Dear ladies and gentlemen, welcome to the conference call of Sohozoku Bay G. At our customers' request, this conference will be recorded. As a reminder, all participants will be in a listen only mode. After the presentation, there will be an opportunity to ask questions. I I now hand you over to Walter Oberhemski, CEO, who will lead you through this conference.
Please go ahead, sir.
Thank you very much. Good afternoon, everybody. Welcome to the ROCE 2019 results call. I'm joined by Marcel, who will discuss the details of the results in a moment, but also Olaf, who will give you an update on the developments around electronic prescription opportunity in Germany, but also integration and synergies. I will give you a strategy update as well as an update on the impact of the coronavirus on our industry and us in particular.
But first, let me briefly look back at 2019 and give you a broad view of the progress we made and some of the challenges we faced before handing over to Marcel for a review of our financial performance. Overall, 2019 was very active and also successful year with very strong top line growth of German Association of General Practitioners and the German Association of Specialists, but also crew with regards to the e script introduction in Germany and with CSS in Switzerland, where we launched a future oriented insurance model with relevant customer benefits. A notable challenge was the continuation of the discussions around the Rx bonus ban in Germany, even though we are confident and convinced that this bonus ban will not come into effect. My personal highlight of the year also occurred in Germany with the enactment of the law to introduce electronic prescriptions. The introduction of the e script has the potential to be the major game changer to determine our Rx market, and we are ready to take full advantage of this development.
Olaf will discuss that in detail later in the presentation. I'm fully convinced that this is the starting point for the long awaited game change within the German pharmacy market. Over the last weeks, the spread of the coronavirus has been the predominant topic in all channels. It is impacting all of our lives, and we are closely monitoring the developments. As of today, I'm not aware any cases affecting on one of our employees.
The operations at all our sites are running quite smoothly given the circumstances and the taken internal measures. What we have seen as an immediate impact is a significantly increased volume at all of our brands and in all segments. Obviously, it's now too early to fully assess the full year effect. However, we see a clear push in acceptance of digital services in the broader public and especially in digital health related areas. The digitalization in health care and especially in the pharmacy field obviously takes place anyway, but the virus is accelerating this move and also the shift from online to offline offline to online, excuse me.
The wireless will catalyze especially the electronic prescription in all of our segments. Therefore, we are getting massive tailwind in our business already short term. As an example to make, we are seeing a largely increasing number of new Rx customers in Switzerland sending in their prescriptions via fax because people want to stay safe and their medicine to be delivered to their home. If I may cite The Economist as just one example of the current news coverage, the COVID-nineteen epidemic has brought millions of new patients online. They are likely serious, and it is our task to manage through this very dynamic time via making sure that all our warehouses stay fully operational and cope with the largely increased additional volumes.
Picking up on the additional volume, I would like to share with you some preliminary data and evidence as to the current impact on our operations. Please take note that we are not drawing any conclusion from this initial data points on our quarterly or annualized basis. On the demand side, we are winning new customers by the 1,000 on a daily basis and in all regions. We see an increased demand of up to 100 percent in the last few days. So also is meeting these new peaks of demand a capacity
reserve of
50% among our 5 hubs in Germany and in Switzerland as well. In terms of staffing, we are increasing our employee numbers, offering opportunities to employees affected by the crisis elsewhere. We are taking the social responsibilities that we have in Switzerland, Germany and Europe very serious. Overall, we think that the coronavirus will be very generally spoken a catalyst for our business model and especially for electronics prescriptions. I'd now like to hand over to Marcel, who will summarize the financial performance in 2019.
Good afternoon from my side, and thank you, Walter. Let me also start with a look back. As you can see, we achieved what we said we would with sales growth of 32.8 percent in local currency, we achieved our sales target above SEK 1,600,000,000. Due to the exchange effect, total sales amounted to SEK 1,560,000,000. We achieved also the target of an EBITDA margin in line with 20.18 at minus CHF 13,800,000, which equals minus 1.0%.
Let's look at this in more detail, starting with group sales. Sales increased by an impressive 30%, in line with our guidance. The biggest contribution came obviously from Germany, where we were able to grow sales, including MedTech, at 45.4% in Swiss francs and above 50% in local currency. This number resulted in a challenging environment driven by OTC competitiveness and also reduced Rx marketing. In Switzerland, despite regulatory price cuts having a negative effect of around 3% on our sales, we achieved a growth rate of 5%, driven by good performance from the professional service and a slight decrease in the B2C segment, mainly driven by the declared price cuts.
In segment Europe, we achieved sales of CHF 30,800,000 growing over 50% in Q4 2019, and we continue expansion outside Germany and our home country, Switzerland. Next, I want to share the pleasing developments of the KPIs of our B2C and Marketplace business combined over all segments. The number of customers rose from 4,300,000 to 7,000,000 and increased by 61% compared to the 12 month period ending 31 December 2018. The increase was obviously also Due to the high growth in the German OTC as well as the marketplace business compared to RX and P2C Switzerland, the basket size on the bottom right side slightly decreased from €61,000,000 to €57,000,000 The same holds true for the order frequency, which is now at 2.4x this year. Though our repeat order rate mainly remains at a high level at 79%, posting a slight decrease versus full year 2018 of 81%, which shows the extraordinarily high loyalty of our customers.
In terms of site visit, we saw an increase from 140 6,000,000 to 216,000,000 visits in the 12 month period ending December 2019 versus the period in the previous year. Earnings for the year were broadly in line with previous year's level. Sales reported, excluding metrics, were at CHF 1,355,000,000. On a segment level, Switzerland continuing to be the solid profitable cash generating unit of the group. The sales of the existing shop in shop pharmacies to the Medpace joint venture led to a positive effect on earnings of roughly CHF 15,000,000.
Europe showed excellent sales performance, thanks to the increased marketing efforts, the impact on earnings, of which were in line with our plans. In Germany, three effects has an impact on our profitability. The progress of the integration led to higher costs, driven by increased complexity and product volume following the integration of the Aper Road operations in Harlan. To ensure continuing excellence in our customer service, we have installed a 3rd shift in our warehouse, which will likely continue until the completion of the new warehouse. The new building is ready, and we are on track for completion in 2021.
Secondly, we saw some pressure on OTC as communicated at the half year result call also as a result of the competitive market situation. The positive effect overcompensated the negative ones outlined before. Let me take you through the details of due to the fact that net tax is not consolidated yet on this level and a slightly more competitive market in 2019. Personal costs rose as we continued to expand our operations across our markets and also due to higher growth in the businesses with lower basket as we saw in the KPI overview. Marketing expenses were slightly higher as a percentage of sales at 3.9% compared to 3.4% in year ago, also to higher share of B2C business
and
upfront investments in growth in Europe. At the operating income and expense line, an increase in integration costs to drive future growth were more than offset by the revaluation of the MedFacts earn out and the sale of the existing shop in shop the higher than the negative ones, resulting in a slight improvement in profitability on EBITDA levels. The key changes in the balance sheet occurred out of our growth strategy through acquisitions and also through organic growth. Assets increased mainly because of the impact of IFRS 16 of approximately CHF 45,000,000. Intangible assets increased by CHF 200,000,000.
The dominant effect came from the addition of goodwill from the acquisitions, including earn out components. The investments in technology increased this line item as well. Financial liability rose to CHF125,000,000, driven by earn out components and leasing liabilities. The straight bond issuance of CHF 200,000,000 increased the bond outstanding line item. While this led to a decrease of the equity ratio, it still stands at a solid 40.9%.
This development leads to the change in cash. To summarize the main impact, M and A payments for NetBack's Clean Pass ClusterTek and Doctipharma, investments in our Tek platform, the operational result and the bond issuance in October 2019 resulted in the cash position of CHF204 700,000. With that, I hand back over to Walter, who will give you an update on our strategy and recent management additions.
Thank you. I would like to start by introducing our new organizational structure and new executive board members. Sorote has historically operated on a predominantly country based model and still does so. This has worked very well as we built our business firstly in Switzerland and Germany and across Europe. As we have expanded in size, offer and skills, we have also been considering the optimal way to organize ourselves to deliver maximum value to customers, leveraged across the businesses and countries.
A good example of this is the marketplace expertise that we acquired with POMOFAMA and which we are expanding across the group with excellent early impact. We will continue this process in the coming years so that we can fully realize value across the full group. We have also added new functions to our Executive Board and have strengthened our team. Petul has joined us as the new Chief Strategy and Digital Officer and will predominantly work on the ramp up of our eHealth Ecosystem and Data business. She joined us from Novartis, where she was Global Head of Digital Medicines and has a background in industrial engineering.
Bernd will become our new Chief Operations Officer and will lead the completion of our new Herrland site and bring his considerable experience in cutting edge operations acquired at Amazon, where he was the Country Director Logistics for Germany and Austria. He has a degree in Industrial Engineering from Eritha Aachen. The 3rd addition to the team is Tariid, who has been with the group since the acquisition of POMOFAMA. He will take full responsibility for the Europe segment and also place know how across the group. He is the founder of POMOFAMA and has a telecommunication engineering background and has also completed a Stanford executive background.
With these additions to our strong management team, I feel very confident that we will be able to continue to deliver on our strategy. I would now like to give you an update on our key initiatives. The absolutely clear focus of the whole group is on the ERX opportunity in Germany. We are therefore shifting our resource allocation from OTC to ERX, while maintaining our position as clear market leader. In the second half of twenty twenty, we will launch our ERX Marketplace app and are targeting a larger scale pilot project to establish the proof that electronic prescription is scalable.
Olaf will take in greater detail about that opportunity as well as the current status of the integration work where we are continuing scaling of the Helen site, and we'll be making progress on our branding strategy, all based on a further strengthened segment management team. The impact of the coronavirus is a topic that will develop into a major impact our company as explained in the beginning of the call. The effect of COVID on any digital business, but especially in Healthcare is massive and is here to stay. In addition to these three topics for this year, further growth opportunities are the French OTC market and the eHealth ecosystem ramp up. The French OTC market could be fully addressable via Marketplace and or cross border e commerce in the near future.
This would create an additional opportunity for us. Last but not least, we continue to work towards reaching our vision of becoming Europe's leading eHealth ecosystem, where we aim to integrate key partners into our network. I would now like to hand over to Olaf, who will inform you firsthand about the current status of the ERX opportunity and also integration progress. Please, Olaf.
Okay. Good afternoon, everyone, and thank you, Walter. Yes, as you all know, we are following a dual strategy approach on the ERX topic. On the one hand, we have the official process governed by Gemartic, that is the body who had to introduce the e script in Germany. And the second one is we have our own approach.
I call this the entrepreneurial approach. And the good news is they can both go hand in hand. So let's talk first about the official process. And as you can see on the slide, here everything is going the way it has been already presented. So that means we have the Eastcott law was introduced last year.
The Egemartic, 51 percent owned by the Ministry of Health, is mandated to implement the technical infrastructure The focus is on a safe connection of physicians and pharmacies. And as of now and in all, installing a national ERX server. The time line for the infrastructure is already has been defined. There are currently all of the doctors are being connected to this infrastructure. Right now, we are approximately on 80%.
The plan is and the intention is to connect the pharmacies to this network until Q3 of this year. And the rollout of the national ERX service plan to take place mid of 'twenty 1. Like always in life, when it becomes relevant, and that is we will let's talk about this one a little bit more in detail. It is now about the way how the East Coast would be become operational in Germany. And so there's a detailed rollout plan.
And currently, all of the different stakeholders, of course, are trying to make sure that their interests are somehow met in this process. The very good news is, from our perspective, we look into the rule set, which has been currently developed, I mean, is that the access or the ERX server will be possible for all market participants, meaning not only pharmacies from Germany, but also pharmacies from the EU can connect to the server. There will be a competition between the different pharmacies. And this is an open solution. And overall, it's a very good news from our perspective because, as you know, and some at least the pharmacy association in Germany tried to have a hand on this server, but as of now, it looks very good.
It will be an open server, and everybody can connect to this platform. So very good news on the Gematik side. If we then go to our own process, it also looks pretty good. As you can see on the next slide, we have Christoph, maybe you can turn that into the next one. That would be great.
What you can see here is this is actually what we are doing. This is, to me, 1, the strategy chart and the business model chart of what we want of what we intend to do going So, well, I don't see the slide right now, but maybe I will try to give you the explanation of what we try to do. Here we go. On the one hand, we have what we call the B2B approach. This is our eHealthtech vehicle, the company we acquired last year.
But as you know, we already had a 50% stake in that company already a couple of years ago. And we want to use that B2B platform to enable the e script in Germany. And then on the other hand, we want to launch our marketplace model with the Let's first talk about a little bit the EHAZtech approach. EHAZtech, the product, is connecting doctors and enables them to issue an e script following all of the standards and rules which are out there. So for example, encryption, qualified electronic signature and other kind of things.
And we will connect the solution with doctors and also with pharmacies on the other hand. And the incentive model for doctors to do so is, in most of the cases, an increase in convenience because almost half of the scripts at the doctor's office is used for repeat purposes. So that means chronically ill patients are showing up and want to sign up on a repeat script. And by using this technology, this software, it's more convenient for the doctor just to issue an e script as opposed to having the patient in the office. And especially in these days, with a virus out there, of course, that is even further a service towards doctors.
So the intention is to launch this model already in 2020. And here, we are currently in strategic talks with all of the the because of that, we are actually talking to all of the players in the market, meaning doctors, doctors associations, software providers for doctors, software providers for pharmacies, payers, of course, and also to the regulator. And we are pretty confident that we can, by using eHealthtech as an enabler, launch something already in 2020 ahead of the So eHealthtec is the enabler of e scripts, and the marketplace is the tool how we want to capture the consumer or the patient. And within this tool, we do not only want to offer, let's say, the one and only solution online pharmacy, but we want to offer more options. And more options means more options means this can be a pickup at a brick and mortar pharmacy or it can be a 2 hour delivery by using the infrastructure of the existing pharmacies.
And there will be additional services in this marketplace app as well. For example, one of the relevant services will be our stock availability in brick and mortar pharmacies. And this, especially for chronically ill patients, is a relevant need. So by the end of the day, if we use the marketplace app, you have a couple of advantages. On the doctor side, you can simply ask for a repeat script in an electronic way, and you don't have to see the doctor, you don't have to go there, you don't have to call there.
And then once you have the e script in the app, then you can select out of the different pharmacies. Of course, you can select the online pharmacy, and it will be processed by the existing facilities of us, or
you can use the brick
and mortar for a 2 hour delivery or pickup by using also stock reservation. So overall, I think we are very well positioned. We have the Ehealth tag to enable the e script business ahead of the market. We have a very strong product on the marketplace side, also using technology from Humu Pharma, and we are pretty confident that we can launch something already in 2020. We also have already out there a case study together with the German largest payer, Technikakkenkase.
That means our technology, the eHealthtech technology is already up and running. It is working. So we have doctors who are connected in that pilot to that solution issuing e scripts, especially repeat scripts. And then we have participating pharmacies where the customer can do the dispensing or actually the pickup of the product. So overall, I think we are very well prepared to launch this in 2020.
If we now go to the next slide, which is our technology slide, it also clearly shows you that what we did in the past, so acquiring POMOFAMA, it'd be very helpful in order to achieve our strategy. Because now we do have different technology hubs and we can put this all together. So we have 3 great tech hubs. The one is Berlin, the other is Barcelona and the next one is Zurich. And already today, we have more than 150 employees from 20 nationalities working in agile culture and continuous deployment.
So we have actually what we need in order to get this done because the
the
the setup we have here. If we now go to the integration part, I would like to say at the beginning, we are moving fast on this one. And integration is not only about the logistics. The good news is the earn out models from Metpegs but also from Ourofen, of the earnout and some of the case, of course, the teams were working because of the earnout. Now we can bring it all together and build this one organization, and we have started to do so already 1st January this year.
Accenture is supporting us on integrating and building this new organization, so we also have external help to get this done in a reasonable frame way timeframe. So let's talk about the organization first. Now we have already this one organization. We have built clear responsibilities within this organization. There's only one organization for Germany across all legal entities and across all sites and across all brands.
It's in place already since January 2020, and it's organized in a way it's more of a functional way we have marketing responsibilities, purchasing of and the advantage because of the aligned interest after the earnout phase, the aligned interest now in 2020 that we can build this one marketing team. And the good news is we have Franck Muller. He has been the CMO, so Chief Marketing Officer of MedPEx. And MedPEx provides best in class marketing in our industry. That was actually the reason why we acquired Medpacks.
And now he's heading this team. And you know we are currently keeping the different brands, but we are aligning the brand strategies. That means pricing positioning, channel marketing, branding marketing, this is all aligned. We are only supporting 1 brand. And we are making sure by exchanging on a daily basis that all of the brands we have currently out there from a marketing perspective, especially performance marketing perspective, work in the same way.
If I look into the IT platform, we are also moving here into one platform. We already rid of the Aperol platform, and the clear target is to have one common platform already in 2021 for the German site. And the more we integrate them, of course, the more synergies we can get. On logistics, the target is to have 1 hub. But as Walter mentioned earlier, I mean, right now, we are in a very good position because of the different hubs we have out there in Germany, because they can provide additional capacity right now, and we are making use of that currently and ramping up all of our sites.
In terms of management team, we are very happy that we now have gathered a strong team for the German market. We have, on the one hand, we integrated the Metpac founders, the 3 guys, and it's great to have them here on board with their entrepreneurial spirit. And as Walter already pointed out, we are also working very closely with David from Promopharma, who has the marketplace know how. So we have a strong team of entrepreneurs here working on the German market. And at the same time, we also got external experts like Bernd and Meite.
They have proven track records from great companies like Amazon and Zalando. So I think now we are very well positioned to get to achieve all of our targets with this great team. And that's actually from my side on integration. And I would love like to hand this over back to Walter.
Thank you. In addition to that one and only opportunity because of the electronic prescription introduction in Germany, Nevertheless, there are more opportunities and especially one to add is the French OTC opportunity. The French OTC market might open up for e commerce to create an additional growth opportunity to us. As France is the 2nd biggest pharmacy market in Europe, of course, this is has obviously a strategic relevance for us. The draft law is currently in the debate, which includes measures to ease OTC e commerce for French pharmacies and will create an opportunity for our own OTC market entry in France.
According to Sempura, the French OTC market is worth €6,000,000,000 We will follow the regulatory process in detail and in the form once we know more. As communicated already during the last calls, we are in the process of creating Europe's leading healthcare platform, building on our cutting edge technology, unmatched links to a broad area of partners like insurance companies and physicians, customer base of €7,000,000 and on a group level and the highest brand awareness. This is the vision we are working towards from a leading technology with multiple revenue and profit streams with the ultimate goal to ensure the efficacy of pharmaceuticals with the help of digital solutions. This vision motivates all of us, and it will bring relevant value to the customers as well as to the health care systems itself. We are ready to take health care where retail, entertainment, travel and mobility gone.
As the examples on this page show, the winners have succeeded in transforming their transactional core businesses to a wider level, ultimately becoming tech companies offering superior services to their customers. Our proposition is to become our customers' health partner in life by offering personalized data driven products and solutions that work seamlessly with a single sign on in our app. The ERX marketplace is the first step in this journey and will allow us to widen our offering afterwards, ultimately becoming the one stop shop for our customers and their digital health related needs. On the supply side, we see emerging health players creating innovative solutions along health journeys with evolving business models. Our Our our Platform business, we are opening up for local pharmacies to extend the product and service offering, OTC, Rx and BBC.
Integrating partners, for example, digital health solution providers, will As said before, we will evolve from not just selling pharmaceuticals to bring the efficacy to medicine of medicine to the customers, especially the chronically ill. With that, I hand over to Marcel for the financial outlook. Thank you, Walter.
As we have outlined in the presentation, the current developments in the market are extremely dynamic and create very strong momentum. Based on the strategic focus shifting towards electronic prescription, we are targeting to increase sales by roughly or to say only 10% with subsequent over proportional Rx growth acceleration starting 2021. Adjusting for expenditures on additional growth initiatives, the profitability target is to breakeven in 2020 at the EBITDA level. Please note that effects of the coronavirus on the business are not reflected in this outlook. For the midterm, we see sales of more than CHF 3,000,000,000 and an adjusted EBITDA margin of around 8%.
We also believe that ehealth ecosystem has the potential to drive longer term EBITDA acceleration. To make it more tangible, I would like to run you through the steps and the line items of the P and L of achieving our midterm targets. On the first line of the chart, you see our 2019 figures. Including positive one off effect, we reached an EBITDA margin of minus 1%. The second line shows our run rate based on the current sales, but after completion of the integration with an increased gross margin post other expenses driven by organizational synergies leading to a run rate margin of 2% to 3% EBITDA.
On the sales level, we aim to reach CHF 3,000,000,000 in sales, mainly driven by an increasing online penetration in the German Rx market. This will have a positive effect on our gross margin, where we see additional contribution from our needed to log in customers and sustain our sales. The combination of these effects lead to our midterm target of an EBITDA margin of around 8%. With that, I would like to conclude the presentation and open the Q and A session.
Now we will begin the question and answer The first question is from Volker Bossel of Baader Bank. Your line is now open.
Hello, gentlemen. Volker Bossel, Baader Bank. Congratulations on the great set of results. I have a couple of questions. I would like to start with your guidance.
To have clear, it's in the target of 10% growth is on top of the EUR 1,600,000,000 so to say on a pro form a basis, right, which means including mid packs. And it brings me to the question, if we can expect mid packs to be fully consolidated in the course of 2020? An update here would be helpful. And also in regards to the guidance, you mentioned the great growth potential of the marketplaces, France and Spain. So what growth do you expect for the Rest of Europe segment?
And yes, a bit more guidance would be helpful here. And for clarification, Italy is postponed, right? So it's not going to happen in 2020. So it's still on the agenda, but beyond somewhere, I guess. And the second question would be on the midterm targets.
You guide for EUR 3,000,000,000 midterm and 8 percent EBITDA margin. Is that replacing the EUR 22,000,000,000 and an EBITDA margin of 5% to 6%, which you mentioned earlier? So or is that guidance for 2022 still valid too? And a final question would be on the trading update of your business. Sorry to come back to coronavirus outbreak, but did I get you right that over the last days, the number of orders increased by 100%?
I mean more clarification here. And perhaps also how do you see differences between Germany and France? In Germany, stores are closed, but we are still allowed to go out. While in France, we have really a shutdown, so people are obliged to stay at home. Does that make differences to your business?
Do you see here regional differences given the coronavirus outbreak between the different countries given to the different travel bans, so to say, mobility bans we occur? Thank you very much.
Thank you for your questions. Let's start with the first one. You're right, this 10% growth rate is including netbacks, so on the baseline of 2019 of this CHF 1,570,000,000.
Okay. Thank you.
In terms of time of consolidation of Metpac's numbers, as you know, we will consolidate Metpac's operations latest when we can integrate them after the completion of the new warehouse in 2021. And so we will not have all the consolidation in 2020.
Okay, cool. Thank you.
The second question was about our segment Europe and the growth rate of this business. As you know, we are starting on a low absolute number, and so the percentage growth levels are, of course, significantly higher than on group level. And Italy is postponed because we have our focus on the German market and do everything in order to succeed in the electronic prescription business in Germany. Question number 3 was about the mid term guidance with €3,000,000,000 8 percent EBITDA margin. This is a roll forward our guidance from 2022 because we think it makes sense to give you a midterm perspective of our business.
That does not mean that we do not target the announced numbers in 2022, but it's a roll forward to a 3 to 5 year timeframe.
And then maybe to the corona effect, actually I said in the beginning for this week, we have an increase of demand of 100%. And this increase of demand is happening not only in Germany, but also in Switzerland and in Europe. That means Spain and France. In France, actually, it's even higher just also due to the fact that the revenue numbers are comparably much smaller. But it would be too difficult and too early to say what would be the differences in the different markets we have.
But I would say, in general, it's very comparable what we see. So this corona effect brings the shift from offline to online and which will take place anyway, but the corona will just accelerating this effect. That's what we see.
Okay. Sounds encouraging. Thank you very much for all the answers and good luck and stay healthy. Thank you.
The next question is from Alexander Till of Jefferies. Your line is now open.
Hi, Wouter, Marcel and Olaf. I actually have one question for each of you. Maybe, Marcel, the first one for you, a technical one. Given that you cannot include MetEx right now in your current financials, what would have been the drop through rate on EBITDA if you would have included MetEx?
You mean in the annual results 2019 or in our guidance perspective?
Yes, actually on both. I mean 2019 would be interesting, but going forward, more interesting even more.
In our guidance in our midterm guidance, MaPEx is included because we can consolidate then on from 2021. And so it's fully included in these numbers. And in the numbers of 2019, there is a sales number included of in the reported numbers of €13,000,000 sales. And on an EBITDA level, it's more or less 0. There's no impact on our earnings.
Okay. But if you could have included all the sales, what would have been the effect on EBITDA?
It's on a similar level. So in 2019, it was more or less breakeven result out of the netbacks operations.
But Marcellus, I can add to this. I think it's fair to say Metpac is operating on a significantly higher gross margin than the Dog Morris. It has been since the acquisition, they have a better go to market approach, and therefore, their gross margins are higher.
Okay. For Walter, maybe the next one. What would be the business profile in France look like? What would be the approach? And do you have any insights on the time line for the draft order?
So what the time line concerns, I couldn't tell you what approach means. Obviously, we have already the marketplace approach in place in France with Docifarma for the moment. And obviously, we would base on that marketplace approach first.
Okay. And last one, maybe for Ola. What was the response actually from the brick and mortar pharmacies for this stock availability feature on your app?
Very interesting question. So I mean, there are 2 answers to that. The answer number 1 is if you look into the, let's say, press from pharmacy associations. And so they started a survey. And in this survey, up to 25% that they might consider to work together with us.
That is one part of the puzzle. And the other part of it is that we are currently talking to all of the major associations out there, meaning corporations. So there are a lot of strategic talks. And then also, the big ones and the very good ones, the very good corporations are in discussions with us because they think it's a very interesting model. And they know that this is one of the models going forward, which you should probably join.
And that's so do not believe what you see in the press. It's about the discussions we are currently having and again, talking to all of the major corporations. To me, very promising start into our marketplace approach.
Okay. And currently, the coronavirus situation, do you have any emergency plans for your logistics in the Netherlands?
Yes, of course. But we do not only have this for the Netherlands. We have this also for I can only talk more in detail about the German side. We have different logistics sites. And we have taken a couple of measures to make sure that we stay operational.
So we are working in different shifts. For example, we have hired significantly more people. We have introduced home office wherever possible. We even took some of the, let's say, operational processes, and now we are doing them from home. So I think we are very well prepared.
We also asked for special permissions to cross border, yes, because we are located in the Netherlands and some of our staff is coming from Germany. And we even got a permission for that one because, I mean, we are a pharmacy. And so it's important that we stay stable. So as of today, I would say we are very well prepared to keep this operation up and going and even to make sure that we can handle the increased
volume. Okay. Last one, maybe the 100% increase was mentioned. Was it on a page visit or orders or what was that related to?
Actually, that was the demand, not the revenues, but the demand.
Yes, demand in terms of page visits or on new orders or
Yes, on orders. That means orders.
Yes, it's a demand
on orders. What we try what we currently try to do because it happened from one day to the other. We cannot ramp up that quickly within one day 100%. Yes? So we see the demand, and we try to realize as much as possible of that demand, bringing it to the 100%.
But that, course, means hiring more people, working on night shifts, working over the weekend. And this is what we are currently doing to ensure that we can fulfill all of the demand.
I've got three questions. First, as you've highlighted, COVID has caused a surge in demand. Just curious what you're hearing from suppliers? To what extent are you running into any supply constraints? And then with this natural surge in demand, have you been cutting back marketing costs since you were getting a lot of demand 3, on the financial model of your marketplace solution, how would this work?
Would pharmacies be paying you a commission or what would the economics of that be?
Okay. Maybe, Olaf, would you answer 12 and then mark 3? Yes.
That's fine with me. Yes, first question was COVID supply constraints. As of now, we don't see any constraints on the supply chain. But of course, I mean, we do not know what's happening what's going to happen in the next couple of weeks. So it's okay.
I mean, sometimes you see, for example, paracetamol yesterday because of the story out there exploded. But besides that, most of the relevant products are still on stock and we see a stable supply chain. We are in close relations to all of our suppliers, especially, of course, the pharmaceutical industry. And as of now, it looks good. But of course, we cannot promise that it will stay the same way.
Again, we have, I think, very good relationships to the suppliers. And right now, we feel comfortable. The marketing cost was the second part of the question. Yes, we just discussed the demand. And of course, what we try to do is to play with whatever we have to make sure we can somehow control and handle the volume.
And one of the measures we can take is reducing marketing. So that means, yes, we have reduced marketing on the performance marketing side, for example, on Google and on other channels. On the question number 2, which is on the bonus, if I understood the question right, there's not really there's no any there's no update. I mean, this is still, I mean, the proposal has not passed the cabinet because they are waiting for the feedback from the EU Commission. And so far, everybody is still waiting for the feedback from the EU Commission.
So there's not really any news on that on the bonus part. And question number 3, Marcel, you would like to?
Yes. I think it was about the financial model of the marketplace in Germany. I mean, we have a lot of experience of marketplace out of Spain and France, and we are in negotiations in Germany. We have our concepts, but we cannot disclose right now how the financial model in the German market will be in detail.
Thank you.
The next question is from Olivier Canray of Kepler. Your line is now open.
Hi. Yes. Thanks for taking my question. First one maybe on capacity usage. How many orders can you process today at your existing facilities, maybe including and excluding Medpac, please?
And what's the target capacity that you are targeting at your new warehouse?
So as I said before, we see the aim in enlarging our capacity as of now up to 50% without the new logistics. And the new logistics, of course, have a much different approach, which maybe Olaf can answer to that question about the new logistics.
Yes, I would love to do so. Yes, as Walter said, I mean, we think I mean, only we think right now in the German market, I mean, we can scale or bring in up to an additional 50% on short term capacity. And this would bring us to more than, let's say, 22,000,000 parcels on the existing warehouses. And then we have our what we call the DC2, so distribution center 2, which will be alive in 2021. And here, we have a capacity of more than 20,000,000 if we go for 3 shift models.
So that means if we add it all up, it's almost 40,000,000 in volume. This, of course, requires a 3 shift model if you want to go for volume like this, of course.
Okay. Can you maybe tell us approximately how much Rx bonus you paid out last year approximately?
In Switzerland, we do have an Rx bonus or discount of 12% in average. And in Germany, in relation to sales price, it's about 5%.
That's 5 percent of Rx or
Yes, of Rx, yes.
Okay. And roughly speaking, did you can you comment on your Rx growth this
year? Because our strategy is to emphasize on the electronic prescription, We reduced on our Rx marketing in Germany, and therefore, the development was more or less stable.
Okay. Okay. So close to the 2018 level, right?
Yes.
Okay. And then just I was just wondering about your preparations for market entry in France. I mean, obviously, I don't know if that's something that was on your radar. So there was this the Senate struck down the RCL34 that all you're referring to, which introduced the simplification rules of rules of main order pharma. And is there am I correct in assuming that this is not leading you to change gear?
And could you sort of detail your strategy and legal setup? Is it going to be still a marketplace? Like to what extent are you going to rely on local pharmacists?
So at the current stage, it's not yet decided either if it's just a marketplace only approach or in addition to also a mail order approach that will be affected through the law, how it will end up. And so for that this stage, we cannot say more than this. Actually, we have to whatever solution will come up.
Okay, okay. And then can you maybe comment on when e scripts will really kick off in Germany and maybe also Switzerland?
Maybe Olav, you say something about Germany.
Yes. I love that question. So as I try to point it out, I mean, yes, this official process schematic and maybe mid of 'twenty one, end of 'twenty one, you never know. But on the other hand, we feel comfortable that we can already launch something this year. And that means we might be ahead of the curve.
That looks actually pretty good based on what we have developed. So it's difficult to say. It could already be this year a little bit and based on our own solution boosting next year, or we have to wait for the Gemartic and then maybe more towards mid or end of 2021. But that's all we can say at this point in time.
And to add, Switzerland, in Switzerland, we have already relevant revenues coming from electronic prescriptions. And there, we see also from the virus sort of an acceleration of that effect. But we could not say how much it will be. I mean, we will have to look at the next day weeks months in order to assess what is in for the electronic prescription in Switzerland.
Okay. Okay. Thanks very much.
The next question is from Patrick Porschstein of Abertigartok. Your line is now open.
Thank you. Good afternoon. You already said a lot of things about the marketplace model. I was just wondering how many pharmacies would you need to have these 2 hours delivery slots?
Maybe I can try to answer that question. I mean yes, I will try to answer that question. So what we think, I mean, based on our initial calculations, but again, it's not set in stone. We think we need roundabout 1,000 pharmacies in Germany to have a 2 hour delivery service up and running, but that does not mean that we target to have a 1,000 pharmacies. That's not the same kind of thing.
So right now, we initially speaking with the corporations
in Germany? Okay. And you said you are initially speaking with the corporations in Germany?
Yes. As I pointed out earlier, I mean, this is a time for change in Germany, and that means new alliances will come up for sure. And because of that, that, we are talking to partners, major stakeholders in the market, and they are also talking with us. A lot of corporations and are talking to us, approaching us and are interested in our marketplace model, how they can participate in the online world as opposed to just being stuck on the offline world. So very interesting times, it's too early to say to give any more details into that one.
So it's still the roadmap to launch in the second half of the
year? Yes. Our intention is still to launch an ERX marketplace approach in the second
next next question is from Sveta Bischoff of Societe. Your line is now open.
Hello, gentlemen. I have two questions concerning the outlook. First of all, the outlook 2020 with EBITDA, you expect 0 EBITDA, but you also plan to invest in growth initiatives in Germany and France. Could you give us any hint how much are you planning to invest there? And then the other question is about the long term EBITDA of 8%.
So do I understand right, this is the EBITDA reach you reach when you don't invest additional in growth initiatives, right?
So the first question about the EBITDA target 2020 before these investments in this additional growth initiatives, as Olaf and Walter mentioned before, we do not know exactly when this scaling up is taking place. In France, we are depending on the regulatory environment. And in Germany, we intend to launch the marketplace in the second half year. But we do not exactly know at which time we can invest in this growth. And that's why we give the guidance that we have an EBITDA level of breakeven before this additional investment.
On the long term EBITDA of 8%, we've included some upside in high margin businesses out of the Ehealth ecosystem. And on the marketing ratio, we target to have the marketing for the existing business and locking of the customers on a sustainable basis, but not additional marketing for further growth initiatives that are not integrated in the plane right now.
Thank you. Additionally, could you give us your plans about CapEx in 2020, how much you're going to invest?
So the CapEx will be in line with what we said before. Expect CapEx in the size between EUR 40,000,000 EUR 50,000,000 for 2020.
This includes intangible and tangible assets, right?
Yes, that includes both and also the distribution center too in
Thank you. And depreciation and amortization went up in 2019. Will it be the same growth in 2022?
In 2019, the growth came also from the integration of the acquired businesses like Pharmopharma, like Aperod and also from the IFRS 16 effect. And so the growth between 2019 2020 will not be in this amount.
Thank you.
The last question is now from Sebastian Froel of UBS. Your line is now open.
I got three questions. The first one, you mentioned in the press release this morning for sort of special or exceptional items. It would be great if you can break them apart into the individual ones and how each of them has contributed in terms of a quantitative number. The second thing is you mentioned your increased marketing spending by a bit, it was like, if I'm not mistaken, 30%. Is that sort of a proper run rate for the future if you assume like if you take the COVID-nineteen cases for a short time aside?
And the last one would be on the whole eHealth side of things. I'm correct that Gemartic is currently actually still defining how the eRx platform is actually should be look like? Is that an issue that you potentially come up with a pilot that is eventually not in line with the one with Gematic defining thereafter and therefore need be again discontinued?
Question 1 about the one offs in 2019. In our detailed chart to the guidance, we show the number of €29,000,000 of 1 offs, and that includes the positive one off effect of the sale of shop in shop business in Switzerland in the joint venture. The second, the revaluation of the MetPEX earn out and the third one is the integration costs and M and A one off costs in 2019 and altogether leads to disallowance.
And can you break them apart? Which of these four points has contributed which number to the overall €21,000,000?
Yes. You can see it also in our annual report in the note number 6 business combination. We disclosed positive effect out of the sale of shop in shop in the size of about EUR 15,000,000 netbacks, or all the revaluations of the earn out at about EUR 17,000,000. And on the other hand, we have this one off costs of about €3,000,000 to the marketing expenses development from 2018 to 2019, as I understood you correctly, with the growth of 30% on the absolute numbers of marketing spendings if this is continuing over the next years. Is that right?
Not a 30%, but if that sort of absolute level is the one that you would expect that it's the sort of level you can you should be going on for the future?
As we our strategy has the focus to the electronic prescription, and therefore, in the past, we reduced our marketing spendings for electronic prescription. And so there will be an increase in the future if we have the business model of electronic prescription in order to acquire new customers on this level. So it will not stay on this absolute level in the future. It will increase on an absolute level.
And the third question, maybe Olaf, you can answer about Gematik?
Yes, maybe I can try to answer that one. Yes, that's a very good question. But like always in life, I mean, we can either wait or we can try to build something, and we feel very comfortable building something. So that means we develop today a solution and partners are willing to install that solution. We think that's going to happen.
But on the other hand, of course, we try to make sure that with our solution, we also meet future Gemartic specifications. And those specifications are especially circled around the national ERX server. And our solution is developed in a flexible way so that the part which will be run and operated probably by Gemartic, the national eHealth server, I mean, we can migrate this part of our solution into the Gematik solution and then keep the remaining parts. And the remaining parts are the parts at the doctor side and at the pharmacy side. So we are talking, of course, to Gimatic, like everybody is talking to Gimatic.
We try to anticipate their specifications, and we are building a model which can be transferred Gamatik model.
Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect now.