Medicover AB (publ)

Welcome to the MediCover Q22026 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. Welcome to our Q2 2026 report. I think we've got a quarter of positive progression, which we're very pleased with. You can see it's another quarter of double-digit organic revenue growth and margin expansion, which is really what we're aiming for. Strong organic growth of 11.8%. And this is our sixth quarter of improved margins. So we're very pleased with that. It's a record that we're proud of and hope to continue as we go forward. Just a reminder for everybody, this particular quarter has a very strong comparable base. Last year, we made significant movements upwards, so it's even more pleasing to see the progress that we've actually made. And a year or so ago, probably just a year and a quarter, there was a lot of talk about India and what we're going to do in terms of the growth for India. But you can see that over Q1 and Q2, we've had Thank you very much. and leverage was at 2.9. So revenue 640.4, very respectable in terms of the growth rate. You can see that from an organic perspective, it's 11.8, which is very credible indeed. Adjusted EBITDA 109.2, very pleasing to see that and to see our progress. And you can see also with the adjusted EBITDA margin at 17.1, the increase there is not as big, but as I said, there's a very high comparable. So just to see that move in the right direction is very positive for us. Operating cash flow is 73.6%. That's up 28.4%. So really good generation. You know that from our perspective, that's quite important for us because as we do that, it gives us more choices. Leverage, as I said, is at 2.9. That's down from where we were at year end at 3.1. And of course, it's improved quite considerably if we look year on year from 3.6 last year to 2.9. So, you know, good, good, solid set of numbers that we've produced. We're happy with that. If we move forward and just look at the revenue and the progression of the revenue streams, another good quarter, you know, revenue produced at expected levels. So we're happy with that. Revenue by country is very steady, but you can see a strong quarter in India in euros up 23% and local currency much higher. And, you know, as I said, this time last year, it was a big area of debate for us. So it's really pleasing to see the team have continued their progress and got momentum inside that business. And revenue by pay, a little bit of change of mix here happening with different things going on, but very good strength coming through from FIFA service, which is our biggest dream. It's obviously the stream that we want to concentrate on a lot, and it's good to see that growth. Governmental revenue streams in terms of the public pay, lots of micro changes happening there that's affecting it. And we know that in terms of our funded business, we want to continue to develop that. If you look at healthcare services, solid performance by healthcare services. Again, this is the area where probably the comparable base was the highest, so we need to bear that in mind. But, you know, revenue growth 6.9, organic 12.2, so very, very good. And price accounted for 5.2 of that, so... Thank you very much. sports and wellness continues to be strong for us, and we will continue to develop that proposition very strongly. Memberships are relatively unchanged. As I say, Poland grew. Some membership fall in Romania. Quite a bit of that was contract management, so managing the profitable and unprofitable accounts, and most importantly really here, related to the FIFA services that Thank you very much. Thank you very much. Organic growth was up 10.9 and a good proportion of that is in price. And please remember that from a German perspective, the ability to move prices, you know, almost absolutely zero. So very credible performance by the diagnostics team. Feed for service strong. As we said, that's the area of focus. So that's really pleasing to see. We've always focused on making sure we've got a reputation for not only covering the basics, but covering the more advanced side of life. So that's great. Ukraine continued to deliver really solid performance for us. I mean, Q1 we said was softer. A bit of that was reflected by the weather. A bit of that was reflected by the war conditions, but considering the things that they have to overcome, we just have such a fantastic team in Ukraine, and we'd like to thank them for everything they do, because it really is difficult conditions that I don't think any of us would want to trade under. Germany did really, really well. Solid momentum. We're seeing the change in mix continue. service, maybe as a consequence of the environment, but also a consequence of the varied proposition that we have there. Our expansion on BDPs continues, really important for us in terms of the future, so that's very good to see. million that we produce, which is great. Revenue, very solid, 205.1, up 8.5, so very, very good. Continued improvement in the margin. You can see that that's a significant improvement that the team have done there, so very pleasing to see. And, you know, 40.3 is a positive sign, a of the comparable quarter. And if you look through from a country mix, it is again, relatively stable. And you can see the strength of Ukraine coming through with that. And again, our payer mix And that will give us much more stability and, of course, opportunity to move prices as we move forward. So very, very positive signs. So congratulations to everybody in Diagnostic Services. So I'll hand on to Anand, who will talk you through a little bit more detail of the financials, and then I'll come back at the end to summarise. Anand, over to you.

So I'll describe the quarter as a solid quarter and consistency in us delivering double-digit organic growth from a revenue perspective and margin accretion as well. So we're pleased with our numbers. I think one number I'd put out is EBIT. So EBIT of 51.2 million. You can see our margin rate is 8% now, which is up 100 pips year on year. So pleased to see underlying profitability being boosted by, as John said, in some areas, tough comps, but we're still growing our margins year on year and organic growth as well. Other profit measures are up year on year as well, as you can see from the page. One I'll pull out is EBITDAO, which is obviously our best measure of cash profit at 72.7 million. That's up just under 13% with margin accretion of 50 basis points a year on year at 11.3. So we're pleased with that. And as a reminder, in Q2, we paid our dividend of 20 euro cents per share. So that's kind of reflected in our cash flows. From a healthcare perspective, John's mentioned that we had some tough comps from last year, but still pleased with the growth. I'd say a solid performance. So organic growth of 12.2%. And you can see there was kind of growth in both price and volume, which is very pleasing. From an EBITDAO perspective, it's up year-on-year at 55.6 million. There is margin rate dilution year-on-year of 30 basis points. That's predominantly due to the tough comps, as I mentioned earlier. And there's also some one-off activity last year, which is if you strip out, then we'd be up year-on-year. EBITDAO relating to the immature Indian hospitals. You can see the loss on those in the quarter was 3.2. So it's down a bit on last quarter. We're up on last year. Those are predominantly due to the hospital that we opened in Q1 and in line with expectations. But as John says, we're pleased to see the India overall company performance perform really well at the numbers that he mentioned earlier. I'd say a very strong month from diagnostics, so solid in healthcare, strong in diagnostics, so organic growth of 10.9%. Again, pleasing to see volume growth as well as price growth across both. EBITDA of 30.3 million, which is very strong, with margin rate up 110 basis points at 14.7%. I think obviously we kind of concluded on the two acquisitions we did in Q2 last year and it's pleasing to see in both healthcare as well actually and in diagnostics that the synergies we've realised are helping boost our numbers year on year. In other metrics, so leverage trends down, so it's below three, which is good compared to last year as our increasing profitability kind of offsets the fact that we're kind of keeping our invested base safe from a debt capital and equity capital perspective. You'll have seen that we increased and strengthened our liquidity in Q2. So in May, we managed to increase our RCF from 300 million to 400 million. That gives us more scope and more optionality and headroom to take further investment decisions in the future should we choose to. I've mentioned the dividend we've paid of €30 million in Q2. Taxes in line with expectations at 28%. An improved performance in cash versus Q1, with net operating cash flow at 28% at €73.6 million, and free cash flow at 4.1% of revenues versus 3% last year. And finally, on ROIC, kind of an improvement there as well, so 13.6% versus 9.3% last year. So I'd say a good performance on those measures. In terms of capex, if you look on the left, you can see this clear blue water between our free cash flow and our growth capex, which is good. Our capex overall was 29.7 million in the quarter, about 4.6% of revenues. I've mentioned previously that we'll be around 6% of revenues for the full year, and we'll stick to that. In terms of the type of spending, where the money was spent in the quarter, two-thirds was in healthcare services and a third in diagnostics. The maintenance growth split is 44%, 56% in this quarter. However, looking forward for the full year, we expect to revert back to more two-thirds on growth and a third on maintenance. And finally, medical space of just over 1 million square metres. And finally, with regards to our midterm targets to 2028, we still expect to achieve them. So organic revenue of 3.25 billion, adjusted organic EBITDA of 600 million, leverage under three, and all the other measures highlighted in the bottom right corner, including EBIT, we expect to achieve that for that. So with that, I'd like to say thank you, and I'll hand back to John to wrap up.

Yeah, so, you know, we say here solid performance, and that's probably our Englishness that's coming through there. It's really good to see the consistency that we've got with the double-digit organic growth. Six consecutive quarters with margin improvement, which is, you know, the zone that we want to be in. Strong fee-for-service growth, yeah, that's one of our most important areas. Thank you very much. India, as I said before, a lot of conversation, a lot of talk about India if we go back 12 months and we said that we would start to see the momentum of that coming through and it is coming So strong double-digit revenue growth, even in euro with the exchange rate. So congratulations to all. And we will do what we've said that we're going to do. We'll focus on our execution. We'll focus on making sure we get efficiency, improving our capacity utilization, and making sure that when it comes to our price and cost management, that we take the appropriate steps that means that the customer Thank you very much for all you do. Okay, and now we'll go to the Q&A and hand over to the moderator to help us with that.

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 Christopher Liljeberg from DNB Carnegie. Please go ahead.

Hi. I have some questions here regarding Poland and then India as well. Poland first. Would you be able to comment what group would have been adjusted for the strength in the sport and wellness segments? I'm thinking about both funded and the fee-for-service adjusted for sport and wellness, which seems to do very, very well.

No, we don't disclose that information, Kristoffer, so unfortunately I can't answer that question. We don't do it for competitive reasons.

Okay. Okay. And you said found that we're growing again in Poland. Is that also true for members quarter over quarter?

Yes. Our funded position started to move again in Poland. As we commented on previous quarters, we've put some different solutions out there in the market and more are going to come. And we fully expect the employment But given that the number of members were down here sequentially, it seems

A pretty large drop in Romania, if you could maybe explain that a bit.

Yeah, we did some, you know, looking at our profitability on the portfolio and made some sort of harsher decisions in terms of the membership we have in the portfolio in Romania. So it did drop. And what we have to remember about Romania, you know, currently there's quite a lot of fiscal things that are happening, and there's some other companies that decided that healthcare is not right for them at this moment in time. But membership isn't the biggest part of our business down in Romania. It's a small, a much, much smaller percentage of our mix of revenues. So I think that, you know, that will stabilize as we move forward. So we've got a watching brief on it. We're taking counteractions. But, you know, your question about Poland is, you know, we expect Poland to be, as history, relatively strong for us.

Okay, great. And then India, if you could comment on more audience there. I don't know if EBITDA versus the rest of the group, if it's improving year over year, yeah, anything.

Yeah, I think broadly speaking, they're slightly up here on you. But we're more pleased about the revenue growth. As always, with building margin in, let's say, Indian hospitals that I've seen, you kind of recruit the doctors first and then the kind of revenues tend to follow. So we've got a strong base of having recruited a good doctor set. And now the revenues are starting to follow, as you can see. So we expect... a bit of margin accretion further, but yes, now we're pleased.

Is it true then that India margin are still dilutive for the business?

Yes.

Okay. And just when it comes to the impact on EBITDA margin from leases, is that the similar The next question comes from Mattias Vadsten from SEB. Please go ahead.

Yes, hi, I have a couple of questions. So starting with Romania, I think the macro backdrop quite well explained. What would be helpful, I think, is some more flavor on the political situation and perhaps more, yeah, what tangible initiatives that are taken there to impact the ability to grow for you and maybe, yeah, if it will be sort of soft on a year-on-year basis also for H22026. That's the first one.

Yeah, I mean, you know, the political situation down there creates a degree of instability and that, you know, translated into some micro changes in the payment system in health care from the governmental funds. where they've capped things which in history weren't capped before and they've cut some of the tariffs and they're basically repurposing their framework to be able to balance budgets and come into line with things. So, you know, what happens there is that these changes happen and then for us, we feel it because in that location we do. And over time, what we would expect to happen, and usually does happen, is that the people that are not getting their care through that means will switch to getting their care through an alternative means. So we have to repurpose our operations as these things happen. And we're taking those kind of countermeasures in terms of the offerings that we do for fee-for-service and the way that we look at the lines that have been affected from a governmental perspective. And then usually what happens is our fee-for-service line starts to attract more people as a consequence and we start to move through. Ultimately, government of Romania have a responsibility to provide care to Yeah, thanks.

A good example of that, I guess, is Germany and what we've seen. And you had better growth year-on-year in Q2 compared to the first quarter. Would you say this is just more patients moving to the civil service line that is helping you there, or is it anything else?

I think there's a combination of a number of factors, as it always is in our business. It's not really down to kind of like one particular answer due to the nature of what we do. But, yes, you know, the nature of the reforms that happened a year ago would have changed consumer behaviour to be more prepared to pay out of pocket because of delays. You know, we don't expect that to be like a tap. which didn't have a lot coming out of it, and suddenly there's loads coming out of it. We expect that to move over a period of time. But I think the strength of our broad portfolio of testing and the fact that we've got lots of tests Thank you very much. of those positions and see FIFA service progress. But don't expect it to be a dramatic thing. It should be steady as we go. And as we see the trends and understand where to focus on, we'll very much seize on that.

Thanks. I will squeeze in one last question. In terms of the price contribution in diagnostics, it has been averaging around 3.1% since the onset of 25. Now, I think it was five. Just what is driving that? I think in Germany, no changes, I presume. Could it be an impact of raising prices in safer service for Germany, maybe?

No, I don't think so. I don't think that, you know, any price change that we do in Germany, there's frameworks that control things. So, no, it's much more mixed, yeah, and, you know, the strength, as I said, of the broad nature of our portfolio. Thank you so much. Thank you.

The next question comes from Kane Slutskin from Deutsche Bank. Please go ahead.

Good morning, guys. Just a quick one. I'm not sure if you can comment, but can you talk to the situation around the Indian business? I mean, originally you were looking to list this business, but I guess in June we learned of talks with KKR regarding a potential sale. Where are we on these bits? Thanks.

Yeah, as you can expect, I can't say too much on this from a legal perspective. I can just reiterate the facts for everybody, which is, as everyone knows, some time back we said we'd explore the IPO in India. That still very much is an option for us, and we're continuing to do the work on our IPO. At the same time, our business in India is very attractive and it's no surprise and shock to us that Thank you very much. Thank you. The next question comes from Darius Saftoyu from Jefferies. Please go ahead.

Hi, thank you for taking my questions. I hope this time the line is better. So first on India, I would like to ask, given the strong local currency growth in Q1 and Q2, and of course the new hospital opened in Q1, if you could provide some color on the, when do you expect the startup losses to peak and when we should see a meaningful reduction in the drag from newer hospitals? And as well, if you could provide some color excluding these new hospitals in Q1, how was the progression there?

Yeah, great news is the line's very clear this quarter, so that's very positive. The trend of opening new hospitals and the period before the drag disappears is different hospitals. Thank you very much. Thank you very much. Thank you very much. to be less significant.

Thank you. And my second question on the fee-for-service momentum in Q2 accelerating, if you could discuss about the momentum in Germany versus Poland and Romania, and also some color and how do you see the differences between volumes and pricing going forward given inflation has been more stabilized in Germany and Poland versus higher inflation in Romania?

Yeah, you know, we have a stance that we've repeated a number of times when it comes to pricing, which is that our position is that we want to provide high-quality healthcare to the people that entrust their money with us and that, you know, as they come to us, that we give them the care that they need to get the effective outcome. If that means that we have to adjust price to be able to pay for our resources appropriately, then we will do that. So we've got a history of making Thank you very much. Thank you very much.

Yeah, thank you. And if I may have one last short question. In regards to the recent heatwaves across Europe, have you observed any postponements in surgeries or appointments or testing? You could provide some color on the end of the Q&A.

No, you know, in our first six months of the year, we've been affected by weather more than anything else. But no, we haven't seen any dramatic change in trends created by events, so no.

Thank you. That's all.

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

Just a quick one on the tax rate. Have you commented what tax rate you expect for the full year?

Yeah, the kind of counsel I gave was between 26 to 30 percent.

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

Hi, one follow-up. A bit larger tie-up in working capital year-to-date this year versus six months, 25. Is it anything in particular that is driving that or, yeah, is it expected to normalize going forward? Thank you.

Sorry, Mattias, I didn't hear. Did you say working capital? Is that what you said?

Yeah, the tie-up in working capital year-to-date figure this year is a bit higher than last year. I just wanted to see if there's anything in particular or if it's

Yeah, nothing particularly in terms of one-offs or anything like that. I think it's just to do a little bit with the mix of our business, right? So as we do more, let's say, governmental-led business, either in India or in Poland, then they naturally have kind of longer terms in terms of securing our papers. So, yeah, I mean, that's it. Aside from that, you know, there's nothing specific to pull out in terms of working capital.

Thank you so much.

All right.

The next question comes from Dawid Gorzynski from PKO BP Securities. Please go ahead.

Hi. Thanks for taking my question. Actually, I have three questions. The first one, again, on a BDA loss from India from new hospitals. And you said that the majority of this quarter loss, which was 3.2 billion, if I'm right, was related to the new hospital opening in the first quarter. And when we compare to, you know, three just also about three million in four quarter where there was no impact of this new hospital, does it mean or is my conclusion correct that the loss from other hospitals opened in last three years was like close to zero this second quarter?

Yeah, so I can't answer the question exactly, but I think over about two-thirds or so at least of the 3.2 million is driven by the new hospital. It's a very big hospital, 14 floors, is it? So I think it's the tallest hospital in Hyderabad. So, yes, the others are performing broadly in line with where we expect on their recovery curves versus the new one we just opened, which is a big one.

Okay, thanks so much.

Remember, there was another hospital opening as well that happened in that fourth quarter, you know, so there's two. Yeah.

Okay, okay. and two questions on polish market so first on diagnostic business like there are several government programs right now like including myself program and last year there was like prevention 40 plus program and i wonder what is the next net impact of this on your revenue dynamic in Poland?

We don't really comment on that, but everybody knows in the market that last year's program was more generous than this year's program.

Sorry, I went too fast.

I went too fast. We don't really comment on the specifics, but as a general, everybody in the market knows that last year's program was more generous than this year's program in general terms.

Okay, thank you. And the last issue on the quite recent plans from Polish government to cut wages for the best-paid doctors. Do you think it will have any impact on your wages in Poland? And I also wonder if you may see some shift from the reduction of the number of procedures performed by public healthcare and maybe shift to private healthcare. What do you think about that?

Yeah, I mean, there was quite a number of concepts that were talked about in recent weeks in relation to Poland. You know, we have to put this into context of the way that we ran our business for the last 30 odd years, which is constantly over that period, different governments and different people within those governments have Thank you very much. You know, we've been close enough to understand what's happening, what's the implication to us, and how do we repurpose? So how do we move our operations around to be able to make sure that whatever changes are put in place, we can adapt? That means that we're here for the long term and then we have a sustainable business. So this is business as usual to us. There are some specifics in that particular set of changes that people talk about, and we will work through those specifics. But currently, you know, from our perspective, it is business as usual. Some of these changes will come in. We will adjust and we'll move forward. So we're confident that we'll be able to navigate often when these changes have happened.

There are no more phone questions at this time, so I hand the conference back to the speakers for any written questions and closing comments.

There's a few questions that have come through online, so we'll just try and answer those before we close out. So people are asking for a bit of flavor in terms of the drivers in India, which is moving the growth up. Thank you very much. Thank you very much.