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

Good afternoon, good morning, everyone. Welcome to EuroEyes' 2026 Interim Results Presentation. It's my great pleasure to introduce to you the management joining us today. They are Dr. Jorg Slot Jorgensen, Chairman, Executive Director and Chief Executive Officer; and Mr. Marcus Huascar Bracklo, Executive Director and Chief Financial Officer. [Operator Instructions] May I now pass the time to Dr. J.J. to start the presentation, please.

Yes. Hello, everybody. Good morning here from Europe, and I'm very happy to welcome you here to the first half year's interim results from the EuroEyes International Eye Clinic Group. I'm here sitting today with Marcus Bracklo, our CFO, and we'll go through you, the numbers. So let us start here with the first slides, please. The next one. Yes. This year and last year, much of our deal were regarding FYEO, the Holland group we acquired where we had completed listing acquisition on July 22. So the numbers today, you will see here from the half year, it's not included in. The only numbers which is included is from our acquisition last year, end of last year, of Betterview, the Swiss Group. Let's take the next slide, please. So I have put here the highlights of the first half year. You see here, including the Swiss [ Grow ] Group, we had a growth of year-to-year on 20% to HKD 454 million. Without the Swiss group, we had a growth of 10%. So we are very proud of that in this time with so much, let's say, trouble in Europe, geopolitical, that we managed to grow here, 10%. And we put up a slide here with the acquisition, successfully merged acquisition of the Swiss group, which took part and which generated HKD 38 million revenue. The Swiss integration has been more difficult as we thought. It was a group we took over in the name of Betterview, it was called. It was in financial trouble at that time, so we took it over. We renamed it to EuroEyes. We rebranded that to EuroEyes. We put up new landing pages, new web pages, and we also put in new services. And this has been -- let's see, we are really started from the ground, but it has been more difficult as we thought. But we are on a good way, and I will get to that later on. The solid growth is especially in the presbyopia treatment. We are a presbyopic group with specialty in presbyopia with laser and lenses. And also with our acquisition of FYEO of Holland, which have the same services exactly that EuroEyes, I can say we are probably one of the biggest group worldwide to perform presbyopic treatment. And the revenue grew on year-to-year by 18%. Next one. And here, you again see the growth, which have been revenue from presbyopia treatment since 2022. And you see we have had a steady growth of 18%. So it's the right track. And on top of this, you also saw -- see here Presbyond. The blue one is presbyopic treatment with lenses, and the gray one on top is with the help of laser. We took over London Vision Clinic for -- now more than 4 years ago, and you can see we have started to implement that in the group, and especially treatment of presbyopia by younger people in the age 40 to 50. And it's now when you go over on the right hand, you see here lens exchange is 56%, refractive laser surgery is 26%, and Presbyond, 5%. So you can see that. But when you see a steady growth here in presbyopic treatment. Next one. And here, you have all our groups seen on one picture, and the new which came in here was Netherlands. And you can say that this Netherlands have 15 clinics right now, although 4 of them are with treatment units where you have operation and the other 9 are consultation center, which is spread around the operations [ here ]. And it's a remarkable acquisition we did here with the Netherlands which is not in these numbers here today. I can only repeat that, but they have been -- they are on the way to get integrated now closing took place. So we are on the right track, and they have the same revenue or more than in Germany. So you can see here, a small country like Holland with potential that had also presbyopic treatment. And you see here the Swiss aid clinic. The next one, please. Yes. Let's go here land by land, country by country. In Germany, our biggest group, we had a revenue of HKD 233 million. On year-on-year, it's a growth of 16%. And I think this is remarkable. You know the problem we have in Europe, let's say, in geopolitical, first of all, Ukraine, Iran and also here with the car industry. But nevertheless, we were able to grow 16%, 14% of presbyopia, 18% of myopia. So you can see myopia is a little back again here. It was, let's say, declining for a long period of time, but now it's on the way back. Next one. And also in China, China had the last year been in stagnation. And what we saw this year here, revenue grow on 13%. And revenue growth is on lens surgery presbyopic treatment, whereas laser vision correction in China, because of the huge competitive impact, is a difficult business, but we are international clinic group specialized on presbyopia, and this is very good. Let's take the next one. Yes. We had a growth in U.K. of 8%. That's not so much as we have thought. We are in the reconstruction in the U.K. where we are pushing our acquisition, London Vision Clinic, we did for some years ago. We, as a group, took over now more operational also after 4 years after the earn-out period. So we are now pushing to get lens surgery in there as well. And -- but we saw at the same time that the costs also were rising even more. Dr. Bracklo will come on to that later on, but it has to do with something with the doctors' costs increased after the period where they went out of the earn-out. And this had an effect also on the cost. Let's take the next one. Yes. Switzerland, as I told you before, it has been difficult. We are losing money in this transition period. We took over in the end of -- in the beginning of November last year. And we have been rebranding that. And we see it has been more work as we have guessed, while EuroEyes is not so much known in Switzerland as we have believed. So we really need to rebrand it from Betterview to EuroEyes. Betterview went bankrupt almost because of -- they had done some, let's say, developed some unhappy patient who went to the press, and it got a very bad reputation. Therefore, we choose very early to rebrand it to our high-end mark. And this turnaround is ongoing now. We have got a new interim General Manager in Switzerland, one from Holland, one who have been used to be in the FYEO group, and she has just started. And we have put new marketing on board, and we have done many things. We have got some of our high-volume surgeons from Germany. They have got license also to perform surgery in Switzerland. So I hope next time I can present to you much better numbers. The next one. And Denmark, yes, Denmark is also -- has been very challenging during this period. They have had bad press, not because of our clinic group, but some of our competitors made a very bad headline in the press, and it has been on television and so on. So it has led to a downturn in revenue. We are -- our new manager from Holland, who's just joined us and will be General Manager of the EuroEyes German and European group, Rens, he will take over Denmark. And hopefully, also here, I can show you better numbers next time, but Bracklo will go more into detail. Next one. Yes. This is a little -- we will go into more detail now, and I will hand the word over to Mr. Bracklo.

Yes. Thank you, Dr. Jorgensen. Happy to take over. As you've already heard from Dr. Jorgensen, on the revenue side, the first half is quite positive. The reported revenue for the group was up by 20%. If we exclude Switzerland to have a like-for-like comparison because Switzerland was not part of the group in the first half last year, revenue grew by a lower percentage, but at plus 10% is quite a positive development over prior year. Similarly, the other 3 graphics show you the numbers, both as reported. And the second bar shows them. If we exclude Switzerland, the losses of the turnaround, which we believe to be temporary in nature and the one-off costs, just to give you a picture of the underlying business, excluding those, if I may call them, special effects, you can see that gross margin grew by 9%. If we exclude the special effects, it improved -- EBITDA improved by 14%. If we look at -- that's the gross profit, improved by 14%. If you look at EBITDA, that's the one on the bottom left. you can see that it, as reported, is down 40%. If we exclude these special effects, Switzerland and the one-off acquisition costs, it's down 13%. That is mainly due to U.K. and Denmark. Dr. Jorgensen has already briefly spoken on those matters. I will say some more about it in the subsequent slides. The last chart at the bottom right shows the development of the net profit. As you know, last week, we issued a profit alert because we are -- in the first half, we have a net loss. The net loss is due to one-off acquisition costs and the Switzerland turnaround losses. If we correct for those two items, net profit would not have been negative. It would have been positive at HKD 39.8 million, more or less in line with the net profit in the first half of last year. Next slide. Just expanding on that point, the reported net income of minus HKD 11.8 million. If we add back the one-off acquisition cost of HKD 16.2 million and the losses and expenditures related to the Switzerland acquisition of HKD 35.5 million, we come to roughly HKD 40 million, which is the same as the net income in the first half of last year. Next slide. Yes. The -- as you've heard from Dr. Jorgensen, we have completed two substantial acquisitions, first in Switzerland and then in Holland. Switzerland completed last year. Therefore, it's consolidated in the figures. And Netherlands was closed in July. Therefore, it's not yet in these numbers. Only the acquisition costs are, so there's a little bit of an imparity there. That has allowed us to substantially expand the size of the group, and of course, the geographic coverage. Switzerland is already in the first half. And we haven't yet ramped up sales as we had expected, but it's already approaching 10% of our business. And as Dr. Jorgensen said, when we add FYEO, which is about the size of Germany, you can see that we're even larger than the German business. You can see that the German size of that pie will reduce well below 50%. So then we will become truly a global German -- European Asian group. And Switzerland is a group that covers all of Switzerland with the 8 clinics we have. And FYEO, which is an even more substantial business, doesn't just cover Holland, but is the market leader by a very wide margin. Next slide. Yes. As Dr. Jorgensen has already pointed out, we are quite happy with the development in Germany, which saw quite substantial growth over prior year, given that it's our most established market, which is where it all started after all these years, to be achieving 50% is quite an achievement. And the good news is that we've also seen a recovery in the myopia business, which is also, as you know, worldwide, myopia is the more challenging of the two business segments. Presbyopia is the one with a stronger growth. So it was very nice to see myopia also recover and overall for us to be able to achieve a first half record revenue in the German market. Next slide. Similarly, after 3 years where revenues stagnated, we've returned to a growth trajectory in China, driven mainly by growth in presbyopia. In fact, myopia declined, but was overcompensated by the very strong performance of our presbyopia business. I think that's an indicator that the marketing measures that we have implemented are proving to be quite effective. Perhaps there's also a bit of a market recovery in that. But overall, with plus 13%, we're quite happy with the result. Next slide. Yes. As opposed to the developments in our largest markets, Germany and China, you can say U.K. is a more mixed bag. We have grown, 8%, at a lower rate than in Germany and China. You have to say, when we say U.K., it's really a London business. So we're talking about the London market, not the whole of the U.K. The London market is quite a competitive market. So therefore, to grow 8% there I think is also quite good, although really, we believe we should be able to do more. What is -- has been more challenging in the U.K. is the development on the cost side. Unfortunately, costs have grown more rapidly than the revenues in the first half, and we are taking some measures. Dr. Jorgensen already pointed out that at least one of the cost increases is structural. We renegotiated the surgery contracts or they needed to be renewed after the earn-out period ended, and the salary levels we had to agree to are higher than the previous one. So that's a structural element that will remain, so we can't just extrapolate both margins. On the other hand, there are a couple of costs in there which are related to the acquisition of Betterview U.K., the third clinic. The clinic itself has transferred. The deal, however, has not yet closed. There were various delays in getting the lease transferred. That has now been done, and we expect the closing to happen in the course of this month. Nonetheless, we've already had some preparatory expenditure to get things ready for that third field -- third clinic, which is in the Westfield Shopping Center. Quite a good location, we believe. So we will be able to put up now EuroEyes signage, et cetera, that we've already prepared. So there are some, if you like, costs related to those pre-opening measures which are also depressing earnings. That's clearly a temporary issue that will be resolved. And on the marketing side, we did, in order to get to growth, experiment with various marketing measures before we got to a more efficient model. So I think maybe the marketing costs are also a little bit higher than they should have been, which will be more disciplined about in the second half of the year. Next slide. Yes, the -- I've already mentioned that the turnaround in Switzerland or the fact that the turnaround has not yet been achieved is a major part in explaining our negative earnings. To add a little bit more detail to what Dr. Jorgensen already said, just to remind investors, we took this business over in October last year. So we've -- including this half year, we'll have been by 30 June, owned the business for roughly 8 months and -- 8.5. And we did an asset deal which caused quite a lot of disruption. We did it, of course, because we wanted to leave the liabilities that Dr. Jorgensen mentioned, the negative press associated with Betterview behind us and have a clean start. And -- but of course, that caused some disruption. Second, we took, I believe, the correct decision to rebrand it as EuroEyes. But of course, that meant we had to build this brand because in Switzerland, EuroEyes is not known. Maybe in German-speaking part because of our -- because we are quite well known in Germany, there was some awareness. But overall, building up the new brand and the new customer base is taking a bit longer than expected. Yes, maybe we were a little bit optimistic about it. I think the market potential, I fully agree with Dr. Jorgensen, it's significant and tremendous, and we have a really good platform to take advantage of this. We are making progress, but not as quickly as we expected. In particular, it should be mentioned that in the presbyopia field, the good news is we are -- our timing is right. The market has not yet been taken by others, but it is still in Switzerland as opposed to Germany or Holland, still a novel concept. So patients need to be made aware that they have the option of getting rid of reading glasses. Therefore, if they're not aware of it, they are not searching the Internet. Therefore, marketing measures that are just online are not really sufficient. So I think we've basically had to develop an off-line awareness campaign, which, under Dr. Jorgensen's guidance, we have done and which we'll be implementing in the coming months. So I think in addition to the strengthening of management that Dr. Jorgensen has mentioned with somebody who's got a particular focus also on sales and marketing, I think we've put in place a number of measures that we are comfortable that we will be able to get to a breakeven in the course of the second half of this year or early in 2027 at the latest. So I think in Switzerland, it's experiencing delay, but I think our belief in the market potential is undiminished. Thank you. Next slide. Denmark, as Dr. Jorgensen mentioned, we had a very good start into the year in the first quarter, especially March was a very strong month. And then there were a couple of issues stacked on top of each other. One, the fact that he talked about a competitor had some bad press that created some apprehension. That in turn caused some competitors to be very price aggressive. And also, we did some changes in our marketing strategy. So I think the combination of these factors led to a significant drop in revenues in the second quarter, as you can see on the slide. We have been taking measures, both on the marketing side and as regards the sales process to increase conversion rates. So we expect the situation to improve and stabilize in the next 2 quarters. Next slide. Yes. If we take all of that together and look at the key volume statistic, the number of surgeries, you can see that, that has increased in the first half of this year over last year in quite a positive way with 15,500 surgeries done, a new record for the group. Capacity utilization is still at 18.3% despite this rise in volume. The reason is that through the acquisition of Switzerland, the 8 clinics there, we've significantly added to capacity. Therefore, we didn't -- despite making progress on volumes, we didn't make progress on capacity utilization rate, but that's going to be a key focus going forward to increase the utilization of capacity, of course, especially in Switzerland. Next slide. Looking at the cost side, there are some structural effects, some positive, some more challenging. And there are some temporary effects, which I've tried to highlight by excluding the one-off costs to give you a feeling for the underlying number. The first top left, it is the case that salaries and doctors' fees over the last years have gone up from 23.6% to 28.5%. We don't think, unfortunately, that it's realistic to assume we can get back to where we were in '22. I think it's -- there is -- yes, there has been quite a competitive market for surgeons. Nonetheless, our recent experience in the last 6 months has been that things seem to be better there. It seems to be easier to recruit high-volume surgeons. So I don't expect that to edge up further, but I don't expect it to go much further down at this stage. Depreciation, we've invested in new technologies. That's important for us to differentiate ourselves. So I think 12% is probably a realistic number going forward. I think where we've done well is in reducing the raw material and consumables costs. That's also an area where I think we will be able to hold that or maybe even improve it because as a result of combining with FYEO, we have really significant volumes. And we are in negotiations with many of our suppliers, and we already have first significant successes. So I do believe that we've got positive synergy potential in that area. Selling expense, the number has gone up in the first half significantly, mainly because of Switzerland. If we take out Switzerland, it's a notch higher than prior year, but not that much. So I think the number of the first half last year is definitely one that we're going to be targeting, maybe a tad above it. But what we have here in the first half is a special effect. Similarly with the administrative expenses because of the acquisition costs, which are in the administrative expense category, we are in the first half at 20%. If we exclude those, we are at 13.7%, which is still higher than it was a year ago. So we will be focusing in the second half, looking at costs and seeing for ways to reduce those again. Next slide. Yes, balance sheet is strong. But here, you need to take account if you look at our cash position, this is the cash position before the acquisition of FYEO concluded. And of course, as you will know from reading our filings, we have substantially deployed that cash for the acquisition of FYEO. We've retained enough to have a margin for our business. But substantially, we've deployed the cash, and we also took on a syndicated loan provided by UniCredit of EUR 75 million. So our balance sheet, when you see it at the year-end will be substantially changed. But of course, our P&L will also be substantially changed. Neither of the two are yet included in the first half year numbers. Next slide. Yes, we come now to give you a little bit of an outlook and some comment on future strategies. Next slide. Dr. Jorgensen, do you want to take over?

No, you can go on. You can go on.

Okay. So if you look at the three main pillars, they will seem familiar, but there are some significant changes that I will highlight. First of all, focus on presbyopia. That continues to be a key pillar of our strategy, our growth strategy forward. Presbyopia is an attractive growth market for reasons that you are now familiar with in terms of demographics and what is now technologically possible. We are well positioned as a market leader both in lens replacement and also in -- especially for younger patients, the Presbyond laser procedure. In fact, we have with Dan Reinstein, the inventor of that procedure, on our team of surgeons. We have an incredible track record, and we believe that we are the market leader in that field in Europe based on the feedback we get from vendors. So that's a very strong pillar that we continue to emphasize. The second one I've mentioned is we are -- despite the -- if you exclude the one-off items of the first half, we are a profitable group even at relatively low utilization rate of 18.3%. So if we get that utilization up, we can significantly improve profitability. But that's going to be a key focus going forward, improving that utilization through focused marketing measures. The third pillar is the one that's most changed because of the acquisitions we've done. Our focus over the next 6, 12, 18 months is going to be, on the one hand, integrating FYEO, which is not just an add-on, but it's a strategic acquisition. It's an acquisition that will transform EuroEyes. So getting that well integrated is going to be a key focus. Dr. Jorgensen is working with Rens, who joined our Board. And I can report that from my perspective, things are going extremely well there. And second, Switzerland is fully integrated. But from a business point of view, of course, it's not where it should be. We need to get that to a breakeven level of -- which is CHF 1 million per month. We're currently at about CHF 700,000, and we were at CHF 250,000 in October when we started. So we've made progress, and we're almost there. So I think Switzerland will be, yes, a success story in the future. But at the moment, it still is not, and every month's delay is a cost of cash. So really focused on getting that turnaround completed as quickly as possible. Having said that, that does not mean that we don't keep our eyes open for add-on acquisitions, but it does mean that our focus is now more on integration than on acquisitions, at least for the next 6, 12, 18 months. Yes. And perhaps just to round off on that, due to the consolidation of those recently acquired businesses, which will have a material impact on the group results, we've temporarily suspended the provision of guidance until the integration is substantially complete. So we will reissue guidance in the near future. But temporarily, we feel that it's the correct approach to temporarily suspend it. Next slide. Yes. So I'd like to leave you with three takeaways. I think we have a resilient business model. I think we've taken some key strategic steps. We are, especially after the acquisition of FYEO, the market leader in presbyopia treatment, which is a very strong and robust growth business. We're now a truly global business as a result of these acquisitions, making us, of course, an attractive partner for other businesses and giving us a nice natural hedge through the geographic spread of our group. And there are, I think, operational synergies yet to come. First of all, integrating FYEO will add significantly to the financial profile and the profits of the group and of course, the synergies of combining the two groups as well. Yes, the integration, I think, will definitely be a catalyst for future expansion. So I think that brings us to the end of the presentation. Thank you very much for your attention, and I think we are now open for Q&A.

Thank you very much. Thank you to Dr. Jorgensen and Mr. Bracklo. [Operator Instructions] First question comes from [ Cyrus Bucklo ]. His question is, any update on your 3-year organic guidance from the financial year 2025 annual results? Among others, it was a net profit CAGR in the low 20s.

Yes. Shall I take that question?

Yes.

Okay. I think as I just mentioned towards the end of my presentation and as we stated in the interim report, we have temporarily suspended the provision of stand-alone organic revenue and results guidance while we integrate the recently acquired businesses. This should not be interpreted as a change in our view of the underlying prospects of EuroEyes. It reflects the fact that the scale and composition of the group have changed materially in a relatively short period. FYEO only became part of the group on July 22, and therefore, was not included at all in our first half year results. Switzerland meanwhile, remains in its turnaround phase. We are, therefore, currently managing both the integration of a significant new profitable business and the continued turnaround of Switzerland. In that environment, we believe it is more responsible to allow the integration to progress and to establish sufficient visibility on the performance of the enlarged group before providing the market with updated financial guidance rather than providing guidance today that may need to be revised as the integration develops. This does not mean that -- I would like to emphasize that we are no longer communicating our expectations for the business. As set out in the interim report, we expect FYEO to contribute materially to the group's results in the second half and thereafter. We expect synergies from the acquired businesses to emerge progressively, and we continue to see significant opportunities to improve utilization across our existing clinic network. We intend to resume financial guidance once we have sufficient visibility on the enlarged group to provide guidance on a robust and meaningful basis. Next question.

Thank you. Next question is about, could you please comment on your capital allocation framework given the significant change in capital structure? How was the Netherlands operations in July and August after the acquisition was closed? What can EuroEyes learn from the -- FYEO to maximize capacity utilization?

Yes. I think that's several questions at once. Could you give me the first one of those, and then we just take them one by one?

Sure. Let me repeat one by one. The first part of the question is, could you please comment on your capital allocation framework given the significant change in capital structure?