Earnings Call: Q2 2018

Jul 27, 2018

Good day, and welcome to the twenty eighteen Quarter two Results Presentation Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Frederic Ragnarck. Please go ahead, sir. Hello. Good morning, everyone, and welcome to our six month interim report and the webcast presentation. I'm here with our CFO, Joe Ryan and Paula Treutiger, our IR Director. So a good quarter behind us, continuing strong growth. Revenue up just short of 14% to just above €161,000,000 So keep on the good growth pace in terms of revenue growth. And as you will see when we go through the two divisional segments, this is reflected throughout the business. Lower EBITDA this quarter lower EBITDA growth this quarter than previously, where you see adjusted EBITDA excluding the India fertility business at 7%. As we'll take you through, this downward in this quarter is due to the revisions in the KV public reimbursement system in Germany that we will expect explain to you in some detail in this call. Otherwise, everything else is growing as previously and as planned. Very good member growth on health care services. In fact, I think it's the strongest ever. This also has some knock on effects in terms of us further scaling up our facility investments across Poland to not only cater for more members, but above all, ensuring we provide them the best in class service and accessibility, which is why they choose us. So very solid growth and outlook in the core Polish employee paid business. Diagnostic service, also strong growth across major markets. Ukraine had a fantastic quarter behind us as well as Romania, significant double digit sort of 20% plus type of growth, so really, really good. We reiterate our three year EBITDA growth target, the compounding 18% to 20% growth. However, in this particular year, we revised that down due to the Diagnostic division trading slower due to the German KV revisions overall to the company to 8% to 12% for the for this particular year. However, important to reiterate that we're comfortable that we maintain our three year compounding target. Last but not least, if we look at the adjusted EBITDA excluding India on the last twelve month basis, we are up 17%, indicating the underlying trend in the business. So flipping to Page four. Strong top line growth of both divisions. So yes, we grew we continue to grow strongly across both divisions. The fee for service offering, I. E, where our customers come to us and pay out of pocket, growing over 20% versus the prior year quarter, indicating significant demand. We have commented almost in each report recently on the situation of the public contract in the Warsaw Hospital. The existing contracts, as was mentioned in our last quarter call, have been extended, and we have submitted tender offers in the tenders. And we do expect results to come back to us on that within the pretty close future. We comment here that we see no significant impact whatsoever on our results in full year 2018 as opposed to a bit more negative previously. So that sort of moves forward in quite a good direction for us. Clearly, we have pressure on margins in Germany because of these KV changes, and I can address that upfront. So we had planned and expected for a regular price cut, which we have seen many times before. That came slightly earlier than what was expected, but that's not a significant issue. In addition, there were certain referral volume measures introduced, which came unexpected to the market in general as well as to us. So referral volumes have been somewhat impacted, which is by far the vast reason behind what we have seen in the second quarter. Clearly, it's not going to go away in the third quarter, and hence, the somewhat lower expectation on Diagnostic EBITDA growth for 2018. We will talk more about this later on, what our expectations going forward in terms of the volumes. So adjusted EBITA grew by 2.2 with a margin of 8.8% in the second quarter. If we exclude the losses as we typically do relating to the start up fertility business in India, we were up 177%, sorry, to just short of €15,000,000 EBITDA for the quarter, a margin of 9.2%. If you then move on to Slide five, Healthcare Services. As I said, fantastic growth. Members, 17% up. We are clearly growing faster than our competition, which is a strong sign, and it certainly is a sign that our customers appreciate our service. EBITDA, just short of €7,000,000 8.4%. And adjusting for the India fertility business, which sits in this division, as you know, 9.3%, slight contraction from prior year driven solely by short term investing in additional medical facilities and capacity to manage this growth. So underlying, very solid, very positive outlook this business. I already made a comment in terms of the reimbursement changes in Poland will have no material impact on us in 2018. Something which is new to you, and I want to just take a minute on that. So in the last month of the quarter, we acquired a business called Okay Systems in Poland. This is an employee benefit sport fitness card business, effective where we can very synergistically to our health care offer cross sell both to our own customer base for sport and fitness and to their customer base for health care. If we look at what Polish employees are looking for in terms of employee benefits, health care is a far away number one and that's where it remains a very strong runner-up in the second place is sport and fitness memberships. So we believe this will significantly add to the attractiveness of our combined offer. For those of you who are interested, you may want to look, there's a very large competitor to this business called Benefit Systems that is many, many like 20x as large as Okay Systems. So it's and then nothing, nothing, nothing. And then we have this business and then there's pretty much nothing else in terms of corporates in this sector. Benefit Systems is listed in Warsaw, did about €225,000,000 or so revenue last year 20 times 17, plus 30% and high double digit EBITA margin. Now clearly, that business is at a very different scale than what this is, But we believe we will have significant opportunity to scale this up and to create a very complementary offer with our current healthcare services. All right. If we flip on to Slide six, Diagnostic Services. So we grew in Diagnostic Services just short of 12%, organic just short of 14%, so indeed strong. Lab test volume picked up only 4%, and that's really on the back of the lower referral volumes in Germany. And now Germany, of course, is our largest lab market as you know. So when we do see significant movements in the volumes in Germany in any particular quarter, that has a very visible knock on effect on the division wide test numbers. However, important to point out here is that while we then had a contraction in the KV paid, I. E, public paid lab volumes in Germany this particular quarter. The private pay lab volumes in Germany, which is about 40% of our German lab volume, is growing very strongly, just short of 20% year on year, which is if not remarkable, that may be a strong word, but it's a very strong growth rate in a mature German market. We kept on adding blood drawing points. So we added 24 during the second quarter. We are now just short of five fifty BDPs across our territories. The reimbursement revisions in Germany then, to articulate that a little bit more here, had sort of two components to it. That's why we call it a double cut, and that's why the effect of it has been more visible and beyond what we had expected. I made a point already. We had budgeted for and planned for a, what I call, a regular price cut. That pretty much happens, if not every, but certainly every second year. So nothing new with that. It came a bit earlier than we planned for, but that has really no material impact. In addition, was introduced a way to seek to not necessarily reduce volume of test referrals. Actually, don't think that was the intention of the regulator here, but that has been the consequence. So we see referral volume drops of anywhere from sort of 1% to 5%, 67% depending on location. And we do expect this to normalize over a certain period of time. And we're not going to volunteer a number of months over which that will happen. But clearly, as a company, we take mitigating actions to manage the short term situation, while we still expect this to return to normal referral volumes level in quite a reasonable time, I would say. It's around 15% of the Diagnostic Services revenue, which is subject to these revisions. And you see that, that's significantly lower than the overall sorry, the overall public pay component in diagnostic service. And that is because it's not all type of tests that have been subject to these price cuts. And Medicover Clinics in Germany, they keep improving. They clearly, they were also impacted by the KV adjustments, albeit to a much more limited scale due to the nature of their services, but they were held back in the quarter to some extent due to that. We have previously commented on that we had some issues with recruiting staff and doctors. That's really been improving quite a bit. So we feel good in terms of how we are able to sort of staff up the locations and get productivity going in our locations. So that's pretty good actually. Then flipping on to Slide seven, which is our India venture and So we have, in the second quarter, further increased our ownership, and we are now at just above 45% ownership. MaxCure currently operate 10 hospitals in two states, Telagana and Andhra Pradesh, where Hyderabad being the capital of Telagana, and that's where the founders of the business started and where the bulk of the business still exists or still is, sorry. So revenue for Max Qur second quarter, 14,000,000, underlying growth just short of 20%. A lot of currency effects here, as you can see, but the underlying growth 20% in Max Qur, reflecting the growth of the market. We are maintaining a good double digit EBITA margin. So this is a fast growing, nicely profitable business that we have very, very positive outlook for. On the right hand side, you see our latest addition, which is going to be hospital number 11 in the network, which is the first step into the Maharashtra state or the state of Maharashtra, which is on the Western part of India. Mumbai is in Maharashtra. So this is together with the Ashoka Group. Ashoka Group is a very well reputed. It's listed India business in infrastructure. And they have built this facility brand new, three fifty bed, highly specialized. We have staff in place now. And within the coming few weeks or maximum a month, we will start to provide services. So we're very excited over this, which is then the first step into a new large populous and fast growing state. I can also take this opportunity to comment on that the sort of growth strategy for MaxCure is Hyderabad from where it all started, which is still sort of the center of gravity for MaxCure. Hyderabad, which, by the way, some of you may have read the first IKEA shop in India that was slightly delayed. Now it's opening that's opening in Hyderabad. And it's actually just opening some sort of 300, 400, 500 meters away from our core hospital facility in Hyderabad. So that sort of gives you a bit of a Swedish connection to where we operate in Hyderabad. So Hyderabad is quite a busy hospital city. We've had some questions coming, is it right to keep expanding Max Q in Hyderabad if it's so much competition? And Hyderabad is quite a competitive city for hospital services. And this is obviously where we started, Max has started. However, most of the expansion, if not all expansion now is outside of Hyderabad down in the Andhra Pradesh city on the Eastern Coast and also really creating feeder system hospitals on the outskirts of Hyderabad to provide patient referrals into the Hyderabad infrastructure as well as then now stepping into the state of Maharashtra. So we feel very comfortable, which you obviously can tell from the way we speed up our investments into this business in terms of how management and the current majority owners are thinking about expanding and scaling the business. Then our fertility business, which, as you recall, is a start up. And now it sort of moves a little bit away from being a start up into running quite a significant network of clinics now. We are at 12 operating clinics as of a few days ago when the 12 clinics sorry, the twelfth clinic opened up. And we maintain the ambition to be at 20 or around 20 operating clinics by the end of this current year. So you recall that we operate in Delhi in the NCR region. That's where we started doing very well, growing volumes nicely. We went then into the Punjab state Northwest of NCR, where we are now up and running. And we are working on opening our first facility, which will be a hub, so a significant facility down in Hyderabad again in the state of Talagana. So that really will be the third cluster around which we will develop our hub and spoke model to grow fertility volumes in India. So overall, we're very confident and pleased with what we see in India. And with that, I hand over to Joe to talk a little bit more specifics on financials. Thank you, Frederic. So top line, very strong. So for the quarter, 161,100,000.0 versus €141,600,000 13.8% increase on the for the quarter versus last year quarter, euros 13,700,000.0 organic growth. We had something like about, for the quarter, 2,100,000 acquired revenues versus 2017 quarter and some currency effects around about GBP 2,000,000. So good strong revenue growth. In the Healthcare Services side, we had something like about 13.3% organic revenue growth. The Polish zloty year on year has been a little bit stronger in the second quarter, and that's impacted between the headline growth, 15.5. So a very good strong growth there. The members, extremely strong growth. So we put on 162,000 people, members, individuals' lives since the end of the second quarter twenty seventeen. Just to put that into a sort of Swedish context, Uppsala has a population around about 150,000. And we need to put the facilities on to be able to service those people. And one thing is putting the physical facilities on in terms of expanding them, But the more important one is then in terms of bringing the doctors to be able to service and look after those people. That is something which is really important for us in terms of being able to service those people, maintain the satisfaction levels, which drives the retention levels, which drives our longer term profit. And that has impacted in terms of the health care services, in terms of their EBITDA a little bit in this quarter as we've made sure we've been putting on the doctors and the medical staff to be able to service those people as well as the facilities. So if we look at the EBITDA level for the health care services, that was adjusted for India to make it comparable to last time around. That was some €7,500,000 revenue EBITDA profit versus 6.9%, so and a margin of 9.3 versus margin of around 9.8%. So there have been some impact in terms of the medical costs side, delivery side in terms of making sure that we can actually treat these people in the way that we expect to make sure we get retention. That will normalize over time. Not particularly worried about that. In terms of for the Diagnostic Services side, that was up a headline 11.9% in euro terms, 13.9% organic. The currency situation in Romania and Ukraine is relatively benign at the moment at the time, but there still is a small negative movement there in terms of Romania and Ukraine, and that's driving the variance there in terms of the between the organic and the headline. Volume increase, that has been a little bit subdued, and that's on the issues that Frederic talked about in Germany. Within the numbers, we also picked up our share of profits from MaxCure for the twelve months to March 31, which is the financial year in India. On an IFRS basis, their net profit after tax is around about €1,000,000 We pick up earn about $0.02 €5,000,000 and reflect that in our financial statements here for our share of their profits for the period that we've owned the business. If we come on to and just to finalize just on that point in terms of Formaxiur, they have a debt on their balance sheet, and that debt is in Indian rupees. So they're matched to their currencies. They don't have a foreign currency exposure on their balance sheet. But there is quite a spread in terms of the cost of debt in terms of Indian rupees versus dollars or euros, as you can imagine. And so that's why you get a more significant difference between their net profit and their operational profit. Just coming over on to the financials, just to make a few other points. Our effective tax rate that we're looking at for the year is 29%. We have adjusted that in terms of taking out the impact of the other income, where we recognize some of the gains in terms of the options that we have over revaluation of our options to acquire shares in MaxCure. Those are, by their nature, not taxable. They are IFRS adjustments. So there's no tax impact in respect to those. So we expect adjusted for that will be around about 29% for the year. We have done been active now in terms of getting ready to buy assets and actually buying companies. As Frederic mentioned, we bought Okay Systems in June. We haven't consolidated that into the numbers. It's just at the end of the month that, that was finalized. We own a 78.5% share of the business, so there's a minority. And we paid something between the final price will end up somewhere between EUR 7,000,000 and 8,000,000 in terms of the finalization of the price details. Given that the business had some €9,000,000 revenue for 2017, I think that's quite an okay price that we pay there. We bought some other assets. We have a small clinic in Romania, which we just finalized after the quarter in terms of signing an agreement, and that will close in September. The process in terms of regulatory approvals is going ahead and following its process in Romania. That will be for around about £23,000,000 in terms of the price for Scipital Pelican in the West Of Romania. We expect that to close, could well be September. I don't expect it to be after October. So we will consolidate those into either September and the last quarter or just for the last quarter. The Fertility business in The U. K, we exited that. There's a loss of 1,800,000 which we booked through the other income line. This has been loss making in Q2 and for the first half, about €300,000 loss for the second quarter, about €700,000 loss for the first half. That was booked into the other income cost line, which is a net profit of €3,200,000 Within that, we have a CHF 1,500,000.0 gain in respect of our real estate assets that we developed with some excess land in Warsaw. All of those apartments have been sold. We have a very nice new clinic on the Ground Floor in a great location, which we are continuing to use as a MediCover center. So we booked in a £1,500,000 gain for that process there And a net position in terms of the revaluation of the options for MaxScore net profit of £3,500,000 All of those lines together gave a net £3,200,000 costs is running a little bit higher, as you see here. We have a net GBP 1,000,000 charge. In that GBP 1,000,000 charge, we have around about $05,000,000, which is interest on bank debt. And the others are release of discounts of financial liabilities. Operating cash flow, good. Working capital, we paid down some payables balances, so that was an increase in our working capital. Tax cash paid was a little bit higher in terms of settlements for 2017 and some prepayments for 2018. Net debt, just under €40,000,000 So that's ticking up a little bit as we start our acquisition agenda and start to put some of the money that we've raised to work in from the IPO. Around £70,000,000 just over £70,000,000 gross drawn on our revolving credit facility of £200,000,000 Investing for growth on the next slide. So we've now closed seven transactions, including smaller ones: Dental, Genetics, the Klinix and now Okay Systems in Poland. Payments in total total €18,100,000 cash paid for those investments. Our two main investments in India and our greenfield fertility business that we've invested to date since the IPO, 9,300,000.0 cash in that. And our investment in cash into the MaxCure business, just short of €30000000.29100000.0 euros So we've invested just short of €40,000,000 into India since the IPO. Our investment, we continue to invest, putting our money to work in terms of growing our facilities, growing our distribution, growing our clinics, new blood drawing points, pharmacies. So for the first half, we've invested just short of €12,000,000 in growth CapEx. So this is things which are new and expanding our footprint and providing to service our growth and provide our ability to grow. And at £26,000,000 since the IPO. We will continue at that sort of pace in terms of investing. That's what we're here for in terms of raising the money to invest and put it to work to ensure we can continue to drive growth. Just coming over on to the next slide. Just here, recapping in terms of our targets against what how we've performed for the six months and for the quarter. So we're looking at 13.7% growth for the organic for quarter, 14% for the six months. As you can see, the German issue is not an issue in terms of revenues. German issue has held us back in terms of profits. So for the quarter, we have organic EBITA expansion 6.513% year to date. If you remember, on the first call, those numbers were in excess of our targets. So that's what's helping us holding us back temporarily. Our interest bearing debt, we're starting to invest a little bit of money now, so that starts to creep up, but there's still plenty of ability for us to be able to invest, and that's what we're working on. All right. So thank you, Joe. That was the slides and the information we want to take you through. So I suggest we open up for questions then. Thank you. We are going to take first a question from Nordea. Your line is open. Please go ahead. Yes, good morning. This is Hansmauller with Nordea. I have a few questions. Starting off with the impact on Diagnostics in Germany, the changes on reimbursement was that active from the first day of the quarter? Or should we see a sequential larger impact going into the third quarter? And then also in terms of the acquisition of OKSystems, should we expect that, that will be consolidated now during the third quarter? Or do you have a date when we can expect it to be consolidated? And then finally, when it comes to growth CapEx, should we expect similar levels going into the second half? Or do you expect any acceleration in growth CapEx? Thank you. Hans, that was simple to answer. So yes, yes, yes. So it was impacted from the beginning of the quarter. And OKSystem is consolidated from July. And you should expect a similar level of growth CapEx for second half of the year. Okay. Perfect. Maybe I can do a follow-up since you were so quick in answering those questions. I heard you mentioned, Joe, the structural impact on the first half and the second quarter. Could you just repeat how much M and A contribution you had in the second quarter? Yes. So for revenues, we had EUR 2,100,000.0 of our revenue came from acquisitions in the prior twelve months. And for the first half, that was EUR 3,700,000.0 of sorry, 3,900,000.0 for revenue impact in terms of acquired businesses. When we were doing the IPO, we were we slowed down in terms of doing acquisitions and M and A work. So it's taken us through to now before we actually start to actually move that agenda forward with any real more sizable acquisitions, as you can see. So pretty much most of the acquisitions we've done in the last twelve months have been on the smaller side, things that we were so the agenda starts to move now. As I said before, in the past, when we talked about this, our agenda is to invest anywhere between EUR $250,000,000, $350,000,000 over the next few years in terms of M and A and accelerated growth CapEx. So we've got our work ahead of us. Very good. Thanks so much. We're going to open next one from Jefferies, James Van Tempest. Your line is open. Please go ahead. Yes, hi. Good morning. Thanks for taking my questions. It's James Van Tempest from Jefferies. Just firstly on the IDF business, the decision to close The UK. Just wondering if that's an operational issue or a demand issue. And if you could tell us who you sold it to, that would be helpful to know. Second question, just on the guidance and the new organic EBITDA growth. If the deals do consolidate as you expect in the second half of the year, can you give us a sense what they would contribute so we can think about what a reported level would be at this stage? And then the final question, just on the Germany Diagnostics margins. Just curious if this changes your strategy in Germany from a capital allocation perspective. And I know the magnitude seems to have taken some by surprise. And how do you view the ramp from peak profitability in this segment now given those changes? All right. So I'll try and deal with one and three, and I'll leave two for Jo here then James. So in terms of The U. K, that's not it's not a market and structure issue. We actually the local partner that we had took over the business, so we basically handed it over to him, the local doctor that we work with. That was largely an operational scale issue. If you wish, we sort of failed to scale that business adequately within a reasonable period of time and didn't really see that, that would happen within a reasonable planning horizon, which warrants our time and effort. So it shouldn't be seen as a vote on the attractiveness of The U. K. Fertility market, but we could just not get the sufficient scale and operational efficiency out of that particular business. So that's how you should see it. And then number three, in terms of the if the KV revisions, were we taken by surprise? Does it change our strategy? I made the point here that we were taken somewhat by surprise as I think and nothing I'm sure the entire market was by the sort of volume inducement in productions. Now we are of the opinion, James, that that's probably going to normalize over a and I said, I don't want to put a number or a time period to it, but reasonably soon I think, because I don't think anyone has had the intention of really changing the prescription behavior of doctors just the way this has been done. That has been the consequence. So it sort of has happened before in the German market and that's returned to normal. So it's an external factor that we can't impact. So we just got to adjust to it, which we do in the short term. It does not in any way change our fundamental outlook in terms of what we want to do in Germany. I made the point that in the lab business, today, have 40% private pay. If anything, perhaps it underlines the importance of our strategy to really push private pay in Germany alongside the KB business. KB business is not bad business in any way. It's just that you're obviously subject to the regulatory authorities changing like they did now. But I think the combination of a significant private pay component, which is growing very strongly and managing the KV revenue segment is a strong combination, and that's what we intend to keep doing. And Joe, you want to comment on the middle question? Yes. James, it depends upon when the transactions obviously close and when we can consolidate the figures from. But in terms of for a beta level, I don't expect it to be lower than the 1,000,000. I expect it more probably to be about 1,000,000. Point It could be up to 2,000,000. It might if we get a bit earlier consolidation, be a bit higher than that in terms of and the beta profit level. If I could ask a quick follow-up, Fred, to your comment on IVF. I'm just curious, given the relative, say, small size of that business overall compared to your other business you have and the relative fragmentation given you have presence in many markets. Just wondering whether you see any risks in other markets where you have a smaller presence in IVF that there may be an element of retrenchment if it is kind of tough to scale in some of these individual markets. No. But I mean, if you look at where I mean, this that little business, if I should term it like that, was largely an exception to what we I mean, we went in I can't tell you exactly, I said three years of work, don't time goes so fast, but a number of years back on the ambition to really be able to scale that up quickly. Now we haven't been able to do that. Call a spade a spade and say, time ran out on us. And we basically said, this is not going to work, so just get out of it. And now if we look at the other IVF business, do Poland, we're the largest one in the market, is growing very strongly. Ukraine doing tremendously well, growing very nicely. And India, I mean, I think the Indian business is probably an educated estimate towards the end of the year, we're probably going to be out of a run rate of our group wide cycles in India of sort of 20%, 25%. So the scaling up there is going really well. So I think what you should look at The U. K. One, hopefully, has the exception to the rule that we're able to scale well where we operate. And here, we just couldn't see that, that's going to happen. And then call it a day, I guess, that's the way to put it. That's really helpful. Thank you. We are going to open next question from SEB, Richard Cox. Your line is open. Please go ahead. Yes, good morning. Could you just please on your guidance, please clarify what is the base that you use for the EBITDA figure since we're using a lot of adjusted figures? So what is based? And also, could you again say what is the adjustment that you're making? What is the organic impact of SEK1.5 billion? And also, are you excluding any other figures in there in your presentation there? You're in the slide, you're excluding the impact from the fertility clinic in India. So is that loss excluded from the guidance? Richard, so yes, yes, yes. So basically, if you recall, in our IPO and in each quarter, we've been very clear on communicating, given the size of the losses within the infertility startup that, that is exceptional to our financial targets. We rarely would have would not have a startup of magnitude. The financial targets that we set adjusted EBITDA and adjusted EBITDA as it is defined in our financial statements and adjusted EBITDA then we exclude India because it has such a significant impact. So in the same way as our financial targets are stated as being excluding the start up losses relating to Fertility India. Likewise, the revised guidance for 2018, of course, is made on a similar not a similar, on the same basis. Rich, just to go back here and recall for this. In terms of India, the asset prices we discussed this when we were doing the IPO. The asset prices were pretty high if you want to buy anything in India or in the health care sector at all. And it's much more interesting for us and to build our own where we get our own culture, we get the right procedures, right practices and the right quality levels. So versus buy something or build it, it was very much in our interest to build that. And we're excluding the India in terms of making to give you a comparative adjustment in terms of the growth. So it's not any structural thing on trying to do anything to the numbers. It's purely in terms of giving a clear comparative basis. Okay, fine. I just wanted to understand. And what is the base figure that we're using? The reported figure including a loss that we that you want to adjust for? Or what's the starting point? He asks in the base reported EBITDA, the engine losses in Q1. Think that's what Richard is asking. Yes, yes, yes, yes. In our base EBITDA, the India losses are consolidated in there. Yes, absolutely. So what is the starting figure that we should use as a base for the 8% until 20% growth guidance? Is that 44.3%? Or should we adjust that figure? In terms of for 2017? No, in terms of the starting point that you when you're talking about the three year CAGR of 18% till 20%. Right. Okay. They're now but their base there is 2016. Reported So 2017, 2018, 2019. Yes. Our reported outlook 2016 is the starting base. Okay. And then there was a €1,500,000 positive impact from M and A that you're seeing? In terms of to James' question, he asked where did we think that it was going to come out in terms of the consolidation of the acquisitions, which are coming, assuming they all close, etcetera. And I mentioned there, I don't expect it will be I'm pretty sure it will be less not less than GBP 1,000,000, probably more like GBP 1,500,000.0, depending on if we can consolidate a little bit earlier. It could be up to 2,000,000, maybe if we're lucky, a little bit higher. So if you're looking at it very much bottom range, it won't be less than GBP 1,000,000. I doubt it would be very much above GBP 2,000,000. Okay. And the gains on the options from Max Cure? Is that sort of mark to market all the time? I mean do you expect that later in the year? Or is that should that be fully If reflected you just remember the history of this, go back. And when we were doing the IPO, we disclosed this, that we had an option to that our major shareholder was investing in this, and they invested in this initially back in May 2017. We acquired that position from them at cost in beginning of the fourth quarter. Within that position in terms of what they've invested in, they've been negotiating this back in the 2017 and the 2016. And the arrangement was such that we have options to invest further. The business has performed very well over that period of time. So the mark to market value of those positions, financial derivatives has increased quite significantly. And this is then just a release and recognition of those mark to market positions. Eventually, when we consolidate as we consolidate, this will form part of our cost base in terms of our investment. So eventually, through our profits and recognition of profits, we will convert it into cash. But it's not a cash profit at the moment. So do you expect more during the rest of this year or to book more gains? Yes. We have a certain amount which is disclosed. I think we've got about three or four pages of disclosures in the release. As you could imagine, with IFRS nine, we've ordered the detailed disclosures that are needed, sensitivities, basis of valuation, inputs, da, da, da. There's an enormous amount of data in the release for to pick over. So we have an amount which is deferred, and that will be released over the rest of the year, yes. And also last question, just on the tax rate. Could you you said that there's a 29% underlying tax rate, but what do you expect to have as a sort of reported tax rate for the full year? Yes. It will be lower because with this other income, that, as I said, is not subject to taxation given the nature of it. It's an IFRS adjustment. So that will actually bring down the tax rate. You can calculate that yourself. As we had like in the quarter, we had GBP 3,500,000.0 recognized. And I think for the year to date, we have recognized just remember some we have recognized some EUR 7,200,000.0 profit for those positions. Okay. Thank you. Next question comes from the line of Geoffrey Jameson, Tepes. Your line is open. Please go ahead. Hi, it's James again. Thanks for taking my follow-up question. It's a quick clarification actually. I think you mentioned that when thinking about the impact from reimbursement cuts in Germany, it had happened before. Just curious how long at that previous point it took to normalize through the business, just to help us kind of understand how dynamics kind of may play out again this year. Yes. You're sort of pushing for that. I would say it's quite a long time ago they did that. But if I would volunteer anything, I would probably say six to twelve months, James. Is a that's a nonscientific answer, but it's the best guess I can offer you. James, just to add in respect to that, it's part of the issue is also doctor IT systems in the clinics. So the providers need to adjust their IT clinics to be able to reflect this for the doctors to be able to operate in this operate more efficiently in respect to this. And so it's a myriad of facets that come into it. So it's quite complex and difficult to be able to really give a prediction of how long it's going to take to get it sorted out and working properly. Understood. Thank you. There is no further question. All right. Okay. Well, as always, we appreciate very much that you take your time and listen to us. We are in Stockholm where it's like 32 degrees outside and probably as warm wherever you other people are. So thank you for taking the time to listen and looking forward to talking to you, if not before, so at the end of the third quarter. Thank you all very much. Bye. This concludes today's call. Thank you for your participation. You may now disconnect.