Earnings Call: Q3 2023

Nov 21, 2023

Hello, everyone. This is Ahmed Moataz from EFG Hermes, and welcome to IDH's third quarter of 2023 results conference call. I am pleased to be joined with Dr. Hend El Sherbini, the Chief Executive Officer, and Nancy Fahmy, Director of Investor Relations. The company, as usual, will start with a brief presentation, and then we will open the floor for Q&A. Hend, please go ahead. Thank you, Ahmed, and good afternoon, ladies and gentlemen, and thank you for joining our analyst call for the third quarter of 2023. My name is Dr. Hend El Sherbini, and I am the Chief Executive Officer of IDH. Joining me on our call today is Nancy Fahmy, our Director of Investor Relations. I will begin our call today by giving you a quick overview of our results, highlighting the key developments for the period. I will then discuss with you our outlook and priorities for the rest of the year. I will then hand the mic over to Nancy, who will discuss our financial performance in more detail. As usual, we will end the call by opening up the floor to your questions. I am proud to report a very strong set of results in this third quarter of 2023. During the three months ended 30th of September 2023, IDH broke several records, reporting impressive results and recording the strongest quarter of the year. Looking at our results in more detail, our top line for the quarter came in just shy of EGP 1.2 billion, increasing more than 50% compared to the same time last year. Strong revenue growth was supported by increased test volumes. During the quarter, we conducted over 10 million tests across our four geographies, an increase of 22% compared to Q3 2022, and 19% compared to the previous quarter. Not only is the figure significantly higher than the comparable periods, but it is also the highest figure ever recorded in a single quarter in IDH's history. Adding to that, we have been implementing strategic price hikes since the beginning of the year to partially counteract inflation rate pressures in several of our geographies. Subsequently, this saw our average revenue per conventional test come in at EGP 118 in quarter three, which is 23% higher than the same time last year. Turning to our patients, we served a total of 2.3 million patients during Q3 2023, expanding versus the previous three quarters and continuing to normalize following boosts from COVID-19 related testing. Before moving on to discuss our year-to-date results, I wanted to take one moment to highlight that our average number of tests per patient hit another record high of 4.3 tests in the third quarter of the year. This is a notable achievement, which is in line with our long-term growth strategy and which comes directly as a result of our successful loyalty program, which we introduced in 2021 to boost patient retention. Moreover, our strategic price hikes have also helped encourage increased testing by patients. Finally, and perhaps most importantly with regards to our quarterly performance, we recorded significant improvements in profitability during the third quarter of the year. With the initial effects of the devaluation beginning to fade and the active measures we have been employing to control costs at all levels throughout our geographies, our gross EBITDA and net margins have recorded remarkable increases compared to both the same time last year as well as versus the first half of 2023. Turning to our results on a year-to-date basis, the previously mentioned record high performance in the third quarter helped drive our nine-month results with conventional revenue reaching EGP 3.1 billion, an increase of 44% year-on-year. What was even more impressive is the fact that the business recorded year-on-year consolidated revenue growth for the first time since the first quarter of 2022. Despite the comparable period of 2022 still including a significant contribution from COVID-19 testing. During the nine-month period, we recorded conventional revenue growth of 44% year-on-year, reaching EGP 3.1 billion. Meanwhile, on a consolidated basis, our revenues increased 9% compared to the same time last year. Our robust results during the period came despite a challenging macroeconomic backdrop in several of our geographies, and specifically in our home and largest market, Egypt. During the period, we have continued to maneuver through increasing inflation, multiple devaluations, and soaring fuel prices in our markets to control our cost base while expanding our business. Running quickly through some of the most important macroeconomic updates in Egypt, inflation continued to rise, reaching 38% in September. Meanwhile, the Egyptian pound remains fixed at 30.9 to the US dollar at official rates, continuing to put pressure on several USD-denominated expenses while exacerbating inflationary pressures in IDH's largest market. The strong operational ramp-up of our branch network continued to support financial success during the period. During Q3 2023, we rolled out six additional branches, including the launch of our seventh branch of Al Borg Scan in September, which makes us the fastest growing radiology chain in Egypt as we speak. The new Al Borg Scan branch comes as a part of a wider expansion plan of our radiology venture as we continue to grow our reach and tap more under-penetrated and underserved neighborhoods in the Greater Cairo area. In fact, during the nine-month period, Al Borg Scan recorded revenues of EGP 108 million, growing at a rate of 86% compared to the same time last year. Additionally, household contribution to Egyptian revenues have maintained the trend, sitting comfortably above pre-pandemic averages of 16% of revenues. Turning to our individual markets, our largest market, Egypt, booked a 49% year-on-year conventional revenue increase in Q3 2023, reaching nearly EGP 1 billion in revenue. Growth in Egypt was driven both by 24% year-on-year rise in conventional test volumes and 20% growth in average revenue per conventional test. Meanwhile, our results in Jordan were similar to the trends witnessed in Egypt, with Biolab recording conventional revenue growth of 13% in local currency, driven mainly by higher test volumes. Looking at Nigeria, the devaluation of the naira and continued inflation put significant pressure on patient purchasing power, leading to a drop in test volume by 16% compared to the same time last year. However, despite lower test volume, revenues remained largely stable in the third quarter of the year, recording EGP 21 million. Finally, in Sudan, as mentioned earlier, our revenues are significantly below last year due to the mentioned branch closure of 16 of our 18 branches due to the ongoing conflict. Shifting to our profitability, in line with previously communicated expectations, we began seeing a convincing normalization of margins across the board as the effects of the devaluation and inflation began to fade. During the quarter, we booked gross profit of £480 million, and this is 44% above the one booked in the previous quarter and 37% above the figure recorded in Q3 2022. Meanwhile, our gross profit margin came in at 41%, improving remarkably from 35% margin recorded in the first half of 2023 and coming in largely stable versus last year. Further down the income statement, we booked a normalized EBITDA at £411 million, which stood 76% above the previous quarter and 55% above the same quarter last year. Our EBITDA margin recorded 35%, also a significant increase compared to the previous two quarters, which stood at 24% and 25% in Q1 and Q2 respectively. Here, I want to quickly note that EBITDA is normalized for several one-off expenses, specifically a £12 million expense owed to the Egyptian Government Vocational Training Fund covering the past five-year period, £6.5 million in pre-operating expenses ahead of the rollout of our operations in Saudi Arabia, a £5 million impairment expense in Sudan following the unfortunate political situation in the country. Finally, our net profit recorded £176 million, with a margin of 15%, and this is a material increase compared to a net loss in Q3 2022, which had been weighed down by one-off expense and from £55 million last quarter. The improvements in our margins during this quarter, both in comparison to the same quarter last year and in comparison to the first quarter of the year, showcases the effective cost control measures which we have employed to keep our cost base under control. This includes leveraging our long-lasting relationship with key suppliers to negotiate favorable terms of test kits, along with several other measures which have enabled us to improve profitability and see a normalization of margins. Considering the strong results we were able to post in the third quarter of the year, coupled with the growth momentum, which we aim to capitalize on for the remainder of the year in both Egypt and Sudan, we reaffirm our guidance of approximately 30% conventional revenue growth for the full year, which will enable us to comfortably reach a top line of £4 billion. In parallel, we have already begun to witness the normalization of our margins as the initial effects of the devaluation and inflation begin to fade, and this is a trend we expect to see carried into the final quarter of the year. For these reasons, we reaffirm our guidance of around 30% normalized EBITDA margin after excluding non-recurring expenses and pre-operating expenses in Saudi Arabia. Finally, before yielding the floor to Nancy for a rundown of our financials, I am delighted to announce that our operations in Saudi Arabia are set to commence imminently. The venture will begin with the rollout of two initial branches in Riyadh. The Kingdom is an attractive new market for IDH, characterized by ample future growth potential and providing us an opportunity to positively impact hundreds of thousands of new patients in the years to come. Additionally, this venture falls in line with our long-term regional expansion strategy and is sure to become an integral market in IDH's operation. I will now yield the floor to Nancy to continue the presentation. Thank you very much. Thank you very much, Dr. Hend. Good afternoon, ladies and gentlemen. First, I am going to recap briefly on the main takeaways from Dr. Hend's presentation before delving further into our costs and profitability for the period. The main highlights of our results for this quarter are, number one, as Dr. Hend noted, this is the strongest quarter for the year. We booked several record highs. We reported our highest monthly revenues for the year between the month of July and September, and there we capitalized on the growth momentum that we started to see in early summer months following several seasonal declines in the first half of the year. As Dr. Hend noted, the company booked a 40% year-on-year growth in revenues, even when we include COVID-19 in the comparative base. Furthermore, versus our second quarter, our revenues grew 24% Q on Q. As Dr. Hend noted, this has been supported by record high 10 million tests, as well as 17% increase in revenue per test. The impressive performance of the third quarter has also boosted our results for the overall nine months for the year and enabled us to record a 9% revenue growth again, even when we include significant contributions from COVID-19 testing in the base year. We are also continuing to see strengthening of patient mix with our average number of tests per patient reaching a record high both on the corporate and the walk-in patient fronts. That had continued throughout the first three quarters of this year. As Dr. Hend noted, that proves the success of our loyalty program and our strategic price positioning that we have taken from the year start. We are seeing our margins improving significantly down the income statement during the three months of the period as the effects of the devaluation of the Egyptian pound begin to fade, and patients' behavior have also started normalizing after the harsh effects of the devaluation carried over at the beginning of the year. As you can see, our EBITDA margins in the third quarter alone are around 10% higher versus where they stood for quarter one and quarter two, standing at 35% versus 24%-25% in the previous quarters. Finally, considering our regional performance, operations in our two largest markets, Egypt and Jordan, have been outperforming expectations. We are attracting more patients and boosting results. In Egypt specifically, growth has been also driven by the ramp-up of our radiology venture, Al Borg Scan, which is maintaining growth momentum as well as household service contributions, which have been sitting comfortably above pre-pandemic levels throughout the first three quarters of the year. Now, before delving into cost analysis details, I would like to highlight a few one-offs that have impacted profitability on both quarterly and year-to-date basis for this period. On the EBITDA front, there are three non-recurring expenses which have impacted profitability. First, we booked £6.5 million in pre-operating expenses in Saudi Arabia as we get ready to launch operations imminently. Second, we booked an impairment expense of £5 million for Sudan to account for the ongoing conflict in the country, which has seen the closure of 16 of our 18 branches over there. Finally, we chose to cautiously book a £12 million non-recurring expense and contribution to the Egyptian Government Vocational Training Fund covering the past five-year period, and that's why it's also non-recurring. After deducting these three non-recurring expenses, we reported a normalized EBITDA of £873 million in the nine months of the year, with an EBITDA margin of 29% for the whole nine months. Moving down our income statement, we booked a total of £27 million, also in non-recurring expenses, which include losses due to expiry of COVID-19 kits and also expenses related to the termination of the Pakistan agreement. Accounting for those expenses, we would have recorded a bottom line of £463 million, with a margin of 13% during the nine months of the period. Finally, on the cash front, as a reminder, we agreed with General Electric, one of our main radiology equipment suppliers, on an early repayment of our contractual dollar obligation worth $5.7 million to hedge our foreign currency exposure. To fund this repayment, half of due amount was funded internally while the other half was funded through a bridge loan amounting to £55 million, and that has been fully repaid in the first half of the year. Now, I would like to discuss with you our EBITDA profitability for the period. First, let me start by our quarterly performance. As Dr. Hend noted, for the third quarter of the year, we booked a normalized EBITDA of £411 million. This is a notable 55% year-on-year increase with an EBITDA margin of 35% versus 31% in the third quarter of last year. As noted earlier, this is a significant expansion compared to the EBITDA margins that we recorded in the first and the second quarter of the year. Higher EBITDA profitability also is a direct reflection of cost normalization as we begin to see the fading effect of the initial impact of the devaluation and inflation in Egypt. On a year-to-date basis, normalized EBITDA declined 10% year on year and recording 29%, as I noted earlier. Raw material costs have remained our highest contributor to cost of sales during the nine months. They came in at £668 million, increasing 19% year on year and constituting around 22% of revenues for the nine months. Increasing raw material cost during the period is a direct reflection of higher average cost of conventional test kits, which jumped almost 5%. This came back on the increased inflation and the devaluation of the pound. However, it is important here that on a cost per kit basis, we were able to partially share the burden with our suppliers, and hence, we didn't reflect the impact of the full devaluation of the Egyptian pound from 15 to 31 against the dollar. Moving along. Total wages and salaries are also primary expense, diluting profitability on a 9-month basis. Total wages and salaries increased to almost £800 million, constituting around 26% of revenues, up from 22% in the same comparable period last year. That has been also partially to compensate for increasing inflation and retain our staff in this difficult time. It's also worthy to mention that wages and salaries in Egyptian pound increased due to the translation effect from salaries denominated in Jordanian dinars following the weakening of the pound, and definitely that also affects the results on a consolidated basis. It's also worthy to mention that the salaries include some USD-denominated salaries from expat staff in Nigeria and also our board members as well, and that affects the consolidated levels as well. Finally, higher USD-denominated expenses also, compared to last year, have been coming from higher auditor fees, increased consulting fees for the period, exchange fees, and board fees as well. Considering our quarterly results, we booked a bottom line of £176 million in the third quarter alone, and that's a net profit margin of 15%. Again, this is a notable increase compared to the same period last year, whereby when recorded a loss, a net loss of £36 million due to a one-off expense. It's important to note that this improved profitability is also apparent on a quarter-to-quarter basis, with our net profit more than tripling from £55 million last quarter. Finally, when quickly studying our balance sheet, our CapEx during the 9 months of the period stood at £245 million. This represents 8% of our top line. If we exclude the translation effect as well as outlays for the expansion of our radiology brand, Al Borg Scan, our radiology venture, CapEx would represent around 4.5% of total revenue, which is in line with our historical periods. Our cash balances at the end of the year stood at £794 million compared to £816. This decrease, as noted earlier, is the early settlement of our contractual obligation with GE, as noted earlier in my presentation. Now, before opening up the floor to your questions, I'm reiterating our guidance for the full year, which Dr. Hend has noted earlier, which points to a 30% increase in conventional revenue alone, which brings our top line comfortably over the £4 billion, and our normalized EBITDA margin to sit around 30% after excluding non-recurring expenses and pre-operating expenses in Saudi Arabia. As Dr. Hend noted, we're very pleased that our Saudi Arabian venture is setting to commence imminently. We are starting with the rollout of two branches in Riyadh. We are thrilled at the growth opportunities in the kingdom and the solid fundamentals there. Thank you very much. Thank you very much to all participants. If you wish to ask questions, you can either send them through the Q&A system or you can use the raise hand function. There is one question in the chat. Thank you for the presentation. Could you possibly comment on any difficulties you experience with the current shortage of USD in Egypt? The second part of the question, do you have any problems to pay for test kits, either in USD or in euros, or could you also pay suppliers in local currency? Sure. Thank you for the question. No, we are not facing any difficulties because, as you are aware, we pay our suppliers in Egyptian pounds. First of all, we do not import ourselves. Maybe this is a reminder for everybody on the call. We do not import any kits ourselves. We buy the kits from the local agents of the international suppliers, whom we all pay in Egyptian pounds, and hence, any shortage in the currency at the banking system does not affect our operations. Thank you very much. Another question. Could you please detail your KSA strategy, like business segments to be offered there, the rollout plans for 2024, market share expectations? Any details will be most welcome. Sure. I think it is a bit early to give precise guidance for KSA. I think when we are fully operational on the ground, it will be better for the market to give them precise guidance for the full year. However, let me recap where we stand. We are launching two branches in Riyadh very soon, and we have plans to open at least four other branches next year. So that is as a start. We believe that the market is huge and there is a lot of demand, especially in the standalone lab segment. The market is big in terms of number of tests per year performed by the whole kingdom. In terms of tests per patient, the test per patient there is higher than any geography we operate in. It is over 10 tests per patient. Even the revenue per test, if you compare it in dollar terms, it is the highest among our four markets, actually. It is around at least $13 to $14 per test. So the opportunities are immense. We have a detailed business plan, but I think it is better to wait until the full start of our operations there. We aim to target everyone, walk-in, corporate segment. It is like our operations in Egypt and Jordan, Nigeria, our typical clinical pathology operations over there. However, we will be able to share details once we are fully operating on the ground. Thank you. Darren Smith is asking, have any of the operating and financial metrics changed materially in the fourth quarter? Also any comments on 2024 outlook. Sure. Hi, Darren. What do you mean by operational metrics that have changed materially? Is this due to the strong results versus the previous two quarters or what? Because the results have improved on all fronts. Our revenues have picked up significantly. If you remember, the first half has been, on the revenue front to start with, have been impacted by several things. We had, of course, a strong devaluation in January, and that impacted patients' behavior to start with. Patients pull back whenever a strong devaluation hits the economy. That is in general, across services. Then we had Ramadan. Ramadan is a slow month usually. That was followed by a week of holidays and then another week of holidays. So the first half had several impacts that impacted revenue as a whole. It impacted volume growth, it impacted patients' behavior as well. We started to see pickup after the end of holidays, starting May. So if you look at our monthly performance starting May, things have improved both on the revenue side and the cost side as well. Okay? Because throughout the period and from the very start of the year, we are also trying to optimize costs as much as we can. So starting May, June had also a week of holidays, so June was slightly less, but the three weeks without the holidays were good. Then July, August, September, all have been growing, I would say, more or less in the same trajectory. Strong volume growth, healthier footfall of patients, and also better margins on a monthly basis. That has been also carried in our October numbers as well. So hopefully that is the trend going forward. I hope this addresses- Yeah. His question was mostly on the fourth quarter of 2023. Oh, okay. The improvement that you've been seeing, whether it's on Yeah the test per patient, et cetera, has it continued into It is. Sure. Sorry, go ahead. Yes, for October, it is, we're seeing the same trends. October is also a good month for us, both on the revenue side and the margin side as well. Hopefully it continues this way, yes. Thank you very much. Fouad Abishahen is asking, volume growth has been impressive. Could you comment on competitive dynamics in Egypt, in particular, competitor pricing and expansions? Sure. Well, we would say that we haven't seen, of course, new entrants in the markets. What we're seeing actually is that the smaller players are actually not doing as well, and they are struggling. We're seeing even that their business is coming to us in the B2B segment as well, because we have some B2B segment that we get as well from those smaller players. I would say, if anything, it's the smaller players that are struggling in this market while us are doing well. We're not seeing, of course, any new entrants in this new market. Thank you. Brooke Cudi is asking if you can confirm the EBITDA margin guidance for the full year 2023. He's not sure if it was 30% or 37%. No. It's around 30% normalized EBITDA margin, as Dr. Hend noted at the beginning, and that's excluding any non-recurring expenses and Saudi's pre-operating expenses. So it's around 30%, 3 0. Thank you very much. Ali Al-Nasser from Vergent is asking, he has three questions. The first one. The parallel market in Egypt is reported to be over 45 EGP to USD. In your guidance for 2023, are you incorporating that the USD remains at the current official rate? This is part one. Part two is how prepared is the business for another round of devaluation in 2024? Sorry. Is the first part of a question related to the parallel market rate, what we expect for next year in our numbers? Because 2023 is almost closing. For instance, our agreements with suppliers is not affected by the parallel market rate, and this is very important to highlight here. If the parallel market rate moves, our agreement with suppliers of kit suppliers, for instance, judges on the rate at the bank. That also never really fully even reflects the 31 EGP to the dollar, because this is very important. It is not with every move in the parallel rate that affects our kit supplier agreement. Just to establish this as a start. Going forward, we try to put our budget at the worst USD to EGP, which is around 50, 51 EGP, if this is your question on next year. Thank you. As final part of the question, can you update us on the search for a CFO? Yes, sure. Yes, we have a new CFO joining us actually in a few weeks time and very soon. Thank you. Someone is asking if you can share your dividend policy. Well, actually, dividend policy remains the same. We distribute whatever excess cash that we have from the business. Nothing has changed on that front. I would say the main challenge is actually sourcing dollars from the bank, and this is actually the only foreign currency that we need in our business. We do not need foreign currency in our business except for sourcing dividends. However, given the macro situation, dividend payments in the banking system are never prioritized, unfortunately. We will be unable to distribute USD dividends until the FX issue is sorted out completely in the banking system. Thank you. Farouk Meyer from All Africa is asking, during the 2016 devaluation, EBITDA margins fell from 43% to 40% for 24 months or a period of 2 years, and then it rebounded. This time, the hit to margins is much more severe. Can you explain the differences between then and now? Sure. By the way, Farouk, yes, you are right on an annual basis. However, if you look at quarterly basis, actually our EBITDA in the first devaluation fell below the 40%. We had singular quarters that have reported 35% and 36% as well. Maybe because you are seeing on an annual basis, it is kind of diluted or it is showing a better picture. Judging by this time, of course, the devaluation this time is more severe. It is simply apparent in the multiple devaluations that has hit the economy. Last time it was one hit, and then things have started to normalize. But as you can see so far, we had 3 rounds of devaluation. We had March, we had October, and we had January earlier this year. On the macro front, definitely it is more severe this time. However, I believe what is reassuring for us is that over the past 5-6 quarters, our EBITDA margins are also recovering, I would say more or less at the same pace. Maybe not, we have not seen the 40% yet. However, the trajectory is reassuring and positive. We have been at 24% and 25% in Q1 and Q2, and now we are reporting 35%, and that is also reaffirmed in October numbers as well. The trajectory is positive. However, reaching the 40% again is still a question mark of many things. It is the macro picture of what will happen in the pound. It is all that. But assuming that things, if we assume that things are as is and there are no further depreciation in the currency, it will be a matter of time that we reach the 40% again. We are very close. That is what I mean. Thank you very much. Another question is, given where real interest rates are in Egypt and the difficulties in upstreaming cash, what is your cash management strategy going forward? Sure. The excess cash now would be mostly at treasury bills, which give a lucrative 18%-19% after tax. Definitely, we always scan the local market for opportunities. If anything pops up on our radar, we definitely explore it. Thank you. Tareq Karam is asking, on the cost side, there are three parts to his question. The first one, how often do local kit suppliers reprice their kits? Secondly, how much kit inventory do you usually hold on average? The last part is, do the COGS now fully reflect the EGP rate of 30? Sure. Tareq, as you are aware, our contracts with suppliers are long-term contracts, so they are typically 5-7-year contracts. In an ideal situation, should macro environment is stable, cost per kit does not change throughout those long-term contracts. However, there is a clause in the contract that whenever there is a drastic FX movement, then the supplier comes to the table to renegotiate the price. Okay? That is what happens, that the clause is breached. Let us say if the clause is breached at 10% depreciation, so the supplier comes and it becomes a renegotiation. It is not a one-to-one movement with the currency rate. This is very important to highlight, because that means that if the pound moves to 32 to the dollar, then our suppliers will come. No, it is not like that. It's when the pound moves at a big There's a big jump or there's a big depreciation, then they come and renegotiate the cost per kit. However, should things remain stable, the cost per kit is stable throughout this long-term period. Now, if we look at what has effectively happened, because this question we get a lot. What has effectively happened to your cost per kit? If you simply divide the conventional raw material over our tests, you will find that our conventional cost per kit has been up around 40% versus the depreciation of the pound. That means that we have saved almost half of the effect, or we have shared the half of the burden with our suppliers. So it's not a one-to-one relationship. It doesn't move with every movement in the pound. It's more of the drastic movement that allows our suppliers to come forward and renegotiate. I hope this answers your question, Tareq Karam. Yes. There was just one point within the question, how much kit inventory do you usually hold on average? Yes. It's 135 days. This is slightly longer than what we used to do because we want to lock in as much inventory as possible and to make sure that we have all the kits needed for the business. Sorry, I remember the bit of the question that was asked and I didn't address. It's the raw material to sales percentage, and if this has been reflecting all the new inventory, and the answer is yes. What you're seeing at the raw material to sales percentage is reflecting all the new inventory in our warehouses. There's no longer old inventory that's reflecting in that ratio. Thank you. Another question is on pricing. Could you comment on how you think about pricing into next year? In the case of further devaluation, would you increase pricing faster than this year? Sure. As we've done this year, we're trying to price our services or our tests very strategically. We try to be very competitive, still providing the best price in the market with the best service. If you look at our, for instance, look at this year, we can take Egypt as an example, because on a consolidated level, it is sometimes distorted by Jordan and the translation effect. But if we look at this year, through direct and indirect price increases, we have increased our prices for the walk-in by 22%-23%, and more or less for the corporate, it was around 17% to 18% on an aggregate level. Of course, it is for the corporate, for instance, it's a negotiation. It's a contract by contract negotiation depending on the volume. But if you look at the average revenue per test for Egypt, it was up around 18%. That's impacted by the price increases and of course, the mix between the contract and the walk-in. What we try to do is the same. What we're aiming for is the same direction for next year. When in our negotiations, we try to really maximize the price per test that we agree with in our contracts, for instance, and we try to maximize also the price increase that we can pass on for the walk-in patient. This is the same strategy for next year. Also just to bear in mind, the aim is to always be the market leader and to have the highest market share. We don't want to lose any market share throughout this devaluation, because this has proven to us to be the best long-term strategy. You retain patients. This is your bread and butter. You retain patients, they stay with you throughout all the periods. We try to balance out strategic price increases, not losing market share, and retaining our patients. This is how we look at it. Thank you. Could you comment on the business in Nigeria? It is a large market and you have been present there for some time. What is holding back growth and profitability? Sure. It is a large market with a lot of opportunity, but I am sure you are aware things have not been easy, especially on the macro front. There is the new government. There has been significant depreciation in the currency. Not just the currency, everything is impacted, like gasoline prices, diesel prices. By the way, diesel is an integral component of our COGS there because we have to use generators in our labs. The macro scene has definitely been impacting our operations there. I would say we are doing our best. If it is reassuring maybe that looking at October and September, our numbers are way better than the previous months of the year. We are doing our best to improve operations there, especially on the gross profit level. As I said, September and October are way better than previous months. We are hanging on. We are trying to optimize costs and increase prices whenever it is plausible. Thank you. Another question is, there has been significant investment into radiology over the last five years. Could you comment on the return on investment realized so far relative to your expectations? As Dr. Hend noted at the beginning, yes, there has been significant investment. We are the fastest growing radiology chain in the market. I would say that in a span of 2 years, we have opened 5 branches and no other, actually, competitor has been able to do that. We have been able to ramp up branches very quickly. We have actually introduced a seventh branch, as Dr. Hend noted, in the end of September. On the profitability side, I would say it's been ramping up very quickly because, as I said, in 2 years, we've opened 5 branches. We're looking at an EBITDA margin of around 20% as we speak, and we're still ramping up utilization levels because, as you know, it's about utilization in radiology. So our utilization levels still far from their full capacity, and we're already reporting an EBITDA margin of around 20%. We're optimistic about this. We believe that as we move forward, utilization will increase and our margins will even improve further from the current levels as all our branches fully ramp up. Thank you. Marina Roche has 3 questions. The first and second have been mostly answered. There is just one part of the second question, which is, do you have any clarity if the local agents of suppliers are able to source the FX that they need, or you typically find shortages on their end? So far, we haven't faced any issues. Sometimes there are limited shortages, but so far it has not reached any level that could impact our business. Been very quite limited because medical is always prioritized in the banking system, the medical sector. Great. Her third question, would you consider exiting difficult regions like Sudan and Nigeria? If so, would there be any liabilities, for example, lease liabilities with such an exit? Would you like me to repeat the question? Sorry. Sorry, Ahmed Moataz, can you repeat again? Sure. Her question was, would you consider exiting difficult regions that you operate in, particularly Sudan and Nigeria? If so, would there be any liabilities with such an exit, for example, lease liabilities? Sure. So far, I wouldn't say that there are imminent plans of exiting. It's a bit early to talk about exiting this market. We have already impaired Sudan, as noted, and this is done. No more impairments to Sudan as we speak. By the way, if you look even at our regional performance, Sudan is not impacting our profitability, by the way. If you look at our earnings release where we dissect the EBITDA impact of every country on the consolidated level, Sudan is not causing an issue, actually. It's almost break even. Actually, there's a 9% even margin in Sudan, and the impairment for that asset is done. Sudan is fine for now, and we are waiting to see. Nigeria, again, there is still decent growth in our top line there. As I said, October and September are showing better margins even on the gross margin front. It's a bit early to talk about exiting for now. We'll always be very closely looking at the situation and the viability as we go of this business. But definitely, we closely monitor and we assess the viability as we move. Thank you. We have a final question in the chat, but before I ask it, final reminder to everyone, if you wish to ask questions, please either send them through the Q&A or you can use raise hand function. The question comes from Farouk Meyer. The largest increase in costs is actually salaries. It's 26% of revenues from an average of 20%. What can be done to reduce reliance on manpower and/or increase automation? Sure. Thank you, Farouk. First, on the salary question, because this is a bit tricky, and this is why we try to dissect salaries in our earnings release. Yes, there is an increase definitely in salaries, but the increase is aggravated even by Jordan, because if you look at Jordan's direct and indirect wages and salaries as a percentage of sales, it's higher than Egypt, actually. This is why when you consolidate it looks like the increase is even bigger. That's number one. Salaries this year, I would say, it has been impacted by the unusual salary increases that we had to take at the beginning of the year. Because the unprecedented wave of inflation in this, we had to really compensate our staff for this. We increased our salaries by an average 18% for the year and then the increment with the new hires for new branches and so on and so forth. Going forward, we're also looking at that. However, we're trying to also control the number of branches that we open every year. Next year, for instance, we will not open the same 25 to 30 branches that we were used to open. We'll try to control that a bit, and we will try to optimize costs and operations even of manpower on those branches as we go. We are taking steps, serious steps in branch openings and so forth. As I said, you need to look at it for each country in isolation as well. Sorry, one more thing. Jordan also has added five new branches this year, and this is also unprecedented for Jordan. If you look at the history of Jordan, it never added more than one or two branches. That is also why you are feeling the weight of wages and salaries this year more than any other year, also because of this. This requires ramp up and even the rate of their branch openings will also slow down as we go. We got a follow-up and it is the final question. What is the rationale again for slowing down branch openings next year? I think he missed the answer. Sure. We believe that we have reached a comfortable level so far with branches, that we cover the whole country very decently, and we are looking at optimizing our current level of branches. You know that we have 600 plus branches now. We cover the whole country very comfortably. We are doing more studies to the current branch network, and we want to make sure that everything is optimized before opening any more branches at the moment, especially given the current situation. Thank you very much. We have not received any further questions. I would like to thank you for taking all questions and answering them patiently, and I will hand it back to you if you have any concluding remarks. Sure. Thank you, Ahmed, and thank you, everyone. We are always available by phone, by email for any further questions and happy to take any unanswered questions throughout this call. Thank you very much, everyone. Thank you. Thank you, Ahmed. Thank you, everyone. Bye-bye. This concludes today's earnings call. Have a good rest of the day, everyone.