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Karo Pharma AB — Interim / Quarterly Report 2017
Feb 22, 2018
6166_10-k_2018-02-22_88c714df-20a3-4f41-9fee-6d1fc5d1c667.pdf
Interim / Quarterly Report
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YEAR-END REPORT 2017 THE FULL YEAR AND FOURTH QUARTER
- o Net sales amounted to MSEK 657.6 (347.3), whereof the fourth quarter MSEK 238.7 (96.5), representing an increase of 89 percent for the year and 147 percent for the quarter.
- o Adjusted EBITDA amounted to MSEK 169.3 (51.7), whereof the fourth quarter MSEK 41.8 (28.9) representing a margin of 25.7 percent (14.9) for the year and 17.5 percent (29.9) for the fourth quarter. The relatively lower margin in the fourth quarter was primarily due to the lower adjusted EBITDA margin at Weifa. Restructuring to achieve synergy effects on operating costs is proceeding according to plan.
- o Cash flow from operations amounted to MSEK 33.5 (-36.1), whereof the fourth quarter MSEK -28.8 (9.6).
- o Earnings per share were SEK 0,17 (1,34), whereof the third quarter SEK -0,42 (1,21).
- o Cash and cash equivalents and other short-term investments at the end of the period amounted to MSEK 838.6 (121.3).
1
SIGNIFICANT EVENTS AFTER PERIOD END
o The rights issue initiated in December 2017 was completed in January 2018 and raised MSEK 794.3 million before transaction costs of MSEK 48.8. The issue was subscribed to 98.7 percent through subscription rights and the total issue was oversubscribed at 170.0 percent.
The bridge financing of the acquisition of Weifa of MSEK 700 was amortized in January 2018.
AUDIOCAST TODAY AT 11.00 CET
The report is presented at an audiocast today at 11.00 CET that can be followed through the website www.karopharma.se, or by telephone +46 8 505 564 74. Questions may be submitted over both web and telephone.
COMMENT ON OPERATIONS
We follow our plan and the fourth quarter yielded growth with increased profits.
Karo Pharma is in a position to develop strongly in the coming years. We have changed the company's focus into becoming a leading Specialty Pharma company in the Nordic region. Through acquisitions and organic growth, we have achieved good profitability. Risks in early research have been reduced. The Pfizer Agreement/RoR Gamma has high priority without us needing to allocate resources to the project as our partner does this. The company should now be regarded as a Specialty Pharma company with a strong focus on pharmaceuticals, both prescription niche products and OTC products.
Questions are frequent on if it has not become more difficult to find acquisition projects. In truth, I have probably never experienced as many interesting and profitable acquisition candidates as right now.
But it requires us to have a serious and disciplined approach. The rights issue we carried out is aggressive in character. The acquisition of Weifa is based on a strong commercial basis. The two companies complement each other well when it comes to product portfolio and geography. The integration of Weifa into Karo Pharma has been completed and related restructuring charges have been taken. Extraordinary items affecting comparability amounted to MSEK 28 in the fourth quarter
Our plan is to further strengthen our position in the Nordic region, primarily in the field of OTC drugs. The next step also means that we step outside the Nordic region. In the next year we will be able to launch several products. We have strengthened our organization to meet the new challenges. Karo Pharma has all prerequisites to succeed.
Anders Lönner Executive Chairman
KEY FINANCIAL DATA (MSEK)
| October - December | Full year | |||
|---|---|---|---|---|
| 2017 | 2016 | 2017 | 2016 | |
| Net sales | 238.7 | 96.5 | 657.6 | 347.3 |
| Gross earnings | 116.5 | 39.4 | 341.9 | 148.7 |
| Operating expenses | -139.0 | -18.6 | -274.0 | -119.2 |
| Earnings before depreciation excluding non-re curring items |
41.8 | 28.9 | 169.3 | 51.7 |
| EBITDA, % | 17.5 | 29.9 | 25.7 | 14.9 |
| Earnings before tax | -40.8 | 14.7 | 20.9 | 19.8 |
| Earnings per share, SEK | -0.42 | 1.21 | 0.17 | 1.34 |
| Cash flow from operating activities | -28.8 | 9.6 | 33.5 | -36.1 |
| Cash and cash equivalents | 838.6 | 121.3 | 838.6 | 121.3 |
SALES AND EARNINGS
Sales and earnings for 2017 and the fourth quarter include net sales and earnings from BioPhausia, unlike the previous year. In the fourth quarter, Weifa is also included, unlike the previous year.
Net sales for 2017 also include a milestone payment from Pfizer of MSEK 17.9.
Cost of goods sold amounted to MSEK 315.7 (198.5), whereof the fourth quarter MSEK 122.2 (57.1). This resulted in a gross profit of MSEK 341.9 (148.7), whereof the fourth quarter MSEK 116.5 (39.4) and a gross margin of 52.0 (42.8) percent for the year and 48.8 (40.8) percent in the fourth quarter. The change in
gross margin in the fourth quarter compared with previous periods is primarily due to previous periods being affected by a milestone payment of MSEK 17.9 from Pfizer received in the second quarter and that the fourth quarter was affected by higher inventory write-downs than normal.
Operating expenses including depreciation and other operating income, amounted to MSEK 262.0 (119.2), whereof the fourth quarter MSEK 127.1 (18.6). Operating costs for the full year include BioPhausia's full year costs and Weifa's costs during the last quarter totaling MSEK 103.5. Furthermore, operating costs have been affected by restructuring costs related to the acquisition of Weifa
and costs attributable to the acquisition. Sales costs amounted to MSEK 198.6 (112.8), whereof the fourth quarter MSEK 93,7.7 (35.4). The increase in sales costs incurred in 2017 compared to the previous year, include MSEK 97.0 of costs from Bio-Phausia and Weifa that were not included in the Group 2016. Of these costs, MSEK 44.7 relate to depreciation of product rights. Restructuring to reap synergies on the cost side are developing according to plan. Restructuring costs have affected operating costs during the fourth quarter.
Administrative costs amounted to MSEK 43.7 (28.7), whereof the fourth quarter MSEK 16.5 (10.2). The increase in the fourth quarter compared to previously relates to costs from BioPhausia and Weifa of MSEK 2.5 and restructuring costs of MSEK 3.5.
The operating profit amounted to MSEK 79.9 (29.6), and the fourth quarter recorded an operating loss of MSEK -10.6 (profit 20.8).
Earnings (loss) per share amounted to SEK 0.17 (1.34), whereof the fourth quarter -0.42 (1.21) SEK.
CASH FLOW AND FINANCIAL POSITION
Unless otherwise stated, comparative figures refer to 31 December 2016.
Cash flow from operating activities amounted to MSEK 33.5 (-36.1), whereof the fourth quarter MSEK -28.8 (9.6). Cash flow from operating activities in the fourth quarter was affected by interest payments and other fees related to loans for the acquisitions of Biophausia and Weifa, as well as changes in invoicing dates, affecting accounts receivable. The Group's cash and cash equivalents amounted to MSEK 838.6 (121.3) at the end of the period. Intangible assets amounted to MSEK 2,923.1 (1,432.0) at the end of the period. The change relates primary to acquired intellectual property rights in connection with the acquisition of Weifa.
The Group's long-term liabilities increased to MSEK 1,452.6 (539.9). The increase in long-term liabilities relates primarily to loans for the acquisition of Weifa and long-term liabilities that Weifa had before the acquisition. Short-term liabilities increased to MSEK 1,013.2 (456.6). The increase in short-term debt is primarily due to the loan raised in conjunction with the acquisition of
Weifa of MSEK 700, which was amortized in full in January 2018.
The Group's equity increased to MSEK 1,586.5 (717.0), which, after consideration of the profit for the period, amounted to SEK 0.17 (1.34) per share. The equity ratio was 38.3 (40.4) percent.
THE PARENT COMPANY
The parent company's net sales for 2017 amounted to MSEK 39.3 (48.9), whereof the fourth quarter MSEK 0.4 (33.1). Net sales for the full year include a milestone payment from Pfizer of MSEK 17.9. Loss after financial items amounted to MSEK -45.2 (profit 0.9), of which fourth quarter MSEK -34.4 (18.5). The Parent Company's cash and cash equivalents and other short-term investments amounted to MSEK 695.2 (85.7) at the end of the period.
NOMINATION COMMITTEE
In accordance with the AGM's resolution, the Chairman of the Board has seen to that the company's four largest shareholders by voting rights, have been offered to appoint one representative each to be included in the Nomination Committee. The Nomination Committee has the following members:
- o Per-Anders Johansson
- o Leif Edlund
- o Hans Ek
The Nomination Committee will prepare proposals for the Annual General Meeting 2018 regarding Chairman of the meeting, number of Board members and Alternate members, remuneration to the Board and auditors, election of the Chairman of the Board, other Board members and auditors.
The Annual General Meeting will take place in Stockholm on 3 May 2018.
Shareholders who wish to submit proposals to the Nomination Committee can do so by e-mail to [email protected].
SIGNIFICANT EVENTS AFTER PERIOD END
In January 2018, the right issue initiated in December 2017 was completed. The proceeds have in addition to payment of transaction costs, been used amortize the MSEK 700 bridge loan granted to the company in connection with the acquisition of Weifa ASA.
o Anders Lönner, Chair
RISKS
The Group is exposed to a number of risks and insecurities. Wrongful, delayed or missing deliveries from Group suppliers may result in Group's deliveries also being delayed, inadequate or wrong. The Group is also exposed to exchange rate fluctuations. It is not guaranteed that Group operations will not be subject to restrictions from governmental agencies or that the Group will receive necessary future authority approvals. There is a risk that the Group's ability to develop products decreases or that the products will not be launched according to set schedules. These risks may involve decreased sales and may have other negative effects on Group earnings.
ACCOUNTING AND VALUATION PRINCIPLES
This year-end report has been prepared in accordance with International Accounting Standards 34 on Interim Reports and International Financial Reporting Standards IFRS as adopted by the
EU. The accounting and valuation principles that have been used are unchanged compared to those applied in 2016.
As regards the Parent Company, this interim report has been prepared in accordance with the Annual Accounts Act and RFR 2 Accounting for Legal Entities. The accounting policies applied to the parent company differ from those applying to the Group solely for the purposes of accounting for leases.
AUDIOCAST
This report will be presented (in Swedish) today at. 11:00 CET in an audiocast with slides that can be followed on www.karopharma.se as well as over telephone +46 (0) 8 505 56 474. Questions can be submitted both over the Internet and over the phone.
FINANCIAL CALENDAR
| Annual report 2017 | Apr 2018 |
|---|---|
| Interim report Jan-March | 26 Apr 2018 |
| Annual General Meeting | 3 May 2018 |
| Interim report Jan-June | 19 July 2018 |
| Interim report Jan-Sept | 1 Nov 2018 |
| Year-end report 2018 | 14 Feb 2019 |
All reports will be available on the company's website at the specified date.
The 2017 Annual Report will be available at the latest between 5 April to 9 April.
BOARD OF DIRECTORS' ASSURANCE
The Board of Directors and the CEO ensure that the interim report gives a true and fair view of the company's and the Group's operations, financial position and earnings, and describes significant risks and uncertainties that the company and the companies that are part of the Group face.
Stockholm 22 February 2018
| Thomas Hedner | |
|---|---|
| Board Member | Board Member |
| Marianne Hamilton |
| Per-Anders Johansson | Håkan Åström | Peter Blom |
|---|---|---|
| Board Member | Board Member | CEO |
FOR FURTHER INFORMATION, PLEASE CONTACT Peter Blom, CEO, +46 (0) 70-655 56 98 or [email protected]
ABOUT KARO PHARMA
Karo Pharma is a specialty pharma company that develops and markets products to pharmacies and directly to healthcare providers. The share is listed on Nasdaq Stockholm in the Mid Cap segment.
The information in this report is such that Karo Pharma is obliged to make public pursuant to the EU Market Abuse Regulation and the Securities Markets Act. The information was submitted for publication, through the agency of the contact person set out above, on 22 February 2018 at 8.00 a.m. CET.
CONSOLIDATED INCOME STATEMENT SUMMARY (KSEK)
| October-December | Full year | |||
|---|---|---|---|---|
| 2017 | 2016 | 2017 | 2016 | |
| Net sales | 238 716 | 96 454 | 657 606 | 347 261 |
| Cost of sales | -122 238 | -57 078 | -315 703 | -198 536 |
| Gross earnings | 116 479 | 39 376 | 341 904 | 148 725 |
| Operating expenses | ||||
| Distribution costs | -93 729 | -35 339 | -198 609 | -112 787 |
| Administration | -16 496 | -10 165 | -43 650 | -28 689 |
| Research and development | -1 502 | -586 | -4 355 | -5 259 |
| Other operating income/expenses | -15 325 | 27 497 | -15 385 | 27 583 |
| Operating costs | -127 052 | -18 593 | -261 999 | -119 152 |
| Operating profit/loss | -10 574 | 20 783 | 79 904 | 29 573 |
| Financial net | -30 290 | -6 105 | -59 054 | -9 735 |
| Earnings/Loss before Tax | -40 863 | 14 678 | 20 851 | 19 838 |
| Tax | 5 627 | 76 741 | -6 346 | 75 718 |
| NET EARNINGS / LOSS | -35 236 | 91 419 | 14 505 | 95 556 |
| Net earnings attributable to: | ||||
| Shareholders in the parent company | -35 241 | 91 367 | 14 516 | 95 554 |
| Non-controlling interests | 7 | 52 | -11 | - |
| Earnings / loss per share (SEK)1 | -0.42 | 1.21 | 0.17 | 1.34 |
| Number of shares issued (000) | 82 166 | 63 907 | 82 166 | 63 907 |
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (KSEK)
| October-December | Full year | |||
|---|---|---|---|---|
| 2017 | 2016 | 2017 | 2016 | |
| NET EARNINGS / LOSS FOR THE PERIOD | -35 236 | 91 419 | 14 505 | 95 556 |
| Other comprehensive income for the period, net of tax | ||||
| Exchange rate differences | -20 282 | 58 | -20 638 | 357 |
| TOTAL COMPREHENSIVE INCOME / LOSS | -55 518 | 91 477 | -6 133 | 95 913 |
| Total comprehensive income / loss attributable to: | ||||
| Shareholders of the parent company | -55 525 | 91 425 | -6 122 | 95 911 |
| Non-controlling interests | 7 | 52 | -11 | - |
| 2017-12-31 | 2016-12-31 | |
|---|---|---|
| Assets | ||
| Intangible assets | 2 923 110 | 1 432 012 |
| Equipment | 14 498 | 12 297 |
| Other financial assets | 79 686 | 37 801 |
| Other current assets | 285 969 | 169 390 |
| Cash and cash equivalents | 838 586 | 121 346 |
| TOTAL ASSETS | 4 141 848 | 1 772 846 |
| Shareholders' equity and liabilities | ||
| Equity | 1 586 515 | 717 012 |
| Deferred tax | 89 537 | 59 371 |
| Long term debt | 1 452 623 | 539 883 |
| Current liabilities | 1 013 172 | 456 580 |
| TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES | 4 141 848 | 1 772 846 |
CONSOLIDATED STATEMENT OF FINANCIAL POSITION (KSEK)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (KSEK)
| Ongoing | Other contrib |
Retained earnings/ |
Non control |
|||
|---|---|---|---|---|---|---|
| Attributable to shareholders of the parent company |
Share capital |
rights is sue |
uted capital |
accumu lated losses |
ling interest |
Total equity |
| Amount at 1 January 2016 | 19 970 | 1 473 614 | -1 130 127 | 1 124 | 364 581 | |
| Total comprehensive income | - | 95 911 | 2 | 95 913 | ||
| Acquisition of non-controlling interests | - | -557 | -1 004 | -1 561 | ||
| Rights issue, net proceeds | 5 593 | 251 966 | - | - | 257 559 | |
| Warrants | 520 | - | - | 520 | ||
| Amount at 31 December 2017 | 25 563 | 0 1 726 100 | -1 034 773 | 122 | 717 012 | |
| Amount at 1 January 2017 | 25 563 | 0 1 726 100 | -1 034 773 | 122 | 717 012 | |
| Comprehensive income | - | -6 051 | -82 | -6 133 | ||
| Dividend | -41 083 | - | - | -41 083 | ||
| Rights issue, net proceeds | 7 303 | 341 487 | - | - | 348 790 | |
| Rights issue paid in, not registered equity net of transaction costs |
8 501 | 559 428 | 567 929 | |||
| Amount at 31 December 2017 | 32 866 | 8 501 2 585 932 | -1 040 824 | 40 1 586 515 |
| October -December | Full year | |||
|---|---|---|---|---|
| 2017 | 2016 | 2017 | 2016 | |
| Operating activities | ||||
| Operating income/loss before financial items | -10 573 | 20 783 | 79 904 | 29 573 |
| Depreciation | 23 532 | 8 067 | 60 561 | 22 110 |
| Other items not affecting liquid assets | 0 | -26 749 | 0 | -26 652 |
| 12 959 | 2 101 | 140 465 | 25 031 | |
| Financial items received and paid | -27 785 | -13 447 | -47 986 | -17 077 |
| Income tax paid | 2 745 | 0 | -2 292 | 0 |
| Cash flow from operating activities before changes in working capital |
-12 082 | -11 346 | 90 186 | 7 954 |
| Changes in working capital | -16 705 | 20 919 | -56 667 | -44 072 |
| Cash flow from operating activities | -28 787 | 9 573 | 33 519 | -36 118 |
| Investing activities | -1 250 656 | -530 | -1 255 689 | -2 087 |
| Net investment in company acquisitions | -3 783 | -863 699 | -4 075 | -926 183 |
| Net investment in intangible assets | 0 | 0 | 17 671 | 0 |
| Net investment in other financial instruments | -1 653 | -62 152 | -3 721 | -67 656 |
| Net investment in equipment | ||||
| Cash flow from investing activities | -1 256 093 | -926 381 | -1 245 815 | -995 926 |
| Financing activities | ||||
| Net proceeds from share issues | 616 295 | 0 | 990 309 | 279 628 |
| Transaction costs rights issue 1) | -300 | 0 | -25 523 | -22 070 |
| Dividend | 0 | 0 | -41 083 | 0 |
| Warrants | - | -60 | 0 | 460 |
| Loans | 1 750 368 | 900 000 | 1 750 368 | 900 000 |
| Repayment of loans | -372 017 | -8 555 | -743 017 | -80 055 |
| Transactions with minorities | - | -1 561 | 0 | -1 561 |
| Cash flow from financing activities | 1 994 346 | 889 824 | 1 931 054 | 1 076 402 |
| Cash flow for the period | 709 467 | -26 984 | 718 759 | 44 358 |
| Cash at the beginning of the period | 130 387 | 147 832 | 121 346 | 76 490 |
| Currency exchange in cash | -1 268 | 499 | -1 519 | 499 |
| Cash at the end of the period | 838 586 | 121 347 | 838 586 | 121 347 |
11) Comprises the portion of transaction related costs that has been paid during the period
| PARENT COMPANY INCOME STATEMENT SUMMARY (KSEK) | |
|---|---|
| ------------------------------------------------ | -- |
| October-December | Full year | |||
|---|---|---|---|---|
| 2017 | 2016 | 2017 | 2016 | |
| Net sales | 430 | 33 067 | 39 269 | 48 885 |
| Cost of sales | 162 | -1 812 | 152 | -12 567 |
| Gross earnings | 591 | 31 255 | 39 420 | 36 318 |
| Operating expenses | ||||
| Distribution costs | -1 031 | -995 | -5 518 | -4 079 |
| Administration | -6 487 | -8 013 | -19 158 | -20 126 |
| Research and development | -1 503 | -586 | -4 355 | -5 259 |
| Other operating income/expenses | -193 | 28 939 | -594 | 28 956 |
| -9 213 | 19 345 | -29 624 | -508 | |
| Operating result | -8 622 | 50 600 | 9 796 | 35 810 |
| Financial net | -25 738 | -32 102 | -55 033 | -34 938 |
| Earnings before tax | -34 360 | 18 498 | -45 237 | 872 |
| Group contributions paid | 65 537 | -1 260 | 65 537 | -1 260 |
| Tax | -62 | 75 000 | -62 | 75 000 |
| NET EARNINGS | 31 115 | 92 238 | 20 238 | 74 612 |
PARENT COMPANY BALANCE SHEET SUMMARY (KSEK)
| 2017-12-31 | 2016-12-31 | |
|---|---|---|
| Assets | ||
| Intangible assets | 76 279 | 76 328 |
| Equipment | 16 | 666 |
| Deferred tax receivables | 75 000 | 75 000 |
| Other financial assets | 350 388 | 28 357 |
| Shares in group companies | 2 646 768 | 1 308 367 |
| Other current assets | 127 073 | 61 283 |
| Cash | 695 191 | 85 743 |
| TOTAL ASSETS | 3 970 715 | 1 635 744 |
| Shareholders' equity and liabilities | ||
| Equity | 1 607 442 | 712 418 |
| Long term debt | 1 464 152 | 538 807 |
| Current liabilities | 899 121 | 384 519 |
| TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES | 3 970 715 | 1 635 744 |
Note 1
ACQUISITION
In October 2017, Karo Pharma acquired all shares in the Norwegian company Weifa ASA. The acquisition includes a portfolio of well-known drug brands in the Norwegian market. The brand portfolio is characterized by a long history of stable sales, primarily of four key products, Paracet, Ibux, Paralgin and Asan.
Details of the consideration, acquired net assets and goodwill are shown below (all amounts, unless otherwise stated, are expressed in thousands, KSEK):
For consideration - cash outflow, see below.
The assets and liabilities recognized as a result of the acquisition are as follows:
| Assets and liabilities | Fair value, |
|---|---|
| KSEK | |
| Product rights | 775 468 |
| Tangible assets | 818 |
| Inventory | 19 216 |
| Customer receivables | 74 442 |
| Tax claim | 87 510 |
| Other current assets | 3 122 |
| Cash | 72 092 |
| Payables | -23 043 |
| Other short-term debt | -79 947 |
| Interest-bearing long-term loans | -355 001 |
| Other long-term debt | -4 841 |
| Deferred tax | -39 322 |
| Goodwill | 792 247 |
| Acquired net assets | 1 322 748 |
Goodwill is attributable to the synergies expected based on the companies fit regarding product portfolio and geography. The common product portfolio with several new product launches has greater chances of success. A strong and profitable home market provides better opportunities for taking the next step towards more markets and collaborations outside the Nordic region. No part of the reported goodwill is expected to be tax deductible.
Had the acquisition been completed on 1 January 2017, consolidated pro forma income and adjusted earnings before depreciation at 31 December 2017 were MSEK 951.3 and MSEK 226.1 respectively. These amounts have been calculated using the subsidiary's earnings adjusted for non-recurring items.
Acquisition-related costs in Karo Pharma AB amount to approximately MSEK 15 and have affected earnings in the fourth quarter.
Consideration - cash outflow is shown in the table below:
Acquisition 2017 relates to the acquisition of Weifa and acquisition 2016 relates to the acquisition of BioPhausia.
| Cash outflow to ac | 2017 | 2016 |
|---|---|---|
| quire subsidiaries net | (KSEK) | (KSEK) |
| of acquired cash as | ||
| sets | ||
| Cash consideration | 1 322 748 |
928 964 |
| Cash assets in ac | -72 102 | -764 |
| quired companies | ||
| Net outflow of cash – |
1 250 646 |
928 200 |
| investment opera | ||
| tions |
The acquisition analysis of the acquisition of Weifa ASA is preliminary until the final breakdown between goodwill, product rights and other intangible assets has been determined. The company is currently evaluating the future potential and life of the acquired products. When this analysis is completed, the acquisition analysis will be determined, which may lead to a change in the distribution of product rights and goodwill. A changed valuation of product rights would also affect the size of deferred tax liability.
Note 2
TRANSACTIONS WITH RELATED PARTIES
During the third quarter, Karo Pharma acquired the company Medireduce AB with the product "Kolestemin", which contains a unique patented combination of plant sterols. Through his company CIMON, Board member Per Anders Johansson had an ownership in Medireduce AB corresponding to 24.2 percent. Per Anders Johansson did not participate in the decision to implement the acquisition.
During the period, one of Karo Pharma's subsidiaries sold two products on license from a company Beampoint owned by
Chairman Anders Lönner. The subsidiary received commissions of 15 percent of sales. The commission amounted to KSEK 532 for 2017.
In the rights issue during the first quarter, Chairman Anders Lönner marshalled and guaranteed 92 percent of the total issue of MSEK 374 and received a 5 percent commission on the guaranteed amount corresponding to approximately MSEK 17 in guarantee fee. Furthermore, Anders Lönner guaranteed without compensation his own holding of 5 percent, as Board member Per-Anders Johansson also did for his holding of 3 percent.
In December 2017, a rights issue was initiation that was completed in January 2018. In connection with the issue, Chairman Anders Lönner marshalled and guaranteed 89 percent of the issue amounting to MSEK 794. The guarantee fee amounted to 5 percent, resulting in MSEK 35.5 being paid to the guarantor in January 2018. In addition, Anders Lönner and Board member Per-Anders Johansson guaranteed without compensation to subscribe for shares related to their respective holdings at the time of issue.
In January 2018, the Board decided to purchase the brand Viruseptin from one of Board Chairman Anders Lönner's companies, Beampoint for KSEK 74. Anders Lönner did not participate in the decision to acquire Viruspetin.
Note 3
DEFINITIONS
The quarterly report refers to a number of financial performance measures that are
not defined in IFRS. These measures are used to help investors, management and other stakeholders to analyze the company's operations. These measures may differ from measures with similar names at other companies.
Below are a number of financial performance measures and how these measures are used to analyze the company's goals.
For further definitions, see the Annual Report 2016 under the heading Definitions.
| Financial performance measure | Definition | Purpose |
|---|---|---|
| Average number of shares | Weighted average number of shares |
|
| Earnings / Loss per share | Earnings / loss per average number of shares |
|
| Equity ratio | Equity as a percentage of Total Assets |
The equity ratio is relevant for inves tors and other stakeholders who want to assess the company's finan cial stability and ability to manage long term. |
| Gross margin | Gross earnings as a percentage of Net sales. |
Gross earnings is used to show the company's margin before the impact of costs such as sales and administra tion costs and R & D. |
| Adjusted EBITDA | Operating earnings before de preciation excluding items af fecting comparability |
The financial performance measure shows the underlying earnings from operations, adjusted for effect of de preciation and items that affect com parisons over time. It provides a pic ture of earnings generated from on going operations. |
| Adjusted EBITDA margin | Adjusted EBITDA in relation to Net sales |
The ratio is used to measure the profitability of ongoing operations. |
| October - December | Full year | |||
|---|---|---|---|---|
| Reconciliation adjusted EBITDA | 2017 | 2016 | 2017 | 2016 |
| Operating earnings / losst | -10 573 | 20 783 | 79 904 | 29 573 |
| Depreciation | 24 714 | 8 067 | 61 744 | 22 110 |
| Other depreciation and amortization | 0 | 0 | 0 | 0 |
| Items affecting comaparbility | 27 615 | 0 | 27 615 | 0 |
| Adjusted EBITDA | 41 757 | 28 850 | 169 264 | 51 683 |
As items affecting comparability are
- Transaction costs linked to the acquisition of product rights, trademarks, licenses or companies.
- Costs related to restructuring and reorganization, eg in the case of acquisitions.
- Costs for revaluation of assets in connection with acquistions.
Note 4
NEW ACCOUNTING PRINCIPLES FOR 2018
As of 1 January 2018, IFRS 15 Income from Contracts with Customers and IFRS 9 Financial Instruments enters into force. IFRS 15 regulates how accounting for income is
to be done and IFRS 9 deals with the classification, valuation and accounting of financial instruments. Karo Pharma has been working in 2017 to analyze the effects of the implementation of these two standards. The assessment of impact on earnings and financial position remains but is deemed not to be material.