I would now like to hand the meeting over to your host, Fredrik Rågmark. Please go ahead, sir.
All right. Good morning, and welcome, everyone. Welcome to our second quarter 2019 results. You all have the presentation in front of you. We are very happy and very proud of our second quarter results. Medicover has always been a growth company, and I think you see that growth is even accelerating. We reached revenue of just short of EUR 203 million for the quarter, which is a strong 26% up versus prior year, of which north of 14% is organic growth. Indeed, I think that is strong however way you want to look at it. The acquisitions, which as you recall, was a good part of the reason why we did the IPO two years ago to be able to step up that agenda, contributed almost half of our revenue growth. That's a strong sign.
The fee-for-service segment, which is particularly important to us, and again, as we have said many times, it's particularly within the fee-for-service segment that we have acquisition opportunities. You can see that now with the fee-for-service segment for the group being up a strong 31% versus prior year, and is now representing just over half of overall group revenue, particularly in healthcare services, where we have been very active as well on the M&A front. You see fee-for-service as a share of divisional revenue rising to 40% versus 35% last year around, and growing 51% year-on-year. Some of that being organic growth and complemented by an active M&A agenda.
On the diagnostic services side, where you know that fee-for-service has always been a larger proportion, and we grew up to 66% versus 65% last year around, and again, growing 20%, which is also strong on the diagnostic services side. Certainly not of any lesser importance, but the core business and healthcare services are funded employer paid model, remains very stable and keeps growing well, as you will see a bit further on in the presentation. Important as well, the Neomedic acquisition, which is the largest acquisition we have done now since we became, again, a public company, is consolidated from May. The second very important message and good news is that margins keep expanding. Not only do we very robustly grow our top line, we are also able to grow our margins, not just in absolute terms, but also percentage-wise.
That's important that you can see. EBITDA grew just short of 29% to EUR 27.3 million, 30 basis points expansion. However, we have also expensed unusually high M&A costs related to the Neomedic closing. If one adjusts for that, looking at the underlying business, we're more than 100 basis points up on the EBITDA level, which is significant. That's what we should do. Again, that's a reflection of increased volumes and improving efficiency we can see throughout the business. Looking at the adjusted EBITDA, growing 100 basis points up to 14.5%, or 35% growth, so significant. The EBITDAaL that we introduced together with the new IFRS 16 regulations, which you recall is more akin to the historic EBITDA, which is more or less the proxy for underlying cash flow generation, grew some 33%, up to EUR 17.5 million. That was a 40 basis point expansion.
If one would look at the adjusted EBITDAaL, that would be up 110 basis points. More or less all in the same direction around that 100 basis point growth, which all confirms in the same direction. We have the public financial profitability target of organic adjusted EBITDA growth of 18%-20%, and we significantly beat that this quarter with 26.8%. That's strong and good news. Finally, on the profit side, you recall that in the other income category, last year around, we had quite significant such income relating to the revaluations on our options in the MaxCure Indian hospital business that we don't have this year around. Net profit is down a little bit due to that. However, if we exclude the other income category and looking on the underlying business, the net profit growth is a significant 91% up.
I think that's a confirmation of indeed that the business is generating a stronger profit flow through the increased volume, both in existing facilities as well as the efficiency in how we operate our businesses. Then if we go in specifically to the two divisions. I start with Healthcare Services, where revenue was up a very strong 34%, just short of EUR 109 million, of which organic growth was 17%. Indeed, a strong figure. Here, fee-for-service grew a strong 51% to reach, as I mentioned, just 40% of divisional revenue. This was the ongoing organic growth in our existing businesses, as well as the various acquisitions that we have done over the past couple of years. Strong EBITDA growth, up 43% to reach EUR 15.3 million, a 90-basis point margin expansion. You see organic EBITDA growth was just short of 19% of that.
If we look on the alternative performance measures, EBITDAaL, that increased 58%, very significant growth or even 150 basis points margin expansion. This you then should interpret as a reflection of, you recall that this profit measure looks at actually bringing back all our lease costs. Of course, the fact that this is expanding much more than the regular EBITDA is then a reflection that we are operating our facility usage more efficiently, i.e., we're pushing much more volume through the existing facilities that we have across the network. On the funded business, our employee paid business, our member base grew by 13.5% to just short of 1.3 million. That confirms the positioned outlook that we've had for a number of years. The employer markets remains very tight, both in Poland and Romania.
We have made the point in several of these calls that at some point, the economies will start to soften, and particularly in Poland, the issues around availability of labor, where the economy is firing on all cylinders. At some stage, it will start to soften a little bit, although it is not for the second next quarter, but into 2020, at some stage, we expect a little bit of softening in the growth of the economy in Poland. Of course, the results in this segment, the result in Healthcare Services is really driven by this ongoing strong underlying member growth and then the increased fee-for-service activity, which is really across the board.
If you look certainly at our admissions into our hospitals, it's the fee-for-service activity in our clinics, and it's the fee-for-service activity in our dental network that we're busy at developing or expanding. It really is across the board, and the demand remains very strong, both in Poland and Romania for private paid healthcare. If we switch over to our diagnostic services side, again, the private pay business, we continue to see strong growth here. Overall, revenue grew by 18% to just short of EUR 98 million, of which organic growth was 11.6%. Here, fee-for-service represents two-third of divisional revenue and was up a strong 20%, as previously mentioned. EBITDA grew well at 23.6%, an 80-basis point margin expansion here as well to 17.7%, reflecting good and strong underlying development.
The alternative performance measure here grew 50 basis points to 12.8%, so same dynamic as on the Healthcare Services side. 8% growth in the number of lab tests, where most of the growth is coming out from the private pay markets, and the growth is weighted towards the advanced test category. That, as you recall, is a very significant part of our strategy, and we see that playing out very well across all our main geographies. Important for those of you that were with us 12 months ago in this earning call, that's when we started to talk about softness in the German lab business on the back of a second quarter 2018 reform.
The second half of last year, we were quite significantly impacted by that, and we have talked about normalization over the first quarter, and we can report even more so here in the second quarter, where we are more or less, if not 100%, but more or less back to the position we were before we were started to be impacted by that reform. That's significant and good news for us. Overall, we added a total of 24 new blood drawing points during the quarter across the network, so a total of 614 BDPs by end of the quarter. If we turn to India and MaxCure. MaxCure is still an associate company, as you know, so it's not consolidated in our numbers. MaxCure operates 11 hospitals in three states, Telangana, Andhra Pradesh, and Maharashtra in India.
They reached revenue for the second quarter of EUR 16.4 million. Their local currency growth was 15%. We expect to be consolidating MaxCure into the Medicover group during the final quarter of 2019. Our current ownership amounts to 46.7%. Joe will comment on that later. We have slightly increased the ownership during the quarter. Two new cancer centers are under development. They will be open towards the end of this year or early next year. We also are underway rebranding all of MaxCure's hospitals into Medicover. You see there on the right-hand side of the slide some beautiful images of recently rebranded facilities. If you happen to tour around India, you will see some nice Medicover hospital facilities in a few states. With that, I hand over to Joe to talk a little bit about the financial overview.
Thank you, Fredrik. Just having a quick look through the key financial data slide, just to pick out a couple of things there. We use this alternative performance measure, EBITDA, equivalent to the pre IFRS 16 EBITDA. We still get a little bit of front-loading effect from the lease accounting through that, but it's a number which is reconcilable back to the reported figures. You can keep track on it. This is pretty good. We came in EUR 19.6 million, so that's a very strong growth there, 42% increase on the same figure in Q2 last year. For the first half, EUR 38.6 million, so that's up 34%. Very strong momentum in terms of the key performance metrics for us. 9.7% margin for this quarter, so up about 110 points, and 9.6% for the first half, so up about 70 basis points.
We've also included here on this table a new figure for you, as some analysts have been asking for adjusted EBITDA. We include that in there as well. That is EUR 13.7 million for the quarter, so up some 59%, and if we look for the first six months, that is EUR 26.7 million, up some 43%. Again, a very strong performance there. Even if I look back on an LTM basis, that's pretty good. That's up 26% on an LTM basis. You can see there we've actually got an acceleration of the performance of that number. Just flipping over in terms of the financial few points we'd like to make. I can't reiterate really enough that this is very strong growth. We're very happy with this. On top of that, we keep the margin expansion as well.
Definitely growing in the right area, firing away the investments that we've been doing now over the last few periods are starting to come through. We continue to invest. We're continuing our capital program. We invested just short of EUR 25 million for the first six months in capital investment, just short of 60% of that being in growth CapEx areas and just over 40% being in maintenance areas to maintain the existing business. Premises, we're increasing dental inpatient facilities, BDPs. We're doing some expansion of the hospital assets that we have in terms of the physical capacity. We can continue to build, and that will then be strongly supportive for us for our future growth.
Pricing, we've always been disciplined in terms of our pricing in the core employee benefit market with the high levels of growth that we have and dealing with that and making sure that we can maintain our service levels with our customers. We continue to have a strong pricing discipline, which is supportive of margins. Neomedic, we closed this now and consolidated from May. We paid EUR 69 million for that, including the debt that we assumed. We've expensed both in this year and in last year, we expensed some EUR 1.7 million associated with that in terms of some M&A costs, but through the P&L account. Very happy with that. We recognized EUR 5.2 million of revenue in the quarter in respect to that for two months.
The other few things that we've done now after the quarter end, we acquired all of the shares of OK System, the employee benefit health card business in Poland. We're underway expanding the gym network to support that business's growth. We acquired also then a dental practice in Poland in our continuing expansion, both organic with greenfield sites and inorganic with acquiring good quality dental practices in Poland. The consideration for that was about EUR 3.6 million. Just going over to the next slide. Just to remind you, these figures are restated for IFRS 16. We did a full restatement, so everything that we talked about here in terms of the comparatives has been restated, so no confusion and full transparency for you to be able to understand the figures. Fredrik mentioned about the net profit, the net figure being impacted.
We had a relatively low figure in terms of the other income. We had quite a high in the prior periods with the revaluation under IFRS 9 for our options in the MaxCure business. We now have increased by 1.6% our investment into MaxCure, so we took that up to 46.7%. We bought some secondary shares under the arrangements that we have. That's good for us and we'll continue probably to pick up some more shares now over the rest of the year and expectation probably in the fourth quarter that we would pass through the control barrier and we would then consolidate from then. Net interest EUR 3.3 million for the quarter. EUR 1.8 million of that is the IFRS 16 lease interest charge. That's a little bit increased on the higher debt levels that we have compared to last year.
Net operating cash flow before working capital tax, this is good. We're doing well there. Our tax rate, we're projecting 27%, not taking into account any of these fair value movements, which are non-taxable by their nature. Equity has been developed quite well. We're just short of EUR 330 million on an IFRS basis for our equity. That's the net profit falling through. Plus also we had a quite benign situation in terms of the foreign exchange translation rates for our foreign subsidiaries. That helped a little bit there as well. Net financial debt, including the lease liabilities, this has gone up. We're at EUR 332 million at the end of the period. The increase on this is also the acquisitions where we have recognized the IFRS 16 lease liabilities as well, and plus also our expansion of our own facilities as well.
If you look at the increase in lease liabilities, it's about half and half between acquisitions and between our own organic growth. Excluding lease liabilities, net financial debt, that came to short of EUR 186 million. If we look at that in terms of the ratio to EBITDAaL, which is the correct figure to compare it to, that came out to 2.8x . That's picked up there. It spiked a little now on the back of the acquisition that we've done with Neomedic, which is a little bit more sizable. I expect that to trend downwards as we recognize through the year the profits from that, and that spike goes away. Also as we grow profits through the year, all things being equal without any other acquisitions.
If we look at the commercial paper program, which we launched at the end of June, we put in place a SEK 2 billion program. We've got EUR 89 million funded under this. This is quite cost effective for us. We should see a reduction in our cost of funding over the next 12 months on the back of this and some other activities that we'll do in terms of our funding. This changes the profile in terms of the balance sheet with part of the debt being reclassified as short-term. However, we have our revolving credit facilities standing behind this program. There is no risk in terms of funding. The funding risk stays exactly the same as we had before. That's all managed. Just to recap in terms of our organic growth, we've been above our midterm targets now.
Very happy with the development there. Good strong momentum in the business. I think if you look at the run rates, you can work it out yourself that we have very strong forward going growth in terms of our revenue line. In terms of profits, we're above the targets again. I think as we mentioned when we gave you updates last year with the reform processes in Germany, that we expected over the medium term to pick up and come back to our targets. We're certainly doing that now in terms of picking up and catching up on those targets as we said we were going to last year. Capital structure, you can see here now we're deploying debt in terms of acquisitions, which is what our objective was. We're executing on that.
That spikes a little bit now up to 2.8x, we expect that to come down all other things being equal toward the end of the year.
All right. Well, thank you, Joe. That was a run through of our results for the second quarter, and we're happy to take any questions you may have on this.
Thank you. Ladies and gentlemen, we'll now begin the question and answer session. If you'd like to ask a question, please press star and one on your telephone and wait for your name to be announced. We do have a question here from the line of Kristofer Liljeberg of Carnegie. Please go ahead.
Yeah. Hi. Thank you. Good morning. I have three or four questions. First, could I ask you about the operating leverage differences between the two business areas? It seems much stronger in the healthcare services relative to diagnostic services that I thought should have a higher fixed cost. What's the reason for that? Is it just because of the even better growth in healthcare services, or are you doing some investments in diagnostic services? If you could maybe talk a little bit about that.
No, I think, Kristofer, how you should view that is that Germany, it really is on the diagnostic side. Germany is a big piece of diagnostic, as you know, although I say we're basically back normalized for the corresponding period last year, if you recall, we said this really started to hit us from May. The relative comparison last year for these six months, it's basically two out of six months, and for the quarter it's two out of three that was impacted last year around. On a relative comparison basis, we are actually still quite significantly impacted on Germany. On a run rate basis going forward, we're more or less back. I think, that's given the size of Germany in the diagnostic division, that's the largest explanation to that.
The operational leverage in healthcare services is real because we have much more square meters there. By filling all of those with more volumes, from that point of view, you will see more leverage coming through. Those would be the two reasons for that.
For the Healthcare Service, how much more volumes could you fill with in the existing?
Well, I think you've also-
-facilities?
You can't really give a good answer to that because it's no good use because it really depends on where the facility is. If you have an average utilization, it's not going to tell you very much, because if you're chock-a-block full in one city and empty in another one, the average just tells you nothing. I think the right answer to give you is that we keep expanding our facility network as we fill them, and I'm sure we're going to continue to grow our facility base next year. The fact that you see more operational leverage coming through is, and particularly you see on the EBITDAaL line in healthcare services, that's because facilities in general are more full than they were a year ago or two years back.
Also for the Healthcare Service, the membership growth, still very impressive, almost 14%, but somewhat slower than last year. Is that any first sign of a cool down of the economy as you mentioned, or is this just maybe normalization after exceptional strong growth?
No, I would say it is not, Kristofer, a first sign of slowdown. I think Joe had in his commentary price discipline, and if anything, we have always been certain to maintain price discipline. We haven't seen any slowdown. I keep mentioning that the economy is firing away on all cylinders because I think probably us, as most other people perhaps, are somewhat surprised how long this economic expansion just keeps on going. I mention it because at some state, it's going to start to weaken in Poland, although we have no signs of that happening yet. The fact that it's slightly slower this quarter, it will vary from quarter to quarter depending on how much new contracts come in, et cetera. There's nothing other than that this time around.
Okay, thanks. Then just 2 short ones. Could you comment on the profitability also in MaxCure? Then on M&A contribution, do you have a figure how much M&A in total will contribute in 2019 based on the acquisition done so far? That would be helpful. Thank you.
You want to take it, Joe?
Just the two questions there. I'll take the MaxCure one. In terms of for MaxCure, they're expanding quite well in terms of the revenue growth. We have the new hospital, which we opened in Maharashtra, and that's going well. That's still obviously not profitable. We're still in open, just less than a year. Normally it would take two years to get to a level where you've got an okay level of profitability. That's still a drag in terms of the overall numbers. We're also expanding with two cancer centers as well. Overall, profitability in terms of the net number, we're still in a position where we haven't really got anything to pick up in terms of the net line.
We're bringing on debt to fund these acquisitions. On a net basis, we're still not producing anything. EBITDA, with those investments we're doing, that's a little bit softer. We're quite happy with the development. We're quite happy with how that's going. We feel that we're creating value and development.
Yeah, I can fully understand, of course, margins are under pressure due to this expansion. For modeling purposes, if you are going to consolidate that at some point in the fourth quarter, it would be good to know what type of margin we should assume modeling this.
Yeah, you need to be somewhere in the double digits, but in the low end of the teen range, yeah.
Okay, thanks.
Thank you. Once again, ladies and gentlemen, star 1 if you have any questions. We also have a question from the line of Caroline Elvind of Danske Bank . Please go ahead.
Hi, good morning. I just have a short question on the financial expense. The financial expenses on Q2, is that a good proxy for the next coming quarters?
In terms of the lease side, yes, definitely. We'll continue to expand our facilities as we continue to invest, so that number will keep going up. As a baseline, that's the sort of same number you're going to see recurring. In terms of the cost of debt, our aim is to actually reduce that in terms of the cost of debt, and not necessarily as an absolute number. The commercial paper program we've put in place should help us in doing that. We also expect to do some more actions over the rest of this year in terms of our debt structure, to both increase maturity and reduce costs. Mr. Draghi yesterday decided to help us in that endeavor as well.
Okay, thank you.
Thank you. Once again, it is star and one for any questions. We do have a follow-up from Kristofer Liljeberg . Please go ahead.
Yeah. Just my last question about the M&A contribution, if you have that.
We have quite a bit of disclosure in the back of the report there, Kristofer, in terms of net acquisition and what that's contributed. There's full IFRS disclosures in there. I think there's quite a bit of information that will answer your questions in that.
Okay, thanks.
There are currently no further questions. Please continue.
Okay.
Is there no further questions?
All right, good. Thank you for listening in. Again, we're very happy with the second quarter and we look forward to talking to you again at the end of our third quarter. Thank you all very much. Bye.
That concludes the presentation today. Thank you for participating. You may disconnect.