Aevis Victoria SA (AEVS) Earnings Call Transcript & Summary

Ladies and gentlemen, a warm welcome to the Aevis Victoria S.A. publication of the 2024 annual results. [Operator Instructions] Let me now turn the floor over to your host, Antoine Hubert.

Thank you. Hello, everybody. Welcome to this webcast. Today, we are 3 speakers, Mr. Fabrice Zumbrunnen, CEO of Aevis Victoria; Mr. Michel Keusch, the CFO and CIO of Aevis Victoria; and myself, Antonio Hubert, the Delegate of the Board of Aevis Victoria. As you know, I'm going to give you an overview that was my last year as a delegate of the Board of Aevis Victoria. Fabrice Zumbrunnen is CEO of Aevis Victoria since May 2024, is already into the 2 main segments as a Board member since May 2023, so already 1.5 year that we are working together. Aevis Victoria is an investment company focused on service to people with investment in health care, hospitality and lifestyle and infrastructure related to those segments. Health care, as you know, we have Swiss Medical Network, we have Reseau de l'Arc, we have VIVA, which is the joint venture with Visana for the insurance product. Nescens, Genolier Innovation Hub and 2 minority investments into, a, the Swiss, which is [ Benecura ] and, well, which is a second digital initiative in health care. Hospitality and lifestyle, we have 11 hotels, 10 in Switzerland and 1 in London, U.K., and we have 27 shareholding into Batgroup, Batmaid, the Swiss leader in housekeeping providing. Infrastructure. Swiss Hotel Properties are real estate company for hotel and Infracore, minority participation, 30% into the leading infrastructure company for health care together with medical property trust who own 70% in Infracore. Just remember that we are in joint control because we have 50% of the voting rights as MPT. The most important highlights of this past year, 2024 in the first quarter, strong performance, deleveraging, successful investment activity has led to significant value creation. So at the AEVIS VICTORIA level, we have opened Genolier Innovation Hub after a 3-year construction. We have also acquired the hospital, the Zofingen Hospital. And we have sold our 40% into TCS, Swiss Ambulance Rescue, which is now the leading company for rescue -- for ground rescue in Switzerland. At Swiss Medical Network level, we had strong business activity in both hospital and health center -- medical center. We confirm the valuation of Swiss Medical Network with the deal -- the acquisition of Spital Zofingen from Kantonsspital Aarau. We have now Kantonsspital Aarau as a shareholder in Swiss Medical Network with 3.7%, but also as an important medical partner, Kantonsspital Aarau is the sixth hospital in Switzerland, is at almost same level as the University Hospital. And there are very strong synergy that can be deployed between our 2 companies. We have also, in the first quarter, reduced the debt of Swiss Medical Network. The debt has been reduced CHF 50 million net. We also have a strong growth in integrated care that will be explained more in-depth by Fabrice Zumbrunnen later. The MRH Switzerland, so our operating company for hospitality in Switzerland, very strong business activity with more than 10% growth. Another record year in 2024 and 2 first months of 2025 are confirming the trend and the growth of this activity. Swiss Hotel Property, the portfolio is very strong. We acquired -- the last acquisition for Swiss Hotel Property was in Q4 2023. That was a set of apartment building and a retail space in Zermatt, an additional packet that we bought from Credit Suisse Hospitality Fund. At Swiss Hotel Property, we have started to sell some noncore assets, so various real estate assets in Zermatt apartment that we have started to sell and also land for development in Crans Montana and Kusnacht. At the Infracore level, a very strong portfolio. Market value is quite stable. We'll -- we have a deleverage Infracore of CHF 80 million net by repaying completely CHF 100 million bond, and we had a slight increase in our mortgage. So the net deleveraging is CHF 80 million. The portfolio also has grown in the first quarter 2025 with the addition of the real estate of Zofingen. The main operational building of Zofingen has been integrated to the Infracore portfolio. As you know, we are an investment company, and we had strong deal activity since 2018. At Infracore level with the first share capital opening in 2018 with Baloise then in '19 with the sale of an additional stake to Baloise and a stake to MPT. Infracore as milestone in Q2 2024 with the completion of the Genolier Innovation Hub and in the Q1 '25 as a sales acquisition of the real estate in Zofingen. Then at the hospitality business, so hospitality is fully consolidated with operation in MRH Sweden, but also with the real estate in Swiss Hotel Property. As said in 2019, we had the acquisition of Seiler Hotel, the operating company. In 2020, we acquired the real estate of these hotels in Zermatt. We also acquired Schweizerhof in Zermatt. 2022, acquisition of L'Oscar in London and Adula in Flims. The additional packet from Credit Suisse Hospitality in Zermatt in Q4 2023. And we started in Q1 2025 the sale of these apartment in Zermatt. We have 20 apartments and studio for sale in Zermatt in the center of the village. Swiss Medical Network, the first investment in Hopital du Jura bernois was in 2020, 35%. We increased then our stake, and we started a joint venture with Visana Beteiligungen and canton of Berne in 2022. Visana also acquired a stake of 11.1% in Swiss Medical Network in 2023, and we were able to launch VIVA, the new insurance product, 1st January 2024 in the region of the [indiscernible] on the canton Neuchâtel, Jura and Berne. Q3 2024, we acquired Centro Medico. The deal was signed in Q3 and then closed early Q1 2025. This acquisition of Centro Medico, it's 10 medical center in this year has made -- it made possible the launch of a second integrated care region in Ticino. In December '24, we acquired also Spital Zofingen from Kantonsspital Aarau, and they became a shareholder with 3.7%. We launched the VIVA product in Ticino 1st January 2025. And also, as I said, during Q1, we sold the real estate in Zofingen to Infracore and to third parties. Batgroup, we acquired minority share in '21, then we increased our share in '22 and '23. Batgroup is now profitable since Q4 2023, has been profitable during all year 2024, and it's pursuing its growth in 2025. Just to remember, we did a similar investment in Medgate back in 2015 that we did exit in early 2022 with a very good return on investment. I'm going to hand over to Michel Keusch, our CFO, CIO, for the full year 2024 performance of Aevis Victoria. Thank you very much. Michel?

Yes. Good morning. I will make a review of the 2024 period for the year for the group, starting with the statutory accounts, which is obviously the best way to understand the value of our group, which is, as Antoine saying, a pure investment company making deals every year, buying certain companies, so the best way to capture the value of the group is to look at the statutory accounts. And then obviously, I will give you the full visibility on the different participations within the group going for health care, hospitality and so on. So starting with the statutory numbers. We see a net profit of CHF 26.5 million, which is a great figure comparing to a loss of CHF 8.8 million last year. This year, obviously, it reflects a good investment activity, and basically the deals in Zofingen and also the divestment of the TCS business, ambulatory business. Looking at the balance sheet, the statutory balance sheet, the 2 key points is, first, the level of the participation in terms of book value. We see CHF 656 million. If we compare this to the market value of those participations, which is more than CHF 2 billion, it shows clearly the significant amount of hidden reserves and also the strong value creation capabilities of the group. The second point, which is a highlight for us as well during this year, is the strengthening of the capital base with the equity ratio being now 70%, very strong at 70% and also low leverage ratio now less than 15%. Now diving into the different segments, starting with the Healthcare segment, which is obviously the biggest within the group. We see here -- the best way to look at the bottom of this chart where you see the organic performance to have it on a really clean basis, we see a good organic growth, 4.4% for the Healthcare segment and resilient margins. We see EBITDAR margin moving up 10 basis points to 16.6% and EBITDA margins moving up 30 basis points to 5.7%. So it's a sound performance. But obviously, it doesn't show the whole picture. Now what we do for the first time this year, we try to give more visibility and granularity to the investors of what is within this Healthcare segment. And as you can see on this slide, 90% of the segment is related to hospitals and about 8% is related to ambulatory services. Now you're clearly seeing on this picture that the margin profile of those activities is totally different. And here, we clearly see a strong improvement of EBITDAR margins for the hospitals. We see that's moving up from 18.2% EBITDAR margin to 19.4%. This is reflecting, obviously, operating leverage. It's reflecting our cost reduction programs. Slowly, the reduction in energy costs and so on. So that's -- it's a good performance for us, it's satisfactory. But at the same time, you see on the bottom of the chart the dilution from ambulatory, which is costing us CHF 3 million of EBITDAR and about CHF 10 million in EBITDA for the year. Now obviously, it could [indiscernible] so some buildup to divest the loss-making activities. We do the opposite. We do this investment because it's an investment in the future. We needed for 2 things: first, the expansion of our integrated care concept across Switzerland, where we need those ambulatory services. And also second, we know that the industry is going in this direction with the uniform financing, the recent rotation on [ EFAS ] we need to be prepared, and we will be agile and make those activities profitable. Turning to the Hospitality segment. It's a very pleasant performance with organic growth of 10.1% during the year. It's obviously more than the industry in Switzerland. The reason for that is a strong increase in the revenue per room of about 8.5%. And this is resulting both from an increase in occupancy rates. We are now at 54% for the group, but also a further increase of the average room rates. We are now reaching CHF 580. This is related to the repositioning of our hotels, which is helping us to further increase the average room rate. And obviously, as you see on the right side of the chart, the profitability is the fixed cost business. So when you can grow your top line by 10%, the rest is following. On the Real Estate segment, here you see SHP. This is purely related, obviously, to the performance of the hotel business. You see in the middle of the EBITDA moving up by 26% (sic) [ 29.6% ]. This is strong because it's not only the performance from the hotels, but also the increase of the scope. Basically, it reflects the acquisitions we made, which have now a full year impact in '24 on real estate, mainly in Zermatt. And then you see on the left side, the increase of the market value of the portfolio. And what is very pleasant to see as well, a decrease in the LTV ratio on the right side, now about 46.5%. For Infracore, which is a 30% stake for the group, it's a similar story. We see a good increase of EBITDA. The market value at the end of '24 was CHF 1.3 billion. Now since the beginning of the year, we are even above CHF 1.4 billion because the recent acquisition in Zofingen was, at the end of the year, still in Swiss Medical Network, but now moved partly to Infracore. So this is further increasing the size of the portfolio. And here, again, on the right side, you see a decrease of the LTV ratio to 43%. Last segment, the Others segment. So this is a small segment where we have all our different ventures, all the ends of tomorrow. It includes the innovation hub, but also Nescens. I will not go too much in detail here because Fabrice will talk about it more in detail later in the presentation, but you see here more than -- let's say, almost CHF 11 million dilution on the EBITDA level. We'll come to that later in the slide from Fabrice. Now if we sum up the whole thing in terms of the value of the -- of those participations on the next slide -- sorry, sorry, here you see it. So basically, here, you see all the different parts. We try to make it visible for you. Swiss Medical Network, CHF 1.5 billion; MRH Switzerland, CHF 0.4 billion; Swiss Hotel Properties, CHF 0.4 billion; Infracore, CHF 0.2 billion. Then obviously, we deduct the overheads, the capitalized overheads at the holding level and also the net debt at the holding level, which give us the total value of CHF 2 billion. Now if we compare this to our market cap, which is about CHF 1 billion as of today's prices, it shows a discount of about 50% to this sum of the part valuation. The second way to look at it, and we like to look at this also this way as a cross check is to look at the value of our real estate on a per square meter basis because this tells something to everybody. And you see here that on the hotel side, our portfolio is valued at about CHF 6,800 per square meter. This compares really favorably versus the benchmarks in Switzerland for similar hotels, which is more about CHF 8,000 to CHF 9,000. On the Infracore side, we see the value per square meter of CHF 6,200, which also compares very favorably towards the average of CHF 10,000 for the health care real estate. Now we transfer the word to Fabrice, our CEO, who will talk more about 2025 and to give you an outlook per segment.

Yes. Good morning, everyone. We had a very good start in 2025 with a growth of 25% in the first 2 months. This was driven by acquisitions via acquisitions of Spital Zofingen and Centro Medico and by organic growth of 4%. So we are expecting very strong revenue for this year. And now we are really working on the integration of both acquisitions and in the preparation of a third integrating region -- integrated care region. And speaking of integrated care region, we are in the second year of Reseau de l’'Arc. With real success, we could more than double the number of our members within certainly the strong performance, the customer satisfaction and the fact that we could keep our premiums unchanged in 2025. And we are very optimistic about this promising model. And as I've already told you, we are the first region in Reseau de l’'Arc in Jura -- in the region of Berne and Jura and Neuchatel. The second one is reality now in canton Ticino, and we are really looking forward to our third region in Zofingen for 2026. And something very important to mention is the fact to our continuing -- improving our margins, and we have savings programs, we have already presented last year, and we are really good on track in -- we have -- in 2024 we could reach more than half of the CHF 20 million we set our goal and something will help us from this year is the slight reduction of energy prices. As you probably remember, we decided at the beginning of the war in Ukraine to fix our energy costs. Next slide, please. This is a very interesting snapshot of the maturity phase of our hospitals. In red, you see our turnaround cases. In yellow, a range of ramp-up hospitals and in green our stable growth hospital. Red mean an EBITDAR of under 10%. Orange is an EBITDAR between 10% and 20%, and green is more than 20%. And obviously, we are really working out to position our hospital better, to have the right measures, optimizations, et cetera. And I want to give you 2 examples of how we can manage it. The first example is Villa im Park and Zofingen. We will have a joint management of both hospitals. And obviously, there are very important synergies, and we are very optimistic. But next year, you will see a real improvement of the profitability for these 2 hospitals. And another example is Bethanien, already in the green field here. And in fact, it reflects the positive effects -- the already positive effects of the transfer of our activities of clinic [ Privatklinik ] in Bethanien, and we think that we will reach very, very strong figures this year. Hospitality and Lifestyle segment, obviously, after a very, very good 2024, we are still on a very good track after a 10% -- more than 10% growth. We had a 4% growth in the beginning of this year and with a very, very strong winter season in Zermatt and also a very strong performance here in Zurich that we want to mention. And as you know, it's something very important for me the continuously optimization of our concept, and there is always room for improvement, something that we could prove in the last years. And I think the example of food and beverage, and we are really working to even strengthen our positioning and our performance in this field. So a very, very solid performance of MRH Switzerland. On the other side, we are very happy to mention that with Batgroup, we could successfully integrated Putzfrau, and we reached a record turnover of CHF 48 million. And maybe even more important, we could reach a positive EBITDA during the whole year. As Antoine already mentioned, the first turning point was Q -- the quarter -- last quarter of 2023. And we are really observing a very, very strong and optimized performance. We are the leading home cleaning company in Switzerland, and we are very positive for the future of this company. Next slide, segment Others. We have the Genolier Innovation Hub with our grand opening last year in September '24 with very, very strong strategic partners like General Electric, Accuray, for example, but it was only the starting point. And we are now preparing the next evolutions with very promising contracts. And will, in the next months, have new partners, new ideas. We will organize very important health conferences already this year. And the interest is very, very important for many companies and for start-ups, for innovators. And this -- the launch of this Genolier Innovation had a very strong impact on the attractivity of the world campus in Genolier. And obviously, we could attract our new doctors, talents and we will also invest in research, and it's a very, very, very strong step that we could make with Genolier Innovation Hub. Important for us to mention that we are only at the beginning of a very long journey. Our goal is reaching a cruising speed, full capacity in 2029. And we are very, very good on track. Nescens, 2024 was a pivotal year for Nescens. We have decided to focus on a new operation structure, with new management. We decided to discontinue unprofitable activities, to enter medical services through the clinic of Genolier because our main focus is really preventive and regenerative medicine. We have a unique profile in this very, very promising business. As you know with [indiscernible] we're one of the pioneer in the longevity field. In Switzerland, we are very, very long record -- track record, but we want to focus on what we are doing very, very well, that is to say our exclusive and personal programs. Something very important, we invested in our development capabilities. And in new projects, you will see more of Nescens in our hotels, for example, and we will have the best of our revitalization queues in our hotels. We will start with [indiscernible] and his plan to step us in a step by step mode to -- and I'd say, more Nescens more program of Nescens in all our hotels. And speaking of Nescens cosmeceuticals, as I said, we have invested in new capabilities, is to say that we will be able in the second half of this year to launch new products and to refine the whole product line, that with a clear goal to position it in a top premium segment. And this week, for example, we could presented our new concept in Globus [ Geneve ], and we are very optimistic, but this new positioning will bring us very strong results for the coming years. I've already reached my conclusion, something absolutely unchanged, our strategy. So we are still focusing on deleveraging and further unlocking value potential in all segments. That's very important for us. All segments have potential. We will continue to invest in services to people, real added value is something that really motivate us to have new ideas, to bring new concept on the market and something also that we could do last year with the strategic alliance with Hospital of Aarau, Kaisa, who wants to attract new strategic partners. And this -- for accelerated path to integrated care. And the collaboration with Kaiser is very important for us because we will have even in a very, very specialist and high-level medicine. The possibility to have a full integrated care vision. And we are very excited about this partnership. I'm very happy to have them on board. And we are looking for a new strategic partner for the next years, so after Visana, [ Kaiser ] this year. And financial outlook in hospital, so I think that the improving results that we have seen in 2024 are really very promising, but we are working hard to reach new heights this year. And we think that the measures that we have taken should bring us very good results as we have mentioned, for example, our cost-cutting -- or efficiency programs. And we are, as I have said before, on track. Hospitality, after a strong winter season, we have a very, very good start but optimistic about the full year results, even if it's very complicated now with many uncertainties, what will be the real figures this year, but the reservations are very promising. And we think that we are very well positioned in this highly competitive business. Infrastructure, we had a very positive performance in the last year with both acquisitions, and this will be reflected in the year-end valuation. So we are still working and considering that there is a very strong potential in infrastructure. And something that Antoine already mentioned, the disposal of noncore and non-EBITDA generating assets should contribute to increased revenues and deleveraging. So I think that the example that Antoine mentioned, Zermatt -- apartments in Zermatt or land in Crans Montana give -- already give you an example of what we are doing in this field. And like every year, we can -- we don't want to mention targets -- margin targets or revenue targets because of the diversity of our investments, but I hope that you -- with all the examples that I've mentioned that we have understood that we are on a very good track. And I would like to go through these slides, something very, very important for us, the strong track record of value creation. This is our motivation. We had a very, very impressive journey in the last year. And the recent acquisitions show us that there is a very, very strong potential, strong, not just -- not only growth potential for the group, but we could make our vision a bit more tangible. I speak of integrated care on one side, on the level of quality that we have reached with our hotels. And of course, our infrastructure are supporting the whole strategy. So I think that we are at the end of our presentation. I'm very happy to answer your questions.

[Operator Instructions] There seems to be no questions incoming. [Operator Instructions] The first question is from Kevin [ Chat ] of Bell Capital International.

There is one question from my side. Why was the stock price under pressure even though numbers were solid?

Thank you for your question. Actually, it's a good question. We were asking ourselves the same thing 10 days ago when we basically preannounced the figures, and we got a lot of good compliments from peers and bankers and so on. And then suddenly, we saw the price losing almost 15% in a week or, let's say, in 10 days. So we had no clue about what was happening. Obviously, completely uncorrelated with our fundamentals. We discovered then later on that the SIX made some changes in their indices. Usually, they do that always at the end of September. And here in the middle of March, they decided to change the methodology for the ESG indices. So basically the SPI ESG Index. And for some reason, we were excluded from this index. We don't know why actually. They haven't communicated the criteria, but we were excluded from that index. And as a result, obviously, all the index funds had to sell their shares. And this is why you had almost 200,000 shares being traded within 8 days, which obviously for our company is a huge volume, and this made the stock tumble by 15% in a week. So it's purely technical, purely related to this rebalancing of indices, and obviously not at all related to our fundamentals.

As there are no more questions in the queue for now, [Operator Instructions] There seems to be no more questions incoming, so I hand back over to the host.

Thank you very much. Please note that we are always available for further questions, if you want, or for one-to-one meeting. Please feel free to contact me, Michel or Fabrice through our Investor Relations desk, and we will be happy to answer any questions. Thank you for attending this conference today. I wish you a pleasant day under the sun. And I wish you a good '25 years -- 2025 year. It was my last year as a delegate of the Board. Thank you for the trust also for the past year. And I hope I will be elected as the Chairman of the next general meeting, and I will pursue with this renewed and strong team, the development and the growth of Aevis Victoria in the future. Have a good day. Thank you very much.