Release Date: August 15, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Vimian Group AB (FRA:0V0, Financial) reported 11% organic growth, with double-digit growth in its three largest segments.
- Adjusted EBITDA improved by 220 basis points from 25% to 27.2%, driven mainly by specialty pharma and medtech businesses.
- The company finalized a capital raise in April, reducing leverage to 1.4 times, positioning it well for future acquisitions.
- Veterinary services segment saw 18% growth with the addition of 400 new member clinics, and co-owned clinics accelerated their growth to double digits.
- Net profit for the quarter increased by 57% year-over-year, reaching EUR 5.1 million.
Negative Points
- The diagnostics segment, which makes up 5% of the total business, saw a revenue decline of 9% due to challenging market conditions.
- Nonrecurring items amounted to EUR 5.8 million, driven by high legal costs for US patent litigation.
- Net working capital increased to EUR 82 million, impacting cash flow negatively.
- The US surgical market showed softness and slowdown, impacting the medtech segment.
- Cash flow from investing activities was negative EUR 11.2 million, reflecting earn-out payments and capital expenditures.
Q & A Highlights
Q: Can you elaborate on the margin improvement and potential areas for further upside?
A: We've seen good mix and scale, and our strategic initiatives are starting to take hold, driving margin improvement. There's more to do across the board, particularly in cross-selling high-margin products in specialty pharma and leveraging scale in veterinary services. However, we may choose to invest in further growth rather than continuing margin improvements indefinitely. (Patrik Eriksson, CEO)
Q: How long does it typically take to see the full effect of synergies from acquisitions?
A: It varies. Some well-run companies with scale issues can show quick margin improvements, while more complex acquisitions requiring ERP replacements and supply chain streamlining take longer. (Patrik Eriksson, CEO)
Q: What's driving the weakness in the US surgical market, and how long will your educational and commercial efforts take to show results?
A: The decline in high-end surgical procedures is likely due to economic hesitancy. Our response includes intensifying commercial activities and educational events. Commercial efforts can show quick results, while educational initiatives may take longer, depending on the participants. (Patrik Eriksson, CEO)
Q: Can you provide growth expectations for the medtech business for the remainder of the year?
A: We expect medtech to be a growth business in 2024. The softness is isolated to the US, while Europe and APAC are performing well. We are countering the US softness with increased commercial intensity. (Patrik Eriksson, CEO)
Q: How long should we expect the single-digit EBITDA margin profile in diagnostics, and how is the oversight launch progressing?
A: We are investing in companion animal diagnostics this year, so margins will remain low. Significant revenue impact is expected in 2025. (Patrik Eriksson, CEO)
Q: Should we expect items affecting comparability to remain high for the rest of the year?
A: Nonrecurring items were high due to US litigation costs. We expect these items to decrease in the second half of the year as the legal process enters a different phase. (Carl-Johan Boudrie, CFO)
Q: Are there any stocking effects in specialty pharma, and do you expect continued margin expansion?
A: No significant stocking effects were observed. Margin improvements are driven by internal efficiencies and positive mix effects, particularly in specialized pharmaceuticals. (Carl-Johan Boudrie, CFO)
Q: How has the reduction of the annual order program (AOP) in medtech affected revenue visibility?
A: The reduction of AOP has improved visibility, allowing for more predictable daily run rates and quicker identification of customer weaknesses. (Patrik Eriksson, CEO)
Q: What are your plans for expanding veterinary services into new markets?
A: We see growth opportunities in existing markets and are also considering new geographies. Recent expansions include Brazil and Belgium. (Patrik Eriksson, CEO)
Q: Can you provide more details on the slowdown in the US medtech market?
A: The slowdown is due to economic hesitancy affecting high-end surgical procedures, which are among the most expensive treatments. The low insurance rate in the US exacerbates this issue. (Patrik Eriksson, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
