Contents Management statement 3 Business review of the full year 2012 4 Highlights 4 Key financial figures FY2012 4 Net sales 5 Gross margin 5 Operating charges 6 Operating profitability 6 Financial result, taxes, net result 7 Main balance sheet items 7 Main events 8 Main events in 2012 8 Significant events after balance sheet date 9 Consolidated income statement (by function) 10 Consolidated statement of comprehensive income 11 Consolidated balance sheet 12 Consolidated statement of changes in equity 13 Consolidated cash flow statement 14 Statutory auditor s statement 15 The full Annual Report will be published on the corporate website (www.omega-pharma.be) after March 15, 2013. p. 2/16
Management statement The financial information included in this condensed annual report is derived from the consolidated financial statements of Omega Pharma NV, which are subject to audit by PwC Bedrijfsrevisoren. The audit by PwC Bedrijfsrevisoren is substantially completed and has to date not revealed any material misstatements. We hereby certify that, to the best of our knowledge, the consolidated financial statements of Omega Pharma NV as of December 31, 2012, prepared in accordance with International Financial Reporting Standards, as adopted by the European Union, and with the legal requirements applicable in Belgium, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole, and that the management report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face. Marc Coucke, CEO Barbara De Saedeleer, CFO 28 February 2013 p. 3/16
Business review of the full year 2012 Highlights Turnover grew 16% year on year, benefitting from the good results of the Top 20 brands and the contribution from the brands acquired from GSK as of June 2012. Turnover of Top 20 brands increased by 29% and represented 48% of consolidated turnover in 2012. Strong sales performance in France, Italy, UK/Ireland, Germany, Russia and Belgium. Omega Pharma secured 300 million from issuance of two series of retail bonds to fund the acquisition of 54 European OTC brands from GSK. Integration of brands acquired from GSK ahead of schedule. Continued investments in top brands, as well as in optimizing the organization in selected countries. Profitability: improvement of all indicators (gross margin, operating cash flow margin, operating profit margin, net margin) Key financial figures FY 2012 (in million) 2012 2011 Year on Year Evolution Consolidated Net Sales 1 041.9 900.6 +16% Gross Margin 549.6 454.4 +21% As percentage of Net Sales 52.7% 50.5% EBITDA (*) 202.2 139.3 +45% As percentage of Net Sales 19.4% 15.5% Net Result 65.9 35.7 +85% (*) EBITDA: operating result before non-recurring items, increased with depreciations and amortization p. 4/16
Net sales Integration of the brands acquired from GSK strengthens brand strategy and improves market position in key geographic markets Consolidated net sales increased by 16%, reflecting the inclusion as of June 2012 of the sales from the brands acquired from GSK. On a like-for-like basis, the net sales of OTC products continued to grow in spite of a weak consumer confidence in Europe. This demonstrates the robustness of the underlying OTC sales figures. The turnover from the distribution of generics in Belgium decreased by 5% and represented 17% of 2012 consolidated net sales. The 54 OTC brands acquired from GSK provided Omega Pharma in key European OTC markets with the critical mass it was missing before. As of 2012, Omega Pharma is now also in the United Kingdom, Germany and Italy a prominent competitor in the respective local OTC markets. In 2012, Omega Pharma generated net sales exceeding 50 million in seven national markets, i.e. Belgium, France, Italy, the UK/Ireland, the Netherlands Germany and the Nordics. The acquired brands also strengthened Omega Pharma s position in key segments of the European OTC market. The new brand combinations represent strong market shares in the segments of cough-and-coldand-allergy remedies (including nasal hygiene products), sleeping aids and natural remedies. Moreover, this acquisition also provides Omega Pharma with a solid platform in previously unexplored major segments of the OTC market, including pain relief products and female intimate hygiene products. Out of the 54 acquired brands, 7 have been integrated into the group s Top 20 either as the principle brand for their segment, or in combination with an existing brand of Omega Pharma s portfolio. The Top 20 brands generated 495.4 million of sales, i.e. 48% of the 2012 consolidated turnover of the group. This new position enables Omega Pharma to even better explore synergies and economies of scale. The turnover of the Top 20 brands grew with 29% versus 2011. Gross margin: 53% of Net Sales Expressed as a percentage of net sales, the gross margin grew from 51% in 2011 to 53% in 2012. This is the result of an improved product mix i.e. more sales contribution from high-margin products and brands, mainly those included in the Top 20 of the group, which had an average gross margin of 67%. Excluding the distribution of generics in Belgium by definition characterised with a lower gross margin the average gross margin for the group was approximately 60%. (in thousand) FY2012 Gross Margin % of Sales FY2012 % of Sales FY2011 Total group 549 565 52.7% 50.5% Top 20 brands 330 448 66.7% p. 5/16
Operating charges Advertising & Promotion in support of Top 20 brands. Functional costs under control. Sales and Marketing expenses including Advertising & Promotion (A&P) increased by 15% to 277.2 million and represent 27% of net consolidated sales (an equal percentage as in 2011). The last few years, Omega Pharma has consistently allocated its A&P budget largely in support of its Top 20 brands. Approximately 40% of the 2012 consolidated A&P spent was allocated to TV advertising, which is generally considered to be still the most effective advertising instrument for OTC products. In 2012, Distribution expenses increased with 18% versus 2011 i.e. largely in line with the evolution of the turnover. General administrative expenses, on the other hand, decreased with 8% versus 2011, reflecting structural savings. Operating profitability EBITDA: 19% of Net sales. The above-described factors led to a recurring EBITDA of 202.2 million for 2012 (19% of sales), compared to 139.3 million for 2011 (16% of sales). The main factors positively impacting the EBITDA were the sales growth, the improved average gross margin and the well controlled evolution of the functional costs. This ultimately resulted in a 45% growth of EBITDA well ahead of sales growth. Depreciations amortization and changes in provisions increased from 29.0 million in 2011 to 40.2 million in 2012, mainly as a consequence of the inclusion of the brands acquired from GSK mid-2012. Non-recurring expenses amounted to 38.1 million and were largely defined by restructuring charges and related provisions mainly referring to charges incurred for corporate projects (delisting, acquisition of GSK brands, issuance of the retail bonds) and to organisational restructuring charges in the Netherlands (plant closure), Germany (relocation of offices), Ireland (relocation of key activities to Belgium), Belgium (relocation of Biover operations from Bruges to Nazareth) and Denmark (closing of country office; integration of operations into the group s Swedish organisation). Starting from the above-mentioned recurring EBITDA this led to an Operating Result (EBIT) of 124.0 million for 2012 (12% of net sales), compared to 80.8 million for 2011 (+54% YoY). p. 6/16
Financial result, taxes, net result In 2012, the Financial Result amounted to -37.9 million compared to -29.0 million in 2011. This evolution largely results from a higher level of average net debt in 2012 mainly associated with the acquisition of the brands from GSK which caused an increase of the interests paid by 8.7 million. Income taxes were 20.2 million for 2012, implying a tax rate of 24%. In 2011, income taxes amounted to 16.0 million. Adjusting for the one-off item in 2011 i.e. the annulment of a tax asset in Germany the 2011 tax rate was 21%. This yielded a Result after income tax of 65.9 million versus 35.7 million in 2011. Main balance sheet elements Net debt 756.7 million. Equity 825.4 million On 31 December 2012, net debt amounted to 756.7 million (according to the methodology applied for the bank covenants). On 30 June 2012 this was 658.3 million and 422.1 million on 31 December 2011. The increase by 334.6 million versus 31 December 2011 is mainly related to the acquisitions of 54 European OTC brands from GSK (June 2012), and of the Optalidon brand (November 2012), partly offset by the 190.0 million capital increase (June 2012). With this net debt level, Omega Pharma remains safely within the covenants agreed upon with its credit providers. Working capital amounted on 31 December 2012 to 97.3 million, i.e. 9% of net sales (non-annualised for acquisitions). On 30 June 2012, the working capital reached a level of 82.1 million (9% of net sales, not annualised for acquisitions) and at the end of the previous period (2011) this was 51.6 million (6% of net sales, idem). The increase is mainly related to the inclusion of the OTC brands acquired from GSK. Intangible assets corresponded to an amount of 1,517.2 million versus 1,042.2 million at the end of 2011. This increase mainly refers to two factors. First: the acquisitions (the OTC brands of GSK, Optalidon). A second factor refers to Omega Pharma s enhanced efforts in the field of new product development, which led to increased investments in R&D, brands, licenses and patents. The increase under property, plant and equipment refers to the inclusion of the Herrenberg manufacturing site (Germany), which was part of the transaction with GSK. Equity increased from 633.2 million to 825.4 million, principally as a result of the 190 million capital increase implemented in June 2012 in the framework of the transaction with GSK. The changes in Liabilities reflect the increased utilisation of existing credit facilities and the issuance of two series of retail bonds, for financing the transaction with GSK. Net debt amounted to 756.7 million. p. 7/16
Main events Main events in 2012 Following the initial acceptance period for the takeover bid, launched by Couckinvest NV (now named Omega Pharma Invest NV) on 2 September 2011, the bid was reopened from 27 December 2011 until and including 6 January 2012. After the reopening, Couckinvest held or controlled 97.10% of all shares outstanding, thus triggering a squeeze-out which ran from 16 January until and including 3 February 2012. After the payment (17 February 2012) for the shares tendered in the squeeze-out Couckinvest held/controlled 99.26% of all shares outstanding. All remaining warrants were also acquired at that time. All shares not acquired or tendered on 3 February 2012 are deemed transferred to Couckinvest NV by operation of law, with consignation of the funds necessary for the payment of their price to the Belgian Deposit and Consignation Office where these funds will be held available for a period of thirty years. As a consequence of the successful takeover bid, the Omega Pharma shares were delisted from NYSE/Euronext Brussels. The last listing day was 3 February 2012. 15 March 2012. Omega Pharma announced that it had reached an agreement with GSK for the takeover of the formerly identified non-core OTC-brands of GSK in Europe for the amount of 470 million (GBP 398 million) in cash. The acquired brands are amongst others Lactacyd, Abtei, Solpadeine, Zantac, Nytol and Beconase and represented in 2011 a turnover of more than 200 million. The transaction was largely completed in June 2012. As a part of the agreement, Omega Pharma took over the production plant in Herrenberg (Germany) on 1 July 2012. Several brands of the acquisition are produced in Herrenberg. 24 April 2012. Omega Pharma announced that it made a public offer in Belgium and the Grand-Duchy of Luxembourg for two series of retail bonds for an expected total minimum amount of 25 million each and a combined expected total minimum amount of 100 million. The fixed rate for the bonds due 2017 is 4.500%, and 5.000% for the bonds due 2019. It was mentioned that the bonds were intended to finance part of the acquisition by Omega Pharma of an important portfolio of European OTC brands from GSK. On 26 April 2012, Omega Pharma announced that this public offer had been closed after the first day of the subscription period because the combined expected total maximum amount of 300 million was largely achieved. The total issue amount was 300 million of which 180 million for the 5 year bond and 120 million for the 7 year bond. The total amount of subscriptions received by the Joint Lead Managers was significantly higher than the total issue amount. The issue date was 23 May 2012. The bonds are listed on the Luxembourg Stock Exchange. 31 May 2012. Omega Pharma reached agreement with the South-African company CAVI Brands (Proprietary) Limited to create a 51/49 joint venture, named OmegaLabs. The joint venture became operational early July with the launch of Wartner, Silence, Predictor and a number of other Omega Pharma brands. p. 8/16
29 June 2013. Omega Pharma s capital structure was strengthened by a capital injection of 190,000,000.00 through the issuing of 5,277,778 new shares. On the balance sheet, 3,586,777.93 is recognized as Share Capital and the remaining 186,413,122.07 as Share Premium. 24 September 2012. Omega Pharma entered into a co-branding agreement with Kwizda Pharma to market, distribute and sell the BronchoStop cough products in 13 Western European Markets. Under the agreement, Omega will exclusively market, distribute and sell Kwizda Pharma`s BronchoStop brand of cough products under its umbrella brand label in the UK, Ireland, France, Belgium, the Netherlands, Luxembourg, Spain, Portugal, Italy, Norway, Denmark, Sweden and Finland. This cobranding collaboration opens access for BronchoStop into Western Europe and allows Omega Pharma to further expand its market position in the cough market. 15 November 2012. Omega Pharma closed the acquisition of the OTC brand Optalidon. The brand for pain relief products has a strong market position in Italy and is also marketed in Spain and Belgium. The acquisition of Optalidon further strengthens Omega Pharma s portfolio for the European pain relief market segment, which already includes Solpadeine, a leading brand in its segment in the UK. 27 November 2012. Omega Pharma Invest, the company that holds the shares of Omega Pharma, announced that it made a public offer in Belgium and the Grand-Duchy of Luxembourg for a retail bond for an expected minimum amount of 200 million and a maximum amount of 300 million. The fixed rate for the bonds, due 2017, is 5.125%. On 30 November 2012, the first day of the subscription period, the public offer was closed because the maximum amount of 300 million was largely achieved. The bonds were issued and accepted for trading on Luxembourg Stock Exchange on 12 December 2012. Significant events after balance sheet date On 1 January 2013, Omega Pharma gained full ownership of Naturoteek, a Belgium company that markets three key brands: Buurmans (a food supplement range for the Dutch market), Vitafytea (a high-quality food supplement range, often recommended by physicians, for the Belgian market) and Etixx (the number one on the Belgian market for sports nutrition products and food supplements for professional and amateur athletes. On 31 January 2013, it was announced that Omega Pharma remains for at least five additional years the exclusive distributor in Belgium of the generic medicines of Eurogenerics (EG), a subsidiary of Stada. Omega Pharma already distributes the EG products on the Belgian market since 1999. On 28 February 2013, Omega Pharma announced the acquisition of Arterin, Belgian market leader in natural food supplements for managing the cholesterol level. p. 9/16
Consolidated income statement (in thousand ) 2012 % of Net Sales 2011 % of Net Sales % 2012/2011 Net Sales 1 041 940 100% 900 551 100% +16% Cost of goods sold -492 375 47% -446 154 50% +10% Gross Margin 549 565 53% 454 397 50% +21% Distribution expenses -63 198-6% -53 746-6% Sales and Marketing expenses -277 216-27% -241 576-27% General Administrative expenses -46 376-4% -50 544-6% Other operating income/expense, net -743 0% 1 683 0% Non recurring expenses -38 051-4% -29 453-3% Operating Profit 123 986 12% 80 761 9% +54% Finance income 5 742 2 524 Finance cost -43 672-31 559 Net Finance cost -37 930-29 035 +31% Result before income tax 86 055 51 726 +66% Income tax expense -20 194-16 035 Result after income tax 65 861 35 691 +85% Of which attributable to the shareholders of the parent company Of which attributable to non-controlling interests 66 037 35 940-176 -249 Additional information: connection to the operating result before interests, income tax, depreciations and amortization (EBITDA) Operating Profit (EBIT) 123 986 12% 80 761 9% Depreciations and Amortization 40 153 4% 29 042 3% EBITDA 164 139 16% 109 803 12% p. 10/16
Consolidated statement of comprehensive income At 31 December 2012 (in thousand) Fair value and other reserves Cumulative translation adjustments Retained earnings Total equity Attributable to noncontrolling Interests Attributable to the shareholders of the parent company Profit for the period 65 861 65 861 176 66 037 Fair value gains/(losses) on cash flow hedges -6 396-6 396-6 396 Fair value gains/(losses) on cash flow hedges - Tax effect Currency translation adjustments Total recognized income for the period ended 31 December 2012 2 175 2 175 2 175 1 685 1 685 1 685-4 221 1 685 65 861 63 325 176 63 501 At 31 December 2011 (in thousand) Fair value and other reserves Cumulative translation adjustments Retained earnings Total equity Attributable to noncontrolling Interests Attributable to the shareholders of the parent company Profit for the period 35 691 35 691 249 35 940 Fair value gains/(losses) on cash flow hedges -5 622-130 -5 752-5 752 Fair value gains/(losses) on cash flow hedges - Tax effect Currency translation adjustments Total recognized income for the period ended 31 December 2011 1 911 1 911 1 911 187 187 187-3 711 187 35 561 32 037 249 32 286 p. 11/16
Consolidated Balance Sheet (in thousand) 31 December 2012 31 December 2011 Non-current assets 1 640 536 1 137 140 Intangible assets 1 517 156 1 042 155 Of which consolidation goodwill 570 402 554 820 Property, plant and equipment 72 378 49 047 Financial assets 1 940 1 940 Deferred income tax assets 38 894 34 466 Other non-current assets 10 168 9 532 Current assets 452 602 356 992 Inventories 148 024 127 444 Trade receivables 221 661 154 200 Other current assets 43 040 37 291 Of which income tax assets 5 447 5 228 Cash and cash equivalents 39 877 38 057 Assets held for sale 1 977 1 575 TOTAL ASSETS 2 095 115 1 495 707 EQUITY 825 381 633 215 Share capital and share premium 557 706 367 706 Retained earnings 393 312 388 475 Treasury shares -118 730-118 730 Fair value and other reserves -7 193-2 972 Cumulative translation adjustments 424-1 261 Equity attributable to the shareholders of the parent company 825 519 633 218 Equity attributable to non-controlling interests -138-3 LIABILITIES 1 269 734 862 492 Non-current liabilities 908 719 549 417 Provisions 3 138 4 675 Pension obligations 7 992 5 589 Deferred income tax liabilities 99 435 86 595 Retail Bond 300 000 Borrowings (non-current Financial liabilities) 480 649 442 112 Other non-current liabilities 1 300 1 522 Derivative financial instruments 16 205 8 924 Current liabilities 361 015 313 075 Borrowings (current Financial liabilities) 12 730 15 105 Trade payables 272 351 230 038 Taxes, remuneration and social security 46 896 49 875 Other current payables 29 038 17 673 Derivative financial instruments 384 TOTAL EQUITY AND LIABILITIES 2 095 115 1 495 707 p. 12/16
Consolidated statement of changes in equity IFRS (in thousand) Number of shares Share capital and share premium Treasury shares Fair value & other reserves Cumulative translation adjustments Retained earnings Attributable to Shareholders of parent company Attributable to noncontrolling interests Total equity Amount 31 December 2010 Total comprehensive income for the period ended 31 Dec. 2011 23 351 086 366 941-24 144 739-1 448 376 016 718 104 170 718 274 0-3 711 187 35 810 32 286-249 32 037 Capital increases Employee share options scheme 29 288 765 765 765 Treasury shares -2 738 645-94 586-94 586-94 586 Dividend on treasury shares 880 880 880 Dividend -24 231-24 231-24 231 Non-controlling interests 76 76 Amount 31 December 2011 Total comprehensive income for the period ended 31 Dec. 2012 20 641 729 367 706-118 730-2 972-1 261 388 475 633 218-3 633 215 0-4 221 1 685 66 037 63 501-176 63 325 Capital increases 5 277 778 190 000 190 000 190 000 Employee share options scheme Treasury shares Dividend on treasury shares Dividend -61 200-61 200-61 200 Non-controlling interests 41 41 Amount 31 December 2012 25 919 507 557 706-118 730-7 193 424 393 312 825 519-138 825 381 p. 13/16
Consolidated cash flow statement (in thousand) 2012 2011 Profit before income tax 86 055 51 726 Taxes paid -16 639-9 500 Adjustments for operational non-cash items 39 168 37 318 Adjustments for interests and financial non-cash items 35 790 22 209 Gross cash flow from operating activities 144 374 101 752 Changes in operating working capital -45 727 10 449 Changes in working capital related to changes in scope and other -10 523-16 130 Total cash flow from operating activities 88 124 96 071 Capital expenditure -530 284-50 155 Disposals of investment goods 612 20 323 Cash and cash equivalents from acquisitions 34 606 Investments in existing shareholdings (post payments) and in new holdings -410-25 250 Dividends received 0 0 Total cash flow from investing activities -530 048-54 475 Proceeds from the issue of share capital 190 000 764 Purchases of own shares 0-94 532 Dividend distribution -61 299-23 901 Proceeds from borrowings 340 701 385 043 Repayment of borrowings -5 185-287 058 Interests received (paid) -20 897-17 534 Total cash flow from financing activities 443 320-37 217 Net increase/decrease of cash flows for the period 1 396 4 379 Cash and cash equivalents start of the period 38 057 33 823 Gains or losses on currency exchange on liquid assets 425-145 Cash and cash equivalents end of the period 39 878 38 057 Total net cash flow of the period 1 396 4 379 p. 14/16
Statutory auditor s statement The statutory auditor, PricewaterhouseCoopers Bedrijfsrevisoren BCVBA, represented by Peter Opsomer BV BVBA, represented by Peter Opsomer, has confirmed that the audit of the consolidated balance sheet, consolidated income statement and consolidated cash flow statement, which is substantially completed, has to date not revealed any material misstatements. The statutory auditor has also confirmed that the accounting data included in the enclosed document do not include any material inconsistencies with the consolidated balance sheet, consolidated income statement and consolidated cash flow statement from which the document has been derived. Ghent, 28 February 2013 The statutory auditor PwC Bedrijfsrevisoren bcvba Represented by Peter Opsomer BVBA Represented by Peter Opsomer, Partner p. 15/16
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