Laboratorio Reig Jofre, S.A. (RJF) Earnings Call Transcript & Summary

Okay. Good morning, everyone. I'd like to start by thanking everyone for joining us. I'd also like to thank BME as always for lending us this wonderful facility in a very appropriate location for this type of event. I'd, of course, like to thank the company and its representatives, of course, at the highest level, as you can see. And now I'd just like to spend 30 seconds emphasizing Reig Jofre's commitment and loyalty towards investors and analysts. We have to say it openly, unfortunately, this kind of direct personal face-to-face contact between listed companies and investors and analysts is becoming increasingly rare. And so really very grateful for their commitment and their loyalty. It's also a special year for the company since they're celebrating their 90th anniversary and 5 since they became a listed company. So congratulations. And a bit of advertising on our part. The Spanish Institute of Financial Analysts is also celebrating its 50th anniversary this year. So we're also involved in the celebration. It was in 1965 when it was established in Barcelona, the Spanish Institute of Investment Analysts, which was the original name, led by Rafael Termes Carreró who is really the father of finance in this country. And so you can imagine back there in 1965, to speak about cash flow, discounts and multiples would be like talking about blockchain today. So I just wanted to take advantage of this opportunity to remind you of that celebration. And without any further ado, I'm now going to introduce the company management team led by Ignasi Biosca, CEO; Roser Gomila, the CFO; and Inma Santa-Pau, who's the DIRCOM and Head of Investor Relations. Inma, I think that you wanted to make some comment -- some practical comments to start with.

Yes. Thank you, Javier. Welcome, everybody, to this results presentation for 2019 results for Reig Jofre. This presentation will last around 1 hour during both the presentation and the Q&A. We'll hear questions first from the room and then over the webcast. It's been livestreamed in English and Spanish, so we'd like to welcome everyone who's following the streaming. And as Javier has just said, this year, we are celebrating 2 milestones in our history: our 90th anniversary and our 5 years as a listed company. And so after this presentation, we hope you can join us on a short trip through the 90 years of the company's history, led by our Vice Chairman, Alex García Reig. And we will be ringing the bell in the stock exchange and then offering you a drink. So please join us after the presentation out there on the floor. And now I'm going to give the floor to Ignasi Biosca, our CEO.

Good morning, everyone. Good morning to everyone here in the room and everyone who's following the webcast. Our purpose today is to share with you our earnings in 2019 and also to give you a bit of an overview of how we see the next 5 years for Reig Jofre. 2019 was a good year. It was a transition year in which we are beginning to see the completion of an investment process, which had begun over the last 5 years. And we're beginning to see an increase in our turnover and also our EBITDA as a result of this new cycle in the company's history, which I believe should set the trend for the coming years. As I said, we're celebrating a double milestone this year: our 90th anniversary as a company celebrated in this year. It was founded in 1929, a bit older than the Institute of Financial Analysts, as we've just heard, but it's still a good run for the institute. And also 5 years since we became a listed company. I think I should refer to the 1,121 people who are working for the company at the end of 2019, 58% women. So we have a majority of women employees. And you can tell, I think, in the company with our Chairwoman, Isabel Reig López, at the helm, she couldn't join us today for personal reasons, but she has obviously been at the helm of the company. First was founded by her father in 1929, then Joan María Biosca took the lead, her husband. And then in 2006, I became CEO, I'm her son, while she stayed as Chair. At the end of 2019, I think we have a year in which we've reached a record EUR 200 million in turnover. That's 11% up with respect to the previous year. And so really, this number of EUR 200 million was a target that we had set for ourselves back in 2015 when we went public after the merger, the reverse merger with the old Natraceutical. And so really satisfied that we've reached that target that we set at the time. Our EBITDA this year was EUR 19.7 million. That's 20% up on the EUR 16.3 million last year. So again, we are beginning to see, I think, a new trend in EBITDA. We should continue to grow in the coming years as a result of the effort of the investments made over the last few years. Net profit, EUR 4.9 million. Roser will be telling us a bit more about the underlying metrics. And we are closing a year in which we've still made strong investments, EUR 22.2 million in investments for expansion without including the acquisition at the beginning of the year of the osteoarthritis business. This investment CapEx has been funded with debt and equity, as a result of which the debt-to-EBITDA ratio is currently at 2.67x EBITDA, a number which we feel very comfortable with since in the Board, we've always believed in staying below what we think would be a prudent level, which is 3x EBITDA. In 2020, perhaps at some point, we might be closer to that figure of 3x EBITDA. But after this year, we should start to see how this number will come down and return to our traditional levels. As for different business units within the company, the company is basically divided into 3 major business units, each of them with their respective director generals. And basically, we have one very large division, which is pharmaceutical technologies, And that includes or represents at the end of 2019 50% of our turnover, and that's up 2% in the year. Later, we'll talk in more detail about this division, pharmaceutical technologies. And then the other 50% of our EBITDA is split into 2 approximately similar parts, specialty pharmacare, which is division where we work on skin, hair and nail health, joint health and pain, women's health and with a clear aim which is business to professionals, so health professionals. And that's where we will be recommending our product. And finally, the other quarter of our turnover, 24% of our turnover is consumer health care, which is a business that's more consumer-centered. It's focused more on prevention and on cures. And it's a business which has been growing very significantly in the last few years, very strongly in the French market. And we expect to keep growing this business. All 3 business units have had positive turnover growth this year, plus 2% in pharmaceutical technologies, plus 41% in specialty pharmacare and up 6% in consumer health care, so very solid year with good earnings growth. As for the first division, pharmaceutical technologies, that's the division in which we specialize in development, in industrial-scale manufacturing and also in the marketing of products with specialty technologies. Essentially, we're talking about antibiotics derived from penicillin and also injectables and lyophilized products. In these contexts, we are, I think, probably the global reference. These are areas where in antibiotics, we manufacture in Reig about 25% of antibiotic consumption of penicillin derivatives in Spain and the different brands, but really, it's a relevant market share or 30% of a molecule which is a last-generation anesthetic, and 30% of world assumption is being supplied by Reig Jofre. But nevertheless, we do have significant product diversification. Our main molecules, amoxicillin, clavulanic, none of them represent more than 10% of our turnover, so pretty diversified by products but also geographically because this is a business where 60% of our turnover is international, and we don't have a clear dependence on any specific market. It's a business which is basically B2B. So we work through partners, other pharmaceutical companies that market the product in the different markets. But this is actually shifting because in the markets where we have a direct presence, we are growing our own marketing capabilities. In 2019, this division basically, I think, had 3 highlights. One was the strong growth that we've experienced in the Japanese market. This was a year in which we were still limited by total manufacturing capacity and therefore our ability to get product out of our plants whilst we await the increased capacity that will come from our investments. But we've been shifting from markets with less added value or with a lower profit margin to more profitable markets. So basically, we've had an almost 24% growth in the Japanese market. I personally was in Japan 4 months ago in an event we held with our Japanese partners, with the Spanish ambassador to Japan. And so really, our focus on the Japanese market is very significant, and our presence is growing and will continue to grow over the coming years. Also, 2019 was a year in which the new line of injectable antibiotics of the Toledo plant came partially online in 2020. It will be operational throughout the whole year. And the St. Joan Despi plant, the Barcelona plant has maintained its 100% capacity throughout the year whilst we were migrating different products and markets in order to maximize value creation with our still rather limited capacity. Moving on to our next business unit in the center, specialty pharmacare. Here, our growth was 41% of our turnover. And that's due to 2 effects: organic growth basically of our franchisees for hair and nail health, which grew approximately 5%; and then basically a very strong growth due to the incorporation on July 1, 2019, of the new joint pain and health unit as a result of the acquisition of Bioibérica's pharma division, an acquisition which was completed on July 1, 2019, and therefore has contributed to our earnings only in the second semester. The integration of this business has brought in about EUR 13 million in additional turnover within the group's perimeter and in this particular division. Later, we'll talk a little bit more in detail about the acquisition itself, the strategic rationale and the opportunity. And finally, in consumer health care, we've had 6% growth in sales. Basically as a result of our growth in the French market, we've grown our turnover by 9% in that market. Basically, we still have a strong presence in this area. As I mentioned before, our focus is on prevention and general well-being more than on curing. Curing is actually a much smaller market than caring. As consumers, we care about our health, and we're willing to invest money in prevention and in our general well-being. And growth this year has strong -- that last year, we -- most of our growth was in weight control products. This year, it was in natural energy drinkable products, combinations with ginseng, guarana, ginger, jelly with vitamins, products for stress, for sleep, collagen for beauty and also joint pain or the prevention of joint pain so that all of these probiotics, we've launched a whole probiotic range in France, are areas that have driven this sales growth of 6% in this division. Moving on. Let me just very briefly show you our international progress. Internationally, the company is present. And sometimes people are not aware of this, but we do direct selling in 7 different countries. That's with our own sales teams and employees. Basically, of the 1,100 employees I mentioned before, about 800 people are based in Spain, mostly in our industrial plants in Toledo and Barcelona. But about 100 people are based in France, sales team who sell to pharmacies. Another 100 are in Sweden to cover the Nordics. And also, we have a plant for semi-solid dermatology products in Malmö in Southern Sweden, also very close to Copenhagen. And we have smaller teams in Belgium, the U.K., Portugal and a small operation in Singapore to guide the growth of the business in Southeast Asia, from which, we've opened 2 new markets this year, Bangladesh and Myanmar markets, which we expect to generate good returns in the coming years since these are markets where European quality is valued and where they are willing to pay a premium price for high-quality products like ours. Total sales through our own sales teams to pharmacies was EUR 120 million out of the total of EUR 200 million. And therefore, we -- the remaining EUR 80 million have been sold through our 130 commercial partners in the 72 markets where our products are sold through distributors and licensees. The overall picture for our international sales is 45% Spain, 45% the rest of Europe and 10% the rest of the world. So outside Spain, it's 55%, so bigger than the Spanish market. This year, 2019, we've seen some increased sales in the Spanish market because the acquisition we've made, as you will see, has a relevant presence in the Spanish market. And now I'd like to give the floor to Roser Gomila, our CFO, who is going to give us more details about the P&L.

Yes. Good morning. Thank you, everyone, for coming. Running through the numbers and the end of year earnings for 2019, we have to keep in mind 2 effects. First, the technical effect, which is the application starting this year of IFRS 16, which is basically about the company's leases, which are asset amortizations, which is why some metrics in our balance sheet and also in our P&L show rather particular shifts with respect to the previous year. And the second impact this year, of course, was the acquisition of that health joint and pain (sic) [ joint health and pain ] business, which through its impact on investment and on the P&L, is something we need to keep in mind when we review the year's figures. So if I may, I'm going to start with the numbers as they were posted and published for our investors and analysts. EUR 200 million in turnover, which are a very solid starting point for the coming years. Sales are up 11% while our gross margin has risen a bit more. So product profitability is up somewhat. And our gross margin in 2019 was 63%. As for OpEx, company's expenses have also risen this year but less than sales. And so we've also improved our profitability at this level. Personnel expenses, you can see, are up EUR 5 million That's about 10%. And basically, the main reason here is the fact that the new joint health and pain division includes a team of 51 people basically in sales and marketing who are joining our workforce at Reig Jofre to develop this business. Other operating expenses, that item which also increases by about 10%, is also partly due, as we will see in more detail later, to the expenses connected with this joint health acquisition, so the cost of the intermediation of this transaction plus the expenses connected to the capital increase that we did in June to finance part of this acquisition have impacted these operating expenses, and it's a one-off effect, which has increased this item. Overall, also, other operating expenses have come down on the leasing side because that's come down below the EBITDA line to amortization. And so overall, you can see that our EBITDA for the year is EUR 19.7 million, so that's up 20% with respect to the previous year percentage that I think puts us on a solid track for growth within reach of the EUR 20 million in EBITDA, which is the basic target that we will use to calculate all of our other targets. If you look below the EBITDA line, which is currently at 10% of our sales, what you can see is that our amortizations are up. You can see EUR 5 million amortization. Half this impact is due to the technical application of IFRS 16. Those leases that are no longer considered as leases are added to amortization, so it's just a technical impact, which doesn't affect the company's profit or cash flows. And there's also an effect connected to the acquisition of the new division, which I will explain a bit later, so you can see how we can compare like-for-like and really see the impact. But really, this amortization item has a relevant impact on the bottom line. Our financial earnings -- or financial costs up this year because of the increased debt due to the new investment, but it's still only 0.6% of our sales, so a very acceptable ratio in our P&L. In other results, which includes some one-off impacts, which we've grouped here. Last year, we had a positive one-off as a result of the new valuation of land and property owned by the company. But this year, we've not repeated that one-off, and that's also having an impact on the year-on-year comparison. Profit before taxes of the company was EUR 5.3 million. That's approximately about EUR 4 million below last year. And in spite of that, we think that this was a very good year for Reig's profit. And in the next 2 slides, I'll try and explain why we believe that. As I said, this was an exceptional year because we've incorporated in the middle of the year. So in the second year, we have the impact of the acquisition of a new business unit, an acquisition which is a price -- fixed price plus variable amount, which is to be calculated over the coming years, at EUR 48 million. And so it has a relevant impact on our numbers. This unit is having 3 effects on the P&L, which we have to consider when we look at the year's profit. The first result is immediate. That's the additional sales and income. It contributed in the second semester of the year. As we've heard from Ignasi Biosca, it's brought in EUR 13 million in additional sales, which clearly also have expenses connected to them, including product costs and also sales and marketing expenses, but it does not include any additional structural costs. So it's a business that is being added to our existing businesses with no additional overhead and so improved our aggregate profitability. The second significant impact on our P&L, as we saw before on that amortization line, is due to the structure of the acquisition. When you acquire a business, you can approach it in different ways. You could acquire a company, and therefore, you're buying a company that's managing a certain business with an associated P&L. That would not have an impact on Reig's P&L if we'd done it that way. But what we have done is to acquire specific assets. And specifically, what we've acquired is a product and brand portfolio from Bioibérica S.A. And so what we've added to our balance sheet are full assets that are added to our intangible and therefore amortized over a 10-year period. What does that mean? That in another type of acquisition, there wouldn't have been any impact on our P&L. But because it's an asset purchase, our P&L reflects about 10% of the cost of the acquisition, greater amortization over the next years. And so in '19, because it was 1 semester, we're including EUR 2.4 million to our amortization in the year. This has no impact on cash flow or the company's profit. It's just as a result of the structure of the acquisition, but we need to keep that in mind when we look at the results in order to understand our numbers hereinafter. And the third important impact of the acquisition are these nonrecurrent one-off costs of -- connected to the capital increase and the acquisition of the new division. These costs we estimate at EUR 2.3 million, combining consultancy and advisory costs and so on, are nonrecurrent. And so they're having an impact in 2019, but they will not be there in coming years. So if we adjust our P&L to reflect these impacts, what you can see is a result that really changes the way the bottom line looked in other P&L we looked at. Let's make 2 adjustments. The first is a technical adjustment. Under IFRS 16, we need to calculate in the same way in the 2 years so that we can calculate the quantities, and then we're going to adjust the impacts of the acquisition. So the first adjustment is to apply IFRS 16 backwards. So in 2019, of course, it was already enforced, so already reflected in our P&L. But if it had been enforced in 2018 and if we had applied it, and you can see here on that column on the right, the EBITDA, which was originally EUR 16.4 million, we would have added the cost of leases, and our EBITDA would have been EUR 18.8 million, but the amortization, which was EUR 7 million, would have been EUR 9 million. It's almost EUR 10 million that year. And therefore, our bottom line would not change, but the distribution between EBITDA and amortization would. And so this would be a more like-for-like 2018. But how do we adjust 2019 to make it more like-to-like? We don't need to change anything about IFRS 16 because we've already done it in 2018. But those transaction costs we need to adjust because they're a one-off. And so the EBITDA was EUR 19.7 million. If we add these nonrecurrent costs, the company actually had a solid recurrent EBITDA of EUR 22 million versus the EUR 18.8 million of the previous year. That would have meant that our adjusted like-for-like EBITDA would have grown about 17% and therefore a very positive trend in this parameter. Further down the P&L, We have that impact I mentioned of amortization of intangible assets of the acquisition. So the EUR 13 million you see here, which we haven't adjusted because that's the way we'll be comparing our trends from now on, this amortization of intangibles, which, of course, as you all know, has other advantages, the fact that it's going through the P&L instead of other transaction structures will mean that the amortization annually will be increasing in comparison with previous year. And in these EUR 13 million, there are EUR 2.4 million, which is a result of applying this additional asset amortization. So financial earnings don't change, and so the result would be EUR 7.6 million. That's the profit before tax, which would have come down slightly 2 -- about EUR 2 million in comparison with the previous years. But if we hadn't done that amortization of intangibles, if we had structured the acquisition in a different way, the profit before taxes of 2019 would have actually been higher than that of 2018. So our conclusion is that this number, 2019, is a solid starting point for future growth of our profitability and that in general, our P&L of 2019 is actually very good. Moving on to the balance sheet. Clearly, in a year of major investments, there are major changes in the balance sheet both on the asset side, reflecting the investment, and on the liability side. And I'd like to focus on this chart on the right-hand side. Our total balance sheet of Reig Jofre in 2019 has gone from EUR 220 million the previous year to EUR 314 million. That's a difference of EUR 94 million in our balance sheet, so a very significant year in the company's evolution, so a year in which we really have to look at how we've managed this evolution of our balance sheet and particularly how we finance this major investment made by the company this year. And I have tried to simplify the explanation of the balance sheet so you can understand the makeup of our balance sheet right now. And basically, as you see on the column on the left, 1/3 of our balance sheet is intangible assets. And that's basically a combination of incorporating 2 businesses in our most recent history: in 2014, the Forté Pharma business, which was incorporated by the integration and merger between the 2 companies and which is a significant part of the company's intangible assets with all the customers and product portfolios; and recently, the joint health and pain portfolio. So that's some of our intangible assets together with R&D projects and other stakes in other brands and products that we've acquired over the last years. Our property, plant and equipment, that's basically industrial investment, this is EUR 84 million. Other noncurrent assets, that's essentially DTAs connected to negative taxable basis that have come to Reig with the integration of Forté Pharma as well as R&D investments that we are generating and which will be absorbed in the coming years on the basis of the company's results. There are EUR 12 million of nonactivated DTAs on this balance sheet, but they are completely recoverable. Current assets, it's about EUR 100 million, and that includes the company's working capital. As for the liabilities, you can see equity, a very solid number, EUR 178 million. And then this financial debt of EUR 63 million; other noncurrent liabilities, EUR 19 million; and in current liabilities, these EUR 54 million, which are basically and essentially the supplier credit number. And I'm going to simplify this even further in order to try and show you how these numbers have changed if we look at the fundamentals in Reig Jofre this year and how we financed these variations. If we simplify this, what you can see is that our company has noncurrent assets of EUR 217 million and working capital, EUR 47 million. And this working capital, we've already netted supplier credits so that we can have this net figure. So our investments currently are these EUR 217 million in assets and these almost EUR 50 million in working capital. And how is this being funded? Well, as you can see, a good part of that, over 60% of our balance sheet is funded by our equity. And so the confidence that shareholders have placed on us and contributed to the company, including the recent capital increase, nonfinancial assets or liabilities, which are the ones that have no funding costs, but which we get from creditors and public institutions, different items and net financial debt, which is our bank debt discounting cash already because in this way, we have the company's net financial debt. And so I think this is a very solid balance sheet structure. Let's look at the main changes in 2019. On the one hand, on the asset side, in noncurrent assets, net valuation was EUR 79 million, almost EUR 80 million. And working capital has increased by EUR 5 million. Working capital, to simplify, has mirrored the growth in sales, so the additional EUR 5 million in working capital is an 11% increase in line with sales growth. Let's look at the top, the investments. And what has the company invested this EUR 71 million in net? That means gross, it's about EUR 90 million. And so from top to bottom, the first impact we have is a technical impact, IFRS 16, which injects into the company's asset side these EUR 13 million in future leasing income, which is supposed to be assumed to be commitments made by the company. And so they increased our asset side even though no cash has been paid beyond the leasing payments. And then an investment of EUR 71 million in CapEx, which basically was for 2 major projects plus the current CapEx. EUR 71 million, if we look at the breakdown, you can see there's EUR 22 million in industrial CapEx, so investments in new technologies and increased capacity. And of these EUR 22 million, EUR 17 million are for the construction of the new plant for injectables in Barcelona and so in our investment plan. And the remainder, EUR 5 million recurrent CapEx, the acquisition of the joint health unit is EUR 48 million investment. And how have we financed this growth in our noncurrent assets on our working capital? If we look at the liabilities in these 3 elements, you can see on the variations column that all 3 elements, interestingly, have increased by a similar amount in number, at least these round figures. So 1/3 of these investments have been funded with increase in equity as a result of that capital increase of EUR 34 million, which we carried out in June very successfully for the company because the speed and the interest in the market, nonfinancial assets, which are no cost of liabilities rather, which are basically a subsidy of almost EUR 2 million from the IDAE for an energy efficiency project in the new Barcelona plant and because of the content of this recognition to our efforts to improve sustainability is something we're very proud of. And then the EUR 26 million in other noncurrent liabilities, which are connected to the deferred payment, we've agreed with the seller of the new acquisition. What has happened to net financial debt? So that's the debt where we do -- which we do use to calculate debt ratios. As a result of IFRS 16, again, it's an additional EUR 13 million. That's just the technical impact of the application of this standard, and -- but it doesn't actually mean more debt. And in the following 2 elements, we do have financial debt with banks mostly, both long term and connected to industrial investment projects; and short term, these EUR 5 million, which are basically to finance the company's working capital. So if we look at debt-to-EBITDA, these numbers, net financial debt has gone from EUR 24 million to EUR 53 million. That brings our debt-to-EBITDA ratio to 2.67x. It was 1.49 last year. If you want to consider it in more like-for-like terms without the impact of IFRS 16, it would be 2.35x. So really a very comfortable level given our balance sheet. And how -- what is the composition of this financial debt, this EUR 63 million in gross financial debt minus EUR 10 million in cash? So forget -- we subtract the impact of IFRS 16, and we focus on the EUR 50 million bank debt. So basically, 1/4 is loans; credit facilities, 8%; and financial leases, 57%. 1/3 of the bank debt is fixed rate, and the remainder is variable rate with a mean maturity of 3 years, which will be amortized rather gradually and linearly over the next 6 years with a cost, which is currently 1.95% on average, and the cost of new debt, which is actually significantly lower. And so overall, the year was a very important year for Reig Jofre with significant impacts on our balance sheet and our P&L and a year which completes a 5-year cycle of investment in expansion and opens a new phase to capture the returns of these investments. And because we have this 5-year horizon up to 2025, which Ignasi Biosca is going to discuss now, let me, just a couple of minutes, give you a bit of a historical background of the company's evolution in the last 5 years, during which we've implemented this strategic investment plan and what has happened to the company's main metrics since 2013. If we look at, starting on the top left, the evolution of sales these years, I've added some additional years because sometimes qualitative leaps happen before 2015 or right after, just to give you a better picture of this evolution. So sales have been growing at a constant rate every year, and there are some years which have been more marked because they have been turning points in our inorganic growth like this year with the acquisition. But overall, sustained constant growth in the last 5 years and didn't grow more because we were investing in increasing our capacity to generate future returns. And EBITDA, which, with the exception of 2015 due to exceptional circumstances, is also growing sustainably and has now moved beyond the EUR 15 million barrier and is now close to EUR 20 million, which is the basis for our forecasts and our future targets. On the bottom left, you can see how our R&D investment and expenditure has evolved in the group. And here, we haven't separated whether the projects are activated or not. It's just our complete R&D effort. And here, you could see the quantitive and qualitatively that happened in 2016 where we moved to an average expenditure in R&D of about EUR 10 million in this period, 12 years in 2019, which really puts us in a position with a product development platform that we'll be able to generate significant revenues as our product pipeline moves forward. And finally, our investment chart. This is CapEx. I'm not considering R&D or activation. And here, you can see this last figure is not to scale because it wouldn't have fit within the slide, the EUR 71 million. But you can see that overall, we've invested EUR 122 million in the last 5 years between 2015 and 2019, which is I think a considerable number given our size. And of this EUR 122 million, we feel that EUR 30 million is the recurrent industrial CapEx to maintain our capacity in the current manufacturing volumes, so an annual CapEx of EUR 5 million, EUR 6 million. And the rest are investments for special projects, and what special projects were these? About EUR 92 million in total invested in the 2 first elements on this slide, investment for inorganic growth with the acquisition of brands and products. And in 2019, with the acquisition of the joint pain portfolio, that will generate immediate returns and will -- and were made to generate EBITDA from day 1 after the acquisition. And the second set of elements, investment in new technologies and increased capacity with 2 very major projects and medium-term returns when these investments generate full returns 2 or 3 years after the capacity comes online. And finally, a set of significant R&D investment projects with a total of about EUR 50 million. And now this is the most relevant part. You can see how these investments will impact the company's future strategy. And so now I'm going to give the floor back to Ignasi.

Thank you, Roser. Basically, I think we've -- and Roser has explained it very clearly how the Board back in 2015, we -- after we became a listed company, we designed a 5-year plan of investments in order to build a stronger future and to convey to the market that even though we were a 90-year-old company back then, we had a very bright future ahead of us. And so we were betting on our own capacity and our ability to grow. This year, we're at the end of 2019 presentation, and we are completing that first strategic plan which completed this year. And we are moving on to the next phase of our strategy to the end of 2024 in which we will capture the full potential of the investments made. The investments made, as Roser has been describing, basically these 3 areas. We've tried to invest in things that would contribute to our 3 business units in various ways. And the first, of course, is inorganic growth. So basically, we've gone after brands or joint ventures with other companies. In 2014, we integrated the Forté Pharma business essentially in France, Belgium and Portugal, amongst other markets. In 2016, we acquired various products in the U.K. And in 2019, 3 years later, since that last inorganic growth transaction, we've acquired the joint health business, which I will review in a bit more detail in a moment. So basically, we have experience in the acquisition and integration of businesses that have a good strategic fit with us that are complementary either geographically or by therapeutic or business areas. And so we have sought these opportunities, which appear from time to time in the market. And if you're alert and you move fast, you can integrate them in the company very successfully. The second, more medium-term type of investments are our investments in new technologies and increased capacity for our industrial assets. Basically in order to enhance our first division, pharmaceutical technologies, we've invested about EUR 14 million to increase capacity. This did not include our maintenance investments with a peak of EUR 17.2 million in 2019. But as you can see, in 2020, that's going to come down to EUR 5.8 million. And therefore, we believe that this investment cycle to increase our capacity will have been completed for a while, although, of course, we are always open to consider new growth opportunities that might arise. And the third area for investment is, of course, as always, R&D to develop new products in the pharmaceutical sector. Creating new products is absolutely essential. It is the great driver that can enable you to take a significant leap forward in this sector. And being aware of our size and therefore our investment capacity because we're not a company that is investing all of its cash flow in a single project with too much risk, we've always tried to diversify our risk. And our commitment is to invest 6% of our turnover in R&D for new product development. In the last few years, approximately 50% of the 6% of our turnover we've invested in products basically for the pharmaceutical technologies division in order to create the demand to use up the extended capacity we're building. And 30-some percent was invested in specialty pharmacare, so dermatology, gynecology, joint pain. And that's where we still think that as a result of this effort, we should be able, as a company, to fulfill our business purpose, which is to market pharmaceutical products and solutions internationally that will add a benefit for patients, physicians or health services. And so that's our purpose, and we're focused on generating cash flow that we can invest in order to someday take that leap. We've seen a lot of pharmaceutical companies, which with a good product -- project, doesn't have to be a disruption, can take that qualitative leap forward in size and profitability. And that's what we believe in, although more in the medium and long term. And if we focus on the first area, which is inorganic growth, I'd like to say a few words about the acquisition of the joint pain portfolio of products and the new division, which was integrated on July 1, 2019. With this acquisition, we've brought on EUR 26 million of additional annual sales. It's a portfolio -- it's a combination of medication and nutritional supplements, approximately 80-some percent of it, 87% of it medication and about 13% nutritional supplements. It's a portfolio of products that is very much based in Spain. It's 90% Spain, 10% international. And so as a company, that's enabled us to develop a new therapeutic area. But this new therapeutic area, we believe, is an opportunity for a company like Reig because it's a sector which is growing fast since the population in general is aging and because we have a problem with increased overweight in the developed world and because there's also an issue with joint wear as a result of exercise, sometimes inappropriate exercise that's endangering our joints. And so we believe this is definitely a growing market in which, particularly for arthrosis, there isn't a definitive cure. There is no treatment that can really cure arthrosis today. The different treatments are palliative and treat symptoms and reduce the pain in the joints caused by arthrosis. And so we feel that this is an area which will continue to develop. It's grown significantly already but will continue to grow. And so it's an area that we believe is valuable for Reig. And the strategic fit, well, we're experienced at integrating businesses of this type because we've done it successfully in the past. Secondly, our company has the know-how that's necessary to market products by medical visits, so visiting health professionals, but also reaching consumers directly through the pharmacies. And so we are familiar with both channels, and we think that this new area for joint care and pain because care, of course, is more for consumers and treating pain is more through professionals, is an area that we understand and where we have a lot of expertise. And therefore, we can make it grow at both levels, prevention and cure. And finally, it's an area which has a very good international fit with us because it's very present in Spain but not so present internationally. And given our subsidiaries and sales teams abroad and our international partners, we think that we will be able to successfully develop this internationally. And at the same time, it's an area where internally, our internal development teams and the teams that have come on board from Bioibérica can generate enough innovation to add value to the market and to patients who suffer joint pain and which we don't want treated with products that can cause significant side effects, like in sales, side effects are very significant particularly when they use long term as they must be in this type of situations. As for our investments in new technologies and increased capacity, as I said before, I'd like to look at this circle in the center of the slide. We've always been focused on first generating the demand, first creating the products and exploring the needs and having the right partners to develop the business, and then we build the capacity. And then thirdly, which is what we're going to focus on next, we focus on the profitability of these investments. As for building demand, I should just mention that in 2019, I would like to track these figures, we've managed to get a registration for 25 new products for 8 different molecules in 20 different countries. And so that's where we are planting the seeds with the coming years. And if our partners are commercially successful in those countries, we'll continue to grow and therefore use up the capacity that we've been building in Toledo and in Barcelona. And as for this new capacity building, we always do it with 3 clear priorities: capacity itself; second, the highest quality standards; and third, automated processes that will improve efficiency and productivity. In Toledo, we've increased our manufacturing capacity for injectable antibiotics for hospital use by about 33%, and that means 25 million vials a year. There are few global manufacturers because you need dedicated plants for these types of antibiotics, more certified and recognized. And it's a very global product because it's used all over the world. Plus, the developed world is now -- the developing world is now having access to these products. In Barcelona, the new capacity will enable us to produce 50 million vials at full capacity. We're beginning with about 40 million vials with the current capacity in 2016, '17 of 15 million. Quality. Well, the quality standards are, of course, a priority for us. We are manufacturing injectables, and injectables have to be manufactured in aseptic conditions because these are going to be injected into blood, and so they cannot have any sort of contaminant. These are -- have to be completely sterile products. And so you have to manufacture under aseptic conditions, which is really the most stringent standard in drug manufacturing. And in order to guarantee those aseptic conditions, we've invested in isolator technology, so there's no human contact. The product is always isolated from any human contact. You can only access the product through special gloves. And that way, we are able to sign contracts with innovative companies that have more added-value products, higher prices, access markets where they're willing to pay a bit more for these products. Also having these large automated facilities will enable us to reduce, as long as we are at full capacity, to reduce our costs and therefore increase our efficiency by increasing our productivity. The Toledo plant will be operational this whole year 2020. It was being commissioned during 2019. And the Barcelona plant will come online in 2021. In fact, this Christmas, the new line that was being built, we've built in a new building, as you see on the picture on the left, a 3-story building. In the roof, you have all the technical facilities. In the center, you have the lines for the freeze drying. And below, you have the secondary conditioning of the product. And there's a short video which we're going to show you now where you can see the plant where we're manufacturing our line in Italy just a few months ago. In their factory, they have been manufacturing the -- they were manufacturing the line that came to Barcelona this Christmas. And so we left the building open so all the machinery could be installed, and now we are closing the walls. And it's a robot that moves all the vials automatically. There's no human contact. It's a very automated process. And really, it's a very productive system once it's at full capacity, and it's also of the highest quality standard. Then once it's at full capacity, which will be soon since we've been driving demand, and at the end, we'll show you a video for simulation because that's not running yet, but -- of the new line. Finally, we have our R&D pipeline for new products. And here, we have 2 approaches: partnerships, depending on the degree of innovation and risk. For the higher-risk, higher-innovation products, we tend to use partnerships with start-ups or universities or other pharmaceutical companies. And the lower-risk or lower-innovation products, which are more focused on generics or other patent products, we develop 100% at Reig in order to minimize our risk. I'd like to mention a current project for the next 2 years of a biosimilar product. We're partnering with Korean companies in the development of biosimilars for Europe. And also a project of our own, we're running in a joint venture where we have a 50% stake for our own biosimilar. And I'd also like to mention that in 2020, we're completing a Phase III clinical trial for a skin product for fungal infections, which I think could be a very significant step forward with an innovative product of our own, which will be marketed internationally within the next 2 years or so. We have other products for skin infections, for impetigo that's already under submission; for molluscum, which is already premarket, we'll be launching this year; and another for nail regeneration, which is about to be launched; as well as one for male fertility. And finally, to close this, I'd just emphasize what we said before. We're closing a phase of major investments. And so from here on out, we expect our CapEx, our recurrent CapEx to stabilize at around EUR 6 million, EUR 7 million, and our expansion CapEx will come down significantly. And we will be focusing on obtaining or capturing the returns of these investments. So I think now would be a really good time to invest in Reig although of course, it's up to each of you to decide. How are we going to capture the potential of these investments? Well, we've set some very ambitious targets in our strategy for the next 5 years, which I think reflects the consensus in the markets by analysts who follow us given our increased capacity and so on. Our target is to reach sales of EUR 300 million with -- versus the current EUR 200 million and to double our current EBITDA within the next 5 years. So with the expected growth, we hope to meet these targets and even exceed them in this time line. And finally just 2 comments about shareholding and structure and market cap particularly because in 2019, there have been some significant changes. First, the Reig family, through their investment vehicle, Reig Jofre Investments, which is the biggest shareholder of the company, has reduced their stake down to 62.7% in 2019. As a result, free float has increased. We've been trying to increase free float for some time. In 2017, it was only 13.5%, but in 2019, it's already at 21.2%. And also -- and as a result of the capital increase in June 2019, we've had a chance to bring on board new partners committed with this new phase of the Reig project, such as Onchena with 5.5% of share capital or Quaero Capital who've been following us, they're based in Switzerland for some time and had been trying to invest in the company. Other investors who have come in are family offices, institutional investors who believe in the project and want to be part of this new phase with the capital increase, which was 10 million shares. The Board -- or rather the AGM last year approved a dividend of EUR 0.04 per share with a cash option payment or this subscription of new shares. 87.3% of the shareholders decided to subscribe to capital increase and so that we issued an additional 1 million shares, which have contributed to the increased free float. Ultimate goal, which is to increase our daily trading volume. Also relevant change at the end of November, our old reference shareholders Natra, who had been with the company since our merger with Natraceutical, exited our shareholder structure and sold their holdings in an orderly fashion to Kaizaharra, which is an investment vehicle of a Basque family, Spanish family with industrial commitment in the country, with know-how and expertise in the industrial sector and really committed to the project. So in 2019, we've been able to restructure our shareholder base with really committed investors for the present and the future of the company. And finally, with respect to our share performance, we closed the year at EUR 52. We had started -- well, it was 10.5% up -- EUR 2.52 rather. Analyst cover, we have Bankinter, Solventis. You can see that their target value is above EUR 3.5 per share. So obviously, we're trading below our estimated value by analysts, discount in the cash flows for this next phase. And good news for us was that in December, we joined the IBEX Small Cap. It was the first step for us to move forward. And so basically, we've been working with regular road shows this year with investors and shareholders both at the national and international level. And that's basically all we wanted to share with you today. And so of course, now we'll be happy to answer any questions.

Well, just to remind you that this presentation will be available very soon on our website in our Investment section -- in our Investors section. We've had over 200 people following the webcast. And now we will answer questions from the room and then questions coming in off the webcast.

Right. In -- for 2025, you've set a target for free float is now...

Well, it's not 20% -- well, it's currently 21.2%, and we think that about 25% would be reasonable. We felt comfortable with 21% because it had been so much lower. Also in June this year, there was the capital increase, and new shareholders came in, which will gradually at some point, of course, sell some of their shares, and all of that will contribute to that additional free float. So we really think we have the right basis for our free float to move between 21% and 25%, which would be ideal at this point. Anyone else?

I'm Pedro Echeguren from Bankinter. Congratulations on the results, which were wonderful. I have 2 questions for you. First, in view of the improvement in free cash flow, which you should experience from 2021, could you consider additional acquisitions? And secondly...

Excuse me, Pedro. Could you repeat the question?

Yes. In view of the increasing free cash flow we would expect between 2021 -- would you consider a new industrial or acquisition plan because you will have surplus cash? And according to those numbers, your debt amortization could be quite a lot quicker than the 5 years you mentioned before. And with respect to the guidance you've given us, doubling your EBITDA in the coming 5 years, I'd like to know whether that's on the basis of the adjusted EBITDA or accounting EBITDA 2019 or book EBITDA 2019.

Well, as for the free cash flow, we do expect that it will increase in the coming years. Currently, our industrial plan, we're quite satisfied with the investments we've made to increase capacity. So we're thinking more about capturing the potential of the investments we've already made, although of course, we'll be alert to any opportunities that might develop in the market if we need more capacity or if we identify some technology with a good fit. And we have the cash. It would be a good way to invest it. But for now, we're very focused on capturing the profits from what we've already invested because there's lots of opportunities we've identified out there, but right now, we're focused on capturing profits of our current investments. And as we're reducing our debt levels, of course, we have a plan to amortize quickly. The ratio we're at, we expect will come down rather quickly. But we feel comfortable with the debt level. We don't see deleveraging as absolutely urgent. So we wouldn't use all that free cash flow to amortize debt. And finally -- oh, and also another point about the -- what I said earlier about the dividend, the scrip dividend that the AGM approved last year, we expect that for this year, a similar model will be approved. But also if there's more free cash flow, we might also consider having dividend policy adapted to that increased cash flow.

Yes. And as for your question about what EBITDA are we going to use as a reference, when we talk about tripling it -- and that's a very good question, as we said, our target sales are EUR 300 million in 5 years. The second target is to focus on profitable growth. And so our target is to have a ratio of EBITDA of our sales at the end of this period of closer to 15% than 10%, which is where it is now. And if you apply that 15%, that would mean doubling your adjusted EBITDA, so the recurrent EBITDA I mentioned that the company would have at this point.

Two questions, very quick questions. First, the joint pain division that you've integrated in 2019, it only contributed during the second half of the year. Is there some kind of seasonality? Or would the full year be just double the second semester? And the second question. The CFO talked about the impact on amortizing -- on the amortization of intangibles of this structure you've chosen for the acquisition. But is it tax deductible? Does that contribute to the cash flow ultimately because it reduces your tax rate, keeping it at the current level, which is quite low?

Right. As for your first question, based on the analysis we did when we carried out the acquisition of this joint pain division, we didn't see any significant seasonality in turnover figures. We estimate annual sales of EUR 26 million, and it brought in EUR 13 million in the semester. So we don't think there are going to be any relevant differences in the full year. And as for the impact of this amortization of intangible assets, yes, it is tax deductible under Spanish law. And that's why structuring the acquisition this way has its benefits even though it impacts our net profit. But there's also the issue that under IFRS, which is how we post our earnings, you can't amortize the goodwill. There's about EUR 2 million of the EUR 48 million, which is goodwill, and you don't amortize them under IFRS. But they -- so they don't impact the P&L, but under the Spanish accounts, they do. And that's another element that is tax deductible.

All right. So let's move on to the questions from the webcast. I'm going to summarize them. Do you think that with the news we've seen in the media about the Spanish government no longer providing subsidies for arthrosis drugs...

Well, I'm actually going to connect this question with the one that was asked in the room. It's true that the Spanish government has been considering, and there were some analysis by the ministry about not providing reimbursement by social security for arthrosis medication. That's a fact, but we don't know yet how that's going to evolve. What I would say is that we feel that the ministry will do what's best for patients with arthrosis in Spain. And in that sense, we feel that they will always do what's best for the patients and not consider other factors. But having said that, medication -- the medication is safe. It's effective. It's quality. So no one's questioning the quality and the effectiveness of those drugs, whether they're subsidized or not. So really, there's no therapeutic alternatives. So we still think that these are good drugs. There is no therapeutic alternative. The only alternative is using NSAIDs, which -- so nonsteroid anti-inflammatory agents like ibuprofen and others that -- or opioids that are clearly not recommended for chronic long-term treatment. So they can only be used during pain peaks, but you can't use them in chronic joint pain. And joint pain, something that's experienced mostly by women more frequently than by men, so it's also -- the other day, there was a speech by the new minister of health in which he spoke about the need to include the gender perspective in treating disease and how sometimes women are being undertreated because they bear pain more quietly than men and that they want more parity, not just access to treatment but also making sure that there's a more egalitarian treatment for the same diseases. And so there's obviously political will behind this, which will I think move things in the right direction. But in any case, having said that, our Plan A is still to continue to work with drugs that are covered by social security for all the patients that are using them. And our Plan B, when we worked on the business plan for the acquisition, we considered this, but it's still Plan B, is for the drug not to be publicly funded and therefore a drug which we would have to market by visiting professionals but also pharmacies to sell direct to consumer. But we're ready to do that, and we have the structures we need to do that. And we have experienced products like Almax, which are products that were initially covered by social security and then not. And generally, what happens is that the number of units sold might stabilize. But the prices can go up, so actually the products can be more profitable. But in that sense, the EBITDA in the earnings presentation of Laboratorios Almirall spoke about the potential impact of certain measures by the administration to contain pharmaceutical expenditure. And I think we're always willing in this industry to work with the administration. And sometimes having products that are not covered by social security means you're actually more protected from these types of regulatory changes and price controls that are difficult to predict. In fact, the only thing I would ask the Spanish administration would be that they be a bit more predictable. Obviously, we need to have a sustainable public health care system, but the industry needs some visibility. We need a kind of time line, so we can adapt to events and circumstances. Okay. Did you want to say anything else? Okay, then.

I think that so as not to prolong this any further, there's a few questions that we haven't had time to answer, which we will be answering by e-mail because we want you to join us for this drink in celebration of our 90th anniversary. Sounds old, but we're very young and dynamic. So let's go over to the floor of the stock exchange and travel through the 90 years of company history. Thank you.