emeis Société anonyme

Ladies and gentlemen, welcome to the MIE's conference call regarding its full year 2025 results. It will be structured in two parts. First, a presentation by MIE's management team, represented by Mr. Laurent Guillot, Group CEO, and Mr. Jan-Marc Boursier, Group CFO. Afterwards, there will be a Q&A session during which you can ask oral or written questions. I will now hand over to the management team. Gentlemen, please go ahead.

Thank you. And good morning to everyone. And thank you once again for attending this webcast for Full Year Earnings 2025. Before answering to your question with our deputy CEO and CFO, Jean-Marc Boursier, we'll share with you a few thoughts regarding this year, 2025 and 2026. I will begin my presentation by reviewing some of the group's key characteristics, which many of you already are familiar with. First, I would like to highlight the geographic diversification of operations, which include France, Northern Europe, Germany and the Netherlands, Central Europe, Austria, Switzerland, Southern Europe, Spain and Italy. Next, our business diversification, with two-thirds of our revenues generated by nursing homes and the remainder by post-acute care clinics and psychiatric clinics. And finally, our shareholder structure, which is built for the long term around solid and reputable encore shareholders. It is also important to know that our group also distinguishes itself through its significant real estate portfolio, which is worth 5.6 billion euros by the end of 2025. 44% of the beds we operate are owned by the group, a figure that, to my knowledge, is unmatched among groups of comparable size, and our portfolio is also geographically well-distributed of real estate. is well distributed in Europe. As we previously reported in mid-February, 2025 was a particularly strong year. In 2025, the company delivered strong performance with revenue growth by over 6% on a like-for-like basis and occupancy improving by nearly two points. Profitability also increased significantly, with EBDR margin up by 19.2%, reflecting sustainable positive momentum. Cash flow generation improved sharply, with net operating cash flow rising from 15 million in 2024 to 290 million, highlighting a strong operational recovery. Free cash flow reached 347 million, driven in part by substantial asset disposals. Since mid-2022, total disposals have reached now 2.35 million, exceeding by far initial targets. However, the one that are following us the most closely, this figure is slightly lower than previously reported due to the decision not to proceed with the sale of Swiss nursing homes operations following an internal strategic reassessment. The company also strengthened its financial position by refinancing its entire bank debt by 3.15 billion in new financing, improving visibility and stability. Consequently, the leverage ratio dropped significantly to below 10 times compared to 19.5 times the previous year. Looking ahead, the company is confident about its growth prospects starting in 26, expecting average annual growth of at least 15% between 24 and 26, including over 10% growth in 26. Medium-term guidance for 24-28 is reaffirmed. Our operational performance is driven by improvement in our CSR KPI. In 2025, we continue to enhance all our quality and satisfaction metrics, reaching levels that now place us among the industry leaders. Regarding human resources metrics, please note that employee turnover, while still high, has once again declined significantly this year. We warmly welcome this, since this is a key support for quality in our facility and thus occupancy. Also, a new indicator has been launched this year, the engagement rate of our employees starting at a relatively high level of 62% well over global market average. On the climate front, energy consumption has also fallen by nearly 9% year-over-year, which is also a positive for our energy bill. In 25, indicators relating to the satisfaction of our patient's resident and their relatives have improved significantly once again. The resident satisfaction measured in 25 in the French facilities now stands at 93.4%, up 50 basis points compared to 24, and more than three points above the comparable level in 22. same message when considering the Net Promoter Score, which also measures the satisfaction and loyalty of residents, patients and their beloved ones. It has also risen sharply, now reaching the score of 41 in 25, up 4 points from 24 and 23 points from 22. This significant improvement illustrates the successful measures taken in recent years to restore the confidence in the group. As you already know, in France our facilities are rated by the Autorité de Santé, the French National Authority for Health, in the same way as all other facilities in the sectors. These ratings are divided into four groups based on quality assessments. 99% of MAE's facilities are on the top two categories. It is significantly higher than the sector average and even higher than the private sector as a whole. It is a mark of distinction and illustrates MAE's leadership in this area. We are also pleased to see that the improvement in all these metrics is reflected positively through extra financial ratings. EMI is now ranked above the industry average on nearly all metrics and is even among the best in class according to S&P and Sustain Analytics' rating. But there is still more to come. In our view, the steady progress you see in these charts is not over and should continue in the years ahead. The steady improvement in our extra-financial performance in terms of quality of care, patient satisfaction, resident satisfaction and human resources continue to translate into an annual increase of our occupancy rate. In 25, this rate rose by nearly 2 points across all nursing homes and since 21, we have seen an improvement of nearly 7.6 points and it's not over. Mechanically, this growth translates into the revenues that is largely translated into operating margins. Thanks to the work done on quality, and capturing a favorable price effect on accommodation and on segmenting or offering, we have been able to boost our revenue growth. By controlling operating expenses, adapting methods and tools, and focusing management efforts on turning around underperforming facilities, we continue to optimize our operating performance. Our revenue growth in 26 was 6.1% like for like or nearly 15% over two years. And at the same time, our EBDA margin increased far quicker by 58% like for like in one year and even 90% in two years. And you can trust our midterm targets. It's not over yet. There is much more to come ahead, as I already said. As we already told you mid-February, we have exceeded our initial guidance for 2025. With like for like FBDR growth of 19%, we are 10 million to 30 million above our initial target. And as already said, it's not over. We are happy to share with you the fact that these encouraging achievements lead our figures to grow comfortably in line with our ambition, confirming that we are now in the right path. It's now fair to say that this set of figures is a good milestone on the road to an embedded recovery that confirms our confidence for the years ahead. We can be confident this positive momentum will continue in 2026, with NABDR expected to grow at least by a minimum of 10% at constant perimeter. This means that from the end of 2024 to the end of 2026, we do expect an average growth rate, or CAGR, of more than 15% per year at constant perimeter. Although the global environment seems relatively unpredictable these days, especially regarding inflation pressure that could arise from energy price today, we are relatively confident. Energy expenses are limited in our P&L and very largely hedged. So the performance we do expect for 26, bang in line with the high side of our midterm outlook by 28. The momentum is set to continue ahead. I will conclude my introduction before ending over to Jean-Marc with this list of the major issues and challenges we had to address and we addressed in the last years. It is clear that we have now made significant and positive progress and that the main achievements are now complete or on the way to be completed. The disposal plan has been largely exceeded, now reaching 2.35 billion. The structure of our balance sheet has been considerably strengthened this year in 25 and very beginning of 26. Our debt ratio has already improved dramatically, but there is still more to come ahead. Occupancy rates have risen sharply already. but they should continue to grow significantly in the coming years, and especially in 26. And we are halfway there in terms of operating margin, which have grown over the last 18 months and will continue to do so ahead. On top of that, our company is also supported by a favorable trend in real estate market valuation. This year is therefore a stepping stone, and the road again is full of promise, and harnessing further value is yet to come ahead. Our focus will now be on continuing this operational improvement trend further ahead, relying on attractivity, quality, and financial results improvements. Jean-Marc Boursier, our deputy CEO and CFO of the group, will now outline in detail the main elements of our performance for 2025.

Thank you Laurent. Good morning to all. We are pleased to present our 2025 financial results to you today, the key highlight of which we already shared with you on February 17th. I will thus be brief on certain topics we have already discussed earlier this year. In my infoduction, I will briefly touch on six points. First, our revenue, which continues to be a positive trajectory, driven by both occupancy rates and favorable price effects. At group level, performance is particularly strong in the nursing home segments. Second, operating margin is rising sharply. EBITDA is up 19% on a like-for-like basis, and EBITDA is up 58%. This is the result of our very effective control on operating expenses and external rents, and this is not fading out in H2O. Third, net present group share remained negative at minus €298 million. However, it increased by €114 million despite higher non-recurring expenses related to exceptional transactions that we carried out in 2025, such as the refinancing of the group and the setup of Izemia real estate vehicle. Fourth, all cash flow indicators are showing a very strong growth. Net operating cash flow improved significantly from 15 million last year to 190 million this year, and free cash flow increased even more, now reaching 347 million versus minus 298 million a year ago, which represents an improvement by more than 600 million. Fifth point, net debt is decreasing in 2025. and even considerably so when taking into account the isenia transaction which has been finalized on 14th of jan the reduction then reaches 1 billion in one year and sixth and final as a result the leverage ratio improves significantly as said by laurent now standing at 9.9 times where it was nearly 20 times a year ago and this implement will continue in the coming semester I will be relatively quick on that slide regarding revenue, as we already commented this element earlier this year. Sales posted substantial organic growth at plus 6.1%, very similar to the one published in H1, driven by a combination of three factors. First, a positive price effect of plus 3.3 points. Second, occupancy rate effect, plus 1.8%. And finally, the effect of the ramp-up of facilities that we've opened in 2024 and 2025, which brings a further 1% growth. This favorable growth trend can mostly be observed on nursing homes, for which the annual growth is plus 8.1%, whilst clinics have been more muted, only up 2.5%, but I will show you in a minute that we have very encouraging signs in that segment also. We can see on the next slide that revenue is growing internationally very strongly, particularly in Northern and Southern Europe, less so in France. In Northern Europe, momentum is particularly strong in Germany, with both a favorable price effect and occupancy rate that continue to grow significantly. In Spain and in the Netherlands, recent openings which are gaining momentum are accentuating an already favorable revenue trend. The momentum has been supported by the group improvement in occupancy rates. On average, it rose by 1.8 points to 87.6% versus 85.8% at the end of 2024. continuing the gradual recovery in this aggregate that you can see on this slide for the last three years. As you can see, the recovery was mainly driven by nursing homes, where the average occupancy rate rose by 2 points to 87.2%, and even plus 5 points when considering the comparison between 2023 and 2025. Although solid everywhere, the increase in occupancy rate has been particularly important in Northern Europe and in Central Europe. Although we remain still below our medium-term ambition, we are happy to see that this supportive momentum continues and I can confirm to you today that the year 2026 has started on the same encouraging path. As you can see on the next slide, the performance on revenue is flowing nicely to operating margin. Staff costs have been reduced, staff costs and sales have been reduced, reflecting the measures that we progressively implemented during the last 12 months to optimize the allocation of our human resources. At the same time, we also benefited from the initial effect of our cost rationalization measures launched in H1, which has led to a reduction in the intensity of other costs, mainly procurement as well. I'm very confident that those two cost components, staff and OPEX, can be further improved in the years to come, and as a result, these measures are enabling us to maximize the conversion of revenue growth into operating profitability. In H2 only, ABDR margin reached 15.8% and ABDA margin 7.4%. When we break down the ABDR growth, we can see that the main contributors of the growth are France and Northern Europe, that is mostly driven by Germany and the Netherlands. Not only do those two regions account for the largest contribution to ABDR, in millions of euros, but they also have the highest growth rate on the like-for-like basis. And as you can see on this slide, EBITDA growth in Northern Europe was nearly 30% versus 2024, and in France, nearly 15% year-on-year. If you look at H2 versus H1, what can we see? Over the six-month period, we can see that this momentum shows no sign of slowing down at all. with a six-month increase in EBDR of 19%, again comparing H2 versus H1. It is worth noting that this momentum even appears to be gaining strength in France, particularly thanks to nursing homes whose performance has been significantly improved since mid of 2024. The positive dynamic and revenue therefore largely flew into margin, In Euro terms, the positive upside in sales of €259 million versus last year was largely transferred into EBDR plus €132 million and then into EBDA plus €135 million given efficient rental management. Another evidence that the increasing leverage to the upside is strong and should continue to be supportive against the HEC. If I go into a little bit more detail for the rest of the P&L, I would like to highlight a few points. First, to remind you that the growth in EBDR is partly attributable in 2025 to capital gain from the sale of PropCo assets for nearly 64 million in 2025 compared to 28 million in 2024. This is due to the particularly high volume of TropCo disposals that we have finalized this year. However, you can see also that organic EBDR growth, even after deducting those capital gains, remain at 15%, which also aligns with the pure operational momentum we expect to see in 2026 and beyond. Thanks to the effective control of rental expenses, EBITDA before IFRS 16 is up 135 million or 58.3% on a life-for-life basis. EBIT is growing strongly by 171 million euros, now reaching 173 million euros versus only 2 million last year. This is mainly due to the decline in amortization, But please note also that we have recorded some depreciation, especially in France. This depreciation amounted to 42 million and resulted from a balance sheet cleanup. When breaking down the financial statements in net income, it should be noted that non-recurring expenses rose significantly this year by plus 86 million euros. This is a direct consequence of certain exceptional transactions that we finalized in 2025, notably related to the refinancing that we announced on December 18th and the creation of the Xenia real estate company finalized in January. New depreciation and non-recurring expenses have limited the improvement in net income group share, which nevertheless rose by a considerable €114 million to minus €298 million. the net loss per share have therefore been reduced to 1.9 euro. Regarding now the cash flow statements, I would like to highlight a few points that contribute to a very strong improvement of all our cash flow aggregates. First, an effective management of maintenance capex and IT investment. Please note, however, that these components are expected to go moderately over the next few years to modernize our IT system and to optimize our operational efficiency. Second, an exceptional financial expense of approximately 23 million euros corresponding to upfront fees related to the refinancing. And if we exclude these upfront fees, please note that the recurring free cash flow is now turning positive in the second half of the year for 20 million, and this is a very significant milestone symbolizing the normalization of the group. Third element, development capex continue to decline in line with the pipeline progress and given the higher return requirements now needed for new operations launched. And let me be clear, we will continue to be extremely selective in the coming years. Fourth element, the significant contribution from disposal amounting to 602 million euros in transaction for both Popco and Propco that we closed in 2025. And as a result, as I said earlier, our free cash flow is now positive and stands at 347 million euros, representing an improvement of the 645 million in one year. And if we include the EZNia transaction that was finalized on January 14th, which brought an additional 703 million of new liquidity, it means that EMI's group was able to reduce its net debt by almost 1 billion in one year. The next slide illustrates the three key drivers behind the improvement in free cash flow. First, the improvement in operating margin, which has already been commented. Second, the sharp acceleration in disposal in 2025 on an unprecedented scale compared to previous years. And please note that 216 million of signed transactions remain to be cashed in today. And finally, sobriety in capital expenditures, particularly for development CapEx, which are now limited to the most promising projects and the shortest payback. Across all cash flow indicators, trends continue to be very favorable. The next slide illustrates perfectly the continuous improvement in all of our aggregates, which we expect to see continuing in the coming years. All cash flow, as you can see, have now turned positive and the momentum does not seem to be fading out. As a result of everything we said today with Laurent, EMEI's financial structure has continued to strengthen significantly this year. Net debt, including IFRS 5 and 16, has decreased by almost 300 million euros in one year at 4.5 billion euros. And if we consider again the EZMA transaction closed on January 14th, it brings proforma net debt down by 1 billion since December. Net debt proforma is thus down to 3.8 billion, a massive decrease books thanks to the important volume of disposal achieved, but also thanks to operational margin improvement. And as a result of both information that we shared with you today, operational improvement on one hand and the net debt reduction on the other hand, we can see that the group leverage ratio has significantly been reduced from 23 times in H1-24 to 19.5 times at the end of 24. It now reaches 11.8 times and even 9.9 times for former Iselia. This average ratio is already well below the covenant that we have agreed with banks and debt investors for 2026, that is at 12 times. An illustration of this embedded improvement is that we forecast with confidence. We anticipate this ratio to fall below 6.5 times before the end of 2029, this target being the debt covenant that we have agreed through the refinancing of the group that we've achieved in December. One word about the refinancing. We have refinanced the whole bank debt of MSSR and this has enabled the group to raise 3.15 billion euros of new debt under favourable conditions. I remind you the condition which is early birth 3 months plus 247 basis points cash or plus 363 basis points including PICS. These new debts, including a new 400 million euro bond, have fully refinanced the former ABCD financing and have largely enhanced the debt maturity profile of the group, as you can see on this slide. And as a consequence, EMEIS early exhibited the accelerated safeguard plan on February 20th. We are now comfortable today saying that EMEIS is now back in a situation that can match our ambition for the future, with our priority now being clearly on pursuing the improvement of our operational performance ahead. Thank you for your attention, and I will now hand over to Laurent once again to conclude this presentation.