Q2 2026 Dr. Soliman Abdel Kader Fakeeh Hospital Company Earnings Call
Speaker #1: Okay, I see that most of the attendees have joined the call, so I think we should maybe kick off. Thanks, everyone, for joining the call to discuss the key care second-quarter results.
Speaker #1: is Ricardo Resende. I lead the healthcare coverage for the Middle East at Morgan Stanley. Pleasure having management with us this afternoon. Just before we start, a few things here: the presentation is available on the IR website.
Speaker #1: You can get a copy there. We're also going to have a Q&A after the presentation, so if you would like to ask any questions, just please raise your hand.
Speaker #1: You can click on the raise your hand button, or you can also send a text question via the Q&A box. And with that, I'd like to pass it over to Faqih Management.
Speaker #1: Thank you.
Speaker #2: Thank you. Good afternoon, everyone. This is Waleed Hamid, Investments and Investor Relations Director at Faqih Cadrew. So thank you for joining our Q2 2026 earnings call.
Speaker #2: For the period ended 30 June 2026, and a special thank you to Morgan Stanley and Ricardo for hosting us today. So joining me on the call are Professor Ayman Abdo, the group's Senior Vice President and Executive Board member, and Mr. Panos Hachintonio, our group VP of Investments and Treasury.
Speaker #2: So before we begin, a quick reminder that as a listed company, we're subject to CMA and Tadawul regulations. Regarding forward-looking statements, please refer to the disclaimer on slide 22 of today's presentation.
Speaker #2: So here's how we'll run today's call. Professor Ayman will start with the group, our operating model, and our strategic developments. And then Panos will take you through the financial and operational performance in detail.
Speaker #2: After that, we will open the floor for your Q&A. So before I hand over, this was a period that brought real momentum for Faqih Cadrew, and our growth engine continued to deliver.
Speaker #2: We completed the acquisition of Dr. Mohamed El Faqih Hospital in Riyadh, we inaugurated our medical center in Mecca, and saw the new business nearly double its revenue, exceeding the pace of its cost base, which all will be discussed in further detail during this call.
Speaker #2: So with that, I will hand over to Professor Ayman.
Speaker #3: Shukran, Shukran Waleed. Good afternoon, everyone. Always a great, great pleasure to meet all of you and tell you about our journey in Faqih Care.
Speaker #3: So we continue to build this ecosystem that is in front of you, that is composed of healthcare delivery arms from primary care to very advanced care.
Speaker #3: The educational arm, the supporting companies like home care, like EMS, like facility management, and others. So we currently have 4 hospitals and 5 medical centers, and around 835 beds.
Speaker #3: Supported with all this network and ecosystem, we continue to focus on quality and patient safety, as a hallmark of Faqih Care Group. Next slide, please.
Speaker #3: Okay, so one of the important developments that we are pleased to share is the opening of Faqih Care Medical Center in Al Awali in Mecca.
Speaker #3: This is very, very important for us because this is our first entry into Mecca. And as you all probably know, we are advancing our construction of our large hospital in Mecca, in Masar, strategic location.
Speaker #3: So, this center comes in preparation, or a couple of years before the Masar Hospital. It strengthens our position in the Western region. It's a very beautiful building that contains about 20 clinics, with all specialties: primary, secondary, and tertiary care.
Speaker #3: It also contains dialysis, day surgery, endoscopy, and advanced radiology and lab. And we have a very good experience. As you know, in the past, with these medical centers, their lighting capex, and they produce a lot of good quality care and referrals to our hospital in Jeddah until our hospital in Mecca is finalized.
Speaker #3: Next. Big news, of course, is the completion of the acquisition of Mohamed El Faqih. We talked briefly last time about this very important development, but this is now completed, and closed.
Speaker #3: It's 100% acquisition of Dr. Mohamed Ben Rashid El Faqih Hospital. This hospital has been around since October 2022. It's around 350 beds of which 200 are currently licensed and available.
Speaker #3: Almost 200 clinics the hospital, in 2025, has seen almost more than half a million patients. It's been very successful. It's very well built in terms of construction.
Speaker #3: It attracted excellent doctors. It has been doing extremely well. And we hope that with this acquisition, the Riyadh cluster is going to integrate. It's going to synergize.
Speaker #3: It's going to open opportunities in different insurance classes. So the currently the situation today is that we have already appointed a CEO and in the final stage of appointing a chief medical officer.
Speaker #3: We're already starting to implement our policies, procedures, quality systems, and patient safety systems. There are departments and business lines that are doing great that we're just going to support and push further.
Speaker #3: There are some business lines that require more synergies and enhancements, and we have already put a very robust plan in place to address that.
Speaker #3: Our HIS system, or IT system, is already the one operating. It just needs upgrading, and that's going to improve and help with our integration.
Speaker #3: So we're very, very happy, and we are expecting to see significant synergies with that. This, of course, adds to Riyadh, Medina, and Awali, which are the new members of the family that are all doing well and pushing the group forward.
Speaker #3: Next. Exciting news for us, and I'm sure for you, our hospital in Jeddah has performed the first bone marrow autologous transplant in the private sector.
Speaker #3: This is very important for many reasons, because it's an inauguration of our cellular therapy program that, as you know, is a very important advancement.
Speaker #3: But this is a testimony of how advanced this hospital is. Having been the first in the private sector to do robotic surgery, we have done more robotic surgeries now than any other private hospital and, in fact, more than many of the governmental hospitals.
Speaker #3: Robotic joint replacements, and so on. So this comes in a testimony of how advanced to do something like this, you need a very advanced lab, very advanced blood bank, very advanced surgeons, and systems.
Speaker #3: So very proud. And hopefully, this will inaugurate our stem cell transplant program and cellular therapy transplant program. Next. The Saudi patient safety center has started its certification this year, and we're proud to say that our hospital in Jeddah received the gold accreditation as the only hospital in Saudi Arabia to receive that accreditation.
Speaker #3: And our hospital in Riyadh received the silver accreditation as also one of two hospitals in Riyadh only to receive silver accreditation. Again, time after time, every time we meet with talking to you about new accreditations and patient safety and quality, and this is a relentless pursuit that we are going to continue to make sure that we achieve our mission and vision.
Speaker #3: Next. On the patient experience side, we very briefly mentioned this last time, but we have now been officially awarded the Plain Tree Gold certification for the Riyadh Hospital and for the Jeddah Hospital.
Speaker #3: Only 100 hospitals in the world are accredited in gold patient experience Plain proud. And these are really literally our pillars: quality, patient safety, patient experience, and we're going to continue to do that.
Speaker #3: Next. Finally, we're also very proud to report that the group has been awarded the Sustainability Award of Tadawul of the Year for small-cap categories.
Speaker #3: This is in testimony of our efforts in standardizing EC, reporting on EC, doing a lot of work in for education, sponsoring students, sponsoring patients, and in lots of work on environmental solar and many others.
Speaker #3: So we're very also proud in this regards. Next. Okay. So the fun part is over. Now we go to the finances. Thank you, planners.
Speaker #2: Thank you, Dr. Ayman, and good afternoon, everyone. And thank you for attending our second quarter and first half of 2026 results conference call. The group revenue in the first half reached 1.5 billion, and was up circa 6% year over year, excluding the Hajj contract in June 2025.
Speaker #2: Notably, new business revenue in the first half was 86% up year over year, while covering the direct costs. Total patient self at group level grew 3% year over year on a higher acuity and average revenue per patient self.
Speaker #2: Despite the top-line growth, profitability was affected by competition, immature business, and other drivers, which we will dive into in the next slides. In terms of volumes, patient self-growth was led by an increased number of beds—545, or 30 more than last year—and higher clinic utilization in the new hospitals, while acuity increased through admissions and surgeries.
Speaker #2: Across the group, in the second quarter of patient self rose 4.4% year over year, and this led to a 3% year over year growth in the first half.
Speaker #2: Notably, in the first half, in patient admissions were up 14% and surgeries 22%, as demand continued to build across tertiary higher complexity service lines.
Speaker #2: At the same time, outpatient visits also grew, but at a lower pace, affected by the agenda facilities. Home healthcare patient self decline and strategic payrolls progressively moved delivery in-house, we have set a new base and we are in discussions with other long-term strategic payrolls to restore the growth plan.
Speaker #2: A specific note on new business patient self, where we had 66% growth year over year in the first half, as Riyadh Hospital footfall and admissions grew close to 20% year over year, through utilization benefits and the Medina Hospital ramp-up, we will further and deepen case mix especially in the ICU beds utilization.
Speaker #2: Today, the hospital, Medina Hospital, has 102 licensed beds already. Moving to the revenue slide, where gross group revenue grew 6% year over year, as we mentioned, excluding the Hajj contract, driven primarily by new business revenue growth of 86% or 238 million, and acuity as overall average rate per patient grew 3% year over year.
Speaker #2: The mature business revenue is, in the first half, by circa 2% versus the prior year, has growth in non-medical business, partially offset headwinds in medical and operating and management segments.
Speaker #2: Overall, new business accounted for almost 18% of healthcare revenues year to date, and are expected to further grow than the group's geographic base in the coming quarters.
Speaker #2: This is a important metric for the group, as we progress with our growth. As you can see, a cadre of 20% growth in revenues since the first quarter of 2024 helped us to absorb almost all direct and indirect expenses over our expansion, leaving a 11% gap, which we expect to close by the fourth quarter of this year on a like-for-like basis.
Speaker #2: Moving into direct expenses and margin, as we continue to grow, we remain diligent with our costs in order to preserve our gross profit margin.
Speaker #2: Even new businesses added to operational capacity, staff costs continue to be controlled at circa 40% of the revenues, and helped to absorb the rise in materials and consumables as a result of supply chain constraints, the higher acuity case mix, as well the rise in other expenses line, which includes depreciation from our new hospital in Medina.
Speaker #2: In the first half of '26, gross profit is, by 300 basis points year on year, although mature gross profit margin were lower by 200 babes year on year, reflecting new business scale cost.
Speaker #2: Despite this fast-paced growth, gross profit in new businesses became positive by 1 million real in the second quarter of 2026. In mature business, the revenue declined at weighted all cost control efforts.
Speaker #2: As we analyzing our EBITDA and attributable profits, gross profit as mentioned is, by 30 basis points, on the second quarter year on year, and all factors continue to apply to the group EBITDA leading to 123 million of earnings before depreciation and finance cost, with a 60 bips contraction year on year.
Speaker #2: Positive lift came from control general and administration expenses, selling and general administration expenses, which were stood at 12.5% of revenue, despite the new business added capacity.
Speaker #2: Centralization and automation of selected support activities continue to protect any contraction in the top line. Mature business EBITDA is, in the second quarter, by 90 bips year on year, maintained above 20% mark, reflecting mainly the lower revenue while as mentioned, new businesses continue narrowing their EBITDA loss by roughly 23 million in both the quarter and the first half.
Speaker #2: Top-line growth, more than offset direct and indirect expenses, and containing the headwinds at group level. The efforts in managing the EBITDA margin were diluted by increased finance cost, depreciation, and various one-off items, and as a result, attributable net profits although they rose sequentially to 57.9 million in the second quarter of '26, and they drove first half figure to 96.3 million as almost all businesses expanded post first quarter seasonality.
Speaker #2: Moving to the our balance sheet and our liquidity position, as of June 30th, our liquidity headroom remains strong, with 657 million of available funds where our total loans were 726 million, cash and cash equivalents stood at 357 million, and also we had 300 million of governmental scoop.
Speaker #2: Building on this strong liquidity position, the group secured in 2.2 billion of new credit facilities, from local banks to fund its growth projects, including the acquisition of Dr. Mohamed Al-Hakim Hospital in Riyadh, which was completed on July 20th.
Speaker #2: With the consideration transfer of 1.6 billion. Thank you for listening, and I would like now to pass to moderator for Q&A session.
Speaker #1: So as a reminder, if you like to ask any questions, please click on the raise hand button, and I'll call you, or otherwise you can send the questions as well on the Q&A box.
Speaker #1: If I may just start with while we collect some of the questions, you mentioned that the new businesses were gross profit positive by 1 million.
Speaker #1: You should be EBITDA positive or breaking even by the fourth quarter. Would you be able to provide us some more visibility on the two different hospitals, how they're doing separately?
Speaker #2: Yes, definitely. I will start with our new hospital in Medina. Which is doing extremely well. It's positioned itself in the market in terms of acuity, and no acuity is it has a very busy emerging department.
Speaker #2: It's busy as we mentioned ICU beds are fully utilized, and we that's why we're expanding and in July we licensed 102 beds. Which is a remarkable achievement on don't forget that we opened the hospital in May last year, at the very beginning of May last year.
Speaker #2: It's a I mean, a greenfield hospital as we said in many of our previous calls to our investors. We can timeline the revenue growth with our direct expenses.
Speaker #2: So we're doing quite well also on the cost, and we are I would say humbly positive that Q4 we might see the EBITDA break even.
Speaker #2: Also in Riyadh, despite the strong competition from one of the biggest hospitals our competitor, we're still grew almost 20% year on year, and this scale benefits continue to post positive EBITDA.
Speaker #2: But as you know, our business are seasonal, and the second half will be much stronger than the first half, so we're confident that we will reach this milestone of EBITDA.
Speaker #1: And if you're getting a few questions in the Q&A box, but just before I move there, one of the points that you mentioned on the quarter was on the home healthcare and then some of the payers are moving that in-house.
Speaker #1: What does that mean for your home healthcare business?
Speaker #2: Yeah. Before Dr. Emin answer this, I'll just clarify that when I say positive EBITDA, when I like for like basis. Why? Because we will add another two facilities to new facilities.
Speaker #2: As we said, we opened the Al Wali center in Makkah, and now we're going to open the OPFUR, North OPFUR Medical Center, so this I mean, they will contribute some expenses.
Speaker #2: So that's why I said underline on a like for like basis, yeah. Thank you, Dr. Emin. If you want to travel the whole business.
Speaker #3: Absolutely. Home care is affected by the shift in the market, especially in the insurance side. So this company almost tripled over the last three years.
Speaker #3: We expanded to about seven cities. We expanded horizontally, geographically, and then we expanded into type of services. So it does all kind of services, including home ICU, home physiotherapy, home chemotherapy, and everything else, including radiology, lab, and everything.
Speaker #3: So there was a lot of investments put, and we saw that reflected very nicely on sensors, on revenue. What happened most recently is that many of the insurance companies have started investing primary care.
Speaker #3: So you probably know that the main two insurance companies are now they have their own primary care lines, and they're adding a lot of home care on top of it.
Speaker #3: Also, you know, it's not a secret competitor's learn from experiences, and there's many, many companies now that comes and provides some services, some with lower prices.
Speaker #3: So we're adjusting the strategy. We are not going to reduce the breadth of the services or the quality of services in any way. But we're going to start utilizing more the online services or the digital, as well as the branches where there is no primary care services by insurance companies, and increase the B2C services because traditionally most of our functions has been referrals from insurance company.
Speaker #3: So we're thinking that we're going to go through maybe a correction phase in the next six months, and then the company is going to be profitable again by the beginning of next year.
Speaker #3: This is our hope and our plan. Thank you.
Speaker #1: Going to the audience question: What were the drivers of decreased utilization in mature businesses, especially in Jeddah? And is this driven by increased competition?
Speaker #1: And if so, how is that materializing? Lower price at competitors or hiring pressures on talented doctors? How do you see that? And I think you commented a bit on that in the first quarter release and the call was also if you could provide us an update on the competitive landscape in Jeddah.
Speaker #3: Maybe I can start, Thanos, and then you can continue. We were discussing this morning in a different meeting as whether it's fair to call Jeddah now a red ocean, and if there was a color that is more red than red, we would probably use it.
Speaker #3: To be a dominant player in a market, and then to have more than five good hospitals open in a matter of two years—and then maybe two or three more are going to open this year—that's definitely a challenge.
Speaker #3: Which we welcome, positively. When we were giving we were talking to some of our dear friends investors, especially at the time of the IPO, the question was, how are you going to sustain Jeddah hospital?
Speaker #3: With the competition, the expectation was very significant reduction in business revenues. What you see now what you see today is actually very significant holding of business, which is a very strong testimony of the trust of patients.
Speaker #3: You see that clearly in ICU patients, in advanced surgeries, in oncology, in all of the other specialties. Maybe Thanos will try and explain this a little bit further.
Speaker #3: So we are very happy to see the results in Jeddah. Of course, our focus continues to be relentless focusing on quality and patient safety, advancing procedures and businesses that our competitors or the city really needs, improving the patient experience, by improving the touchpoints with the patients.
Speaker #3: And then we hope that the three medical centers or the two in Jeddah plus the Al Wali center in Makkah will start also increasing our referrals to the center.
Speaker #3: So I think we are very pleased with where Jeddah is now. The competition mainly is in beds, of course, you can see a lot of competition in deliveries and women health.
Speaker #3: Some competition in and in outpatients. The competition is really not in ICU or advanced surgeries or advanced care because we are really I think ahead of the competition in that area.
Speaker #3: So that's the general look. Maybe Thanos can give some more details if he likes.
Speaker #2: I think you covered it very well. I'll just add, I mean, although it's a decline, we're pleased with the level of the decline. It's still a decline, and we don't like declines.
Speaker #2: But it's a reality. And we live with it, and we address it. We are agile. We also manage our worst quite well. And we're building on our cluster or Jeddah cluster and we scale benefits because, as you said, we're adding three more medical centers.
Speaker #2: So we increase our reach, we increase our presence, while creating scale benefits. So hopefully, this will sustain us in the next quarters.
Speaker #1: If I may, another question is on DRG. We've seen comments from some of the competitors that apparently shadow billing hasn't started yet. So, what's the latest from your side?
Speaker #1: And would you expect any delays compared to what the government previously said for 2028?
Speaker #3: I can take the first part maybe. We've probably heard this say this many times. We are ready for DRG. We're started Shadow Billing. We think that Taufiq Care might benefit or at least not be majorly affected by DRGs.
Speaker #3: We're preparing everything by improving our coding, improving our pricing, improving our IT systems, more efficient healthcare, but usually, as you know, and there's a lot of experience in this neighboring countries and international countries.
Speaker #3: Providers with higher acuity with more complex patients actually benefit from DRGs. And God knows, I mean, there's nothing there's no way to predict and we don't even know the start dates for that.
Speaker #3: So, there's not much more to say than this.
Speaker #1: Sylvia, I see that we have the raised hand. Go for it.
Speaker #4: Thank you, Ricardo. Can you hear me?
Speaker #2: Yes.
Speaker #4: I just wanted to ask a quick question on the developments in pricing for your O&M contracts at Neom. How do you see this developing in the future?
Speaker #3: I can take this if you like, Thanos. So Neom, has been a very exciting, successful project that we're very honored to have operated for the last four years or so.
Speaker #3: The contract was their current contract, the ending contract, was three years plus one plus one. So we did the three years and we managed to extend it for one year, which we are living in right now, coming to the end of it.
Speaker #3: This contract was a cost-plus contract that we have done extremely passionately this hospital is a psychiatric, JCI credited, CAPA credited, AAB accredited, one many awards.
Speaker #3: Did a lot of great a lot of great work. So as you know, there's always readjustments in business plans and expansion plans in all the mega projects.
Speaker #3: And so there's an RFP that has been announced a couple of months ago that we are competing for to hopefully keep having the honor of operating Neom Hospital and healthcare for another five years.
Speaker #3: So we should be hearing about this in the next couple of months. And if we win, then we will be operating for a number at least five years more.
Speaker #3: Now, the current contracts are also quite lucrative with a very good margin, but with a lower profits, maybe Thanos can comment on that.
Speaker #2: Yes. As we said, we grew the hospital. We created a significant goodwill. In terms of the processes, the doctors, the services. And that's why we renewed.
Speaker #2: And we are now in the one plus one period. And we are confident with the RFP process. I mean, we are one of the top contenders.
Speaker #2: And which is five years, and we hope that we're going to be celebrating. Nevertheless, at the moment, the effort contracted, the demand reduced, so this scaled down in terms of revenue and cost.
Speaker #2: And the amount of the result. But the margins have basically remained similar to the beginning. So, still, I want to say it is a lucrative contract that is adding value to our results.
Speaker #2: Significant value. And we hope that we're going to celebrate the extension.
Speaker #1: If I may follow up on that question, when you look at the RFP, are the unit economics similar to the current contract or is there any changes on the profitability?
Speaker #2: It is different. And is it is it has a curve, I would say. In terms of cost, subsidization, revenue, setting, cannot go into details, but nevertheless, it is a five-year contract, and everyone is assessing for the five-year period.
Speaker #2: And it's different from the existing one. Perhaps lower margin. This is the essence of the RFP. To make it less costly to our Neom colleagues.
Speaker #2: This is the target.
Speaker #1: And one of the questions that I got is now that we have completed the acquisition of the new hospital, after the end of the quarter, first, we're talking about having the new CEO appointing a chief medical officer as well.
Speaker #1: On the next steps, and how when you announce this acquisition, you're talking about potentially adding more beds as well. You had the real estate to do so in the hospital.
Speaker #1: So when you look for now until the end of the year or the next four quarters, how should we think about the number of beds on that hospital and on the profitability and the margin profile of that hospital as well?
Speaker #3: Do the first part again. We're a good we're a good tandem team here. So we just took over like, I think, two weeks ago.
Speaker #3: And immediately we've been assessing, of course, during the due diligence and during the acquisition exercise, of course, you learn about the hospital. But when you're actually in, you really become more aware of the potential and of the challenges, of course.
Speaker #3: So our CEO is already there. We're going to add a couple of more C-suite individuals, but we're going to try our best to keep most of the systems intact because they're working.
Speaker #3: They're doing well. The hospital is very well structured. And as I mentioned in my introductory remarks, there are departments and services that are doing very well.
Speaker #3: Like plastic surgery, for example. And there are some departments that can be enhanced. This enhancements come from synergies with Riyadh, synergies with Jeddah, more advanced procedures, advanced protocols.
Speaker #3: So that's in terms of the business side. In terms of quality and patient safety, already we are we have started in implementing faqih legacy gradually and slowly.
Speaker #3: Replacing whatever we feel we can improve. And keeping a learning, actually, from this hospital any good practices. Which are many. On the other hand, also, enhancing the IT system and starting to prepare the financials for integration with our financials and trying to unify the way we present financials or quality metrics or patient safety metrics.
Speaker #3: The plan currently is to keep the hospital with the same brand, same name, try to keep everything as is at least initially until further notice.
Speaker #3: In terms of beds, goal is to improve utilization of clinics and of current beds. As I mentioned, reduce new procedures, advanced cases, maybe renegotiate some insurance contracts.
Speaker #3: Implement our systems. And then I think within about six months, it will be obvious maybe earlier if we need to expand the license beds in any way.
Speaker #2: I just want to add, Ricardo, that this is a hospital that operates 200 beds and has 350. And almost 200 clinics. And on a linked building.
Speaker #2: It's a journey. And it will take us time to maximize the benefits. So we will have a lot of work ahead of us, but the area is strong in terms of catchment and diversity.
Speaker #2: And we hope to have positive impact in the next periods.
Speaker #1: And I see a final question here, just a reminder. If anyone wants to ask a live question, please click on raise hand button or send us through the Q&A box.
Speaker #1: A follow-up on the new hospital in Riyadh. It's a sizable acquisition. It's a sizable asset as well. And as I said, there's still a lot to be done on more beds, on integrated with the existing operations.
Speaker #1: Could that imply that you could see some postponements or some changes on your previous growth plan in other regions as well as a way of company focus on getting these assets up and running?
Speaker #2: You asked about changing the growth focus? Can you clarify the question?
Speaker #1: Yes. If you could be a bit delayed or you could see some changes versus your original growth plans.
Speaker #2: Great. Look, very rarely said, this is an acquisition, significant acquisition. It's 100% over profitable hospital. And it's all for debt. So we added one almost 1.6 billion of debt as we speak.
Speaker #2: This will extend our net debt to EBITDA to over three times. I mean, we will see we don't know yet our EBITDA how they look like, but it will be definitely about three times.
Speaker #2: We are prudent. I mean, we say four times is a ceiling or we need to look after the four times. So we have space.
Speaker #2: But nevertheless, we the net debt will affect our earnings. So our growth is, let's say, reviewed again. In terms of prioritization, and also how we're going to expand.
Speaker #2: Now we're looking more into partnerships, similar to our Zahra Medical Center, so we are in discussions with various interested parties that we can, let's say, jointly grow our pipeline.
Speaker #2: And spend less on CAPEX and have space for the growth. So yes, it's a very good question. We are at the moment reassessing our priorities.
Speaker #2: But nevertheless, we continue with the as fast as possible we can with Masad, Makkah Hospital, and we had the three assets, the three medical centers in our focus.
Speaker #2: These are the focus areas. Thank you.
Speaker #1: I see we have two follow-up questions here. Waleed, it seems like you're typing one of the answers, but let me just ask live. So, the first one: can you clarify about keeping the same range at the new hospital? For how long can you keep the same range?
Speaker #1: And the second question, if you could please share some details on the new hospital on revenue growth in the past few years and in gross margin profile as well.
Speaker #2: I will start with the end. We have published we share available and mentioned FY25 finances. First half is not ours. It belongs to the existing shareholders.
Speaker #2: So we focus on the second half. Which is seasonal strong. So we expect to see some good results. We cannot comment now on numbers or margins.
Speaker #2: And we hope we're going to delve more to it on the third quarter. We're going to have our first set of results. What was the first part of the question?
Speaker #3: The price is of insurance prices in the future.
Speaker #2: no, no. The brand. Okay. Look, any acquisition, I mean, we develop.
Speaker #3: I think it's of services panels, not that.
Speaker #2: No, no. Just before, I will ask about the brand. And the name. So the name is part of the legacy of this hospital. It has a value.
Speaker #2: Yes, Fakih Care—our Fakih spelled with a K—is a very strong brand. But also, Dr. Mohamed Fakih Hospital has a brand, and a name, and is recognized.
Speaker #2: So this is what we are acquiring also. We're acquiring the existing clientele, systems, processes. So all these have a value. And this value is, you know, through purchase price allocation, it needs to be recognized and identified.
Speaker #2: So we will be assessing going forward the strength of these assets and but we will see we have to keep them. I mean, the first place.
Speaker #2: And then we'll see how we'll progress. Prof. Eamon, you were saying during travel also.
Speaker #3: No, no. Thank you.
Speaker #1: There is another follow-up on the out of questions of the new hospital. If you could talk a little bit about synergies with existing Riyadh hospital if you have identified already any synergies and then on the I think you already touched on that, on the expansion plan and number of beds by year-end.
Speaker #3: Okay. So the synergies are multiple. Currently, our cluster in Riyadh is larger than our cluster in Jeddah. And there is geographical synergies between northern Riyadh, which is near the current hospital, and more east of Riyadh, so that's the geographic.
Speaker #3: And we have a very advanced EMS company, emergency medical services company that can transfer patients easily. Synergies in terms of insurance contracts or insurance, I mean, levels.
Speaker #3: So we access now one level lower insurance, which is a huge population of Riyadh. So we have a much wider insurance base now. Synergy in terms of insurance prices and renegotiating insurance contracts.
Speaker #3: I think this is a huge potential. And then you can go into sharing resources in terms of supply chain marketing, call centers, and others.
Speaker #3: So there's potential cost savings there. There are synergies in terms of clinical. Some doctors can do clinics here and there. Patients can be transferred between different procedures if they are covered with the same network.
Speaker #3: Of course, there's learning. Both sides. There is experience. There is cultural mix. And that's always a positive thing. So there's many, many synergies between the two hospitals.
Speaker #3: These are some of them.
Speaker #1: Perfect. I don't see any further questions here. Just give it a less oh, just because I said there's a new question that just popped up.
Speaker #1: How much of the percentage cost escalations the company expects on its upcoming projects due to the recent geopolitical events and subsequent increase in many raw material prices?
Speaker #2: That's a very good question. Yeah. We give you some heads up on the last call. I mean, about the supply chain. And talking to our suppliers, there is a challenge in the logistics.
Speaker #2: And increased cost, I mean, we're blessed to live here and work and have contained energy cost. But overall, energy cost grew around the globe.
Speaker #2: And supply chain we expect to see an inflation. I would say we had a lot of long-lived items already ordered, secured. So we don't expect to see significant change.
Speaker #2: Usually, with the new projects, to be honest, it is more internally driven inefficiency. For example, you change your mindset for layout or whatever. That generates more expensive rather than the long-lived items.
Speaker #2: Where we have a scale and we have suppliers and we buy bulk, I mean, we have five assets to cover. So yes, there will be a cost, but not significant but nevertheless, it will affect our net profit.
Speaker #2: In terms either through additional depreciation, because we capitalize the cost, or direct expense in operating. Expense.
Speaker #1: I see that Ahmed has raised his hand. So Ahmed, please go ahead.
Speaker #3: Hello? Am I audible?
Speaker #2: Hi. Good afternoon.
Speaker #3: Hi. Good afternoon. It's Ahmed Shafi from Tico Bahrain. I just have one question related mainly to Jeddah. So in terms of the competition in Jeddah, how do you view the competition compared to what it was five or even 10 years ago?
Speaker #3: I mean, there are a lot of new entries into the Jeddah market and I assume the next couple of years there might be even more.
Speaker #3: So what changed within the last five years? I don't know if you've heard my previous answer. So I can repeat parts of it. Yeah.
Speaker #3: Sorry. I wasn't in the call. Sorry. No, no. I'm fine. I'm happy. I'm happy to answer very briefly. So we've been in Jeddah for, like, what, now, 48 years or so.
Speaker #3: So Faqih in Jeddah is very well known. And the legacy is very strong. But of course, having competitors, especially in more strategic locations of the city, with newer buildings and newer brands, that's definitely something that is that's going to affect current business.
Speaker #3: Again, we welcome competition because it improves service, it improves care. And I think Jeddah people deserve all kinds of competition. Now, as I mentioned before, in spite of the five hospitals, very reputable, excellent providers with a good track record.
Speaker #3: And some more to come this year, and maybe in the years further. You can see that Jeddah numbers, the decline is much better than what was expected.
Speaker #3: And what was usually asked by you guys in these investment meetings? And I think the reason is that there is a very strong brand. People of Jeddah believe in the brand.
Speaker #3: The quality of service and patient safety, which is every single year it gets recognized either by the government or by the international agencies and then that reflects on the patient's trust.
Speaker #3: So I think you can see that patients still prefer that hospital to do advanced surgeries, to do their oncology services, to do their robotics.
Speaker #3: And to come to the and patients we think we still have the best doctors. In Jeddah. So our plan is to continue. To invest in quality patient safety and patient experience.
Speaker #3: You saw this hospital got the gold plane tree. The hospital number 101 in the world that has been recognized with a gold plane tree award.
Speaker #3: And so if we continue to invest in this and we continue to regain the patient trust. We continue to renovate the hospital, improve it.
Speaker #3: If you come to the hospital every year, you'll find different. Like, for example, the outpatient clinics, the ICU, the delivery rooms, the parking spaces, and so on.
Speaker #3: And then the addition of the three medical centers. This will give more access to patients in their communities quicker in and out exposures whether radiology, endoscopy.
Speaker #3: Because these medical centers, Ahmed, we have day surgery. We have endoscopy. We have dialysis. We have advanced radiology, CT scan, MRI. And all of them are populated by consultants.
Speaker #3: So they're not primary care centers. They are as good as the main hospital, even better probably in some cases, but without more than overnight admission.
Speaker #3: And so we're very optimistic with Jeddah. And we think the results so far is a testimonial of those things. What's going to happen in the future is hard to say.
Speaker #3: Obviously, the business will be affected. There's no doubt about it. And we're compensating with the Riyadh expansion, with Medina expansion, and with the other companies that are doing quite well.
Speaker #3: Thank you. Thanks, Ahmed. Thank you. And all the best for the rest of the year. Marcus starts. Maybe we should come to Bahrain, Ahmed.
Speaker #3: Why not?
Speaker #1: Bonus. I think there is a question here for you. Would you be able to provide any guidance for gross margins at top-line outlook post the new hospital incorporation?
Speaker #1: So looking into 2027.
Speaker #2: With the challenging, look, I mean, as a summary, I mean, probably the last question. What we have ahead of us, we have a Jeddah cluster where we defend our position.
Speaker #2: And we cost-optimize through the clustering. However, we're going to open three new medical centers. So we'll see some pressure on the margin there because direct expenses are from logic.
Speaker #2: Salaries. It will take some time to get the scale. So we see some pressure coming from there. However, we're going to have two hospitals the existing hospitals that will continue ramp up and bringing gross profit margin gains.
Speaker #2: And third, we have the Muhammad Faqih Hospital, which has a better or higher gross profit margin from our existing operations. So this will be a critic.
Speaker #2: All in all, I mean, we don't know yet. But the point is that as a follow-up to the previous question of the Jeddah, now, I mean, if you notice, we have 20% of the admissions and 18% of the visits coming from non-Jeddah operations.
Speaker #2: And by adding the new medical the new hospital in Riyadh, this might reach also 50/50. So we diversify our offering across all the kingdom.
Speaker #2: I mean, from 90, I remember on the IPO, we were writing the risk factors. We say that Jeddah is 95% of the revenue. 95.
Speaker #2: Now we are almost 50% with the new acquisition. So I think we did well on expanding. And Marcus,
Speaker #1: Well, final call for any questions. If you want to type anything, please send it or raise your hand. Just let's give a few seconds if something comes up.
Speaker #1: Well, I do not see anything new here. So Professor Eamon, who knows, Waleed, I'd like to thank you again. Oh, sorry. Just because I said not final, final question.
Speaker #1: That's the last one. So how close is your upcoming thought of hospital to Dr. Soliman Al-Habib?
Speaker #2: How close is the South Hopkur Hospital to Al-Habib?
Speaker #1: Yes. Yes.
Speaker #2: I don't remember. I think the 7, 10 kilometers. It's northern. Our land is northern. Northern to closer to Hopkur. But it's I would not say it's the same catchment area.
Speaker #2: I mean, we are closer to serve the northern parts. So I think attracting the north, we're first. Getting from the south, maybe we'll have some challenge.
Speaker #2: But I think, look, this Dr. Soliman Habib Hospital is very close to Red Sea Mall or the Salama Hospital. So in both are doing quite well.
Speaker #2: So I mean, irrespective of the location, if you every hospital has its own clientele and catchment area. And there is space. There is space still for more hospitals.
Speaker #2: And the hospitals are not one year or two years business. Are long-term business. I mean, and Jeddah will continue to grow and expand north, east, south.
Speaker #2: So as Dr. Eamon said, the future is here to them. But the more you grow our presence, the more we'll secure our market leadership in the region.
Speaker #1: Great. I promised that it was the last question. That was the last question. I'd like to thank Professor Eamon, Panos, Waleed for this call.
Speaker #1: Always a pleasure hosting you. Thanks, everyone, for joining us as well. And for the ones there, have a nice weekend.
