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Medicover
Annual / Quarterly Financial Statement • Feb 14, 2020
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Annual / Quarterly Financial Statement
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YEAR-END REPORT JANUARY–DECEMBER 2019
Fourth Quarter
- Revenue increased by 26.8% to €229.7m (€181.2m). Organic revenue grew by 15.0%.
- Operating profit (EBIT) increased by 26.6% to €10.8m (€8.6m), representing an operating margin of 4.7% (4.7%).
- Net profit amounted to €6.6m (€3.5m), which represents a net profit margin of 2.9% (1.9%).
- EBITDA increased by 37.5% to €33.4m (€24.3m), corresponding to an EBITDA margin of 14.5% (13.4%).
- EBITDAaL increased by 40.5% to €22.3m (€15.9m), corresponding to an EBITDAaL margin of 9.7% (8.8%).
- Net cash flow from operating activities was €25.0m (€16.6m).
- Medicover Hospitals India (former MaxCure) consolidated as of 1 December.
- Basic/diluted earnings per share were €0.048 (€0.022).
Full Year
- Revenue increased by 25.7% to €844.4m (€671.6m). Organic revenue grew by 14.8%.
- Operating profit (EBIT) increased by 38.0% to €46.5m (€33.7m), representing an operating margin of 5.5% (5.0%).
- Net profit amounted to €24.7m (€24.2m), which represents a net profit margin of 2.9% (3.6%) affected by lower other income/costs.
- EBITDA increased by 33.0% to €120.7m (€90.7m), corresponding to an EBITDA margin of 14.3% (13.5%), impacted by €2.4m (€1.8m) merger and acquisition related costs expensed.
- EBITDAaL increased by 37.7% to €80.6m (€58.5m), corresponding to an EBITDAaL margin of 9.5% (8.7%).
- Net cash flow from operating activities amounted to €87.3m (€74.4m).
- Basic/diluted earnings per share were €0.168 (€0.167).
- The board of directors proposes a dividend for 2019 of €0.05 per share.
| € millions (€m) | Q4 2019 | Q4 2018 | Growth | FY 2019 | FY 2018 | Growth |
|---|---|---|---|---|---|---|
| Revenue | 229.7 | 181.2 | 27% | 844.4 | 671.6 | 26% |
| Operating profit (EBIT) | 10.8 | 8.6 | 27% | 46.5 | 33.7 | 38% |
| Operating profit margin, % | 4.7% | 4.7% | 5.5% | 5.0% | ||
| Net profit | 6.6 | 3.5 | 91% | 24.7 | 24.2 | 2% |
| Net profit margin, % | 2.9% | 1.9% | 2.9% | 3.6% | ||
| Basic/diluted earnings per share, € | 0.048 | 0.022 | 118% | 0.168 | 0.167 | 1% |
| EBITDA | 33.4 | 24.3 | 37% | 120.7 | 90.7 | 33% |
| EBITDA margin, % | 14.5% | 13.4% | 14.3% | 13.5% | ||
| EBITDAaL | 22.3 | 15.9 | 40% | 80.6 | 58.5 | 38% |
| EBITDAaL margin, % | 9.7% | 8.8% | 9.5% | 8.7% | ||
| EBITA | 13.9 | 10.0 | 39% | 53.7 | 37.0 | 45% |
| EBITA margin, % | 6.0% | 5.5% | 6.4% | 5.5% |
For definition and reconciliation of alternative performance measures, refer to note 10. As from Q3 2019 margins (including margins of comparative figures) and growth rates have been calculated based on EUR whole figures instead of figures rounded in millions.
Medicover is a leading international healthcare and diagnostic services company and was founded in 1995. Medicover operates a large number of ambulatory clinics, hospitals, specialty-care facilities and laboratories and the largest markets are Poland and Germany. In 2018, Medicover had revenue around €672 million and 20,970 employees. For more information, go to www.medicover.com
CEO STATEMENT
We have ended a very strong 2019 with historic high revenue growth, expanding margins and strengthened market position on all major markets, evidencing our strong brand and service propositions, and the benefits of diversification across geographies, payor groups and service offerings. Market dynamics have been favourable during the year and strong organic growth has been complemented with acquisition growth, with the year's most significant acquisitions being Neomedic, a leading neonatology and obstetrics hospital group in Poland, and the consolidation of Medicover Hospitals in India at the end of the year.
Revenue for the quarter grew 26.8% to €229.7m (€181.2m), with organic growth amounting to 15.0% and revenue for the year increased to €844.4m (€671.6m), likewise strong growth of 25.7%.
EBITDA margins have continued to expand also in the final quarter, with EBITDA for the quarter increasing by a strong 37.5% to €33.4m (€24.3m) and by an equally robust 33.0% to €120.7m (€90.7m) for the year. EBITDA margin for the quarter expanded by 113bps to 14.5% and by 78bps to 14.3% for the year. Organic adjusted EBITDAaL grew a robust 27.7% for the quarter and 23.7% for the full year. The margin expansion is reflecting increasing scale and operating leverage for both divisions. Profit flow through to the net profit line was also good, which excluding other income/costs, was up 91.2% for the quarter and 51.8% for the full year.
Our strategy to grow private pay Fee-For-Service (FFS) continues to be well executed in both divisions. FFS and other services continued to grow strongly, with quarterly revenue growth of 31%, with the segment now representing 53% of total quarterly revenue and full year revenue growth was 30% now representing 52% of total revenue.
Healthcare Services quarterly revenue grew by 27.8% to €124.8m (€97.7m), with organic growth of 13.6%. Revenue growth for the year was 29.8% with organic growth of 16.1%, reaching €449.3m (€346.1m). At the end of the quarter the division had 1.3 million members and grew 7.5% compared to the same period last year. FFS and other services grew 29% in the quarter and represented 42% of divisional revenue, full year FFS revenue growth was 37%.
Healthcare Services EBITDA grew by a strong 33.1% to €17.8m (€13.2m), an EBITDA margin of 14.2% (13.7%). EBITDA for the year grew by 32.8% and reached €61.0m (€45.8m) corresponding to a margin of 13.6% (13.3%).
Diagnostic Services performed very well and revenue grew by 25.2% to €108.6m (€86.6m) in the quarter with organic growth of 16.7%. Revenue for the year grew by 21.3% to €408.7m (€336.7m) with organic growth of 13.6%. The number of laboratory tests grew by 8.2% to 26.8 million (24.8 million). FFS and other services grew 31% for the final quarter and represented 68% of divisional revenue, full year FFS growth was 25%. A total of 43 new blood drawing points (BDPs) opened during the quarter and we are now operating a total of 670 BDPs across all geographies.
Diagnostic Services EBITDA increased by 25.2% to €18.7m (€14.9m), an EBITDA margin of 17.3% (17.3%). EBITDA for the year grew by 28.8% and reached €75.7m (€58.8m), a margin of 18.5% (17.5%).
I would like to finish this year-end report, with expressing my sincere gratitude and respect to all of my colleagues across our geographies and businesses, for your relentless commitment and focus on quality of care and customer service, which in all aspects is the most important driver of our ongoing success.
Fredrik Rågmark, CEO
REVENUE FOURTH QUARTER 2019
Consolidated revenue increased by 26.8% to €229.7m (€181.2m) with organic growth of 15.0%. The quarter has shown solid organic growth in all markets, also lifted with one month of revenue recognised from Medicover Hospitals India ("MHI", former MaxCure). Acquisitions made within the last twelve months contributed €21.0m of acquired revenue in the quarter representing 43% of the total year on year growth of €48.5m. These included MHI, Neomedic (a leading neonatology and obstetrics hospital group), Klein (a German genetic laboratory) and some Polish dental businesses.
Healthcare Services revenue grew by a very strong 27.8% to €124.8m (€97.7m) with organic growth of 13.6%. Members grew by 7.5% to 1,300K (1,209K) with lower member growth than previous quarters from termination of contracts for profitability reasons and slower employment market growth.
The employment market in the major countries continues to be tight with full employment in many major cities. The trend for out of pocket Fee-For-Service being the larger component of organic growth for the year has continued into the fourth quarter representing just under half of the organic growth. Fee-For-Service volume increased in the quarter reflecting demand and the impact of
acquisitions and prior investments. Healthcare Services continued to benefit from a good economic background in the major countries of operation.
During the quarter, €1.3m was injected into MHI for new shares and €2.7m existing shares were acquired bringing the ownership from 49.2% to a controlling stake of 54.4%. MHI is from 1 December a subsidiary and consolidated into the Group for one month. Revenue included in the consolidated income statement for December amounted to €5.9m.
During the quarter, Medicover also acquired three Polish dental practises and at the end of the year operated 187 chairs in Poland.
Diagnostic Services revenue grew by 25.2% to €108.6m (€86.6m) with a very strong organic growth of 16.7%. The Romanian currency was weaker, the Polish zloty stable and the Ukrainian currency maintaining and further increasing its strength. The laboratory test volume increased by 8.2% to 26.8 million (24.8 million).
All markets grew strongly reflecting economic development and contribution from prior period investments. Underlying growth in the German laboratory business is clear. This was from a mixture of growth of number of customers and also doctors' referral patterns reverting back to normal as well as a good contribution of private paid testing. The genetics business in Germany has rolled out a new generation NIPT (non-invasive prenatal test) which is developing well. Volume development was good across all markets.
The continuing strong economic development in the fast growing markets has led to increased ability to self-pay for healthcare and the expansion of access through more BDPs supports this growth. During the quarter, 46 new BDPs were opened and 3 closed, bringing the total at year-end to 670.
REVENUE FULL YEAR 2019
Consolidated revenue increased by a very strong 25.7% to €844.4m (€671.6m) with organic growth of 14.8%. Both segments contributed nearly equally to organic growth.
Revenue recognised from acquisitions made in the last twelve months was €72.2m, just over 40% of the total growth.
Healthcare Services revenue grew by 29.8% to €449.3m (€346.1m) with organic growth of 16.1%. A favourable employment market combined with continued good economic development are driving member and revenue growth in the employer funded business. The Fee-For-Service business in both Poland and Romania grew at a faster rate but from a smaller base. The net increase of medical facilities (including pharmacies, etc.) amounted to 30 reaching 256 at the end of the period.
Over the year, additional shares were acquired in MHI for €6.6m increasing the ownership from 45.1% to 54.4%, and a total of €35.6m cash was invested since 2017. MHI is from 1 December a subsidiary and consolidated into the Group for one month. Revenue included in the consolidated income statement 2019 amounted to €5.9m. MHI consists of 11 specialised hospitals and two oncology centres under construction.
Diagnostic Services revenue grew by 21.3% to €408.7m (€336.7m) with organic growth of 13.6%. Growth was strong in all markets, but being particularly marked in Ukraine with an increase of 39.8%.
Revenue for the center for genetic diagnostics of Dr. Klein, Dr. Rost, and colleagues ("Klein") which was acquired in January 2019 amounted to €16.1m.
117 new BDPs were opened and 17 were closed over the year bringing the total to 670 BDPs at year-end. Investments were made in the year to increase automation in the central laboratories to mitigate salary inflation and take advantage of volume concentrations.
The laboratory test volume increased by 8.8% to 106.7 million (98.1 million) with the increase being predominantly driven from private pay markets and weighted to advanced tests.
Revenue from external customers, recognised over time as services are rendered, by division, by payer and by country is disclosed in the following table.
| Q4 | Q4 | % of | % of | |||||
|---|---|---|---|---|---|---|---|---|
| €m | 2019 | 2018 | Growth | FY 2019 | FY 2019 | FY 2018 | FY 2018 | Growth |
| Healthcare Services | 124.6 | 97.5 | 27.9% | 448.6 | 345.5 | 29.9% | ||
| By payer: | ||||||||
| Public | 12.6 | 2.6 | 376.8% | 40.0 | 8.9% | 9.5 | 2.8% | 319.8% |
| Private | 112.0 | 94.9 | 18.2% | 408.6 | 91.1% | 336.0 | 97.2% | 21.6% |
| Funded | 59.4 | 54.0 | 10.0% | 228.8 | 51.0% | 204.7 | 59.2% | 11.8% |
| Fee-For-Service (FFS) | 47.3 | 35.4 | 33.9% | 156.5 | 34.9% | 119.4 | 34.5% | 31.2% |
| Other services | 5.3 | 5.5 | -3.0% | 23.3 | 5.2% | 11.9 | 3.5% | 95.8% |
| By country: | ||||||||
| Poland | 94.3 | 73.3 | 28.5% | 345.1 | 76.9% | 270.7 | 78.4% | 27.5% |
| Romania | 15.5 | 14.5 | 6.9% | 59.6 | 13.3% | 41.1 | 11.9% | 45.0% |
| India | 7.3 | 1.1 | 571.0% | 9.9 | 2.2% | 3.4 | 1.0% | 192.0% |
| Other countries | 7.5 | 8.6 | -10.9% | 34.0 | 7.6% | 30.3 | 8.7% | 12.5% |
| Diagnostic Services | 105.0 | 83.6 | 25.6% | 395.5 | 325.8 | 21.4% | ||
| By payer: | ||||||||
| Public | 35.2 | 30.8 | 14.3% | 137.6 | 34.8% | 119.6 | 36.7% | 15.0% |
| Private | 69.8 | 52.8 | 32.1% | 257.9 | 65.2% | 206.2 | 63.3% | 25.1% |
| Fee-For-Service (FFS) | 67.3 | 51.9 | 29.6% | 250.4 | 63.3% | 201.1 | 61.7% | 24.6% |
| Other services | 2.5 | 0.9 | 171.9% | 7.5 | 1.9% | 5.1 | 1.6% | 46.0% |
| By country: | ||||||||
| Germany | 51.2 | 41.8 | 22.3% | 196.6 | 49.7% | 163.3 | 50.1% | 20.4% |
| Romania | 14.6 | 13.3 | 9.8% | 59.5 | 15.0% | 52.7 | 16.2% | 12.9% |
| Ukraine | 18.8 | 12.4 | 51.5% | 64.8 | 16.4% | 46.5 | 14.3% | 39.5% |
| Poland | 9.5 | 8.2 | 17.0% | 36.4 | 9.2% | 31.9 | 9.8% | 14.0% |
| Other countries | 10.9 | 7.9 | 37.4% | 38.2 | 9.7% | 31.4 | 9.6% | 21.8% |
As from Q4 2019 other services are presented separately from FFS. Other services include non-medical related services.
PROFIT DEVELOPMENT FOURTH QUARTER 2019
Operating profit (EBIT) increased strongly by 26.6% to €10.8m (€8.6m) with an operating margin of 4.7% (4.7%).
Profit for the period amounted to €6.6m (€3.5m), a margin of 2.9% (1.9%), which was impacted by foreign exchange gains on lease liabilities of €1.0m (€-0.2m) recognised within the financial result. Excluding other income/costs, net profit increased by 91.2% from €2.9m to €5.4m.
Other income/costs of €1.2m (€0.6m) which by nature are non-recuring included results from accounting for the valuation exercises in respect of MHI consolidation. These exercises included revaluation of the Medicover shareholding in MHI,
options over non-controlling interests' shares (puts and calls) and reclassifications of previous foreign exchange translation differences. Refer to note 3 for more information.
Net financial cost amounted to €-2.5m (€-1.6m). €-3.8m (€-2.8m) of interest was charged on the Group's debt, commitment fees and other discounted liabilities. Interest income earned on cash balances amounted to €0.4m (€0.7m). Within the interest charged €-2.1m (€-1.4m) was related to lease liabilities. Foreign exchange gains were €0.9m (€0.5m).
Basic/diluted earnings per share amounted to €0.048 (€0.022).
Consolidated EBITDA increased by 37.5% to €33.4m (€24.3m), an EBITDA margin of 14.5% (13.4%). Adjusted EBITDA was €34.4m (€25.7m) increasing by 34.5% and with a margin of 15.0% (14.1%). Adjusted EBITDAaL amounted to €23.3m (€17.3m), an increase of 35.7% with a margin of 10.1% (9.5%). 77.6% of this increase was organic, leading to an organic adjusted EBITDAaL growth of 27.7%.
The improvement predominantly reflected the increased revenue in both divisions and flow through to profit, driven by growth, increasing volume in existing facilities as well as acquisitions.
Items affecting comparability
MHI was consolidated for the first time in December 2019 and included in the results. The two-month period prior to December included a share of the net loss of MHI of €-1.1m, which included costs of rebranding from MaxCure to Medicover. In the fourth quarter 2018 the recognised share of loss related to MHI was €-2.3m covering a period of twelve months.
€0.8m of assets were impaired in the Indian fertility business for 3 locations closed in the Punjab and Delhi regions due to inadequate development, reducing the number of fertility units in India to 13.
Direct merger and acquisition related expenses in the quarter were €-0.4m (€-0.9m).
Interest on lease liabilities increased to €-2.1m (€-1.4m) following MHI consolidation and the addition of new leased premises.
EBITDA for Healthcare Services increased by 33.1% to €17.8m (€13.2m), an EBITDA margin of 14.2% (13.7%). Organic growth was 17.0% for the quarter. EBITDAaL increased by 34.1% to €12.2m (€8.9m), a margin of 9.7% (9.3%). Contribution from increased volume of activities in major business lines has strongly supported profit development. Cost pressure remains in medical costs in all markets. Acquisitions impacting the quarter included several Polish dental practises,
Neomedic in Poland and MHI. Medicover is investing to expand the capabilities of both Neomedic and MHI with additional facilities beyond the 2 cancer centres to open in India in 2020.
Operating profit was in line with previous year and amounted to €4.7m (€4.6m), a margin of 3.7% (4.8%) with an impairment charge and higher amortisation associated with acquisitions dampering operating profit.
The segment results were driven by the increase in employer funded members, good growth of the Fee-For-Service business areas such as dental, hospital admissions as well as acquisitions. The expansion of the Pelican hospital is in construction with commissioning expected in the first half 2020. This will add 100 beds with new medical modalities, expansion of the intensive care unit (ICU) department and new medical imaging diagnostics.
The two main markets for Healthcare Services, Poland and Romania, continued to see strong demand for privately paid healthcare services, driven by strong economic development and real wage growth.
EBITDA for Diagnostic Services increased by 25.2% to €18.7m (€14.9m), an EBITDA margin of 17.3% (17.3%), of which 24.1% was organic growth. EBITDAaL increased by 22.8% to €13.3m (€10.8m), a margin of 12.3% (12.6%).
Operating profit increased by 18.6% to €9.4m (€8.0m), a margin of 8.8% (9.3%).
The Ukrainian business continues to grow strongly with good scale effects contributing to profit flow through. All major laboratory units performed well
with mild winter weather being supportive of volume.
Additional regulatory licenses were acquired to enable new doctors to work in the existing network of German clinics.
PROFIT DEVELOPMENT FULL YEAR 2019
Operating profit (EBIT) grew by 38.0% to €46.5m (€33.7m) with an operating margin of 5.5% (5.0%).
Profit for the period was €24.7m (€24.2m), a margin of 2.9% (3.6%) with lower other income/costs recognised of €1.0m (€8.6m). Refer to note 3 for further information. Excluding other income/costs, net profit increased strongly by 51.8% from €15.6m to €23.7m.
For eleven months, a loss of €-2.0m (€-2.0m for twelve months 2018) was recognised for MHI, which has been accounted for as an associate up to 1 December 2019. MHI was in a net loss position due to the development projects, investments, opening of a new hospital in late 2018 and rebranding costs expensed to change to Medicover.
Net financial cost amounted to €-12.3m (€-8.8m). €-13.7m (€-9.6m) of interest was charged on the Group's debt, commitment fees and other discounted liabilities. Interest income earned on cash balances amounted to €1.8m (€1.4m). Within the interest charged €-7.2m (€-5.6m) was related to lease liabilities. Foreign exchange losses were €-0.4m (€-0.6m) of which a gain of €0.2m (€-1.4m) are related to lease liabilities.
Basic/diluted earnings per share were €0.168 (€0.167).
Consolidated EBITDA increased by 33.0% to €120.7m (€90.7m), an EBITDA margin of 14.3% (13.5%), despite higher merger and acquisition related costs being charged for the year. Adjusted EBITDA was €125.0m (€94.1m) increasing by 32.9% with a margin of 14.8% (14.0%). Adjusted EBITDAaL amounted to € 84.9m (€61.9m), an increase of 37.3% with a margin of 10.1% (9.2%), with approximately 63% of this increase being organic.
The increase in EBITDA was slightly weighted to Diagnostic Services, supported by strong contributions from Romania and Ukraine.
Items affecting comparability
Medicover disposed of its UK based fertility operation in the second quarter 2018 with a noncash loss of €-1.8m recorded in other income/costs. The EBITDA loss for that business for 2018 was €-0.7m.
Medicover completed and sold a real estate development in Poland in 2018 thereby realising the value of a plot of surplus land, with a profit of €1.5m recognised in other income/costs in the second quarter 2018.
MHI was consolidated for the first time in December 2019 and included in the results. The eleven months prior to December included a share of the net loss of MHI of €-2.0m, which included costs of rebranding from MaxCure to Medicover. In 2018 the share of loss related to MHI amounted to €-2.0m.
€0.8m of assets were impaired in the last quarter in the Indian fertility business for 3 locations closed in the Punjab and Delhi regions due to inadequate development, reducing the number of fertility units in India to 13.
Direct merger and acquisition related expenses in the year increased to €-2.4m (€-1.8m).
Interest on lease liabilities increased to €-7.2m (€-5.6m) due to acquisitions and addition of new lease premises.
EBITDA for Healthcare Services increased by 32.8% to €61.0m (€45.8m), an EBITDA margin of 13.6% (13.3%), with nearly half of the growth being organic. EBITDAaL increased by 39.2% to €41.0m (€29.3m), a margin of 9.1% (8.5%).
Operating profit amounted to €20.1m (€15.6m), an increase of 28.3% with an operating margin of 4.5% (4.5%).
EBITDA for Diagnostic Services increased by 28.8% to €75.7m (€58.8m), an EBITDA margin of 18.5% (17.5%), of which approximately 80% was organic growth. EBITDAaL increased by 29.4% to €56.0m (€43.3m), a margin of 13.7% (12.9%). Strong underlying customer demand and volume increase has supported the performance of the segment with flow through to profit of increased contribution.
Operating profit for the segment followed a similar trend with 33.3% growth to €43.3m (€32.5m), a margin of 10.6% (9.7%). Good economic activity in Romania, Ukraine and Poland continued to support out of pocket private pay demand. The German clinics continued to develop with the addition of four locations and some extensions to existing infrastructure in other cities during the year. The total number of clinics operating at year-end was 25 (23), with 4 additions and a reduction of 2 units being merged into existing units. Diagnostic Services continues to invest in accessibility to services and has increased its number of BDPs and distribution in all geographies, with the net addition of 100 BDPs in 2019.
KEY FINANCIAL DATA
| Medicover, €m | Oct-Dec 2019 |
Oct-Dec 2018 |
Growth | FY 2019 | FY 2018 | Growth |
|---|---|---|---|---|---|---|
| Revenue | 229.7 | 181.2 | 27% | 844.4 | 671.6 | 26% |
| Operating profit (EBIT) | 10.8 | 8.6 | 27% | 46.5 | 33.7 | 38% |
| Operating profit margin, % | 4.7% | 4.7% | 5.5% | 5.0% | ||
| Net profit | 6.6 | 3.5 | 91% | 24.7 | 24.2 | 2% |
| Net profit margin, % | 2.9% | 1.9% | 2.9% | 3.6% | ||
| Basic/diluted earnings per share, € | 0.048 | 0.022 | 118% | 0.168 | 0.167 | 1% |
| EBITDA | 33.4 | 24.3 | 37% | 120.7 | 90.7 | 33% |
| EBITDA margin, % | 14.5% | 13.4% | 14.3% | 13.5% | ||
| Adjusted EBITDA | 34.4 | 25.7 | 34% | 125.0 | 94.1 | 33% |
| Adjusted EBITDA margin, % | 15.0% | 14.1% | 14.8% | 14.0% | ||
| EBTIDAaL | 22.3 | 15.9 | 40% | 80.6 | 58.5 | 38% |
| EBITDAaL margin, % | 9.7% | 8.8% | 9.5% | 8.7% | ||
| Adjusted EBITDAaL | 23.3 | 17.3 | 36% | 84.9 | 61.9 | 37% |
| Adjusted EBITDAaL margin, % | 10.1% | 9.5% | 10.1% | 9.2% | ||
| EBITA | 13.9 | 10.0 | 39% | 53.7 | 37.0 | 45% |
| EBITA margin, % | 6.0% | 5.5% | 6.4% | 5.5% | ||
| Adjusted EBITA | 14.9 | 11.4 | 32% | 58.0 | 40.4 | 44% |
| Adjusted EBITA margin, % | 6.5% | 6.2% | 6.9% | 6.0% | ||
| Oct-Dec | Oct-Dec | |||||
| Healthcare Services, €m | 2019 | 2018 | Growth | FY 2019 | FY 2018 | Growth |
| Revenue | 124.8 | 97.7 | 28% | 449.3 | 346.1 | 30% |
| Operating profit (EBIT) | 4.7 | 4.6 | 1% | 20.1 | 15.6 | 28% |
| Operating profit margin, % | 3.7% | 4.8% | 4.5% | 4.5% | ||
| EBITDA | 17.8 | 13.2 | 33% | 61.0 | 45.8 | 33% |
| EBITDA margin, % | 14.2% | 13.7% | 13.6% | 13.3% | ||
| EBITDAaL | 12.2 | 8.9 | 34% | 41.0 | 29.3 | 39% |
| EBITDAaL margin, % | 9.7% | 9.3% | 9.1% | 8.5% | ||
| EBITA | 7.0 | 5.8 | 20% | 25.5 | 17.8 | 43% |
| EBITA margin, % | 5.6% | 6.0% | 5.7% | 5.2% | ||
| Members (period end) (000's) | 1,300 | 1,209 | 7% | 1,300 | 1,209 | 7% |
| Oct-Dec | Oct-Dec | |||||
| Diagnostic Services, €m | 2019 | 2018 | Growth | FY 2019 | FY 2018 | Growth |
| Revenue | 108.6 | 86.6 | 25% | 408.7 | 336.7 | 21% |
| Operating profit (EBIT) | 9.4 | 8.0 | 19% | 43.3 | 32.5 | 33% |
| Operating profit margin, % | 8.8% | 9.3% | 10.6% | 9.7% | ||
| EBITDA | 18.7 | 14.9 | 25% | 75.7 | 58.8 | 29% |
| EBITDA margin, % | 17.3% | 17.3% | 18.5% | 17.5% | ||
| EBITDAaL | 13.3 | 10.8 | 23% | 56.0 | 43.3 | 29% |
| EBITDAaL margin, % | 12.3% | 12.6% | 13.7% | 12.9% | ||
| EBITA | 10.2 | 8.2 | 24% | 45.1 | 33.6 | 34% |
| EBITA margin, % | 9.5% | 9.6% | 11.0% | 10.0% | ||
| Lab tests (period volume) (m) | 26.8 | 24.8 | 8% | 106.7 | 98.1 | 9% |
For definition and reconciliation of alternative performance measures, refer to note 10.
CASH FLOW
Fourth quarter
Cash generated from operations before working capital changes and taxes paid amounted to €34.7m (€25.1m), being 103.7% of EBITDA (103.3%). Net working capital increased by €6.3m (€5.9m) reflecting the growth in the business. Cash paid tax was €3.4m (€2.6m). Net cash from operating activities was €25.0m (€16.6m).
Investments in tangible and intangible assets amounted to €25.2m (€13.4m) with equipping investment in the new 100 beds extension in Pelican hospital in Romania being the largest growth investment in the quarter at €8.1m. Other notable growth areas were expansion of the fitness gyms in Poland supporting the employer paid fitness benefit business and dental facilities in Poland, two buildings to be used as central laboratories and the addition of regulatory licences in Germany. Investments for acquisitions of subsidiaries and associates amounted to €9.9m (€4.3m). Interest received was €0.3m (€0.7m) earned on cash investments in liquid instruments.
Net loans drawn amounted to €8.4m (net loans drawn €0.8m). Leases repaid were €8.2m (€6.6m). Interest paid amounted to €4.3m (€2.0m), of which €2.1m (€1.4m) related to lease liabilities.
Cash and cash equivalents decreased by €13.5m to €34.8m.
Full Year
Cash generated from operations before working capital changes and taxes paid amounted to €124.2m (€94.4m), being 103.0% of EBITDA (104.1%). Net working capital increased by €23.4m (€8.1m) with an increase in stock, receivables and payables, in line with the underlying growth in the business and adjusted for acquisitions. Cash paid tax was €13.5m (€11.9m). Net cash from operating activities was €87.3m (€74.4m).
Investments in tangible and intangible assets amounted to €63.2m (€41.0m) with just over two thirds being growth capital investment and one third being maintenance investment.
Investments for acquisitions of subsidiaries and associates amounted to €82.7m (€49.8m). Refer to note 4 for further details. Interest received was €1.7m (€1.4m) earned on cash investments in liquid instruments.
Net loans drawn amounted to €97.4m (net loans drawn €70.5m) with a switch in funding during the year from the Group's revolving credit facility to the Group's commercial paper program and longer term schuldschein loans issues. Leases repaid were €29.9m (€24.5m). Interest paid amounted to €14.0m (€9.4m), of which €7.2m (€5.6m) related to lease liabilities.
Cash and cash equivalents decreased by €5.7m to €34.8m.
FINANCIAL POSITION
Consolidated equity as at 31 December 2019 amounted to €359.7m (€317.5m). The increase in the levels of equity resulted from profit for the year and positive movements on translation reserves plus recognition of non-controlling interests of MHI of €38.4m upon initial consolidation. Offsetting this was a reduction in equity of €23.2m due to recognition of put option liquidity obligations towards non-controlling shareholders who may put a proportion of their shares to Medicover at the earliest 2023 and 2027.
Loans payable amounted to €275.3m (€131.3m) and lease liabilities of €176.2m (€125.4m) for total financial debt of €451.5m (€256.7m). Loans payable net of cash amounted to €240.5m (€92.9m) funding acquisitions, of which Neomedic was the largest and consolidating MHI's external debt of €23.5m at the acquisition date. The ratio of loans payable net of cash to adjusted EBITDAaL was 2.8x, up from 1.5x for the prior twelve months. This has increased temporarily with the larger
acquisitions of 2019 yet to be reflected for a full year basis in the earnings measure.
Lease liabilities increased by €50.8m over the year with €30.9m from acquisitions. MHI's lease liabilities amounted to €19.3m at the acquisition date, with typically long dated premise lease contracts for the hospitals operated.
During the quarter, the Group has issued schuldschein loans in Germany for €140m with maturities of five, seven and ten years with fixed and floating rate tranches, improving the Group's liquidity profile.
The Group launched in June its Swedish commercial paper program to achieve lower cost of borrowing. The committed revolving credit facility of €220m is used as back-up facility for the program. The commercial paper program is classified as short-term debt with maturities of up to six months, however the Group's committed revolving credit facility mitigates any short-term liquidity risks.
The Group had €126.6m of available credit lines centrally at year-end.
TAX
The Group's effective tax rate for the year was 25.9% (23.7%) with a tax charge of €8.6m (€7.5m).
PARENT COMPANY
Net profit for the period was impacted by dividends received of €12.0m (€30.5m) from subsidiaries resulting in a profit after tax of €9.7m (€28.4m) in the quarter and €4.4m (€24.9m) for the year. The parent company's assets consist of investments in subsidiaries. The business is financed with equity contributed by the owners and a short-term commercial paper program launched in June 2019. Cash paid taxes for the period were €13.5m (€11.9m).
€80.4m was outstanding under the commercial paper program at year-end. The proceeds of the program have been lent to the parent's only subsidiary on the same maturity as the program drawings. Equity of the parent company as at 31 December 2019 was €463.1m (€457.0m).
FINANCIAL TARGETS
The board of directors has approved new mediumterm financial targets for the period 2020-2022 replacing the medium-term targets issued in February 2017.
The new medium-term financial targets for the period 2020 to 2022 with 2019 as a basis are as follows:
| 2019 basis | Target | |
|---|---|---|
| Organic revenue growth | €844.4m | 9-12% |
| Adjusted EBITDA margin target year-end 2022 | 14.8% | 15.5-16.5% |
| Loans payable net of cash / adjusted EBITDAaL1 | 2.8x | =<3.5x |
| Dividend payout ratio | Up to 50% of net profit |
The new medium-term financial targets confirm the continued expectation to maintain robust organic revenue growth alongside ongoing margin expansion, with a maintained strong balance sheet, allowing an ongoing active mergers and acquisitions agenda. This reflects Medicover's strong market position and positive outlook.
DIVIDEND
The board of directors proposes to the annual general meeting that a dividend of €0.05 per share is distributed for the financial year 2019. The decision is subject to the shareholders' approval on the annual general meeting on 30 April.
The proposed dividend is 30% of the net profit attributable to shareholders, in line with the dividend policy, corresponding to a total of €6.7m. If the proposal is accepted, the expected record
Medicover is maintaining its organic revenue target unchanged having substantially exceeded its targets for the last three years. Medicover has also delivered its profit targets at the top end of the target range for the last three-year period and expects to be able to continue to expand margins over the new period.
date for the dividend will be 5 May and the dividend is expected to be paid out by Euroclear on 8 May.
The board of directors has also decided on an updated dividend policy. An annual dividend of up to 50% of net profit will be considered from 2020 and onwards. The proposed dividend will take into account Medicover's long-term development opportunities and its financial position.
1 This may temporarily be exceeded in relation to acquisitions.
RISK FACTORS
Operating risks faced by Medicover include risk relating to access to sufficient qualified employees and the related payroll expense to fulfil growth and customer service expectations, risk relating to medical quality or service deficiencies and medical malpractice. External risks include risk relating to the regulatory environment and the general economy, political risk and change in public government funding policies.
Apart from the risks described in the 'Risk and risk management' section of the management report in
BASIS & AUDIT
This interim report has been prepared in accordance with IAS 34 Interim Financial Reporting. It should be read together with the consolidated financial statements of the Group as at and for the year ended 31 December 2018 as well with the restatement for IFRS 16 Leases and accounting policy update released on 17 April
the annual report 2018 (pages 44-47), no other significant new risks are deemed to have emerged. Medicover is exposed to various financial risks, such as credit risk, interest rate risk, liquidity risk and foreign currency risk. Financial risks are managed by the central finance department.
For further information on risk management and financial instruments, see the consolidated financial statements of the Group as at and for the year ended 31 December 2018: note 24 on pages 78- 80.
- The comparative amounts presented in this statement have been restated for the impacts of the adoption of IFRS 16. The interim information on page 1-13 is an integral part of this interim report. This report has not been reviewed by the Company's auditor.
The board of directors and chief executive officer declare that the interim report for the period January-December 2019 gives a fair overview of the parent company´s and Group´s operations, financial position and results of operations and describes significant risks and uncertainties facing the parent company and companies included in the Group.
Stockholm on 14 February 2020
Fredrik Stenmo Chairman of the board
Peder af Jochnick Robert af Jochnick Arno Bohn Board member Board member Board member
Board member Board member Board member
Sonali Chandmal Michael Flemming Margareta Nordenvall
Fredrik Rågmark Board member and CEO
This is information that Medicover AB is obliged to make public pursuant to the EU Market Abuse Regulation and the Securities Markets Act. The information was submitted for publication through the agency of the contact person set out below at 7.45 (CET) on 14 February 2020. This interim report and other information about Medicover is available at medicover.com.
Financial Calendar
Annual report week 14 2020 Interim report January-March 2020 30 April 2020 Annual general meeting 30 April 2020 Interim report April-June 2020 24 July 2020 Interim report July-September 2020 6 November 2020
Contact information
For further information, please contact: Hanna Bjellquist, Head of Investor Relations Phone: +46 70 303 32 72 E-mail: [email protected]
Address
Org nr: 559073-9487 Medicover AB (publ) P.O. Box 5283 S-102 46 Stockholm Visiting address: Riddargatan 12A SE-114 35 Stockholm, Sweden Phone: +46 8-400 17 600
13 – Year-end report January-December 2019
FINANCIAL STATEMENTS
CONSOLIDATED INCOME STATEMENT
| Note | €m | Oct-Dec 2019 |
Oct-Dec 2018 |
Jan-Dec 2019 |
Jan-Dec 2018 |
|---|---|---|---|---|---|
| 2 | Revenue | 229.7 | 181.2 | 844.4 | 671.6 |
| Operating expenses | |||||
| Medical provision costs | -175.9 | -137.2 | -637.6 | -507.3 | |
| Gross profit | 53.8 | 44.0 | 206.8 | 164.3 | |
| Distribution, selling and marketing costs | -13.4 | -9.5 | -45.0 | -35.2 | |
| Administrative costs | -29.6 | -25.9 | -115.3 | -95.4 | |
| Operating profit (EBIT) | 10.8 | 8.6 | 46.5 | 33.7 | |
| 3 | Other income/(costs) | 1.2 | 0.6 | 1.0 | 8.6 |
| Interest income | 0.4 | 0.7 | 1.8 | 1.4 | |
| Interest expense | -3.8 | -2.8 | -13.7 | -9.6 | |
| Other financial income/(expense) | 0.9 | 0.5 | -0.4 | -0.6 | |
| Total financial result | -2.5 | -1.6 | -12.3 | -8.8 | |
| Share of loss of associates | -1.1 | -2.1 | -1.9 | -1.8 | |
| Profit before income tax | 8.4 | 5.5 | 33.3 | 31.7 | |
| Income tax | -1.8 | -2.0 | -8.6 | -7.5 | |
| Profit for the period | 6.6 | 3.5 | 24.7 | 24.2 | |
| Profit attributable to: | |||||
| Owners of the parent | 6.5 | 3.0 | 22.5 | 22.3 | |
| Non-controlling interests | 0.1 | 0.5 | 2.2 | 1.9 | |
| Profit for the period | 6.6 | 3.5 | 24.7 | 24.2 | |
| Earnings per share attributable to parent: | |||||
| Basic/diluted, € | 0.048 | 0.022 | 0.168 | 0.167 |
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
| Note | €m | Oct-Dec 2019 |
Oct-Dec 2018 |
Jan-Dec 2019 |
Jan-Dec 2018 |
|---|---|---|---|---|---|
| Profit for the period | 6.6 | 3.5 | 24.7 | 24.2 | |
| Other comprehensive income/(loss): Items that may be reclassified subsequently to income statement: |
|||||
| Exchange differences on translating foreign operations |
6.5 | 0.4 | 7.8 | -6.1 | |
| Income tax relating to these items | -0.1 | 0.4 | -0.6 | 0.5 | |
| Other comprehensive income/(loss) for the period, net of tax |
6.4 | 0.8 | 7.2 | -5.6 | |
| Total comprehensive income for the period | 13.0 | 4.3 | 31.9 | 18.6 | |
| Total comprehensive income attributable to: | |||||
| Owners of the parent | 13.2 | 3.9 | 30.0 | 16.7 | |
| Non-controlling interests | -0.2 | 0.4 | 1.9 | 1.9 | |
| Total comprehensive income for the period | 13.0 | 4.3 | 31.9 | 18.6 |
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
| 31 Dec | 31 Dec | ||
|---|---|---|---|
| Note | €m | 2019 | 2018 |
| ASSETS | |||
| Non-current assets Goodwill |
293.1 | 150.1 | |
| Other intangible assets | 74.6 | 50.8 | |
| Tangible fixed assets | 252.7 | 164.4 | |
| 9 | Right-of-use assets | 166.0 | 117.0 |
| Total fixed assets | 786.4 | 482.3 | |
| Deferred tax assets | 9.1 | 4.2 | |
| Investment in associates | 0.7 | 43.8 | |
| Other financial assets | 7.5 | 9.3 | |
| Total non-current assets | 803.7 | 539.6 | |
| Current assets | |||
| Inventories | 37.1 | 30.3 | |
| 5 | Other financial assets | 1.6 | 27.8 |
| 5 | Trade and other receivables | 142.3 | 92.3 |
| 5 | Cash and cash equivalents | 34.8 | 38.4 |
| Total current assets | 215.8 | 188.8 | |
| Total assets | 1,019.5 | 728.4 | |
| SHAREHOLDERS' EQUITY | |||
| Issued capital and reserves attributable to owners of the parent | 317.4 | 313.1 | |
| Non-controlling interests Total shareholders' equity |
42.3 359.7 |
4.4 317.5 |
|
| LIABILITIES | |||
| Non–current liabilities | |||
| 5, 8 | Loans payable | 163.8 | 126.4 |
| 5, 8, 9 | Lease liabilities | 142.0 | 96.4 |
| Deferred tax liabilities | 27.5 | 23.7 | |
| Provisions | 2.2 | 0.3 | |
| 5, 8 | Other financial liabilities | 42.3 | 28.6 |
| Other liabilities | 0.3 | 5.6 | |
| Total non-current liabilities | 378.1 | 281.0 | |
| Current liabilities | |||
| 5, 8 | Loans payable | 111.5 | 4.9 |
| 5, 8, 9 | Lease liabilities | 34.2 | 29.0 |
| Provision for unearned premiums/deferred revenue | 11.4 | 10.3 | |
| Corporate tax payable | 4.8 | 4.2 | |
| 5, 8 | Other financial liabilities | 5.2 | 3.6 |
| 5 | Trade and other payables | 114.6 | 77.9 |
| Total current liabilities | 281.7 | 129.9 | |
| Total liabilities | 659.8 | 410.9 | |
| Total shareholders' equity and liabilities | 1,019.5 | 728.4 |
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
| €m | Share capital |
Treasury shares |
Additional paid in capital |
Retained earnings |
Non-controlling interests put options reserve |
Other reserves |
Translation reserve |
Total attributable to owners of the parent |
Non controlling interests |
Total equity |
|---|---|---|---|---|---|---|---|---|---|---|
| Opening balance as at 1 January 2018 | 26.7 | - | 319.7 | -11.3 | -13.8 | 1.3 | -22.3 | 300.3 | 3.7 | 304.0 |
| IFRS 16 impact – first application |
- | - | - | -4.3 | - | - | 0.2 | -4.1 | -0.1 | -4.2 |
| Opening balance as at 1 January 2018, restated | 26.7 | - | 319.7 | -15.6 | -13.8 | 1.3 | -22.1 | 296.2 | 3.6 | 299.8 |
| Profit for the year |
- | - | - | 22.3 | - | - | - | 22.3 | 1.9 | 24.2 |
| Other comprehensive income |
- | - | - | - | - | - | -5.6 | -5.6 | - | -5.6 |
| Total comprehensive income for the year | - | - | - | 22.3 | - | - | -5.6 | 16.7 | 1.9 | 18.6 |
| Transactions with owners in their capacity as owners: | ||||||||||
| Share issue for cash |
0.4 | - | - | - | - | - | - | 0.4 | - | 0.4 |
| Acquisition of treasury shares |
- | -0.4 | - | - | - | - | - | -0.4 | - | -0.4 |
| Disposal of interest in a subsidiary |
- | - | - | - | - | - | - | - | -1.5 | -1.5 |
| Non-controlling interests put-option reserve |
- | - | - | - | -1.1 | - | - | -1.1 | -2.2 | -3.3 |
| Recognition of non-controlling interests on business combinations |
- | - | - | - | - | - | - | - | 2.6 | 2.6 |
| Employee share-based compensation costs |
- | - | - | - | - | 1.3 | - | 1.3 | - | 1.3 |
| Total transactions with owners in their capacity as | ||||||||||
| owners | 0.4 | -0.4 | - | - | -1.1 | 1.3 | - | 0.2 | -1.1 | -0.9 |
| Closing balance as at 31 December 2018, restated | 27.1 | -0.4 | 319.7 | 6.7 | -14.9 | 2.6 | -27.7 | 313.1 | 4.4 | 317.5 |
| IFRIC 23 impact – first application (note 1) |
- | - | - | -1.9 | - | - | - | -1.9 | - | -1.9 |
| Opening balance as at 1 January 2019, restated | 27.1 | -0.4 | 319.7 | 4.8 | -14.9 | 2.6 | -27.7 | 311.2 | 4.4 | 315.6 |
| Profit for the year |
- | - | - | 22.5 | - | - | - | 22.5 | 2.2 | 24.7 |
| Other comprehensive income |
- | - | - | - | - | - | 7.5 | 7.5 | -0.3 | 7.2 |
| Total comprehensive income for the year | - | - | - | 22.5 | - | - | 7.5 | 30.0 | 1.9 | 31.9 |
| Transactions with owners in their capacity as owners: | ||||||||||
| Acquisition of interest in a subsidiary |
- | - | - | -2.3 | - | - | - | -2.3 | - | -2.3 |
| Non-controlling interests put-options reserve |
- | - | - | - | -23.2 | - | - | -23.2 | -2.4 | -25.6 |
| Recognition of non-controlling interests on business |
||||||||||
| combinations | - | - | - | - | - | - | - | - | 38.4 | 38.4 |
| Employee share-based compensation costs |
- | - | - | - | - | 1.7 | - | 1.7 | - | 1.7 |
| Total transactions with owners in their capacity as | ||||||||||
| owners | - | - | - | -2.3 | -23.2 | 1.7 | - | -23.8 | 36.0 | 12.2 |
| Closing balance as at 31 December 2019 | 27.1 | -0.4 | 319.7 | 25.0 | -38.1 | 4.3 | -20.2 | 317.4 | 42.3 | 359.7 |
CONSOLIDATED CASH FLOW STATEMENT
| Note | €m | Oct-Dec | Oct-Dec | Jan-Dec | Jan-Dec |
|---|---|---|---|---|---|
| 2019 | 2018 | 2019 | 2018 | ||
| Profit before income tax | 8.4 | 5.5 | 33.3 | 31.7 | |
| Adjustments for: | |||||
| Depreciation, amortisation and impairment | 22.6 | 15.7 | 74.2 | 57.0 | |
| Gain on disposal of fixed assets | 0.0 | - | -0.2 | -0.1 | |
| Gain on termination of leases | -0.1 | - | -0.8 | -0.1 | |
| 3 | Other (income)/costs | -1.2 | -0.7 | -1.0 | -7.2 |
| Net interest expense | 3.4 | 2.1 | 11.9 | 8.2 | |
| Employee share-based compensation costs | 0.5 | 0.5 | 1.7 | 1.6 | |
| Other non-cash transactions | 2.1 | 2.7 | 6.2 | 3.3 | |
| Unrealised foreign exchange (gain)/loss Cash generated from operations before working |
-1.0 | -0.7 | -1.1 | 0.0 | |
| capital changes and tax payments | 34.7 | 25.1 | 124.2 | 94.4 | |
| Changes in operating assets and liabilities: | |||||
| Increase in receivables & inventories | -3.2 | -12.3 | -25.0 | -13.3 | |
| Increase/(decrease) in payables | -3.1 | 6.4 | 1.6 | 5.2 | |
| Cash generated from operations before tax | |||||
| payments | 28.4 | 19.2 | 100.8 | 86.3 | |
| Income tax paid | -3.4 | -2.6 | -13.5 | -11.9 | |
| Net cash from operating activities | 25.0 | 16.6 | 87.3 | 74.4 | |
| Investing activities: | |||||
| Payment for acquisition of fixed assets | -25.2 | -13.4 | -63.2 | -41.0 | |
| Proceeds from disposal of fixed assets | 0.1 | - | 0.3 | 0.1 | |
| Payment for acquiring interest in associates | - | - | - | -15.3 | |
| Dividends received from associates | - | - | - | 0.1 | |
| Payment for acquisition of subsidiaries, net of cash | |||||
| 4 | acquired | -9.9 | -4.3 | -82.7 | -34.5 |
| Proceeds from disposal of subsidiaries, net of cash sold | 0.1 | 0.5 | 0.1 | 0.5 | |
| Payments into escrow for acquisitions | - | -24.7 | - | -24.7 | |
| Loans repaid | 1.1 | - | 2.0 | - | |
| Loans granted | - | -2.1 | - | -2.7 | |
| Interest received | 0.3 | 0.7 | 1.7 | 1.4 | |
| Net cash used in investing activities | -33.5 | -43.3 | -141.8 | -116.1 | |
| Financing activities: | |||||
| Proceeds from issue of shares | - | 0.4 | - | 0.4 | |
| Acquisition of treasury shares | - | -0.4 | - | -0.4 | |
| Acquisition of non-controlling interests | - | - | -2.7 | - | |
| Loans repaid | -219.5 | -2.7 | -479.9 | -35.6 | |
| Loans received | 227.9 | 3.5 | 577.3 | 106.1 | |
| Leases repaid | -8.2 | -6.6 | -29.9 | -24.5 | |
| Interest paid | -4.3 | -2.0 | -14.0 | -9.4 | |
| Distribution to non-controlling interests | -0.9 | -2.0 | -2.0 | -2.0 | |
| Net cash from/(used in) financing activities | -5.0 | -9.8 | 48.8 | 34.6 | |
| Total cash flow | -13.5 | -36.5 | -5.7 | -7.1 | |
| Cash and cash equivalents | |||||
| Cash balance as at beginning of the period | 47.1 | 74.2 | 38.4 | 45.4 | |
| Net effects of exchange gain on cash balances | 1.2 | 0.7 | 2.1 | 0.1 | |
| Total cash balance as at end of the period | 34.8 | 38.4 | 34.8 | 38.4 | |
| Decrease in cash and cash equivalents | -13.5 | -36.5 | -5.7 | -7.1 |
CONDENSED PARENT COMPANY INCOME STATEMENT
| Note | €m | Oct-Dec 2019 |
Oct-Dec 2018 |
Jan-Dec 2019 |
Jan-Dec 2018 |
|---|---|---|---|---|---|
| Revenue | 0.3 | 0.2 | 1.0 | 0.6 | |
| Operating expenses | -2.4 | -2.3 | -8.2 | -6.3 | |
| Operating loss | -2.1 | -2.1 | -7.2 | -5.7 | |
| Income from participation in Group companies | 12.0 | 30.5 | 12.0 | 30.5 | |
| Interest income/(costs) | -0.2 | 0.0 | -0.4 | 0.1 | |
| Profit before income tax | 9.7 | 28.4 | 4.4 | 24.9 | |
| Income tax | - | - | - | - | |
| Profit for the period | 9.7 | 28.4 | 4.4 | 24.9 |
As the profit for the period corresponds with the amount in total comprehensive income, no separate statement is presented. Income from participation in Group companies includes dividend income of €12.0m (€30.5m) received from subsidiaries.
CONDENSED PARENT COMPANY BALANCE SHEET
| Note | €m | 31 Dec 2019 |
31 Dec 2018 |
|---|---|---|---|
| Tangible fixed assets | 0.0 | 0.0 | |
| Investments in subsidiaries | 434.8 | 434.8 | |
| Other non-current assets | - | 28.0 | |
| Total fixed assets | 434.8 | 462.8 | |
| Current receivables | 109.7 | 0.9 | |
| Cash and cash equivalents | 0.0 | 0.0 | |
| Total current assets | 109.7 | 0.9 | |
| Total assets | 544.5 | 463.7 | |
| Restricted equity | 27.1 | 27.1 | |
| Non-restricted equity | 436.0 | 429.9 | |
| Total equity | 463.1 | 457.0 | |
| Non-current liabilities | 0.0 | 3.3 | |
| Current liabilities | 81.4 | 3.4 | |
| Total equity and liabilities | 544.5 | 463.7 |
SELECTED EXPLANATORY NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of preparation and principal accounting policies
Basis of preparation
Medicover AB (publ) ("the Company") together with its subsidiaries are referred to as "the Group". Medicover AB (publ) is a company domiciled in
Statement of compliance
This interim report has been prepared in accordance with IAS 34 Interim Financial Reporting and should be read together with the consolidated financial statements of the Group as at and for the year ended 31 December 2018. The interim financial statements do not include all disclosures that would otherwise be required in a complete set of financial statements.
A restatement and updated accounting policies communication regarding IFRS 16 Leases and
Sweden, with its head office in Stockholm. The reporting and functional currency of the Company is the Euro.
IFRIC 23 Uncertainty over income tax treatment was published on 17 April 2019, detailing the impact of and restatement of reported results and amounts for 2018 and prior periods. This interim report should be read in conjunction with that communication and is an integral part.
The condensed interim financial information on pages 1-13 is an integral part of this interim report.
Significant accounting policies, use of judgements and estimates
The Group applies the International Financial Reporting Standards (IFRS) as adopted by the European Union. The accounting policies applied by the Group in this condensed consolidated interim financial information are the same as those applied by the Group in its consolidated financial statements as at and for the year ended 31 December 2018, except for the changes described in the restatement release of 17 April 2019. For further details on the impact of IFRS 16 Leases, refer to note 9. Changes in IFRIC 23 are summarised as follows:
IFRIC 23 Uncertainty over Income Tax Treatments impact – first application as at 1 January 2019:
- corporate tax payable recognised €1.9m
- reduction in total equity €1.9m
Other new and amended standards as well as interpretations issued by the IASB that will apply for the first time in the 2019 annual consolidated financial statements are not expected to impact the
2. Segment information
The basis of measurement of segment profit or loss has changed from EBITDA to EBITDAaL compared to the consolidated financial statements 2018. Due to the adoption of IFRS 16 Leases, the utility of the EBITDA measure has reduced as it now excludes costs of leases. EBITDAaL addresses this to be an
Group as they are either not relevant to the Group's activities or require accounting which is consistent with the Group's current accounting policies.
The preparation of interim condensed financial statements in compliance with IAS 34 requires the use of certain critical accounting estimates. It also requires the Group's management to exercise judgement in applying the Group's accounting policies. Refer to the Group's consolidated financial statements as at and for the year ended 31 December 2018 and the restatement release of 17 April 2019 and note 4-5 for further information on the use of estimates and judgements.
The parent company applies the Swedish Annual Accounts Act and the Swedish Financial Reporting Board's Recommendation RFR 2 Reporting for Legal Entities.
approximation of the previously used profit and loss performance measure including the costs of leases. EBITDAaL is a new alternative performance measure, refer to note 10 for more details.
| Oct-Dec | 2019 | |||||||
|---|---|---|---|---|---|---|---|---|
| €m | Healthcare Services |
Diagnostic Services |
Central/ other |
Group total |
Healthcare Services |
Diagnostic Services |
Central/ other |
Group total |
| Revenue | ||||||||
| Total revenue |
124.8 | 108.6 | 0.1 | 97.7 | 86.6 | 0.1 | ||
| Inter-segment revenue |
-0.2 | -3.6 | 0.0 | -0.2 | -3.0 | 0.0 | ||
| Total revenue from external customers |
124.6 | 105.0 | 0.1 | 229.7 | 97.5 | 83.6 | 0.1 | 181.2 |
| By payer: |
||||||||
| Private | 112.0 | 69.8 | 0.1 | 181.9 | 94.9 | 52.8 | 0.1 | 147.8 |
| Public | 12.6 | 35.2 | - | 47.8 | 2.6 | 30.8 | - | 33.4 |
| By country: |
||||||||
| Poland | 94.3 | 9.5 | 0.0 | 103.8 | 73.3 | 8.2 | - | 81.5 |
| Germany | - | 51.2 | - | 51.2 | - | 41.8 | - | 41.8 |
| Romania | 15.5 | 14.6 | 0.0 | 30.1 | 14.5 | 13.3 | - | 27.8 |
| Ukraine | 1.0 | 18.8 | - | 19.8 | 1.7 | 12.4 | - | 14.1 |
| India | 7.3 | - | - | 7.3 | 1.1 | - | - | 1.1 |
| Other countries |
6.5 | 10.9 | 0.1 | 17.5 | 6.9 | 7.9 | 0.1 | 14.9 |
| Operating profit |
4.7 | 9.4 | -3.3 | 10.8 | 4.6 | 8.0 | -4.0 | 8.6 |
| Margin, % |
3.7% | 8.8% | 4.7% | 4.8% | 9.3% | 4.7% | ||
| Depreciation, amortisation and impairment |
13.1 | 9.3 | 0.2 | 22.6 | 8.6 | 6.9 | 0.2 | 15.7 |
| EBITDA | 17.8 | 18.7 | -3.1 | 33.4 | 13.2 | 14.9 | -3.8 | 24.3 |
| Margin, % |
14.2% | 17.3% | 14.5% | 13.7% | 17.3% | 13.4% | ||
| Right-of-use depreciation |
-4.3 | -4.6 | -0.1 | -9.0 | -3.5 | -3.5 | 0.0 | -7.0 |
| Interests on lease obligations |
-1.3 | -0.8 | 0.0 | -2.1 | -0.8 | -0.6 | 0.0 | -1.4 |
| EBITDAaL1 Segment result: |
12.2 | 13.3 | -3.2 | 22.3 | 8.9 | 10.8 | -3.8 | 15.9 |
| Margin, % |
9.7% | 12.3% | 9.7% | 9.3% | 12.6% | 8.8% | ||
| Other income/(costs) |
1.2 | 0.6 | ||||||
| Net interest expense |
-3.4 | -2.1 | ||||||
| Other financial income/(expense) |
0.9 | 0.5 | ||||||
| Share of loss of associates |
-1.1 | -2.1 | ||||||
| Tax | -1.8 | -2.0 | ||||||
| Group profit after tax |
6.6 | 3.5 |
1 EBITDA under previous accounting standards was reported as the segment measure of profit or loss. This has been changed to EBITDAaL under the new accounting standard, IFRS 16 Leases, as applicable from 1 January 2019. The difference between EBITDA as previously reported and EBITDAaL for Q4 2018 was €0.3m, split between €0.4m in Healthcare Service and €0.2m in Diagnostic Services, with the balance of €-0.3m for central services.
| Jan-Dec | 2019 | |||||||
|---|---|---|---|---|---|---|---|---|
| €m | Healthcare Services |
Diagnostic Services |
Central/ other |
Group total |
Healthcare Services |
Diagnostic Services |
Central/ other |
Group total |
| Revenue | ||||||||
| Total revenue |
449.3 | 408.7 | 0.4 | 346.1 | 336.7 | 0.3 | ||
| Inter-segment revenue |
-0.7 | -13.2 | -0.1 | -0.6 | -10.9 | 0.0 | ||
| Total revenue from external customers |
448.6 | 395.5 | 0.3 | 844.4 | 345.5 | 325.8 | 0.3 | 671.6 |
| By payer: |
||||||||
| Private | 408.6 | 257.9 | 0.3 | 666.8 | 336.0 | 206.2 | 0.3 | 542.5 |
| Public | 40.0 | 137.6 | - | 177.6 | 9.5 | 119.6 | - | 129.1 |
| By country: |
||||||||
| Poland | 345.1 | 36.4 | 0.0 | 381.5 | 270.7 | 31.9 | - | 302.6 |
| Germany | - | 196.6 | - | 196.6 | - | 163.3 | - | 163.3 |
| Romania | 59.6 | 59.5 | 0.0 | 119.1 | 41.1 | 52.7 | - | 93.8 |
| Ukraine | 8.2 | 64.8 | - | 73.0 | 6.2 | 46.5 | - | 52.7 |
| India | 9.9 | - | - | 9.9 | 3.4 | - | - | 3.4 |
| Other countries |
25.8 | 38.2 | 0.3 | 64.3 | 24.1 | 31.4 | 0.3 | 55.8 |
| Operating profit |
20.1 | 43.3 | -16.9 | 46.5 | 15.6 | 32.5 | -14.4 | 33.7 |
| Margin, % |
4.5% | 10.6% | 5.5% | 4.5% | 9.7% | 5.0% | ||
| Depreciation, amortisation and impairment |
40.9 | 32.4 | 0.9 | 74.2 | 30.2 | 26.3 | 0.5 | 57.0 |
| EBITDA | 61.0 | 75.7 | -16.0 | 120.7 | 45.8 | 58.8 | -13.9 | 90.7 |
| Margin, % |
13.6% | 18.5% | 14.3% | 13.3% | 17.5% | 13.5% | ||
| Right-of-use depreciation |
-15.8 | -16.7 | -0.4 | -32.9 | -13.2 | -13.2 | -0.2 | -26.6 |
| Interests on lease obligations |
-4.2 | -3.0 | 0.0 | -7.2 | -3.3 | -2.3 | 0.0 | -5.6 |
| EBITDAaL1 Segment result: |
41.0 | 56.0 | -16.4 | 80.6 | 29.3 | 43.3 | -14.1 | 58.5 |
| Margin, % |
9.1% | 13.7% | 9.5% | 8.5% | 12.9% | 8.7% | ||
| Other income/(costs) |
1.0 | 8.6 | ||||||
| Net interest expense |
-11.9 | -8.2 | ||||||
| Other financial income/(expense) |
-0.4 | -0.6 | ||||||
| Share of loss of associates |
-1.9 | -1.8 | ||||||
| Tax | -8.6 | -7.5 | ||||||
| Group profit after tax |
24.7 | 24.2 |
1 EBITDA under previous accounting standards was reported as the segment measure of profit or loss. This has been changed to EBITDAaL under the new accounting standard, IFRS 16 Leases, as applicable from 1 January 2019. The difference between EBITDA as previously reported and EBITDAaL for full year 2018 was €1.3m, split between €1.1m in Healthcare Service and €0.4m in Diagnostic Services, with the balance of €-0.2m for central services.
As almost all sales in each geography are denominated in the countries' respective currency the above table shows the exposure of the Group to foreign currency risks for revenue. Within the Healthcare Services segment, revenue for
insurance contracts for 2019 was €228.8m (€204.7m). For further information on insurance contracts, see the consolidated financial statements as at and for the year ended 31 December 2018: note 4 on page 67.
| 31 Dec | 31 Dec | |
|---|---|---|
| €m equivalent | 2019 | 2018 |
| Non-current assets by location of assets | ||
| Poland (PLN) | 304.0 | 199.2 |
| Germany (EUR) | 209.8 | 165.8 |
| Romania (RON) | 99.0 | 80.6 |
| India (INR) | 126.0 | 54.4 |
| Ukraine (UAH) | 27.6 | 14.9 |
| Other (various) | 28.2 | 20.5 |
| Total | 794.6 | 535.4 |
Non-current assets by geography include land and buildings, equipment, intangible assets including goodwill, other financial assets, right-of-use assets and investments in associates. Deferred tax assets of €9.1m (€4.2m) are excluded.
3. Other income/(costs)
| €m | Oct-Dec 2019 |
Oct-Dec 2018 |
Jan-Dec 2019 |
Jan-Dec 2018 |
|---|---|---|---|---|
| Other income/(costs) | ||||
| Revaluation of equity interest in MHI at acquisition date | -5.81 | - | -5.8 | - |
| Release of currency translation adjustment related to the acquisition of MHI |
-2.11 | - | -2.1 | - |
| Release of deferred profit relating to call options MHI | -2.12 | 0.3 | -0.8 | 6.6 |
| Change in fair value/release of deferred loss/derecognition relating to put options MHI |
1.63 | -0.6 | 0.6 | 0.9 |
| Change in fair value of other financial liabilities MHI | 9.54 | 0.8 | 9.0 | 1.1 |
| Change in fair value of other non-current liabilities | - | - | - | 0.2 |
| Gain/(loss) on disposal of interest in subsidiaries | - | 0.2 | - | -1.6 |
| Profit on real estate development project | - | - | - | 1.5 |
| Other | 0.1 | -0.1 | 0.1 | -0.1 |
| Total | 1.2 | 0.6 | 1.0 | 8.6 |
1) Refer to note 4c; 2) Refer to note 5a; 3) Refer to note 5c; 4) Refer to note 5d
The revaluation of the prior held equity in MHI was measured using a fair value model based upon discounted cash flows. The projections of future revenue growth were made at the lower range of
the likely outcome and discounted using a rate of 12.2%. A terminal value was imputed using a growth rate of 4.0%. Certain early stage assets were valued at cost.
4. Significant business combinations
Preliminary purchase price allocation has been performed, subject to change in the next twelve months from the acquisition date, presented below.
a) In January 2019, the Group acquired 100% of the voting rights in the center for genetic diagnostics of Dr. Klein, Dr. Rost and colleagues ("Klein") located near Munich in Germany for a total consideration of €25.3m including contingent and deferred liabilities of €3.9m. €21.4m was released from money deposited in an escrow account in 2018. €3.3m has been allocated to customer relations and €2.5m to brand. €17.0m goodwill was recognised on this acquisition, unallocated to specific intangibles representing expected synergies with existing operations. Included in the consolidated income statement of the year is revenue of €16.1m and net profit of €0.1m.
b) In May 2019, 100% of the voting rights in Neomedic has been acquired for a total consideration of €69.0m including debt assumed. €4.0m has been allocated to other intangibles. €48.6m goodwill was recognised on this acquisition, unallocated to specific intangibles representing expected synergies with existing operations. Included in the consolidated income statement is revenue of €20.4m and net profit of €2.8m. If this acquisition had occurred on 1 January 2019, revenue would have been €9.7m higher and net profit would have been €0.6m higher.
c) In December 2019, the Group obtained control of Medicover Hospitals India ("MHI", former "MaxCure"). This company, currently operating 11 hospitals, was until 30 November 2019 accounted for as an associated company. The Group and other shareholders of MHI have entered into an agreement such that management control was vested with the founders when they owned more than 50% of the voting shares, until such time the Group only had protective rights under the agreement. On 1 December 2019, the Group exercised additional call options and purchased more shares (primary and secondary) which increased the voting shares from 49.2% to 54.4%. The purchase price of that tranche amounted to €4.0m. By doing so the Group assumed control of the investment and consolidated MHI. The
previously held interest of 49.2%, with a carrying amount of €47.2m, was remeasured to its acquisition date fair value of €41.4m resulting in a loss of €-5.8m recognised in other income/costs. In addition, €-2.1m related to foreign exchange differences, initially recognised as currency translation adjustment, was reclassified to other income/costs from other comprehensive income.
€10.3m of the total consideration has been allocated to operating licenses and €2.8m to other tangible fixed assets, resulting in a recognition of a deferred tax liability of €3.8m which has been offset by a deferred tax asset due to available tax losses carried forward. €60.0m goodwill was recognised on this acquisition, unallocated to specific intangibles, attributable to the entry into a large new market where the Group has a well-functioning organisation with an established workforce. Noncontrolling interests of €38.4m have been measured at fair value. Fair value was estimated by applying a discounted cash flow model. The key model inputs used are the projections for revenue development and the discount rate (12.2%). Included in the consolidated income statement is revenue of €5.9m and net loss of €-0.5m.
d) Other acquisitions during the year included five dental businesses in Poland, three medical clinics in Germany and a laboratory in Germany. Total payments net of cash acquired for these acquisitions amounted to €18.9m. Deferred and contingent payments amounted to €2.7m. Contingent payments have been recognised and capped as part of the purchase price based on future performance targets. €4.4m has been allocated to other intangibles. €16.9m was recognised as goodwill, unallocated to specific intangibles representing expected synergies with existing operations. Included in the consolidated income statement is revenue of €8.5m and net loss of €-0.1m. If these acquisitions had occurred on 1 January 2019, revenue would have been €8.6m higher and net profit would have been €-0.1m lower.
In 2019, the following cash flows (net of cash acquired) were paid in relation of business combinations.
| Medicover | |||||
|---|---|---|---|---|---|
| €m | Klein | Neomedic | Hospitals India |
Other | Total |
| Cash | - | 2.5 | 2.2 | 0.4 | 5.1 |
| Accounts receivable and inventories | 0.6 | 4.7 | 26.9 | 1.1 | 33.3 |
| Tax receivable | - | - | 4.0 | - | 4.0 |
| Tangible fixed assets | 2.0 | 18.7 | 34.1 | 2.8 | 57.6 |
| Right-of-use assets | 5.8 | 3.6 | 19.3 | 2.9 | 31.6 |
| Goodwill | 17.0 | 48.6 | 60.0 | 16.9 | 142.5 |
| Other intangible assets: | 5.8 | 4.0 | 10.5 | 4.4 | 24.7 |
| Brand | 2.5 | 3.7 | - | 2.2 | 8.4 |
| Customer relations | 3.3 | - | - | 1.6 | 4.9 |
| Licenses | - | - | 10.3 | 0.2 | 10.5 |
| Set-up costs | - | - | - | 0.0 | 0.0 |
| Other | 0.0 | 0.3 | 0.2 | 0.4 | 0.9 |
| Deferred tax asset | - | 0.2 | - | 0.7 | 0.9 |
| Lease liabilities | -5.8 | -3.6 | -19.3 | -2.9 | -31.6 |
| Deferred tax liability | - | -2.2 | - | -0.8 | -3.0 |
| Corporate tax payable | - | -0.1 | -1.2 | 0.0 | -1.3 |
| Accounts payable | -0.1 | -4.6 | -17.7 | -2.3 | -24.7 |
| Loans payable | - | -9.9 | -31.4 | -1.2 | -42.5 |
| Other long-term liabilities | - | - | -1.6 | - | -1.6 |
| Non-controlling interests | - | - | -38.4 | - | -38.4 |
| Total purchase price | 25.3 | 61.9 | 47.4 | 22.0 | 156.6 |
| Less: cash acquired | - | -2.5 | -2.2 | -0.4 | -5.1 |
| Previously settled in cash | - | - | -29.0 | - | -29.0 |
| Non-cash movements | - | - | -11.8 | - | -11.8 |
| Deferred and contingent consideration payable | |||||
| (discounted) | -3.9 | - | - | -0.9 | -4.8 |
| Release from escrow account | -21.4 | - | - | -1.8 | -23.2 |
| Total cash flow for acquisitions net of cash | |||||
| acquired | - | 59.4 | 4.4 | 18.9 | 82.7 |
5. Financial assets and liabilities
The following table shows the Group's significant financial assets and liabilities. All financial assets and liabilities are carried at amortised cost with the exception of:
- derivative financial instruments being reported at fair value through profit or loss;
- put option liabilities over non-controlling interests in two of the Group's subsidiaries being reported at fair value with the changes in fair value being reported to equity as a transaction between shareholders;
- contingent consideration payable in relation to acquisitions;
- a financial liability arising from an agreement with a third party that entitles the other party to receive cash based on the value of equity instruments of a subsidiary, carried at fair value through profit or loss; and
- investments in equity instruments accounted for at fair value through profit or loss.
All financial assets and liabilities at amortised cost are considered to have carrying amounts that materially correspond to their fair value; for loan borrowings this is due to floating interest rates.
| 31 Dec 2019 | 31 Dec 2018 | ||||||
|---|---|---|---|---|---|---|---|
| Non | Non | ||||||
| Note | €m | current | Current | Total | current | Current | Total |
| Financial assets at fair value through profit or loss |
|||||||
| a) | Call options on associate's shares | - | - | - | 1.6 | 3.1 | 4.7 |
| b) | Other financial assets | 2.8 | - | 2.8 | 2.8 | - | 2.8 |
| Financial assets at amortised cost |
|||||||
| Other financial assets | 4.7 | 1.6 | 6.3 | 4.9 | 24.71 | 29.6 | |
| Trade and other receivables, | |||||||
| gross | - | 151.7 | 151.7 | - | 98.4 | 98.4 | |
| Provision for expected credit losses |
- | -9.4 | -9.4 | - | -6.1 | -6.1 | |
| Subtotal financial assets at | |||||||
| amortised cost | 4.7 | 143.9 | 148.6 | 4.9 | 117.0 | 121.9 | |
| Cash and cash equivalents | - | 34.8 | 34.8 | - | 38.4 | 38.4 | |
| Total financial assets | 7.5 | 178.7 | 186.2 | 9.3 | 158.5 | 167.8 | |
| Financial liabilities at fair value through profit or loss |
|||||||
| c) | Put options on associate's shares | - | - | - | 1.7 | -1.1 | 0.6 |
| d) | Other financial liabilities | 3.4 | - | 3.4 | 11.2 | - | 11.2 |
| Contingent acquisition | |||||||
| e) | consideration payable | 10.4 | 4.1 | 14.5 | 5.6 | 0.6 | 6.2 |
| Subtotal financial liabilities at fair value through profit or loss |
13.8 | 4.1 | 17.9 | 18.5 | -0.5 | 18.0 | |
| Put option liquidity obligations with | |||||||
| non-controlling interests (with | |||||||
| f) | movement through equity) | 38.9 | - | 38.9 | 15.7 | - | 15.7 |
| Subtotal financial liabilities at | |||||||
| fair value | 52.7 | 4.1 | 56.8 | 34.2 | -0.5 | 33.7 | |
| Financial liabilities at amortised | |||||||
| cost | |||||||
| Borrowings | 152.4 | 105.1 | 257.5 | 117.3 | 1.8 | 119.1 | |
| Lease liabilities | 142.0 | 34.2 | 176.2 | 96.4 | 29.0 | 125.4 | |
| Other liabilities | - | 5.2 | 5.2 | - | 4.7 | 4.7 | |
| Trade and other payables | - | 114.6 | 114.6 | - | 77.9 | 77.9 | |
| Deferred consideration payable | 1.0 | 2.3 | 3.3 | 3.5 | 2.5 | 6.0 | |
| Subtotal financial liabilities at | |||||||
| amortised cost | 295.4 | 261.4 | 556.8 | 217.2 | 115.9 | 333.1 | |
| Total financial liabilities | 348.1 | 265.5 | 613.6 | 251.4 | 115.4 | 366.8 |
1 Amount deposited into an escrow account related to 2019 acquisitions.
Recognised fair value measurements - valuation technique and principal inputs
A breakdown of how fair value is determined is indicated in the following three levels:
Level 1: Medicover presently has no financial assets or liabilities where the valuation is based on level 1.
Level 2: The fair value of interest rate swaps is determined by discounting the estimated cash flows. Discounting is based on quoted market rates on comparable instruments at the balance sheet date.
Level 3: The Group has the following financial assets and liabilities recurrently measured using level 3 fair value measurements. Sensitivity of fair value of financial assets and liabilities to reasonably possible variations of unobservable inputs is presented in a table below.
a) Upon consolidation of MHI on 1 December 2019, €2.1m relating to release of the deferred profit from the initial call option recognition included in other income/costs.
b) Other financial assets at fair value through profit and loss include a 11.2% share ownership in an innovative biotechnology company that is specialised in non-invasive diagnostics for a total of €2.8m.
c) Upon consolidation of MHI on 1 December 2019, €1.6m relating to release of the remaining deferred losses from the initial put option recognition and derecognition of the put option liability were recognised in other income/costs.
d) The Group has a contractual obligation to an unrelated third party in relation to the investment in a subsidiary for services rendered in sourcing and negotiating the transaction and ongoing assistance in mergers and acquisitions as well as corporate governance of the subsidiary.This is remunerated through a contract that grants the advisor a simulated participation in the Group's investment. It is a level 3 fair value technique with subsequent changes in fair value of the future obligation recognised through profit or loss. In November 2019, the contract was renegotiated resulting in a reduction in the liability. In determining the fair value as at 31 December 2019 estimations of key variables were made, of which the most significant are the projected growth of underlying profit and the discount rate applied to the nominal value (12.2% at year-end 2019 and 12.9% at year-end 2018). At 30 September, 2019 fair value amounted to €12.8m compared to €3.4m at year-end 2019, the reduction in liability of €9.5m has been recognised in other income/costs.
e) The fair value of contingent considerations payable is based on an estimated outcome of the conditional purchase price/contingent payments arising from contractual obligations. This is initially recognised as part of the purchase price and subsequently fair valued with changes recorded in profit or loss. During the quarter, an additional €3.0m has been recognised as contingent consideration relating to acquisitions based on future performance targets.
f) The Group is contractually obliged to acquire at a future date a non-controlling interest at a market price determined at that future time. This put option relates to one of the Group's German subsidiaries. Fair value amounted to €17.2m (€15.7m) at yearend 2019.The valuation is based on management's estimate of the exercise date and the expected valuation of the put option at that time. Due to contracted terms disadvantaging the holder, it is estimated that the put option will be exercised in 2023 at the earliest. In determining the fair value of the obligation, estimations of key variables are made, of which the most significant are the growth rate of the business to determine its profitability at the future date of exercise (compound rate of 5.5% at year-end 2019 and 5.5% at year-end 2018) and the discount rate applied to the nominal value (0.8% at year-end 2019 and 1.7% at year-end 2018). This is a level 3 fair value technique with subsequent changes in fair value of the future obligation recognised as a movement within equity.
A put option liquidity obligation over non-controlling interests in MHI was recognised and amounted to €21.7m at year-end 2019. This obligation has been offset to shareholders' equity (other reserves) to reflect that this transaction is from an economic point of view a transaction between shareholders. It is a level 3 fair value technique with subsequent changes in fair value of the future obligation recognised as a movement within equity.The put options can be exercised anytime between March 2020 and March 2023 and between March 2024 and March 2027 or until they cease to be shareholders. In determining the fair value of the put option liquidity obligation at 31 December 2019 estimations of key variables were made, of which the most significant are the growth rate of the business to determine its profitability at the future date of exercise and the discount rate applied to the nominal value (12.2% at year-end 2019).
No additional significant changes have been made to valuation techniques, inputs or assumptions.
No financial assets or liabilities have been reclassified between the different levels in the fair value hierarchy.
Sensitivity - valuation inputs and relationships to fair value
The following table summarises the quantitative information about the significant unobservable inputs used in level 3 fair value measurements.
| Fair Value at (€m) | ||||||
|---|---|---|---|---|---|---|
| Description | 31 Dec 2019 |
31 Dec 2018 |
Unobservable inputs |
31 Dec 2019 |
31 Dec 2018 |
Relationship of unobservable inputs to fair value |
| Put option (liquidity obligation with non-controlling interests in a German subsidiary) |
17.2 | 15.7 | Earnings growth factor |
5.5% | 5.5% | Increase of 1% point in profit growth = increase in FV liability of €0.5m |
| Risk adjusted discount rate |
0.8% | 1.7% | Decrease of 1% point in discount rate = increase in FV liability of €0.7m |
|||
| Put option (liquidity obligation with non-controlling interests in MHI) |
21.7 | - | 4 year projected CAGR EBITDA |
20.6% | - | Increase of 10% in CAGR EBITDA = increase in FV liability of €2.5m |
| Risk adjusted discount rate |
12.2% | - | Decrease of 1% point in discount rate = increase in FV liability of €0.7m |
|||
| Economic interest option (other non-current liability) |
3.4 | 11.2 | 4 year projected CAGR EBITDA |
20.6% | 33.6% | Increase of 10% in CAGR EBITDA = increase in FV liability of €0.3m |
| Risk adjusted discount rate |
12.2% | 12.9% | Decrease of 1% point in discount rate = increase in FV liability of €0.1m |
|||
| Contingent acquisition consideration payable |
14.5 | 6.2 | Risk adjusted discount rate |
5.5%-8.7% | 5.5%-8.5% | Decrease of 1% point in discount rate = increase in FV liability of €0.1m |
6. Share capital
Share capital as at 31 December 2019 was €27.1m represented by 135,735,195 shares divided into 78,771,431 class A shares, 54,563,764 class B shares and 2,400,000 class C shares. The quota value was €0.2 per share. Celox Holding AB owned 47,157,365 shares with 55.8% of the voting rights.
The class C shares are all held by the Company in conjunction with the long-term performance-based share programs.
The number of shares used to calculate the basic and diluted earnings per share is 133,335,195 (133,335,195).
7. Related party transactions
The Group's financial position as at 31 December 2019 and 31 December 2018 and profit for the year were not significantly affected by the existence of balances and transactions with related parties.
8. Net financial debt and other financial liabilities
| €m | 31 Dec 2019 |
31 Dec 2018 |
|---|---|---|
| Loans payables | ||
| Non-current loans payable | 163.8 | 126.4 |
| Current loans payable | 111.5 | 4.9 |
| Total loans payable | 275.3 | 131.3 |
| Less: cash and cash equivalents | -34.8 | -38.4 |
| Total loans payable less cash and cash equivalents | 240.5 | 92.9 |
| Lease liabilities | ||
| Non-current lease liabilities | 142.0 | 96.4 |
| Current lease liabilities | 34.2 | 29.0 |
| Total lease liabilities | 176.2 | 125.4 |
| Total financial debt | 451.5 | 256.7 |
| Less: cash and cash equivalents | -34.8 | -38.4 |
| Net financial debt | 416.7 | 218.3 |
| 31 Dec | 31 Dec | |
| €m | 2019 | 2018 |
|---|---|---|
| Other financial liabilities | ||
| Non-current | 42.3 | 28.6 |
| Current | 5.2 | 3.6 |
| Total | 47.5 | 32.2 |
The increase in net financial debt is due to funding the Neomedic and other acquisition and a €42.8m consolidation impact of MHI's debt and lease liabilities at acquisition date.
€80.4m of the Group's debt as at 31 December 2019 is funded under the commercial paper program launched at the end of the second quarter, presented in current loans payable.
9. Impact of IFRS 16 Leases
The impact that IFRS 16 Leases has had on the Group's financial position, income statement and cash flows for 2018 (full retrospective application) and 2019 is disclosed in the following tables.
| 31 Dec 2019 | 31 Dec 2018 | |||||
|---|---|---|---|---|---|---|
| €m | As if IAS 17 still applied |
IFRS 16 impact |
As reported |
As previously reported |
IFRS 16 impact |
Restated |
| Impact on assets, liabilities and equity |
||||||
| Right-of-use assets | - | 166.0 | 166.0 | - | 117.0 | 117.0 |
| Shareholders' equity | 366.6 | -6.9 | 359.7 | 323.9 | -6.4 | 317.5 |
| Lease liabilities | - | 176.2 | 176.2 | - | 125.4 | 125.4 |
| Oct-Dec 2019 Oct-Dec 2018 |
||||||
|---|---|---|---|---|---|---|
| €m | As if IAS 17 still applied |
IFRS 16 impact |
As reported |
As previously reported |
IFRS 16 impact |
Restated |
| Impact on profit for the period | ||||||
| Right-of-use depreciation expense | - | -9.0 | -9.0 | - | -7.0 | -7.0 |
| Interest on lease liabilities | - | -2.1 | -2.1 | - | -1.4 | -1.4 |
| Operating profit | 8.9 | 1.9 | 10.8 | 7.5 | 1.1 | 8.6 |
| Profit for the period | 5.9 | 0.7 | 6.6 | 3.9 | -0.4 | 3.5 |
| EBITDA | 22.5 | 10.9 | 33.4 | 16.2 | 8.1 | 24.3 |
| Impact on cash-flows | ||||||
| Net cash from operating activities | 14.7 | 10.3 | 25.0 | 8.7 | 7.9 | 16.6 |
| Net cash from/(used in) financing activities |
5.3 | -10.3 | -5.0 | -1.9 | -7.9 | -9.8 |
| Jan-Dec 2019 | Jan-Dec 2018 | |||||
|---|---|---|---|---|---|---|
| €m | As if IAS 17 still applied |
IFRS 16 impact |
As reported |
As previously reported |
IFRS 16 impact |
Restated |
| Impact on profit for the period | ||||||
| Right-of-use depreciation expense | - | -32.9 | -32.9 | - | -26.6 | -26.6 |
| Interest on lease liabilities | - | -7.2 | -7.2 | - | -5.6 | -5.6 |
| Operating profit | 40.3 | 6.2 | 46.5 | 29.4 | 4.3 | 33.7 |
| Profit for the period | 25.3 | -0.6 | 24.7 | 26.5 | -2.3 | 24.2 |
| EBITDA | 81.6 | 39.1 | 120.7 | 59.8 | 30.9 | 90.7 |
| Impact on cash-flows | ||||||
| Net cash from operating activities Net cash from/(used in) financing |
50.3 | 37.0 | 87.3 | 44.4 | 30.0 | 74.4 |
| activities | 85.8 | -37.0 | 48.8 | 64.6 | -30.0 | 34.6 |
10. Definition and reconciliation of alternative performance measures (APM)
In its decision making, the Group uses some alternative performance measures (APMs) that are not defined in IFRS. They are used because they provide information useful to assess the Group's development and performance. These measures should not be viewed in isolation or as an alternative to the measures presented in accordance with IFRS. These APMs may not be comparable to similar measures presented by other companies. The main alternative performance measures used by the Group are explained and reconciled below. As from Q3 2019 margins (including margins of comparative figures) and growth rates have been calculated based on EUR whole figures instead of figures rounded in millions.
Acquired revenue
Represents revenue recognised from acquired businesses in the first 12 months from the acquisition. This represents non-organic growth. If there is significant expansion of the acquired business post-acquisition due to investments made post-acquisition and such revenue can be readily identified then this additional revenue is excluded from acquired revenue.
Organic revenue
Organic revenue combines real internally generated growth and also comprises price changes. This represents the growth of the business after removing the impact of acquisitions and disposals or other scope changes as well as exchange rate movements. This provides a "like for like" comparison with the previous year or period in constant scope and constant currency enabling a deeper understanding of the business and evolution of revenue.
The revenue of an acquired business is generally excluded for the 12 months following the business combination, but revenue generated by postacquisition expansion of the business due to investments made subsequent to acquisition, if significant, are included. Revenue of disposed businesses is removed from the comparatives for the 12 months prior to the disposal. The effects of changes in foreign exchange rates are calculated as the current year's revenue less the current year's revenue converted at the prior year's rates.
Organic revenue growth
Organic growth is the comparison of organic revenue for the current year to the comparable prior year revenue, expressed as a percentage or absolute figure.
EBITA
Earnings before interest, other financial income/(expense), tax, amortisation related to acquisitions, impairment, other income/(costs) and share of profit/(loss) of associates.
EBITDA
Earnings before interest, other financial income/(expense), tax, amortisation, depreciation and impairment, other income/(costs) and share of profit/(loss) of associates. This is a measure that investors and other users find useful in appraising and understanding the Group's activities.
EBITAaL
EBITA, as defined above, reduced by depreciation and interest charges associated with leases. This APM gives a measure of performance that equates more closely to the cash flow of the business and is used by management in making decisions and accountability.
EBITDAaL
EBITDA, as defined above, reduced by depreciation and interest charges associated with leases. This APM gives a measure of performance that equates more closely to the cash flow of the business and is used by management in making decisions and accountability.
Adjusted EBITA
EBITA, as defined above, adjusted for non-cash equity settled share-based payments as well as merger and acquisition related expenses.
Adjusted EBITDA
EBITDA, as defined above, adjusted for non-cash equity settled share-based payments as well as merger and acquisition related expenses.
Adjusted EBITAaL
Adjusted EBITA, as defined above, reduced by depreciation and interest charges associated with leases.
Adjusted EBITDAaL
Adjusted EBITDA, as defined above, reduced by depreciation and interest charges associated with leases.
EBITA margin
EBITA as a percentage of revenue.
EBITDA margin
EBITDA as a percentage of revenue.
EBITAaL margin
EBITAaL as a percentage of revenue.
EBITDAaL margin EBITDAaL as a percentage of revenue.
Adjusted EBITA margin Adjusted EBITA as a percentage of revenue.
Adjusted EBITDA margin Adjusted EBITDA as a percentage of revenue.
Adjusted EBITAaL margin
Adjusted EBITAaL as a percentage of revenue.
Adjusted EBITDAaL margin
Adjusted EBITDAaL as a percentage of revenue.
Operating profit margin
Operating profit as a percentage of revenue.
Gross profit margin
Gross profit as a percentage of revenue.
Net profit margin
Profit for the period as a percentage of revenue.
Net financial debt
Net financial debt represents the net level of financial debt contracted by the Group with external parties (banks, bonds) upon which interest is charged, and lease liabilities recognised under IFRS 16 net of cash and cash equivalents. Refer to note 8 for further details.
Members
Number of individuals covered under a pre-paid subscription or insurance plan within the Healthcare Services segment at the end of the relevant period.
Laboratory tests
Number of laboratory tests performed within the Diagnostic Services segment for the period referenced.
| Reconciliation to EBITDAaL and EBITAaL, €m | Oct-Dec 2019 |
Oct-Dec 2018 |
Jan-Dec 2019 |
Jan-Dec 2018 |
|---|---|---|---|---|
| Operating profit (EBIT) | 10.8 | 8.6 | 46.5 | 33.7 |
| Amortisation (acquisitions) | 2.3 | 1.4 | 6.4 | 3.3 |
| Impairment | 0.8 | - | 0.8 | - |
| EBITA | 13.9 | 10.0 | 53.7 | 37.0 |
| Depreciation and amortisation | 19.5 | 14.3 | 67.0 | 53.7 |
| EBITDA | 33.4 | 24.3 | 120.7 | 90.7 |
| Right-of-use depreciation | -9.0 | -7.0 | -32.9 | -26.6 |
| Interest on lease liabilities | -2.1 | -1.4 | -7.2 | -5.6 |
| EBITDAaL | 22.3 | 15.9 | 80.6 | 58.5 |
| Less: depreciation excl. right-of-use depreciation | -10.5 | -7.3 | -34.1 | -27.1 |
| EBITAaL | 11.8 | 8.6 | 46.5 | 31.4 |
| Revenue | 229.7 | 181.2 | 844.4 | 671.6 |
| Operating profit margin, % | 4.7% | 4.7% | 5.5% | 5.0% |
| EBITA margin, % | 6.0% | 5.5% | 6.4% | 5.5% |
| EBITDA margin, % | 14.5% | 13.4% | 14.3% | 13.5% |
| EBITDAaL margin, % | 9.7% | 8.8% | 9.5% | 8.7% |
| EBITAaL margin, % | 5.2% | 4.7% | 5.5% | 4.7% |
| Net profit margin, % | 2.9% | 1.9% | 2.9% | 3.6% |
| Reconciliation to adjusted EBITDAaL and adjusted EBITAaL, €m |
Oct-Dec 2019 |
Oct-Dec 2018 |
Jan-Dec 2019 |
Jan-Dec 2018 |
|---|---|---|---|---|
| Operating profit (EBIT) | 10.8 | 8.6 | 46.5 | 33.7 |
| Amortisation (acquisitions) | 2.3 | 1.4 | 6.4 | 3.3 |
| Impairment | 0.8 | - | 0.8 | - |
| Non-cash equity settled share-based payments | 0.6 | 0.5 | 1.9 | 1.6 |
| Merger and acquisition related expenses | 0.4 | 0.9 | 2.4 | 1.8 |
| Adjusted EBITA | 14.9 | 11.4 | 58.0 | 40.4 |
| Depreciation and amortisation | 19.5 | 14.3 | 67.0 | 53.7 |
| Adjusted EBITDA | 34.4 | 25.7 | 125.0 | 94.1 |
| Right-of-use depreciation | -9.0 | -7.0 | -32.9 | -26.6 |
| Interest on lease liabilities | -2.1 | -1.4 | -7.2 | -5.6 |
| Adjusted EBITDAaL | 23.3 | 17.3 | 84.9 | 61.9 |
| Less: depreciation excl. right-of-use depreciation | -10.5 | -7.3 | -34.1 | -27.1 |
| Adjusted EBITAaL | 12.8 | 10.0 | 50.8 | 34.8 |
| Revenue | 229.7 | 181.2 | 844.4 | 671.6 |
| Adjusted EBITA margin, % | 6.5% | 6.2% | 6.9% | 6.0% |
| Adjusted EBITDA margin, % | 15.0% | 14.1% | 14.8% | 14.0% |
| Adjusted EBITDAaL margin, % | 10.1% | 9.5% | 10.1% | 9.2% |
| Adjusted EBITAaL margin, % | 5.6% | 5.4% | 6.0% | 5.2% |
| Reconciliation to organic revenue, €m | Oct-Dec 2019 |
Oct-Dec 2018 |
Jan-Dec 2019 |
Jan-Dec 2018 |
|---|---|---|---|---|
| Revenue | 229.7 | 181.2 | 844.4 | 671.6 |
| Less: acquired revenue | -21.0 | -72.2 | ||
| Revenue excluding acquisitions | 208.7 | 772.2 | ||
| Currency effect | -0.4 | -1.4 | ||
| Organic revenue | 208.3 | 770.8 | ||
| Organic revenue growth | 15.0% | 14.8% |