Good morning, everybody, and welcome to Terveystalo's Q4 and full year 2022 results webcast and conference call. My name is Kati Kaksonen. I'm responsible for investor relations, communications and sustainability here at Terveystalo. Today, as usual, we'll have the results presented by our CEO, Ville Iho, and followed by the presentation by our CFO, Juuso Pajunen, who's lately joined the company. Ville will go through the financial and operational highlights and the progress of the profit improvement program in his section, and Juuso will follow that with a more detailed analysis on the financial performance and progress against financial targets as well as the market outlook. As usual, we'll follow the presentation with a Q&A.
We'll take questions first from the phone lines and then, through the webcast after the presentation. Without further ado, over to you, Ville.
Thank you, Kati, and good morning from my behalf. Let's dive straight to the highlights of the quarter and also of the year. During Q4, profitability was still dampened by sales mix and inflation issues, but we are making progress in the underlying business which we'll, we will describe in more detail in mine and Juuso's presentation. Really the turning tide and rock star of the quarter was the supply improvement. We were able to increase supply and improve that one with 15%, which is a really high number against a really strong demand.
Despite that one, our Q4 adjusted EBITA was down due to the known factors: inflation, sales mix, a decrease in COVID sales. But as said, underlying business showing signs of recovery. Our business can comfortably stand on high quality, both when it comes to operations, customer experience, and medical quality. We showcase still a record high customer satisfaction, 83 NPS, industry-leading employee satisfaction and high clinical quality where we have today a showcase also presented. Our profit improvement program, which we disclosed after Q3, is making steady progress. Good start for that one and we have now clocked EUR 11 million run rate for this year and continue pushing forward with the plan
Key numbers from Q4 and our full year, so revenue grew still. F ull-year growth 9% is a solid one. A s I said, the adjusted EBITA fell short of our targets and last year but there are positive signs also underneath. A ppointments grew nicely, so 15% up. Activities are high and with the improving supply, of course, we can, we can then take stock on that one. And, our full-year appointment number , 6.5 million, of which, 34% took place in remote and that's really a high number.
On a quality side, I said NPS, very high, and industry leading employee satisfaction and preferred choice for professionals to work in. Profit improvement program, which we disclosed, one after Q3, is concentrating on our core business, Healthcare Finland. There's a EUR 50 million program. It's progressing as planned. We'll share some more details later. While launching the program, we also changed the operating model and that's showing positive signs on better focus and better accountability throughout the organization.
Our Portfolio Businesses, which are now outside the core in Finland, have the dedicated more independent value creation plans and we are implementing those with rigor and there are also good commitment and good size, signs of future turnover turnaround. Sweden are progressing in our portfolio as planned, growing and also improving in profitability during Q4. Our highlights from the profit improvement program, I said we have new operating model supporting core business turnaround.
We have made good progress in there, especially in commercial area where also inflationary environment has supported our efforts to improve the pricing schemes, pricing models and really push also straightforward price increases in the market. Procurement is doing good job in fighting inflation, but not only fighting inflation, also getting cost savings in. We are focused on getting sales mix improvement also in digital channels, and there are a lot of activities ongoing there. Some positive signs in underlying sales mix in also in digital channels can be seen in December. Of course, early days, but moving to right direction.
Thus far, as I said, we have clocked EUR 11 million run rate improvement for this year, but this is of course only a start. With the strong start, we can with great confidence say that we'll achieve the EUR 50 million targeted improvement during 2024 latest. The target, as I said initially, is during this year to get to over 50% of that mark. There also we have a great confidence. Our operating model, just a recap on that one. As I said, we have now split the business in, let's say more clear buckets.
We have Healthcare Services in Finland, which is the core business. Portfolio Businesses consist of more independent platforms, healthcare related and healthcare platforms. We have Sweden. Healthcare services is the core business. If I put rough numbers into this one, we start reporting according to this structure after Q1. Roughly speaking, cutting some corners, Healthcare Services is a EUR 900 million business with already above our target profitability. Portfolio Businesses is roughly EUR 300 million business, and Sweden roughly EUR 100 million business. Of course, everybody can do the math.
If Healthcare Services is already above the targets, then the other two are lagging there and some work to be done when it comes to profitability. Sweden is the growth market and continues to be that one in the future. Then if we go closer to operation and then to more medical, some key highlights. 8.5 million customer visits. Steady growth there goes to show how big player Terveystalo is in Finnish healthcare. 1.4 million digital appointments out of 6.4 million. That's really a high number. 1.3 million individual customers.
That's there's no changes from last year. That also goes to show that our target has shifted from increasing the customer base to profitability and that can be seen, for example, in this KPI. As said already, very high customer satisfaction, industry-leading employee satisfaction. Making a deep dive into the core of and essence of Terveystalo, what we do. We deliver health. We are fighting for healthier lives. There are a couple of focus areas in our operations and medical.
We have inside core business almost 50 different medical disciplines presented, but there are a couple of key focus areas where we see growth and value add with our services. Mental health has been one for a couple of years. It has grown nicely to be core part of our offering, especially in B2B, where we have pioneered and developed new type of low-threshold services, early detection of issues and then low-threshold services deeper into the care chain. We have now during Q4 studied, we have taken a stock on what we have achieved with these services.
There will be, by the way, a scientific paper later on this one. Rough numbers, if company X takes our services in mental health into the use, the mental health related sickness days are reduced almost to half. As everybody knows, this is a post-pandemic, new sort of second or third pandemic, mental health really trending and to negative territory. This is a big issue. With these numbers, with these services, one can showcase a return on investment for a company, which is impressive. This is a prime example of what we do, what we are. We create great customer value, great medical quality, and do good business. Those all three shake hands with this.
`This is just an example, but an impressive one. S howcasing our confidence in the future and in our programs and improvements in our core business, the B oard of Directors have proposed a dividend of EUR 0.28 per share, which is steady from last year, slightly up obviously when measured with the adjusted EPS but we are confident that we will deliver on our turnaround and hence, again, with confidence propose stable dividend level. With that one it's a great pleasure to invite for the first time with Terveystalo our CFO Juuso Pajunen
Thank you, Ville. It's a privilege to be here in front of all of you guys. A couple of words about myself. My name is Juuso Pajunen. I have a 20-year history in engineering industry. The past four years in AFRY, listed in Stockholm, Nasdaq Stockholm, and before that one as the CFO of Pöyry that was listed in Helsinki. That's about me. Let's talk about financials. If we look the financial development during the fourth quarter and in total, it's solid financials. There are headwinds, there are definitely things that we can't be happy with, but there are also things that we can and we have to be happy. We are growing year-over-year 9% on full year basis. If you put that one roughly to organic and M&A, you can say that it's somewhat 50/50, 5%...
4-5% organic growth is a strong performance. 5% M&A growth is also a strong performance in that front. Of course, when we look the EBITDA, 8.4% doesn't meet our ambitions, it doesn't meet our financial targets, and obviously we are working on to make that one turning around. There are quite understandable reasons underlying in the sales mix, and I will go further through those details in the coming slides. On the balance sheet part, we have a steady cash machine. We delivered EUR 141 million of operating cash flow. We are at net debt to EBITDA at 3.2x, so we are below our peer group. We are fairly good in the balance sheet.
We have been investing our cash flows back to operations, 4.6% in the CapEx, and then we are maintaining the dividend at EUR 0.28 per share, giving it back to our owners. Profit improvement program, definitely a highlight. The speed has been great. We have reached by end of 2022 EUR 11 million run rate, and we are speeding up to reach our ambition and target of EUR 50 million in 2024. It also comes at a cost. We have roughly EUR 5 million of restructuring and performance-based advisory fees recorded on the fourth quarter for this topic. Let's go a bit deeper into what has happened. First of all, the revenue. During the quarter, we have grown 2%. The biggest impact in there is, like Ville mentioned, the appointments. The supply is now picking up.
We have 15% increase in appointments, and that's visible. On the headwind side, the big component is the diagnostics. We have a reduction of COVID test by approximately 90,000 compared to 2021 Q4, and that comes with a toll both in revenue and in EBITDA, which we'll talk on the following slide a bit further. It's good to note that we have the underlying diagnostics excluding COVID is now showing growth, but it starts from a low levels compared to pre-COVID. Definitely something that has a positive glimpse also of little ray of light in that side. We have the outsourcing part, which is declining, and also, we have some contracts ending, and the maturity of those contracts is fairly well known and part of the appendices of the presentation. Staffing had some supply issues.
The other part of the public business, Sweden growing both in Q4 and full year. Sweden is having a bit of headwind from the negative Swedish krona rate. It has devaluated compared to previous year some 10%. On that one, we are losing some growth, but that's effects. We are talking about the translation item. As mentioned in the first slide of financials, we have a 9% growth full year, which is a good number. It is a number to be happy about and to... We are above our financial targets. Obviously, the pricing and the inflation is supporting our revenue on that part. If we talk about the EBITDA, here we can see that both full year and the quarter four, we have the change in sales mix.
90,000 COVID tests less come with a good margin, that is visible. We have in proportion more appointments compared to diagnostics and tests, that comes with a negative impact. It's good to note that we have the change in productivity. In full year, we are negative, in fourth quarter, we have now been bridging that gap, partly with our profit improvement program, partly also with other actions, we are now stabilizing in that front. Cost inflation is hitting us from various corners. There is especially the energy components and supply chain related items that are impacted by the high inflation we see throughout the world. Public business is a place that we have lost in fourth quarter. It's coming materially from two different places.
We have the outsourcing contracts where we have a headwind from inflation compared to the price increases we can contractually push to our clients. On the other hand, this is always related on the underlying specialty care needs and such, and in fourth quarter, we see items related to these ones quite often. On the staffing part, we have had shortages of supply that has negatively impacted the public business part. Sweden is improving both in absolute numbers despite the FX headwind and in relative numbers, also in fourth quarter, the other topics we have been able to start turning into green compared to previous year, while in year to date, they are still on the negative side. Basically, we have many items to be happy about. We have shown that we can implement price increases and other positive pricing actions.
We have been able to fight to certain degree in inflation. We are suffering from that one. The underlying diagnostics is showing trending to right direction. Not happy with the relative profitability, not happy with the profitability, but we are working on it, and we can demonstrate that we are clearly getting forward in that front. If we look quickly just a reminder, we will comment this one also in the market outlook, but on the COVID tests, the volumes peaked in Q1 2022, 178,000, and we do know as a fact that in first quarter and during 2023, COVID tests will not be on these type of levels. This will come with an impact, and then little by little then phase out from the numbers.
We then go forward and look a bit of the charts, we went through the details, I don't dwell too long time on these slides, but we are delivering 14.4% EBITDA, 2.2% growth on the revenues in fourth quarter, despite the headwinds in the COVID. We are little by little getting there, and you will see in the following slides on the cash flow that the EBITDA continues to turn into cash very steadily and in a very predictable manner. As stated, and I will reiterate, 8.9% on the quarter, 8.4% in the year is not reaching our ambitions, but we know it, and we are working on it.
CapEx and soon cash flow, we have now been stabilizing on the latest 12 months numbers into EUR 58 million levels. It's still a bit on the high side, but we are already now in the smaller numbers when it comes to digital investments. Machinery and equipment is pretty clear when there are bottlenecks in imaging or such. It's a good place to invest, and we will continue investing those ones based on how we see the demand developing. Let's look a bit deeper on the EUR 26 million, EUR 30 million digital part. What have we actually done in the past? What we continue to do is that we can split our digital environment roughly into three different buckets. We have the front end, the clear front end, terveystalo.com. I would guess all of you here have visited that one.
We have over 2 million monthly individual visits. Our Terveystalo app and online, 2.5 million registered users. Very big numbers, no matter how you how you measure it, given that this is materially Finnish market. We have, for example, the Suunta work ability management for the occupational healthcare clients or Sirius tool under there to help our corporate clients to unleash the potential they have in too high sickness leaves. This is the first part of the layer. We have what we could call services in the middle which are such that are used for the better care parts that are used almost in the front. We have different type of health queries on there that you can help yourself how to get forward, different type of online coaching platforms and such.
Those ones are also developed from business perspective. Then we have the back end. We have a shared services platform where finance, recruiting, HR, and so on are working. Then all of the operations are sharing that part. We have shared data models, reporting, and analytics. That is then tying up the mid-layer and the front layer, critical on managing our care parts, for example. Then we have the financial backbone, ERP, accounting, CRM, and so on. Then we have the electronic health record system where we are basically making sure that we are doing the right diagnostics or reporting the right diagnostics and the tool that the doctors are using. When we are talking about this one, we are the digital leader in our industry, and we are especially strong in the front end.
That is the most critical part of doing our business. This is where we have been investing. We are continuously evaluating the right investment levels and the CapEx levels, just to give a bit more flavor on how it works. Back from investments to cash flow. We have a steady cash flow, EUR 141 million, high correlation to profitability, high cash conversion rates. It's a good place to be. It's a solid place to be. If we look our net debt to adjusted EBITDA, 3.2x, it's below our target of 3.5x. It's a solid place when you compare to our peers in industry. It means that we have bandwidth to be opportunistic if such opportunities would emerge.
Obviously, we are very selective under the current market conditions and concentrating on making the profitability materialize within our ambitions. M&A is also part of our growth journey. Balance sheet and the maturity, there has been some questions in the interest rate world where we all know how interest rates have been peaking and how they have been behaving during the past 12, 18 months. We have a good maturity profile. We don't have big gaps in there. We have maturities from one year to seven years. We have a solid RCF base to back up our corporate paper programs or commercial paper programs. We are in a good place. From interest rate perspective, our financial policy is to hedge interest rate risk, so we don't see immediately the impact of increasing interest rates.
Obviously, over time, it will little by little come back to us. How did the year look like? Crystal clear, we delivered on growth, 9% year-on-year. We have almost doubled our business since 2017. Our EBITDA continues to grow, but the margin is not where we want to be. 8.4%, once again, is not enough. We are pushing for the 12%-13%. That is our target. If we look the balance sheet, how we have been doing, we have been, excluding 2018, fairing continuously below our 3.5x target. We are at the moment at 3.2x. We are pretty clearly where we want to be on that part. Obviously, with the improved profitability, this one also gives quite quickly downwards as a number.
Finally, EPS obviously follows the profitability. EUR 0.2 is not enough. Signaling the confidence we have on the profit improvement program, which delivered EUR 11 million already by end of 2022 as a run rate, the board of directors is proposing a dividend of EUR 0.28 per share. It's 145% of the EPS. Obviously, if you take the adjustment items, we are in a more reasonable number on that end. Not reaching all of our targets, we continue working on the profitability. In other corners, we are quite okay. With these ones, I will not reiterate the financial targets, but the market outlook. As the first remainder, you saw the COVID test numbers.
We do know that the demand for COVID-related services continues to decrease, the digital services continue to be strong. We have high remote channel participation or the share of total appointments is high in the digital channels. If we look a bit further into the market, the demand for health services is strong. That goes across our regions. It goes Finland, Sweden. It's crystal clear that there is a strong demand. It still continues to focus on the shorter care pathways that correlates also with the COVID tests. We have seen now the underlying diagnostics to pick up a bit in Q4. Let's see how that one develops. We have the inflation environment. It is a tight labor market. We work on our supply. Now we have some movement during this week.
The benchmark industry have reached in Finland the collective labor agreement. Now that one will reflect to our labor agreement probably shortly. It is within our expectations, but now we know how this one will behave. Finally, clouds from the employment and consumer confidence perspective. We don't see it at the moment, but it is something that we all can read from media, and we know that there are potential issues in there. I would still like to iterate strong underlying demand, strong operational machine. There are in the market outlook always some clouds, but at the moment, we think that we are in a quite good place in the demand perspective. With these ones, I would turn back to Ville.
Thank you, Juuso. Well done for the first time. Our focus, just recapping what we have said already, our focus for this year, obviously in core business and this is a key driver for our ability to invest and create cash. We will deliver on the profit improvement program as already explained. So we are aiming at, you know, EUR 50 million improvement by the end of 2024 as a run rate and more than 50% of that one already this year.
We are confident that those targets will be reached and even more confident after seeing the initiation and first tracks on the program, and also commitment from Terveystalo team. Portfolio businesses have now their own independent value creation plans, and those are being implemented with rigor and create a solid base for those entities to be inside the portfolio. In Sweden, we are aiming in increasing our footprint and growing there both organically and if the opportunity arises, inorganically. With that one, I think we can invite Kati back and go to Q&A.
Thanks, Ville and Juuso. first, we could take questions from the phone lines if we have people on the line.
If you wish to ask a question, please dial star five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial star five again on your telephone keypad. The next question comes from Sami Sarkamies from Danske Bank. Please go ahead.
Okay. Hi, I have a couple of questions starting from the efficiency improvement program. You disclosed that EUR 11 million run rate was achieved by the end of last year. Does that include price increases that became effective 1st of January?
Well, I can answer. You can continue, Juuso. Yes, partly. Not the full effect, but part of the price increases are already included to that number. There's no full effect yet.
If you look on the EUR 11 million, the methodology is such that we are trying to get above headwind type of an impact. First we take out certain part of the inflation, the next part is within the profit target, EUR 11 million. Now you're asking.
Okay.
... from the 1st of January part. The 1st of January, not all of that one is included in there.
Okay. Just curious, what will roughly be the pace of development going forward? I mean, are you going to be making strong progress also in the coming few quarters, or will the sort of pace slow down considerably after Q4?
Well, a very good and central question. In successful programs, typically, what you see is that they are front-loaded, and that's what we are aiming as well. We have a strong start and we aim at being front-loaded in our progress.
Okay. Maybe continuing on that, I mean, if we look at your program, I think you're now disclosing that slightly more than 50% of the sort of impact will be achieved through measures that will be taken this year. I mean, that's not highly front loaded. I mean, can you maybe elaborate on why so much of the work will be left for next year, and are there sort of any risks related to those measures?
Well, we continue tracking and disclosing the progress of the program. During next quarters, the more than 50% is what we said initially. As I said, successful programs are front-loaded, and that's a minimum level that we have set out loud. Stay tuned for Q1 disclose.
Okay. I'm sort of understanding that you're sort of, aiming to sort of exceed, these, disclosures that, you know, internal targets are much higher.
Well, we are not holding our troops back. Let's put it that way.
Finally, would it be possible to elaborate on the weak sales growth in Finland? I mean, when we look at private and public segments in particular, they're not growing at the moment. Are you able to provide some reasons for the situation in Q4?
Well, if I again start, and Juuso, you can continue. In private, we have been supply restricted for the whole H2, as we have discussed earlier, even though we were able to increase supply in Q4. There was really nothing more to sell for the market. For the corporate, we have made changes in our policies, sales policies, and we have been targeting at, let's say, broad-based customer base growth earlier, but now the focus has been on profitability and margin. We have been much more selective. We have actually even terminated some unprofitable contracts. There's the, s ome more transparency on that one and explaining why the revenue line is or was stagnant.
We need to remember that the material part of the COVID tests are coming from the private segment.
That's right.
... and the corporate segment. It's pretty irrelevant in the public part of the-
Yes
... portfolio.
Yeah. Okay. If we think about, you know, the outlook for this year in private and public segments, do you think you will be able to improve on the sales growth side?
Well, the focus with the corporates continues to be in the margins. We are not super aggressive when it comes to land grabs with new customers. We are much more selective. Our customer base is really strong and there's more juice to get out of the customer base so to speak. With the consumers, of course, allowing that the demand continues high and our supply actions will bear fruit. The target is obviously grow that business in Juuso's outlook description. The consumer market obviously is the key question going forward.
If demand picture shows similar kind of a robustness that it has shown and our supply actions bear fruit, the consumer should grow as well.
Okay. Thank you very much. I don't have any further questions.
Thank you.
Thanks, Sami. Do we have any further questions from the phone lines?
The next question comes from Joni Sandvall from Nordea. Please go ahead.
Hi. Thanks for the presentation. I think Sami went through some of my questions. Maybe I'm still asking about the price increases now, especially on the corporate side, what you have been doing. Could you give some color on how large price increases we are speaking here? Then the second question relates public sector contracts and the pricing models here. How much you have still old legacy contracts left that are burdening your margins?
Yeah.
You start.
Yeah. Again, if I start. Talking about corporate segment and price increases there, well, typically, the starting number for the price increase negotiations has been roughly around 3% in previous years and then you negotiate it down. This year it's a materially higher the starting number and also the success rate in those negotiations is much higher than it has been. The team has done a really, really good job in there. When it comes to public in our staffing business, the agreements are fairly short.
That's, you know, we're evolving quite rapidly and we are able to improve the pricing there. When it comes to partnerships there, we have a long tail of old contracts from Attendo.
There's actually the partnership contracts are in the appendix of the presentation. I think that the number in 2022 was EUR 120 million, and the number for 2023 in that contract base is EUR 80 million. Feel free to double-check it from there, these are now from the back of my head. Obviously, price increases on those contracts are contract law based, and they don't reach the level of inflation today.
Okay. Thanks. still one question from me, a bit about the CapEx outlook for 2023. I think you also mentioned that investments on devices continue, but what level of sales should we look for for 2023 on investment front?
Well, basically our CapEx was EUR 58 million in 2022. I would expect that we are below those levels in total. Obviously we will match the demand needs, so we need to continuously evaluate, especially the fixed asset part of the CapEx or the tangible asset part of the CapEx as we see how demand develops. Digital part we are compared to 2022, continuing to ramp down.
Okay. Thanks. That's all from me.
Thanks. I think.
The next question comes from Grace Lee from Jefferies. Please go ahead.
Hi. Thank you for taking my question. Could I ask you, please, first on the public side, I'm just curious post-Sote reform, there are a few sort of challenges that's ongoing still. Can I just check in with you to see how you look at sort of outlook, the scope of opportunities there with the few tenders and outsourcing side of things. Anything on that will be very helpful in terms of the timing and the phasing of that opportunity. Thank you.
Yes. In the midst of Sote reform, as we have communicated earlier already, the public market and tenders, they have been fairly silent. That was expected. So, d istricts are basically concentrating on getting their act together and reorganizing. I think we said already earlier that we expect the market to start evolving during H2. Then, I think we are in a place where the districts start new type of bidding and discussions about new type of service packages with us. Those discussions and new service bids are not materially impacting this year.
Yes, thank you for that. From that it's clear that in terms of when that benefit will flow through, you'll be more talking from 2024 onwards, but from that perspective, how do you see sort of growth potential from that?
Well, the full potential obviously is very difficult to predict. There's an upside. Due to the fact that we are in totally new place, there's a new type of procurement machine in districts, they are doing the independent evaluation on the market and opportunities, what type of cooperation they can do with us. We actually will not at this stage take any position on sort of trying to estimate the full potential.
Thank you. My second question is on the profit improvement program. You've mentioned the sort of various buckets of where sort of the focus is going on at the moment, which includes pricing and procurement. The EUR 11 million that you achieved so far, can you just elaborate where, for example, you are seeing more benefit coming through faster than the other buckets? How you sort of see this evolving? For example, what are the more easy sort of apple sizes to more difficult ones? Thanks.
Yeah. I think that in the early stages of the profit improvement program, we have different streams that we have been tackling. For example, in Q4 we have taken some tough decisions related to employees. You saw also in the EBITDA bridges that our productivity has stopped declining and our group costs compared to previous year have been now showing a green delta. You can interpret that one a bit, that it's potentially coming from the profit improvement program. Obviously, we have price increases in the consumer side in November, which one part of that one is related to profit improvement program, but obviously we would have increased the prices without the program in a certain manner in any case.
Finally, in the procurement, we have been able to reap some quick wins in various different pockets. Those are stream by stream, little wins here and there, either to fight the inflation or actually to really reduce the cost. Those are the quick ones. Those ones obviously we continue. In the procurement, you are always a bit of victim of your contract maturities, and then in these continuation points you can start reaping the benefits or start rethinking. You can always think about what you buy and how you buy. Obviously in the discontinuation point you consider more the how, but now we are also working on what. Those are clear ones.
Then, obviously the whole corporate part, pricing part, and then how can we work on the efficiency mode, and the referral part, the diagnostics part. That, that work is ongoing and there are small wins, but those are always longer perspective items to be developed. There are no short-term wins. Our machine was already in a fairly good condition, like Ville indicated on the operating model and the new segment structure, that the healthcare Finland is providing fairly reasonable profitability already pre-profit improvement program. There we need to work further to reap the benefits. We are in a really good pace and in a quite good place already now on that path.
Thank you. My last question on margin expectation for 2023. I know you've given reiterated guidance margin for medium term to long term, but just can you share your thoughts on the margin expectation for 2023, whether it's including the improvement or excluding on the line basis? Thank you.
Our current practice is not to disclose or give margin ranges for the ongoing period. Our medium target is 12%-13%, and we are fighting to reach that one. We don't guide 2023, not in revenue or margin perspective.
Thank you.
There are no more questions at this time, I hand the conference back to the speakers.
Thanks very much. We have quite a few questions from the webcast. If I start with the savings, with the EUR 11 million run rate in 2022 and the target of EUR 50 million by 2024, can you compute EUR 30 million savings for the full year of 2023? What restructuring costs should be taken accountable for the ongoing year?
Maybe I'll take also this one. As I commented on the margin part, we don't give guidances, forward-looking guidances, not in the profit improvement program either. What I can reiterate is what we have in the texts of our presentation and then in the releases, EUR 50 million by 2024, and I think the wording was majority reached in 2023. How that one then times into 2023 PNL remains to be seen, and stay tuned for Q1, Q2 releases as we go forward.
Yes. Then a question on the M&A. Are we planning to pause for a moment in order to focus on profitability? With that, are we able to grow by 5% during this year without any M&A action?
We are not pausing M&A actions. As I think we said in the presentation, we are more selective. The market conditions are totally different than they were, for example, three or even two years ago, and we are more selective. As we know, in our core business, there's not too much to buy. In portfolios, we are highly selective. We need to get the bases right also when it comes to organic growth in those platforms prior to doing additional M&A. In Sweden, as we have said from the beginning, it is a growth market. There we are actively looking for opportunities.
Yes. Anything that you want to add?
No, I think we look about that one.
Maybe a question to you, Juuso. What percentage of sales are the energy costs and are we hedged in our energy expenditure?
Unfortunately I can't get it from back of my head the energy cost from sales, but obviously it's not material when you look in the total big picture. Material part of our costs are employee related, and then comes IT, facilities, and then some. Normally now this is generic comment. You are talking about 8%-10% of the facility cost. That is everything else than the actual rents. In that ballpark we are talking. Unfortunately, we are not hedged at the moment in full for the energy price fluctuations due to some unfortunate incidents in Finnish market where some of the providers went bankrupt during the fall time.
We are continuously evaluating that one, and we are continuously working on the market to make sure that we are at the same time optimizing and prudent in the energy procurement part.
Yes. Some questions on guidance for this year and next year, I will not repeat what's already been said. Further follow-up question to you, Juuso, on CapEx. What should we be expecting for 2023?
Yeah. As I commented on that one, we don't on any aspect give numeric guidances, but EUR 58 million we are expecting that to be below that one. We are continuously evaluating different bottlenecks and different especially tangible side of the investments based on the need and based on the investment cases. We work also on those ones.
Yes. We commented that the organic sales growth was roughly 5% last year. Should something similar be expected for the 2023? Are we letting go of some businesses? Should example, for example, the price lifts, help with the organic sales growth?
Well, I think we commented that one already. We are more selective when it comes to our sales activities and sales growth, for example, in corporate comes through prices, not expanding our customer base. When it comes to our consumers, we have some question marks around the market, thus far, as Juuso said in his presentation, we have not seen a dip in demand. If the demand holds, our supply keeps tracking as it has now been tracking for a couple of months, we can reach a growth with consumers as well.
Yes. A question on the outsourcing contract base. We disclosed the maturity profile that you can find from the appendix of the slides. It's slide 28. There's a question from Jutta regarding that one. Should that be read that we are not taking or planning to take on any new public outsourcing contracts as they are presumably more lower margin businesses today?
Yeah. Old fashioned outsourcing contracts, I think, are a thing of the past, so we don't exactly know how the healthcare districts are going to maneuver in their new space. Most probably we will not see that type of very long-term, very extensive outsourcing contracts going forward. We'll manage the existing ones well. The new type of services that will evolve from interplay between ourselves and then healthcare districts is yet to be seen. As we said, during H2, we will have more light on that issue.
I think we covered already the status of the Sote reform and how it's affecting us today, so I won't repeat that. A question on the portfolio businesses. Are there any plans to divest some parts of it?
At this stage we are concentrating on the independent value creation plans and getting them organically to right level and at this stage no activities in exiting any of those.
Thanks. A question on the clinic network. Are there any changes planned there or perhaps having a fewer clinics in the midterm, considering the growth in the digital front?
In our profit improvement program, there's a stream on that one, dealing with the network and network efficiency. There are some individual cases actually now being planned. They are not sort of dramatic or huge, but some combi- combining different units are in play. What we have done, though, is that we are redefining the scope of a different type of unit so that if there's a very light, for example, occupational healthcare, tar- targeted or con- concentrating unit, then, for example, we can take the front desk out from that one and with that one, make it more sort of a light version of our unit.
Both of these are in play, inside the profit improvement program. During this year, you should not expect anything dramatic to change. We are, of course, reacting to new environment.
These are, of course, such that you gradually tackle the topics. Every time you have a discontinuation point on a rental agreement or location, you can rethink, you take the new world into account on whatever you plan.
Um-
... that is a continuous work.
Yes.
Yeah.
Actually we will look, for example, concentrating some part of the services locally so that instead of having what like four units conducting certain type of service, we only have one, so to get better volumes and hence better productivity.
Thank you. We have a couple of more questions left. Do send them in if you have any further questions. A question on the comment, any comments on the sustainability metrics, as the trend on all aspects is not looking up. Maybe I can start and Ville and Juuso, you can further comment. We'll publish our Sustainability Report actually next week's Friday in connection to the Annual Report. The KPIs that we did disclose in connection to Q4 were the key KPIs. NPS, eNPS, and then quality index, as well as some mixed waste intensity.
obviously, we are still on a high level in NPS as well as eNPS, if you compare to the industry standard, but anything that you want to comment on the shifts in these aspects during the last year?
Well, as you said, we are well above our targets. Of course, pushing even for higher numbers when it comes to NPS and eNPS, and especially eNPS, which is a bedrock for growing our supply and recruiting more professionals going forward. When it comes to quality index, there really the issue has been tight supply and us not in all fronts meeting the supply targets. Well, I said on Q4 commentary, that has been now the rock star of our last quarter, so making progress.
Anything that you want to add?
No, I think like Kati said, we will publish the report next week. You can read quite a lot on our UN targets and GRI indexes. I think that you will find out that we are good corporate citizens. We have effective medical care. Like always, when you have KPIs, you can improve, and you should have a high ambition in these topics. We are in a fairly good place if you just take the absolute measure.
Yes. Further, follow-up next week on that one. A more detailed question over to you, Juuso. What's the current interest rate hedge percentage for the 2023?
I think we are roughly 50/50 hedged at the moment. It's a more complex question because the hedges have also a maturity like loan contracts and so on. Roughly 50/50 is a good place if you are updating your Excels to use something like that.
Good. We have one more question from the webcast so far. What's the outlook for some of the new services that were launched last year? Are we going to see trimming or potentially new launches?
Well, our focus is not in our core business in expanding portfolio. Our focus is in profitability. There are some growth pockets still addressable for Terveystalo even in the core markets. Then we would be talking about some medical disciplines where we have not as heavy foot yet as we should have, taking into account full potential and our market share in general. This year, the focus is in profitability, not expanding other services.
Good. I think with that, we don't have any further questions, and we are on the time mark. We thank you for joining us today and have a good rest of the week and weekend.
Thank you.
Thank you.