Medicover AB (publ)

The MediCover Q1 2025 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 Rugemark and CFO Anand Patel. Please go ahead.

Good morning everyone and welcome to the first quarter 2025 results presentation. It's with great pride and joy we present this report. In fact, I think it's probably the best report we have presented. possibly with the exception of one or two covid doped pandemic reports but in terms of the broad business it is definitely the best report we have published since we listed the company now eight years ago it's a combination of factors you know we see continued strong top line growth organic growth was more than 14 percent most importantly The further down the profit and loss statement you see, the more operational leverage you see coming down in margins expanding. EBITDA margin up 1.6 percentage points, EBIT margin up 2.4 percentage points, and it goes on as you flow through down the profit and loss statement, which is exactly what we have been focused on. It is exactly what we have been reporting to you over the past four or five quarters. It is just that as the numbers get bigger, it becomes a bit more pronounced. And that's really what we see here. Poland continues for healthcare services to be really very strong. Now, India had a particularly weak quarter. and we'll speak a little bit more about that later on but I think it's noteworthy to see that we push through these results both growth and margin expansion despite actually you can argue a disappointing a quarter out of one of our core markets so more about that a bit later Diagnostics very strong again remind you that half of diagnostics is Germany where a good chunk of that is public reimbursement where we get no price compensation but despite that with all the initiatives going on and actually really strong growth in the German private pay revenue and really good performance outside of Germany in DX we see really good growth double digit organic growth out of dx as well as margin expansion now that's flowing through as you've seen in the in the last quarters in in in really good cash generation cash flow you know we've always had good cash flow it's just that the number starts to get bigger so the amounts become bigger and then also i'm really very pleased and happy to be able to report to you that on a quarterly basis, i.e. we annualize the first quarter, we have achieved the year-end 25 financial targets that we set a little bit more than two years ago. So we're on an annualized basis, we're trading on around 2.3 billion euros of organic revenue. We're just a tad above 350 million organic adjusted EBITDA. and we're also trading above those two additional targets we added a year ago adjusted beta l of at least 235 million and ebit of at least 140 million so that's after nine quarters out of 12 so three quarters of the period And for all of those that attended our capital markets day, I think you very well remember that they were certainly not unambitious targets. So I think that is that's super performance. Then if you go on to our standard graphic pages, The revenue split is pretty standard. What's worthwhile to point out there, you see Poland has now grown into 52% of revenue on the back of, it's just sort of stellar growth performance over a longer period of time. You see 22% growth out of Poland, 7% out of Germany, which is not bad in fact, because you said you have relatively no price growth and relatively little volume growth in the public pay segment. So the private pay segment is growing really well. 19% out of Romania and you see basically 1% out of India. And I take the opportunity to comment on that here now. So India had a strange first quarter. We were trading pretty much on plan in January and first week of February, and then it was pretty much a cliff fall for the second half of February and March. And I think most people in India experienced the same thing. So very weak consumer sentiment. Then we have around 10-ish percent of medical tourism in our business in India, and we got no visas issued. So that sort of came to a halt. We closed down one underperforming unit, et cetera. So there were a number of factors explaining that fact, but there's no other way of expressing the first quarter in India than it was a disappointment. I think the most important of all is that it was an exceptional quarter now. April is pretty much over, like tomorrow, and we are back and trading significantly double-digit revenue growth again in April, and that we expect to continue going forward, which is important. So that is India. We then flip on to the topic slide. So very pleased with how the volume growth is turning into higher margin and hence increased profitability. So EBITDA up to 86.5 million, 29% growth and even 15% margin. So good growth, 150 basis points on last year. And the adjusted number for the first time is above 90 million. So 90.6 million adjusted EBITDA 15.7%. good strong number adjusted the beta l up over 60 million i think also for the first time effectively and then i already mentioned ebit is almost doubling not fully doubling but not far from it from from 19 up to 36 million so a margin of 6.2 percent so significant margin expansion again very healthy good cash flow And then, of course, the biggest expansion, if you wish, comes on EPS, obviously, because it's the smallest number. So EPS more than tripling effectively from just above 4 euro cents to about 13 euro cents. So I think super, super performance. Then if you go to health care services, So, good growth, running above 400 million, I think, for the first time, so 403 million of revenue, 18% up of which 15% was organic, and just short of 9% of that being price. So, I remind you that price is very important to us, that we are able to continue to push price growth on to our consumers to manage. Although, you know, cost inflation has certainly come down and we are in a much better position than a couple of years ago, but one should be also very clear on the fact that it's not gone. So it's not normalized. So it's really important that we are able to keep seeing that we can continue to raise pricing, although at lower levels than what you saw last year. So fee for service here is half of the division, up 14%. And I made the point before that, you know, performance is pretty much stellar across everything we do in Poland. It is also good actually out of Romania, relatively speaking, compared to last year. We still have loss making units in the large hospital in Bucharest but you know Romania is pushing on. I have commented on India. The member growth may look a bit soft. I remind you that as we announced end of last year that we are exiting the Hungarian business and as we do that that happens gradually throughout the first six months of the year so we had a not insignificant negative member movement out of Hungary as part of that exit process here in the first quarter, which contributed quite significantly to that lower than normal member growth number. If we then switch to the earnings profile for healthcare services, strong margin expansion, in fact super strong margin expansion, you see a beta up more than two percentage points. EBITDA L even more, 2.3 percentage points. EBIT significantly more than doubling in terms of absolute amounts and almost also doubling in terms of the margin, you see 3.4 to 6.7. So lots of operational leverage coming through here. And I remind you, this is despite the Indian business, which is significant in this division, not firing on all cylinders in this particular quarter. So there's still room to improve this situation significantly as we progress. You actually see that in this next bullet point where we... You have seen that we have reported a number of times now when we take the six most immature hospitals, five of them being in India, and one of them being the large recent addition in Bucharest, You see that we had a beta L loss for the quarter of 3.9 million. Effectively, that's 600,000 worse than in the prior quarter, which is purely driven by the point I made on India. In fact, Romania is improving. the situation. So the loss is coming out of the Indian hospitals on the back of lower revenue than we had in the prior quarter. But again, I reiterate that's going to reverse into the second quarter. So you don't need to worry about that going forward, but one should recognize that in this quarter. The medical cost ratio, which is then the most important cost category in this business, which is i.e. all of the cost of delivering the medical service, you see is actually down quite significantly, two percentage points, which is a combination of factor mix, price growth, of course, and a lot of very good hard work of our management team to manage utilization and costs. You have the standard Indian picture. Nothing has changed in that since we showed this the last quarter. Now, we have to remind you, we have two more units coming up in India over the coming 12 months, both of them in the main Hyderabad market. So one will open in the summer, Both of them are large units and the second one will open towards the end of the year or beginning of 2026. Then flipping to diagnostic services. Again, I made point before, I think good revenue growth, good momentum in this business, 182 million. So just short of 12%, all of being organic growth. where price is just about 3% of this, so slightly less than half of the price component in healthcare services. Again, you have heard me say many times before, that's explained by the fact that half of this business is in Germany, where there's very little price compensation. So basically outside Germany, we have been able to adjust prices very much in line with how healthcare services have been able to. So good performance pretty much across all markets here, really. You see a relatively benign growth in lab tests. We have done fewer. If you remember last year round, we did quite a few, almost three lab tests in Ukraine for the public insurance house. We still do some of those tests, but we did significantly fewer. this quarter round, which explains the much lower lab test growth vis-à-vis revenue growth. Fee for service here is a full 70% of the division and that was up 16%. I remind you we talked a lot about end of last year about the pricing reform. The additional pricing reform, I should say, that came into force in Germany in January, we have assumed a worst case scenario for us, and that's what we account for. We will know really in early July. how the different lender kvs treat this and it may be that we get some upside time will tell at least we know it's not going to get any than what we are assuming currently in our numbers you can also see a little bit what i'm talking about on these two pie charts to the right where you see um the upper pie chart you see germany is growing six percent And below you see public money is growing 3%. And basically, pretty much all of that public money is in Germany. So that means that the other half of the 6% in Germany is growing double the 6%, if you see what I mean. So that illustrates the fact that our private paid German business is actually growing very nicely. Now, this resulted in good flow through. to increase profitability so EBITDA was up very well so a bit more than one percentage point just short of 20 percent margin EBITDA L likewise just short of 16 percent margin And EBIT then grew a bit more, so a margin of just above 12%, up 28%. So good results out of this. And again, it's not split out here, but I think I made that comment last quarter round, I can make that comment again, that actually Germany, where there's a lot of focus on this price reform, etc. Our total German business in diagnostics is growing its margin. So relative to the first quarter last year, despite all the pressures around us, we are up around one percentage point in terms of the German margin. Then we have two post-closing events that we just want to comment on. We made two acquisitions that we had sort of hinted to you about before in the previous quarter. These closed just early in April. Both of them had been in competition clearance for quite some time. So we were very happy when they finally got released. In diagnostics, you may be familiar with the relatively large lab group Synlab, that used to be listed in Germany, now again it's a private company, and they are selling off a number of assets now, and we had an opportunity to pick up This set of markets, and this is really a synergy play for us. So we have tremendous synergies, particularly in Romania, but also in Turkey. And then they have some really nice businesses on some of the other markets there in the Balkans. But you can see that we stated in the release that we expect already within one year to have grown their current profitability at least 50 percent and within at least two years have doubled the current profitability levels from Synergis really. So we feel we have all of that under control. So we believe this is a very good, very strategic and certainly very accretive acquisition for our shareholders. Then in healthcare services, we build further on the tremendous growth and positioning we have in Poland by adding a a very well-run fitness operator to our network. And then I remind you, we sell these sports cards in Poland alongside our healthcare cards to the B2B corporate clients. And then they are buying either standalone healthcare, they may be buying standalone sports, but increasingly they are buying a mix of the two, which is really what we want, because of course, the more Customers also go and look after themselves at the gym. The more healthy they become, the less illness they will contract. Hence, the synergies are both in distribution and cost for us. We expect this to be a very good acquisition. We think it's priced reasonably. We will have good synergies on the overlap that I was just talking about. And it also will be very accretive to our results. And with that, I think I hand over to Anand for the financial review.

Thank you, Fredrik. Very pleasing to talk about another strong quarter for us. And also, I would say a kind of continuation of the story of recent quarters that we've spoken about. So as per usual, I'll talk about EBITDA after lease costs, as lease costs are a key part of our cash flow. So if you look at group level, group EBITDA grew to 60.4 million euros. That's growth of 39% with margin accretion of 1.8%. And the pleasing thing is, and similar to what I said in Q4, the story is consistent across both business units. So we have strong absolute growth across both business units, both in price and in volume, and margin rate accretion across all businesses as well. In healthcare in particular, so we had EBITDA of 40 million, so a margin rate of 9.9%. So that was up 2.3% year on year, so really strong performance there, particularly as Frederick mentioned, given that the India performance was below slightly better expectations, but back on track. In diagnostics, again, despite the news about Germany, et cetera, Frederik's mentioned that we grew volume, we grew price through growing our fee-for-service business, and also we grew our margins. So overall EBITDA of 28.7 million in DS, with a margin rate of 1.2% year-on-year to 15.7%. So if you look at page 16, a key thing for us this quarter, I guess, was a real improvement in our leverage levels. So our loans payables were broadly unchanged from Q4 and clearly our EBITDA grew year on year. So that resulted in our leverage dropping to three from 3.4, which we had in Q4 last year. I will talk about future projections when we get to the target slide. But for now, really strong performance from a leverage perspective. In terms of our effective tax rate, it was 28% in Q1, in line with our expectations, a bit higher than last year, but that's due to the timing of tax settlements in Poland. Again, a strong performance from a cash perspective. Again, reiterating what Frederik said earlier. So net operating cash was up 11.6% to 87.5 million, predominantly by EBITDA. And free cash flow, which in essence is cash flow after maintenance capex, but before investment capex, that was up year on year as well to 44.2 million. And the final line I'll talk a little bit about. So ROIC was up pleasingly versus what we reported in Q4. So in Q4, we're at 6.7%. In Q1 this year, we're at 8.3%. And that's where you can really see the benefit of the EBIT accretion that we're seeing year on year. So Frederick mentioned that EBIT was up nearly doubling in Q1. And that really helps our ROIC level. So we're pleased to see that. And hopefully that's a manifestation of what will happen for the rest of the quarter. oh rest of the year sorry uh looking at capex so from a capex perspective uh we spent 28 million in q1 which is broadly the same as last year uh as a percentage it was five percent of revenue previously we've guided that our capex spend in fy25 will be between five to six percent so uh a bit timing yeah we'll spend a little bit more later in the year From a medical space perspective, a small accretion in the month, but broadly unchanged at 915,000 square meters. And then you have the two charts that we normally show at the bottom of the page. So on the left, you can see that actually similar, let's say, to last year's cash flow. We see a spike in Q1 from a free cash flow perspective and clear headroom between that and what we've invested in our business from an investment CapEx perspective. On the right, you can see the Q1 breakdown of growth and maintenance capex year on year. So the first block is the spend in Q1 FY25. You can see the split is 53% growth and 47% maintenance. That's kind of just a timing thing. So going forward, and we project for the full year, we'll be back to about the 60-40 levels that we've seen in prior years in terms of splits, with 60% being on growth. And finally, talking about targets. So very pleased in Frederick's final quarter as CEO to say that actually he's mentioned this already. Our run rates for Q1 extrapolated forward imply that we are going