Earnings Call: Q2 2020

Jul 24, 2020

All right. Thank you, Joanna. Good morning, everyone, and welcome to our second quarter earnings call here in Medicover. This time around, I would like to commence this call with exception a strong dedication, expression of appreciation to all our staff and of course, particularly to all our frontline staff who have, throughout the crisis, really worked relentlessly and professionally to meet all our customer demands and expectations despite these very most stressful times. So I would like to begin with expressing a thank you to you all. Then we go into the highlights of the quarter. Clearly, the second quarter for us as the most of the rest of the business world is a quarter that we like to be over. And despite this, I think overall, it has come out significantly much better than we first envisaged when we went into the month of April and the crisis unfolded. So revenue came in just short of $200,000,000 or 198,800,000.0 which was a 2% contraction versus prior year and organically just short of 8% contraction. EBITDA reached just north of €25,000,000 a margin contraction of 80 basis points, again significantly ahead of what we could have seen in the early parts of the crisis. Fee for service revenue, which of course is the most exposed to the lockdowns and customers not being able to come to us, contracted 8% overall. And most of our servers, of course, were quite significantly impacted by the COVID-nineteen crisis. And as you will see as we go through the presentation, of course, one of or perhaps the besides cost containment, the most important reason why we have come through this so far in good shape is really our diversification in terms of revenue and customer types as we talk about so many times. We estimate that the negative impact on revenue from the crisis for the quarter is some EUR 53,000,000. And you see that's pretty much an equivalent of some 26% year on year growth on the prior year quarter. So indeed, a very significant impact on the group. The really good news, read about strong V shaped recoveries and if that will happen or not, I think we are a good illustration of a very V shaped recovery with a strong dip in April, more or less flat in May and a very strong pickup in June, as we write in the report 19% up in June on the prior year month. Clearly, one should be clear on the fact that I'm sure within the June number, there's a certain element of deferred demand. But nevertheless, it's very nice to see such a strong rebound. We completed the directed share issued during the quarter and raised just short of €142,000,000 net with 15,000,000 new shares, creating a very strong balance sheet going forward. And as we previously have communicated, we maintain our three year financial targets until 2022. Important to point out on our two traditional pie charts to the right there, if we look at the payer split, you note the left hand side, fee for service side as mentioned, that's where you see the contraction. That's really the lockdown effect. You see our funded business, our prepaid insured business being up, not very much, but still a positive number. And the public side being up a bit more, remember, that's quite a bit of acquisition effect in there, both with the Neomedic and our Indian hospital business to some extent in there. And likewise, on the right hand side, you see the geographic split. We have commented before Germany being the country that has been least affected in our business by the crisis and that's quite visible as you see Germany as a geography is actually up 9%, whereas all the others are down. You see one other positive number being India, but remember that's all acquisition related as the hospital group were not in the prior year number. So with the exclusion of India, obviously everything is quite negative, but Germany being positive is a strong number. So we flip to the healthcare services side. Here, revenue is positive year on year, be it just a couple of percent, but still 110,500,000 up, organic obviously contracting 8%. We had a very strong EBITDA progression in this division, growing 20% up to just north of $18,000,000 And that's really on the back the point I made before diversified funding sources, particularly the strength and resilience of our prepaid corporate business and also the very swift actions to adjust our cost base and certainly also the ability to service in a very successful way large groups of our customers on our digital health platforms that has really supported our customers in a very positive way and certainly helped us through the quarter. Fee for service contracted just short of 5%, in the same way as across the businesses. Our member business was more or less flat. We contracted in fact 11,000 members. And those of you that have listened to our trading updates throughout the quarter, I have said that we may have a minor negative movement or we will be flat. You see we came out 11,000 members down, which I think in the scheme of things is actually very strong outcome. And we see that returning over the second half to positive movements. Clearly, one should be clear on that there still is a lot of uncertainty in terms of the outlook with the COVID and how much new outbreaks that will be coming back and how that will impact economies, etcetera. But we clearly don't expect to see another general lockdown of our societies that we don't think will happen. We are virtually seeing new regional and local outbreaks. So clearly, we will live with this for quite some time. But I think the resilience of the business has been proven, in this very general lockdown quarter, so to speak. In healthcare services, clearly, we've had the biggest impact on the number of our elective services that we talked to you about before. IVF was in fact closed for a while. Our gyms business was also closed for a while. Certainly big impacts on the dental business, etcetera for a while. All of those are now more or less back to where they were or even above where they were when the crisis broke. We also have a new source of revenue in terms of the COVID-nineteen services in this division really out our Indian business. We come back to that in a little bit where we have significant demand for COVID related services. You see on the pie charts here, where, if we start with the funding sources that are a point I made before already, funded, the prepaid business being basically flat 2% positive. The fee for service business in healthcare services contracting 5% and a 28% growth in our public business. Again, you know that is an acquisition related growth as most we had quite a bit of that segment not being represented last year around. And in the geographic split, very much the same, you see Poland, Romania more or less contracting the same amount, India not being represented last year, and the other smaller activities contracting a bit more. So flipping on to Diagnostic Services, here revenue wise more or less the same impact as on healthcare services, but significantly much more impacted on the profit level. Again, this is a reflection of the nature of the diagnostic business, which is much more marginal in nature. We put on more revenue on top, quite a bit of that is profit contribution. And the opposite is equally true, you take away quite a bit of revenue and then you also take away quite a bit of profit contribution, which is very visible from the EBITDA contraction and the loss of contribution. As you know, remember well, a much larger part of this business is elective fee for service or private pay fee for service. So that contracted some 11% for the quarter. Our lab test decreased 21%, so obviously quite significantly as you can see. The COVID related testing and in knowledge testing in general has been significantly scaled up and to some extent has insulated, the contraction. And going forward, we're actually investing quite significantly now in scaling up our capacity, in COVID related testing as we see demand for that significantly increasing, through the rest of 2020 and also into 2021. And we kept growing our BDP network really on the backlog from project already initiated in prior quarters. And if you look on the pie charts here at the bottom, again, quite visible the private pay business contracting 11%. Our public business less impacted for obvious reasons, you see plus 1%. And the point I made before on the geographies, you see a pretty much uniform pattern across the non German countries contracting 18%, 22%, 23% year on year, whereas Germany is up 9%, again illustrating the point that we have talked you through throughout the crisis here in terms of the resilience of Germany. Then if we flip to a slide we put together on COVID-nineteen specifically, what has the impact been. So point already made, we estimate the €53,000,000 of revenue lost due to the lockdowns and COVID related impacts. We have been very swift in terms of addressing our cost base in the quarter. I think we talked you through on prior calls that we have had voluntary compensation reductions, temporary unemployment, reduced working hours, etcetera, etcetera. Of course, we have worked with local governments where support packages have been available. We have worked with our landlords to have rent reductions, etcetera, etcetera. All of that we sum up to approximately €60,000,000 of cost reductions during the quarter that clearly have very significantly helped us through. And we're back now to normal compensation levels, etcetera. So going into the second half of the year, all of that is back. We've also had some tax deferrals, clearly, so with the support of tax authorities, these will be paid now during the second half of the year and into 2021. So these are just you know, tax cash flow effects on that. We have largely protected our employment throughout the group, thanks to and due to the dedication of all levels of staff across our geographies. So I have already expressed my gratitude to that for that and I do that again. Activity levels are expected to normalize as we have previously communicated. Month of July has started well, so we expect a continued improvement from what we see through the second half of the year and returning to more or less normal trading condition in the fourth quarter. Again, I made the point many times that we bring this down to the essential nature of our services. Our services is really important in the societies where we operate, and I think that has been proven very well through this resumed demand. Obviously, we curtailed all our capital investments very strongly during the quarter, particularly so the first half of the quarter, and we are now resuming our investment programs to start investing for growth again. I already made the point that I think everyone should be, there's nothing certain in the world, but we are very, clear on the fact that we expect the new regional local outbreaks of the virus, clearly. And in fact, in our geographies, you all read the newspapers. So in India, which is obviously significant presence for us, India is a country where the virus is still very, very, very significantly on the uptick. So, the crisis is far from over, although, with exception India in most of the geographies where we operate, clearly it is very much more under control nowadays. I made the point that we are now investing significantly in new diagnostic capacity to be supported in what we expect to be an increased demand over the second half of the year for further COVID related testing. Then if we flip to the next slide, we just try to put some bullet points in terms of the two divisions and COVID. So starting with the DX side, it's about EUR 20,000,000 revenue impact assumed here. I already made the point that we have quite a bit of mitigation of the revenue reduction here increased COVID related testing. Just to give you sort of a reference ballpark, about three little bit more than 300,000 tests of COVID related nature performed during the quarter, about two twenty PCR tests, just to give you a feel for the numbers involved here. We issued a press release, just make you aware of that on the July 13 regarding a really interesting, we ran a pilot project with Illumina and the quite a large scale live pilot in the Munich area on just sort of 2,000 live patients on running testing on NGS technology, where you can have a dramatically much larger capacity versus the traditional PCR technology. That test came out as described in our press release really well. So, this is not a commercial product yet, but I just draw your attention to that as a potential, for the future to have a much larger capacity, testing capability. And if we look at healthcare services, the revenue impact was larger here. So you see €33,000,000 again, that's the nature of the service business and many more customers being unable to come to our services throughout the quarter. Importantly to say that, pretty much all of the services that were significantly impacted, in the month of June are either back just below or in some instances quite a bit above the prior year levels. So sort of illustrating that the swing back in demand, already made a point before that, you know, very swift actions to adjust the cost base here and also working with our commercial partners to manage the lower revenue. In India, we have our we have three of our main hospital units being, adapted to enable treatment of COVID-nineteen patients, clearly with strong isolation features. So currently about two fifty beds dedicated to that and we are able to should the demand arise, which we expect it to be unfortunately, if you wish during the second half of the year, we can scale that further up. Currently, we run that at about 90% occupancy, and the vast majority of our patients are making full recovery. Approximately two thousand patients we have so far, twenty COVID nineteen patients we have so far treated in our Indian hospitals, which obviously is a very important contribution to those local societies. So with that, I would like to hand over to Joe that will take you through the financial overview. Thanks, Frederic. So, Hannah, if you could slip to, slide nine. So I don't go through most of these numbers, because Frederic has commented on them already, I think. But we were obviously impacted even though the numbers have come out better than I expectations were at the beginning of the quarter with the rebound that we've seen in terms of demand at the end of the quarter. Our net result is still impacted though. So we came in with a loss of $8,500,000 on our net result. And that was also then impacted by the impairment charge, which we put through €4,900,000 non cash charge. Hannah, if you could move ahead. Slide 10. So net proceeds from the directed share issue, which we did in June, EUR 141,900,000.0. We issued 15,000,000 new shares, just below 10% dilution impact in terms of the share base. It was very cost effective in terms of the capital raise. We issued not far the price of the share at the time. We had a strong investor base and we had strong demand from that investor base, the existing one and also some new shareholders that came in. So very effective ways for us to bring in additional capital through strengthening the balance sheet. And most importantly, positions us very well for further organic and inorganic growth when and as those opportunities present themselves. So really strong balance sheet. Our net interest cost of EUR 4,500,000.0, 2,500,000.0 of that was interest charges for leases. Despite having now quite significant cash on hand, we've done really seeing the non lease part of that interest charge reducing so much because part of that is arrangement fees being amortized. And then a large part is obviously our commitment fees for our $250,000,000 revolving credit facility, which is now undrawn. So we have that fully available for us for expansion. Foreign exchange was volatile. We had a profit this quarter. Q1, we had a loss. And this is the IFRS 16 impact, non cash movements where we have foreign currency leases in our operating countries, which is a very effective way for us to reduce the cost of our leases, but it does mean that we get volatility at this line. But overall, over time, this is a very cost effective way. We don't go out and hedge those positions. That's just not gonna really help us. So not particularly too worried about this line. We've been through this foreign currency dive for evolving market and we've gone through that fine. We've got plenty of balance sheet power. That's not an issue for us. Cash flow for operations before tax, very strong, just short of 41,000,000, a very strong working capital inflows both in Q1 and Q2, supported by our high levels of receivables at the year end and lower inventories. Underlying, if you strip out the working capital adjustments and obviously adjust now for leases as well because that's an ongoing cash outflow, then our operating cash flow is actually impacted. You can see that, as you would expect, with the results being impacted due to COVID for the first half. But what is very encouraging is that we're getting paid, particularly by statutory funders, which are always the ones which drag and are poor payers. And we see no real issues with funders, corporates. So our cash cycle is very supportive. And we've also been supportive for our suppliers as well in terms of making sure that they're being paid as well. Income tax, we have a charge now reversing the credit we had in Q1. Basically, the recovery is much stronger than we expected in terms of demand. So the good news is most of our operating units are profitable at an income tax level, so we're going be paying tax for the year. So that's in today's environment, that's a good thing. Cash and cash equivalents up, a very strong $124,000,000 as you'd expect on the capital increase. And then we've paid down all of our short term debt except for a small amount, which we paid back in Q3. So our net cash net of debt is GBP 78,000,000 versus GBP $240,000,000 at the end of last year. So the remaining debt profile we have is the 140,000,000 short of shine, average maturity around about seven years. So we have a very good debt profile, very good excellent liquidity position. Our lease liabilities, they've increased it in the first half around about €10,000,000 So this is on our gyms that we're expanding to support the employer pay gym benefit plans in Poland. India, two new locations that we've added on which were in the pipeline before COVID and we went ahead and finalized those and some FX movements as well. So we're in the process now of continuing to expand. So we'll be adding more locations as we go through the second half of this year and into next year. So this balance sheet item will increase. Liquidity, we're up if we look at cash and we look at credit lines available, have over $350,000,000 in liquidity available. And this means we're in a fantastic position to be able to execute not only our ongoing organic expansion, which we are putting back in process and pushing back on pushing ahead with again now, but also for inorganic opportunities as and when those present. As you know, we've done quite a bit of inorganic in the past and we expect to do that and continue to do that in the future now with a strong balance sheet. Capital investments were lower as we pulled back on that in the quarter as you can expect, dollars 11,200,000.0. And as I said, we will resume those growth plans and we maintain our guidance as well. And we will be investing to ensure we have that. We have funding. We have confidence in the business, in the business units, we're seeing the demand under there. So we're pushing ahead with our original investment plans. Wes mentioned we have this noncash charge for impairment, 4,900,000.0. This was pretty much individual sites which were not performing well enough for us. So there's no business line or individual country. IFRS equity just short of €05,000,000,000 $473,000,000. So very strong equity and capitalization. We had some translation movements as you'd expect with the foreign currency movements on the back of the COVID nineteen impact. And we certainly have enough equity and balance sheet power to be able to handle that. We look then at our on Slide 12 with our financial targets Q2. As you can expect with the COVID situation, our growth is down. So on the six months prior year on the six months organic, we were flat and for Q2, we're down 7.7%. And then if you look at the profit, obviously we've been impacted in terms of our margins. So haven't made the progress that we were originally expecting to do there. But we maintain our guidance with organic growth of 9% to 12% over the three year period, looking at last year as the base. And we also maintain our EBITDA margin targets 15.5% to 16.5% for 2022. Our capital structure, as you can expect on the capital increase, then we have plenty of headroom here in terms of our upper limits or where we expect to work towards the 3.5 times where we're at one times. So I head back to you, Fredrik, for any closing remarks. All right. Thank you, Joe. So, that pretty much sums up our commentary of the quarter. So as I started out saying, certainly not a quarter that we would like to experience again. But given where we started out, I think we have come through this in a strong way and again on the fantastic staff support throughout our company. And I think we are now well positioned going into the second half of the year, where, we expect demand to remain strong And we remain vigilant and expect, as I said, new local and regional virus outbreaks, but nothing in terms of a complete general lockdown that we saw during the second quarter. So with those words, I hand over and we're happy to take any questions that you may have. Go So our first question ahead. Is from the line of Christopher Foe from Carnegie. Please go ahead. Your line is now open. Yes. Hi. Good morning. Three questions. Hope that's okay. First of all, you mentioned that there were probably some pent up demand in June. So I'm interested to hear if you could say anything about what July looked like so far. And then on on India, you highlighted that some of the the facilities supporting facilities has been converted treating COVID nineteen patients. So is that private pay? And also if you could comment how the rest of the business is doing in in in in this environment. And then when it comes to the COVID testing that you're scaling up, what's the potential positive impact on sales? Could this be something really significant? Thank you. All right. Thank you, Christoph. So I deal with those. So in terms of the pent up demand, July has started off well. So we actually don't know exactly how much of the June impact is pent up demand. It's actually impossible to know. I'm just I just made a point because, you know, there is some element of it. So I don't think that 19% in June should be interpreted that, you know, second half of the year necessarily will be up 19% year on year. So July is up, but not the full 19%. So it's a positive growth in July, but not fully at the June level. I think that's a way of answering that, Christoph. In India, the COVID nineteen patients that we treat are all private pay or private insurance. You know, there is there is a government related, pricing cap, but you can charge for peripheral service around etcetera. So it is private pay, and private insurance. Now the rest of the business in terms of Indian hospitals is impacted. So it's a little bit like with diagnostics business when we say the COVID related testing is sort of shielding some of the shortfalls in the rest. And it's sort of the same in India, but it's more pronounced because we whether you say unfortunate or not, but we think unfortunately, we will see much more COVID related patients over the second half of the year. So we will see quite significant, I think revenue impact from that in our Indian hospital business, although other parts of the business is obviously is not performing where they were before the crisis. And does this mean that there is I guess the net effect is negative for India? Yes, yes. Christoph, the net effect versus where we would have been had there been no crisis is negative. Yes. Definitely. But it's significantly less negative than it would have been. And on the on the COVID testing side, you know, we're scaling up demand. Sorry, we're scaling up supply as I said. And, you know, I'm not going to put out a number how much we expect it to be, but, you know, it will be visible. It you know, it's very meaningful volumes, put it that way. So if demand increases the way we expected, it will be visible in the Diagnostic division revenue certainly. And coming back to my first question about pent up demand July, etcetera, because your comments about the negative impact on sales in the quarter suggest you would have been growing 20 including m and a without COVID nineteen. When do you think you could be back Do you see that happening towards the end of this year, or is that part of question? One you know, we say normalized trading patterns in the fourth quarter. Now clearly, you know, we still bring with us for the year the shortfalls that we have. So in terms of a rolling twelve month figure, it's going to take a while until we are back to our historic growth levels. If you take month on month, I think that's a different picture, that will be towards the end of the year or whether it will be into 2021. I think it would be wrong to make a comment on that. And that's really because Christopher, not that don't have a view, but it's such it really is a very large degree of uncertainty around additional COVID related impacts. So versus any other situation we have been, clearly, have come through this quarter much stronger than we expected. But I think we have a great deal of respect still for the fact that it is an outlook which is unusually uncertain because of the, what may or may not happen with additional outbreaks. Yes, I understand. Thank you very much. Thank you. Your next question comes from the line of Klaus Pick from Nordea. Please go ahead. Your line is now open. Hi, and thank you for taking my questions. My first question relates to the revenue development. It might be a repetition of Christopher's questions, but I didn't fully hear the answer as I was interrupted by stating the name to the operator. Nevertheless, the 90% increase in June compared to prior year, could you please put that into perspective of pre crisis level, I. E, the levels seen in January and February? Also, if you could put some color on the revenue development in Poland, which I believe was lagging the other regions a bit when you published your most recent trading update? That's my first question. Thank you. You want to comment on that, Joe, so we split a little bit? Yeah. Yeah. I can. Remember, we have some inorganic levels of in June as well. We had the acquisition which we did for in South Of Poland, the maternity hospital group, NeoMedic, back in May 2019. So June, that that was in there on a on a like for like basis. But the the Indian business was was obviously was obviously additional additional in there as well. So so so that But in terms of activity activity levels? Pardon? Just in general activity levels, if you compare with the levels you see now compared to prior or pre crisis levels? Yes, I can give you a little bit more color on that. So you asked also about Poland. And we have this diversified business base. So our employer paid businesses has performed reasonably well given the protection of employment that you've had across countries. So so that's performed very well in terms of the the revenue holdup, and you see that in the member numbers. So there, we're we're we're we're above prior year prior year numbers because we're above in terms of the the member numbers on a prior year basis. Sequentially, we're we're we're we're flat. And if you look on the the businesses which have been impacted by the lockdown, so particularly the diagnostics, IVF, dental things, and stuff like that, then we're above levels that we were at on a prior year basis. It's a bit difficult to look back to January and February because we've got quite a bit of seasonality in in the in the businesses as well. So we we we were first looking at, you know, our prior year levels because that's our sort of first target. But as now we've moved ahead of those prior year levels, then we're looking now at our original budget numbers in terms of tracking against those. So obviously we still see an impact against those original budget levels. But it's, you know, we're very happy with the performance. When you asked about that we were seeing a lag in Poland, we were seeing a lag in Poland particularly on the diagnostic side. And now we're above prior year levels back on the diagnostic side as well. So that's encouraging. Particularly as you still have some lingering effects of the COVID-nineteen, in terms of scheduling for hospital procedures, people coming to doctor's offices. You still see, people, reacting and behaving in a different way. So there still is a lingering impact in terms of the COVID-nineteen situation. But we're above prior year levels. So we're happy on that and we'll look back and tracking against our original budget figures as a target. But I don't think we're going to get there, certainly probably not before the year end, but on an individual business unit. But we're looking forward to a normalization in Q4. I think that that will be supported by the ability for governments and healthcare infrastructures to be able to influence people's behaviors and also have large scale, large volume testing and tracking and tracing keep a cap on the levels of COVID-nineteen running around in the general population. So that's our base case. That's our outlook. Okay. Thank you very much. My second question relates to costs. So you touched on it briefly, but just to clarify. So you say that you have returned to full compensation levels for your staff. As such, should we expect a normalized cost base going forward? Or is there still any cost reductions measures in place? Obviously, we've been through the businesses, as you can imagine, in all of our cost structures with a fine tooth comb. So we will have some ongoing cost reductions that we put in place. And as you can see in terms of the impairment charge, we have accelerated also in a quite ruthless fashion in terms of any units which are not performing at the levels or where our expectation is that it won't perform or the timeline is too long. So that should have an impact in terms of being supportive in terms of the cost side. But what we see is you've got to remember we're working in a particular sector and we've got a lack of nurses, we've got a lack of doctors, we've got a lack of healthcare professionals. Those people have helped us through enormously now in terms of dealing with this. And we want to make sure that those people stay with us and are happy with us. And so we wanna make sure that compensation comes back up to where it was. And also that they're remunerated. It's reflected in there for the work that they've done. So we still see continuing, inflation levels above general inflation levels in terms of our staffing costs. And that's across whole society. So in Poland, Romania, Ukraine, so, Germany. So, we expect that we're going to need to continue to, see an increase in there. And what this has demonstrated in terms of the crisis is the demand is there and the demand is there and people are willing to pay. So I think we can manage all of that. But yes, we have adjusted cost base. Yes, some of that will be ongoing. So but we would have done, I think some of that anyway in terms of moving our margins up. Okay. Thank you very much. That's it for me. Thank you. Your next question comes from the line of Caroline Alvin from Ulster Bank. Please go ahead. Your line is now open. Hi, good morning. So first, just a follow-up on the cost question here before. So if I understand it correctly, you have reduced your costs and including government support then by €16,000,000 in the quarter. Looking into Q3 and Q4, how much of that is temporary? And how much of those reductions would you have also going forward? Should I answer that, Frederic? Or do you wish to No. Go ahead, Joe. Hello, Caroline. Yeah. All of that is temporary. A large part of that is is short working, temporary salary reductions. So Frederick here, he's received no remuneration in Q2. All the other executives have taken significant salary cuts. And our frontline staff as well have been supportive in terms of making sure that we haven't had to lay any staff off. So, you know, it's been a fantastic solidarity from all of our staff in terms of making sure that we could go through this. So all of that is temporary. If you look at in terms of the government support, it's not a significant number in that figure. The majority of it has been through and neither is landlord lease reductions. So the majority of it is staff costs, which is our biggest cost. So, you know, we just got a fantastic team and wonderful wonderful people in our in our business. And and and so we've been able to manage that in really, really proactively and really well. Okay. Thank you for the clarification. And also on you you talked a bit about investment plans, and you said you will resume them during the rest of 2020. But as of right now, are they still on hold, or did you resume them already? And what load times would you say there are for, I mean, these investments that you will do to start contributing to growth? Go go ahead, Joe. Yeah. Caroline. So most of these projects are long a longer you know, long planning cycle projects. So we're investing now for projects for next year. So we're making commitments now for twelve, eighteen months and ahead. So quite a few of them were put on hold. They even had some direct cost impacts for us. But given the uncertainty at the beginning of the Q2, we felt that was the right thing to do. So some of them very swiftly we put back on that. We talked about before the two cancer centers that we had in India. So we're going ahead now and contracting to equip those whereas we put them on hold initially at the beginning of the quarter when we were ready to sign contracts then. And so now we're reinvigorating those and getting those moving and signing contracts to equip those. We opened two new facilities in India already in the quarter. And we have a few others which are now moving ahead with. So we have dental facilities in Poland, which we put on hold and we had a pipeline of new gyms as well. So we invigorate pretty much all of those. A couple we've put on hold, we assessed and probably won't go ahead with, but we wanna go out there and push the button in terms of the opportunities we have. We're seeing the underlying demand. We're seeing that in terms of the numbers and it sort of reinforces and reassures us in terms of with the COVID situation that demand is strong and is still there and the customers are still there. So that's why I think we're reasonably bullish in terms of our guidance for the three years that we will be able to achieve that. Okay. Thank you very much. We'll stop from it. Thank you. Your next question comes from the line of Jagana Amquist from Redeye. Please go ahead. Your line is now open. My question is to Fredrik. Hello, everybody. Thank you for the presentation. I want to know more about the Ukrainian operation. It used to have a very strong growth, and now it's a very strong drop. Could you explain a little bit your views on on this about the future? Yeah. You know, we are we are very I am no less optimistic or impressed with our Ukrainian operation now than I have been before. You know, Ukraine, had pretty much the same same profile of drop as our Romanian business. And that's really because the vast, vast, vast or all of our Ukrainian business is private pay out of pocket. And that more or less all I shouldn't say all disappeared, but almost all disappeared in April and almost all reappeared, in June. So I think of all our markets, Ukraine is probably one where you have the most pronounced V shape recovery. And now you know if you follow it, that, you know, Ukraine has quite a significant, you know, virus spread as well nowadays. And I'm sure there's a very large amount of untesting in Ukraine. So it's I'm sure it's a much wider issue than what is reported as well. So but on an ongoing basis, we have we're back to normal in terms of our customer flows. And so if anything, Ukraine is a place where I made, I think twice in this call the comment that we expect actually a second half positive impact from COVID related testing. And Ukraine is certainly a geography where that will be visible, Because I think everything else equal, on the back of a very weak, and sometimes non existent public system, of course, anyone that is worried about the virus, they will turn to the private sector for testing. And then that's pretty much us in Ukraine. So, we're we're very optimistic, Giordano, on the Ukrainian outlook. Thank you. And I want to ask also about the Romanian operation and specifically the Pelican Hospital. You had some building work there. How is that going? Yep. Absolutely. And that's a that's a pertinent question. That's it's ready. You know, we've we've opened that now. You know, the extension is open, and we're growing. So in fact, from a revenue point of view, Pelican did really well. They had actually significant growth year on year in the second quarter, so despite obviously being largely private pay. So that's good. It's open, it's growing, it's doing well. Okay. And the same about the Polish hospitals. How is the occupancy rate? Say say how the operations are doing? Say that again. I I I didn't hear your question. The hospitals in Poland, have you seen any impact on the occupancy rates and operations resumed? How is the activity in Yeah. I mean, if you take if you take the Neomedic group down in in Krakow, you know, as as you know, that that's, mother and child. So that really a little bit of impact on elective, but I think we had a record number of births and deliveries down there several months. So people are pregnant and delivering babies despite the crisis. So in terms of NeoMedics relatively little impact. Vilanov in Warsaw saw quite a bit of impact in April, of course, from elective surgeries. That has come back quite significantly. So sort of May, June, the Villano hospital would be reflective of the overall picture that we communicated. So quite significant drop early on and significant coming back really in terms of elective surgeries not happening. And then some of that resurgence coming back being a pent up demand that we talked about before. Yes. So would you say that the demand that was lost during the crisis will be recuperated in the second half or? Yes. I mean, as we said in a couple of the trading updates, our view is because of the central nature of the service, most of it will not be lost business. Most of it are deferred business and I maintain that view. Then it's impossible to be able to quantify if it's X or Y percent. But the vast majority, I think, of business that we could not service during the depth of the crisis will come back to us. And we already see that. And I'm sure that's how it is. Okay. And my last question is about potential acquisitions. Have you identified any targets or? Yes, mean, what yes, so I think the way to answer that, Jojana, is that we have a as you know, we have a team in both of our divisions working on active deal sourcing and M and A activities. Now what happened when the crisis broke was we just said, well, for now we do nothing. Yes, it didn't mean that we said, well, we're just going to stop this forever. So we basically just put a temporarily halt on anything to preserve cash in the company. So now, Joe talked about resuming investments activities, that's both organic and inorganic. So now when we're resuming this, we just start from where we left it in sort of March. And pretty much the landscape now looks I mean, not you can't say it's identical, but it's pretty much the same as it was when we left it in March. So we go back and we resume the same discussions and the same processes as was running back then. And restart the engine again, if you wish. And of course, I'm not saying that you restart it from one day to another, but you probably restart it certainly from a two, three week period to the next month. So, give it a month or so and then I'm sure we'll be back with a regular pace that we had before. Thank you very much. Thank you. Your next question comes from the line of James Van Tempest from Jefferies. Please go ahead. Your line is now open. Thank taking you my question. You mentioned some reimbursement of some costs in the quarter around CHF16 million. I'm just wondering which line items did you see these to help us think about the second half of the business? And then secondly, in India, should we think about the contribution this year and performance given the COVID curve seems to be behind Europe? Thank you. You want to take that, Joe? Sure, Frodo. James, it wasn't reimbursement That was the cost reduction. As I said, most of it was through salary reductions, working time and voluntarily or across the board for some businesses. We had some businesses pretty much closed. So we had all people being on short term working. We had government grants in there, but they're not significant. Think the amount of money was the order of a little bit over a million euros. So not a significant component of that, James. India in terms of where they are in terms of their COVID curve, they have lower per capita rates they're reporting than Sweden. So it's a big country. Now the infections are concentrated in more areas, Delhi, Mumbai, a few other cities, Hyderabad being one of them where you have active infections going on. So I think you're going to see a spread where it's going go out through other cities across India as well. When you get a case, they are very, very strict in terms of their lockdown procedures. So I think that they will be able to manage it to a certain degree, but given the size of the country, population, the healthcare infrastructure, for sure it's going to be an ongoing issue. So that affects us in terms of elective procedures. Our emergency procedures continue as we did before. We're doing quite a bit of that. And actually in some places, we get a bit of business coming to us that we didn't have before because certain hospitals have been designated as COVID hospitals and people don't go to them, whereas we have no specifically designated hospitals. Just to make a position about the two fifty beds, it's in three locations where we have specifically set up wards, but the hospitals continue to do other activities as well, separate flows, almost separate physical part of the hospital. So and we're seeing that that business line I think in terms of treating COVID patients, are all private pay or private insurance, I think that's going to continue for into next year. So I don't think there's going to be a situation where you're going to see those sort of levels reducing. And that is on a net basis impacting in terms of helping us to diminish the loss that we're having in terms of other elective procedures. I think we'll be okay in India given the situation. That's great. Thank you. Thank you. And your final question is another question from Christopher from Carnegie. Please go ahead. Your line is now open. Yeah. Thank you. Coming back to this, the previous question about the temporary cost, I think you just talked around it a little bit. But I guess considering that the second quarter turned out better than expected, isn't it difficult for you to continue asking employees for salary cuts now the third quarter? And let's assume you could grow top line 10% in the third quarter. How much of the €60,000,000 would you still have in place in that case? I would expect in terms of the $16,000,000 almost all of the $16,000,000 has come from salary actions. But we as Fredrik mentioned, we have all of those are finished. So we're paying all of our staff, as we were before the crisis. So we won't see any of that coming through. But we need our staff to work. We've got the demand there. We've got patients the to treat. So so it's just correct that we would we would pay them. So we're not gonna see any of that coming through. So we're gonna be in terms of our cost structure back to back to what we were in terms of pre COVID situation. And in some cases Okay. So but sorry, sorry. So based on that, because you indicate sales won't be back at pre COVID levels while cost is, so it's a risk that margins would actually be weaker in the second half than what we saw in the second quarter then. I think we've we gave some flavor in terms of where we're seeing in terms of the sales levels. And as you can see, we mentioned there that we're up 19% in terms of June. We're seeing continuation of decent demand into July. So part of that is inorganic. But still, we're in terms of our revenue side, I think we're going to be okay. And I think if you look at your projections from the analysts, you're projecting that our revenue is pretty okay in the second half of the year. So I think with the actions we've taken in terms of our cost base, in terms of things which weren't really performing with the other actions we've taken with demand levels we've seen, I don't think we're going to be too pressured when we get back to normalization in terms of the margins. I think as I mentioned It sounds that the July sales increase is not far off from the nineteenth percent, you saw in in June. Yeah. I think, we've two aspects going on. One, which is where people haven't had services, and they're coming back. So we've got a certain amount of pent up demand. We can't really quantify that for you. So there's definitely part of that. Part of that is continuing into July. So does it come down then to to a level which is which is more consent commensurate with with a longer term with longer term trend. You know, that's where we haven't got the answer we haven't got the real outlook. We've got autumn coming, so I'm sure there's gonna be an uptick in terms of, the COVID situation. Also confused with the normal regular flu, so that's gonna make it more difficult for management by by public health authorities. So, you know, we've got a fair degree of uncertainty in terms of the outlook. We're okay now. It's in the summer. People are not going on vacation so they're at home or locally so they're using more healthcare services. So to be able to look at those numbers and then project that forward is quite a bit of a leap of faith I think. And I think as I mentioned in terms of when we gave the updates earlier on during the outset of the crisis, I think longer term, this situation will probably help us in terms of meeting our margin target. And as you can imagine, we have been sitting on our hands. We've been pretty busy in terms of going through everything, looking at everything, justifying everything. So I think we'll be okay in terms of the margin outlook. Just to clarify that, Christoph, Joe sort of said it, but I say it in a more straight way and that is that the €16,000,000 is all one off because we dealt with that in the quarter to manage the crisis. Now, what we have done in addition to that, now we have brought back people to normal compensation, etcetera. So all of these one offs are back to normal. However, we have also, of course, gone through Joe made a comment, gone through our everything we do, and with a conservative cautious outlook and ensure that we have adjusted costs going forward to reflect a slightly more uncertain revenue outlook, because I made the point before, I think we've got to respect the fact that we've never had such an uncertainty in general in terms of will this come back and how will it impact us, etcetera, etcetera. I think we're in a position where quite a bit of a potential impact coming back will be revenue generation. But nevertheless, we have been conservative to adjust some of our costs going forward on a permanent basis. We have not quantified that in here for obvious reasons. But we're confident that we will meet our margin expectations despite a bit of uncertainty on the revenue growth and that's really on the back of these cost adjustments. Yes. Thank you for that. Very clear. There are no further questions. Please continue. So I think that's it for questions. There are no further questions. All right. So thank you all for attending the call today, and thank you for your questions. And looking forward to speaking to you next time around. Thank you. Bye.