Medicover AB (publ) (MCOVB) Earnings Call Transcript & Summary

Welcome to the Medicover Q2 2025 Report Presentation. [Operator Instructions] Now I will hand the conference over to the speakers, CEO John Stubbington and CFO Anand Patel. Please go ahead.

Good morning, everybody. It's John here, and welcome to our presentation for Q2. As you can see here on the headline, we've sort of positioned this as sustained high growth with strengthening profit margins, which I think is really, really good. When asked to frame the first quarter, from many people, I think I positioned it as strong. I think to frame the second quarter, our positioning would be -- actually, it's a little bit stronger. You can see strong growth coming through with good operational leverage. And this, of course, is improving our operating cash flow, which we're very, very pleased with. From a growth perspective, 17.1%. We're seeing growth in all markets, which is good. A little bit later on, we'll talk you through each of the markets and how it's progressing. But literally across the board, we're in a good position. Most of this growth is organic. As you can see, there's a relatively small amount of revenue that's come through with recent acquisitions. And then of course, growing revenue is one thing. But at the end of the day, we want to expand our margins. And again, that's really going well for us. All of our metrics from a profit perspective are up. I think I'll leave Anand to talk through that. And this is being driven by our strong Polish market as usual. Pleasingly, our Romanian hospitals are starting to mature, which is what we expected. We've brought in the acquisitions, which has been good for us. And we've got solid volume growth across the board. And what's really nice to see is that our Ukrainian business has improved and some of the initiatives that they put in some time ago are starting to pay off, which is excellent for them because if anybody in our operating sort of network needs some good news, it's Ukraine. So absolutely delighted for them. Healthcare Services, pretty consistent in terms of robust organic growth and enhancing profitability. Polish ambulatory are doing very well. Sports and wellness, again, doing well, and our facility continues to support as well as the remaining hospitals that we mentioned earlier. And Diagnostics have got growing momentum, which is really good to see and most of that coming through Fee-For-Service, which, of course, would be our preferred revenue stream from an ability to control pricing, et cetera. Leverage, as we talked about last time, is at 3.6x, which is the sort of zone we expected. We'll notice that over future quarters start to come down. So we advised last time it would go over our guidance and then slightly correct itself over the course of the year. Then if we look on the right-hand side, you've got revenue, EUR 596 million, up 17%, which is good and organic growth, 13.9%, again, which is good, really consistent revenue growth from the group, which is exactly what we want. In terms of our profit metrics, it's really strong, EUR 100.9 million, up 35%, so that's great. And 16.9% in terms of margin, which is a nice improvement to see. So congratulations to all the team that have contributed positively to that. And talking about positive things, it's nice to see the cash flow improving at such a rate, which will stand us in good stead for the future. So I think we move on to look at the revenue and how the revenue has developed. As you can see here, on the left-hand side, we've got the graph, which shows the previous performance over the same quarter. And what we see here is good, steady, consistent performance by us in terms of our positions being 17% growth, 20% growth, 17% growth. So that's really good to see. And if you look at the pie chart in the middle, you can see that, that growth is pretty much across the board, 21% coming from Poland. Germany, slightly subdued. But again, we would expect that with the reform that's going on. And I would say that the team are navigating some of those challenges really well. Romania, very, very strong there at 25%. India, again, looks relatively low at plus 5%. But what we've got to remember is in terms of last quarter was very low. But in local currency, it's up to 13%. And we're quite pleased with the local currency, 13% sort of jump. And we're monitoring this -- the start of this quarter, and we believe that, that will continue to increase and improve our position, which is as expected from the commentary that we made last time. And you can see a good contribution from Ukraine and our other parties. Our pay mix is pretty much unchanged, good growth across the board. So it's nice and balanced, strong Fee-For-Service, again, which is positive for us in terms of our ability to be able to control pricing and some of the challenging dynamics, but supported well by the funded business and the governmental pay, which, of course, is steady, consistent payers for us. So that's really, really good. Healthcare Services, strong performance. Poland continues to drive it. So nothing's really changed dramatically in terms of Healthcare Services. You can see strong organic growth driven almost across the board from each and every business, which is pleasing to see. Whilst that is great, we still have many areas that we feel that we can improve. So we fully expect to continue on the journey of consistent growth in this particular area. As I talked about previously, you can see Indian hospitals is up and has rebounded and the operational changes that we said that we would make have started to take effect. I don't think that that's a full effect that you're seeing yet in the quarter. So we expect that to mature as we go through the year. And we've got a little bit more immaturity that will come into the system because over the course of the next few days, we've got a 300-bed facility that is being opened. I think it goes fully operational on Monday with a soft opening. So good luck to our Indian team with that new opening. One of the Romanian hospitals, the Polaris Hospital, which is in Cluj, doing really, really well. It has become the biggest robotic hospital in Romania, with the highest number of operations. And obviously, that's just a facility that's only been open a couple of years. So congratulations to them. In the figures here, you'll see that we had a long-standing sort of position with Hungary where we were going to exit and we fully executed that in Q2. That drops our membership down a little bit, but we still have growth in membership. I mentioned in my commentary that it's a little bit subdued. That's mainly due to the kind of political situations and the delays with EU funds being deployed in some of our markets. So people are a little bit hesitant, but we fully expect that to start to flow through as we go through the course of the year and as we go through 2026. So even though those headwinds are coming at us, we're navigating it well and still performing at a high level, and I don't expect that to change. We fully consolidated CityFit. This was the acquisition that we mentioned in Q1. That comes straight into our network. And the biggest synergy you get from that, of course, is that your member base that was going to a third-party provider now is going to your own provider. So that's fully starting to show in our numbers. So the team has done well to put that in place. Look at the growth, it's very consistent. Look at the margin, it's improving. Look at the membership, it's been adjusted down. But as I said, I expect a little bit more membership growth to come through in Q3 and beyond. And then in terms of revenue growth for the division, it's pretty strong across the board. You've got the 21%, as I say, 13% for India in local currency, 5% in euros and other areas doing well. And then we've got a pretty consistent payer mix, and it's a healthy one. So that's positive for us. And then if we go to Diagnostics, very encouraging for Diagnostics. I think what you can see here is the building of some momentum. Part of that momentum is coming from the Fee-For-Service area, which is exactly what we would want to see. The SYNLAB acquisition has come into the business. We've started with our synergies and started to execute and some of those have been done. There'll be others that will take effect over the course of the next few quarters. So that's very positive for us. And of course, it's had a big impact in terms of the number of tests that we do. So our overall test volumes have increased quite well. Germany, revenue growth, as we talked about, is fairly subdued, but really, the reforms that came towards us, I would say the team are navigating that well. They are quite challenging. We've got to do more efficiency and put more things in place, but the team have done well. So that's good to see. Ukraine, strong growth driven by public pay and our ability to be able to also do Fee-For-Service with some of the customers that come and upsell and do other products. So that's worked quite well. And a couple of important developments from a genetics perspective, as you can see here that our liquid biopsy portfolio has -- they're doing some clinical research that has gone well and looking for clinical validation of that. And the first phases of that have been done and been really well received by the medical community. So we look to see that develop over coming quarters and years to see how we can increase our exposure in that particular area. And we've integrated our technology with Element Biosciences, which gives us extended distribution capability, which, again, we're quite excited about and looking to see how that will develop over coming quarters. If you look at the division's revenue, up 16%, very, very positive. If you look at the margin, we've got increasing margin, very, very positive, quite a big increase in the lab test. No significant change really in the mixes. And I'll hand over to Anand now really to talk you through some of the financial numbers in detail.

Thank you, John, and good morning, everyone. So I would say pleasing to report another strong set of numbers from us and a continuation of the trend of prior periods. So to remind you of the themes that I think are important. So one, double-digit organic growth. So we've done that consistently now for a while. Number two is margin expansion across all profit measures. And pleasingly, not just EBITDA and EBITDAaL, which we speak about a lot, but actually now you can see that it's coming through in net profit and EBIT as well. I'd say good cash numbers and debt leverage in line with our prior guidance, which we've given, and I'll talk a little bit about the expectation for the end of the year. And finally, we're on track, as we've said before, to beat our 2025 targets that we've set previously. So in terms of going into a little bit more detail on that, so you can see that revenues in total were EUR 597 million. John has touched on that. Overall growth of 17.1% with just under 14% of the total growth being organic, which is pleasing. The EBIT numbers, I'll just touch on now as well. So EBIT up 96% year-on-year at just under EUR 42 million and material margin expansion of about 280 basis points to 7%. And net profit tripling as well. So we normally have always spoken about EBITDA and EBITDAaL in the past. But actually, as we see improved capacity utilization flow through all lines of our P&L, naturally, our EBIT and net profit improves, which gives us good soundings for the future. So that's pleasing. In terms of other things to note, I'd say, actually, our net cash position was good. I'll talk about that in a later slide. And up year-on-year and our earnings per share tripled to EUR 0.127 in the quarter. And the final point to note from a cash flow perspective is that we did pay the dividend of EUR 0.15 per share, returning to just under EUR 23 million in Q2. If you look at Healthcare Services, John has touched on this. So the pleasing thing for me, a lot of organic growth, as John said, of 15.6% and broadly split 8.7% is price, with the balance being volume. And you'll see on the next slide that actually on Diagnostics, we've had good volume growth as well. So pleased to see that actually we can expand our pricing as well as generate volumes through our network. EBITDAaL of EUR 53.5 million with margin expansion materially from a rate perspective. So what you can see in Healthcare and Diagnostics, again, a continuation of prior quarters in terms of margin expansion. But obviously, the Healthcare numbers you've seen this quarter are a lot stronger. So Healthcare is up 3%, where Diagnostics is up 1.5%. So still strong numbers. And what you can see, if you talk about the hospitals, for example, you can see that in Q1, we had the loss-making immature hospitals contributing EUR 3.9 million of negative EBITDAaL. That's going in the right direction in Q2. So that's a EUR 2.7 million impact now. But as those mature through their maturity curve, we expect them to -- if they got to 0, add on another 0.7% EBITDA margin within Healthcare. So still room to grow. But as John said, there will be new hospitals opening 1 in this quarter that will kind of bring the number down again. The pleasing thing, I think, to note is as we fill our capacity and all the infrastructure that we've built in the prior quarters, although there's still room to go in terms of what we can do, our medical ratios come down naturally. So medical ratios improving by about 2% year-on-year in the quarter. In terms of Diagnostics, I would say strong growth again. So again, organic growth of just under 10% with the majority of it being volume with price being about 3.5% of the growth. Again, strong numbers across EBITDA and EBITDAaL. What we did have in the quarter, which we'll talk about later, is obviously the SYNLAB acquisition. So we added on circa 27 labs and 92 blood-drawing points. So that adds to our nonfinancial KPIs in terms of number of facilities. As there were challenges in Germany around, obviously, the public pay model, then clearly, I think the team has done a good job in terms of improving Fee-For-Service business, not just in Germany, but across the rest of the countries that we're in Diagnostics as well. And again, just to reiterate what I said earlier in terms of good price and volume growth from Diagnostics as well as Healthcare. In terms of cash and other financial metrics, so leverage at 3.6x in Q2, we've guided to that in the past, and we've also guided to the fact that we'll be nearer 3x by the end of the year, and we stand by that. And obviously, in terms of the other material thing to note is, as we did the 2 acquisitions in Q2 this year, we've increased our net debt by EUR 178.2 million. Remember, we bought those 2 acquisitions because we expected it to be revenue accretive and margin rate accretive from this year. We still expect that to be the case. In terms of the effective tax rate, 28%, so that's pretty much in line with Q1. And I've guided earlier that actually the range for this year will be between 26% to 30%. So nothing different there. And from a net cash operating perspective, up year-on-year as a consequence of the margin expansion impacting our profit numbers flowing through into cash. And finally, I think on this slide, I'll just talk about ROIC. So I think if you remember our Q4 statement, our ROIC was 6.7%. We said that there'd be kind of -- as we fill the infrastructure and as we get improving margins, we'd see an uptick in our ROIC numbers, and we're pleasingly seeing that this year reasonably quickly. So at the end of Q2, we're at 9.3%. We know there's still some way to go, but we expect to be double-digit by the end of the year. In terms of CapEx and other investments, I think in terms of total CapEx spend in Q2, broadly the same as Q1. So we spent EUR 27 million, which is 4.5% of Q2 revenue. However, we've previously guided that our CapEx spend this year will be between 5.5% to 6%. So clearly, the CapEx will be backloaded into H2, so back to your models. The other thing in terms of space, I would say, so currently, we're at 970,000 square meters. In the quarter, we added on 55,000 square meters of space, and that's broadly around the 2 acquisitions that we've made, 26 gyms and the SYNLAB acquisition, which are basically 27 labs and 92 blood-drawing points. And finally, from a target perspective, I mentioned at the start, and Fredrik said this last time, and John is saying it now, and I'm saying the same thing again in terms of we will exceed these targets. Our revenue will be in excess of EUR 2.2 billion. Our adjusted organic EBITDA will be in excess of EUR 350 million. The numbers, the other profit measures quoted on the bottom right, we will exceed those as it stands today and leverage will drop from below 3.6x to a number below 3.5x and closer to 3x by year-end. So before I hand over to John, just to summarize what I said at the start. So double-digit organic growth, margin expansion across all profit measures, but pleasingly in EBIT and net profit, good improvement in EPS and ROIC, strong cash and on track to exceed our targets. Thank you. John?

Thank you, Anand. So Q2 for us has been a really good quarter. You've got continued strong growth, both organic and a bit of acquisition coming through. Margin expansion, very, very positive for us, which is good to see. We're filling up our facilities, still adding square meters, but filling up our facilities as customers start to use us and more importantly, as customers come back. Immature hospitals, we are seeing progress. There's more to do, but that journey is progressing well, and we fully expect the trend to continue going forward. Leverage, as we've said a few times on this call already, it's a temporary position for us. So that will start to come in line as we go through the year. And the momentum is strong enough to achieve, I think, our '23 to '25 targets. So very pleased, very grateful to all of the people in the organization that have worked very hard to achieve this. So thank you very much for all that you do. And I suppose the soundbite in terms of how do we sum up the quarter and our place currently is that we're in a strong position, with a strong platform with good opportunities as we go forward. So we're excited to see what happens in Q3 and Q4 and beyond. Thank you.

[Operator Instructions] Next question comes from Julia Angeli Strand from Handelsbanken.

I have 2 questions. And my first one is on Germany and the pricing reform. And I know you talked about this before and that you would know more in July. So I'm wondering how do you expect the pricing reform to impact operations going forward? And how should we look at the potential of ongoing efficiency initiatives?

I'll take it. So the German reforms were quite harsh. I think if you go back in time in history when they were first mooted, there was quite a lot of worry, fear and trepidation about what could this do to our numbers that literally from our perspective, you can't answer until you get into the journey. But there's 2 sides to reform. There's the adapting to the actual reform and sort of responding as an operating unit. And then the second side is that any reform has opportunities for the players that can navigate that well. So far, we're only 2 quarters in. And I think to really see the full effect of it, it really is a whole 12-month journey because of the way that the German system works in terms of the quarterly adjustments. But so far, the soundbite from us is that our team in Germany are doing a good job in terms of navigating the challenges. They are generating efficiency. They've got more to do, and we will continue to press on that journey. But most reforms are designed to cut off the tail. They're designed to cut off some of the smaller players that maybe haven't got the most efficient systems and therefore, can't adapt to the pricing that they put in place. That will happen in the market. The tail will get cut off. As the tail gets cut off, the suppliers that are left -- that are able to provide the services will get the work that used to go to the tail. So we fully expect that -- those trends to be seen as we go forward. We can't quite see them yet, but it's early days in terms of the progression. But our soundbite in terms of where are we versus the initial trepidation that some people would have had is that actually the team are navigating it, managing it well, but still have some work to do to be able to complete the journey.

Okay. I understand. And just a follow-up on that. Is the reform in line with you expected so far? Or is it worse or possibly better?

I don't want to tempt fate really. But in terms of our modeling of the financial situation when it first happened, it was quite extreme. If you then look at our current numbers versus that extreme position, then we're -- as I said before, we're navigating it well.

Okay. Okay. And then to my last question. So regarding the subdued member growth, is this a short-term fluctuation? Or could this be indicative of a broader trend? Is there anything you could elaborate on there?

I see it very much as a short-term trend. The beauty of the scale that we have is that we can see the employer trends, and we see when they start to slow down, putting extra employees on and when they start to speed up in putting employees on. So we get our growth really from 2 main areas. One is brand-new business, people that haven't had a relationship with us before. And the other side is the organic growth that comes from an employer that's already with us putting extra employees on. I think with the political situation of the world, political situation in Poland, Romania and with the delay of some of the deployment of some of the EU funds, you've just seen a little bit more hesitance and caution from some of the employers and that organic growth isn't as strong as it was before. But we've had that for quite a period of time. And if you look at our numbers, our numbers have still been pretty strong. So we have an ability through our new business and through our pricing to be able to navigate these things and I fully expect the EU funds to be deployed. I expect the political situation to calm down a little bit and people get more used to it as always happens and then the employment market to be buoyant again. And whenever that's buoyant, we are strong. So we're not in a bad place at all. We're in a very, very good place. It's just there's a little bit of hesitance and that's cooked in a little bit to the present numbers. But if you look at the present numbers, they're still very, very good.

Next question comes from Mattias Vadsten from SEB.

I have 3 questions, I think. First one, I'll take them one by one. First one relates to India. So the sort of key driver for the return to the strong growth in the quarter. If you could describe maybe the market climate a little bit. Is it business as usual now in India? And any general sort of growth outlook for the second half is very much appreciated as well. That's the first one.

Yes. Okay. So I think in the conversations that we had post the Q1 call, we were very open with everybody in terms of the situation in India. One, we were subdued in Q1. Two, it was a little bit surprising to us. There were some kind of factors in terms of the election. There were some factors in terms of medical tourism, in terms of the government not issuing the visas for people to be able to come through. And as we honestly said, there was a few operational goals in some of our strong marketing techniques that we've used historically where we thought we'd modernized a bit and we could change the mix, and it didn't really work. The good news for us is that the election is gone, and there's no signs of any drag from that. The medical tourism, the visas are now being issued, and we are sort of back to normal in terms of the volumes. But of course, we didn't have 100% of that in Q2 because it took a bit of time for that to filter through. And the operational own-goals that we scored, we've made our defense a little bit better, and the team have adapted well. And that's the one where I said in my commentary that you don't get the full effect of that in the quarter. So we expect and we see so far in July, a strengthening of our position. Market conditions, well, it's quite strong, I have to say, because there are some of our competitors that are also in our markets considering to do IPO, which makes them a little bit more focused on some of their activities and some of their recruitment activities. But the local team are very strong in the areas that we operate. They're very well established. We have good reputation with the doctors that we have and good systems and good equipment for them. So we're in a good place, but we expect to see it improve as we go through Q3 in terms of -- as we repair some of the things that we've done. So better for us Q2 should be a little bit better for us in Q3, and we'll see where we go about Q4.

Very clear. Then the next question, I mean, seeing the first sales figure for CityFit, SYNLAB for the group looks quite good, I think. Could you disclose if you're satisfied with what you've seen in terms of growth so far? And perhaps also talk a little bit about the margin contribution from them too at this stage as it stands right now and the scope to sort of lift margins going forward? That's the second one.

Yes. So I'll take this one, if that's all right, John. So yes, we've kind of integrated the businesses, as you can imagine, in Q2. So remember, I think one was on the 1st of April and the second one was on the 6th of April. So yes, in terms of what we've seen so far and what we've captured into the numbers, there's no surprises in terms of what we expected from synergies or revenues, I would say. Obviously, things are always slightly a little bit different. But actually, in terms of do we still expect, as I said earlier, full year margin accretion and full year revenue accretion as a consequence of those businesses? Absolutely. We have seen margin accretion in Q1 -- in Q2, sorry, most definitely as a consequence of doing it, but probably not as much as we would have expected, but I think some of that will happen in the second half of the year. So we're pleased with the businesses and what they're generating at the moment. And we still have about the same expectations that we had before with regards to the profitability of the businesses.

Sounds very encouraging. The last one relates to the margin. So the EBITDAaL margin up by a significant 2 percentage points year-over-year here in the first half. Is it likely that this trajectory continues in the second half? Or are comps getting gradually a bit tougher? And should we consider the opening here in July as well because it looks like a significant -- so a few words there, maybe if you could help.

No, I agree. So look, I think John framed it well. So Q1 was strong and Q2 was stronger. So say if I had to pick and you want margin rates for the rest of the year, then I'd pick something in the middle in terms of your models or one sort of better phrase if I was being prudent. But we'll carry on doing what we're doing, which is focusing on optimizing our facilities and stuff. But yes, I'd say Q2 was probably a surprise to you guys in terms of margin rate expansion versus Q1. But yes, if you pick a number somewhere in the middle, it's probably right, but obviously, we'll try and beat those numbers. The other thing that just to remind everyone of is remember in Q3 last year, we had the impairment write-off. So the Q3 numbers will probably look a bit odd from an EBIT level anyway, year-on-year anyway. Because we had a EUR 16.4 million write-off -- sorry, write-off impairment of the 2 businesses, the fertility businesses and German dental. So the year-on-year is looking a bit odd for next quarter.

That's very helpful. Sorry for squeezing in 1 more, but maybe a few reflections on the elections that were taking place during the quarter and the impact in the market environment.

Yes. I think from us, politics is politics. So time will tell in terms of how it really plays out. But I don't think the political situation from our business perspective currently will influence or change our costs. In fact, there may be some good opportunity that actually comes out of it. The Romanian change is perfectly okay in terms of the environment for us, in terms of pro-European, et cetera. And the Polish position is kind of shaking down right now currently with the reshuffle that happened yesterday. So I think that's an interesting change in terms of the Health Minister. But again, I think from our perspective, we're not sitting here with any major reaction from the changes that we've seen.

Next question comes from Kristofer Liljeberg from DNB Carnegie.

Four questions from me. I'll also take them one by one maybe. First, you mentioned that the acquisition actually benefited a bit here to margin in the quarter. Is it possible to quantify how much they contributed to earnings? And whether that was mainly one of the acquisitions or both of them?

Yes. So as you can expect, we're not willing -- we're not going to quantify that. It was small in the grand scheme of things. I think, let's be honest, in terms of the quarter, the overall underlying business did super well versus any acquisitions that we did. So yes, look, I mentioned it was positive from a margin rate perspective, positive from a revenue and EBIT perspective. But in the grand scheme of things, it's the overall medical business that contributed the largest to our performance.

Okay. And when it comes to the SYNLAB synergies, what's the timing of this?

Yes. I think some are already there in terms of things that we've done. I think you'll see more in Q3 and more in Q4, and then it will start to settle down. So the next 2 quarters are quite key for us in terms of implementing some of that change. But from our perspective, the team are on it, very focused, very clear and know what to do, so they should be executed.

Will you have some one-off costs related to that restructuring here in the third and fourth quarter?

There might be. There might be, but I wouldn't expect it to be dramatically material. So usually, when you do these things, there are -- there were some, for example, with CityFit, but they're not dramatic for us. So it should be okay.

And then the third question relates to the minority line and the fact that, that one is positive. Is all of that India or some other explanation for that?

Yes. So the majority of our minority interest are India. There's small bits and bobs, which is less than 2% of the total. But India is our material minority interest at the moment. No material change quarter-on-quarter. I think the only change is driven by FX changes in the quarter, but nothing else has moved.

Okay. And then my final question, this effect or dilution from new hospitals. Do you expect that EUR 2.7 million negative to be smaller end of the year or larger because of the new openings?

Yes. I think we're going to be a bit careful about this one because I remember talking in Q4, and we said actually it's going to improve through the year. Then obviously, you saw the Q1 numbers spike due to the challenges that we had in India. So look, I think we've fixed the own goals, as John said, and any other external factors that had -- that are out there that kind of resolved themselves. So we'll go in the right direction, but we will add on another hospital that will be negative from a margin perspective. But look, I will say the same thing again, over time, it will get better. We're hopeful the next 2 quarters will be stronger.

Next question comes from Philip Ekengren from ABGSC.

I just want to go back to the subdued growth in members. Did you say anything about which markets? Or was that kind of overall in the different markets you operate?

Mainly from -- actually both, but the big member growth position and the big membership business we have is in Poland. And I would now -- we've put that line in so that people are aware that some of the organic growth isn't the strongest history, but I wouldn't overcook this in terms of our ability to navigate it. These -- some of these trends have been there for a while. And if you actually look at the strength of our Polish operations, our Polish operations have been good. So there's also a bigger positive side to come through, which is whilst these trends are there, it does subdue us a little bit, but it will -- eventually, the organic side of life will come back stronger again. And we've seen these trends. If you go back in history, you had these periods where it dies down for a period of time because of usually the economy or some uncertainty and then it starts to mature again. So from our perspective, it's there. We're navigating it, but it's not something we're worried about at this stage. But it's mentioned because Hungary will disappear, and therefore, there's a smaller base. And when the smaller base is, there's a little bit more volatility.

Sounds reasonable. And then a final short question from my side here. The privately paid business seems to have had strong momentum in all markets, and you mentioned Germany here. Could you elaborate a bit on that? Is that a result of the changes in the German market or any other reasons for that, please?

Sorry, we missed the first -- a couple of words that you said. Which line?

So the privately paid business, yes, in Diagnostics. So the private pay and Diagnostics.

Yes. So I'll start with that one, if that's okay. So listen, in Germany, clearly, given that there has been tightness around public pay, then the team have done a good job on trying to expand our private offering. So if you look across Diagnostics full stop and including Germany, there has been a growth in our Fee-For-Service model as we call it. So that helps us offset some of the shortfalls that we've had in terms of price in the public pay sector. So that's helping us actually. So previously, we've said that actually we'll consolidate Germany and make sure that we kind of still grow it in the right way. So you've seen that actually in Q2, revenue growth of 1%. You could argue that's a little bit better underlying because of movement of Easter. But then after that, our margins are flat as well. So we have seen pleasing movement in Fee-For-Service, not just in all of Diagnostics, but in Germany as well to an extent.

Next question comes from James Vane-Tempest from Jefferies.

John, maybe just a question on your first impressions. I know obviously, you've been at the company for 15 years or so, but nearly 3 months in as CEO, I guess, in your new role, what are your more nuanced observations about the business seeing it from a different perspective? And then my second question is the company has always given this sort of midterm guidance. And obviously, we're coming up to '25. When do you think would be a natural point having sort of looked at the business from a new perspective, when we can get an update? And what's your sort of initial thoughts on philosophy? Are we likely to get 1 year? Or do you still think 2, 3 or even 5 years? Because I know sometimes the company has given 2- or 3-year guidance. So any kind of first sort of initial thoughts around those would be really helpful.

Yes, sure. First impressions, well, part of the business is very new to me in terms of the detail, but not new to me in terms of the -- being aware of things that we do. Lots of opportunity for us to improve things, lots of opportunity for us to grow. Very excited in terms of what can happen as we go forward. We're in this planning and organizing phase for us to evolve things more. There's not going to be dramatic change, but I think we can evolve things more and as we do that, make improvements. So -- but if you want a soundbite, it's -- I'm very excited by what I see. In terms of the guidance, we're very aware that we've got to give new guidance. We haven't actually completed the guidance that we gave already. So we kind of want to get to the base count of Mount Everest before we actually say where are we going to go next on the journey on the climb. So I think you'll expect something from us either the end of the year or the beginning of next year. That's the kind of range that we've discussed so far. Whether it's 1, 2, 3 years, again, we haven't confirmed that. We're at the beginnings of the discussions. It won't be 5. 5 basically is a little bit too long in terms of time frame. But we will definitely, as we get towards the back end of the year, be very clear about either here's the numbers or here's when it's going to appear.

Next question comes from [ Graham ] from [ Buring ].

Most of my questions have already been touched on, but I'd like to go back to -- yes, you slow, you lose. But I wanted to go back to talking about the employment environment in 2 of your big countries, Romania and Poland. I'm fairly clear why companies would be hesitant to add new workers in Romania. But could you just maybe walk me through a little bit on what would be causing hiring hesitancy in Poland? I'll asks a question after that.

I think I've mentioned it before. The world political position at stages throughout this year has been a little bit unclear in terms of the American President making certain statements that unsettle people. You've then got obviously, the elections that were happening in Poland, and that always creates people to just hold back for a period of time and looking for that to settle down. And then you've had, as I say, the EU funds, which Poland are always very good in terms of deploying and using. They've been a little bit slower in terms of being deployed. We mentioned this in our statement just to make people aware, but it's probably also very important to clearly lay out that these trends in terms of the hesitancy have been there for a few quarters. And if you look at our performance over those quarters, we are still strong. So they're there. They do create a headwind for us, but it doesn't stop us moving forward. And at some stage, as I said earlier, these will be turning from a headwind into a tailwind, which then we will see the advantage of. So it's normal cycles. If we go -- I've been with the business 15 years, I've seen the cycles of the organic growth drop for a period of time, and then I've seen the cycles when the organic growth goes like a rocket, and it's great. And I think we'll mature out of this because we've got much more stability from a political position that appears to start to have been navigated. The EU funds will start to roll and come and confidence will build. So we very, very much see this as a temporary position. But we're mentioning it really because we're making a significant change on the membership base with the Hungary exit. And as your base gets smaller, volatility is seen and we're just pointing it out. So we're just putting it so that there's no surprises as we go forward. Our membership growth in Q3 is a little bit better than Q2 or is expected to be. So I'm just -- as you say, we're mentioning it for context. No panic from what I've said.

Clear. The other question was regarding -- you've been very kind in giving us numbers on losses stemming from the immature units. So part A of this question is you have a new 300-bed unit opening very soon. How much -- how many more openings will you have with the next 12 months?

We -- in India, we have 1 more opening scheduled, which will be early '26.

So that will be -- that would be it for now, correct?

I wouldn't say that with us. From our perspective, we're always planning and always looking. All I can say today is with regards to our current plans and the current position, the next hospital in terms of a self-build position is scheduled for Q1 next year. And there's nothing currently in the pipeline, but opportunities come at us very fast, we can move very fast. So I wouldn't rule it out, but that's the current position.

Part B would be, again, in the context of this EBITDA loss coming from immature hospitals, by how much would this new opening later this month increase those losses in terms of the third quarter? I'm not going to ask you by how much -- how the rest will improve, but by how much would a new unit just off the cuff number, how much would it increase the losses from the immatures?

As you can expect, that's quite sensitive information that our competitors would look to have from us in terms of not only the losses, but also the pace that we move through those losses. So it's not something that we're actually disclosing.

[Operator Instructions] There are no more questions at this time. So I hand the conference back to the speakers for any written questions and closing comments.

Just checking to see if there's any written questions that we've got time to answer.

Yes. So I'll touch on 1 or 2 of them, I think. So the bottom one. What was the price growth within Diagnostics segment in CE? So I think if you look at our webcast report, I think in total, Diagnostics, we're saying price was 3.5% within all the areas. Hopefully that answers that question. Germany is 50% of Diagnostics. So yes, you can kind of calculate the balance from that. I don't think we've been specific price growth by sector country before. Why you're not adjusting your midterm target? I think John has already answered that question in terms of -- we will say we're beating our targets. We've said that before. We're not going to give further guidance apart from certain profit lines, which I've said earlier. So that's answered. In terms of sports, was our revenue growth in Q2, mainly driven by price or volume? It's a combination of both, in all honesty. I would say -- so remember, when I looked at -- when I talked about overall Healthcare Services, we said of the 15-odd percent, 8% was about price and 7% was volume, and that's consistent with ambulatory and sports, which is our biggest sector. And then M&A strategy, do you want to talk about it, John?

Yes. I think that from our perspective, when it comes to M&As, we're constantly looking at our pipeline. So even though our current ratio is high, that doesn't mean to say we stop the work because we fully expect to be able to bring that down relatively quickly. So the work doesn't stop. We've got lots of opportunities. We're evaluating different things. And as and when we feel it's the right situation with something that's highly synergistic and accretive to us, we will press the button and execute it. So I would expect us to do things as we go forward.

I'm sorry, I'll just read the final question. Do we expect wage hikes in Poland from 2025 to negatively affect margins in Healthcare Services? Look, I think -- there's always inflationary costs, maybe wage rises or something else, where as a business, we work hard to try and offset this through either pricing or being more efficient in the way we operate our business. So we've given guidance for this year. We're confident in our guidance number, and that assumes any potential impact of either macro factors from a political perspective or, let's say, wage inflation factors.

Yes. Great. I think that covers all the questions that's been written. So thank you, everybody, for joining the call. Just in summary, it's been a really good quarter for us. We're very pleased. We're very grateful to all of the people in the organization for everything they've done to help us achieve these results. So thank you very much to them. And the soundbite for last quarter was that we were strong. The soundbite for this quarter is that we are stronger and the outlook for us remains very positive. So we look forward to talking to you in Q3. Thank you very much.