Medicover AB (publ)

Good day and welcome to the Medicover first quarter 2023 results presentation. At this time all participants are in a listen only mode. After the speaker's presentation there will be a question and answer session. If you have a question please press star 1 1 on your telephone. You will then hear a message advising your hand is raised. To withdraw that question press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Fredrik Rugmark. Please go ahead.

Thank you and good morning everyone to our first quarter 2023 results presentation. So our first headline slide is very high underlying growth, important to point out, make a very Specific statement here that we see from a trading point of view COVID-19 is behind us. It's in the past It represents around 1% of revenue this quarter. So 99% of revenue what we do is our underlying business And that is doing really well very strong growth. In fact, you see underlying growth is up organically 25% year-on-year, which I think is a super strong number and If we go back, that may be interesting also to note, if we look at the first quarter 2019, which is the last first quarter of a year where we had no disturbance or awareness of what would come with COVID. And over those four years, we have more than doubled our business on a like for like basis. So from just under 200 to over 400 million euros this quarter, So we've been compounding 20% revenue growth over those four years, which for sure has had a lot of negative impacts from COVID on our underlying business. I think I really want to point out how strong that development is. If we look at how this quarter's organic revenue growth in that underlying activity splits between the division, you see just short of 28% in healthcare services. and just short of 19% in diagnostic services. And both of those are very good. You all know that we have invested much more over the past two, three years in healthcare services. It's quite natural to see higher organic growth in that segment. But equally important is to see how diagnostic services ex-COVID is coming back with the revenue growth. And as I will comment on, That's a good mixture of both volume growth and price and mix growth. Number two, I think the most commonly discussed theme in our reporting through 2022 was how cost inflation impacted us with very, very significant, particularly salary inflation. And given the fact that we're such a staff-intensive business, that was significantly impacting us. Likewise, we commented throughout the year that, you know, we've had good acceptance, good receptions with our price growth in our private pay markets. But we've had this delay factor and it would be into 2023 when this would start to be noticeable in reported financials again. So, you know, particularly happy to be able to visualize that with underlying margins in the group and for both divisions. rising substantially this quarter, so that again is good for the quarter, but even more important I think it is you see how the price mitigation is coming through in reported margins. Our expansion has continued in terms of opening new hospitals. And that will continue as well as we progress throughout the year. I write in my CEO statement that if we look at the amount of medical space we have put on, if we compare to the start of the prior year, so end of this quarter compared to 1st of January 2022, we've added 34% in terms of square meter medical space over those five quarters. So indeed, that is a significant amount of medical space that obviously has short-term drag on our margins, but as I will speak a bit later on, we're very happy with how we keep filling up those facilities. Then looking at some more of the specifics, so just short of 420 million euro revenue for the quarter, up 10% of which roughly half of that being organic. I already made a point with 25% organic growth in the underlying business, ex-COVID. We bring with us quite a bit of acquired revenue from last year, so 33 million, a good growth in our fee-for-service business. Important as well, it's just to point out for you, if we annualize the first quarter revenue, we're up versus the full year, 2022. already now 11%. And netting off the COVID element, we're in fact up already 19%. So quite significant in terms of recognizing just the annualization factor where we are in the first quarter. You're familiar with our two pie charts there. And again, just draw your attention perhaps to the growth factor. Poland is a is obviously our largest market. You've known that for a long time. And pushing through 30% revenue growth across that geography in the quarter versus last year is a significant number to be noticed. And you can also note the reduction in Germany, which is then obviously all driven by COVID dropping out of the German diagnostics business. Perhaps the other thing that is worthwhile to note draw your attention to. If you look at the bottom pie chart there, you see negative growth in public funding. Again, that's all COVID related. You have a 18% growth in our funded business. And as I'll speak a little bit about later, we have about 8% member growth year on year in the quarter, which is good. So you see how the price and mix element is coming through. in addition to underlying member growth in that important piece of what we do. And also solid good growth in our fee-for-service side. And I think we'll go to the margin slide. So again, important message here being the underlying margins improving. Of course, as I initially said, we overall reported financials, they are what they are. But no doubt most important for understanding where our business is today and even more importantly where it's heading for the rest of the year is to understand the dynamics in the 99% underlying business. Beta 54.3 million down 30% since prior year and margin of 12.9%. Looking at the underlying business, it's up 129 basis points. good solid underlying margin expansion. And you can see that illustrated in the graph in the bars to the right where we have given you the blue shades for the underlying and then topped up with the COVID earnings during the quarters historically here. And you have also the other results measures. Then shifting on to the two divisions. Again, phenomenal growth in healthcare services. You see that very well illustrated with the bars to the right over a three-year period, rising strongly pretty much every quarter, so up to 276 million euros this particular quarter, 33% up, of which organic was 20.7. And again, isolating out, we have no COVID revenue whatsoever in this division in this quarter. So separating that out, we're up some 28% organic year-on-year, again, a just phenomenal number, I would say, of which about 12 percentage points is represented by price, illustrating again the point that I've made throughout the prior year where customers have accepted, I think, very well our price increases. Most of the acquired revenue you see is coming from this division so just over 30 million sits in healthcare services and obviously given the overall growth and the strong position of fee-for-service in this division you will see very strong growth in fee-for-service at 36%. Continued good member growth which we've had pretty much throughout the period. I believe we still have a factor and we will have that factor, I think, for perhaps forever, but certainly still for many years to come where employers, I think more so after the pandemic than before, recognize the inherent value in providing the kind of healthcare benefit that we do. So demand for our services in the in the employee paid market remains very, very strong. And likewise, if you look at the pie charts here, pretty much the same picture as I painted before. When we looked at the group level, Poland is up even stronger here relative to, it has a higher proportion in this division. India is growing nicely on the back of our hospital expansion. And likewise, you see how the different payer segments are developing. So overall, a quarter to be very pleased with in healthcare services. That is also reflected in terms of how margins are developing. So EBITDA at 34.2 million, up 35%. And overall, also a slight margin increase to 12.4%. And again, I don't need to remind you now, I've said that many times, Here is particularly where we have significant drag on our margins because of the expansion, particularly so in India, but also not insignificant. For example, in Romania, where we will be opening the large new hospital here during the second quarter, but again, been very well mitigated, partly by the investments we did last year and acquisitions, but most importantly through price increases that we've pushed through. Now, I made a point in the report. Obviously, it's one important data point that you all are, I think, studying very closely is how we are able to fill up the capacity that we put on in all of these new units. And two units that we have mentioned in prior reporting are the two major large new hospitals we have opened in the state of Maharashtra in India, in Navi Mumbai and in Pune, both 300 bed plus facilities. And it's very pleasing and reassuring to be able to say that both of those are expected to break even on an EBITDA level within 12 months of operation, which is significant. And so we're very happy and pleased To say that to you, that's one indication in terms of how we're filling up this capacity. Shifting then on to diagnostic services where revenue just short of 150 million euros, obviously big organic reduction on the back of a big chunk of COVID revenue and testing dropping out. We had 4.6 million euros of COVID revenue this year. I said about 1% of overall group revenue. 3% of divisional revenue, so 97% of revenue in diagnostic services relates to everything else we do. There will remain some COVID testing for hospital admissions, things like that, but it's just going to be part of the ongoing business from now on. Importantly, also to remind you, the first quarter last year, so first quarter 2022 was really the last quarter where COVID revenue and earnings had a very material impact on us. So although it certainly existed throughout the remainder of 2022, but on a comparable basis, as we progress through 2023, it will have significantly lower differences in the annual comparisons. Point already made that good, actually very good underlying growth in the remainder underlying business, 19.5%. That is a combination of volume growth where if we exclude Belarus, we have disposed of the Belarusian business during the quarter, so isolating for the Belarus disposal. We are volume-wise up about 9% in terms of test volume. And then the balance is then a combination of price and mix. So also here, and that's really good against the background of half of the business here being in Germany where there's no price adjustment so far. So we've had good dynamics in our private pay fee for service markets. So we have discussed in prior quarters quite a bit around the outlook for German price indexation. That has not happened yet. There are no visible signs on the horizon, if and when it will come. So until we know that or have some more certainty around that, we assume that prices in Germany will remain stable. Ukraine continues to improve. As we pretty much talk about every quarter since the atrocities broke out end of February last year, I am overwhelmed with the ability of our people in Ukraine to manage the situation there. We're growing, we're profitable. It is a situation where we don't make any forecasting for the future. That is too uncertain, but equally, I want to emphasize how much we recognize the extraordinary ability of our people and leadership in Ukraine to handle the situation the country and our business is in. So here again, reported profit, reported margin, obviously sharply down on the back of a very profitable COVID trading quarter dropping out the prior year quarter. But looking at the underlying business ex-COVID, a very healthy development with 24% growth in beta to just north of 25 million and margin expanding more than one full percentage point. So good progress both in growth and in profitability ex-COVID in this division. We have continued to invest in BDPs, although you see on a comparable basis it's down. That is then due to the removal of the business in Belarus as we sold that during the quarter. And that's as much as I will say now, and I hand over to Joe for the financial review. Thank you very much, Fredrik.

So just looking a little bit at some of our balance sheet items, our debt levels in terms of cost of financing, this has increased. So if we look at our lease liabilities, on the top bar there on the right-hand side, the implied interest rate for lease liabilities, that's ticked up a little bit, as you'd expect, with our new lease liabilities coming in in a higher interest rate environment. If you look at our debt, our real commercial debt, then rates there have also ticked up in terms of in line with the increase in base rates. Just one point to add in terms of our debt instruments. We in the quarter launched a Swedish social finance commercial paper program in April. So this is a first. And we're very proud to make that available to Swedish investors to be able to manage their cash and put it into a social financing framework and actually doing some good as well as making some interest. Our liquidity position is good. We have a good maturity profile and we have a large undrawn facility lines as well available for us. We look at our indebtedness levels, we brought that down from the year end about on our net loans payable basis, we brought that down around about 20 million. We had the sale of the business in Belarus which generated a bit of cash and helped us to bring that down. We look at the ratio to our adjusted EBITDA LTM number. then as reported the debt ratios are up slightly from 3.2 to 3.3. If we look at that on a lender covenant basis that's around about 3 because that takes into a case a real LTM basis including the impact of the full impact from acquisitions. Cash flow has been quite strong. We've had good working capital movements as well. So our operational cash flow has been around about 61.4%. million net inflows. Effective tax rate, we estimate that around about 28.7, so just slightly lower than what we had in 2022. We have quite a few new startup entities and costs which are not then impacting in terms of the tax rate, so we're carrying that a little bit in our tax rate. I'll move on to the next slide. Our right of use lease liabilities, that's increased from around about 5 million net. The biggest item in here is in terms of our new leases extensions. We have 24.8 million increase of which about 13.8 is due to indexation. So we have around about 11 million which is new facilities and extensions that we brought on in the quarter. Our consolidated equity, this has moved up around 5.2 million euros. and we have then the profit for the period and also then we have a positive movement in other comprehensive income, primarily related to the sale and disposal in Belarus. We have continued to invest in the quarter. Although our guidance at the capital market stage was that we would be looking to invest at a lower level than we did in 2022, it's well worth noting that 2022 was very high. So we have consistently invested a high level in terms of capital investments, particularly in our growth area, and that has consistently helped to drive our growth organically and our expansion. So we are certainly investing at a level which is commensurate with keeping that growth going and also to take us through our $2.2 billion target and actually through that. So we have continued to invest. Around, if I look at the total investment there, so I'm just short of 30 million euros in the quarter, around about a third of that has been in hospital facilities, India, Romania, Poland. And I think if you read through the report there, we give a number of approximately around about probably four hospitals that we're going to bring in online in India over this coming year. So we'll just move on then in terms of our financial targets, just to give a little recap in respect to that. So our organic revenue, we're looking to exceed $2.2 billion in 2025 and adjusted EBITDA organic $350 million. If I look at where our run rate is in terms of our Q1 numbers, $419 million top line revenue, annualized that, we're just short of $1.7 So we're about 523 million gap to that 2.2 billion target, and we have 11 quarters in terms of filling that. So we are very confident in terms of being able to meet these targets and continue through them. So I'll hand back to you, Frederik.