Fourth quarter and preliminary 2006 results

27.02.2007 - Nutri Pharma today reports total revenue for 2006 of MNOK 82.8 compared to MNOK 25.3 in 2005. The loss in 2006 is MNOK 11.3 (MNOK -10.5 in 2005) after amortisation charges of MNOK 9.1. The EBITDA loss in 2006 is MNOK 2.9 compared to a loss of MNOK 7.2 in 2005. Net financial revenue in 2006 is MNOK 0.7 compared to MNOK 0.1 last year.

(Oslo, 27 February 2007) Nutri Pharma today reports total revenue for 2006 of MNOK 82.8 compared to MNOK 25.3 in 2005.  The loss in 2006 is MNOK 11.3 (MNOK -10.5 in 2005) after amortisation charges of MNOK 9.1. The EBITDA loss in 2006 is MNOK 2.9 compared to a loss of MNOK 7.2 in 2005.  Net financial revenue in 2006 is MNOK 0.7 compared to MNOK 0.1 last year.

 

Fourth Quarter results

In the fourth quarter of 2006 total operating revenue is MNOK 17.7 million and there is a loss of MNOK 2.7. The Q4 revenue is slightly higher than the previous quarter; although around 19% lower than Q4-2005.  Total operating expenses in the fourth quarter is MNOK 21.4 compared to MNOK 22.0 in the last quarter of 2005. EBITDA in the fourth quarter shows a deficit of MNOK 1.4 (MNOK 2.0 in Q4-2005). Amortisation of intangible assets has been charged with MNOK 2.3 in the fourth quarter (MNOK 2.2 million in Q4-2005). Net financial items are recorded with net revenue of MNOK 1.0 compared to revenue of MNOK 0.1 in the same quarter the previous year.

 

Nordic region

Royalty income in Q4-06 from the Nordic area is MNOK 1.2 which represents an increase of 29% compared to fourth quarter 2005. This is a result of the continued strong performance of the Nutrilett brand. The operating profit from the Nordic region is MNOK 0.2. Amortisation of Royalty and Patent rights has been expensed with MNOK 0.4 (Q4-2005: MNOK 0.4).  The subsidiary Nutri Pharma Holding AS in Denmark was conclusively dissolved in November 2006. A remaining balance deriving from earlier period exchanges difference has generated financial revenue of MNOK 1.2 in the fourth quarter accounts. The net profit for the period is MNOK 1.2 compared to a profit of MNOK 0.5 million in Q4-2005.

 

Russia/CIS

Total revenue from the CIS area in the fourth quarter is MNOK 16.5 which is 4% higher than in Q3-06; although around 20% lower than Q4-2005. MIG achieved a gross margin of 88% from sales in Q4. The business segment Russia/CIS delivered a negative EBITDA of MNOK 1.3.

In Q4-2006 the variable proportion of MIGs costs were 73% of the revenues, covering cost of goods sold, commissions to distributors and service providers. Operational costs were reduced by MNOK 0.4 compared to Q3-06.

 

Financial results January - December 2006
The consolidated loss for the period is MNOK 11.3 (2005: MNOK -10.4), and the EBITDA result shows a loss of MNOK 2.9 (2005: MNOK -7.2).

Total revenue in 2006 is MNOK 82.8 compared to MNOK 23.3 in 2005. MIG was first time consolidated in Q4-2005.  Royalty revenue from Nordic is MNOK 4.7 which is 5% higher than in 2005. Sales revenue in Russia/CIS came in with MNOK 78.1 in 2006. The nutrition products NutriPro and NutriBar account for 65% of total sales revenue in Russia/CIS in 2006.

Total operating expenses increased from MNOK 35.8 last year (only Nordic up to Q4) to MNOK 94.8 in 2006. Total operating expenses from the Nordic operation are MNOK 7.0 in 2006, which is a reduction of 55% from the operating costs of MNOK 15.6 in 2005. Total operating expenses in MIG, ex. amortization of

intangible assets are MNOK 82.7. MIG was first time consolidated in Q4-2005. In 2006 the variable proportion of MIGs costs were 72% of the revenues, covering cost of goods sold, commissions to distributors and service providers. The cost structure has been improved during 2006 through the implementation of a new commission plan and renegotiation of agreements with the key service partners.

In total amortization has been charged with MNOK 9.1 compared to MNOK 3.3 in 2005.  Amortisation of Royalty and Patent rights has been expensed with MNOK 1.4, Software platform with MNOK 4.5 and Distribution lists with MNOK 3.1. A revision of the Distributor lists valuation has been made prior to the Q4 reporting. See comments below.

Net financial revenue in 2006 is MNOK 0.7 compared to MNOK 0.1 in 2005. The subsidiary Nutri Pharma Holding AS in Denmark was conclusively dissolved in November 2006. A remaining balance deriving from earlier period exchanges difference has generated financial revenue of MNOK 1.2 in 2006. Interest costs on loans have been charged with MNOK 0.6.

The consolidated loss for the period is MNOK 11.3 (2005: MNOK -10.4). The parent company Nutri Pharma ASA made a net profit for 2006 of MNOK 1.8 compared to a loss of MNOK 9.8 in 2005. The fully owned subsidiary MIG made a loss of MNOK 13.1 after amortisation of intangible assets of MNOK 7.6.

 

Balance sheet at 31 December 2006

An impairment analysis of the intangible assets related to the acquisition of MIG per Sept 2005 has been concluded without any impairment losses. Intangible assets and equity related to the acquisition of MIG is adjusted for currency movements in Euro/NOK rates

Re-evaluation of Distributor lists

Fair value of the Distributor lists was determined by the Market approach, when allocating the purchase price of MIG at the date of acquisition 15.09.2005. The distributor lists were valued at NOK 15 million at year end 2005 and the useful life was determined to be indefinite. Based on an indefinite life evaluation, the distributor lists have previously not been amortised.

This evaluation has been revised before issuing the Q4 figures for 2006. The customer lists are amortised over management’s best estimate of its useful life which is 5 years. The reassessment implies that amortisation using the straight-line method has been charged on Distributor lists as from the acquisition date of MIG, starting from last quarter of 2005. As a result the 2005 result, equity per 31.12.05 and intangible assets has decreased with TNOK 757.

This prior period error has been corrected by restating the comparative amounts for 2005. Amortisation of distributor lists for Q4 2005 is TNOK 757. Amortisation for Q4 2006 and FY 2006 is TNOK 794 and TNOK 3 090 respectively.

Cash and other liquid assets were MNOK 4.6 as of December 31 2006, compared to MNOK 6.0 as of December 31 2005. In 2006 cash flow from operational activities resulted in a reduction of MNOK 3.7. Cash flow from investment activities amounted to MNOK 1.8 and from financing MNOK 2.2.

The consolidated equity has increased from MNOK 18.0 at December 31 2005 to MNOK 29.0 at year end 2006. For details of movements see p 7.

 

Commercial Update Nordic

Nutrilett, which is distributed through Orkla subsidiary Collett Pharma, as one of their core product lines, continues to show a growing trend. The market segment for nutrition and weight management is increasing in the Nordic market and Nutrilett is the market leader, with a 60% market share in the Powders and Bars segment. Collett Pharma is planning to introduce new products under the "Nutrilett" brand. In 2006 sales from Collett Pharma increased by 20% compared to 2005. It is expected that the Nutri Pharma's Nordic business will continue to grow in 2007.

 

Russia and CIS countries

With revenues of MNOK 16.5 in the Fourth Quarter, MIG had a revenue increase of 4% compared to the Third quarter. With the implementation of the new commission plan the management has a strong focus on increasing sales. Additionally, considerable cost cutting has reduced the break-even level.

 

Oslo, 27 February 2007

The Board of Directors of Nutri Pharma ASA

For further information :

Trond Syvertsen, CEO         + 47 23 31 08 80