• Revenue: Just short of EUR510 million, with 20% top-line growth, including 16% organic growth.
• Cash Generation: Increased by 23% compared to the same period last year.
• CapEx: Reduced to 5% of revenue for the second quarter.
• Poland Revenue Growth: Increased to 50% of group revenue, growing 24% for the quarter.
• Germany Revenue Growth: 18% growth, primarily from diagnostics revenue.
• Operating Profit: Increased by more than 60%, with over a full percentage point of margin expansion.
• Adjusted EBITDAaL: Up 28% with solid margin expansion.
• Healthcare Services Revenue: Over EUR350 million for the quarter, up more than 20%, with 16% organic growth.
• Diagnostic Services Revenue: Up just short of 18% to EUR163 million, with 16% organic growth.
• EBITDA Margin for Diagnostic Services: Expanded to 12%.
• Net Debt: Increased by EUR70.51 million since the beginning of the year.
• Operating Cash Flow: EUR47.4 million for the quarter and EUR125 million for the half year.
• Free Recurring Cash Flow: EUR11.5 million for the quarter and EUR54 million for the half year.
• 2025 Financial Targets: On track for EUR2.21 billion in organic revenue and EUR350 million in adjusted EBITDA.

• Warning! GuruFocus has detected 9 Warning Signs with FRA:5M0B.

Release Date: July 25, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Medicover AB (FRA:5M0B) reported a strong 20% top-line growth, with 16% being organic, showcasing robust performance across both divisions.
• The company achieved a 23% increase in cash generation, highlighting effective cash conversion and financial health.
• Operating profit increased by more than 60%, with a full percentage point of margin expansion, indicating strong operational leverage.
• Healthcare Services division saw over 20% growth, with a significant portion being organic, demonstrating successful strategic execution.
• Diagnostic Services reported an 18% revenue increase, with 16% organic growth, marking the strongest organic volume growth since before the pandemic.

Negative Points

• The company experienced a drag on margins due to new unit start-ups, particularly in the Bucharest hospital, contributing negatively to EBITDA.
• In India, revenue growth was softer at 6%, impacted by the sale and closure of smaller hospital units and IVF facilities.
• The German diagnostics sector faced challenges with no price adjustments, and the proposed price reform is expected to have a negligible impact.
• Integration costs from a recent acquisition in Berlin are currently dilutive, affecting the profitability of the diagnostics division.
• Inflationary pressures, particularly wage growth in Poland, continue to impact costs, necessitating ongoing price adjustments in private pay services.

Q & A Highlights

Q: Can you provide more details about the strong diagnostics growth in Germany and clarify the situation with divested hospitals in India? A: The strong diagnostics growth in Germany is due to solid organic test volume growth across the board, including special immunology. Regarding India, we sold two smaller hospital facilities in Telangana last year, not to be confused with IVF units. We also closed some smaller IVF units in northern India. The current profitability in India is improving with a 100 bps-plus margin expansion, but new units will initially contribute negatively.

Q: Should we expect India to return to double-digit growth in Q3, and is there any update on the standardization of hospital rates in India? A: Yes, India is expected to return to double-digit revenue growth in Q3. There is no new update on the standardization of hospital rates since the last quarter.

Q: Can you elaborate on the margin drag from Germany in diagnostic services? A: The margin drag is due to the integration of a lab acquisition in Berlin, which is currently dilutive. We are incurring costs related to restructuring, moving tests, and redundancies.

Q: Regarding the reimbursement changes in Germany, is there anything else you can do to improve margins in the diagnostic services business? A: We are working on efficiencies, centralization, and automation to improve margins, as we have lost margin since 2019 due to no price increases. The reimbursement changes are not expected to have a significant impact, but we continue to focus on internal improvements.

Q: What is driving the 8% year-on-year price increase in healthcare services? A: The price increase is largely across the board in our private pay business, reflecting cost and inflationary pressures. We continuously adjust pricing to manage inflation, particularly in the healthcare sector where wage growth is a factor.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.