Okay, let's get started here and the team here will work to see if we can get a video link as well to work. Let's start with the, with the presentation here. Again, apologizing for the technical challenges and the delay. We are going to present the fourth quarter and the full year results. Hold on. Starting with the 2022 summary, that has been a year where the team has worked diligently to position the company for a post COVID-19 market. Indeed, we have had acquisitions compensating for the reduced COVID-19 revenue, and we have been able to achieve a 14% growth in spite of the significant decline in COVID sales.
These new businesses that we have added, they are really set to benefit from the re-recovery in elective surgery once we enter into the post COVID-19 environment. It's important to note that this high margin COVID-19 sales is being replaced by acquired MedTech sales, and at this point in time, at a slightly lower margin. We're working diligently to improve the profitability of this newly acquired MedTech business. Based on these acquisitions, we have also established a very significant European footprint, with a much broader and more stable portfolio. With this new European footprint, we see a lot of opportunities for cross-selling, for collaborations between companies, and the ability to launch new products and form new relationships with suppliers.
We see a long-term positive trend in the demand driven by demographics and underlying economic growth and of course, a continued prioritization of healthcare systems in spite of market uncertainty. Based on this positive outlook, the board is proposing a dividend of SEK 1.2 per share, which is in line with our policy. Moving on to the fourth quarter. Having prepared during the year for a post-COVID market, we are really now entering a post-COVID situation with increased demand in the healthcare systems in general, and a growing number of surgical procedures being done. Same as for the full year, acquisitions and organic growth is compensating for the reduced COVID-19 sales, and we are happy to note the increased growth, organic growth in both of the business areas.
On 6% growth on the group level, from that organic underlying growth. On a very positive note as well, we are noting that EBITDA margin and cash flow is in a positive trend compared to the previous quarter. Next slide, please. Talking about COVID-19. As expected, a significant drop in COVID-19 related sales in the quarter. Almost SEK 300 million reduction in sales based on that in the quarter, and SEK 1.2 billion reduction for the full year. As stated before, we have been able to compensate that fully with acquired and organic growth. As the market develops, COVID-19 testing is now part of broader respiratory test panels, so it's no longer possible to separate it from the rest of the normal business, so to speak. Indeed, the market has normalized.
We have full customer access again. The teams are focusing now on normal commercial activities. That means that we will probably not show this slide anymore, and we will not separately report on COVID sales going forward. Of course, when comparing to previous year, it's a significant factor in Q4 that we just reported. Also, as you can see on the graph in Q1 will also be significantly impacted by that. Again, going forward, we put the COVID-19 impact behind us. Next slide, please. Taking a look at the numbers, we can see that for the full year, the drop of SEK 1.2 billion in COVID sales was more than compensated by acquisitions in MedTech of SEK 1.7 billion for the full year.
A similar picture, if you take a look at the EBITDA numbers, where the Labtech decline based on COVID, reduced COVID sales is almost fully compensated by increased EBITDA in MedTech. If you take a look at the quarterly numbers, next slide, please, we can see that similar picture, acquisitions compensating for reduced COVID sales on the revenue line, but on the EBITDA line, not fully compensated yet. That's something that we're working on. Important to note also that we continue to invest in digital solutions, which pulls down the margin a little bit in MedTech. Starting to talk a little bit more in detail about our Labtech business.
We have had a significant drop again in COVID-19, but organic growth is very healthy at 6%. The EBITDA margin is solid, and the focus is really now on developing the portfolio, introducing new products. Next slide, please. If we take a look at the diagnostics and the research and laboratory parts of the business, the testing is decreasing as expected, but in diagnostic we are seeing an underlying healthy organic growth. We see an increase in interest in our service and efficiency improvement products and solutions that we can offer because of course, the staffing shortages is a main theme in healthcare in general, but this is also affecting the diagnostics labs. We can help the customers to be more efficient with the resources that they have.
technologies and new products, for example, in the sepsis area, as well as increased use of point of care testing. We have a lot of instruments sold and placed in the market that can be leveraged for other types of tests as well. In addition, there has been initiative ongoing within the diagnostics team to offer European distribution to suppliers. We have a strong commercial organization in 29 countries, and this is a pretty unique offering that we can provide to the suppliers, and we are having very interesting discussions along those lines. A new approach for us, but very, very promising. On the research and laboratory side, we see healthy organic growth there as well. Of course, there are some budget concerns in state-funded research, in academic research, for example
We still see a continued strong development and in research and drug discovery, a continued very strong sales development. Also in this area, a lot of emphasis on negotiating new supply agreements and launching new products, particularly in the areas where we see a rapid technology development and adoption of new technologies such as gene sequencing and bioprocessing. If we move on to the Medtech business area, acquisitions is strong growth driver of course, in addition to that, we have a strong organic growth in this quarter as well at 5%, and that's a significant improvement versus the previous quarter. We see an increase in elective surgeries happening, and that is driving the demand for many of our products.
Of course, there is still a significant waiting list that has been accumulated during the COVID years. That list will have to be managed. A lot of patients are waiting for surgery, surgical procedures. However, as many of you know, the healthcare system is struggling with some staffing shortages, and that's true for all the European markets where we're active. So that will slow down the handling of that waiting list. We expect that over time, these patients will have to be treated, and we'll be there to support the health system to do that. Moving on to the next slide. Looking at the hospital health services business, organic growth is there, in a solid way, driven by electives, more and more elective surgeries.
The acquisitions in advanced orthopedic surgery that we have done during the past years are indeed contributing to both growth and margin, and that's evident as if you compare it to the corresponding quarter last year. We have also seen a rebound in number of procedures after the summer months. That has led to better sales, but also better margins in that part of the business. Some of you remember we had a bit of a weakness in the previous quarter profit-wise, and so that one has now recovered fully. In the eye surgery business, we are also seeing a gradual improvement driven by increased patient flow, but also a number of new product launches, very promising new technologies that we're bringing to the market, and also a strengthening of the team.
The home care side, we see a strong growth in the quarter. The home care portfolio is really exciting because it addresses many of the needs that the healthcare systems are facing right now. We can address the needs to take care of elderly patients and patients with chronic diseases, and doing so within a very efficient way using digital solutions, and reducing the staff requirements, and also enabling savings and improvement in quality of life. We are continuing to invest in this area, and for the quarter, a SEK 17 million investment was done. That impacts the profitability of the Medtech business area by roughly one percentage point. Next slide, please.
If we take a look at the long-term financials, we stick to our targets of growing the profit by 15% per year over time, as well as our profitability target, which we measure by profit over working capital, which we are above that target. That, those targets remain. With that, I want to hand over to Christina, our CFO, to talk a little bit more about some of the detailed financials.
Yes. Thank you. AddLife have delivered a stable revenue growth and EBITDA growth during the past years. There has been some peaks, of course, during the COVID in certain quarters, but in general, it has been a stable revenue growth. Looking at the gross margin, that has also been stable over the years, and I'm very pleased to see the way that our companies have handled the quite challenges situation we have right now with cost increases. We have done good during this year. The COVID-19 space, that has been handled within current organization, meaning that today we don't have an excess in employees or other expenses related to the COVID. That means also that the COVID revenue boosted EBITDA straight off on both money and percentage-wise. Next slide, please.
AddLife has also proven to generate stable operating cash flow throughout the years. During this year, and especially in Q3, we did build up some inventory. This was done to make sure that we could continue to deliver to our customers, even though it was supply chain challenges and component shortages. Going forward, we do think that this will gradually improve because in Q4 it was still the stable level of inventories, but we did foresee that that will improve a little bit. Debt has been increased in conjunction with major acquisitions. The aim is to deleverage via self-generated cash flow, and this has also been the case looking back over the history. Next one. The bank facilities, just below SEK 5 billion, is across 50/50 short and long-term loans, and it is traditional bank loans with our house bank.
We have a good headroom to the covenants, which is interest coverage ratio and equity ratio. During the quarter, the interest expenses increased as a reflection of Euribor and CIBOR increasing. Financial net, in addition to interest expenses, also include exchange rate losses relating to the debt and continuous considerations. Of course, in the current market situation, high debt means that the interest expenses increases, but except from that, we do not see a risk with the debt and it will deleverage going forward. Yes, with that, I hand over to you again, Fredrik.
Thank you very much. In summary, we can conclude the year in a good way and the team has done a fantastic job continuously adapting to the changing environment. Yet another example of the strength of our business model with decentralized responsibility and very entrepreneurial and agile companies. In summary, we have replaced the COVID-19 revenues with acquired MedTech revenue. We have positioned the company to be able to benefit from the market condition post-COVID, and we think we are now in that phase. The healthcare system is indeed entering as a phase where elective surgery procedures are increasing, and they will continue to work on this waiting list of patients needing surgery. We see a significant long-term growing demand in that area.
We're happy to see a significant improvement in organic growth in both of our business areas. As I mentioned earlier, we see a positive trend in profitability and cash flow compared to previous quarter. Of course, working on these parameters, improving profitability and make sure we are efficient in our operations and generate more cash is going to be a high priority going forward. Of course, in the market that we're facing, there are price and cost increases that we're facing. We are increasing our prices to our customers as well. That will remain a theme during the year. In general, we feel that there's a good willingness to accept price increases. Of course, some of these agreements are long-term and the negotiations may take some time.
As Christina just said, our ambition is to reduce the debt. As you can see from the graphs that she showed, we have at times taken on higher debt to finance acquisitions in the past as well. In those scenarios, we have always been able to relatively quickly reduce the debt again based on the cash flow that's generated from our business. While we work on improving the efficiency of the business, growing organically, generating higher profits and cash flow, we will also continue to proactively develop our acquisition pipeline for acquisitions in the area and the selected segments that we like. Again, as previously stated, main focus on smaller acquisitions that are natural add-ons to the companies that we have recently acquired and leveraging our European platform.
With that, we can conclude the presentation of the fourth quarter and the 2022 full year report. We now open up for questions. I think we have Carl asked, you have a question in mind, perhaps?
Yes. Good morning. I have a couple of questions here. Maybe just starting off on the cash flow side, quite good capital or working capital release now here in Q4. Just a question regarding how you think that could play out during 2023. Do you expect to get a release for the full year, or how should we think regarding working capital in 2023?
Yeah. Thank you, Carl. Yes, indeed, we did see an improvement in cash flow, and that is certainly an area of focus for all our companies. We have been building inventory to act as a buffer and to make sure that we are a really reliable partner to our customers. That is an important strategy. In general, one could expect for us to reduce some of that buffer going forward. I will also comment saying that we are, as we speak, adding new products to the portfolio, taking in new supply agreements and at some times, that also entails building up some inventory to start with. That's a effect we also have to take into account.
In general, our aim is to improve, you know, cash flow during the year.
Okay, thank you. A question on, like, there are some one-offs in the quarter, I would say, but, from the reversal of the contingent consideration and et cetera, could you please provide us the figure, ballpark, how much do you think is, like, positive one-off in the fourth quarter?
Yeah. That, that's a good observation. There are some smaller ones, a few smaller that are kind of of the size that we haven't commented on them specifically. Some smaller positive effects, like you just mentioned, but also some smaller negative ones. In general, they're kind of evening out, but maybe you wanna give some more detail to that, Christina.
The reverse of the continued consideration relates to a couple of companies, and in total is SEK 16 million.
Okay, that's clear. I have some questions regarding the margins here going forward. I think that's quite interesting. I mean, if you look on the Labtech side, the margins were still quite strong and at pre-COVID above pre-COVID levels in Q4. What can you say regarding the margin development there going forward? Because I know it's been some discussions regarding where the margins will land in Labtech after COVID.
Yeah. I think a general comment is that, for the business as a whole, you know, we're going back to a pre-COVID situation. There is still some positive impact in this quarter as well from COVID. That's the general starting point, so to speak. Our work now is to launch new products so that we can indeed grow the volume in Labtech. Because that's the main reason why we saw such a positive margin during COVID. The fact that we were able to handle a larger volume in the system without needing any extra cost. Now that COVID volume is gone, now we wanna replace it with new business.
I think in the short term, we should expect something along the lines of something more similar to pre-COVID levels in the Labtech business. Then over time, as we add new, more products, it should improve. While we speak about margins, I should also say the similar logic applies to Medtech, but with the exception that indeed we have acquired some high-margin businesses in Medtech, and most of them are performing according to plan at the level that we were seeing at the time of acquisition. We've talked about the eye surgery business where it has been, you know, below and kind of pulling down the average, but that is improving.
It's not going to be back to the starting point quickly, but it's moving in the right direction. Finally, the, the impact of the investment in our digital solutions, that's around one percentage point on the Medtech margin. I think that's the summary we can provide.
Yeah. That was also my last question relating to the Medtech side, but I'm just more... Because I think in historically, Q4 has been the strongest quarter for the margins. I don't know if that will be the case going forward, but in most Medtech companies, Q4 is relatively strong, both volume and margins. Now you need it 9% or 8.9% here in Q4. I'm just curious about, is it possible? Do you think that margins will be above 9% for 2023, or is that some kind of reasonable level to assume, or what do you think?
I don't wanna comment on a specific margin number like that. I think let's take the starting point as stated before in pre-COVID and with the adjustments of the acquisitions made. I think it's a good question, though, about the fourth quarter because the dynamic has changed a little bit. In our significant Healthcare 21 business that we see, you know, end of year effects in Q1 because some main customers are having a different fiscal year. Also, in the orthopedic surgery business, there is an effect of holidays. Some of these surgical procedures, which are indeed elective, they might not be scheduled around Christmas and New Year. There's a little bit of a negative effect in.
Yeah.
-in December on the orthopedics business. The dynamic has changed a little bit.
Yeah. That's why I asked, because last year-
Yeah.
I think Q1 was better margin in Medtech than in Q4. Will be interesting.
Yeah.
to see how it will turn out, here. Thank you for answering my questions.
Thank you. Thank you. We have some more questions. Anna had a question, I see.
Yes, hello. Thank you for taking my questions. Maybe if we go into the organic growth, after you have adjusted for the COVID-19 effects, do you have any sense of how much of that is volume and how much would be sort of price effects? Because I guess you have raised prices, quite a lot against customers, as you've mentioned.
We have indeed raised prices. Some of it has come in effect, some of it come in effect, you know, as we enter into 2023, and some of it is still to come into effect. It's a gradual process, and some of it will take even longer because they are long-term contracts. It's a little bit hard to give a, you know, an estimate of that mix. It is indeed a mix. I think we're not able to give a hard number to which is which, to be frank.
Okay. We shouldn't assume that there's a high tilt towards any of them.
No. I would say it's a mix, yeah.
Okay, perfect. The development cost in Medtech, it seems like it grew this quarter to SEK 17 million. Could you explain maybe why, and what we should expect ahead?
Well, I think there's no dramatic change there really. It's, it's a little bit higher, that's right. SEK 3 million higher, something like that. I think we should expect something along the lines of, say, you know, around SEK 15 a quarter or something like that. Yeah. I think there's no trend shift. It should be, you know, averaging out around that somewhere.
Okay. That's very clear. Thank you. My last question is, if we maybe could get some more details and updates on AddVision, like how it's going and what are the strategies ahead?
Absolutely. AddVision is a fantastic company, ticking many of the boxes that we are looking for. Strong position in a niche market supported by demographic trends, such as aging population and so on. AddVision has a very strong European position, a quite unique European position actually in the segment that they are active. We have had some challenges relating to suppliers primarily, and some products that we no longer carry and some that we are still carrying, but there has been some delivery problems. Overall net development in that company is quite positive here in the quarter. We see that We have strengthened the sales team.
Some of the new products that we're launching are starting to have a positive impact. We have indeed, a lot of products in launch right now. It takes a while to introduce them to each country to train our sales team, but also very important to train the surgeons who are actually using the technologies. That takes a while, but, we see good traction there. We're cautiously optimistic about the future here. We're investing in that area. It will take a while to get to the levels of profitability that were communicated at the time of acquisition. There's this clear improvement in the fourth quarter compared to the third quarter.
We're optimistic about the development, but not to expect an extremely quick shift, but rather gradual improvement.
Perfect. Thank you. That's all for me.
All right. Thank you, Anna. We have Aline as well with some questions.
Yes. Thank you. Aline here from Carnegie. I have a question regarding the covenants. You say that you have quite good margins through covenants, but as net financials are increasing, we're seeing that you're getting closer to the four, which is on the interest coverage ratio. When I calculate the interest coverage ratio, I get 3.9, then I use the EBIT. Could you just please describe how you calculate the interest coverage ratio?
The EBIT in the bank covenants is not straight off what you see in the profit and loss. There are some adjustments to that. When we calculate it's around 20, actually. It's a good coverage.
Okay, that's very good.
Yeah.
Is this something that we can calculate on by ourselves?
No, unfortunately not. That's why we haven't added it either into the report. There are some differences in how we calculate it towards the bank, actually. Unfortunately, you cannot take it straight off the report. Currently we're in the range of 20.
Okay, super. Also a question-
I guess the message there is that we're very, very far from any of those limits. We're very comfortable with that financing solution and with the relationships we have with our banks. For us, that's not a concern, but we are committed, of course, to over time reducing the debt by the cash flow that we're generating.
Okay, super. Thank you. Also a quick question. As we're seeing that AddVision is not contributing to the group as initially thought, would it be likely that there will be a goodwill write-down in the company? I'm also thinking about on the covenants here, if you would reach out the covenant.
No. We're comfortable with the AddVision business. We're comfortable with how it's developing, and we're strengthening team and resources and launching new products. We don't see a risk of that at all.
Okay, super. Do you know approximately how long it would take for AddVision to get back on the same levels or more profitable levels as before?
Well, they, you know, they're, they made a solid improvement in the fourth quarter. We expect that trend to continue. We're gonna have to monitor it closely. We hope that, you know, in, you know, in the coming quarters, they will stop being, you know, an entity that pulls down the average margin and they will be... Over time, they should be a company that actually that actually contributes positively to the average margin of the Medtech quarter. That will take some time, you know. We're moving certainly in the right direction. It's not, you know, it's not months, it's quarters for sure to get it to where we want it to be. Yeah.
Okay. Super. Thanks so much. Congratulations on a great report.
Thank you, Elin.
Thank you.
Thanks for good questions. Do we have more questions? Carl, maybe another one or...?
Yeah. Hi again. I just have a question. I looked through the report here and the CapEx side, the investments seem to be up by almost 100%, I think, year-over-year. Can you state any reason to that? What are you investing in?
That is mainly relating to the acquired companies lately, where they invest in instruments, et cetera, for rental. It's part of the business model that they have.
Okay.
That's a positive investment in many ways, right? Because we tie up customers in close relationships with instruments. For example, that then are also linked to the continuous supply of consumables. It's money out, of course, but it's something that generates longer term profits and cash flow.
Okay, that's great. Just another question like the market in the Medtech side. Are you seeing that elective surgeries, et cetera, are improving now also in January? What is the general trend in the market if you look on the broader healthcare hospitals? Are they handling the situation in a good way or what's going on?
I think, in general, we have seen in the third quarter, and it seems to be a continued positive trend here, that indeed more elective surgical procedures are being performed. Of course, it's important to notice that there is a staffing shortage for sure. The waiting lines or the backlog remains long. Some countries have been able to kind of reduce that backlog a little bit. Some are stuck with it still. Some countries are investing, you know, adding much more resource to the healthcare systems to be able to handle that. For example, in the UK, there is a significant additional investment in finding new ways to handle that backlog with new technologies and new approaches.
Oftentimes we are able to contribute to that. We can provide products and services to help out in that, in that scenario. I think we should not expect the backlog to be quickly fixed. This will be a long, probably multi-year process to handle that backlog. In general, a positive trend, but it's being held back significantly by that staffing shortage. We also see a little bit of a hesitancy when it comes to investment in capital items in the hospital system. For us, that's not a huge issue. It's only a smaller part of our business, but there's been a little bit of a hesitancy there at times. Again, not impacting us that much.
Okay, that's clear. Then here's the last one on my side. looking at other healthcare companies, they are guiding for rather weak, maybe first halves to the year and then, you know, gradual improvement in the second half, if that's something you also foresee or do you expect all of the first half to be pretty good or?
We don't want to guide really. We don't wanna give a guidance on how we think things will develop. Of course, we have a relatively positive outlook on 2023, driven by the activity in the healthcare system and the strong, you know, pent-up demand, if you will. Of course, we have to be clear about the staffing shortages. They are there. They can be in particular, maybe in some Eastern European countries, there might be some pressure on budgets and with that, healthcare spending as well. Again, that's a relatively small part. I think we think it will be, you know, a decent year with some challenges here and there.
Again, we feel well positioned for that market, with the activities and businesses we have. Also, historically, we have been able to navigate challenging market conditions based on our decentralized business model. I think, we have a fairly positive view on 2023 as a whole.
Okay. That's clear. Thank you.
Thank you. We have another question. Jerome here.
Yeah. Yes. Hello. thank you for taking my questions and also for these good results. I just wanted to know, Could you give us more details about your, if I could say, audit around the previously acquired companies just to understand if you are suspecting or if you flagged other companies or areas such as in AddVision which could present similar risks.
Well, I think, coming into the company, we have done a pretty thorough review of the performance of all the portfolio companies and also have had some really in-depth discussions about the plans for the coming years and the outlook. We are quite happy with the acquisitions we have made. They are all companies that fit into our portfolio and share many of the aspects that we like. Such as being supported by strong technology or demographic or economical trends and with strong position in their specific niches. In general, really good. We have talked a little bit about some challenges within the eye surgery business. Again, it's moving in the right direction. And we have some really positive product launches in the works.
We think, you know, even though not everything is 100% in all companies at all times, we are confident in the plans that we have and in the trend that we see. I would also like to add that we have a history of acquiring companies and also, over time, working closely with the management teams to find ways to evolve growth and profitability. That's been true in the previous acquisitions we have made, and that is true for the ones that we have made more recently as well. All moving in the right direction, I think would be the summary.
Okay. Perfect. Thank you. Maybe just a last question on your debt. I saw that on your slide, you saw the average rate is at 3.6%. Is it fixed or?
No, it's consists of a margin, and then it follows Euribor and STIBOR, which is the main reason then that it has increased during Q4 since the interest rates are going up.
Okay. Okay. Perfect. Okay. Thank you very much.
Thank you. Thank you for good questions. Are there any other questions from the group? All right. Well, thank you very much for your time. Again, we apologize for the late start here. I also wanna. A special thanks for really good questions. Again, we are happy to conclude 2022 on a positive note. The team has done a fantastic job handling the changes in the market. We do feel we are well-positioned for the market conditions as we move into 2023. Thank you, everyone. By all means, feel free to contact us on the phone or on email if you have any follow-up questions later on. Thank you, everyone. Have a good day.