Medicover AB (publ)

Welcome to the MediCover Q3 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.

Morning, everybody. John here. Welcome to our Q3 report. And I'd like to start with thanking all of our people for producing a really good result. So thank you for all your hard work. Q1, I described as strong. Q2, I described as stronger. I think Q3, you know, what we're seeing here is a really good, solid, consistent and healthy performance. If you look on the right hand side, you can see growth is a good performance at 12.1%, especially when you consider that Hungary no longer is in these numbers. So that's quite a pleasing position for us. If you look at a bit, it's a very respectable increase of 32% which is really positive for us and you can see that coming through with the adjusted margin of 17.2. Moving up by 14.6 is really, really solid and quite an impressive performance by the team. We'll talk about that a little bit later on because there's Some other sort of factors that are pushing that forward and pushing that back. And we'll try and give you a bit more context on that. Operating cash flows, again, very healthy, 98.8. A positive movement of 36.7, which is, again, really pleasing for us and good to see is what we need. So that's really, really good. And as predicted, we talked about our leverage that as we did the acquisitions that that would come down, and we see that that is coming down despite the fact that we did our two biggest deals ever in Q2, which has been very positive for us. So healthcare services being driven by high organic growth and the improvements coming through, the fact that we've put so much extra capacity on of the assets is starting to be seen. When you start, you put all the staff on, you put all the facilities on, you're ready to take customers. But it takes time for customers to come. And more importantly, it takes time for customers to come back. And we did that in many different places across the world. And Diagnostic Services is really, really pleasing to see their performance. They've had quite a lot of headwinds that have affected them. And they're navigating them really well. And I'm really pleased for the team to be able to see them do that. And a note to the bottom about our greenhouse gas emissions, that we've had those validated, which is a good part of what we're doing. So if we move forward. And if we move forward and look at our revenue positions, basically if you look at the bars and look at the percentages, really good solid growth there, 19.5, 19.8, 12.1, which looks a little bit low. But, again, we need to take into consideration Hungary and the fact that we've got a bigger base. So we're really pleased with that progression, and we're really pleased, most importantly, with the consistency of that. If you look at our revenue by country, there's some slight mixed change here. Some of this, again, driven by Hungary. I seem to be saying Hungary a lot. And a little bit driven by currency from an Indian perspective. And then revenue by payer, relatively relatively consistent, a little bit of a change in terms of the growth rates. The consumer segment 58% is a really important part of what we do and of course at times with consumers you'll find people being very active, at times being a little bit cautious and we're watching those particular conditions. As we go to healthcare services, healthcare services revenue growth 9.6 It feels really strange to be able to talk about healthcare services and see single rather than double digit. But of course, if you adjust that for Hungary, we go back up to 12.4, which I think is huge. Revenues at 406.5, which is very respectable. Revenue by country is pretty pleasing across the board. You see Romania 16%, Poland at 17%. India, again, affected by currency, so it looks a little bit different. Strong development in terms of sport and wellness and ambulatory clinics in Poland, which contributed to the drive of the revenue in fee-for-service. And we've got good progression in terms of the public revenue that we've got in Romania and some of the Polish hospitals. We launched a new hospital in Hyderabad. And, of course, as we launch new capacity, that has an impact in terms of the profitability. Again, we're investing in the staff, we're investing in the facility, we're putting out the capacity before the customers come. And whilst the growth in India is a little bit lower than some people may have expected at 8.8% in local currency, some of this is driven by a conscious change in terms of the way that we're steering the business in terms of having less governmental pay, which puts that down. But our underlying trend in India in terms of doctor recruitment is really, really strong. and that's one of the reasons why we've decided to pull forward the planned hospital for next year into this year because we feel that we've got good momentum in terms of the recruitment we can take advantage of that and we can get faster growth so we'll see that come through in Q4 and again that's two new big hospitals that will go on to the go on to our network and having those through will have an impact in terms of a little bit of drain on our profitability and margins. One more word of caution. We talked about the strong margin. Part of that is created by our funded business where there's been a slower phasing of recruitment of doctors. That happens from time to time. There's nothing that is particularly unusual for us, but we will catch up on that. That puts a little bit of extra power into the margin, which will adjust as we go through Q4 and Q1. And that's one of the reasons why we've talked through that that might happen over the next coming quarters. Membership is okay. Membership is pretty good. If we look at it from without having Hungary involved, we've got growth of 2%. But at the same time, we want to balance this by sharing with you for the first time the number of relationships we have because you can see our fee-for-service line is much much higher now in terms of its percentage of our business and it's really about relationships as well as what being about memberships for us because if we can establish a relationship We get people that come to us sometimes funded, sometimes through fee-for-service, and sometimes through paying out of pocket. And you've got a mix here of different relationships being funded, NFZ, some of our benefit customers for loyalty, etc. And we'll continue to publish this number so that you can see how that progresses. This doesn't affect this quarter, but you can see that there was a strike in Andhra Pradesh in India in October. That meant that all the hospitals in that location were not taking inpatient stays for governmental pay. Obviously, that will have a slight effect on us in the fourth quarter, but was probably needed to be able to make sure that the government did pay some of their bills, which can take quite a bit of time to settle. All the indicators on the right-hand side from our healthcare services are pretty good and a positive progression from the team, so thank you very much. Diagnostic Services, they've continued with their strong momentum across the business. And as I say, I'm really, really pleased with the team. Revenue increased by 17.8%, which is pretty impressive, so well done to them. Organic growth at 12.4%, which is still solid and really good for this segment. Strong demand from fee-for-service, which is very positive for us because that's the big part of our revenue stream. Germany, which everybody has been concerned about, worried about, and watching with a close eye. We continue to watch it with a close eye, but the team have navigated that really, really well. And we're seeing increasing volumes there, which is helping us adjust as well as our initiatives to be able to drive efficiency. And overall, we've got an increase in tests, which again is quite impressive. And that's really positive for us. So revenue 191.7, very pleasing. If you look at the progression by country, there's percentage growth there in each of the countries. So congratulations to the team. And I know Germany is 5%. Considering the reform, I think that's pretty good for them. Margin, great to see some improvement here. We've got operational leverage. We'll continue to get that operational leverage if we continue with the lab growth. Very solid number of tests. And again, really pleasing, strong and good growth in So overall, pretty good. I'll hand over now to Anad, who will talk you through some of the details of the financials. Thank you, John. Good morning, everyone. So pleased to report on another good quarter for MediCover, building on the momentum and themes of prior quarters. So as a reminder of those themes, one, we've got double-digit organic revenue growth, again. Two, margin expansion across all profit measures. Three, strong and consistent performance across both business units. We've mentioned previously from John that we've normalised leverage back down to 3.2, so in line with the guidance we've given in prior quarters. And in the quarter, we've also seen an improvement in our ROIC numbers and in our cash. In terms of overall, so from an organic growth perspective, so I'll talk about organic growth to kind of strip out the Hungary effect, and Hungary will obviously impact our numbers in terms of year-on-year growth overall for the next three quarters. So organic revenue growth is 12.4%, which is very pleasing. In terms of EBIT, particularly impressed and pleased with that number internally. So we've got EBIT at 42.8 million. The margin is 7.2%. A lot higher than last year. You'll remember in Q3 last year, we did some impairments. But actually, even if you kind of do a like-for-like comparison, putting back in the impairments for want of a better phrase, we've still got healthy margin accretion across the EBIT lines. So very pleased with that, and that actually flows through to our EPS pretty well. From an EBITDA perspective, growing faster than revenues, as you can imagine, due to the margin expansion of 260 basis points. So EBITDA at 98.2 million. And finally, as I mentioned just previously, the earnings per share was very strong in the quarter as well. Again, we've seen consistent growth in earnings per share during the year, and we further did that in Q3 as well. In terms of health care, again, 12.4% organic growth, price driving 7.5% strong volume growth as well as you can see. EBITDA growth I'll talk about, 15.5 million, which is up and margin rate is up 260 basis points year on year. I guess the only other thing I'll talk about on this slide particularly is the loss from the immature hospitals. So you can see that actually the loss in Q3 is 2.7 million. That is the same charge as we had in Q2. But we've seen really healthy underlying performance in the like-for-like hospitals. What has happened in the quarter is that we've opened a new hospital in India, which is additive in terms of making a loss. but actually there's been really strong improvement in the flow and profitability build of the hospitals. And finally, going back to what John's point was with regards to utilising our capacity, you can see that flowing through in terms of the medical cost ratios coming down as well. In terms of diagnostics, I think John's touched on it, so really pleasing performance again. So, again, organic growth at 12.4%. Here, price accounts for 3%, and as you'll know, due to the German reform, we've got price reductions in Germany. But actually, overall, even in Germany and across the whole of diagnostics, we've got strong volume growth is what I'd say. In terms of the other measures, I'd say EBIT growth, again, pretty strong in Germany and in total DS. So we grew to 20.6 million with strong margin rate accretion. And the pleasing thing to note in Germany, because Germany is roughly 50% of DS, that actually, as I said, revenues were up, volumes were up, despite the margin contraction. sorry, the price reduction and overall margins in Germany were up year on year as well. So with all the challenges, I think the team are doing a really good job in managing that. In terms of weather metrics, I've mentioned leverage. We'll talk about guidance for the four year on the next slide. Tax rate is in line with prior expectations. So previously we've said our ETR will be between 26 and 30% and we remain in line with that guidance. strong net cash flow driven by the improvements in margins flowing through into the cash in our business so we're pleased about that with a really good performance in free recurring cash flow which i'll talk about the next slide but actually in the quarter recurring cash flow was 9.4 of revenue which is a lot higher on last year and finally in terms of roy as you can see 12.3 you'll remember at year end 24 uh we reported a 6.7 number so really strong improvement through the In terms of capex, you can see in the quarter we had spend of 46.3 million. That is 7.8% of revenues. There's a bit of a catch-up you'll have seen in prior quarters, but the numbers were lower, so there's been a bit of catch-up in Q3. In terms of four-year guidance, just to manage now, we kind of say that the number will be between 6.5% to 7%, but broadly in line with what we've said previously. We have mentioned that actually there is kind of clear blue water between our free cash flow as we improve that versus our organic growth investment, so that's pleasing to see and hopefully we'll build on that in the future. In terms of the splits of capex spend, so you can see in the quarter the lion's share of the capex spend was spent in healthcare services. and overall the medical space we've got at the end of the quarter is 988,000 square metres. And the final slide from me. So in terms of guidance for the full year and our targets that we mentioned previously, our position is unchanged. So obviously with a quarter to go, you'd hope it would be. So we've previously said we're going to beat the targets and we continue to say we're going to do so. So as a reminder, we will beat the organic growth revenue numbers of £2.2 billion. The adjusted organic EBITDA, 350 million. We will have leverage below 3.5, and you've seen that we're kind of guiding to 3.2 at the end of Q3, and we'll be below 3.5 at the end of the year. And in the bottom corner, you can see the metrics that we gave in terms of EBIT and adjusted EBITDA, and we'll beat those as well. So in summary from here, a really good quarter, and I'll hand back to John. Thanks a lot. So key takeaways, we continue to deliver solid organic growth driven by both divisions, which is really, really good. We've got consistent margin expansion driven by the improved utilization. Customers are coming to users. Customers are coming back. On top of that, we have got a number of efficiency improvements. able to manage the way that people want to consume more. The maturity in our network can be seen in the hospitals. The fact that we're putting one or two more on, I think that if you look back at the average losses per hospital, it will probably help you model that as you go forward. Our leverage has normalized, so as promised, as committed to, and starting to come back into our guidance. There's some mild headwinds that we're seeing. There's nothing unusual in those. We're commenting on them so that you're aware of them, and we fully expect to be able to navigate through. Thank you very much.

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