Medicover AB (publ)

Welcome to the MediCover Q2 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 John Stubbington and CFO Anand Patel. Please go ahead.

Good morning, everybody. It's John here and welcome to our presentation for Q2. As you can see here on the headline, we've sort of positioned this as sustained high growth with strengthening profit margins, which I think is really, really good. When asked to frame the first quarter from many people, I think I positioned it as strong. I think to frame the second quarter, our positioning would be actually it's a little bit stronger. You can see strong growth coming through with good operational leverage. And this, of course, is improving our operating cash flow, which we're very, very pleased with. From a growth perspective, 17.1, you know, we're seeing growth in all markets, which is good. A little bit later on, we'll talk you through each of the markets and how it's progressing. But literally across the board, we're in a good position. Most of this growth is organic. As you can see, there's a relatively small amount of revenue that's come through with recent acquisitions. And of course, growing rate revenue is one thing, but at the end of the day, we want to expand our margins. And again, that's really going well for us. All of our metrics from a profit perspective are up. I think I'll leave Anna to talk through that. And this is being driven by our strong Polish market as usual. Pleasingly, our Romanian hospitals are starting to mature, which is what we expected. We've brought in the acquisitions, which has been good for us, and we've got solid volume growth across the board. And what's really nice to see is that our Ukrainian business has improved, and some of the initiatives that they put in some time ago are starting to pay off, is excellent for them because if anybody in our operating sort of network needs good some good news it's Ukraine so absolutely delighted for them healthcare services pretty consistent in terms of robust organic growth and enhancing profitability Polish ambulatory are doing very well sports and wellness again doing well and our fertility continues continues to support as well as the Romanian hospitals that we mentioned earlier. And diagnostics have got growing momentum, which is really good to see. And most of that coming through fee-for-service, which, of course, would be our preferred revenue stream from an ability to control pricing, etc. Leverage, as we talked about last time, is at 3.6, which is the sort of zone we expected. We We'll notice that over future quarters start to come down. So we advised last time it would go over our guidance and then slightly correct itself over the course of the year. Then if we look on the right hand side, you know, you've got revenue 596 up 17%, which is good and organic growth 13.9 again, which is good, really consistent revenue growth from the group, which is exactly what we want. In terms of our profit metrics, it's really strong, 100.9 of 35. So that's great. And 16.9 in terms of margin, which is a nice improvement to see. So congratulations to all the team that have contributed positively to that. And talking about positive things, it's nice to see the cash flow improving at such a rate, which will stand us in good stead for the future. So I think we move on. To look at the revenue and how the revenue is developed, as you can see here on the left-hand side, we've got the graph which shows the previous performance over the same quarter. And what we see here is good, steady, consistent performance by us in terms of our positions being 17% growth, 20% growth, 17% growth. So that's really good to see. And if you look at the pie chart in the middle, you can see that that growth is pretty much across the board. You know, 21% coming from Poland, Germany slightly subdued. But again, we would expect that with the reform that's going on. And I would say that the team are navigating some of those challenges really well. Romania, very, very strong there at 25. India, again, looks relatively low at plus five. But what we've got to remember is in terms of last quarter was very low but in local currencies up to up to 13 percent. And we're quite pleased with the local currency 13 percent sort of jump. And we're monitoring this the start of this quarter and we believe that and improve our position, which is as expected from the commentary that we made last time. And you can see a good contribution from Ukraine and our other parties. our pay mix is pretty much unchanged good growth across the board so it's nice and balanced strong fee for service again which is positive for us in terms of our ability to be able to control pricing and some of the challenging dynamics but supported well by the funded business and the governmental pay which of course is steady consistent pay as for us so that's really really good Healthcare services, you know, strong performance, Poland continues to drive it. So nothing's really changed dramatically in terms of healthcare services. You can see strong organic growth driven almost across the board from each and every business, which is pleasing to see. Whilst that is great, we still have many areas that we feel that we can improve. So we fully expect to continue on the journey of consistent growth in this particular area. As I talked about previously, you can see Indian hospitals is up. and has rebounded and the operational changes that we said that we would make have started to take effect. I don't think that that's a full effect that you're seeing yet in the quarter, so we expect that to mature as we go through the year. And we've got a little bit more immaturity that will come into the system because over the course of the next few days, we've got a 300 bed facility that is being opened. I think it goes fully operational on Monday with a soft opening. So good luck to our Indian team with that new opening. One of the Romanian hospitals, the Polaris Hospital, which is in Cluj, doing really, really well. It's become the biggest robotic hospital in Romania with the highest number of operations. And obviously that's just a facility that's only been open a couple of years. So congratulations to them. In the figures here, you'll see that we had a longstanding sort of position with Hungary where we were going to exit and we fully executed that in Q2. That drops our membership down a little bit, but we still have growth in membership. I mentioned in my commentary that it's a little bit subdued. That's mainly due to the kind of political political situations and the delays with EU funds being deployed in some of our markets. So people are a little bit hesitant, but we fully expect that to to start to flow through. we go through 2026. So even though those headwinds are coming at us, we're navigating it well and still performing at a high level. And I don't expect that to change. We've fully consolidated CityFit. This was the acquisition that we mentioned in Q1. That's come straight into our network and The biggest synergy you get from that course is that your member base that was going to a third party provider now is going to your own provider. So that's fully starting to show in our numbers. So the team have done well to put that in place. Look at the growth. It's very consistent. Look at the margin. It's improving. Look at the membership. It's been adjusted down. But as I said, I expect a little bit more membership growth to come through in Q3 and beyond. And then in terms of revenue growth for the division, it's pretty strong across the board. You've got the 21%, as I say, 13% for Indian local currency, 5% in euros and other areas doing well. We've got a pretty consistent payer mix and it's a healthy one. So that's positive for us. And then if we go to diagnostics, very encouraging for diagnostics. I think what you can see here is the building of some momentum. Part of that momentum is coming from the fee-for-service area, which is exactly what we would want to see. The SynLab acquisition has come into the business. We've started with our synergies and started to execute, and some of those have been done. There'll be others that will take effect over the course of the next few quarters. So that's very positive for us. And of course, it's had a big impact in terms of the number of tests that we do. So our overall test volumes have increased quite well. Germany, revenue growth, as we talked about, is fairly subdued, but really the reforms that came towards us, I would say the team are navigating that well. They are quite challenging. We've got to do more efficiency and put more things in place, but the team have done well, so that's good to see. Ukraine, strong growth driven by public pay and our ability to be able to also do fee for service with some of the customers that come and help sell and do other products. So that's worked quite well. And a couple of important developments from a genetics perspective, as you can see here, that our liquid biopsy portfolio has, they're doing some, clinical research that has gone well and looking for clinical validation of that and the first phases of that have been done and been really well received by the medical community. So we look to see that develop over coming quarters and years to see and see how we can can increase our exposure in that particular area. And we've integrated our technology with element biosciences, which gives us extended distribution capability, which again, we're quite excited about and looking to see how that will develop over coming quarters. If you look at the division's revenue, up 16%, very, very positive. If you look at the margin, We've got increasing margin, very, very positive, quite a big increase in the lab tests. No significant change really in the mid-test. And I'll hand over to Anad now really to talk you

pleasing to report another strong set of numbers from us and a continuation of the trend of prior periods so to remind you of the themes that I think are important so one double-digit organic growth so done that consistently now for a while number two is margin expansion across all profit measures and pleasingly not just EBITDA and EBITDA which we speak about a lot but actually now you can see that it's coming through in net profit and EBIT as well I'll take good cash numbers and debt leverage in line with prior guidance, which we've given. And I'll talk a little bit about the expectation for the end of the year. And finally, we're on track, as we've said before, to beat our 2025 targets that we've set previously. So in terms of going into a little bit more detail on that, so you can see that revenues in total were 597 million. John's touched on that. Overall growth is 17.1 with just under 4%. organic, which is pleasing. The EBIT numbers I'll just touch on now as well. So EBIT up 96% year on year at just under 42 million. And material margin expansion of about 280 basis points to 7%. And net profit tripling as well. So we normally have always spoken about EBITDA and EBITDA in the past, but actually as we see improved capacity utilization flow through all lines of our P&L, naturally our EBIT and net profit improves, which gives us good Soundings for the future. So that's pleasing. In terms of other things to note, I'd say actually our net cash position was good. I'll talk about that in a later slide. And up year on year, and our earnings per share tripled to 12.7 euro cents in the quarter. And the final point to note from a cash flow perspective is that we did pay the dividend of 15 euro cents per share, turning to just under 23 million euros in Q2. If you look at healthcare services, John's touched on this. So the pleasing thing for me, a lot of organic growth, as John said, of 15.6% and broadly split 8.7% is price with the balance being volume. And you'll see on the next slide that actually on diagnostics, we've had good volume growth as well. So pleased to see that actually we can expand our pricing as well as generate volumes through our network. EBITDA of 53.5 million with margin expansion materially from a rate perspective. So what you can see in healthcare and diagnostics, again, a continuation of prior quarters in terms of margin expansion, but obviously the healthcare numbers you've seen this quarter are a lot stronger. So healthcare is up 3%, whereas diagnostics is up 1.5%. So still strong numbers. And what you can see, if you talk about the hospitals for example, you can see that in Q1, we had the loss-making immature hospitals contributing 3.9 million of negative EBITDA. That's going in the right direction in Q2, so that's 2.7 million impact now. But as those mature through their maturity curve, we expect them to, if they got to zero, add on another 0.7% within healthcare. So still room to grow, but as John said, there'll be new hospitals opening one in this quarter that will kind of bring the number down again. The pleasing thing I think to note is as we fill our capacity and all the infrastructure that we've built in the prior quarters or the store room to go in terms of what we can do, our medical ratios come down naturally. So medical ratios, you know, improving by about 2% year on year in the quarter. In terms of diagnostics, I would say strong growth again. So again, organic growth of just under 10%, with the majority of it being volume, with the price being about 3.5% of the growth. Again, strong numbers across EBITDA and EBITDA. What we did have in the quarter, which we'll talk about later, is obviously the SYNLAB acquisition. So we added on circa 27 labs and 92 drawing points. So that adds to our non-financial KPIs in terms of number of facilities. As there were challenges in Germany around obviously the public pay model, then clearly I think the team had done a good job in terms of the rest of the countries that were in diagnostics as well. And again, just to reiterate what I said earlier in terms of good price and volume growth from diagnostics as well as healthcare. In terms of cash and other financial metrics, so leverage at 3.6 times in Q2, you know, we've guided to that in the past and we've also guided to the fact that we'll be nearer three by the end of the year and we stand by that. And obviously in terms of the other material thing to note is as we did the two acquisitions in Q2 this year, we've increased our net debt by 178.2 million. Remember, we bought those two acquisitions because we expected it to be revenue accretive and margin rate accretive from this year we still expect that to be the case in terms of the effective tax rate 28 so that's pretty much in line with q1 and i've provided earlier that actually the range for this year will be between 26 to 30 so nothing different there and from a net cash operating perspective up year on year as a consequence of the margin expansion impacting our profit numbers flowing through into cash And finally, I think on this slide, I'll just talk about ROIC. So I think, you know, if you remember our Q4 statement, you know, our ROIC was 6.7%. We said that there'd be kind of, as we fill the infrastructure and as we get improving margins, we'd see an uptick in our ROIC numbers. And we're pleasingly seeing that this year reasonably quickly. So at the end of Q2, we're at 9.3%. We know there's still some way to go, but we expect to be double digit by the end of the year. In terms of capex and other investments, I think in terms of total capex spend in Q2, broadly the same as Q1, so we spent 27 million euros, which is 4.5% of Q2 revenue. However, we've previously guided that our capex spend this year will be between 5.5% to 6%, so clearly the capex will be back-loaded into H2, so back to your models. The other thing in terms of space, I would say, so currently we're at 970,000 square meters. In the quarter, we added on 55,000 square meters of space. And that's probably around the two acquisitions that we've made, the 26 gyms and the SynLab acquisition, which have basically 27 labs and 92 blood drawing points. And finally, from a target's perspective, I mentioned the start, you know, and Frederick said this last time and John's saying it now. And I'm saying the same thing again in terms of we will exceed these targets. Our revenue will be in excess of 2.2 billion. Our adjusted organic EBITDA will be in excess of 350 million. The numbers, the other profit measures quoted on the bottom right, we will exceed those as it stands today. a number below 3.5 and closer to 3 by year-end. So before I hand over to John, just to summarize what I said at the start. So double-digit organic growth, margin expansion across all profit measures, but pleasingly in EBIT and net profit, good improvement in EPS and ROIC, strong cash, and on track to exceed our targets.

Thank you. John. Thank you, Anand. So Q2 for us has been a really good quarter. You've got continued strong growth, both organic and a bit of acquisition coming through. Margin expansion, very, very positive for us, which is good to see. We're filling up our facilities, still adding square meters, but filling up our facilities as customers start to use us, and more importantly, as customers come back. Immature hospitals, we are seeing progress. There's more to do, but that journey is progressing well and we fully expect the trend to continue going forward. Leverage, as we've said a few times on this call already, it's a temporary position for us, so that will start to come in line as we go through the year and the momentum is strong enough to achieve, I think, 23 to 25 targets. So very pleased, very grateful to all of the people in the organization that have worked very hard to achieve this. So thank you very much for all that you do. And I suppose the sound bite in terms of how do we sum up the quarter and our place currently is that we're in a strong position with a strong platform with good opportunities as we go forward. So we're excited to see what happens in Q3 and Q4 and beyond. Thank you.

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. Next question comes from Julia Angelistran from Handelsbanken. Please go ahead.

Hi, good morning. Thank you for taking my question. And I have two questions. And my first one is on Germany and the pricing reform. And I know you talked about this before and that you would know more in July. So I'm wondering, how do you expect the pricing reform to impact operations going forward? And how should we look at the potential of ongoing efficiency initiatives? Yeah.

No, no, I'll take it. So, you know, the German reforms were, you know, quite harsh. I think if you go back in time in history, when they were first muted, there was quite a lot of worry, fear and trepidation about, you know, what could this do to our numbers that literally, from our perspective, you know, you can't answer until you get into the journey. uh but you know there's two sides to reform there's the adapting to the the actual reform and sort of responding as an operating unit and then the second side is that any reform has uh opportunities for the players that can navigate that well so far you know we're only two quarters in and i think to really see the full effect of it it really is a whole 12-month journey because of the way that the German system works in terms of the quarterly adjustments. But so far, the sound bite from us is that our team in Germany are doing a good job in terms of navigating the challenges. They are generating efficiency. They've got more to do, and we will continue to press on on that journey. But most reforms are designed to cut off the tail. You know, they're designed to cut off some of the smaller players that maybe haven't got the most efficient systems and therefore can't adapt to the pricing that they put in place. That will happen in the market. The tail will get cut off. As the tail gets cut off, the suppliers that are left that are able to provide the services will get the work that used to go to the tail. So we fully expect that those trends to be seen as we as we go as we go forward you know we can't quite see them see them yet but it's early days in terms of the progression but our soundbite in terms of where are we versus the initial the initial trepidation that some people would have had is that actually the team are navigating it managing it well but still have some work to do to be able to complete the journey

Okay, I understand. Thank you. And just to follow up on that, is the reform in line with what you expected so far or is it worse or possibly better?

don't want to tempt fate really, but you know, in terms of our modeling of the financial situation when it first happened, it was quite extreme. If you then look at our current numbers versus that extreme position, then we're, as I said before, we're navigating it well.

Okay, okay. And then to my last question. So regarding the subdued member growth, is this a short-term fluctuation or could this be indicative of a broader trend? Is there anything you could elaborate on there?

I see very much as a short-term trend. The beauty of the scale that we have is that we can see the employer trends and we see when they start to slow down putting extra employees on and when they start to speed up in putting employees on. So, you know, we get our growth really from two main areas. One is brand new business people that haven't had a relationship with us before. And the other side is the organic growth that comes from an employer that's already with us, putting extra employees on. I think with the political situation of the world, political situation in Poland, Romania, and with the delay of some of the deployment of some of the EU funds, you've just seen a little bit more hesitance and caution from some of the employers. And that organic growth isn't as strong as it was before. But we've had that for quite a period of time. And if you look at our numbers, our numbers have still been pretty strong. So we have an ability through our new business and through our pricing to be able to navigate these things. And I fully expected the EU funds to be deployed. I expect the political situation to calm down a little bit and people get more used to it as it as always happens. And then the employment market to be buoyant again. And whenever that's buoyant, we are strong. So we're not in a bad place at all. We're in a very, very good place. It's just there's a little bit of hesitance and that's cooked in a little bit to the present numbers. But if you look at the present numbers, they're still very, very good.

Okay, I understand. Thank you.

Thank you.

Next question comes from Matthias Vadsten from SEB. Please go ahead.

Yes, hello. Matthias Vadsten from SED. Good morning, John and Anand. I have three questions, I think. First one, I'll take them one by one. First one relates to India. the sort of key driver for the return to the strong growth in the quarter. If you could describe maybe the market climate a little bit, is it business as usual now in India? And any general sort of growth outlook for the second half is very much appreciated as well. That's the first one.

Yeah, OK, so I think in the conversations that we had post the Q1 call, we were very open with everybody in terms of the situation in India. One, we were subdued in Q1. Two, it was a little bit surprising to us. There were some kind of factors in terms of the election. There were some factors in terms of medical tourism, in terms of the government not issuing the visas for people to be able to come come through and as we honestly said there was a few operational own goals in in some of our uh strong marketing techniques that we'd use historically where we'd thought we'd modernized a bit and we could change the mix and it didn't really work the good news for us is that The election's gone and there's no signs of any drag from that. The medical tourism, the visas are now being issued and we are sort of back to normal in terms of the volumes. But of course, we didn't have 100% of that in Q2 because it took a bit of time for that to filter through. And the operational own goals that we scored, we've made our defence a little bit better and the team have adapted well. And that's the one where I said in my commentary that you don't get the full effect of that in the quarter. So we expect and we see so far in July a strengthening of our position. Market conditions. Well, that is quite strong, I have to say, because there are some of our competitors that are also in our markets considering to do IPO, which makes them a little bit more focused on some of their activities and some of their recruitment activities. But the local team. are very strong in the the areas that we operate you know they're very well established um we have have good uh good reputation with the doctors that we have and good systems and good uh equipment for them um so um we we're we're in a a good place uh but we we expect to see it uh improve as we go through um q3 in terms of uh as we you know repair some of the things that we've done so

better for us q2 should be a little bit better for us in in q3 and we'll see where we go by q4 thanks very clear answer then the next question i mean seeing the first sales figure or 50 sim lab for the group looks quite good i think could you disclose if you're satisfied with what you've seen in terms of growth so far and perhaps also talk a little bit about the margin contribution

from them to at this stage as it stands right now and the scope to sort of lift margins going forward that's the second one yeah so i'll take this one if that's all right john so um yeah we've kind of integrated the businesses as you can imagine in q2 so remember i think one was on the first of april and the second one was on the 6th of april so Yeah, in terms of what we've seen so far and what we've captured into the numbers, there's no surprises in terms of what we expected from synergies or revenues, I would say. Obviously, things are always slightly a little bit different. But actually, in terms of do we still expect, as I said earlier, full year margin accretion and full year revenue accretion as a consequence of those businesses? Absolutely. We have seen... uh margin accretion uh in q1 in q2 sorry most definitely as a consequence of doing it but probably not uh as much as we would have expected but i think some some of that will happen in the second half of the year so so we're pleased with the businesses and what they're generating at the moment and we still have got the same expectations that we had before with regards to the profitability of the businesses sounds very encouraging the last one relates to

the the margin so the evital margin up by a significant two percentage points every year here in the first half uh is it um likely that this trajectory continues in the second half or are you know comps getting gradually a bit tougher and should we consider the the opening here in july as well because it looks like a significant uh yeah so just a few words there maybe if you could

No, I agree. So I think, you know, John framed it well. So, you know, Q1 was strong and Q2 was stronger. So say if I had to pick, and I know you want margin rates for the rest of the year, then I'd pick something in the middle in terms of your models, for want of a better phrase, if I was being prudent. But we'll carry on doing what we're doing, which is focusing on optimizing our facilities and stuff. But yeah, I'd say, you know, Q2 was probably a surprise to you guys in terms of margin rate expansion versus Q1. But yeah, if you pick a number somewhere in the middle, is probably right, but obviously we'll try and beat those numbers. The other thing that I was just to remind everyone of is remember in Q3 last year, we had the impairment write-off. So the Q3 numbers will probably look a bit odd from an EBIT level anyway, year on year anyway, because we had a 16.4 million write-off, sorry, write-off impairment of the two businesses, the fertility businesses and German Dental. So the year on years will look a bit odd for next quarter.

Thanks. Sorry for squeezing in one more, but maybe a few reflections on the elections that were taking place during the quarter and the impact on the market environment.

Yeah, I think from us, you know, politics is politics, so time will tell in terms of how it really plays out. But I don't think the political situation from our business perspective currently will influence or change our course, in fact. There may be some good opportunity that actually comes out of it. You know, the Romanian change is perfectly okay in terms of the environment for us, in terms of pro-European, et cetera. And the Polish position is... kind of shaking down right now currently with the reshuffle that happened yesterday. So I think that's an interesting change in terms of the Health Minister. But again, I think from our perspective, we're not sitting here with any major reaction from the changes that we've seen.

Thank you so much.

Next question comes from Christopher Liljeberg from DNB Carnegie. Please go ahead.

Hi, good morning. Four questions for me. I also take them one by one, maybe. First, you mentioned that the acquisition actually benefited a bit here to more than in the quarter. Is it possible to quantify how much they contributed to earnings and whether that was mainly one of the acquisitions or both of them?

Yeah, so we're not going to quantify that. It was more in the grand scheme of things. I think, let's be honest, in terms of the quarter, the overall underlying business did super well versus any acquisitions that we did. So yeah, I mentioned it was positive from a margin rate perspective, positive from a revenue and EBIT perspective. But in the grand scheme of things, it's the overall medical business that contributed the largest to our performance.

Okay, and when it comes to the SYNLAB synergies, what's the timing of this?

Yeah, I think, you know, some are already there in terms of things that we've done. I think you'll see more in three and more in Q4, and then it will start to settle down. So, you know, the next two quarters are quite key for us in terms of implementing some of that change. But, you know, from our perspective, the team are on it, very focused, very clear and know what to do. So they should be executed.

Will you have someone, of course, to relate to that restructuring here in the third and fourth quarter?

There might be, but I wouldn't expect it to be dramatically material. Usually when you do these things, there were some, for example, with CityFit, but they're not dramatic for us, so it should be okay.

And then the third question relates to the minority line and the fact that that one is positive. Is all of that India or some other explanation for that?

Yes, so the majority of our minority interests are India. There's small bits and bobs, which is less than 2% of the total. But India is our material minority interest at the moment. No material change quarter on quarter. I think the only change is driven by FX changes in the quarter, but nothing else has moved.

Okay, and then my final question, this effect or dilution from new hospitals, do you expect that 2.7 million negative euros to be smaller end of the year or larger because of the new openings?

Yeah, I think we've got to be a bit careful about this one because I remember talking in Q4 and we said, actually, you know, it's going to improve through the year. Then obviously you saw the Q1 numbers spike due to the challenges that we had in India. So, look, I think we've fixed the own goals, as John said, and any other external factors that had that were out there that kind of resolved themselves. So we'll go in the right direction. But, you know, we will add on another hospital that will be negative from a margin perspective. But look, I will say the same thing again. Over time, it will get better. You know, we're hopeful the next two quarters will be stronger.

Okay, thank you.

Next question comes from Philip Eckengren from ABGSC. Please go ahead.

Good morning, guys. I just want to go back to the subdued growth in members. Did you say anything about which markets or was that kind of overall in the different markets you operate?

No, mainly from a, well, actually both, but, you know, the big member growth position and the big membership business we have is in Poland. You know, I wouldn't know, you know, we've put that line in so that, you know, people are aware that some of the organic growth isn't as strong as history, but I wouldn't overcook this in terms of our ability to navigate it. Some of these trends have been there for a while, and if you actually look at the strength of our Polish operations, our Polish operations have been good. So there's also a bigger positive side to come through, which is whilst these trends are there, it does subdue us a little bit, but it will, you know, eventually the organic side of life will come back stronger again. And we've seen these trends. If you go back in history, you had these periods where it dies down for a period of time because of usually the economy or some uncertainty, and then it starts to mature again. So from our perspective, it's there, we're navigating it, but it's not something we're we're worried about at this stage, but it's mentioned because Hungary will disappear and therefore there's a smaller base and when there's smaller bases there's a little bit more volatility.

Sounds reasonable, thank you. And then a final short question from my side here. The privately paid business seems to have had strong momentum in all markets, and you mentioned Germany here. Could you elaborate a bit on that? Is that a result of the changes in the German market or any other reasons for that, please?

Sorry, we missed the first couple of words that you said. Which line?

So the privately paid business, yeah, in diagnostics. So the private pay in diagnostics.

Yeah, so I'll start with that one, if that's okay. So listen, in Germany, clearly, given that there has been a tightness around public pay, then the team have done a good job on trying to expand our private offering. So if you look across diagnostics, full stop, and including Germany, there has been a growth in our fee-for-service model, as we call it. So that helps us offset some of the shortfalls that we've had in terms of price in the public pay sector. So that's helping us actually. So previously we've said that actually we'll consolidate Germany and make sure that we kind of still grow it in the right way. So you've seen that actually in Q2 revenue growth of 1%. You could argue that it's a little bit better underlying because of movement of Easter. But then after that, our margins are flat as well. So we have seen pleasing movement in FIFA service, not just in all of diagnostics, but in Germany as well to an extent. Sounds good. Thank you.

That was all for me.

Next question comes from James Vayntempest from Jefferies. Please go ahead.

Yes, hi. Thanks for taking my questions. John, maybe just a question on your first impressions. I know obviously you've been at the company for 15 years or so, but nearly three months in as CEO, I guess in your new role, what are your more nuanced observations about the business, seeing it from a different perspective? And then my second question is, the company's always given this sort of midterm guidance, and obviously we're coming up to 25. When do you think would be a natural point, having sort of looked at the business from a new perspective, when we can get an update from And what's your sort of initial thoughts on philosophy? You know, we're likely to get one year or do you still think, you know, two, three or even five years? Because I know sometimes the company's given two or three year guidance. So any kind of sort of initial thoughts around those would be really helpful. Thank you.

Yeah, sure. First impressions. Well, you know, part of the business is very new to me in terms of the detail, but not new to me in terms of the you know, being aware of things that we do. You know, lots of opportunity for us to improve things, lots of opportunity for us to grow. Very excited in terms of what can happen as we go forward. You know, we're in this planning and organising phase for us to evolve things more. There's not going to be dramatic change, but I think we can evolve things more as we do that, make improvements. But if you want a sound bite, I'm very excited by what I see. In terms of the guidance, we're very aware that we've got to give new guidance. We haven't actually completed the guidance that we gave already. So we kind of want to get to the base camp of Mount Everest before we actually say, where are we going to go next on the journey and the climb? So I think you'll expect something from us either the end of the year or the beginning of next year. That's the kind of range that we've discussed so far, whether it's one, two, three years. Again, we haven't confirmed that. We're at the beginnings of the discussions. It won't be five. Five, you know, basically is a little bit too long. in terms of timeframe. But, you know, we would definitely, as we get towards the back end of the year, be very clear about either here's the numbers or here's when it's going to appear.

That's great. Thanks very much.

No problem. Next question comes from Bram from Bering. Please go ahead.

Hello. Most of my questions have already been touched on, but I'd like to go back to... Yeah. You slow, you lose. But I wanted to go back to talking about the employment environment in two of your big countries, Romania and Poland. I'm fairly clear why companies would be hesitant to add new workers in Romania, but Could you just maybe walk me through a little bit on what would be causing hiring hesitancy in Poland?

I think I've mentioned it before. The world political position at stages throughout this year has been a little bit unclear in terms of the American president making certain statements that unsettle people. You've then got obviously the elections that were happening in Poland and that always creates people to just hold back for a period of time. And looking for that to settle down. And then you've had, as I say, the EU funds, which Poland are always very good in terms of deploying and using. They've been a little bit slower in terms of being deployed. You know, we mentioned this in our statement just to make people aware, but it's probably also very important to clearly lay out that these trends in terms of the hesitancy have been there for a few quarters. And if you look at our performance over those quarters, we are still strong. So they're there. they do create a headwind for us but it doesn't stop us moving moving forward and at some stage as I said earlier these will be turning from a headwind into a tailwind which then we will see the advantage of so it's it's normal cycles you know if we go I've been with the business 15 years. I've seen the cycles of the organic growth drop for a period of time, and then I've seen the cycles when the organic growth goes like a rocket, and it's great. And I think we'll mature out of this because we've got much more stability from a political position that appears to start to have been navigated. The EU funds will start to roll and come, and confidence will build. So we very, very much see this as a temporary position but we're mentioning it really because we're making a significant change on the membership base with the Hungary exit and as your your base gets smaller volatility is seen and we're just pointing it out so we're just putting it so that there's no surprises as we as we go forward you know our membership growth in Q3 is a little bit better than Q2 or is expected to be so you know I'm just as you say we're mentioning it for context. No panic from our perspective. Clear.

The other question was regarding, you know, you've been very kind in giving us numbers on, you know, losses stemming from premature units. So part A of this question is you have a new 300-bed unit opening very soon. How many more openings will you have within the next 12 months?

In India, we have one more opening scheduled, which will be early 26. And then we're pretty. And then. Sorry, so I'll let you finish.

That'll be it for now.

That would be it for now, correct? I wouldn't say that with us. You know, from our perspective, you know, we're always planning and always looking. All I can say today is, with regards to our current plans and the current position, the next hospital, in terms of a self-built position, is scheduled for Q1 next year, and there's nothing – opportunities come at us very fast, we can move very fast. So I wouldn't rule it out. But that's the current position.

Thank you very much. Part B would be, again, in the context of this, you know, after the loss coming from immature hospitals, by how much would this new opening later this month, increase those losses in terms of the third quarter. I'm not going to ask you by how much, you know, how the rest will improve, but by how much would a new unit, you know, just off the cuff number, how much would it increase the losses from the amateurs?

As you can expect, that's quite sensitive information that our competitors would love to have from us in terms of not only the losses, but also the pace that we move through those losses. So it's not something that we actually disclose. Fair enough. Thank you very much. Thank you.

As a reminder, if you wish to ask a question, please dial pound key 5 on your telephone keypad. There are no more questions at this time, so I hand the conference back to the speakers for any written questions and closing comments.

Just checking to see if there's any written questions that we've got time to answer.

Yeah, so you've got a question. one or two of them I think so that's the bottom one what was the price growth within diagnostics segment in CE so I think if you look at our webcast report I think in total diagnostics we're saying price was three and a half within all the areas hopefully that answers that question price growth by sector country before? Why are you not adjusting your bid term target? I think John's already answered that question in terms of, we will say we're beating our targets. We've said that before, but we're not going to give further guidance apart from uncertain profit lines, which I've said earlier. So that's answered. In terms of sports, was our revenue growth in Q2 mainly driven by price or volume? It's a combination of both in all honesty. I would say so. Remember when I talked about overall health care services, we said of the 15-odd percent, 8% was about price and 7% was volume, and that's consistent with ambulatory and sports, which is our biggest sector. And then M&A strategy, do you want to talk about that one, John?

Yeah, I think that, you know, from our perspective, when it comes to M&As, we're constantly looking at our pipeline. So even though our current ratio is high, that doesn't mean to say we stop the work because we fully expect to be able to bring that down relatively quickly. So The work doesn't stop. We've got lots of opportunities. We're evaluating different things. And as and when we feel it's the right situation with something that's highly synergistic and accretive to us, we will press the button and execute it. So I would expect us to do things as we go forward.

I'm sorry, I was reading the final question. Do we expect wage hikes in Poland? by 25 didn't negatively affect margins in health care services? Look, I think there's always inflationary costs, maybe wage rises or something else. But as a business, we work hard to try and offset this through either pricing or being more efficient in the way we operate our business. So, you know, we've given guidance for this year. We're confident in our guidance number and that assumes any potential impact of

wave inflation factors yeah great i think that covers all the uh questions that's been been written so uh thank you everybody for joining the call uh just in summary uh it's been a really good quarter for us we're very pleased we're very grateful to all of the uh people in the organization for everything they've done to help us achieve these results so thank you very much to them And the soundbite for last quarter was that we were strong. The soundbite for this quarter is that we are stronger and the outlook for us remains very positive. So we look forward to talking to you in Q3.