Redcare Phamacy Unsp/Adr

Good day and welcome to the SHOP Apotheke Europe Q2 2022 Earnings Release Presentation. Today's conference is being recorded. At this time, I would like to turn the conference over to Stefan Felten, CEO. Please go ahead.

Well, thank you and I also want to, together with Jasper, I want to welcome you to SHOP Apotheke Europe's release of our financial results for the first six months of the year. I hope you've already had a chance to take a vacation break. If you haven't been able to do so yet, you'll be able to do so Of course when we look at our financial results we need to look at them in the context of very difficult economic times over the first six months of the year and the ongoing war against Ukraine. Our thoughts remain of course with the victims Well, starting with the end in mind, based on the performance of Schock Apotheke in the first half of the year and our assumptions for the remainder of the year, our management, we continue to stand behind the guidance we had provided to you earlier this year. Well, you're familiar with the agenda. Jasper and I are going to start by walking you through the financial and business performance over the last few months. Then I'm going to say a few words about a couple of strategic topics, most notably, of course, about the status of electronic prescriptions in Phamacy Unsp & Adr Let's start with the business and financial performance of the first half year. What were some of the highlights over the first six months? Our sales over the first six months went up by 11%. After a 7% growth in Q1, we saw an acceleration of our growth to 15% in the second quarter. This is all of Shop Apotheke's business. If we just look at our Phamacy Unsp Phamacy Unsp & Adr in the first half of the year. This was driven by favorable working capital movements. There is some seasonality of course, but also this is the result of some purposeful and sustainable actions that we didn't just take this year, but also last year. certainly one highlight of the first half of the year was a record level of all-time high customer satisfaction you know that we use the Net Promoter Score NPS to measure customer satisfaction and we saw in the second quarter an NPS of 74 this is an improvement compared to a year ago by nine points the main driver was a further improvement of our order delivery times, shortening of our orderly order delivery times. And we all know that order delivery times are one of the most important, if not the most important driver for customer satisfaction. In addition to shortening our customer, our order delivery times, we also implemented some other enhancements to our overall customer proposition. I can assure you that the Net Promoter Score is one of the most closely watched, monitored and managed KPIs at ShopAppetit. What happened to our active customer base? It grew to 8.6 million. This is an increase compared to a year ago by 21% or by 1.5 million customers. 800,000 of the 1.5 million increase happened this year. Our expansion in Italy is fully on track. We have conveyed before that Italy is an important market for shop apotheke today and will become an even more important market for shop apotheke in the future. In July, we opened our second distribution facility besides the one that Jasper and I are reporting from today here in Sebenum. So that's our second facility in Settala near Milan since early August Phamacy Unsp by and shipped from our new facility near Milan. And last but certainly not least, e-prescriptions. Everybody knows that the ERX test phase was successfully concluded in early July by passing the 30,000 fully reimbursed electronic prescription. a goal. Since then, we have seen an acceleration of electronic prescriptions that have been issued and dispensed. We passed the 100,000 mark a few days ago, and we checked yesterday. We were at 118,000 e-scripts dispensed by pharmacies as of yesterday. Well, if we take a look at everything that happened in the first quarter, I dare to say with all the disturbances that we I think we can be proud of how we navigated Shop Apotheke through all of these challenges and hopefully you're seeing this in our growth of our sales, in growth of our customer base, in the increased customer satisfaction that we shared with you and also in our financial results. Well, let's have a closer look at the sales development in our two reporting segments. On the left-hand side, let's start with another look at the overall sales development. I already mentioned sales grew by 11% to almost 600 million euros, 592 million to be precise, non-RX growth of around 16%. In the DAS segment, our total sales grew by a bit more than 6%. Phamacy Unsp but you need to look at the two sub-segments. Our non-Rx business grew double digit at a healthy pace of around 12% and our Rx business showed a decline of 20% compared to the first half of 2021. This is of course the result of the Rx bonus prohibition which came into effect in December 2020 and then showed its effect in the first half last year. If we just look at the second quarter, our RX business compared to Q2 last year was basically flat. We showed a marginal decline of 3%. And since Q3 last year, we are posting, we are recording monthly sales, stable monthly sales, RX sales of around 10 million euros per month. Our international segment continued to be a growth driver with an increase of 30% and our half-year sales approached 140 million euros. International consists of Belgium, of France, the Netherlands and of course of Italy. So just shifting gears and taking a quick look at some of our KPIs. I already talked about the growth of active customers, which is approaching 9 million, the 9 million mark, our Net Promoter Score 74 in the second quarter. I can assure you this is something that really everybody at Shop Apotheke is really Phamacy Unsp & Adr The main drivers were the reduction, a lower proportion Phamacy Unsp & Adr Looking at our traffic. What you see here is the traffic across all of our sites, so not just Germany, across all of our sites. It covers both mobile visits and desktop visits. But before I jump into the details, let me emphasize again that looking at Germany, our website in Germany, shop-apotheke.com, continues to be the most frequently visited pharmacy website in Germany by quite a margin. Well, what are you seeing on this chart? The green line shows the total number of weekly visits, again, to all of our sites. In the first quarter, you saw very healthy Phamacy Unsp & Adr In the second quarter, our customer deservedly so, I dare to say, spent more time in parks and on beaches and less time in front of screens. The blue bars show the growth of our web traffic compared to the exact same week a year ago. When you look at the second quarter, for most of the weeks, We see a growth of around 20%. The negative growth in the second week has something to do with the Easter week in comparison to when Easter fell in the year before. At the end of the month, you see a spike where the traffic growth came up to 50% or more. This has to be seen in the context of what happened at the end of last year when For good reasons we purposefully reduced our performance marketing which at the time then resulted in a reduction of our web traffic. And with this I'll hand it over to Jasper to walk you through the details of our financials.

Thank you Stefan and good morning to everybody on the call. This is the customary slide we always show with the number of orders per quarter. And as you can see, we continue to grow dynamically our number of orders. If we start at the right of the graph, the first two quarters of 2022, then if you add up those two quarters, then you're getting close to 12 million orders that we processed over the first six months. If you then would go to the left side of the graph, to the gray one, that's 2019, only three years ago, it took us 12 months to do 12 million orders and now only 6 months. Also, this graph makes clear that there is the seasonality that also you referred to already, Stefan, where often quarter two and quarter three is somewhat lower than quarter one. And then we have another peak in quarter four. That's the same this year. You only see that in 2020. There was only a slight step down from quarter one to quarter two, but that quarter two was really the peak of COVID coming to Europe. Going a little bit more to the numbers that we achieved this year, so close to 12 million orders and a strong growth of close to 19% year over year. With a number I want to point out that in the last quarter, despite welcoming, as Stefan said already, so many new customers in total, 0.8 million alone in the sixth month, 83% of our total orders in Q2 came from repeat customers, so returning customers, an expression of the loyalty of the shopper particular customers to our proposition. To the next slide, please. What did those numbers bring us? This is the customary overview of the P&L. It's the adjusted numbers for the ongoing business, in this case first A acquired a little bit later than when we gave guidance this year. The total numbers that we achieved in half one include a couple of costs that will not repeat in the second half of the year. This weekend we opened our new website in Italy. One and a half weeks ago we opened our warehouse in Italy and the preparations Other examples are the launch of our marketplace in Austria that also took place in this first half year. In this table we have the sales up to and including the adjusted EBITDA margin. Sales increased over the first six months by this 11 or 10.8% to be precise for the total group. Later, I will show you the variances bridges of this gross profit margin and S&D as we always do, but first a little bit the high level view. Again, we have been successful in expanding our gross profit margins. In the gross profit margin of 2020 in quarter two and in the first half of 2022, there are no significant positive or negative items. So the number is basically what the reported number is. The year-over-year increase, as we will see later, is also impacted by the fact it's a little bit inflated, the year-over-year improvement, because we had some negative one-offs related to the corona assortment, like masks last year, but that's not impacting this year's number. Later more. So, healthy improvement of the gross profit margin, higher sales, On the other hand, S&D increased significantly as well, both up in the first half and in the second quarter by a total 4.3% But already now, a couple of remarks. The majority of this year-over-year increase is because of our investments, our decision to invest in marketing, to bring us in the best position for the opportunities that we are seeing across Europe and also particularly in Germany. And of course, there is a little bit of an apple and an orange in the year-over-year comparison, because last year, particularly in Q1 2021, was a full lockdown quarter. Later a bit more. Admin is up as a percentage of sales 0.2% of our total net sales. Actually, if you would exclude the business additions we did in 2021, the underlying administrative cost as a percentage of sales would have been stable year over year, despite the fact of the many activities that took place that we executed this year, like expanding the marketplace in Germany opening the marketplace in Austria and a lot of attention to improving our last mile with, for example, also the success of Shop Appeteker now in Germany. If you would add up all the numbers I just quoted, then you get to a minus 1.5% after six months in 2022. for the continuing operations also at the bottom line the fully loaded total group EBDA numbers and one remark there if you look at the first column so last year the first six months of the year there were in total from 7 million to 2 million there were 5 million of adjustments and this year from minus 9 to minus 23 it increased to 40 million so the There is no increase in other adjustments. The only reason for the increase is the IFRS-free business combination accounting that we started to do in quarter four of last year. That's a non-cash item, as you will see later in the cash flow bridge. Before I go to the next slide, what's the summary for me if we look at this slide? I think we are internally very happy with the fact that With the high customer satisfaction scores that we achieved, growing customers, repeat customers, we have been able to expand our gross profit margins. So in total, we increased our gross profit and we have been spending effectively and wisely in marketing in order to be in the best positions for all the growth opportunities that we are seeing across Europe, in particular with the ERX in Germany. We go to the next one. This is a slide I showed you two quarters ago. So I want to repeat the messages that I explained to you then. And the two blue arrows are changes compared to what we presented two quarters ago. So first the key messages. The vertical axis is the adjusted EBITDA margin and the horizontal one is the sales growth. Phamacy Unsp & Adr Phamacy Unsp International is growing even faster close to 30% but certain elements of international are profitable but some elements like for example Italy are not profitable and that's why the total of international is still at a negative adjusted EBITDA margin. We see no fundamental difference in the unit economics here and the only reason for being Then to the upper left, that's the first change, that's the PaperRx. PaperRx is even already having a higher margin than our NonRx and eRx will even have a higher margin than our PaperRx. So it's nicely at a good adjusted EBITDA margin. It used to decline by 30 to 20%. To the right of this graph, you see our investments that we have been doing and are doing in a couple of things. The NOW proposition and first A, that's clearly investments in that proposition for our customers. The MET app is entering a new market, namely the RX market in the Netherlands. and the owned marketplace that's now live in Germany and in Austria that's actually a promising new possibility for new revenue and new income and also an addition to our overall proposition. Now discussing all the bubbles of course all the elements I just discussed benefit from our growing share of our successful own brands but the key message from this slide is we are investing in growth in our base In our base that is already operating at a positive adjusted EBITDA margin and at the same time we are making investments in other growth opportunities for the mid-term. The next one please. Now back to the bridges for the gross profit margin and later the S&D as a percentage of sales. So as I said already we have an but that's not impacting the 27.1% that we reported after six months. Starting at the left, again, we are very happy with showing you sourcing improvements that we have been able to show you for many consecutive quarters of 0.5% compared to the same period last year. 0.5% better sourcing conditions, more direct deliveries instead of via the wholesale. was a negative one and this is mainly reflecting that in a couple of our markets we have passed on the underlying cost price inflation slower or not entirely to our customers. The next one to me is not so relevant with the mix of RX and OTC because the flip side of this is often in the S&D. So all in all strong improvement in line with what we have shown in recent quarters. On the other hand, there is a significant increase of the selling and distribution expenses as a percentage of sales. Marketing is explaining more than half of it. Of course, there is an apple and orange in comparing this number to last year, because last year, particularly the first quarter of the year, was a full lockdown Covid quarter. Phamacy Unsp&Adr Phamacy Unsp&Adr Phamacy Unsp&Adr have been spending this marketing very effectively. At the same time, this number is also impacted because of international growing faster than DAG. All these numbers, all the four blocks you're seeing here, are impacted by the fact that we have a slightly lower basket in a certain trend. And if you compare quarter two to last We saw some indication in Q1 that customers tended to leave an item of non-essentials outside of the basket, but we did not really see that in Q2. So the decline in year-over-year baskets, we could not attribute to a slowdown in customer confidence. And actually, we saw from Q1 to Q2 a slight increase as a result of the actions we took to focus on the What we are seeing in the year-over-year comparison is the fact that we have more younger customers, and younger customers tend to have a smaller basket. And we also see that we are successful in getting more people to mobile, but also mobile tends to have lower average baskets than from desktop. So that average basket is impacting the cost performance. And then, of course, also we have not been immune for certain increases because of inflation We aim for this to be a green one, a year-over-year improvement in the upcoming Q3 and Q4. Next please. And then cash. So luckily with cash we don't talk about adjustments, ongoing operations and all kinds of other things. Cash is what it is. When we counted our better and we had this amount with in total 31 million of investments. This included the acquisition of First A where we paid 5 million and the remaining is regular CAPEX, particularly IT, but also the opening of a new distribution center and regular PP&E. The first two blocks together, that's the operating cash flow. Underlying improvements that we achieved but there's also seasonality in it where in the quarter four we will probably need to increase our inventories as pharmacies always do because of the winter before the autumn all in all a positive operating cash flow we have been investing and we had the total financing that was slightly lower in total cost as last year I think we go to you again

So for the coming minutes, I want to give you brief updates on a couple of topics that are of strategic relevance. Of course, first and foremost, where do we stand with electronic prescriptions in Germany? Secondly, what is the status of our forays into the Italian market? And finally, what is happening with our marketplace? So, starting with electronic prescriptions. I'm repeating myself there. We've successfully concluded the test phase. It's old news. More important, a couple of days ago, Susanne Ozykowski from the German Health Ministry could declare that we passed the 100,000 mark of redeemed e-prescriptions, e-prescriptions that have been issued and Now looking into the future, the rollout of e-prescriptions in Germany, the start of e-prescriptions in Germany is going to start on the 1st of September in two regions in Westphalia-Lippe, which is part of North Rhine-Westphalia and Schleswig-Holstein. These two regions cover around 11 million people in Germany or 14% of the German population also as of the 1st of September all pharmacies in Germany local pharmacies but also online pharmacies will be ready to accept and to process electronic prescriptions on the 1st of December a second Phamacy Unsp & Adr we are receiving electronic prescriptions. Our processes, our systems continue to work flawlessly and we can't wait to get started to move full steam ahead with the go-live of e-prescriptions in Germany. So just a couple of words about the electronic health card or the EGK. The EGK will be one of the three means for patients to transmit electronic prescriptions to the pharmacy of their choice besides the Gematik app and paper printouts and then patients taking a picture of the QR code and sending it again to the pharmacy of their choice. We as Shop Apotheke of course we are supportive of all options if they are safe, if they are convenient for patients to transmit electronic prescriptions and the EGK could play an important role in this contract. As Shop Apotheke we support our industry association, the EAEP or the European in their discussions with the German Health Ministry to ensure that all options including the EGK option will be non-discriminatory in nature and are not going to limit to constrain the freedom of patients to choose their preferred pharmacies when they want to transmit an electronic prescription. At this point of time, the EAEP is in discussions with the German Health Ministry to ensure that an option eventually is implemented that will also allow online pharmacy, that will also allow Shop Apotheke Europe to fully partake in the EGK opportunity or the EGK pathway. Well, the second topic, Italy, we mentioned in the past that Italy is an important market for shop apotheke in terms of the sheer size of the market. Italy is the, after Germany and France, is the third largest pharmacy market in Europe. In terms of the sheer size Italy is important for us Italy has a very low online Penetration rate in the pharmacy space. It's still in the single digits and the online space from a competitive perspective is still pretty fragmented in order to serve our customers in Italy better. We already mentioned this. We opened our new distribution facility in early July. The first package left the new facility on the 4th of July and as of this week all customer orders are going out from our Settala facility near Milan. This results in significantly shorter delivery times. This is something that will be in Italy and it also significantly reduces the carbon footprint of our business in Italy. Well, and the last quick update I wanted to share with you is on the marketplace. You might remember that we went live with our marketplace in Germany last December. Since then, we have been busy onboarding new merchants and onboarding new products. As of the end of July, we were offering an additional 40,000 products to our customers in Germany through our marketplace. Just to put this into perspective, in total, before we launched the marketplace, we were offering around 100,000 products to customers in Germany. As of today, and this is growing on a daily basis, we are already offering to customers in Germany. At the end of June, I think on the 29th of June to be precise, we started, we launched our marketplace in Austria initially with 5,000 products but similar to what we have seen and will continue to see in Germany, the product assortment, the number of products we offer through our marketplace partners is going to grow rapidly over the coming weeks and over the coming months. And of course, Austria is not the last market in which we are going to operate a marketplace. The marketplace will, over the coming years in the future, is going to account for a growing and a significant part of Shop Apotheke's overall business. And of course, coupled with very attractive unit economics, Well, and that's what I wanted to share with you. I hope I could convey to you that we have a strategy, a detailed roadmap for implementing our strategy. We are reliably executing against this roadmap. We are ready for e-prescriptions. We make progress in markets beyond the boundaries of Germany and we're expanding our marketplace business. There's a lot of other stuff that's going on. Medication management will become very important in the context of electronic prescriptions. We continue to improve our same day offering via our NOW program. We continue to work on cooperation with other healthcare providers. But again, these might be subject to future updates in the context of future earnings releases. Well, I think that's what I wanted to share about some strategic

So the last slides are for me. The guidance, if you can go to that slide please. So we know of course that many, many things have changed since we gave our guidance. Geopolitical, customer confidence, inflation, inflation from the perspective of the end consumer and inflation from our cost base and also interest increases. based upon the start of July and based upon the visibility to the extent that we can have for the second half of the year, we can confirm our full year guidance on all elements. And to repeat what our full year guidance is, we think that this more than a billion base of non-RXM, more than a billion sales of Phamacy Unsp & Adr

Thank you. If you would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star 1 to ask a question. We will pause for just a moment to allow everyone an opportunity to signal for questions. We will take our first question. Christopher Jones from SSBC. Your line is open. Please go ahead. Christopher Jones Yes, good morning, guys.

Thanks for taking my questions. I'd like to take them one by one if possible. First on the current trading, I mean, the quarter is almost done. Just be interesting to hear your views as to, you know, how the quarter has been going. I'm particularly curious whether international could also grow 30% or more in the current quarter, so any color you have. I think you also gave a comment with respect to 10 million a month on PRX. The line was bad on that one for me, so maybe you could repeat that comment as well.

Hi, Christopher. Good to speak to you again. You're saying the current quarter is almost done. Probably you mean the current month. We just had July. It's a bit forward looking what you were saying, but I can repeat what I just said. We started well in July. Of course, we can only talk around sales there. So actually, if you look into the details of quarter two, April was a bit challenging for us, but May and June were stronger. And with the strength of the end of quarter two, we entered July. And up to now, we don't see any peculiar changes ongoing there in the trading environment. So that's continuing. in line with what we just explained. PaperRX, 10 million per month. It's not really worthwhile, I think, in the big scheme of things to give a lot of color there. If I bring it to a like, International being able to grow faster. We only give guidance on the total company perspective. In the preparations for the opening of the distribution center, there was some, both in June, but also in July, which is in the next quarter, and we had a certain slowdown

Got it. Then my second question on the electronic health ID. I mean, this is arguably super important, right? I mean, if this is established as the primary means that people will get their e-script and you're sort of, quote unquote, cut off from that, this could have a material impact on the total addressable market. So I'm just trying to pick your brain here in maybe as much detail as you can get at this point to understand it. You know, we had this last quarter already discussions about, you know, trying to establish the non-discrimination also by forcing legal action. Yeah, maybe there is some incremental color you can give you because this seems to be going ahead. And, you know, what I can't fully grasp is whether essentially the government could say, look, you know, there's two other ways, two other methods to get the e-script, you know, to you guys. You know, the paper is perfectly fine. The gematic app is working. So if you don't have a soft token on the EGK, you know, that doesn't really prohibit anything. So I'm just trying to pick your brain on that angle.

Christopher, at this point of time, nobody knows. We have three pathways. We have the Gematik app, we have the paper printout and the QR code, and we're going to have the EGK. At this point of time, nobody knows what patients are going to prefer in a couple of years from now. But let me try to add a little bit of color. The EAEP is in discussions with the health ministry right now. The Health Ministry was very receptive of the concerns and now in terms of the proposals that are being developed to ensure that this is non-discriminatory. If the EGK is going to play an important role in the future, all players need to be able to participate equally in this. At this point of time when you look at the timeline that the Gematik has communicated, the pilot is going to go live sometime in the fourth quarter and the EGK on a broad scale might be used sometime next year. I'm not familiar with any more precise timing at this point of time but that if this is a safe and convenient option, that we are in a position to participate in this as well.

Okay, got it. And then on the 25% number that came out last night and this morning with respect to the first phase of the trial in the first two test regions, It seems that everybody who's commenting on this so far seems to believe that 25% of the ERX as a percentage of the total scripts issued seems like a punchy number, and that could delay, you know, the sort of further rollout to the next six or seven states. So I'm just, yeah, I mean, I know it's another, you know, picking your brain question, very, very difficult to answer, but maybe you do have a view. Is it possible to achieve that 25% in two months, in your view?

Well, Christopher, this is, of course, a moving story. I just saw, but I haven't read it yet, that there seems to be some press release from the Gematica. I haven't read it yet, so I need to be a little bit more cautious. I don't know whether there's really a young term between phase one and phase two of the rollout that, you know, phase two can only start if these criteria have been met. Quite frankly, yesterday, when we heard that they're discussing about a 25% ERA is also a sign that now everybody believes in e-prescriptions. All the shareholders of Gematik are now also vocal about promoting e-prescriptions, making it happen. And I think to have an aim out there that 25% should be based on electronic prescriptions, I think in half a year, we're going to laugh about the 25% because I'm confident we're going to see a much faster adoption rate, whether we're going to see in the two tests E-Prescriptions in Germany with whether they're going to achieve this within two months. Again, it's speculative, but my understanding is it's not yet clear whether there's going to be a young term between achieving the criteria and moving to the next set of federal states in Germany.

Okay, that's fair. Then last question, I promise. With respect to market shares in the ERX, I understand that you guys do not want to disclose how many e-scripts you have processed so far. I mean, I'm sure most people on the call would probably appreciate the number, but I guess we can't force you. Maybe you can still give a little bit of color. I mean, you said you won market share. Did you also win market share in the ERX in your view? I'll try it this way.

We disclosed it in Q1 when we were presenting the full year numbers. It's just because we want to be transparent, we wanted to be clear, we wanted to substantiate that we all the time said that we were ready for year 8. So we said yes, we're ready, we processed, we got reimbursed from the insurance company, everything is working on our side from the customer. and there you release the number. What subsequently happened is that number was extrapolated a lot and we also consider it actually quite a sensitive information for competition also what the exact number is. So we already give you a lot of information by saying actually there's almost no day every day we receive these prescriptions at the moment so that's what we're saying at the moment and why this number if you would release it doesn't make any sense just two quick remarks on one end we are ready not all pharmacies are so then our share is too high On the other hand, we didn't do any marketing yet, so the number is too low. This is now, it was the test phase, and now the rollout is starting, and the number of what is your share in the total market only becomes relevant when we enter the next phases.

Okay, appreciate it. Thanks, man.

Thanks, Christophe.

We will take our next question. Alexandra Tew from Jeffrey, your line is open. Please go ahead.

Hi, Stephan and Jasper. Good to see you. I hope you can hear me. A couple of questions from my side, and I would also like to take them one by one. Secondly, firstly, on your first aid deal, we have seen in the cash flow statement the 5 million payment. Could you talk about the deal structure in general in terms of burnouts and the accounting timing for the cash flow? And secondly, I assume we have also seen it on the slides, first aid is still a highly diluted business. Could you clarify if this is already included in the full year guidance of the minus 1.5 to plus 1.5? Thank you.

Yeah, we disclose what we have to disclose in those deals. It was the half-year report and after six months, so we gave all the details in the interim report and indeed until now we paid five million for first aid, that's it. All the remainder is part of an earn-out and that depending on the results and we also have the opportunity if we want to There's nothing else to mention on this besides that information that you correctly took out of our disclosures. Your question on the guidance, in order to be as clear as possible, we gave guidance at the start of the year for what you could give guidance on. And by definition, we cannot include M&A there. So we gave guidance for the ongoing business at the moment there. That's what we also made explicitly, not that we suddenly do an acquisition and then we make, because of the acquisition, our sales guidance or something like that. It was that guidance. So that guidance relates to the excluding M&A activities that we're having. And that's, we reiterated the minus 1.5 to plus 1.5 adjusted EBITDA. On top of that, there's this relatively small acquisition of first aid, where we also, in the interim report set, That will, according to our best estimates, not have an impact larger than 0.5% of sales on our EBITDA in 2022. I think that's all. Yeah.

Secondly, on your current view of the market in general, how do you see competition, marketing and pricing developing in the third quarter so far?

Well, I think everybody is dealing with the cost price increases. You know, that also selling prices are following the cost price increases. You know, what we have seen with Shop Apotheke, we're seeing with some of our competitors with a certain delay. Besides this, there's nothing in the third quarter that would be, you know, surprising, you know, that would lead us to question again the guidance that we just reiterated.

Okay. Lastly, on the EDK, we know from several DEMATIC meetings that this is a clear priority for the BMG to make this discrimination-free in line with the BSI requirements. And the timeline seems to indicate that the project should go live end of Q123. And you're currently in very constructive discussions, I understand. But what if you don't find a solution for the EDK in time? Would you file an objection to block this way?

All three options need to be non-discriminatory, and they cannot constrain the choice of patients to choose to send e-prescriptions to their preferred pharmacy. And for the time being, Alex, I'll leave it at this. I think that's pretty explicit.

Okay, perfect. My last one would be, again, on the targets that we have seen coming out over the last two days, actually. So it's now official press release from the Gematics saying that in the three months of the first period you want to have 25%. Are you aware of any kind of incentive programs for the doctors? Is there anything planned that you know about?

Well, we know there's nothing from the Health Ministry or from the Gematik, at least not to our knowledge, but there is the initiative of the Irritate Enthusiasten. They continue to incentivize, they try to excite, to enthuse participating pharmacies and doctors to to start getting used to issuing e-prescriptions. Whether there will be a new program through the eRECEP enthusiasm, we don't know at this point of time. But again, to our knowledge, there won't be an incentive from the government.

Okay, perfect. Thank you.

We will take our next question. Jen Koch from Deutsche Bank. Your line is open. Please go ahead.

Hi, thanks for taking my questions. I would also like to ask them one by one. And I would like to start with your cost expectations. So I understand that you expect lower costs in H2 compared to H1, given that you rolled out your marketplace to Austria and opened your distribution center in Italy. Are you able to quantify, let's say, the tailwind you expect in H2 from sequentially lower costs

Phamacy Unsp & Adr

And then, secondly, on your margin guidance for 2022, would you be willing to trade off a few percentages of your top line growth in order to reach the midpoint of your margin guidance in 2022?

This is what ShopAvertake has been doing for 20 years. We always balance growth and investments in our margin. Not something changed from that, no. So there needs to be a fundamental good reason to take actions. And that was not in your question. We will do so when we think that the marketing is not effective or efficient, or it's not the right moment to do it, yeah.

Okay, understood. And then finally on the supply chain situation, so I heard from several pharmacists that it's increasingly difficult to get sufficient supplies of certain OTC medicine. Are you witnessing similar issues at the moment? And if so, does that slow down yourself?

Yeah, we also experience some supply chain challenges. At this point of time, when you look at the overall business of Shop Apotheke, it's not of a material nature. But again, we can predict what's going to happen in the future. We are, through our procurement department, in very, very close contact with all of our major suppliers. Some of the shortages, you know when you look at some of the especially the the infant or the children's carbon coal products You know, that's that's well known but even you know for for these types of products We are in the process of securing additional supplies So yes, we are not immune to what's happening in the world and what's happening to our competitors But at this point of time, it's not having a material impact on our business or our growth. I

Okay, great. Thank you.

We'll take our next question. Gerhard Ogonus from Bloomberg. Your line is open. Please go ahead.

Yeah, good morning. Just one question, please, on the EGK. Could you tell us, from a technical standpoint, are there any ideas already in the room to make the e-prescription on the EGK non-discriminatory? What have been any proposals, how you could technically solve that?

Yeah, I can answer in the affirmative. Yes, there are several options, but they're being discussed with the health ministry at this point of time. I don't want to jeopardize these discussions, so we can't say more about this. It's been loose. Do we have another question?

Yes, we will take our next question. Sven Sauer from Kepler, your line is open. Please go ahead.

Yes, hello, gentlemen. Just two questions from my side. Thanks for taking them. Also a follow-up question on the electronic health card. If there would be no solution and it would be rolled out as announced, that there were three transmission possibilities and online pharmacies would not be able to partake in the electronic health card transmission. Do you see a risk that your assumption for online penetration in ERX and also your medium-term EBITDA margin guidance would be of risk?

Sven, thank you for the question. I think I at least partially answered it already. All options need to be non-discriminatory. They cannot constrain the choice, the freedom of choice of our patients. And if that's not the case, you know, then we need to have a different discussion. But at this point of time, we remain convinced at Shop Apotheke and through our industry association that all options, including the EGK, need to be non-discriminatory.

Okay, thanks. And the second question is regarding also your margin guidance. I'm sorry if I didn't understand it clearly, but you are the minus 1.5% to plus 1.5%. This is excluding the first A acquisition effects. So, ultimately, am I understanding this wrong? You provide guidance for an adjusted EBDA, and then you are now defining a new adjusted EBDA, excluding first A. So, effectively, you're reducing your guidance. Am I understanding this correctly?

Thanks for asking the question. If that was not clear to you, then it's our mistake. It wasn't clear. We should communicate very clear. But it's totally incorrect what you are saying. It was at the start of the year, we clearly said that this is the guidance on all three elements for our continuing operations. We always said that, and it makes a lot of sense because the alternative would be that with every M&A transaction that you will do, you also need to revise your guidance. The guidance is based upon what we had as a business at the moment that we provided the guidance. And luckily, we are able, after six months, despite the challenges on all elements. On top of that guidance, we disclosed as much information as possible and as required on a swallow acquisition that we did. We did not change the definition of our guidance.

I mean, if you were to acquire a company and you would have a significant increase in sales, you would also adjust your guidance. So, I mean, to me, it's kind of a bit of a cherry picking here if you don't adjust it downwards.

Okay, I don't agree. I only agree with you that if it's significant, of course, you have to do something else. I do agree. But if it's a significant thing, then if your prior guidance isn't relevant anymore, then that's an item. But I hear what you're saying. But to me, the intention here was the contrary. The intention was to not cherry pick. The intention is to give a stable guidance that's not influenced by any M&A activities that could take place during the year.

OK, thank you very much.

Thank you.

Let us conclude today's Q&A session. I will turn the conference back to Mr Stefan Felton for any additional or crossing remarks.

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