medmix delivered on its growth commitment despite the turbulent political and economic environment. Revenue increased 10.2% year on year despite reduced manufacturing capacities caused by Covid-19 lockdowns in China and the suspension of operations in our Poland facility as a result of sanctions imposed by the Polish government.
In a context of global inflation, medmix profitability of 24.0% adjusted EBITDA margin is resilient and demonstrates strong relationships with our customers and the high confidence they place in our products. Our free cash flow generation of CHF 14.3 million reflects working capital requirements to fund our growth and ensure agility during the continuing challenging supply chain conditions.
Unless otherwise indicated, changes from the previous year are based on currency-adjusted figures.
“In a challenging environment, medmix delivered revenue growth at the top-end of its guidance and mitigated most of the inflation impacting raw materials and services. Our half year performance reflects the strength of our teams and the robustness of our business model.”
Jennifer Dean
Chief Financial Officer
Record revenue generation
In the first six months of 2022, medmix delivered revenue of CHF 250.6 million, up CHF 22.3 million from the prior year. The Healthcare business area grew 16.0% year on year, delivering CHF 101.9 million in revenue, with all market segments growing at double-digit growth. Supported by a strong opening backlog, Dental recorded CHF 71.3 million revenue, Drug Delivery CHF 23.8 million revenue and Surgery CHF 6.7 million revenue. The Healthcare business area represented 40.7% of medmix’ revenue.
The Consumer & Industrial business area grew 6.7%, with CHF 148.7 million revenue in this first half of 2022. Our Industry market segment was down 0.5% as the pandemic-related lockdown in Shanghai and the sanctions imposed in Poland temporarily decreased our manufacturing capacities. Backed by a strong order book and backlog, Beauty delivered 15.8% growth year on year.
Resilient business area gross profit margin
The business area gross profit margin was 47.8% in the first half of 2022, down 1.1 percentage points versus the same period last year, primarily due to the timing lag between the impact of inflation on raw materials and transport and customer price increases coming into effect.
The Healthcare business area gross profit margin was up 0.7 percentage points to 62.6%, benefiting from a 2.0 points uplift from projects in Surgery and Drug Delivery market segments. The underlying margins are -1.3 percentage points from the same period prior year, with the time lag to pass on inflation impacts to customers eroding margins.
The Consumer & Industrial business area gross margin was 37.7%, down 3.1 percentage points from last year. The business area was the most heavily impacted by the economical and political disruptions to the supply chain. Revenue was lower in China due to Covid-19 lockdowns and in Poland due to sanctions. Price increases have been agreed with our customers, and will be reflected in the gross profit margin after the existing backlog has been executed.
Solid profitability performance
medmix' adjusted EBITDA margin is 24.0%, 1.4 percentage points below the prior year. The main driver for this is the time lag in passing on cost inflation to our customers.
Bridge from operating income (EBIT) to adjusted EBITDA
January 1 - June 30
millions of CHF
2022
2021
Operating income (EBIT)
31.3
31.3
Depreciation
15.1
13.8
Amortization
10.2
11.2
Impairments on tangible and intangible assets
–
0.6
EBITDA
56.5
56.9
Restructuring expenses
0.5
0.2
Non-operational items1)
3.1
0.8
Adjusted EBITDA
60.1
57.9
1)Non-operational items include significant acquisition-related expenses, gains and losses from the sale of businesses or real estate (including release of provisions), and certain non-operational items that are non-recurring or do not regularly occur in similar magnitude.
Adjusted EBITDA margin
January 1 - June 30
millions of CHF
2022
2021
Adjusted EBITDA
60.1
57.9
Revenue
250.6
228.3
Adjusted EBITDA margin
24.0%
25.4%
Financial income and expenses
Interest expenses on borrowings and lease liabilities were CHF 3.0 million, down from CHF 4.1 million in the first half of 2021, after the successful negotiation of more favorable financing conditions.
Other financial income and expenses amounted to CHF -0.3 million in 2022, compared to CHF 0.1 million in 2021. The decrease is mostly driven by foreign exchange losses.
Income tax expenses
The effective income tax rate is 15.1% in 2022, compared to 16.6% in 2021. Income tax expenses decreased to CHF 4.2 million in 2022, from CHF 4.5 million in 2021, as a result of the lower effective income tax rate.
Key balance sheet positions
Total assets as of June 30, 2022, amounted to CHF 977.9 million, an increase of CHF 3.5 million from December 31, 2021. All balance sheet movements are compared to the year end balances as of December 2021, unless stated otherwise.
Non-current assets decreased CHF 15.7 million to CHF 619.0 million. Amortization of CHF 10.2 million on other intangible assets mainly contributed to the decrease of CHF 12.6 million. Lease assets increased by CHF 12.8 million, mainly related to the group's investment in a new Healthcare site in Atlanta, USA. Defined benefit assets decreased by CHF 6.9 million to zero due to a pension asset ceiling adjustment in Switzerland.
Current assets increased by CHF 19.2 million to CHF 358.9 million. Trade accounts receivable increased by CHF 23.2 million, driven by 10% higher revenue. In line with our growth strategy and to secure lead times, inventory increased by CHF 11.0 million. Cash and cash equivalents decreased by CHF 18.9 million.
Equity amounted to CHF 517.6 million on June 30, 2022, down by CHF 16.3 million. The dividend of CHF 20.5 million, currency translation differences of CHF 8.0 million and acquisition of treasury shares of CHF 6.1 million reduced equity. Net income for the period added CHF 23.8 million to equity.
Non-current liabilities decreased by CHF 3.7 million to CHF 319.4 million. Non-current borrowings decreased by CHF 12.2 million while the non-current lease liabilities increased by CHF 10.7 million, mainly related to our new Healthcare site in Atlanta, USA.
Current liabilities increased by CHF 23.5 million to CHF 140.9 million, mostly due to the outstanding dividend payments of CHF 5.5 million and normal seasonal pattern on other current and accrued liabilities. Current borrowings increased by CHF 5.4 million over the period.
Net debt increased by CHF 24.8 million to CHF 135.7 million.
Free cash flow supporting current and future growth
Cash flow from operating activities was CHF 26.4 million, down from CHF 47.9 million in the first half of 2021. Higher revenues and securing lead times resulted in an increase in working capital. Trade accounts receivable increased by CHF 24.2 million and inventory grew by CHF 12.2 million.
Cash out from investing activities was CHF 11.8 million, mostly related to purchase of property, plant and equipment.
Cash out from financing activities was CHF 32.8 million, including shareholders' dividend of CHF 15.0 million and purchase of treasury shares for CHF 6.1 million. During the period, current and non-current borrowings in the net amount of CHF 7.3 million were repaid.
Free cash flow in 2022 was CHF 14.3 million, down from CHF 33.6 million in the first half of 2021.
Bridge from cash flow from operating activities to free cash flow
January 1 - June 30
millions of CHF
2022
2021
Cash flow from operating activities
26.4
47.9
Purchase of intangible assets
–0.7
–0.3
Purchase of property, plant and equipment
–12.2
–14.4
Sale of property, plant and equipment
0.8
0.4
Free cash flow (FCF)
14.3
33.6
Outlook
Total revenue is expected to be in the range of CHF 460–470 million, in effect confirming the guidance issued earlier in the year for an 8 to 10% growth in revenue, adjusted for the one-off impact of CHF –30 to –40 million resulting from the Polish sanctions.
Guidance on adjusted EBITDA margin is lowered by 200 basis points from 26% to 24%, half related to the suspension of operations in Poland and half reflecting the time lag of price increases compensating for the continuing cost inflation across all market segments.
The medium-term aspiration, a compound annual growth rate (CAGR) of 8% in revenue and an adjusted EBITDA margin of 30%, is confirmed. To achieve such growth and profitability, we will continue investing in R&D at average of 5% to 6% of revenue.
Abbreviations and definition of alternative performance measures (APMs): CAGR: Compound annual growth rate EBIT: Earnings before interest and taxes EBITDA: Earnings before interest, taxes, depreciation and amortization For the definition of the alternative performance measures, please refer to the medmix annual report 2021, chapter alternative performance measures.
