Aevis Victoria SA (AEVS) Earnings Call Transcript & Summary

[ Good morning, ] ladies and gentlemen, and welcome to Aevis Victoria SA Publication Half Year Results 2026. The conference will be recorded. [Operator Instructions] Let me now turn the floor over to your host, Fabrice Zumbrunnen.

Yes. Good morning, everyone. I'm very pleased with my colleague, Michel Keusch, CIO and CFO of Aevis Victoria to briefly comment our half year results. Let's start with an overview of our most important investments. As you can see here, around 60% of our investment are in the healthcare area, and there are 2 of our very important areas, hospitality and lifestyle, 20% and a bit more for infrastructure. I would like to highlight the new ventures that you have in the healthcare area, Viva is the company which enables the development of integrated care. We have Genolier Innovation Hub, which enables us to be very well positioned in the innovation segment with a very interesting collaboration with the industry. And Nescens is a company focused on longevity. So let's start maybe with the key figures. For an investment company, you know that these figures are -- maybe not the most relevant, but let's say that we are on a very good track with a strong increase in net profit with very good EBITDA. And as I've said, maybe it's obvious facts and figures, not the most important one for an investment company. That's the reason why I'll hand over to my colleague, Michel Keusch for the analysis of the detailed facts and figures -- financial fact and figures. Michel?

Thank you, Fabrice. So I will quickly run you through the figures, but also just a couple of highlights on the equity story. And actually the -- sorry, yes, and actually, why to invest in Aevis Victoria. Just to summarize a little bit the 4 investment pillars that you see in blue of our investment case. First, very focused investment approach. Everything we do is related to services to people, nothing else. The second one, we are invested in hard-to-replicate businesses. This is the case in healthcare and also in hospitality. In healthcare, we are the leading care provider and accountable care organization in Switzerland, not only the leader, but the only one, actually. And on the hospital side -- on the hospitality side, we are the leading Swiss luxury hotel group. So it's always key leading positions in businesses, which would take years to replicate. The third one, the strong track record of value creation. As you see, over the past 15 years, our shares have returned more than 10% per annum in average, versus 8% for the SPI. So this is really a proof of value creation. Last point, the historically high discount, which is now reaching a level of 50% or slightly more than 50%, which is unprecedented in the history of the group. So these are the 4 pillars. As we all know, obviously, a discount is an interesting entry point for an investor, but only if there are reasons to believe that this discount can be narrowed in the future. And for this, we need catalysts, and we think there are 3 catalysts currently. The first one is a next phase of value crystallization. This is very important because in our portfolio, we're going to sell some stakes in companies to strategic shareholders. We are looking at different solutions in all segments. Obviously, Swiss Medical Network, that's the key segments where we are -- we have already officially announced that we are looking for strategic investors, and to have a big stake in the company. All this would help crystallize the value. Second point, the enhanced Investor Relations. We are doing a lot more in terms of roadshows, Capital Markets Day, and we have a much higher transparency in our financial communication. The last point, which is resulting from the second one is that the average daily liquidity has nearly quintupled over the past 2 years. And this is a key point. 2, 3 years ago, it was maybe difficult to invest in Aevis. I think today, the liquidity has been improving very much. And that's -- it's a key point to make the stock more attractive. Now I will quickly go through the H1 performance not in every detail, but I will try to give you the highlights. So first, and this is our key indicator at the Aevis group level, the NAV. So the NAV for H1 '26 is CHF 26.75. This is an increase of almost 7% versus last year. And if we compare it to the last year-end level, it's plus 2.3%. The discount to NAV, as you see on the right side, is now more than 50%. These are the consolidated figures. As you see, it's going in the right direction with improvement in margins and on the EBITDA and EBITDA level. As Fabrice said before, for an investment company, this doesn't -- it's not the best indicator. It's much better to look at the different segments, which are showing the true operating performance. On the health care side, you see Swiss Medical network, very good performance, first, resilient growth, but also a strong improvement in margins from 18.6% to 21.6% EBITDA margin. And this is obviously achieved in a difficult environment for the industry. The key driver for this is the ramping up of unprofitable hospitals in our group. We were also having the costs very much under control, material costs, also personnel costs. This is the reason for this performance. One point to mention quickly, if we split the health care between hospitals on the upper side of the slide, and ambulatory services on the lower side, you see that margins are improving in all segments. What is to be noted is a strong improvement in ambulatory services. For EBITDA, which is moving up strongly from 7.1% to 11.8%, but also the fact that on the EBITDA level for ambulatory we're for the first time in the black figures. So this is not an EBITDA loss business anymore. As you know, this is a strategic segment for us, ambulatory. We need that for the integrated care. It's diluting margin on the first hand, but we still see the possibility to make this business profitable, and this big improvement is, I think, one of the key highlights of this set of figures. Hospitality, there's not much to say. It's a challenging environment with what we saw with the tensions in the Middle East. Nevertheless, we had a very resilient performance on the growth side, 1% growth. EBITDA margin stable. What you see on the EBITDA margin is not the reason for concern. You see a decrease of EBITDA margin. This is simply related to the fact that we increased the rent for several hotels. But as you know, the hotels are owned by Swiss Hotel Property, which is 100% owned by Aevis. So it's going from one pocket to the other. So there is absolutely no impact, and the fact that we're increasing rent is absolutely normal from time to time. Whenever one hotel is at the end of the CapEx cycle, this was, for example, for the Victoria-Jungfrau, after 8 years of CapEx cycle, then we have the arguments to increase the rent. So you have some adjustments from time to time. Real estate, so this is the Swiss Hotel Properties business. Here again, you see optically a decline in revenues and EBITDA, but this is only due to the fact that the gray part you see last year, we had sale of properties in Zermatt apartments. So we have CHF 10 million extraordinary profit, which is not recurring this year. And that's why, optically, you have declined. However, on an underlying business, it's growing and the margins are always at the level of 90%, 91%. So this is a cash cow, which is not without any variation. Also, on that real estate segment, you see the improvement of the market value. The debt has been reduced and LTV has been reduced as well. So we have now a 45% loan-to-value ratio, which is very, very conservative for this business. We are benefiting from the decline in interest rates as well and the decline of the debt. So basically, in terms of -- I forgot to mention on the previous slide, in terms of interest expenses, we saw a decline of 43% year-on-year. Last segment, the other segment. This is where we put all our ventures, all our start-ups. So it's mainly the Genolier Innovation Hub and Nescens. As you see, these are still loss-making businesses, obviously, for the time being. However, the loss is narrowing. So it's going in the right direction, and Fabrice will tell you more about the evolution of Nescens later on. Just to finish on the financial framework point of view. This is a slide we show now every quarter since 2 years. You see that the debt situation is improving year after year. The point which is important in this slide is that out of the CHF 846 million net debt at the consolidated level, you see that the bulk of this debt is under SHP, which is purely mortgage-based, and with an LTV of 45%. So it's very solid. If you look at the debt on the Swiss Medical Network side, on the left side, you see that this is now relating to a net debt-to-EBITDA of around 2.2x, 2.3x. You see at the bottom of the chart. So we are in very good hands now in terms of financial framework. After the deleveraging of the past 2 years, we're in a very sound situation. And finally, this is the sum of the parts where you see that the NAV is now, as indicated initially, CHF 26.75 which shows a discount of about 50% currently. And last slide on my side is the historical perspective on this -- some of the parts evolution where we see a factor of 19x over the past 15 years. from 2011 to 2026. Now I pass to Fabrice, who will talk to you about the outlook and the initiatives.

Thank you, Michel. I would like to conclude this short presentation with an update in our value creation journey. And we have here 3 of our most important initiatives. Health care in this business, we would like to further improve profitability. You have seen we are in a very good track, but there is still room for improvement. Integrated care, maybe the most relevant initiative in the long run with very encouraging results. And last but not least, Hospitality. We have iconic hotels in iconic destination and there is a very resilient business, but there is even more potential, but many maybe thing. So let's start with the health care, with the improvement of our profitability, here, you can see the pillars or the leverage possibility that we could reach, activated and will help us to improve the profitability in the next years. So I think the most important are the cost optimization programs, the fact that we can ramp up our recent acquisitions. And of course, we will have in the long run. But even now, that's the good news, a very positive effect of our Integrated Care initiative. So you see from 16% to more than 20% and the goal that we have to reach, 23% margin in this organic growth of 2% to 3% a year. So that's an overview of our different hospitals. You see 3 categories. We have mature hospitals. More than 50% of our hospitals cooled and can reach more than the 25%, 26% EBITDA margin, and we have the so-called ramp-up hospitals with a very good progress in the last 6 months. And here, we are around an EBITDA of 10% to 20%, as I've said, with an already good improvement. And we have the new acquisitions or the turnaround hospitals, and you can see, if I take the example of Lindberg, but we have taken a very important decision to seize to stop our activities. We could have a very good deal with the hospital Winterthur. And it will automatically improve our financial performance in the next months, obviously, next year, we will see all the positive effects. And we have a very, very clear program to to follow that path and to improve profitability. So as I've said, on good track, we're on a good track, but we are working very hard to improve in the future and to have all our acquisition or hospital in the right area of this rentability chart here. Second initiative, integrated care, we would like to scale our very unique capitation model in Switzerland. This is our country, and we have already 3 integrated care regions, and we will open next year in the Bern area, a new region, integrated care region, and we are very pleased with this experience, and we could reach the first results. And we are very proud of this second year, 16% cost improvement, a very, very good performance, the best in class in the market. And our goals are very clear on the medium term, 15% to 20%. We have already reached these figures. And in the long run, we think that we have the potential to reach 25% to 30% depending on the different realities of the regions. And our aim is to double the amount of members every year are absolutely on track with our business plan, in fact, even better. And we see this as a transformation project, but also as a new source of revenues, which will improve the whole performance of our health care business. And last but not least, Hospitality. We have the extreme privilege to have iconic destination, iconic hotels. But we still believe that we can reach more than this. We have existing land reserves, we have the possibility to make acquisitions and improving also the profitability of our commercial rental retail areas. So there is very -- something very interesting year happening. As you know, this year was not so easy. We had a very strong decline in the turnover of our guests coming from Asia and Middle East, but we could compensate this with more guests from U.S.A. and Europe. And in fact, we are very -- we are better than the market and the whole industry and chose that but our iconic hotels are very, very resilient, are beloved the destinations, and we are working out to reinforce even in the future years, the attractivity of our hotels. And two, I come now to the conclusion. These are really our main goals. As Michel already mentioned, this strong focus on crystallizing value across the portfolio. I think that the recent IPU of Infracore was a very good project. We are very proud to make it happen and very, very, very big potential for Infracore, but in the other business areas, I think of health care, we are absolutely convinced that we will have new investor, who will help us to reach our strategic goals. So we are very happy with Visana, but we think that there is room for other key partners for us. I can also speak of Nescens longevity. There is a very strong interest for many investors to be part of it, and [indiscernible] innovation could be also another option for us. So we have this very, very important goal to crystallizing value across the portfolio. And as I've said, even if you are the best in class in Switzerland, there is still room for improvement -- to improve the profitability in health care and the scaling up of our capitation model is absolutely key, key for us, key, I think, for the whole industry, we are market leaders. We inspire many, many of our competitors, but we are still ahead, and we have a very unique capitation model. And for the rest, we will continue to focus on our value creation teams. And if it's about new opportunities and options, I think we have plenty of them. And to conclude, we are very pleased that we could reach good results in this first half of 2026. But we have -- I hope that I could convince you that there is room for improvement, and it's only the beginning of our very long track to improve profitability, to grow. And I would like to thank all my colleagues for achieving these very good results in the first year of 2026. So I think that was our [indiscernible] short presentation, and we are very happy to answer all your questions. And I'll hand over to the organization for the Q&A.

[Operator Instructions] First question is from Arthur on from Alpha Value.

Congratulations on your first half results. I had 2 questions, if I may. It's regarding the Slide 25 on the hospitals and ramp-ups and turnaround. Comparing to the slide you presented in May in the turnaround buckets, we saw that it's moving the right way regarding mature hospitals and that EBITDA margin is improving. But on the turnaround hospital, it's moving from 5.4% to 4.4%. And I'd like to know if you could break out what's driving that? Is it some residual drag from Lindberg before the transfer? Or is it something lower in which paying the turnaround. And I can add a question. I'd like to point out that Réseau de l'Arc is now in the lower point of the stop in the investment part. And I would like to know what's -- if you could give us more color on that on the investment specifically for Réseau de l'Arc? And finally, I had another question regarding your, and it was on Slide 30, you mentioned that further opportunities to reduce seasonal pricing gaps are engaged. And I'd like to know if you could be a bit more specific about it.

Okay. Thank you for your question. To your first question, you are perfectly right. We could improve, in fact, the rentability if you see all the hotels. But you're also perfectly right, but there was a decrease of profitability by Mondrian and Lindberg. The reason is very simple. We decided to stop our activities -- and from the moment that you communicate this, you have a very strong decrease of your activities. It's a very short-term effect. As I've mentioned, next year, you will see that it was a very -- they were a very good decision, which will improve the profitability. So it's -- the reason is the decision. The case of Réseau de l'Arc is a very particular one. It's because of the change of the canton from Canton of Bern to [indiscernible]. And there are other tariffs reality. They are over sale, and we prefer knew that and we have to face a decrease of profitability without having the problem of decreasing numbers of patients, et cetera. That's not automatic. It's the pleasure to have a concentration with different realities in Canton. And obviously, [indiscernible] is the poorest canton in Switzerland, and it's our job now to improve the profitability. In fact, I can say that in July and August, we could make very strong progress -- but it's not something you can -- you can reach or the kind of improvement you can reach on the short term. So we have decided to to improve our efficiency. And I think that Réseau de l'Arc will be in a positive field at the end of this year. But yes, it was not such an easy step for us to go from Caston Bern to Canton [indiscernible]. I think that -- your questions and to your -- sorry, about those. Yes, I think the seasonality is something very important. In fact, I mentioned Interlaken, Interlaken the good season, the high season is summer and winter, it's not exactly at the same level. And obviously, you have the over situation, the opposite situation with Zermatt. And it's very interesting because we see a very strong increase of the attractivity of the destinations, not only because of us in the the low seasons. But I think that our initiative, for example, gastronomy to our [indiscernible] are very attractive points to be, to stay in our hotels and the other aspect is to focus on individuals. And we -- as I've mentioned, we could compensate the loss of many, many guests from Asia and the Middle East with very, very interesting guests from the U.S.A., and [indiscernible] guests are very pleased to stay in our hotels. And so we are working very hard to compensate, but you will, in the future, have always a very high season and a low season. But we are very confident that the gap will be smaller. It's already smaller than 2 years ago. So we are on a very good track.

At the moment, there seems to be no more question. [Operator Instructions]. Mr. [indiscernible] is back on the line, Alpha Value.

If I may, maybe I have another question also related to hotels. -- in this improvement, and you say you don't plan on expanding that much in the hotel and focusing, as you mentioned, on individuals. So and we saw it with the numbers that the pricing is improving. And I'd like to know if there's an occupancy target attached to this. I know that the occupancy is roughly flat towards roughly 55%. I'd like to know if there is a target that will be attached to this improvement in the seasonality mix?

No, no. There is no occupancy targets. Obviously, it's always a trade-off between occupancy and pricing. So we think in terms of RevPAR, we want to increase the RevPar. Obviously, the main components because of this pricing gap will be the pricing. But we have to be careful. It's never at the expense of the occupancy. So typically, if we can keep occupancy levels as there are currently and improve the pricing, it's good. In some cases, we can even improve both but we do it very carefully and step by step. We have to check what the local competition is doing and so on. We are in a very good position strategically in those 2 destinations because we are very strong in the 2 destinations. So we cannot only manage our hotels, but also shape the future of the destination in a way like in Zermatt, where we control most of the retail store, for example. Actually, they are renting to us in a way. So we can upgrade the shopping experience. And this is attracting a new clientele for the summer, and it helps us improve the pricing of the hotels in the summer because of this new clientele. The same in Interlaken where we are so strong that we can also shape a bit the winter destination or do partnerships locally. So it's a long game. But in both destinations, we can certainly improve this pricing for summer and winter. But it's -- let's say, pricing is more important than occupancy at this stage.

Okay. And maybe if there's a for one last question. It's on totally different and it's concerning [indiscernible]. Are you confident towards reaching the breakeven point of 10,000 members by the end of 2026 or early 2027?