Aevis Victoria SA (AEVS) Earnings Call Transcript & Summary

Yes. Hello, everybody, and welcome to the presentation of annual results. I will start with a quick presentation of -- quick remember of AEVIS' value. We are investing for a better life. We invest in service to people. We try to create value, grow and manage company for the long term, and we try to bond partnership with entrepreneur and founder in the company that we are investing in. Our focus sector, healthcare and hospitality and lifestyle and infrastructure. So as you know, we have Swiss Medical Network, Nescens and Swiss Ambulance Rescue in our healthcare investment. We just divest Medgate in March. In hospitality and lifestyle, we have Victoria-Jungfrau Group, with 9 hotels in Switzerland and in London. The Victoria-Jungfrau in Interlaken, Bellevue Palace, Crans Ambassador, La Réserve Eden au Lac in Zurich, Hotel Monte Rosa, Hotel Mont Cervin and Schweizerhof in Zermatt, the AlpenGold in Davos and L'Oscar in London. We also have an investment for 27% in Batmaid Group, which is a platform for home service delivery. On the infrastructure side, we have Swiss Hotel Properties, a company dedicated to hotel building, and Infracore, a company dedicated in healthcare buildings. Our investment activity in '21 and '22, so we divest 10% of Swiss Medical Network in March '21 to Medical Property Trust. We sold 60% of Swiss Ambulance Rescue to Touring Club Suisse in February '21. And we invest up to 27% in Batmaid in September '21. In '22, so -- subsequent event is the sale of our participation in Medgate to Otto Group in March '22. If I go in detail on those transactions, we've sold 10% of the share capital of Swiss Medical Network to Medical Property Trust. The transaction was based on an enterprise value of CHF 1.7 billion for 100% of Swiss Medical Network. And for AEVIS, this transaction led to a cash inflow of CHF 145 million and an increase in equity by CHF 98 million because the book value of Swiss Medical Network is CHF 20 million. The transaction was in March '21. And what is the rationale? So it's unlocking of substantial value creation. It's also a sign to open the shareholder base to strategic investors. We are discussing with several strategic partners who can invest in Swiss Medical Network and help Swiss Medical Network to become the integrated care provider. The sale of 60% in Swiss Ambulance Rescue. So the idea was to have a Swiss institutional partner to develop this rescue network within Switzerland. We sold 60% to TCS. Touring Club Suisse is a very well-known organization with more than 1.5 million members. And since we did that in '21, we already acquired 2 additional rescue companies, and TCS Swiss Ambulance Rescue became the biggest rescue organization in Switzerland. So we are now the largest private ambulance service provider in Switzerland. The acquisition of minority stake in Batgroup. So we have signed an investment agreement to stake up to 27% in Batmaid. The investment will be up to CHF 25 million. And -- so based on CHF 75 million premoney value, and it's structured in various installments that can lead to this 27%. Batgroup is the parent company of Batmaid, which is the leading on-demand home-cleaning platform in Switzerland. We are helping Batgroup to become more than a cleaning company but a company that brings hospitality into private homes. There is a clear strategic fit with our strategy because we also think that we can use the same platform Batmaid to manage the home care delivery on the healthcare -- in the healthcare activity. The sale of 40% in Medgate. So in 2016, we acquired 40% in Medgate, and we helped the company to become the leader in telemedicine in Switzerland. Medgate wanted to make an expansion international. We do not want to invest internationally in healthcare because healthcare is highly political, and you have to understand and to be connected to the system. So Medgate has completed the financing round. And during this financing round, we have sold our interest, our 40% interest to Otto Group. The transaction was in March 2022, and the exit generated cash proceeds of CHF 66 million and CHF 47 million capital gain. In Swiss Medical Network, there was some investment activity also. Swiss Medical Network took over 100% of Pyramide am See, 100% of Rosenklinik, 52% Hôpital du Jura bernois, and we also bought 80% of Xundheitszentren from the Ärztekasse, Ärztekasse is retaining 20% in Xundheitszentren. What's the detail of those transactions? So in 2011, we acquired a 20% share in Klinik Pyramide. We have been working with Pyramide since then. And in July '21, we acquired the remaining 80%. The idea is to consolidate the Zurich market, and we expect to have a lot of synergy with Bethanien in Zurich. The increase of the participation in Rosenklinik that was -- so we did a 40% investment in 2019, and we had the option to take 100% of the company. And together with the founders, the seller, we reached an agreement to fully integrate Rosenklinik. That's a clinic in the Zurich area but on the canton of St. Gallen. Hôpital du Jura bernois, we will explain more -- in more detail what is our project in Arc Jurassien, but we had this option to acquire an additional 17% in HJB. So we exercised this option in August '21. And so Hôpital du Jura bernois is now fully consolidated in Swiss Medical Network since September. The Xundheitszentren has 11 doctors office and medical center across Switzerland from Ärztekasse. We took over this, and we are managing these 11 centers and integrated these centers into the Swiss Medical Network in each region. In the hospitality and infrastructure, we also made an investment in March '22. Swiss Hotel Properties acquired the building of L'Oscar London. It's a freehold building located in Holborn. And Victoria-Jungfrau acquired the operating company of L'Oscar London. L'Oscar has been -- is now managed with our other hotels within Victoria-Jungfrau. The transaction is a total of 39 rooms and suites in Central London. We also acquired the adjacent building, which gives us the ability to expand the hotel with 10 additional rooms and, probably, a spa and some amenities for the hotel. The price of this transaction was GBP 60 million. And we think that's very important for our hospitality activity to expand abroad to be able also to retain talent and make our staff work and some work experience abroad. And London is an ideal start for this international expansion. Let's go to the financial of AEVIS. I will start with the statutory AEVIS figure. That's the -- reflecting the investment activity. So the income in 2021 was CHF 216 million, and we made a net profit of CHF 197 million at the holding level. We also increased the equity from CHF 426 million to CHF 639 million, and we also reduced the liability with the repayment of CHF 150 million bond in June '21. We create value. We've been creating value since 2012. We can see that the equity has strongly increased in this almost 10 years and that the share price is following, also, this value creation in the equity. The consolidated P&L. So -- we achieved CHF 895 million revenue, so CHF 787 million net revenue. It's a 22.8% growth, with 9.8% organic growth, which is the result of the development CapEx we invest in '19 and '20. EBITDAR is CHF 152 million, EBITDA at CHF 78 million. The rental expenses increased by some CHF 11 million because last year, in 2020, we had a rent holiday due to the COVID situation. So EBITDA, CHF 78 million and EBIT of CHF 16.7 million. The balance sheet, we've increased total assets to CHF 1.7 billion. The account receivables are mostly insurance and cantons, so it's 100% guarantee. It's almost cash-like. Financial liabilities are stable, and we also increased the equity at the consolidated -- in the consolidated account from CHF 419 million to CHF 585 million, improving the equity ratio and improving, also, the leverage ratio of AEVIS on a consolidated base. The consolidated segment reporting. So hospitals have achieved a very good result with a 23% EBITDAR. Hospitality has a net revenue of CHF 114 million. Within this CHF 114 million, there is, of course, the one-off payment from cantons and consolidation, the [Foreign Language], the [Foreign Language] for some CHF 30 million. The real estate also improved its results. There was no rent holiday in '21. And so that's the segments reporting. The capital market, so we have a market now -- a market capitalization of CHF 1.6 billion. Current stock price is CHF 18.95, which is, in our view, not the sum of the parts. So it's still below the sum of the parts price when you look at our investment. And we also show, on this slide, the total shareholder return that we did since 2018, with the exception of 2020, of course, with the COVID. Healthcare, Swiss Medical Network. So we have 22 hospitals, around 40 medical centers, 2,300 physicians. We have been creating value through acquisitions since 2002. We expect to have more than CHF 750 million revenue in 2022. We have 7 clusters for Swiss Medical Network. We divided Switzerland in regions. So Geneva, Vaud, the Arc Jurassien, Fribourg, Valais, Mittelland, Region Zurich and Region Ticino. The vision for Swiss Medical Network is to create a pioneer in integrated care. We want to get rid of this vicious triangle, where the patients -- the ideal patient for insurance space is a dead patient, and the ideal patient for us, for doctors, hospitals, pharma, is chronic patients. So to try to align the interest of insurance and provider, we aim to create the first [ pay wider ] in Switzerland, which will include insurance, health plan, education and research. And the idea is to have an offer for the member for the -- its whole life path from birth to death. Maybe a focus on Arc Jurassien. So the Hôpital du Jura bernois and what we have in terms of Neuchâtel. So we have one region with the health center, hospital, mental hospital, radiology center, elderly care home, rescue service, laboratory and pharmacy. We also have partnerships with Hôpital de Bienne, Inselspital in Bern and the Inselspital Basel, and we have a partnership with rehabilitation and home care delivery. In this region, there is a population of 250,000 people with quite good distribution between active population and retired population. In this region, we have some 600 doctors, and we are doing 21,000 cases per year. We are now partner with canton of Bern, in Hôpital du Jura bernois. So the idea is to change the name of this company into Réseau de l'Arc to make this company a real accountable care organization, so a real [ pay wider ]. And we will have, as additional partner, an insurance company. So that means an insurance company is going to invest in Réseau de l'Arc to be shareholder in Réseau de l'Arc and make a tailor-made health plan for the member who wants to be followed and treated by Réseau de l'Arc. TCS Swiss Ambulance Rescue. So we have now 40% in this company. It's now the biggest rescue organization in Switzerland since we acquired 2 additional companies with a presence in canton de Vaud, Geneva, Zug and Aargau via Zurich. So we plan to pursue this buildup together with the Touring Club Suisse, and we have a very strong motivation from our partner, TCS, to build this network. In hospitality and lifestyle, Victoria-Jungfrau with these 9 hotels in Switzerland and U.K. It's a total of 941 rooms and some 183,000 overnight stays in '21. '21 was still not -- is still not a normal year. '21 was heavily affected in the first half by the COVID. Number of employees is not accurate. We have around 1,000 employees in the hospitality segment, and our average room rate is CHF 423 for 2021. That's the current hotel portfolio with a very strong presence in Zermatt. We are the biggest hotelier -- the largest hotelier in Zermatt, and to -- this destination has made extraordinary winter season this year. We are also a big player in Interlaken with Victoria-Jungfrau collection. We have this cooperation with Michel Reybier Hospitality for the hotel organization. So the management of Victoria-Jungfrau and Michel Reybier Hospitality is done together with the -- so 8 owned hotels and the 2 affiliated hotels in Switzerland, 1 owned hotel in U.K. and 5 affiliated hotels in France. Batgroup, which is Batmaid, Batsoft and Batwork, was founded in 2014. It's an on-demand platform for B2C and B2B cleaning services. Batmaid has around 20,000 active clients and 1,800 Batmaids. And you can add to these Putzfrau.ch because Putzfrau.ch has been acquired by Batgroup. The integration process is scheduled to be in '23. So -- and Putzfrau.ch has almost the same size in the Swiss-German part. We have now 8 active countries within Batmaid. Real estate and infrastructure. 30% shareholding in Infracore, we have 50% of the voting rights. So the market value of the portfolio is CHF 1.2 billion. We will pay CHF 36.5 million dividend for 2021. This will be paid in 2022. So AEVIS will receive 30% of this CHF 36.5 million. That's the portfolio of Infracore within Switzerland. Swiss Hotel Properties has a market value of CHF 530 million, 18 properties. We had CHF 29.9 million net income and the total of 100,000 square meter. That's the hotel portfolio of Swiss Hotel Properties, with hotels in Switzerland and in London. This is the portfolio detail. You can see that in Zermatt, we have a very important presence. With these 3 hotels and a lot of commercial properties, which has -- which are rented to third-party tenants, among them, Migros, for instance. We have Migros as a tenant in Zermatt for the Migros, the Interhome and for the restaurant, Molino. And L'Oscar is the only foreign property. Outlook. So COVID-19, I think, is now behind us. The last measures are now falling on Friday. So we think that COVID is behind us, but there's still uncertainty with the war in Ukraine. Yet we have no big exposure to Russian market. So Russian market is -- in hospitality, was CHF 2.5 million per year. And in hospitals, in healthcare, total revenue of Ukraine and Russia was around CHF 12 million. So not a big share, but still, this war is something that -- it's of concern, and we are closely monitoring this evolution. So we have already, at the holding level, a promising start because of the sale of 40% of Medgate and, also, the dividend that will be paid by Swiss Medical Network, Infracore and Swiss Hotel Properties. We will continue to pursue our support to Swiss Medical Network for 2022. We also will support Victoria-Jungfrau and the Swiss Hotel Properties for the growth. We will continue to monitor the market and acquire the best landmark building that we can find. I'm finished with my presentation, and I will hand over to the operator for the question-and-answer session.

Our first question today comes from [ Christian Afolger ] of [ AGC ].

Just a question on this Medgate divestment and the division of integrated care. Won't Medgate have played a role in the integrated care division? Or is it any way separate from the project you have with -- in the Jura bernois and Neuchâtel?

So when we acquired Medgate back in 2016, we agreed that Medgate will stay neutral gatekeeper for the insurance. That means that we never used Medgate to funnel patients to our hospitals. So our hospitals and our doctors were Medgate partners but at the same level as the other partners. So Medgate was a neutral organization, and the business model of Medgate is to contract with insurance and to help insurance to reduce the cost. So that was not intended to integrate more Medgate. But of course, we are going to develop our own telemedicine service within Switzerland, starting with this Arc Jurassien. Telemedicine is a key part of the integrated care, but it's more a B2C telemedicine. That means that, of course, there will be a dedicated service for Swiss Medical Network.

[Operator Instructions] There appears to be no further questions at this time. Apologies, we're just receiving a follow-up question from [ Christian ].

Yes. Perhaps, just on this, you said that you are closely monitoring the evolution regarding Russia and Ukraine. So what does that mean in -- on behalf of your activities? Are you maintaining activities at the moment? Or what's your approach?

Yes. Of course, in the hospitals and the same in the hotels, the people that come in Switzerland are allowed to travel, so they are not people under sanction. And especially in the hospitals, our -- I mean, our philosophy is to treat all the patients, disregarding their origin or religion or country. So -- but of course, probably, some of our patients will not be able to access Switzerland, so -- because of the sanction. So there will be an effect. But on our side, we are treating all the patients, disregarding their origin.

As there are no further questions today, that will conclude today's call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.