Good morning, everybody. Welcome to Terveystalo's results call and webcast for the financial year 2019. My name is Kati Kaksonen, and I'm in charge of investor relations here at Terveystalo. Today, we have our new CEO, Ville Iho, and our CFO, Ilkka Laurila, presenting the results. Additionally, we have a special guest today from our largest Finnish employer, SOK Group, who will give a case example on our collaboration. Without further ado, I'll give the speech over to Ville, but just as a reminder, we have the Q&A session after the presentation, and we'll take questions through the phone lines and through the webcast. Thank you.
Thank you, Kati. Good morning from my behalf as well. Happy to be here. First time presenting Terveystalo results. Let's start from the overall view on 2019, which we can state was a financially and operationally excellent year. Looking at the revenue growth, we exceeded EUR 1 billion during 2019, which is a great landmark, obviously. Putting things a little bit into perspective comparing to 2015, we have doubled our revenue, so it's a great achievement by this company. Couple of key KPIs which I want to comment shortly. First of all, obviously, revenue growth, then adjusted EBITA. We slightly missed last year's EBITA percentage, but taking into account the integration of Attendo, which is from a structure point of view, lower-margin business, we deem this as a good result still.
Number of physician appointments in millions growth was 6%. This one needs to be put into perspective in a way that number of physicians in Finland, the net growth annually is around 1%. This is now apples-to-apples comparison, excluding Attendo-related outsourcing, dental, and staffing businesses. 6% growth means that we have been able to gain more than our fair share from the market. This is really important going forward. We are gaining more than our share. Everybody knows how strained this physician supply today is. This is really important and positive for us going forward. Remote appointments growth rate 60%, that's a high number, obviously.
Figure itself, 150,000 appointments, is not at the high end of a scale yet. Growth rate is high. My expectation for this year actually is that this is going to be exceeding. This is going to be a tipping-point year in a way for digital services to properly scale up. We are geared for this change. We are seeing a lot of supply and a lot of demand coming to our new services. NPS customer experience KPI all-time high, 72.4, which is, as I said, all-time high. This, again, putting this one into perspective, the utilization rate of our appointments and our services have been all-time high. Against that fact, us being able to give excellent service, better service than in previous years is very, very good achievement from our organization.
It's very easy to give excellent service when you have a low utilization rate and decreasing number of customers. In this environment, and in our case, this is really positive and really good from our people. Of course, our scale when it comes to employers is growing rapidly. We are a big employer especially due to M&A activities, especially due to Attendo integration. All in all, a very strong year from Terveystalo and 360 view of our operations and our financial numbers all speak the same language. We are going strong. As a new CEO, of course, I need to take a little bit of outside-in view on our organization operations. Also, a lot of questions are obviously popping up around what are we going to do next? What is our strategy going forward? This is sort of stating the obvious.
Quality is going to be in core of our operations and in core of our strategy going forward as well. I come from aviation industry, which is, as you know, highly quality-driven. Quality systems, safety-related systems are world-leading in that industry. Taking outside-in view at Terveystalo from this angle, I can say that the value base of our organization, our people, is solid. People are taking quality, be it operational quality, medical quality, or customer experience, to their heart and acting accordingly. This is a very strong foundation. Also our systems when it comes to our quality systems are working in, I would say, they are mature, they are working properly, they are working well. They are supporting our development going forward. This has been a very positive finding from my behalf.
Assessing our operations further and what are we going to do next, a little bit in more detail. I think you are familiar with our sort of overall conceptual description of our operations. We have talked about, and Ilkka has been talking about this funnel view, through our different layers of services and this is going to be very important also going forward. We need to be able to serve efficiently and with good customer experience, basically three different customer segments and different layers in our service chain. What it requires going forward is that we develop and strengthen our system skills, our core brain, which manages customer flows, manages our supply and matches supply with the demand. In this area, we have been investing in this, but we continue investing in this one even more going forward.
Utilization rate in our funnel in different services, they are already very high. Everybody knows that this is a physician supply continues to be a bottleneck. We need to be able to further increase the utilization rate, but we also need to be smart in a way that we, in our analytical system layer, we analyze each and every transaction so that we need from individual customer level what kind of service is optimal for him or her, and what kind of service is at the same time optimal for our business and our service chain. This is going to be very much in the core of development going forward and part of our strategy also.
We are very good when I'm again assessing our capabilities and skills, taking still a little bit of an outside-in view, I can say when comparing our skills and capabilities even globally, I can say that we are sort of masters of managing care chains. Finnish system has educated us in this area more than I would say any other system in the world or globally. We can assess customers and their needs. We can guide them through our service layers very efficiently and give very good supply and response whenever needed. This is one of our key strengths. Our strategy consideration, obviously, we'll take a look at other aspects as well.
World is changing. Obviously Terveystalo as well is taking more consumer-centric view and we are developing a dialogue and constant dialogue with our customers, so that we are partner with our customers also when they are not having any acute needs in our services, but also in between. I think we are very well positioned to do that because we are dealing with an area which is very sensitive, very close to the heart for our customers, and we can be the most trusted partner for the consumer base. I'm sure of that. Obviously we are looking at the M&A activities as well, and also assessing if the market and service scope which we are currently serving is the one that we will stick also in the future. We have, let's say, our eyes open.
We will come out with our strategy on 27th of May with Capital Markets Day, and then obviously we will have more to say about this, but I'm sure it's going to be interesting. Looking at the elements, looking at our strength, looking at the capabilities and competencies in-house already today, we are very well positioned for our renewed strategy going forward. We have a case example today, as said, Sanna-Mari Myllynen from S Group will give a flavor what kind of solutions can be achieved when Terveystalo capabilities flexibility when it comes to one customer segment and one customer in particular when we are matching our sort of ideas, our needs and our capabilities what can really in practice be achieved and how we at the same time serving our customers' customers and our business. Please welcome Sanna-Mari.
Thank you. Thank you. My name is Sanna-Mari Myllynen. I work in S Group and there as a Director of Work Well-being, health. My job is to serve our 19 regional cooperatives that makes us one of the biggest companies in Finland. This case is actually, I am telling you about our cooperation with Terveystalo, when we wanted to start supporting the mental health of our employees. There are a few pictures of our business. We are mainly in retail business and service sector. Wide service range in a huge resource, I have to say. Like I said, we are the largest private employer in Finland. We have 40,000 employees and business also in Russia and Estonia, but of course, mainly in Finland. We started a few years ago, the program called Young Mind at Work.
The reason we started it is that 23% of our employees are under 25 years old, so 10,000 employees. In that time, we saw that the mental disorders and the challenges with mind started to grow. Also, the pictures what we were looking at Finland, but also our pictures. We wanted to react as soon as possible and so we gathered the experts in Terveystalo and started to work together and innovate together what we should do when we are facing the challenge. Here is the picture of whole Finland within this challenge. Mental disorders became the largest cause of sickness allowance days in Finland, and I believe that this is the same kind of picture in whole Northern Europe, at least at the moment. The main picture is here.
I'm very happy the way we have been able to cooperate and very happy the way that we have been innovating together with the experts of Terveystalo. Within this program, Young Mind at Work, we actually created this mental support model that we have now been piloting in a couple of companies in S Group. This case that I'm now telling you is about SOK Group, which is our, how to say, central administrative company that serves whole S Group. These are the factors that actually include in our mental health support model. I would like to point out this organizational and leadership culture, which is very important in this model. Supervisors training, adapted work practices for supporting recovery from mental disorders, meaning that the employees don't have to stay for so long for sick leave.
They are able to come back to work even if they haven't recovered totally yet. Occupational psychology consultation, brief psychotherapy, and these new digital services, Mielen Chatti and Sparri. Actually that last part is the one that was invented in this program. The resource that we are now seeing from this model, I have to say in this part that we are just starting, and that we haven't been implementing this model in the whole S Group yet, but we have very promising results within those companies who have taken this model into use. In SOK, we have 1,700 employees that are experts, very highly educated experts. Usually, we have been able to decrease about 20% our sick leave days caused by mental disorders. We have invested EUR 49,000 in a brief psychotherapy and the digital services, Mielen Chatti and Sparri.
Our cost savings are about EUR 140,000 in sickness absences. When we are able to take the model into use in whole S Group, we can of course think of totally different numbers, as much as we can trust that this model really works. In the end, we have learned some lessons, and also, I think this is very important when we are creating something together with the customers or creating something together with anybody, that is always a process where we have to learn. We have had very successful cooperation and joint development and seamless cooperation when working towards shared targets. We always have to have shared targets when we are working together. No single entity, such as individual or employer supervisor organization, or occupational healthcare service can solve this issue with these mental disorders. This is a huge issue in the whole country.
Cost savings in sickness days are higher than the costs for supporting mental health. We are very satisfied, of course, for that. Despite very encouraging results in SOK Group, like I said before, S Group is still in the beginning, and we want to very strongly support our company to take this model into use. Also it is very important that all parties in the society participate in this work. Otherwise, the employees, individuals, and entire country will have a huge bill to pay. Thank you. Is there some questions, or do you want them to ask in the end? Okay.
Yes.
Yes. Thank you.
Thank you, Sanna-Mari. I think this is an excellent example of also Terveystalo capabilities. Whenever there's a new requirement or even a challenge, we are very fast, we are very agile. We can tap into our capabilities and come up with a solution and beat whichever customer group. This is very much in the core of Terveystalo. Fast response, fast scaling of service. Going forward with Q4 highlights. Ilkka earlier commented this one to be a little bit boring because every customer group is growing and sort of no drama in this one, but that's a good thing. Broad scale of growth across all customer groups, which we can see in detail in the next slide. New processes and digital solutions. This is very important. I talked about this system layer sort of central brain of Terveystalo. We are developing heavily that.
At the same time, we are bringing new customer-related solutions, developing our customer interface. Of course, this requires investments, we are sort of in a phase where we are investing in new Terveystalo quite a bit, that one will yield results later on. As I said, also for 2019, profitability remained at a strong level and a strong cash flow, which is very typical for Terveystalo. That allows us to propose a dividend of EUR 0.26 per share, which is quite a big increase compared to last year. I said strong growth, strong organic growth, Attendo together yielded growth in all of our customer segments. Couple of comments from these ones. Corporate customers demand remains steady.
There's certain polarization going on with that market so that they are more ambitious companies like S Group, which we heard a case example just a minute ago, who are really investing in this occupational healthcare from a business case point of view and really taking ambitious stance. Then, of course, there are companies who are putting a lot of effort on cost only. So market is going two different directions at the moment. When it comes to private customers presenting the strongest growth in our portfolio, very strong Q4 for private customer growth. When it comes to public segment obviously growth due to Attendo deal. Looking forward, maybe I will comment that one later, but I think public sector is also sort of wakening up after waiting for a long time for a SOTE renewal.
Profitability Q4, as said strong adjusted EBITA, which is our core KPI financially EUR 31.9 million, and adjusted EBITA percentage 11.9%, slightly down from Q4 2018 due to Attendo and then sales mix changes and also our investments in the areas that I just described. I said due to our strong cash flow position, we are in a place where we can propose dividend to be higher than historically for Terveystalo. Market outlook, a couple of words around that one.
As I said, corporate customers, we are seeing as a steady market segment polarization going on. Private customers, we are seeing growth and we are seeing us gaining market share in that segment, which is really important. Market is changing, but throughout Terveystalo history, basically, we have been seeing a phenomenon where when Terveystalo has grown, Terveystalo has also been able to gain more than its fair share of the market.
That should continue also going forward. I said earlier, public segment, let's say public sector is sort of wakening up. There's a lot of needs for our services, even though the system view from government side is still not clear, there's no way, I think that public sector could go on without increasing the services, both from private actors like Terveystalo. Now over to Ilkka with details.
Good morning on my behalf as well. Like usually, we will take a closer look on the financial and some operational KPIs as well. Starting from the annual sort of operational and corporate responsibility-related KPIs. On the left-hand side, you can see some of the KPIs related to operations and from the middle to right-hand side, you can see some corporate responsibility numbers, which, of course, are also important part of the economic development of Terveystalo as well. From the operational numbers, you can see that we have talking a lot about the scale and the scalability of the fee for service type of healthcare business where we are operating in. Here you can see that number of the units has increased at 10.7%.
Even though the number of the customers has remained rather stable, the number of the visits and the visits to physician, like Ville already mentioned, has increased quite considerably compared to the market numbers. Therefore, we believe that we have been able to gain share also in 2019. As a reminder, these numbers are sort of related to our existing sort of the healthcare center network, which excludes outsourcing, staffing, massage therapist, dental business, et cetera. There is no way to make concrete conclusions on prices, but for the number of the visits development, you can see here. Second highlight on this that I would like to raise is the sickness absence, which has continued to decline, is now 3.7%, which is obviously in a sort of the employee incentive business like ours is very important. The next one to highlight is the CO2 footprint.
At least in the Finnish context, we are the first one to able to report that as well. Hopefully, that will encourage both private companies and public healthcare sector as well to report that. Hopefully, we will have a fierce competition with other healthcare players to able to decline that number. As you can see, the biggest proportion in our case from the CO2 footprint comes from the electricity. That will decrease considerably during this year because we have changed our electricity portfolio to green electricity. From the economic perspective, the tax footprint has increased considerably as the sort of the deferred tax losses have been used. Now we are in tax paying position.
Obviously, of course, because the result has increased as well, and the number of the employees, which also relates to the fact that we are, even in Finnish terms, quite big payer of the salaries and fees to the employees. On the quarterly development profitability-wise, like Ville already mentioned, the good profitability development continued also in Q4. That the EBITDA margin was at 11.8 versus 13.7 last year. The number of the working days is the same, but obviously, the Attendo was not included in during that time. Like mentioned already during the Q3 result meeting that we had that the comparison period, the Q4 in 2018 was really good. That's why we had a tough comparison period.
Also, like Ville said, we are investing heavily now in our IT and digitalization and other sort of the central overheads, which will have impact on the cost structure. As well, which is investing for the future. Also one other thing worth of mention is that the sales mix develops continuously in the direction that, as we have said, that when the wellbeing services increases and the preventive services increase and also this quarter, the doctor appointment increase. It means that the appointment-driven business is increasing, relatively speaking, to labs, imaging, and surgeries, which have impact on the overall margin development as well going forward. On the next slide, you can see the operating leverage, like before.
Even though that the comparison period is a bit difficult to compare with because Attendo's numbers are not included in there, you can see that if taking those more cleaner line items like other operating expenses or materials into services, those have increased less than the top line, which further elaborates the fact that the fee-for-service type of business is a scaling one, and that same trend will also continue in the future, although this year has been a bit more difficult to compare with the last year. On the balance sheet side, probably one thing to highlight here is that we updated our financial target related to leverage ratio. That was purely based on technical update based on the IFRS 16. The previous one was three times EBITDA leverage ratio. Now the updated financial target is 3.5, including those rental liabilities.
As you can see, in addition to the fact that we were able to achieve our growth target and our dividend target, we are also below our financial target when it comes to the leverage ratio, which gives us, of course, room to maneuver and invest in the future opportunities. Development of the leverage ratio, you can see on this slide, continuously declining obviously because of the strong cash flow that we have been able to generate and increasing result. Also, as mentioned before, one of the important KPIs related to the operational efficiency is also net working capital development in this business. As you can see, that also has remained rather stable. Like before, the same trend further has continued when it comes to the investments.
Like mentioned many times, the intangible is investments which relates to IT and IT infrastructure and digitalization has continuously increased the LTM number now up to EUR 18 million. Although the rest of the investments, even though that we have grown quite considerably compared to 2018 Q2, have remained rather stable. The investment which is growing is the intangible investments. Not so heavily on machinery and neither in premises, as you can see from the longer trend as well. Finally, a few words on the targets for this year. Like mentioned, we have renewed our financing package with the sustainability-linked financing. There's three KPIs which we are targeting at. The numbers and the target levels, you can see here. One is the Net Promoter Score, NPS and eNPS, which relates to employee satisfaction.
There is a mixed waste intensity, which is one of the most important environmental KPIs for the healthcare. If we are able to achieve those targets, obviously then our interest expenses will further decline during this year and the following. Finally, some information regarding the financial reporting and upcoming IR events. I think that we have time for the Q&A.
Thank you, Ilkka and Ville. Do we have any questions from the phone lines?
Ladies and gentlemen, if you have a question from the speakers, please press zero and one on your telephone keypad. We have our first question from Mr. Panu Laitinmäki from Danske Bank. Please go ahead, sir.
Thank you. I have three questions. First one is on price pressure in occupational healthcare that you mentioned in the report. Can you comment on the magnitude of this? How much are prices down? How large part of your business is impacted by this? What has changed in the market after Q3? What is driving this?
Should we take all those three, or take we one by one?
Well, it's the same topic.
Yeah
Three questions.
Okay. Regarding the pricing, we will see the magnitude of that in the future. Like Ville mentioned, it's going to the two directions, actually. One is that there is companies that are more price sensitive, and then there are more and more companies, like we have said many times, that are investing heavily on wellbeing and preventive services. In that sense, the net result of that can already be seen in the result and will further be seen in the future result.
The magnitude of those two different sort of developments is quite difficult to say at the moment. I don't want to over-dramatize it. In occupational healthcare, it's good to remember that the churn within the occupational healthcare customers is clearly less than 10%, closer to 5%. Therefore, the impact is not that dramatic. It's not that fast. It's a more sort of the trend, so that the corporates are buying a different kind of service levels.
Yeah. I would add that from our point of view, this is more adjusting to new and varying customer needs. Basically, it's natural that basic services, in any business basic services, there will be price pressure. Luckily, also in this business, there's a vast need for additional services and new service concepts as we, for example, heard from S Group. It's our internal job and challenge to adjust to new and changing customer needs.
Price competition in occupational health cases has obviously always been tight. Of course, that's why we need that scale and we need that growth that we are able to improve our cost efficiency as well.
Thank you. My second question was on the digitalization investments. How much do you expect your cost level overall to increase in 2020 compared to last year?
The overall rule of thumb is typically for the IT investments is that EUR 1 invested comes with EUR 0.20 OpEx costs during the next year. That's the general rule of thumb, that if you have a software investment of EUR 1 million, you will have some sort of maintenance or other sort of expenses of EUR 200,000 following on that investment. That's how it typically goes and develops over time.
Thank you. My final question is on the public sector segment. What is the combined revenue of the outsourcing contracts that have ended at the beginning of this year, and what do you expect to end later?
We haven't published the exact number, but it's dozens of millions. It should be noted that those contracts will continue on a lower level. Even though that those large outsourcing contracts will end, we will continue providing services to same customers in a sort of smaller scope. The net impact for the profitability is not that high as the top line development.
And maybe coming back to my-
That's all from me. Thank you.
maybe coming back to my earlier comment on the activity in this segment. Scale of deals that are out there right now, excluding this one, PH, HyKy, PH, whatever it's in English. There's one outsourcing deal contemplated in the marketplace. Other than that, they are smaller in scale, but the number of needs and requests and questions from public customers, it's increasing. Activity is increasing.
Thank you.
We have further questions from phone lines.
We have another question from Alex Gibson from Morgan Stanley. Please go ahead, sir.
Hi. Thanks for taking the questions. I have two. Please, can you talk about the changes of the Kela reimbursement in the corporate customer segment? I realize there's incentives to provide more preventative care. With lower reimbursement available for general medical care, do you expect to see that driving negative mix and margins? Then I have one more question, which is a bit more high level. This is about the investments in technology that you've made over the years. It's clearly been very successful, but it seems there's an acceleration and a step up in the industry. Would you agree that the cost of customer acquisition is going up? Where is that incremental spend going exactly?
If I take the first one first.
Yes, Kela.
Related to Kela reimbursement. The change is such a way that without going into the details of the numbers, they will provide more reimbursement for the preventive services. Before they had a capped amount, both for the sickness care and preventive. Now it steers more reimbursement for the preventive services. Our conclusion on that is that for the small enterprises, it will not have any impact, because when you call the small enterprises, they don't have a HR function existing, and therefore most likely will not have a greater impact on those. For the large corporates, we believe that it will also not have a major impact because the maximum cap amount will most likely be fulfilled anyway.
For the medium-sized corporates, which already have some sort of HR functions and which are able to steer their needs and demand, there it would most likely have a slight positive impact on the demand of the preventive services. Therefore, overall, I would say that there is no dramatic impact on that either, but slightly increasing impact for the further ongoing trend, which is that increase in preventive and wellbeing services. That will further enhance that development. For the sickness care, I don't believe that it will have any negative impact either, because when people are sick, they are sick, and they need some sort of medical help or assistant for that. That's why I believe that it will not have that dramatic impact on that. The next one was related to IT-
Cost of IT. Sorry, I missed the last part of the question. It was related to cost of IT and development going forward.
Yeah, sure. It's more about the cost of customer acquisition, effectively having to have a better and better IT system to actually gain that customer over your competition or being able to treat that customer. Related to the IT investments that you're making now, where is the incremental spend going exactly? Is it just reinforcing what you have? Is it the cybersecurity elements that you had in the quarter? Just understanding where you're putting the IT investment.
First of all, to start with where the money goes. Money goes, I think, in all areas, basically. Like I said, during the last quarter, we renewed our system for the occupational healthcare nurses. We have renewed our bookkeeping systems, our back office systems, et cetera. It goes both for the infrastructure and the renewing of that, but a lot of money goes also for the digital development, be it mobile app and mobile development, be it the remote services, et cetera, or services for our healthcare professional. It's a, I would say, wide scope of different kind of development activities which relates to IT.
Yeah, I could comment further on that one. As I said earlier, and as Ilkka said also, we are working on different areas of our IT, integrating our systems, integrating our network, integrating our service flows and customer flows in a way is one part. Putting new services and, for example, apps to our customer frontline obviously is another. Assessing Terveystalo place and capabilities in this scheme, I would say that we are ahead of the market, especially when it comes to holistic view and connecting the nodes between different services. It's quite easy to come up with a very narrow scope and a narrow service, for example, an app for a service. Really connecting the system network that we have today requires skills, requires investment, and we are, I would say, ahead of market in that area.
One more comment further to elaborate on that, the reasoning why we are also renewing our infrastructure can be seen on this slide. If you think about it that way, that our scale has doubled since 2015, and obviously all the IT infra has not been renewed since that. Obviously, as you scale, as you grow, you have to upgrade overall all the systems that you are operating with, and that comes with the growth as well.
Enables scale.
Stepping back and taking all of the elements, do you think this next year you will see margin expansion, or will the costs of the investments weigh on margins next year, and you may see a step back before the efficiencies come through?
As you know, we don't provide margin forecast for the following year. We only have mentioned that we believe that for the corporate customer, the good positive development trends further continues, and for the private customer, strong demand is there and will further continues. On the cost structure, obviously these elements will have impact on those that well, but like we have said, our midterm target is still the same that it has been before, and that's where we are targeting at least.
Thank you.
Thanks.
We have no further question from the phone. Sorry.
Thanks. I think we have questions from the room. Sami, go ahead.
Thanks. Sami Sarkamies, Nordea Markets. I have three questions. Firstly, starting from Q4 margin development, I think we already discussed the impact from IT investments, but can you still elaborate on the sales mix change relative to earlier quarters?
Basically, what happens if you would exclude the Attendo piece and the public piece, if in overall the development is such that the appointment-driven business, be it physician appointment or be it other sort of healthcare professional, be it a nurse, be it a psychotherapist, nutritionist, et cetera. When that sort of volume is increasing faster than the relative volume of the surgeries or diagnostics, it will have impact on the margin as well, because the appointment-driven business, typically in our business includes that private practitioner fee, and that's why it has a sort of lower margin level than in other sort of care chain pieces. That trend has continued already and like mentioned before, we expect it to further continue and will therefore have a further impact when we go forward as well.
Okay. My second question would be about organic growth. I think you discussed this related to group level and also for the public segment. Can you share some light into organic development within private and corporate segments?
Overall, if you take a look at the numbers, we said that for the full year numbers, we exceeded the financial target 6%-8%, and it was slightly below 10%. There is a quite narrow sort of spectrum between 8% and 10% for the full year. For the Q4, like we know, here is the public organic growth, which is at 11.5%. For the corporate segment, that 5.8% is almost organic. It's the below last decimal, the impact of the Attendo acquisition. That is organic. The impact of the private business, the acquisition impact for the private business in Q4 from the dental piece of the Attendo was 9%. If you would exclude those, you get sort of the rough numbers for the Q4 as well, which is then again slightly below that or somewhat below that 10%.
Okay, thanks. Very helpful. Then final question, you've been in the press recently regarding this information security incident. Can you tell us what happened and what are the sort of recovery actions you're taking to solve the issue?
Okay. We had an incident, time goes so fast that it was around one week ago or so, where it surfaced that a bad actor had been phishing some individual details of our customers, not medical details. Basically, last four digits of social security number, that was the target. It was from our booking system, which has no sort of funnel to medical data. We were dealing only with personal identification data. We, of course, had that information, analyzed that one, put a strong response in place.
Now we, as the only private operator in this industry, are applying strong electronic identification for our bookings as well. I think it was, for me, of course, not very welcome incident as such, but a good demonstration of organization's capability to really fast come up with solutions. Also, as I mentioned before, of the value-based people are taking these ones really to their heart and are taking these ones really seriously.
Okay, thanks. No further questions.
Yeah. Iiris Theman from Carnegie. Just one question. The government is planning to cut Kela reimbursements for private healthcare. What is your view on this, and what kind of sales impact do you expect?
Well, we have been, of course, discussing this, analyzing this one. The impact from our point of view, from our assessment is going to be very mild, if anything. If we are talking about private sector, the changes as we understand them, if they would fully go through, would represent 2% pricing increase for private customers, and taking into account the price elasticity of 2% when you actually don't even touch the face value of your pricing, and basically no real alternative. It's going to be, in our view, at max, very mild.
Okay. Thank you.
Thanks. We have one questions from the webcast. What is the total value of lease liabilities under the IFRS 16, and how much real estate do you have on the balance sheet as freehold?
The real estate liability is EUR 178.7 million. Practically speaking, we don't own any real estates. There's only some really minor real estates that we own in some smaller municipalities in Finland. Practically speaking, we don't own. We operate in rental facilities. The impact can be seen here.
Thanks. Do we have any further questions either through the phone lines or from the room?
No, we have no further question from the phone line. Ladies and gentlemen, I would like to remind you that if you wish to have a question, please press zero and one on your telephone keypad. It seems that we have no further question.
Thank you. If we have no further questions, then we thank you for your time.
Thank you.
Thanks a lot.