Hello, everyone. This is Ahmed Moataz from EFG-Hermes, and welcome to Care's Q2 of 2025 results conference call. I'm pleased to be joined with Dr. Abdulaziz Al Obaid, Chief Executive Officer, Jahanzeb Ahmed Khan, Chief Financial Officer, Syed Mohammad Naseer, Chief Strategy Officer, and Alia Balbaa, Head of Investor Relations. We'll start with a brief presentation on recent results and developments, and then we'll open the floor for Q&A. Alia, please go ahead.
Thank you, Ahmed. Good afternoon, everyone, thank you for joining us today. We are pleased to report Care's first half results, which saw a continuation of the positive momentum established at the start of the year. During the first half of the year, we reported a growth of 32% in revenues as well as 10% increase in net profits year-over-year. During this call, we'll go through our first half performance in more details and provide updates on our strategic progress. We will start today with an overview of our performance and strategic direction by Dr. Abdulaziz. Mr. Jahanz eb Khan will take you through a detailed breakdown of our financials for the six months period. Finally, we will open the floor for a Q&A session to address any question you may have. With that, I'll hand over to Dr. Abdulaziz to begin the presentation.
Dr. Abdulaziz, over to you.
Thank you, Alia, and good afternoon, everyone. Thank you for joining our call. The first half of 2025 has been a period of remarkable growth for Care Medical. The company has delivered strong performance across all key financial and operational metrics. Operationally, we saw a 40% year-on-year increase in total patient count to 460,000, more than 460,000, where you can see it in the middle of the top graph. That was driven by both a rise in outpatient visits and higher inpatient admission. Year-on-year growth of in the inpatient volumes is primarily linked to the seamless integration of Al Salam Hospital and consistent growth recorded at our legacy hospitals at Rawabi and Al Malaz branches.
Similarly, inpatient admissions grew significantly in the first half of the year, and that was supported by similar factors. It is worth mentioning that the continued growth of more established facilities has been partially driven by increased contribution from our three-year contract with Prince Sultan Military Medical City. The operational expansion reflected positively on our financial performance with revenue growing 32% year-on-year. Further down the income statement, we saw EBITDA expanding by an impressive 36% year-on-year, and net profit climbing 10% year-on-year, reaching SAR 165 million, as you can see in the graphs in the lower side of the screen.
It is important to note that the last year's bottom line figures had been partially boosted by a one-year of SAR 29 million Zakat provision reversal following the finalization of prior years assessment by ZATCA. Looking ahead, our strategic focus remains centered around expanding our business, diversifying revenue streams, and further improving efficiency. Now I'll take you at the strategic initiatives supporting these goals before diving into the financial details. The consistent growth was delivered as a direct result of our focused strategy, which is built on key pillars: new services, expansion, efficiency improvement, and digital automation. Over the last year, we have taken notable strides on all four pillars with our efforts and investments already translating to improved performance and returns.
In terms of new services, our recently launched Reliv mental health center provides specialized mental health services for wellness focused clients, supported by growth in our cash segment and diversified our offering. On the expansion front, the integration of Al Salam Hospital is exceeding expectations, with the facility achieving key operational and financial milestones well ahead of schedule. The development of the 400-bed greenfield hospital in Al Narjis in Riyadh is also proceeding as planned with construction underway for a phased launch in Q1 of 2028. Internally, we continue to prioritize operational efficiency and digital automation, currently, we're integrating our ERP system to unlock greater economies of scale and aligning with the MOH standards to accelerate our transformation.
These initiatives making Care a more streamlined and efficient organization, and I want to thank the entire team at Care for their commitment to this process. With that, I'll hand it over to Jahan, our Chief Financial Officer, to walk you through the operating and financial performance.
Thank you, Dr. Abdulaziz, and good afternoon, everyone. I appreciate you joining us today.
We have achieved solid operational growth in the first half of the year, driven by healthy organic expansion at our legacy facilities, combined with the successful integration of Al Salam Hospital. As you can see on the slide, we served over 460,000 patients in the first six months of 2025, marking a strong 40% increase from the same period last year. The growth was supported by a 40% rise in outpatient visits. Al Salam Hospital contributed nearly 83,000 visits, while our Rawabi and Malaz branches recorded growing outpatient volumes as well in the first half. Similarly, inpatient admissions rose by 47% to over 14,000, driven by Al Salam Hospital's contribution, as well as considerable inpatient volume increases at the Rawabi and Malaz facilities.
In line with increasing admissions, surgical procedures also saw a significant increase in the first half of 2025, growing 44% year-on-year to 12,000 procedures. Al Salam Hospital accounted for 18% of the total surgeries performed during the period. A key highlight of our strategy execution is the substantial increase in our bed occupancy rate, which rose to around 81% in the first half from 61% this time last year. This remarkable increase, which comes despite the significant 16% expansion of our overall capacity versus last year, is underpinned by two key drivers. Our proactive efforts to diversify our patient mix and increasing volumes leveraging the recently signed Prince Sultan contract. Our ongoing operational enhancements and our diverse service offerings are fundamental to our growth strategy.
They make us a more compelling choice for major players like GOSI, MOH, and insurance providers, which is key to capturing more referrals and successfully navigating the changing healthcare market. Let's now move to the financial trends for the period. Care delivered a robust financial performance in the first half of the year, with revenue rising 32% year-on-year to SAR 783 million. While total cost of revenue increased versus the comparable period of 2024, company-wide efficiency measures resulted in a 33% year-on-year increase in gross profit to SAR 290 million with an expanded margin of 37%.
Further down the income statement, we saw operating expenses increase by 34% year-on-year, predominantly driven by a 40% year-on-year rise in SG&A outlays related to the newly acquired assets, as well as ongoing efforts to strengthen the company's head office team. However, improved gross profitability filtered through to our EBITDA, which expanded 36% year-on-year to SAR 233 million, yielding an improved margin of 29.8%. Net profit in the first half of the year increased by 10% year-on-year to SAR 165 million with an associated net profit margin of 21%. It is important to note that last year's figures include a one-off SAR 29 million reversal for Zakat provisions following the finalization of prior years' assessments by ZATCA.
Adjusting for this reversal, the normalized net profit for the first half of the year shows robust underlying growth of around 36% year-on-year. Let's take a closer look at our revenue and cost breakdown. Our top-line expansion in the first half of 2025 was fueled by several factors. Increased revenue from GOSI referrals, contributions from Al Salam Hospital acquisition, and the continued ramp-up of our contract with Prince Sultan. At the cash paying segment, targeted initiatives strategically introduced throughout 2024 propelled an impressive 34% year-on-year rise in revenue. The insurance segment also contributed positively, recording double-digit growth during the period, fueled by higher patient visits and improved insurance policy uptake.
In terms of revenue by hospital, the Rawabi facility remains the primary revenue contributor currently, accounting for 45% of total revenue, followed by Malaz at 39% and Al Salam at 8%. Let's take a closer look at our costs. Our total expenses grew 31% year-on-year to record SAR 601 million. Cost of revenues made up 82% of this figure, while operating expenses accounted for the remaining 18%. During the period, we saw our cost of revenue rise 31% year-on-year, mainly due to two factors. Higher salary expenses as we acquired new facilities and increased spending on medicines and consumables as our surgery volumes continue to rise. At almost 62%, salaries and benefits constitute the biggest component of our cost of revenue, followed by supply chain costs at 27.4%.
Similarly, our operating expenses rose by 34% year-on-year. As previously mentioned, this was largely driven by higher G&A expenses, for the most part related to the integration of our recently added Al Salam Health Medical Hospital. Let's turn now to our balance sheet and cash conversion cycles. As of the end of the Q2 of 2025, Care's balance sheet remains solid, with total assets reaching SAR 2.5 billion, a 1% rise year to date. In the six-month period, current assets increased as higher cash and cash equivalents outweighed the decline in trade receivables and term deposits. Liabilities declined by 5% year to date to SAR 832 million, mainly due to a 5% decrease in non-current liabilities, driven by payments against lease liabilities and long-term loans.
Current liabilities also decreased by 4% on a year-to-date basis due to lower Zakat provision balances. Days sales outstanding improved by 5% year-to-date, standing at 145 days in Q2. This was balanced by a reduction in days payable outstanding to 96 days. Meanwhile, inventory turnover period shortened to 75 days. Overall, the cash conversion cycle remained stable at 124 days. Net debt stands at SAR 23 million, down 70% from Care's net debt as at year-end. I will now quickly discuss our receivables management in the first half of the year before moving on to cash flow dynamics. Trade receivables grew by 16% from the end of 2024, a figure consistent with our top-line growth. This growth is mainly the result of higher balances from insurance providers and the MOH and associated government bodies.
The receivables portfolio is balanced across our various payer segments and aging profile. We are effectively managing the aging of our receivables and remain focused on maintaining an efficient collection process. In terms of cash flow highlights, we saw a marked improvement in cash flow from operations in the first half of the year, which was bolstered by strong earnings and notable decrease in payments for Zakat, finance income and end-of-service benefits. Net cash flow from operations totaled SAR 80 million for the six-month period, a significant turnaround from the negative SAR 17 million recorded last year. While working capital changes remain largely stable at SAR 145 million, the company's improved operational performance contributed positively to its liquidity. CapEx spend amounted to around SAR 48 million during the first half of the year, related for the most part to building and leasehold improvements as well as medical equipment.
These investments were more than offset by SAR 300 million returned in time deposit during the first half. Net cash outflow from financing activities recorded SAR 122 million related to payments on loans and lease liabilities. As a result of these factors, National Medical Care Company saw a net increase in cash and cash equivalent of SAR 213 million in the first half. As of June 30th, the company's cash reserves stood at SAR 477 million, positioning National Medical Care Company well for continued operational and strategic expansion initiatives. This wraps up our presentation, and we are now happy to take any questions you may have.
Thank you very much. We'll open the floor for Q&A. If you wish to ask questions, either send them through the chat or you can use raise hand function. We'll start with questions from the line of Mishaal from SNB. Please unmute yourself and go ahead.
Salaam-Alaikum. Thank you, gentlemen, for the presentation, and good afternoon. Couple of questions from my end. First on the cost profile this quarter, and I'm here comparing the figures in the Q2 versus first quarter this year. I have adjusted the reverses we had in ECL in Q1, and I can see that EBIT margin was pressured in the Q2 when I compare it to the first quarter, even though that we have growth in sales. Salam is doing much better. Can you elaborate here? Did we see any increase in SG&A for Salam specifically this quarter? 'Cause as per my understanding, and we don't have much of ramp-up as of now. If you can give me a color on SG&A in the Q2 compared to the first quarter this year.
You used to report details on Salam, so if you can give me like a number of patients we saw either in the first half or the Q2. Do we expect any CapEx to for Salam to, in order to renovate the facility? I have another question, but we'll do it later.
I'll answer the SG&A first. SG&A is a very fluid expense for us. As you know, there are a number of initiatives that we are undertaking, and there are a number of avenues that we continue to explore in terms of strategic growth. Implementing our strategy. We do engage with consultants and advisors on a regular basis. That keeps the SG&A quite variable quarter on quarter. What I can assure you is that this is not driven by Al Salam. Al Salam has a very stable G&A as of now. Regarding your other questions on Al Salam's disclosure that we used to do before and not now, Dr. Abdulaziz will take that.
Thank you, Mishaal. Salam, we wanted to give some disclosure at the beginning just to make sure that people appreciate what was happening there because there was some skepticism around the performance and the impact on our overall performance. Going forward, as we don't disclose every unit specifically, and we will not continue to disclose Al Salam consistently. Keep in mind that what happened in quarter one is a reflection of the overall improvement. Yet, there are lots of initiatives that, inshallah, we think will improve the performance further down. The CapEx, yes, we're spending on Salam. It's not a major expenditure.
We're improving the outpatient pharmacy, the clinics, the layout of some of the rooms, the reception, introducing some digital solutions as well there, and the ICU beds renovation. There is CapEx expenditure, and will further improve the performance, but it's not a major CapEx expenditure.
Thank you. Thank you, Victor, and Alas. Maybe just one last question on the receivables. Did we notice any delays from MOH this quarter? I've seen the trend in other players. Is the seasonality being good? Well, I didn't notice anything out of nature from MOH.
Nothing in particular. It was the summer months. People were on vacation. However, it's just a timing issue. As of now, what I know, there are significant payments from Ministry of Health and Prince Sultan that have been forwarded this week to Ministry of Finance for payments to Care. It's just a timing issue for us. We have not experienced any significant delays.
Perfect. Thank you.
You're welcome.
Thank you. We'll take questions from the line of Margarita. Please go, unmute yourself and go ahead.
hi. Am I audible?
Yes. Yes, you are now. Go ahead.
Perfect. Thank you. Thank you for taking my question. Congrats on another great quarter. My key question is around Jiwar. I was wondering what happened there. We saw a steep decline in patient volumes quarter-on-quarter and year-on-year. Are you seeing any structural changes in the market? Is there a decline in pilgrims or maybe something else has happened there?
There isn't any decline in the pilgrims. However, there are the insurance for the pilgrims and the Umrah performance is under continuous revision by the Minister of Hajj. There are many stakeholders. There's the Minister of Hajj, the Minister of Health, as well as the insurance companies. Back and forth discussions among all the parties. We've seen an impact from that. However, we got a license to operate 20 intensive care unit beds, as an inpatient rather than a critical care emergency room only. That should have an uplift on the performance. We should expect better performance in the months coming.
Okay. Overall, I remember we were extremely bullish about Makkah, back in the day. How would you estimate Makkah contributing to the top line of Care, let's say in the next maybe five years or so?
Look, I think we were bullish on Makkah as a strategic entry into the western province because that allowed us to actually engage with our stakeholders in the west where we had never been before. Because being in the Haram means you are in a much more prominent place. As far as the financials are concerned, I think we have been very upfront since day one that this center, while ultimately it will be profitable and in percentage terms will be accretive to our EBITDA profile. In the overall legacy business context of pure volume and size of the revenue and absolute profitability, it will be in single digits. It would not be a sizable contributor. The reason for going there was much more strategic as I just explained.
Right. Understood. Thank you.
We'll take questions from the line of Jonathan Milan from Mohaj. Please unmute yourself and go ahead.
Hi, can you hear me?
Perfect. Yes.
Perfect. Thank you. Thank you, and congratulations on another fantastic set of results. I just have a couple of questions from my end. When is you gonna renegotiate, I think, with insurers end of this year or early next year? Do you expect to be able to pass a price increase? Looking at the current occupancy around 80%, do you feel that you might have a bit of a ceiling on revenue growth because your hospitals are going to be fully utilized, Salam fully turned around, and that you can maybe struggle to grow revenues until the next acquisition or until northern Riyadh is open? Or do you see room for better efficiency, like lower average length of stay? I mean, how do you think about it this way?
How do you think about price increases specifically with insurance over the next few months? That's the first question.
As far as insurance contracts go, yes, major contracts are coming up for renewal end of this year and mid of next year, and we are negotiating on price increases with them. I can't disclose the specific targets that we have, but yeah, we are moving towards a price increase. As far as your second question goes.
What was it?
Occupancy.
Okay, occupancy. Occupancy at 81%.
Occupancy, yeah.
I'm guessing without the long-term care it's lower.
I understand your point that if the hospitals are already 80% occupied, where is the growth going to come from? You have to understand the Prince Sultan contract is a temporary fill-in contract for us. We have the beds. We are utilizing that contract to fill those beds and absorb our fixed costs. As the business grows with GOSI, MOH, and insurance, we have a three-year time period to gradually phase out Prince Sultan. At the next renewal, we may not go for the contract. We may not renew it and perhaps seek a smaller contract so that we can phase out these long-term care patients and replace them with our other more margin accretive contracts. That's where the growth is going to come from.
Okay. One last question. Regarding M&A, what are your thoughts now on potential M&A? Do you have a timeline, say, by a certain number of time, if we don't find the appropriate acquisition, we're just gonna continue growing maybe organically and reduce some of the overhead that's brought about by the consultants?
Yeah. Jonathan, on the M&A side of things, keep in mind that again, yeah, there is overhead, but the thing is the overhead is not ongoing, right? The consultants are actually engaged when we get into a discussion on an M&A deal that, you know, the other party has expressed interest in selling, and we have expressed an interest in buying, and now we are just going through the process of an offer, NDA or so on and so forth. Outside of that particular scenario, there is no overhead that is incurred. The overhead when we talk about consultants, keep in mind that the piece of work that's happening is not just on M&A. There is a piece of. Someone probably needs to go on mute.
There is also a piece of work that's also happening on the organic growth opportunities. For example, when we went into mental health and we went into other areas, we engaged consultants to help us scope out the market. There is where also that overhead is going. Now, M&A by its nature, onto the second part of your question, M&A by nature is something that you do active scanning for. How and when an opportunity materializes and how you proceed with that is again, time dependent. I don't think there will be a scenario where we will say, "You know what? We are not really finding anything.
Let's just proceed with the organic side of the opportunities, because keep in mind, we are proceeding with the organic side of the opportunities regardless. We are looking at all of those opportunities. In fact, it's the other way around. When M&A comes, we take a look at it and say, "Okay, this is something else that we can potentially pursue." It's not an either/or situation is what I'm trying to say.
Okay. Perfect. This is very helpful. All right. Thank you.
Right. We'll move on to questions from the line of Madhu from Rajhi Capital. Please unmute yourself and go ahead. Madhu, you need to unmute. Let me send the request again. I've sent one. You need to unmute from your own application.
Hello. Can you hear me?
Yes. Yes, we can now. Go ahead, please.
Thank you, Ahmed, for the opportunity. My question is follow-up to what Jonathan was asking about the growth going forward. Let's take a scenario where, you know, given that Prince Sultan you have contract for next three years. In such a situation, what would be the catalyst that will help you in growing from the existing assets in addition to your plans to increase pricing for insurance patients? Could you list like one or two or let's say three catalysts that will help to maintain a decent growth rate going forward? That is one. Second, is it possible for you to quantify the revenues from Prince Sultan in H1 2025?
No. To start with the second question, no, it's a fixed contract, so it depends on the number of the patients. It's 250 patients, and we have now 200 patients, so we're willing to accept at least 50 more based on their needs. The price is fixed. Now, what we're going to do with the contract when it terminates, like the National Guard contract, and we develop opportunities with GOSI, MOH to increase our referral base. We had more acute patients. That's why when we lost the National Guard contract or we decided not to continue with the lower prices, that didn't affect the revenue or performance overall. Same thing for Prince Sultan.
We will reevaluate in a couple of years, before it ends, whether we will continue, and if we decide to continue, are we gonna continue with the same prices, or we may ask for an increase. If they decide to lower the prices, we may just walk away. Keep in mind that opportunities do arise in the market, so it's not unique for Prince Sultan. You have National Guard as well, the Ministry of Interior, the Security Forces, et cetera. We evaluate these opportunities based on the prices, the overall capability of the existing facilities to handle these patients.
Okay. Okay. Just as a follow-up on Prince Sultan, you mentioned 200 patients you have admitted, and your contract is for 250 in a single year. Is that correct?
250 patients at any given point in time.
At any given point of time. That, does that mean that the revenue budgeted, if I assume the value of the contract is SAR 380 on an annual basis, somewhere around SAR 120 million. Are you making somewhere around SAR 100 million if I assume 200 patients are admitted? Is that a fair assumption on an annual-
It depends on the. Because the patients keep discharging and readmitting, there's a time gap. You have to take average patients to see how much revenue you would have earned. It's a fair estimate to, you know, take a call on, let's say, throughout the first half, 180 patients were there.
Yeah. Just splitting the value of the contract in three years will give you a rough estimate. Keep in mind that we do offer other services for these patients. Let's say a patient is admitted, and he needed an extra procedure. We would build that separately, but as part of the contract.
Okay, clear. Another question I have is on cost. We have noticed that your OpEx spiked in quarter four. This trend, you know, for last two years, you attribute this to consultant fees. Can we see similar thing happening this year as well, wherein first three quarters the OpEx remains broadly same, and then in quarter four there is a spike?
There is no trend behind it, Madhu. It's more of an opportunity. I think Naseer can elaborate further. There is no specific trend that Q4 always sees a spike.
Yeah. One of the potential reasons is keep in mind our internal planning cycle.
Right.
Outside of the budget, we usually update our business plan around Q4 time. When we are going into a business plan update, which is usually a forward-looking five-year plan, prior to that business plan, there are a lot of questions that we want to be addressed in the plan to ensure that it is current. When that generally happens, at times we do engage external parties to help us answer some key questions. There is a nominal spike as far as overheads is concerned in Q4. The quantum and nature of that varies, but you cannot isolate it just on this one basis because as Jas mentioned, there are some opportunistic deals that are also happening in the background and consultants' fees become due.
If keeping everything the same there, Q4 overhead should always be slightly higher because of this business plan cycle. The quantum of that you cannot compare year between year because of the opportunistic aspects, as Jas and I have just explained.
Clear. Thank you. Thank you. Yeah. That's all from me.
Thank you very much. I'll just ask one question in the chat, and then I'll go back to the raise hand function. Naif is asking, do you refer patients from your existing hospitals to Salam or the growth more or less is happening or just organically from Salam itself?
No, we don't refer patients because, mind you, it's a different insurance class. Salam covers Class C insurance, while our hospitals are B plus. We don't refer patients. However, Prince Sultan contract covers the Salam as well. They have five patients, I think five or six patients, at any given point of in time. Basically, these are patients who prefer to be in Salam because of family location, et cetera.
Understood. We'll go back to the raise hand function. We'll take questions from the line of Hikmat from Lazard. Please unmute yourself and go ahead.
Hello, am I audible?
Yes, you are.
Okay. Thank you, AJ, for hosting. Thank you, management, for the presentation. I have two questions from my side. First one is regarding the pricing of GOSI patient. Is there any color on that? What is the likelihood of returning back to a former contract agreement? That's my first question. The second question is on the Al Narjis Hospital and the CapEx associated. If you can provide some color on how much has been already spent, when is it expected to open, and the remaining CapEx for that would be very helpful. If you can provide some color on the class or grade of the facility. Is it a Class A/VIP? Any color on some of those would be helpful. Thank you.
You're welcome. To cover your first point, regarding?
GOSI.
GOSI, yeah. There is no news on the contract. There are no discussions on it. We are not pursuing that subject anymore because they continue to refer patients to us. We've seen tremendous growth in GOSI patients over the past few years, even this first half of the year as well. They continue to pay as well as per the old contract. We don't have any indications of changes in pricing as of the half year. Now, your second question was around Al Narjis Hospital. The Al Narjis Hospital, the construction is ongoing. We have not disclosed the amount that we have spent up till now. It's not significant. We have announced the appointment of the contractor to construct the gray structure.
On an overall basis, the CapEx for the full facility, phase one and phase two, is expected to be around SAR 3.5 million per bed. It is a 400-bed facility times SAR 3.5 million.
Okay.
As far as your question around which insurance segment it will be catering to, the plan currently is that it will cater to premium customers, that is Class A and VIP. We may choose to go for VIP alone, but that's a conversation we don't have to think about right now. It's definitely going to be premium.
Okay. Is it expected to be opened in 2028, or has that been revised?
No, that is still the target, that the first phase should be operational in 2028.
Okay. Just to follow up on GOSI, it's making the same prices as before. Roughly more or less the same margins that we witnessed before. There's no change on that?
Correct.
Okay. Thank you.
All right.
Thank you very much.
All right.
Right. We'll take questions from the line of Ibrahim from Jazira. Please unmute yourself and go ahead.
Yeah, hi. Thank you for your time and the presentation. I've got two questions. The first one is about, well, impairments. I saw that the earnings release was crediting the spike in impairments to the increase in revenue. As a share of revenue it is still quite heightened from your normal. I suppose my question is, can we expect to see less provisions for impairments in the next quarters for the remainder of the year? My second question similarly also asks on gross profit margins, considering the price increases and everything going on. Is it fair to expect, you know, similar levels of 37% or higher for the remainder of the year on gross profit margins?
Yes. The ECL, it does tend to rise in Q2 because of summer vacations and not much traction coming from settlements. Yeah, Q3, Q4 generally does see reverses as and when we settle the periods with insurance companies. We are also, as management expect, some reverses coming in in Q3 and Q4. Yeah. What was your second question? Sorry.
Gross-
GP margin. Yeah.
Yeah.
Yes. We are expecting the GOSI business to keep increasing considering all the infrastructure investments that are happening in Riyadh. With the Expo coming up, with the football World Cup, GOSI business is going to increase. We've already seen its share of revenue reach 37%. A GP margin of 37% and above can be reasonably expected in the near future.
All right. All right. Thank you. If I can squeeze in one more question. You know, since we spoke about price increases, do you sort of have a, you know, a range in mind of what you expect, you know, where you expect price increases, where you expect to land on with negotiations?
We're not disclosing that because we're still discussing with our partners. We don't want to show our hand now, do we?
Sure. All right. I understand. All right. Thank you very much.
You're welcome.
Thank you. We'll move on to questions from the line of Ahmed Desaky from SICO. Please unmute yourself and go ahead.
Hello. Am I audible?
Yep.
Hi. Congrats on the great results. I just have a couple of questions from my end. My first question is about your strategy update. When are you planning to provide a strategy update? I have one more question about Salam. It's basically about the margins. Given, you know, the recent ramp-up in the Salam Hospital, possibly the hospital maturing, how are the margins there compared to the legacy hospitals? Just one more question about the Reliv facility. What are the long-term plan with the Reliv mental health facility? Do you expect to expand the facility given the ramp-up and high utilization? That's from my end.
Okay. I'll take question one and three, and then Jas can speak to the margins in Salam. Look, the strategy, we are currently contemplating a strategy refresh, and what we are targeting is to have this done within, let's say, the last quarter of the year. Based on the outcome, we will communicate to the market appropriately early next year. The Reliv facility is one of the key questions that we would like to address in this strategy refresh in terms of the way forward and how do we want to approach this relatively new market. That's going to be part of it. Jas, on the floor.
For Salam margins, although we have not disclosed the margins for this half, what I can tell you that definitely it's not similar to our legacy facilities because they operate in a higher network than compared to Al Salam. Now, Al Salam margins are lower than what we want them to be, primarily because of the legacy contracts that we are dealing with. What management is doing that we have a target to revise our prices to bring them as at market standard so that we can improve the margins. We want to work on our rejections as well, because the previous rejections were quite high, and we continue to provide based on historical trends.
However, we do believe that given our experience and our relationship with the insurance companies, we can get those rejections provisions to significantly lower than where they currently are. We do expect improvements there as well.
Okay, thank you.
Basically the insurance prices revision will also be applicable to Al Salam as well, right?
Yes. I mean, they are separate contracts. They are subject to separate discussions because both Al Salam and our legacy facilities operate in different networks, so we can't have single pricing for both. It's a separate discussion and separate timing as well because the contract dates are not aligned.
Okay. Thank you very much.
You're welcome.
Thank you. We'll take questions from the line of Shiro. Please unmute yourself and go ahead.
Hi, this is Shiro Ghosh. Two very quick questions. The first one is the new services, the home care, Reliv, all these things. What is the kind of revenue contribution you foresee? I mean, we just want to get a sense. Will it be very small, like 2%-3% of your revenue or 10%-15%? How big or how small it is? Just a ballpark would give us some kind of sense to build in our model. That's my first question. Second one, I'm just new to the sector, so just wanted to understand about, in the past you have said that you are working to get the license of license in the in the western region to cater to the Mecca patients.
If you can just please remind us, what exactly is and what is the status currently?
As far as home care and ancillary services like executive health check and all, those are single-digit revenue contributor. They're more of, you can say relationship building and patient satisfaction and patient loyalty rather than significant revenue generating segments. When it comes to Reliv, that and mental health, that is something that has the potential to contribute significantly to the top line. Now, as far as the license question goes, we already have a license to operate in Mecca. What we did was that, we upgraded our license from a critical care unit to a hospital, and we've already done that.
The reason was that we wanted the ability to admit the patient under in our ICU beds for observation, for generic treatment, rather than just treating them within the four-hour time period that is average for any emergency room and then transferring them to another facility. This enables us to generate more revenue per patient as opposed in the past.
Okay. That's all from my side. Thank you very much.
You're welcome.
Thank you. We'll move on to questions from Abdullah Alshamsan. Please unmute yourself and go ahead.
Hello, am I audible?
Yes, you are.
Yes, you are.
Okay. Thank you for taking my question and congrats on the strong set of results. Two question from my end. First, the company has an overall growth in the outpatient services on a quarter-over-quarter basis. However, the revenue from outpatient has dropped around 30% quarter-over-quarter. Secondly, could you please elaborate more on Al Salam facility, where the growth is coming from? Is it volume-based, price adjustment? What are the things that you did in order to drive the growth? Is it possible or do you refer GOSI patient to Al Salam facility? That's all, thank you.
Thank you. I'll take Al Salam Hospital. We had multiple initiatives to improve the Al Salam performance. The occupancy rate was around 50%, now it's around 80%, steady most of the time. The number of surgeries have increased because we recruited more qualified surgeons. Some of our surgeons do operate there on a part-time basis. The acceptance from the Ministry of Health has improved significantly since we took over the hospital. They had issues before, it's not there anymore. GOSI, yes, they do have some GOSI patients just like any other facility, we don't transfer GOSI patients from our legacy hospital to there just because we want to boost up the performance. Mind you, the occupancy rate is already healthy at 80%.
It's driven mostly by increase in number of patients. The prices haven't been adjusted or revised yet with the insurance companies, but that's coming up [Foreign language]. Regarding your question on outpatient revenue, I don't believe that's the case. I, we can take this offline. I would appreciate if you can send an email to our Investor Relations address, and we'll answer you directly over there, yeah? Is that okay?
Yeah. That's okay. No problem.
Thank you.
Thank you.
Okay, final reminder to everyone, if you have questions, please either use the raise hand function, or you can send them in the chat. At this moment, we haven't received anything further. Alam Rashid from Jadwa is asking, "You mentioned in the past your intention to collaborate with international players for Narjis. Any developments on this front?
Yes, it remains on our platform. We've already engaged with some of them. We just want to make sure that when we engage with any international partner, it's not gonna be just a name that we put the name on the billboard outside and say we're working with Mayo Clinic, for example. It's not Mayo Clinic, but a true partnership. Keep in mind that we still have at least a couple of years, so we're evaluating all the potential partners. It's something that we would like to have to have that added value that will differentiate our hospital.
Understood. One question in the chat from Jonathan: If you get paid by the MOH in the third quarter, will you be able to reverse some of the bad debt provision?
The, we don't book any ECL provision against government clients, including Ministry of Health, because we already take rejection provisions against them. We don't believe that they have, they don't have the ability to pay as a government entity, so no bad debt provision is taken against Ministry of Health.
Sure. Someone is asking if you can share the payer mix for Salam Hospital.
Payer mix. We have not disclosed it, but we will consider this request for future periods.
All right. A follow-up on the prior question, Tab, what if insurers pay then? Will you be able to reverse some of the bad debt provision?
Yes. As we settle with the insurance companies and they pay the remaining amount, the ECL provision will be reversed.
Understood. We'll take follow-up questions from Mishaal, from SNB Capital. Please unmute yourself and go ahead.
Thank you, Ahmed. Just following the up on Nurjis CapEx, that's technically SAR 1.4 billion almost if we calculate SAR 3.5 million per bed. Is this inclusive of the land cost?
No, this does not include the land cost.
Yeah, it doesn't.
Um, just-
The land cost was around SAR 180 million.
SAR 186 million, that was the land cost.
Yeah.
If you'd allow me, I had a recent, like, analysis on the CapEx per bed profile across the sector. SAR 3.5 million per bed is quite high and on the higher range of the average. I mean, we see other hospitals in Riyadh expanding at SAR 2 million-SAR 2.5 million CapEx per bed inclusive of the land. Don't you think that this is quite high?
No, I don't think so, Mishaal. If you, the most recent announcement, on Tadawul, the hospital, mentioned more than SAR 4 million, for a hospital, I think in Jubail, or so. I don't think it's higher than a Class A VIP premium hospital overall.
Perfect. Yeah. Thank you.
Hello, I think, we are running out of time. Can we have last question?
Yeah, actually, there is only one final question, and that's going to come from the line of Madhu. Once he's done with any concluding remarks he can provide us, we can end the call. Madhu, please, I've unmuted yourself, your mic. Please go ahead.
Thank you. Thank you, Ahmed, for the opportunity again. 1 question on the insurance revenues. I believe the key surprise this quarter was the sequential growth in insurance revenues. Just wanted to understand what helped you in growing insurance revenues in a weak quarter, seasonally weak quarter. That is one. Second is, I assume you need to keep beds reserved for GOSI and Prince Sultan. Does that restrict you in terms of growth from insurance patients? Like, in terms of capacity for insurance, where are you? Are you at, like, maximum utilization, this is the max that you can grow from insurance patients?
In terms of the growth, for the insurance, it's not from pricing, it's volume growth. We have more patients, both in the outpatient and the inpatient. We don't reserve beds for clients. Like, we don't reserve beds for GOSI and dedicated certain beds for Prince Sultan. We do manage our bed situation on a daily basis. If we have more insurance patients, we still have capacity to accept them. We don't turn them down just because the beds are reserved for someone else.
All right. Because I was of the opinion that you can't turn down a GOSI patient or also patient from Prince Sultan, even.
We never, Prince Sultan by contract, we cannot turn them down. GOSI, we don't have a contract with them. We never had a situation where we turn down any patient. There's always capacity. It's about managing the bed situation. We have an efficient team that manage the bed situation, and we never turn patients down, whether it's GOSI, Prince Sultan or insurance.
Okay, does that mean that there is still room for growth in insurance patients?
Absolutely. We always. We've seen tremendous growth. The number of outpatient visits in the past five years have more than tripled as of up until the end of 2024, and we expect continuous growth. It's part of our strategy with the diversification of revenue.
Okay. Thank you. Thank you. That's all from me. Thank you.
Thank you. Thank you, Ahmed.
No, no.
Any follow-up questions?
No. No follow-up questions in the Raise Hand nor the chat.
Thank you everyone. To conclude this session, I would like to thank EFG and Ahmed for organizing it, and thank you all for attending. We, inshallah, will continue to perform as per the expectations of the market. I wish you all a pleasant afternoon.
Thank you very much to Care's management and to all participants. This concludes today's earnings call. Have a good rest of the day.