Ladies and gentlemen, dear participants, we warmly welcome you to the Q3 earnings call 2026 of Medios AG. I am pleased to welcome the company's CEO, Thomas Meier, and CFO, Stefan Bauerreis, who will guide us through the presentation, after which we will move to the Q&A session via audio line and chat. Dear participants, please note the Q&A chat will be enabled after the presentation, and we will only be visible in the toolbar at that time. Having said this, with that, I am handing over to you, Mr. Meier.
Thank you very much, and a warm welcome to everybody in this call. We prepared a presentation. It has four parts. We will start with the executive summary, the financial overview, then look at activities and takeaways, and of course, we have ample time for Q&A. With this, we are looking at the first nine months of Medios, and especially at the last quarter. I am sure you agree, we have a solid last quarter with a total revenue for the first nine months of EUR 1.63 billion and a growth rate of 6.7%. Remarkable growth in all our segments. We have an EBITDA pre within our expectation of EUR 66.7 million, and we have an operating cash flow that Stefan will explain, had a little bit of special events there, but we remain with our estimates for the full-year, and earning per share, EUR 1.35.
Focus points unchanged over the last nine months. We have the operational efficiency program, Avanti Medios!, that is delivering. We are on plan there. We acquired Caelo, a strategic acquisition that we wanted to make in a Compounding Essentials business that we see has potential, and we are working right now as we talk on realizing the synergies, bringing teams together, and make this work. We had the Capital Markets Day in the Netherlands, where we present our Medios Next Level strategy and ambition till 2031, and we are on track there to achieve what we want. We work with the teams to sharpen the plans further going forward. Overall, we could confirm guidance for 2026, the adjusted guidance, even with the Hilfstaxe news that we received shortly after the Capital Markets Day. In more details, we see here the revenue.
We are certainly ahead there for the full-year, well in plan, EUR 558 million in the third quarter 2026. Organic growth that is driven by PS and the compounding segments are plus/minus stable. The EBITDA pre-margin, a little bit below previous year. Lower margin in International Business, whereas in Patient-Specific Therapies in Germany, we have seen that we could stabilize the margins due to the operational work that we are doing continuously with the teams in the market environment. Those cost optimization overall, they show a positive impact. Avanti Medios!, as I mentioned, and we can compensate the Hilfstaxe backlash that we have in Q4. That is our expectation, and I think that is a good operational result that we can achieve. Business highlights, Pharmaceutical Supply, revenue growth of 6.8%.
At the same time, we have, and we talked about that, pricing pressure, and the EBITDA margin for that for the first nine months is a little bit lower than over the last year. We see improvements. We are cautiously optimistic going forward. We are competent in the business, and I think we find the turnaround for that. Patient-Specific Therapies, also there, healthy growth of 8.4%. We are again in double digit for the German PST business in terms of EBITDA pre-margin. That is substantially improved compared to the last quarter in 2025 and the early quarters in 2026. The work is paying off, and it's nice to see that. International Business, they have some revenue growth, reduced EBITDA pre-margin, and their profitability challenges are in specific fields.
We also have some earnings from last year that we have not included, that we could not possibly have this year. That was resulting there. Looking at the regulatory pressure, I talked about Hilfstaxe. The top line gets reduced, and in this situation and in our business overall, the key is that we have our unit costs under control. That is work in progress. We work on automation, we work on how we execute, how we work as a team, and I think we have shown that those measures are helpful, but we need to continue doing that. At the same time, we help 365,000 patients, people in need for the first 10 months, and I think it's also remarkable to say that this is what people are doing, and we can do even more going forward.
The margin pressure, of course, we have that, but we also want to mention that how we are set up. We are best positioned to absorb that shock, to absorb that pressure, and remain profitable and gain market share in the market. That's what we are after, and we want to continue this mission. To do so, we have ready to scale capacity. We can do more with the existing footprint, even as we have closed one site. We now have five labs. We have a regional network. We like that, and we work more on operation leverage, automation, operational excellence, organizational adjustments. They are all happening as we talk, and they will help us to succeed in that market. At one point, we hoped that we could tender the oncology business that was on the table, and at the end, it was off the table again.
That's how politics work. We were ready to go for the tenders. They don't happen. That's life. Nothing that makes us nervous, but of course, the other way around, we would have preferred. This also keeps us on track for the targets we have outlined during the Capital Markets Day. We're trying to increase the business from EUR 2.1 billion to EUR 3.1 billion. We want to do this profitable growth, and we are looking at the main chunk of growth in the compounding business, driven by organic growth and inorganic growth. This story is intact. We're working on specific measures, on specific initiatives, and I think the team really nicely coalesces around this vision, and we are moving forward in our day-to-day operations.
We do this with a quiet demeanor so that we focus on what we achieve in time, and we let you know as soon as the results are there. With that, I have the great pleasure to introduce or hand it over to Stefan, and Stefan will guide you through the financial results. Stefan, please.
Thomas, thank you very much. I will continue with the financial overview of the first nine months of Medios Group, starting with the group and then continuing like the other quarters we already presented, going then deeper in the different individual segments that we have. I still want to remember all of us that in 2026, we are still working with the three existing operating segments, but we will come to that in a second. As Thomas already mentioned, we have a good development of our revenues with now EUR 1.633 billion sales in the first nine months, which is, at the end of the day, an increase of 6.7% compared to last year. All the different segments, we will come to that also in a second, contributed to that growth.
Coming to the gross profit, which is, at the end of the day, the margin that we are able minus the material expenses that we have. We can already see here what is in total this year our major pain point, and that is mainly this pricing issue. We already explained the last quarters, which is continuing still in the third quarter in the Pharmaceutical Supply area, but also temporarily higher material costs in the International Business, which is both of them the main contributor for this reduction on the gross profit side, which then you can also see when we are talking about the EBITDA pre-margin, which is at 4.1% this year compared to the 4.6% in last year. We have in the EBITDA pre-margin obviously also the material cost impact.
On the other side, all other operational costs are really much stable, and we are step by step improving them structurally and also mainly with our operational excellence activities, we are able to take a good benefit out of them in terms of shaping the future also for the Medios Group. Necessary to mention here as well is that last year, EBITDA was impacted positively by a one-time effect of about EUR 2.6 million due to the sale of non-core business, mainly some pharmacies on the International Business in Netherland. I think it is not a great amount, but nevertheless, when we are talking about structural comparison, we have to have that in mind. Earnings per share finally are on the adjusted level are at 135, also here below prior year as a calculation obviously, as the net income is reduced compared to that.
Thomas already mentioned that we have quite a big deviation when we are talking about the operating cash flow. We were able to realize EUR 26.2 million in the first nine months 2026 compared to the value of EUR 52.7 million. It is a quite significant reduction. Where does it come from? On the one side, obviously, as we have a slightly lower result, the result always is a consequence of cash, but that is not the most important thing. The most important thing is that we had one-time impacts also mainly in the prior year, which led to a significant increase in the third quarter operating cash flow of 2025, and it is for the biggest portion then offset in the fourth quarter of 2025.
This mainly due to late payment of suppliers, but also, and that is what we also have to mention, also this famous EUR 2.6 million positive impact on the sale of non-core activities, which obviously improved the overall cash flow. If you have a look at this pool comparison of both numbers, we always have to know that there is a little bit apple with pears that we are comparing due to this special impacts. Yes, due to the lower result in 2026, we will not reach exactly the value of 2025 on a full-year basis, but we are very much confident that we will have, other than last year, a very positive fourth quarter also in terms of cash flow generating.
At the end of the day, we will see there are significant improvements for the next months to come due to that seasonalities that we have and compared to last year. In addition, we also explained that in the last quarter, that we had due to tax audits and final, let us say, tax finalization with the different authorities in the different countries, higher tax payment this year, but that is nothing that we would like to count as a special impact. This is what comes, and you cannot plan that from one quarter to the next. But the main issue is when we then have also a look on the working capital side, this significant change between the quarters. The cash flow from investing activities, also here, this year, we are investing significantly more money than last year.
This is not, and I think that is important to mention, this is not a change in the CapEx need of Medios Group. This is just by the fact that we are investing in a new building in Breda when we are talking about warehousing and also our shipping area, which this year leads to slightly higher CapEx payments and also in the seasonality over the year. This will not mean that from now on, Medios will need significant more CapEx spending. We will remain in that level of what we know and what we also always announced around this EUR 10 million in a year. Finally, that is the overall structure that we see on the cash flow from operating activities.
Not good compared to the nine months of last year, but very much impacted by special impacts and a quite successful and big optimization in the fourth quarter to be expected. Cash remains on same level. Working capital, as I explained, also part of this one-time impact of last year mainly, but also here we know that working capital optimization will be on our priority list for the next month and also especially for the next year to come. If we then continue and say, what does that mean in the different levels of our segments? We have the Pharmaceutical Supply with a 6.8% increase of our revenues compared to the nine months of last year. Patient-Specific Therapies with 8.4%, so that is a good sign, a good message that we have here, a good growth rate in this year.
But International Business, you could say, "I t's just in brackets of 4.1%." But here, once again, I want to refresh our minds. Due to the sale of non-core activities, we had there significant higher sales in the last year. So if we would eliminate that, growth would be by around EUR 4 million sales higher, which then would mean that also here, our sales would have been increased by around 7.5%, 7.6%. So also very much in line with what we see for the full group and all the other segments. That will mean growth is in line, it is expected. But when we then go to the EBITDA pre line, there we can see EUR 35 million this year on the Pharmaceutical Supply. Already explained that this is the impact of the pricing of specific medicine and specific drugs.
We see their recoveries in the last quarter, end of last quarter to come, but at the end, that is still what we have and what we are suffering the whole year. Patient-Specific Therapies, I think still we are below prior year, and it's unfortunate that also the Hilfstaxe for the fourth quarter will have there an impact. But we were able now to show exactly that with all our operational excellence activities, we are able step by step to compensate then this Hilfstaxe issue, and also in the last quarter, we are there around 10% and back on the level where we want to be. So finally, International Business, also here we see, when we have a look at these numbers, a reduction from EUR 22 million nine months 2025 to EUR 20.3 million.
Also, when we take out the earnings out of the sale of those non-core activities, then the EBITDA pre would be around EUR 19.4 million in last year. So also here, we would even have a small increase of around 3% in the year 2026 if we take out this special impact. Coming back to the individual quarters, and starting with the Pharmaceutical Supply, we are happy that we were able to get a EUR 455 million revenue, so it's an overall increase of 3.6% quarter-over-quarter comparison with last year. As I said, the price decrease of selected products is still ongoing, but first improvements are also now seen, and that will bring us in a level where we see that more positive the future to come. In the bridge of the Pharmaceutical Supply, also here, that shows you exactly where the pain points comes from.
On the one side, starting with the EUR 38.8 million of last year, this price drop of various products is around EUR 3.4 million, which we obviously cannot compensate with the new business that we started in 2026. It is a good starting point, it is a good start of compensating and developing the business, but that is what we have to work on that continuously. Apart from that, obviously, there are also some operational costs, increase of personal costs. That does not mean that we hired people. That is just the normal labor cost increase of our organization, and also some other operational expenditure costs increasing, which led us to the EUR 35 million EBITDA. Patient-Specific Therapies. Here, we have a revenue grow quarter-over-quarter of 8.2%, so that is really a high and then a very good positive development.
We also were able in the Q3 to increase our EBITDA to around EUR 6.3 million. This is compared to the full-year 2025, now back on the Q1 result that we already achieved there. So we have here a 10% margin, and I think that shows us what that operational excellence and all the activities are key to further develop the business and what we will do. What are those initiatives that we made? It is mainly summarized in the Avanti Medios! program, and which have a significant impact on Patient-Specific Therapies. It is on the one side, just to refresh our mind, the closure of the site in Aschaffenburg, end of June, where we were able to transfer all customers to all of our other locations and labs that we have.
So that increased also the capacity usage, but also not only this transfer, but also our growth that we were able to get increased our capacity usage because we managed that without increasing own operational people. Last but not least, also the stop of Advanced Therapies is contributing to that numbers and still will do that over the next quarters. Also here summarizing the development with the bridge. So we have 1.7 million positive volume impact. On the other side, still compared to last year, we have 1.2 million due to the Hilfstaxe adjustments and price reduction in prior years. So there still was the last quarter where in Q3, we did not have this price regulation already in place, compared to 2026, where it is already obviously the full-year in place.
So there is still recovering the EUR 1.2 million compared to last year, but still providing a 10% EBITDA margin. Smaller other operating income are then also impacted with an increase in personal costs. Also here, not an increase in people, but this is a normal increase of labor costs and also some other operational expenditures, which led us to the EUR 17.7 million EBITDA pre in the actual nine month of this year. Coming last but not least in terms of our operational segments to the International Business, here we can say revenue is stable. EBITDA pre in those numbers is below prior year, but also here, I have to mention that International Business is the area where it is impacted by the sale of some non-core activities.
If we would add that, you could say that Q1, Q2, and Q3 of this year would be around EUR 1 million sales higher if you compare that to the prior year in terms of sales. That explains us that we are really much stable in the development, and also with the 14.9% that we are now able to provide in the Q3 this year. There is a way to go. There is activity still to do. We know that. We started our cost efficiency program. Why it changed? PS? I didn't move, sorry. No problem. The cost efficiency measures started, but there is still a way to go. We know that.
We are already now able to finalize the restructuring measures in Q3 at Magis Pharma in Belgium, where we took out a little bit more than 10 people, and see their very good impacts now for the months to come. We also now in October already started in taking out and adapting our cost basis on the level of activities we have, including our operation excellence measures also in the core area of Breda and also the location Oostrum.
Also here, I am quite confident that operational measures. We, in the first half of the year, probably were a little bit more focused on the Patient-Specific Therapies. Also here, will contribute. Coming back to the bridge, also here starting from the EUR 22 million, we have then the divestment impact on EBITDA compared to last year, because normally then without this impact, last year would have been EUR 2.6 million lower.
We have a good volume increase, which leads us to an increase of result of EUR 5.5 million. But then, obviously compensated with higher material costs. We have to work on that increase in the personal expenses and then some other OpEx. Also here, we say that this is part of the operational excellence to come for the next month. Therefore, I think it is a little bit a kind of mixed bag, is like the result in the last quarter is as expected. In that perspective, I think we can summarize that in that way. International Business impacted by some special impacts. Cash flow negative compared to third quarter or nine months last year. But there, we are confident that we will have a good fourth quarter in the cash flow in this year to get a good outcome in 2026.
Finally, I would like to also start as a kind of reference also with the Capital Markets Day, because I think it is important step by step also to look a little bit of all those topics where we said, "Okay, these are steps to come," and we are then happy when we can provide there the execution. Just to refresh our mind on the Capital Markets Day, we showed that we have a term loan of EUR 125 million and an RCF, which is the tranche B of that loan of EUR 100 million with a potential extension of another EUR 50 million. You know that we made the BNP Paribas financing, bridge financing for our Caelo acquisition, and now we are also proud about that as well the increase as the extension option of the tranche B of RCF is now finalized.
All our banks absolutely confirm that they will follow this way. We said, "Okay, in the first step, we just go from 100 to 125 in the RCF, but the second option to still go to the 150 would be available." We simply say, "The 125 is still that what is okay and sufficient for us at the moment, but the other 25, we can take them over the course of the until this gets mature." Also here, the maturity of the full tranche B then is now extended up to November 13th, 2031. That will mean that a big puzzle part, if you want to say it, in our financing structure, now is closed, and we are happy that we could accomplish that in that period of time. Finally, let's talk about a second about the guidance 2026.
You know that all of us know that this adjustment of the Hilfstaxe came very quite on a very short-term basis. Also here, it's not a secret that this impact of approx EUR 1.2 million was not calculated in our guidance forecast. Nevertheless, we are really much optimistic that we, even when we are on the lower side on the EBITDA corridor, but nevertheless, we confirm the guidance for this year 2026, in terms of EBITDA as well as on the sales side for the fourth quarter and for full-year 2026. With that, I hand over back to you, Thomas.
Thank you very much, Stefan. Let's look at the focus activities for 2026. I listed four here. First one is One Team Medios. We're working on implementing the two-segment structure that we explained, so bringing the teams for compounding together and having the Specialty Pharma Supply as a second segment going forwards. We also worked on the SAP S/4HANA rollout for Medios Pharma. That is on track. We want to start in January. That's always a big piece of work, and I think we're going to be all very, very happy when we have this up and running in the first quarter of 2027. There are several activities to bring the Medios team together as one team within the different geographies and over the geographies, and I think they all are well understood by the team, and we're moving into that direction because it brings us synergies.
It helps us in how we execute our business. Operational excellence is focused on how we optimize our portfolio in Specialty Pharma Supply, how we optimize the network in the different countries. We have had a closure of Aschaffenburg. We're going to continue driving up utilization in the manufacturing sites, and we work on the digitalization roadmap, and we bring those activities together as one team, as one roadmap going forward. I think the other update Stefan already mentioned, so I move on to accelerated organic growth. We want to grow by organic growth, so that means we work on getting new customer for the existing business, and we want to benefit from the market trends, and I think we are well positioned to use the capacity we have in our network for further growth, as we have seen it this year going forward into the next year.
We do M&As. We had an example with the Caelo acquisition. We do M&As in a very clear focus and with a good idea what is a healthy pricing and synergies. If that fits, we execute, and then we go into the post-merger integration phase, where we have an integration management office that is now working, and we will update you on the progress on this. What are the key takeaways for you from this call? First of all, we have a broad-based growth, so all the business segments can generate growth, so that's, of course, a positive. We have seen that we worked hard in the PST segment to improve margins.
We believe that profitable growth is what we are after, so we have to continuously improve how we execute so that we can absorb pricing mechanism that come from the regulators, and they will generate other opportunities for us to grow if we have our unit costs under control. We work on the cash flow management, as Stefan said. We still have a little bit of fluctuations there in the quarters, but I think we can iron that out, and we will improve cash conversion for our shareholders going forward along the lines as we already have outlined. With that, I hope I was concise enough, and we can now go to the question-and-answer session right here. Thank you.
Yes, thank you very much for the presentation. To all participants, we are opening the Q&A session now. If you would like to ask a question in person via the audio line, please click the raise your hand button in the toolbar. If you're dialed in by phone, please press star nine to raise your hand so I can allow you to unmute yourself. If you're additionally via chat proposing your question, you can do so. The toolbar shows the Q&A chat icon as well. We move on to Yannik Siering. Mr. Siering, you should be able to unmute yourself, switch on the microphone, and ask your question. Mr. Siering, please.
H ello. Can you hear me?
We hear you well. Great, Yannik.
Thanks a lot. Thanks for taking my questions. I have a couple. First would be on your guidance. You already provided some color, especially on the EBITDA pre-guidance. You mentioned that you would reach the lower end. Maybe you could walk us through some of the moving parts here. Hilfstaxe, you mentioned EUR 1.2 million. Then we have the remaining Avanti savings, a little more than EUR 2 million. What about the Caelo contribution and the IB recovery that should be expected to get to this, yeah, little more than EUR 21 million that is implied for Q4? That would be the first one, please.
I can take that question directly. What are the moving parts on the Hilfstaxe, on the guidance? For sure, it is the Hilfstaxe that was, simplest said, not included in the perspective. Therefore, we are focusing and we are fostering all our activities to be in line with the guidance, and I think we are on good track to do that. First message. Second point is the remaining Avanti Medios! savings. For sure, that is a point which is a very important contributor also to make the guidance happen in this year. We are on the way of having finally EUR 5 million expected for the year 2026. Out of them, EUR 2.7 million are already now, or EUR 2.5 million are already now realized. We are tracking them very much in detail.
The good message is that all activities already started, so it is now the time to bring that home, let us call it like that. At the end, all of the activities already started. There is no gap of saying, "Oh, there is still a couple of thousand euro that we have no clue how to make that." No, this is not the point. Everything is identified, all the activities started, and it is now, in brackets, just bringing it home. It is a work, it is important, it requires discipline, but we are very much confident on that. In terms of International Business recovery, here, that is, let us say, we already executed those changes.
I already talked about the Magis restructuring topic, which is part of the International Business, but then also in the location Breda as well as in Oostrum. We also were able to find some cost optimization. Also, these activities are already not only planned, they are already executed in that perspective, but you cannot see them in the third quarter because execution here was in October. It is therefore also here, once again, discipline, once again, key management required, but also here confident to make that happen. This is also the reason why we said, "Yes, we will be on the lower side of the guidance, but we confirm the guidance." I hope this answers your question.
Yeah, that is great. Then maybe following up on that, you mentioned the International Business and most of the restructuring measures already having taken place. Could you quantify the impact of the Magis restructuring and then also a realistic margin level for Q4 and then going forward in 2027? Because I assume that some of the measures are not fully done yet, especially with the other plants and utilization increases that are still pending.
Yeah. Magis, we took out. Finally, we will have, at the end of the year, we will have 13 people taken out. Out of that, 10 are already left end of Q3. This is for our organization, which a little bit more than 60 people, I think, an important step. Also here, as we said, it is part of the Compounding Essentials business, and also for that business, it is clear that we want to get in a double-digit EBITDA, let us say, profitability to come, and we were far away from that at the beginning of that project, but we are very confident that next year we will be there. This is the main impact. What we also made here in the other side is also around, it is by coincidence, another capacity-wise 10 people.
It is not own personal, it is also these people and activities we took out in the other activities of the International Business. Overall, you can count with cost optimization of around 20 people. In addition to that, we also restructured some of our sales activities in Magis. These are not big numbers, to be honest, but nevertheless, also here, we went through in that restructuring and taking out all areas of sales where ideas were good, but finally did not materialize or did not provide the margin we are expecting.
Also here, we reduced slightly some activities in terms of sales. But on the total group of Medios, you even will not see that in the second or third digit number. It is very small. Finally, last point, because that I forgot in answering your first question. Sorry for that. You mentioned Caelo. Here we have to say that all what we are now showing is in terms of our guidance, that is still excluding Caelo.
Stefan and Yannik, thank you very much. Those are very detailed answers. I just want to intervene quickly to say we do a lot of cost containments and cost reduction measures, but we always do them with the sight on how we want to grow business. We make sure that we do not cut into what is our future business, and I think we can align that within the company and with our Medios Next Level initiative quite well. I see this absolutely positive, and I think it is important that we do not shy away from the hard work, and we are open to share that with you here on the call. I just wanted to make that comment.
Great. Just one last question from my side, please. On operating cash flow, you mentioned that Q4 should be much better than the first nine months. Is it still realistic that you will reach at least towards the previously communicated level of EUR 50 million-EUR 60 million, just a very broad range to get a feeling for these seasonality effects that you also alluded to?
No, the fourth quarter will be a good quarter, but it will not doubling the cash flow of the first nine months. That is not realistic. Therefore, the EUR ±50 million , that is the normal cash flow that we are expecting in a normal year. We have to admit that this year, results are under pressure. In addition to that, we have the higher tax payments. If you take that out, you are coming there with EUR 40 million, EUR 45 million when you are eliminating those impacts for this year. Therefore, I think with around the EUR 40 million, it is a realistic number to come. But it is not that we would like, that is not a guidance. That is only saying that this is expected to get a good fourth quarter.
Okay, that's very helpful. Thank you.
T hank you very much for your question. We move on to Simon Scholes. He's dialed in by phone, so Mr. Scholes, you should manage to unmute yourself, listen to the announcement, and then we can hear you. Mr. Scholes, please.
G ood afternoon. Thanks for taking my questions. I've got three. First of all, I was wondering if you could tell us about any efforts you might be making to expand the sales footprint of your cannabis products outside the existing markets. Secondly, in the International Business, you said the margin was affected by a temporary rise in cost for syringes. Has the syringe costs now gone back to a more normal level? Thirdly, am I correct in thinking that there's a second stage of the Hilfstaxe due to come into force from January, which particularly affects biosimilars?
Okay, thank you, Simon, for your questions. Let me try to answer them. For the cannabis business, we are indeed working on additional geographies. We will inform whether this will materialize as things are moving. On the syringe questions, it's indeed so that the situation is unchanged. We are working on alternatives, but that will take some time, unfortunately, and at the same time, negotiations are happening. Second stage of the Hilfstaxe, I'm not quite sure what you meant. I think the oncology Hilfstaxe is very clear, and in the ophthalmology field, there are movements around for biosimilars.
That outcome is, in my opinion, still unknown. We have scenarios going that we can work in any situation that will happen. But as it is with those regulations, some things are on the table, like the tender, and then they go off again. Other things are coming there. We need to see how they play out, and our job is to secure our business either way.
Okay, so you don't expect any additional price pressure from January onwards in biosimilars?
I expect price pressures all the time.
Related to legislation, that is.
That is clear. There is a potential that biosimilars in ophthalmology will become quicker reality than what everybody expected, but that is still in the works. I think nobody can give you a definitive answer on that. We get briefed from our experts almost daily, and we follow the situation. I hope I can make myself clear. I think this is not a special situation. Those kind of situations are just the standard of that business, and we need to be prepared to absorb those and execute our business according to our predictions.
Okay, thanks very much. That is very helpful.
T hank you very much. We move on to Mr. Weitgruber. Mr. Weitgruber, you should be able to unmute yourself, switch on the microphone, and ask your question.
Thanks for the presentation also from my side. My questions are on share buybacks. At about six times adjusted earnings, a buyback already gives a double-digit return today. That return rises further once your organic growth comes back, and once the market also prices in your 2031 plan, the stock will likely not be this cheap again. Also your leverage is very below your target, so now seems the right time to act. Honestly, we do not understand why there is no buyback yet. We know it is an option for you, so my questions are concrete.
The first one, what exactly is holding you back from a buyback today? Second, if you do a buyback, maybe as a tender offer, do you share our view that you should first cancel your own shares so the full 10% would be possible? And the third one, as long as the valuation is this low, do you agree that own shares should not be used for M&A, because otherwise the benefit of the buyback is lost? Thank you.
I'll try to answer your questions. First, we are on that context absolutely also positive to do share buybacks. It's not anything that we say, and we communicated, I think, very clear on our Capital Markets Day that in the current environment where we are, that this is our preferred option. So, is there anything that we say we feel in a way that we should not do that? No, that is our preferred way to go. And therefore, all topics are under investigations, are under discussions, and we will see then over the course of next week's month what will happen on that perspective. Second, canceling the existing shares. Here you have to know that by law, we are allowed to get up to 10% we can hold on our own books on shares, and as of now, we are significantly away from them.
Theoretically, we could do also here whatever kind of share buyback in addition to not canceling them. Nevertheless, I agree with you that finally it will not make too much sense keeping all these potential shares on our books. So, whenever there comes something, this is a question which should then or will be then answered hand in hand, and therefore also to keep a certain flexibility, sooner or later we also will be in the logic of canceling shares. And when next program starts, I think this can be, I will not say it is, but it can be a good moment to do that. Are we planning to use that for M&A? No, for the moment we're not planning that to use that for M&A.
Nevertheless, I think whatever comes with additional share buybacks, it is a question of keeping flexibility that a portion of that still theoretically could use for that. But obviously, we will not get a 10% of our shares in our books to use that for M&A. There will be then some of parts of them we will then cancel.
Thank you, Mr. Bauerreis. I mean, when you say there's no reason against the share buyback for now, this morning there was an opportunity to do another buyback. What is the reason today against one?
I think we are in a good structure of, let's say, doing one step after the other. I personally do not believe in the fact that combining several impacts is the right way to do. Now the focus of the presentation and the press release today, this morning, was obviously to give insights on our Q3 numbers, and that is the focus that we have. Then every other activities is now to come and now to follow. I think it's not the best structure combining too many things in one day.
Thanks. Maybe let me do one follow-up on the buyback topic. Until 2031, you plan about EUR 325 million for M&A. That is about 20% more than your market cap today. In theory, you could buy back with this amount your whole company or more of that. Why should M&A be better than the buyback right now? I know you say you can do both things, but why not take this money and put it into buybacks for as long as the stock stays this cheap, even if that means you buy back and cancel, I don't know, 30% or 40% or 50% of your shares? I mean, many of the best long-term stocks had managers who bought back more than 20% when the shares were very cheap and canceled them.
Once again, you don't have to convince us in terms of, is a share buyback a good option to go further on? I think that is also what we communicated. I think when we're talking about the share buyback, it's on the one side, the valuation, and there we are on the same page. On the other side, we also have to have in mind what is the further development of the long-term growth and long-term development of the share price. This share price development also depends on the liquidity of the share price in the market. If we would go in a company, and that is different when you compare that with the very big DAX companies, for example, they can do whatever share buyback within the legal frame, and they have no issue at all to justify or discuss about liquidity in the market.
Unfortunately, Medios is not perceived as a DAX corporation, not yet. Therefore, the liquidity in the market is currently and also historically not on the best level. We have to find a good balancing in all those criteria to do that. That should not mean, and don't interpret that in a way that we say we will exclude the share buyback. No, that is what we will not do. But we have to do that in the right structure, in the right way, because would you invest in a company with the only activity, say, we are not doing anything in terms of developing, growing our company, and establishing new businesses, but on the other side are doing just share buyback? I'm not sure if that is the right way going forward.
That's why share buyback, yes, but we should also not forget the development of the company and bring the company to higher level of profitability, developing as we explained in the Capital Markets Day. This includes and higher activities on compounding. This needs internationalization, which is required in the best way doing that via M&A. It's not either or, it's the combination of both.
Thank you.
Pleasure.
Yes, thank you very much. Tim Kruse is raising his hand, so you should be able to unmute yourself, Mr. Kruse, and ask your question.
Yes. Thanks for taking my question, a lot of questions already asked and answered. Two more questions on the International Business from my side. Firstly, can you comment on the non-core, non-strategic part of that International Business, how you are thinking about the remainder of those pharmacies, and if there is any activity there? Then the second question, you mentioned cost structure and the measures you have taken. Can you comment on organic growth development, I mean, on units less than on pricing? We heard that pricing is an issue there as well, but overall organic development in the International Business and how you see that in the next quarters. Thank you.
Thank you for your question. It is indeed a focus area for us, International Business. As we have discussed previously, we are looking at the options for the pharmacies, and this is happening. We prefer to do our work and let you know once we have solutions or we execute. This is ongoing. On organic growth for the International Business, I think we are well-positioned with our sites. We have capacity that we can have ready to deploy. We are active in securing additional business and growing the existing business in the areas we are active. That is happening over a new product development, and it is also further helped with quality and operational excellence initiatives that are running. I think everything is in place. We are going to double down on what we have and execute as we go forward.
Okay, thank you.
T hank you very much. Before we come to the conclusion of today's earnings call, we move to the Q&A chat. There are three short questions, I will read them out. Question one is, "Sales guidance implies a negative sales growth in Q4." The participant asks why this is the case.
That is probably accurate in a sense that we are not looking to maximize our growth. We said we are a little bit ahead of the curve, so we expect that there is a little bit of less sales growth, and our main focus is profitability. We will see how this plays out, and we are, of course, happy that we have healthy sales development in the first nine months.
Thank you very much. There was a follow-up concerning the tax rate and the expectations for that. "The tax rate still elevated. What should we expect next year?"
First, I agree that tax rate is elevated and also from our perspective too high. We have this year some special impacts involved there. We will have there, let's say, also detailed optimization of our tax activities starting then beginning of next year. Really much to come with a concrete effective tax rate is a little bit difficult, but the clear expectation after digesting the special impact of this year, it should be significantly lower. We are, I think now in Q3, on around higher than 40%, so it has to be significantly below the 40%. Something between 35% - 40% max. There is still the way and the whole project to come, but I agree that it is too high as of now and due to some special impact in this year. It will be below 40% at least next year.
Thank you. We move to the last question of today. "Given the ongoing margin pressure across several business segments, how do you assess the risk of a goodwill impairment, and have the recent developments materially reduced the headroom in your impairment tests, and are there any particular cash generating units where you see an elevated risk of a write-down?"
The easy answer on those question is, no, we do not see a risk of a goodwill impairment for the year-end 2026. For sure, as a prudent accountant, you have to have that always in mind. The question is very much appreciated. It is also not that we are, let's say, having a deterioration of our margin, but not at all. It is very quite okay, and even I would not see any material reduction in headroom to be foreseen for this year.
All right. Thank you very much for your interest and your questions, and I wish you a nice day.
Thank you very much, and from my side as well, a wonderful day. For any upcoming questions, you can see the contact of the IR department of Medios from our side. Thank you very much, and goodbye.
Thank you. Bye-bye.
Bye-bye.