DocMorris AG

Let me please start with a brief glance on the geopolitical situation with a horrible war just in front of our door which personally makes me really concerned. Humanitarian suffering and the limited especially the limitability to influence the situation are really hard to endure. For that background we do what we can, we help in all ways possible, especially with medication and other needed material, but quite significantly. Today actually is the last time that I will be opening this conference as I stand for election as chairman of the board and Walter Hess will take over by the 1st of May. Walter is really the perfect fit for this position with long-standing experience within Soros and especially excellent management skills. I'm personally fully convinced he will continue and further accelerate the success story together with a great management team. And the real story starts right now. With the opening of the 50 billion RX market in Germany via the introduction of the electronic prescription, we will speak further more on that topic. Today you will also see Marcel who will present our numbers and an outlook to you in just a minute. 2021 ended with a low light when the German government decided to postpone the mandatory introduction of the electronic prescription. This was really a political swing that caught us as fully unexpected. We invested heavily in the ERX readiness, which is reflected also in our numbers. We were by the end of last year and now still are fully ready and geared up to drive electronic prescriptions from the first day onwards. Nevertheless, we achieved great things in 2021. New record in brand awareness of DocMorris as a result of our DocMorris app with great functions and excellent user experience actually that achieved already 1.3 million downloads we are really proud of and we also entered to strategic corporations with leading pharma companies just to mention a few highlights yesterday we learned that DocMorris and Magpacks cover the first two positions in the latest evaluation of Stiftung Warum test, which we see as a proof of our strong customer centricity. In a nutshell, we remain fully, but fully convinced about electronic prescription as key growth and profitability driver for the future, given the latest developments. Extended test phase proves electronic prescriptions work and no technical problems occur with the infrastructure. Also on the regulatory side, despite all negative processes, confirmation on electronic introduction continues. Nevertheless, the delay causes a big impact on our business plan and requires action. We are taking the situation as it is, but also as an opportunity to now focus on operational leverage and execution. We already took some steps last year, integration of VITRASANA and APOROT, and then the go-live of our new distribution center in Ireland, which will take place in the next months with a high degree of automation, which will help us to improve operational performance. We have quite some work ahead of us, but Walter, the whole team, and myself in the new role are fully committed for execution and very much excited for the electronic prescription opportunity. Before I hand over to Marcel, I also want to highlight that we issued our first sustainability report in line with GRI standards this year. We will continue to improve our disclosure and stand available for any sustainability related questions. Now over to Marcel.

Thank you, Walter. And hello also from my side. I want to start by highlighting two key points concerning the financial year 2021. First, as Walter mentioned, we were fully convinced to see an ERX launch on the 1st of January 2022 and thus invested heavily in ERX readiness and marketing to achieve the best possible starting position. And second, a significant backdrop on the German non-RX online market caused us to reduce our 2021 sales targets and also had an impact on our profitability. Let's go into the 2021 performance, starting with the group sales. We achieved our revised sales targets with a growth rate of 14.8% in local currencies. In Switzerland, we realized a solid and sustainable growth rate of 5.7%. In Germany, we were able to grow 19.4% on our external revenues. This includes the continuous light decrease of the ERX of the RX business as a result of discontinued marketing and the bonus band and also includes the contribution from the acquisition which we did in summer 2020. The OTC and BPC business developed strong in a very challenging market which grew significantly lower compared to previous year. Segment Europe achieved 22.3% growth This somewhat slower growth compared to prior periods is a result of the very strong demand in the previous year driven by the COVID effects. Let's now look at the development of our underlying KPIs. The key development here is the growth of our active customer number to 12.4 million. is an increase of 1.9 million customers. For better transparency, we decided to show the basket size and order frequency now separately for RX and OTC. Our average RX basket, which consists of our Swiss and German RX business, is at €115, with slight declines in 2021 as a result of low-value basket in connection with stately reimbursed self-tests in Switzerland. The OTC basket also saw slight declines over the period, driven by smaller COVID-related baskets. Our repeat order rate remains at a high level of 74%, which shows the significant loyalty of our customers. In terms of site visits, we saw an increased 2021 was the year in which we achieved ERX readiness and grew external revenue by 14.8% despite the significant backdrop of the German non-RX market compared to previous year. The course margin came in below previous year pandemic in 2020 and the slowdown of the German non-Rx market as a result of missing flu season and tough comparison days. It is in line with pre-pandemic levels. Personal and distribution expenses both slightly reduced as a percentage of revenue. The largest difference compared to previous year is our marketing versus 4.1% in 2020. This increase has mainly two reasons. First, our TV campaign to boost awareness ahead of the ERX launch. And second, the less dynamic non-ERX market, which required higher performance marketing spend to achieve both. This led to an adjusted EBITDA of minus 128.9 million Swiss francs. I will explain the bridge from 2020 to 2021 earnings and adjustments in more detail on the following two charts. Depreciation increased as a result of higher base due to acquisitions and higher investments in tech developments. The net financial result was impacted by the negative exchange rate effect and the results of joint ventures in Switzerland. On this chart, I will explain the drivers of the result compared to Previzia in more detail and build a bridge from 2020 adjusted EBITDA of minus 31.2 million to 2021 of minus 128.9 million. The first bar shows the achievement of ERX readiness. Together with the ERX related TV marketing push worth ahead of the ERX launch. The slower market growth in the German non-RX market led to increased customer acquisition costs and lower average gross margin with an impact of 18.7 million. We invested more in tech capabilities and user experience to enable faster scaling in all parts of the company's business and continue building the leading online platform and apps. In the second half of 2021, we successfully carried out the rebranding of our French Doctifarma platform to DocMorris and also initiated our OTC business in France with a combined effect of 13.4 million. As explained at the Capital Markets Day last year, our new business, Telemedicine Platform as a Service, and partnerships built a high future margin potential, which is why we increased our spendings in these initiatives by 9.9 million Swiss francs compared to 2020. In sum, these effects led to adjusted EBITDA of minus 128.9 million. The EBITDA adjustments in 2021 reduced significantly compared to previous year. M&A related adjustments amounted to 9.6 million. Integration includes mainly the upper road integration amounted to 2.2 million and several other smaller run-offs of 1.9 million. Total adjustments amounted to 13.8 million compared to 47.2 million in 2020. Our balance sheet remains in a good shape. Our solid cash proposition is at 277 million compared to 300 at EIR in 2020 and includes obviously the proceeds from our capital increase in December 2021. We achieved a sustainable reduction of net working capital by 28 million during the period focus also for next year. Other positions of the balance sheet remained broadly in line with previous year. Equity ratio stays with 38.2% on a solid level. Now I hand over to Walter Hiss who will give you an update on our strategic priorities for 2023.

Hello and welcome also from my side. I would like to give you first strategy update and afterwards to explain our key priorities for 2022. How important and absent digitalization in the healthcare sector is, we all experienced during the pandemic over the last three years. With our digital health ecosystem, we can contribute to more integrated and more digitalized healthcare systems. For our patients and customers, we want to become the preferred digital health destination. We will achieve it by consequently understanding and fulfilling their needs and wishes. It will be enabled by a best-in-class platform with the technology as the call area for operations, services and brands and will lead us to profitable growth and will create value add for patients, customers, partners, shareholders and employees. A trick condition for great success is that we have the best people in the right place. Therefore, to attract best talents is one of the key priorities of our company. I'm very pleased and happy to announce today that Matthias Peukert will join our company on 1st of April this year. He will become head of Germany and CEO of DocMorris and therefore be my successor in these two functions. Matthias is a proven and excellent e-commerce expert 14 years of experience with Amazon and four years as CEO of windle.de. In addition to Matthias and Madhu Nuttaki, our CTO who joined the company in last August, we further strengthen our senior management team with a digital marketing expert who already started in February this year, also coming from Amazon with a data and science specialist coming from Nissan and an expert in health procurement coming from the Phoenix Group. And he will also run our transformation program, which I will just show you afterwards and in that function reporting directly to me. All of the senior managers have proven and strong track records from their previous careers. and have a core strength in execution, which is one of the key success factors for our company. The situation which has arisen due to the extension of the ERX test phase gives us the opportunity now to leverage on the synergy potentials we have and to set the base for profitable growth in the future. We manage cash immediately accelerate on our growth activities once ERX will start. And therefore we have defined three key priorities for this year. Number one is to keep the best ERX starting position. Number two is on operational leverage. And number three is on a growth focus with DocMorris. Let's start with ERX first. Since January 1st, the mandatory ERX law is in place and in force. On 20th of December, we all know, the Ministry of Health declared to extend the testing phase as the technology was not ready and not sufficiently tested. Meanwhile, the shareholders of Gematik have defined six quality criteria, which you will find on the right hand side of the screen. which have to be passed before ERX can go in the next phase and the next phase which will be the nationwide rollout of the system and therefore all these criteria have to be fulfilled. The main criteria is number one that 30,000 ERX will have to be processed without any problem. As of today we already reached 5,700 ERECs being processed without any problem. And frankly speaking, if the system already works for 5,700, it will also work for 30,000 or 100,000 for 1 million or even more. So the system, also based on our own experience and based on the opinion from industry experts, is technically already ready and we are confident, therefore, that the ERX scaling will start in the second half of this year. Let me remind you of the size of this opportunity and our position. Today, we are at roughly 1% of online market share for prescribed drugs. If it goes up to 10%, as it was in Sweden already two years ago, we talk where the OTC market in Germany already almost is, we talk about the 12 billion market. So a huge market potential. There are many studies out in the market about the ERX. One is from Sempora saying that 25% of the people indicated that they would redeem their prescriptions with an online pharmacy once ERX is in place. Another fact is that 80% of the medication is for chronic demand. And our assumption is that out of our customer base, far more than 2 million customers have the potential to be converted from OTC customers also to RX customers. And as Marcel has shown, we have invested in marketing and brand awareness to be prepared for RX. And we have reached 80% brand awareness of 71% end of last year, which is an all time high for us and also of 26% for ERX. But why is ERX so interesting and why is it the game changer? It's all about KPIs and unit economics. see the KPIs and compare them to OTC KPIs of orders and of customers. So RX orders have a higher basket size. The customers have higher order frequency, higher retention rates, and higher customer lifetime values. And if we see the unit economics and compare ERX contribution profit, contribution margin after fulfillment cost, Only with PRX, it's already double as high and compared to OTC orders, it's even five times as high. So we are with DocMorris, but all other brands as well, fully ready for all of this ERX potential. And we have invested quite a lot last year in being prepared with technology, processes and people. And as of yesterday evening, we could process already on our systems 226 ERX prescriptions and I can assure you and confirm we could process them without any problem and we could build them without any problem. Let us give you now a glimpse on how easy it is to redeem an ERX at the same time purchase an OTC product and use our services with our DocMorris digital health ecosystem app. So let's move now to our second and equally important priority of operational leverage. Our target and our commitment is to reach EPTA break even in 2024. Therefore, we have set up an extensive transformation program, including measures to increase gross margin, leverage on performance improvements, and structural synergies. With regard to gross margin, we will enhance our assortment, pricing, and procurement strategy, and we'll launch our advertising services in Germany and France this year, as we have already done in Spain two years ago. With regard to performance improvements, we will improve on marketing performance and operational performance, including DC2, which I just would like to give you an update afterwards. And on the side of structural synergies, we see significant efficiency gains through optimizing our organizational structure and consolidating and integrating our platform. All of the measures that we have planned, we will implement and execute within the next 12 months. And this will be the base and contribute to reach target of being EBITDA breakeven in 2024. Marcel will show afterwards the impact of these measures on our P&L. We will update you about the progress regularly and on the occasion of a capital market day later this year. Let me give you a brief update on our the go-live preparation of our distribution center tool in Helen. We are fully on track to go live in Q2 this year. Based on the really extensive testing which already started in November last year and the setup of the two warehouses and distribution centers where we can run them autonomously from each other we are confident that we will see a good go-live in Q2 and a smooth ramp-up in Q3. Once we have taken live this new DC2, we will reach an automation degree of 70% in this warehouse and can leverage on a productivity improvement of more than 10 million euros per year. This is again an important and significant contribution to reach the EBDA target in 2024. And this DC2 will also add 15 million of Arcel's additional capacity and more than double the capacity in Helen. So let's come to the third priority, which is the growth focus on DocMorris. But before we talk about the growth measures on DocMorris, we have to talk about 2021. The non-Rx online market last year saw a significant slowdown, coming from 17 and 15% in the years before, down to 3.6% in the last year. But we also see that part of the cohorts of the last two years related to COVID and masks have reduced retention metrics compared with other cohorts, whereas the stickiness of the existing cohorts remain at the same high level. In combination with the fact to keep and allocate wisely our cash and being ready for the moment where ERIX starts to accelerate, we will focus on double-digit growth on non-RX with our core brand of DocMorris. With new customers, we will focus on new customers with RX potential, so OTC customers, which we can convert afterwards to RX customers with high CLV, also as a base for sustainable growth going forward. As mentioned before, part of the transformation program is the reinforcement of the marketing performance. The areas where we have defined measures you see on the right hand side in the circle on the slide and it will be added by strengthening the digital marketing team also with cross-segmental competencies from within the company. With the non-core brands we focus on profitability and have an upside potential on the market recovery on OTC in addition to ERX in the second half of the year. One of the key assets of the Dr. Morris brand is the digital health ecosystem map. We offer a unique experience for our patients and customers by combining products and services for them from awareness to diagnosis to treatment and to adherence. You see the products and services shown on the right and left hand side of our screen. This app has already been downloaded more than 1.3 million times within only a few months and have a high average of 4.7 star rating. So let me conclude this part and let me summarize. We are fully convinced and committed to capture the full potential of ERX immediately after it has started. This year, we set a strong focus on execution and leveraging the potentials we have within all our company. And we set the focus on growth with our core brand DocMorris. I will now hand over back to Marcel who will give you the information regarding the impact of the transformation program and give you the outlook for 2022 and beyond.

Thank you. As Walter explained, we have defined clear measures to achieve ABTA break-even in 2024 independent of ERX scaling. The actual ABTA includes significant spendings for ERX readiness. We are fully convinced in the importance and strategic relevance to continue to invest this amount in order to keep the best position for ERX scaling. The explained focus on marketing spend on our main-vial DocMorris and the reduction of channels with lower customer KPIs and cross-margin will have an immediate impact on 2022 ABTA. The contribution of the new distribution center will start post-co-life in Q2 2022 and have the first full year effect in 2023. After 2022, one of the three important levels towards breakeven is cross-margin improvement. Here we initiated to improve product mix, buying conditions and pricing, to introduce and scale advertising service businesses and to extend our assortment and private label offering. Some of the already initiated measures will start to have the main impact on our numbers post 2022. Performance improvements includes the reduction of our cost per parcels driven by the new distribution center and direct savings via realization of economies of scale in all our segments as well as via our telemedicine and platform as a service business. Structural synergies are indirect cost reductions which we will realize by organizational optimization implementation of more shared services throughout the group. In sum, this will lead to breakeven in 2024 with significant potential on ERX scaling comes on top. This leads me to our financial outlook for 2022 and beyond. We are confident that the German ERX market will ramp up in 2022 and this remains our core growth and profitability driver. As the timing is not yet confirmed, we exclude any ERX impact from the outlook for 2022. We target double-digit non-RX growth for our core brand DocMorris. Group external revenues are expected to remain flat relative to previous year as we focus on operational leverage and profitability in the short term. Our current rating also is in line with this outlook. Driven by continued tech invest and maintaining ERX readiness, adjusted EBITDA in the range of minus 75 million to minus 95 million Swiss francs in 2022 is expected. As a result of the ERX delay, we now expect to reach EBITDA rate even in 2024. Our median term ABTA margin target is confirmed at around 80%. With that, I would like to open the Q&A session and look forward to your questions.

Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. Please ensure the mute function on your phone line is switched off to allow your signal to reach our equipment. If you find your question has already been answered, you may remove yourself from the queue by pressing star 2. But again, please press star 1 to ask a question over the phone. We will take the first question from Alexander Feld from Jefferies. Please go ahead.

Yeah. Hi, good afternoon, gentlemen. A few questions on the guidance from my side, and I would like to take them one by one. First on your flat revenue guidance for 22, how should we understand the moving pieces there? I mean, you guide for Doc Morris, which is a major part of the OTC business in Germany to grow double-digit. And I believe we can also assume that the Switzerland business will grow with 5% plus. So excluding RX, how should we come up with a flat revenue performance year over year, basically? What are the moving pieces there?

Yeah, maybe starting with Switzerland, there we expect growth between 5% and 10%, which is very sustainable and on a good level like the years before. In Europe, we target low low teens as a percentage of growth and in Germany it's flight to slight declines with ARX and the market covering as an upside potential and these leads on group level on the flat development on sales.

Okay. Second, on your profitability guidance, I mean, you obviously don't guide on ERX for the top line, but how should we think about profitability? I mean, does that mean if ERX kicks off in the second half, we should assume a guidance change for top line and profitability? Because, I mean, on the presentation, page 28, you bake ERX readiness into your guidance, but one page later, you're basically saying any ERX impact is excluded from the outlook. So, yeah, if you could clarify this one.

Yes, ERX is included from the outlook. Nevertheless, as I showed, we included in the EBITDA bridge that we remain on our spendings for ERX readiness and also to keep the achieved brand awareness topics. So a base marketing is included in the EBITDA. But again, we do not know the timing and so we cannot include ERX guidance at the moment.

The last one from my side on your scale back in marketing, I mean, we have seen a doubling to around 120 million in 21. What number is currently baked into your guidance for 22? And if you could comment also on your current trading in Q1, I mean, what market development have you seen in the OTC space so far? Because last year was really weak. And I mean, you highlighted that also in your presentation. Thank you.

As we included in our 2022 EBITDA guidance, a reduction of marketing spendings, which I have shown in the bridge from 2020 to 2021 to 2022. Therefore, marketing spendings will be below the EZO level. This is one main impact to achieve the EBITDA guidance for 2022. On market development, we do not have yet any market numbers for the first year 2022.

Okay, understood. Thank you.

The next question comes from Chris Huon from HSBC.

Yes, thanks everyone for taking my questions. I would also like to do them one by one if possible. First, I'd like to pick your brain on working capital and CapEx for the year. I mean, I would just try to understand your funding needs going forward. You closed the year with two rounded 280 cash on the books. At the midpoint, the EBITDA burn will be 85. There will be some CapEx on top this year. And with the break-even target now postponed by a year, I'm just trying to see if we get to a level where the cash on the books is maybe not comfortable enough to go without, you know, raising your equity or debt. So if you could give some color on predominantly working capital and CapEx, that would already be helpful. That'd be my first question.

Yes. Due to the fact that we have a flat sales development target for 2022, we do not see an increase of net working capital. we manage on these positions, we target a slight decline. And on investments on CapEx, we expect to be on a similar level in 2021.

Okay, that's clear. Then coming to the current quarter, I think that was also missed previously. I mean, the quarter is almost over. Is there any color you can give on, I mean, I'll happily take any comment on any market group, anything you can share on the current quarter?

Yes, the car trading supports our four-liter guidance and is in line with what we expect for the four-liter.

Okay, and in terms of RX in Germany, I think this is probably by far the biggest driver of the suggested decline. Is there any sort of color you can give as far as your expectations are concerned on that?

What the PRX concerns, there is a slight decline in the same range as last year, but we are sure it will be more than compensated in the second half of the year once the ERX starts to ramp up.

Got it. And then the last question regarding the number of e-scripts you process. So looking at, I think yesterday was 5,700 in total. Your share is 4%. I mean, how are you thinking in terms of your share of all of the total ERX issued so far? Do you think the sample size is still very much too small to draw any conclusions? Or how are your initial expectations on on the share of the ERX market in Germany so far?

Yeah, it's probably not yet really representative. It's only 5,700 e-prescriptions. So for us, we do not already take considerations or assumptions out of it. I think what is really more important is that it is growing day by day. the last few days we are at the rate which would bring us latest even if it would remain flat latest in four to five months to reach the quality gates and we know that every day there are additional doctors joining and we see that there are additional doctors issuing e-prescripts and therefore we think the curve will continue to raise and we will see an earlier reach of the quality gates than the four or five months if it would now remain flat. And I think this is the real important part of the figures that are at the table at the moment.

And should we, I mean, once we go live, is it your expectation, or fully live, let's call it that, is it your expectation that, you know, we will see a very significant pickup? I mean, the number, the SEMPORA number, you know, the 25% general interest, do you expect a more positive shift also in the later stage of the trial phase once, you know, more people are onboarded? Or what's your expectation in the near term?

Yeah. Well, in the next phase, we follow very closely what the Ministry of Health says, what Chematix says, and they now say all that once the quality gates have been passed, so there will be the nationwide rollout of the system. So this means for a certain period of time, probably, they will talk or tell to all the doctors and pharmacists to roll the systems out completely before then it will start after some months, probably really then at full speed. And from there on, we have different scenarios prepared for ourselves. So let's say that the planning scenario is that within three to five years, we will reach 10% of online share, but of course we have scenarios which also are different to be prepared for any case. And the only thing what we see is all of the studies. So I mentioned the SEMPORA study, but all of the studies, I think the lowest said it will relatively fast go to 14% of the people redeeming ERX. And there is no study I have seen which says it will be low after a certain time. So that's why we are confident that there will be the ramp up and the speed of the ramp up, we will see probably already after the first month, but definitely after the first year.

Perfect. Thanks a lot. You're welcome.

We'll now take the next question from Volker Bosse from Baader Bank.

Hello, gentlemen. Thank you for taking my question. I would have three. Volker, sorry, I cannot hear you. Can you speak up, please? Is it better now? I have a mic at my mouth. So I think for 22, a certain strategy changed. So before you already said you are... 100% top line focus with all brands capturing the maximum of the market potential. Now you move to short-term profitability focus. Would you agree on that observation? And the second question would be on the group sales guidance. You said group sales to be flat. You just gave us a breakdown. Doc Morris called to be up double digit. What does it mean for other brands? Which brands will so to say decline in sales in order to come up to the flat on groupers finally and the third one is on your mpa guidance and before you already said yeah if we would not invest in growth and if we have the new uh warehouse on stream we would be profitable now for 22 you will not grow and the warehouse is on stream, but you still guide for a double digit million negative FTA. So what is here the missing part to understand the augmentation?

Thank you. I will take the first question and then send it to Marcel. So yes, that's correct. Up to now, we have focused a lot on growth and gaining and extending customer base. The customer base, which then is the base also to convert the customers into Rx customers. And now with the extension of the test phase, but nevertheless with the Rx really just ahead of us, we shift now to a path where we will follow profitable growth and as i've said before we'll just now use the opportunity of this phase to leverage on the potentials we have and we have level but we have we have done a m a acquisitions uh we have potential on the on the structure we have potential in marketing in operations we will now just use this time to set the base for profitable growth and in addition uh of all this transformation process, we then will have the ERX and will anyway come in a profitable growth situation in the future.

And this leads to your second question. Therefore, we have the goal focus on our main brand, DotMorris, on our ecosystem brand and more the profitable focus on the other brands and this in combination leads to a flat development on group level. And of course, if DocMorris is only a couple digits, then some of the other brands have a slightly decline because of the focus on high quality, high loyalty customer base. On the ABTA level, our ABTA includes also all the investments for ARX readiness. and also marketing in order to keep our starting position on the highest level because we are fully convinced that this will move the needle to be the best in the ERX topic and that's why we think it's very important to have this amount of spending for eScript. and also the tech focus that we still develop on user experience, customer-centric services and to develop in our ecosystem. This will be the success factor for the future and that's why we are convinced that it's really important to spend on these levels and focus on operational leverage and performance improvements on the other topics.

Okay, thank you. All the best. Thanks. The next question comes from Gerhard Organus from Bernberg.

Yeah. Sorry. Good morning. A couple of questions from me as well. You said that you are focusing the non-core brands on profitability. Can you tell us which one these non-core brands are? Or which ones you consider non-core?

Yeah. So the core brand is definitely Doc Morris. And then we have Medtex as let's say the second lead brand within our portfolio. And the non-core brands definitely are Europone, Alexorose, and Aportale.

Okay. And then I was wondering, for the flat Germany guidance, because your paper RX revenues were pretty good last year. down from maybe the single digital. So is there any lag effect? Is there any effect from bonuses you may say that given last year that you see a more significant decline in the paper Rx business this year before ERX comes in?

It continues at the same scale about of the second half of last year. The first half was less. in our portfolio the second half was a bit more on the continuous at the same level uh about of last year it's due to the the bonus ban uh yeah but uh i think our focus really is on the erx we we keep the x customers as retention as we ever can, but the focus and the future will be ERX definitely.

Can you give us an indication what the H2 decline was in paper Rx?

We do not comment on the details on that.

And then my last question is on the cross-profit improvement. You expected significant cross-profit improvement between 22 and 24 just in the OTC business. It looks like, you know, maybe, I don't know, 40 million or so. What is the driver for that?

Yeah, here we have a lot of initiatives, initiated measures starting on improvement on procurement and pricing and reduction of the low margin channels like price search engines or external marketplaces. Then, as Walter explained, we are increasing our ad services offerings, which also increases our cost margin. And last but not least, we work on assortment and private labels. with higher margin and this in sum altogether leads to this margin improvement for the APTA by even 2024.

Thank you.

We will now take our next question from Michael Heider from Warburg Research. Please go ahead.

Yes, hi and good morning. I have a follow-up also on your flat state guidance again. Sorry, but you said Switzerland is going to grow 5% to 10%. And then, obviously, DocMorris is growing double digits. And then the sales decline in non-core brands. Is this now, are you only talking about Germany? So what is your, I mean, can you give an indication on your international business? Is this expected to continue to grow as we have seen in the past?

I want a European business. We plan sales growth in the low teens. So we focus on the German market and Europe. We will continue on a double digit basis, but not on the levels we have seen in the last years.

Okay, thanks. Then another question on your mid-term or long-term targets. You confirmed your 8% everyday margin. Before, you also guided on revenues. You said that you expect to reach 4 billion in revenues, and that was like a timeframe you gave there, but you expected that to be at the beginning of the period, so that was around 2024. Can you confirm this guidance?

This also is very much related to the start of the mandatory introduction of e-scripts. And so we do not give an exact year for the $4 billion, but we still believe in the 10% online penetration in the midterm, which in the result leads to this $4 billion.

So basically, the four billion should be still reached in that time period, but maybe not in the first year anymore.

Yes, this could be possible, yes.

And then last, well, two more questions, sorry. First one. Will you be able to integrate all your external sales in the year 2022? Because the logistics center is planned to be opened in 2022. And I think that was one of the key issues here that you needed to shift all the volumes to Herlin. And so the question is, will there be a full integration and full consolidation of all external sales in this year?

No, we will not be able to fully consolidate. We will continue on the reporting as we did in the past.

So is that then planned for 2023?

Maybe part of the transformation program is that we also leverage on the structural synergies and the synergies also out of our M&A acquisitions and as I've said before we will keep you informed and then regularly updated about the progress of the project and yeah this will be part of it okay and then last question and

Can you remind me of your total capacity now or once that the logistics center will be up and running, please?

Total capacity will be up to 48 million parcels per year as of the go-live of the DC-2 in Helen.

Okay, great. Thanks. Welcome.

We will now take the last question from Lorenzo Margiatta from Bank of America. Please go ahead.

Two quick ones from me. One is on the OTC market. Excluding the issues you're discussing this year with it being flat, do you confirm that you would expect that to be growing double digits again from 2023 onwards? And secondly, in the 2024 breakeven guidance, if RX comes sooner than expected or is strongly additive in 2023, do you still think you could be profitable in 2023 or is that no longer a realistic target at all?

Yeah, maybe on your first question. So we assume that for this year, The growth might be more or less the same level as last year. So this is our assumption. Therefore, we see an upside potential if the market grows, comes back or grows faster. And on the EBITDA target for next year. So what we confirmed and are committed to be at breakeven in 2024 because the breakeven was planned including the ERX ramp up within 12 to 18 months and this is now delayed. It will be in 2024 and we will make sure just to have breakeven ready in any case this time.

Okay, thanks. That's clear. And then just OTC from 2023 onwards, do you think that market will return to growth of recent past or do you think it's now something that your business, excluding ERX, will grow slower?

No, we think that the post-COVID, the markets will recover completely. And despite it's already at 23 to 25% online share, we see there is much more growth potential also in the OTC business in the future.

Okay. So one year impact from shifting towards DocMorris rather than a structural change in the story. Yes, we think so.

Thanks. Thank you very much all together. Thank you for attendance and for your questions. And with this, we close this conference call. Thank you so much. Thank you.