Report on the 1998 financial year Meda AB

Report on the financial year Report on the 1998 financial year Meda AB (publ) Sales increased to total SEK 554 (496) M. Operating income totalled SEK 2.3 M, exclusive of non-recurring items totalling SEK 21.0 M, while it was SEK - 18.7 (19.7) M including these items. Income after net interest income/expense was SEK - 20.3 (18.2) M. The earnings per share was - 8,06 (4.74). The Board of Directors proposes that no dividend should be distributed for 1998. The large number of company deals - mergers, alliances and acquisitions - that have taken place in the industry have resulted in some of the pharmaceutical, nutrition and medical devices companies with which Meda previously collaborated changing the orientation or scope of their operations in the Nordic area. Products which were previously marketed by Meda have instead been transferred to these companies' own subsidiaries in the Nordic countries. Examples of these changes include Meda's assignments on behalf of Solvay and Knoll, which explain most of the decline in profits for 1998. In 1998, a strategy for improving profitability in the future was established. Enormous efforts are being made to continue to adapt the organisation, intensify the acquisition of new products, strengthen relationships with principals and continue to develop the resources for marketing and sales. Even if the ongoing transitional process is taking place while pressure is being exerted on the group's profitability, the agreements on new assignments and products which have either been concluded or for which negotiation are well under way, together with the registration applications that have been submitted, are creating grounds for believing that a positive trend has begun. Sales Sales totalled SEK 554 (496) M. This positive trend is largely due to an increase in the range from Knoll of Germany and Galderma of France, plus an increase in the sale of products for Ballard of the USA, Dr Falk of Germany and Fresenius of Germany. MediNet's sales in the Baltic, which have been consolidated since 1 September 1998, totalled SEK 9 M. Starting with this report, Meda will be presenting sales distributed by business unit. Of Meda's total sales, Pharma accounted for SEK 252 M and Hospital Care for SEK 172 M. Sales of the ranges from Solvay Pharma in Sweden, Denmark and Norway and Knoll in Sweden, where Meda currently only handles the logistics and the administrative and medical services, totalled SEK 121 M. Results Operating income in 1998 was negative, SEK - 18.7 (19.7) M. The result has been charged with non-recurring items totalling SEK 21.0 M. This means that the result generated by operations in 1998 was SEK 2.3 M. The lower margins which have resulted from the change in the partnerships with Solvay and Knoll had a negative effect on the result totalling some SEK 20 M, compared with the preceding year. In addition to the previously-mentioned structural costs of around SEK 8 M, a reservation for additional non-recurring costs of SEK 13 M has been made in the final accounts, partly for severance pay and pensions for two leading executives and partly for structural costs relating to contracted surplus rent. Income after net interest income/expense was SEK - 20.3 (18.2) M and income after estimated tax was SEK - 19.5 (11.5) M. Financial position On December 31st 1998, liquid assets totalled SEK 16.8 (35.1) M. The equity/assets ratio was 34 (45) per cent. Dividends totalling SEK 8.5 M were distributed during the period. On December 31st 1998, net interest-bearing liabilities totalled SEK 37.1 (10.1) M. Net investments in fixed assets totalled SEK 16.4 (14.2) M, SEK 12.7 M of which related to the shares in MediNet International Ltd. Dividend proposal The Board of Directors will submit a proposal to the Annual General Meeting that no dividend should be distributed for 1998. Future prospects The strategic reorientation and cost adaptation which began in 1998 will continue in 1999 with the aim of significantly improving profitability from financial year starting in 2000. The year 1999 will, however, be characterised by continuing pressure on profitability. The commitment to business development will result in additional licence agreements within the pharmaceutical sector and new agency agreements, first and foremost within the field of medical devices. Important events Business Meda signed a letter of intent with Access Pharmaceuticals of the USA relating to a licence agreement for amlexanox, a substance for the treatment of aphthous ulcers in the mouth. This agreement relates to the Nordic and Baltic markets. Meda utilised its option to take over 100 per cent ownership of MediNet International Ltd prior to the final date. MediNet runs operations in Estonia, Latvia, Lithuania and Russia and was consolidated in the Meda Group on 1 September 1998. Meda signed an agreement with UreSil of the USA relating to the marketing of drainage products for interventional radiology in Sweden, Denmark and Finland. Meda signed an agreement with Pronosco of Denmark involving the marketing and sale in the Nordic countries of the Pronosco X-posure System, a system for measuring brittleness of bones (osteoporosis). During the year, the partnerships with Knoll of Germany and Du Pont of the USA were extended to include MediNet and the Baltic market. At the end of 1998, the partnerships with Reckitt & Colman of the UK and Merck/Lipha of Germany were terminated. An agreement involving the joint ® marketing of Glucophage , a drug for the treatment of diabetes, has been reached with Merck/Lipha. The partnership with Pasteur Mérièux involving the Swedish market was terminated at year-end. It will continue as before in Norway and Finland. Sales for the partnerships which are being terminated totalled SEK 50 M in 1998. Strategy and development During the year, a strategic action programme for the period 1998 - 1999 was drawn up with the aim of creating long-term growth and greater profitability for the company. This programme includes strengthening the relationship with principals, greater Nordic co-ordination, intensified business development, cost cutting and an even more intensive commitment to marketing and sales. Organisation and personnel During the year, work began on combining the staff and operations of the two Swedish companies to create one company. During the final quarter, Meda implemented a rationalisation programme which resulted among other things in staff cutbacks involving some 40 jobs within the group. As one part of Meda's cost-cutting programme, the post of deputy managing director has been discontinued. Jan-Olof Ohlsson has been appointed as the company's new economy and finance director. He was previously responsible for Business Control at Meda AB. Ownership structure During the year, Stena Sessan Rederi AB acquired 508,900 shares, corresponding to 21 per cent, in Meda AB. At an extraordinary Annual General Meeting at Meda, Bert-Åke Eriksson and Anders Lönner were elected as members of the board. On 20 January 1999, Anders Lönner left Meda's board at his own request. At the Annual General Meeting in April, it was decided that a nomination and replacement committee should be set up. Events after the end of the period Following the acquisition of Pharmacia & Upjohns's nutrition operations, Fresenius of Germany has decided to leave Meda at the end of 1999. In 1998, Meda's sales of this nutrition range totalled SEK 25 M. Dr Falk of Germany has extended its partnership with Meda by signing a new ten-year agency agreement which relates primarily to gastro-intestinal ® products. For the past couple of years, Meda has been marketing Ursofalk for the treatment of gallstones and, within the next year, the introduction of a new product for the treatment of inflammatory intestinal diseases is planned. In 1998, sales of Ursofalk totalled SEK 13 M. Annual report The annual report will be published on 3 March 1999 and can be ordered from Meda AB, phone +46 31 701 28 00. Financial reports The interim report for January - March 1999 will be published on 22 April 1999. The interim report for January - June 1999 will be published on 10 August 1999. The interim report for January - September 1999 will be published on 20 October 1999. Annual General Meeting The Annual General Meeting will be held on Wednesday, 24 March 1999 at 5 pm in the Wallenstamsalen, Ostindiska huset, Norra Hamngatan 12 in Göteborg. Göteborg, 10 February 1999 Board of Directors This report on the financial year has been reviewed by Meda' auditors. Meda develops profitable partnerships in the Nordic and Baltic areas in collaboration with international producers of pharmaceuticals, nutrition and medical device products. With our thorough knowledge and our expertise in marketing and sales, we offer benefits to the health and medical care sector at the same time as we promote our own and our partner's growth and development. Summary of the consolidated profit and loss account SEK M October - December The year 1998 1997 1998 1997 Net turnover 157.4 138.3 553.8 495.6 Cost of goods sold -110.6 -90.3 -378.6 -310.9 Gross profit 46.8 48.0 175.2 184.7 Sales and administration costs -47.9 -44.7 -177.1 -169.8 Items affecting comparability -21.0 -1.8 -21.0 -1.8 Other operating income 0.4 0.9 4.2 6.6 Operating profit -21.7 2.4 -18.7 19.7 Net interest income/expense -0.1 -0.1 -1.6 -1.5 Profit after financial items -21.8 -2.3 -20.3 18.2 Tax 2.3 -1.0 0.8 -6.7 Net profit -19.5 1.3 -19.5 11.5 Summary of the consolidated balance sheet december 31st SEK M 98 97 Current assets 101.3 101.1 Fixed assets 226.9 197.9 Total assets 328.2 299.0 Liabilities and shareholders' equity Equity 110.6 135.4 Allocations 40.0 33.3 Ling term liabilities 27.7 19.0 Current liabilities 149.9 111.3 Total liabilities and shareholders' equity 328.2 299.0 Key figures The year 1998 1997 Operating margin, % Negative 3.9 Profit margin, % Negative 3.6 Return on capital employed, % Negative 12.6 Return on equity, % Negative 8.4 Equity/assets ratio, % 33.7 45.3 Rate of stock turnover, times 5.5 5.5 Profit per share, SEK - 8.06 4.74 Equity per share, SEK 45.75 56.01 Cash flow per share, SEK - 8.65 8.83 Net worth per share, SEK 47.30 56.00 Number of shares 2 417 298 2 417 298 Operating profit per quarter and year Operating profit based on rolling 12-months (MAT) per quarter and year th Göteborg, February 10 , 1999 Report on the financial year Enclosed you'll find our report on the 1998 financial year. For further information, please contact Göran Pettersson Managing DirectorPhone +46 31 701 28 01 or 70 445 03 01 Annette Johansson Public Relations Manager Phone +46 31 701 29 04 or 70 445 03 00 Best regards, Meda AB Annette Johansson Public Relations Manager ------------------------------------------------------------ Please visit http://www.bit.se for further information The following files are available for download: http://www.bit.se/bitonline/1999/02/11/19990211BIT00220/bit0001.doc http://www.bit.se/bitonline/1999/02/11/19990211BIT00220/bit0002.pdf