Aevis Victoria SA (AEVS) Earnings Call Transcript & Summary

Hello, ladies and gentlemen, and welcome to the AEVIS Victoria S.A. Conference Call regarding the publication of the 2022 Annual Results. [Operator Instructions] . Let me now turn the floor over to your host, Antoine Hubert.

Hello, everybody. Thank you for attending to this analyst and press conference regarding the 2022 result of AEVIS Victoria. We will talk about AEVIS Victoria, our investment activity, the group result, then a focus on health care, hospitality and lifestyle, the subsegment infrastructure and finally, an outlook for 2023. As you know, AEVIS Victoria is a company investing in -- mainly in healthcare and hospitality and lifestyle. So service to people, and has a subsegment with infrastructure related to these 2 main segments. Our investment activity in 2022 -- so we take -- we increased our stake in Batgroup, the leading on-demand home-cleaning platform in Switzerland. We increased from 7.4% to 23.3% in '22. And to 27.3% in January '23. This investment of 27.3% is the level that we agreed when we signed the investment agreement with Batgroup. Medgate, we sold the entire stake in Medgate to Otto Group. Medgate wanted to develop internationally. We always have said that in health care, we wanted to focus on Switzerland. So we are happy to have found the right investor to bring Medgate to the next level. We are also very happy with our investment because we end up with a comfortable gain on the investment. We also invested in Well. Well is a digital platform. It's an initiative of 2 health care insurance was CSS and Visana. Then this initiative has been joined by Zur Rose and Medi24. And finally, last year, we entered together with Galenica. So now Well is an initiative supported by 5 player -- healthcare player in Switzerland. We also invested in 2 new hotels. So hotel Adula in Flims and L'Oscar in London, that we bought in 2022, which are operated by our operating company, Victoria-Jungfrau and real estate is owned by our real estate company Swiss Hotel Properties. We also achieved a milestone in the integrated care with the foundation of the first true integrated health care organization in Switzerland. So we were with the Canton of Bern shareholder of Hopital du Jura bernois with 52% and Canton of Bern 48%, in January '23. So in October 28, we sign an agreement with the Visana Group for an investment in Hopital du Jura bernois. And in January '23, it has been executed. So the capital has been increased by Visana Beteiligungen. And so now we are in a situation with 35% for Swiss Medical Network, 32.5% for Canton of Bern and 32.5% for Visana Beteiligungen. This is the first time in Switzerland that the 3 main stakeholders usually staying on different side of the table. It's the first time that these 3 stakeholder Canton provider and payer, our partner in accountable care organization result luck. The name of Hopital du Jura bernois has been changed into [ Reseau de I'Arc ]. And Swiss Medical Network as a management contract with Reseau de I'Arc for the old management. The group results, so we achieved a total revenue of CHF 1.144474 billion. The net revenue after the deduction of the doctors' fees is slightly above CHF 1 billion. We achieved an EBITDAR of CHF 209 million and an EBITDA of CHF 130 million with an EBIT of CHF 61 million. The consolidated EBITDA is up more than 65%, and we also improved the overall EBITDA margin. The balance sheet, so balance sheet is CHF 1.8 billion with CHF 500 million -- CHF 510 million equity. So equity ratio is 28.5% and leverage ratio 54.2%. The segment distribution, so gross revenue in healthcare, CHF 916 million; net revenue, CHF 795 million. It's a 21.9% revenue growth, 4.4% organic growth with an EBITDAR margin of 17.7%, which is slightly lower than 2021 because of the consolidation of Hopital du Jura bernois which was -- which is less profitable than the rest of the portfolio. Hospitality, we did CHF 154 billion (sic) [ CHF 154 million ] turnover. It's a 35% increase compared to last year. The organic growth is 30%. And if you deduct the indemnity for [ artship ] that we received in '21, even 72.9% organic growth. EBITDAR margin, 21.6% and EBITDA margin, 7.4%. The Real Estate, which is consolidated in AEVIS is mainly the real estate of the hotel. So Swiss hotel property, there were CHF 22.6 million revenue with a 90% EBITDA margin. The statutory key figures, CHF 82.9 million revenue, CHF 67.4 million net profit. The total asset of AEVIS Victoria is CHF 883 million with a liability of CHF 260 million. So a total equity of CHF 624 million, very strong equity of leverage and low leverage ratio for heavy statutory level. We increased the ordinary dividend from CHF 0.40 to CHF 0.45 and the extraordinary dividend, which comes from the divestment is lower than last year because last year, we sold the 10% participation in Swiss Medical Network with CHF 210 million gain. And this year, the gain from Medgate is CHF 33 million. So we are distributing CHF 0.30 of extraordinary dividend. The total dividend will be CHF 0.75 per share. The share price development was clearly above the Swiss performance index of current share price around CHF 18.3. Remember that the Kepler Cheuvreux target price is CHF 19.4. Kepler has not made any change from our -- after the publication of the results. We have always made sustainable and attractive dividend policy with the exception of 2020 and 2021 because of COVID, we did not distribute any dividends. Focus on healthcare. So Healthcare segment, we are the leading healthcare platform in Switzerland. And we are focusing on developing integrated care region. We are in a very favorable market. I think the private hospital have coped better than the public hospital with COVID. So the 90% investment from AEVIS in Swiss Medical Network is an investment in an industry leader who's providing integrated care and has a lot of growth in value potential. In Healthcare, we also have Nescens, which is the anti-aging and longevity brand. Swiss Ambulance Rescue, 40% belong to the Touring Club Suisse. Swiss Ambulance Rescue has been growing a lot in 2022. Now it's the biggest rescue organization in Switzerland. So we are very happy with this partnership with Touring Club Suisse. And then we have these 2 investments in Well and Helveti Care and also new investment in Genolier Innovation Hub, which is the operating company of the Genolier Innovation Hub built by Infracore in the Genolier campus. Swiss Medical Network, 21 hospitals, more than 50 medical center. We are still in the process of buying more primary care. So the focus is on acquisition of primary care around our hospital. We have 2,250 physicians, independent physician for the majority of them and 4,095 employees. In 2022, we did 75,000 surgical intervention and more than 600,000 outpatient visits. The footprint of Swiss Medical Network. We are now on 14 cantons. The blue dots are the medical center, as we took over the [indiscernible] from the [indiscernible], we have a few medical center, which are not in regions where we are active like the one in Silvaplana. So probably, we are going to make some adjustment in the portfolio because for us, the interest is really to help the medical center linked with our hospital. Also, we have increased the footprint of Swiss Visio, which is our network specializing in ophthalmology. So in the division for integrated care, so really, I think Swiss Medical Network is really the leader in this change, which is a trend also in the U.S.A. So changing from provider to accountable care organization. What we did in Jura bernois started in 2015 when we did a public private partnership for radiology in 2018, we start the idea to develop the idea to establish an integrated care organization in Switzerland. We started a discussion in 2020 with potential partner. And in 2022, we signed the agreement with the Visana Group, Visana Beteiligungen and we executed it in 2023. The idea is to have more clusters. So we start with this region, but the idea is then in 2025 to have 2 or 3 more regions and to achieve the coverage of all our regions within the 5 next years. What is integrated care? So integrated care is going from a sick-care system, an inefficient system that we are -- where we only treat patients when they are sick. And the insurance only has interest with the patient when they are healthy. So we are in a vicious triangle. And to change this, you need to create accountable care organization, which are uniting all stakeholder which have some time diverging interest. So first of all, the provider -- so provider not only hospital, but all the chain of provider in health care, then also education and research because you need to educate your people, if you want to have the best, and you have to give the opportunity to your doctors to make research if you want to attract the opinion leaders. And also to be able to present our old health plan, means being -- pay wider instead of being a simple provider, which will create a fully-aligned incentive structure, higher patient centricity, quality increase and a system which is not based on volume, but based on quality. Transition from sick-care service, we were all talking about health care, but the reality is that we are in sick-care system. We are -- we have payment according to the number of procedures we do. We have divergent interest between provider and payers. The whole system now is based on quantity. There is incentive to overtreat patients, to increase profit. And the risk -- they always with the risks, they always with the insurers. So there is a mistake on the slide. It's not a health provider, but the risk is with the insurer. And with the full capitation, that means that we receive a fixed and predetermined payment per member and per population. The service provider and the payer are the same -- have the same interest. It's based on quality and there is an incitation to prevention to reduce cost. And the risk remain in the healthcare organization. That means that we are accountable for what we do. And if we do a wrong procedure, then we have to assume all the financial consequence. How will such network work? So the Reseau de I'Arc, it's the integrated care organization. We will still work as usual with all the population, so with the fee-for-service, if somebody is insured at Assura or Helsana or any based insurance in Switzerland, we will provide the service and we will bill according to the tariffs. But the difference is that we will have our own health plan powered by Visana. It will be a HMO health plan, called Reseau de I'Arc that will be sold also through our hospital and [ Medicentre ] in the Reseau de I'Arc. Those member will pay the premium to Visana, which will take the administrative cost which will also pay or receive the risk compensation, [ Risikoallokalish], that means that if you have good risk in your population, you have to pay the other health insurance. And if you have bad risk in your population, you receive money from the other insurance. That has been established 6 years ago to avoid the risk selection by insurance. And then -- so Visana will pay the full amount to Reseau de I'Arc. That means that we will not be paid per procedure, but we will be paid per member. The canton will still subsidize the member who can apply to the subside. In Switzerland, there is between 25% and 30% of the population receiving subside from the cantons. And the canton is also still pay is the share of the hospital financing, what we call [Foreign Language]. The canton must pay 55% of each in-patient stay. The big difference also here is that if we cannot do the procedure within the Reseau de I'Arc and we have to send the patient to Hopital [ du Bienne ] or [ Inselspital ] or [indiscernible] , [ Universitätsspital ] or anywhere. We will buy the service. That means that we will select the hospitals that are able to provide service and the payment will be done on the full capitation. Hospitality & Lifestyle. So 2022 was the year of Hospitality & Lifestyle. The people after 2 years of lockdown, have been -- are back on the road and traveling again. So it's a favorable market for AEVIS is also a diversification. There is a strong value potential because usually, we buy hotels that need to have a repositioning, and we are positioned with high quality. We have 2 investments in this hospitality. So all the hotel of Victoria-Jungfrau and also our investment in Batgroup, 27.3%. Batgroup is hospitality at home, that means we bring hospitality to every client of Batgroup. That's why the investment in Batgroup is also strategic for us. We also foresee to use the same platform, Batgroup, the same platform of Batmaid to manage home care delivery. That mean not only housekeeping, but at one stage, we can also provide medical services at home through the same digital platform. The Victoria-Jungfrau is a 100% subsidiary of AEVIS. It's the operating holding of hospitality. We have more than 1,000 rooms in operation. We have increased the average room rate to 618, roughly 1,000 employees. There is a big fluctuation in employees number due to the seasonality. As you can imagine, we have more employees in winter -- during the winter season than in the summer. In 2022, we did 260,000 overnight stays. We have now 10 hotels. So the La Reserve Eden au Lac in Zurich, which has been refurbished in 2018 and 2019, reopened in 2020, then close for some lockdown, reopen, reclosed. So the first full year of Eden au Lac -- La Reserve Eden au Lac was 2022, and we are very happy with the result Eden au Lac was doing CHF 7.5 million turnover before the refurbishment, and we achieved CHF 19 million in 2022. We aim to achieve CHF 24 million to CHF 25 million in this hotel in -- on the cruising mode. So after 2, 3 years of launch. Interlaken, 216 room and suite, that's a landmark hotel in Switzerland. We are working since a few years on transforming this hotel into a resort. So we have added an external pool, a park, a kids house in the park. And the idea is really to increase the average length of stay of the client in Interlaken. The Bellevue Palace in Bern, we have been able during COVID to renegotiate the lease. So we have now a 10-year lease -- new lease with the configuration and the new lease has been -- has the advantage to have lowered the breakeven point of Bellevue Palace which was CHF 20 million to CHF 12 million. So now the Bellevue Palace is really on the safe side with a very low breakeven point and a very fair lease agreement with the Swiss Confederation. Then the Mont Cervin Palace in Zermatt that include also the Le Petit Cervin. We plan to separate those 2 hotels to have 2 different products. The Le Petit Cervin and the Mont Cervin Palace are connected. They will be using -- they're using the same spa, the same key room, et cetera. But we think that we can do 2 separate products with -- to address different clientele. So the Le Petit Cervin is 45 room hotel and the Mont Cervin will be 106 room and suites hotel. They will still be connected. There will still be sharing the spa and the conference infrastructure, but we will position that as 2 independent products. In Zermatt, we also have the Monte Rosa that was the first hotel in Zermatt was the hotel where Whymper had his room when he did the first climb of the Matterhorn. And we also have the Schweizerhof, which is 89 room and suite hotel, 4 star. Schweizerhof is very successful with its food and beverage offering and Schweizerhof will be the model to -- for the transformation of the new acquired Adula hotel in Flims Laax, which is almost the same size as the Schweizerhof, also around 90 rooms. Spa also 4 star. We will -- so we will expand the food and beverage offering and we will use Schweizerhof as a model. In Crans, we have the Crans Ambassador, 57 room and suites. That was the AlpenGold with 216 room. AlpenGold has been renamed. AlpenGold was formally Intercontinental, works fine. We had a great 2022 year, and we started the 2023 years with a very successful World Economic Forum. And as said in the Press communique, we had inquiry about eventually selling the AlpenGold by several parties, and we are now exploring this possibility, knowing that it's -- AlpenGold was part of a package that we bought from [indiscernible] Hospitality. AlpenGold does not really fit in our DNA. We are more focused on traditional hotel with the story and negative AlpenGold is a brand-new hotel. Very nice, but not really in our DNA. So we will probably divest this hotel. Last year, we also bought L'Oscar in London that was the former headquarter of the Baptist Church of England. It's an historic building has been refurbished by Jacques Garcia, 39 room and suite. We are going to add 9 extra room because we also bought building next door. We are going to add a spa and a few amenities to this hotel. And this hotel will be rebranded La'Reserve after this addition. We just received the building permit for this extension, and it will be -- the work will start as soon as possible. Then Adula in Flims Laax that was really great opportunity. Flims Laax is a very successful destination in Switzerland, one of the best young -- the best destination for young people. We think that the Schweizerhof concept -- Schweizerhof type concept with a very extensive food offering will fit perfectly. We will do that together with Weisse Arena in Flims Laax. So this will be completely integrated in Weisse Arena offering for food and beverage. The [ whole ] hospitality business is managed by Michel Reybier Hospitality, which also manage Michel Reybier's private properties in Geneva, Montreal, Paris and Bordeaux. And the discollaboration has been really fruitful and we can see that in the financial result of the hospitality. We can see that we have increased both turnover and profitability in the hospitality in Victoria-Jungfrau with, of course, 2 very difficult year in 2020 and 2021. But we can see in '22 and also early '23 that the investment is bearing fruit with nice turnover and profitability for this segment. Infrastructure, so infrastructure is basically a subsegment because both company. So in fact, on Swiss Hotel property has mainly -- are mainly supporting our operating companies Swiss Medical Network and Victoria-Jungfrau. It's also a favorable market. We have a very attractive financial profile. We have a strong value potential because we -- the valuation of our property are very conservative and high-quality positioning. So in Infracore, we have 30% shareholding with 50% voting rights and Medical Property Trust has 70% interest with 50% voting right. 42 properties, CHF 1.3 billion market value. Swiss Hotel Property, 100%. We have 20 properties and market value above CHF 700 million. Infracore is not consolidated in AEVIS. So we are receiving dividends from Infracore. 2022, the dividend was around CHF 10 million. In 2023, the dividend that we will receive based on 2022 numbers will be CHF 12.8 million. So an increase in the dividend that we received from Infracore. The net income in 2022 was CHF 103.7 million. So consolidated revenue, you can see the detailed results from revaluation of CHF 71 million. That's due to the fact of the complication of several building projects and also because of the Genolier Innovation Hub, which the whole concrete work is finished, and it will be opening end of '23, beginning of '24. So CHF 59.9 million revenue, plus the 71% -- CHF 71 million revaluation increase in value, then it's CHF 131 million total revenue with an EBITDA of CHF 125 million -- and an EBIT of CHF 125 million. The balance sheet of Infracore, the market value of the whole portfolio have increased 8.5%, mostly due to the development, the construction. We have an equity ratio of 41.1% and a leverage ratio of 49.7%. The investment is -- are in 13 cantons in Switzerland. The project Genolier Innovation Hub, that's building next to the Clinique de Genolier will be cross-sectoral development platform for transfer of research from bench to bedside. Product development and improvement or late phase clinical trial. We start the project in 2019. We start the construction in 2021. And the construction will be completed end of '23 and opening in 2024. It's around 25,000 square meter of surface with 6,000 square meter of green roof. An auditorium of 260 seats, a complete congress center, 160 parking slots and 2 floor of office labs and training rooms. Swiss Hotel Properties is a 100% subsidiary of AEVIS. The market value is CHF 753 million, that's not reflected in the consolidated account of AEVIS because it's a fully owned subsidiary. And we also operate these hotels. So the building are at -- stay at the book value. We do not make any market value adjustment because it's self-use. But still, the value is there. 20 properties, 22.6% -- CHF 22.6 million revenue. Net income, including the valuation, so the development and valuation, CHF 71.6 million and it's a total of 120,000 square meter. This is the income statement of SHP in a standalone view with CHF 22 million revenue, CHF 76 million result for revaluation, so CHF 99 million. CHF 96 million EBITDA and CHF 96 million EBIT. The balance sheet of Swiss Hotel Property is very solid with an equity ratio of 40% and leverage ratio of 46.5%, net debt of CHF 340 million on a total value of CHF 750 million. We are in Switzerland and in London with 10 properties. The value -- the implied value per square meter is quite low with CHF 6,400 per square meter. And the benchmark value is above CHF 10,000 per square meter. Outlook for 2023. So the first quarter was in line with 2022 with a slight organic growth. So it was fine. We expect to have a good 2023 years, but we never know what's happening this time. So we don't want to give precise guidance because of all the geopolitical situation, but we are quite confident. And we have a very strong infrastructure, state of the art we do not have CapEx requirements. So every building is in the pristine condition with the exception of the last acquired Adula in Flims, which will need some investment. Thank you. So now we will be open for questions. Thank you to have listened to me.

[Operator Instructions]. At the moment, there are no questions yet. Let me repeat once more [Operator Instructions]. It looks like there are no questions, So Mr. Hubert back to you for some closing remarks.

Okay. Thank you very much. So if there is no question, this means that I was perfectly clear. If you have any questions, feel free to contact us through our Investor Relations and we will be happy to answer to all -- to all questions or to arrange a meeting with investor or analyst. Thank you very much, and have a good day.