Edited Transcript of KORI.PA earnings conference call or presentation 28-Feb-20 9:00am GMT

Thomson Reuters StreetEvents

Full Year 2019 Korian SA Earnings Call

Paris Mar 16, 2020 (Thomson StreetEvents) -- Edited Transcript of Korian SA earnings conference call or presentation Friday, February 28, 2020 at 9:00:00am GMT

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Corporate Participants


* Philippe Garin

Korian - CFO

* Sophie Boissard;Chief Executive Officer


Conference Call Participants


* Bruno de La Rochebrochard

Bryan Garnier & Co Ltd, Research Division - Equity Research Analyst

* David Cerdan

Kepler Cheuvreux, Research Division - Equity Research Analyst

* Hans Bjorn Eskil Bostrom

Crédit Suisse AG, Research Division - Research Analyst

* Laurent Gelebart

Exane BNP Paribas, Research Division - Financial Analyst & Analyst of French Mid Caps

* Louise Boyer Gräbeldinger

MainFirst Bank AG, Research Division - Research Analyst

* Patrick Jousseaume

Societe Generale Cross Asset Research - Head of Mid and Small caps Europe Research




Sophie Boissard;Chief Executive Officer, [1]


Good morning, everyone. I'm delighted to be with you here today to introduce the annual results for 2019. I'd like, first of all, to pay tribute to all those who have seen the little movie. Those people who work in our facilities, who keep the business going, who make Korian what it is, and thanks to whom we had a good performance last year operationally, in terms of service quality also and from a financial point of view too.

2019 is very significant and that the transformation that has been initiated is really fruitful. The diversification is showing it's effective. And that we are, in fact, looking at care, at fragile people and accompanying the elderly and that we are ahead of time here, so much so that we are the leading European group for care, care to people who are in a fragile situation or -- and the elderly.

Maybe we need to look at 3 figures. Philippe Garin will tell you more about this in a minute or 2. But let me just remind you of these 3 figures. First of all, 8.3%. That's increasing growth, therefore, growth that is high and managed. And every country, every business line is contributing, France specifically. You may remember that France was the -- well, the sick man of the Korian family. France is coming close to the overall average. So there are interesting opportunities for development in France, France being ahead [for much].

Then the operational margin after rent at 50 basis points. We have, however, made significant costs and yet achieved this. We have increased specialization, staff cost, everything we do on training, on the workplace, and we'll come back to that.

The reason why we managed to reach the 50 bp mark is that we are working effectively on the other expenses and our nimble real estate growth and our mixed ownership is proving positive. And we've also got the operating free cash flow EUR 231 million which clearly means that we can turn this operational margin into cash and that is the key to the future. For indeed, add that to our careful management of our funding, it means that we can develop independently, safely, have organic growth, also targeted acquisitions and real estate development.

You will have noticed that we have something like EUR 300 million in real estate expenses. Our own ownership is above 22% now. And our portfolio -- real estate portfolio is worth more than EUR 2 billion.

Now can I maybe just revisit briefly the main lines of the group's approach and I'm sure that you're familiar with that and you still remember this since it was presented in September at the Investor Day.

Korian's aim is, in each of the communities we live in, an operator that can offer diverse solutions for various situations in terms of fragility and dependence. Anything can happen. Chronic diseases, the death of a relative or whatever, we need to be able to offer the right service. And that's what we have here. With our network, 900 facilities in 600 communities across Europe, we need to be able to cover the whole range here, be operating at home with Petits-fils, or Oriane to be able to give medical care services based on our network of clinics and also outpatient services. We also want to be able to offer accommodation, alternative housing, living communities, service-based communities near enough these medical facilities. So the whole range, indeed, on a local basis or multilocal basis, I mean, our footprint isn't really so much to the country as the community.

We have 600 communities across Europe. You can see here, Western Europe, we actually have a presence where the light shines brightest here and we basically cover 70% of the over 70s.

Our vision is, therefore, to diversify so that we can cover the whole range or work with partners. I mean, there's no reason why we should do absolutely everything ourselves. So multilocal partnerships. And also add to that, a targeted geographical footprint expansion. Again, what we want to focus on is sort of density and of course, we can't just sprinkle a little bit of Korian presence here or there. You have to have the right critical mass, the right people, the right network to work in the long term. For indeed, we have a sustained approach to this, not just a one-off approach.

So here what we have is our geography and our businesses. We have 4 businesses in 6 countries: medical care and clinics; home care services; assisted living facilities and shared housing; and nursing homes. And as you can see, we are currently in the process of covering the whole range in all our countries even though there are still needs for development. And as I said, we have 6 countries. For indeed, 2019 was the year that we made inroads into the Netherlands which in fact doubled what we already covered in Belgium. So we now have a coverage of 30 million inhabitants; and also Spain, Spain being the fourth largest country in terms of demographic needs, a country where facilities -- there's a strong need for facilities. So as I said, almost 900 facilities, more than 80,000 beds, 56,000 employees and -- and that's important, almost 500,000 people that we supported last year, so twice what it was in 2016.

The network increased 20% between 2016 and now. And we've, in fact, increased twofold the number of people that we are actually service -- serving. This clearly illustrates our development. What's our road map? Well, Le Soin a Coeur, taking care to heart. We really want to be best-in-the-class in all the fields and at the same time show -- and preserve our pioneering spirit so that we can be ahead of time, ahead of the curve in our network of local care.

So first expectation, first concern, caring for those who care for us. For indeed, these carers are the key to the quality of our service. And to do so to -- they need to be in the right place, have the right kind of training, the right staff, the right teams and really committed to our project and our values. That really is the key and the starting point which is precisely why we've worked hard on putting forward our promise as employers, something that is shared by our employees. So we want to hire, train, keep onboard our staff and offer our staff career prospects and personal development prospects because that is possible. We also want to support and help our managers grow, the site managers, for indeed, they are key.

So what does that mean? Last year, we had 11,000 full-time equivalent hires. This year, probably 12,000. Net job creations, 2,500 over 2019, 2020. For the last 2 years, we've actually started really planning our hires, similar to what -- the way in which we plan our real estate projects and our development projects. So we've really started planning our hire. We know that we need to require 10,000, 12,000 people a year. We know what needs we have. We don't -- we're not just expecting or waiting for the need to emerge. We know what the needs will be. We're starting to look out for hires ahead of time, at scale, and this is actually working. We've been bringing down the vacancies -- vacancy time when someone leaves. We've also looked at in-house modalities to cover service around the clock all year long. And we want, of course, to stabilize the team and we're looking at growing the teams and increasing the attractiveness of the company.

Second thing, training. Training, obviously, is key. You have the minimum basic legal statutory obligation of 15 hours a year. And we also have the possibility of having sort of qualification offered in the company. We have people who've started literally on the ground floor as cleaners and who have ended up as site managers or people who were assistant nurses and who have ended up -- nurse -- as matrons.

Then we have the management, but we will really make sure that we have in-work training covering 5.5%. Now we've opened also in-house training centers, acknowledged. We have a CFA, as we call them in France, a training and apprenticeship center that was opened with 600 students working on restoration and food. And we're also going to work in creating a learning hope -- hub, sorry, in, Lyon producing all the digital educational support and materials so that we can have a sort of standardized approach to our values and to our work in all of the apprenticeship centers and training centers across the country.

We know that this is a market for which there will be tension pressure, obviously. And we know that our market is such that if you haven't got the staff, you won't be able to do anything. Now you need to realize that, obviously, there is real commitment, real enthusiasm, of course, from local managers to get involved because, of course, you need mentors to support this whole educational approach to help educate the young people that we are onboarding. Really, this is a real business focusing on mentoring.

Third approach, third pillar, management and managers. This really is the key. We rolled out the first Europe-wide qualifying project for our managers, clearly because we want to -- I want to make sure that we stay focused on this pioneering approach when we manage. This project -- this program is a proprietary program developed with INSEC and it will be both individual-tailored training, coaching, working groups, working parties across borders, across Europe, because we do feel that this Europe-wide approach is what will help us really set ourselves aside and find -- and secure the best practices.

So this really is at the heart of employer -- the promise that Korian as an employee is making, the 8 promises, the 8 commitments that we're making that -- in fact match the commitments to the clients. So full involvement in site projects and also in the whole business and support for staff and all sorts of other things that you can see here, quite simply because we can keep staff with us.

The commitment to the company has really shown that the levels are stable, 75% commitment to the company in the latest survey and that is always positive.

Now this yearning for excellence, for quality, means that we need to be seen to be high quality by our clients, so -- the people we are serving and supporting. With our significant development, the increase in our client numbers, we have managed to keep very high customer satisfaction, somewhere around 96%. And that includes not just the actual people cared for but also their carers and supporters. And we did get a number of awards even in home care. Look at Petits-fils, 1,500 people surveyed responded and we have the overall mark is 4.7, 4.8 on Facebook, Google, which is quite good indeed. And in Germany, they got very high marks and rewards and awards after a large survey.

Now obviously, we will always strive for improvement. We can never rest on our laurels. But this kind of feedback is really very important to help us sort of forge ahead and strive for excellency which is precisely why we've embarked on this very ambitious ISO 9001 process. We hope to be -- I hope to make sure that we are the first in the business to have been certified ISO 9001 by 2023. Now this is actually quite demanding to have a -- develop the Europe-wide standards in the various dimensions and the 7 fields, what the best practices are, what the expected standards are and should be, and to make sure that this is rolled out in these various sites with training, quality assessment, staff. Of course, there was some in the clinics, but that wasn't always the case in the housing facilities and we're starting to do this and rolling out.

We have 8% of our network covered. So Italy, Spain, part of the Netherlands are already certified, as I said. And this is the road map and we aim for 100% by 2023. And we'll be fully transparent in the way we roll out this project that has really got people supporting it across the business.

So I set this focus on excellent. But the second approach is the pioneering spirit, this ability to innovate and lead the pack. Now that means that we have to have this culture of a nimble growth. And this is exactly what we're focusing on. We can see that this is blossoming across Korian, across countries, across business lines. This nimble growth through diversified multilocal approach means that it has to start out in the field, grassroots. What does that mean that we want to be -- have nimble growth? Well, first of all, that we can see on the ground what the best partners or add-ons could be. Those who already share our values on service also, our care for quality of service and that could help us develop organic growth with the right kind of services.

Acquisitions. Well, we secured 20 acquisitions last year, twice what it was the previous year. This, as you can see, has supported the diversification of services. That's what you can see here. The sectors in which we're supporting our business, medical activities and also home care. And it's also helped us expand our geographical footprint, Netherlands and Spain, more specifically here. This means that we can onboard growth for the future and that's really been supporting this diversification. For indeed, more than half of the acquisition are beyond the historic business, nursing homes.

Organic growth, of course, remains key. We're working very hard on it, and we're starting to see that through the size of the real estate investments that we've been making across the network. We've been investing in greenfield sites, so new builds, also moving extensions and heavy renovations. 30% of our buildings were renovated last year and this is something that's very important and well spread across the entirety of our network. This is something that enables us to stay on target for our development and diversification road map.

Let me give you 2 examples of how this Buy and Build strategy is being deployed. First of all, in the Netherlands. Last year, at this time in the Netherlands, there was basically nothing. We purchased a first stepping stone platform in the Netherlands which is specialized in Alzheimer's Community Care in the summer. And as it stands with the recent acquisitions and upcoming acquisitions, we will be in a situation where we have a network of 50 facilities, 1,300 beds with a revenue of EUR 70 million, with a pipeline of projects, with a lot more to come.

We'll be looking at well-spread presence across the most habited areas of the Netherlands. And also, this should help feed into what we can provide to the French and the German people with a very alternative offering of smaller community-based support, similar to what you'll see in the south of Europe with medical treatment also for end-of-life palliative care and rehabilitation in clinics. We'll also be looking at very high-end resident services which are performing very well and may help us further accelerate our development in high-end resident services elsewhere in Europe as well outside of the Netherlands. The Dutch Buy and Build strategy has been deployed through our ability to bring in high-quality teams that already have their own networks. And now they are part of our Benelux network and then we're going to be able to continue to spread and grow without requiring further large acquisitions which wouldn't even make sense for the Netherlands.

Second example of Buy and Build. This is our development or rather our acceleration of our development for medical services in France. A couple of years ago, I don't think anyone would have seen Korian as a health care player in France. But actually, today, we are the largest private operator in the sector for follow-up and readaptation patients with a specialism in reacclimatization of the elderly. We recently bought 5 Santé which is the GOTO Group for the support of chronic respiratory disease in France with the Clinique du Souffle about EUR 50 million in revenue with development potential across the south of France where they already are in the Savoie and Haute Savoie regions. More generally, this is the acceleration of our health care subsidiary system through further specialization. We've now got 85 clinics that are specialized on the big pathologies, more precisely specialized on rehabilitation after orthopedic surgery, treatment for the elderly, after-stroke treatment, and also psychiatry. This means that across these areas, we're able to establish care protocols for hospitals and in cities. And these protocols end up being high-quality and feed into the ecosystem with our own carers and health care professionals. And then we can reintroduce people to the wider network once they become autonomous enough to do that.

So nimble growth is the first part. The second part, the tock to the tick is digital. I firmly believe that digital will enable us to completely reinvent the way we work in the coming decade. Now we're not talking about gadgets. The Internet of Things that are detecting pretty much everything doesn't really make sense if it's not part of a wider network that has been designed to properly use the information coming from the sensors themselves. Without that network, it doesn't do anything. It's completely useless.

To my mind, digital today is part of 2 revolutions. The first revolution or adaptation is the way clinics and medico-social establishments work and I'll come back to that. But then there's a second revolution outside of hospitals in the way that we can help support people's health and support people in their own homes, reaching people that in the past would have required hospitalization.

But let me come back to how digital technologies can change the way we organize health care facilities. The first change would be in quality of life and comfort of life. But if we want to achieve this, we need to standardize the use of digital technologies. Digital technologies, yes, mean that we can detect someone falling, for example, so we can immediately go to help them if they fall down during the night, for example. Digital technologies also enable us -- to enable someone to manage their lights and their heating from their bed. These are things that will change their lives during their stay with us. And digital technology also gives us communication tools for our patient so that they can communicate with their loved ones, their families, and we've come up with a very simple telecommunication system that will enable our patients to talk with people even if the patient is unable, for example, to punch a number into a phone. So this has been standardized after in situ tests with our teams. Digital solutions, [Korian] agency has been working on this, and now it's been rolled out to all of our projects.

The second revolution is on our people, our staff. Now, it might seem like a small thing. But when you give a carer a tablet to support them in the miles that they walk every month walking up and down the corridors so they can check up on the patient, they can see whether their colleagues have done the -- applied the treatment or given the test that they were supposed to or so they can know what their colleagues are doing elsewhere in the establishment at any time. That changes the lives of our staff. We did the math in Germany and we saw that information system digitization, which is now standard, could save 2 hours per day for a nurse. And those 2 hours a day can then be used supporting the patients directly, working with their own teams. And also, the technology provides better traceability and better coordination.

Today, we are digitizing all of our IS interfaces. We've already done it in Italy. It's the Equippe project. It's now fully rolled out and everyone is impressed and wants it if they don't have it. We've also completely digitized all of the interfaces with our IS systems in our care homes in France. That's done and dusted. And once again, you can't even imagine the positive feedback that we've received about this. People are extremely thankful for this new technology. And of course, in the coming 2 years, we're going to be doing exactly the same thing across our network. This is our new standard, of course.

I think that investing in information systems, digital technologies are going to be just as key as the physical investment in our real estate network. Give or take, today, we're looking at a spending rhythm for information systems which is settling at about 1.2% to 1.5% of turnover, especially seeing as we don't actually need so much real estate space per product today.

The next revolution is going to be outside of the establishment. And this is beyond design phase. We're now actually implementing it. There are 4 things that I would like to discuss with you, 4 investments that were made last year. The first one is in-home support. As you know, a bit more than a year ago, we purchased the Petits-fils network. So carers who visit people, we've got more than 115 agencies, 6,000 people are supported through Petits-fils and we've added 2 Petits-fils, a digital network called Oriane. Oriane serves to share information. So on top of the physical presence of the carer, you can also have information flows with third-parties, with the nurses that supervise their health overall if that is a service that the person has asked for, the doctor, and also all of the carers who may be involved with the in-home support of our client.

Oriane is currently being developed in another form, adapted to each country. This takes the form over in Italy which is the combination of our health care platform with a network of professional carers who can get involved through voice calls and also the home visit network to collate all of the information and use it.

Now, of course, all this needs to actually be developed and this is why we have invested in a start-up called, Move in Med. Move in Med is a company made up of 18 award-winning health care app developers. And we developed Oriane with Move in Med and we are also designing our very first home support monitoring system with Move in Med for chronic respiratory patients. So they come in, we stabilize their situation, but we need to monitor them at home to make sure that their situation doesn't worsen.

We've developed a protocol of measurements that are taken every day, behavior monitoring. So the patient gets sent home and through the information platform, we can monitor the parameters, we can then push that information to the nurse who is supervising the in-home care and that nurse can then everyday check up to see whether there are any clinical signs that would require bringing them in for testing or for care. This requires a high level of expertise on what parameters to monitor and how to make the whole process safe. It also requires, of course, training the health care professionals who will be involved in the remote monitoring, but it does work. We did a pilot project in Marseille. It works. And we took a 70% stake in Move in Med because today, alongside Move in Med, we are working to do exactly the same thing on 5 other care pathways related to chronic diseases present in the elderly.

The fourth thing is something that could change, revolutionize the daily lives of our patients, Omedys, remote consultation. Now I'm already hearing you say that everyone does remote consultation. Now everyone can do a conference call with a doctor, but teleconsultation is different. Omedys is made up of 2 department heads from public hospitals and they created the very first remote consulting network with a single goal and they were facing areas of medical decertification in the east of France. So talking about people who were not able to access a doctor for a prescription or for a renewal when it was required and that just didn't make sense to them.

So they received certification from the medical board -- the National Medical Board. They can access the medical records for the patient, fully traceable. They work fully with the GPs. they're not taking over from the GPs. They are simply there when the GP is not available. And they train remote assistants. So nurses and pharmacists who can physically be present during the remote consultation, they can take the measurement and they can help establish the correct clinical diagnosis. Once you've got that, you have continuity of care in the evenings or over weekends, you can also monitor stabilized chronic disease patients at home, you can decide when it's the right time to bring him into a hospital, but you can also decide whether you can just wait until the next day to have a further consultation.

Our goal is very simple. It is to cover the entirety of France with this remote consultation service by 2021. The way we're going to achieve this is by opening 26 practices based on the model that's already been established in the pilot project. This can be with GPs or independent doctors, specialists. And this will help us strengthen the medical presence in our care homes, which is, of course, very important to have a GP. Sometimes, there are plenty of them, but in some regions, there's a lack of GPs, especially as they retire.

And we're also able to use our own care sites -- establishments, as places where people can do this remote consultation because we already have the trained nurses and professionals on site. So it's 2 birds with 1 stone. We're strengthening the medical presence in a way that reduces the risk of having to ambulance someone to a hospital during the weekend. So permanent medical presence that is strengthened in a very simple way. This is reassuring for the patients, for our residents and also for the health care professionals themselves. But on top of that, we are providing a service to these regions and this is a service that may significantly change the paradigm in areas where doctors are retiring and there's not much replacement.

The third part of our pioneering spirit is bricks-and-mortar. Because I've talked about digital technology, but to even implement these, you need high-quality living spaces where people feel comfortable as far as possible. That is why real estate for me is so vital. And I'd like you to take away from this that Korian is a health care service provider, yes, but also a developer and a designer of living spaces and a real estate investor. Those 3 components are important. I think they are vital and key to our success in the future and to our innovation.

Today, this means that there are 4 different concepts which match our 4 business lines that we've developed and defined, carved out, in the way they operate and the tech specs that go with them. We have more than 540 new builds ongoing today based on these 4 different concepts. We have our new Korian retirement homes, our new concept, all based on the same service model, demedicalized of course, but with a remote consultation practice that is available and resident services in a way that provides a full community support service.

Then we have a medicalized establishments with outpatient services, diagnosis services and our alternative living spaces, the living community such as Ages & Vie and our urban resident services. Today, if you look at our portfolio of projects, we have a good spread with more than 45 maison Korian projects, 200 small-sized living community projects, not just in France, but in all countries. We have 30 new communities that will open this year in 2020. But there are also numerous projects in the Netherlands, in Italy and in Germany. 22 projects with renovation and new builds. For the connected clinics, we're going to be developing this in the Netherlands and in Spain. And urban resident services, 25 projects there with a concept that has been fully developed in Belgium. High-quality services there that we're currently working on defining the features for these resident services.

Now innovating is all about innovating in the design, in the services, but also innovating in the -- on the technical side of things. And can I maybe just mention a platform, a new Korian house in Sondrio, in Italy. Medical services, assisted living, nursing home, all in the same thing, in the same facility, in a wooden structure. Electricity is derived -- 75% of the electricity derived from renewables. And energy consumption is 40% lower than a standard, sort of, traditional building and this is obviously very interesting and we will be developing this from a technical point of view.

So that gives you an overview of what happened in 2019 at Korian and maybe we can see with Philippe what this means financially.


Philippe Garin, Korian - CFO [2]


So good morning, everyone. And let's come back to this nimble growth thing. We have 8.3%, but also 3.8% which is our strong point where we had the organic growth where we didn't have quite as much organic growth before. Now look at Medical business. Medical accounted for 10% of growth in the Group. 5 of this or more than 5 percentage points at actually organic growth derived from France. So if you look at the French style clinic, you can get indeed organic growth and that's clearly what nimble growth is all about. As I said -- as we've said, we've done also external growth in Italy, to start with its external growth. But I'm sure it will turn organic and this is our model, as I said, and this is how we manage to reach this 8.3% growth.

Now look at margin now, 26.2%. This is fairly stable now. It's a combination of all sorts of things as you can see here. We've had an increase in our staff costs. That's true. It's now greater than the sales. But I suppose that's the -- a choice we've decided to train our staff, to give them pay rises when we can afford to, and there's the little mix if -- impact also is that the more medical you have, the more staff you need. But we've managed to keep the margins by keeping our European business, renegotiating our insurance costs, energy costs also. This means that we have maintained service levels, but have made the most of it across Europe.

Now look at this, and I think, you think about transformation, clearly. In France, it's true that there was a bit of a stuttering start or [rejoined there with growth], but we've had growth in medical, as I said, but we've had transformation by looking out at different things, different businesses. Obviously, we have to make acquisitions. But you can't just acquire stuff at the drop of a hat. You have to work hard on it. Acquiring Petits-fils was a good thing. Being at 7% in France with good acquisitions and good organic growth is a real performance while at the same time, preserving and stabilizing margin. We were expecting a drop in margin because we were investing in staff. But in fact, EBITDAR is stable at 27%.

Look at Germany. Transformation there means restoring growth. They've worked really hard and they've secured it. And their growth is organic, almost exclusively. Why? Well, because you can actually open nursing homes there. You can't in the new places, in the other 3 countries. But you can in Germany. And when you open a facility, then you have ramp up and therefore downward pressure on margins. Now when you expect a country who heavily relies on organic growth to preserve margin, it's not always easy. They have managed to do so. Well done. They will have to work on coming closer to the group's average. But they have had significant growth, significant increase in margins, 70 basis points last year. All in all, 120 basis points over 2 years.

Italy, there's a transformation too through medical. It's not quite organic -- entirely organic now. Organic growth is increasing, but this is route to medical and also to assisted living. You can't really do much growth in nursing homes, but on the other businesses, it is. And the fact is that in Italy, they were doing medical and had been for a long time, but they're now branching out into medical -- into assisted living.

In Benelux, they've been -- in Belgium rather, been reorganizing Senior Assist, closures, openings, reorganization and that has led to ramp up and good margin. Because of margin pressure, of course, that is derived from the Netherlands where you have mainly ramp up facilities, but it's also heavily due to the reorganization of Senior Assist.

EBITDA. EBITDA is stable. Well, actually growing at 50 basis points. This is the result, of course, of the real estate policy. Every time we increase the real estate portfolio, you bring down the rents. And when we renegotiate rents, it's also to a downward renegotiation. But there's also a mix impact for somewhere around 20 basis points derived from diversification. The more medical and more home care we do, and that's what we'll see on the next page, the more EBITDA is under pressure admittedly, but also benefiting from the lower real estate pressure.

This is a slide that we'd already shown you. When you look at the business mix, mixed developments, so that you can understand what happens. Diversification has an impact on EBITDAR, but has a positive impact on EBITDA.

Net income. Net result up 10%, more -- near enough the KPIs. In fact, the financial results are derived from excellent market conditions and we have increased our debt, but brought down our debt servicing [EUR 2 million] which is impressive.

Tax. Obviously, it's difficult to say that we've been successful when the tax rate has increased. But I don't know if you remember what the CICE was in France, anyway, this has been discontinued to replace by a drop in the social security taxes. The CICE -- end of CICE was worth 4 percentage points. But we have managed to manage this and keep this in check. I do think that we can bring down our income tax rates over and beyond the announced rates reduction.

Now this is my favorite topic, cash. I think that's quite good, 65% increase since 2016. Admittedly, I wasn't here in 2016, but still good work and a lot of good work done in 2018, '19. 65%, that's quite good that, that's EUR 90 million. Half of it derived from the conversion rate. If we hadn't done anything, we'd have EUR 50 million less in free cash flow. And what does that mean? EUR 50 million means EUR 100 million investment basically or possibility for EUR 100 million investment. So this is really vital. Obviously, it will go on improving, but there is still room for maneuver, in processes, for instance, getting information earlier, digitizing, invoicing earlier, everything, all these things that Sophie mentioned will help.

What do we do with all that money then? We invest it. We invest it threefolded actually. There are 3 fields of investment. First of all, development investment. It's actually the best investment, best form of investment, and I want to highlight it. The return on investment is actually tremendous when you renovate, refurbish, extend. It's actually less -- much less expensive than any other kind of investment and the return on the investment is much better. I do hope that our French network will be fully refurbished soon enough. But all the work we've done has been terribly effective.

Then we've got the bolt-on acquisitions. I think that's clear. We have had a strong investment -- a strong increase in investments with 2 new countries, Spain and the Netherlands, plus all the other investments in the other countries anyway, across the board, as Sophie showed you.

And then thirdly, real estate. We invest in 3 ways. First of all, through greenfields, I think we can talk about that because we're increasing greenfield. So the return on investment and EBITDA takes longer to come through when you used to have EUR 100 million and it was 70-30 and now it's 50-50 which means that we'll get a slightly faster return in the EBITDA.

Then bolt-ons. We're quite nimble there. Often, when you're in contact with the families, people come to us because they know that we can be trusted. And if we're ready to take on the real estate, it's actually easier. Now admittedly, real estate is not necessarily a bad deal. It might require some work to make this -- to bring all this up to a standard, but still. And then also, we've got buyback operations. When you go and see the owners and you say, look, the value we give you is a bit of a problem because there's a lot of significant refurbishment work to be done, why don't we either split the work or we'll buy back the facility and then conduct the work ourselves. And that sort of works out.

Talking about real estate. We've increased twofold our portfolio. It's now worth EUR 2 billion. So increase -- twofold increase since 2016. If you look at the pie charts here, our portfolio was 75% French, and now it's more or better diversified. We have some Germany, some Italy, some Belgium, new things that we didn't have in the past. So a very real change and development to really be more in line with what kind of operator we are.

What you have here also, too, is how we've gone from EUR 1.65 billion last year to 2-point something this year. People always going on about CapEx and rates, et cetera. Well, the fact is that most of this EUR 390 million increase is mainly due to acquisitions and investments. There's a bit of an impact [arrived] from greenfield, because that generally is valued a little more than the actual building costs. And then we have had a positive development of cap rates, mainly in Germany, which was a little late. Actually, only in Germany. There you have it.

The pipeline. Well, our pipeline is fairly stable. 15,000 beds. Actually, we delivered 50% more beds than we had expected. We hope that we can accelerate and speed up on the pipeline and on the deliveries. 2/3 of our pipes are green -- of the pipeline is greenfield, and 50% of our growth is bolt-on, so -- maybe because there's less visibility on bolt-on, these seem not [to match].

Debt, lastly. Out of the EUR 3 billion in debt where there are actually 3 parts, and this is pre IFRS 16, mainly because people are asking that to be done and also because we couldn't -- done. Then we have EUR 1 billion in debt as compared to the EUR 2 billion valuation for real estate, so about 50%. And then on corporate, there's EUR 1.4 billion in debt. So I think you can say that over the fiscal year, we have kept the leverage ratio stable. We set maximum 3.5, it's at 3.1, and I expect that it will be more or less around 3.

Dividends now. For 10 years, I believe, the dividend was at EUR 0.60. The payout is not quite the same. Some have said that we should stabilize this number. I said that we'd keep payout levels and, therefore, this means a 10% increase in the dividend, so up from EUR 0.6 to EUR 0.66.

So much for me, and back to Sophie.


Sophie Boissard;Chief Executive Officer, [3]


So by way of conclusion on the outlook, I think you can see that there's a lot of projects, on-boarded growth. You know what the acquisitions that occurred last year mean. So our prospects for 2020, '21 are actually fairly strong, quite strong indeed. We expect revenue increase to -- by 9% for this year. EBITDA margin, over 15%, which means that we're quite good as concerns the midterm guidance that we had mentioned in September. So we should get revenue above 4.2% for 2021, more than -- above 15.5% EBITDA margin, and free cash flow of EUR 300 million. So all of that is -- we seem to be online for the 2021 guidance.

And the -- as concerns the financials, the conservative guidance was 3.5x, and we expect to be much closer to 3x loan-to-value. And that would be the case despite the temptation derived from real estate because our loan-to-value is only just above 50%. And as Philippe said, our valuation is very reasonable or actually very conservative. As concerns the new assets that are -- that join our portfolio, these facilities that are really in the core of our business. And I must say, I really want to be conservative, prudent to make sure that we can preserve our growth model, a model of a balanced, sustainable, regular growth. Which brings me to the following. We have committed -- we have decided to commit ourselves on nonfinancial targets. And we've done this by looking at our corporate, social and environmental responsibility, looking at the environment in which we operate.

We've identified, therefore, 5 clear dimensions here that really match the business or the company's project, sort of, our responsibility towards the elderly and the vulnerable, trying to see how we can contribute to their autonomy and to their -- their making their own choices, commitment to and undertakings given to our workers, our staff members, so caring for the carers. Then also, our commitment to society as a whole for these aging societies, and that means also scientific research. Our commitment to local communities. As I said, in all 600 communities where we operate, we hire, we buy, we contribute to local life. And also, obviously, waste management, the transport of our staff. We have a footprint similar to -- the carbon footprint similar to a town of 40,000 inhabitants, which is not that much, actually, when you remember that 80,000 people live on our facilities, and we want to aim for a 40% drop in carbon emissions by 2030. But we'll wait for standards to be set. But for the moment, we really are going to reduce the amount of energy used, reduce waste, at least 5% drop by 2023, and also have high-quality buildings when we build. So we have these clear commitments that can be audited. And this will be our compass for the future, and this enjoys the support of our workers, our staff members who really can see in that what they see in there as being their job.

Here on the board, you can see where we started last year. And this will be our yardstick on which we will base all of our targets. Most of them will be coming in, in 2023. This is the rollout of the Positive Care Montessori ranking, the implementation of the ISO standards, the team satisfaction level. So loyalty, training, diversity and presence of women in top management, amongst other criteria.

The next point is particularly important to me, which is our philanthropic involvement. From this year on, we are committed to putting 1% of our profits towards philanthropic activities, such as research with the charities that we work with, and also working with societies that work on things that we think are important, such as helping young people get into caring careers and also helping women who are the victims of abuse. That's the situation that a number of our staff have been in the past, so it's very important to us as well.

So that's what I had on our new and improved compass for Korian's future. And I mention all of this because, once again, we have changed. The Korian that we have in 2019 is very different from Korian in 2016. This will be part of our visual identity, the 2 hearts intertwined logo, which shows the tie of trust that we have with our employees, with our patients, and the whole rainbow of colors that show, of course, the entire rainbow of businesses and activities that we host within Korian.

Thank you very much for your attention, and we can now move on to Q&A.


Questions and Answers


Louise Boyer Gräbeldinger, MainFirst Bank AG, Research Division - Research Analyst [1]


Louise-Boyer from MainFirst. Now a couple of questions from me. The first one, on cash. And I'm sure your CFO will enjoy it-- enjoy this. So you generate EUR 230 million in cash. You invest a large part of that. Can you fund the acceleration of growth without deteriorating the health of your balance sheet beyond the 3.1x leverage ratio that you have at the moment?

And the second question on cash as well. An improvement in the WCR. So you're working on quick invoicing of the resident patients currently. What is the number of your patients that are on direct debit? And how much do you think you can improve that in the future?

The 9% growth that you mentioned to -- that you're expecting in 2020, what is the not yet onboarded external growth that you are including in that 9%?

And my final question. We're starting to see lots of people -- Korian is getting bigger. There are lots of different brands. Can you confirm that all of the new brands that you purchased are not dilutive for your EBITDA? And how are you going to be redirecting people from Petits-fils towards Korian establishments within the group?


Sophie Boissard;Chief Executive Officer, [2]


Some excellent questions. Some pretty wide-reaching questions as well. Okay. Let me start with cash. So EUR 350 million. If I buy something for EUR 350 million, and it generates 0 EBITDA, then that's a problem, right? If you're generating 15% EBITDA, then all's well. Because that 15% EBITDA, then with that 3.5x leverage ratio lead to virtually a co-financing situation with the cash flow. That means that using the cash flow, you can then purchase more than EUR 400 million in investment further down the line. So when you say buy cheap, it's not because you've got tight purse strings, but rather, by buying cheap, you increase the gain in EBITDA and the less that impacts the balance sheet.

For working capital requirement. Now direct debit, I've just been told it's 80%. I wasn't aware of that. But it's more about transfer and information. Automation of the payment system can still be improved, and we're still looking at improving the processes involved there. And I think with digital technologies, we can improve that further.

Now as to the onboarded growth. I haven't really looked at it because, of course, we started off in January and February. Now we're getting into the March, April period with an acquisition and another one that's coming very quickly as well. I think for the first quarter, we're going to be looking at a significant part of external growth that will be booked.

There are 2 types of acquisitions. When you look at the Move in Med and the ROI that is coming from Move in Med, we're in a very different ballpark than more traditional acquisitions that aren't start-ups. Overall, we are looking at EBITDA that is accretive. And I'd even say that Petits-fils, given the way that it works with its employees that are directly paid by the patients and with its franchise system, a company such as Petits-fils, despite them being in a field which is generally dilutive, they're highly accretive. That's important to remember. And also, it's important to remember that we are driving for most of our acquisitions to not be dilutive no matter the type of service we are buying into.

And on your question on incentives. It's very important to me that each of our business lines, our service lines, be a profitable stand-alone. So today, there's no incentive system. It simply wouldn't make sense. We don't ask any more [of them] to hold their margin forecast and to continue to develop, which is ambitious in and of itself. Their occupation rate is 100%. The people who go to Ages & Vie generally stay there. And something that's important to everyone is that if there is a need, we are able to find another solution in one of our other establishments nearby. But Ages & Vie is in no way a halfway house towards Korian retirement homes.

So without wanting to repeat what Philippe said, our acquisitions are profitable stand-alone, and we purchased them as such. The service clusters that I mentioned with some of our subsidiaries, that's an extra. Omedys is not here to generate high levels of revenue because, generally, it's going to be independent doctors who are going to be working with them. But it's a huge plus for our business as a whole, our established business and our retirement home business. And it's something that doesn't cost anything to us. Nothing. It's all extra. It's all gravy.


Hans Bjorn Eskil Bostrom, Crédit Suisse AG, Research Division - Research Analyst [3]


Hans Bostrom. I have 3 questions for you. Let's kick things off with coronavirus. I assume none of your assumptions have been affected by coronavirus. But what extra protocols would you implement if that were to occur?


Sophie Boissard;Chief Executive Officer, [4]


Well, thank you for bringing up coronavirus. Since this weekend, we deployed our epidemic vigilant plan, which is a standardized process across all of our establishments with a group-wide and nationwide monitoring system that's set up. What this means is that in each of our sites, we have very clear information on the pre-epidemic situation. We log all of the visitors. We also changed the dates on some external meetings. We've taken all of the prophylactic measures that you would expect during a high epidemic risk period and immediate diagnosis of any potential coronavirus infection. So that's been applied. It's, of course, been rolled out across all of our countries. We've asked all of the family members to avoid visiting if they have any concerns or if they travel to any of the high-risk regions. We also made sure that none of our staff are at risk. There were 4 people in Italy who are asked to stay home because they lived in one of the villages that has been affected. And we are, of course, in permanent communication with the health care authorities. Now unfortunately, for us, it's sort of business as usual because given the fragile situation of the people who stay with us, they are highly exposed to epidemics, and every winter, there are epidemics of one form or another, maybe not with COVID, but quite virulent epidemics that can spread. And the only way we can contain them is by using very high standard of hygiene rules and that everyone uses them.

And what will we do? It's true that in the south of France, we do have a couple of retirement homes that are just a few miles away from those 2 currently confirmed cases. We've decided to take precautionary measures and to completely isolate those establishments. Limited visiting rights and temperature screening so we don't let anyone in who has a fever and we're also filtering suppliers as well, trying to keep interaction down to a minimum.


Hans Bjorn Eskil Bostrom, Crédit Suisse AG, Research Division - Research Analyst [5]


Secondly, you mentioned your HR and wanting to increase your salary base. Is that going to increase this year? Do you believe that digital investments will drive down personnel costs? And what are your thoughts on implementation of digital? Maybe there's going to be an overlap where you're implementing digital but haven't drawn down personnel costs yet.

And my third question. Nearly EUR 400 million in real estate value increase. How much of that comes from the increase in property valuation in Germany?


Sophie Boissard;Chief Executive Officer, [6]


On the increase, the EUR 40 million increase is just from Germany. There's just a little bit of a mix effect in the other direction because the drop in Germany means that there's a little bit of a mix there. But all of the EUR 50 million increase comes from Germany.

So out of that EUR 400 million -- okay, so you're asking where we invested, right? How has Germany's share changed in the portfolio? I think we're at 14% in Germany. It was mainly due to earlier acquisitions. 6 or 7 homes were purchased back then. We haven't seen any particular spike or change over the period beyond the -- well, 15% of our real estate investment was in Germany, if that answers your question. It was, in fact, more than a quarter, more than 25% of our real estate investment was made in Germany. Currently, we have the longest rent commitments in Germany as well with leasing clauses, which are spread enough that we can work with local owners who may be disposed to sell as well.

Now on your staff cost question. Let's not get things mixed up. The need for care and the need for specialization mean that HR intensity for people working directly with the person who's being supported is likely to increase. So what we're looking at today is we have this rare resource of carers, how can we save them time? A nurse manager in Germany will spend 2 hours doing paperwork. And they experience this not only as wasted time, but also as an ordeal. So we want to cut that paperwork time down. So how can we make our nurses more available, give them more room to breathe?

We certainly need the carers. But how can we work on our support functions, our back office functions? Resources are being poorly used because sometimes they're on-site, and they're not best used on-site. But let me give you an example. We used to work with the old Medicare wages system. We had 0.5 full FTEs dedicated to wages on-site. And we've been able to completely shift that. We've been able to completely shift our payroll system that, in a way, that will save 0.4 FTEs in each establishment because things are going to be handled centrally rather than on-site. So we're currently working on this and also working on price negotiations because as have we've become more specialized, we are able to refinance things. As we get bigger, we're able to refinance things in better terms. Germany, for example, has just readjusted its minimum wage for carers. That is, of course, something that's going to require renegotiating our costs with all of our suppliers so that, quite simply, we match that increase in wages, which came from the German political decision.


Hans Bjorn Eskil Bostrom, Crédit Suisse AG, Research Division - Research Analyst [7]


[Current question is unfortunately off mic.] Will the authorities recognize that you're going to be paid more? [Relative to the first part of the question, which was inaudible.]


Sophie Boissard;Chief Executive Officer, [8]


Well, my answer to you would be that if you provide quality, if you're doing your job properly, and that's why our lead is important, then you can negotiate with the payers in a much better way. In Germany today, investment in digital technologies as a whole, in the broad sense, to facilitate the work of the staff are paid for by 50%. The German Health Minister has allocated budget to this so we can get public help with our investments. In-home care as well is something that can be financed in part through the French Article 51, as it's known in France, to have integrated health care, including in-home care.

Now I'm not saying that public money is flowing. But I am saying that when you're a player in this field and you're providing a service that is relevant and high quality, there's help available. You will never hear me say that we are making short-term productivity gains by cutting staff working with the patients. That would be crazy.


David Cerdan, Kepler Cheuvreux, Research Division - Equity Research Analyst [9]


David Cerdan, Kepler. Couple of questions, if you'll allow me. The acquisition you announced about 5 Santé, can you tell us more about the purchasing costs, the real estate side of things? On free cash flow, also, can you tell us what kind of investments we can expect to see for 2020? Development CapEx, M&A or real estate? Growth, you expect 9%, how does that -- what's the split between organic and external growth, maybe in new countries? And on real estate, more generally, 22% today. You want to increase your home -- your own ownership rate, but that's fine. What is your target? And any adjustments you can see?


Sophie Boissard;Chief Executive Officer, [10]


Well, 5 Santé, thank you for announcing -- for asking me the question. Honestly, we haven't paid much for it. There was real synergy. There were 5 clinics, 1 very active research center and a call center thrown in the [bargain]. When you look at the sum of the parts, a real estate really in the -- at the average cap rate, means that we can really reach our target. Remember, the target was set at 8.5%. Some is at 6%, as I've said. And the smaller projects where it's bolt-on, it's generally about 6%. In new countries, the target might be around 10% or more.

On acquisitions for 2020, I'd say that the outlook for -- I mean the way in which it happened in 2019 could be very much the same in 2020. We know that we have some CapEx to do across the network. So there's no reason why you should hold back given the return on boost. Bolt-ons, there are a good few targets we've started working on. And on real estate, nothing is pushing us to downsize or to change given the current rates environment.

Oh, and seeing as we're talking about real estate, Germany is very interesting for all sorts of reasons. First of all, because it's not too expensive yet. Also because as operators, we are the weakest, so to speak, because we have no rights or entitlements, and it really is good for us to have a strong relationship on the real estate side of things. And the market hasn't really been covered, so to speak. The work we've done, working with the various owners in France hasn't been done in Germany. But we'll have to see what the bolt-on is. I mean we didn't know that we were going to do 5 Santé. But we're getting real estate and good quality real estate in France.

Also to add on 5 Santé. Yes, there are synergies -- cost synergies. They have a sort of support functions center for 6 clinics. We can basically take them on board as is. And changing for our contracts for supplies, for instance, and taking on board the support functions means that the acquisitions multiple is very much low double digit, very low double digits. So it's really quite good.

On organic growth, the split of organic growth. Look, we're going to boost organic growth, at least, 4%. That's the target. On real estate, what are we or aren't we buying? And what's our choices? Look, we're already doing

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we're already selling property. We also focus on new properties when we know that we're going to be there for 10 or 15 years or 20 years with potential markets. So yes, Germany is interesting, especially where we already have a strong foothold. Obviously, there's a lot to do given the environment.

In the Netherlands, also, we're interested in the Netherlands. We're looking at strong investment partnerships and joint ventures as we did Ages & Vie. And we also have a very selective interest in what's happening in France. For indeed, we know our market very well. So this is not an exhaustive list, not a comprehensive list, but we are looking at all these -- looking at the sustainability and robustness of the assets over the longer period.

For a year now, I think the real estate development manager for the group has actually moved over to Munich. So that clearly means that he wants to be on-site to develop this pipeline, this real estate pipeline for real estate management and development.


Philippe Garin, Korian - CFO [11]


Developments across, in the various countries. Look, we're open to any country as long as we've got the right kind of targets, great management teams, a decent price and a strong real estate approach. Obviously, we don't want expend all our EBITDA for -- on the owners.


Bruno de La Rochebrochard, Bryan Garnier & Co Ltd, Research Division - Equity Research Analyst [12]


Bruno de La Rochebrochard, Bryan Garnier. 3 quick questions. Can you remind us what the Boost plan is all about? What's still outstanding? Alternative offerings have developed mainly in France. Even though, obviously, the Dutch acquisitions are a little bit different. But what do you make of development outside France or possibly inside France? Are you using French experience to develop your own concepts or what?

And lastly, in Germany, there does seem to be the possibility of a premium offering in Germany, freely priced. Is that something you'd like to look at?


Sophie Boissard;Chief Executive Officer, [13]


Look -- let me address that first -- last question first. As we see things in Germany, we really want to boost what we do on outpatient proximity medical services and at-home services. Premium is really a very niche product. I don't think that's our favored approach for the moment.

Is France being sort of a test ground? The answer is, well, yes and no. It's true that on digital, we are ahead of time on nonresidential, because that's where we started. But for operating, obviously, it's the proprietary service or proprietary system we developed in Italy that is in the lead. We'll try it out in Spain. And if it works in Spain and in Belgium, then it will become the standard operating model across Europe. So we are doing cross fertilization, undoubtedly. The real country we need to develop now on digitalization is Germany. Why have we waited so long? Well, for reasons of equipment. We're rolling out WiFi in the network and we need WiFi to be able to go to -- onto the next stage. And we're starting digitalization in nonresidential in Germany this year, and we're looking at this over the last -- next 3 years. So we have a broad and diverse model trying to identify the best practices and rolling them out in a standardized way across the board.

Boost. I'll remind you that Boost, we had set a target of 4,000 beds. We've got 2,500 built and delivered. We've got something like 18 months left for the refurbishment. It's a intensive program. We've done the catch-up, and then we'll move into sort of maintenance and beautification of our assets. So yes, we're fully on time for the CapEx. And the fact is, we can do it, we know how to do it and everyone's enthusiastic about it. So that's a good program.

For Boost, there are also all sorts of spin-offs in the common areas. So having teams that can be swift in high-quality refurbishment across France is really something that's much appreciated and very effective.


Laurent Gelebart, Exane BNP Paribas, Research Division - Financial Analyst & Analyst of French Mid Caps [14]


Laurent Gelebart, Exane. Can I come back on the regulatory side of things in France? There were 2 parliamentary reports, the (inaudible) report. The idea, as I understand it, is to increase the number of carers -- significantly increase the number of carers per facility. Do you think that will come into being?

And secondly, do you think we will get a piece of legislation on dependency and vulnerability, which had been spoken of but seems to have been delayed unexpectedly?


Sophie Boissard;Chief Executive Officer, [15]


Look, the new Health Minister, before he started working on the coronavirus, he went and visited facilities, and that was very welcome. What will be in the law, we'll see. Will there be additional funding for the carers in residential facilities? We'll see. Look, I think we're already able to increase carers, medical staff also. Means that we have a little more funding, meaning we can have different staff, maybe night-time nurses. We've got them everywhere now. And also -- look, if you look at the staffing levels across Europe, it was somewhere around 0.6, 0.7. The only place where it's different, and it really is a great model, and that's the Netherlands, and that's anywhere between 0.8 and 0.9.

Look at public funding for a day in such a residential center. So say, a specialized nursing home. In the Netherlands, you get EUR 200 to EUR 400 a day. And in France, it's a grand total of EUR 40.

And the share of GDP on health and dependency in the Netherlands is 9%. 12% in France. What's the difference? Well, clearly, the difference is in public hospitals. In the Netherlands, they've said, look, I'd rather pay a EUR 400 for a highly medicalized and residential home for someone who needs it rather than spend EUR 1,000 or EUR 2,000 for a day spent at hospital for these people. And they manage to do so by rearranging their funding, redirecting the funding for -- on small-scale community-based facilities.

Now how much and how far will the French be able to change things? Well, we'll see. Look, I'm not really expecting some kind of funding big bang for nursing homes. I do expect some kind of improvement, not sure how much of an improvement it will be. But I am and remain convinced that we can improve with sort of the situation, address this question by working with private doctors. And it's actually working and much faster than having to wait for the piece of legislation on the (inaudible).

But something good has been done, and that is that training -- that apprenticeship training for carers is good. Having some which of course is very positive. The (inaudible) report made it possible. I needed this to unlock the situation, and that's fine. And now that it's possible, we're doing it. We know exactly where we're headed. I mean, when vulnerability levels increase year-on-year, obviously, you need more staff, you need to rethink the facilities, you need medical support around the clock, and that's exactly what we're doing. So we're doing our, sort of, own piece of legislation ourselves.


Patrick Jousseaume, Societe Generale Cross Asset Research - Head of Mid and Small caps Europe Research [16]


Patrick Jousseaume, Societe Generale. Briefly, 2 questions. First, on the 9% growth. I'm not sure we got a full answer on the organic share in that 9%.

Second question, on Page 30, you mentioned 10,000 beds to be refurbished or renovated. I'm not sure where they fit on the -- it looks as though they're in the pipeline.


Philippe Garin, Korian - CFO [17]


No, these beds are sort of on top, over and beyond the pipeline. On the other question, it's at least 4%. So we're fairly guarded in our forecasting, but we expected at least 4%.


Patrick Jousseaume, Societe Generale Cross Asset Research - Head of Mid and Small caps Europe Research [18]


At least 4% on organic?


Philippe Garin, Korian - CFO [19]


Yes, at least 4% an organic. That's what I've always said. We want to cross that 4% threshold. And track record seems to indicate that we can do that.


Unidentified Analyst, [20]


[Pierre Perret], independent analyst. You said that our -- that the 2019 tax rate had increased somewhat compared to 2018. Your acquisitions outside France lead to tax savings. Can you tell us how much you derived from these in 2019?


Philippe Garin, Korian - CFO [21]


What do you mean?


Unidentified Analyst, [22]


When you purchase abroad, do you have a tax break?


Philippe Garin, Korian - CFO [23]


Not particularly then.


Unidentified Analyst, [24]


So how can you get such a low tax rate then?


Philippe Garin, Korian - CFO [25]


Well, look, it depends on the country. Look, I'm not exactly sure -- our tax rate is quite near to the average of the various countries. Is your real question, how did we offset the impact of CICE then? Shall I tell you then. In France, you pay less tax when you're a small company or a group. And in fact, a significant [part because the company's] not consolidated. So we're not cheating or anything, but we're playing around with how we consolidate them. And there are all sorts of issues to take into account, VAT, wage taxes, et cetera. So basically, when you're an independent company, not in a group in France, your tax rate is lower.


Unidentified Analyst, [26]


Maybe one more question from me. Why LTV at 52% in a country where -- in a business where there's quite a lot of cash, low interest rates are real estate opportunities in that. A bit too cautious?


Philippe Garin, Korian - CFO [27]


Well, no, you're never too cautious. I mean the real estate investment companies are at 40%. When they're undergoing growth they're at around 50%. I mean, we've thought long and hard at this. The best way to increase our leverage is obviously to increase real estate debt. Some have gone up all the way to 75%. No, that's not what we want to do. Imagine the markets, as sometimes happen, get somewhat upset. And imagine that's related to a spike in interest rates. Look, if that happens, I'll be pleased to be in a position I am today. If you have too much of a real estate debt, then you're actually cashing in profit twice.

So you really have to look at the financials' make up as a whole. Now obviously, this means that we have to be more disciplined, be more careful. I mean, you saw that we managed to increase our ownership rates over the last few years. So we do have some wiggle room even when applying these roles.

Maybe a final question?


Unidentified Analyst, [28]


(inaudible) What is your [EBITDA] margin rate in Spain at the moment? And are you counting on Spain to maintain your French EBITDA margin rate?

And my second question, what kind of margin rate are you expecting this year in Germany? And what can you tell us about the SSR pricing in France?


Sophie Boissard;Chief Executive Officer, [29]


Well, let me start with Spain. The Spanish market generally has dilutive [EBITDA] rates. But that's not the case for us because, actually, we are slightly above the group-wide EBITDA rate in Spain now. I can't give you exact information on a business line that's about $200 million, doesn't make sense. But it's not dilutive to the group. And if you were to look at the margin rates, they'll be quite good. I will be surprised if the margin rates do remain at this level in Spain given the state of the rest of the market.

I think we've done good work. We can't ask Germany to do everything. I think they've still got some elbow room. But I'm pretty sure we're not going to be getting 120 basis points in the next 2 years. It's going to be gradual.

And as to SSR prices, this is the third financial year where we're going to be in the black, plus 0.5. Of course, the government has asked for a caution because they need to close their budget as well, but seeing as we want to increase our level of specialization and, therefore, increase the prices, the pricing effect is actually very good for us in the way we develop our health care activity.

Now on that law on the elderly in France, we don't really know what's going on. But on the health care side of thing, there is a multiyear commitment that was made by the Ministry for Health. So we're looking at 0.5 in the coming years. This means that we have a lot more visibility going forward than we had maybe 3 or 4 years ago in this sector. I think the Ministry is starting to realize quite -- how important these players are in the health care ecosystem, and we can't afford to [sink] them.

Okay. Thank you very much. If there are no further questions, I'm, of course, available to meet you one-on-one after this.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

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