The listing prospectuses of Orion Corporation and Oriola-KD Corporation, the new companies resulting from the demerger of the present Orion on 1 July 2006, will be published on 22 June 2006, as currently estimated. With this stock exchange release, the following carve-out information extracted from the 2005 Financial Statements and the Interim Report 1-3/2006 of the present Orion Group is presented on the new companies before the disclosure of the listing prospectuses:
- Carve-out Income Statements
- Carve-out Balance Sheets
- Carve-out cash flow statements
- Carve-out breakdowns by businesses
- Certain key ratios
- Principles for the preparation of the combined carve-out financial statements.
The carve-out information has been prepared solely for illustrative purposes. The data should be read observing the principles applied in their preparation as given in this release, as well as the information given in the ordinary financial statements of the demerging Orion, and the carve-out financial information extracted from them in accordance with Appendix 9 of the Demereger Prospectus. The combined carve-out financial information extracted from the demerging Orion's consolidated financial statements does not as such necessarily give an accurate view of the future results, financing position, changes in equity and cash flows of the new Groups, nor does it present a view of what they would have been if the new Groups had operated as separate legal entities during the periods presented.
The carve-out information presented here has not been audited.
When preparing the carve-out data on the new Orion and Oriola-KD Groups extracted from the Financial Statements 2005 and the Interim Report 1-3/2006 of the demerging Orion, it was found necessary to amend certain carve-out figures given in the demerger prospectus. The amendments were made to the following items and they are explained after the carve-out tables.
- The ROCE of Oriola-KD for 2003 and 2004 is slightly lower than that given in the demerger prospectus
- In the cash flow statements for 2003-2005 of the two new companies, the change in the intra-Group loan within the demerging Orion has been moved from the cash flow from operating activities to the cash flow of financing activities.
Basis for the preparation of the combined carve-out financial statements
1 Demerger of Orion Corporation
The Orion Group is engaged in the healthcare business, whose operations are divided into three divisions:
- Orion Pharma develops, manufactures and markets pharmaceuticals
- Orion Diagnostica develops, manufactures and markets diagnostic tests
- The Wholesale and Distribution Division engages in the wholesale and distribution of pharmaceuticals as well as healthcare equipment and supplies.
The Extraordinary General Meeting of Orion held on 19 December 2005 in Helsinki decided to demerge Orion Corporation into two parts so that all its assets and liabilities are transferred, without a winding-up procedure, to two companies to be established and listed on the Helsinki Stock Exchange as on 7 July 2006. The new "Orion Group" to be formed in the Demerger will comprise the Orion Pharma and Orion Diagnostica divisions and the other, "Oriola-KD Group" will be formed from the present Orion Group's Wholesale and Distribution Division.
In the Demerger, Orion's shareholders will receive, as Demerger Consideration, shares in the companies to be established in proportion to their shareholdings, whereby the ownership structure of the companies to be established will correspond to the ownership structure of the demerging Orion on the effective date of the demerger.
In the demerger, the shares in Oriola Oy and Orion Holding Sverige AB will be transferred to Oriola-KD Corporation to be formed and the new Group will therefore comprise these three companies and their subsidiaries. Orion Sverige Holding AB is a holding company which owns 69.4 per cent of Kronans Droghandel AB. In addition to the above-mentioned shares, no other assets or liabilities of the present Orion Corporation will be transferred to Oriola-KD Corporation in the demerger except for plots of land in Espoo and Oulu, a land area in Espoo as well as 2 million euros in cash.
Hereinafter reference to the Oriola Group shall be to Oriola Oy and its subsidiaries and reference to the KD Group shall be to Orion Sverige Holding AB and Kronans Droghandel AB and their subsidiaries.
All other companies belonging to the present Orion Group will transfer to the new Orion Group. Except for the above-mentioned assets that will be transferred to Oriola-KD Corporation, all assets and liabilities of the present Orion Corporation will be transferred to the new Orion Corporation, as will Orion Corporation's retained earnings.
2 Basis for preparation of the combined carve-out financial statements
The new Groups' combined carve-out financial statements for the years 2005 and 2004 have been prepared in accordance with the International Financial Reporting Standards (IFRS). Also the interim reports for 2005 and 2006 have been prepared in accordance with the IFRS.
All the financial statements also comply with the other provisions and regulations on financial statements that are in force in Finland.
The combined carve-out financial statements have been derived from the Orion Group's audited consolidated financial statements for the year 2005 and from the unaudited IFRS statement of reconciliations for the year 2004 and the Interim Reports for 1-3/2006 and 1-3/2005.
The combined carve-out figures have been prepared in conformity with the above-described demerger into the new Orion Corporation and Oriola-KD Corporation.
The combined carve-out financial information presented does not necessarily give an accurate picture of the new Groups' results of operations, financial position, changes in equity and cash flow in the future, nor what these would have been had the Groups operated as separate legal entities during the periods presented.
Balance sheet assets and liabilities
The basic principle in dividing the balance sheet items between the new Groups has been that all the assets and liabilities of the present Oriola and KD Groups have been allocated to the Oriola-KD Group to be formed. Also allocated to this Group are the plots in Espoo and Oulu, the land area in Espoo, as well as 2 million euros in cash. A further item transferred to the Oriola-KD Group's assets is the goodwill that arose in the acquisition of KD in 2002.
Except for the above-mentioned items, the assets and liabilities of the present Orion Group have been allocated to the new Orion Group. These items also include the assets and liabilities in the balance sheets of other companies in the present Orion Group's other than the Oriola and KD Groups.
The assets and liabilities of the new Groups also include the assets and liabilities arising from transactions between the new Groups, which have been eliminated in the financial statements of the present Orion Group. The clearly most important of these are the items arising from the pharmaceutical distribution agreement between Orion Pharma and Oriola Oy in Finland.
Net assets
Because the companies do not have a historical capital structure, the share capital and other equity items have not been itemised. The net assets presented constitute the difference between the assets and liabilities of the Groups to be formed.
According to the Demerger Plan signed by the Board of Directors on 7 November 2005, the share capital of Oriola-KD Corporation to be formed (parent company) will be EUR 147.9 million. In the Oriola-KD Group, the EUR 111.7 million revaluation on the acquisition cost of the shares in Oriola Oy, which Orion Corporation carried out in 2004, has been eliminated from the share capital as an intra-Group transaction. New Orion's share capital will be a minimum of EUR 50 million and a maximum of EUR 2,000 million. New Orion's exact share capital will be determined at the time of the demerger on the basis of the present Orion Corporation's share capital and share premium fund by first deducting from it Oriola-KD's share capital. On the basis of the share capital at 30 March 2006, the New Orion Group's share capital would be EUR 88.2 million.
In addition, the Extraordinary General Meeting held on 19 December 2005 decided that in connection with the demerger, the present Orion Corporation's share premium fund be decreased by EUR 53.0 million by transferring said amount to the expendable fund. It is proposed that from the expendable fund EUR 30.0 million be entered in Oriola-KD's balance sheet and EUR 23.0 million in New Orion's balance sheet.
In preparing the combined carve-out financial statement information, the 1,787,864 treasury shares held by Orion during the financial years 2004 and part of 2005 and invalidated on 1 April 2005, have been considered to belong to the New Orion Group. The dividends paid within the present Group, which are apportioned between the Groups to be formed, have been treated within the Oriola-KD Group as dividends paid to outside parties. Within New Orion, the internal dividends received have been stated as an item netting out paid dividends without placing them as an item in the income statement.
Corporate administration expenses and income
The combined carve-out financial statements include a portion of the expenses for the Orion Group's corporate administration staff which in the present Group are not divided among the divisions. A portion of the following expenses of the corporate administration has been allocated to the Oriola-KD Group: Group management and administrative bodies, Group accounting and treasury as well as legal affairs. The basis of apportionment used is the average operating profit ratio of the divisions calculated on the basis of the years 2003-2004 and the interim period January-September 2005. According to these calculations, New Orion's portion is 77 per cent and Oriola-KD's 23 per cent.
|
EUR million |
2005 |
2004 |
|
New Orion Group |
3.9 |
6.0 |
|
Oriola-KD Group |
1.1 |
1.8 |
|
Corporate administration expenses, total |
5.0 |
7.8 |
The corporate administration expenses include, as a counterbalancing item, capital gains totalling EUR 3.2 million, without which the allocated expenses would have been EUR 6.4 million for the new Orion Group and EUR 1.8 million for the Oriola-KD Group.
It should be noted that the allocated corporate administration expenses, as they pertain to Oriola-KD, do not necessarily reflect what the amount of said expenses would have been had the company operated as an independent legal entity. Additional expenses will be incurred from costs connected with listing on the stock exchange as well as for the reorganisation of administrative and internal control processes after the demerger.
Operating profit
With the exception of the adjustments described above, the items included in the present Group's operating profit have been allocated so that the Oriola-KD Group's operating profit comprises the aggregate operating profit of the Oriola and KD Groups. Other items belonging to the present Orion Group's operating profit are included in the new Orion Group's operating profit.
The items above operating profit for the new Groups also include internal purchases, sales and inventory margins arising from transactions between the new Groups, which are eliminated in the present Orion Group's financial statements. The clearly most important of these are the items arising from the pharmaceutical distribution agreement between Orion Pharma and Oriola Oy in Finland.
Financial income and expenses
All the financial income and expenses items of the companies belonging to the present Oriola and KD Groups have been allocated to the Oriola-KD Group. All other financial items of the present Orion Group have been allocated to the new Orion Group.
Taxation
The historical income taxes of the companies belonging to the Oriola and KD Groups have been allocated to the Oriola-KD Group and the income taxes of the other companies belonging to the present Orion Group have been allocated to the New Orion Group.
Deferred taxes resulting from accumulated accelerated depreciation, an IFRS pension asset (2004 and 2005) as well as other smaller items have been allocated to that new Group whose earnings and balance sheet items have given rise to the deferred taxes. Deferred tax asset has been allocated to the originating Group for whose companies the losses have been incurred. In respect of the deferred tax assets, only the amount estimated to be deductible from profits generated in coming years has been booked.
Deferred taxes have been calculated for the internal profits between the Groups to be formed.
Cash flow statement
The cash flows of the new Groups have been calculated on the basis of the combined carve-out income statements and the combined carve-out balance sheets for the Groups.
The internal dividends between the new Groups, paid by Oriola Oy and Orion Sverige Holding AB to Orion Corporation, have been treated in the Oriola-KD Group's cash flow statement as if they were dividends paid to external parties. The difference between this sum and the total dividend paid by the present Orion Corporation to its shareholders has been included in the cash flow statement of the New Orion Corporation.
In the carve-out cash flow statements presented in the demerger prospectus, the loans granted by the group companies to each others within the demerging Orion, also including cash transferred to the Group account, were treated as part of the change in working capital. For this part, the calculation principle has been amended to be in line with the manner in which this kind of a cash flow will be presented in the new Groups. The liquid cash assets invested by the Oriola-KD Group outside the company and the loans taken by the Orion Group from outside the company have been included in the cash flow from financing activities.
Orion Corporation
Jukka Viinanen Jari Karlson
President and CEO CFO
Contact persons:
Jukka Viinanen, President and CEO, Orion Corporation phone +358 10 429 3710
Jari Karlson, CFO, Orion Corporation phone +358 10 429 2883, gsm +358 50 429 2883
Eero Hautaniemi, President, Wholesale and Distribution, phone +358 10 429 2109,
gsm +358 50 429 2109
gsm +358 50 429 2109
Disclaimer
The combined carve-out financial statement information presented here has been prepared solely for illustrative purposes. The data should be read in conjunction with the combined carve-out financial statement information from the demerging Orion's consolidated financial statements to be presented in Appendix 3 of the Listing Particulars, presented in Appendix 9 of the Demerger Prospectus and presented in Orion's financial statements and Interim Reports published earlier.
The combined carve-out financial statement information presented here has been prepared solely for illustrative purposes. The data should be read in conjunction with the combined carve-out financial statement information from the demerging Orion's consolidated financial statements to be presented in Appendix 3 of the Listing Particulars, presented in Appendix 9 of the Demerger Prospectus and presented in Orion's financial statements and Interim Reports published earlier.
The combined carve-out financial information from the demerging Orion's consolidated financial statements does not as such necessarily give an accurate view of the future results, financing position, changes in equity and cash flows of the new Groups, nor does it present a view of what they would have been if the new Groups had operated as separate legal entities during the periods represented.
The press release (including tables) can be downloaded from the following link: