Good afternoon, everybody, welcome to Terveystalo Q3 results call and webcast. I'm Kati Kaksonen, I'm in charge of Investor Relations here at Terveystalo. As usual, our CEO, Yrjö Närhinen, and our CFO, Ilkka Laurila, will give a short presentation, we'll follow that with a Q&A. First, we'll take questions through the phone lines and then through the webcast as well. Without further ado, I will give over to Yrjö.
Need to ask Kati, what's the time zones this on? Because for me, it's still morning and not afternoon. Anyways, good morning, especially if there's anyone joining from the Nordic countries or the U.K. Without further ado, let's get into the results and we'll talk about Q3. I think the headline really is that a strong earnings trend has continued, we have seen a very solid growth on both earnings and revenue. Strong earnings trend. Capacity growth has stalled. We have seen several indications from both Pohjola as well as our competitor Pihlajalinna that they have stalled further investments into their network, which is something we had already alluded to earlier, that we think that a very rapid growth on physical facilities may change the market dynamics and at least for now, we have seen the end of that trend.
We will on the other hand, have invested and will continue to invest in the way we work and especially in digitalization. Running through the numbers, we have seen a revenue growth of 3.2%, up from EUR 155.4 million to EUR 160.3 million. Reflected into EBITDA, adjusted EBITDA growth from EUR 17.5 million to EUR 20.1 million, i.e., giving an EBITA margin of 9.2%, which is a solid 1.2 percentage growth. Net result up from EUR -6.9 million to EUR 16 million. Ilkka will talk more about the dynamics of that, which then takes our net debt to adjusted EBITDA down from 4.5 to 2.0, which of course puts us in a very good position to then implement and close the Attendo healthcare acquisition when that in due time is approved from competitive authorities.
Breaking down by payer group, we'll see revenue growth approximately 3%, we'll see a very strong growth in our public customers, 31.8%. Somewhat lesser decline, which is a sad way to say, in private. Basically, what we see underlying is that the decline that we saw Q2, as we see it, will not get worse and therefore the consolidation or the stabilization of the market is likely to happen. No dramatic shifts in occupational healthcare. The number of customers remain broadly flat, we'll see some shifts in mix which we'll come back to talk about. Puts our corporate customers now at 53% of total mix. Public growing, you may recall we had at some point in time at 9%, now representing 12% of our total revenues mix. Diving into corporate customers, as said, 1.3%, there is really no significant impact on any acquisitions.
I think kind of diving deeper into the numbers, we'll see growth both in wellbeing prevention. As you may recall, we do split our activity between healthcare and prevention. It has to do with our national reimbursement classification. Basically, what we see is that we continue to increase relative the work that is proactive and preventative, which is something that is then a reflection of the activity we agree with the customer, whereas then healthcare is always a function of sickness, of course. We're happy to see that development is something we've long-term strive for, which is increasingly grow our prevention, our wellbeing services, and we see a good trend on those. No significant change in number of occupational healthcare end customers year-over-year.
A kind of, I think, a very positive signal that we see this MyHealthPlan, which is then the forward-looking health plan, number of those continue to grow. We have about 150 or over 150 plans already implemented. The good thing about it is that it does not only give the patient a full annual view, but it actually gives us an ability to plan our production also. That is a very positive trend. We see strong growth and demand for digital services, and we continue to invest on those. On private sales, we do continue to see high occupancy rates on our clinics. The demand remains solid.
The increased capacity which we saw Q2, of course, that situation remains broadly there, but looking forward, we don't see that trend strengthening and rather, I would say that the kind of investments for increased capacity, I think we've seen the peak of that now, and we're unlikely to see strong development on that front, which will stabilize the market in its own right. We have also worked very hard on activating to make sure that we can mix or match demand and supply, which basically means for us that we need to make sure that we do all possible activity to make sure that our private customers get in, that there is no long waiting times. That, of course, then secures that we're able to provide the services that we have demand for.
We have more physicians than a year ago, but we still continue to see the number of appointment times that we have open is actually below last year. That's the work we continue to do. From public customers, now mind you though, in public customers, we also do calculate some public occupational healthcare deals, which is always worth recognizing here. A very strong revenue growth, 31.3%, basically supported by new outsourcing contracts started, as well as then participating in these freedom of choice pilots, which I think still continue to be a very important piece for us to learn how would we, in the case of Sote going forward, how would we then provide these freedom of choice services. Overall, I think very solid development there.
I think it is always worth to highlight that in our system, in a way, we do see that we continue to take efficiency out of the system, almost despite which customer group, the traffic, if you wish, increased patient flow comes from. At the end of the day, there is a relatively strong cross-selling element in there, and therefore it's important for us to grow year-on-year and it's important for us to drive efficiency, which of course is what we're seeing. Looking at market forward, we think that the demand continues to be solid. Capacity growth from a physical premises point of view has stalled, which kind of, I would say, stabilizes the market somewhat, at least clarifies roles. It has intensified competition, especially in the major cities, and I think we do see quite large variation from one city to another.
That trend has not significantly changed from Q2. The Sote reform is now being further submitted to constitutional board or law committee. Then they will take their due time. Whether we will then see a parliament vote still during this year or early part of next year remains a little bit unknown. I think having moved now a step forward, now basically all eyes are on the constitution committee. If the proposed reform is postponed, of course, then the public sector demand will continue to be structurally more of what it is today. Should that proposal go forward, then of course we will be talking about quite a large shift towards freedom of choice. That's why we are participating in these tests, as said. Consumer confidence remains on a high level, and I think overall our healthcare market remains positive.
Basically, from a corporate side, we don't see any major shifts for the trends that we've seen earlier. I think the only point to highlight is we do see increasing amount of demand for well-being services, which we grow steadily. We see increasing growth for digital services, and I think both of these, while still are relatively small in the absolute sphere, I think will become increasingly important as we continue to develop our total portfolio. From the private customer point of view, I would say that we don't see a big shift from a market point of view. I think the work that we continue to do is how do we optimize our internal operations. Overall, I think the outlook remains positive.
We continue on the path that we have chosen. I think from our point of view, really continuing to invest in development of our organization, make sure that we remain very close contact with different customer groups, as well as continue to invest on digitalization is what I think continues to keep us very competitive in the marketplace. Let the word to Ilkka.
Thanks, Yrjö. If we take a bit closer look on the financials, starting from the revenue and adjusted EBITDA. As reported, the EBITDA and the EBITDA is both, again, relatively speaking and in absolute terms is up. Mostly, of course, deriving from the both operating leverage as well as the synergy impact of the previous acquisitions. We have been able to continue the marginal improvement in all quarters during this year as well. To note that actually the working days are actually same amount than the year before. Regarding the cost structure, the same sort of trend continues as earlier.
If the top line has increased at 3.2%, the adjusted EBITDA has increased at 15%, deriving from the cost structure in such a way that the material expenses increased only 2%, and actually the material expenses declined somewhat in there, whereas the service expenses increased in line with the top line. The sort of the key driver for the material expense decline is, of course, the sales mix impact, as we have said that especially in private, the surgeries have declined versus the increase in the preventive services and the well-being services, which are not that material heavy. On the employee benefit expenses, the increase is 2.1%, which is also less than the top-line increase, same sort of impact as in earlier quarters. The sort of the operating leverage impact as well as the sort of the synergy impact from the previous acquisition, meaning the Diacor mostly in 2017.
Other operating expenses obviously distorted by the IPO for the third quarter in 2017. The major amount of the decline is deriving from that reason. On the balance sheet side, further strengthening quarter by quarter and we now see what we have said already earlier, that because of the good cash flow that we have been able to generate, we are not that worried about the increased leverage, both the Attendo acquisition as the cash flow has been strong and we've been able to all the time decline the gearing and the leverage ratios. The leverage ratio development you can see here, even though that the third quarter, from the seasonality perspective, is the lowest sales and profitability season because of the summer holidays, even though we have been able to decline the net debt to adjusted EBITDA ratio down to 2x EBITDA.
For the working capital, the sort of the positive development further continues, taking into account that the 2017 numbers are impacted by the IPO-related items and therefore, actually at the DSO and DPO, if you would sort of clean the IPO impact of those, have actually developed positively, and we have been able to release cash out of those elements as well. On the CapEx side, same trend still continues as earlier. As you can see, the intangible assets, the CapEx related to intangible assets has increased again and trend-wise continue to increase as said, which is sort of obviously deriving from the CapEx and the investments and the efforts that are done to the digitalization and the service development of the digital service offering. On the other hand, slight decline in the machinery and equipment, and the network investment have remained quite stable.
Totally sort of another kind of topic we would like to sort of open the impact of the IFRS 16, which is effective from the beginning of 2019, and implemented in the first quarter of 2019. As you can see, the estimated impact that these are not the final numbers, obviously, because we are not yet at the year-end, so there is a renewal of the contract base all the time. We have hundreds of rental contracts, but the preliminary impact of the adoption of the IFRS 16 is such that there is going to be EUR 173 million more debt and assets, and the P&L impact is such that the EBITDA will increase with that EUR 34 million, EBITDA EUR +2 million, and the net profit will decline EUR 0.6 million. That is the sort of the current estimate at this stage that we have at the moment.
The calendar for the 2019 reporting as well as for the financial year 2018 is here and there. There is some IR events and roadshows as well following the Q3 result. I think we have time for the Q&A.
Thanks, Ilkka and Yrjö. I think we have audience here as well, but let's take first questions from the phone lines, see if we have any in line.
Thank you. Ladies and gentlemen, if you have a question for the speakers, please press zero one on your telephone keypad. Our first question comes from the line of Alex Gibson from Morgan Stanley. Please go ahead. Your line is open.
Hi. Thanks for taking my questions. I have a few, but I'll first with one on corporate customer group. Could you just give us a bit more color around how you're seeing the growth in this market develop for yourself? I see that you haven't really added any new customers. Is this a case of a higher competition in the marketplace, or have you just felt that there hasn't been the opportunities to add any more contracts there? Also on the corporate customer side, talking about the preventive business becoming a bigger focus over the near term, how do you see that shift in mix play favorably or negatively to your margin going forward? I'll follow up with a couple after.
Thanks, Alex. I would say if you look at the corporate customer overall, of course, there's kind of two functions or three functions really to it. One is, of course, how much tendering processes there are out there. That tends to vary from one quarter to another, of course. The other one is, of course, that when the tendering is, the question is when do the customers start? Of course, we do start from a relatively high base. Therefore, these situations vary from one quarter to another. Overall, I think if you look at the number of customers, they are more or less flat year-on-year. The current impact is actually much more around mix, and it's much more around how much do we do preventative services, healthcare operations versus appointments.
I think right now on Q3, the main impact for Q3 is rather mix related than the number of patients under care contracts. Looking forward, though, I think we do believe that our total offering, our competitiveness is such that there is no reason to believe that we would not continue on our kind of existing growth plan. Of course, my indication is that we need to grow and continue to grow in line or higher than the market. I would say that we're probably closer to in line than higher currently. That's kind of my point of view on the competitiveness on corporate.
Maybe one more thing to add is that I think there is increasing amount of demand for what I would call a broader range of services, and that's why we have put quite a lot of effort in developing our wellbeing services, our digital platforms, because they do work hand in hand with our, if you wish, the classical healthcare and occupational healthcare and kind of being very competitive on that, I think will continue a pathway to continue to grow in the future. I think your second point was around-
Around the margin
around the margin. Maybe if you could comment on the margin then.
Yeah. Regarding the margin and the sort of the sales mix change that we are describing, I would say it's closer to neutral than you might imagine, actually. We don't see that drastic change in the margin deriving from the sales mix impact. If something, it will have somewhat diluting margin impact, obviously, but not that much as you might imagine, possibly.
Overall, one thing that I would kind of look at our total business, and if you look at our ability to gear the business, it's really about how are we able to attract total number of customers and how do we then continue to supply a larger share of that demand to our customers, and then how do we grow our mix across the board? It is a very complex view, so you can't draw linear lines between one customer group to profitability because it's always-
Yeah
-produced in kind of all units, and it's all about utilization rates and efficiency of our existing units. I think we still believe that even with eventually Attendo coming in, I think we continue to find pockets of efficiency that we can address, and therefore we remain optimistic that our ability to grow profitability and gear the business in line with the top line growth remains there.
Yeah. On top of the utilization rates of the facilities, it's also utilization rate of the personnel, because you should note that some of the preventive services are actually carried out with the employed nurses or actually quite big proportion of that.
Yeah.
That's why it will have a quite sort of good solid operating leverage and gearing on that sense.
Okay. Yeah. Thank you. That's helpful color. Could I ask one on the increasing capacity in the market and how you think that will impact your employee benefit expense in 2019? Are you seeing more competition for doctors, for private practitioners? Do you factor in as percentage increase to wages over 2019, for example?
Yes.
Yeah. Actually, I think what we missed to say is that for at least people that are not here in Finland, have probably not noticed that actually the OP Pohjola publicly announced that they will stop the increase or the investment in additional hospitals as well.
Stop the existing ones.
Yeah.
That's great. Thank you. My last one is just on your guidance statement and the outlook for 2019. Do you think you'll have enough visibility this year to give a precise growth and margin target, or will you keep with the more broader mid to long-term targets?
Far we remain this kind of guidance that we are saying.
If you look at 2019, I think then again, for us, fortunately, we'll see strong growth.
Yes.
For transparency, unfortunately, we'll see a lot of reorganization and activity, basically meaning that the like-for-like, again, is going to be quite difficult to compare. As we have not gotten full access to Attendo's operations, it's going to be somewhat difficult for us at this stage to say what is the end number on synergies and what's going to be the organization formation when we go forward. We will need to get access to the company. We stick with our synergy calculation, but to be able to give guidance for 2019 will be quite difficult.
Yeah. At this stage at least. Yeah.
Okay. Thank you.
Thank you. Once again, if you would like to ask a telephone question, please press zero one on your telephone keypad. Our next question comes from the line of Panu Laitinmäki from Danske Bank. Please go ahead. Your line is now open for your question.
Thank you. I wanted to ask about the corporate segment sales growth that you already partially answered. Just to put it this way, can you be more specific about the number of customers? Was it down or up, and how did it develop in Q3, and what are your expectations for the kind of coming quarters if you have this visibility to the tenders? Thank you.
I think the short answer is no. The reason for that is that basically, like Yrjö told, the sort of the tendering processes and the stops and beginnings of new customers vary case by case. System-wise, as we have that close to 700,000 occupational healthcare customers that is not sort of real-time database that we are having. We are only having the most strongest number at the end of the year, and it's also so that at the Q4, typically there's a lot of tendering processes ongoing, like this year as well. So far, like I said, it's close to flat, the sort of the development versus year ago.
Okay, thank you. I have another question about the outsourcing tendering pipeline. You had strong growth in the public segment in Q3, can you give us any color on the outsourcing pipeline at the moment? What are the public tenders, and what are you seeing in the market at the moment, even though the reform is obviously still under preparation?
Yeah. I don't have a specific list on me. Of course, many of these processes are public, so in terms of public tendering. I would say that there is basically three elements you might want to look at when you look at the public business the way we classify it. One is, of course, what we call service sales, i.e., there are a lot of activity where we discuss very smallish activity together with hospital districts, with communities. That pipeline is a function of very many small negotiations, and that varies through time. That's one. Two is the large public outsourcing tenderings, and these are public processes. I don't have the number on me. Overall, I see quite a lot of activity there. To be very precise on how many start and when, we would need to probably return.
The third point is we see quite a lot of activity around publicly provided occupational healthcare, where we saw, for example, Kouvola just a couple of weeks ago. We saw.
Kotka
Kotka a few weeks earlier, which were actually both something that we won.
North Karelia.
North Karelia will be coming up. There is quite a lot of activity there. When you look at our public portfolio, you'll actually see three quite distinct different types of activity baked into one public segment.
Yeah.
Therefore, it's not only the outsourcing. The outsources, we will probably need to come back to you just to give you an exact list, because it's a public list.
Okay, thank you. I still have one final question. What about this public occupational healthcare service providers, like the municipal ones? Are you seeing kind of movement to the private at the kind of deadline for them to be incorporated is nearing? What's your view on this planned public provider organized by Keva?
Yeah, that's a quite a complex picture you're painting, but you're absolutely right. There is basically Keva thinking about forming their own. Some of the municipalities are looking at that as one option.
Associations.
Associations. Some of them can then basically think about whether they will continue as associations or whether they will actually sell out. You have communities like, for example, Kouvola and Kotka, who would then decide to outsource. That segment overall is in a quite a fluid state at the moment. If you take the big picture of it, is I would say there's more potential than risk in that segment for growth. Of course, we being a large private occupational healthcare provider, that of course means that we have the service provision that we think we continue to be very competitive there. Keva is a situation on its own. It's quite complex. What's the role of Keva versus other pension insurance companies, and how will that actually form? I think that's a little bit early days. It's a topic on its own.
Look, as long as there is competition that follows the same rules, we think we're going to be competitive, and I think, in that sense, if Keva chooses to come, welcome. Of course, from a industry point of view, we do call for same rules for all players, and that's a little bit the question from kind of the whole industry point of view on how will the Keva form its operations.
Okay. That's all from me. Thanks a lot.
Thank you. As there are currently no more questions registered from the telephone lines, I hand back to our speakers for any questions over the web and in the room.
Thanks. We'll take questions from the audience here now.
You can-
Go ahead.
Unless you don't want to practice your English, it's okay to do a Finnish question, and we'll simultaneously translate the question and the answer.
All right.
That's good
I think I can do it in English equally well. It is Jutta Rahikainen from SEB. Maybe a housekeeping question on the previous one, the public customer segment. Is it the fair assumption now, given the tenderings you have won, that we assume that it will be around EUR 20 million per quarter going forward as well? Or is there something that would change it either way, up or down in the coming quarters?
In the coming quarter, there is going to be a huge increase in sales because of the Attendo.
In Q4.
Incredible.
Incredible.
All right. Aside from that.
It's quite steady. If you look at the business, it's relative to private. It's probably the most kind of steady business from a kind of a contract point of view.
Yeah.
It jumps in steps.
There is no sort of discontinuing major agreement. If there is going to be a new sort of tendering processes which we will attend, and should we win, of course, we will have a high percentual growth rates because of the low starting point, because those outsourcing contracts typically are quite significant.
Q1 next year looks very good.
Yeah. In terms of growth rates in public.
Indeed. All right, a different question on the insurance flows, and now in particular that we have the OP or Pohjola Health situation changing. What do you think or know that's cooking in that market, and how do you play out in market shares?
Well, overall, there are basically two takeaways. One thing is that our insurance business aggregate has developed positively. There is shift in mix, i.e., basically we see operations, the number of operations being basically impacted by Pohjola opening their facilities in large cities. Then we've already started to see compensating activity coming. So we'll see overall growth, but the mix is shifting. That's kind of one statement on it. The other one is, of course, that when you look towards the future. It's, of course, very difficult to say how will the Pohjola plan pan out, and that's really their game.
I think it is a significant announcement in a way that says they do stop development. That then puts kind of a say, all right, well, as we are the producing, the providing partner for Pohjola as well, that then calls out for them to come back and say what's their view on orthopedic surgeries versus other forms of activity. If I would need to speculate, I would say that everybody tends to work with partnerships, but I think the fundamental dynamics of that market has not really changed, which is as an insurance company, your primary role is to provide speedy, transparent services for your insured individuals. That I think remains very strong there, and therefore, we continue to develop our operations. We continue to develop our what we call care chains, reporting.
Thanks to the network, we think we remain competitive, which I think historical numbers will show. Then speculating on what will LähiTapiola do and what will Pohjola do, I think that's a little bit premature.
Okay.
Unless you have financial wisdom.
No, I don't.
Okay, thank you.
Thanks. Do we have other questions, Sami?
Okay, thanks. Sami Sarkamies, Nordea Markets. I have four questions. Starting from the corporate segment, you sounded quite optimistic regarding the future growth prospects. Can you verify that you're still expecting market growth sort of 3%-4% going forward, even though in Q3 you had only 1% growth year-on-year?
Well, I do remain optimistic in our relative competitiveness. Of course, having new players, whether Pohjola would have come in, whether Pihlajalinna would come in, that of course changes the normal kind of market dynamics in every single town. If I look at the total offering, I look at our ability to attract customers and our ability to provide services. Yes, I do remain positive. What's then the market outlook? That I don't see any change in the way I look at the total market development. In that sense, no change.
Okay. Then on the private segment, you did achieve some improvement from the Q2 growth rates. Can you elaborate on the reasons? Was this based on your own actions? Did the doctors behave differently? Was it the weather or demand? What explains the improvement?
Not the weather. Of course, there is an impact on Ilkka can a little bit talk about the variations on infectious diseases, but overall, I think it is indeed a combination of. They happen a little bit different timelines. Couple of kind of facts. Basically, we have more doctors than a year ago. We still have less appointment times open than a year ago. The work that we do is to make sure that we're able to, one, give enough times open, so match supply and demand at all times. We also need to continue to be better at allocating individual, the patient, to a right caregiver, i.e., to make sure that the doctor uses their time to do the job that they're trained for. We utilize better also nurses there, digital services.
We will now open pre-booked specialist teleappointment in occupational healthcare so you can actually pre-book a digital visit. We continue to look for ways that we make our operations more efficient, which should then make sure that there are minimum amount of time slots that we're not able to fill. It's a combination of many things. I would say overall, if you look across the market, I remain confident that our ability to, over time, make sure that we optimize the supply and demand, and because the demand remains strong, we just need to learn how we utilize it better. I think that's one of the factors. How do you compare quarter on quarter becomes then more difficult. Overall, that's the job that we do. Look, we do small things, but now small, big things.
Our patients can now, for example, kind of come into the appointment with their mobile and pay mobile, which means we take away steps from the chain, which frees up capacity.
It's also.
We optimize the supply and demand.
Yeah. Which also provides further opportunities when it comes to the efficiency development.
Of course.
You don't.
There's not this kind of a magic bullet that you take one.
Yeah.
Your last question, will the doctors behave differently? No. I think the big trend remains. If you think of this business, it's really a function of who has demand over time has the physicians. Who has the contract base, monthly variations, quarterly variations are there. The big trend is very clear.
Yeah. It's also something that probably is worth to mention that, of course, like said in the report, the well-being services developed well. We see that it will continue to develop quite nicely. On the other hand, like Yrjö said, the small variation, be it then 1% it's there, 2% it's here, are also impacted by the flu seasons, et cetera, how these kind of influenza vaccinations develop quarter-on-quarter, et cetera.
If I try to, from my point of view, why do I remain confident? We have practiced for years on how do we drive efficiency in our operations. That you should see in our profitability development over long term. What does that mean? Means that our ability over time, and even medium term, is to react to changes in customer mix and in total growth rates is, I think, what makes me confident that once we identify a topic, it's a big organization, remember. There's still close to 10,000 people, so it takes a while. Once we get going with it and we identify it, I think we have demonstrated over and over again that we're able to change the way we provide in such a way that we optimally utilize the resources.
It's a high amount is individuals, I mean people's work.
Yeah.
It takes a while, I think that we've been able to demonstrate. That's why I remain confident that we're able to withstand the changes in the market situations and continue to turn that into profitable development, which I think is key in this business.
I have a question on competitive landscape. We did already discuss decisions at some of your rivals-
Yep
asking about OP specifically. Is it your understanding that they will stop offering occupational health and private health services at current five hospitals, that would, in a way, improve the landscape from where we are today?
If I understand correctly, what they have said is they have stopped expansion.
Yeah.
That even then meant that they took a step back from already announced expansions of Lappeenranta and Pori. That does not mean that they would not continue to provide the services they've already started to provide. That's my current understanding. That means that there is potentially less capacity being built looking at the future, but it doesn't change status quo as for today.
Okay. Then finally, can you share experiences from the Sote pilots you've been involved?
Yeah. Well, that's a very good question. I think there's a handful of pilots, basically what our experience is that, one, you can make them profitable, but two, they're not all profitable. There's a large variation. We understand increasingly what the dynamics are, i.e. what's the critical threshold of number of people in contracts, how do you operate, organize your operations, how do we utilize local and central resources. I think the combination of the three, I would say should we get into a large scale freedom of choice services, I would say I grow in confidence that we're able to compete in there. Basically then the takeaway is I'm not shying away saying, "If that comes, I think we're able to enter." I would equally say it is not a free lunch.
That means everybody needs to adjust the way they operate.
Yeah.
I think that's the net for me, at least.
Yeah. Although those are, like said, those are small trials at the moment, one thing that is the sort of the one learning seems to be that it's a local brand that has a big impact on the ability to be able to get the listed people.
Yeah.
It's really a matter of the local market share and the local brand image, so that the people get listed.
If you think of it this way. That's why we tend to talk about this on a national level and you automatically need to, I don't know, you need to simplify things because there are so many stories in different facilities. As you say, every micro market has its own dynamic. Overall, it's about availability, it's about premises, that drives the number of people who list, i.e., brand, you could say. Then the question is: How are you able to receive that pool of individuals and provide that efficiently? Then that becomes a mix between nurse work, doctor work, central work, local work. To learn that I think takes a while, and that's why we've entered the tests. I think it's, as tests are, it's a good learning ground.
Thank you very much.
Thank you.
Thanks. Does anybody else from the audience here want to ask questions? Yeah. It's very warm here in our meeting room, so if you hear sweating, it's because of that. We have a couple of questions from the message board. Let's start with Andreas Røhne. I was wondering if you could elaborate on the potential for Terveystalo in other Nordic countries, and also your view on growth of video services like Kry, which is expanding rapidly outside Sweden.
Well, yeah. A couple of reflections on that. One is, of course, this whole Ramsay Capio thing, it kind of sheds the light on the Nordic businesses, and it's equally, of course, Ambea and Aleris, these transactions. I think it's interesting to see what happens in the Nordic market. We continue to follow it. Of course, our strategy remains the same, which is we have still growth domestically here, as well as we want to see what happens with the reform. The second question regarding the digital services, there is a little bit of a difference between what I can see the Swedish market and the Finnish market operating when it comes to digital services, and the key driver of that is actually compensation.
In Sweden, it appears, I'm not the expert, of course, on the Swedish market, but it appears that some of these digital services actually get fee-for-service payment from the landsting, and they basically are able to provide a service which lowers the cost for the landsting because they avoid a visit. In our case, it actually is somewhat different because we do offer this possibility, for example, our occupational healthcare customers, but these customers tend to use digital services out of convenience, out of actually, let's say, productivity loss. Take a very easy example. If you need to renew a prescription, instead of traveling to a doctor and traveling back to work, which would then mean that you're gone for, let's say, three hours, you can easily do that with a chat. It is a convenience and productivity increase.
In our case also, the digital services actually provide us increasingly a platform to bring a specialist into remote areas or towns where there is not availability of the physician. Coming back into how do we manage demand and supply and match these things. In Sweden, I think that the growth in digital, while the technology remains broadly the same, comes in slightly different paths that we see in Finland. The net though is it's convenience, it's productivity increase, and it is increasingly the game of matching supply and demand at the professional and the patients. I think digital platforms provide that very well, and of course, we look at that in several different formats.
Great. We have a question for Ilkka from Kimmo Stenvall, OP. CapEx is down year-on-year in Q1 and to Q3, excluding M&A. Where should the CapEx land on a full year basis for this year? Will Attendo integration require some additional CapEx?
I think the historical sort of numbers are good proxy also going forward. We don't see any major sort of fast movements in the CapEx at the moment. On the other hand, like I think we already announced while doing the Attendo acquisition, it requires some CapEx at the integration of the units and the integration of the ICT infrastructure, et cetera. It's only sort of handful of million of euros sort of as a non-recurring item as such. On the other hand, like we have said, we will continue to increase investments in digitalization, which will inevitably have an impact on the total CapEx level at least on some level going forward also for the following years.
Of course it does, and I think it's only natural when we look at across industries, you'll see this development between, I would say, analog world and digital world. In order to be competitive there, I think we need to keep on driving efficiency of our existing network to be able to invest into creating digital platforms. I think only the players who can do both will, I think, over time be successful, and that's our strategy. We will continue to invest in material CapEx, if you wish.
Yeah. When it comes to the Attendo piece of the business going forward, the only material impact for the CapEx on their business is actually related to the dental business. The outsourcing and the staffing business that they have don't really require any significant CapEx.
A follow-up on the corporate customer group that we discussed earlier. Could you elaborate a bit if we have lost or gained any big customers this year and if there are shifts within the customer base as such?
There always is. Public information, was it Pihlajalinna who said that they gained the
Stora Enso.
Stora Enso. On the other hand, we just won Valmet in Uusikaupunki, you do see shifts in there, I don't see there is an abnormal amount of shift. The shift is there. It varies from one quarter to another, therefore, I see that situation rather stable rather than being very shaken, I think. It does vary from one quarter to another.
Related to that, Valmet, that is actually one that we also have, I think, discussed several times, that there is a typical way when we established a unit. We want that Valmet contract, I think it was 4,500 employees or something. With that sort of customer, when we will establish a new unit in Uusikaupunki which is a sort of white spot for us at the moment. That is the way we see that we would like to sort of grow and open new units should that happen.
Basically what it means, of course, we then have a customer base that supports establishing an operation.
Yeah.
Which then means that we can widen the services there over time.
Yeah. Related to that, I would also probably this is good place to say that the Ora or the ONNI, the small dental clinic in Porvoo that we also acquired a couple of weeks ago, I think it was, is a typical another kind of sort of organic growth element for us. It was a brand-new clinic, which was opened at the beginning of 2018. Instead of building a greenfield in Porvoo, we acquired a brand-new unit with actually lower price than that was invested in the unit. We actually got doctors and some of the customers, obviously we did. Those are the sort of the network growth and the organic growth elements that we are continuously seeking for and looking for.
Both of those we see inside of the company, we see those in organic growth elements, although from the financial perspective, other one is organic, another one is inorganic. We see both of those actually being organic growth. Instead of building, we made an asset deal without increasing the capacity in the local town.
Great. We discussed quite a lot around the capacity development within the market. There's a follow-up on how does the capacity growth stalling within the market impact Terveystalo strategy in terms of investments or business as in general?
Without being overly sarcastic, I think basically what it just highlights is that our strategies, and we firmly believe that the last thing one would need to do from a macro point of view is to build units. We think we look at tactically and we look at white spots in the market, it really is around network of physical units. Next to that network, we will continue to develop two sorts of activity. One is national 24/7 digital network, and the other one is outsourcing network that works hand-in-hand with our physical network. Through that combination, we believe that we can continue to drive scale benefits that then takes increased efficiency of our entire system. I would say from our point of view, no change. Rather, I would say underlines that we believe we're in a right path.
Great. Do we have any other questions within the audience at the moment or from the phone lines?
We currently don't have any more questions registered over the telephone.
Great. Neither would we have any follow-ups from the audience here. If there are no questions, I would like to thank you very much for taking time to join us today and have a good day.
Thank you.