Medicover AB

STO:MCOV B

Earnings Call Transcript 2021-Q2

[Operator]

Good day, and thank you for standing by. Welcome to the Second Quarter 2021 Results Presentation. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions]. I would now like to hand the conference over to your speaker today, Mr. Fredrik Ragmark. Thank you. Please go, sir.

[Fredrik Rågmark, CEO & Director]

Hello. Good morning, everyone. Welcome to our second quarter presentation. This is another fantastic and strong quarter. I would like to start with paying tribute to all our absolutely fantastic staff, who continues tirelessly after now soon 18 months of pandemic to provide reliable and accessible services to all our customers, which I think is remarkable under the circumstances. We have no doubt had the most challenging quarter from a public health perspective behind us. We had unprecedented levels of infections in India with knock-on implications for our hospitals in the first half of the quarter, and likewise, elsewhere, we have seen significant impacts on our operations from the infections. Obviously, this declined towards the end of the quarter. Underlying business growth is really strong and robust. That is a really key takeaway message to everyone today. While these results are significantly enhanced, obviously, by significant additional COVID-related revenue and contribution, one should not miss the fact that underlying business is strong, robust and profitable. So overall revenue, we came just short of EUR 350 million for the quarter. That's up an impressive 75.5%. We've had significant foreign exchange headwinds that we will speak more about. So from an organic growth perspective, that's even higher, 79%. And the point I made with underlying business, that was -- it came in at EUR 267 million. So grew by more than 40%, organic by 42%. As you see in the report text, we have also tried to show illustrative underlying growth. It's not so easy to illustrate for you what is going on beyond COVID. But in that table, we show you an underlying illustrative year-on-year growth when we pull out the last year's impact of about 10% despite very negative foreign exchange headwinds. We estimate that to be a minimum of 15%, as we can't really, in any way, reliably estimate in the current quarter how much business we are now losing out due to COVID, but I think that still gives you a good indication of where we are relative to last year. Looking at the specific COVID-19 revenue for the quarter, that was up to more than EUR 80 million, so significantly up from the prior quarter, where, obviously, as we will come to at most of the additional revenue in this category is coming from -- versus the prior quarter is coming from our health care services side and the Medicover Hospital India unit, as I already mentioned. We have a very strong pickup in our private pay Fee-For-Service business, with over 120% growth versus prior year. And that is now up to more than 60% of group revenue. And point already made, you have 7.5% euro exchange headwinds within these numbers despite the rather strong figures. And just commenting, you see the two pie charts at the bottom that we show over time. It may just be worthwhile to see the very large share now of Fee-For-Service that has continuously grown I think every quarter as a proportion of the overall pricings we listed. We have the funded business, which you see is back growing 12%, which is really strong. I'll come back to that in a moment. You recall this time last year -- the second quarter last year, we had a softening, obviously, in that business, as in all other businesses, but then that has rebounded very strongly. And you also see in our public business being 20% of the total. That is up by more than 50%, obviously, on the back of a lot of the testing that we're doing being publicly reimbursed. On the geographic split, may be worthwhile just to draw attention to the fact that India is now up at 12% of group revenue. So you see ahead with Romania as our third biggest geography of the Poland and Germany. And obviously, all of the geographies growing very strongly. So moving on -- so this fell through to a very strong profit growth with EBITDA up north of EUR 70 million for the first time in our history, so EUR 71.8 million for the quarter, at 20.6% margin. And the underlying business, which may be the most important here to look at, being almost EUR 41 million, so not far away from doubling from last year, a margin of 15.3%. Now that's up 3.5 percentage points from last year. Now it's important, sometimes memory is short. So this time last year, we had the second quarter reporting 2020 when things look rather dire. And you recall that we did very extensive cost reductions in that quarter before we knew sort of where the territory was heading. And of course, if you -- if one really wants to understand what's going on year-on-year, we need to take that into account so that was an additional, you see 7% of Q2 margin last year, which were the temporary cost reduction. So overall, we are more than 10 percentage points up in EBITDA margin, which, I think, illustrates the fact with the strength in the underlying business. And the COVID-related contribution, around EUR 31 million, so a little bit more than 5 percentage points of the total margin, and also EBIT growing very strongly. Obviously, percentage-wise, the further down the profit and loss statement you come, the larger are the percentage growth versus prior year as the base is lower. And then going into our divisions, starting with Healthcare Services, again, super strong EUR 186 million revenue, 68% up, organic growth just short of 70%. Again, I think I've said that for 3 or 4 consecutive quarters, I don't know, however, many times in your life, one will report organic growth like that and somehow each quarter it has gotten stronger. So we will see how long that will continue. The revenue from the underlying business just short of EUR 150 million, so up 35%. Again, when you read through the longer report text, you will see that we have tried, in order to illustrate for you, look at the illustrative underlying growth. And clearly, in Healthcare Services, we still have a situation where the underlying business is not back to where it was pre-COVID. So we show there illustrative underlying growth of around 4%. And we estimate, as we write in there that to be a minimum of 12% looking at what we think it's still not recovered in that business. So I think it's fantastic to see these kinds of result in this division despite the fact that we are still not back at the pre-COVID levels in the underlying business. As I will talk about later, on the DX side and Diagnostics Division, there we see that underlying business is basically back to where it was before the pandemic hit. So we do have a slightly different situation in two divisions, that's important to remember in terms of recovery from the COVID impact. So here, revenue from COVID jumped up to EUR 38 million. So that is a much higher level than we have previously reported in this division. And point already made that the large proportion of that increase is coming out of Medicover Hospitals India that did an absolutely phenomenal job to contribute to the sort of Indian situation and deal with the incredibly stressful situations that was the fact all across India and certainly in the areas where we are operating. So Fee-For-Service in Healthcare Services Division is now up at 55% of revenue. And again, just outstanding growth numbers. Important is our integrated health care model, which is sort of largely the anchor in this division. This is how we started the business 25 years ago, and for many, many years, was basically what this division did. Now as you see on the left pie chart at the bottom, it's around 1/3 of divisional revenue, but still obviously really very important. It's a very stable business. It's growing very nicely. You see we took in more than 35,000 new members in this quarter, which is a significant number, and we're up some 10% versus the prior year quarter. So more than 1.4 million members. So don't underestimate the importance of seeing that growth number. Again, as you remember, this is a deferred revenue model. So we bring almost all of this revenue with us to future subsequent quarters. So that's a really important number. Within the Fee-For-Service area, as you know, we have dental, we have all kinds of things. Dental performed particularly well in the quarter. That's obviously very prioritized growth area for us where we're investing heavily, both in organic expansion in Poland as well as M&A activities. We've seen a good increase in the patient admissions in our hospitals, albeit that elective surgery is still an area where we're not yet back where we were pre-pandemic. And particularly, for example, in India, in our hospital business that when the COVID situation dropped off in June, which is good from a public health perspective, it's not the fact that you immediately from one day to another replace your COVID admissions with elective surgery. So that's always a period of a number of weeks, month or 2 until you replace that. And then with Medicover Sports, so the gym and wellness business, that was very significantly impacted. In fact, that was closed, as you know, and that reopened in Poland towards the end of the quarter. But of course, as a quarter total, that was still heavily impacted. And again, commenting on the pie charts. I made the point on the funded business being down to 1/3. You see the public revenue in this division remains at about 10%. And again, noteworthy perhaps to say here is you see India is up now representing just short of a quarter of divisional revenue. So it's good to see we build scale in our Indian business, which certainly is a condition for why we started to invest there a number of years ago. Then looking how this has sort of dropped through in Healthcare Services to contributions and, profits so good profit growth. So EBITDA up to EUR 33.4 million, so margin up to 18%. In fact, the underlying business, you actually see a margin drop here or contraction to 14.5% from 16.4% now. Very, very important here to remind ourselves again being what we did last year. You recall we have quite different contribution profiles of our two divisions so -- whereas profit dropped very significantly in the diagnostics side in the second quarter last year. It certainly dropped in Healthcare Services, but less so because this is less sort of contribution sensitive as opposed to the diagnostics side. However, we did cut costs very significantly. So when looking on year-on-year, you clearly need to take that account and pulling out the cost reductions, which were one-off for the quarter last year where we are up some 400 basis points in EBITDA year-on-year for the quarter. So -- and again, I'll remind you that, that is despite the fact that we estimate, here, we have significant revenue in the underlying business, which is not yet back. So that's a really strong performance just to underline that so everyone is clear on that. We estimate EUR 12 million of COVID-related contribution or 3.5% of the margin. Clearly, fertility services remains impacted by the COVID situation. And in India, for example, as India was so heavily impacted, that was largely shut during the quarter. Fertility in Poland did okay or actually very good and not so much impacted. And so again, it depends a little bit from geography to geography. Other areas were not impacted all such as maternity services, for example. We did a major extension into a new hospital unit in India in Vizag on the East Coast of India. That's the city where we already are located. So this is a good, good extension, a very sizable facility. So a 500-bed unit, so that's obviously very significant. By adding that, we could significantly fill that up with COVID patients at the height of the crisis. And we will, I'm sure, fill that up now with elective surgery as the country hopefully returns to normal. Important to point out is the utilization of our virtual care digital channels remain on a high level. So I think we made the point before that we think our customers really like that, and we expect post-pandemic to remain at levels much higher than before the pandemic and that's really what we still see. Then shifting to Diagnostic Services. So a fantastic growth, again, 86% up to EUR 169 million, 92% organic, nothing to complain on that really. And here, revenue from underlying business went up to EUR 125 million, more than 50% growth. Again, you see in the report text, where we talk about the illustrative underlying year-on-year growth, and here, we estimate that to be at 21% and say that we see that really being back to where it was before the pandemic hit. So that illustrates the difference in the two divisions. So really strong underlying growth in diagnostic and basically normalized. And then on top of that, you have all the COVID-related activities. And COVID,for the quarter then in this division being EUR 44 million. So you see versus last year being EUR 8 million, so more than a fivefold of COVID-related revenue in this division for the quarter. So strong Fee-For-Service at more than doubling 69% of divisional revenue, super strong. And obviously, the whole sort of Medicover Genetics area, which obviously is, perhaps, the area of everything we do, where we are most busy dealing with the -- all the testing around COVID. They're doing very, very well. And one element of all of this that we have seen is that we see more and more customers across Europe outside of our current operating geographies are finding us and starting to contract with us. So that's a really positive sign. And on the pie charts here, you can see the right-hand geography. Germany, obviously, remains the largest geography. Interesting to see Ukraine is more than doubling, as you see. And in fact, it's now the second largest geography in DX. Romania doing really well. And you see Poland also has had a phenomenal growth in terms of geography for DX. And then, of course, with a marginal sort of contribution nature of this business and having this kind of volume put on, you get a big operational leverage on to profits. So EBITDA jumped very significantly to EUR 43.5 million, just short of 26% margin, underlying EBITDA threefolded. And if you then take into account the cost reductions that we had last year around, that I commented on in the other division, you see we were 18 percentage points up in EBITDA. So I think that well illustrates the point that we have made many times that how scale and marginal contribution matters in the diagnostic business. And we estimate that we had some EUR 19 million EBITDA contribution in the quarter, or 6.1 percentage points of margin. So strong growth in number of laboratory tests, of course. And not to be forgotten is that we keep investing very aggressively. Joe will speak about that later on, but just in terms of our BDP network, in the quarter, despite everything else, we had to do, we opened some 23 new BDPs across the region, and we're approaching 800 as the absolute number in our network. Then just make the point on India. I talked quite a bit about India already. But one thing we have done or rather our colleagues in India have done has been to be really active on the vaccination front. Everyone knows how important it is to get vaccinations out in society to be prepared for the next wave. But that I think, at least in our company, we are as close to certain as one can be that there will be another wave coming in the autumn. And of course, the more people are vaccinated, the more resilient we will be as individuals and societies to that. So one just can't underestimate the importance of getting vaccines out. Our colleagues in India have been phenomenally effected with this. So these pictures are from a particular drive in Hyderabad where we -- in one single day, that we have repeated several times, have vaccinated more than 35,000 people in a single day. And now we're above 300,000, and we keep counting. We have contracted more than 1 million doses. So we still have a lot of work ahead of us. This is not a for-profit activity. And we do that as a -- at cost coverage, and we see this as an important contribution to society and our role in the health care universe in India and elsewhere. So with that, I hand over to Joe to talk through the financial side of things.

[Joe Ryan, Chief Financial Officer]

Thank you, Fredrik. Hanna, maybe if you could go through to Slide 12, financials.

[Hanna Bjellquist, Head of Investor Relations]

Sure.

[Joe Ryan, Chief Financial Officer]

So net interest cost, EUR 3.9 million. We have within that EUR 3.9 million, some EUR 3.2 million, which is the IFRS 16 interest charge for leases of our premises. And so our underlying debt interest about EUR 700,000. Had some positive items going through as well, so that's a little bit lighter than we see -- we expect on a normal basis. FX gains, EUR 2 million through the P&L account. A large part of that being the euro-denominated leases in Poland, where the currency has strengthened over the quarter, noncash, obviously, and an unwinding of the weakness that we saw over 2020. Tax charge, we estimated that at 27% effective tax rate for the 6 months. We had, on the first quarter, an estimate of 28%. So we're taking that down slightly with a little bit of better visibility in terms of where we look for the full year. So tax paid, cash-wise was some EUR 9 million. We've paid EUR 5.9 million last time around for the 6 months. Cash flow, obviously, that's one of the themes, very strong, with the underlying strong profit performance. So EUR 44.5 million before tax payments, increase in working capital of some -- just short of EUR 30 million. We expanded the business very strongly, as you can imagine, and some of that money is going into financing the working capital for that. For the 6 months, just short of EUR 105 million cash flow before tax and increase in working capital EUR 35 million. Cash and cash equivalents, that is -- strengthens. We're up to some -- so excluding our short-term liquid investments from -- just short of EUR 78 million and that's from just below EUR 50 million at the at the year-end. We moved EUR 15 million from our liquid short-term investments into cash to reduce that balance by EUR 15 million since year-end. Loans payable net of cash and the short-term liquid investments, EUR 84.3 million. That's up a few million from year-end as we've been investing quite heavily in both our inorganic and organic side. So if you could go to the next slide, Hanna. Our lease liabilities, that is up some EUR 44.3 million. A large part of that is driven by acquisitions where we recognize the leases that we acquire, bring onto the balance sheet that way. So that sort of makes up a quite a large chunk of that EUR 44.3 million. So on top of that, we've then been adding new facilities as well and particularly in Poland. Within that number there then is the new hospital that we added the large new hospital in Vizag, and that's a 25-year lease. So that's a substantial part of that increase. Lease liabilities follow as well being up, so that's up at some EUR 240 -- just short of EUR 244 million, that's from around about EUR 200 million at year-end. Our capital program in terms of our organic side, we invested some EUR 23 million in the quarter, about 69% of that has been growth CapEx, 31% maintenance. So as we ramp the capital investment up, then a larger proportion of that is then going in terms of the growth side. Expansion of facilities in India, we've been quite active there, dental and clinics in Poland and some additional laboratory capacity as well and BDPs, obviously. So for 6 months, we're at just short of EUR 43 million in terms of capital spend, organic. And that breaks out about 60-40, growth and maintenance. We expect to be able to continue to invest on our organic side at quite a pace. So we're definitely aiming to keep that pace of investment up. We have the facility -- we have the ability to invest that, and we have the opportunities and the demand is there. So we're trying to grow into that. IFRS equity strengthening there. So we came up to just short of EUR 541 million from year-end. That includes some positive translation movements, just short of EUR 8 million. Indian rupee, hryvnia and zloty have been strengthening. And it much a story about the euro-dollar movements and some unwinding of what we saw -- the weakness we saw last year. Liquidity, very strong. So we have with our cash on hand and our available facilities some just over EUR 320 million of liquidity available. So not only are we ramping up in terms of our organic capital investment, but also, we certainly will be expecting to be able to deploy some of that capital into inorganic opportunities as well over the coming future. Next slide, please, Hanna. So this is just looking at our target. It's a little bit difficult here really in terms of trying to unpick this against our targets, obviously with the prior year comparatives being so impacted by COVID, but for the record, you can see there 79% organic revenue growth above the euro growth with the headwinds from FX, and 6 months up over 56%. Our adjusted EBITDA margin, again, very strong, being supported there by COVID. But I think as Fredrik was talking to you earlier on in terms of the underlying business, I think we're well on progress in terms of making on the underlying basis, our targets and being comfortably there. And then on our capital structure, we have -- in a fantastic position in terms of being able to have a really strong balance sheet and plenty of capacity in terms of being able to support that organic expansion and also some inorganic expansion that we expect to see coming. So with that, Fredrik, I hand back to you.

[Fredrik Rågmark, CEO & Director]

All right. Thank you, Joe. And that sort of concludes our messaging. And obviously, we're happy to try and answer comment on any questions you may have today.

[Operator]

[Operator Instructions] And your first question comes from the line of Karl Norén from Danske Bank.

[Karl Norén, Analyst]

So I have a couple of questions. But if we can start with on the diagnostics side, maybe, can you say anything regarding the revenue split for a different amounts in the quarter for the COVID testing just so we get a sense of how the run rate is looking now when we go into Q3 and the second half of the year?

[Fredrik Rågmark, CEO & Director]

Sorry, you said the split in different kinds of tests or during the quarter?

[Karl Norén, Analyst]

During the quarter, the different monthly revenues from COVID testing, just so we get a sense on the run rates.

[Fredrik Rågmark, CEO & Director]

No. I mean I don't think we will go in to start to comment on the monthly run rate. We -- I think the point we're making is that, clearly, the first part of the quarter, so the first 2 months out of the 3, was quite a bit higher than the third month. So I think the situation is that as I write there in my commentary that we -- second half of the year, we expect to be lower than annualizing the second quarter. However, the big uncertainty here is the -- is what is going to happen with the delta and the fourth. I mean, as I said before, we are certain there will be another wave coming in the autumn. But we just don't know considering the level of vaccinations how that will play into our testing volume. So we're sort of being quite affirmative on that it will be lower than annualizing the second quarter for sure. But how much, we just refrain from saying that because, quite honestly, no one knows.

[Karl Norén, Analyst]

I agree. Good. And another question maybe on the Diagnostic Services side. I think when I look at the underlying margin here, I think it was 19.6% now in Q2. It seems to be down somewhat from Q1 levels, which was extremely high. Can you say anything on what you're seeing on the margin side sequentially in diagnostic side, the underlying, please?

[Fredrik Rågmark, CEO & Director]

Sure. You want to comment on that, Joe? Well, perhaps, we lost Joe. So I comment on it. So...

[Joe Ryan, Chief Financial Officer]

Sorry, the gadget that was speaking into the mute button now. You want to go ahead, Fredrik?

[Fredrik Rågmark, CEO & Director]

No, no, go ahead, Joe. That's where you take that.

[Joe Ryan, Chief Financial Officer]

Yes. Yes. So yes, growth has been very, very strong now in our underlying. It's been really good. Seasonality, we normally see seasonality between Q1 and Q2, but we're not -- it's not really there this year. It's not really surprising given the COVID impacts that are still at some sort of level there. Some things are still going on, whether it's more or less demand or people impacted by the public systems being stressed and coming to us as that are going away. So maybe some migrating demand or something like that. So -- and then we continue to invest. And we've got growth coming out of our genetics and our clinical research side. So -- and then we've got the FX side coming back and holding this back. So we've got a little bit of all of those things going ahead. But if you look at our business as usual margin, it's actually very strong when you look at it on a normalized basis. If you go back to 2018 or you go back to 2019 for Q2, and then also sequentially quarter-on-quarter, you see a drop, you see anywhere between -- around about 3 percentage points drop on a normalized basis coming down. So if you look back to '18 or '19, we were around about 17%, 17.5% in terms of our EBITDA margin. And now we're reporting at 19.6%. But you're quite right to observe that that's quite -- that's sequentially quite a reduction. I think we've got a reduction of some -- almost 6.5 percentage points, something like that. So you need to bear in mind that when we're estimating on the COVID side, it is an estimate, and we allocate some costs between COVID and some costs between business as usual. We changed that around a little bit between Q1 and Q2. So sequentially, it's not exactly comparable. But the estimate in terms of the margin -- the estimate that we do for the COVID business is not a marginal cost basis. So we are allocating some costs from the labs and the premises into the calculation for the COVID side. We changed that around a little bit in Q1 and Q2 because, effectively, the underlying side was not probably a fair reflection of what is actually going on there in terms of the underlying. So maybe some of the allocation was too much weighted towards one way than the other. So it's really only to try and give you some sort of guidance. It's not an exact thing. And we're going to have to see how we come out of COVID when that goes away, how the margin settles down? But I think, as Fredrik said in the report, we're very confident in terms of our mid-term targets, and we're very happy on that. And when we look sequentially, we're definitely making very good improvement over a longer time series.

[Karl Norén, Analyst]

Yes. That's very helpful. And then just the last question on India actually. I guess the question, what do you expect to happen now when it returns to a more normal situation, or hopefully, it will return to a more normal situation? How will that impact you in terms of margins and revenues? I guess you have ramped up quite a bit. So I guess you have a bit higher cost base there, and now we have had quite good occupancy. So it would always be interesting to hear how you expect that business to develop in the upcoming?

[Fredrik Rågmark, CEO & Director]

Yes. I mean I think there's sort of three things to say there. Fundamentally, we're just really, really positive and encouraged. So you can see how much emphasis and capital we deploy in India because we think it's just a really big opportunity for us. So otherwise, we wouldn't pay so much attention to it. And now short-term, the first thing is to say, again, sort of repeat my initial answer to you. I mean, there will be another wave hitting India as well. The question is just when it comes. So at some stage, we're going to have our beds filled up, hopefully. I say, hopefully, from a public health perspective, not as much as we saw in this quarter, but we will have that -- I don't want to sound like I know that for 100% certainty, but in any planning we do that's part of the scenario. Now the longer term, which I think is sort of what you asked, the mid-, longer term, clearly, with COVID filling it up, you get exceptional high bed utilization. So it's not really reflective of what is the true long-term state of nature. Now we are super confident that, over time -- and that's not 1 month, but it's not 1.5 years either, so it's a quarter or 2, we will be filling the bed capacity that we have taken on because we are -- we're well located, good brand, a super good operator. So we have no hesitation that the capacity that we are bringing on will be well utilized. In fact, the way we have looked at this, and, again, I mean, the Vizag one that we put on this quarter, the reason for doing it, you can say, very short-term, we could take advantage and supporting the COVID situation. But fundamentally, we make that expansion because it's the right thing to do. And now we were just a bit quicker than, perhaps, it would have been if there would have been no COVID because short-term we could support with COVID, but it gave us a very good opportunity to extend the footprint. That's how I think you should sort of think about it.

[Hanna Bjellquist, Head of Investor Relations]

Any other question? We...

[Operator]

[Operator Instructions]

[Hanna Bjellquist, Head of Investor Relations]

We have...Okay, go ahead.

[Operator]

We still have two questions on the line. And your next question comes from the line of Grace Li from Jefferies.

[Qihui Li, Former Equity Associate]

I hope you hear me well. I have two questions, if I can, and maybe like a third question, if there is a sort of time availability and I'll just jump back on the queue. But my first question is with regards to, for example, in India. If India is 24%, Healthcare Services growing, 247%, how big do you see India being a proportion of business in 3 years? So that's my #1 question. And #2, in regards to sort of COVID because organic growth is 79%, then you have said 37% of that is due to COVID. Just so that we can understand how the sort of dynamic is evolving, first, how much of that, for example, split between Fee-For-Service because you said majorities in publicly reimbursed, but then in terms of that Fee-For-Service split versus public and funded, as of all? And second, how do you see sort of evolving in terms of pricing versus the demand dynamics?

[Fredrik Rågmark, CEO & Director]

So if I take the first one, and Joe can comment on the second one. So we will not give you a specific percentage what India will be of our revenue in 5 years' time. I don't think that would be appropriate. But we have said many times when that question has come up before that the reason to go to a geography like India is that you intend to build -- you intend and believe that you can build scale, otherwise, it's just not worthwhile. And I think we have built partly because COVID have supported us, but I wouldn't sort of overplay that matter. I think we have been -- or rather our Indian colleagues with our support have been very skillful in building scale since we got involved whatever, 3 years ago. And no doubt, will we do that many times over, over the coming 5-year period. So our Indian business will be multiple the size it is now in the future, no doubt about that. That's just the nature of what we do in India. We invest heavily to grow the footprint, and we fill up our facilities and demand is strong. So where that's going to leave us in 5, 10 years' time, we will see. Because, of course, as a proportion of our overall revenue, it also depends on how all the rest is growing. So no doubt will India grow very strongly, but the other side of the group is growing strongly as well. So it's difficult to -- what even if I had a number, I wouldn't be specific on that 5 years down the road. So -- but and then perhaps, Joe, you want to comment a little bit on the sort of pricing pressures on COVID testing in the public system?

[Joe Ryan, Chief Financial Officer]

Yes. You were asking about how much is public funded, how much is individual pay Fee-For-Service. We haven't got that number in terms of splitting that out for you, but what we -- just to give you a little bit of flavor in respect to that, we've seen strong growth, and you see that in the split of the revenue. You've seen strong growth in Ukraine. Part of that is COVID, although we've seen the testing levels actually fall off probably steepestly in Ukraine. But there, it's all 100% private pay. In Romania, we're doing very little public work now at the moment. It's almost all private pay there. Poland, it's almost all public pay. And Germany, it's almost all public pay in our sort of traditional business. But then we have sites like in Munich Airport and some other locations where we -- it's paid by the users, not reimbursed. And then we have also specific contracts for clients as well, which then would come under the sort of Fee-For-Service, nonpublic reimbursement level as well, where we're doing contracting for commercial companies, and that would fall under that block there as well. So I hope that gives you a little bit of flavor. And then coming on to the pricing question, we're seeing pretty good stability in terms of pricing, both on public reimbursement. We're not seeing any movement on there. And then in terms of the out-of-pocket and Fee-For-Service payments, also right there. Now we didn't partake in this price gouging process, but some suppliers did when times were really hard and there was a big peak in demand. We kept our pricing as it was before. So we've been fairly stable in terms of our pricing all the way through.

[Qihui Li, Former Equity Associate]

How about in terms of going forward?

[Joe Ryan, Chief Financial Officer]

I don't think it's going to be pricing, which is going to be the issue. It's going to be volume in terms of the impact on performance and profitability coming from COVID. I think, in fact, it's going to be quite difficult to see pricing reductions because you're going to see the volume fall off. Now then what happens in Q4 with Delta variance and the seasonal impact, it would be interesting to see.

[Operator]

Thank you. And your next question comes from the line of Klas Palin from Erik Penser Bank.

[Klas Palin, Research Analyst]

Congratulations for a very impressive quarter indeed. I would not focus on COVID, but I wonder, you highlighted a very good development in your subscription business in Poland, particularly. Do you see a similar pickup in Hungary and Romania, perhaps?

[Fredrik Rågmark, CEO & Director]

Yes. Klas, just to remind you that, in Hungary, we only have the risk carrier. So that's just important. But yes -- the short answer is yes to that. But remember that the scale in Poland is so much bigger than in Romania and Hungary. So the relative impact on us from seeing that pickup is much bigger in Poland because, relatively, we see so much more members.

[Klas Palin, Research Analyst]

Yes. Absolutely. But I also recognized that you are investing or setting up a new hospital in Bucharest. Maybe you could comment what is your plans for a couple of years going ahead in the Romanian market? Are you planning for setting up more hospitals and clinics, I guess?

[Fredrik Rågmark, CEO & Director]

Yes. I mean we are heavily investing in Romania. We have so done for quite some time. We whenever -- I mean, I don't know -- 2, 2.5 years ago, we bought that Pelican Hospital up in Oradea. And we've investing in extending that. That's done phenomenally well for us through these periods. It's been filled up. We bought some other sort of ambulatory businesses overall, where we're very pleased with what we see in Romania. The prepaid business or the subscription business that you're asking us about, it's -- yes, we see some really encouraging signs. And then, importantly, we actually didn't write in this report about the hospital investment in Bucharest, you have obviously seen that. It's been published. That's a really good thing. Clearly, we've signed a contract. It's going to be, whatever, 15 months or so until that can open its doors. But it's a really important step. One thing which is happening in Romania from a sort of legislative perspective, they have enacted legislation in Romania, which very significantly facilitates the copay, so to speak, in private health care facilities where you can combine public reimbursement contribution with a private co-pay, which, we believe, and I think everyone else as well, so it's not a Medicover belief, will significantly increase private sector demand in Romania. So I'm not saying that's only why we did this hospital investment. But we expect, over the coming years, you will see significant private sector growth in Romania.

[Klas Palin, Research Analyst]

Okay. But isn't it also key to expand your presence in Romania to be a significant player in the subscription business going forward?

[Fredrik Rågmark, CEO & Director]

That's the point I'm making. I mean, we're expanding the hospital infrastructure. We're investing in our ambulatory facilities. The -- what you don't really know is the -- what is the right -- if we look at '22, '23 -- 2022, '23, how will we split between acquiring existing ambulatory businesses that has an existing Fee-For-Service business to use that to fill up additional prepaid or subscription members alongside keep doing our organic greenfield development of our own clinics. Now how that plays out in reality, that's always going to be a little bit opportunistic because we know how much capacity we want to put on. And of course, if we come across a business where instead of only incitation marks doing a greenfield investment, we can as well acquire an existing business with a customer base in a going concern. Most often, that's the preferred choice. But you come across that when you come across it, so to speak. But fundamentally, we have a very aggressive investment plan for Romania.

[Klas Palin, Research Analyst]

Okay. Great. And also, you highlighted the dental business was performing very well in Poland. And I guess you are launching a new concept there. And is it possible to give some sort of a hint of how large of the Polish business is in dental today?

[Fredrik Rågmark, CEO & Director]

Yes. Well, I mean, if you -- I mean the -- yes, well, I mean as a proportion of the overall Polish business, it is still a small, Klas. I mean, somehow, for the year, I think, revenue-wise, it will be sort of towards EUR 40 million, EUR 50 million or somewhere there. So relatively, as a total Polish business, it still is a small piece. But in fact, that's why it's so super interesting because if you look at our market share in Poland or private pay dentistry, it is still minute. And I think we still -- we are today the largest or certainly, if not #1, we are certainly #1 or #2 in the entire country in terms of size of private pay dental business. And if you have that platform and great people leading it, and then having a combination, as I said before, of very aggressively rolling out your greenfield clinics and acquiring dental practices where it makes sense, you can grow that business for decades to come. So that's really why we're excited over it.

[Operator]

So no further questions that came through. [Operator Instructions] And your next question comes from the line of Mattias Vadsten from SEB.

[Mattias Vadsten, Analyst]

Some of my questions were already asked. But one from me -- I mean given the vaccinations in India are done at cost coverage, as you say, the implied EBITDA margin on revenues from COVID-19 related services look incredibly high, I must say, in Q2, and considerably higher than in Q1 and Q4. Can you just provide some thoughts and flavor here just to get a sense of what is happening in terms of the COVID-related services?

[Fredrik Rågmark, CEO & Director]

Mattias, that's the point that Joe made before that. We have changed around a little bit -- but I wouldn't overdramatize that, but we have changed around a little bit the cost allocations between COVID, non-COVID to -- it's an estimate, as Joe said. And we think --for each quarter that progresses, we also become a little bit wiser. So I think that reflects the latest best understanding we have of the contribution coming out. So the growth in the profitability level or contribution level on COVID, sequentially quarter-on-quarter, is largely from that because you see the volumes are pretty much the same, as they were quarter-on-quarter. So that's really what it comes down.

[Mattias Vadsten, Analyst]

Yes. I fully expect it's difficult to single out the impact here. Thank you.

[Operator]

[Operator Instructions] And so no further questions that came through, please continue, sir.

[Fredrik Rågmark, CEO & Director]

All right. Okay. Well, I think we have had all our questions then. So let me then thank you for calling in and listening and wish you all a lovely summer. Now we take a couple of weeks of -- not a couple of weeks of holidays, but we take a couple of weeks after the report here, and we look forward to welcoming you to our third quarter announcement towards the end of...

[Hanna Bjellquist, Head of Investor Relations]

3rd November.

[Fredrik Rågmark, CEO & Director]

3rd of November, it is. So we welcome you all then. Thank you. Bye.

[Operator]

Thank you. That does conclude our conference for today. Thank you all for participating. You may all disconnect.