Redcare Pharmacy Q3 2024 $RDC (-4,75%)

Financial performance

• Sales growth: Group sales increased by 33.8% to EUR 1.7 billion in the first nine months of 2024. Excluding MediService, growth amounted to 23 %.
• Growth in non-prescription products: Sales of non-prescription products grew by 20 % to 1.2 billion euros.
• Prescription sales in Germany: Growth in prescription drugs was particularly notable, with an increase of 7 % in the first quarter, 37 % in the second quarter and 81 % in the third quarter.

Balance sheet overview

• Total assets: Remained stable at 1.0 billion euros, unchanged compared to year-end 2023.
• Current assets: Increased by 16.6 million euros to 516.1 million euros, with inventories rising to 142.4 million euros.
• Cash and cash equivalents: Increased to 99.4 million euros.

Details of the income statement

• Adjusted EBITDA: Increased slightly to 38 million euros in the first nine months of 2024.
• Gross margin: Decreased year-on-year from 25.2% to 23.3%.

Cash flow overview

• Operating cash flow: Positive at 39.1 million euros, compared to 69.6 million euros in the previous year.
• Investing activities: Net amount of -9.3 million euros.
• Financing activities: Outflow of 14.9 million euros.

Key figures and profitability metrics

• Adjusted EBITDA margin: Decreased to 2.3% year-to-date.
• Sales and distribution margin: Improved to 18.2% from 19.4% year-on-year.

Segment information

• DACH segment: Sales of 1.376 billion euros with a gross profit of 315.5 million euros.
• International segment: Sales of 319.4 million euros with a gross profit of 79.8 million euros.

Competitive position

• Market share in Germany: Doubled from January to the end of the third quarter, with further acceleration into the fourth quarter.

Management forecasts and comments

• Management updated the full-year guidance on October 3, pointing to strong e-Rx metrics as the basis for the accelerated development.

Risks and opportunities

• The report highlights seasonal effects and general business expansion as factors impacting trading and other liabilities.

Summary of results

The company showed robust sales growth, particularly in the prescription segment in Germany. Despite a slight decline in gross margins, the overall financial position remains stable, with increased cash resources. The company is strategically well positioned to benefit from the growing e-Rx market, which is reflected in the increased market share. Nevertheless, the decline in operating cash flow and the need for continued investment in IT and infrastructure indicates areas that need to be carefully managed financially.

Positive Aspects

• Strong sales growth: The company recorded significant sales growth of 33.8% in the first nine months of 2024, with total sales of EUR 1.7 billion. This growth was driven by both prescription and over-the-counter sales.
• Increased market share in Germany: The company's market share in the German e-Rx segment increased significantly from 0.27% in January to 0.66% in October, indicating a strong competitive position.
• Growth in cash and equivalents: Cash and cash equivalents increased to €99.4 million, reflecting a solid liquidity position.
• Improved sales and distribution margin: The sales and distribution margin improved to 18.2% from 19.4% in the previous year, indicating better cost management in these areas.
• Expansion of the customer base: The company added 1.4 million active customers year-on-year to reach a total of 11.9 million active customers, supporting future revenue growth.

Negative aspects

• Decline in gross margin: Gross margin decreased year-on-year from 25.2% to 23.3%, which could indicate pricing pressure or increased cost of goods sold.
• Decline in operating cash flow: Operating cash flow decreased to €39.1 million compared to €69.6 million in the previous year, indicating potential challenges in generating cash from operations.
• Lower adjusted EBITDA margin: The adjusted EBITDA margin fell to 2.3% year-to-date, indicating reduced profitability.
• Increase in trade and other payables: There was an increase in trade and other payables of €23.7 million, which could indicate higher liabilities due to seasonal effects and business expansion.
• Higher capital expenditure: Net expenditure on investing activities amounted to -9.3 million euros, indicating increased capital expenditure. This could put pressure on cash reserves if it is not accompanied by corresponding sales growth.