Medicover AB (publ)

Welcome to the MediCover Q3 2024 report presentation. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answers session, participants are able to ask questions by dialing pound key 5 on their telephone keypad. Now I will hand the conference over to the speakers, CEO Frederick Ruhmark and CFO Joe Ryan. Please go ahead.

Good morning everyone. Nice of you to join us for our third quarter results presentation. Before I start going into the presentation, I would just like to mention that This is then the last quarter when we have Joe Ryan as CFO, who will be taking us through the results today. I will be coming back to Joe at the end of the presentation today. And also we have in the room with us here Anand Patel, who you have seen we have recruited in as successor to Joe, who sits in on the presentation today, although he will not be speaking. but just so you are all aware that both of them are in the room. So the third quarter overall message, a very good quarter, actually very strong and robust delivery. We continue the very strong and visible trend we have reported throughout the first half of the year with strong and even increasing organic revenue growth coupled with expanding margins in both divisions, as we will go through in detail. And in addition to that, very strong operating cash flow. So I think those are the sort of three cornerstones. We had organic revenue, which ticked up above 17%, so 17.4%, which obviously speaks for itself. represented by both divisions really, we come back to that in detail. Operating cash flow. I also added in here for your information, you find that in some of the details of the quarterly reporting, but I think it's interesting to see if we look at the rolling 12 months figure for our net operating cash flow, it's 240.2 million. Here in the third quarter, that's up 18% versus the same period last year. But more importantly, it is the strongest quarter ever from that operating cash flow measure on a rolling 12-month basis we've had since we listed the company. That includes these rather exceptional COVID-19 years. That's a very good illustration of the progress we are making, because obviously cash flow is always largely the best measure to see performance. Again, healthcare services continue to show very strong organic growth. You can say you're almost getting used to that, but nevertheless, very strong underlying of organic growth, which drives profitability improvement. And that's really coming across the board. We've talked about each quarter for quite some time now, the importance of filling up the infrastructure that we have invested into. And of course, that's particularly true in healthcare services with the investments, particularly in India and Romania. And we will talk more about that. But most importantly, it's very visible in the numbers we report. Likewise, diagnostic services are growing very nicely. We continue the trend we have seen first half of the year with solid double-digit organic growth again, and even on a volume basis for diagnostic services. Less price on that side because of half of it being in Germany. But nevertheless, a very strong position. We are also recording an impairment charge of 16.4 million on our Nordic fertility businesses, Denmark and Norway, as well as the German dental activities. And we will talk a little bit more details about that later on in the presentation. So going to the second page that you recognize. So overall, then just short of 20% growth, 19.8% to be exact, 17.4% organic. Acquired revenue almost non-existent. You know that we have been very inactive now for some, well, seven quarters really on the inorganic front. So that's very visible in that number. good growth in fee-for-service, of course, given the overall impact of fee-for-service in our revenue base. And I've already made the point, I think, significantly on the operating cash flow. On the pie charts, just pointing out, I think it's worthwhile. You see Poland, if you had had the quarter 3.23 pie in front of you, Poland was then 48%. So despite us growing quite nicely in many other geographies, Poland is growing so strongly. So its share has popped up to 50%. So you see that 25% growth out of Poland, obviously rather exceptional. I'm sure as Joe will comment on later on, there is some Foreign exchange support in that number clearly on the back of the slot is strengthening, but also the underlying real number is very significant. You see Germany, again worthwhile to point out, 15% up. And that is despite a pricing situation that is a constant topic to talk about. So Germany performs very strongly. Romania you see on the back of course largely of additional hospital capacity that we put into healthcare services in Romania. India you see they're 10%. I talk about 11% when we talk about our hospital business. So the fact that India as a geography is 10% is due to the fertility businesses that we've exited, that we have talked about before. So more importantly, the hospital business is then in Europe up 11%, in local currencies up 13%. Then if you go to the next slide, looking at the profitability, two points to make. You remember last time around, so third quarter last year, we had an exceptional credit that we put into central administrative costs not to impact the trading margins in the two divisions. That was, you know, these sort of contingent acquisition payments that would not be paid. So we had to credit that back to the P&L now. So that's why you see actually shrinking margins on the reported number. For all sense and purposes, when we look at how the business is doing, I think we need to take that out because that was one of non-cash, non-operational. And in doing so, as you see here in the slightly smaller print, we have good, healthy margin increase on All results measures and very much in line with what you have seen during quarter one and quarter two so far this year, and likewise what we expect to see going forward. Joe will speak more about the goodwill impairment, but of course that then goes to operating profit and it goes to net profit, which is then significantly impacted. As I note in my CEO statement, also just for full transparency, if we neutralize the impairment charge in addition to the 4 million, our operating profit EBIT is up just short of 60% versus the prior year quarter, and a good evidence then of operational leverage. A point that we have made, I think, every quarter recently is the fact that Despite then having quite significant sort of margin expansion in here, we still carry a significant drag with us from the, you know, the larger hospitals that we have opened. And specifically what we say in this report, if we look over the past two years, so since the third quarter 22, we have opened six large units, five of them in India, one in Bucharest, and two of those six we have now opened then during the third quarter this year, so during July and August of 24. Now, two of those six turned positive during the quarter, and that's a really important message because, of course, as they turn positive, they no longer lose money. Now, as a group, those six hospitals contributed almost a negative 5 million on a beta L basis in this quarter. So for the overall group, that's close to 90 basis points of additional margin. just by bringing them to zero, let alone of course getting to the profitability levels where we want and need them to be. So that is really the single largest item that keeps improving our margins on a reported basis as we progress. Then turning to healthcare services, again, very impressive growth, organic above 18%, so 18.3%. That splits pretty much 50-50 into price and volume, so 9 percentage points of price and slightly more than 9 percentage points of volume growth. Almost non-existent acquired revenue, and you see fee for service up 16%, just above half of the divisional revenue. And I think we can say universally a very strong demand picture across the line here. I spoke before about Poland, Romania is certainly a similar situation, as well as India. So I mentioned before, India hospice up 13% in local currency, a good member intake in our corporate paid business. So overall, a very solid picture for revenue wise healthcare services. that is then transforming into you know good robust you know profit improvement 20 basis points up on the beta 70 basis points up on the beta l so really visible in terms of the improvements we are doing here I made the point already on in terms of the six hospital units now if you look only on the healthcare services division and that amount of money, you see that's even 130 basis points additional EBITDA L margin on top of the 9.8 that we report in this quarter. So as a proportion of the overall reported margin right now is then really significant as you can see. And two of the six have turned positive in the quarter. We just opened an additional tube, which will obviously take some time to bring to positive territory. But really important is that you understand that underlying dynamics in terms of what is driving the improvement. Then we have a slide which we have had for a couple of quarters just to show you where are the Indian hospitals and the maturity profile of them. I will only point out on the map this time around. You see the slightly more light blue bobs. You have Warangal up to the middle right, which opened during the summer. And you have Bangalore. down in the, for us, new state Karnataka, which also opened then during the third quarter. So those are the two additions during the quarter. Then moving on to diagnostic services, good growth, very solid growth, 15.5% up, of which organic was 15.3%. And then price representing four percentage points of that. So you see volume growth being 11% plus. And if you think about 4% price growth and basically half of the business in Germany, healthcare services had 9% price growth. So 8% on a like for like basis, then it's more or less 8%. So quite similar between the two divisions when you compensate for the situation in Germany. So overall good growth, driven both by some price, obviously, but also good test mix development, underlying good test growth. We have commented for a number of quarters in terms of the situation in Germany. You will probably have some questions around that. And the situation we are You know, you recall us saying two, three quarters back, but that we expected price increases. Now we see price being flat and we are working hard to address that situation and compensate in terms of cost structure. We are confident in terms of the work we do in that area. And I think it is relevant to make that comment that of course Germany being half of the division and the significant margin growth that you see in diagnostic services is of course largely driven by Germany given that it's half of the division. And I think the fact that we are able to grow our margins in the division and then largely out of Germany the way we do, despite a situation the way we have reported it with prices being stable and not growing, I think is a good illustration. So we are confident that we will manage that situation going forward. But I'm sure you will have some additional questions relating to that. So in terms of margins coming out of DX, we have said many times, you know, this is a more sort of marginal contribution type of business. So when we put more volume into the network, we have a larger proportion of that additional revenue will flow through as additional contribution. And that's really evident when you look at the At the margin expansion, you've seen that picture before, and that's a picture that we expect to continually, obviously, a good picture to report. And really, just like the comment I had on healthcare services, it really is a good, solid demand picture across our markets in Germany, in the other countries. We don't have a bullet here on Ukraine. I shall mention Ukraine separately. You know, there is no change. You read the newspapers as much as we do, I'm sure, so there's really no change in the in the situation and the hostilities with Russia. Our business performs well in Ukraine, surprisingly well, I should say. And the efforts that are being made by our team, by our leadership in Ukraine is nothing less than heroic to manage that situation. We keep on what we call the NHS pilot, so that is doing quite a large volume of tests with the local public system on the back of expecting reimbursement for those during 2025. That slightly impacts the test and sort of revenue mix out of DX. It's well described in the report. I just want to mention that we are very supportive, we are behind Ukraine, but there's no difference in outlook in terms of when that conflict will end. All right. So with that, I will hand over to Joe for the financial overview.

Thank you, Fredrik. So my preferred measure here is adjusted EBITDA, so EBITDA after lease costs. That's more in line with our cash flows from our operating business. as the real estate that we use in the business is a recurring structure of our capital and a recurring cash outflow for the group. That measure grew by 16%, so we're up to 48.5 million. Last time around, 41.9 million. And the margin there is down. We're down for 9.2 for 9.5. So when you adjust for the €4 million credit we had exceptionally last time around, then that margin comes up. Well, the growth comes up to 28% and the margin comes up in line to reflect what's happening in the business underlying. So we're up 0.6 percentage points on that margin level. So good development on our cash flows. And you see that then also later on in the cash flow numbers as well. Healthcare services, that wasn't impacted by this one off credit. the divisions uh this is the segment so healthcare services 36.1 million around 28.5 last time around so you can see we've got point four percentage points increase in the margin on there um the flow through on the incremental volumes um and operational leverage but the operational leverage is a little bit clouded we see that on some lines um very clearly for instance on these costs and some other items but it's a bit clouded by the um startup costs as well that we incur in relation to the new hospitals we have running. On the diagnostic side, 19.5 versus 15.2. So you can see the absolute amounts there and margin quite clearly up 12 versus 10.7. So it's a little bit clearer here in terms of that flow through the contribution in the increased volumes coming from the fee for service markets. Operational leverage, you can see much clearer in the diagnostic side. They have less new units diluting the figures. Continue room for growth here. I think we've got that coming as we've explained before. You can see that for many quarters coming through. We've got the maturing profile of the units that we have on the ground now. We've got the volume increments which will feed through in that. And on top of that, we have various different efficiency initiatives working as well in terms of to improve efficiency and margins. As mentioned, we had an impairment charge this quarter, 16.4 million overall in two business areas, smaller business areas. We had a Nordic IVF activities and we had an impairment 9.8 million there and a German dental business unit. units, 6.6 million. And that's about one third of the goodwill that we carry for the Nordics and about half of the goodwill we carry on the German dental businesses. These are relatively small units. We have always been and are conservative in terms of our goodwill carrying values. We still carry after those empowerment charges, 515 million euros of goodwill at the end of the quarter. And all of those other items in our goodwill, we have lots of headroom and very clean and very clear that there's no issues with any of that goodwill that we're carrying. Very well supported. So that means then there's a clean situation in terms of when I hand over to the new CFO, so leave a clean deck, so to speak. That's approximately 3% of our carrying Goodwill value. And it's worth noting that one of the, One of the negative things in respect of writing that down is obviously it hits our net profits and earnings per share. So if we adjusted for just this item, 16.4 million, that would be 10.9 euro cents higher in terms of the earnings per share. So unfortunately, I'll leave on a little negative note in terms of that, but at least it's definitely a clean slate going forward. If we look at our leverage levels, that's come down. So we come down to 3.1 versus 3.3. This is our basis of looking at leverage where we look at our loans payable, net of cash and liquid investments to adjusted EBITDA also after leases. So we're not including lease liabilities in this measure. Now that sort of like is with the leverage, but I think that what you is hidden there is that the leverage has been much larger than that. We've got 52 million euros of cash and debt recognition in terms of buying in non-controlling interests. And that sort of doesn't change the the profit measure in the in the leverage calculation. So that's to increase our shareholders' share of profits and to feed through into EPS increase. So we financed that and still come down in terms of leverage. Inorganic acquisitions, 18.1. This time last year was 16.4 for the nine months. So in those units, we've had a little bit of investment in Germany. We bought out a lab in Germany in Berlin and integrating that into our Berlin assets, and then also a nice addition with the genetics unit in the west of the country. We have some dental units as well within those figures. Net debt overall increased 62.8 million for the nine months, and working capital side has been very benign, 12.4 million increase for the nine months as well. So we have a very good working capital cycle, very benign in almost all of our units, as you can see with the growth we put on with a very small net investment in working capital. our effective tax rate comes in that we keep that 26 percent projected for the year end through to the year end and our operating cash flow up 25 percent as I mentioned earlier on you can see that flow through in terms of the cash that we're generating so 25 percent up at 72.3 million And if you look for the nine months, we're at just short of 200 million versus just over 160 million last year around. So that's up 22%. So we are generating more cash out of the businesses as you'd expect in terms of investing and growing the activities. Then if we look at our free recurring cash flow, So what we've got left after our lease payments and after we reinvest in our maintenance side of the business, that was just short, just under 35 million euros, 34.8 million. So up 35% for the quarter. And if we look at the nine months, that was just short of 90 million, up from 66 million. And so that's 35% up. So really, um good strong uh development for the nine months if i look at that as a percentage of revenues then we can see a very clear increase there so we're at 5.8 percent from 5.1 percent so um we are not only generating absolute you know with the size of the business growth but we're also increasing the um the margin in respect of that free cash flow free recurring cash flow We then reinvested in the business our growth investments and we did just short of 20 million for the quarter. And if I look for the nine months, we're at 55 million for the nine months, up slightly on where we were in absolute amounts of money in the prior year. Of that 55 million, around about a third, just over a third, has been into our Indian activities in our hospitals. So we've got three large hospital units in there that we've invested in with Warangal outside Hyderabad, our beautiful facility in Bangalore. And then we've also got a facility in Visag, our Onco facility, which is also then a brand new state of the art electric machines there as well. So really nice facility and that's picked up really well. Then we have some Polish gyms, quite a bit of IT spending there as well, particularly in terms of orientated to resilience and in terms of new statutory obligations on our healthcare businesses as deemed to be critical infrastructure. We're looking then on the next slide, you can see here in terms of that capex on the left hand side, you can see our free recurring cash flows. You can see that as a percentage increase that from five point one to five point eight percent. And you can see then our organic growth investment with the darker column there in terms of where we've reinvested part of that free cash flows. Our organic capex then, so this is capex excluding leases, so real assets if you like. You can see there in terms of the graphs, 5.4% for the quarter as a percentage of revenues, 5.3% as a percentage of revenues for the nine months. So we are up in terms of the absolute amounts, but you can see we are for the nine months we are down in terms of as percentage. You will see a slightly higher capex in Q4 as a percentage of revenues. We've got some projects coming in which we're finalizing some new clinical assets and also we have quite a few gyms coming in as well in Q3, hopefully if they are finalized in time. Just come back in a quick glance at our financial targets through for 2025. So sort of a short-term target now, really, looking forward just over one year. If you look on the left-hand side there, you can see that projection we have with the dotted line in terms of the rate of growth. Remember, we didn't start at 1.5 billion revenues. We started lower than that because part of that revenues was COVID. So adjusting for that, you can see we are well on track in terms of meeting our target levels. And if you look at our run right now for this quarter, and remember, our revenues are recurring. So if we're showing revenues on there, those revenues are largely recurring revenues. So we're well on track with there with 2.1 billion run rate. So we'll clearly be in excess of 2.2 billion euros for next year. If we look then in terms of our adjusted EBITDA organic, you can see in that same projection, if you look at the start base, we had to take off the COVID contributions, profits that we were getting, so our base was much lower. And I think you can see on that with the dotted line as well, that we are well on track in terms of meeting that 350 million organic EBITDA target. We have then also some illustrations here which haven't changed in respect of some of the other profit metrics that you will see. Leverage, we're now at 3.1. Our stated level is to be lower than 3.5 or at 3.5 unless we've got some short-term larger inorganic activity, but we're well within that measure currently. I hand back to you, Fredrik.

Sure. So the summary slide, key takeaways. So super strong organic growth, very strong cash flow. Joe has talked about that in detail. I commented on that as well. And really represented by super performance out of both healthcare service and diagnostic services. We're well on track towards the financial targets. Joe just made that point. Which will include both putting on more revenue, more volume, price and units, volume units. It will include to keep growing our margins for the same logic that you've heard us repeat for a number of quarters and the illustrations that we have taken you through in this quarter, in this presentation. And it will involve generating additional strong cash generation, which will allow us to both invest in the organic expansion bring down debt on the balance sheet and then very likely distribute some money to shareholders over time. So I think we're in a very good position. And I think that's the sort of summary of the quarter. And I would like to sum up also with saying a point I made initially that, you know, this is the last quarter when you have the pleasure to listen to mr ryan as our cfo and i thought it was would be appropriate just to say that i worked out this morning that we have actually delivered 66 quarterly reports together and 30 of those is in our second iteration as a public company and 36 of them was in our first iteration as a public company so 66 quarters i think works out to 17 and a half years so i think you can retire with dignity joe and on behalf of the company and all of us i would like to express a warm thank you for all these years and super strong execution and delivery on the financial front thank you joe

Thank you, Frederick. It's been a pleasure to serve as Medicover's CFO for the history of Medicover, effectively, to date. And I have been very fortunate and lucky, Frederick, to have such a quality CEO and business partner in creating such a healthcare powerhouse that Medicover is today. It's been a pleasure of a journey. Furthermore, I'd like to thank my colleagues who are with us now still and the ones that have been on our journey over the years. As you can imagine, we have had many people coming in and going through their careers with us and leaving as well. They have been on that amazing journey of growth and development. and our history. Sometimes have been hard. We've had lots of memorable times and events and achievements. But I'd just like to just echo our sort of, you see that on our presentations and we talk about that in our annual report, which is caring for your health is all we do. And that's all we're going to continue to do in more locations with more patients and more people as we grow for many, many, many, many years to come. So it was a pleasure and a real honor to be able to serve as a CFO for Medicover. Thank you, Fredrik.

Sure.

Good.

Thank you, Joe. Very nice words. We bring those with us. So with that, I hand over to see if we have any questions to answer from the audience.

If you wish to ask a question, please dial pound key 5 on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key 6 on your telephone keypad. The next question comes from Rickard Anderkrans from Handelsbanken. Please go ahead.

Good morning and thank you for taking my questions. So starting off, could you remind us of the share of the total installed bed capacity of the six units you called out previous in the presentation? And what are your internal expectations of when these six units could reach, you know, at least adjusted EBTA break even as a group to start with? I'll start there. Thank you.

Well, Richard, as you know, we are not noting down the quarters when the startup units will become positive. The reason why I said in this quarter that out of the six that have started over the past two years, two of them actually turned positive in the quarter. So that is then within two years of starting up, which is, I think, really good. I think if you want to be a little bit more conservative, I think you can say within three years out of India, you sort of would expect that to happen. Now it happened for two of them within two years, which I think is good. Now, the two ones that just started now in this third quarter, they are large. So, they are significant units. They're sort of 300 bed plus, I think, or 250, 300, both of them. So, significant units. I think as, you know, the six combined would be plus, minus 1,000 beds. So, I think total capacity currently in India would be somewhere between, I think, 5,000, 6,000. So, say, give or take 20 odd percent of installed capacity would be within the past two years, to give you a sort of sense of the magnitude.

That's helpful, thank you. And impressive growth rate continues in Poland. Would be interesting to hear a little bit of an update on how you expect the quite strong budget uplift for next year, as well as EU funds could play out from Medicover perspective in 2025-2026. Any incremental update there?

Well, I mean, you know, We've made the point many times that the question comes rather often if we think that sort of the Polish economy will start to impact us more in a negative sense. And I think we have, as a company, we have weathered the years behind us, I think very well, if you look at our reported results out of Poland, if anything, You know, Europe and certainly Poland, I guess, is going into more positive territory from an economic perspective. You take a three year perspective going forward. And certainly Poland, you have, you know, what you were addressing here, you have significant amounts of these sort of EU transfers coming in, improving the economy and stuff. Short term, we're reporting, I think, quite solid sort of member growth numbers, but the employment market in Poland is sort of a bit mixed, I think is true to say. So on the one hand, it's quite difficult to find people if you want to hire people. But then you've had quite high, this minimum wage growth that we have talked about in our reporting for a couple of quarters. That is sort of impacting quite a bit the employer's willingness to bring on additional people. So short term, you have, I wouldn't call it soft, but you have sort of a little bit of a mixed employment picture in Poland. But if you take 12, 18, 24 month perspective on economic growth and the strength of the economy, I think it's a really solid perspective. So I think we're in a sort of good position from that perspective.

Okay and a final question on the German sort of lab or diagnostic reimbursement topic. It seems that your view on the impact and outlook has become a bit worse versus expectations in Q2. Maybe you could help us quantify the impact you're expecting at this point, at least in 25, just trying to get a sense of how we should think about the impact throughout the P&L, you know, get a sense of the magnitude so we don't get lost in expectation there. Thank you.

I think the right way to answer that question, Richard, is that if we try to describe that reform to you, it would just get too complicated. So I think the important message to send this point I made before is that we are addressing some of our cost structure elements and some call it revenue sources to mitigate the impact of that reform in 2025. So although on the face of it, if you just sat and did nothing, it would have a negative impact on us, which I'm not going to try and quantify. More importantly, you know, we're confident that with the work we do, we will mitigate on a like-for-like basis any impact from that reform on our sort of German. And that's why I made the point that, you know, throughout the past two years, if you wish, with a stable pricing situation and quite inflationary environment, if you wish, from a cost perspective, we have, despite that, quite significantly grown our margin out of Germany, which is why we have, I think, a high degree of confidence that we're able to mitigate this going forward.

I think it's worth observing, Frederick. This is going to cause disruption in the German laboratory sector as well. So that may well shake out some opportunities. So every cloud has its lining. But we don't see that this is going to have a material impact in any way in terms of our figures for 2025. We will manage through this as some of the other challenges that we manage on a regular basis.

That's a good point. Very clear. Thank you for taking my questions.

The next question comes from Mattias Vadsten from SEB. Please go ahead.

Hello, good morning. I have three questions today. The first one would be on India. I think previously during the year you've talked about some one of here It has been divestiture of some smaller hospital units and IVF clinics, and you have had a revamp of a larger unit into an oncology facility, if I'm not mistaken. So maybe if you could talk a little bit about how much this is still affecting you year over year, and when all of those factors are not disturbing the picture anymore year on year, and also maybe comment a little bit on the If you're pleased with the initial ramp up in the new units in India, that's the first one.

Could you just repeat that, Mattias, in terms of your question about you're asking about margins, what it would look like X the startup units or when they mature, something like that?

No, this is not on the margin side. So it's on the growth rate year on year. Previously, you had some impact from a revamp of a larger unit in India, and you've also had some divestitures in the country that have impacted growth year on year. So when do you expect this to be not affecting you year on year any longer? And then also the initial ramp up of the new units, if you're pleased with what you see. That's the question.

yeah i i think i think i just echo what frederick was saying earlier on which is we're very pleased with it with the ramp up in terms of the new units um i think we will we will get to a stage where we have very good occupancy um in not too far in the future in um in in our units in in in navi mumbai it's a fantastic location and um mumbai continues to increase we also have um It takes a bit of time also in the process in getting some of the insurance enrollments such that we can address certain parts of the market. And we're well past those on those units as well. So that then boosts the sort of more value added part of the segment of the market as well that we can address. So we're well on the way in terms of that. And I think that those units, Pune, and Navi Mumbai are going to be real good performers. When we look at the new units, they've taken off pretty well. The one in Bangalore and the one in Warangal. Warangal, a lot of patients were traveling to Hyderabad. And I think that we sort of pick up those patients now rather than traveling. So that's actually picked up faster than we expected. And then the... the development the one in in bangalore is is is going fine according to plan so um in terms of the numbers you see we go into double digit growth on this quarter um um the two units i think you're referring to that we we we closed and and and and um uh disposed of um uh those are very small units so they don't really disrupt anything in terms of the development side um So it's a mixture of those new units with the new growth coming through. And then it's in terms of getting additional occupancy into the older ones. And we see a mixed bag in respect to the older ones. So some we've got really good development ones, some they're a little bit stalled. So we need to go back and look at how we got the doctors working in some of those. But I think overall, as you can see here in the in the figures with our growth here, and I think we're doing we're doing fine. We think we can continue to have good growth levels coming out year on year in India.

Thanks for that. The next one would be to continue to, I think, at least be impressed by the price increase as you press through, despite these growing volumes the way you do. So maybe just a little bit of comments on on how you see the pricing strategy going into 2025?

You will see quite significant price component of growth in 2025 as well. It will come down relative to 2024 because of the fact that inflation is coming down in our markets as well and hence the knock on price indexation or ability to grow price will correspondingly reduce, but it will be on significantly more elevated levels than it was before all of this started to happen. So relatively speaking, price growth is coming down vis-a-vis 24, but still on historically much higher levels. I think that's the way to describe it, Mattias.

I think that's perfectly clear. then i also have a follow-up on germany uh i would tweak that question a little bit so in terms of the outlook there do you see these strong volumes um coming up to a better level because it's growing quite substantially in germany because competition is coming off from the sort of first reimbursement levels in in that country And also, if you could just give a sense, I mean, you don't have to be specific, but just a sense on the, let's say, margin development for Germany, yeah, in 2022, 2023, and maybe year to date this year.

That's the third and last one for me. I mean, if I start from the back end of that, I'm not going to be specific for obvious reasons because we don't split out our country margins, as you know. But the point I made before, Mattias, I think it is given that Germany is so significant, you're not going to be terribly wrong if you take half of the divisional profit improvement and perhaps slightly more is represented by Germany being half of the business. And if you work that backwards, you're going to see that there is a significant margin improvement in the German component of what we do, which is really good and very important. And again, I repeat the point I made to Richard before here. Remember, that's in an environment where we had cost inflation significantly above any price compensation. So that's a significant point to make. Now, why do we see such good volume growth in Germany? I wouldn't attribute it yet to competitive reasons. I think the point Jo made here, that depending on how this sort of pricing thing plays out in 2025, You know, that may work to some people's advantage, perhaps ourselves. Time will tell. I don't think that is something we've seen yet. So I think what has driven is driving our, I think, volume development in Germany is just a sort of good offer. I mean, some of our sort of specialized testing that we have talked about before is growing super strong, you know, in specialized immunology or genetics businesses. significantly double digit growing. So, you know, that growth is driven by the composition of our test mix, really, that is growing very differently across Germany.

Okay, perfect. Thank you so much.

The next question comes from Christopher Liljeberg from Carnegie Investment Bank. Please go ahead.

Thank you. First, I just want to thank you, Joe. I think I could say honestly that I've never come across a CEO who knows so much details about the business. I mean, not only the financial stuff, but also other issues, such as, for example, ICU layouts in in the Indian hospitals. So it's been very nice working with you those years.

Thank you, Kristoffer.

Then to my questions here, coming back to Germany, I think if it's fair to say that the situation you expect next year in Germany is not going to be worse than what you have seen in the last two years.

Yeah, that was nice for us, Kristoffer. I would answer yes. So I think the answer is shortly yes on that question relating to Medicare.

Yeah, so and the cost savings and other issues or other adjustments you're doing, that's not just to keep margins flat. We could expect you will be able to continue to improve margins in Germany.

Yes, correct.

Good. Why that sort of is supported on that is it affects the whole industry. So the whole industry is going to be moving in certain directions. So we see it could be positive in some aspects, minor.

Okay. Yeah. Then on the five million euro negative impact from the new hospitals, I think you referred to the EBDA level here. Are you charging those hospitals with full depositions, i.e. the impact is as big further down in the P&L?

Yeah, absolutely. Full depreciation is charged on those, yeah. It's a beta L. It's not a beta, Kristoff. It's a beta L level.

Yeah, yeah. So even on a pre-tax profit level, we're talking about 20 million here on an annualized.

Yeah, it's significant in terms of the fall through to the profit and loss account, which is what we've talked about, you know, sequentially now for many of us.

I just wanted to make sure. Yeah, that's good. And then final question. New upcoming large openings here for the coming quarters and into 2025?

We stand by what we have said before. There's nothing new in addition to that, Kristoffer. So we said there's two new openings coming in India, both of them in the Hyderabad area during 2025. And if anything, they I think we've said last time we talked about this it's going to be in the second quarter and I think it may be that one of them is going to be a bit later during the year but there's nothing more beyond what we have said previously that is on the horizon.

And when it comes to the competitive situation in India there have been some M&A deals etc but Do you see this changing significantly in another way, or is it just more of the same, that there's tough competition for resources and a lot of capacity being open?

Christopher, competition is quite local in the inpatient services, as you can imagine, for obvious reasons. So our competitors don't stand still in just the same way as we don't stand still. So we're always facing those challenges. And you see some hospital units which change hands and ownership and you might get someone who's a little bit more competent at running it. So the competition goes up, but that's just within the mix. Nothing unusual in that respect in the competitive dynamics. What we see with the M&A of our competitors is we see very little new investment in new locations. And that's what we're doing differently is in terms of we're putting new locations. So the dynamics don't change that much actually on the ground in the local area.

Okay, that's interesting. Thank you.

As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. We have a few online questions. There are no more questions at this time, so I hand the conference back to the speakers for any written questions and closing comments.

I think there's one, I think those two we have answered. There's one written question which has not been addressed, which is can you provide the mix between advanced and standard testing in terms of volume and revenue? And I think we report on that pretty much annually in the annual report, I think. So just for reference for the audience, what we define as an advanced diagnostic test in the diagnostic division is where the end customer pays more than 15 euros for a test, so that's not a scientific definition, it's a commercial definition, but I think the overall price per test in the portfolio is somewhere I think around 4 euros or so, and I think the average price per test within the advanced diagnostic category is 35 odd euros or so, so you see there's a big difference price-wise between the advanced diagnostic testing and the overall routine testing and I think the last number we reported if my memory is correct was sort of like 40, 42, 43 percent of revenue I think and four or five percent of test volume. So test volume wise a very small proportion of diagnostic division but revenue-wise a very significant element and importantly you know that component is growing faster than the overall total so it's an important piece of our strategy. Otherwise there are no questions that we have not answered I think in terms of the commentary so with that I would like to thank you for attending today's call and goodbye.