EuroEyes International Eye Clinic Limited (1846) Earnings Call Transcript & Summary

Good afternoon, everyone. Welcome to EuroEyes 2023 Annual Results Investor Presentation. It's my pleasure to introduce to you the management joining us today. We have Dr. Jorn Jorgensen, Chairman, Executive Director and Chief Executive Officer; and Dr. Markus Braun, Executive Director and Chief Financial Officer. Following the management presentation, there will be a Q&A session. [Operator Instructions] May I now pass the time to Dr. Jorgensen to start the presentation first, please.

Yes. Many thanks for the introduction. My name is Dr. Jorn Jorgensen, and I'm here together with Markus Braun today to tell about our 2023 annual numbers to the investors. Next one. I'm very happy also to do that while we really had good numbers and when you see the environment in Europe and elsewhere, we were still able to grow substantially. When you see about the total revenue, we grew by 20% on year-to-year to HKD 722 million (sic) [ HKD 733.8 million ], adjusted EBITDA, I like that, that is our cash flow. And we had here an increase of 31% to HKD 302 million adjusted revenue -- adjusted EBITDA and adjusted net profit HKD 152 million, we had here an increase year-on-year of 50%. So this is good numbers, and I'm happy to announce that today. Next one. When we go to [ Greater ] China, China is, in my opinion, our most important market still while it is -- have the huge potential and it have its biggest luxury market worldwide. So it's a lot of people there who can afford to have presbyopia operation. And we saw here a revenue increase of 46% year-on-year to HKD 144 million. Our focus is still on our 8 clinics we have, 9 clinics with this one here in Hong Kong. So we have in our clinic utilization capacity rate of around 30%. So we can grow there. So when we wish to grow, we will not grow opening up new clinics. So we will feed the existing clinic even more as to increase utilization capacity rate, and we will do that here next in Beijing and in Shanghai. So this is what we will do. And we will also push the 2 clinics we opened here during COVID in Chongqing and Chengdu. And so we hope that this will gain a lot of success and we will do that by a strong rebound in our marketing effort on social media. What one time more to mention is probably also our cash flow, our EBIT in China, we will see that normally you have this in the financial numbers that everything is decreased or depreciated the buildings, the construction, the laser, everything over 3 years -- 3 to 5 years. So over these first 3 years, you get punished in your term of numbers. And now almost half of our clinics is out of this, so everything is depreciated. So we also hope to see some effect here on our numbers. Next one. Well, Germany, we go here, we saw an increase in year-on-year revenue of 14%. I think it's remarkable. When these people who follow the German economy online and everywhere, you have seen last year, we had a growth in Germany of about 1% to 2%. And this year, it's even worse. It's -- I think they predicted 0.1%, but we still managed to grow. We are still growing and we are still attracting people. So we don't feel that that's the economical downtown you see in Germany at the moment. Next one. And here also strong growth especially here is fueled also by lens surgery. That might be one of the reasons we don't see a downturn while these 48-year-old people, they wish to pamper themselves, they have the money and they wish to let's see, change something in life and wish to get rid of readers or progressive glasses. And you see here again, with the CAGR since 2020, revenue from exchange lens surgery is 18%. So it's rather robust in this environment with war in Ukraine, with Gaza, with high interest rate and bad mood, we grow. Next one. We have done one thing here also in marketing. We have concentrated a little more about social media. We have done introduction video, educational video, brand videos and review video of happy patient. It seems to have a great effect. We have just started with them, but I'm very surprised and it looks like social media also in Europe is something that has been there in China for a long time, but Europe also seems now. And when you are doing good educational video, I think you can really also increase laser vision correction. Next one. Yes, that is see our clinics. That's the Denmark, Germany, there are 2 new clinics, we have seen that has been 1 in the United Kingdom, in London and 1 in Hong Kong. This year, we will get 2 new clinics in Germany. They will be finished this year. So this is our landscape now with clinic. We will come up until 34. Next one. And London. London was a little my baby. We opened next to Harrods in a very prestigious location, and it finished here in the end of last year. And we already -- we expect within the next 3 to 6 months to have a breakeven. So this is very remarkable. We are doing 41 patients here in March. And so we will have breakeven. And you know the model [indiscernible] have after breakeven the cash flow is flowing. So this is very good. So it was the right decision to go there. It is lens market. They have -- it's international. I have never seen such an international area before in hybrids, you have Arabic, you have Asian, you have German, European, you have everybody there. And don't forget, in London, you have living 150,000 Chinese and Chinese as for EuroEyes, they know us from WhatsApp and WeChat. And we are really low-hanging fruit there. So we hope to also on this market for Chinese living in London to be a good candidate. Next one. Clinic, we opened in the end of last year, we opened a clinic here in Hong Kong. We were waiting on -- for doing our main business. Our main business is lens surgery is ICL. For doing that, we need a license. And we first got the license 2 weeks ago. So we are now preparing the opening here to really start businesses. The other patient we had here, we used to send them to [ Shenzhen ] but we have seen it's better to do it in-house. Also, our -- the third eye surgeon we have, sir, Christopher Liu from London. Hong Kong East who was raised here. He got also his license to perform surgery in Hong Kong. He also got that for a few weeks ago. So we are really ready to start, so we will -- I think they will do the first lens surgery also in this week here. So we hope now being able to fulfill and to grow here in Hong Kong. Next one. Yes. A little overview about -- here about EuroEyes. We are a company focusing on surgery -- eye surgery with a high margin. Mean average revenue per eye is about EUR 3,000 or HKD 25,000. We have a strong balance sheet, HKD 720 million cash, no debt. So we are ready to take on when we are talking about M&A and something will happen, I can promise you. We are a cash flow business. We see that. You saw our EBITDA, it is very high. So we are -- we can fund these private equity and these M&A deals, we hope to -- we can fund them ourselves. We don't need to go on the market to ask for loans and very high interest rate. And we will grow organically, but especially by M&A. I told you 2 new clinics will open in Germany this year and consultation center in China. So I will get later on to the forecast and to our plan when you look a little in the future. In the meantime, I will give here the word to Dr. Braun. Thank you.

Okay. Thank you very much. Also, thank you very much today for joining our session here on the annual results announcement. My name is Dr. Markus Braun, the CFO. And as the CFO, I'm very happy with the numbers we are able to present here. So perhaps the next slide. Because, as Dr. Jorn says, I think it's remarkable what kind of figures we actually achieved with the turmoil in Europe with the bad economy, with the war in the Ukraine. And on the other hand also was what we see in China was a slowing economy there. So I'm very happy that we actually see a 17% increase year-over-year from 2022 to HKD 714 million and what is also remarkable from my perspective, which also shows the strength of our business model are really the margins we are having with an EBITDA margin now at more than 40%, up 26% from last year and also adjusted net profit, we are back at 20% net profit margins there. Next slide, please. We acquired the practice of -- the clinic of Professor Knorz in Mannheim. And just as a quick recap, that was not only for having a bigger footprint in Germany with this additional clinic in Manheim, but also that Professor Knorz helping -- is traditionally helping us very much in China. He was regularly in China before COVID for doing surgery. And now he's picking that up again, is also strengthening the management structure in China from a medical perspective. And what is also an additional goody we get with him is the fact that he is very well connected in the ophthalmology world, so he can really help us and has helped us already to identify potential partners in that area, who might be interested in joining the EuroEyes family [indiscernible] will come to that later on. And if we are looking at that, because of the IFRS regulations we are only able to consolidate him for 5 months in 2023. If you look at the figures, as if you would have joined EuroEyes at the beginning of the year already, I think they are looking even more impressive with revenue at nearly HKD 740 million with the adjusted EBITDA more than HKD 300 million and with adjusted net profit more than HKD 150 million. Next slide, please. What differentiates us from our competitors as well is global footprint. That in the past, like in 2022, 2021, where there were very strict COVID restrictions in China. We were able to push in Europe. Now China is actually helping us this year very strongly. You have seen that. I will tell about that later on as well. So I'm very happy with the diversified portfolio because it somehow hedges us from the political or geopolitical problems. With Germany is still at 53% of the revenue, still our biggest country, our cash cow. China, again above 20% and U.K. and Denmark with middle 10 digit figures. And with the second clinic in London, we are certainly expecting that U.K. is growing there. Next slide, please. In Germany, what I already told or what Dr. Jorgensen already told, we have grown from 2022 to 2023 by 14%. Also with Dr. Knorz acquisition, we have grown by 10% and that's quite remarkable in the business environment we see in Germany now, which is difficult now for 2024, GDP growth of 0.5% projected. And why are we growing? I think it's really the fact that we are focusing on presbyopia treatment, that we have been the largest implanter of trifocal lenses for the last 7 years in a row, that we are really the go-to clinic for these kind of surgery and that actually the people who are in the age for presbyopia, so 45 plus, they want to pamper themselves. They have some money. They have settled so much that they are saying, okay, I go for the surgery while the younger people who are myopic, might want to keep their money together and might not go for the surgery. And you can actually see that in the lens exchange surgery revenue increase, which has grown 32% actually. So that's really -- well, sorry, 26% up there, 26%. So that's really driving what we are doing here, and we see the same picture. Next slide, please. See same picture in Denmark, where also the growth from lenses is stronger then the overall growth. I think in Denmark also what we see is really that our new clinic in Copenhagen and Parken International Football Stadium is really working very, very well. We see a lot of patients coming and being interested in us because they know, okay, it's Parken and so on. So we see a very good growth in Denmark as well. Next slide, please. And China is really remarkable because we reached that HKD 144 million of revenue with from my perspective, like only 11 months because January 2023 was still very much affected by COVID and then Chinese New Year, which was end of January last year. So we are really looking at a very strong rebound with 46% revenue increase. And with the normal January, we would have surpassed our record year 2021 for sure. And also, again, here, what we see is that strong growth in lens exchange surgery from HKD 40 million to HKD 72 million, so 83% growth in that area. We have done the first trifocal lens exchange in China back in 2015, I think when opening our Beijing clinic. And so we are really the market leader in that area to provide the services. We have a lot of experience. So it's really the clinic where to go to for presbyopia treatment. Next slide, please. The only clinic where I am from a CFO perspective, was a little bit unhappy with was London Vision Clinic because they were not able to sustain the level of 2022, where they did a really good job. Just remember, we acquired them in January 2022. So 2022, first year; 2023, second year, they were more hit than we expected and than they expected by the slowdown in the British economy, which only grew 0.1% in 2023 with Brexit, with other problems they have. And on the other hand, we see the London Vision Clinic is focusing on laser surgery. So the new clinic is focusing on lenses. Clinics in Germany are focusing on lenses. And so that's also one of the reasons we see or we believe and that we say, okay, it's a focus on laser surgery in the British economy, makes them more vulnerable, and we see that in the figures. We see, on the other hand, British economy is picking up now. And if I look at, let's say, the first quarter surgery numbers from 2024, they are back on track. They are back on track to reach their business plan, to reach their earn-out, which we have agreed with them. So happy to see what we are doing there. Next slide, please. Dr. Jorgensen already mentioned that capacity utilization rate. So how many surgeries are actually done in our clinics, in our operation theaters and how many surgeries could we do? And right now, we are at a rate overall clinics of 25.6%. So there is a lot of room to grow, a lot of room to grow in an environment where we have reached breakeven for all of these clinics. And so every additional surgery directly contributes to our EBITDA -- to our EBIT and to our net profit. Next slide, please. And here you see why that is the fact because the only variable cost we have is actually raw materials and consumables. 11.8% of revenue is coming from that area in 2023 with a nice downward trend. So we were even able in an inflationary environment to actually reduce the prices with our suppliers, so that the average spend per surgery for these direct materials were actually going down. But also the other cost factors like salaries and doctors' fees, 24%. Depreciation, 9.5%. They are kept at a low level and I'm very happy with that, that we are not only -- or that Dr. Jorgensen is actually focusing on the revenue, giving us new patients by good ideas from marketing perspective and so on. And on the other hand we are also, from a cost side looking at that, keeping that under control. Marketing, 10% right now. Administrative expense, going down to 12.5%. So very happy with these figures. And again, every additional surgery minus direct costs distributes directly to the EBIT. Okay. Next slide, please. A little bit of -- on the cash side, and Dr. Jorgensen will say a little bit more on what do we want to use the HKD 720 million of cash we have right now. We have this strong cash position. We don't have any debt. And just keep in mind, you might say, okay, 2021, you had HKD 845 million. But from these HKD 845 million, we actually bought 2 clinics. So we bought London Vision Clinic, we bought Knorz. And so if we didn't -- wouldn't have done that, this one would have been way above HKD 900 million. Okay. Thank you very much for that. Thanks. With that, I hand over to Dr. Jorgensen again to give us a little bit of a picture on the future.

Yes. Dear investors, ladies and gentlemen, next one. Everybody, of course, are most interested in next to all our numbers for '23 also, how will it looks forward. And what we're looking forward is we are an international company. We are in Europe and we are here in Asia. And of course, we wish to grow. We have the cash and we were looking for that long time. We are very selective in a way. But of course, we have now deals in the air. And this is something what you will hear later on. We will -- we have a leadership in presbyopia, and this was a very good decision. While it sees when you are in this environment in Europe and Germany with low growth, I told you 0.1% growth in the German economy but we are doing so many eyes as never before. So it looks like to be in the 45-plus region, it's a good area to be in. And we have also, let's say, put up a lot of efforts in the clinic to strengthen the internal management. The next one. And again, here, we have tried to set up to see outlook until '26, and we expect a revenue in the low 20s. So you see the journey we have been on only organically, that is not including M&A. It's only including assisting clinic. And I don't think you have many clinic groups who organically without M&A grow there 20%, 30%. We have done that all the years, and we expect that to go on. Of course, when you grow in the low 20s with the revenue, the EBITDA will be even higher. While we have already in all the clinics we have passed the breakeven. And after breakeven, you get a cash cow, while you have all the costs already paid. And when you are going to net profit, you will see even higher, so we expect also something here like in the mid-30s, a growth rate. So next one. So we have, as I told you, HKD 730 million cash on the account, I'm very happy for that in the current interest rate environment where you really need to put on some like 6% or 7% interest rate when you are going for a deal. We don't need that. We can go out and pay it for cash. The private equity are all sidelined, they are nervous at the moment. So they more wish to cash in of old deals and you will see this money here probably being deployed within the next 12 to 24 months. And we also have, as a doctor-owned company, mostly, most of our shares is by the doctor. So we have good connection with other doctors who are in -- let's see, who need an exit strategy, who are 50 or 60 plus need an exit strategy. And this is also the deals that we are going to do. They know us, they trust us and they know it's medical decisions, which is going to be taken. We will go also outside of Asia, North America, in Asia and also other places in Germany. Next one. Yes, a little takeaway message low cost and high EBIT. I think this is -- this should be a dream for every investor and high EBITDA means a high cash flow, so what we can finance our deal ourselves. And I think this is very easy. We have been on the market so long time that our marketing cost is less than 5% of revenue. So you can see when we were so leverage and probably we should have done that much more, we need to spend it on marketing. Most clinic groups have marketing cost of 10 to 15x -- [ 10% to 15% ] of the revenue, we have below [ 5% ]. We are doing mouse by mouse marketing, and this is the most important thing. Yes, global presence that make us a little independent, let's say, when Europe is down, then Asia are up and the other way around, maybe we go to the North America, so then we will be hedged in another way. We will expect here a very high profitable growth while we are in a clinic where we are mature, they know us and the snowball is already big. So this make it easy, like in Germany, where we have been so many years, people come mouse by mouse. So you have seen our growth [indiscernible] and we are cash rich, and we are ready really to do M&A. And I think many of you are waiting on that, and I hope I -- we can fulfill your expectations. Many thanks, and we are ready for Q&A.

Thank you, management, for the presentation. Before we begin the Q&A session, let me introduce Mr. Michael Zhang, Chief Operating Officer, who will also be joining the Q&A session with us, together with Dr. Jorgensen and Dr. Braun. [Operator Instructions] We'll take the first question from the floor if there's anyone. If there are any questions.

I have 2 questions. One is about operation? As just my friend from London visited me and she wanted to get some kind of its easily available drugs for short eyesight for kids. But in London, they cannot get that kind of thing they want, but they can get it in Hong Kong. If you can provide such kind of a service like you can do maybe in your London Clinic or you can have a testing online testing and then can get the drugs from Hong Kong?

So first of all, you're talking about low concentration atropine drops that's drops for children myopia control. That has been approved in Taiwan, Hong Kong, when it's registered by some other reference countries you can use over here. In London, you need to register it over there also. So I'm not sure if there's any local provider, pharmaceutical companies there who have already got the drops approved in U.K. to be used if that's something that doctors can prescribe over there, I think that's from a, I would say, legislature perspective, regulatory path, you need to do that. The second is in London, we are a clinic more focused on presbyopia, also myopia, laser vision correction. Children myopia control at the moment is not a big topic in our London clinic. So that's also one other thing why historically our London clinic wasn't giving the prescription for such drops. I think that answers your question.

My second question is about the M&A. So how do you do the valuation for the M&A target?

Case by case, That's always case by case. You need to see if that's a chain or if that's a big individual practice? Are they refractive based? Or are they general ophthalmology based? I mean, in Europe -- it's also different from Asia to Europe to North America to Singapore, so different region also plays a role in giving the multiples also the parameters.

So in that case, coming like 1 or 2 years, what's your CapEx for the M&A?

We just said over the presentation, we plan to deploy HKD 500 million from our cash reserves to be deployed into M&A in the next 2 to 3 years.

Both Europe, Hong Kong and Mainland China or...

Globally, but we are now looking at potential target in Asia Pacific, in Europe, North America, but it's -- we are open to well, developed country, English speaking, where we -- of course, we need to manage there. And I think that's the region we're targeting at. Also, the clinic where we can apply our presbyopia correction technologies and service line into that will be our key parameters to see whether that's a good fit or not.

Thank you. Are there any further questions from the floor?

I have a question about the dividend proceeds. So together -- so with the interim dividend, I think our total payout for the financial year 2023 is about 25%. So I think -- I'm very happy that our company will do more M&A in the coming future. But how about the dividend policy in the coming year or a few years? Do we have a guidance or what kind of factors are we considered for the payout?

Yes. Thanks for the question. We wish to keep a very consistent dividend payout ratio. So it will be somewhere around 25% to [ 30% ] in that range. We have been doing that for like 3 years or so. So that will be our consistent dividend policy.

People expect as when you get listed and where you raise money on the stock exchange. And we are still very young, we have from 2019. So I don't think they expect that -- to get that as dividend. They get to -- they expect us to invest in M&A and grow. So this has always been our policy. But as we are cash rich, we also choose to take 25%. And I think we did that the last year also.

And I wish to mention one particular point that when we first listed, we were net profit wise somewhere around HKD 40 million and during all these years, from '19 until now, we like quadrupled our net profit. Now this year, we are HKD 140 million, HKD 150 million almost. So this 25% are based on the net profit, where it also grow over the time. So you're seeing 4 years ago, you're getting 25% of HKD 40 million, but now you're getting 25% of HKD 150 million. So it's not -- also adding up the M&A in the future the base number of the 25% will be larger, much larger than what it can expect it. Therefore, I think we are a little bit combination of growth stock, also a solid payout. There's no other, I would say, companies in our area listed in Hong Kong who have the continuous consistent dividend payout policies over the year.

Any further questions from the floor? If there isn't any, we have a number of questions from the Q&A box. The first one is from [ Lisa Chang ] of Trumed Investment. She would like to know what's the expansion plan in existing presence and new markets.

Yes. Thank you very much for the question. What we will see this year as we've already said is that we will open up another 2 clinics in Germany that we will open up a consultation center in Shanghai. That's a plan for 2024. And going forward, we are also looking at other consultation centers, especially in China. And from an M&A perspective, where we will -- where we are looking for targets, I think we have already said that it's Asia also outside China, it's Europe and it's North America.

We have the next question from [indiscernible]. He has 5 questions. So I'll go for the first 2 questions first. The first one is, please explain how you can achieve low 20s organic revenue growth? And how will you drive this? Does this include the opening of new clinics. And a second one, why have you not opened additional clinics in Mainland China yet. What is keeping you back? And it is surprising given your stated focus on China and the cash that has been sitting on the balance sheet since the IPO.

Okay. So first of all, I will address why we can achieve 20% of the growth organically. Point one, we need to go back to look into EuroEyes numbers of surgery back in 2018. That's somewhere around 5 years ago. So by then, we are not doing as much of a lens exchange surgery as we are doing right now. We are there, like, 30% -- 40% lens exchange, 60% refractive surgery in terms of eye sale and laser surgery. But over the years, we have shifted our , I would say, our business focus more into the lens exchange. And you can see main in Germany, we're growing more than 10% in lens exchange; in Denmark, more than 10%; China, more than 30% in lens exchange surgery. Presbyopia correction will be the main driver for our organic growth. And in this market, it's much less competition compared with laser surgery, is no price war, and we are as a market leader in this area, plus with the new clinic we opened in [indiscernible], in Chengdu, also in Hong Kong and with London also new clinics in Germany that will bring us the potential to grow 20% organically by more focusing on lens exchange in the next 2 to 3 years. I thing that's from the growth perspective. The second question you just mentioned is why there's a lot of cash sitting on the piles in our bank accounts without opening clinics in China. I mean to do a business, it needs to make sense or not. We're seeing a lot of or in the same industry, some other -- or say, competitors or peers open a lot more clinics in China in the last 3 years. First of all, given the COVID situation, it was very uncertain with the construction, with the recruitment, with the economies and everything. I think we're a little bit happy or lucky that we didn't have a very aggressive new clinic opening plan to be executed in the last 3 years. Otherwise, we'll be sitting by a lot of empty hospitals with depreciation every month is a lot where it eat up all the net profit. We are now in China, 39% of our EBITDA ratio, that's very good. And I think we are now looking at maximizing -- we are still only 25% utilization rate in terms of China. So our -- to grow in China, it doesn't mean you need to build a new facility to grow. You can also grow in your existing facilities. So a consultation center, that's the concept where we hold a pause during the COVID, but now we restarted afterwards.

The third question is what is the rationale for looking for targets in Asia outside China and the Americas?

Well, I think Asia is a very good area. And you have Singapore, you have Japan and you have South Korea. And I think all of these are people 45-plus. And all of them is not, let's say, they don't have any big numbers of operation performed on presbyopia. When you go to Singapore, I saw the numbers there. It's really amazing to see so little going on there. And also the aging population in Japan and very, very cash rich. So of course, it's a big opportunity.

Another question is on. Can you please elaborate why you're not buying back shares? EuroEyes trades below 3.5x EBITDA. If you look at your own forecast, you're a trade below 2x 2026 EBITDA.

So first of all, that's not true. We are buying back the shares according to our employee RSU scheme, we've buyback more than 1.5 million shares in the last year. And we have been buying back the shares all these years and granted it to the staff. Another thing is we are not keen to buy too much share from the current liquidity, though, because it's already very poor liquidity as a small cap company in Hong Kong. If the company has been buying back all of the shares, then literally, it's excluding of the major shareholder and all the other doctor shareholder, management shareholder, there won't be much free flow out there. So why list it. So I think to buy back the shares, first of all, we are doing that, but we are doing that in a controlled manner. Every year, we're buying back and we are granting that to key surgeons, key staff, and they will be trading that on the market, I mean, that's healthy. So to buy back and to write off the shares, I don't see the point. And if that's going to substantially help with the liquidity then we can do that. But it's after evaluation with the financial advisers and our bank, it doesn't seem company buying back and write off the shares having any positive improvement over the liquidity in Hong Kong. So I mean that's the reason and also our analysis over that.

The last question from [indiscernible]. Can you please elaborate on the difference between EBITDA of [ HKD 281 million ] and the operating cash flow of only HKD 190 million. Is this from lease payments, which are not included in EBITDA?

What is it?

Can you please elaborate on the difference between the EBITDA of HKD 281 million and operating cash flow of only HKD 190 million. Is this from the lease payments, which are not included in the EBITDA.

It's partly from that part. That's right because of the new IFRS 16 lease treatment and also partly coming from the fact that in 2022, we had a big prepayment to one of our suppliers, which isn't applicable in 2023, so that's the 2 major things which contribute to that.

We have some other questions from [ Joe Kim ] from [indiscernible]. So first question is what is the actual lifetime of your equipment and furnishing in the clinics versus the accounting rules for depreciation?

Well, when you go out on the equipment, laser equipment or other diagnostic tools. Well, it's -- normally as long as you don't have any new better things on the market. When we next year get better lasers, we will probably buy them. We will also wish to be equipped with the latest standard technology. But I would say normal equipment, normal lasers stay there for 5 years. And then normally, a new one will come. The VisuMax laser had stayed there for longer, but they are all getting upgraded. So we are a clinic group which always use a lot of money while we wish to have the latest state-of-the-art.

Also what is the number of eye surgeries performed in the first quarter of 2024 and how effective is the marketing spend in driving incremental surgeries? Given your low utilization rate? Would it be possible to ramp up the marketing to drive surgery growth?

For first quarter 2024, we will announce surgery numbers quite soon, but we are in line with our business plan. That's something I can say there. And for the marketing, I will hand over to Dr. Jorgensen, but just saying, I think we have already entered into social media marketing, which is really helpful. But I think you can...

Yes. I think worldwide social media, I'm not a social media guy, but I have learned to do a lot of [ spots ] now and I have seen the effect. We have learned it and we have our own team making video spots for the whole world. We are struggling a little with Hong Kong still while you need to have it from English and Cantonese, it needs to be made right and according to regulatory reason. But in marketing, we will increase our budget, our cost in marketing while we believe that social media, it will come.

Yes. So what are the most critical challenges, assumption in the 2026 forecast and on the M&A side, what makes you confident that you will achieve the M&A goal, given that it has been tough to land deals in the last 5 years? And what is the lowest yield you would be willing to accept on an M&A deal? And what is the yield that you're aiming for the yield?

As is a multiple.

No, yield.

Perhaps for the business plan, 2026, what is the most challenging was the question there. I think it really was a trend we see. So it keeps up, but that's a lot about the economic environment and it's about the ramp-up of our new clinics. We have already seen Knightsbridge is developing very good. In Hong Kong, we have just got the DPC license. So we are also expecting quite a lot from the Hong Kong clinic, especially with our presbyopia treatments. So I think that's the most critical thing there, supported by marketing to drive all that. And for the M&A [indiscernible].

I think we are in a fantastic position. I'm so happy that we didn't buy for 2 years ago. I see the private equity who was people who always drive drop prices up. We see that the multiples -- normally such a clinic is spot in a multiple of EBIT or EBITDA and the multiples are coming down. And that don't mean that the quality is not good, but I think the M&A deals are a little not so modern anymore. They are relocating, they are cashing back from investments. So -- but -- we are now ready, and we have learned. And of course, the last year, we have been in negotiation in due diligence and all these things, but I cannot say much more about it, but I think we did the -- but I think we are lucky that we first didn't, now -- we'll do it now by it's good quality and it's lower multiples.

We have the next question from [indiscernible] of Industrial and Securities. How do you assess the influence of [ GPO and ATLs ] on company revenue and margin. The fierce competition of similar hospital has led to a lower price and how would you encourage the customer sentiment under this weak economy?

Okay. So this has been a question being brought up very frequently, recently. It's a topic that government hospitals are able to buy multifocal lens with a cheaper price compared years ago. First of all, we don't see it as a problem because even before the government the group procurement process, a lot of hospitals have been providing multifocal lens exchange. And patients, I think, from a consumer decision point of view, it's not every time about money when it comes to a lens surgery or eye surgery. You can see in Beijing, in Shanghai, the hospital -- the public hospital is charging more in terms of laser vision correction than private hospital, but still a lot more patient goes to expensive one. Not everyone will pick a cheaper one, point one. I think patients, they believe in referrals. That's the nature of the medical. You will always look up to your friends and families and who have done by the doctors who satisfy who thinks they are good. That's a good -- that's the ultimate was the internal source of marketing in terms of medical service companies or hospitals, institutions. The second is the general hospitals, the purpose, the fundamental function of it is to treat disease, general disease and to give medical service to everyone. But presbyopia correction is more of a tailor-made personalized procedure, where you need -- the physician needs to spend a lot of time with the patient to manage the expectation to taking care of the post-surgery care. There's a lot of things involved. So public hospitals has been offering -- have been offering multifocal lens exchange for a long time. The problem of not getting into volume is not because of price, maybe it plays a little role, but it's more because they are just so enormous amount of patients they need to take care, they couldn't in this system to provide more care to the patients who need a tailor-made procedure. And those patients are tend to go to private hospital where it can satisfy all of their demands and all of their -- it makes them satisfied. So that's -- you can see EuroEyes if you take 8 years in a row, we grow multifocal lens exchange from basically nothing until right now almost HKD 100 million a year. That's, I think, largest as a single clinic in whole China, and we don't see much competition there. Also, other private hospital group like Aier's, like [indiscernible] they're all doing that. I don't see anyone has been harmed by a cheaper procurement price from public hospital. So I think that's talking to -- giving to your first question. The second is they have a cheaper price, doesn't necessarily mean the other service provider needs to go down on the price because it's not a very simple add-up based on how much you buy the lens. It's the service, it's the package, it's post care. No public cost at all will give free post care for a year, but mostly private hospital does, and presbyopia patients, they look up to it because they need to get into your -- get into the contact of their physicians anytime they need. So I mean, that's something public hospital will never been able to provide in the system. So I don't see it as a problem, yes.

We have a very similar question from [indiscernible] of [ Essence ] International. She would like to know in the phase of the macroeconomic downturn will the company decide to adjust the surgical price, which is pretty similar.

First of all, speaking of the economic downturn, we have seen that in Germany, U.K., also in China. With more of the young patients who wish to do ICL and laser vision correction, they will be more price sensitive, that makes sense. But more of the -- but presbyopia patients, patients over 55 years old. The amount of money they need to spend on the procedure over their net worth. It's so low they couldn't care if you gave a 5% or 10% discount, they will still do it. So even that German, you can see. The very example is Germany, everybody were having this skeptical or this thinking that Germany having a very bad economy, but our lens exchange in Denmark and Germany all grew very fast all these years. So -- and we have been increasing price. How much did we increase 5%, right, in terms of trifocal. We actually increased price of our trifocal in Germany for 5%. In China, we increased 12% 3 years ago, and we are still seeing a 30% growth over the time, even though the economy has been downturn. So I mean, we don't see why should we adjust multifocal lens exchange price. But for SMILE and ICL, that's more of a commodities for the young patients. You need to follow the market to do some promotions or other things that's unavoidable.

Thank you. Due to time constraint we will take the last 2 questions. The following question is from [indiscernible] of Commando Capital. What is the company long-term development plan? The long-term development plan.

Of course, we are listed on -- of course, we will grow. So this has been in our mind all the years. And COVID came in between, so you can see our M&A plan did not really work out. It takes some time to do M&A, but we are ready now. We have the cash now. So we -- you see here our plans, our growth plans for revenue until 2026. I think it's in the middle of the 20s and you see in terms of net earnings, it's in the 30s and this is for the next 3 years. So we have sent out or we have made a growth plan for the next -- for the next 3 years, 4 years, and this we really hope and we have the first quarter now here and we fulfill it. So we have there a growth plan 20% to 30%.

Thank you. Our last question is from [indiscernible] of HSBC. What is the market demand outlook for refractive and cataract in 2024 to 2025?

So refractive surgery in Asia, according -- only according to the statistic, refractive surgery in Asia is still growing. It's growing at 10%, somewhere around that. But that's in Asia generally, including emerging market like Vietnam, Malaysia and all the other places. Cataract surgery, we need to specify RLE. It's a refractive lens exchange in terms of presbyopia correction or not. I think that is -- I think the projection is more than 10% every year, globally. That's a new trend in our business.

Thank you, management. So this will conclude our investor presentation today. Should you have any questions later on, please feel free to contact SPRG. Thank you all for your participation. Thank you.