Welcome, welcome to AddLife's Capital Markets Day. My name is Helena Nordman Knutson, and I will be your host this morning. We will start off with a presentation by our President and CEO, Fredrik Dalborg, who will give you an overview of the current state of the company. He will talk about the overall business model and the market and growth drivers, as well as the diversified portfolio and the company's current priorities and actions. After that, our CFO, Christina Rubenhag, will present a deep dive into the figures and discuss both the P&L and the balance sheet with an in-depth presentation on organic growth, profitability, net debt, and cash flow. There will also be a presentation by Peter Simonsbacka, our CCO, on performance management and some of the tools and the approach AddLife has to drive performance within the group.
After Peter's presentation, we will have the opportunity to listen to CEO Karin Fischer, supported by Mattias Bengtsson from Biolin, describing how AddLife's business model is turned into practice. We will round up this morning before the break with a Q&A session. To make this a smooth process, Fredrik and Christina will answer questions that come through our online feed only. Please remember that they will not answer any questions regarding the Q3 report. Please, only one question per person. Thank you. Then after that, it's time for a break, and grab a cup of coffee or tea and be back in time and no later than 10:30. After the break, we will start with a panel discussion where we will discuss AddLife's ownership and the advantages of being part of this entrepreneurial group. After then, we will have yet another case.
This time, MBA CEO Carlos Pinto will present MBA's differentiated portfolio within high-end healthcare technology solutions. Again, reflecting the circumstances of being part of AddLife. Finally, and as a highlight of the day, Fredrik will give an in-depth strategy presentation. This presentation will contain the different elements of the company's strategy and focus areas. Before we close down and say goodbye, we will wrap up today with yet a short Q&A session. You can start sending in the question as soon as you have one. The questions that have not been answered will be followed up during the next couple of days. For questions, remember to use the QR code provided. All questions need to come through digitally. Now, let's get on with the day, and let me present our President and CEO, Fredrik Dahlborg. Welcome to the stage.
Thank you very much, Helena.
Thank you.
Most welcome to all of you today. I'm very happy to see so many of you chosen to join us here today, live in the studio, and I know that also we have a lot of people joining us online to follow the day here today. I'm very pleased with the fact that we have been able to gather so many people from the organization here today. They will help to give you a flavor of what's going on in the organization. We will have, we will have Carlos and, and Jussi, and Karin speaking about their respective companies. I think that is very, very important. As you well know, we are a decentralized organization, and the focus is on what's going on in the companies.
This is where the deep customer knowledge lies, the strong customer relationships, the product knowledge, and the market knowledge, and this is where the action happens and where the success is created. So I think you'll find it very interesting to hear their stories. I'm also very pleased by the fact that we have Peter here as well today, as well as Mattias and Tara, who all have strong and successful operational backgrounds and have now moved on to take a bigger role in the company to support the other group's companies in their development. So this is another key factor for success in our group.
So looking back a little bit, when I just joined the company about a year ago, with an experience from lab tech, med tech, and home care business of around 25 years, I knew that I was getting into a company with a very strong business model, well-established and well-functioning, but maybe most importantly, a very, very strong culture. This culture is very important and also very close to my own values and my own experience from previous roles. So this is something that's of huge importance and value to everyone. So coming into the company, meeting all the teams...
Visiting the companies, discussing the plans with each and every company, I've come to learn more about this business, this business approach, the strategy, and how we work as a company, and I can really see the strong value that has given over the years. So as you will note from some of the presentations today, we are sticking to many of the tried and true approaches, the culture, the business model, and so on. But we have also made evolutionary steps. We have updated the organization to reflect the bigger and more international organization that we are today. We have taken actions where improvements are needed and so on. But it still has this strong, similar culture that has made AddLife successful over so long time.
So now we will move into the presentation, and we will start with an overview of where we stand today. Starting with the vision, which is a very powerful one. We strive to improve people's lives by being a leading, value-adding provider in life science. This is a vision that we all stand behind as a company, and something that generates a lot of passion within the group and is very motivating. I think we're all fortunate to be able to be active in this life science industry, when everything we do every day really counts for the patient. Moving on to our business model. As you well know, we have a proven decentralized business model.
We're trying to combine the flexibility, the personal engagement, and the efficiency of the small company with the larger company's resources, network, and long-term perspective. This mix, done correctly, is very successful. We are an active owner, and that has many shapes and forms. We have the AddLife Academy that you will learn more about today as well. It helps to improve the organizations, it helps to improve the teams, and also helps the individuals to evolve in leadership skills, sales skills, and so on. We have a fantastic industry knowledge within the group, where we are knowledgeable about the products, the respective geographical markets in detail, and we also have a fantastic network that each member of the company can utilize, and this is proving very, very successful.
We do take a long-term investment perspective, and that means that top line is not necessarily the focus. Profitability and cash flow are the main drivers for us, that is what we drive, and you'll see examples of that during the day. In addition to that, we take a long-term perspective, meaning we are ready to invest for the long term to develop the companies for future success. We also provide a lot of support for the companies, and that's around business development tools, very clear KPIs, and well-structured business planning processes. We make sure that each company has a strong board appointed, and that means a board that is knowledgeable in the industry, has the relevant geographic experience, and also is very familiar with the specific development phase that the company is in.
On top of that, we offer support for the different groups in the company when it comes to analysis of business performance. Very importantly, we can provide very relevant benchmarks for the companies, and that is a unique benefit as well, that you will learn more about during the day. With this, we can be an active and value-creating owner. I mentioned the culture and the values, and these are really core to us. The simplicity, responsibility, commitment, and innovativeness is something we work with every day, and this is part of the trainings that we have and in the decision-makings that we go through every day. Yet another key component of the long-term success of AddLife. I will also talk a little bit about sustainability.
We will keep that relatively short because this is nothing new. This is something that is totally ingrained in how we run our business today. We have defined targets that are well communicated all across the organization, and each company has their own targets, and the leading individuals have their incentive plans also connected to these targets. We'll split it up in three major parts. The first is we want to be a driver of sustainable offerings. It's important to note that our part of the value chain represents a small fraction of, for example, CO2 emissions in the value chain. However, we are in a position where we can influence other parts of the value chain, so we take an active role in that.
We try to work with our suppliers to improve the profile of their specific product lines, and also, we work with logistics and, of course, the end user to make sure that they are running it in the most efficient way. It's important for us to be an attractive employer and a strong business partner. This comes very natural to us with all the values that we have. So we emphasize culture, employee growth, organizational development, and also inclusion, equality, transparency, and compliance. And in all these areas, we have pretty ambitious targets. And last but not least, of course, we want to be a responsible market participant.
That means everything we can directly influence, such as solar panels, electric cars, and so on, we make those decisions quickly and do everything we can to make sure that we are a responsible part of the business. I want to move on to give a little bit of a background of our business as well, which you well know has transformed quite a bit over the past few years. Looking at our profile back in 2016, primarily a Scandinavian company, but now. Only when we were launched, we had around SEK 1.5 billion in revenues, and the majority of the business in Labtech. As the business evolved, by 2019, we had more than doubled the business and extended our footprint a little bit more into Europe.
But then, of course, looking at the situation 2022, clearly, we had again more than doubled our business with the revenues of above SEK 9 billion. And interestingly here, you can see that Medtech has become the largest business area, and our European coverage is significant. So these are important changes, and they also reflect the actions we are taking today to evolve our business and, primarily leverage the opportunities that this new size and footprint provides. So AddLife Group at a glance by 2023. So we're active in 29 countries. We have more than 2,300 employees, 80 warehouse locations all across Europe. This is a quite impressive number, enabling us to be a very, very strong and reliable partner for our customers that have come to rely on us for quick and, and predictable deliveries.
We have 54,000 customers, 3,500 suppliers, and believe it or not, 18 million SKUs. That's an amazing number that our companies are very well able to manage. So moving forward to how our portfolio of products looks nowadays. I will share with you this slide that where you can see that the hospital segment has become the biggest part, and it's under the umbrella of the Medtech business unit. So here you can see also home care, a smaller share, but very important. The business is active in a huge range of segments that we have strong specialties within. And the same is true on the Labtech side, where diagnostics is a major part of the business, and biomedical and research is almost the same size.
So looking at the slides, it will give you an understanding of the number of segments that we're active in, closely related segments where we have strong competence, but it also gives us a well-balanced portfolio from a product standpoint. Moving on, looking at the European footprint again. As I mentioned earlier, we are present in 29 countries, and as you can see here, the revenue is fairly well spread over the continent. You can see that the Scandinavian markets now represent maybe around a third of the revenues, so meaning that we are indeed clearly a European player now. This also gives another level of stability because we are not relying on a single country for our development, but our decentralized approach also makes sure that we have a very strong local customer knowledge in each and every market.
Looking at the industry we're in, it's a very attractive one in many ways. Not only do we get to help patients every day in improving their lives, but it is also a business where there is stability in the growth. As you can see here on the left-hand side, the orange bars represent healthcare spending in Europe as it evolves over the years, and it's hugely stable. The GDP growth, though, can have significant swings, but we're fortunate enough to not to be too dependent on that. And this is also reflected in the revenue of our company, as you can see on the right-hand side. It actually starts in 2014, when AddLife was just a business unit within Addtech. But here you can see, again, a very stable and growing growth profile.
So we are fortunate in many ways to be in this very stable industry. And looking forward, we have outlined what we can expect in terms of market growth. So the medical device market, which is a much bigger market than the diagnostics market, there we are expecting growth of around 5% per year up until 2025. In the in vitro diagnostics markets, which we can use as a proxy for our LabTech business area, the growth is expected to be 2%-3% per year. There are many important drivers behind this. Demographics is certainly one thing. We all know that there's an aging population all over Europe.
We all see a rising prevalence of chronic diseases as well, and the preventive and personalized medicine is increasing, and that is actually helpful for us, both in the medical device market as well as in diagnostics, again, forming a very important link between these two business areas for the future. There is also an increased focus on clinical outcomes, health economics, and productivity. This will be a powerful growth driver for us and an area where we can certainly contribute to the development of the healthcare system. So these are more high-level pictures, and it gives you a perspective of where the market is heading. But let's get into a little bit more on the details of the product offering and our position in the value chain. So as some of you know, the vast majority of our business is recurring revenue.
It's actually around 80%, and the structure is normally around an advanced instrument sale that you can see on the top on this, in this graph. It could be advanced instruments for sepsis, PCR testing, blood gas analysis, for example, surface analysis, which you will see examples here exhibited today. These installations often come with a steady flow of consumable sales, such as aspirators, disposables, reagents, and such. Also very important in the orthopedics business are all the types of implants that we provide in a steady flow to all our customers. And, of course, every type of product that we provide, such as stroke cars, drainage products, and so on, that are used in surgical procedures. So the business model is really set up around instruments and the recurring long-term revenue of consumables.
Moving forward to our position in the value chain, we are positioned very close to the customer. We take care of warehouse logistics, marketing and sales, and services in our role as a distributor. This means we have a very, very close relation to the end customer. This is very important because we pick up the trends real quick, and we are able to adjust the product portfolio continuously to the needs that are evolving. And with our strong service component, we also bring really, really strong customer relationships. As you can see here on the slide, we are also active in product development and manufacturing. And one good example of that is, of course, the Biolin product and the Biolin business that we will be seeing presenting here today, later.
So there we are, not only a commercial entity, but also developing and manufacturing. Our partners, many times, are the product companies, companies that manufacture and sell products. Sometimes they sell through us, and sometimes they go direct. And sometimes also important to note, the trend is the reverse. We are seeing right now in multiple locations, product companies abandoning their direct sales strategy and moving again back to a distribution model. So we have a strong position in the value chain with a very strong customer relationships and an ability to constantly evolve. So I touched upon the service component and the value add that we bring, and that's also very important to note. There are simpler ways of distribution, like box mover or commercial partner models.
We have evolved much further than that to the right in this slide, where we provide value-added services, and we act as—as a matter of fact, as a productivity partner. This means a wide range of services, such as operating room support, clinical application support, clinical study support, that we will hear Carlos talk about later today. Also examples of where we take the responsibility of a product in the entire life cycle of that product, including rental, reconditioning, and life cycle management. So we have evolved very far in to the right here in this graph, and this gives us a very strong position versus the suppliers, the customers, and also gives us strong pricing power.
So speaking about the position in the market, I also want to talk now about the growth plan that we have set out a number of years ago. As many of you know, during the pandemic, we saw a great growth driven by COVID. So here the companies showed their agility and strength and ability to adapt to the new conditions by supporting the healthcare system in a very, very strong way during the tough times of the COVID pandemic. We, of course, knew that this situation would come to an end at one point, so the company made some good moves in terms of being able to create a strong acquired growth that would succeed the COVID revenues that we saw.
So as you, as you have followed us, you have seen that, indeed, the COVID growth was followed by strong acquired growth. This acquired growth was in very selected segments and market, and by that, we were hoping to see, post the pandemic, a very strong organic growth. We can now see that that plan is working. We have seen in the first two quarter of the years, a very, very strong organic growth, and that's, for us, a very important sign that our positions are well selected. We are, we have a good group of companies, and the companies are flourishing under the AddLife umbrella. So that is a very, very important component, and we are very pleased about that. And we will certainly be talking more during the day about the different components of why the companies are so successful.
So right now, the organic growth is our main focus, but as we move forward, we foresee, again, entering to a mix of acquired and organic growth. So what are then the priorities for us as a group? And these are the top four priorities that we have also communicated earlier. It is to protect and improve the profit, it is organic growth, it's cash flow, and as a number four, acquisitions. So this is the order of importance as well that we put to it. But I want to talk a little bit about what is it that we are actually doing along these priorities. First of all, on the profit side, price management has been very, very important recently. This is an area in which our companies are really, really good.
We take a very active approach to constantly evolving the prices, not only updating the price list once a year, but the constant evolution. This has been an important skill during a period where we saw price increases coming quite a bit from suppliers, in particular during the second half of last year. So this was an area of focus during that time, and we were able to increase the prices towards our customers in a very, very significant way. So in almost all cases, we have been able to pass on these cost increases to our customers after sometimes negotiations and so on.
It is also a method of, of course, just the price increase, but also evolving continuously the product portfolio, as well as increasing the service component, and also working with different pricing methods, such as payments for logistics costs and whatnot. But this has been going well, and you can also see that in our numbers, that we have been protecting the gross margin in a good way. Of course, then, organic growth in high margin segments is going to be very important, and you will see examples of that going forward. And as we move forward, of course, we are also reviewing the efficiency, organization, structure, and priorities in selected companies. I wanna share with you a few examples of that.
One area is in the home care field, where we are having a fairly large component of our own products. We're working to optimize that product portfolio and optimize the way the companies work together, and that will lead us to improved profitability. We have also reviewed our portfolio of development products to make sure we are focusing on the areas where we see most potential. Moving forward, we are also been working quite a bit on the company AdVision, that many of you are quite familiar with. This is a business, a European distribution business in the eye surgery area. This is a very attractive market, and this market has also very stable and interesting growth drivers.
However, as many of you know, we have seen a gradually decreasing profitability in this business over the past few years, and this has been driven by a few lost supply agreements, but also changes in reimbursement systems and so on. Now, we have taken a number of firm action steps. We have new suppliers in place to replace these lost products, and we have launched a new product that will replace that revenue and profit that we lost. In reflection of a more advanced and high-tech product portfolio that we now have, we have updated and strengthened our sales force in the major markets of Europe. During the summer, we have gone through extensive sales training in those sales teams as well.
And now, in the most recent weeks, after a long period of thorough analysis, we have implemented a new and decentralized organization within AdVision. This way, we are empowering the country teams, making them more agile and able to quickly to respond to the market needs. This is an area where we have seen some weakness previously. And of course, by removing those overhead functions, we are also significantly reducing costs. So this is an example of actions we are taking to, in a strong way, improve profitability where needed. Organic growth then. So I'm very pleased by the fact that we are indeed back in full-scale commercial activities after the pandemic.
So our sales teams are out there, they're meeting customers, they're doing new product demos, they're launching new products, they're hosting and attending industry fairs, and so on. So this is positive for the sales as they stand today, but also for the future potential. We have taken on a number of new and significant supplier agreements. These agreements are oftentimes multi-country agreements of a size that we have never done before. This provides us with huge potential growth for the future. And finally, we are supporting the healthcare system in the strong increase we see in elective surgery. So this is a trend that we are expecting that will continue in the near future, but also into next year.
So to give you a little bit of a flavor of how this is developing, we have gathered information from all our companies in Europe to get an assessment of where we stand as it relates to elective surgery. Clearly now, in the healthcare system, the activity is picking up, but the activity is still below where it was at in 2019 before the pandemic. So this means that the healthcare system still have to increase activity to really be able to tackle all these patients that are waiting for surgical procedures. So we are expecting that this increase will continue, and we are, right now, as we speak, in mid-2023, at less than 95% of the surgical procedures conducted, compared to 2019.
We think that will increase towards the end of the year to reach just above 95%, but still below. So this means we expect this positive tailwind that we have, the trend that is helping us in terms of growth within the med tech business, to continue throughout the year and well into the next. And you will hear also Carlos talking about that later today. When it comes to cash flow, this is certainly a key area and that attracts a lot of attention for us. But on the other hand, this is also an area where AddLife is really, really strong. We have many measures and methods to improve cash flow, to make sure that the working capital situation is effectively managed.
We have methods and tools to track this, and we incentivize our team based on this. So again, a key strength of AddLife, and as you will see later today as well, we have a great track record of improving these factors for the companies within our portfolio. Oh, and when we look at inventory reduction, we have also worked on selective targets for the five largest companies. Christina will show us later that, indeed, the major part of the inventory is indeed with the top five companies. So well before the summer, each and every one of these companies has been given a clear target that we are expecting them to meet during the second half of 2023.
In addition to this, we have hands-on, detailed cash flow analysis projects started with the major companies within the group. This way, we can analyze in a very detailed way, together with the company, supported by the business control teams, every aspect of the cash flow and find improvements. So all in all, we think that there will be an improvement in cash flow in the coming quarters. So looking at cash flow and cash conversion, I want to share with you a little bit of a framework and a reflection on how these things have evolved over time. So as you can see, cash conversion in the pre-COVID times was around 70%-80%, a pretty healthy number. During the COVID, it increased quite a bit to over 100% in many cases.
Of course, a special situation. In 2022, we saw the new structure of the business in place and COVID declining. And when I say new structure, I mean the bigger share of Medtech that is traditionally tying more capital. Nevertheless, during that period, we had a cash conversion of around 80%. In the beginning of this year, the two first quarters, we have seen 35, so an extremely low cash conversion. And that is certainly a reflection of the fact that we have taken on many new accounts, and we are seeing a strong pickup in the growth rate of the Medtech business. So over time, we expect this to normalize again towards more numbers more looking like the previous history.
So that is around the cash conversion, and as we have talked about, this is a very important factor right now, also closely linked to our acquisition strategy. So, what you will be seeing later today is a quite thorough analysis of prioritized targets and segments in which we want to grow going forward. So we have really taken a strong effort to map these out and make sure that we know, and everyone within the organization knows, what kind of segments we are looking for, and we will share that with you later today. We have indeed reduced the acquisition activity during 2023, and we expect it to gradually improve, in the next year. However, constantly watching carefully the cash flow and the debt level.
So when the cash flow gets back to a more normalized level again, we expect to maybe be able to allocate around 25% of that cash flow to acquisitions. However, the main priority here is to reduce the debt, and once that is in place, we can slowly again start with the acquisition activity. And also, when we do move forward with acquisitions, the focus will be on small to medium-sized acquisitions, and where we can leverage our new European footprint and our segment exposure. So these are the activities and priorities that the company has been working on recently, and this will be the priorities going forward as well. We are really happy that we're seeing a very, very strong organic growth all over the business.
The approaches and plans that we had put in place are indeed working. We see a positive trend as well in the profitability, and the cash flow is high on the radar screen with strong and dedicated efforts to improve them. I'm saying again, we do expect an improvement here during the coming quarters. So with that, I want to sum up by stating that we are indeed reiterating our long-term financial targets. That means that we continue to want to grow by 15% per year in terms of EBITDA, and that means a doubling of the profit in the coming five years. The profitability target is very important for us, and as you well know, we measure profitability as profit over working capital.
So again, highlighting the fact that we are focused on a strong working capital and high working capital efficiency. And finally, the dividend policy, the 30%-50%, remains unchanged. So with that, we can round up the introduction here, and I want to hand over the word to Christina, our Chief Financial Officer. She will give you some more details about the financial situation. So welcome, Christina.
Thank you, Fredrik. AddLife has a track record of strong revenue growth, driven by organic and acquired revenue, as well as COVID sales during the years of 2020 and 2021. The focus going forward will be acquisitions as well as organic growth, both within Labtech and Medtech, currently driven by recovery in the elective surgery. During the first half of this year, we had a strong organic growth of 10%. Looking into the rest of this year, organic growth will be the focus, and also that will be the focus for 2024. We have a large share of recurring revenue, just below 90%. The majority of the revenue is recurring products, meaning devices and consumables. Service, which is just below 10%, is a revenue stream in itself, but even more important, it build trust and loyalty, strengthening the customer relations and enabling pricing power.
Instrument sales generates long-term recurring product sales, and approx 80% of the revenue is long term. Margins pre-COVID was just below 10%. We are now at a higher level. This has been supported by good price management. That means that we have been able to defend the gross margins via transferring the majority of the price increases from the suppliers to the customers. Price management is also a strength of ours and is part of the toolbox. That is something that Peter will talk about more later on. Also, the evolving the product portfolio towards higher margin products is essence. The commercial organization is back in full swing. They are visiting customers, doing demos, showing new products, on-site support, et cetera. We have also strengthening the sales organization within growth areas. This means that sales and marketing cost has increased during this year.
If we look at the COVID sales that we knew would disappear, that was handled within the current organization at that point in time, meaning that we see a boost in the gross margins during 2020 and 2021. Having profit expansion or profit growth as one of our, of our financial targets, continuous efficiency improvements are key. If we look at the margins per business area, pre-COVID, Labtech was in the range of 10-12. They are now just above that range. Nothing dramatic has happened within Labtech during the past years. We have added a few small acquisitions, but otherwise, it's really a gradual margin improvement via new products, as well as increased efficiency. Medtech used to be in the range 8-10. They are now in the upper level of that range. Within Medtech, we have made acquisitions of high-margin companies.
While you might think that the margin should be higher, the reason is low performance in our eye surgery business, as well as investment into digital solutions. Adding those two together, it deduct a few percentage of the margin. As Fredrik talked about, we are taking actions, and he's working diligent with AddVision to improve the profitability in that company, and we are foreseeing a gradual improvement. Also, within Medtech, the gradual margin improvements for our new products and efficiency improvements are key and really the focus. If we exclude the COVID year, that was outstanding, operating cash flow has been stable and something that AddLife has been good at, with the cash conversion rate in the range of 70%-80%. During the first half of 2023, cash flow was weak, and the cash conversion was as low as 35%.
The main reason is increased working capital, as well as growing within orthopedics. This is a segment that require more consignment stock to support a broad product range. This actually means that when a surgeon going into the operational room, he or she need to be sure that all the screws and nuts, and instruments, and different sizes of knees, if now that is the operation, is at hand. Carlos will be able to give you a much more sophisticated description of this. Looking at the cash flow for the first half of the year, we did pay a dividend, but the main part here is the increased working capital, and that increased of three reasons. One was accounts receivables and the inventory increase due to strong organic growth. I will come back to both of them later on.
Also, we have invested in future growth by adding new large suppliers and products to the portfolio. Right now, this is only having an impact in increased cost and increased inventory because it has not yet been converted into revenue, but that will, of course, come. Also, we are carrying buffer stock still, and this is due to the fact that we are experiencing component shortages. So whenever we get hold of those rare products, we need to buy them, sometimes in batches. It's not only us having those problems, of course; also the competitors have. So we have been carrying inventory to be able to support customers where their competitors has failed, meaning that we have converted customers and hospitals to us, gaining market share during this period of time.
If we look into the accounts receivable, you can see that days outstanding or the share of due accounts receivable in proportion to the total accounts receivable has not increased. So this is purely driven by organic growth. Looking into the inventory, the large share of inventories remains within the five largest companies. If we look at the increase in those five companies during this period of time, it is driven by growth, new suppliers, and buffer stock, all for good reasons, but operating cash flow needs to improve. So that's why we have taken some firm actions, and we are now working very diligently with the established KPIs that we have, profit over working cap, in this case. This we do for the full range of companies, so all companies are working with this right now.
We have also implemented targets in euros for the five larger ones, where they need to be on the inventory levels by year-end. We are doing a detailed review of the working capital processes in a few selected companies. This means that our business controllers are working together with the companies, looking at the full process from purchasing, lowest level of articles to be purchased, how often do you see deliveries, payment terms to the consignment stock? What is the optimal size? That needs to be definitely scrutinized, and of course, the very important revenue recognition and collection part of the business. This is all actions that we are working on right now to improve cash flow until year-end. We are planning for normalization of the cash generation approaching the year.
We do not have a formal target for the debt, but we have an internal guidance that debt towards equity should be at one or preferably below. We are now at one point one. Also, we have an ambition that net debt towards EBITDA should be three or below over time. That will be achieved via both paying down debt, but also increasing the EBITDA. This will not happen this year, and it will most likely not happen until the latter part of next year, meaning 2024. The operational cash allocation is super clear: debt reduction and then investments and acquisitions. Net debt increase in Q2 in size. The main reason for that was FX, since the majority of the loans are in euros. Also, we utilized the credit facility a little bit, but main, main part was FX-driven.
The loans enabled acquisitions that we had done in 2021 and 2022. We have traditional bank loans, we have very long-term bank relationships, and the aim is to reduce debt with self-generated cash flow. Looking at the structure of the debt, approximately half is long term, half is short term. If we use the extension options on the loans, the long-term loan is due end of 2027. Part of the short term is due beginning of 2025, and the half, the other half of the short term is to be renewed beginning of 2024. We have two covenants, interest coverage ratio, that should be above four. We are now at eight. Also, we have equity ratio, should be above 25, now at 38. So we have good headrooms to the covenants.
We often receive the question, how we calculate the interest coverage ratio, and it's EBITDA towards interest net. Interest net is where we have the adjustment, and that means that we deduct the IFRS 16 interest costs. We are running a CapEx-like business, even though CapEx has increased in size, as well as percentage of revenue, due to the acquisition of orthopedic-focused companies. The main part of the CapEx is instruments placed at the customer sites, enabling recurring revenue as well as strengthening the ties to the customers. We have a performance matrix that we work with, and that means that depending on the financial performance of each and every company, there is a different focus. So if the margin is below 10%, focus is on EBITDA margin, purely. If the margin is above 10%, but working capital is below 45, focus on working capital.
Then finally, if you are in the lucky and happy square, then you have a margin above 10% and a profit over working cap above 45, focus on profit expansion. Quite clear. So if we then would map our companies, we have the group was at just below 60 in profit working cap and 12.5 on the EBITDA. And if we map our companies based on the size of the revenue, you will see that approx 25% need to focus on EBITDA margin. You will find AdVision within this category as the main contributor, and also have a few of the home care companies that normally have slightly lower margins. You will find another 25% in the area to focus on working capital. In this category, we will find some of the larger hospital companies.
Then finally, the majority, 50%, will be in the lucky square, where they are above the 10% margin and above the 45% profit over working cap. They are where we want them to be, and they are focusing purely on profit expansion. We have company-specific incentives related to our KPIs, but also to the placement in this performance matrix, making sure that we have the correct focus in the companies, as well as that we are aligned and everyone is working in the same direction. With that, I would like to hand over to Peter Simonsbacka, who is going to talk more about performance management and how we actually work with that.
Thank you very much, Christina. I will talk about performance management and also performance improvement, how we work with that. I think this is, of course, a very interesting topic for us. If you look at our way of working and our approach, I think it's really good that we have this kind of clear financial targets. I think we talked about them already, and Christina talked about, and also Fredrik, that we talk about this profit growth, more than 15% per year, profitability, profit over working cap, more than 45%, and also what Christina just talked about, the performance matrix. That really makes it clear for a company, depending on what kind of margin they have in the company, where to focus.
So everybody in the company will understand why they make certain actions, because if you're below the 10%, all the actions in that company would be related to improving the profit margin. So it's really clear in that kind of respect. In order to grow the business, of course, we also need to develop. And I think development is really crucial for us, and of course, development can be very, very different depending on the company, and this is just a few examples about possible areas for development. But why we highlight this with our companies is really that they have to devote time. They have to devote time to development, because development doesn't happen by itself, and this is really important for us for our future growth. So how do we bring this kind of message or information to our subsidiaries, to our employees, to our companies?
The tool we are using is AddLife Academy. AddLife Academy is our own academy, a training center where we are training our employees in different kind of ways. We've had this AddLife Academy since the very beginning in 2016. What do we offer for a kind of trainings? The vision and corporate philosophy training, that's a mandatory training for all our employees. When we acquire new companies, within three to six months, we make this kind of trainings for all the employees in that company. It's a one-and-a-half-day training, where we're going through the history of AddLife. We talk about, of course, the vision, we talk about the strategy, we talk about the requirements that we have for the companies, and of course, about the tools, and last but not least, our core values.
So it's really a very important thing for us to have this kind of trainings. Part of that is, of course, also to discuss our toolbox. Besides that, of course, we have a lot of salespeople, and we need to see, too, that we improve the salespeople skills. We have several types of different kind of sales trainings going on. For our service technicians, that usually is fantastic salespeople for us because our customers, they love them. But the sales guys doesn't really like to be, or the service guys doesn't like to be a salesperson. They will have a training called soft sell, so they can give some kind of a more guidance and also bring back leads to our sales organization. Last but not least, of course, it's important to see, too, that we have our leaders really can lead in a good way.
We have leadership trainings for all our leaders in the group. From 2016, when we started in March, until 2022, we'd have 4,000, almost 4,800 people in the organization going through this AddLife Academy. I think that's a fantastic number, and we're driving this by ourselves. I think at this point, probably we are around something like 5,000 participants. One of the key things we are really learning in these trainings is really the art of optimizing six parameters. And once again, this links to the super parameter, what we're working with, profitability, profit in relation to working cap. And of course, when it comes to the profit part, how can we increase profit? And of course, we need to sell, and sells more always helps.
I think that's really what we need to focus on, how can we sell more? But in order to get the profit, we always need to have a gross margin. And what actually Fredrik mentioned before is that we have been extremely good, really working with the gross margins in our companies. And especially now, during the very, very big price increases, we were able to carry out the big part actually to our customers. And during our training, we actually have a small credit card. Probably you can't see it, but I can hand it out afterwards. This is some card actually showing how much more in volume you need to sell if you give a discount.
So if you have a 40% gross margin when you start, and you give a 10% discount, then you need to sell 33% more in volume in order to get the same kind of gross profit, and that's fairly a big amount, I need to say. So this give really the people the understanding, the salespeople, that I really need to work hard to really maintain or even increase our margins. The good thing is, if you turn that card around, and this is what the clever sales guys does, they can see how much less you need to sell in volume if you increase the price, increase the gross margin. So I think this is an easy tool. Hopefully, they carry it very close to their heart every day we're doing these customer calls.
And, of course, looking into the expense side, of course, we have should see, too, that we're very cost efficient in what we're doing. Always question ourselves: does this really give value to the company? And if it doesn't, I think we shouldn't really do it. Coming to the working capital, and when we look at the working capital, it's really what the companies can influence. So what we are talking about is, of course, inventory. And inventory, as also Fredrik mentioned before, I think is really something that we are focused on right now. Really see to how can we increase the inventory turnover rate and also reduce inventory in this kind of respect. The next part is the accounts receivable.
Really to see, too, that we collect the money in time, the customer should pay according to our agreements, and of course, it's quite different if we compare to Finland, where they have 20 days DSO, and then the further south you come in Europe, you have some more days than that. So of course, it's different. But the important part, the message to our employees, is that the customers should pay according to the agreement, and not 50 days later. That's really the message, so we should collect that part.
The other thing is, of course, working with our suppliers when it comes to the account receivable, really seeing to that we have good agreements in place, should at least be 45 days, 60 days, payment term to our suppliers, so they can lend us money instead, and we collect the money faster from our customers. So why do we talk about these kind of things? It's really about optimizing these six key parameters. Fine-tuning, fine-tuning, fine-tuning. And I think really the takeaway for the employees in our companies is that everybody, everybody in the company can influence at least one of the six parameters. So it means that everybody can contribute to the profitability in the company. Coming back to the tools.
One of the tools, I think probably one of the most used tools in AddLife, is the Johansson Analysis, and that's the profitability and business analysis. What you see in this kind of example, what we start in, actually, is to look at the profit over working capital analysis. And this can be really used in many, many different ways. So like in this example, we're having different kind of dimension. It can be suppliers, it can be product category, it could be customers, it can be sales department, and that's really the nice thing with this analysis. So then we really go through the whole calculation about gross margin, sales, cost, profit, inventory, accounts receivable, accounts payable, and finally, also, we come to a profit over working capital score.
And what we can see in this example is, of course, we have something here in red, 77% in profitability. That's not according to our, our level of at least 45. So what we use this kind of analysis for is really to use tail cutting, that we really can take away non-profitable business and really see to that we focus our time and effort to something that really is profitable, giving value to the company. Of course, how to allocate capital for profit improvement and business planning. So this is really one of the fundamental tools, but we really are focusing on in AddLife. And to really give you a fantastic example, a company been a long, long time within the group, and really has been using these six parameters, fine-tuning, fine-tuning, fine-tuning all the time, is Triolab in Finland, our diagnostic company in Finland.
And if you can look at their journey, starting already from year 2000, it was really a small company. It was EUR 3,000, something like that, and then building up over time, increasing sales, but also increasing their profit margin. So at a very nice time here in place, 2011, 2012, they crossed the 15% profit margin and really been growing also after that. Really fantastic way of using our tools in a good way. Of course, we can see here that this is, of course, the influence from the pandemic and the nice, COVID-related sales what we had, but really, really nice performance. And also, if you look at the profitability, 481%. Yeah, that's higher than 45. That's really good. And they always be in between 300, 350, up to 400.
So it's really a fantastic case to showcase. So next, we're gonna have a case study regarding Biolin Scientific, one of our companies that we acquired in the end of 2016, and a bit about their journey from that until now. And they also been using a lot of our tools, what we just talked about, during that journey. So welcome to Karin Fischer and Mattias Bengtsson.
... Thank you.
Thank you.
Thank you.
So warm welcome to Biolin Scientific. We are a Swedish-based company with our headquarters in Gothenburg. However, our operations and R&D are based in Finland. We provide state-of-the-art application solutions to scientists, R&D, and product development departments in surface science. We have a strong track record and history in the academy field, and our long-term strategy is to increase our presence in the industry field in the years to come. I will share more about that later on. But now I will hand over to you, Mattias, the former CEO of Biolin Scientific. Today, you are the board director, and you will share the background and understanding from 2016 when AddLife acquired Biolin Scientific.
Thanks, Karin. World-leading surface science instrument, what does that mean? Biolin Scientific, we develop, manufacture, and sell three different product lines. All are focusing on interactions and analyzing surface interactions. Starting with QSense to the left here, we are the pioneers of the QCM-D technology. We were the first inventors, and we're still leading that market. What it does is that in real time, it can detect a mass change on a surface on a nanoscale. So we're talking one molecule in or out. It's an extremely sensitive technology. I will talk a little bit later about what it does and what it does for our customers. We have Attension. Tensiometric measurement is a technology used to categorize surface properties, but also surface-to-surface interactions. KSV Nima, that's a tool for fabrication of organized thin films.
When I say thin, I mean thin, thin as in one molecular layer, so extremely thin layers. It can be used, for example, when companies are developing solar panels in the next generation efficiency. Here, you see a lot of applications, and our products, technologies, and solutions are providing the market with a broad opportunity to investigate surface interactions, and could either be for academic but also for industrial customers. As you can see, as an example, I would like to try to become a little bit more tangible, so I've selected three applications and tried to highlight what it does. First, biotechnology and medical devices. The Attension equipment and tensiometric measurement can develop the surface properties, for example, an implant. So in this case, biocompatibility is of essence.
So with this technology, we can predict whether the implant for permanent uses is biocompatible with the body or not. The second one is called pharmaceutical, and in this case, let's say you are a drug formulator in a pharma company. What you want to avoid is aggregation of the active substance. And if you can avoid that, you can use the QSense technology to predict aggregation or not. And if that's done in a secure way, the actual uptake of the drug substance in the body is secured. The third application is something completely different, electronics. Here, we support the companies developing next generation of electronic circuit boards. With the QCM-D technology, we can make sure that the surface is extremely smooth and the thickness of the layer is extremely thin.
And if that's done in a very consistent way, companies like Intel can develop the next generation processors, which are even faster than today's processors. So as you can see, we have a lot of other applications as well, but this is kind of the breadth and, and as an example of what we can do in supporting our customers. Here, you have a bunch of, what I would say, companies and and universities, but if you look a little bit deeper, you can see that they're quite a good spread, various companies, various academic, but also geographically. But what they have in common is that they're leading in their specific fields, but they're also customers to Biolin Scientific. So if you ask me, I would say it's kind of a strong customer base that we have here, and we have many, many more.
So what it means is that we support a lot of high-tech companies in various stages of their product development. So coming back to this 2016 and onwards, as you mentioned, at end of 2016, Biolin became a family member of the AddLife family. Previous owner was a Swedish private equity firm, and I've been told that they had extremely short focus and impossible expectations. I wouldn't say that we have tough expectations, not that, but maybe we are working in a slightly different way, because when we enter into a new company, we start with an assessment—an assessment that we understand the organizational setup, the stages of the project, and kind of take the temperature of the company. Immediately, we, of course, implement an awareness of the financial KPIs that Peter talked about before.
We do talk about profit expansion over 15%, profitability, profit over working capital, above 45%. But we also talk about development of continuous improvement inside the organization. We also add all the AddLife tools we have in the toolbox when we assess the company. In this case, after we've done a few Johansson analysis on various levels inside the company, we quite early on understood that sales organization, the organization in North America, didn't generate any profit. And in fact, it had not generated a profit for a few years now. And when we interviewed the company and the people there, it didn't really come as a surprise because they've lost top management and the sales organization a little bit lost the momentum. So there was a tough decision taken to actually switch from a direct sales method into a distributing setup.
But once that tough decision was taken, we could immediately see that we were generating profit and the business were turning a little bit. But what was more important is that after a few months, we were kind of given the second wave and second task of developing long-term growth. We were given the task to develop a new strategy for long-term growth, and we did what we always do in Biolin. We went to our key opinion leaders, our leading scientists, internally and externally, and look for market input. And although we had focused on industrial customer as well as in academic customers before, we felt that we needed to do something slightly different and maybe much more deeper than we've done before. So we started with product development, but with the product development, with the mindset of an industrial application, industrial user.
They are a little bit more demanding when it comes to user-friendliness, level of automation, and maybe also interpreting of the data. With that mindset, we were starting our projects. At that time, we also had an opportunity, which I'm really glad that we did, was to decide of one design guideline. The ambition was to have three product lines, but with the design DNA that made them stick together from an outside appearance look. The last part related to industrial applications. There are, as you see, many applications, and we had to select a few, the fastest-growing, the most prominent arguments that we have for our products, but of course, also selectively development into maybe a little bit more tangible arguments. We need to quantify the sales arguments. We need to generate kind of a more value-added approach to those customers.
Of course, when the assessment was done and the new strategy was shaping up, it didn't really transform overnight. But most of the work were done in 2019. And then, of course, it took quite some time until we started to launch our products. So what happened? I mean, we started in end of 2016, and here I've tried to call this slide, Biolin on its way. You see revenue in orange, EBITDA in, I would say, purple, and then EBITDA percentage as a green line from 2017 up until today. The first phase, I've called profit improvement. So after the assessment, we were focusing on profit improvement, and we did make this tough decision.
As you can see, already in 2018 and 2019, we managed to generate quite decent profit, and as you can see, also, the EBITDA percentage increased to decent levels. But it's also important to mention that already in 2019, we spent significantly more money on product development, so we were investing for the future. That's a long-term mindset, but still, we managed to generate profit. So that's actually a very strong result in 2019. The next phase, we call innovation investment, and already started end of 2019, but the development and spend into new products continued. Of course, we focused on growing the business, becoming more sharp in our application, offering all of these things. But unfortunately, if you remember, in 2020, the pandemic came. So we were really struggling to get going.
Our sales approach of meeting customer face-to-face, demo the instrument, showing examples, got kind of taken away from us. We could see that revenue decreased significantly, but despite a very tough year, we managed to keep profit up, and in this case, the EBITDA percentage got extremely high because some of the things, basically, we couldn't do. But we also did something very fast in 2020. We switched the approach of meeting face-to-face to a more online-driven sales approach with webinars and seminars. We were on one channel, the distributor were on the other, and the customers were on the third part. We managed to demo our equipment. We had a lot of, like, video cameras, cameras in the lab showing experiments.
But as you can see, already in 2021, we were not back on track, but we had significantly grown the business on top, compared to 2020. And what I can say during this period, I am personally extremely proud because the organization was, like many other companies, really struggling, but managed to generate this during tough period is something I'm personally very proud of. But what also supported this, that we started the product development, and then in 2021, the first product with industrial focus came out. So it was an Attension product called Theta, with the mindset of one design and industrial usage. So we started in 2020, and we kept this promise that we set in 2019 to launch one new product every year.
So moving into what I would say, a global expansion phase, and that's where we are at the moment. So you can see, the goal was to keep, the EBITDA percentage, but start growing the, the revenue stream with, with an increased profit expansion. And 2022 was a very strong, result, and 2023 has started extremely strong. And now we have a very interesting launch ahead of us for QSense Omni, but this is not for me, this is for Karin to talk about what we're doing right now, but also in the near future.
Yes. Thank you, Mattias. So, so as you can tell, surface science is a quite complex area. However, it is very essential in product development in many application areas. As I told you, our long strategy is to improve our footprint in the industry segment for the years to come, in strategic application areas on a global level. We have a strong history, and we have a well-established global customers in the academy field, and this is, of course, essential for us as we penetrate the industry segment. From a market perspective, Rest of Asia Pacific is the fastest-growing market for Biolin Scientific. Over the years to come, we will increase our investment in Rest of Asia Pacific to accelerate the market penetration. Key markets are, of course, China, Japan, Taiwan, and Korea. Several of the key application areas are driven from high-tech companies in the region.
One strategic action that we took this spring is that we have broadened our collaboration with DKSH. DKSH is a company based in Switzerland, and they have more than 150 years of distribution experience in the region. So let's talk a little bit about the tensiometer market and the Attension portfolio. The tensiometer market is a well-established market with a few key players, and in most of the countries and regions, Biolin are number two. Already today, about 40% of our Attension business is in the academy field. Next step is to broaden the portfolio based on M&A activities, and we have identified potential candidates to be evaluated. And these candidates, they have either regional or global presence.
You can tell from the pictures below, which you already mentioned, Mattias, that the portfolio represents a nice, aligned design language, and we are very proud that we've been awarded the Red Dot Award several times for the portfolio. Let's move on to the QSense business. The strategy is slightly different for the QSense portfolio. The portfolio is mainly driven by internal R&D resources at Biolin Scientific. The competition is limited, and it's really in our hands to further develop the market. Biolin Scientific is number one in this business. As you can tell from the history, the launch of QSense Omni is in line with our design language, and this is the instrument provide the feature and benefits asked by our industry customers. To this target group, ease of use, reproducibility result, and reliability are key.
We have a strong track record, as I mentioned, in the academy field, and the technology is well used in many well-known institutions with a strong reputation. And that is of important now when we enter the industry field. We also have a well-established global distribution network in place, and they have the capacity to drive the market penetration in the various application areas. The QSense portfolio and the launch of QSense Omni is driven by internal R&D resources, and the QSense Omni, that is our enabler to really improve our presence in the industry segment for QCM-D. The technology has been developed at the latest hardware and software environment, and that gives us the opportunity to further develop Omni to the customer needs today and the customer needs tomorrow. I would like to end my presentation by sharing a short video.
I hope you will get the sense of understanding that Biolin is really in the forefront when it comes to surface science, and I can promise you that our future is super exciting and bright. Thank you.
It enables you to unfold unique insights quicker and base your decisions on more reliable results from highly controlled measurements. The smart guiding tool makes it easier to mount the sensor in the right position. Together with the automated and controlled clamping of the sensor, this prevents experimental failure, unwanted variations, and maintains the acoustic fingerprint of the sensor. The unique measuring chamber provides a stable environment with controlled conditions for reproducible results. The clever automation features minimizes hands-on time and unwanted variations. By upgrading to more channels or adding QSense Orbit for alternative experimental setups and complementary measurements, you can easily go beyond entry capabilities and grow with your research. This stable environment, background quality controlled setup, and automated procedures all work together to ensure successful measurement results free of unwanted variations, providing you with a smooth journey to trustworthy results.
Now it's time for our first Q&A. And for questions, please use the QR code provided, and all questions will need to come through digitally. Maybe we should start then with one here. We have one for our CEO. You reiterate that your target is to grow EBITDA by 15% per annum. Is it possible by doing so in 2024, as contribution from acquisitions will be lower in 2024? And it's Karl Norén from SEB who asks.
Well, thank you, Carl. Good question. So to start with, we don't give specific outlook, year by year on what we hope to be able to achieve. But of course, we have, we have just now reiterated our financial targets, so this is what we will be shooting for, and we think it is realistic.
Hmm. Thank you. And then we'll ask Christina one. Regarding Euribor, if the ECB now holds the rate flat, meaning that we are at peak rates, will you manage to stay on the right side of the ICR covenant of more than four times?
Right. We are right now at eight and the covenant, as is, as you stated, four and our plan is definitely to stay on the right side.
This was Gustav Berneblad from Nordea who asked that question. And then we have another one for Fredrik. With regards to working capital and cash flow improvement, in light of a seasonal weak Q3, not least in Europe, with holiday seasons taking place during this quarter, would you like to help us set fair expectations from when that working capital release will come through in the cash flow statement? With Q4, a seasonally strong quarter, is that when you should expect that working capital release to materialize? And this is Mattias Häggblom from Handelsbanken asks.
Thank you, Mattias. Good question. I think it's a good observation that indeed, during the summer month, in particular, when it relates to elective surgery, that is normally a fairly weak month, and that also translates into a weaker cash flow normally, and in particular, in July and August. Also, we can use as a guidance the previous year, where we also saw that the Q4 indeed was a stronger cash flow quarter than Q3. So I think it's reasonable to expect a similar pattern this time as well.
Maybe one for Christina. Can you talk more specifically about what exact targets you have set in for the largest five companies that account for some 75% of inventory? And are you expecting to come down from to other levels to around 13%, as in 2019, like 20% as of Q2 LTM? Or what is sort of a reasonable long level, long, long term? And that's Gustav Berneblad from Nordea.
Okay. Thank you, Gustav. Great question. If we start with 2019, the situation at that point in time was, as Fredrik has shown, more Labtech companies dominating the revenue, and Labtech is normally more inventory working capital light. So now we have a different profile in the company, with Medtech being the stronger part. So with that said, it might be that we will not come back to the levels exactly that low as we were in 2019, but right now we are too high. That's a fact. So we are working to get back to a more normal level, but with the new structure in place, of course. And the exact targets, let them stay at the companies, but for sure, they have received high ones. And realistic ones, we should say as well.
Yeah, exactly.
Because still we have a business to take care of, and we cannot kill the business by just reducing inventory.
Mm.
Important that there are highly set, but realistic.
Yeah. Then we come back to some of, of targets and discussions around performance. I ask you, Peter, in a decentralized business model, as we've talked about, how do you really implement this Johansson Analysis?
... Very good question. I think, as I said, this is one of our most important tools really in AddLife, and at least all companies does it once per year, and that around the target presentations. But some companies do it really on a regular basis, and even on a monthly basis, really to follow, especially the new companies, to follow and see is there really unprofitable business that we can tail cut? So I think that it's really something that we use a lot, and also supported by a business controller in AddLife that helps the companies out there to make this kind analysis if they need that kind of help.
We still have one here from Karl Norén at SEB. EBITDA to working capital, that exactly, where 45% adjusted for reversals. Do you believe it will increase going forward? Who wants to take that one?
Well, I think, I can start a little bit. Again, we want to be very cautious about giving, precise guidance for the future. That is not something that we do. I think it's fair to, assume that we are going to improve from the levels that we're currently at, given all the efforts that we're driving and the exceptional period that we're in right now, when we have seen a strong acceleration in the growth, in particular in the MedTech area. That, of course, ties working capital. That's understandable. So an improvement is, is realistic, but, we will not give a detailed guidance.
I also have a question here on AddVision. It would be really interesting to hear more about AddVision. What are sales and margins right now, and what actions are you taking to improve margins? Maybe you want to elaborate a bit on AddVision.
Yeah, I can, I can speak to that.
Yeah.
So AdVision has been an area of strong focus for us, for a long period of time now, and I think it has accelerated during this year. We have made some changes. We have a new, new board in place, for example, and, we have done a thorough analysis of that business. I want to start by saying it is a good business to be in. Ophthalmology is, is a great market segment with, with a positive growth projections and, and good profitability, normally. As many of you know, when we acquired the business, it was at a certain fairly high, margin level. Now it has declined, so we are now at the low single-digit margins. The revenue is roughly unchanged, around EUR 70 million or so.
We have done a number of activities there that I mentioned earlier on in terms of updating the sales force and so on. And now, very recently, we have taken some strong efforts to actually reorganize the group. We want to organize it in a way that we empower the local teams so that they can be agile and nimble and respond to market trends in a more quick way. And with that, we are also significantly reducing the cost by removing a number of centralized functions. So this is a change in alignment with our strategy and culture that will reduce cost, but more importantly, drive the business towards profitability improvement through a more active commercial work.
Working capital seems to be a popular item this morning. I still have one here for Mikael Holm Rosell on working capital. Is it fair to assume this being a positive figure for the full year 2023?
Well, again, we don't want to give a detailed guidance, but I think we're very confident in saying that we are expecting an increase in the cash flow in the second half of this year, starting in Q3, most likely, and even more pronounced we expect in Q4.
I also have one question here from Marcus Rylander on. Do you, do you expect there will be any need for platform ERPs investments to monitor in real time, follow the efficiency work on any larger logistics investments to increase efficiency, given the 80 million SKUs and diversity of operations? Or are you happy with the more historically decentralized structure?
We will, by all means, stay with the decentralized structure. No centralized ERP system, for sure.
Mm.
That is, the completely wrong way, the way we look at things.
Mm.
We want the companies to drive their business based on their local knowledge, their product knowledge, their deep understanding of the organizational culture. That is working really, really well. We support them in that, of course, but we will not drive that from a central level.
We have Aline from Carnegie again on AddVision. What margin level should we expect AddVision to reach, and when?
Mm. Yeah. So thank you, Aline, for a good question. As many of you remember, they were in the range of 15% EBITDA margin when we acquired them. They have dropped now to single-digit margins, unfortunately. We hope that that will recover, and we think it will, but we want to be really careful by saying that is not something that happens overnight. This is a long-term effort. So, you know, eventually, I'm confident we will reach similar levels, but that will take time.
We also have a question here from Erik Bertilsson, Lancelot Asset Management, on what types of returns do you get on CapEx and placing equipment at customers? Is CapEx reductions a potential lever for cash flow improvement?
... Yeah, I guess I'll answer that. Well, thanks, everyone. Very, very active questions here. We like that for sure. So, well, CapEx is still a very small part of the business. We are very CapEx-like business. As Christina showed, it has come up a little bit, but nothing dramatic in any ways. Of course, we're always looking at that, we're always optimizing, but we won't do anything drastically. You know, when we sign up a new customer or a new hospital, for example, within MBA that Carlos will be presenting later, we're super happy with that. Of course, we're going to support them in responding to their immediate surgical needs. So of course, we are going to have, you know, consignment stock, close by. But of course, we can always optimize.
We're also really, really good at quick deliveries, and we can analyze the business in terms of what are the products that are actually being used frequently, and Carlos's team is doing an excellent job in that. So we can always optimize, but we're not going to abandon that idea, and we're not gonna strangle a very, very positive growth momentum we see now by being too, too strict on those things.
But is it at risk that management focuses too much on the larger subsidiaries and to some extent, not have the same focus on the smaller ones? Or how do you mitigate this happening? Would you like to do that? That's Karl Norén from SEB.
Oh.
Mm-hmm.
Good, good question. Maybe, maybe, do you want to start with that, Peter, or?
No, yeah, I can start with that, and you can then continue if you like to. I think it's quite clear that we're working with all the companies. Of course, the focus now is on the big ones, I mean, you know, the 75%. But clearly, I think everybody had to contribute in the way that they can. So I think it's without doubt, a part—everybody should be part of that.
Yeah. I think, well said, Peter. But of course, some of the larger companies are also fairly new in the group. So of course, there is more work to make sure we are aligned on every aspect of cash flow improvements. And so, that is why we have an extra focus on that right now. But, you know, of course, we are also supporting the smaller companies. The smaller companies can also be a very nice role model, as we saw, right? With the Triolab Finland, with a fantastic efficiency in working capital. You know, that's a great role model for all of us to look at.
Please continue to send in Qs to the second part of the Q&A, which we will have at the end. I think it's time for a coffee break now. Please be back at 10:30 A.M. Please enjoy some coffee.
Yeah, brilliant.
Please don't forget to send in more questions. Thank you.
Doing a pretty good job, right?
Yeah.
Thanks, Helena.
Thank you.
Okay.
There are many, many, many words that define for us MBA, but if I have to choose three, four, maybe trust, maybe commitment, maybe kindness, maybe professionalism. All the time, every time that we had a demand and request and meeting up, whatever, always NVA are or is available for us. Not for us, like patient organization, because they understand that behind us are patients, but behind the patient are lives, and this is the most important thing that a company as NVA has clear and has present all the time. I speak in behalf of all patients with achondroplasia and other skeletal dysplasias who benefit from NVA work and service. The constancy and interest to improve the quality of life of the patient with skeletal dysplasias, I think are the best value the company has.
My name is Mattias Kellermayer. I am a research manager and a senior principal scientist working for the German chemical company, BASF. I have joined the company 10 years ago. I have worked ever since in central research, and Biolin, especially the QSense part of their products, has been a vital part of my work since day one. So we're doing advanced surface science to develop materials and system solutions for the next generation, who has a broad range of products that go into all sorts of markets, all the way from agriculture, over personal and home care products to performance materials. What I appreciated from day one on was the quality of the Biolin instruments, their quartz crystal microbalances.
They are best in class, in my opinion, both in terms of sensitivity, robustness, flexibility, throughput, and many other positive factors. We are on a very good way of further innovating together, improving with our input, as expert users, the instruments, of the QSense branch, and I hope that this will continue in the future to bring surface science, and in particular, the quartz crystal microbalance further ahead.
The benefits using Camanio system is that we have a diversity of technology, where the clarity of the system is very, very important for us, and we can individualize every step of our work, which is a tremendous value. We can do a lot of stuff that we could... we couldn't do before, so for us, it's a big step at the Norrköping municipality. We feel that they listen to us, so we are very happy right now that we have a good communication.
... And the team at Healthcare 21 are always on hand in the rooms, supporting us, helping us, with every aspect of the care of the patient, and in particular, guiding us to use the equipment and the accessories, which has been fantastic. So we deliver several courses at King's College, with the support of the team. This has always been exemplary in terms of its organization. So I think, you know, delivery of these meetings is really a joint effort, and we couldn't do it without them. So we're completely satisfied, that the products that we're using are used well to the best of our knowledge and used safely for our patients. So that just shows that this is a very caring team, and that does best for patient care.
Welcome back after the coffee break. We will start off the second part of the day with a panel discussion. I have invited the following to the stage: Tara Kearney, former CEO at Healthcare 21, the largest company within AddLife, and she is also a chairperson to two of the larger, large AddLife companies. Then we have Jussi Kurittu, CEO at Triolab Finland, and he is also covering the Baltics within AddLife. He has been with the company for 20 years, something like that. And then we have Carlos Pinto, CEO MBA, and he will talk later, have a long presentation. And you've already heard Karin Fischer, CEO of Biolin Scientific, and also Peter Simonsbacka, CCO at AddLife. And please be free to send in any questions that you have using the QR code. So let's start with the first question.
What do you think are the advantages of being part of a larger group such as AddLife? Maybe you, Tara, want to kick off with that one.
Thank you, Helena. For me, with AddLife, from the minute we met, from our first meeting, it was the cultural fit, that synergy of culture. And I know Fredrik mentioned culture when he started out earlier today, and how close it was to his heart and how strongly he felt about it. And I have to say, I feel the same way. And just to see how aligned we were in culture, in values, it just... It was phenomenal. That, combined with the decentralized model, the devolved ownership with accountability and responsibility, because when you're selling your business, you okay, the price has to be right, it has to be fair, but you're always... That's it. It doesn't stop there. You're really looking for a long-term owner. An owner who's going to continue the growth and the success that you've developed in the business.
It's not just the business. For me, it was about the people. It was the growth and the development of the people. Peter, you mentioned the AddLife Academy and what that does in terms of supporting and developing people, and that's just one of the areas where AddLife add value. I suppose the other advantage for me when I look back is, AddLife got it. They were an expert in life sciences. They knew what it was, they knew our business, they knew how to drive the market segments. Again, Peter, you mentioned the tools that were there and the support, so you really believed in the model that was there. To be perfectly honest, two point five years later, I can sit here and honestly say that expectations were met, they were exceeded, and Healthcare21 today continues to flourish.
Mm.
under AddLife's ownership.
Mm. Do you, Carlos, have any additional perspective to this?
Yes.
Item.
Thank you, Helena.
Mm.
I'll take the long-term owner. Being part of a long-term owner, for us, MBA, it certainly is already allowing us to look further with a different stability for us. Long-term owner with a very powerful network. We just joined the company last year. I don't know how many meetings we have already with the other companies-
Mm.
Healthcare 21, MediPlus, and some other companies that really help us to look out of our frontiers. We were an Iberian company, very proud to be an Iberian company, but now we are part of a larger group, and that will be very important for us, MBA, to have also a long-term perspective in terms of profitable market share.
If we go over to the next question, then, how does being part of AddLife actually improve your performance? Peter, maybe you want to start and shed some light on this issue.
Yeah. I would say that our clear and consistent targets, and also our close cooperation with our distributors, our companies actually in the group, has really helped us-
Mm
... really achieve a great performance, strong performance, development the last few years.
Mm.
I think also very much leading to that is, of course, the AddLife Academy.
Mm.
Because due to the fact that we are training our employees, in improving their skills and also building a higher business acumen in that kind of thing, so I think that had a huge impact.
Mm. Do you want Karin to continue on this one?
Yeah.
Yeah.
I mean, AddLife support long-term investments, and that's key for Biolin Scientific. We develop the customer offer in-house, and then you need to have an owner that really believes-
Mm
... in those investments. But also, talking about bold decisions, which we did, I and Matthias earlier today, I mean, when you make those decisions, as for Biolin Scientific, when you decide to close down the U.S. entity, of course, you need to have an owner behind you supporting that.
Mm.
Despite we had to change the business model, today, U.S. is one of our strongest markets, very profitable, and with a very sustainable growth. We have established a very good relationship with our partner in the U.S.
Jussi, what do you say on this topic?
Well, thank you, Helena. As we have heard today many times, AddLife has a strong focus on profitability and operational efficiency. As our company has been part of the group since the beginning, it's kind of already part of the DNA of people to always think how we can improve our processes, become more efficient, and how... especially how we can positively contribute to the key KPI profit over working capital. As you, Peter, presented, thank you for that. A nice, nice, sustainable, profitable growth curve of the company. Yes, but it's only possible when we base our decisions really on, on profitability, whether they are sales-driven or OpEx-related, working capital-related. There we have got a lot of support from AddLife all the time. It's teamwork. Everything is teamwork, so the whole team needs to be committed on, on that.
Like, Peter, you said, the fine-tuning, that's... Our people all know how they can affect working capital. So that's been a lot of trainings related to that and so on. So it's long-term.
Mm.
Like, for me, as being a long time in the group, it's great to see that new companies entering the group and to learn from their best practices around how to improve performance, efficiency. That's really a great value for-
Mm
... for every company in the group.
So going from performance then, how do you keep the dynamics and the flexibility and the entrepreneurial spirit of a smaller company while being part of this larger European group? Do you, Jussi, want to continue on this?
Oh, yes, definitely. Good question. Well, we work with very sophisticated and unique products within healthcare and life science, and in very different market conditions.
Mm.
If I take an example, as I'm responsible for Finland and the Baltic countries, if we look at market environment, business culture, competitors, their strategies in Finland, and compared to that with Estonia, Latvia, and Lithuania, they are completely different. We need a lot of local knowledge to operate in that environment.
Mm.
So even though AddLife does have extremely lot of, of business understanding, market intelligence in the headquarters, I would say it's the decentralized model that is really the key to the success. When we can decide ourselves locally based on the information we have in the teams, we can actually be very agile and fast in making the decisions.
Mm.
The outcome is that we are a few steps ahead of the competition, and those are crucial steps quite often.
Mm.
I would also like to emphasize that from the motivation perspective, the decentralized model is excellent for the whole company, the management and the whole team, when we have the freedom to decide important business-related decisions locally, and of course, carry the responsibility of the consequences. It really increases commitment. And in the end, it's really great if you deliver good results, to say proudly that it was our team who really did it.
Mm.
That's how I see it.
Well, then, Karin, how do you see it?
Well, I can more or less just echo what Jussi just shared with you. But I think, you know, in our day-to-day life, I mean, the companies are different, and we utilize the fact that we are a small, very flexible company. But when decisions needs to be taken, I mean, we have one strong owner, very competent owner, that will guide us and help us so we can execute accordingly. And also, as you mentioned, Jussi, the fact that you believe to a bigger cooperation with a lot of know-how, and experience, of course, very valuable, not just for me as a leader, but for the entire company, on our growth journey.
Mm. Peter, do you have an additional angle on this one?
I would just like to say, Jussi, fantastic. I mean, you've really nailed it, I would say. Really that our, our decentralized approach really gives the opportunity to empower our management team, local management teams, really give them the responsibility and also the mandate to act. I think this really makes them really aware about they can take decision close to their market, they have the understandings of the customers. And I would say a very good example of that was really when was running into the pandemic in the beginning of 2020, they really was acting fantastically. They was jumping on, really see to: How can we source? How can we get actually this COVID test in place? Assuring that we could supply that to the society. And without that, actually, society was only having that kind of tool to control the pandemic.
That was the only way to do it. So without these kind of tests, I think there were much, much more suffering in the societies.
Mm.
Mm.
Now we've discussed several topics already, but what about the major commercial advantages of being part of AddLife? Maybe you want to start on this one, Carlos.
Thank you, Helena. Well, definitely when I mentioned earlier the network that AddLife has in terms of the companies, not only in the hospital MedTech side, also the LabTech. This ability that we have, and we was discussing the opportunities among the business, are also efficiencies among the business, and this is definitely a great advantage for MBA, that now being a part of such a group, will be able to benchmark, not only in terms of segments, also in terms of our strategy that I will try to show the world, at least to share later, and that we want to diversify.
Now, it's much easier because we get the contacts with the other companies that they have other suppliers in different niches, and we are seeing a lot of opportunities right away for the next year to start to participating in new niches, diversifying our business with the experience that we have within the group. So-
Mm
... definitely, almost.
... Do you want to finalize? Do you have any final comments, Tara?
Well, I just have to follow on from Carlos there. For me, it's really about the scale, and it's about the expertise. It has to be.
Mm.
Like, if you look at what AddLife is today, we are a pan-European specialist in the life science sector.
Mm.
So that just brings the scale in itself, and I can probably speak for everybody sitting here today, is we all share the same passion, the same values, the same driver of growth, first and foremost, obviously, in our own organizations, but now for AddLife as a group. Because, yes, we're a collection of companies, but we're now thinking like a group, and I think that's what's coming together, I think, as the acquisitions are bedding down, and that's just the mindset that's been instilled. But for me, I think if I just say, look at the customer testimonials when we started, what are we here for? We're here to make a difference. And looking... And you can-- I'm humbled when I look at those, those testimonials and seeing that. Fredrik mentioned our division at the start of his presentation, making a difference to people's lives.
Mm.
That's exactly what we do all day, every day. How we do it and how we deliver it is through our products, it's through our services, it's through that delivery, it's through going that extra mile. But for me, the magic ingredient in all of that is the supplier partnerships that we all have. Because that long term, that relationship building, and for me, now, being part of AddLife, is enhancing that and adding to that. Because we can now bring to our suppliers more territories, more expertise that we all share as a group, and then that will deliver more products.
I think the scale, as well, of the organization, it just allows us now, in terms of bringing more into the organization, which what that will do, combined with the, the skill and the expertise and the knowledge sharing, we'll be able to keep making that difference. We'll be able to keep on making the promises to our suppliers and living by them. I suppose looking at everybody here that's joined us and spent their time this morning, also delivering for, for our shareholders.
Well, thank you very much for these fantastic reflections. Now, let us see if we have any questions from the audience, and I actually have one from Redeye, here from Eddie Palmgren: "Curious to hear more practically how you are incentivized by AddLife to improve your specific businesses." Maybe you all want to start. Maybe you want to start, Karin?
Do you want to start?
Or do you want to start?
Oh, do you want to start?
Yeah, you can start.
If we look at the incentive scheme, the bonus scheme-
Yeah
... that we have for our MDs in our companies, it's really based on what we talked about, this performance metric as a basic.
Mm.
Because it, really depending on where they are on that kind of a scale, and what is the most important thing for them to focus on to really improve, and then it's based to make that kind of improvement. So it really goes hand in hand with our key KPIs, and that I really like, because then it are aligned with our targets and these kind of things. So I think that really hopefully works well.
Yeah.
Okay. But so that's how you feel it, too? That's not only from AddLife perspective?
Yeah-
Yeah
... I do. I think it's a very solid process, you know. And then, of course, this is cascading down in my company-
Mm
... and follow the KPIs that has been approved and decided together with AddLife management team.
Mm.
I think it's a very solid process for all the companies.
I have one here, too, that: "What are the advantages of having a long-term owner as AddLife?" And maybe you, Jussi, who is long-term, want to comment on that one.
Yes, really long.
A really long term.
Well, I think, the key value is really on giving security to the organization, safety to the organization, kind of. We know that we have a long-term owner who wants to develop the company together with the management and the whole team. And we are working with product and customers with very long contracts, and we cannot have short-term strategies. It's a long-term-
Mm
... strategic work, so it can only be supported in the right way with a long-term owner as well.
Yeah. But then if we go to the next one, from long term to how AddLife can support you in sustaining and extending your company's existing competitive advantages, and would you mind to discuss that, Carlos?
Yeah. As I mentioned earlier, the expertise that AddLife has, not only because of the companies and the network, but also because it's a long-term owner, will help us to evaluate better internally, to realize - maybe to realize our reality in a different way. And, again, with the resources of the company that we have locally, we'll try to understand and benchmark to improve our efficiency. Today, my name was mentioned several times - because of some of the efficiencies of the company. And, I'm proud of it, because I think being part of AddLife, we are - we will be realizing certain things that in our own reality we were not.
Mm.
That's definitely a must, and that's definitely very positive and promising for our future.
Once again, thank you very, very much. And now it's actually time for you, Carlos Pinto-
Yeah
to give us an insight into MBA. Please, Carlos, the stage is yours.
Thank you so much. It's my time. Okay. Well... So first, and allow me to just to say that it's really an honor for me to be in here and represent the excellent and talented team of MBA, okay? Good morning, and I will try, I'll do my best to share our values and our strategy, at least to introduce the MBA company, one of the newest companies in the group.
... So who we are? MBA Surgical Empowerment. As you see in the map, I would like to point out the biggest dot on the top of the Spanish map is where we're born. So we are a Spanish company, a leading distributor in medical and surgical technology that was born. I will talk a little bit about our history further. We offer innovation. We want to add value to the market. We are covering both Spain and Portugal, and of course, in the healthcare sector, it's important we cover both public and private sector. Why we think that we play differentiation? Because we always are focusing, bringing the most innovative solutions to the market. Our main priority is our people, because it's through our people that we can really deliver excellent customer service.
That's in that, in that origin. Our strategic priority is always moved by the differentiation. In service, you will see that service is critical for us. We are a distributor, we are not a manufacturer. In marketing, also, because some of the suppliers that we represent are excellent suppliers, but they rely on us, that responsibility, and in promotion, of course, through a magnificent team that covers both Spain and Portugal. From where we are and where we are going, we're saying here, always in our strategy, we are moving towards the high value segments. This is where we want to go. Just briefly about our history, I think it's important. Three main phases stand out. The first one, of course, the creation of MBA. MBA, born 35 years ago in Asturias, in Gijón.
For the ones that don't know, it's up in the north. It's considered nowadays, it's curious, but it's considered an healthcare cluster because MBA born from other companies that were already there. And it's an interesting part to see from the company because the environment that is surrounding us, university and hospitals, also help us to grow as a company. But at that time, just it's important, MBA, the aim of the company was not to be a distributor, only distributor, it was much more than that. It was to be a distributor, but a distributor that could be bringing different technology to empower our health professionals, at the same time, increasing the access of to healthcare for our patients in Spain. Okay?
Throughout most of the decades, MBA extended their capabilities throughout the Spanish market, our core market, and we've been able to later to expand MBA because we thought that with the capabilities and the infrastructures that we have, that we could extend our footprint, and we later expanded to Portugal and also to Italy. After I think the second phase, and this is important one, because after a decade and a half of the 2000s, with a lot of economic turbulence, with a lot of changes, not only in terms of Spain and Portugal, but also in terms of the European market, MBA took a very important decision, which was taken in 2015, change management, a change of the strategy.
We were a company pretty much focused in several, well, high volume segments, and we did think that we had the resources, the capabilities to start to move towards the high value, to start to differentiate ourselves as a company. And that take to the third stage, which I think is critical for us, because throughout these years, the more or less, I may say, seven to eight years, we've been making a successful track record. We have extremely growth and a trend growth trend, and we finally reached to a stage where AddLife acquired MBA. This is important for us. We've mentioned already long-term perspective. This is the way that we work in the market, not only towards the market, but with our suppliers. And finally, we became an Iberian company. Okay?
As an Iberian company, it's important to dedicate and to invest a lot of resources. As I mentioned, we are a distributor, we are not a manufacturer, so we need to differentiate ourselves in certain areas to really cover the market. Our aim is to cover the market in Spain and Portugal. We want to be everywhere through our specific segments where we are focusing, but we want to be everywhere in serving this market. This is key for us, for our mission, okay? So bringing differentiated, innovative technology for our health professionals, allowing to increase the quality of life of our patients. That is...
What we have built throughout these years able us to be part and to participate in more than 85 hospitals in the region, Iberian region, which is more or less the majority of the hospitals that covers our segments. Also a very impressive number, we have more than 14,000 doctors using our products. This is possible, why? Because first of all, we partner with some of the best suppliers in MedTech. That's the only way of bringing new innovation technologies. Then we are able to partner with those suppliers. Then we are organized into three major divisions. The first one, Orthopedic and Trauma, Neurospine, Pediatric Orthopedic, and Anesthesia and Surgery. Those divisions are the ones that drive all the solutions and all the services that we need to cover.
So we really understand how each division can create synergies within. We really understand how these solutions work within those divisions, and with the powerful help of some of our suppliers that have been with us since the foundations, we achieve market leadership in three segments, three important segments. In the break, I was showing one of the products of one of these segments, pediatric orthopedics, and then you saw the video. This is one of the areas that we can say we are market leaders in both Spain and Portugal, and that is possible because we develop a partnership with one of our important suppliers since our foundations. So their brand and our brand is the same in the market.
This is the only way that MBA sees that we can evolve in the market, looking to the market needs, looking to our suppliers, and how can we be the same in the markets? This is interesting because these kind of market shares that we have in these segments are only available—usually, they are available or for some original manufacturers. And we did manage to, throughout the years, to achieve the market leadership in these segments, and thanks to our teams and thanks to the suppliers and their commitment, and of course, both of committed in developing the market. We are establishing two new divisions. Why is that emerging? The technologies are emerging right now. Emerging technologies, they are really reshaping the healthcare in multiple ways. So or we are seeing what is happening in that trend, or we will be out.
What were you doing right now? So we have to take care in taking into consideration first, how this technology will be accessible to the health professionals and to the patients. Secondly, how suppliers and distributors can deliver this type of the technology to be accessible in the market. And third, how the patients will benefit from it. So, what are the outcomes of this technology in the future? And this is where MBA is right now, bringing new technology, cooperating directly with the health professionals and patients to really evaluate the outcomes. And this is where MBA is in terms of futures development, future business, okay? So why we are a unique partner? And we consider ourselves to be a unique partner, if you allow me. Four pillars, four very important pillars.
First, the talent. I mentioned already, our people, it's the most important asset that we have in the company. Second, the training. Third, customers, of course, I may say customer always come first, but it's third pillar, a very important pillar. It's important also to understand some of the layers of the business. And last, but not the least, the scientific development and the commitment. All of those four are related to our long-term commitment as a company, okay? I will mention internally first, talent. People are our main priority. Internally, it's very important to provide the best conditions to our people to develop, and we think that one of the keys is the education. Just an example, throughout the COVID, as you know, suddenly we have the majority of our people in a empty space.
We did take a decision that was the time to improve that their capabilities, and all of our staff stayed active. We provide and supply more than 3,000 hours of education, of training that year. Then when we restarted in the market, we were like speed. We were one of the most fastest companies in the Spanish and Portuguese market at that time because we were prepared. We invest in education programs. Under AddLife, there is an advantage nowadays because there was some capabilities that in terms of technological capabilities, to bring those capabilities to us, the investment was a bit too much. Then we are part now, we, we've managed to access to a learning management system, which is Sana, under AddLife, and we are increasing the effectiveness of our internal education programs.
Training, of course, it's really important, not only internally, but also externally. That's what we were mentioning, our customers. We need to provide them all the information, all the education that they need to perform well, they need to really improve the quality of our patients' life. And on that case, we established several channels of training. MBA is really a benchmark in training in the Spanish and Portuguese market. And why is that? Because it's not only provide training, it's the way that we provide training. We have surgeon-to-surgeon training, we have specific medical education programs that we've been investing for many years now, where we can use reference KOLs from all over the world to participate on those programs because they really see themselves in a very high-quality programs.
Then the MBA On Air, which was an invention from the COVID, which is a web-based training that allows the surgeons, the residents, that they work, most of them, 20 hours a day, that can train while they have a break, they can use the online facilities. They are access to that online base to most of the most important references in the world in specific segments. So training is key internally, and of course, externally, and MBA provide a training to more than 1,500 surgeons a year. I think it's a number that if you compare with other companies, will be on top of it. Customers. So our customers, what they expect from us? We already delivered innovative solutions. We already delivered the best service, the best care. They need this.
They need more than that we commit with the service. What they need is that the service covers the needs. The way that they work in a hospital, as you know, it's a huge company, not sometimes the best organized company. So we need to be fast, we need to be agile, we need to be immediate. So for that, we are considered to have the top-level service in the countries. 80% of our customers, more than 95% of the orders, we can deliver within 24 hours, and some of the urgent orders, we are delivering in less than four hours. For that, of course, we have infrastructure in place, we have inventory in place to really deal and to really serve on their needs. That's critical, and that's one of the biggest assets that has MBA.
And then the other one... Sorry, I just, Yeah. The other one, is the institute. MBA Institute is one proof of our long-term commitment. So we are bringing new technology, we are bringing innovative technology, we are training surgeons, and so on. Now, as an example, bringing new emerging technology that's helping to improve the, the outcomes and the quality of life of patients, but suddenly we have to be here in the future, measuring if that technology is really aligned with the outcomes expected. And there is no better way of doing it than participating in those outcomes. In the, in the way that we evaluate, we take that. So MBA Institute was created in-- back in 2010. It's, it's a perspective of long-term collaboration with the scientific and clinical research.
So if you're going to the Google right now, input MBA Institute, I will invite you to do that. You will see a lot of clinical papers in the most important, medicine journals with the support of, MBA Institute. A lot of multicentric studies, important multicentric studies, also with support driven and helped by MBA Institute. So this is really proud. But better than that, and the numbers speak by themselves, is to show the numbers. When you talk about research, supporting the research, the popularization of knowledge, this is very important in the healthcare. It's, it's that you have the knowledge, but the knowledge can be spread out. MBA Institute is a very powerful tool.
Right now, in the most important congresses in Portugal, in Spain, you will see a lot of papers, a lot of presentations, a lot of researches, and a lot of clinical evidence that were made possible because there was a foundation, an institute that was behind, helping, to make that happen. And this is really one of our signatures when we talk about the medium or the long-term commitment of the company. So we are in the present, supporting the present, bringing new technologies, bringing access, but we are here also shaping the future. We are here to expect that the outcomes that we are promising now, they will be possible in the future, and being responsible for it.
Well, trying to explain a little bit of our strategy, and the beginning, what I was saying, we were a company much more on the high-volume segments, and now we are going toward the high-value, high-margin segments. How we started? Of course, we started as an orthopedic company. We were playing high volume. It is important to play the high volume, yes, because if you're not playing the high-volume segments, you are not perceived as a company, as a partner for the high-value segments. And that's in orthopedic, as an example, if we're not playing the primary and elective surgery, you will not play the revision and the complex surgery because they will not perceive you as a trustable supplier. So again, you not see products here, you see solutions, you see the disease statement.
That's where we focus. We don't focus in selling, plates and screws for trauma. We focus in trauma. We don't focus in selling particular screws for spine. We focus in spine. So everything that we do, we do to improve the quality of life of the spine patients, and that's, that's where we are. So coming from the left, where you see lower margins, definitely higher volumes, but needed to be there. If we are not there, we cannot play on the other segments. We start to move to the right side. We have a much more diversified pie. Our pie 15 years ago, had two, three colors. Nowadays, we say it's a multicolored pie, a much more diverse, much more strong, much more resilient, portfolio. And the future is expansion, and the expansion is going towards the...
Hopefully, to the right, top quadrant, which is participating in areas where we think we can add value. We'll not participate because it's trendy. It's because we, within our structure, with our resources, with our capabilities, we can add value, and we know that we can add value at this, at this level. So this is more or less, I try to resume in this slide, our strategy and our roadmap, and to where we wanna go as a company, and hopefully, we'll reach this very soon. And hopefully, we'll reach this faster now under AddLife, because now we, under AddLife, we have access to a lot of suppliers that some time ago, we were knocking on their door, and they were not so interested in leasing from us.
Now they are much more interested in leasing from us, and some of those suppliers, they are working with some other companies of the group. So definitely, it's everything, it's aligned with the strategy that we've been building for more than the last 10 years. Well, just for ending, talking a little bit about the market, also to show how MBA can differentiate also in the market. So in a way, as Fredrik mentioned, fortunately, one of the good tailwinds this year is the recovery of the elective surgery. We are still not far, but we're going fast to 2019 level, which we consider the normal level. But at the same time, as you see, there are some increasing in the waiting lists, but it's... this is good news, okay, good news.
Elective surgery is recovering, the activities is getting to the normality. On the right side, how we, MBA, can really help our markets to grow. It's because when you look to Spain as an example, but it's our market, core market, Spain, the healthcare is not centralized. It's by communities. And you see this example, which is the communities, some of them are already green because they are reducing waiting lists. Some of them are like pinkish, and some of them are red. We have to understand that each community, they have their own reality. Each community, they need to have different tools to really improve the quality of the patients. And that is where MBA can really bring the effort, because we are present in all the communities. We know how each community works.
We know really and deeply the profile of each community. So when you think about MBA, think about the company that is really fitted to serve as best, as close our health professionals, always, always to improve the quality, the life of the patients. And nowadays, I'm sure that under AddLife, we really have a very, very promising future. And talking about future, I will hand over to Fredrik, that will bring us some more about future and strategy and thank you so much.
Thank you, Carlos. Well done.
Thank you.
Excellent. All right, so let's continue. So, Carlos did a fantastic job, I think, to talk about the value that we bring to the patients, and improving the life of the patient is really something we are passionate about, as you can tell from all these discussions. So a big thanks to Carlos for a great presentation. Also to Karin and Mattias for a great presentation. And of course, during the Q&A session here, I think that you got some good contributions and better understanding of the business from Tara and Jussi. So a great thanks to Tara and Jussi as well. And of course, Peter and Christina providing great insights into the financials and how we run the business for continuous improvement.
So now we're gonna talk a little bit about the future, and I think the interesting thing here is, of course, that the starting point is very exciting and very strong. So, we have started to work on a new and updated strategy within the group, and this work started actually already, as early as July of last year. And it has been a very thorough process, engaging from the get-go all the companies, and leveraging their expertise, in particular in the areas of what are the most interesting segments that we can drive, what are the most interesting geographies, and so on. And then, this has been a process over the year to evolve that strategy and, and define it, and communicate it internally as well. The starting point is really a very, very strong AddLife.
We are now a broader and stronger business. We, we have a much bigger MedTech business active in many, many more segments. We have a European coverage that's much strengthened, as we have talked about earlier today, and this gives us many, many new opportunities and also a unique stability. So with this increased exposure to a number of new segments, as well as a number of new geographical markets, we have a very promising future. So, but of course, most importantly, it's the team, the team that delivers this, and that's why I'm so happy today that you've been able to actually see and interact with many of our very strong team members. We have an amazing team of dedicated, experienced, and energetic people.
The picture you see here is from the meeting we held in May of this year, gathering all the managing directors and their key management team members from all companies within the group to go through our business status and our strategies for the future. So we have a great team, and these are the people that are going to deliver on this plan. So we start with looking at a little bit of the market trends, and then moving on as well to what is happening in the competitive field. So looking at the market trends, we've talked a lot about it. The post-pandemic environment is here. Elective surgeries are recovering in a strong way.
It is happening all over Europe, and it, this will be an effect that will support us in our growth, for the rest of the year, but certainly into next year as well. So this, this means an increased number of surgical procedures that many companies like MBA, but also Healthcare 21, Mediplast, and others within the group, Fischer, to mention a smaller company, also very strong in this area. They are able to benefit from this trend and help the healthcare system to handle these patients. So increased number of surgical procedures, clearly. Moving forward, we also see, unfortunately, a staffing shortage. This means that there are and will be healthcare capacity constraints. So here, the hospital systems will have to handle more patients with lesser resource.
So here we can help them with different time and resource-saving methods and tools. And very importantly as well, you've heard a lot about the fact that we are very strong when it comes to the service provision that we have in many ways, and I think MBA is one of the best examples of that in the group. This can also offload the hospital system in a very meaningful way. The healthcare systems, you know, we have to realize that they have been in a special budget situation during the pandemic, so now they're getting back to a more normal situation. This will likely mean that there will be some budget constraints going forward, and we can sense that from time to time. In particular, larger and more expensive instruments are being sometimes put on hold.
Fortunately for us, the vast majority of our business is with a slightly smaller type of equipment, so we have seen a decrease in the lab tech side, primarily, but that has been more than compensated by sales of consumables and the reagents. So of course, with these constraints that we are seeing to some extent, and that will be the reality for some time, the focus on value and productivity selling. We need to be really good at communicating the value that our products bring and the productivity that they can contribute with. So this is also important for our strategy going forward. If we move forward to take a look, what are the competitors that we're facing in the market? And there are really three major groups.
One is the global product companies, the global manufacturers and developers of products. The other one are multinational distributors like ourselves, and the final one is the smaller, local, distributors. So, if we start with the global product companies, they, of course, develop and manufacture products. They have a mix normally of go-to-market strategies, sometimes sell directly, sometimes through distributors. They are, for us, a competitor in many of the tenders, for example, but they are also a partner and supplier. What we're seeing in this market, and I'm talking about very many of the really large and famous, global manufacturers, is that they are shifting the focus of their portfolios to be more prioritized focus areas where they can, where they can be really strong.
They are divesting or spinning off other parts of the portfolio or finding other routes to handle these products. We also seeing that there are a lot of cost-cutting going on, reductions of country teams from these companies, in a quite drastic way, and this is happening in many, many examples, that we see in the market. So for us, this represents an opportunity. We see a weakened competition in terms of, country-specific market support, meaning we can take market share. That is happening as we speak. It also means that these companies open up to, to discontinue their direct sales, approach, and instead go for an, distribution model, and then we can be a very, very strong partner there. So a shift is happening clearly in the market, which we can benefit from.
If you look at the multinational distributors, very similar to ourselves, in which acquisitions are a key part of the strategy. None of them, though, have the full European coverage that we do, and we think this is a great strength. Also, we don't see any of them having the mix of lab tech and med tech products like we do, which is another great strength that we have. So what is happening with these companies? We see that they, of course, have an ambition to expand into higher margin segments, similar to what we do. We also see that very many of them are in a situation where there is an ownership change that has recently happened or is about to happen. This is probably, for us, a positive situation.
There is a high risk that they will be a bit distracted, and we can take market share. And then finally, the smaller local distributors. As we have talked about earlier, there are a huge number of those out there in the market, often owner-operated. In this environment, where the financials are a bit tougher, interest rates are higher, they find some challenges with capital requirements. Sometimes there is also regulatory challenges for a small company to handle, and oftentimes, there is also a limitation in terms of the ability to handle succession and so on internally. So for us, we can take market share from these companies from time to time, but they can also, for sure, be very interesting acquisition targets. So I think when you look at the competitive situation, there are many opportunities for us to leverage.
Of course, in a market, there is always a risk, and there is always some mitigations that you can put in place to handle that. So we're gonna look at that a little bit. Of course, we can lose suppliers. That is the life of a distribution business. That happens from time to time. We are normally very, very good at that, but as some of you know, we have seen some examples where it didn't really happen in a smooth way. But normally, what our companies do is to diversify, not to be too dependent on a few suppliers. And so that is an important component.
Another important component is the strong service, because that generates a very, very strong customer relationship, and it also is a—it's, it's an important feature that is hard to copy if someone, for example, wants to switch distributor or want to go direct. And then, of course, as always, we work on contingency planning, making sure that we have alternative products to bring on if we need to. Then the budget constraints in the healthcare system, the reimbursement changes, what can we do about that? Here again, the value-adding service is a strong component for us that will protect us for these things. And of course, also continuously evolving the product portfolio. That way, we can continue to bring the value that the healthcare system needs through a good combination of service and leading products. There is an acquisition risk.
We are a company that acquires a lot of, a lot of companies. There is a risk that, you know, sometimes it goes wrong. We have to be, and we are, and we will continue to be very selective in these acquisitions based on the strong, and I would say, quite unique market knowledge that we have. With a network all over Europe, we are able to understand the business, understand the product group, understand the supplier situation, understand the local market conditions, and we would know what businesses are good and what are not. And then, of course, the active ownership that we've spent a lot of time talking about here this morning. And then finally, failing to react to market trends, that is, of course, a major risk for any company.
And I think you've seen today that we have a very strong culture and a decentralized leadership, so everyone is empowered to make decisions, act upon their very, very detailed knowledge about the market conditions. I think Jussi mentioned this really well in the panel debate today. Another great example is, of course, the very, very rapid actions that the companies took during the pandemic, and now similarly, during the time when the elective surgeries are recovering strongly. So there are risks in the market, but we think we have very good ways of mitigating those. So moving forward then, into the strategy of AddLife as a company. Here you will see a number of familiar components, but also some new.
So this slide here provides you with an overview of the strategy of the company. The vision, improving people's life by being a leading value-creating provider in life science, is front and center. We have talked about the targets. We have reiterated those today, and as you well know, meeting those targets will mean that we, within five years, will be a double-sized company compared to today. So a very exciting outlook for sure. I'm going to spend a little bit of time on the strategy, the three pillars of the strategy, that we have, and then also new strategic initiatives that we are communicating today. But before I do that, I also want to underscore that the values, they do act as a foundation for us.
The simplicity, the commitment, the responsibility, and innovativeness, that is the core to our strategy. So leading the market, that's an established strategy for us as a company. We wanna build positions in selected niches. Then the niche strategy is really critical. We wanna be a qualified supplier of high-tech products and also a trusted advisor to the customer, and we build the sales on close relationships and recurring revenues. The agility and the mobility is, of course, very, very important, very closely linked to our decentralized model. So the subsidiaries should be flexible and agile so that they can make the most of every trend and opportunity that they identify. And, in parallel, AddLife acts as an active owner, supporting steps that need to be taken.
We want to grow through acquisitions, and we have a continuous work to search for potential targets and attractive ones that we like in the niches that we have selected, and we have a successful acquisition process for integration and development. So these are the previously established strategies, and they remain valid for us going forward. However, we have also added a few new strategic initiatives, and these are based on the trends that we see in the market, but also, of course, our new and much stronger footprint in terms of geographic areas and product segments. So we wanna really leverage this position as a European partner to suppliers and customers. But I think the most important part right now is to suppliers, and they are really valuing the potential that they see in a collaboration with the different AddLife companies.
We will get to that a little bit later. I will show some good examples of that. Then, of course, digital solutions are critical for us. It is a mix of different ways we look at this. Some of our companies have increasingly become successful in selling digital products or digital software solutions, and so on, and you saw one example here earlier in the videos. In addition to that, we have also digital sales tools and digital sales methods, and we have some of our companies, recently acquired, actually, Bio-connect and BioCat, who are really strong in this area, handling most of their commercial interactions online. And then, of course, on top of that, we have many good examples within the group as well. Healthcare21 and MBA are using robots and AI solutions to optimize their processes.
So here again, these are some areas that we can learn from each other within the group. And then on top of that, we've touched upon the importance of value selling. The healthcare systems might be at times struggling with some budget constraints. They are struggling for sure with staffing shortages, so we can help them to perform more procedures with the staff and the resources they have at hand. The service offering is really critical as well, and as you've heard, this is a hallmark of success for many of our companies. We want to continue to build on that. It is something that nurtures the relationships, strengthens our position versus the supplier, and also, increasingly, it is something that we can charge for. Another initiative that is very relevant for us is own products.
As some of you know, we have a portfolio of products that we own and design, develop, and sometimes also manufacture. The share of this type of product group has declined as a percentage of the total. However, it is not declining in absolute terms. We think we can do more here. We think we can leverage these products, sell them through our entire channel, and that could be an upside for us. So that initiative is ongoing, and we've seen some good success with it already. Then finally, acquisitions are critical for our long-term development. We have done substantial work to investigate what kind of acquisitions we should be looking for, to be more precise in terms of the type of companies, the segments, the geographies.
By doing that, we can really mobilize the whole organization to look for exactly those companies that we like and start the networking activity to create those relationships, and over time, it will lead to many very interesting acquisition opportunities for sure. We will go into those segments shortly, but I will start with two fairly interesting examples of when we have been able to leverage our new and stronger European coverage. So the first example is within gene sequencing. Here we have a collaboration with a company called MGI. It started off in Italy with our strong company, Euroclone, that they were very, very successful in building the market for this company. And now, very recently, we have concluded a deal to extend that collaboration to the Triolab countries in Sweden, Finland, Denmark, and Norway.
This is a very interesting area, certainly high tech products, and they are also growing fast, and they are moving from being primarily a research tool to be something that is more used on a regular basis in the clinics, for example, to analyze cancer biopsies. So very interesting, high tech product with a great growth trajectory in the future, we think. Another example on the MedTech side is AngioDynamics. Here, Healthcare21 has had a long-standing relationship with this company for selling the products in UK and Ireland. And this is really an industry-leading player within oncology and the vascular therapy and vascular access. These product lines, we think, have a great potential for the future, also linked to the fact that minimally invasive procedures are becoming more and more important.
So based on this successful collaboration with Healthcare21, we're now expanding it to Mediplast, covering not only the Nordics, but also Benelux. This is a significant new agreement that we have, and we have not seen the full impact of that yet. We have seen, though, an inventory build-up, and we have seen, cost increases because we have taken on what was previously a direct sales force by this company. So an example of companies actually moving from direct sales to distributed sales. But however, we know this product line well, we think that the future potential for this product line is very, very positive, but we haven't seen the positives of it yet in the numbers. So these are two tangible examples from the new potential that is provided from our greater strength and bigger footprint.
So what about the segments that we like? So I think it's really important for us. We have so many opportunities now. We have to be focused, we have to prioritize. So for each of the business units, we have defined the segments in which we want to grow. So I will start with diagnostics. In diagnostics, we want to grow in microbiology, molecular diagnostic, genetic testing, immunology, cytology and pathology, as well as point-of-care diagnostics. These are areas in which we are already active, but as you can see, only to a fairly limited extent. You may remember that in the Labtech business unit, we have a profitability of between 10% and 12%, and as you can see, the expected margins here are all above that level, meaning as we grow into these areas, we can expect a positive margin impact from that.
These are significant addressable markets, and as we can see, the market growth is expected to be quite high. Here we have average growth rate from now up to 2028, and all of them are significantly above the growth rate of the diagnostics market in general, which is in the range of 2%-3%. So these are very attractive subsegments, if you will, and this is where we will grow in diagnostics. On a similar note, we have looked at the biomedical and research areas, and here we have identified molecular biology, cell biology and culturing, as well as advanced instrument for laboratory analysis. Again, you can see we are active in these markets.
We have a few percentage points of sales here already, which is a good thing because that means we know these markets, we know the products, we know the customers, but for sure, there is growth opportunity for us. Here again, these come with very interesting margin potential and a growth, again, significantly above the 2%-3% that we use as a benchmark within Labtech in general. So these are promising markets for us. Continuing into the Medtech business area and into hospital, which is a very big and important segment for us. Here we have identified a number of interesting areas. So surgery, and in more specifically, orthopedic surgery, interventional radiology, endoscopy, ophthalmology or eye surgery, and hospital consumables. So as you can see, we are active in these markets already at a slightly higher scale.
As many of you know, the Medtech business has a profitability profile at this point of around 8%-10% EBITDA margin. All of these businesses are higher than that, so they can be expected to contribute in a nice way to profits going forward. Also, they have a healthy growth projection. Here, when we look at the Medtech business, we think that the market growth in general is around 5%. Here, we're looking at a significantly higher growth rates in most cases. So also very attractive market segments for us. Then finally, looking at home care. Home care in general is not as profitable as the hospital business, and we have activity here in a limited way.
The expected margins in construction and welfare technology are healthy, I would say, but we can also obviously improve that, and here a key driver is the increased use and of optimized products that we manufacture ourselves. Here we see a very healthy market growth potential as well, and this is understandable. We see a lot of factors driving this growth. The healthcare systems need to find ways of handling the patients in a different way. The patients prefer to stay at home much longer, if possible. So this is—it's much better for the patient and also a very cost-efficient way to handle an aging population. So here, again, we are quite positive about the potential in the home care market.
We are seeing already today a very healthy growth here, and there is potential for more of that and for sure, improvements in profitability as well... So these are the segments that you will see us looking in terms of acquisitions and also organic growth going forward. So talking about acquisitions then, what are the criteria that we are looking for? I think it's important to be fairly clear on that, both, of course, towards the investor community, but also towards the targets we're looking for and in the organization, so that we can really leverage all of our resources in this search. We look for companies that are established and well managed. We want the key individuals to be committed to staying on after the acquisitions, as we have seen many examples of within our group.
We want there to be a good alignment with our culture. This is clearly very important. We can assess that early on, and it will certainly be a determination if we move ahead or not. We like companies that have a strong focus and that operate in our prioritized segments. The model of being a value-added distributor with advanced products and a strong service component is very strong, so we want to see that. And of course, just like we do in our other businesses, a big component of recurring revenue. When it comes to financials, we prefer a size that is below EUR 50 million of revenue, and probably the sweet spot is smaller than that. I think it's probably in the range of EUR 20 million or so.
We want a stable, profitable history, an EBITDA margin of above 12%, and a history of strong cash flow generation. And then when it comes to the geography then, we are a European company, this is our main focus. Here we see still a lot of potential, so that is where we will be looking. We have an ambition to strengthen the footprint even further in some geographies like Germany, Switzerland, and Italy, for example, and there are more markets that we are interested in, for sure. But this hopefully gives you a flavor for what we're looking at.
It's important to note also that, given the big acquisitions that we have made in the past few years, this will enable us to find these new companies through the strong management teams we now have in place in U.K, in Ireland, in Spain and Portugal, but also Central and Eastern Europe. We can leverage these companies to scout for leads. It can be about add-on acquisitions, but of course, also standalone companies. Moving on. This sounds great, a lot of great companies that we would like to acquire, but what are the benefits really for us, and why would this be attractive, or what is the uniqueness of our access to these types of companies?
So looking at the targets as such, we like this type of company because they're obviously proven businesses, they're profitable, fast-growing, and customer-focused. We know that we can acquire them at low valuation multiples. Traditionally, we've been acquiring companies of this type at multiples of around 7-8x EBITDA. Now we are certainly seeing those valuations coming down, albeit slow, but they're coming down. This means that there is potential for good value-creating deals going forward. And there is also a large pool of opportunities. So out of the 35,000, roughly, companies in this space, 95 of them, or nearly 5% of them, are indeed small and medium-sized enterprises. So what unique access do we have here?
I think we have the ability to identify these, to assess them, through our industry network, and we have the product segment and the geographical knowledge. So we can find these oftentimes through our own networks by reaching out ourselves, sometimes through brokers, but preferably that we initiate the contact ourselves. We have significant experience, clearly, in these small and medium-sized acquisitions, and this is ingrained in the organization, and within the functions for at AddLife group level, but also in many of our companies. And as we have talked about, and you've heard also from the team members earlier today, AddLife in general is an attractive acquirer.
This is based on the decentralized model we've talked about, retaining the ability for the key team members of the acquired company to stay within the company, to continue to develop it and be proud of their legacy. But also, of course, our ability to support the long-term business development of these companies. As Tara alluded to in the discussion here earlier, the price is always important, but it's not the only factor. We find oftentimes that we may well win these types of deals, even though we're not the highest bidder. These are very attractive opportunities for us that we are continuing to investigate and search for. During this period of time, when we have had a little bit lower activity in terms of acquisitions, we have also taken the time to really go through our acquisition process.
It is well functioning at the get-go, but we've taken the time to review it and modify it and evolve it. I will give you a brief overview of that. So of course, this. It starts with the strategy. We have defined already, and we talked about that, the type of companies that we want to look for in terms of the size, the ownership model, and then the niches that we like.... And then, of course, the next step is to identify these options. And here, very important to leverage our entire network of companies, building these long-term relationships, so when the time is right, we're ready to move. So we are also proactively approaching these targets.
So that is why this process has been so important to really map out, to engage all the companies, so that everyone is clear on what we're looking for. But also, when we indeed contact the company, we know that the group is behind it, and we will be ready to move. The evaluation of the company, of course, critical, and we have a unique strength in this. The geographical market knowledge, I think that has come through very clearly today in the presentations, because it is certainly not a one-size-fits-all in Europe, and even within the countries, on a regional level, there are differences. So that geographical market knowledge is key, and I think we have an unmatched ability there.
We again know the products, we know the customers, and we have established clear assessment criteria. And then moving on to a potential transaction, you know, we're looking for a fair evaluation, but not being the highest bidder. That means we're also ready to walk away if the price increases too much. We have long-term incentives for the management. They are well communicated, and as was discussed earlier today, they are very, very clearly linked to the financial targets of the group, as well as the targets of each company and their position in this performance matrix that we talked about. We will support with board appointments. We have an ability to really find the right persons for the boards, and that is an important way to certainly evolve the companies.
And then we provide the things that we've been talking about: training, culture, values. And moving forward, as an active owner, we will be engaged and investing for the long term, and we can also provide resource and the tools to facilitate the development of each company. And I think you've heard today also the value of that network that we have. The interaction that's taking place between the companies, I think is super valuable. We, as AddLife Group, we want to facilitate that. We make sure that there are meetings being held and so on.
But the discussion points and the collaborations, that is purely based on the needs of the specific companies, and that is working very, very well, and we are happy to see how that is evolving, and the network and the familiar feel that we see within the group is certainly evolving. So we're very, very happy with that. So with that, I think we have concluded an overview of where we're heading in terms of strategy. And as I think you can see, it's been based on a thorough process over more than a year, starting with a bottom-up approach, engaging all the companies, putting the plan together, linking it all to clear targets, and roles and responsibility, and also a clear communication internally, what we can expect and how much and when, in terms of acquisitions.
But in parallel with that, the work with organic growth is continuing, and that is, I may say, very, very successful at this point in time. So with that, we're starting to wrap up here, and now we're opening up for the second round of Q&As.
I'll join you here, then.
Yes.
Thank you. Okay.
So we received a lot of questions, right?
Oh, yes, we did, actually.
That's great.
We actually did one.
Yeah. Ex-
I could start immediately with one of these that you've been talking about. This is a short one, and it's Karl Norén from SEB. Will you do any acquisitions before you are below net debt to EBITDA of 3x?
Quick answer, yes. Yeah.
Yes.
We will certainly make sure we see the right trend in terms of acquisitions, and sorry, in terms of cash flow, before we make a significant move. But I don't think we will completely stop the activity until we reach that level. Rather, we will make sure we see a good trajectory in the cash flow, and then we can carefully start with selective smaller acquisitions.
Mm-hmm. I still have one other here, too, relating to your presentation. Could you quantify the opportunity that AngioDynamics opportunity in the Nordics and Benelux, as well as the MGI opportunity in the Nordics? What does it provide, and could you see that there are more regions which this relationship could expand into? And this is Matthias Häggblom from Handelsbanken who's asking.
Thank you, Matthias. Yes, we certainly could because we have done a lot of homework on that, but I am not going to share that. We don't wanna share that type of forward-looking or guidance type of information, but it is significant. This is, you know, much, much bigger than a normal addition of a supplier. This is really significant. You know, on the magnitude of almost of a smaller acquisition. Yeah.
Mm-hmm. There is also from Karl Norén, SEB, another one. After MDR and IVDR regulations, have you seen a change in companies approaching you to get acquired?
Yes, I think it's we are being approached, of course, and we are taking proactive contacts as well. But I think this is the regulatory burden as well as other, you know, burdens in terms of sustainability and so on. They are becoming not insignificant for a smaller company, and that is something that we can support with. We have a great network, obviously, within the group that they can share some good examples, and there's also a small, but still, a resource on, for example, on the sustainability side at the AddLife level. Yeah.
... and still one. How much of your sales are now your own products? And, when you did the large acquisitions, you mentioned one rationale behind them, was to push out more own products in the new companies and markets. And how is this really going? You discussed it a bit, but-
Yeah.
Do you have any further comments on it?
Yes, I do. And so that's a great comment, and obviously, this is one of the strategic initiatives now going forward. That work has been ongoing for some time, and so we are now adding some of the new companies to that commercial arm that's then sell the products that we have, that are our own, in more markets. So that's ongoing, and that has been successful so far, I would say. It's not given yet an enormous bump in the numbers. And to the specific question, how much is it? It used to be around 20% or so. Now, I would say it's below 15%, but that's not because it's declined in absolute numbers, it's because it's a smaller share. But so this is a long-term effort as well.
It's happening in the hospital business already. It's being analyzed, actually, by Matthias, who we met here, in the biomedical and research and diagnostics field. And we're—we have some really interesting activities as well in the home care part, in which we have a much higher share of own products than in the other businesses. So things are happening. It's moving forward. It's a strategic initiative that we will drive.
Hmm, good. Anyway, we have from Redeye, Eddie Palmgren and one other. You are reducing acquisition equity activity in 2023 and 2024. How are you handling relationships with prospects, companies, and brokers during this time?
Yeah, great question.
Great.
So we do nurture these relationships. We have clarified for ourselves and others what exactly it is that we're looking for. Oftentimes, these are long-term processes. We build relationships over time, and we can oftentimes control the timing of it. So what the important thing here is the openness. You know, we don't want to create false expectations. That will hurt us in the long term. So we can be pretty open, saying: "You know, we like your company. We may not be ready right now, but, you know, if we can talk again, after New Year's," you know, or something like that. It is not a problem, as long as we're transparent and clear, which I think we are.
And then there is this one: Is there... are any of these strategic initiatives more important than the others?
Yeah, well, they're all very important, for sure. But what I think the areas where we've seen most traction already is in leveraging this European network. You know, that has been some very clear and evident-
Mm.
Progress there and some new exciting, you know, companies and partnerships coming on board. It's almost like we have to be a little bit careful not to do too much at once, so but it's really good, great potential. So that one, I would say, is quite important, but all of them are important. We're driving them at a good pace, and you can expect to see progress in all of them. Some of them are fairly new, some of them it's more around leveraging existing strengths.
Hmm. But then I'll also ask,
Yes
... Carlos and, Tara, a few questions here, which were-
Good
Relating to the discussion earlier at the panel. One is to both of you. It's Alina at Carnegie, who has asked: "Tara and Carlos, what's been the largest challenge becoming part of the AddLife group?" Maybe you, Tara, wants to start.
Thank you, Helena. Great question. I think with any acquisition, there's always going to be uncertainty with a new owner. For me, though, we didn't change anything in terms of go-to-market models. We still had that decentralization. So in terms of that customer and supplier piece, we were comfortable that that was being managed. I've probably put it into context a little bit. We sold the business during COVID, so for me, the biggest challenge really was our people. I mentioned it earlier in terms of the importance. I was with Healthcare21 for nearly just shy of 20 years, and you become a family. You have those relationships, and to then have to make an announcement of that scale, to manage and lead a business, especially in the early couple of months, when you can't get close to your people.
But look, I would like to think that we did a good job working with marketing and comms. My thing has always been, even if there's nothing to say, then you should communicate. So we communicated, and we communicated, and we tried to do as much as we could with what we could, but that, to me, was probably the biggest challenge.
Carlos, do you want to continue?
I will pick the same. I mentioned already in our presentation, people is our top priority. It's everyone to feel part of AddLife. In the beginning, we are the managers that we are in an acquisition process, so no one knows nothing about AddLife. Then we introduced that AddLife acquired MBA, uncertainty around. And then we are in a lot of different meetings, participating, and we need to bring this to the company and need to communicate internally to them to feel part of AddLife, okay? So the challenge, I will say, it's a good challenge.
Mm.
Okay.
I have another one for you from Berneblad at Nordea. Can you talk about the healthcare backlogs in Spain and the pickup in surgical activity, and how you see the development going forward? And also, what role will private players play in reducing backlogs? And are we above 2019 surgical levels today?
Yeah, I tried to mention very simple chart, but the trend, the recovery is there, okay? Elective surgery is being recovered this year. Great source of growth for the majority of the companies, but we still see that the waiting lists are growing, and this is an effect that will not pass throughout the next three, four years. Because unfortunately, the society is back to the activity. And if you're going to Spain, so if you visit Spain, you will see that the activity is there, and we saw a lot of tourists this summer, and so on. So the activity is there. So what we are seeing right now is that all the sources that have been invested to recover the waiting lists are there.
The elective surgery is growing, and it's going towards 2019 levels, but we are still seeing that the waiting lists are increasing. So we saw that on the maps by the communities. We have to understand by community and community. But this is an effect that will remain for the last 2 to 3, 4 years. At least the analysts, the health care analysts, they say that the curve is going down in elective surgery, but at the same time, the waiting lists are ballooning up. So this is something that we have to take care. Good sign, everyone is active, and fortunate for some patient that has a fracture, the companies are there to provide solutions. So as the activity is there, the patients and the procedures, they will be growing. Okay?
So-
I had one other for you, too, on how has the way MBA operates changed since joining AddLife? More specifically, the financial way of operating your business, and how have you adjusted to the AddLife model?
Well, we are getting adjusted. We are not adjusted still. Our-- First of all, I think it's important because we are part of the AddLife Group and all the KPIs that were presented, we are following those. Those KPIs are on our targets and our objectives. We are learning from the AddLife. What I mentioned previously, that being part of AddLife helps us to see other dimensions. It's a long-term owner with a different expertise from where we came. So now, of course, we are not still in these adjusted KPIs, but also AddLife is learning our company, as MBA, can improve because for AddLife, I think, is also a different company from the companies that they have in the portfolio.
So I think we are doing a good synergy, learning from AddLife, learning from the other companies. And we have already in place, as Christina mentioned, some KPIs for this year, and definitely for the next year, we'll be improving. But as I said, it's a way that we have to follow a long-term commitment from the companies, and nothing can be done from one day to the other. And as we have to understand where we are operating, our success is due to the differentiation that we provide to our markets.
Mm.
So-
I'd like to add to that.
Mm.
I mean, I think you, Carlos, and MBA have many very strong ways that you are operating, you know, and I think there is a lot of learnings that other companies within the group can have from the MBA as well. So I think, so it's certainly an exchange of ideas and best practices, for sure.
Definitely. Definitely.
Maybe you, Tara, want to discuss also this Matthias Häggblom from Handelsbanken again. What's been tougher than you anticipated when joining the AddLife Group?
Matthias, that's a bit of a tough question to answer. There's probably two things that come to mind. First, I suppose being part of a listed company. When you come from an entrepreneurial, privately owned business, where you have, I suppose, the freedom or the flexibility when you're using social media, when you're kind of whatever methods or means in terms of communication. So it's probably just getting used to that. I found that a bit tough. The other thing for me was, I suppose, being the new kid on the block. As in the company, being the kid, not just me. But it was just having-
Right
...to kind of, I suppose, fit into a wider organization, which you've never had to do before. Again, it was during COVID, so we didn't access real people, it was all via Teams. I think it took nearly 12 months before we got together as like as in terms of the MDs and CEOs, but then that started to change, because then that's where that collaboration, that experience-sharing, everything that we spoke about earlier in the panel discussion, that then all started to come together.
Mm-hmm. Do you have anything to add, Carlos?
No, I think Tara mentioned pretty much just everything.
There is a question, of course, from Karl at SEB, who wants to know the profitability by division. What do you say to that?
Okay, so by business unit? Yeah.
By division, yeah.
Yeah, okay. Sure. No, we're not disclosing that. It's by business area, and that one you well know, Karl, so.
Then we have another to you, Fredrik. There's a lot of discussions around your acquisition strategy, and could you also update us regarding your financing strategy? That is, can you confirm if acquisitions will be financed through your own cash flow, or do you need to conduct a capital raise to finalize this strategy?
So our approach is to finance acquisitions through our own generated cash flow. That's always been the model, and that remains the model. So we have no current plans for any other sources of capital.
So we're coming to an end, but we have a philosophical question here, more or less. Who are your role models in business, and why? This is from Eddie Palmgren at Redeye.
Wow! Mm.
Do you have any ideas?
Wow! It's a difficult question. I think if you say a role model would be like one individual that does the trick, I don't think that's how it works. It's always a team effort. I admire the companies that engage the teams, that have an open dialogue when everyone speaks up and challenges ideas, and that's what I like. So I think it's not like one individual that we wanna emulate. I think it's more a working method, and AddLife has that working method. And there are other companies that do that well, too. But I think we do it uniquely well in the life science field.
So we are going to end this discussion now and/or this Q&A session, and Fredrik will give his final remarks. So I leave the table to you once again.
Yeah, thank you, Helena. Thanks, Carlos. Thanks, Tara.
Thank you.
Good, good questions. So, yeah, a lot of questions. We really appreciate that. Thanks for your activity, and, I'm glad that we could also bring Tara and Carlos back into that, dialogue. So that's really good. So we are about to wrap up now. I've thanked a couple of times already our fantastic team, and I really mean that. We have a great team, many of them represented here today, but of course, not all the talent that we have in the organization. But very proud of this group of people, and they're all very strong leaders, as you can see. I also want to thank everyone who's been involved in arranging this event. So, Helena and Sascha from the AddLife office.
We've also been fortunate to be able to engage some members from other companies within the group. So from Healthcare21, Joe and Julie have been very engaged in helping us with everything from arrangements and videos. And of course, also to Safir, Helena and Maya, who's done a fantastic job. So with that, I wanna move into the summary. So I think it's clear that our growth strategy is working. We have been seeing for the last two quarters, a very strong organic growth. We think that is very important because it shows that we are positioned really, really well for the market conditions at hand and the market conditions that are coming. And it's also a very important fact, and it shows that we are really a good home for these successful companies that we have acquired.
So that strong growth is not only good in itself, but it's also a sign of strength, that the company is working really, really well and that we are well-positioned. Starting from that growth that we are seeing in the market and in our business, then we can address the profit and the cashflow improvements that we would like to see. And we are doing that, as we've talked about in the presentation today, with full force. And that includes, of course, the regular work that we do day to day with efficiency and improvements, our methods and tools to evolve the businesses, but also in some cases, you've seen some clear actions and the important moves to take more significant changes, such as we have done in the AddLife business or AdVision business.
We are taking clear actions, and we are driving the priorities all across the organizations. With the confidence we have in the underlying business and our ability to improve the financial parameters, we are reiterating our financial targets, as you heard today. Our ambition is indeed to reduce the debt, and we want to get the net net debt to EBITDA level below 3. When we have achieved that level, we can, of course, go back to a full-scale acquisition approach again. But in the meantime, we will still do selective and small acquisitions, but not until we've seen that pickup in cash flow generation that we are expecting towards the end of this year.
So that is the plan, and that is what we will be driving as a group, and as you can see, we have a fantastic team who will be successful in making that happen. So with that, we're wrapping up the day, but I do want to ask you for a few more minutes to see a very good video that we have, and this time we are going to show a video of our partners, our supplier partners, and how they look at us as a collaboration partner in the different markets. And I think there are some really powerful statements in there. And after that, we look forward to having lunch together with those of you who stay, and continue the dialogue about our exciting business. So thank you very much, everyone, for joining us today.
It's been a pleasure. Look forward to the continuing dialogue. Thank you.
It comes with the partnership and everything that comes with the long-term partnership, and that is, the strong relations. It's, mutual trust, and, and then it is, mutual also dependency. We, we are dependent on Triolab or AddLife as, as distributors, and they are building their business on, on, on Radiometer. They've shown the way, in the Nordic market, also for other, other countries, other where we have sales companies. In the, in the Nordic region and for Radiometer, we're very strong. AddLife and the Triolab, distributor companies, they have really been able to, to handle the markets, and, and expand as, as well as the sales company in Denmark. So we have the highest market shares in the world, we have the, the best customer support, and so on.
And in that way, they have shown the way, continue the long tradition, growing in some very mature markets with high market shares. So I'm looking forward to the future collaboration. We've been working together for more than 50 years, up to 75 years. We look forward to continuing that, so we just look forward to this partnership for the coming many years.
We significantly grow our installations in the lab automation, especially for the nucleic acid extractions and virus detection. And after that, when we officially launch our next-generation sequencing products in the market, and Euroclone and AddLife will work together with us to design a go-to-market strategy about the NGS products, and we really open the market in Italy together already, and we are expecting significantly growth of the market share in the future.
BioMedica signed the contract in 2016, but since they created a sepsis solution, they've grown faster than expected. This has had a huge impact in their market, and it's an example for all the other distributors that we work with actually worldwide. We were very pleased to give BioMedica an award, because we wanted to put BioMedica in the spotlight for all their activities that they do around our product. I think what is really key in this sentence for me is a partnership. It's not just a distribution, it's a true partnership, supporting each other, wherever we need it, and really build on each other's capabilities, and knowledge. They continue to grow. They have increased the revenue about 40% last year, and my expectation is that it will only be more this year with all the opportunities that are outstanding at the moment.
My name is Marco Martini, and I'm the Vice President for Europe for two operating units in Medtronic, Patient Monitoring and Respiratory Interventions. We have a strong relationship for a very long time with one of your companies that you acquire, Healthcare21. We are very impressed about the level of quality and service that Healthcare21 is deploying to our customers. The team is really best in class in their markets, and our customers are delighted. It's not a surprise to see Healthcare21 to be part of AddLife and working now together as we share the same vision about providing the best value to our customers to improve patient safety and quality at the end. We are also sharing the same value in terms of responsibility, commitment, and innovation. I truly believe in partnership, we can't do everything alone. We can go really further together.