Burjeel Holdings PLC (BURJEEL) Q2 FY2025 Earnings Call Transcript & Summary

Hello, ladies and gentlemen, and welcome to the Burjeel Holdings Earnings Call for the Second Quarter and First Half of 2025. Today's call will be hosted by our CEO, John Sunil; and CFO, Muhammed Shihabuddin, who will provide overview of Burjeel Holdings' financial and operational performance, followed by a Q&A session. My name is Sergei Levitskii, Director of Investor Relations, and I will be moderating today's session. First, please review the disclaimer on Slide #2, which includes important information regarding the interpretation and limitations of historical data and forward-looking statements. I will hand over the floor to our CEO, John Sunil, to walk us through the key business highlights.

Thank you, Sergei. Good afternoon, everyone. Q2 2025 has been a strong quarter for Burjeel Holdings, marked by solid progress on the priorities we outlined last quarter. Revenue growth accelerated to 19% year-on-year, up sharply from Q1. EBITDA rose by 59% and net profit more than doubled to AED 148 million, a clear signal that our corrective actions are delivering results. We saw strong patient recovery post-Ramadan, successful ramp-up of surgical throughput at key facilities and tighter control over manpower and marketing spend, all driving margin expansion. We are entering the second half with a real momentum and remain confident in our strategy to deliver sustainable growth and long-term value. Let me walk you through some of the recent business and medical developments driving this performance and shaping our outlook. In June, we took another significant step in expand our care platforms with the launch of AlKalma, our new regional mental health network, now operating 4 centers across Abu Dhabi, Dubai and Saudi Arabia. Mental health affects up to 1 in 5 people each year and still accounts only for just 5% of total health care spending across the region. Access remains limited, held back by a shortage of specialists and fragmented care models. AlKalma was built to close that gap. And this launch is just the first step in the multiyear expansion strategy. We have also reinforced our position in oncology, expanding the Burjeel Cancer Institute's footprint with new clinics in the UAE and Oman and introducing the country's first dedicated cancer pharmacy. These efforts strengthen our capabilities in delivering comprehensive end-to-end cancer care across the region. In the UAE, we have opened the Saadiyat Beach clinic, broadening our primary care network and deepening our presence in premium high-growth areas. It also strengthens referral pathways into our society centers and hospitals. And in Saudi Arabia, we acquired PhysioTrio, a fully built rehab center in Riyadh. Now integrated into our 30 center of 30 center PhysioTherabia network. While currently underutilized the center requires no additional investments and offers clear upside potential. It is also in panel with key government entities including the Ministry of Support giving us direct access to government-funded rehabilitation programs. In parallel, with our network expansion, we have also made significant clinical advancements that reflect our strategic focus on complex care. This quarter, we launched the Middle East first and only osseointegration clinics, a major breakthrough in amputee care, led by Professor Munjed Al Muderis, a global pioneer in limp reconstruction. Unlike traditional socket-based prosthesis, this next-generation method anchors the prosthesis directly to the bone, offering patients greater mobility, comfort and sensory feedback. We have already seen strong demand across the region, reflecting both a clear and unmet clinical need and a compelling global cost advantage. We also expanded access to high-equity services through newly established centers for thalassemia, sickle cell disease and genetic disorders, extending advanced care to patients with rare and complex conditions. In oncology, we launched our Global Tumor board, bringing together 7 leading international experts to support complex care discussions and drive personalized cancer care across our network. At Burjeel Medical City, we commissioned a dedicated epilepsy monitoring unit, a significant advancement in the diagnosis and multidisciplinary treatment of neurological conditions. And finally, the Axiom 4 UAE space mission, which launched and returned successfully completed Burjeel in-orbit research on glucose metabolism. This milestone underscores our commitment to pioneering science and expanding the frontiers of medical innovation. Before we move into the financials, I want to take a step back. What you see here is not a collection of announcements. It's the outcome of a disciplined strategy that we have executed consistently over the past 12 months. From launching advanced specialty centers to pioneering transplant programs and embedding AI in clinical workflows. Our progress shows one thing clearly. We are firmly on track with our long-term growth strategy. Burjeel continues to lead the private sector in widening access to complex care, deepening clinical capabilities and expanding nationally, not just in scale, but in impact. Our strategy is rooted in serving the UAE, our home and the core market. From Abu Dhabi to the Northern Emirates, our goal is simple, to ensure every patient has access to advanced high-quality care without needing to leave the community or their country. The investments we have made are already starting to show in our financial momentum. But more importantly, we are laying the foundation for sustained long-term growth, and that's what we are building towards. With that, I'll now hand over to our CFO, Shihab to walk you through the performance in more detail.

Thank you, John. Let me walk you through our latest operational performance where we have continued to deliver the strong patient growth across the platform. In Q2, our inpatient footfall increased by 18 percentage contributed by high-value specialties, particularly oncology, cardiology, mother and child and also supported by the continued ramp-up of our key hospitals. We have performed over 22,000 surgeries during this quarter, which is 19% growth, reflecting a strong post-Ramadan recovery in elective and minimal invasive procedures. At the same time, occupancy rose to 69 percentage, which indicate an improved utilization across our inpatient network. Outpatient volume remained solid as well as with footfall up by 12 percentage. This was fueled by our ramp-up of our primary care networks, PhysioTherabia centers, alongside sustained demand in oncology, pediatrics and woman's health. As of Q2, outpatient utilization improved compared to Q1, supported by optimized workforce deployment and targeted hiring. We remain on track to improve it further as newly launched assets continue to be matured. These operational results have led to a strong foundation for our financial performance. Let us move to the next slide. Yes, in Q2, we accelerated top line growth of 19 percentage, driven by a stronger patient footfall and improved yields. Oncology stood out with 37 percentage growth during this quarter. As our sustained investment in super specialization, the talent and infrastructure begin to translate into higher surgical conversions and more complex case mix. This specialty is not only a key growth engine today, but also a strategic pillar of our ambition to lead an advanced comprehensive care across the region. Our EBITDA performance was equally strong. Group EBITDA grown up by 59 percentage, which is supported by operating leverage, improved physician efficiency and the stronger performance from recently launched assets. During this period, we achieved AED 72 million as nonoperating gain generated by acquiring Medeor Hospital Dubai Building. These transactions eliminate a significant long-term rental obligation and convert the hospital into a capital asset, unlocking full operational control and flexibility for future reconfiguration and long-term margin acceleration. By segment, our Hospitals business delivered revenue and EBITDA growth broadly in line with the group growth. Our Medical Center segment recorded a strong revenue growth by 37% in Q2, driven by our continued ramp-up of our recently launched centers across UAE and KSA. We remain on track with EBITDA ramp-up in this segment with the margin expected to improve steadily as these assets mature over the coming quarters. When it comes to Burjeel Medical City, which is our flagship hospital and integral part of our growth strategy, BMC continued to scale its patient base in Q2. BMC achieved a volume growth of 30% year-on-year. This growth was driven by rising demand for subspecialties alongside a post-Ramadan surge in elective and minimal invasive surgical procedure. Revenue growth reflects a higher share of outpatient and day cases volume, while medical oncology continued to gain the momentum. Operational efficiency also improved. EBITDA grew by 21 percentage with the margin expanding to over 17 percentage despite ongoing investment in subspecialties and physician onboarding. As John mentioned earlier, our recent super specialty investments are starting to gain the traction, and we expect further upside in both realization and margin progression over the second half of the year. Next, I would like to highlight the case study that demonstrates both strategic delivery and the financial impact. Two quarters ago, we committed to scale our newly launched Trust Fertility Center, the largest fertility center in UAE with a targeted to reach the breakeven by Summer 2025. I'm pleased to report that we have delivered by achieving the positive EBITDA and net profit within just 6 months of its launch. In H1 alone, the center generated $27 million revenue, served over 1,800 unique patients and achieved more than 50% success rate, which is well above the global benchmark. This is a clear example of demand for subspecialties and how an ecosystem can support its success. This is more than a financial success. Fertility is a national health care priority in UAE and the center played a key role in our women's health platform, supporting our patients with an advanced AI-enabled reproductive care. Looking ahead, we are preparing to scale this model to Al Ain and Dubai to strengthen our referral flow from core specialties. Strong growth is only a part of the story. We are also becoming more efficient across the board. So let me walk you through how operating expenses evolved in the second quarter. We have started to see the real operating leverage. Personnel cost optimized despite onboarding 143 new physicians over the past 12 months. This reflects a stronger workforce utilization, optimized hiring and more efficient clinical scheduling across the platform. Our expenses also moved in the right direction, down by 7% Q-to-Q and more than 13% versus Q4 as we continue to normalize the spending as a part of the cost control across our business. One area that stayed meaningfully elevated was the ECL provision. Due to our auditor, conservative approach and updating the model on a ECL methodology on a historical loss model, the provision has increased, which is clearly an independent view of an auditor, which brings the global best practice and improved transparency. So we expect the ECL level to ease in the coming quarter, supported by ongoing improvement in the collection. Although this trended by driving the margin expansion, group EBITDA margin rose to 21.8 percentage in Q2, up from 16.2% a year ago. And we see further upside ahead and newly launched asset scale and cost efficiency continue to improve. These efficiencies are also showing up in our bottom line and cash generation. So the net profit for the quarter more than doubled, up by 129% year-on-year, supported by a strong revenue growth, disciplined cost control and gain from the asset optimization. Operating cash flow grew by 8%, reflecting a better underlying performance and improved working capital dynamics. We remain focused on our strengthening collection and driving further improvement in our cash flow conversion cycle. On the investment side, we maintain a balanced approach. Growth CapEx reflect -- continued to invest in super specialty capabilities and expansion across UAE and KSA. The maintenance CapEx remained in line with our 2.5% of the revenue guidance. As a result, free cash flow conversions improved to 54% in the first half, demonstrating the resilience of our cash generation model even as we invest in future growth. With regards to our financial position, we continue to uphold a disciplined and conservative financial policy, maintaining the flexibility to fund our growth while progressive balance sheet strength. As on 30th June, our net debt to EBITDA stood at 1.8. The increase in this quarter reflects the acquisition of our Medeor Hospital building in Dubai and other investment activities. We maintained a strong financial discipline throughout the first half. With no contingent of balance sheet liabilities and robust governance across all financial controls. This gives us a solid foundation to capitalize on further growth opportunities. And as we're increasingly doing so through the capital-efficient model like Operonix. So let me walk you through the latest development on that front. Operonix is our wholly owned subsidiary that consolidates all of Burjeel O&M partnership under a single scalable platform. It continues to deliver a strong asset-light growth throughout the long-term contracts with the government and corporate partners. As you know, Operonix is not a capital-intensive structure. And Operonix contributed 12% of our group net profit in the first half of 2025. Today, we have 15 active O&M projects. Recently, we got an ADNOC Das Island Hospital as a fully acute facility serving offshore workers. Looking ahead, our pipeline remains strong, particularly across UAE and beyond. Building on that success, we have now extended our asset-light strategy into Africa through Docktour, a new joint venture with the Abu Dhabi port. This platform is designed to expand health care access across underserved region through scalable container-based field hospitals. These units are rapidly deployable and can be scaled to support the health care needs in various parts of Africa. So both teams are now actively engaged in the joint development phase, and we expect it to share more detail on Docktour operational and financial impact over the coming quarters. Before we move to Q&A, I would like to close with a few words on the guidance, which should now be visible on your screen. In 2025, we are expecting our revenue growth as guided, driven by a ramp-up of new assets, contribution from our O&M portfolio and strategic expansion across both UAE and KSA. Our underlying fundamentals remain strong, and we are quite confident of achieving our midterm guidance. For EBITDA, we have updated our 2025 margin guidance to 19 percentage, representing year-on-year improvement compared to 2024. This reflects the timing of proactive investment to the long-term growth, particularly in the subspecialization like super specialties and network scale up in core markets. Importantly, our margin outlook remains aligned with our operational focus, driving efficiency, scaling high-performing hubs and maintaining a disciplined capital allocation. With these building blocks in place, we are confident in our ability to deliver the sustainable, profitable growth in 2025 and beyond. Now I would like to hand over to Sergei for the Q&A session.

Thank you. We are now ready to take questions. So I will turn it back to the operator.

[Operator Instructions] Our first voice question comes from Asjad Hussain from International Securities.

Congratulations on a great set of numbers. So a couple of questions I have. First of all is on the overall group revenue. So just wanted to understand if there is any inorganic component to it, if there's any split that you can provide around that. And secondly, on BMC, we see that year-on-year growth in the revenue has been slightly lower compared to the overall hospital growth of 17.3%. So I just wanted to understand if there are any other facilities which are contributing to this revenue growth.

Thank you for your point. Can you please repeat the first one, actually, we missed the first part of your first question.

Okay. So my first question was that we have seen that Burjeel has depicted a robust revenue growth of 18.7% in the second quarter. So can you please highlight if there is any inorganic component in this growth? Or is it all organic?

No. It is an organic growth basically. So except the ACOC you see like, which is the purely radiation facilities, we don't have any acquisitions or inorganic way of growth, right? So the growth what we achieved is an organic growth. And your second point with regards to BMC, obviously, and with regards to your second point, as you know, Don, obviously, the BMC was -- this quarter was lower than compared to the group. And equally, the other facilities in the group has contributed. So per se, Burjeel hospital in Abu Dhabi, Burjeel Royal Al Ain. And even the Medeor Hospital, Dubai and Abu Dhabi has contributed in a better form. Some of the facilities like Burjeel-branded facilities even contributed more than 22% growth. So this organic growth is across the facilities, not on a specific or on 2 facilities as yet.

That's clear. Second, I wanted to understand that we see that there is 1 gain in this quarter amounted to around AED 72 million. So I just wanted to understand, we understand that it's obviously related to the acquisition that was done in this quarter. So is there any recurring component of this basically -- amount which has been recognized? And secondly, I want to understand that since you have mentioned that in the guidance fee, the EBITDA margin in FY '25 will approach to 19%. So will this AED 72 million be part of this guidance that has been given, I mean, if the guidance is on the reported number or will it exclude this one-off?

Yes. First of all, with regards to the Medeor lease -- the building which we bought, this is the -- on that particular transaction. This is a onetime, and there is no recurring impact of that basically. This is purely IFRS 16 treatment, right? So this is a onetime. There is no recurring part. Secondly, with regards to the -- what the specific questions you ask -- Can you repeat your question, the second question?

So second part of my question was that this AED 72 million, I mean the group has guided for a 19% EBITDA margin overall for the group level in FY '25. So will this be on the reported level. I mean, it will include the AED 72 million as well? Or will it be excluding this one-off?

Yes. So our guidance is on a reported level, basically, which means it included, yes.

Okay. Just one final question. We have seen that previously, the company also used to announce interim dividends, but we have not heard any announcement from that. So is it something which is in the plan for now?

No, see, the group is growing, right? Like we are supporting for the group and equally supporting for the stakeholders to increase their value. Our plan is that basically like we'll maintain the steady way of distributing dividend and mostly that will be on annual basis. So obviously, with respect to all the shareholders will create a value are trying to bring a value by way of growth also, which you are seeing, and we are expanding beyond UAE also. So we have to support equally for the growth as well as we equally will give importance to the distribution of dividend also. It will be annual distribution.

[Operator Instructions] We have next voice question from or from Alaoui Morgan Stanley.

I have 2 questions. The first question, could you please provide us an update in terms of the competitive landscape in the UAE. We've noticed from PureHealth, for example, is adding more capacity, et cetera. So if you can provide us an update there, how you see it. That's the first question. And the second question is in terms of the update in your investments and your operations in the Saudi market, both on -- with Fitness Time and in terms of the 1-day surgery. So if you can please provide us update there?

Yes. Your first question about the UAE competitive landscape. The UAE, like all of us knows, right, like how the population is growing, the institution and the international people are trying to be settled in UAE, the population is growing, which is in the average of 3 to 3.5 percentage on a year-on-year growth. So when you see our -- on a volume growth, which is a clear indication is that how the Burjeel is relevant in this market. So our population has grown. Our outpatient volume on an H1 basis, it has grown more than 8.7 percentage. And if you take Q2, we've grown at around 12%. So we are growing here, flourishing in the market and through our networks. So there is no competition as such, basically we felt and there is no new player or a brand is coming to the UAE and is getting established. The same existing health care provider is increasing their network or beds, that is where the expansion is happening. That is the known brand expanding in the region or expanding in the country as the organic growth, I can say. Other than that, we didn't felt anything like the competition or as such. But as a Burjeel, we know about our product, we know our market, we are increasing our network and we are growing, which is truly reflecting our number as well. When it comes to KSA, our plans are the same. We are going, we are expanding in Saudi with our Physio network, with our day surgery network and primary network. The projects are on. Basically, it is going on. As we indicated, our first day surgery, we will come and disclose our upcoming -- when we are going to be inaugurated. But the project is up and running basically. Project is as we planned. And the Leejam -- with the Leejam partnership, we are continuing. There is no any other way sort of basically. So like we are the operator. We are expanding. We are expanding across the Saudi basically. So there is not another thought on Saudi, basically. Saudi is our next destination.

So just a follow-up in terms of with Leejam. Is it as expected or you're facing challenges. And if you can provide more color there.

So Leejam, like the business is going as we planned basically. Obviously, like we completed around 30 centers. So we are now giving focus more on to the ramping up of those assets. Parallelly, we are identifying the location also. So the growth is equally valued, and we'll be bringing those indicated projects. But as of now, the team is very much focused to ramp up the existing assets basically. So that is where we focus, and we have a full support from Leejam and the project is going on. And we are identifying some more locations, and we will come soon and we'll announce more projects.

We'll be now moving to the next question from Saiket from HSBC.

Congrats on strong set of results. Two questions from my side. First is on the receivables. So this quarter, your receivables increased, and I also see that more than 180 days of receivables has actually increased by around 40%. So just want to color on how you are doing with the receivables and the collections for the second half. And the second question is on the Operonix. So I just want to know what's the strategy to actually club all the O&M projects under this brand. And if you can provide like without Operonix, what is your EBITDA margin.

Yes. With regards to our receivables, our business also grown basically. So when we see that the receivable growth in correlation with our revenue growth, they're aligned basically. So there is no abnormality as such receivable grown against the revenue. So it is very much aligned. Obviously, the team and we all are working to improve the collections, which is in action basically. So you'll be seeing the better and better in the coming quarters, which is an ongoing process, and we are on it. And secondly, with regards to Operonix, Operonix has been indicated, which is our O&M arm. So the company, which is asset light, which is built for -- which is managed for someone basically. That is the concept of Operonix. So Operonix is now focusing more under the project, which is beyond UAE. And we are acting like a health care arm for the strategic project of Abu Dhabi government. So we are closely working with a lot of organizations, charity organizations and government-funded projects, which is strategically for some other countries, we are working as a health care arm to manage those projects. And more than that, basically, now we are getting a lead on various countries on a G2 level also to manage the health care system, which all are in pipeline, which will come to all of you as soon as we lock all these projects. But as of now, Operonix is very much progressing, growing, and our bottom line also is contributed, right? So initially, I indicated that Operonix will be contributing around 5 to 6 percentage. But in this particular quarter, if you take Operonix has contributed around 12 percentage of our bottom line. So the beauty of Operonix is that basically this is an O&M fees, which is directly coming to our bottom line. So the rest of the cost, everything is a part of the project cost, which is either funded or supported by the corporate or the regulators, as we indicated. But as O&M fees, which is a separate block under this particular element is coming to the holding as the bottom line support. So that's where we are. And with regards to the percentage of the margin, it depends on the project basically. And this is truly, I would say, please bear with us. We can't disclose this particular margin openly. So I'm very, very, very honest. So Operonix is contributing in a very good form to our bottom line. And this margin also varies to project to project basically. It is not the standard project, EBITDA margin or the profit margin across the project. It is varied from project to project.

[Operator Instructions] We saw a question from Ahmed from Tegya. Hello, Ahmed do you have a question. Ahmed sent us the question as a text instead. Can you please shed light on the other net gains of plus AED 69 million. Yes.

So Ahmed, if I understand your question correctly, you're saying that like what all included in the other income, you mean. So which include like obviously, the gain what we achieved from the acquisition of Medeor Hospital, as like the income like or net profit that we generated from our other associates also including this. And this is clearly demonstrated in our financials as well.

We have a follow-up question from Saiket from HSBC.

I just want to understand because a few quarters back, you mentioned that the oncology is ramping up. So there were more low-margin patients like doing chemotherapy, and these will be converted in surgical or medical oncology, right? So just want to understand that are you seeing that conversion happening? And my second question also is related to this. So the complex facilities that you are opening over the last couple of years, are you seeing that the EBITDA or profits are going up and increasing in that trend.

Yes. Saiket, with regards to oncology conversions, obviously it is increasing basically comparatively like when we compare the last few quarters, the improvement is much, much better. But like obviously, parallelly, the volume also increasing. As you may notice, basically, in one of the slide, we clearly indicated, right? Like 30% of the growth came from oncology, which is majorly contributed by medical oncology. So if I just compare apple-to-apple, what was the volume at that point of time, how this got improved, yes, obviously, it's massive improvement. But parallelly my volume also increasing. So the growth conversion percentage may be minimum, but in absolute number, it is more. So this is what is happening. But it's a clear indication, and it is a good indication basically. So the volume is growing, is a clear cut indication that the people are trusting the system. That is what we're trying to score. So conversions, obviously, when they enter into the system, conversion is a matter of time. So we are seeing that positively. And secondly, with regards to the profitability margin, obviously, it is increasing. And if you may check the few quarters of BMC, it started from 6%. Now it is 17%. It is growing. So as we indicated earlier, basically, when the ramp-up is improved, when all the doctors which we hired start performing, for example, last year, we hired around 84 doctors, which is coming with the system and getting ramped up. So when they improve the ramp-up basically, then I will have only the marginal cost impact because currently, I'm bearing all the costs, then I will have only the marginal cost impact. Then it will be supported or it will contribute to my bottom line aggressively. So that is what we are expecting. So obviously, the growth is yet to come. It is going to come for sure.

If I ask one more question. This is regarding the acquisition of Medeor Dubai Hospital. So I just want to understand that the rationale for the acquisition? And are you looking for conversion of more leased assets as your owned assets if there is an offer.

No. See, this is purely -- it was a long-term lease commitment, what we agreed long time with these landlords. And this asset came to us through some opportunities through the bank. And we feel that this is a great opportunity. That is we immediately we converted. So if anything comes as such like this, obviously, we'll not shy away from this. And you saw that what it is adding value to us, basically. So if anything come in future, we'll not shy away. But we are not aggressively exploring an option of creating an asset base basically. If anything come which we feel are strategically and financially adding value, we'll explore that option. And we'll come to the market and we'll disclose in advance for sure.

[Operator Instructions] At this point, we are seeing no further questions. I would like to pass the line back to the company for their concluding remarks.

Thank you all for joining today's call. For any follow-up questions, please find the Investor Relations contact details at the end of this presentation and on burjeelholdings.com. Thank you.

This concludes today's call. Thank you, and goodbye.