Ladies and gentlemen, welcome to the SYNLAB Q3 nine months 2022 financial results call. At our customer's request, this conference will be recorded. If any participant has difficulties hearing the conference, please press star zero on your telephone for operator assistance. Today's call will be hosted by Mathieu Floreani, CEO of SYNLAB, and Sami Badarani, CFO of SYNLAB. After the presentation, there will be an opportunity to ask questions. May I now hand you over to Mathieu Floreani, who will lead you through today's conference. Please go ahead. Thank you. Good morning, good afternoon to all and welcome to our call. We'll present today our Q3 nine months 2022 results as usual together with Sami. I'm very pleased to report today another strong quarter in a very challenged macro environment. This again demonstrates the resilience and critical nature of our activity. We can start with our financial highlights on page five, and starting with the first nine months in Q3. We continue to see strong growth of our base business with 4.1% in Q3. Also resilient COVID testing of EUR 105 million in the summer period, inflation impacting our margin and strong cash generation. Overall, a strong Q3. We're also happy to confirm our 2022 guidance of EUR 3.2 billion revenue with 24%-25% EBITDA margin. Finally, even though it is still very early in a volatile environment, we are providing our 2023 guidance with around EUR 3 billion revenue at 18%-20% EBITDA margin. Moving to page six and our operational quadrant. The summary here is again continued good execution across our four pillars and starting with the first one on organic growth. The organic growth is stable at around 4%, and that's similar to Q2, with a confirmed positive price development in both South and North and East regions. We continue to progress our retail initiatives with 21 new BCPs open in Q3 and also a renewed digital offer in Estonia, for example. On our second pillar of operational excellence, we progressed well also with SynEx delivering EUR 18 million of savings year to date. Continued work also on our infrastructure, like what we do in pathology or in on our IT systems. Finally, important also, the workforce reductions continue in order to adapt to the needs. M&A, our third pillar. There are 19 acquisitions completed year to date, balanced in eight countries for around EUR 139 million EV, representing EUR 79 million revenue. To be noted that here we entered Chile with the first acquisition and also sold our U.K. vet activity. Finally, on the fourth pillar of employee engagement, we got awarded as Top Employer in Estonia. We continue also our journey of training and completed our double materiality assessment on the ESG front. Strong execution on our four-year transformation program. Moving to page seven, I want to illustrate here our dynamic portfolio management. We indeed sold our U.K. veterinary business with a very high value creation. The business is about GBP 13 million in revenue in a U.K. market where our vet clients are fast consolidating into substantially large platforms. We continue to operate and strengthen our continental vet activity, which is about EUR 30 million in revenue. Moving to page eight, our usual update on COVID-19 testing. The key message here is a sustained level of activity in Q3, with testing having now moved into the routine prescription of general practitioners and hospitals. We remain comfortably above our long-term business case here. Now I hand over to Sami for the financial section of today's presentation. Thank you, Mathieu. Good afternoon, everyone. I'm very pleased to walk you through the Q3 and the nine months 2022 financial performance of the SYNLAB Group. These are the non-audited SYNLAB AG financials. Let's start with the revenue on page 10. The Q3 2022 reported revenue stands at EUR 698 million. It's a - 8% revenue variance year-over-year. The pro forma revenue as usual includes the additional revenue as if 2021 and 2022 acquisitions had been consolidated on 1st January of each year. We have EUR 214 million of revenue reduction from COVID-19 testing, EUR 7 million from price, and EUR 207 million from volume. Q3 2022 COVID-19 organic revenue stands at EUR 105 million, 2.3 million PCR tests performed with a price of EUR 42 per test. Prices have been stable quarter to quarter, but price will continue to reduce gradually. EUR 23 million of underlying organic growth, 4.1% of organic growth. Q3 2022 price is up 1%, reflecting the positive effect of price indexations in several countries from the Northeast and South segments. The Q2 volume is up 3.1%. Volume growth is improving from Q2 2022, but still lower than usual, reflecting some continued softness in hospital business, some residual impact of the Omicron wave on non-COVID testing activities. Mathieu will provide more color in the business review of the growth by segment, and it's the most visible state in Germany, where we had still high volume of COVID-19. We have a positive FX impact in Q3 with the strength of the Swiss franc and the Mexican peso, more than offsetting the weakening of a few other emerging countries' currencies. Overall, EUR 10 million revenue from the 14 acquisitions completed in the nine months 2022. Page 11, the nine months revenue page, the same four elements to explain the revenue development. COVID-19 testing EUR 720 million of organic revenue in nine months 2022. We still have EUR 5 million in acquisitions, so EUR 725 million in total. 16.1 million PCR tests performed at an average price of EUR 42 per test. The underlying organic growth, excluding the Southeast London contract, which started in Q2 last year, stands at 3.5%, 6.3% with the SEL contract. Favorable effects, again, EUR 22 million contribution. The 2022 acquisition, EUR 33 million of pro forma revenue from nine months 2022, 1.1% growth. Overall, the nine months reported revenue stands at 2 point... Rounded EUR 2.5 billion, an 8% reduction versus the nine months of 2021. Page 12, the EBITDA performance. The September year-to-date 2022 reported adjusted EBITDA stands at EUR 663 million versus EUR 907 million in nine months 2021. The adjusted EBITDA organic evolution explained the bulk of the variance. EUR 283 million organic EBITDA drop. EUR 213 million comes from price drop from COVID-19, EUR 6 million positive from underlying business. We have EUR 41 million inflation on a year-to-date basis, 2.9% negative overall percent on the base business. Strong inflation on OpEx, around 5%, mostly energy and fuel are a double-digit impact. Limited incremental inflation on PEX at 2.7% so far. We have limited inflation on MATEX at 1.7%, mostly consumables and external labor, as our reagent costs are, for the most part, fixed with multi-year contracts. Overall, we have an acceleration of inflation. It was reported at EUR 9 million in Q1, EUR 14 million in Q2, and EUR 18 million in Q3. Q3 inflation is at 3.8% again on the base business. The rest of the business is at EUR -35 million. It includes, obviously, the negative effect impact of the COVID-19 volume drop and the cost of maintaining sufficient COVID-19 capacity, partially offset by the positive impact of the organic growth and the SynEx benefit of EUR 18 million. The reduction of COVID capacity is well underway. To illustrate the progress, we started the year with around 3,000 FTE dedicated to COVID-19 activities. At the end of September, the FTE dedicated to COVID is just below 1,000. Our target is to bring back the level of productivity of the business at the same level than pre-COVID. The year-to-date EBITDA margin of the group stands at 26%, 2.5 points lower than in H1. The Q3 2022 EBITDA margin stands at 19.3%, and it's in line with our implied H2 2022 guidance of 18%-20%. Again, our overall year guidance is 24%-25%, and we are very confident to achieve this guidance. When we compute with our H1 performance, the H2 implied guidance, it was 18%-20%. At 19.3%, we are above the midpoint of this guidance. Let's move now to page 13, robust earnings. The bridge from EBITDA to net profit and from reported to adjusted financials. EBITDA first, nominal adjustment of EUR 7 million, acquisition-related costs, including PMI costs. The adjusted operating profit is at EUR 487 million. It's down EUR 274 million from nine months 2021. Again, COVID-19 price and volume reduction. The adjusted operating profit excludes the EUR 173 million of goodwill impairment in Germany recognized in the Q2 quarter. The net finance result is lower than the EUR 21 million interest expense, thanks to the gains from financial instruments revaluation. Tax line is overall decreasing compared to nine months 2021, but adjusted effective tax rate is at, up at 27%. It reflects a prudent approach on how to activate prior tax losses in our German tax unit. The nine months 2022 net profit includes EUR 71 million of profit from the disposal of the U.K. veterinary testing business. The nine months 2022 adjusted net profit stands at EUR 332 million, down EUR 182 million year-over-year. Adjusted EPS is at EUR 1.5 per share. It would translate already to EUR 0.30 per share of dividend, assuming the guidance of 20% adjusted net profit. The goodwill impairment and the profit from the U.K. veterinary testing business do not impact the adjusted net debt nor the dividend calculation. Moving now to page 13, strong cash flow in Q3. The EBITDA translates into strong cash flow generation. Receivables DSO is at 54 days, down eight days compared to year-end. The normalization of the working capital is progressing post-Omicron peak, even though it's not yet completed. EUR 151 million tax payment in nine months 2022. It's a big number. Net CapEx is increasing EUR 54 million year-over-year as planned, including leases. Retail expansion and IT are the biggest contributors. It's also impacted by inflation-related lease increases. EUR 339 million of unlevered free cash flow, 51% conversion of EBITDA. Next page, strong balance sheet. Our balance sheet of the group expressed with the capital employed and capital resource view. The change versus December is mainly driven by the addition from the 14 acquisitions completed in the first nine months, the goodwill impairment in Germany, recognizing Q2, and the normalization in progress of the working capital with the reduction of COVID activity. The net debt of the group, including EUR 630 million of leases, is now at EUR 1.4 billion, down EUR 214 million versus December 2021. Of which EUR 84 million from the net proceeds of the disposal of the U.K. vet business. The group has a strong balance sheet with EUR 660 million cash on hand and EUR 500 million of undrawn RCF. The return on capital employed stands at 15.6% at the end of September. Next page, reduction in net debt and stable leverage. The adjusted net debt is at EUR 1,454 million at the end of September. Adjusted net debt reduction reflects the strong unlevered free cash flow. The EUR 90 million spent in acquisition offset by the EUR 84 million net proceeds from the disposal of the U.K. vet business, the dividend paid to SYNLAB AG shareholders, and EUR 15 million share buyback to cover for management incentive plan and employee purchase plan. The last 12 months pro forma EBITDA stands at EUR 971 million. The leverage ratio, debt to EBITDA, stands at 1.5 x, up 15 basis points compared to year-end 2021, and stable compared to H1 2022. This concludes the financial section of this presentation, and I will now hand it back to Mathieu for the business review. Thank you, Sami. We indeed have a comfortably strong financial situation. Now let's cover indeed our main geographies, page 18, starting with France. 22% decrease in Q3 revenue, 9 percentage points decrease in AOP, and it is mostly due to a reduction in COVID-19 contribution, both on volume and price. Underlying flat revenue in Q3 made up a reasonable volume growth of 2.3%, offset by a sharp price decrease. Here we still have two components, year to date. The normal price decrease as per the three years agreement, which was 2.5% starting, January 2022, and an unfavorable comparison base in Q1 of this year as the 2021 price decrease started later in April. To be noted also a further expected COVID PCR price decrease, which will impact Q3, and some inflation weighing about 2 percentage points in the margin. The discussions for the new price framework are not final yet, with a tabled 5.5% from the regulator. Here, of course, regional scale is a strong driver of profitability and M&A is a potential lever. Page 19, Germany. 4% revenue increase in Q3 plus 7.5 percentage points increase in AOP. Very strong margins despite some inflationary pressure. We have a flat underlying revenue year to date with -5% in Q3, driven by an unusually weak volume. Here we have to say the German market has still not normalized. COVID-19 prevalence and testing are strong, and this hampers hospital and regular GP activity in a context where our client base is very stable. Inflation is still fairly low, below the percentage points impact, and agreements have been reached on salaries for 2023, combining one-off payments and an increase. Page 20, South Region. - 14% revenue evolution in Q3, and a more marked reduction in AOP due to the sharp drop in COVID PCR testing volume and some inflation. 5.6% underlying revenue growth in Q3. It's driven by robust volumes across the board and a sound positive price also. Switzerland recorded a weaker volume, being also hit by the August first price decline of 10%. Here, as a reminder, we estimate the impact to be around EUR 8.4 million on an annualized basis. Inflation is a bit higher in this segment South, reducing AOP by 3.1 percentage points in addition to the COVID cost of ramp down. Network expansion continues also here with 12 BCPs opening Q3 and three bolt-on acquisitions closed also in Q3. Page 21, North and East Region, -30% in Q3 revenue and a marked reduction in AOP, driven by the sharp drop in COVID contribution and the COVID cost of ramping down. The SEL contract margin dilution and inflationary pressure, which impact the margin by 3.5 percentage points. The inflation is offset to a degree with a continued strong positive price effect of 4.5% in Q3, and price indexation being mostly in the U.K. Very strong volume growth across most countries, resulting in 12.6% underlying growth in Q3. We continue also here the network expansion with nine BCPs open. In conclusion to this, our first nine months in Q3 confirm our 3%+ underlying growth target, despite the still disruptive effect of COVID in some countries, as we saw in Germany. Overall, volumes have been growing in line with expectations. We've now also a positive price effect, and the combination of the two proves once again the very resilient nature of our activity. Now let's move to the concluding section of today's presentation, which is the outlook. On page 23, we confirm the outlook for 2022. Just to repeat, we confirm this guidance revised in August of group revenue to be around EUR 3.2 billion with an adjusted EBITDA margin expected within the 24%-25% range. Priorities for investments for 2022 unchanged, prioritizing future growth with CapEx and M&A, while paying out 20% of adjusted EPS in dividend. We have a bit of a technical issue here to move the slides. Hope you can see them. On page 24, we provide an outlook for 2023. Given the many uncertainties in the macro environment, providing this outlook for 2023 at this stage is of course very challenging. We target for 2023 a revenue of about EUR 3 billion revenue and an EBITDA margin ranging from 18%-20%, while our M&A spend is expected stable at around EUR 200 million. This relies on assumptions of 4% underlying revenue growth, about EUR 250 million COVID-19 testing revenue, and an increased SynEx cost saving program in a context where the evolution of inflation is still very uncertain. In summary, once again, the company is performing well, delivering on the commitments and strongly positioned for the future. This concludes our presentation for today. Thank you for listening, and we now open the floor for questions. We will now begin our question and answer session. If you have a question for our speakers, please dial zero one on your telephone keypad to enter the queue. Once your name has been announced, you can ask a question. If you find your question is answered before it is your turn to speak, you can dial zero two to cancel your question. Once again, that is zero one on your telephone keypad to register for a question. Our first question comes from the line of Blanka Porkolab from Barclays. Please go ahead. Your line is now open. Hi, Blanka Porkolab from Barclays. Thank you for taking my questions. I have two, please. Could you walk us through the bridge from your margin guide in 2023 of 18%-20% to 23% over the medium term? What are the key puts and takes, and what is the timeframe in achieving this? Is it 2025, or is it pushed out further? Then my second question is, do you still expect EUR 800 million worth of COVID testing revenues for this year? That implies a sequential deceleration in Q4. What gives you confidence on the EUR 250 million in 2023? Thanks to you. Okay. I will try to respond to those two good questions. First one on the long-term margin. I mean, this has been reconfirmed at our Capital Markets Day in June, and where we have presented different scenarios of inflation impact on the short term, where our margin will reduce from our normalized margin of 21%. At that time, we have reconfirmed that, despite the short-term drop in N+1 and N+2, we would be able to recover the 23% on the long term based on the two assumptions. First, we're able to unlock some productivity in the group which are not easy to unlock on the very short term. Second, that on the mid-term, pricing will be aligned with any inflation on the basis that we have a lag between those two today, but this will be catch up in the future. There is no change and our model, which remains a major wherever the starting point is, in normal inflationary environment, not as the one we are experiencing now, we have a volume leverage as we have any incremental volume, and we have a stronger volume today. If there is one thing that has changed since the Capital Markets Day is a 3%+ volume or organic growth that now we have rounded to 4%. This is a positive development here. That's the point on the margin for the long term. Long term, it has been clarified at the Capital Markets Day is 2027. For the second question in relation to the COVID activity, yes, EUR 800 million is the current view for 2022. It implies around EUR 25 million euro per month, and this is the latest rate we have been going through in starting September. We're comfortable with this so far. For next year, we've made an assumption of EUR 250 million, which is fully aligned with our IPO case, the one we had back in 2021, where we said that in 2023 will be around EUR 230 million of COVID revenue, which is a sequential drop of the activity. This EUR 250 million represent 15% of the peak activity we had in 2021. The only probable change we had versus the IPO case is that the prices have been a little bit higher or maintained at a higher level than the assumption we've made at that time. I would say beyond the numbers, what is important also is that the assumptions we had made at that time that the mass testing would probably wane, but you would have the practice of the test trickling down into the normal routine healthcare activity at this point is fully confirmed. There is no reason to change what Sami mentioned, right? We're comfortable. Thank you. Thank you. Our next question comes from the line of Oliver Reinberg from Kepler Cheuvreux. Please go ahead. Your line is open. Thanks so much. I also like to come back to this midterm guidance, and thanks for confirming it for 2027. I'm just trying to think about the savings here. I mean, if I look at your guidance for 2023, and if I were to rebase it to EUR 150 million COVID sales, I think the midpoint of the margin guidance next year will be rather 18%, than 19%, which basically means a 500 basis points margin improvement over four years. So can you just talk about the kind of timing? Do you expect this to be kind of straight line, or will this be very back-end loaded? First question. Secondly, just on France, can you provide some kind of color in terms of the timing for this proposed 5.5% price cut? When will this be finally decided on? If it will stay at 5.5%, what ability do you have to offset this, and what would be a reasonable AOP margin assumption for France for next year? The third question, please, just for modeling purposes, based on your guidance summary, can you just provide some kind of color? What is a reasonable assumption for D&A ex TPA for interest expenses including leases, tax rates, and CapEx? Thank you. Starting from the first question, again, the recovery or the achievement of the long-term guidance of 23% that was communicated at the Capital Markets Day. At that time when we communicated, we were talking about normalized margin going from 21%-23% at one point. Here, we're talking your starting point 18%-19%, and with the assumptions that you have made, that if we reduce, but to the long-term COVID activity, we lose an additional 1 point of margin is fair, but it's not necessarily the normalized margin. In our current margin for next year range, we still have a number of items which are not into the normalized activity. We still have ramp-down costs, and we still need to address the lack of productivity or the bringing back the business to the productivity pre-pandemic. This has an impact on our margin next year still. We're still investing heavily into these two items, the D2C activities development, as well as the transformation of SEL, which have an impact on our margin. It's very difficult to necessarily assume that this is all normalized activity. Now, again, the model is volume leverage. If our volume goes up and we're able also to update to align our prices with our inflation. This is a model where we will be able to improve our margin. Now for France, I mean, as Mathieu mentioned, the negotiation is ongoing, so it's very difficult to. We've made an assessment where we have taken the conservative view of the 5.5% negative impact for us in 2023. We don't know yet when it will start. Is it January 1st? Is it April 1st? It's a one-off, or it will be on all the activity. It's still unknown. I mean, we have taken a conservative assumption here with the 5.5%. Obviously, it's relatively new information. It has increased versus the prior communication we had with you. I mean, the fact is the team in France is working their case and for 2022, and we don't have it yet. We are in the middle of the budget review, so I will not be able to explain the impact on their AOP margin yet, how much they will be able to recover and what is the volume assumption also that we'll have next year. Now, on the CapEx and lease impact, we are at around, in last year and this year, around the 9% cash impact. The D&A should increase in percentage of revenue year-over-year and towards these percentages. That's the current high level assumption that I can give you. Super. Just on tax rate and net financial results from up here. On tax and net finance cost. On tax, we have no change to our usual parameter that our normalized tax rate is around 28%. We were at 27% year to date, but this is the prudent assumption. On the net finance cost, our net finance interest, the interest cost for us is at 1.9% at the end of Q3, and there is no significant change. Just to note that a big portion or half of our debt is hedged in terms of fixed versus variable. Okay. Thanks so much, indeed. Thank you. The next question comes from the line of Kirill Talai from Natixis. Please go ahead. Your line is now open. Hello? Hello, can you hear me? We can, yes. Yeah. Great. Well, hi. Thank you for the presentation and, thanks for my question. Just, would like to go back again to, France and the ongoing discussions, as you said. Just, I think I also read that actually the budget for 2023 has been already, voted or kinda, you know, implemented by the government. Just, you know, just to confirm that it's really still ongoing or it has been already finalized. Yes. Technically, you're right. It has been voted by the Senate Monday during the night at this assumption of 5.5% one-off, which is a departure from the past and more positive the fact that it's a one-off. There are also some ongoing actions that the industry is taking. What we have seen in this say process is that it has been, let's say, less linear than usual and with ups and downs and stops and resuming. That's why we're a bit cautious to say the negotiation or the discussions might not be fully over. You know, just referring back to 2018, when was the last negotiation of the biennial agreement. Back then, the industry participants were also not satisfied with the result and one of the, let's say, actions that they took was some sort of strikes. Yes. Just trying to assess, you know, in-house, for example, do you see a potential strike as significant to your 2022 guidance? First, it is one of the considered actions. The answer is no. We're still within the three-year agreement today. In any case, whatever negative impact it has on the volume activity for this year will be caught up as a true-up for the three-year contract, because then the prices will have to be adjusted. Thank you very much. Just, you know, one more question on other countries. For 2023, do you see some certain countries where we might see potentially some significant tariff revisions expected? At that point, I mean, we have to be a bit forward looking here. We have to be cautious, right? What we don't have any knowledge of discussions of anything being discussed that would be significant. You can always have one region in Italy doing this or that, but that is not what I understand your question is, right? Anything significant, we have no information about at this point. Okay. We don't expect this to happen. Just promise the last one. It's on wage for 2023. How much you see the wage inflation next year? This is still being worked. There is no final number here as we are reviewing the budget. I mentioned earlier for Q3 year to date that we had only 2.7% inflation, but probably the inflation on PEX will be higher next year. The range is more in between, I would say, 3% and 4% max. That would be the range overall for the group. Yeah, I think. Thank you. Thank you very much for your answers. You know, very Thank you. Next question comes from the line of Grace Lee. Hi. Thank you for taking my question. Could I ask two questions, one on margin and the other one on pricing? One on the margin side, can I just go back to your sort of CMD illustration example? I think that was really helpful to understand sort of moving dynamics. Can you help to bridge that 18%-20% 2023 margin, how that inflation assumptions that you sort of laid out at CMD, how much of that has changed? And where do you see further pressures in terms of those inflation further increasing in your assumption? And I think, I guess the second part of that question, if I could add, you are still including sort of material EUR 250 million COVID revenue in your 2023 revenue guidance. Is it fair to assume, excluding that on blind basis, margin range will be lower than 18%-20%? I'll follow second question. Thank you. Yeah. Inflation, I mentioned Q3 is a bit higher, so we have around 3.8% inflation in Q3. Inflation next year will be in this range around 4% overall for the group. If you compare to the assumption used in the CMD scenarios, we're slightly higher, but this is already baked in the 18%-20%. That the answer for the point. The EUR 250 million is the total number of COVID that we were planning for next year. In our long-term view, we will keep EUR 150 million of COVID. That means that the difference is EUR 100 million, that will have an impact on the margin, and we estimated at around 1 point. Okay, great. I guess in terms of sort of the just to follow up, inflationary pressures in terms of buckets of what, where you highlighted, is it fair to assume what you're seeing in the Q3, that will be broadly where you see the most pressures? The pressure will evolve, I mean. On the long term, the inflation, I probably I will use your questions to react to it, to link the different topics here. The inflation today has been on energy and fuel and limited on PEX. We have limited on MATEX. For next year, we probably have more PEX inflation. What would be the inflation by year-end next year on the fuel? Nobody knows what will be the fuel price. But there is probably the assumption that those prices on the long term will stabilize. At one point we'll have a reverse impact of the fuel in one year, which will help us to improve our margins. Now the inflation has increased gradually in Q1, Q2, Q3, and as I mentioned, that will be around 4% next year, it will still increase a little bit in the subsequent quarters. Okay, thank you so much. On pricing, we are hearing also pricing negotiations being challenging on the Germany side as well. Can you share sort of your insight and what you see in that market and what's included in your growth assumptions? Thank you. You probably refer to pricing negotiations in the hospital area because to my understanding there is nothing ongoing of any significance. I mean, different from the normal on our industry. Okay. You are exposed to hospital sector a lot in Germany, so could you comment on that? No, actually, to clarify, they are negotiating and I think have already received something like 5% increase. This is, it's not my specialty, so I cannot say 100% precise. This is fairly rather good news for us that they are able to increase their prices to the final patients, right? That's rather a positive for us than anything else. Okay, thank you. Thank you. Our next question comes from the line of [audio distortion] from BNP Paribas. Please go ahead. Your line is now open. Thanks for taking my questions. I have two. One follow-up on the negotiation with the French regulator. From various press articles suggest that the French regulator is also looking at deeper cuts in 2024-2026 period. Can you comment on that and what impact of that, if any, is included in your long-term margin assumptions? Second, following the impairment that you passed on the goodwill for the German business in Q2 and the further increase in interest rates, have you recently run other impairment tests on other regions? Or, given that if I'm not misunderstanding, this was triggered by or done by your auditor when are the next tests planned for? Thank you. Yes, thank you, Hugo. On France, yeah, I mean, as I said, it has really not been a linear discussion at this point. We are in an annual type of situation, not a multiyear plan. There have been discussions of having decreases as one-offs for the future, which again is positive for us because it doesn't mean reducing the envelope but leaving the growth in it. It's really way too early to call. I suspect that also it will depend on the inflationary pressures that will be measured in the year 2023. If they would confirm that, for 2023 it's just a one-year agreement or a one-year measure during the year, they would also have to look at what's happening in inflation. I think it's too early to call at this point. Yeah. For the impairment, this is part of the normal closing cycle of the year. We are working through the budget also multi-year plan, and we'll have our models updated with the latest WACC early January. We will fine-tune the view on the impairment at that time. It's more a through your discussion. Now as mentioned in Q2, having done an impairment in Germany means that there is no more headroom in our German activity. If there is a deterioration of the WACC, there will be mechanically, as mentioned at our reporting in Q2, an adjustment again in at full year. This again will be pure mechanics and accounting and there is no, again, reading to be made on this, on the strategy, on the acquisition, on the bolt-on, and on our model. It's pure accounting, and it's, as already mentioned, excluded from the adjusted number. Okay. Thank you. One follow-up, if I may, on the declining volumes in Mexico. You did not comment on that unless I missed it. Can you give some more color, please? Can you repeat the question? Because what metrics you're looking for? You mentioned in the presentation declining volumes in Mexico. Just wondering what's been the driver for that? Yeah. We stepped out of one hospital contract in Mexico. You remember we just took over the business, so we also apply the same discipline in terms of some profitability hurdles and so on. That's the reason. Okay. Thank you. Thank you. Our next question comes from the line of Jan Koch from Deutsche Bank. Please go ahead. Your line is now open. Hi, Mathieu. Hi, Sami. Thanks for taking my questions. I would also like to start with your EBITDA margin and pick your brain on the potential inflationary impact on your margin in 2024. At your Capital Markets Day, you mentioned that you expect the margin trough to happen next year, but you also mentioned that if the inflation remains elevated, your margin could be further hit in outer years. If we were to see an inflation in the high single digits next year and no meaningful reimbursement rate increases, would you be able to show any margin expansion in 2024? I understand that it's quite early to speak about specific numbers, but any comments would be appreciated. Secondly, I was a bit surprised by the strong margin in Germany. Can you speak a bit about the COVID activity you have in Germany? How much of this is backed by contracts? Should we expect a sharp decline here next year? Then finally, on your vet business you sold in the U.K. Can you tell us the margin profile of this business? The implied transaction multiple looks highly attractive. Could you achieve similar multiples in other regions? If so, would you be willing to sell your remaining vet business? Okay. Inflation for 2024 is, I think. I mean, we're already compared to the average companies reporting 2023. I would pass on this question and wait a little bit longer because it's too early to say what will be the inflation in 2024. It doesn't change the business model, the only thing. This is my joker today. On the second question, the strong margin in Germany. We don't have COVID-19 contract in Germany. It has completely trickled down into the normal healthcare activity for the very vast majority. No risk, say, like, of contract loss for next year. And at this point, it's very resilient volumes. Go on. And, uh, vet, uh- Yeah. I mean, yeah, you're right. You have noted the very nice accretive transactions that we have done in the U.K. So far, we're still investing in other countries, as Mathieu mentioned. We have done a recent acquisition in Germany. We will continue working and we will manage the portfolio. That means, we'll create value where we can and develop those businesses where we can at the same time. Okay, great. We remain open. This is really the dynamic portfolio management, right? We remain open to look at where we are, where the, say, the dynamics of the markets are. And then assess where we have maybe lack of scale or where we can either consolidate with bolt-ons or to the contrary rather exit and sell. It's difficult to predict for the continental part in the future, but we will remain a very, say, dynamic in how we look at it. Okay, great. Thank you. Thank you. As a reminder, it's zero one on your telephone keypad to register for any more questions. Our next question comes from the line of Sezgi Oezener from HSBC. Please go ahead. Your line is open. Hi. Thanks for the presentation. Thank you for my question. One question I had on total M&A spend with EUR 90 million growth and after actually your divestment, you seem to be almost at nil for 2022 versus your budget up to EUR 200 million. Does this point to some conservative or general lack of targets in the market? My second question will be on France. I'm actually surprised since in your last call you had actually voiced your hopes perhaps of a positive renegotiation of the pricing level, and the amount that came is considerably below that. Is this going to apply all across the board, or do you think you would be able to balance part of this out with out-of-pocket services to retail customers? Thank you, Sezgi, for your question on questions. On the M&A, it's absolutely not a lack of targets. We are always selective. At this point, the deal flow is absolutely not a question, not a problem. It's, as usual, right, we need to have a good strategic fit, reasonable financial conditions, and capability to integrate in good conditions. As we have always said, right, M&A for us is always a multiyear view, right? You rather should look at EUR 1 billion over five years than exactly EUR 200 million each year. At this point, there is nothing we observe that would give us any worries about the capabilities of doing this. On France capability with out-of-pocket probably not. It's quite limited, quite a limited market there. It might change a bit in the future, but also, of course, price is one component, but you also have to look at volume, right? The government, in the same token, has asked and, say, the whole healthcare practitioners to also put much more efforts on early detection and prevention, which means a push on our volume. We'll see how this all, this whole, say, components pan out at the end. That would be the view here. The next time this could be reviewed would be in two years or would be further down the line? As we always talked about the structure of the sector with smaller players having less stamina against price decreases, how do you expect the situation to evolve in the long run? Yeah. I mean, as I mentioned earlier, it's too early to call, right? At this point we are on a one off price decrease, which means that the year after, to be specific, right, one off means that you take a savings in the year 2023, and then the starting base of the year after is the same price you had end of 2022 when you looked at it, right. It's not in steps down. It's too early to say what will happen in the outer years. You're absolutely right that whatever is happening has an impact on still a substantial part of smaller players. There will be an impact on the policy should they want to push it further. It's probably not very sustainable. That's all. That's all. Thank you. Because at the same time, the same government has communicated very strongly on improving healthcare as a result of the, say, realization during the pandemic. All clear. Thanks very much. Thank you. Our next question comes from the line of Oliver Reinberg from Kepler Cheuvreux. Your line is now open. Oh, yeah. Thanks so much for taking my follow up. Three in fact, if I may. Firstly, on the profitability of South and Northeast as a region, I mean, this came sharply down basically to mid-single percentage weights now. Can you just talk to what extent is that a concern? I understand that there's a COVID sales decline, went down costs and offsetting inflation, but is that a kind of reason for concern? That's question number one. Secondly, the margin guidance for next year is quite wide, in particular considering that you gave a specific COVID number. Can you just mention what are the kind of three key variables that would lead you to move towards the lower and upper end? I guess, personnel cost inflation and France are two items, but if you can just talk about the top three items and probably also providing ranking. Third question for me, just in pricing. In your assumption for next year, you talked about a kind of positive pricing environment or more positive going forward. Can you just provide any kind of example where you're seeing favorable pricing indications already? Bear in mind that obviously only 15% of your business is subject to pricing, where you can influence it yourself. Thanks so much. Okay. Profitability, South and North and East. Fair point. I mean, Q3 is low. It's impacted by a number of one-offs. It's a long release, so I don't know whether we need to go there. These are not the normalized margin, I would say, for those two segments. There is nothing here alarming for us in terms of point. Now on the 18%-20% margin for 2023, the range, I mean, obviously it's similar to this year in second half. So first it's. The second point is what drives the range. I mean, we have highlighted a number of points here. Still, the level of uncertainty we have on the inflation. The second point is our ability to execute our plan to bring back the productivity level of the business pre-pandemic level. There is still, on the upside, it's probably if we can do more than the COVID levels that we have. If we're slightly better than EUR 250 million. The timing of the closing of the M&A. Obviously this is something that we don't master, but the mix of M&A that you have. One element you mentioned that I would add leading to the next question, which is the pricing environment. We have seen, as you noted, a positive price. If you exclude just for Q3 as an example, right, France and Switzerland, you come to something in the range of 2% across the board. If you look at our emerging market cluster, I'm not talking about all emerging markets, right? A cluster which is made of some Eastern European countries and Africa. We have more than 10% price increase in that quarter. In the U.K., we have more than 5%. You see, it's not just one country where it's happening. It's fairly. Now if I play the game, if you even exclude all what I said, right, France and Switzerland, the negatives, you exclude the positives of U.K. and emerging market, you are still at 1% positive in Q3. That shows that it's fairly spread across the board. I hope this answer your question. Yeah, it does. Thanks so much. Thank you. Once again, as a reminder, it is zero one on your telephone keypad to register for any more questions. Okay, it looks like we have exhausted the questions on time. It's 4:00 P.M. here in Munich. Thank you very much for your participation in listening. The next time we communicate is March 16, 2023. We also will have a new investor contact starting December 1st, Investor Relations who is Anna Niedl. With that, wishing you a very good rest of the day. Goodbye. This now concludes our conference. Thank you all for attending. You may now disconnect.