Pharmacy Chain 36.6 announces 2005 financial results

26 JUNE 2006, MOSCOW – Pharmacy Chain 36.6 [MICEX: RU14APTK1007; RTS: APTK] announces 2005 financial results (audited by Deloitte) in accordance with the International Financial Reporting Standards (IFRS).

Sales

• Consolidated sales grew 45% y-o-y in 2005 and reached $305 million.
• Net sales in the pharmacy segment increased by 51% in 2005.  This growth was facilitated in part by the opening of 139 new pharmacies and acquisition of 8 existing regional pharmacy chains.  Sales at pharmacies that had been operating for more than one year at the end of 2005 grew 12.3%.
• Veropharm sales reached $79 million, up 32% y-o-y.  This increase was primarily due to a significant growth in sales of the new prescription medicine portfolio.

Profit

• Consolidated gross profit grew 46% in 2005.  The start up of Veropharm’s new product line increased the gross margin in the production segment by 4.7%.  Active development of the regional drugstore network led to a gross margin decline of 0.7% in the retail segment.
• The Company’s consolidated EBITDA grew by 12%, reaching $21 million.  EBITDA in the production sector was up 31%.  The opening of a substantial number of drugstores had a significant impact on profit in the retail sector, which, in part, led to the decrease in EBITDA to $3 million.
• Net profit in 2005 totaled more than $8 million, an increase of more than 6-fold y-o-y.  This increase in net profit due to the sale of 18.9% of Veropharm’s shares to Troika Dialog in the autumn of 2005.

Investment and Other Indicators

• Pharmacy Chain 36.6 invested $35 million in 2005 in opening new pharmacies, re-branding and acquisition of regional pharmacy chains, as well as on real estate acquisitions and in production.
• In 2005 the Company refinanced its short-term credit and attracted a syndicated loan, thus increasing its loan portfolio to $29 million.  The total outstanding financial debt as of the end of 2005 reached $109 million.

Artem Bektemirov, General Director, Pharmacy Chain 36.6:

“The financial results of Pharmacy Chain 36.6 for 2005 reflect the Company’s strategic direction – rapid development of the retail segment.  The active growth of the pharmacy chain continues to have a negative impact on our current profitability indices.  Last year it required us to mobilize our internal resources as well as attract outside financing. During 2005 Pharmacy Chain 36.6 took out a syndicated loan and also sold a stake in a production subsidiary to a financial investor.”

Sergei Krivosheev, Chairman of the Board of Directors, Pharmacy Chain 36.6:

“In 2005 Pharmacy Chain 36.6 remained the largest player on the mergers and acquisitions market in the pharmacy sector.  The Company continues to actively consolidate the Russian pharmacy market and acquire regional pharmacy chains.  In executing its development strategy for the retail sector in 2005, the Company acquired not only the leading regional pharmacy chains, but also small local players.  Pharmacy Chain 36.6’s accumulated experience in assessing and integrating the acquired pharmacies guaranteed a fair price for the buyers and the sellers. And for the employees of these pharmacies it provided the opportunity to work in one of the leading companies in Russia.”

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