
Furthermore, some smaller companies and activities were acquired during 2015. The total net assets acquired, before allocation of the acquisition price, amounted to 0.507 million euros positive.
To a large extent, the goodwill relates to future profit potential due to operational benefits to be gained, including synergy and scale benefits and efficiency improvements, as well as commercial benefits in the form of access to new markets and realising market leadership in both new and existing markets. The fair value of a number of acquired assets and liabilities, acquired in 2015, was determined on a provisional basis. The fair value as stated is provisional because the integration process of the acquired entities and their activities is still ongoing. The provisional fair value of intangible assets, property, plant and equipment, deferred tax and working capital can change when the final fair value of the assets and liabilities acquired is established.
The final determination of the fair value of the assets and liabilities from previous minor acquisitions, acquired in 2014, resulted in an adjustment of 2.321 million euros (increase of goodwill). The changes are mainly the result of the final determination of the acquisition price.
The total changes in goodwill from acquisitions represents an increase of 40.693 million euros.
At first semester closing the Group had 40.777 million euros in contingencies. These fees payable to former shareholders were determined on the basis of business plans at the time of acquisition.
| (x 1,000 euros) | 2015 |
|---|---|
| Balance at 1 January | 72,439 |
| Additions through business combinations | 1,025 |
| Used during the period | (26,408) |
| Unused amounts reversed | (12,313) |
| Currency exchange rate differences | 6,034 |
| Balance at 30 June | 40,777 |
The contingent liabilities mainly relate to earn-out agreements of acquisitions in the United States. The earnout agreements are based on the companies' operating income before depreciation and amortisation of 2015 and 2016. The recognised contingencies are based on the companies' projected operating income.
The first semester of 2015, the IT division Corilus has been divested. The total consideration received is equal to 74.001 million euros.
| (x 1,000 euros) | March 2015 |
|---|---|
| Current assets Current |
11,300 |
| Inventories | 1,440 |
| Trade receivables | 4,783 |
| Other receivables | 3,525 |
| Cash and cash equivalents | 1,552 |
| Non-current assets | 73,636 |
| Intangible assets | 72,746 |
| Property, plant and equipment | 831 |
| Other non-current assets | 59 |
| Current liabilities | 14,453 |
| Trade payables | 7,201 |
| Taxes, remuneration and social security | 6,173 |
| Other current payables | 1,078 |
| Non-current liabilities | 1,127 |
| Financial debts | 109 |
| Pension obligations | 61 |
| Deferred tax liabilities | 957 |
| Net assets disposed of | 69,357 |
| (x 1,000 euros) | March 2015 |
|---|---|
| Consideration received | 74,001 |
| Net assets disposed of | 69,357 |
| Subsequent payments | 2,062 |
| Gain (loss) on disposal | 2,582 |
For the outlook of the financial year 2015, please refer to the press release of 4 August 2015. The main risks and uncertainties for the second semester are the same as those mentioned in the 2014 annual report.
Recognised income tax expenses are based on management's best estimate of the weighted average annual income tax rate of 32.6%, which is expected for the full financial year 2015 (2014: 30.7%).
In case of differences between the English translation and the Dutch original of this press release, the latter will prevail.
To the Board of Directors Fagron NV
Statutory auditor's report on review of condensed consolidated financial information for the period ended 30 June 2015
We have reviewed the accompanying condensed consolidated statement of financial position of Fagron NV and its subsidiaries as of 30 June 2015 and the related condensed consolidated income statement, condensed consolidated statement of comprehensive income, condensed consolidated statement of changes in equity and condensed consolidated statement of cash flows for the 6-month period then ended, as well as the explanatory notes. The board of directors is responsible for the preparation and presentation of this condensed consolidated financial information in accordance with IAS 34, as adopted by the European Union. Our responsibility is to express a conclusion on this condensed consolidated financial information based on our review.
We conducted our review in accordance with International Standard on Review Engagements 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity." A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Based on our review, nothing has come to our attention that causes us to believe that the accompanying condensed consolidated financial information is not prepared, in all material respects, in accordance with IAS 34, as adopted by the European Union.
Antwerp, August 3, 2015
The statutory auditor PwC Reviseurs d'Entreprises sccrl / Bedrijfsrevisoren bcvba Represented by
Peter Van den Eynde* Bedrijfsrevisor
*Peter Van den Eynde BVBA Board Member, represented by its fixed representative, Peter Van den Eynde
PwC Bedrijfsrevisoren cvba, burgerlijke vennootschap met handelsvorm - PwC Reviseurs d'Entreprises scrl, société civile à forme commerciale - Financial Assurance Services Maatschappelijke zetel/Siège social: Woluwe Garden, Woluwedal 18, B-1932 Sint-Stevens-Woluwe Vestigingseenheid/Unité d'établissement: Generaal Lemanstraat 67, B-2018 Antwerpen T: +32 (0)3 259 3011, F: +32 (0)3 259 3099, www.pwc.com BTW/TVA BE 0429.501.944 / RPR Brussel - RPM Bruxelles / ING BE43 3101 3811 9501 - BIC BBRUBEBB / RBS BE89 7205 4043 3185 - BIC ABNABEBR
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