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