Ladies and gentlemen, thank you for standing by. I am Mina, your closed-call operator. Welcome and thank you for joining the MedLife conference call to present and discuss the first half of 2025 financial results. Please note that the conference call is being recorded, and during the management presentation, all participants will be in a listen-only mode. The presentation will be followed by a question-and-answer session, and you can submit questions via the webcast platform or via telephone. Should anyone need assistance during the conference call, you may seek an operator by pressing star and zero on your telephone or by dialing the phone numbers under the ask a question section on the webcast page. At this time, I would like to turn the conference over to Mr. Mihail Marcu, Chairman of the Board and CEO of MedLife Group. Mr. Marcu, you may now proceed.
Thank you. Good day to everybody. Thank you for participating in our conference for the second quarter results. Today, I'm here with Ioana Birsu, that is our IR Manager. Also, Irina Cojocaru, one of our financial team members, Financial Managers in MedLife. Also, we have by phone Dorin Preda, the Deputy CEO, and Alina Irinoiu, the CFO of the group. They are quite often traveling, and it's better not to rely on them because they may lose the network from time to time. We'll start with Ioana, that she will make the presentation, and after that, we'll be here for your questions. Thank you. Ioana, please take over.
Thank you, Mihail. Good afternoon, everybody, and thank you for joining our presentation regarding the results for the first six months of the year. Despite a less friendly economic environment during this period, the group recorded a consolidated pro forma turnover of around RON 1.57 billion, marking a 20% increase over the same period of 2024. Pro forma EBITDA advanced by 21%, reaching around RON 234 million. Organic revenue growth of 16.2% was driven by sustained demand for medical testing, imaging services, and robotic surgery. Across business lines, both hospitals and clinics networks, followed by the laboratories business line, delivered strong performances with the benefits of recent investments in modern equipment, new facilities, and exceptional medical teams becoming visible in the financial and operational results. Regarding the M&A activity, in February, we finalized the acquisition of Routine Med group in Tulcea, strengthening the group's footprint in southeastern Romania.
In March, we completed the acquisition of a majority stake in All Clinic in the Republic of Moldova, which is our second cross-border acquisition. The All Clinic network operates three multidisciplinary centers, providing outpatient care across 20 specialties. In June, through the Sfânta Maria network, we announced the acquisition of Medstar clinic group in Cluj-Napoca, further consolidating our presence in Transylvania. Medstar operates four clinics, a laboratory, imaging facilities, and two recovery centers, offering more than 30 specialties with the support of over 200 medical professionals. In 2024, the company reported revenues of approximately RON 32 million. The transaction is subject to the competition council's approval. During this six-month period, we kept our focus on strategic investments in technology and innovation and consolidated our position in robotic surgeries through the introduction of the ROSA robot, designed for highly precise orthopedic interventions.
MedLife Medical Park Hospital broadened its services with the opening of an emergency department, ensuring rapid response to critical patient needs. In alignment with our vision on the future of medicine, we launched the first AI assistant integrated into our mobile app, delivering personalized real-time medical guidance directly to patients' phones. This is a first on the local market and a significant milestone in the digital transformation of the healthcare experience of our patients. Also, we enhanced our diagnostic infrastructure with the second automated laboratory line in the group, launched in June in Brașov, with an investment of over EUR 2 million and equipped with advanced technologies such as the eBot robotic line, automatic hematology, and higher-capacity analyzers for biochemistry and immunology. The equipment uses AI and middleware software to streamline workflow, ensure accuracy, and validate results.
This investment reinforces MedLife 's commitment to fast, precise, and standardized diagnostics while minimizing human error under strict medical oversight. We also consolidated our leadership position in genetics by acquiring the Illumina sequencing technology, the most advanced one in the world. The initial investment amounts to EUR 3 million, but will gradually increase as the group is now preparing to roll out a large-scale genetic testing program designed to make such services widely accessible in Romania and shift medical practice towards prevention and data-driven care. On the outlook, in the short and medium term, we expect the group to maintain a stable trajectory, adopting a prudent approach while capitalizing on the available resources to sustain strategic investments and adapt to the evolving macroeconomic environment.
In line with market expectations, given the recent fiscal measures addressing the significant budget deficit, we closely monitor potential impacts on purchasing power as some of the medical services are elective rather than emergency or acute care, and we have prepared multiple scenarios to remain agile and ready to address potential challenges while safeguarding growth and stability. We see consistent performance in laboratories and hospitals, as well as in business lines related to chronic diseases and acute care, which have increasingly contributed to our sales over the past few years. Capital expenditures for the second half of this year are expected to remain very low. There are currently no planned CapEx initiatives, at least through the third quarter, as we continue to prioritize operational efficiency and strategic allocation of resources. Any future investments will be carefully evaluated in light of market conditions and business priorities.
When it comes to strategic priorities, we are accelerating AI and advanced data analytics projects applied in imaging and laboratory to deliver quicker, more accurate, and tailored medical results, reinforcing our leadership in healthcare technology and innovation. At the same time, we are advancing in the development of our strategic genetic testing and sequencing projects aimed at facilitating Romanians' access to personalized medicine. Moving on to the next section, the financial results, and looking at the consolidated statement of profit and loss, six months 2025 pro forma versus six months 2024 IFRS, gross sales, National Health Program for chemotherapy drugs included, increased by 20.3%, reaching around RON 1.57 billion. OpEx increased by 10.9% to around RON 1.36 billion. Operating profit increased by 17.7% to around RON 92.3 million.
Pro forma EBITDA increased by 21% to around RON 234 million, resulting in a margin of 16.1%, 14.4% on an IFRS basis and compared with 14.7% in H1 2024. The depreciation of RON against euro had a significant impact on the financial result that posted a loss of RON 83 million and led to a pro forma net loss of RON 4.2 million. Regarding the pro forma figures, in terms of the bridging revenues from IFRS figures to pro forma figures, we have around RON 2.2 million normalization adjustments from acquisitions included, explained by Routine Med and All Clinic transactions, February and April being the months of their consolidation. Less, around RON 120.8 million reclassed of the National Health Program for chemotherapy drugs in all our units.
In terms of the bridging EBITDA from IFRS figures to pro forma figures, around RON 203,000 corresponding to normalization adjustments from acquisitions, plus RON 7.8 million one-off expenses. Looking at the quarter-on-quarter EBITDA evolution, we registered a constant improvement in EBITDA levels in the past two years, even though we had integrated throughout this period new units with negative contribution to EBITDA in this reporting period. Regarding the EBITDA margin, the slight decrease registered in the first two quarters of this year compared to the similar quarters of last year reflects the effect of the two hospital units in Timișoara and Craiova, which are currently in their early stage of development, which was anticipated, of course, and is forecasted in the 2025 budget. Quarterly revenues have shown steady and consistent growth in the recent years, underscoring the platform's expansion capacity through both acquisitions and organic development.
Out of the 20% revenue growth registered in the first six months of this year, 16% is organic, and the rest of 4% comes from the acquisitions finalized in 2024 and 2025. In terms of business lines evolution, clinics continue to be the group's primary sales driver, accounting for 37% of total sales. The 20% growth in the six-month period is driven by a 13% rise in the number of visits and a 6% increase in the average fee. The higher volumes are attributable not only to the increased demand for medical services, but also to recent acquisitions, including Antares, Euromedica, VP-Med, and Routine Med . Dentistry accounts for 3.9% of the total sales. Sales declined here by 5.5% over this six-month period, continuing the trend observed in the latter quarters of the last year.
The market for premium dental services, such as those offered by Dentastat, has been contracting, while increased competition from providers using lower-cost materials has intensified market pressure and altered market dynamics. Also, in Romania, similar to most of the world, the dentistry services are out of pocket, so if the country is doing well, this sector is doing well and vice versa. Hospitals represent about 28% of total sales. The growth of 38% was driven by a 30% increase in patient numbers compared to the same period last year, resulting from several resources. Acquisitions, namely Euromedica Hospital, consolidated starting October 2024. Investments in technology and equipment in our more mature hospitals in Bucharest, Cluj, Sibiu, Brașov, and Arad. Increased number of procedures at the North Hospital in Bucharest opened at the beginning of last year, and the openings of the Craiova and Timisoara hospitals at the end of 2024.
Additionally, the average fee increased by 5.9%, reflecting both price adjustments and greater complexity of the intervention. Laboratories account for 11% of total sales and posted an 18% year-on-year growth. This was driven by a 21% increase in the number of lab tests performed, despite a 2.2% decline in the average fee. Volume growth was reported across all laboratories, including both the MedLife and Sfânta Maria brands, with a particular strong increase in the molecular biology and genetics division. Corporate accounts for 9.75% of total sales, with the revenues remaining largely flat compared to the same period last year. In 2024, the portfolio underwent adjustments with a focus on pricing and repositioning, leading thus to a 1.2% decline in subscriptions in the first six months of this year versus the same period last year, offset by a 0.9% increase in the average fee.
We have implemented some really interesting products, and we expect in the long run they will have really good results. Pharmacies represent 2.4% of total sales, with revenues growing 13%, driven by a 22% increase in the average spend per client. Others account for 8% of total sales and posted a 16% increase in revenues, driven primarily by strong performance in pharma distribution, with additional contributions from stem cell bank and wellness services. In terms of pricing outlook, we have already implemented some price adjustments in the hospitals' division following the VAT increase. In the lab and outpatient segments, we have observed recent price increases from our competitors. Based on this, we believe there is potential for further adjustments. However, we have decided to wait and monitor the impact of government measures on our patients' purchasing power.
As I mentioned earlier, we want to wait and assess whether purchasing power may be effective, particularly as some of these medical services are elective rather than emergency or acute care. Moving forward to operating expenses, as a percentage of sales, operating expenses increased by 0.8 percentage points to 95% in H1 2025. The most significant change was a 1.5 percentage point decrease in commodities, reflecting the lower share of pharmacies in the group's mix, while the stronger performance is coming from the oncology units, hospitals, and labs that drove a 1.5 percentage point increase in consumable materials.
With the opening of the new hospital units, third-party expenses, including doctor's agreements and salaries, rose by 0.8 percentage point, though this is expected to ease as the newly added capacity is absorbed, but also given the current pressure on the salaries of doctors and medical staff in the public hospitals that give quite a good relief on the private sector salary. Depreciation increased by 0.3 percentage point in line with the rapid pace of the M&A activity in recent years, amortization of intangibles from acquisitions, and new investments commissioned. Given the macro environment challenges, we have been preparing since the start of the year for different scenarios, like for example, the 2% VAT increase that we estimate will have an impact on our results of up to EUR 200,000 per month. We are also looking at stabilizing or reducing costs at the level of overheads at all levels if necessary.
In terms of consolidated statement of financial position, non-current assets increased by 2.5%, mostly explained by the increase in goodwill and property, plant, and equipment. Financial debt increased by 8%, driven by a 6% rise in net debt. The higher debt level reflects utilizations to partially fund ongoing investments and M&A, but also the FX impact from the depreciation of RON against euro. Looking at the net debt to pro forma EBITDA ratio, it remains stable at 3.72 as of 30 June 2025, compared to 3.78 at the end of 2024. On the outlook, we expect to maintain the net debt to pro forma EBITDA ratio at the current level. The ratio would have already improved in the second quarter of this year if exchange rate movements hadn't affected the result.
Moving to the consolidated cash flow, net cash from operating activities amounted to around EUR 100.5 million, which is a 41% decrease compared to the same period last year, mainly driven by changes in working capital. During the first six months of the year, around EUR 121 million were allocated to investing activities, including the acquisition of subsidiaries and CapEx for ongoing projects, the most significant being the Timisoara Hospital and the Oncology and Radiotherapy Center in Bacău. On the outlook, as mentioned earlier, CapEx plan for the second half of the year is very low, with no intention to dispose CapEx at least not in the third quarter. This is our presentation for today, and we can move now to the Q&A session. We will take further questions by phone if any, and afterwards, we move to the questions submitted already in the platform. Operator?
Thank you. Ladies and gentlemen, at this time, we will begin the question-and-answer session. You can submit questions through the platform in the ask a question section or via telephone by dialing one of the numbers provided by pressing star followed by one on your telephone. If you wish to remove yourself from the question queue, then you may press star and two. Please use your handset before asking your question for better quality. Anyone who has a question may press star and one at this time. One moment for the first question, please. The first question is from the line of Buring Bram with Wood & Co . Please go ahead.
Good afternoon. My first question is with regards to the ramp-up of new hospital units, clinic units for that matter. What, if any, currently is the negative EBITDA being generated by the most recently opened units, and should they break even on the EBITDA level by the end of the year?
Thank you. Thank you for your question, Bram. Mihail Marcu here. The answer, it's simple. Now we have two large hospitals still ramping up slowly. One is the North Hospital that is very close to break-even by the middle of this year. Hopefully, we'll see positive results. Still, of course, they are leveraged for the group today as long as they have quite a big debt due to the rental of their main building for about 15 years. Again, the company is doing much better. We are still struggling making the contract with National Health House and with the public sector, which they couldn't do it for the past six months. They're relying exclusively on the cash out of pockets to the clients. Even if they will not succeed, the trend is good, and I hope this autumn they will go on the positive side.
The second hospital that is quite large and was opened recently is the MEDICIS in Timisoara. Here, they are very close to break-even as well. They were much faster growing and covering the gap between the revenues and the expenses. Also, hopefully, at the end of this year, they will be on the positive side. That's the story about the main hospitals in this respect with the EBITDA.
Thank you. There were a couple of follow-up questions. Did I understand correctly that you are estimating a headwind from VAT hike of $100,000 next month?
We were very clear because we don't want to answer this question on straight. First, we calculated this from the beginning of the year because from our estimation of macroeconomic, they will increase with 2% - 3% VAT. The impact on MedLife was simply just presented to you, is about EUR 2 million, close to EUR 2 million per year. That's not a big figure for us. There are some others that they will come, but still, we are reading the new changes. We don't see something significant into our figures at this point.
Okay. The last question, sorry, is could you remind us what you expect for CapEx?
The CapEx for the coming period is quite low. We don't intend to make investments in the at least in the third quarter for sure. Even for the fourth quarter today, we don't have investments. We have this project related with the genetics and related with the very new program in the testing of quite a large number of our clients. They are participating in that effort. Most of our clients, they are three or four clients that they will add the 4,000 people in the study, and it will be covered by the companies that they put their employees into this research. We will not be in stress with that program except the salaries of the staff, which, of course, it's a limited number of people working for this very niche program.
The answer, to be very clear, is no, we don't have large investments in our plan in the third quarter and not any plan of a big amount for the fourth quarter as well.
Okay, thank you very much.
Thank you, Bram.
As a reminder, to register for a question, please press star and one on your telephone or submit your written question in the question box on the webcast, ladies and gentlemen.
I see three questions. Maybe, okay.
I'm sorry, Mr. Killingner. We just had audio questions from Mr. Hetique Philip from ODDO. Mr. Hetique, you can now proceed with your question.
Everybody, thanks for your presentation so far. I just have one question. What do you see as the impact of the rising energy costs after the subsidies have been running out? There was a substantial rise in energy costs, as I am aware, and I was just wondering how this affects you at this point. Is there anything that you see? Thank you.
Thank you for the question. No, it's not a big impact for MedLife. We have taken this hit about two years ago, but we don't see that as a major threat to MedLife today. It's right. We have lots of MRIs and CTs. They use some electricity, but at the end of the day, the impact we discussed is ± EUR 1 million or EUR 2 million per year. We don't see an impact that can be, let's say, relevant to our figures at the end of this. Thank you. If there is anything on this subject, I would like to answer some free questions that have been sent in writing. First is that I can't last about the covenants with the banks. I will speak about the covenants. No, we don't have this problem. We are within the covenants today.
The covenants discussed and negotiated with the banks are covered by and they are fulfilled by us. Another question is about, actually, there are two questions here. What is the view of the full-year outlook in light with the second quarter about the results? We think that we are still aiming to fulfill the budget that was presented in April and May to our investors. The second question about the exposure of MedLife in euro and as a denominated liability. Yes, most of the loans of MedLife are in euro, and this is an exposure that we have. As you could notice, we have decreased the ratio of debt to EBITDA. Even despite the fact that the debt has increased due to the fixed rate, we hope to surpass that in the coming period as well. If you look at MedLife and to the first question from Mr.
Bram, we don't intend to make investments. We are still trying the two hospitals to slowly go on plus, which is happening as we speak, and of course, to wait for a better period to invest and to have this ratio under control. This is about this ratio, yes. We have discussed with the banks. We contemplated as well to switch and to change some of the loans into local currency. They are quite expensive, that switch to be made today. We are quite confident not that it is not going to be stabilized, but if the second measures program of the government will pass these days and these weeks, we hope that to be stabilized.
Our sign that they will be and our advisors from the bankers because we discuss with our creditors quite often, of course, with the main banks, with the consortium of five banks we are working with, and they are not as worried as we are thinking. There is another question. There are actually three questions from Mr. Petre from NN. I will just answer fast. The personal expenses and the trends and given the recent measures announced by the government, here is a positive, actually, for our figures. Unfortunately for the doctors, the budget wants to cut the salaries in the public sector. This was quite a big stress for us in the past three years, four years. Now it's vice versa, and we have lots of signs of the doctors from the public sector accepting to discuss with us much, much more often than before.
The same happens to the nurses. The same happens to the auxiliary personnel in the public sector. The average fee of the laboratories decreased. This is very much depending on the public sector. If the public gives some funds to the laboratories, more funds, then the fees are decreasing because as they do that, because they are paying much less than our price list for out-of-pocket payers, of course, this is going down. In Romania, not only in MedLife, in all the big laboratories, the very well-known laboratories, as long as there is a ceiling, the people use the ceiling with the public, with the funds from the National Health House. If that ceiling is not enough for the small laboratories, then the customers are coming to the big laboratories where they prefer to pay in cash to this.
It is very much fluctuating depending on the available funds from the National Health House. That's the case here as well. There were some funds before the election distributed in the first and the second quarter. Given that funds, of course, they decreased the average price of the laboratories. Now we have the last question that I've seen now on the board. Given that MedLife has performed well operationally but faced significant foreign exchange losses, how does management address the currency risk going forward? Specifically, considerations have influenced the decision not to implement hedging strategies in the past, and are the measures under review to mitigate such risk in the future? I answered already this question. We have discussed with the banks. Today, we were about two months ago, we're very much into it.
We discussed with the banks slowly as the government started to introduce the new measures for reducing the deficit. Our understanding was that the FX rate is not something that very, let's say, imminent to come. Of course, we are strongly, let's say, looking at this risk. If something happened, I think we have enough strategies to mitigate, as actually we have done already. Again, look at the net debt to pro forma EBITDA ratio, and we succeed to improve it a bit despite the fact our debt has increased due to FX rate. These are the questions that were posted on the board. I don't know if there are more questions.
No, sir. Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to management for any closing comments. Thank you.
Thank you again for participating today to our meeting. As you could notice, we have grown at the end of the day about 16% in organic, only organic, which is not something that we did in the past years. We mostly succeed to grow due to the M&A activity. Only 4% of the growth was due to the M&A to acquisitions. Actually, both in the number of transactions and size of the transactions, we have decreased our M&A activity. It doesn't mean we'll not start again, but for the time being, our intention is to wait and see the macroeconomic environment. Also, as many of the investors and analysts asked, we have a very close eye on the FX rate due to our exposure and the total loans. In the past few months, we invested a huge effort, not necessarily a huge amount of money.
They were like EUR 3 million, EUR 4 million, EUR 5 million in that. We have a new project and new products that we think they can change the local environment and even regional. I think some of the products we'll present in October, they are going to be very different from what has happened in this new approach of medicine done personalized to person based on their genetics and genomic, let's say, profile of each person can lead to a totally different individual approach into patients, including in hospital laboratories and clinics. We hope to come with this first flavor of the project at the beginning of October. Also, as you noticed, we have two hospitals that they slowly come on plus. That will be, and it is already a better position for us in the operation activity. I hope this will surpass mostly of the FX rate in the coming quarters.
Thank you very much again for participating today, and I wish you a very nice weekend. Thank you.
Ladies and gentlemen, the conference is now concluded, and you may disconnect your telephone. Thank you for calling, and have a pleasant afternoon.