Clariane SE (CLARI) Earnings Call Transcript & Summary

Hello, and welcome to the Clariane First Quarter 2024 Revenue Conference Call. Please note, this conference is being recorded. [Operator Instructions] I will now hand you over to your host, Philippe Garin, Chief Financial Officer, to begin today's conference.

Good afternoon, ladies and gentlemen, and thank you for attending today's conference call on Clariane's first quarter '24 revenue. I'm Philippe Garin, CFO of the group. Before touching the presentation, please have a look on Slide 2, where you can read our disclaimer regarding the forward-looking statements that this presentation may contain. Let me begin on Slide 3, with the 2 main highlights of this quarter. Clariane recorded solid business growth in Q1 at 7.4% in both reported and organic terms. All regions and businesses contributed to the growth, demonstrating once again the pertinence of our business model. And we confirm our '24 objectives with organic growth of over 5% and stable EBITDA in value for the year at constant perimeter. Finally, our refinancing plan also moved ahead with a 98% approval vote for the capital increase at our recent general meeting. On Slide 4, you can see how the revenue growth is well balanced driven. On the one hand, by strong volume, increase of 3.9% on the back of higher occupancy rate and strong ambulatory activity. On the other hand, by a dynamic price trend of 3.5%. On Slide 5, now you can see that the main driver in our revenue expansion in Long-Term Care has been the continued improvement in occupancy rate over the past year as the sector returns to normal. The rate was 89.6% in the first quarter of this year, an almost 200 basis point progression from a year ago. To note, it crossed the 90% threshold at 19.2% in the month of March. You have on Slide 6 the revenue performance of each of our activity. All 3 businesses positive, solid reported and organic growth. The Long-Term Care segment, which accounted for more than 60% of our activity in the first quarter of '24, generated revenue of EUR 800 million and organic growth of 7.1%. This was fueled by the continued recovery in occupancy rates and price increase. The Specialized Care segment generated around EUR 340 million of revenue in Q1, 26% of the group total, with organic growth of 5.1%. Finally, Community Care keeps growing very fast at over 14% in organic basis and confirms the status of a very promising business. Moving now to Slide 7, to our performance by geographies. Year 2, all regions showed a strong level of activity. The price and volume impact on growth was well spread throughout all regions. Beginning with France on Slide 8. In our largest country, business remained firm with revenue up 7% on an organic basis in Q1. Organic revenue growth in Long-Term Care was 6.4%, reflecting the impact of revised pricing and higher volume, with the average occupancy rate continuing to recover gradually to 80.6 -- 87.8%, sorry. Specialized Care achieved organic revenue growth of more than 6%. Each subsegment delivered significant growth during the period. Outpatient and partial hospitalization activities made a good contribution in all facilities. Finally, Community Care grew 25% on an organic basis, driven by robust demand for the service of Ages & Vie and Petits-fils. On Slide 9, we have detailed our performance in Germany. Revenue in Germany rose sharply in Q1. As a result, Long-Term Care posted organic growth of over 7%, supported by an increase of 300 basis points in occupancy rate to 89.2% in March 29 -- '24, sorry. The rate of increase was 3x than the one of last year. This was largely a consequence of the [ PBM ] law implementation. Growth was notably driven by price increase negotiated in '23 with local authorities. As observed during Q1, the impact of last year inflation should be gradually eliminated in '24 and '25 through the new pricing measure implemented last year and the additional one currently being negotiated. On Slide 10, you have our performance in the Benelux region, where growth remained strong, as revenue rose by over 8% on an organic basis in Q1. In Belgium, revenue totaled EUR 154 million, up close to 6% on an organic basis. In the Netherlands, revenue was EUR 37 million, up almost 20% on an organic basis, thanks to a strong ramp-up of our greenfield. Moving to our last geographic region on Slide 11. Revenue in the Italian market rose by more than 4% on an organic basis. Long-Term Care grew by close to 8% on an organic basis, supported by high occupancy rate of 95.6%, up 340 basis points. Revenue in the Specialized Care segment, which accounted for around 46% in the total of Italy, was stable during the period. In Spain, revenue was almost EUR 60 million in Q1, up 11% on an organic basis. Long-Term Care was supported by an average occupancy rate of 88.5% as a whole versus 83.8% last year by a slight increase in price. Specialized Care revenue grew on the back of a strong outpatient activity. In the U.K. now, revenue totaled EUR 17 million, up close to 24% on an organic basis. The deal to sell the U.K. business closed on the April 9, '24. It will be fully deconsolidated from that date. Turning to the refinancing plan on Slide 12. As many of you know, we have completed its first 2 stage in December '23. As regard to the capital increase, the process is continuing. The AMF has completed Predica, Clariane's largest shareholder exemption for the requirement to file a draft tender offer. The adoption by Clariane shareholders of the resolution relating to the capital increase is a further step towards its completion scheduled for late June '24 or September '24. The transaction remains subject to few remaining conditions. Concerning the asset disposal program, as a reminder, we have already completed over 1/4 of the program and are now actively pursuing several deals, particularly in Benelux. I remind you that the asset disposal program is aimed at refocusing the group business geographically and raising around EUR 1 billion of gross disposal proceeds to reach with the capital increase a leverage ratio of below 3 and the LTV at 55% by the end of '25. On Slide 13, you have our outlook for '24. Clariane expects an organic growth to remain above 5% over this year. EBITDA before IFRS 16 should remain stable in value on the constant perimeter. As regards to nonfinancial indicators, Clariane has set [ constructive ] target for the 19 indicators on its new CSR roadmap, including NPS qualification, lost-time accident frequency rate and low-carbon energy trajectory. Finally, on Slide 14, a word on our twin priority for '24. On the one hand, we are focused on deploying At your side, projects that aims to leverage our existing capacity to address growing inpatient and outpatient care demand as well as strengthen our core capabilities of quality, human resource, digital and inclusive governance to ensure trust. On the other hand, and in line with the refinancing plan, the group has prioritized improving cash flow generation and controlling debt levels. Growth investments are expected to average around EUR 200 million in '24 and in '25. This concludes our presentation for today. Operator, can we move to the question?

[Operator Instructions] We have no questions coming in, so far. [Operator Instructions]

Yes, we have some questions on the web. So the first question is in Q1 '24, organic growth of 7.4% is higher than the organic growth expected of 5% for the whole year. Could you please explain why you're expecting a lower organic growth rate for the remainder of 2024?

We are not expecting a strong decrease in growth. But if you remind our guidance is based on a constant perimeter. So we have computed that whatever -- what is going to be sold, we will have more than 5% of organic growth. It's why we have some, I would say, cautiousness is the way to give this guidance because we may have various type of disposal, which are not all the same profile of growth. But it is true to say that we have a good start of this year, as you have been for sure able to understand that our occupancy rate is moving the right way in most of our country. And I would say it's moving the right way in most of our country and is moving a very, very, very good way in some countries. And I would like to focus on the current recovery of Germany. As you know, Germany was increasing by 100 basis points for the full year of last year when we have 300 basis points for 3 months. So clearly, it can catch up in Germany regarding our occupancy rate. That is the reason why cautiousness related to scope, if I can summary, in the one hand and on the other hand, a very good start of this year.

Thank you, Philippe. The second question is regarding the tariffication, an increase in prices that have been quite high in Q1. The question is, do you expect the positive impact of tariffication to decrease in the next quarter?

We -- as you know, we don't have all the figures for France. Currently, we are waiting for some figures that we have significantly before in the -- we had before in the last previous year. Overall, the figures are moving the right way, and I don't see any bad news to come in the next quarter. Clearly, we were in a very difficult situation, as you know, in Germany, and we have a kind of catch-up because we still have a significant increase of our tariff when the inflation is moving slowly, but seriously down. And so we are not at all in the same situation than last year. And we should -- I would like -- my feeling is the lending regarding inflation will be better for us than what we went through in '22 and in '23.

Thank you, Philippe. Next question would be on an update on the refinancing plan and more specifically on the disposal, especially in Netherlands and Belgium as it started. Did you receive nonbinding bids?

As you know, I can't say anything on the topic. But I can't -- if I had something negative or positive, you would have been aware. And in a way, the fact that we are not giving information is a proof that everything is going the right way. We -- as you know, this kind of program is very significant. So we have a small disposal, which has -- which are easier to achieve. Benelux is a significant part of the program. It's not a must. We will do it if it makes sense. And overall, our program is moving the right way. Same topic regarding the capital increase. As you have been able to follow the 3 first steps we went through with the big issue, and we have been positively surprised by the level of the agreement coming from shareholders regarding the capital increase, which was a very positive point for us. And we are quite confident to achieve it before June.

Thank you, Philippe. Next question. Could you please talk about working capital release related to German operation? So could you please talk about the working capital trend for this year?

As you know, we -- how can I say that? Working capital is probably going to be the last negative point for the various crisis. We are now getting out from both of the crisis. One of the points was related to Germany due to the social help administrative burden, which is clearly modifying significantly our working capital profile. It's clearly not forever. We will recover. It will take a bit of time in Germany, even though I am quite confident that we will be able to achieve part of it during this year. But it's a long way because as a file moving into the social help is around 9 months. So as we have an increase of social help in Germany, which is not an issue regarding financing. The financing coming from social help is a good one. But it's clearly some delay regarding -- due to administrative organization. So we are expecting, for sure, a positive reversal of working capital. But in Germany, to be back to the previous situation, it will take time.

Thank you, Philippe. The next question is about -- there have been a trestle declaration from Mr. [indiscernible]. Did you have a chance to talk with him? And do you know what he's expecting to do with its position with Clariane? That's the first question. Second question. Within the refinancing plan and the capacity to do the capital increase, you are expected to get a waiver from the [ Oceana Elders ]. Could you please update us on this subject?

The first one, it will be difficult for me not to meet Mr. [indiscernible] because he was at our general family. Even last year, it's -- this shareholder is -- was holding less than 5%, but he entered in a capital 1 year ago -- more than 1 year ago. He is showing a wish to be a long-term partner. And we have a relationship with him very positive and constructive. So we are welcoming long-term shareholder who have the same kind of, I would say, value than the one we are sharing in our company. From what we know, it is the case, so nothing to comment especially about this new shareholder. [indiscernible] we -- I have no specific declaration on this topic. As you know, it's difficult to give any information on that kind of subject, as nothing is public as of today.

Next question. Do you have any -- what is your view surrounding your outstanding hybrid instruments? Does the coupon step-up change your view?

Same topic. It's a bit too early to share anything about this hybrid in bonds.

Next question. Could you please provide some commentary on the expected increase on your cost base this year? And why does EBITDA stay stable in value?

As it was shared for the full year financial statement, we have been used to have positive impact in EBITDA coming from real estate, our real estate development on one hand and selling leaseback on the other hand are at a very, very low level today, near to be 0. So we -- with such an increase in both price and occupancy rate for sure, before this impact, we have some improvements. But we know that we will have very probably to compensate real estate participation in our results. And it's why we have been cautious once again regarding the fact that we are at least waiting for an EBITDA equal in value of the one-off last year.

I think that's pretty much it on the question that we have on the web. Maybe if we can have a reminder for the process to ask questions on the phone.

[Operator Instructions] The first question comes from the line of Tomas Mannion from Sarria.

I don't think you'll be able to answer this question. You've already commented. It was in relation to your hybrid or deeply subordinated bonds. When do you think you would be dealing with those?

Sorry. I'm not in position to comment on both hybrid and [ Oceana ]. As of today, we are in the middle of this process with the aim of putting in place the capital increase. So sorry, I can't answer that.

There are no further questions, so I hand you back to your host to conclude today's conference.

Sure. So I'm very pleased to share this Q1 with you. Frankly, we are in front of a very good first quarter. And I'm pleased to see that -- I will say all our countries are in a pretty good shape, and we have been in the right way. Thanks to all of you.

Thank you for joining today's call. You may now disconnect your lines.