Clariane SE (CLARI) Earnings Call Transcript

Hello, and welcome to Clariane Half Year Results 2025. My name is Laura, and I will be your coordinator for today's event. Please note that this call is being recorded. [Operator Instructions]. Today, we have Sophie Boissard, CEO; and Grégory Lovichi, CFO as our presenters. I will now hand you over to your host, Sophie Boissard, to begin today's conference. Thank you.

Thank you, Laura. Ladies and gentlemen, dear investors and financial partners, good afternoon, and welcome to the Clariane Group '25 Half Year Results Presentation. I'm Sophie Boissard, Chief Executive Officer of the Clariane Group, along with Gregory Lovichi, the Group's Chief Financial Officer. During today's call, we will present Clariane results for the first half of '25, comment the most recent development in terms of refinancing, outlining bonds, a high level of liquidity and expanded corporate debt maturities. We will also return to '25 guidance, plus 6% to plus 9% growth in EBITDA, which is confirmed. Let me begin with the key highlights of the first half of 2025. As you see on the slide, we have now successfully completed our plan to strengthen the financial structure of the company and we did so 6 months ahead of schedule. This was achieved in challenging market conditions and represents a major turning point for the group as we look back on the situation in November 2023. The full EUR 1 billion asset disposal program was completed. Our pragmatic approach adopted enabled us to attain strong valuation multiples. Our refinancing operation were completed successfully as evident by the recent EUR 400 million 5-year bond issue closed 1 month ago in June. Our liquidity was significantly reinforced, enabling the full repayment of the EUR 491 million drawdown of the RCF today. The second highlight of the first half is actually the solid organic revenue growth development across all business lines and geographies and a stable EBITDAR, while EBITDA pre-IFRS 16 decreased slightly, minus 4.1% on a pro forma basis due to the temporary impact of the new tariff framework in Specialty Care in France. This is a well-known issue across the sector related to the delays and mistakes that have marked the entry into force of the new regulation especially for newly opened facility, which represents for Clariane in France, around 20% of the operated network. We have been taking corrective measures based on an active and database case mix management that will start to pay off in the second half of 2025. On the long run, we are very confident that this new regulation will be beneficial to our Specialty Care activity in France. On this basis and looking ahead, we confirm our 2025 guidance. The second half of the year will benefit from several drivers in terms of margin. First, in elderly care, continued growth in volume, combined with the full year impact of tariff increase in Germany, which will mainly take place in the second half for 70% of the facility. Second, in Specialty Care, the benefits of the active case mix management that we have put in place and further development in volume in outpatient activity. We will also benefit from our continued focus on productivity and staff efficiency in all segments. And we will also reap the benefit of additional cost-saving measures following the completion of our disposal plan on the overhead. Last but not least, we expect also to see the benefit of continued discipline and selectivity with respect to development CapEx. Let me now walk you through the key financial indicators of this first half. Our revenue reached around EUR 2.7 billion, up 4.8% organically with solid contribution from all region and activity. This confirms the resilience of our business model, diversified and well balanced. EBITDAR came in at EUR 546 million, up 0.8% pro forma, excluding the contribution from real estate development. EBITDA pre-IFRS 16 and excluding real estate development again stood at EUR 263 million, down 4.1% year-on-year. This is actually a resilient performance considering the temporary impact of the tariff reform in France I already alluded to. Our net result group share pre-IFRS 16 was a loss of EUR 47 million to be compared with a loss of EUR 28 million in the same period last year. This is mainly due to the cost and noncash accounting items associated with the group portfolio streamlining and disposal program. It should be noted that no capital gain related to the '25 disposals has been booked yet. This will be done in H2 and should represent over EUR 200 million of capital gain net. When it comes to balance sheet and cash, we maintain our deleveraging trajectory. Net financial debt pre-IFRS 16 and IAS 17 decreased by EUR 212 million to EUR 3.6 billion at the end of June. At the closing was not completed -- as the closing was not completed at 30th of June, this is excluding the net proceeds of Petits-fils disposal taking this into account since we have closed the transaction yesterday, Wholeco leverage should have improved to 5.6x on a pro forma basis. Finally, our real estate portfolio value is stable at EUR 2.6 billion with an LTV of 57% down to -- down from 63% 1 year ago, further evidence of continued financial discipline. Let's now come on Slide 7 to our extra financial performance. I would like to briefly highlight some key milestones achieved on the first half. On the human resources front, we were once again certified Top Employer Europe '25. We are actually the only care company to receive this recognition. We have also signed a major European agreement on Occupational Health and Safety, together with our employee representatives from the European Works Council and EPSU, and also National Trade Union. This agreement represents a key milestone on our road map towards '26 with a very clear and shared focus from all parties on reducing workplace accident frequency and reducing absenteeism. It include a full set of commitments and KPI tracked over 4 years. Finally, on the HR front. At the 30th of June, we had 5,843 employees enrolled on a qualifying path, confirming the relevance of bringing together all training programs under the umbrella of our Clariane University. This gives us confidence in achieving the full year target of above 7,000 Clariane employees engaged in such a training program, which is actually a key enabler for talent development, career development and also meeting the care staff scarcity over the various markets. On the environmental side, we took a key step forward by signing our first green energy forward purchase agreement with IGNIS. This contract will come into force in August '26, supports our target to cut emissions from energy use and refrigerants by 46% by 2031, in line with our SBTi trajectory. And finally, we published for the first time our medical innovation and research policy. This policy is deeply rooted in our commitment to consideration for patient with the rollout of our positive care approach and deeply rooted in international quality standards, such as ISO 9001 for all our activities. It also reflects our ambition and commitment for innovation, medical innovation, supporting the integration of scientific advance into care practices and our contribution of broader medical research in geriatrics. These ESG milestones are fully aligned with our mission and long-term value creation strategy. Let's now have a look back to our plan to strengthen our financial structure. This slide here summarize what we have delivered as part of this plan, which is now completed 6 months ahead of schedule. The plan that we launched at the end of '23 was designed to accelerate deleveraging with dual flexibility and secure Clariane access to long-term financing. And all the 4 pillars are now secured. First, we closed 2 real estate equity partnership in December '23, generating EUR 230 million; second, we secured EUR 200 million in real estate debt, also in December '23; Third, in July 24, 1 year ago, we successfully completed EUR 329 million share capital increase, including preferential rights offering. And finally, in June '25, we reached our EUR 1 billion disposal target, which includes the sale of our home care network Petits-fils. Altogether, these 4 pillars have proven instrumental in supporting the deleveraging of the group as well as normalizing access to financing. This foundation now allows us to look ahead with clarity and renewed confidence. Let's have a focus on Petits-fils disposal. The transaction was finalized on July 30 and is based on today -- yesterday, sorry, actually, and is based on the EUR 345 million in enterprise value. Petits-fils contributed EUR 56 million to our '24 revenue and employed around 370 people across it's network of nearly 300 agencies throughout front. We acquired Petits-fils originally in 2018, and it has grown substantially under our ownership, expanding from 58 to 292 agencies and becoming in France a reference in personalized in home care for elderly people. This is definitely not the end of the story as Clariane and Petits-fils will enter into a country-wide service partnership to enable across and suitable care plans for patients and the caregivers from Petits-fils to Clariane nursing home workings and from Clariane clinics and nursing homes to Petits-fils agencies. The final transaction and the condition of the transaction confirms the strength of our strategy, the quality of our portfolio, our ability to execute -- to generate value and to execute the discipline and value focus. It also allows us now to shift fully to delivering the next phase of our operational performance improvement. I would like to take a few seconds to look back on how we executed the disposal program, which was a challenging one given the overall market condition. First of all, some figures in total. Around 60% of our EUR 1 billion disposal plan was delivered through the sale of operating companies, 54% of the proceeds came from French assets, both operations and real estate. And more important ever is the outcome was the way we conducted the process. Actually, the key success were that we maintain full control over timing and terms at no point where we perceived as for a seller. We systematically build incredible alternative to giving us leverage at every stage. We also demonstrated strict strategy discipline, including walking away from deals that didn't meet our criteria as was the case for Belgium and the Netherlands that had been considered for a disposal option. And we created structured competition even in a situation involving natural buyers to secure the best possible value for the company and the shareholders. These principles reassured investors and creditors, they confirm the clarity of our strategy, which is focused on 6 core countries, financially disciplined and concentrated on core non-acute care activity. We were able to achieve high valuation around 14x EBITDA, which clearly illustrates the attractiveness of high-quality, well-managed assets in our sector. On the next slide, you see now the profile of Clariane after completion of our disposal plan. We present a refocused balance and more reliable profile. As you see, our activity is now concentrated in 6 countries and structured around 3 segments, long-term care, specialty care, community care, so all non-acute care. And this new profile gives us both scale, clarity and optionality in order to manage both the regulation and development opportunities in all those geographies. In the data below on this slide, you see here reflected our pro forma disposal figures, post disposal, which I hope will ensure greater comparability and visibility for all investors going forward. You see on the central, on the green part, the key metric for valuation purpose, both in terms of pro forma revenue '24 estimated EUR 4.1 billion revenue and pro forma '24 EBITDA estimated which is actually EUR 555 million. And this is the basis for the guidance and for our development looking forward. Let's now have a look at the financial structure post plan, post disposal. As you see here reflected, we have significantly reduced our leverage, Wholeco leverage over the past 18 months. As of June '25, our Wholeco leverage, which is now the key indicator on which we are guiding stands at 5.6x on pro forma basis, down from 6.2x at the end of '23. This reflects the combined positive impact of operating cash flow generation and the full execution of our disposal program under the condition set out previously. As a reminder, this level is calculated using the new Wholeco definition used in our amended financing agreement, including both corporate and real estate debt. The steady deleveraging trajectory puts us on track to meet our objectives of a Wholeco leverage ratio below 5.5x by year-end. Now let's move on to the financing side. The successful execution of our plan has enabled us to normalize our access to long-term financing. This slide, along with the following 2 slides illustrate key refinancing milestone secured by Clariane over the first half of this year '25. First set, in February, we completed the amend and extend of our extended credit facility with a final maturity extended on some condition to May 2029. At the same time, we also secured a new EUR 150 million global real estate credit line with the same maturity in 2029. As you see on the next slide, we have completed this negotiation with our bank with the return to the debt market under very favorable condition. In June, we successfully placed EUR 400 million unsecured bond, maturing in June 2030, with an annual coupon of 5.875% (sic) [ 7.875% ]. This bond contributed to a further extension of our average debt maturity profile. The offering attracted significant interest from Tier 1 institutional investors, both French and international, the order book exceeded EUR 1.2 billion, implying an oversubscription rate of more than 3x. Its purpose is to rebuild financial headroom and further reinforce Clariane's liquidity profile. This transaction together with the extension of our bank facilities complete a successful refinancing cycle in H1 that position us well for the future. As a summary of the previous slide and before Gregory will comment on our half results, let me conclude this first section with an overview of the pro forma debt maturity profile, including repayment in full of the RCF drawndown effective today. Cash in of Petits-fils net disposal proceeds effective yesterday. It shows that halfway into '23, '26 midterm plan, Clariane has been successful in addressing short-term debt maturities with no significant maturities to come before '28, as you see here on the chart. This quick analysis should also take into account the reinforced liquidity situation of the company with close to EUR 1 billion at end July '25, including the RTF, which remains available following the repayment of the drawdown. I now would like to hand over to Gregory for the analysis and the presentation of our income statement. Gregory, the floor is yours.

Thank you, Sophie. Let me begin with a look at the group's revenue performance in the first half, as Sophie pointed out, we delivered organic growth of plus 4.8%, this 1.3% volume contribution and plus 3.5% price effect with balanced contributions from all segments and geographies. By activity on the left, Long-Term Care, our largest segment, grew plus 5. 4% organically driven by both volume and price effects. Specialty Care saw an organic increase of plus 1.6%, driven only by volume effect while pricing was flat in France for the first semester. Community Care continued to show strong momentum, putting a plus 8.3% organic growth primarily in France. On a geographic basis to the right, Germany led the way with a plus 8.1% organic growth, followed by Benelux at plus 7.5% and Spain at plus 3.8%. France, despite being impacted by the SMA reform, impacting pricing mechanism for post-acute care, still delivered a plus 2.8% organic growth coming from long-term care. Italy also remained positive at plus 2.5%. This result highlights the resilience of our portfolio as well as the benefits of our geographical and segment diversification. Now if we break down the evolution from H1 '24 to H1 '25, you can see the key factors behind our revenue growth. From the pro forma base of EUR 2.6 billion, revenue increased to EUR 2.65 billion, supported by several drivers. First, volume contributed plus EUR 34 million or plus 1.3% mainly from occupancy rate increases in long-term care and expansion in community care. The price and care mix effect added EUR 89 million of plus 3.5%, reflecting tariff adjustments in Germany and France in the first effect of a more positive case mix in France has started in the second quarter. Offsetting these were a negative perimeter effect of EUR 103 million or minus 4% due to completed disposal and tight closure across several geographies. The sale of the Petits-fils was closed end of July and its disposal effects are not included in this table and other effects of EUR 33 million linked mainly to the reform in specialty care in France and the wind down of our related promotion activity margin. Altogether, this illustrates strong underlying dynamics more than compensating for planned perimeter reductions and providing a solid base for H2 growth. Turning now to occupancy rates. We continue to see a positive trajectory in our long-term care activity despite a more challenging start of the year. The average occupancy rate in H1 2025 reached 90.5%, which is 1 point higher than in H1 2024. This is a clear sign of ongoing recovery and solid demand. In June, average occupancy had risen to 90.7% and preliminary data for July point to further improvements with rates above 91% at end of July. This sustained momentum confirms that we still have growth potential in debt with our existing capacities and provide a strong base for continued performance in the second half. Now let's look at EBITDAR margin performance by geography. At group level, our EBITDAR margin came in at 20.6%, compared to 21.2% in H1 2024, a decline of 62 basis points when excluding real estate development activity. This variation is attributable to France, where margins fell by over 300 basis points due to first, the impact of the tariff reform in Specialty Care and the ramp-up initially accelerated on the back of numerous openings in 2024 and early '25. Outside of France, all other geographies were clear and encouraging improvements like Germany, helped by 144 basis points, confirming the recovery in pricing and productivity, yet still more to come in the second semester of 2025. These effects were identified as the key drivers supporting the 2023-2026 guidance. And this show as well the group's ability to recover margin performance as transformation efforts takes full effect. Turning now to EBITDA. EBITDA for the first half reached EUR 263 million, down from EUR 274 million pro forma in the first semester of '24, a decrease of 4.1%. Starting from the published figures of EUR 290 million in H1 2024, we deduct EUR 11 million related to the disposal plan and EUR 5 million from the hand of real estate development to arrive at a pro forma base of EUR 274 million. From there, several components contributed to the evolution. Volume impact was slightly negative, minus EUR 5 million due to the [indiscernible] ramp-up in France, all other countries posted positive volume effects. The price effect, which has been EUR 89 million was supported by strong tariff adjustment, notably in Germany and to a lesser extent in Benelux, Italy, and France that will positively improve their price cost to ratio over the year and especially in the second semester. This was temporary offset by cost inflation of EUR 100 million mainly in France and Germany. Two main effects to be highlighted. First, the front-loaded salary adjustment in Germany that will be more than covered by ongoing tariff increase in the second semester and the progressive adjustments of the organization in Specialty Care activities in France in the back of the [ SMR form ]. Other effects, including M&A activity in Spain and site closure across several countries contributed plus EUR 5 million. Overall, the EBITDA margin pre-IFRS 16 and excluding real estate development, stood at 9.9% compared to 10.7% in the first half of '24. Let's now look at the cash flow statement for the first half. Operating cash flow reached EUR 133 million compared to the EUR 169 million in H1 2024. This decrease is primarily reflect the lower EBITDA and the saving of financial charges impacted, which totaled EUR 110 million over the period. It is worth noting that adjusted for payment delays due to the late publication of the 2025 [indiscernible] tariff in France, operating cash flow would have remained stable year-on-year. As a result, free operating cash flow stood at EUR 23 million. Development CapEx was reduced to EUR 48 million and financial investments amounted to EUR 23 million, bringing total investment cash outflow to EUR 71 million with significant reduction versus last year, showing the strong discipline in CapEx allocation. Coupon payment amounted to EUR 35 million. Net free cash flow after these items was negative EUR 48 million. Consequently, net debt increased by EUR 101 million, including the IAS 17. When we exclude IAS 17, the increase was EUR 114 million. Also, the full impact of the disposal plan, particularly the [ Petits-fils ] transaction will only be reflected in the second half of the year. Turning now to our real estate portfolio, excluding perimeter effects, the gross asset value is almost stable. As of June 30, the gross asset value of our real estate stood at EUR 2.6 billion, down EUR 64 million compared to a year earlier. But since this evolution is primarily due to the EUR 72 million perimeter impact, mainly from disposals in France, a market parameter has a very muted impact. Positive indexation effect of EUR 55 million on one side was affected by a cap rate increase effect negative of EUR 76 million. Cap rates stood at 6.4% at the end of June and changed from December further evidencing market stabilization. We also continue to invest in maintenance and upgrades with EUR 30 million in CapEx over the period. In summary, at constant perimeter, the portfolio remains stable and continues to support our financial focus. I will now hand it back to Sophie to conclude on our refocused operational strategy and outlook for the current fiscal year and the 2023-2026 period.

Thank you very much, Gregory. Let's now may take a step back and place our transformation road map in the broader context of the European care service market. You know, I think as well as I do the fundamentals but they remain striking. If you just look at the figures by 2040, the population aged 75 and over is expected to grow by more than 40% with the first step in 2030. At the same time, more than 80% of people over 60 already live with at least one non-communicable disease. That means that they need a certain volume of non-acute care to support them at home. These demographic and epidemiological trends will continue to feel growing demand for care and definitely need for further social and care infrastructure. In this context, private investment will remain essential to meeting future needs, and Clariane is uniquely positioned to help address its challenge, thanks to its diversified and balanced platform, experienced teams and focused mission. In this environment, as you see on Slide #28, Clariane today stands out as a true European leading platform in non-acute care. We operate across 6 major countries with a multi-local footprint that enable us to serve over 800 local communities and reached a catchment area of more than 13 million people aged 75 and over. Our platform covers the full spectrum of non-acute care solutions, long-term care, of course, with medicalized nursing home across all our geographies. Specialty Care, including both mental health and post-acute care facilities supported by strong clinical expertise and growing outpatient capacities. Last but not least, we have also a strong community care of small units, which includes shared housing and in-home support model particularly strong in France and in the Netherlands and gaining traction in our other markets. This integrated and balanced model gives us the agility to respond to country-specific needs while benefiting from shared standards, expertise and innovation across the group. It also position us at the heart of the care ecosystem in each country as trusted partners to family, professionals, regulatory health authorities as well as government. And we move into the second half of the year, our priority is clearly to continue improving our operating performance and margin. And for that, we actually rely on 3 main levers. The first one is very, obviously, volume improvement. We are continuing to optimize our existing capacity, particularly in the nursing homes elderly care segment, where a 2-point increase in occupancy rates can activate approximately 1,000 additional debt, especially in the largest network, Germany and France. We are also accelerating the development of outpatient activity in all our specialty care clinics, which meets both patient expectation and system needs and which are very contributive to our margin. The second level to support operational performance is clearly pricing and case mix management. We are actively managing the repricing on the elder care segment ensuring that negotiated tariff with the local regulation authorities better reflect the complexity and the medical intensity of the elderly care we deliver and this is particularly true in Germany. But we are also deploying a very sophisticated and comprehensive database system in order to fully manage the case mix in our Specialty Care facility, and this will definitely drive both volume -- both revenue and margin growth looking forward. And of course, on the pricing, we can also improve what we already do on the private pay side of our offering, be it an elderly care or in specialty care. And finally, of course, operational performance will also benefit from all the program that are in place to support cost efficiency. This includes an ongoing and covenant work on HR performance, with a priority focus on strengthening the staff planning, reducing absenteeism. This is why the agreement I alluded to 10 minutes ago that we were able to sign last month with all our unions at European level, the first of this kind in the sector in Europe is a clear demonstration that we are all committed to improve and to further develop in that segment. We are clearly also betting on further negotiation and strengthening of our supplier base, taking advantage of our large scale and broader process optimization, especially the transactional and back-office practices or centrally and at facility level to digital tools and artificial intelligence. We have been actually actively working on this for the last 18 months, and we see the first benefit of it, and there is more to come in the forthcoming 2 years. Together, all these 3 levels or family of levels will support the rebound in margin expected in the second half of '25 and into '26. I would also like to give some granularity on the cash generation, which is obviously the -- the next key challenge for the company looking forward. We are taking a lot of very precise actions to support sustainable cash generation going forward. First level here is also continued organic revenue growth and revenue integrity. And as we see, we have a lot of visibility on that sector. Second, we, of course, expect that the margin improvement supported by the pricing and volume increase and also the various savings I just mentioned will be, of course, transformed into cash generation for the company. And we are on the top of this pursuing a disciplined investment strategy with clear focus on reducing and normalizing both gross CapEx and noncash items impacting our free cash flow on the back of the restructuring and disposal plan. Fourth, we will beginning to benefit from lower financial costs, thanks to the steady reduction of gross debts and the management of the maturity we have done. Finally, our refinancing capability has been demonstrated with both bank and bond transaction executed successfully comparable terms and well received by the market. These pillars position us well to continue delivering on both our operational and financial objectives. Let's now come to the Slide 31 as a wrap-up. So Clariane is definitely now well positioned to benefit from, a, the structural growth of the European care market and to do so in a rate that is both sustainable and profitable. We have, as a platform, 3 core strengths. We have the scale and the leader position as pan-European operator fully focused on non-acute care. Second, we benefit from a balanced business and country profile and portfolio with no overdependency on any single geography or segment, and this is very important in such regulated activities. This makes our model -- business model more resilient and adaptable to local dynamics and also to local regulation challenges that can happen. Third, we operate with a best-in-class model, a very strong and clearly defined target operating model in the 3 segments, and our performance is underpinned by a robust quality standards, recognized and shared HR practice, active and innovative social dialogue and a growing use of digital tools to support both care delivery and efficiency. These are the main foundation on which we will continue to build on the second half of the year and, of course, beyond. Let's now come to the second half outlook. As we look to the second half, we do so with clarity, focus and confidence. Our main strategic objective for the Europe to finalize the financial structure strengthening plan has now be achieved and is 6 months ahead of schedule. After a transpositional first half, we expect our performance in the second half to benefit from several tailwind I already mentioned. First, continuous volume increase across all geographies, particularly in France, where the recovery in occupancy has been visible since Q2 and more to come here in the summer. Second, the full year impact of the price increased, especially in Germany, where additional price adjustment are still expected on 70% of the network there. Third, we will see the benefit of our database case mix management efforts on the Specialty Care in France with already a very strong increase in the average daily rate that we can achieve through the case mix management. Fourth, we will continue to benefit from improved productivity in line with our quality commitment. And on top, we have launched targeted saving plans on overhead following the group's refocusing for disposal that will contribute to margin improvement in H2 and mainly in '26. And of course, we remain firmly committed to disciplined -- further disciplined CapEx management with strict allocation to high return projects. These values levels will support a strong second half and enabled us to confirm our trajectory for the full year. So I would like now to turn to our outlook for '25 and for the midterm '23-'26. Our outlook for both '25 and midterm is unchanged. In '25, we expect, as we said, organic sales growth of around 5%, underpinned by strong momentum in price and volume, particularly in France and Germany and by ramp-up contribution in the Netherlands and in Spain. This growth momentum, combined with tight control of our operating costs, in the context of lower inflation on supply chain will underpin growth in pre-IFRS 16 EBITDA of between 6% and 9% enhance an increase in our margins. In terms of our financial structure, we are aiming to reduce our Wholeco average to below 5.5x, thanks to the improvement in financial performance and to the effect of the remaining price of our disposal plan, which is still to be cashed in, in the second half besides Petits-fils. This financial objective are, of course, accompanied by extra financial objectives, maintaining the Net Promoter Score above of plus 40, maintaining a number of employees enrolled in qualifying at over 7,000 and pursuing the reduction in the frequency of work-related accidents and in our carbon footprint according to our SBTi trajectory. In terms of our midterm objective for the period '23-'26 as a whole, we are confirming our target of an average annual growth rate in revenue of around 5%. We are also confirming the improvement expected in margin with a target increase of 100 to 150 basis points by '26 pro forma of disposal and '23-'26 scope effect. And we expect our Wholeco leverage to be below 5x at the end of '26, consolidating the group's financial structure and the recovery in operating performance. This achievement of our refinancing plans, the strong business momentum and the strong fundamentals of our business portfolio means that we can look forward to the coming years with the great deal of focus and renewed confidence. And more than ever, we remain focused on our purpose, taking care of each person's humanity in times of vulnerability. Thank you very much for your attention. Gregory and I are now ready to move on to your questions.

[Operator Instructions] We will now take our first question from Laurent Gelebart of BNP Paribas Exane.

I have 4 questions today. So the first one relates to the EUR 30 million cost-saving plan you have been initiated. Could you let us know what will be the benefit in terms of savings you expect from this EUR 30 million one-off costs you have as a provision in your P&L in H1? So second question is that when I look at your net debt at the end of H1, you are at EUR 3.5 billion, and you want to be below EUR 3 billion by the end of 2026. The disposal plan is being completed. So can you give us the building blocks in terms of cash in from disposal not yet being cashed in and other stuff that could explain from the move from EUR 3.5 billion to EUR 3 billion by 2026? The third question relates to your guidance, which implies 6% to 9% EBITDA growth this year. If we look at this number on H2, it implies plus 18% to plus 24% growth versus H2 last year. So could you confirm that it is correct? And could you explain again what are the main drivers to improve the profitability? And last question, basically on Specialty Care in France. If I'm not wrong, this issue was already live last year in H2. So why, I mean, it has been continuing in H1 of this year? And what have you been implementing basically to be able to improve again the margin on this activity going forward?

Thank you very much, Laurent, for the 4 questions. I will address the Specialty Care and I leave, first of all, the first question to Gregory, EUR 30 million restructuring costs and the net debt...

Yes, if I get the question, this is what we have on the noncurrent items. So the noncurrent items that you pointed out correctly, Laurent, amounted to EUR 55 million on the first half of the year. When you look at it, part of it, 50% of it is noncash. When you look on the noncurrent, you have part of it impairment and the other are more restructuring and reorganization. It's more cost to implement the disposal plan. And obviously, part of it will be -- when we see on the H2 and will come to improve the profitability on H2. On the second point on the net debt, and how to drive the net debt down. The first element, you need to have in mind is that we didn't make all the closing yet. So still, we'll have some closing in H2. And you saw it as well with the pro forma, we did with Petits-fils yesterday and with a significant impact on the net debt. Other closing will come on the second part of the year. Then when you say this, we have as well some cash generation impact in H2 and as well in 2026 that are the remaining effect to continue to reduce the net debt going forward. And as we mentioned in the presentation, all the action plan we have especially on the increasing EBITDA, working capital management, strict discipline on CapEx, reducing the gross debt with the positive impact on the indirect effect is. Obviously, all of these elements come to the reduction of, let's say, of cash flow generation. I think this is two main effects that we need to have in mind when in -- to bridge the gap with the reduction of net debt we have. And so that was of the 2 first questions.

On the margin guidance...

Maybe you take the Specialty Care and then we turn on the margin guidance.

Yes. Perfect. So for the Specialty Care, you're right, the new base framework has been in 2024, but with a lot of uncertainty delay and also mistakes because the tariff framework did not take into consideration the newly opened or reopened facility. And this is representing in our case, because they take just to explain how it works. So until '24, the financing of post-acute care in France was based on a fixed daily rate that was actually [ per diem ]. They decided facility by facility and inflated every year by the average indexation decided by the government. That was basically a very simple and common approach. The new tariff scheme is much more sophisticated. It's actually a country-wide tariff scheme for 90 different type of care path depending from the pathology, depending from the profile of the patient. And this 90 type of rate -- 90 type of pathology are to be combined with the intensity of rehabilitation, the severity and the intensity of care required so the severity of dependency and the social situation. So there are 3 parameters plus the length -- the recommended duration of the stay. So it's very sophisticated, so 90 different therapy combined with these 4 criteria that are, of course, unique to each patient. And so the -- the new right framework has been actually published in '24. There has been some correction done where expected at late '24 and they have been only published in April '25. So this is explaining why we had some uncertainty between '24 and '25 with some actually commitment of the authorities that were not reflected in the tariff issue for '25. And last but not least, and this is very specific to Clariane. When they -- when they convert it from the day price to this tariff framework, they did not take into consideration for the part that is still fixed. So half of the funding is fixed, so per facility, they did not take into consideration the newly opened clinics between '22 and '24. And for Clariane, since we have actually executed a very wide repositioning an investment plan, as you know, Laurent, started 2017, actually, 20% of our operated network was not -- was actually extended or even newly opened between '22 and '24 and part of what the amount we were entitled to get was not taken in the tariff framework. So I don't -- I want to make a choice. But actually, this led us to a lot of discussion, which is of the regional agency to progressively correct the amount we are entitled to get first, and we haven't been getting the full amount. We are still missing some million as a basis for this new tariff framework. That was the first thing we had to do. And this explains a lot of the negative deviation from H1 '24 to H1 '25, first of all. The second part is actually that as a mitigation, we put in place a very, very sophisticated data-based case mix management solution. We actually have deployed in-house with sophisticated tool Palantir Foundry software platform to be able case-by-case, clinic by clinic, patient by patient to model in real time the case mix, the adjusted case mix for the situation. And this has actually helped a lot our clinic, we came from an average day rate in [ Jan ], it was around EUR 105 per day for the viable part. We came up to latest -- so July, we are now around EUR 120 per day average. So it seems that we've been able with the same environment, without further funding to significantly improve the case mix management. This is, of course, not reflected -- fully reflected only very partially reflected in the first half, this pricing effect because it's really this active case mix management. And we expect, of course, to see this fueling the margin recovery in the second half. So it is going -- it is tailing off step by step. This is half of the margin recovery for the second half combined actually with also the adjustments we had to do on select facilities to the staff organization according new funding framework. So there are plus and minus, but there are some minus in terms of the way we allocate time and level of staffing according to this new scheme. This is a huge change to be clear, a huge change for the 75 facilities that I take. I'm looking forward very, very positive and confident, not about to way the enter in force, which was a disaster. The disaster from the uncertainty, the change, the mistake, and the fact that there were always late in really taking into consideration the mistake that we have made. But looking forward, now we have really a full comprehension on how we need to work with it. It is actually better reflecting the quality and intensity and outcome of care we are providing. So if -- now that we know how it works and that we have trained and groomed our facilities to work with that, I think that it is providing a very strong basis to develop these non-acute care that is absolutely critical in France to tackle the situation of aging chronic patients that are struggling to get the right support from GP or from University Hospital. And so directionally, it was difficult to enter in this new framework. It took more time than we would have wished to, that we will definitely benefit a lot from this new environment. And as you can hear, I'm much more confident and more positive and precise on it as I was some months ago because we've been actually working a lot to get educated with the support of this database platform. So it brings me to the guidance. So the guidance, yes, the EBITDA amount was down by 4%, 4.1% in first half, and we expect to be up by 6% to 9%, where does it come from? So half of this evolution will come from this pricing mix effect on the Specialty Care on the back of the progression that we have already initiative. And so we are betting that we could at least stabilize above EUR 120 million. That is the point we have already reached, maybe we will do more, but this is where we are. And half of the contribution will come from the repricing to come in Germany. So now in Germany, it's a [indiscernible] care segment. So what is the situation in Germany -- in '24 -- we had no salary increase in '24, because all the salary increase, the huge one were done in '23. So in '24, we benefit from the kind of stable salary profile plus the full benefit of the price negotiation. In '25, it's a little bit different. We have to implement a 5% salary increase from first of Jan everywhere, so that is what mandatory. So this is reflected in the first half figures. And we are negotiating. So it's also piece by piece for each of the 220 facilities in Germany with local funding bodies. And 70% of the negotiation, so we have already negotiated and got a rate increase for 30% of the network. That 70% is to come over the second half, so not reflected in the first half figures. So basically, in '25, we have front-loaded the wage adjustment and the coverage of further repricing will come in the second half. Again, to give you some granularity here, we are expecting on this scope, which is EUR 1.2 billion revenue. And just to give you, we have asked for 5% to 8% of rate adjustment and the first sign on it or the first information flow on it are pretty encouraging. So this is actually pretty much covering all what we said about the margin rebound on the second half. And of course, what we have to do along the year is, of course, to maintain a strict discipline on the staffing level according to the business model of the various segments. It requires a very strong discipline on replacement and interim, especially in Germany. It was difficult beginning of the year. It's now a stable at low level, and we need to maintain that over the second half. And it is actually the same type of attention that is required in the various segments. I hope it helps on the guidance. But as you see, it's a very precisely step. We were absolutely clear when we did the budget that we would be down to buy some basis points in the first half, given this seasonality of rate increase. And actually, that's -- it was probably a little bit more wider effect than expected, may be 20 basis points more, but we are -- because of the specialty care profile -- transformation profile in France. But we are very clear about the road map and the way down to full year '25 when it comes to pricing and cost management. Maybe some words -- some complementary information on the EUR 30 million restructuring costs. So as Gregory explained, this is very much related to the impairment and the stop we had to do on a development project. But we are preparing also a cost reduction plan on overhead, that will come second half in '26. We have reduced globally the size of the operated network in France by 15% in the last 2 to 3 years. And so it means that we are going to -- and we have also done a lot of work in automatizing and digitizing a lot of transactional processes, billing, accounting and also planning. So we are going to post some savings that -- which were are going to -- we will communicate in the second half, but there will be some significant contribution from this saving plan, both internally and externally.

And we'll now move on to our next question from [ Constantine of Curex ].

Thank you for the presentation. Can I first go back to the SMR issue and just make sure that I understand the elements correctly. So first on the fixed element that you mentioned that was Clariane specific, where you lost out on 50% of the 20% of facilities, if that's the right sort of way to think about it. So what's the total annual revenue impact from that, that you're sort of missing?

Yes. We were missing on this EUR 10 million to EUR 15 million. EUR 15 million would be really the absolute number that we would need if they would have deployed according to the promise because actually, this was actually promised money under the previous setup, and we are missing those. And so we are recovering to a more active case mix management. So it will be overcomed.

So what you're recovering in the second half, is it just for the second half? Or is there a catch-up element for the 2 years that you didn't get that?

The catch-up will depend from the -- we are actually -- we have some litigation or pre-litigation ongoing. So it's too early to say what the result will be. But yes, we are requiring to be compensated for what we did not get on the previous year. But currently, what we are guiding on is really the run rate and what is going to come from our own internal case mix management, not from external compensation.

Okay. Understand. And just to make sure that I understand the exact nature of these SMR issues and the catch-up. So is the catch-up -- is what you're seeing in the second half? Is that just better pricing for business going forward? Or is there some catch-up for what you missed on in the first half as well?

No, it's going forward. We cannot reprice what we have done for the previous activity, what is built is built and the average duration of stay is 4 to 5 weeks. So I mean, there is a permanent churn. But what we are saying, so there is a permanent churn on the 6,000 bed capacity that we have in that segment, plus the outpatient. So each billing is done. But what we see is that step-by-step, day after day, we are increasing the average rate that we can -- that we are recording because we are better in recognizing and documenting the care intensity. We are better in using the new framework that has been implemented in '24 and before '25.

I guess where I'm struggling a little bit is because you've basically said that in the first half, organic growth was 4.8%. For the full year, you're guiding around 5%, which implies that the second half organic growth is also around 5%, give or take. So sort of in line with the first half. But at the same time, the 2 main catch-up elements that you've mentioned, the SMR issue and then the Germany repricing, all of those are pricing driven. So why is there no more pricing growth? It does suggest that there should be more. It shouldn't be in line with the first half.

I mean, we are not changing our guidance. And we'll see, of course, the more we can deliver the better.

As in the numbers suggest that the catch-up is sort of cost driven as opposed to revenue, but what you're saying is all revenue driven. Do you see where the disconnect lies?

Yes, I understand. No, it's both actually. But pricing is absolutely -- it's balanced between the two. We are confirming the guidance. That's what we are doing. But I mean your point is valid.

And then you have a sequential and for example Germany, yes, we will get more price increase. But then the front loading of the salaries and you have the full effect on a full year basis. So there's some kind of seasonality effect already in back on the, for example, the second quarter and you have full effect on the year. That's why you have as well some seasonality inside the year that help us to regain some margin effect and points.

Got it. Okay. On the -- one second -- and just to make sure that I understand, what's the exact quantum for Germany as a euro million figure that's going to contribute in the second half?

We didn't disclose Germany, but you can say half and half on between France and Germany on the contribution and the recovery for the second half.

Okay, right. Then looking at the -- you mentioned you made a few references to cost savings measures. It seems like you have a mix of both organizations like central functions, but also perhaps costs further down in the organization. Can you elaborate a little bit on that? What's the total quantum of cost savings measure that you have in mind? And how do they split between central and organizational?

What I can say at this stage, and we will be more precise in the second half once also discussed internally with the people involved. But to be clear, in France, it's about -- we have reduced operated network by 15%. So it means that if we take the overhead in France, Central and the group and the France overhead, we should be able to reflect the 15% reduction, both for internal and external costs. So that's the magnitude we are working on. So this is only for overhead. And when it comes to the network, yes, they are networks with less. There are dedicated plan on the back of the digital plan. We are actually automatizing the billing function. We are automatizing also all of the transactional processes and this will bring some hundreds of FTE to be actually repositioned or diminished depending from profile of the employee involved. So that's what we are. So we are not speaking of a kind of dramatic change, but it can be 1 FTE, 2 FTE per facility depending from the way the processes are structured country by country.

Okay. I understand. And just going back, sorry, to my previous question to make sure that I use the right reference point here. But what's the size of the SMR business in France? Is it EUR 600 million? Or do I have the wrong reference point?

[ 100% ].

Sorry, can you repeat.

Yes, you're right. I mean you have the right reference point.