WEIFA ASA THIRD QUARTER 2016 RESULTS PUBLISHED 25 OCTOBER 2016

Transcription

1 WEIFA ASA THIRD QUARTER 2016 RESULTS PUBLISHED 25 OCTOBER 2016 CONTENTS Overview... 2 Financial review... 3 Operational review... 5 Market development... 7 Outlook... 7 Share information... 8 Condensed interim financial statements... 9 Notes to the condensed interim financial statement... 13

2 Overview Figures in brackets refer to the corresponding period of the year before. Highlights Financials Record third-quarter revenues of NOK 93.8 million (NOK 77 million) Revenue growth of 22% Asan contributed NOK 13.6 million in the quarter Organic growth (excl Asan) of 4.1% Third-quarter adjusted EBITDA of NOK 19.9 million (NOK 16.9 million) Adjusted EBITDA margin of 21.3% (21.9%) Operational developments Strong brands secured revenue growth and high market share in all main categories Product-line and category expansion from launch of Zonat for insomnia and Solvivo for sore throats Consumer health revenues (NOK million) Weifa Asan Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Note: Historical figures represent reported revenue for the consumer health business in Weifa AS. 2

3 Key figures Key financial information for Weifa ASA group Key financial information for Weifa ASA (NOK 1 000) Q Q M M Total revenue and income EBITDA EBITDA adjusted * Profit/(loss) from continuing operations Earnings per share (NOK): diluted ** Total Assets Net interest-bearing debt * Adj. for employee options of NOK 0.9 million in Q (Q NOK 1.8 million) ** 2016 numbers adjusted for reversed share split(ratio 25:1). Financial review The consolidated income statement presented in this report reflects the figures for both the consumer health and the B2B businesses of the Weifa ASA group. The B2B business, which was sold to Vistin Pharma at 1 June 2015, is reported as discontinued operations in the 2015 figures. The consumer health business is reported as continued operations. One-off costs related to the divestment of the B2B business are reported as costs for the divested operations and are also included in discontinued operations. Weifa Derma AS (Asan) is consolidated in the group and classified as continued operations from January Figures in brackets below refer to the corresponding period of the year before. The figures are unaudited. Weifa ASA group Profit and loss third quarter 2016 Weifa had total revenues and other income of NOK 93.8 million (NOK 77 million) in the third quarter. EBITDA was NOK 19 million (NOK 15.1 million) for the third quarter after NOK 0.9 million in the cost of employee options. The latter amounted to NOK 1.8 million in the third quarter of Depreciation and amortisation came to NOK 3.2 million (NOK 2.9 million) in the third quarter. Financial income was NOK 0.5 million (NOK 0.4 million), reflecting interest on bank deposits. Financial expenses came to NOK 3.7 million in the third quarter (NOK 7.7 million), which mainly reflected interest costs on the bank loan. The decline in financial expenses from the same period of last year partly reflected lower interest costs following a debt refinancing completed in the second quarter of Weifa had a tax expense of NOK 3.1 million (NOK 1.3 million) in the third quarter. Net profit for the 3

4 third quarter was NOK 9.5 million (NOK 3.5 million). Cash flow third quarter 2016 Net cash flow from operating activities was NOK 20.6 million (negative at NOK 12.1 million) for the third quarter. Net cash flow from investing activities was NOK 0.1 million (negative at NOK 9.8 million). In the year-earlier period, Weifa invested in various licensing agreements. Net cash flow from financing activities was negative at NOK 3.1 million (negative at NOK 4.9 million). This reflected interest paid in both periods. Financial position Weifa had total assets of NOK million (NOK million) at 30 September Cash and cash equivalents amounted to NOK 57 million (NOK 178 million). Equity at 30 September 2016 was NOK million (NOK million), giving an equity ratio of 72%. Total interest-bearing debt amounted to NOK million (NOK million) at 30 September 2016, which mainly represented amounts drawn down under the new bank facility. Reverse share split An extraordinary general meeting held on 1 July 2016 approved a reverse split of the company s shares, so that 25 shares became one share with a new par value of NOK 7.50 per share. The reverse split was effectuated to ensure adequate pricing of the shares and to comply with section 2.4 of Oslo Børs' continuing obligations. The first day of trading after the reverse split was 13 July Weifa has shares outstanding after the reverse split. Dividend Weifa plans to pay excess cash as dividend to shareholders. When new acquisitions or other transactions emerge, the board will request shareholder approval of the transaction and any related financing. 4

5 Operational review Consumer health products can be divided into three market segments: OTC (non-prescription, drugs sold over the counter), Rx (prescription drugs) and OTX (vitamins, minerals, supplements and other non-registered OTC products). The Weifa portfolio consists of products in four categories: pain relief, cough & cold, nutraceuticals and dermatology. Weifa sells its products through the pharmacy and mass market channels. Consumer health revenues Weifa had total revenues of NOK 93.8 million in the third quarter of 2016, up by 22% from NOK 77 million in revenues for the same period of last year. The new dermatology category, representing the Asan portfolio from 1 January 2016 and the existing wound treatment and skin care products, was a driver for revenue growth from the third quarter of Organic revenue growth adjusted for Asan was 4.1%, driven by rising demand for all the main categories: pain relief, cough & cold, wound treatment and nutraceuticals. Revenue for the first nine months of 2016 was NOK million, up by 21% from the same period in Organic growth over the first nine months was 4.9% after adjusting for Asan. As shown in the graph below, pain relief remained the dominant category in the third quarter, accounting for 70% of revenues. The dermatology category accounted for 17% of revenues and cough & cold for 8%. Consumer health revenue split Q % 8% 4% 1% NOK 93.8 million 70% Revenues for Weifa s prescription drugs (Rx) rose by 13% in the third quarter of 2016 compared with the same period of last year, confirming the underlying positive trend and growing market share. Revenues for the pain portfolio as a whole increased by 4.1% from the third quarter of 2015 on the back of strong demand. Weifa s revenues in the cough & cold category for the third quarter of 2016 rose by 7.6% from the same period of the year before. Sales of Solvivo, a new OTC product for sore throats launched in Norway in September, and increased sales of Dexyl and Nazamér more than offset a decline in sales of Tussin and Weifa C, as well as lower sales of Bronkyl owing to inventory effects related to last year s launch of Bronkyl 600mg. Metformin sales declined in the third quarter as an effect of one pharmacy chain agreement which ended in the second quarter. Zonat, the new Rx tablet launched during the quarter for short-term symptomatic treatment of occasional insomnia, had a limited impact in line with expectations. Nutraceuticals revenues increased by 24% because higher sales of the Complete product series and Ferromax more than offset a decline in sales of Kalsium products compared with the same period of Revenues from the dermatology category were NOK 16.2 million, compared with NOK 2.3 million a year earlier. This broke down between NOK 13.6 million for Asan/Sana and NOK 2.5 million (up 12%) for Weifa s portfolio of wound treatment and skin care products. Pain Cough & cold Others Source: Weifa Dermatology Nutraceuticals Market position Weifa maintained its position as one of the leading OTC companies in the Norwegian pharmacy channel during the third quarter of 2016 as measured over the last 12 months (LTM). Weifa s market share was 14.5%, down from 14.8% last year. 5

6 Measured by the same parameters, Weifa s share of the mass-market channel was about 37.7%, down from 38.8% at 30 September The decrease in market share in the mass-market and pharmacy channels is a function of Weifa s lack of presence in certain high-growth categories such as anti-smoking and nasal spray. Weifa maintained its position as market leader for pain relief. Measured by LTM volume, Paracet and Paracetduo had a combined market share of 89% (87%) in the paracetamol product segment. Weifa strengthened its position in pain Rx (NSAIDs, paracetamol and opiods). Paracet Rx had a market share (volume over the LTM) of 74% (up from 71%), while Ibux Rx had a market share of 24% over the LTM (up from 21%). Paralgin forte and Trampalgin had a combined share of 46% 1 over the LTM (unchanged) in the market for opioids used to treat moderate pain. Paralgin forte LTM Q3 16 market shares* Paracetamol LTM Q3 16 market shares* 11% 54% 46% 89% Paralgin Forte incl Trampalgin Others Paracet + Paracetduo Source: Farmastat/Nielsen * Market share by volume, 12 months rolling Others Ibux and Proxan had a market share of 73% (73%) in the NSAID product segment over the same period. Source: Farmastat/Nielsen * Market share by volume, 12 months rolling The Asan portfolio had a 20% share of the Norwegian shower market in the third quarter of 2016, measured over the LTM. Asan had a market share of 74% of the intimate wash segment in Norway over the LTM when wet wipes are included. Asan LTM Q3 16 market share shower* NSAID LTM Q3 16 market shares* 20% 27% 73% 80% Asan Others Ibux + Proxan Others Source: Farmastat/Nielsen * Market share by volume, 12 months rolling Source: AC Nielsen * Market share by value in Norway, 12 months rolling Asan was the second-biggest category brand in the Norwegian shower market measured over the LTM. 1 Weifa previously showed the market share for opioids used to treat moderate and strong pain respectively (types b and a). Since Weifa currently has no type a product, the share is now measured for type b. 6

7 Market development In the third quarter of 2016, the Norwegian OTC market grew over the LTM by 4.9% in the pharmacy channel and 5.1% in the mass-market channel measured by pharmacy purchasing prices. Sales in the nonsteroidal anti-inflammatory drugs (NSAID) and paracetamol markets increased by 1.2% and 1.9% respectively in the mass-market measured over the LTM. Sales of NSAIDs rose by 3.9% in the pharmacy channel measured over the LTM, while paracetamol sales increased by 0.4%. The fastest-growing categories in the massmarket channel were anti-smoking and nasal spray, while cough and allergy increased the most in the pharmacy channel. Weifa occupies a dominant position in the Norwegian pain relief category, and its product development has helped to make it the fastestgrowing company in the cough & cold category. The Rx pain segment (NSAIDs, opioids and paracetamol) grew by 9.1% over the LTM. The market for both shower and intimate wash products declined by about 1.5% over the LTM in the third quarter of Outlook Weifa has a clearly defined set of strategic priorities: strengthening its position as the leading player in the Norwegian pain relief market, being the fastest growing player in the cough & cold category, capitalising on existing strong brands in other categories, and entering new categories with unique products. The company will also continue its geographical expansion. Weifa has launched several unique new products in 2016, led by Solvivo for treating sore throats and Zonat for treatment of occasional insomnia. Zonat expands Weifa s portfolio to include a new growth market. Being a prescription medication, it will require more time to penetrate the market compared with Solvivo, which is an OTC product with faster direct feedback in the form of revenue and market position. Additional product launches are scheduled for early 2017 in the pain and cough & cold categories. Integration of the Asan portfolio is continuing as planned, providing additional growth and product development opportunities The market for Weifa s consumer health products is expected to continue to grow at a steady rate of around 2-3% annually. In addition, comes the effect of developing additional innovative products. Weifa expects organic revenue growth and an improved adjusted EBITDA margin for 2016 compared with the year before. 7

8 Share information The company had issued shares on 24 October 2016, divided between shareholders. The 20 largest shareholders controlled 61% of the total number of outstanding shares. Largest shareholders at 24 October 2016 NAME SHAREHOLDING % SHARE WATRIUM AS % EUROCLEAR BANK % HOLTA LIFE SCIENCES % MP PENSJON PK % STOREBRAND VEKST % KLP AKSJENORGE % SOLAN CAPITAL AS % HOLBERG NORGE % STOREBRAND NORGE % ARCTIC FUNDS % KLP % VERDIPAPIRFONDET ALF % VERDIPAPIRFONDET DNB % PORTIA AS % NORDEA NORGE % VERDIPAPIRFONDET STO % VIOLA AS % OLLIS INDUSTRI AS % GOLDMAN, SACHS & CO % NORDEA KAPITAL % Total 20 largest shareholders % Other shareholders % Total number of shares % 8

9 Condensed interim financial statements Consolidated statement of comprehensive income (NOK 1 000) Note Q Q M M Revenue Other income Total revenue and income Cost of materials Payroll expenses Other operating expenses Depreciation, amortisation and impairment Operating profit/(loss) Finance income Finance costs Profit/(loss) before tax from continuing operations Income tax expense Profit/(loss) for the period from continuing operations Profit/(loss) for the period from discontinued operations (4 492) (4 492) Profit/(loss) for the period Total comprehensive income for the period Earnings per share (NOK): basic Earnings per share (NOK): diluted

10 Condensed interim financial statements Consolidated statement of financial position (NOK 1 000) Note ASSETS Non-current assets Property, plant and equipment Intangible assets Deferred tax assets Total non-current assets Current assets Inventory Trade receivables Other receivables Cash and cash equivalents Total current assets Total assets EQUITY AND LIABILITIES Equity Share capital Share premium Other paid-in capital Retained earnings Total equity Interest-bearing loans Other long term interest bearing debt Other long-term liabilities Total non-current liabilities Current liabilities Trade payables Interst-bearing debt Other current liabilities Total current liabilities Total liabilities Total equity and liabilities

11 Statement of changes in equity (NOK 1 000) Share capital Share premium Other paid in capital Retained earnings Total equity Equity as at Total comprehensive income Share-based payment Equity as at Equity as at Total comprehensive income Distribution of dividend (45 590) (45 590) Share-based payment Equity as at

12 Condensed interim financial statements Cash flow statement (NOK 1 000) Note Q Q M M Cash flow from operating activities Net profit/(loss) before income tax from continuing operations Net profit/(loss) before income tax from discontinued operations (6 154) (6 154) Foreign currency (gains)/losses (357) (1 068) (1 555) (1 105) Non-cash adjustment to reconcile profit before tax to cash flow: Estimated value of employee share options Depreciation, amortisation and impairment (Gain)/loss on disposal of plant and equipment (103) (103) Changes in working capital: Changes in trade receivables and trade creditors (11 316) (26 463) (3 928) (27 189) Changes in inventory (2 269) (3 341) (4 453) Changes in other accruals (839) (2 670) (26 962) (26 710) Finance (income)/expense Net cash flow from operating activities (12 078) (8 215) Cash flow from investing activities Payment relating to purchase of licences 8, 10 - (13 933) (9 250) (13 933) (15 420) Purchase of equipment (2 723) (2 723) Sales of assets Acuisition of subsidiaries, net of cash ( ) - - Interest received Sales of financial assets Net cash flow from investing activities 146 (9 759) ( ) Cash flow from financing activities Proceeds from share issue Transaction costs on the issue of shares (3 375) Proceeds from borrowings (net) Dividend paid - - (45 590) - ( ) Sale/Purchase own bonds - - ( ) (51 050) (51 050) Interest paid (3 097) (4 884) (12 863) (15 268) (20 057) Net cash flow from financing activities (3 097) (4 884) (69 042) (66 318) (98 776) Net change in cash and cash equivalents (26 721) ( ) Cash and cash equivalents beginning period Cash and cash equivalents end period

13 Notes to the condensed interim financial statement 1. Basis of presentation The financial information is prepared in accordance with International Accounting Standard 34 Interim Financial Reporting (IAS 34). This financial information should be read together with the financial statements for the year ended 31 December 2015 prepared in accordance with the International Financial Reporting Standards (IFRS). The presentation of the interim financial statements is consistent with the annual financial statements. The preparation of the interim financial statements requires management to make estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and disclosure of contingent liabilities at the date of the interim financial statements. If in the future such estimates and assumptions, which are based on management s best judgment at the date of the interim financial statements, deviate from the actual circumstances, the original estimates and assumptions will be modified as appropriate for the period in which the circumstances change. Segment reporting Following the sale of the B2B business in June 2015, Weifa is a dedicated consumer health company and is organised as one operating segment. The company currently has no material sales outside Norway and no segment information is therefore presented. The net result of the B2B segment presented in previous periods has been included in discontinued operations. The Asan portfolio is included in the dermatology category (one of Weifa s four categories). 2. Purchase price allocation- Cederroth AS Weifa ASA acquired 100% of the shares in Cederroth AS on 15 January 2016 and consequently controls 100% of the company from that date. The SPA was entered into on 17 December The acquisition was made for a total cash consideration of NOK million. Cederroth AS is a category leading intimate care brand, known as Asan in Norway and Sana in Sweden. In the purchase price allocation (PPA), the assets and liabilities of Cederroth AS have been measured at their estimated fair value at 15 January The fair values of the identifiable assets and liabilities of Cederroth AS at the date of acquisition are presented below. 13

14 (NOK 1 000) Fair value of assets and liabilities ASSETS Non-current assets Intangible assets Total non-current assets Current assets Inventory Other receivables Cash and cash equivalents 993 Total current assets Total Assets EQUITY Share capital Other equity Total equity LIABILITIES Non-current liabilities Deferred tax liabilities Total non-current liabilities Current liabilities Tax payables Interest-bearing loans Other current liabilities Total current liabilities Total equity and liabilities The preliminary purchase price allocation identified fair value adjustments to customer relations, inventory, goodwill and deferred tax liabilities. The fair value of intangible assets consists of customer relations (NOK 28 million), goodwill (NOK 33 million) and trademarks (NOK 54.6 million). The adjustments to inventory relate to the excess value of inventory (NOK 0.8 million). The residual value of the purchase price will be allocated to goodwill. None of the goodwill recognised is expected to be deductible for income tax purposes. Based on their strong position and Weifa ASA's intention to continue their use, the trademarks are considered to have an indefinite useful life. The fair value of customer relationships for the consumer health business is amortised over 20 years. The fair value adjustment to inventory has been recognised as cost of materials in the first quarter when the inventory was sold. A transaction cost of NOK 3.1 million was expensed in the first quarter of Additional acquisition costs of NOK 0.8 million were expensed in

15 3. Discontinued operations Discontinued operations for 2015 include the financial figures for the B2B business sold to Vistin Pharma AS, including the one-off costs in connection with the divestment of the B2B business as a separate entity. (NOK 1 000) Q Q M M Revenue Other income Total operating income Cost of materials Operating expenses Depreciation, amortisation and impairment Total operating expenses Operating profit/loss (EBIT) (6 691) (6 691) Finance income Finance costs Profit/(loss) before tax (6 154) (6 154) Income tax expense (1 662) (1 662) Profit/(loss) for the period (4 492) (4 492) 4. Cash (NOK 1 000) Cash at banks Cash and cash equivalents Share capital Number of shares (1 000) Share capital (NOK 1 000) At 1 January At 30 September Reverse share split, October ( ) - Private placement, December At 31 December Reverse share split, July ( ) - At 30 September

16 6. Share options Share option plan Number of options WAEP Number of WAEP (NOK) options (NOK) Outstanding at the beginning of the year Granted Granted Expired Outstanding at the end of period Exercisable at the end of period Following the 25:1 reversed share split (third quarter 2016) and the dividend payment of NOK 0.05 per share (second quarter 2016), the exercise price and number of options have been reduced accordingly in The share options have a term of three years, where one-third of the options are exercisable after 12, 24 and 36 months respectively. When the options are exercised, a number of shares with a value corresponding to 25% of the realised gain on the options are subject to a lock-up period of two years. 7. Taxes Following the acquisition of Weifa AS, a deferred tax asset of NOK million as of 30 September 2016 is shown net of a deferred income tax liability of NOK million. The deferred tax asset mainly relates to tax losses incurred prior to the acquisition of Weifa AS. 16

17 8. Intangible assets (NOK 1 000) Licences* Customer contracts/ relationships Trade names Trade marks Goodwill Total Cost Cost at 1 January Purchase intangible assets * Additions Cost at 30 Sept Cost Cost at 1 January Purchase intangible assets * Additions Cost at 31 December Amortisation and impairment Accumulated amortisation at 1 January Amortisation charge for the period Accumulated depreciation at 30 September Net book value 30 Sept Amortisation and impairment Accumulated amortisation at 1 January Amortisation charge for the period Accumulated depreciation at 31 December Net book value 31 December Cost Cost at 1 January Purchase intangible assets ** Additions Cost at 30 Sept Amortisation and impairment Accumulated amortisation at 1 January Amortisation charge for the period Accumulated depreciation at 30 September Net book value 30 Sept Useful life 5-10 years 20 years 3 years Indefinite Indefinite 17

18 * Purchase of licences 2015: Acquired ownership and rights to several products and dossiers in the pain and cough & cold segment with worldwide/nordic rights. Licence agreements that cover unconditional purchase commitments have been discounted to the present value of the payments and presented as a licence asset, and remaining future cash payments are correspondingly presented as interest-bearing debt, see note 10. The licence agreements entered into enable Weifa to expand its core portfolio to new markets. ** Purchase 2016: Purchase 2016 relates to the Cederroth acquisition in the first quarter. 9. Interest-bearing loan Weifa refinanced its debt at the beginning of the second quarter of The new DNB bank loan totals NOK 350 million for a period of five years and carries an interest of three-months Nibor plus 2.50% with the current leverage. 10. Interest-bearing debt (NOK 1 000) Currency NOK Year of maturity Unconditional purchase commitments Licences EUR Q Balance at 30 Sept