Zur Rose Group grows almost 30 per cent in the first half of 2019
- Strong growth in Germany reinforces clear market leadership
- Sales in Switzerland grow faster than the market
- Profitability improved over last year
- Integration accelerated: apo-rot site in Hamburg to be shut down
- Law introducing e-prescriptions in Germany came into force on 16 August 2019
- Debate about Rx mail-order ban is ended
- Targets for 2022 confirmed
The Zur Rose Group continued as planned along its growth track in the first half of 2019. Including medpex sales, Group revenue was up 28.1 per cent to CHF 771.8 million year on year, which resulted in a slight acceleration in growth since the first quarter of 2019 despite intense price competition. Excluding medpex, sales rose 12.9 per cent in local currency terms. The Group was able to significantly extend its leading position as Europe's largest mail-order pharmacy. The EBITDA margin improved from minus 1.5 per cent to minus 0.4 per cent.
Notable revenue growth in the German core market
In Germany the Zur Rose Group increased revenue including medpex by 46.2 per cent in local currency terms or 41.1 per cent in Swiss francs to CHF 480.6 million. In order to be able to manage effectively the increased volume, the fitting and installation of equipment is currently being started in the new hall of the logistics extension in Heerlen, which was completed on time and on budget in August 2019. A review is currently under way to assess whether the activities of other Group companies can be moved to Heerlen in 2020, earlier than planned, to achieve greater efficiencies. The Group expects the new distribution centre to be fully operational as scheduled during the course of 2021.
As part of the integration of apo-rot, the next stage is to combine the marketing, service and IT divisions in Heerlen to realise additional synergies. With this in mind, the apo-rot Service GmbH site in Hamburg, where this work is currently performed by a team of around 80, will be closed on 31 December 2019. Out of a sense of social responsibility, apo-rot Service GmbH has voluntarily developed socially acceptable solutions in the form of severance packages which take suitable account of the interests of the staff.
Steady growth in Switzerland
Zur Rose boosted revenue in Switzerland by 4.3 per cent to CHF 273.3 million, growing considerably faster than the market compared with the same period of the previous year. This was achieved despite price cuts of 4 per cent which were mandated by the regulator (IQVIA, ex-factory figures). The physicians business was again a major factor. Here, Zur Rose managed to increase market share in the first half from 24.5 to 25.2 per cent. In B2C, the retail and brick-and-mortar business put in a pleasing performance. However, price cuts in particular on high-priced medicines and changes to treatment within the specialty care business had an impact on the otherwise strong performance. As announced in June, Migros and Zur Rose are stepping up their existing cooperation in shop-in-shop pharmacies, the webshop and in developing innovative models in integrated care.
Ongoing expansion in European core markets
The Zur Rose Group strategically enhanced its business model with the addition of the capital-light marketplace model by acquiring PromoFarma of Spain in September 2018. With the acquisition of the now integrated French marketplace Doctipharma and the addition of new partner pharmacies in France and Italy the Group is continuing to consistently drive ahead the expansion of the business model in European core markets. Revenue in the Rest of Europe segment rose by 34.5 per cent to CHF 17.9 million. The number of partner pharmacies affiliated with the marketplace rose to over 750, offering a total range of over 110,000 products.
Results impacted by exceptional items
Earnings were influenced by several exceptional items in the first half of 2019. The expansion of the range and the processing of 22 per cent more packages as a result of the integration of apo-rot in Heerlen increased complexity and led to the changeover from two-shift to three-shift working, which is likely to be retained until the new distribution centre comes into operation. These factors have an impact on costs. Expenditure on further internationalisation also affected profitability. Conversely, a lower valuation than anticipated was placed on the costs of the earn-out for the medpex purchase, owing to intense price competition in the OTC business in Germany. Including all exceptional items, EBITDA improved from minus CHF 9.0 million to minus CHF 2.5 million and the EBITDA margin from minus 1.5 per cent to minus 0.4 per cent. A net income / (loss) of minus CHF 17.1 million was incurred (previous year: minus CHF 17.6 million). The net income / (loss) margin improved from minus 2.9 per cent to minus 2.6 per cent.
Legal initiatives accelerate development of e-health in Germany
In Germany the Greater Security in the Supply of Medicines Act (GSAV) came into force on 16 August 2019. This sees Germany putting electronic prescriptions (e-prescriptions) into practice. The official nation-wide launch is planned for mid-2020. Patients will no longer have to follow the previous cumbersome procedure of sending prescriptions in by post to mail-order pharmacies. As Europe's largest mail-order pharmacy, the Zur Rose Group is very well positioned to capture the significant opportunities that development will bring. Over the coming years the Company expects the market share of mail-order for prescription medicines to rise considerably from the current level of just 1.3 per cent. By fully acquiring the joint venture Ehealth-Tec, a digital health solutions company, the Group is playing a pioneering role in the German market as a systems provider for e-prescription solutions. Under strategic partnerships Ehealth-Tec is already putting the first e-prescription pilot projects into practice with health insurers, the Smart Home project of AOK Saxony-Anhalt and, coming soon, the German Association of Specialist Doctors (SpiFa). The technical knowledge gained is a further important element in the development of the Zur Rose healthcare ecosystem.
In July 2019 the Federal cabinet approved the draft of an act to strengthen local pharmacies. The plan to ban mail-order business in prescription medicines is therefore finally over. The Federal Health Minister will refer the intended ban on patient bonuses from mail-order pharmacies based in the EU but outside Germany contained in this draft to the European Commission for consultation. The Zur Rose Group continues to believe that this bill breaches EU law and runs contrary to the 2016 ruling by the European Court of Justice. Other aspects of the bill on strengthening pharmacies, such as repeat prescriptions, will have a positive impact on the mail-order business. In future doctors will be able to issue prescriptions that can be dispensed up to three times. This will make it much easier for people with chronic illnesses in particular to obtain medicines.
The current developments in the market are creating strong momentum supporting the business model of the Zur Rose Group. Management confirms the revenue outlook announced for the full year 2019 and the objectives set for 2022. For 2019, including medpex sales, the Zur Rose Group expects revenue of around CHF 1.6 billion, equivalent to over 30 per cent growth on the previous year. Including all exceptional items, the aim is to achieve break-even at EBITDA level, but at least an EBITDA margin in line with 2018 (minus 1.0 per cent). In light of the introduction of electronic prescriptions in Germany, management confirms the outlook for 2022. The Zur Rose Group is looking to double the revenue achieved in 2018. As previously announced, the EBITDA margin target for 2022 is 5-6 per cent, equivalent to CHF 120-150 million.
|Revenue, in CHF thousands (unaudited)
|Zur Rose Group including medpex
|Zur Rose Group
|In local currency
|Germany including medpex
|Germany including medpex, in EUR thousands
|Germany, in EUR thousands
|Rest of Europe
|B2C including medpex
Key revenue figures
Nominal revenue growth indicates the change in per cent of revenue compared to the previous year. Revenue growth in local currency terms shows the change in per cent of revenue without the impact of exchange rate effects (conversion is at the previous year's rate).
|Further key financials, in CHF thousands (unaudited)
|Earnings before depreciation and amortisation (EBITDA)
|in % of revenue
|in % of revenue
|Net income / (loss)
|in % of revenue
|in % of balance sheet total
The half-year report 2019 and presentation are available at www.zurrosegroup.com under "Investors & Media" | "Publications".
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Zur Rose Group
The Swiss Zur Rose Group is Europe's largest e-commerce pharmacy and one of the leading medical wholesalers in Switzerland. With its business model, it offers high-quality, safe and cost-effective pharmaceutical care and thus contributes to reducing healthcare costs. It is also characterized by the continuous further development of digital services in the field of drug management and actively promotes its positioning as a comprehensive, integrated cross-service healthcare platform. The creation of added value and a pronounced patient orientation make the Group an important strategic partner for service providers, cost units and industry.
The Zur Rose Group is internationally present with strong brands, including Germany's best-known pharmacy brand DocMorris. The company employs over 1,300 people at various locations and generated a turnover of CHF 1,207 million in the 2018 financial year. The shares of Zur Rose Group AG are listed on the SIX Swiss Exchange (securities number 4261528, ISIN CH0042615283, ticker ROSE). The CHF 115 million corporate bond issued in July 2018 is also listed on the SIX Swiss Exchange (securities number 42146044, ISIN CH0421460442, ticker ZRO18). Further information at zurrosegroup.com
 As the separation of the mail-order business has not yet been completed, no medpex revenues have been consolidated in the first half of 2019.