Q2 2026 Euroeyes International Eye Clinic Ltd Earnings Call
Speaker #1: Great pleasure to introduce to you the management joining us today. They are Dr. Jrn Jrgensen, Chairman Executive Directors, and Chief Executive Officer. And Mr. Marcus Bracklo, Executive Directors and Chief Financial Officer.
Speaker #1: Following the management's presentation, there will be a Q and A sessions. During the Q and A sessions, if you wish to ask a question, please type your questions in the Q and A box on the right-hand side of the page, and we will help read it out.
Speaker #1: Please also kindly note: Tencent Meeting is for listening only. May I now pass the time to Dr. JJ to start the presentations, please?
Speaker #2: Yes. Hello everybody. Good morning here from Europe, and I'm very happy to welcome you here to the first half-year interim result from the Euroeyes International Eye Clinic Group.
Speaker #2: I'm here sitting today with Marcus Bracklo, our CFO, and we'll go through the numbers. So let us start here with the first slides, please.
Speaker #2: The next one. Yes. This year, and last year, much of our deal were regarding FAO as the Holland group we acquired, where we had completed listening and acquisition on July 22nd.
Speaker #2: So the numbers today you will see here from the half-year, it's not included in. The only numbers which is included is from our acquisition in the last year, end of last year, of Betterview, the Swiss group.
Speaker #2: Let's take the next slides, please. So I have put here the highlights of the first half-year. You see here including the Swiss grow group, we had a growth of year to year on 20% to 454 million Hong Kong dollars.
Speaker #2: Without the Swiss group, we had a growth of 10%. So we are very proud of that in this time with so much let's see trouble in Europe, geopolitical, that we managed to grow here 10%.
Speaker #2: And would we put up a slide here with the acquisition successfully merging acquisition of the Swiss group, which took part and which generated 38 million Hong Kong dollar revenue.
Speaker #2: The Swiss integration has been more difficult as we thought. It was a group we took over in the name of Betterview. It was called.
Speaker #2: It was in financial trouble at that time. So we took it over. We renamed it to Euroeyes. We rebranded it to Euroeyes. We put up new landing pages, new web pages, and we also put in new services.
Speaker #2: And this has been, let's see, we are really started from the ground, but it has been more difficult as we thought. But we are on a good way, and I will get to that later on.
Speaker #2: The solid growth is especially in the presbyopia treatment. We are a presbyopic group with specialty in presbyopia with laser and lenses and also with the acquisition of FAO of Holland, which have the same services exactly that Euroeyes I can say we are probably one of the biggest group worldwide.
Speaker #2: To perform presbyopic treatment. And the revenue grew on year to year by 18%. Next one. And here you again see the growth, which have been revenue from presbyopia treatment since 2022.
Speaker #2: And you see we had a steady growth of 18%. So it's the right track. And on top of this, you also saw see here presby on the blue one is presbyopic treatment with lenses and the gray one on top is with the help of laser.
Speaker #2: We took over London Vision Clinic for now more than four years ago and you can see we have started to implement that in the group.
Speaker #2: It especially treatment of presbyopia by younger people in the age 40 to 50. And it's now when you go over on the right hand, you see here lens exchange is 56 million, refractive laser surgery is 26, and presby on 5.
Speaker #2: And so you can see the other. But you see a steady growth here in presbyopic treatment. Next one. And here you have all our groups seen on one picture.
Speaker #2: And the new which came in here was Netherland. And you can say then this Netherland have 15 although four of them are with treatment units as where you have operation theatre.
Speaker #2: And the other nine are consultation center with a spread around the operation theatre. And they are remarkable acquisition we did here with the Netherland with this not in these numbers here today.
Speaker #2: I can only repeat that. But they have been they are on the way to get integrated now closing to place so we are on the right track and they have the same revenue or more than in Germany.
Speaker #2: So you can see here a small country like Holland which potential that had also in presbyopic treatment. And you see here the Swiss Eight Clinic and the next one please.
Speaker #2: Yes. Let's go here land by land country by country. In Germany, our biggest group, we had a revenue of 234 33 million Hong Kong dollar on year on year.
Speaker #2: It's a growth of 16%. And I think this is remarkable. You know the problem we have in Europe or let's see in geopolitical first of all Ukraine Iran and also here with the car industry but nevertheless we were able to grow 16% 14% of presbyopia 18% of myopia.
Speaker #2: So you can see myopia is a little back again here. It was let's see declining for a long period of time but now it's it's on the way back.
Speaker #2: Next one. And also in China China had the last year been in stagnation and but we saw this year here a revenue growth on 13% and revenue growth is on lens surgery presbyopic treatment whereas laser vision correction in China because of the huge competitive impact is a difficult business but we are international clinic group specialized on presbyopia and this is very good.
Speaker #2: Let's take the next one. Yes. We had a growth in UK of 8%. Let not so much as we have thought. We are in a reconstruction in the UK where we are pushing our acquisition London Vision Clinic.
Speaker #2: We did for some years ago. We as a group took over now more operational also after four years after the earn out period. So we are now pushing to get lens surgery in there as well.
Speaker #2: And but we saw at the same time that the cost also were rising even more. Bracklo will come on to that later on, but it has to do with something with the doctor's cost increased after the period where they went out of the earn out.
Speaker #2: And this had an effect also on the cost. Let's take the next one. Yes. Switzerland. As I told you before, it has been difficult.
Speaker #2: We are losing money in these transition period. We took over in the end of in the beginning of November last year. And we have been rebranding that and we see it has been more work as we have guessed while Euroeyes is not so much known in Switzerland as we had believed.
Speaker #2: So we really need to rebrand it from better view to Euroeyes. Better view went bankrupt almost because of they had done some let's see developed some unhappy patient who went to the press and it got a very bad reputation.
Speaker #2: Therefore we choose very early to rebrand it to our high-end mark. And this is turnaround is ongoing now. We have got a new interim general manager.
Speaker #2: In Switzerland one from Holland one who have been used to be in the fail group. Anouk and she have just started. And we have put new marketing on board and we have done many things.
Speaker #2: We have got some of our high volume surgeons from Germany they had got license also to prefer surgery in Switzerland. So our hope next time I can present to you much better numbers.
Speaker #2: The next one. And Denmark. Yes. Denmark is also has been very challenging during this period. They have had bad press not because of our clinic group but some of our competitor made very bad headline in the press and it has been on television and so on.
Speaker #2: So it has led to a downturn in revenue. We are our new manager from Holland who's just joined us and will be general manager of the Euroeyes German and European group.
Speaker #2: Her rents he will take over Denmark and hopefully also here I can show you better numbers. Next time but Bracklo will go more into detail.
Speaker #2: Next one. Yes. This is little we will go into more detail now and I will hand the word over to Mr. Bracklo.
Speaker #1: Yes. Thank you Dr. Jrgensen. Happy to take over. As you've already heard from Dr. Jrgensen, on the revenue side, the first half is quite positive.
Speaker #1: The reported revenue for the group was up by 20%. If we exclude Switzerland, to have a like for like comparison because Switzerland was not part of the group in the first half last year, revenue grew by a lower percentage but at plus 10% is quite a positive development over prior year.
Speaker #1: Similarly, the other three graphics show you the numbers both as reported and the second bar shows them if we exclude Switzerland the losses of the turnaround which we believe to be temporary in nature and the one-off costs just to give you a picture of the underlying business excluding those if I may call them special effects.
Speaker #1: You can see that a gross margin grew by 9% if we exclude these special effects it improved EBITDA improved by 14%. If we look at that's the gross profit improved by 14%.
Speaker #1: If we look at EBITDA that's the one on the bottom left you can see that it as reported is down 40%. If we exclude these special effects Switzerland and the one-off acquisition costs it's down 13%.
Speaker #1: That is mainly due to UK and Denmark Dr. Jrgensen has already briefly spoken on those matters. I will say some more about it in the subsequent slides.
Speaker #1: The last chart at the bottom right shows the development of the net profit. As you know last week we issued a profit alert because we are in the first half we have a net loss.
Speaker #1: The net loss is due to one-off acquisition costs and the Switzerland turnaround losses. If we correct for those two items net profit would not have been negative.
Speaker #1: It would have been positive. At 39.8 more or less in line with the net profit in the first half of last year. Next slide.
Speaker #1: Just expanding on that point the reported net income of minus 11.8. If we add back the one-off acquisition cost of 16.2 and the losses and expenditures related to the Switzerland acquisition of 35.5 we come to roughly 40 which is the same as the net income in the first half of last year.
Speaker #1: Next slide. Yeah. The as you've heard from Dr. Jrgensen we have completed two substantial acquisitions. First in Switzerland and then in Holland Switzerland completed last year therefore it's consolidated in the figures.
Speaker #1: And Netherlands was closed in July therefore it's not yet in these numbers. Only the acquisition costs are. So there's a little bit of an imparity there.
Speaker #1: That has allowed us to substantially expand the size of the group and of course the geographic coverage. Switzerland is already in the first half and you know we haven't yet ramped up sales as we had expected but it's already approaching 10% of our business.
Speaker #1: And as Dr. Jrgensen said when we add FIO which is about the size of Germany you can see that we're even larger than the German business.
Speaker #1: You can see that the German slice of that pie will reduce well below 50%. So that we will become truly a global German European Asian group.
Speaker #1: And you know Switzerland is a group that covers all of Switzerland. With the eight clinics we have and FIO which is an even more substantial business doesn't just cover Holland but is the market leader by a very wide margin.
Speaker #1: Next slide. Yeah. As Dr. Jrgensen has already pointed out we're quite happy with the development in Germany. Which saw quite substantial growth over prior year.
Speaker #1: Given that as our most established market which is where it all started after all these years to be achieving 60% is quite an achievement.
Speaker #1: And the good news is that we've also seen a recovery in the myopia business which is also as you know worldwide myopia is the more challenging of the two business segments.
Speaker #1: Presbyopia is the one with the stronger growth. So it was very nice to see myopia also recover and overall for us to be able to achieve a first half record revenue in the German market.
Speaker #1: Next slide. Similarly after three years where revenues stagnated we've returned to a growth trajectory in China. Driven mainly by growth in presbyopia. In fact myopia declined but was overcompensated by the very strong performance of our presbyopia business.
Speaker #1: I think that's an indicator that the marketing measures that we have implemented are proving to be quite effective. Perhaps there's also a bit of a market recovery in that but overall with plus 13% we're quite happy with the result.
Speaker #1: Next slide. Yeah. As opposed to the developments in our largest markets Germany and China you can say UK is a more mixed bag. We've grown 8% at a lower rate than in Germany and China.
Speaker #1: You have to say you know when we say UK it's really a London business. So we're talking about the London market not the whole of the UK.
Speaker #1: The London market is quite a competitive market. So therefore to grow 8% there I think is also quite good. Although really we believe we should be able to do more.
Speaker #1: What is has been more challenging in the UK is the development on the cost side. Unfortunately costs have grown more rapidly than the revenues in the first half and we are taking some measures.
Speaker #1: Dr. Jrgensen already pointed out that at least one of the cost increases is structural. We renegotiated the surgery contracts or they needed to be renewed after the earn-out period ended.
Speaker #1: And the salary levels we had to agree to are higher than the previous one. So that's a structural element that will remain so we can't just extrapolate both margins.
Speaker #1: On the other hand there are a couple of costs in there which are related to the acquisition of better view UK. The third clinic the clinic itself has transferred the deal however has not yet closed.
Speaker #1: There were various delays in getting the lease transferred. That has now been done and we expect the closing to happen in the course of this month.
Speaker #1: Nonetheless we've already had some preparatory expenditure to get things ready for that third field third clinic which is in the Westfield shopping center. Quite a good location.
Speaker #1: We believe so we will be able to put up now Euroeyes signage etc. that we've already prepared. So there are some if you like costs related to those pre-opening measures which are also depressing earnings that's clearly a temporary issue that will be resolved.
Speaker #1: And you know on the marketing side we did in order to get to growth experiment with various marketing measures before we got to a more efficient model.
Speaker #1: So I think maybe the marketing costs are also a little bit higher than they should have been. Which will be more disciplined about in the second half of the year.
Speaker #1: Next slide. Yeah. The I've already mentioned that the turnaround in Switzerland or the fact that the turnaround has not yet been achieved. Is a major part in explaining our negative earnings to add a little bit more detail what Dr. Jrgensen already said.
Speaker #1: Just to remind investors we took this business over in October. Last year. So we've including this half year will have been by 30 June owned the business for roughly eight months.
Speaker #1: And eight and a half and we did an asset deal which cost quite a lot of disruption. We did it of course because we wanted to leave the liabilities that Dr. Jrgensen mentioned.
Speaker #1: The negative press associated with better view behind us and have a clean start. And but of course that cost some disruption. Second we took I believe the correct decision to rebrand it as Euroeyes.
Speaker #1: But of course that meant we had to build this brand because in Switzerland Euroeyes is not known. Maybe in German speaking part you know because of our because we are quite well known in Germany.
Speaker #1: You know there was some awareness but overall building up the new brand and the new customer base you know is taking a bit longer than expected.
Speaker #1: Yeah. Maybe we were a little bit optimistic about it. I think the market potential I fully agree with Dr. Jrgensen. It's significant and tremendous and we have a really good platform to take advantage of this.
Speaker #1: We are making progress but not as quickly as we expected. In particular it should be mentioned that in the presbyopia field the good news is we are our timing is right.
Speaker #1: Yeah. The market has not yet been taken by others. But it is still in Switzerland as opposed to Germany or Holland. Still a novel concept.
Speaker #1: So patients need to be made aware that they have the option of getting rid of reading glasses therefore if they're not aware of it they are not searching the internet.
Speaker #1: Therefore marketing measures that are just online are not really sufficient. So I think we've basically had to develop an offline awareness campaign which under Dr. Jrgensen's guidance we've done and which will be implementing in the coming months.
Speaker #1: So I think in addition to the strengthening of management that Dr. Jrgensen has mentioned with somebody who's got a particular focus also on sales and marketing.
Speaker #1: I think we've put in place a number of measures that we are comfortable that we will be able to get to a break even in the course of the second half of this year or early in 2027 at the latest.
Speaker #1: So I think in Switzerland it's experiencing delay but I think our belief in the market potential is undiminished. Thank you. Next slide. Denmark as Dr. Jrgensen mentioned we had a very good start into the year in the first quarter.
Speaker #1: Especially March was a very strong month. Yeah. And then there were a couple of issues stacked on top of each other. One the fact that he talked about competitor had some press that created some apprehension that in turn caused some competitors to be very price aggressive.
Speaker #1: And also you know we did some changes in our marketing strategy. So I think the combination of these factors led to a significant drop in revenues in the second quarter.
Speaker #1: As you can see on the slide we have been taking measures both on the marketing side and as regards the sales process to increase conversion rates.
Speaker #1: So we expect the situation to improve and stabilize in the next two quarters. Next slide. Yeah. If we take all of that together and look at the key volume statistic the number of surgeries you can see that that has increased in the first half of this year over last year.
Speaker #1: In quite a positive way. With 15 and a half thousand surgeries done a new record for the group. Capacity utilization is still at 18.3% despite this rise in volume.
Speaker #1: The reason is that through the acquisition of Switzerland the eight clinics there we significantly added to capacity. Therefore we didn't despite making progress on volumes we didn't make progress on capacity utilization rate but that's going to be a key focus going forward to increase the utilization of capacity of course especially in Switzerland.
Speaker #1: Next slide. Looking at the cost side there are some structural effects. Some positive some more challenging. And you know there are some temporary effects which I've tried to highlight by excluding the one-off costs to give you a feeling for the underlying number.
Speaker #1: The first top left it is the case that salaries and doctor's fees over the last years have gone up from 23.6 to 28.5. We don't think unfortunately that it's realistic to assume we can get back to where we were in '22.
Speaker #1: I think it's you know there is yeah there has been quite a competitive market for surgeons. Nonetheless our recent experience in the last six months has been that things seem to be better there.
Speaker #1: It seems to be easier to recruit high volume surgeons. So I don't expect that to edge up further but I don't expect it to go much further.
Speaker #1: Down at this stage. Yeah. Depreciation you know we've invested in new technologies that's important for us to differentiate ourselves. So I think you know 12% is probably a realistic number going forward.
Speaker #1: I think we're where we've done well is in reducing the raw material and consumables cost. That's also an area where I think we will be able to hold that or maybe even improve it because as a result of combining with FIO we have really significant volumes and we are in negotiations with many of our suppliers.
Speaker #1: And we already have first significant successes so I do believe that we've got positive synergy potential in that area. Selling expense the number has gone up in the first half significantly mainly because of Switzerland.
Speaker #1: If we take out Switzerland it's a notch higher than prior year but not that much. So I think I think the number of the first half last year is definitely one that we're going to be targeting.
Speaker #1: Maybe a tad above it but what we have here in the first half is a special effect. Similarly with the administrative expenses because of the acquisition costs which are in the administrative expense category.
Speaker #1: We are in the first half at 20% if we exclude those we are at 13.7 which is still higher than it was a year ago.
Speaker #1: So we will be focusing in the second half looking at costs and seeing for ways to reduce those again. Next slide. Yeah. Balance sheet is strong.
Speaker #1: But here you need to take account if you look at our cash position this is the cash position before the acquisition of FIO concluded.
Speaker #1: And of course as you will know from reading our filings we have substantially deployed that cash for the acquisition of FIO. We've retained enough to have a margin and for our business but substantially we've deployed the cash and we also took on a syndicated loan provided by UniCredit of 75 million euros.
Speaker #1: So our balance sheet when you see it at the year end will be substantially changed. But of course IP&L will also be substantially changed neither the two are yet included in the first half year numbers.
Speaker #1: Next slide. Yeah. We come now to give you a little bit of an outlook and some comment on future strategies. Next slide. Dr. Jrgensen do you want to take over?
Speaker #2: No you can go on. You can go on.
Speaker #1: Okay. So if you look at the three main pillars they will seem familiar but there are some significant changes that I will highlight. First of all focus on presbyopia.
Speaker #1: That continues to be a key pillar of our strategy our growth strategy forward. Presbyopia is a attractive growth market for reasons that you are now familiar with in terms of demographics and you know what is now technologically possible.
Speaker #1: We are well positioned as a market leader both in lens replacement and also in especially for younger patients the presbyond laser procedure. In fact we have with Dan Reinstein the inventor of that procedure on our team of surgeons.
Speaker #1: We have an incredible track record and you know we believe that we are the market leader in that field. In Europe based on the feedback we get from vendors.
Speaker #1: So that's a very strong pillar that we continue to emphasize. The second one I've mentioned is you know we are despite the if you exclude the one-off items of the first half we are a profitable group even at relatively low utilization rate of 18.3%.
Speaker #1: So if we get that utilization up you know we can significantly improve profitability. That's going to be a key focus going forward improving that utilization through focused marketing measures.
Speaker #1: The third pillar is the one that's most changed because of the acquisitions we've done. Our focus over the next 6, 12, 18 months is going to be on the one hand integrating FIO.
Speaker #1: Which is not just an add-on but it's a strategic acquisition. It's an acquisition that will transform Euroeyes. So getting that well integrated is going to be a key focus.
Speaker #1: Dr. Jrgensen is working with Renz who joined our board and I can report that from my perspective things are going extremely well there. And second you know the Switzerland is fully integrated but from a business point of view of course it's not where it should be.
Speaker #1: We need to get that to a break even level of which is 1 million Swiss francs per month. We're currently at about 700,000 and we were at 250,000 in October when we started.
Speaker #1: So we've made progress and we're almost there. So I think you know Switzerland will be yeah a success story in the future. But you know at the moment it still is not and you know every month delay costs us cash.
Speaker #1: So really focused on getting that turnaround completed as quickly as possible. Having said that that does not mean that we don't keep our eyes open for add-on acquisitions.
Speaker #1: But it does mean that our focus is now more on integration than on acquisitions at least for the next 6, 12, 18 months. Yeah.
Speaker #1: And perhaps just to round off on that due to the consolidation of those recently acquired businesses which will have material impact on the group results we've temporarily suspended the provision of guidance until the integration is substantially complete.
Speaker #1: So we will reissue guidance in the near future but temporarily we feel that it's the correct approach to temporarily suspend it. Next slide. Yeah.
Speaker #1: So I'd leave like to leave you with three takeaways. I think we have a resilient business model. I think we've taken some key strategic steps.
Speaker #1: We are especially after the acquisition of FIO the market leader in presbyopia treatment. Which is very strong and robust growth business. We're now a truly global business as a result of these acquisitions.
Speaker #1: Making us of course an attractive partner for other businesses and giving us a nice natural hedge through the geographic spread of our group. And you know there are I think operational synergies yet to come.
Speaker #1: First of all integrating FIO will add significantly to the financial profile and the profits of the group. And of course the synergies of combining the two groups as well.
Speaker #1: Yeah. The integration I think will definitely be a catalyst for future expansion. So I think that brings us to the end of the presentation.
Speaker #1: Thank you very much for your attention and I think we are now open for Q&A.
Speaker #3: Thank you very much. Thank you to Dr. Jrgensen and Mr. Bracklo. We'll now moved into the Q&A sessions. If any investor wish to ask a question please type your questions in the Q&A box on the right-hand side of the page.
Speaker #3: And we will help to read it out. Please note once again that the Tencent meeting is for listening only. Now let us allow the few seconds before we move into the Q&A.
Speaker #3: First questions comes from Cyrus Bockwill. His question is any update on your three-year organic guidance from the financial year 2025? Any results? Amongst others it was a net profit trigger in the low 20s.
Speaker #1: Yeah. Should I take that question?
Speaker #2: Yeah. Yeah. Take that.
Speaker #1: Okay. I think as as I just mentioned at the towards the end of my presentation and as we stated in the interim report we've temporarily suspended the provision of standalone organic revenue and results guidance while we integrate the recently acquired businesses.
Speaker #1: This should not be interpreted as a change in our view of the underlying prospects of Euroeyes. It reflects the fact that the scale and composition of the group have changed materially in a relatively short period.
Speaker #1: FIO only became part of the group on July 22nd and therefore was not included at all in our first half-year results. Switzerland meanwhile remains in its turnaround phase.
Speaker #1: We're therefore currently managing both the integration of a significant new profitable business and the continued turnaround of Switzerland. In that environment we believe it is more responsible to allow the integration to progress and to establish sufficient visibility on the performance of the enlarged group before providing the market with updated financial guidance rather than providing guidance today that may need to be revised as the integration develops.
Speaker #1: This does not mean that I would like to emphasize that that we are no longer communicating our expectations for the business as set out in the interim report.
Speaker #1: We expect FIO to contribute materially to the group's result in the second half and thereafter. We expect synergies from the acquired businesses to emerge progressively.
Speaker #1: And we continue to see significant opportunities to improve utilization across our existing clinic network. We intend to resume financial guidance once we have sufficient visibility on the enlarged group to provide guidance on a robust and meaningful basis.
Speaker #1: Next question.
Speaker #3: Thank you. Next questions is about could you please comment on your capital allocations framework given the significant change in capital structure? How was the Netherlands operations in July and August after the acquisition was closed?
Speaker #3: What can Euroeyes learn from the acquired to maximize capacity utilization?
Speaker #1: Yeah. I think that's several questions at once. Could you give me the first one of those and then we just take them one by one?
Speaker #3: Sure. Let me repeat one by one. The first part of the question is could you please comment on your capital allocations framework given the significant change in capital structure?
Speaker #1: Yes. As I mentioned when talking about the cash position and when I talked about acquisitions we have now more or less fully deployed the capital we had raised at the IPO.
Speaker #1: Yeah. With the FIO acquisition. Indeed we have taken on a 75 million loan previously our balance sheet did not have any indebtedness. Yeah. So as a result of that therefore the you know geographic focus has shifted towards Europe.
Speaker #1: Yeah. And we will continue to do add-on acquisitions in Europe we have within the syndicated loan align for acquisitions. So we are in a position to do further acquisitions that we find are of strategic benefit for the group.
Speaker #1: And as we've communicated in the past our acquisitions focus will be on Europe and strategically also if the right opportunity emerges on the Americas especially the USA.
Speaker #1: Next question.
Speaker #3: The next part of the question is how was the Netherlands operations in July and August after the acquisition was closed?
Speaker #1: Okay. Just a minute. The acquisition completed on July 22nd and at this stage we have a complete set of management accounts for July but not yet for August.
Speaker #1: We've therefore don't want to comment on August before those numbers have been finalized. What we can say is that the performance we've seen so far is encouraging.
Speaker #1: FIO's year-to-date performance through and including July is ahead of budget and on the basis of the information currently available to us we expect the business to achieve its full year budget.
Speaker #1: We are therefore pleased with the initial performance of FIO following completion. It is important to remember that FIO was not included in the first half-year group results.
Speaker #1: It will be consolidated from July 22nd onwards and as stated in the interim report we expected to make a material contribution to the group's consolidated results in the second half and thereafter.
Speaker #1: It is still early in the integration process and our immediate priority is to maintain the strong operating performance of FIO while integrating the business in a measured way.
Speaker #3: Great. The final part of the question is what can Euroeyes learn from FIO to maximize capacity utilization?
Speaker #1: Yes. I think there are two elements that we can learn from. One is FIO has a hub and spoke strategy. Dr. Jrgensen already referred to that when he showed you the overview of the group and where he made a distinction when he was presenting the Netherlands to say that of the 15 units in Holland only three are surgical centers.
Speaker #1: Yeah. They are larger than some of the surgical centers that we have in our group and they are then supplemented by a if you call that clinic the hub by a series of spokes the FIO calls them satellites we might call them consultation centers so in other words these consultation centers go close to the patient will do the initial diagnostic and the patient consultation and then send them to the nearest clinic for treatment.
Speaker #1: Yeah. And that hub and spoke system works quite well. We have in the Euroeyes group done something similar. So we do have some consultation centers but we've not done it in such a systematic way as FIO.
Speaker #1: I think that's definitely one element of FIO's strategy that we will seek to implement elsewhere. And Dr. Jrgensen is working on that with Rens and the FIO team that's one of the integration ideas.
Speaker #1: And the second one is in you know the approach to marketing. I think there you know both groups are strong in marketing. So both sides can learn from each other.
Speaker #1: But I think there definitely some marketing concepts and ideas from FIO that we will also use in our group. Next question.
Speaker #3: Thank you. Next questions comes from Bu Quantrum. The investors ask you mentioned the group will continue its acquisition strategy. Given the current valuations of the core business would share buyback not be a more value aggressive than anything done at an acquisition multiple?
Speaker #1: I mean the board of Euroeyes will continue to examine the best way to increase shareholder value. We have in the past carried out some measures of share buyback and we've also taken opportunity or taken advantage of strategic opportunities such as FIO which will really take the group forward from a strategic point of view strongly.
Speaker #1: So I think both are shareholder value increasing options but the board examines and considers on a regular basis.
Speaker #3: Thank you. Next questions. Will the loss continue in the second half of the year?
Speaker #1: The my answer to that would be we expect the earnings profile in the second half to be significantly better than the first half. Although as we have stated in the interim report we have temporarily suspended our financial guidance while we integrate the required business.
Speaker #1: However having said that there are three important factors to consider. First the first half result included significant one-off costs associated with the FIO acquisition.
Speaker #1: We incurred approximately 16.2 million of acquisition related costs in the first half principally advisory and transaction related costs. These were directly related to executing the acquisition and will therefore not recur at the same level in the second half.
Speaker #1: Second while Switzerland remains in its turnaround phase in the second half we are making progress with the restructuring and expect the negative contribution from Switzerland to reduce as the turnaround progresses.
Speaker #1: As stated in the interim report we expect the benefits of the turnaround to begin materializing towards the end of financial year 2026 or in early 2027.
Speaker #1: Third and maybe most importantly FIO contribution was not included in the first half-year result because the acquisition only completed on July 22nd. FIO's results will be consolidated from that day onwards and as we stated in the interim report we expect FIO to contribute materially to the group's consolidated results in the second half and thereafter.
Speaker #1: So in summary there are clearly important factors which should make the second half earnings profile substantially better than in the first half. However given the significant change in the scale and composition of the group following the acquisitions we do not think it would be appropriate at this stage to provide a specific forecast for second half profit or loss.
Speaker #1: We want to have sufficient visibility on the enlarged group before providing updated guidance.
Speaker #3: Thank you. Due to the time constraint let us take the last questions. UK's EBITDA dropped significantly in the first half. What were the reasons and will there be any measures to improve UK's operations in the second half please?
Speaker #1: The first point I would make is that the underlying revenue development in the UK remained quite positive. Revenue increased by approximately 8% to 66.7 million Hong Kong dollars with growth across both presbyopia and myopia treatments.
Speaker #1: In particular presbyopia revenue increased by 9.6% while RCL revenues even increased by 21.5%. So the decline in EBITDA was not caused by a contraction in the underlying business.
Speaker #1: The reduction in EBITDA reflects a combination of structural and temporary factors. On the structural side we've introduced new surgeon arrangements which have increased doctor's costs.
Speaker #1: This is part of the development of the UK business and means that some of the increase in the cost base is permanent rather than temporary.
Speaker #1: At the same time we incurred costs during the first half in preparation for the expansion of our UK platform including our third clinic. These costs have been incurred ahead of the revenues that we expect the additional capacity to generate.
Speaker #1: We have also deliberately increased marketing expenditure to support growth. The interim report specifically identifies higher marketing investment in the UK in support of our growth objectives.
Speaker #1: So we see the first half EBITDA reduction as a combination of a changed cost structure and investment ahead of future growth. In the second half management's focus is on improving operating efficiency and utilization of the existing platform while bringing the additional capacity into operation.
Speaker #1: We've therefore expect UK profitability profile to improve as the temporary and pre-opening effects reduce and the additional capacity begins to contribute. However because of the structural change in surgeon costs investors should not simply extrapolate the historical UK EBITDA margin.
Speaker #3: Thank you very much. Thank you to Dr. Jrgensen and Mr. Bracklo for the very comprehensive presentations and elaborations. This concludes our presentation today. Should you have any questions later on please feel free to contact SPRG.
