Clariane SE (CLARI) Earnings Call Transcript

Welcome to the Clariane Third Quarter 2026 Revenue Presentation. [Operator Instructions] Now I will hand the conference over to the management team. Please go ahead.

Thank you, operator. Ladies and gentlemen, dear investors and financial partners, good afternoon, and welcome to the Clariane Group's 9 Months '26 Revenue Presentation. I am Sophie Boissard, Chief Executive Officer of Clariane. Together with Gregory Lovichi, our Chief Financial Officer, I will review our 9-month performance, the refinancing program we executed and our outlook for '26 and '28. As you see on this slide, you have the agenda for the session. I will first begin with the main highlights of the 3 last quarters. I will then provide you with a brief update on how our European network looks like. Three, I will provide you -- I will share with you a major development of our Clariane Corporate University. Gregory will then take you through revenue performance and the refinancing transaction in greater detail. Last but not least, I will return for the final section to recall the operating priorities supporting our midterm plan, Succeed Together, and to confirm our objectives. Let us move to Slide #4 and 5. Yes. Thank you very much. Let me start with the main messages from the first 9 months of '26. Our results confirm the solid operating momentum we established in the second half of '25 alongside the successful completion of our refinancing program. First, Clariane revenue reached EUR 4.015 billion (sic) [ EUR 4.051 billion ] at the end of September with an organic growth of plus 4.7% and a reported growth of 1.9%. In the third quarter, organic growth is accelerating at plus 4.9% to be compared with a plus 4.6% in the first half. All activities and geographies have been contributing, supported by volume, pricing and case mix effect. The Long-Term Care segment delivered plus 5.2% organic growth and the Specialty Care segment plus 2.9%. Overall, occupancy progression remains an important driver. The average occupancy rate in our medicalized nursing homes reached 92.2% over 9 months, plus 1.4 percentage points year-on-year and 93% in the Q3. France deserve a particular mention. The Q3 occupancy in medicalized nursing home reached 91.1% to be compared with the 89.5% a year earlier. Specialty Care under the brand Inicea is benefiting from the measures we have taken in the second half of '25 to adapt our network to the post-acute financing reform alongside growth in outpatient care. These operating improvements are supporting renewed price and volume momentum in this very segment. Let us move now to the second part of the slide. We have completed approximately EUR 2.3 billion of refinancing transaction, including around EUR 1.6 billion in bond issues and a new EUR 700 million revolving credit facility. Our financial structure is now definitely simpler with principal debt maturities extended to 2030, 2031 and 2032. And with 92% of our total financial debt at fixed rates or hedged, we are well-refinanced against interest rate movements. Last but not least, important to notice that Moody's credit analysis review on October 27, confirmed the group rating B2 rating outlook stable. I would like -- I would also like to recall the remarkable commitment of our teams during the heat waves and wildfires this summer. Their preparation, their responsiveness and their professionalism were essential in caring for and supporting residents and patients and in contributing to the response in affected local communities. Third, and as planned in our corporate project, Succeed Together, we are further expanding Clariane University's training activities by integrating a renowned institution in Paris region called the Fondation Oeuvre de la Croix Saint-Simon. With this move, our corporate university will add 7 schools dedicated to the training of nurses, of care assistants and social workers, which represents an increase in its training capacity by 15% as of 2027. I will return to this in a moment. Finally, we confirm all our financial and nonfinancial objectives for both the '23-'26 period and our '25-'28 medium-term plan guidance. I will return to this objective at the end of the presentation. Let us move now to the Slide #6. which recall how the network looks like. As you see here, we operate a very diversified and large-scale network across Europe. As of the 30th of September, we operate 1,224 facilities and 89,141 authorized beds in 6 European countries. Our [ mixed ] platform spans Long-Term Care and specialty care from medicalized nursing homes and alternative living solutions to specialty and post-acute mental health facilities. France remains our largest network, closely followed by Germany. Our presence in Belgium, in Italy, Spain and in the Netherlands provides diversified growth opportunities, reflecting the specific needs and care systems in each market. We continue to modernize and to actively manage our networks. Over the past 12 months, we brought 30 modern facilities into service, and we added 1 new in Spain, while selling or closing 40 facilities. This active portfolio management is part of our medium-term plan and supports the improvement of our operating margin. I would like now to focus on a specific development closely linked to our HR strategy. As you see here on Slide #7, Clariane University, so our corporate university is joining forces with Fondation Oeuvre de la Croix Saint-Simon in France to take over 7 nurses and social workers schools in the Paris region from the 17th of November '26. This partnership brings together the foundation recognized expertise in initial training with the Clariane University experience in professional and educational training. This is for us a meaningful investment in the skills required across our activities, which support both the quality of care we deliver on a daily basis and our long-term development since we are a people business in all possible dimensions. With this transaction, we will increase our global training offering by 30% in France as of 2027. I will now hand over to Gregory for a closer look at revenue performance and refinancing. Gregory, the floor is yours.

Thank you, Sophie. Good afternoon, ladies and gentlemen. Turning now to revenue. The group delivered plus 4.7% organic growth over the first 9 months with all activities and geographies contributing. I will focus on the drivers behind the performance before moving to our refinancing program. On the Slide #9, and as Sophie indicated, consolidated revenue reached EUR 4.051 billion at the end of September with plus 1.9% reported growth and plus 4.7% organic growth. The third quarter reinforced this momentum with a plus 4.9% organic growth. Let me focus on what is driving these figures. Looking first at our activities, Long-Term Care, which accounts for 75% of group revenue, generated EUR 3.053 billion with plus 5.2% organic growth. Medicalized nursing homes grew by plus 5.3%, supported by solid pricing and higher occupancy. Alternative living solutions delivered plus 4.9% organic growth, reflecting continued development in shared housing. The decline on a reported basis mainly reflects the disposal of Petits-fils completed in France in July 2025. Specialty Care, which accounts for 25% of group revenue generated EUR 998 million and grew by plus 2.9% organically. The Specialty and -- post-acute segment increased by plus 1.6%, supported by the regular increase of outpatient activity and improving case mix, particularly in France. Mental health grew by 6.3%, notably supported by the expansion of our services in Spain following the acquisition of Grupo Cinco. (sic) [ Grupo 5 ] Turning to the geographical breakdown. Spain recorded organic growth of plus 14%, Germany plus 6.7% and Belgium and the Netherlands plus 6.3%. All 3 benefited from improved occupancy and pricing. Italy grew by 3.3% organically with occupancy remaining at a high level. In France, revenue increased by 2.1% organically over the 9 months with growth accelerating to plus 2.8% in the third quarter, the strongest quarter of the year. Long-Term Care benefited from the recovery in nursing home occupancy. In French Specialty Care, the situation is normalized following the SMR reform. Outpatient activity increased by 17%, and the case mix improvements continue to support the recovery. The difference between reported and organic growth across the group mainly reflects disposals completed in 2025. Let us now look at the revenue bridge. We start with reported revenue of EUR 3.976 billion for the first 9 months of 2025. Disposals and other scope effects represented minus EUR 121 million or minus 3%, establishing a pro forma comparison base of approximately EUR 3.855 billion. Volumes contributed plus EUR 62 million or plus 1.6%. Long-Term Care accounted for plus EUR 54 million, including EUR 48 million in medicalized nursing homes, driven mainly by higher occupancy in Belgium and the Netherlands. Specialty Care contributed plus EUR 8 million, including growth in outpatient activity in France and Spain. Pricing and case mix contributed the most to the top line growth with plus EUR 118 million or plus 3.1%. Long-Term Care accounted for plus EUR 97 million, including plus EUR 83 million from medicalized nursing homes, led by Germany and plus EUR 14 million from alternative living solutions. Specialty Care added EUR 21 million with a positive contributions in France, Italy and Spain. Other effects contributed plus EUR 17 million, largely reflecting the comparison with the accrued receivable write-off relating to the SMR tariff reform recorded in France in 2025. Taken together, this movement brings revenue to EUR 4.051 billion, corresponding to plus 4.7% organic growth and plus 1.9% reported growth, higher volumes and positive pricing and case mix effects more than offset the impact of the disposal plan. On the Slide 11 and turning to occupancy, the improvement in medicalized nursing homes continued throughout the first 9 months of the year. As Sophie mentioned, our average occupancy reached 92.2% over the 9 months and 93% in the third quarter. Both were plus 1.4 percentage points above the comparable period last year. The longer-term trend is clear. Average occupancy has progressed from 88.5% in '23 to 90.6% in '24, 91% in '25 and continued to improve with 92.2% year-to-date. That leads further growth potential within our existing capacity. On Slide 12, it shows that the improvement is broad-based. Occupancy rates increased in every country, both over the 9-month period and in the third quarter. In France, the 9-month average rose by plus 1.3 percentage points to 89.4%, reaching 91.1% in the sole third quarter, up 160 basis points compared to Q3 of last year. Germany reached 92.3% on an average over the 9 months and 92.6% in the third quarter. In Belgium, occupancy averaged 94% over the 9 months and 94.5% in the third quarter. In the Netherlands, we recorded the strongest year-on-year improvement with 9-month average of 83.3% versus 75.9% in the year earlier. The third quarter rate reached 84.9%, an increase of 8.8 percentage points, reflecting in particular, the ramp-up of capacity [ opened ] in '24 and '25. Italy maintained occupancy close to full capacity at 97.7% over 9 months and 98.1% in the third quarter. Spain also improved, reaching 93.8% over the 9 months and 94.5% in the third quarter. These rates are measured against total authorized beds. The continued progress across all 6 countries supports our organic growth outlook, while the remaining headroom in selected markets provides further volume potential. I will now turn on the 5 refinancing transactions completed this year and their impact on our debt maturity profile. Starting point was the corporate ratings assigned in February, B+ by S&P and B2 by Moody's. Worth noticing that Moody's recently confirmed its B2 rating with an outlook stable. They supported the way to the rated high-yield market and broaden our financing options. On 10th of April, we issued EUR 500 million of senior unsecured high-yield notes due in 2031 with a 6.875% coupon. The proceeds together with available cash are intended to refinance the Euro PP and Schuldschein maturities from '26 to '28 at maturity or ahead of schedule. Capitalizing on the strong demand, the EUR 230 million tap of 28th of April was fungible with the original note and increased the 2031 series to EUR 730 million issued above par, the new notes offered a yield maturity of approximately 6.6%. The proceeds funded the redemption of the EUR 200 million bond sterling perpetual green hybrid bonds, reducing annual cash cost by approximately EUR 14 million. The transaction also had a mechanical impact of approximately plus 0.4x on Wholeco leverage, reflecting the replacement of the sterling perpetual hybrid bonds with senior debt. On 23rd of June, we issued EUR 333 million of deeply subordinated perpetual hybrid notes, carrying a 7.875% coupon for the first 3 years and the first issuer call option after the 3 years. The proceeds refinanced the EUR 332.5 million ODIRNANE ahead of its September coupon step-up, generating expected annual cash savings of approximately EUR 13 million. On 8th of September, a further EUR 500 million issue of senior unsecured high-yield notes due in 2032 with a 6.875% coupon enabled us to refinance the EUR 350 million syndicated term loan and the EUR 150 million loan and termination of related facility. Finally, on 23rd of September, we secured a new EUR 700 million unsecured revolving credit facility maturing in 2031 with an option to increase it to EUR 900 million, consistent with our approach to simplify the capital structure, it provides additional flexibility with a single Wholeco leverage covenant, no liquidity maintenance covenant and a margin that varies with leverage. The EUR 700 million facility was undrawn at the end of September. The outcome is a simpler capital structure with principal debt maturities extended to 2030, 2031 and 2032. The 2 hybrid refinancing are expected to improve annual cash generation by approximately EUR 27 million. As a repeat issuer, we're also benefiting from broader investor access and more efficient execution. This final slide in my section illustrates the effect of the refinancing transaction on our corporate debt maturity profile. On the left is the recorded structure as of June 30. On the right, the pro forma profile following the September transaction and planned use of proceeds. The 2030, 2031 and 2032 notes replaced short-term debt maturities, including the OCEANE, Euro PP and Schuldschein and the 2 term loans. This substantially reduces the refinancing requirements over the next few years with most of corporate maturities set after 2030. Where proceeds are received in advance, cash remains on the balance sheet until the corresponding repayment is completed. The main corporate maturities are now concentrated in 2030, '31 and '32, alongside residual instruments such as the social bond and our factoring facilities. As of September 30, 92% of the total financial debt, including real estate debt was at fixed rates or hedged, limiting our sensitivity to interest rate movements. The new EUR 700 million revolving credit facility was also undrawn, providing substantial liquidity headroom. This supports our policy of refinancing ahead of maturities while maintaining financial flexibility and disciplined cash management. I will now hand back to Sophie for the outlook.

Thank you very much, Gregory. I would like to conclude by highlighting the priorities that underpin our medium-term plan and the financial discipline that will guide us over the coming years. As you see on Slide #17, our '25-'28 medium-term plan, Succeed Together, builds on 4 distinctive strengths for the client model. First strength, the quality of care we deliver; second strength, our people; third strength, the medical expertise; and fourth strength, our tech and digital capabilities. Quality at the core is our first strength. Our approach and priority is to provide a consistent, high-quality experience for all residents, patient and their families. with care that responds to their needs and expectations. This is central to the trust placed in our facilities and to their long-term attractiveness. Our second strength at Clariane is definitely our people. As today's Clariane University announcement illustrates, investing in training helps us attract, develop and retain skilled teams and supports both continuity of care and operating performance. We aim to reinforce our positioning as one of the leading top employers in our industry. Our third strength is our medical expertise, which combines research, innovation, training and rigorous ethical standards to deliver personalized and effective care. Our fourth strength is the strong digital and tech capabilities we've been building with our client solution teams. These 4 strengths translate into tangible drivers of profitable growth as reflected on the right-hand side of the slide. We will continue to leverage the capacity available in our existing networks with further potential to increase occupancy in medicalized nursing homes and to expand outpatient care. In parallel, we are pursuing selective CapEx-light development, and we are enriching permanently our offering in response to evolving care needs. Active pricing and data-driven case mix management support revenue growth, while our Better Support operational excellence program improve efficiency throughout the group. Better Support efficiency program means also streamlining overheads using digital and AI-enabled tools to improve efficiency and quality in care workflows and leveraging our scale to keep service, maintenance and energy costs under control and to select the best partners. Together, all these measures provide a clear operational basis for the revenue and EBITDA growth set out in our medium-term plan. As you see here on Slide #18, we also put financial discipline and cash generation at the core of our plan. The refinancing program that Gregory has just outlined gives us greater visibility and flexibility. Our policy is and will remain focused on cash generation, disciplined capital allocation and the progressive reduction of the leverage. The first driver of deleveraging is the continued increase in EBITDA, supported by careful management of working capital. The second driver is our investment discipline. We will maintain our annual investment envelope at around EUR 300 million, broadly divided equally between operating and development CapEx. Around EUR 150 million are allocated to operating CapEx to support the resilience and the compliance of our facilities, including climate adaptation and IT. A further EUR 150 million CapEx is directed towards development projects with relatively short payback periods, including selected refurbishments, digital initiatives and local partnerships, particularly in the Netherlands and in Spain. We will continue to manage debt proactively, anticipating refinancing 12 to 18 months ahead of maturity and optimizing financing costs. Any bolt-on acquisition will remain subject to our leverage targets and strict strategic and risk return criteria. So let me conclude by reiterating our objectives across the 2 horizons of our plan. For '23 to '26, we continue to target average annual organic revenue growth of around plus 5% on a pro forma basis. We also confirm a plus 100 to 150 basis point improvement in the pre-IFRS 16 EBITDA margin pro forma disposals and excluding real estate development to be compared with its '23 level of 10.5%. By the end of '26, we are targeting net financial debt pre-IFRS 16 of approximately EUR 3 billion on a comparable balance sheet basis and a Wholeco leverage below 5.5x. For the '25-'28 period, we confirm average annual pro forma revenue growth of around plus 4% together with average annual growth of between plus 7% and plus 9% in pre-IFRS 16 EBITDA and between plus 11% and plus 14% in EBITDA opco, both on a pro forma basis. We are targeting a Wholeco leverage of around 5x by the end of '28. As a reminder, this Wholeco leverage objective reflects the current definition and balance sheet structure, including the mechanical adjustment resulting from the additional EUR 230 million of senior notes issued in April to refinance the sterling perpetual hybrid bonds. We confirm all financial and nonfinancial objectives. Our 9 months momentum and completed refinancing program provide a solid basis for delivery. We remain more than ever focused on delivering outstanding quality of care, thanks to our people, to our operating execution and to our cash generation. Thank you very much for your attention. Gregory and I are now available to answer your questions.

[Operator Instructions]

Thank you, operator. So we have a few questions on the chat. The first one is regarding the French budget, the Petits-fils discussion. What is your view on the process and the proposed measures?

Thank you very much, Stephane. We have a pretty positive view on the measures that are currently into the draft bill when it comes to the funding of elderly care, Long-Term Care and post-acute care. Currently, the draft bill comes with an increase of the funding of 3% to 2.5% of funding. So it's definitely a pretty strong basis for building our '27 budget.

Thank you, Sophie. Next question is regarding inflation, especially wages. What do you expect for '27?

Actually, the -- our view on the wage inflation is a pretty differentiated one when it comes to geographies. Half of our portfolio is located in countries where actually the wage inflation is reflected in the care rates. This is mainly true for Germany, for the Netherlands and for Belgium. In France, Italy and Spain, there is not -- there is no such framework. But if I look what we have delivered over the last years, we were able to pass higher price and rates increase versus the overall wage increase, and we expect to be able to progress the same way in '27. So positive price over cost and especially over staff cost effect.

Thank you, Sophie. Next question is, are higher long-term yields putting upward pressure on your property cap rates, particularly in France? And what does that imply for your real estate portfolio valuation?

Just as a reminder, we own 23% of our operated portfolio and 40% of those 23% are located in France. So I think that reflects pretty precisely the split of our activities across Europe. So we don't expect to see a significant impact of the current evolution of interest rates in the overall valuation of our assets.

Thank you, Sophie. We have one question regarding the contribution of pricing and volume. What do you expect in 2027? The contribution between price and volume in your growth expectation?

Yes. Basically, we are kind of expecting a kind of 3-1-1 effect, 3% of pricing and rate adjustment, 1% of volume overall and probably there will be an additional 1% of external growth coming from the bolt-on and CapEx-light development, I alluded to.

Thank you, Sophie. The next question is more specifically on Germany. Do you consider the Q3 German performance to be slightly lower than expected?

I think that the Q3 quarter reflects the momentum in Germany. We have done a major catch-up in the repricing, which has been suppressing significantly the revenue evolution in Germany over the last 2 years. As expected, this catch-up effect is progressively slowing down and will be partially offset by a higher volume effect. So I see directionally growth in Germany kind of converging to a low 5% based on that effect.

Thank you, Sophie. The next question regarding occupancy rate following the Q3 performance in France. How much do you think the improvement reflects temporary short debt stays and how much represents a sustainable increase in the underlying run rate?

We see month after month improvement in the occupancy volume in France year-on-year. So -- and definitely, there is a summer peak that has been there already for several years. So I think you can count on a kind of plus 1%, plus 1.5% increase year-on-year that is captured very clearly. And this is actually a pretty sound growth in the sense that we are really paying a lot of attention in maintaining the right pricing and not kind of receding on pricing to catch additional volumes. And this is why, again, this growth in France is a sustainable and sound growth.

Thank you, Sophie. I think next question will be live. So please, operator?

The next question comes from David Cerdan from Kepler Cheuvreux.

I have a rapid question regarding the IT CapEx. Do you hear me? Is it okay?

Yes, absolutely.

Sorry, Sophie. Just a question regarding the IT CapEx. Given the recurring nature of this kind of spending, should it be treated as an OpEx rather than a CapEx? And how much of the EUR 150 million relate to IT development?

Yes. So thanks, David, for the question. So it's true that when we look the EUR 150 million CapEx to develop, a part of this CapEx to develop and the way we look at it, a part of it is to have new capacity and other part of it is to have improvement of the margin. When we say improvement of the margin or performance -- percentage margin, we have and we didn't disclose it, but 1/3 of the investment on this development envelope could be linked to this transformation or, let's say, IT CapEx. And when you improve the margin is because you have assets capitalized in front of it because this is the capital you allocate an accounting and in IFRS perspective, that's clearly an asset for the company that help us to improve the margin. That's why part of your question, yes, that's a CapEx. And the second part of your question is it's 1/3 of the development CapEx so far that could be allocated to the improvement in margin that is driven by digital transformation.

And of course the recurring expenditures related to software and the fees related to software are captured in the EBITDA, of course.

Of course. The maintenance fees are what you have on the software, obviously, as mentioned by Sophie in the EBITDA.

And can you give us some examples of what you want to do with this overlap?

Well, yes. When you look on the digital transformation, there is, for example, software we are using in the site, we call it Koala software that make the life of the care operators, [ the nurse ] easier and it help us to collaborate. So for example, its own client tool develop that improves the performance and really some time in the site from the colleagues. And this is one of the example when we say digital transformation and the way we invest in our CapEx.

And actually another example is the [ Connected NG ] project that we have launched in Germany. So it's to replace the current system by an integrated system, ERP system in all our nursing homes. It will save up to 2 hours to the nurses within the facility, and it will unlock additional capacity that we cannot completely fill in currently because we are missing the right nursing staff ratio that is one of the critical dimension in Germany. So definitely, Connected NG project is one of the investment that is planned -- has started already '27 and to come fully live in '28. And it is already taken its legislation in Germany that such digital projects can be partially subsidized and funded by the care agency. So that's another project. We have currently 5 projects ongoing that are definitely contributing to the growth both in revenue, but also in operating -- in our operating results.