Good day, welcome to the Medicover Q1 2023 Results Presentation. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. If you have a question, please press star one one on your telephone. You will hear a message advising your hand is raised. To withdraw that question, press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Fredrik Rågmark. Please go ahead.
Thank you, and good morning, everyone, to our Q1 2023 results presentation. Our first headline slide is very high underlying growth. Important to point out, make a very specific statement here that we see from a trading point of view, COVID-19 is behind us, it's in the past. It represent around 1% of revenue this quarter, so 99% of revenue, what we do is our underlying business, and that is doing really well, very strong growth. In fact, you see underlying growth is up organically 25% year-on-year, which I think is a super strong number.
If we go back, that may be interesting also to note, if we look at the Q1 2019, which is the last Q1 of a year where we had no disturbance or awareness of what would come with COVID. Over those 4 years, we have more than doubled our business on a like for like basis. From just under EUR 200 million to over EUR 400 million this quarter. We've been compounding 20% revenue growth over those 4 years, which for sure has had a lot of negative impacts from COVID on our underlying business. I think I really wanna point out how strong that development is.
If we look at how this quarter's organic revenue growth in that underlying activity splits between the division, you see just short of 28% in Healthcare Services and just short of 19% in Diagnostic Services. Both of those are very good. You all know that we have invested much more over the past two, three years in Healthcare Services. It's quite natural to see higher organic growth in that segment. Equally important is to see how Diagnostic Services ex-COVID is coming back with revenue growth. As I will comment on, that's a good mixture of both volume growth and price and mix growth. Number 2, I think the most commonly discussed theme in our reporting through 2022 was how cost inflation impacted us with a very significant, particular salary inflation.
Given the fact that we're such a staff-intensive business, that was significantly impacting us. Likewise, we commented throughout the year that, you know, we've had good acceptance, good receptions with our price growth in our private pay markets. But, we've had this delay factor, and it would be into 2023 when this would start to be noticeable, in reported financials again. You know, particularly happy to be able to visualize that with underlying margins in the group and for both divisions, you know, rising substantially this quarter. That again is good for the quarter, but even more important, I think it is, you see how the price mitigation is coming through in reported margins.
You know, our expansion has continued in terms of opening new hospitals, and that will continue as we progress throughout the year. I write in my CEO statement that if we look at the amount of medical space we have put on, if we compare to the start of the prior year, so end of this quarter compared to first of January 2022, we've added 34% in terms of square meter medical space over those five quarters. Indeed, that is a significant amount of medical space that obviously has a short-term drag on our margins. As I will speak a bit later on, we're very happy with how we keep filling up those facilities.
Looking at some more of the specifics, so just short of EUR 420 million revenue for the quarter, up 10%, of which roughly half of that being organic. I already made the point with 25% organic growth in the underlying business, ex-COVID. We've, you know, we bring with us quite a bit of acquired revenue from last year, so EUR 33 million, a good growth in our fee-for-service business. Important as well, is just to point out for you, if we annualize the Q1 revenue, you know, we're up versus the full year 2022, already now 11%. Netting off the COVID element, we're in fact up already 19%.
Quite significant in terms of, you know, recognizing just the annualization factor where we are in the Q1. You're familiar with our two pie charts there, and again, just draw your attention perhaps to the growth factor. Poland is obviously our largest market. You've known that for a long time. Pushing through 30% revenue growth across that geography in the quarter versus last year is a significant number to be noticed. You know, you can also note the reduction in Germany, which is then obviously all driven by, you know, COVID dropping out of the German diagnostics business.
Perhaps the other thing that is worthwhile to draw your attention to, if you look at the bottom pie chart there, you see negative growth in public funding. That's all, you know, COVID related. You have 18% growth in our funded business. As I'll speak a little bit about later, we have about 8% member growth year-on-year in the quarter, which is good. You see how the price and mix element is coming through in addition to underlying member growth in that important piece of what we do, and also solid good growth in our fee-for-service side. I think we go to the margin slide. Again, important message here being the underlying margins improving.
Of course, as I initially said, you know, we overall reported financials, they are what they are, but no doubt most important for understanding where our business is today, and even more importantly, where it's heading for the rest of the year, is to understand the dynamics in the 99% underlying business. EBITDA EUR 54.3 million, down 30% since prior year and margin of 12.9%. Looking at the underlying business, it's up 129 basis points, good solid underlying margin expansion. You know, you can see that illustrated in the graph, in the bars to the right where we have given you the blue shades for the underlying and then topped up with the COVID earnings during the quarters historically here. You have also the other results measures.
Shifting on to the 2 divisions. Again, you know, phenomenal growth in Healthcare Services. You see that I think very well illustrated with the bars to the right, over a 3-year period, rising strongly pretty much every quarter, up to EUR 276 million this particular quarter, 33% up of which organic was 20.7. If, again, isolating out, we have no COVID-19 revenue whatsoever in this division in this quarter. Separating that out, we're up some 28% organic year-on-year, again, a just phenomenal number, I would say, of which about 12 percentage points is represented by price, illustrating again the point that I made throughout the prior year where customers have accepted, I think, very well, our price increases.
Most of the acquired revenue you see is coming from this division, so just over EUR 30 million sits in Healthcare Services. Obviously, given the overall growth and the strong position of fee-for-service in this division, you will see very strong growth in fee-for-service, at 36%. Continued good, you know, member growth, which we've had pretty much throughout the period. I believe we still have a factor and we will have that factor, I think, for perhaps forever, but certainly still for many years to come, where employers, I think more so after the pandemic than before, recognize the inherent value in providing the kind of healthcare benefit that we do. Demand for our services in the employer paid market, you know, remains very, very strong.
Likewise, if you look at the pie charts here, pretty much the same picture as I painted before, when we looked at the group level. Poland is up even stronger here relative to, you know, it has a higher proportion in this in this division. You know, India is growing nicely on the back of our hospital expansion. Likewise, you see how the different payer segments are developing. Overall, a quarter to be very pleased with in Healthcare Services. That is also reflected in terms of how margins are developing. EBITDA at EUR 34.2 million, up 35%. Overall, also a slight margin increase to 12.4%. Again, I don't need to remind you now, I've said that many times.
Here is particularly where we have significant drag on our margins because of the expansion, particularly so in India, but also not insignificant, for example, in Romania, where we will be opening the large new hospital here during the Q2. Again, been very well mitigated partly by, you know, the investments we did last year and acquisitions, but most importantly through, you know, price increases that we've pushed through. Now, I made a point in the report. Obviously it's one important data point that you all are, I think, studying very closely is how we are able to fill up the capacity that we put on in all of these new units.
You know, 2 units that we have mentioned in prior reporting are the 2 major large new hospitals we have opened in the state of Maharashtra in India, in Navi Mumbai and in Pune, both 300-bed plus facilities. It's very pleasing and reassuring to be able to say that both of those are expected to break even on an EBITDA level within 12 months of operation, which is significant. You know, we're very happy and pleased to say that to you as one indication in terms of how we're filling up this capacity. Shifting on to Diagnostic Services where, you know, revenue just short of EUR 150 million. Obviously a big organic reduction on the back of a big chunk of COVID revenue and testing dropping out.
We had EUR 4.6 million of COVID revenue this year. As I said, about 1% of overall group revenue, 3% of divisional revenue. 97% of revenue in Diagnostic Services relates to everything else we do. You know, there will remain some COVID testing for, you know, hospital admissions, things like that, but it's just gonna be part of the ongoing business from now on. Importantly, also to remind you this, the Q1 last year, so Q1 2022, was really the last quarter where COVID revenue and earnings had a very material impact on us. Although it certainly existed throughout the remainder of 2022, but on a comparable basis, as we progress through 2023, it will have slightly, we will have significantly lower differences in the annual comparisons.
A point already made that, you know, good, actually very good, underlying growth in the remainder, underlying business 19.5%. That is a combination of volume growth, where we if we exclude Belarus, you know, we have disposed of the Belarusian business during the quarter. Isolating for the Belarus disposal, we are volume-wise up about 9% in terms of test volume. You know, the balance is then a combination of price and mix. Also here... that's really good against the background of half of the business here being in Germany, where there's no price adjustment so far. We've had good dynamics in our private pay fee-for-service markets.
You know, we have discussed in prior quarters quite a bit around the outlook for German price or indexation. That has not happened yet. There are no visible signs on the horizon, if and when it will come. Until we know that, or have some more certainty around that, we assume that prices in Germany will remain stable. Ukraine continues to improve, as we pretty much talk about every quarter since the atrocities broke out end of February last year. I am overwhelmed with the ability of our people in Ukraine to manage the situation there. We're growing. We're profitable. It is a situation where we don't make any forecasting for the future.
It's too uncertain, but equally, I wanna emphasize how much we recognize the extraordinary ability of our people and leadership in Ukraine to handle the situation the country and our business is in. Here again, as reported profit, reported margin, obviously sharply down on the back of a very profitable COVID-19 trading quarter dropping out the prior year quarter. Looking at the underlying business ex-COVID-19, you know, a very healthy development with 24% growth in EBITDA to just north of EUR 25 million, and margin expanding more than one full percentage point. Good progress both in growth and in profitability ex-COVID-19 in this division. We have continued to invest in BD pieces, although you see on a comparable basis, it's down.
That is then due to the removal of the business in Belarus as we sold that during the quarter. That's as much as I will say now, and hand over to Joe for the financial review.
Thank you very much, Fredrik. Just looking a little bit at our some of our balance sheet items. Our debt levels in terms of cost of financing, this has increased. If we look at our lease liabilities on the top bar there on the right-hand side, the implied interest rate for lease liabilities, that's ticked up a little bit as you'd expect with our new lease liabilities coming in a higher interest rate environment. If you look at our our debt, our real commercial debt, then the rates there have also ticked up in terms of in line with the increase in base rates. Just one point to add in terms of our debt instruments.
We in the quarter launched a Swedish Social Finance Commercial Paper Program, sorry, in April. This is a first, and we're very proud to make that available to Swedish investors. To be able to manage their cash and put it into a social finance financing framework and actually doing some good as well as making some interest. Our liquidity position is good. We have a good maturity profile, and we have a large undrawn facility lines as well available for us. We look at our indebtedness levels, we've brought that down from the year end about on our net debt payables net loans payable basis. We brought that down around about SEK 20 million.
We had the sale of the business in Belarus, which generated a bit of cash and helped us to bring that down. We look at the ratio to our adjusted EBITDA LTM number. As reported, the debt ratios are up slightly from 3.2 to 3.3. If we look at that on a lender covenant basis, that's around about 3, because that takes into a case a real LTM basis, including the impact of the full impact from acquisitions. Cash flow has been quite strong. We've had good working capital movements as well. Our not operational cash flow has been around about EUR 61.4 million net inflow.
Effective tax rate, we estimate that around about 28.7%, just slightly lower than what we had in 2022. We have quite a few new startup entities and costs which are not then impacting in terms of the tax rate. We're carrying that a little bit in our tax rate. If I move on to the next slide. Our right-of-use lease liabilities, that's increased from around about EUR 5 million net. We biggest item in here is in terms of our new leases extensions. We have EUR 24.8 million increase, which about EUR 13.8 million is due to indexation. We have around about EUR 11 million, which is new facilities and extensions that we brought on in the quarter.
Our consolidated equity, this has moved up around EUR 5.2 million. We have then the profits of the period and also then we have a positive movement in other comprehensive income, primarily related to the sale and disposal in Belarus. We have continued to invest in the quarter. Although our guidance at the capital market stage was that we would be looking to invest at a lower level than we did in 2022. It's well worth noting that 2022 was very high. We have consistently invested a high level in terms of capital investments, particularly in our growth area, and that has consistently helped to drive our growth organically and our expansion.
We are certainly in investing at a level which is commensurate with keeping that growth going and also to take us through our EUR 2.2 billion target and actually through that. We have continued to invest. If I look at the total investment there, so I'm just short of EUR 30 million in the quarter. Around about a third of that has been in hospital facilities, India, Romania, Poland. I think if you read through the report there, we give a number of approximately around about probably 4 hospitals that we're gonna bring in online in India over this coming year.
Just move on in terms of our financial targets, just to give a little recap in respect to that. Our organic revenue, we're looking to exceed EUR 2.2 billion in 2025, and adjusted EBITDA organic, EUR 350 million. If I look at where our run rate is in terms of our Q1 numbers, EUR 419 million top line revenue, annualize that, we're just short of EUR 1.7 billion. We're about EUR 523 million gap to that EUR 2.2 billion target. We have 11 quarters in terms of filling that. We are very confident in terms of being able to meet these targets and continue through them. I'll hand back to you, Fredrik.
All right. Thank you, Joe. That's our commentary, and we're happy to take any questions you may have.
Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw a question, please press star one one again. Please stand by while we open up the first question. Your first question comes from Kristofer Liljeberg at Carnegie Investment Bank. Christopher, your line is open. Please go ahead.
Thank you very much. Good morning. I have three questions. First one is if you could maybe comment a little bit how you think the losses from new openings will look like coming quarters. Then I'm also interesting to hear about the sequential improvement in diagnostic margins here. Is that only a seasonal effects, or have you been able to better compensate for the higher cost versus what we saw during the autumn 2022? Finally, on investments, 30 million EUR here in the quarter. Is this a level you think will continue for the next quarter, i.e., that we will be around 120 million EUR for the full year? Thank you.
Thanks, Kristofer. Losses, we, you know, in the past, if you go back, we didn't really particularly split out the losses and focus on it because they were smaller in the absolute amounts. As we've expanded and sort of accelerated the expansion rollout, it becomes a little bit more significant. We're giving a little bit more flavor and understanding in terms of the numbers. We expect, and I think Fredrik mentioned this in his, in his commentary, that we expect to see those four units, and actually one of them already within the quarter, for one of the months has turned positive at the EBITDA level. We expect those to turn positive within the within the 12 months
before the year end. We've got new ones coming on, Kristofer. We've got new units for sure coming on. We've got, as you said, we're probably gonna have 4 new units coming in in India. We have a hospital opens now in June in Bucharest, large scale. We will continue to have that drag, I think, as we go forward. The absolute amount is a little bit difficult to say. We obviously have internal expectations of where we're gonna go. As they're new units, you know, it's quite easy for it to be plus or minus in respect to this. It's difficult to give guidance on that.
You know, you should expect a continuing lag in terms of losses as we go through this year and, you know, sequentially because that's what we're doing. We're putting out new facilities and we're starting up greenfield operations or low occupancy level units, and that creates a drag on us. That's what drives the growth. Once they're full, which we've got a long history of doing, of filling up these units, they become recurring cash flow generators. That builds as a block that we carry on. That's the beauty of our business is it's really sticky once you get the capacity to a good level. Sequential margins, was that on a division or was that?
Yeah, it was on DX.
DX.
Yeah.
Yeah. I mean, there, Kristofer, you have a as like, comment on it's good. You have a combination of excluding Belarus, you have about 9% volume impact in underlying business. Pushing more volume through our fixed infrastructure. That helps. As I mentioned, you know, the balance is the combination of price and mix of tests sold. That's been very good. That's been helpful. I think we should be very pleased with that. You had a question, Kristofer, on investments in terms of are you expecting this to be around about EUR 130 million? Not really.
As I think as we talked about at the Capital Markets Day, you should be looking around about EUR 100 million plus or minus, that sort of level. We are running at a higher level because we've got investments that we launched in 2022 programs and we're finalizing some of those. Some of it gets dragged into the next year. That's a little bit higher than where I'd expect to be at the end of the year. We slow down in terms of putting new capacity on and starting new projects. You would expect it to slow down on the second half of the year.
Still it is a level which is commensurate with what we were doing and investing back in 2021 and earlier years in terms of relative to the size of the business. It is enough for us to be able to reach those targets to 2.2 and take us through those targets to EUR 2.2 billion. It's not a shy number, it's not a low level, and it's not gonna impact our ability to deliver in any way. It's just that we've, we're going a little bit slower than we were before.
Okay, thank you. I'll get back to the queue with a follow-up on new openings. Thanks.
Thank you. Please stand by for your next question. Your next question comes from Grace Lee at Jefferies. Grace, your line is open. Please go ahead.
Thank you. I've got three questions, please. First, could I ask on pricing, you've disclosed healthcare, for example, 12.1 percentage point. Can you also disclose that for diagnostic, how much pricing contributed to that organic growth excluding COVID? Is there any sort of further pricing increases that you're expecting as we go through the rest of the year? My second question is the phasing of growth expectation from here. I think you've highlighted earlier annualizing effect, organic growth 11% based on Q1 performance. There are some expectation in terms of sort of negative impacts coming from the volume side of things as well as pricing contribution into the rest of the year. Just could you comment on the phasing of the growth? Thirdly, margin bridge. Could you comment on healthcare services?
I'm quite curious about that Q1 versus Q4, that drop in that margin. I'm just curious what was the driving factor around that? Thank you.
All right. Thank you, Grace, for asking us. You know, pricing, I made the comment on diagnostics that you basically, you know, the balance between volume growth of around 9% when you exclude Belarus and then the organic revenue growth ex-COVID, you know, that's a combination of price and mix.
you know, It varies between the different markets. You also as we write in the report, we have quite negative foreign exchange. We have, you know, raised prices in local currency quite significantly more. In euros, then, it's slightly less. I think the important thing is that you have, given the fact that 50% of revenue division has no price adjustments in this quarter for obvious reasons, and the other 50% that represents on balance, in total some 7%-8%. We're not breaking that down between what is mix and what is price.
On the phasing of the growth, I'm not sure I exactly understood your question, if that was related to the point I made with annualization of Q1 revenue, which I think it was. Joe, do you think it was? Perhaps you answer then.
No, I think I'm just guessing a little bit here in terms of your question, Grace. I think you're worried that there will be a negative impact on volume later on in the year because we've increased prices. We're not seeing that at all. We're not seeing that at all. If you look at the price increases which we put through in terms of our corporate programs, for example, that's perfectly in line with what's happening in the market with costs of labor. As a percentage of the labor costs, we're just maintaining our position in respect to that. For employers, you know, there's not really an issue or problem around this.
You know, we may see this a little bit to a certain extent with some particular customers, but we've got enough new business coming in, which is strong, as you see in the metrics. You know, we're not really concerned about that at all in any way, shape, or form. What we have got a problem, Grace, with is making sure that we can get enough people in to service the customers well that we have. In fact, if we have some customers who are not particularly interested in paying the price that they need to pay to get that service, then we're not really too worried about actually those going away.
We started that way more than a year ago in terms of being very firm on that, and that's not been a problem for us.
you have the.
I think, moving on, you had a question about the sequential margins in the Healthcare Services. Yeah, that's an interesting point. If you go back to Q4, on our bridge there in terms of where we looked on a like-for-like basis, we had a differential margin between Q4 2021 and Q4 2022 of around about 1.9%. If you look at the differential margin in Q1 now, on that bridge, we've increased by about 1.2%. We've got a difference in respect to that. If you look at that, Grace Lee, what we've got is, we've got a seasonality within the Healthcare Services side, which is not particularly unusual. We've got,
That is really what I think what you're seeing coming through in terms of that sequential view, rather than any underlying thing which is different. We had already in Q4 the indexation impact with our prepaid business, with our employer paid business. We already had a pickup in respect to that out of Poland. We've got a full quarter in respect to that for the Q1 of 2023, but we've also got this is our highest cost quarter as well. Even though our utilization levels were quite benign versus what would be what it was in 2022, we still had relatively higher costs in terms of our medical operations.
I think that's what you're seeing coming through on a sequential view rather than anything fundamental.
Okay. Thank you very much. Could I just follow up one point about pricing? Is there any sort of further pricing increases that you are assuming as we go through the rest of the year? Thank you.
Yeah. I mean, I think, although I think the inflationary pressure, relatively speaking, is lower now than it was in the prior year, but it certainly is not gone. I don't think us or anyone else, for that matter, is through with adjusting price to address underlying inflation, although the situation is much improved versus this time last year.
Just to this point, Grace, it's worth adding for participants, we are in the process of changing a little bit how we do our contracts for corporate paid business. We're moving that onto a renewal basis indexation rather than a once a year indexation at a fixed date, or at fixed dates. That will smooth out a little bit in the future over time as we move our contracts over. There won't be a sort of like one point in time where prices will jump in the year.
Great. Thank you.
Thank you. Please stand by for your next question. Your next question comes from Klas Palin at Erik Penser Bank. Klas, your line is open. Please go ahead.
Thank you so much, and hello, and thanks for taking my questions. I have two about your India business. If to start with, if you could comment further on the development on the occupancy rates in your India hospitals during the Q1. Also, you mentioned in the report that you are about to add three to five new units during 2023 and what could that mean in number of new beds?
Sure. you know, the reason Klaus for me highlighting that in my commentary is really that we make good progress in filling up. you know, that doesn't mean that you fill up everything from one quarter to another, but we are certainly on the plans that we made for the units that we are now operating. you know, very importantly, of course, the larger a unit is the more drag it has short term, but the larger the contribution is once it turns profitable. as we communicated on the Capital Markets Day, just to remind everyone, we also have a gradual shift in our Indian expansion to larger units to that way drive over time, higher contribution and margins.
Again, point I just made short term, you then have, if you wish, per unit, a slight higher drag. Relatively speaking, it becomes even more important to show that you turn them, bring them across the corner, so to speak. We're pleased with that Klaus. We're on plan. And so it's good. In terms of the three to five new units, I think you can assume, you know, one of them is a specialized cancer unit. So a repossessed unit if you wish, that we used for other purpose previously. We're turning that into a cancer unit. And we have a mother and child unit in Hyderabad, a larger general hospital in Hyderabad, and also two other potentials in that state.
I think overall, those project that we single out in the reporting today is somewhere in the sort of 600s, 500-600, possibly 700 beds they would add up to, I think.
Klaus, just to add on that as well. We do have seasonality in the Indian business, and it's a little bit the reverse of what you see in Europe, which is the winter months. January, February, part of December, these are the lower occupancy months. Our higher occupancy months are ahead of us for the rest of the year.
Much.
Thank you. Please stand by for your next question. Your next question comes from Mattias Vadsten at SEB. Mattias, your line is open. Please go ahead.
Hi, a few questions from me. Sorry if I missed it during the presentation, but if you could remind on planned openings of hospitals in 2023 and perhaps plans also for 2024, and when you expect the growth investments part of CapEx to fall to the 4% level as % of revenue. Should we expect that, you know, into next year or rather towards the second half? That's the first one.
No, I think you may have missed that, but in terms of Joe, if start from the back, you know, we will drop towards that level during the second half. I think Joe quoted a number of EUR 100 million overall. You know, you break that down into growth and maintenance. You will divide that by your assumed annual revenue for the year. You will see that that's pretty much where you will end up or slightly lower perhaps, but so that's no difference versus what we said at the Capital Markets Day. The planned openings, Mattias, you know, they are what we listed there.
You know, there's not a whole bunch of other hospitals in India that will come in addition to what we mentioned in the report today. You know, there are some things that will come through. When I say some things, there are around two units that will come into play first half of 2024. That's pretty much the visibility we have for the moment.
Just to recap four to five hospitals in India and the large new, state-of-the-art facility in Bucharest, will open in Q2.
Thanks. That's perfect. The next one, if you could share some insights on how to think about salaries through this year in terms of timing, a lot of dynamics. You grew the amount of personnel substantially last year, of course, had some churn as well, increasing salaries. You have different countries. Yeah, just some insights on how to think about it here through the year of 23.
Yeah. That's a tricky one, Mattias, because you have so many different things going on at the same time in different markets. I think I sort of referred to the answer I gave to I think it was Grace Lee that where you basically the inflationary pressure on salaries is lower now than what we had through the pressure upwards is lower. That relative upward pressure is lower now than it was through 2022. Relatively speaking, on a steady state basis, you will see less salary growth than you did last year. Then you have the expansion factor.
Obviously, if we, over time, bring down growth investments a little bit like we have discussed, the amount of new staff consequentially will also come down a little bit, but it's sort of difficult for you to model that. I think it's probably easier if you look at the, I would sort of flip it around Mattias and say, you know, what is my staff ratio cost gonna be of revenue? I think, you know, what we have been able to show here with the, you know, price growth coming through is that that sort of is not rising. I think that's a reasonable assumption going forward as well here, that we're able sort of to compensate that price, sorry, that cost inflation with price growth outside the German business as we speak today.
I think there's no surprises Mattias, in terms of what we do, which is, you know, we pass on pressures to our customers in terms of pricing. Some areas we have a problem to do that because for example, it's public pricing. That doesn't mean we don't do anything in terms of our efficiency side. We're also working in terms of the staffing levels, investing in automation and managing our intensity in terms, if you like, of for the operations. We don't stand still on the right nor the left.
Thank you very much for that helpful. Then membership, I mean, sort of continues to be strong in my opinion, at least, although falling on a year-on-year momentum in Q1 versus you had in H2 last year. My question is really, you know, what have you seen maybe March, April? I guess this is related to the price increases somewhat, and you know, how you see it for the remainder of the year and what signals you have here?
No, I think that, you know.
That would be interesting.
I think we want to send a strong signal in terms of the underlying demand and dynamics. You know, there's nothing, there's nothing we see on the horizon that would signal a softer sort of employment market or lower demand for those services. I think we made a point in last quarter's call, or I'm not sure when, but I made the point before. Now Joe touched on that earlier today, that in an environment where you know, raise prices quite aggressively because you have to, you know, some customers will not be happy. It would be completely unnatural if that was not the case. You do lose some accounts because they don't really want to stay.
In an environment where staff is the biggest challenge to service the business we have, on the one hand you can say it's never nice to lose a customer, but as long as you bring in new customers on the price levels where they need to be, that is not such a bad thing. We are certainly not concerned with the absolute member intake this quarter being slightly less than the corresponding quarter. In reality, I think it's much better, which I know you do Mattias, but also look at as on a rolling 12 months basis to, you know, you're always gonna have quarterly differences because on some accounts going in and out, et cetera. You know, there's a very solid underlying robust demand for that business.
That's fair. That's fair. In terms of Healthcare Services, appreciate if you don't do this, but if you could shed some light on occupancy in other markets like Romania, Poland, and so on, like you've done for India. I have a fair guess, but if you could speak a little bit about it.
Poland, we've had quite an okay quarter. Our main hospital in Warsaw has been is pretty much running at almost as full occupancy as you can really run at. We've got a new operating theater which opens now, so that gives us a bit more ability to put some more volume through there. The maternity business in the hospital chains in the south of Poland, they've had a reasonably decent pickup towards the end of the quarter. That's been doing fine as well in terms of occupancy. We're quite happy with that. We saw that dip last year.
I think that was part of a reaction to the Ukraine situation and end of there where people were worried what was happening and, but, that's been pretty okay for this quarter. In Romania, we have our two established hospitals, the one in Bucharest and the one in Oradea in the west, which have been quite okay as well. We've got a change year- on- year in terms of COVID business in the Oradea one. The new hospital in Cluj, that's still in a deficit situation, so we're still getting more volume in there. So that's about growing and filling up the capacity on there. We've done some more investments to make that even more attractive.
It's the premier hospital in that area, so we feel confident we can get that to the level it needs to be. We have the new hospital will open in June in Bucharest, and obviously we start with 0 occupancy on that. That will be our task for the rest of the year to get people into that. Thanks so much. Yeah, that was all from me.
Thank you. As a reminder, to ask a question, please press star one one on your telephone keypad. Please stand by for your next question. Your next question comes from Hans Boström at Trinity Delta. Hans, your line is open. Please go ahead.
Morning. Just one follow-up question on your diagnostics business. Just curious to understand the drivers of this strong margin improvement, particularly taking into account. I mean, you talked about it at some length, but you obviously have a static pricing situation in Germany and no doubt an accelerating cost base. I just wonder how much of a drag this German business actually is on the underlying margins, and how long you expect to be able to sustain this level of margin improvement from product mix, because it does seem like a very, very strong development considering rather unfavorable dynamics on the sell side relative to.
Okay. Hans, hi. Joe here. It's a lab business, so it's the marginal revenue increase in terms of that flowing through. If you look at Germany as a whole, just looking at that on its own, we've had quite okay growth in the underlying business there. Spitting out the COVID side. We've got a good marginal contribution coming through from there. We've kept our cost in terms of our staffing static year- on- year. That means that we get that then flowing through. Now, how we've kept that static in a situation where we've increased salaries over the year is in terms of the staffing levels.
As I said, we're working on the right side in terms of pricing and the left side in terms of cost. We haven't been standing still in terms of our cost development as well. We've been managing that in that environment also. We've got actually even with a static pricing environment, we've been able to manage some of the contribution from there in quite an okay way. On top of that, we have then in terms of the more fee-for-service oriented, higher growth markets such as Romania, we've got a very good contribution flow coming through in terms of the additional volumes that we've been selling.
It's not only volumes, it's also we've got a good change in terms of our mix as well. Both of those things have been contributing quite strongly in terms of that margin. If you look at the comparative bridge margin that we put in the report there, we've moved that up from 10.9 on a comparative basis to 13. We've got a 2.1% margin improvement, percentage points margin improvement. It's a good quarter because you get higher activity in Q1. On a sort of like normalized basis as you go through for reflecting the seasonality, we feel quite okay in terms of where we are on the performance versus the rest of the year, what we expect.
This level of, you know, keeping the staffing levels in check in Germany, is that something you expect to be able to sustain then on a two, three-year view? Or is this really a very favorable situation you are in the beginning of this year in that regard?
No, that's our outlook and that's our plan. If you look back or if we look back in over the last 18 months or so, we've been also doing automation investments, and we are continuing to do that as well. Our aim is in terms of dealing with part of the cost pressure is also then in terms of dealing with our cost structure. That's how we are dealing in terms of that. We work both in terms of the pricing and the volumes that we get, but we also work in terms of the efficiency and effectiveness of how we use our staff and facilities.
Thank you. There are currently no further questions.
We have one more question in the chat. As I remember from previous calls, you have ability to increase prices by inflation to corporate clients in October and February. Did you use CPI indexation in February 2023?
Thank you, David. We have, historically, we've invested in, two points in October and February. The majority of the indexation was in October. The February indexation was a relatively small part of the total portfolio. As I mentioned, what we have done is we are moving our client base, and we haven't done that for all of them yet, but we're moving them to, move the indexation to the, anniversary of when they, when the contract had originally come. We're gonna move away from this October and February, indexation.
All right. I think that was all the questions. Thank you for listening, and goodbye.
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