Medicover AB

STO:MCOV B

Earnings Call Transcript 2021-Q4

[Operator]

Good day, and thank you for standing by. Welcome to the Fourth Quarter 2021 Results Presentation Conference Call. [Operator Instructions]. I would now like to hand the conference over to your speaker today, Fredrik Ragmark. Please go ahead.

[Fredrik Rågmark, CEO & Director]

Good morning, everyone. Welcome to our quarter 4 and full year 2021 results presentation. We have put in some new overview slides initially before we go into the details of the quarter and the year, and we have really done that because, as you know, it is 5 years coming up since we listed the company. So I thought it could be interesting and relevant for everyone to get a perspective on what has happened over the 5 years since we listed, as a background to the growth and the progress we're seeing. So I used the headline the power of diversification and growth, which I think very well summarizes these 5 years. As you know, we are predominantly private pay group, 79% of our revenue is private pay, and that has been compounding, you see 23% over the 5-year period, many people think we are only boosted by COVID over the past couple of years. We certainly have had some impact some negative, some positive for forbid. But what I'm seeking to summarize for you on this slide is the fact that we have, we are and we will grow organically and total very strongly. And it's particularly important to remind you of the diversification. You look at our payer groups. So the 79%, which is private pay, splits up in 60% Fee-For-Service, where consumers pay to us directly and that has been compounding. You see an extraordinary 28% over the period. Our funded business, our membership business in Poland, Romania, which has a very stable and recurring revenue stream, but it's only an organic growth model than you see for that reason. Of course, slightly lower, but very stable 11%. And perhaps surprisingly to some of you, you will see that even our publicly funded business had compounded 22%. Healthcare Services and Diagnostic Services are two divisions, compounding plus 20% growth, both of them. Looking at the geographies as the third important diversification in Poland, our largest geography, 18% over the 5-year peer. Germany, Europe's largest healthcare market to compounding 21%; Romania, 23%; India, obviously, we started during the period, now representing 10% of group revenue; Ukraine, that has a lot of focus right now, and I'm sure we'll spend some time on them later on in this presentation, compounding at 25% per annum. And I think those numbers speak for themselves. Significant margin expansion over the period, as you see 4, 5 percentage points added to the margins from when we listed the group and members as a good indicator of growth in the funded business, up 68% for the Pereda lab test up more than 50%. So overall, I think a fantastic sort of record of growth and diversification over the 5-year period. We turn to next page, what is driving this growth historically, today and why will we keep on seeing, we believe sustainably a very strong underlying organic growth in our business. Well, fundamentally, all of the markets where we operate, excluding Germany, that's obviously much more mature, but all other geographic markets have double-digit growth in the underlying private pay health care rental market environments we operate in. Many people wonder, well, are you sort of reaching your penetration potential? And that is -- nothing could be as wrong as that. If we look at just one example, the Polish private pay Fee-For-Service, which is, obviously, the longest and the largest market for us. We still have a tiny approximately 4% market share in that market. So there's plenty of room for us to take market share for many years to come. We have a super strong brand, and we are very well positioned in our different service offerings. We're really, besides the underlying market growth by, continually growing our service offer and continuously growing our distribution network in both our businesses, again, driving underlying growth. And not the least over the past couple of years, one of the lasting consequences of the pandemic, well they were certainly there before that happened, but the consumer awareness and increased focus on health and wellness has certainly been boosted -- is being boosted by the current COVID situation in the world, and that's certainly something we expect to last and become a new normal. And then one should not forget the fact that most of our businesses have a direct-to-consumer customer relationship, and that is obviously extremely valuable when consumer behavior is evolving in the way we see now. And last but not least, on this slide, the diagnostic element of the health care industry is growing. So with the evolution of abilities and capabilities in diagnostic the share of wallet, so to speak, as go into diagnostics is increasing over time, which is important. I have a few just quick highlights on the quarter and the year before we go into the details. So I think it's a fantastic -- an additional fantastic quarter. And let's not forget that it's not only positive impacts of COVID from us. You've got to keep that context in mind that we also still have a number of negative impacts. And in such an environment, push through, 26% revenue growth organic, I think, is very significant. One should also not forget that it's not that we have a very softish quarter to compare with last year. So the quarter 4, 2020, sorry, I mean that compared to an undisturbed quarter for 2019. That was before anyone had heard the term COVID. And last year around, we grew 30% on that undisturbed quarter 4 '19. So we do not have a soft comparative quarter. You're looking at the underlying business and strip out COVID and we grew at 28% up and organic 25%. So I think that's a fantastic number, again, just to make the point with a life before COVID. If we look at our underlying business this quarter, and compare that to the quarter 4 2019. So no COVID in either of those, we are up 37% over that 24-month period. Again, I think that brings home the point that I have now made a few times. Good profitability. EBITDA jumps more than 40% up to just north of EUR 75 million, 220 basis points margin expansion. That's a very strong number. Adjusted EBITDA, just short of 21%, that's obviously quite a long way ahead of our financial targets. Fantastic operating cash flow. Joe will talk more about that later. Strong inflow of members, so 31,000 in the quarter more than 140,000 for the year, come back to that. So a strong intake of members in our employer-paid business and likewise in lab tests. And last but not least, added on the COVID revenue at the bottom. It's important to see that you see the COVID revenue element is growing much slower than the underlying business. So clearly, 16% of revenue is not insignificant, but it's much more important to see how the underlying business is growing. Flipping to a quick highlight of the year. I call it a remarkably strong year. I think that is true. 2020 was a very difficult year with the second quarter. 2021, from an operational point of view, has certainly not been easier. I think the COVID virus has operationally had more impact on us in 2021 in terms of being able to manage staff levels, et cetera, et cetera. So I think it's a remarkably strong year. If we look at some of the organizational challenges we have had and our staff as always, have acted, I think, an absolutely formidable way. Revenue being up 38%, same organic, EUR 380 million of absolute growth. And let's not forget that the year before the IPO, we had EUR 479 million in the entire group. So not so very far away from the total size of the group before we listed. We've actually grown absolutely this year. Good underlying growth. I talked about the compounded growth rates. Again, we're just short of 3x, the size of the group of the pre-IPO year. For the year, we put on 72% higher EBITDA, 360 margin points expansion. So I think no one can sort of be disappointed with that and tremendous cash flow generation coming out of this, of course. Final highlights slide. So for the year, 142,000 new members. I think that's the strongest member growth here our business has ever had. Likewise, 28% growth in the number of laboratory tests. And of course, the -- you have seen, if you have read the full report, you have the details on the number of COVID test being done. And of course, that's just a very small minority of the overall number of lab tests we do. And again, the point I made on the initial slides, I think this really very well illustrates the strength of our diversification on pay-your-service offers and geographical mix. We're very forward leaning in how we have invested during the year, putting in EUR 190 million in total investment capital, again, is by far the largest we have done in any year. And that being split in a very ambitious organic growth program, where 2/3 of all of that money has gone into building infrastructure that will drive growth in the coming years. And then an additional quite significant element then of inorganic growth capital that we speak about a bit later on in terms of the businesses that we have bought. And then, as you know, we have closed some larger acquisitions just into the new year. We, very successfully, completed a new round of debt financing in Germany with the Schuldschein issue in the social financing framework that was very, very well received. So we were significantly oversubscribed. So we raised the amount of money quite significantly. So we're super well capitalized going forward. I'm sure you would be glad to see that we have proposed to the AGM later on in the year to do a significant increase in the dividend following last year's inaugural EUR 0.07. We proposed to raise that to EUR 0.12 per share. So I think that sends a strong signal of our confidence in the business. So with that sort of highlight, I will go into the more traditional slides that you have seen many times before, most of this have never been covered, so I will be reasonably quick. So for the quarter, EUR 376 million revenue. So as you see, you see the graph on the right-hand side, where the blip in quarter 2, 2020, stands out. You remember, I said I think when that happened, that was the second quarter in our history when we did not grow. And so it's pleasing to see how growth has come back, as I have talked about not quite for some time. COVID revenue, EUR 61.5 million, you see not so significantly different from the quarter last year and Fee-For-Service being at a strong 62% of revenue, was up a phenomenal 35%. And I think I've talked probably enough of diversification now. So I'm not going to spend more time, but you have the two pie charts that I normally talk quite a bit about that at the bottom that I think very well illustrates the point in terms of payers and geographies. If you flip on, I think that's a nice -- or it's a very nice graph showing the absolute EBITDA progression as well as margin progression. I think that sort of summarizes that the business is doing really well, that being a factor of, I think, very strong development in our underlying business and you overlay that with COVID contribution from the diagnostics side. But again, I said with you that on the health care services side, there is certainly still an element of negative impact from COVID. So it is not that it's only positive. Then flipping on to the full year number. So just short of EUR 1.4 billion of revenue. So the group is sizing up. If you recall last year was just short of EUR 1 billion. So we're looking forward to some point in time when we can reach EUR 2 billion, and we will see when that will come. So of that EUR 246 million being COVID, significant growth, as you see on last year. And Fee-For-Service remains above 60% of our total revenue and a rather phenomenal 53% for the year. Looking at the full year profitability. Obviously, the same underlying dynamics, EBITDA up some 70% to EUR 270 million, just short of 20% margin for the year. The EBITDA contribution is -- provided about EUR 90 million in terms of EBITDA. And looking at the adjusted EBITDA margin, i.e., our financial targeted metrics at 20.4% and you see a rather significant growth on the prior year number. Same thing on EBIT, I already commented on the super strong operating cash flow. And you will see that when Joe talks later on, that we have been able to reduce our debt levels quite significantly despite having this rather ambitious capital investment program behind us. which I think is a good illustration of the strong position we are in. Then if we flip to the details of our 2 divisions. So Healthcare Services had a strong quarter north of EUR 190 million, up 29%, of which organic was 23%. And for the full year, they grew 32% to north of EUR 700 million, of which organic was more than 30%. So that, I think, is an absolutely outstanding number. COVID in Healthcare Services, as you know, is much less. So you see the revenue here being for the quarter, EUR 7.5 million. And for the full year, some EUR 66 million, EUR 67 million. Obviously, it's a growth on the prior year number, but it's significantly less, as you obviously know, than what we see in the other division. Fee-For-Service keeps growing very strongly in health care services, which is pleasing. I remind you that most of the acquisitions we do, if not all, are providing inorganic growth into the Fee-For-Service segment. So that's really why you have this attractiveness, Remind you a 4% market share in a very large market in Poland, EUR 6 billion, EUR 7 billion annual size, where we today have 4% market share and this is obviously a divisional number I show you here, but it's also very representative for the Polish market, seeing the 40% growth in the quarter in that segment. Member business strong, so 1.5 million members. That's a nice number or just short of that, but still rounded to 1.5 million members. So 31,000 new in the quarter, 142,000 new for the year. And again, I think that very well illustrates the strength of that offer and that people like the services we provide. You will have noticed we have announced that the larger deal we closed CDT Medicus in the southwest part of the country just after the new year. Obviously, this flowed through into profitability. Now we have two factors, which has dampened margin growth, if you wish, in this division. Firstly, that we have, as you see from the capital investment program I talked about, a lot of that has gone into two elements of Healthcare Services, which is the very ambitious expansion of our Indian Hospital business. And likewise, the very ambitious expansion our sports Jim's offer in Poland. Those two are super strategic and we have put on a lot of new infrastructure to take advantage of some of the situations arising during COVID that has meant that we have put on a lot of capacity that we will be busy filling up over the quarters to come, which short term is negatively impacting margins in this division. And secondly, as life starts to normalize a little bit more People are coming back to more clinical services, plus we have had a much higher than usual respiratory tract infection season in the fourth quarter. So our medical utilization levels are significantly higher than this time last year. But again, that has been balanced with a very sustained level of digital remote services, which is -- which we talked about pretty much on every earnings call since the pandemic broke out, which is really important. And I think I made the point several times that, that is that's a consumer behavior that we have said we expect to last or stay, and that certainly seems to be the case. If we then flip on to Diagnostic Services, which has had also like health care services, just phenomenal quarter, revenue up 23%, organically, 19% full year revenue up, an outstanding 46%, of which organic likewise 46%. And revenue here from COVID, obviously much more pronounced. You see EUR 54 million for the quarter. EUR 179 million for the year, that's almost tripling for the year versus 2020, you see. Fee-For-Service in this division has always traded on a higher level than in Healthcare Services and is now above 70% for the quarter, was up 28%. And obviously, the growth in lab tests closely tracks or perhaps it's the other way around. The revenue growth closely tracks the growth in our lab test numbers, as you can see. And with this, obviously, follows a quite significant drop through in profitability from revenue growth. So EBITDA, very strongly up 28% margin. I think that's a -- that's number not to be shy about. That's a very strong number. And for the full year, EBITDA doubles. So again, that's not something to be -- or rather something to be very proud and happy over. And margin, you see more than 7 percentage points up versus last year, which, again, we talked about that many times. That's a consequence of pushing higher volumes of tests through are largely fixed cost network of labs and BDPs.We've continued -- important to remind you, we continued to invest in new BDPs throughout the crisis, keep building out our distribution across the region. And we completed what we think will prove to be a very interesting acquisition in the specialist Genetics field with the NIPD business in Cyprus that we -- where we have been minority shareholders for a number of years. We have done a tech transfer of their technology into our core genetics business in Munich since many years. It's a business that we know very well, and we're really excited about the outlook for that opportunity. And hence, we had the opportunity to take control of that business here early in 2022. So that's my summary. I hand over to Joe to talk a bit more details on financials.

[Joe Ryan, Chief Financial Officer]

Talk through to Page 19, Hanna. Net interest, a large increase there in terms of our lease charge under IFRS 16. So EUR 4.4 million of the EUR 5.8 million is for our lease charges as we've expanded our base to talk about in a second. The underlying EUR 1.5 million and for the full year, the underlying EUR 5.1 million. So relatively -- reflecting the relatively low levels of leverage and the relatively low cost of our debt portfolio. FX gain EUR 1.7 million for the quarter. EUR 800,000 or so of that was from, again, coming from the lease changes where we have foreign currency denominated leases, predominantly in Poland. So that comes through as a gain now. It's been a loss at various by the time, so it's up and down and up and down and up and down. Noncash, so no cash flow impact from that. Full year EUR 1.8 million and EUR 0.2 million of that for the euro-denominated leases in -- mainly in Poland. Full year tax charge, our effective tax rate has come down to 25.8%, 26.7% last time around, so down about 90 basis points. Predominantly as the -- where our profits have come and have ended up being in slight weighting to lower tax countries. Tax paid cash flow out was EUR 18.3 million for the year, EUR 11 million last time around. Cash flow, very strong. So we had for the quarter EUR 71.4 million cash inflow before working capital changes. And for the full year, that was just over EUR 0.25 billion, EUR 257 million cash inflow for the business. Working capital outflows of EUR 17.5 million and EUR 40.9 million for the full year. And those levels were in line with the expansion of the business. So working capital is sort of tracking where it should be. Loans and payable. This has increased to EUR 143 million. So we put on over the year just over EUR 60 million in terms of net debt, which is a really strong performance given the strong investment in our capital base, our organic investment and then also on top of that, our acquisition agenda. So I think that's reflecting the strong underlying cash inflows from the business. We'll flip to the next page. We have then -- very happy to talk about our second Schuldschein issue under the German instruments. This was a little bit innovative in the market. This was done under a social financing framework, a use of proceeds. Really happy to be able to do that because this really helps to reflect to in a wider audience, what we're actually doing in terms of our business. It's not only that we've got a great business in terms of growth and development from a financial perspective, but we have a real well impact as well in terms of what we do. We talked here in the framework about something which we really started off on a very, very outset in terms of Medicover and was very apparent for us then when we work with the World Bank and the IFC in terms of helping us to start off, back some 25 years ago. And the area here is the universal health coverage. So we are a significant influencer in many countries, health care system in terms of helping to deliver health care infrastructure to people that otherwise would not be able to get access to their health care. So it's really happy to be able to combine that in one of our financing frameworks there, so we can really emphasize that. It's something we don't really emphasize so much with the financial community. So really happy to do that. EUR 277 million gross we raised. The flexibility of the Schuldschein is fantastic, so we could actually stagger the money coming in as we didn't need all of that money straight away. And then we also retired some of the older Schuldschein. So we had a net EUR 250 million -- or we will have a net EUR 257 million raised. Very good pricing, really happy with the pricing on that. We've also fixed some of that interest rate. So we've got a hedge level there as well and 6.5 years was the average duration for the issue. So fantastic liquidity profile as well. So obviously, we're going to continue to invest heavily, both in our organic and inorganic expansion over the next few years. Strong liquidity. We have over EUR 0.5 billion of that available to us for organic and inorganic expansion. One thing in the next two points is our right-of-use lease liabilities under IFRS 16, both the lease liabilities and the assets. And this is a really important aspect in terms of our ability to expand. So we put on a lot of capacity and that capacity is what we're going to going to fill over the next few years, and we're going to add more capacity. And that's a really important driver for us to be able to grow the business sequentially over the coming years. Capital investment, we did over EUR 37 million in the quarter. Just under 60% of that was growth, so for the full year, 61% was growth CapEx versus our maintenance CapEx. And for the full year, we did just over EUR 100 million of organic expansion in greenfield and maintaining our asset base. Our equity has gone up to EUR 562 million. We had a positive movement on our translations with the Indian rupee and the Ukrainian hryvnia moving to strength at the year-end. And then we had a negative movement of some EUR 33 million for the year, about EUR 20 million of that is from existing positions where we have minorities who can put shares on to us for their minority positions. And this is really good because this actually means that we've upgraded our outlook in terms of the value of those put options as the businesses perform better and as we've expanded those businesses. And then we had EUR 13.3 million new ones, which should come on in terms of acquisitions for our facility acquisitions in the Nordics. Loans payable, very low, just 0.6x EBITDA for our loans payable net of cash and short-term liquid investments. So not only have we expanded the business, invested very heavily, but our debt levels, we've managed lower. Next slide, Hanna. So we did, as I mentioned, just over EUR 100 million in organic capital investment. So a really strong year in terms of investing and growing our business. As I said, 61% of that is for growth CapEx, so over EUR 60 million of growth CapEx investment in greenfield and new facilities and machinery, particularly in India, where we've been busy expanding our footprint in the hospitals there. And then on top of that, we have also then done our inorganic expansion. So just over EUR 10 million cash outflow in Q4, EUR 87.5 million for the full year. And you can see there in terms of the slides, the businesses we've acquired. And then in terms of enterprise values, about just over EUR 120 million. So we've also recognized minorities in some of those business positions as well. So good position for -- to support our future growth. We recognized a net loss of EUR 2.2 million for the full year in respect of all of those acquisitions in aggregate. And the largest driver on that was then the gyms business behind that. That's obviously when we bought some of those that were closed through the first half of the year, but it was an opportunity which we couldn't really miss. We've been in a really fantastic position. This is something that COVID has given us in terms of being able to pick up those assets. We haven't been able to buy those assets. We probably would have had to do organic investments, which would have been more difficult, cost us more money and created more competition in the market. So we're really happy to be able to buy out those assets at good prices, and we expect to -- that's going to perform really well with our sports gyms benefits market in the coming few years. Subsequent acquisitions, we closed those out now, NIBD Genetics and CDT Medicus in Poland. So just under EUR 44.5 million for NIBD cash out, brings us ownership to 87.2%. We have call options over the remaining shares. No debt that we assumed took onto the balance sheet EUR 7.7 million of cash that they had on hand. And CDT Medicus is 55.8% for 100% and debt net of cash is around about 0. So that's affected the full value for the business. So just on targets, just to summarize in terms of there. You can see there, we have our 3-year targets, which would come to an end this year. We have a 9% to 12% organic growth for top line. We've obviously exceeded that for the last year. And then profits, adjusted EBITDA margin year-end, we're looking at 15.5%, 16.5%. Obviously, with code support, we're well ahead of that. But even if you take out the COVID business on the underlying, then we're doing well in respect of that as well. But even if you take out the coke business on the underlying, then we're doing well in respect of that as well. And if you look then at the capital structure, not to be below 3.5x in terms of leverage metric, Obviously, we're well below that at 0.6x. So we have a lot of opportunity in terms of being able to use the balance sheet to further support growth. I'll hand back to you, Fredrik.

[Fredrik Rågmark, CEO & Director]

Sure. Thank you, Joe. So that sort of wraps up our presentation of a super quarter and a rather remarkable year as I headlined it in the beginning of the presentation. And also would like to wrap up with expressing a big thank you to all our staff across all of the geographies that we operate that indeed have performed extraordinarily well during the year. to handle both the COVID situation, ongoing operations and a strong expansion agenda. So with that, I hand over if anyone would like to ask any questions.

[Operator]

[Operator Instructions] The first question comes from the line of Karl Noren from Danske Bank.

[Karl Norén, Analyst]

So I have three questions, but we can start with the underlying organic revenue growth, which has been very strong, both in Q4 and for the full year with that figure of close to 25%. I'm just wondering how one should think of this going forward? I know you have the target of 9% to 12% organically. But as you said, Fredrik, you're still managing to grow 3% underlying organically with a tough comparison. So it would just be interesting if you could elaborate a bit on how we should see the underlying organic revenue growth in 2022?

[Fredrik Rågmark, CEO & Director]

Well, Karl, I think you should look positively up on it. I think that's the short answer. And we will be updating the financial targets at some point here during 2022. We're not going to wait to Christmas to do that. So we will come back I think expect not in too long a time to give you an update when that will be. And I'm not going to obviously comment on how -- if so, how we will change the organic growth target. But clearly, I made the point there that we're -- on a run rate, we're sort of 3x what we were when we listed now. And so of course, one going to respect that when you take a percentage growth number. But your observation is right, Karl. It's -- I think I have -- every time I speak to you and other I always say the strongest factor on Medicare, I think, is the sustainable underlying organic revenue growth. And in fact, that was why I put on that initial summary slide now because we're 5 year into our journey, and I think those factors that were there 5 years ago, they are certainly there still. And if anything, I think they are growing in importance. So I have a pretty bullish outlook on our organic revenue growth perspective.

[Karl Norén, Analyst]

Okay. Sounds good. And then if we just take a bit more short-term view, I guess you have been quite impacted, as you mentioned, by higher sick leave among staff and on metro disturbances in the fourth quarter. I'm just wondering you say that this has had a tangible impact on the financial results in Q1? And how should we see this developing also going into the first quarter? Because I guess this is quite hard to manage.

[Fredrik Rågmark, CEO & Director]

You mean in quarter 4, you said Q1, you mean?

[Karl Norén, Analyst]

I mean in quarter 4 and maybe now when we or now when we're in the first quarter of 2022.

[Fredrik Rågmark, CEO & Director]

No, Karl. I wouldn't say it has had a tangible financial impact what it has had is that it has caused some rather strong operational challenges for our leaders to handle accessibility and service levels. It is not that we have had to close facilities or denied services to customers. So it's more an internal operational impact than it is a financial impact.

[Karl Norén, Analyst]

Okay. And then just on the margin side. For the full year, I think you had an adjusted EBITDA margin for the underlying business of 16.4% at the top range of your target. I'm just wondering -- going forward, as you said, you will have the financial targets. So I guess we'll get an update on this at some point. But I'm just wondering the underlying expansion of the margin going forward, given that there are some wage inflation in the market, et cetera. I'm just wondering how confident are you that the margin -- the underlying margin should be higher in 2022 versus what you reported for 2021?

[Fredrik Rågmark, CEO & Director]

Well, obviously, I'm not going to give you a statement, but I think the margin will be for '22 versus '21, but the point I made I think Joe has answered that a number of times in I think the best way for you to look at that is if you go back and look at the various quarters in 2019 and full year 2019 before the world new COVID and then compare that to our underlying EBITDA margin as we reported now, you see the effect of scale coming through. Then the big -- the sort of white elephant in the room for everyone is inflation. And if -- that is certainly not less a challenge for us than any other business. And I think we talked about that as last as late as last quarter with you that the thing to remember is that we have 79% private pay revenue. And I'm not saying that it's always easy to raise prices, but at least you are in a position to impact your price levels, assuming you have good service and customers like what you do. So clearly, increased efficiency through more digitalization, wherever that is possible and an ability to push through significant elements of the inflation effect on to our prices. That's just super important. But you're coming from a question, well, will we perhaps see reversal of margin expansion because of the environment and that we don't really think. But I guess one should stay away from commenting here on the sort of further growth in the underlying margin. We're positive. We have a strong outlook on that, but I'll wait to be specific until we update the financial targets.

[Operator]

The next question comes from the line of Kristofer Liljeberg from Carnegie.

[Kristofer Liljeberg-Svensson]

My first question relates to acquisitions and what the full year effect there will be from the one you did in 2022 -- or in 2021? What the full year effect will be in 2022 and also from the ones acquired here or closed at the beginning of the year. Is it possible to give such a figure?

[Joe Ryan, Chief Financial Officer]

Kristofer, we disclosed, obviously, the impacts in terms of the acquisitions in the financial statements. So we close for the ones that we've already done for the full year in terms of the impact. So they're in the notes in terms of the release. For the ones that were due next year, we will include those in the annual report. I think I'm not sure if we have that in what we have now at the moment. Yes. So what we have disclosed, Kristofer, in the back page on Note #8, we've disclosed the 2021 numbers for both NIPD and CDT. So that gives you some sort of guidance in terms of looking at the -- where we're looking.

[Kristofer Liljeberg-Svensson]

Okay. And looking ahead there, of course, a lot of moving parts with a large share or almost half of earnings now in 2021 seen from COVID-related services. But at the same time, you said you have had some negative impact from COVID also, which hasn't been quantified as, I think, in the same way. you're growing a lot organically, but at the same time, initial diluted effect both from acquisitions and the start-ups you have done in the year. So do you think this strong underlying organic growth and the potential to improve profitability in units that we have started or acquired. Do you think that will be able to fully offset or gradually lower COVID volumes in 2022 and 2023?

[Fredrik Rågmark, CEO & Director]

Well, I mean specifically on that point, No. So I think there's a very specific now on that question, Kristofer. I think we've always made the point that the COVID element of earnings is a much higher margin business. So short term, if you replace the same nominal amount of COVID business with normal business, your overall margin will reduce. Because as you see from our split out, the marginal contribution on the COVID element is much higher. So short term, it will not compensate. Now if you say as we will keep on growing organically very strongly, I think I made that point enough in this presentation. why we're confident on that plus we're going to add additional M&A. So with those volumes grossing up at, I think, good margins, from an absolute point of view, it's going to come back pretty quickly, I think. So I'm not worried about that. But on a direct comparison replacing the same number of sort of revenue from COVID to non-COVID, margin will be lower. One point which I also take the opportunity to answer as part of that question, Kristofer, and for the wider audience is that One thing that we are likely to do here going into 2022 is to actually stop trying to break out the profitability element of Covid and non-COVID. And that is because now we are basically soon into the third running calendar year of COVID environment. And it becomes sort of increasingly it's not impossible, but very difficult to separate out what was the case 3 years ago, plus a significant element of what we call COVID revenue will probably be permanent. I'm not going to give a figure on that, but there is a new normal in the market where some element of the so-called COVID revenue will be permanent higher systemic testing. And so we will be reporting throughout 2022, the revenue we generate from specific COVID activities, but stop to try and split out the profitability. So I think I wanted to have a chance to communicate to you, so you're aware of that.

[Kristofer Liljeberg-Svensson]

I understand. But at the same time, I think it has been very helpful to see those -- I've seen a lot of companies trying to...

[Fredrik Rågmark, CEO & Director]

No. I mean we really set it out that way in order because when COVID is over, everyone will have forgotten about the fact that we had COVID earnings, and then we can always look back on the underlying business and compare apple-to-apple. So I'm sure it was the right thing to do, Kristofer. And this change, we're not doing to try and not be transparent. It's just that it's increasingly difficult to separate what is what? And then there is a risk that it becomes instead of being specific it sort of becomes counterproductive. That's really what we feel.

[Kristofer Liljeberg-Svensson]

Could add a final question related to M&A because although Kuwait volumes has been maybe temporary in a way, at least, it has generated a lot of cash flow. The balance sheet is very strong. So what's the outlook for M&A?

[Fredrik Rågmark, CEO & Director]

It's good. We have a strong pipeline. We have strong teams. We're ambitious. So yes, it should be good, Kristofer.

[Operator]

The next question comes from the line of Grace Lee from Jefferies.

[Unknown Analyst]

Could I ask two questions on M&A, please? Just to follow up on those. I noticed the medical genetics particularly highlighted I'm just curious if you can confirm how much of that revenue FY'21, specific comes from medical genetics. I'm just curious of how not to quantify that. And obviously, this is an area where you are for it in terms of acquisition, inorganic growth going forward. How much is you sort of or ambition growth outlook for that specific segment? And I'll follow up with the second question.

[Fredrik Rågmark, CEO & Director]

Grace, we're not splitting out the different segments within genetics -- sorry, within diagnostics and genetics being one of them. So clearly, you can say the vast majority of COVID testing that we have done sort of lands part of that business. So -- but we're not quoting a number in terms of genetic what it contributes. It's a significant piece of our business in Diagnostics. And in terms of the opportunity going forward, that's a big question. I mean, somehow, the last point I had on my growth driver slide being that diagnostics is taking a larger and larger share of the overall sort of health care spending thing. That is largely driven. This is my view. I'm not saying it's something that necessary the entire world agrees with, but our absolute view is that through the ongoing development of how genetic testing is changing health care delivery, you're going to get a much more over time, call it, sort of individualized treatments and individualized elements of health care services and that is going to push the whole genetic diagnostic growth very significantly. So we have a very, call it, strategic focus on developing and growing in that segment based on that outlook. And hence, over time, it will be big, but I'm not going to aim to quantify it beyond that.

[Unknown Analyst]

Okay. And then on the India side, again, you are increasing the footprint there and expanding. Can I ask in terms of those that were fully open and operating in India in FY '21. What was sort of utilizing the relation rate, for example, in Q1 now that potentially project patients are lower? And just how is your sort of plan going in terms of expansion? What are you targeting for '22?

[Fredrik Rågmark, CEO & Director]

Well, I'm not sure if that -- that is the question we've had before, and I'm not sure if it was you or someone else asked the question, but the way we try to answer it then was that the way we sort of do this is that we have divided up our hospice in three categories: One being sort of mature operations; one being operations that's been up and running sort of order of magnitude 1.5 years or more or roughly 1.5 year; and the third category being sort of start-up situations. And if you need a rule of thumb, you can say if you run your hospitals, with utilization levels above 70%, you have a very good business. If they're sort of above 60% to 70%, it's okay, but not terribly good. And if it's low 60%, it's not really very attractive. Now you can say that largely sort of reflect those categories. So our mature hospitals, they are all in that upper category doing really well. So what we are doing now is that actually, we're speeding up the rate of expansion. And obviously, they end up being in the third category by definition. And the fact that we have the courage, if you wish to do that is, of course, driven by the fact that we see very well that the projects that we are taking on is moving very nicely up into the categories above. Otherwise, we obviously would not take on such expansion. So I think it's a sign of confidence that we see that happening. But the fact is that, of course, if you're relatively speaking, have more projects in the third category, you will dilute the overall margin of your engine business, which is sort of the situation we're in right now, but we're in it very consciously because COVID has also, likewise, the point Joe made with gyms in Poland, it has opened up some opportunities for us that perhaps would not have been there had it not been COVID.

[Operator]

The next question comes from the line of Lars Klas Palin Erik Penser Bank.

[Klas Palin, Research Analyst]

I have questions more about the specific market. And I would like to start with the Romanian market. It seems like you're making quite a lot of investments. You're setting up the new hospitals in Bucharest and image centers and you also bought into Polaris Medical Hospital. I just wonder how much larger will your remaining business be when all these new entities are up and running if it's possible to give some sort of indication how much more capacity it brings on.

[Fredrik Rågmark, CEO & Director]

Well, that's going to add significant amounts of capacity cost. I mean the hospital construction, which is underway in Bucharest is a significant piece. So we're expensing that as we go throughout 2020. I mean, we started already last year. So in the same way as I just answered great, there's short term actually here depressing our margins because we're where before we can start filling it in with customers, which is perhaps sort of second quarter next year, I think we will be opening the doors, give or take around that time. That's a significant piece, not so totally different from. It's not as large as Vilano in Warsaw but it's not terribly different. And the Polaris thing up in Cluj is also quite a significant footprint and filling that with customers will add. So I mean relative to the size of our Romanian business, once those new assets are fully utilized, which obviously is going to take a while that will have a significant impact, indeed. I mean, I'm not going to give you a percentage class, but it will be very noticeable, put it away.

[Klas Palin, Research Analyst]

Yes. Okay. And I need to ask you about Ukraine. And just in any way, changes your investment plans in the short term given the situation?

[Fredrik Rågmark, CEO & Director]

Well, I think the slightly longer answer and then I give you the specific thing you're asking for. So I think really important and we have done that. We send a very strong signal to all our people and all our leadership in Ukraine. We have, whatever, 3,000-plus people employed that we are standing strongly behind them and we, as an organization, as a company, strongly support our people in Ukraine. We have done super well in 2021. The fourth quarter was really good. If you look on the month of January and February, it's completely business as usual in Ukraine. So when we sit here in Stockholm or in other West European locations, you read only one thing in the newspapers about Ukraine. And that the point I want to make that it does not reflect what is happening on a daily basis in Ukraine or whether you talk about a diagnostic business or kids going to school or whatever it is. So that's the fact of the matter today. Now what do we think about the security situation? Our view is, as I said this morning in an into, we think it is much more likely that we have a peaceful outcome because there's just so much to lose for a lot of people, if that would not be the case. Now I think it's very likely that the situation sort of -- the uncertainty will go on for quite some time because that, I think, is in many people's interest that this sort of uncertainty goes on. So I think, unfortunately, we will live within our book, not a big military innovation, but we will live with a level of uncertainty and sort of aggression on the board for quite some time. Now the knock-on impact of that on us is that we keep on with our ongoing organic investment program. We generate quite a lot of cash in the country of Ukraine. So we're deploying, we're putting that cash to use. So from that point of view, the short-term situation does not change the ongoing business development we have in Ukraine.

[Klas Palin, Research Analyst]

Okay. Perfect. And lastly, about the tax rate. It was mentioned that have been going down for some time. Do you expect this trend to continue that we will see a bit lower tax rate going forward?

[Joe Ryan, Chief Financial Officer]

Yes, Klas, I'll update on the release when we do that. But when we did the IPO, project in over several years, the tax rate would come down. And that's effectively what's really happened, and that's a structural issue in terms of amortization of some of the costs which are not tax deductible, and we couldn't make them tax deductible and also then in terms of the developments in the particular markets. So you've seen, for instance, at Germany, which is the highest tax market has been diluted as a percentage of the overall business, as we've grown in other markets. Therefore, our average weighting of tax rate has come down, and that's pretty much also the other factor that's driving it. So you can expect that to continue to some degree.

[Operator]

The next question comes from the line of Karl Noren from Danske Bank.

[Karl Norén, Analyst]

I don't think I had another question. It must be wrongly registered.

[Operator]

[Operator Instructions]

[Hanna Bjellquist, Head of Investor Relations]

We have got a number questions in chat. And the first one is, could you please comment on your current strategy for Indian hospitals with regard to servicing COVID patients?

[Fredrik Rågmark, CEO & Director]

Well, it's the same strategy that we've had all along is that we -- if and when we can, we help out and service COVID patient. Fact of the matter is that the Omicron variant is driving much less which is very good for public health is driving much less inpatient admissions than the prior variants. So although just as we see here in the other parts of the world, you have a much wider spread of the virus in society, but you actually have much lower levels of COVID-related hospital admissions. And that's what we see as well. So we do service COVID patients in our hospitals, but at a much, much lower level than at prior variance.

[Hanna Bjellquist, Head of Investor Relations]

Can you also give some more color on the share of Airport COVID Diagnostics in total revenues from COVID in the Diagnostic Services segment?

[Joe Ryan, Chief Financial Officer]

Airport COVID Diagnostics.

[Fredrik Rågmark, CEO & Director]

Airport COVID. Yes. Well, it's a small part of it. I think it's the right way to answer that. it's not insignificant, but it's not a massive number in the overall number.

[Hanna Bjellquist, Head of Investor Relations]

And then if you could share some thoughts on how they think sales on EBITDA and EBITDA margins might shape up in 2022? And secondly, with this tremendous success achieved since the IPO over the last 5 years and giving your content ahead of your 2020 part. Perhaps you can share something about your thoughts on future 5-year outlook.

[Fredrik Rågmark, CEO & Director]

Well, I think that question is right to answer together when the update on financial targets come. I mean we put on these initial slides without having seen this question, but to give us -- give you a 5-year perspective of what has happened over the past 5 years. I think one thing which is fair to say and the point that we have made many times health care, certainly, how we operate, it's a scale business. So the more scale we put on to our infrastructure that is driving margin growth, not only in absolute terms but also relative terms. So if we are successful to keep scaling up our business, I think it's a fair assumption that margins will go in a similar direction. I think that's an answer to that question.

[Joe Ryan, Chief Financial Officer]

If I may add, Danny. If you think back to -- because you were part of the -- you came in when and joined Medicover as an investor when we did the IPO. If you think back to the situation we were back in May 2017, when we listed, we had access to much less capital, so we've got access to much more capital now. at cheaper prices and in terms of longer duration. We've got a very good track record in terms of financial markets behind us in terms of being able to deliver on what we think we can deliver on. And we've got more countries. So we've got a wider footprint in terms of where we are, and we've got a wider business base. So we've got more opportunities, and we've developed, most importantly, our management teams and our management capacity to be able to execute. So I think the -- as Fredrik has beaten on many times, the opportunity is there. So it's really about our ability to deploy capital and execute on those projects. And I think we're in a very good position to do that. So I'd say we're in a stronger position today, obviously, much larger. So the absolute amounts get more difficult to keep maintaining, but we're in a stronger position than we go when we did the listing in May 2017.

[Hanna Bjellquist, Head of Investor Relations]

The final question, I think we have had given some color on before. But if the cover diagnostic revenue were to disappear entirely from the end of Q1, what impact might be had on your 9% to 12% organic growth aspiration? Or will the business be able to grow in line above this rate regardless? Similarly, how should we think about the EBITDA margin development, ex-COVID Diagnostic revenue. What were 2021 EBITDA margins have been?

[Fredrik Rågmark, CEO & Director]

Well, Danny, you saw that in the -- we quoted this underlying business revenue growth in quarter 4 of 28%. So take that out -- take COVID out entirely, we grew 28% on the prior year quarter 4, excluding COVID, which is super strong. And I'm not going to say what that number is in quarter 1. We're obviously just a week into -- a month or 2 of quarter 1, but it certainly will be significantly above 9% to 12%, I'm sure. And your second question, we talk about the EBITDA margin in the underlying business. And likewise, there we're saying somewhere in the report. We haven't said that in this presentation here, but it's quoted in the report that on a like-for-like basis, if you exclude some of these subsidies that existed last year, and you -- we've also changed how we allocate costs to a certain extent. But if you look at it from a like-for-like basis, the underlying EBITDA margin is up 150 basis points in the quarter 4 this year versus quarter 4 last year, which, again, is not surprising. That's a consequence of that volume growth of 28% coming through in that segment.

[Hanna Bjellquist, Head of Investor Relations]

Thank you. I think we have -- back to the operator. I think you have a question.

[Operator]

Yes, we do. So we have a next question comes from the line of [indiscernible].

[Unknown Analyst]

Congratulations on a great year. I would like to ask a question on the gym business where you now have invested some EUR 44 million. I see here that have 77 gyms. I wonder if you just could update us on the sort of idea behind the gyms and what -- sort of the -- the good thing about owning them. I have some bad experience in owning gyms. And I wonder also if you have like a member base that on how many members there are or how are you going to work that in the existing business. and the sort of main idea behind being a gym owner?

[Fredrik Rågmark, CEO & Director]

Absolutely. That's a very good question, Gustav. Before I dive into the answer, as posted on the last quarter. If you're interested -- if you go into the archive from the last quarter results presentation, we actually did a little sort of split that presentation on why we invest in Medicover Sports. So you can find some more details there, but the sort of -- the executive summary, Gustav, is that you have a situation in Poland where you sell benefit cards for the sports market in the same way as you do for the health care market. So employers will buy a benefit card which gives access to a wide range of gym networks. And that's very, if you wish, complementary synergetic to our health care offer because our own our own sales force can send that to the same employers that contract us for health care. And in fact, the border between, call it, preventive primary care and wellness, healthy living is sort of very blurry. So if you think about how we make the best returns possible out our insured health care business is by having customers being very healthy and having long relationship with us. And that's what the employer is paying for all of this. They want to have healthy, productive, happy stuff. Now they are today already paying for gym benefit. So if we can bundle them with our health care benefits, we basically can collect more money from employers that we already contract with and staff then become more healthy, hopefully, because they go to the gym a bit more often. So the cost -- the medical cost of servicing them over time will go down because they are healthy and they are happy, the employees are happy, and we are really happy because -- so it's basically extending the offer of health into a wider definition into wellness, if you wish. And part of that is then to operate these gyms, but I think you should really think about it as a benefit business where we -- as an element to that also because our members in that sports business, they also access many gyms that we do not operate. So it's a combination where we send members to gyms under other brands and where they come to gyms that we operate. So that's sort of how it looks.

[Unknown Analyst]

Okay. I get it. It's not the gyms per se stand-alone, they don't really have to be all profitable.

[Operator]

Thank you. Dear speakers, we do not have any further questions at this time. Please continue.

[Fredrik Rågmark, CEO & Director]

All right. So then we wrap up. Thank you very much for listening, and we hope to see as many as possible of you next time around when we report quarter -- and then also remind you, I think, today after we have our Annual General Meeting here in Stockholm, that you're all very well if you're a shareholder, of course, welcome to come and attend. So thank you very much. Bye.

[Operator]

That does conclude our conference for today. Thank you for participating. You may all disconnect. Have a nice day.