other business areas
In the Netherlands, we combined our Dutch pharmacy activities with those of Phoenix in Brocacef Holding at the end of November 2010. This step has enabled us to strengthen the position of both companies on the Dutch pharmacy market by leveraging volume and synergy effects. At present, we hold a 45% interest in Brocacef Holding. With 116 of its own pharmacies at present and around 76 run by franchise partners, the company is ranked second on the Dutch pharmacy market. Starting from 1 December 2010, the investment in Brocacef is included in Celesio’s consolidated financial statements as an associate under other business areas. Other business areas also comprise the pilot online portal for healthcare services, which had been planned for 2011 but has since been discontinued.
business development
Overall, the development of business with prescription pharmaceuticals and services was weak in almost all markets in the 2011 fiscal year, due to govern- ment austerity measures. The otc business fell short of our expectations. We continued to struggle with the tense general economic situation, which directly impacted private demand in the uk and Ireland in particular.
As in the previous year, growth was focused outside of the uk. We are now represented in seven countries with 2,281 retail pharmacies of our own. Of these, 49 pharmacies are new as of 31 December 2011, including 31 in Sweden. We closed or sold 45 pharmacies, mainly in the uk, as part of our endeavours to optimise our portfolio.
change in the number of pharmacies
in the 2011 fiscal year
Number of pharmacies as of 31/12/2010 New pharmacies opened Acquisitions Closures/
disposals pharmacies as Number of of 31/12/2011 2.277 43
45
6 2.281
lloydspharmacy
The uk remains by far our most important pharmacy market. Besides govern- ment measures, we were burdened in particular by our realignment in this market (especially measures to optimise our product portfolio) as well as the poor economic environment overall. Positive factors affecting business in the uk were the small but steady increase in the volume of prescriptions and the growing number of supply agreements with institutions such as hospitals, health centres or correctional facilities.
We benefit here from the special conditions of the British healthcare system. Unlike many other countries, the uk actively promotes outsourcing and privati- sation in the healthcare system with the aim of securing major savings in public healthcare. This means that private companies can be more heavily involved in the national healthcare system. The uk government’s plans for reform, laid down in the Health and Social Care Bill, even provide for equality in the status of private and public providers in the healthcare market. In future, public institu- tions, charitable organisations and private companies will all be equally entitled to provide their healthcare services to the nhs.
The current optimisation programme for Lloydspharmacy was implemented as planned. The programme is consumer-oriented with the aim of providing even better service and advice. Measures included streamlining the product range, launching further price campaigns, a more customer-friendly website and longer opening hours. The realignment burdened earnings by around eur 16.0m in 2011.
docmorris
Norway – where we are represented under the name Vitusapotek – remains our most important pharmacy market for DocMorris. Here, business with prescription pharmaceuticals saw a modest development with a slight increase in volume. Once again, we felt the negative impact of the step price model, which was introduced in 2005 and regularly leads to price reductions for active agents not protected by patents – mainly generic medicines. Revenue with otc products fell short of expectations, but improved in the last quarter. We were pleased with sales of skincare products, which we also offer under our own brands in Norway.
Despite further government austerity measures, our Italian pharmacy busi- ness developed relatively well, outperforming the market. Our focus on non- price-regulated products proved positive here. Moreover, we officially launched our DocMorris brand in Milan and Bologna in the autumn – as of the end of the year 2011, we are represented under this name in 22 locations.
As expected, our Irish pharmacy business also developed negatively in 2011, although not as much as the market as a whole. The major contributory factors were dramatic cuts in reimbursement prices for medicines and reductions in the pharmacy compensation. Ireland’s economic situation also impacted our business with otc products. The 27 newly converted DocMorris pharmacies comfortably outperformed the market. Over a third of our Irish pharmacies have now successfully switched to the DocMorris concept.
The Belgian pharmacy market suffered as a result of the financial and economic crisis, coupled with the relatively high surcharge for visiting the doctor. However, we managed to expand business with retirement homes and similar institutions and were able to look back on a slightly positive develop- ment in sales of non-prescription products. Business development was less than satisfactory overall. We closed ten pharmacies and sold two in 2011 as part of our endeavours to optimise our portfolio.
The Swedish market failed to live up to forecasts, performing less strongly than expected across the board. DocMorris was affected by this development and fell well short of our expectations in terms of revenue and earnings. Against a backdrop of negative market conditions, this was also attributable to the fact that some locations developed more slowly than planned. We consequently closed twelve pharmacies that had opened in 2010 and 2011. We have also put together an extensive catalogue of optimisation measures with local manage- ment. We now have a total of 69 pharmacies in Sweden.
Our Czech pharmacy business struggled in a weak market environment that was compounded by government price cuts for prescription medicines.
Internal restructuring and efforts to strengthen sales were reflected in the satisfactory development of franchise activities in Germany. We saw a slight increase in participants in our brand partnership scheme.
Our mail-order business, which is registered in the Netherlands but focuses on Germany, also fared better than the market in general. DocMorris saw revenue climb by around 16% overall – a clear improvement on the market volume, which only saw a slight increase in the same period. The mail-order business was buoyed by a combination of new customers and a higher volume of individual orders, with the focus remaining on business with prescription-only pharma- ceuticals. Extensive marketing measures and an overhaul of the website had a positive impact on revenue with otc products. In 2011, the DocMorris website was chosen by public vote as the winner of the renowned OnlineStar in the healthcare website category.
other business areas
As expected, our investment in Brocacef exhibited a positive development despite the tough market environment.
Our Pharmacy Solutions division focuses on the needs of pharmacists, providing all the products and services that they require for success. Our full-line pharmaceutical wholesale business is at the heart of this division. Wholesale will remain one of the fundamental pillars of our new strategy. Pharmacy Solutions also comprises smaller, rapid-growth business areas offering complementary products and services for pharmacists.
Revenue and earnings development
revenue
The Pharmacy Solutions division generated revenue of eur 18,819.3m in the reported period (previous year eur 19,019.7m), a year-on-year decrease of 1.1%. Adjusted for currency and portfolio effects, revenue fell by 1.6%. This development can primarily be attributed to weaker markets in general, govern- ment measures and ongoing pressure from competition in France and Germany. The Wholesale business area made the largest contribution to revenue, accounting for eur 18,814.3m (previous year eur 19,014.4m).
revenue pharmacy solutions
eur m
17,730.4 17,213.6 17,542.3 19,019.7 18,819.3
2007 2008 2009 2010 2011