Hi. Good morning, everybody, and welcome to Theravastal's Q1 twenty twenty conference call and webcast. As usual, our CEO, yeah, Villego and our CFO, Ilklaude Lauil, have the presentation of the results, and we'll follow that with a Q And A. We'll take questions from the phone lines and through the webcast after the presentation. But without further ado, I'll I'll give the speech over to Bill.
So good morning from, Piazza, Terabasthava, Helsinki. Q1 in brief, of course, the big headline is the COVID impact, on our business. We will give, fairly detailed flavor on on how how the impact has been passed on, and and then it's, easier to also model and and and discuss and and forecast how we see the future, going forward. Key takeaways, here. Of course, this, this COVID response by the government and exceptional measures taken by the government, has a, basically significant impact on on on our business.
In short term, we can see, it, especially during, last part of, Q1 and and then then, during Q2. However, during q1, still, revenue, was fairly fairly fat, when it comes to corporate and our private revenue, the biggest reason that's actually for the revenue decrease was, ending sourcing contracts, on on on our public business. We are, of course, Looking at the Q2, how the impact is going to continue. It's going to have a significant impact still going, going forward during this quarter, but then how we are sort of structured our our, management and and plans inside the company. There's we have a clear steps.
So we, we see Q2 as a, COVID impact quarter and and then have to assess a recovery already. We are very active in in responding this this, in responding to this crisis, we are not, sort of, victims of of of this crisis. We are active player. We are helping, society, we are helping individuals. We are helping, corporates, to tackle these crisis and and continue as normal living as as possible.
We have been very active in in, adjusting our our services and and ramping up the services needed, to tackle this crisis, mainly, testing capabilities. Here, we have, fairly detailed view on, COVID-nineteen impact on our revenue, going, quarter by quarter, And, I said, impact started during latter part of Q1. Basically, qqone up until, COVID crisis was was still, on on growth path. We had, we were executing according to our plan But then basically overnight when when the crisis hit, Finland, then then, of course, the, the situation changed, rapidly. The impact, if you look at the different payer groups, corporate private and public, for, for corporate and private, customer groups or payer groups.
The impact is is fairly similar. Non acute medical care has been scaling down, at the same time, of course, remote services have been scaling up, on public side, the demand has been steady, service, sales, have actually increased during this this period. As said, we are seeing, biggest impact, from from this crisis during Q2, the, data point that we are giving for everybody at this stage is, sort of, lockdown revenue run rate, which we say is, -30 bet percent, from, from our head, top line for corporate and private payer groups. And this is, really the lockdown revenue run rate. So when the locked lockdown was was, still in effect, if you look at April, full measures in place, then, revenue hit or haircut was minus minus 30 percent.
Of course, going forward, then then you can model and and and and and forecast how the, easing of the message will, will, then improve our revenues We are not giving any, any precise forecast on, on, on that one, but what, but, of course, we say that, our revenue development is going to be, directly, and, clearly linked with the, easing of the measures. And, and then hence the consumer behavior. If we, if we look at the mitigation and, and really, really the operational impact risks and, and, and what we have been doing during the crisis, everybody is, is, of course, aware of, of the, mitigation, done by government, the, the protective measures and a lockdown measures, sort of, detailed, impact in in health care services, not so widely known, we we have been scaling down on our non acute care especially in in the dental and and and then, nose, throat and and and and and and ear, surgeries, all in all, the consumer behavior has changed due to the fear factor, especially in the capital area and and that has, had a a clear impact on on on on our revenue. The risk that that we have, have been discussing, and and contemplating, of course, is is, is that, during the, the special powers act by the government, they, they have mandate to, to basically take, our, our resources to their use, but, this, risk is is, really, really low.
We can, we can see it, actually based on this period, utilization rate for for health care services nationwide, is is, I would say, record lower at this stage. And, and there's no need for, for anybody to, to, really model still still any any resources from from our side. And, and there's we don't we don't see any any change in in in the in in this one. Our mitigation activities, they they have been, there have been many And, we have been very active in, in, in scaling down, of course, the businesses or, or, services that are not needed. We have been mitigating our our costs, as as fast as as as we can.
We have been scaling up, our, remote services. They they have multiplied we have been, I would say fastest in in in Finland scaling up our our testing capability and, and, keeping up our services on as high level as as possible because, the need for health health medical health and medical services, data, it, it has not vanished anywhere. During Q2, the the mitigation activities, will will continue. We can see right now, gradual dismantling of restrictions. We can, start ramping up certain services that we scaled down early early on, like non non acute, dental services to to certain extent.
And, and, of course, we, we, we are reacting, in a child manner in the, to the need of, of, of, of, different customer groups. We have a special focus in, in, corporates segment, because to this is this is the time really when when, we need to normalize, operations and behaviors and working life as much as possible because This is, not going to go away any anytime soon. Our, sort of, Obligation basically is to help, corporates to, to live as normal life as possible. We have a good package in, in place for, for testing tracking, risk mitigation, which by we can, we can help corporates to, to go on, as an an an sort of normalize, as far as, as possible. When it comes to, mitigating, profitability impact, of course, the, weight has been on, on on cost side, we have, basically put the brakes on on on any anything total, sort of uncritical, spending And, we are achieving, or we are mitigating, personal cost with, with, temporary layoffs the impact of that one, can be seen fully during May.
We started the process so that, the impact started kicking in late April, we cannot see the full impact, yet, but, but we will see, see, during, during May. We are, of course, looking very, very closely on on our cash flow and liquidity. Our situation is is very good, due to due to our our measures taken, we have a very good liquidity and and also capability capability to to improve the situation if if needed. But as I said, we are in in a very firm position, with with that one. As to our activities, we can be very proud on on on on the fact that we have been the fastest move and and and and sort of faster scale, when when it comes to, testing capabilities, as I mentioned already, we are helping corporates and we already, many, use cases where where we are together with the with the company.
Building sort of a COVID-nineteen, response plan. So so that, a company can can, scale up, their, their services and operation, as fast as, as possible, core of that one is testing capability, tracking capability and risk analysis done in the companies we have, as I said, being the fastest one to, to come up with, a meaningful scale when it tivirus testing yesterday, we announced that that we are coming to the market with the best available, globally best available, antipolitest and, and, and that will, be a, that will have a significant impact in, in, in sort of, ability of of this society to to tackle tackle this this crisis. Revenue split and and development, during Q1, as said, already. Fairly flat when it comes to, our corporate and and private private payer groups. Early part of the Q1, up until, last 2 weeks of, March, we were, still on on growth path, I said, but then, that impact off of COVID-nineteen, made made this this one flat.
Public revenue from outsourcing decreased due to, ending outsourcing contracts, but, as said already, service sales increased, due to certain certain extent. Couple of highlights from from sort of, more operational side. Number of remote appointments multiplied to, more than 100, 1000 visit which is, big hike on that one. We are very well geared to this, somebody wants to call this one a new normal, our, digital platform is is well in place. We can, we can read customers and and and professionals with with our platform.
And, we are, I would say one of the best positioned, at at least in in Europe to, to, be ready for truly omnichannel, healthcare services and providing that one with good, good customer experience. So, we'll see where the new normal will land. Of course, some of this, will will stick and, and, one can say that, after this crisis, we truly are in, in omnichannel environment And and it's a positive thing for us due to the fact that we were very, very early movers and have been investing in in in in this area. For a, long time already. Impact, on our profitability, adjusted EBITA, 30% down to 22, 900,000, and, again, the impact, was mainly mainly from a later part of March, drivers behind this one, in addition to to COVID COVID crisis or in in, in, sort of, link link with COVID crisis was, sales mix, and, and, heavy investments in in in digital is, in a way.
Good and bad, of course, we have been investing heavily, as I said, on on on digital when we go to the omnichannel environment, it's it's a very positive thing, going forward and in in long term. But obviously, there there's a burden right now when the revenues revenues are dropping. We have a new proposal for for dividends, the the earlier one was, 2 times payment 2 times $0.13 per share. Now now the proposal is, one time $0.13 per share. So, we do have, means and and and and and and and we do have, reason to pay dividend, but of course, also, also our owners are chipping in, in, in this cry So they are scaling down their dividend, from from last year.
So outlook, from, basically, for for Q2 and onwards, asset, we are giving this, one, one very detailed data point, from April. So so the revenue, cut is is a 30% during, sort of full lockdown situation. And, we are saying, and, we believe that revenues will improve, in, in line with the, with the lockdown measures, measures being lifted. We are not giving any precise, prediction how how it will play out, but, then then it's it's fairly straightforward to model model that, that one So full, full lockdown impact 30 percent, going forward, revenues will improve as, as the, are being being lifted. Public sector, as a special case, worth mentioning, that one, it has been, fairly steady during the crisis sales, have been actually increasing.
There's a potential, that, backlog of, services being, delivered during this crisis will, will have a positive impact, going forward on, on, on our revenues. So, as said, the need for health care services have not, gone down there's underlying demand and, and, and, public services. Obviously, they have scaled down their non acute services, and, and, and we are, we are building queues and we are building back backlog At certain point, during H2, most probably, we will see signs, positive signs from that backlog. And and we are part of the solution when when, when, sort of dismantling this this backlog backlog and our queues. We have, said earlier, and update it on our strategy process.
We have not, basically stopped the process. We have been doing the the, work as as planned. We are, I would say, ready with, analysis, but, there there are there are discussions still to be made due to the sort of logistics reasons. And and and that's why we are, we are not giving sort of, detailed information or strategy update, just yet. But we are able to do that during, during the course of, month of June.
One thing which is, certain in, in, in our updated strategies is that our mission will, remain the same. We are still going to fight for for healthier life. There's going to be a, a lot of focus on individual, individual consumer, we are best geared, I would say, among the health care players to really, have the data of, individual consumer have digital platform to reach, reach consumer digital pat platform to have a meaningful dialogue with the with the consumer. No matter what the system is, what the payer group is, always, end user is this individual consumer. And if we are able to serve him or her, well, we will, we will endure and be successful in any system.
And now over to Yoko.
Good morning. On on my behalf as well, as well, and, then, still a few words of the of the financial performance during the Q1. Like we already explained, our our sort of top line and as well as the the relatively profit and the absolute profitability slightly leaked down through into Q1. Here is the slide that we have always, shown, and, and there you can see that that the margin, EBITDA margin relative to earlier period, declined from that 17.9to14.8. There's 3 key drivers on that, first is the decline in the revenue.
Mostly, like Will I said, deriving from from the discontinued outsourcing contracts, but also the impact was was so that, that, at the sort of the doing the first two and a half months of the quarter, the say, saw quite steady increase in, in, in, in revenue when it came to, came to private and corporate segment. We were in a quite good speed with those. But, then suddenly within the hours, when the, when the top line declined during the last two and a half weeks, We ended up having a situation where the private was basically flat during the Q1 and, and slight decline even in, in, in corporate segment. Then the second element regarding the profitability is the sales mix impact which means that that, like earlier, our sort of relative to earlier periods, our appointments business and up up and sales related to appointments, develops, better than, than, diagnostics. As an example.
What it means that, during these kind of quizzes, when, when, top line rapidly declines the, as we know, the most of Dispersulticare, both in the corporate segment and in the private care, private business are taken care by, by private practitioners. So if the top line declines, the cost structure for, for, for, for appointments also declines quite, quite straightforward. But when it comes to the diagnostics, which is not, taken care by our own facilities, The cost structure is not that flexible. And that, that, when when that declines, that will have impact on the profitability as well, The third element is is then regarding the cost structure and, and, and, here, we can actually see more precise sort of impact on that. So so, here is is sort of, 3, circulated numbers there.
And if if we first take the bottom 1, now we have sort of taken or shown separately the IT expenses development you can see that it has increased that, that, 38% year on year change and, and like I said earlier, it's, it's mainly deriving from when you invest in in in digitalization. It typically has the rule of thumb that 1,000,000 invested in in digitalization we'll have 200,000 roughly to sort of the maintenance maintenance expense level. So more you invest in digitalization, more you have have sort of the maintenance expenses. And this cost line item only includes the sort of the external services or the personal expenses are included in the employee benefit expenses. Also, the impact, which, which we can see, with sister sort of, I would say, global situation that there is a there has been quite sort of, turmoil situation in the in the global market of the personal protection equipments, that has also been own procurement team.
So we have been able to supply all necessary, protection equipments, and we don't have any, any score on those. But of course, the consumption of of those as well as the prices have multiplied. And therefore, even though that the top line declined, the purchase of the materials increased by almost that 9% versus year ago. Then a few words regarding the balance sheet, as as we already told, our our cash situation is is is skewed. We have, liquid assets of, of, of that 1,000,000 as well as we have undrawn facilities as well as, as, as sort of, credit limit of 1,000,000.
And we have of course, more capacity to accrete additional funding if needed or if we want to further sort of security liquidity. When it comes to the net debt situation, you can see that that it's it's, the sort of the amount of the net debt is is lower than EuroCOG. Declined from 575 to 530, including €173,000,000 of, of rental liabilities, and, and there you can can can see what is the same sort of the, net debt requirement from the from the financial institution, that's obviously significantly lower. But the net debt to adjusted EBITDA has developed in such a way that now the multiple is stuck 3.2 that includes now those IFRS 16 liabilities, and, and our target is to be below 3.5, like I said earlier, still we are below that, although it has slightly increased, versus previous quarter, And, and of course, the reasoning for that is, that is the main main reason for that is the decline in the, in the profitability. Then regarding the investments, Like you can see, we we are still, we have still slightly increased number when it comes to the total gross CapEx, 46,000,000, up from 1,000,000.
But the sort of the speed of the increase has decreased considerably as you can see from 38 to 41 and 41 45 and then only 446. And like we already explained, one of the mitigating factors has been that we have, basically freeze all, non necessary investments or postponed all all non necessary, investments and, and, and that had already slight impact, for, for Q1 numbers, but obviously, the bigger impact can then be seen in the later quarters. And that's only because of sort of the securing, cash flow in the, in the short term, but obviously, we will be in a longer term, we will continue sort of investing in digitalization and, and, and other sort of facilities as well. But also, you can see that the sort of the increase in, in, in, in investments again, derived from the intangible assets, meaning IT and, and, digital investments. Then I think that's that's it on my behalf as well.
And and that then we have time for the Q And A.
Thanks, Ilkka and Will. I think we're ready to take questions from the phone lines.
Okay. Thank you. And we have the first questions come from Panu Laidar Majir from Bank. Please go ahead. Thank you.
I wanted to ask about this, backlog of services that are not being delivered both in your own business or the public sector. Just to clarify, so you think this will, kind of be beneficial for you already in the second half of this year. And not next year. And then if it happens in the second half of this year, do you kind of expect this to lead to year on year growth in revenue or just that it will be kind of better in the 2nd half compared to what you see in the 3rd half. And then finally, in terms of the public sector backlog clearing and you're helping that.
What in practice have you seen with the public sector? Have you kind of sign any contracts? Will that be, voucher based services or what, what is the kind of mechanisms? How this will benefit you?
Long, long list of different questions without a pen, But, starting from the, sort of, from the bureaucratic cues, It's it's really difficult to estimate when that backlog will sort of start to start to sort of open, it's actually quite impossible to say because it's also it's really it's really dependent on, on, on, also to how the restrictions are developing and what is the situation regarding the epidemic situation and what dev development regarding the epidemic situation because the public sector sort of closes to non acute care because of the, of the sort of, the epidemic situation. So if the epidemic situations sort of will remain rather stable like it has been nowadays, even though that we are opening the restrictions then they will most likely also open the non acute care more. And what that will have impact for for the private sector we really don't know because this is quite unique situation. The only thing that we know for sure is that even this lockdown that has all already taken place has lengthened the queues, for the public sector, non acute care, quite significantly. That's the only thing that we know for sure.
It can sort of even out from, from 2, different sort of raise, I would say. One is like you said, is is the service voucher. It's in our case can be seen, then, it's a 3 ways actually. 1 is the service voucher risk, which can be seen in our business, in a public sales. Second is, is that direct sort of contract with the public sector so that we, take we have a contract regarding the certain amount of the episodes, be it MRIs scanning, be it Qatar accelerates, etcetera, etcetera.
And the 3rd element is, is which is most difficult to estimate in this kind of situation is that, that how many people opt out how many private people opt out to public queue and and comes with their own money, which can then be seen in in in our private business and buys sort of the private services because they sort of are not willing to wait anymore their their hip surgery as an example or knee surgery as an example. And that is probably most difficult part and probably actually the might be the most significant part because, but, but it's really hard to estimate at the moment. It really depends on, like Wheeler said, that that, development of the fear factor as well, because now in many cases, people or the private individuals are without no rational reason, they are afraid of coming to health care facilities, but how that sort of develops and, and, and, and, and, and, and, and, and, and, and, and, that's then it comes to the psychology. And even though I'm I have 2 master degrees in forest science and, and, and, and in economics, I'm not the psychologist and that that I can't, can't answer.
Maybe there's some psychologists in the lines and can, can answer how that fear factor develops. All right.
Just to add on that one, there was a question about the examples of if any. And yes, we do have examples when the public side has been directly purchasing services from from us during this crisis. It has been testing, as sort of a box service, but then then non acute surgeries in certain regions well. So there are there ways and there are examples already.
Do we have further questions from the phone lines?
Yes. Our next person is Sami Taarovich from Nordea Market. Please go ahead.
Thanks. I have a couple of questions. Firstly, like to get a bit more granularity on sales development for corporate and private segments. You're saying that these were on by 30% in April. Can you say we are already on an improving trend if you look at the situation on weekly basis?
Not really because during the April, the lockdowns were quite stable, and that's the that's the lockdown number. And we are only seeing since mid May, the opening of the restrictions. Of course. Which, of course, would then ease in the situation, most likely. But most likely to sort of the impact of that that it's difficult to estimate.
Okay. Thanks. Secondly, I would like to understand the impact from, the various cost saving measures that you're outlined for Q2 including layoffs and the temporary closures of that unit. What kind of savings run rate are you targeting, on a monthly level from these measures
like, like, earlier, we don't sort of, typically, we don't target any specific numbers. We try to, like, realize that we try to adjust our cost structure with the with the sort of operating environment should be taken into account that most of those closures of the units have been related to sort of the demand issue, regarding the, the dental services. And, and, that's the sort of the key reason for those closures. And when when the demand and the restrictions regarding the non acute dental services will ease and out, e even out, or or will be sort of opened. Obviously, we will open those facilities as as well.
The second element regarding the cost saving actions is that I think the best way to sort of have granularity on that is that you can see from that, from the interim report, from the personnel section, you can see that we completed our negotiations, 3rd April. And at the end of April, you can see how many people were laid off, as well as temporarily laid off and and sort of the, your estimate on the impact from those. It should be taken into account that during the first half April, there's a certain notice period before you are able to sort of lay off people. And then on the second half of the April, it gradually increases the number of delayed of people, and I think that, that, it's quite stable at the moment. And obviously, we hope that that that rent will improve, and we are able to sort of, sort of decrease the number of the temporarily laid of, of people, but it should it should also take it into into account that that, like we have seen, that our and Net Promoter Score has been best in ever, and it has been, has been sort of, record high.
And that has been also sort of our purpose. So we are not cutting costs that dramatically so that we will we would sort of jeopardize our customer service and, and, and sort of our opportunities to serve all our customers in this sort of middle of the crisis and this, this development. We want to sort of have open time slot and availability as high as possible and always sort of sort of, decrease that capacity, which is, which is basically restricted. And therefore, they're not sort of adjusting costs either in a full sort of way during the, during the sort of the short period of, of, of lock down. If the situation will continue longer, then we will we are, of course, ready to do more, if if needed.
But but I think we all hope that, that, there is no need for that.
Thanks. My final question would be on the public segment where you will benefit from a new contract from Q2 onwards How does the size of this contract compare against the business that you lost after Q4?
How does all of the size of compares, it's that sort of the, the contracts with the public sector in this kind of situation, so it's, it's, it's coming, to the, sort of, in the service sales, which we have now specified in the interim report. So so to so to not even even though the number of the contract is is is high, the sort of the euro amount per contract is low. It's rather 1,000,000 per contract, 1,000,000 per 1,000,000,000 Euro per contract. That's that's sort of so those are small sort of typically quite small contracts, but the number of the contract can't can't be quite high.
I think he was referring to that.
Regarding that hub to a contract, that is the, that is the contract that that the hospital and municipality, discontinued with P. Lina. So it's the same contract that the P. Lina operator last year. So they were not satisfied with the PLL in the service, and they they sort of discontinued that that contract can be took it over.
And, I think, sort of the cost level of that, that, that at the time of the tender was roughly 1,000,000 per year or something like that, 6 point something.
Okay. Thank you. I don't have any further questions.
Did Will I have something to add on the previous question?
Maybe just to add on your comment around the cost saving measures just to repeat the fact that, at this stage, we are not taking any view on structural changes. If we would do that, then then we, of course, would, would need to take a view on, on the, scenario related to COVID-nineteen, I think the best way to go forward, and that's that's our choice. Is to be flexible. So, as you're concerned, we are, we are not, in that sense, taking a firm view on any sort of new normal, we will see H2 as we recovery and and keeping our flexibility and ability to serve serve our customers the key on us. You could point it out.
We have been very successful with that one with the NBS, at the record level. We are breaking records by the day.
Do we have further questions from the phone lines?
Yes. Our next question is from Oliver Park from Pinterest. Please go ahead.
Hi.
He said that, non necessary investments are postponed postponed. So does this include also acquisitions?
Encourage what acquisitions. Acquisitions? No. I would say that the of course, in this kind of situation, the the M and A market typically also freezes So so that both the seller and the buyer quite typically would like to see the the impact of the of the of the COVID-nineteen before sort of closing, closing at least any and a sort of, significant acquisitions.
Okay. Thank you. And we have our next question from Alex Gibson from Morgan Stanley.
Hi, thank you for taking the questions. I just wanted to follow-up on 2. And 1, just thinking about the capacity of physicians to recoup pent up appointments, How do you think about the competitiveness to try to get those physicians to recoup any demand later in the year once things start to open up again. That's my first question. And, I'll follow-up with a second.
During the start of the Q1 and, and, and, and, and situation at the moment is such that, that, Actually, it's been quite interesting to see that that that still our utilization rates are rather high. But, but the reason for that is that, that, that, especially when it comes to the private practitioners, they sort the amount they offer for open, open sort of times is slower and then for sort of the, the, sort of, they also sort of take sort of vacation if, if, if, if possible, But when it comes to the sort of the second half of the of the year, I don't believe that the situation has changed that dramatically. Since the 1st 2 and a half months of the year. The only change is that, of course, we continue our own development, for the digital tools, especially, so that we are better able and on our, time booking engine, etcetera, etcetera, and our sort of omnichannel approach so that we are better able to serve in different kind of situation and, and optimize the capacity and the offering already during the second half of the year, if that kind of positive thing would happen, and, and, we will have a have a high, high utilization rates there.
It's asked to confirm, we don't see any signs that that we would have, let's say, we wouldn't have the capacity available as needed during the H2S as well.
Okay, great. And more on the midterm strategy and the midterm opportunity to make investments, How will this impact your capability to either do M and A expand organically within the country or or expand abroad, either organically or through revenue. Is this going to delay your strategic thinking midterm, how do you think about your use of capital now?
Well, of course, organic growth, as a as a link to, to, overall, demand situation in in our payer groups. And, that has a clear link then then to a COVID nineteen situation. But as as to our sort of, agility and, our, thinking around that strategy. This, this crisis has not changed basically our view on on on on on way forward. We have a means, of course, we need to adjust adjust the baseline, to a certain extent, but, but we have in, in our strategic thinking in the ways to increase, our, our, our, our market share and, and, and that grow organically in relative terms.
And also when it comes to M and A, you said that, of course, these processes might might hit some bumps during this crisis, but, really our thinking and rationale when it comes to M and A has not changed we have a clear view, a clear process, how we go about those. And whenever suitable opportunity arises, and then we, we, we are active and we are there. And our capability to execute is still there.
Okay. And when do you think you'll be comfortable to communicate that kind of new midterms strategy update that we were expecting from year round this time maybe a bit later. Is that still going to be delivered before the summer or, or later in the year, or is there something that we need to look at early 2021
Well, as as I said earlier, we have basically concluded all the other analysis needed for for the for our strategy, update. We have had, couple of, discussions already with our thought already around this one, but, simply the logistics, don't allow, let's say, the engagement needed for for this this type of a a sort of final conclusion. So so what we are looking at right now is is that we be able to conclude the strategic process early June and then be able to inform you in more detail.
Okay. Thank you.
There are no further questions at this time. I'll pass it back to the speaker.
Thank you. We have a few questions through the webcast. First, there was a couple of questions around the, public sector sales in Q1 and the impact of the outsourcing agreements that were expired in the end of 2019, you can see the revenue split including the part of outsourcings in on on page 6 So I won't address that further. And as discussed earlier, in the public sales, there will be a new outsourcing contract in the beginning of second quarter that would have a positive impact on that line. But then we discussed the strategy as well.
I want repeat that question, but then, regarding the corporate business, there's a question from SEB. If the finished unemployment grows materially in the aftermath of this coronavirus, what's the volume outlook and then possible sales mix impact for for us?
Yeah. If if I, start, you can continue. So out of the payer group groups, corporate, when it comes to underlying demand, of course, there's a link between underlying demand and unemployment rate or employment rate. So, we'll, we're going to have to wait and see what the impact is going to be for the personal number of people employed, that then is sort of our market base, and, and it's going to have a certain impact, of course, for the full market size on corporate segment then within that market, we will, of course, compete and be competitive and continue to fight for market share. Sales mix in that segment, what kind of services corporates are buying.
I don't think there's there's any, any sort of difference between, our conclusion right now and earlier, there's a, in a way, mixed bag, certain companies are buying, buying a price that they are, they are sticking to, to very simplified, simplified service package, but then, then the other companies are in a way, building services and providing services for their personal, so from, a business case point of view and performance point of view. And we see we see increase in that one as well.
Yeah, just shortly adding on that, like, like we have said earlier, that we have seen that, that, like it used to be historically when it was quite straight correlation between the sort of, employment level and sort of the corporate business and development, it hasn't been that way. During the last, say, quarters or even years. And our analysis that is that the key reason for that is the first of all, first of all, is the reason what we'll explain regarding the sort of the polarization of the customer groups. And the second element is that that that that most of the new work in workplaces during the late last years have been developed for the small enterprises and for the service sector. Now that sector that now is under the biggest pressure.
So it's the service sector and small corporates that are in a most thermal situation during this crisis. So from that, you can argue that that the sort of if that would happen so that the employment, unemployment rate would increase through the service sector and through the SMEs in which our market share has been the lowest, it will not have sort of relative straight correlation to our our sales. That has been historically when when the employment situation has improved And if the sort of downturn happens to be the same way, most likely, the sort of impact would be quite similar during the downturn. Thanks.
I'll take a couple of more questions before we run out of time, there's a question from LBB Asset Management that given you given our Q1 And our outlook together with our actions to cut CapEx, is it more likely that our net debt at the year end, 2020 will be higher or lower versus last year?
We don't give any any exact guidance regarding the regarding the net debt situation. Like I said, we have a postponed investment. So our plan is still the same. We have only postponed tons, and we will see it. And how this sort of situation will be even out and then hopefully we can continue continue doing all the plants and complete all the plants that we have.
And then the same person is further asking if we could give some color on what are the additional hygiene measures and changes in processes that we needed to put in place regarding the COVID-nineteen and if there are any meaningful costs related to that?
So basically, it's maybe it's fairly straightforward, you've actually already explained the cost hike related to protective gear other than that, we have, put in place a special sort of cohorts for COVID-nineteen patients, which are in our biggest biggest units, 30 plus units are providing that type of service for COVID-nineteen patients or if there's a, there's a suspicion that a person or patient would have COVID-nineteen then there there are some some, other, more, more sort of, in service detail protective, measures taking, in, in, in, in, in, how are the physicians are operating, then there are some some, what is the Plexio? Plex is giving for service personnel, so that they are protected, but straightforward, and you can see the cost impact in our numbers.
Yes. And so starting on that, obviously, that those cohorts will have some impact for the personal expenses because we you need additional resources for that. And, obviously, just adding, adding one more thing that, that we have increased, sort of the magnitude of the cleaning services as well, and, and the sort that will have some impact for the cleaning expenses as well.
Then there's a question regarding the materiality of the new contracts starting in April. Could you just repeat of the magnitude of the Huttula contract that that's beginning?
Between $6,000,000 $7,000,000 annually.
Can I just put one sort of data point in for this hygiene and protective measures taken by Therabaster? Of course, it has been a big headline, in, in, in many, many, many, many sort of companies and areas, how the project personnel and also also customers. Just one on data point, we, even though our, our services and our people are highly exposed to COVID-nineteen if there's, there's, that one out there in, in any of the regions. We have, 800,700 employed, people in in our payroll. Today, we don't have, a single person on on sick leave, due to the coronavirus.
We have one one person staying home due to current team measures. So just giving a flavor how effective our measures have been thus far.
Thanks. And then maybe as a last question, regarding the staffing services, presumably the pandemic increases the need to to support the public sector through the staffing services? And can we comment anything on the margins? Are we currently performing the staffing services in, in, like, a normal margin level.
We don't specify the margin for the staffing services, but those are in a healthy level, I would say so. And maybe adding some flavor on that, that During the crisis, actually, when when, public sector also sort of decreases the capacity for non acute care. That will also sort of have, have sort of impact for the required, staffing services and quite the opposite when they start to open their facilities and the sort of demand for of staffing services obviously increases. So that's that's the logic of how how it, how it typically, typically grows.
Thank you. We don't have any further questions, at the time being. So I thank you all for your time and, stay healthy.
Thank you.