Good morning, everyone, and welcome to this conference call. We'll present Attendo's results for the second quarter. My name is Andreas Koch. I'm Communication and IR Director at Attendo. Today's presentation is hosted by our CEO Martin Tivéus, and our CFO, Fredrik Lagercrantz. After the presentation, we will open up for questions from investors and analysts, and we take media requests separately after the call. With that, over to you, Martin.
Thank you, Andreas, and good morning, everyone. We'll focus most part of the presentation today on Finland, partly due to the very weak result in Finland for the quarter, but also because our ability to turn around Finland is essential for the long-term success of the company. While the situation in Finland has become even more challenging than we expected in Q1, and will likely remain so short term, we are, given the outcome of the recent price negotiations for 2023, more confident today to reach sustainable conditions in 2023 and onwards. I'll talk by giving you an update of the overall development and direction of Attendo, and Fredrik will then take you through the numbers in more detail. Sales in Scandinavia continued to be strong in Q2, and we're gradually increasing occupancy.
At current pace, we are on track to get back to pre-pandemic occupancy levels during 2023. Reported profits in Scandinavia are slightly higher year-over-year, but adjusted for items of non-recurring character were roughly in line with the second quarter of 2021. Profits in Finland declined SEK 75 million year-over-year as a result of increased staff requirements, high cost for overtime and recruitment, high sick leave costs, and high inflation. Short term, we expect the challenges in Finland to remain while we're working intensely to improve the situation. At the same time, the longer-term prospect for Finland has improved recently, and we are starting to make good progress in price negotiations for 2023. During the quarter, we have finalized negotiations for around 20% of the total elderly care volume in Finland. The result was an average around 30% price increase starting April 2023.
This can be compared with expected total cost increases of approximately 20%. While we still have the majority of the market volume left to negotiate, this development supports our belief that we will be able to reach overall sustainable price levels in Finland from April 2023 and onwards. Another concern regarding April 2023 and the final increase of staff requirements to 0.7 is, of course, access to qualified staff in an already strained labor market. Therefore, the regulatory relief that was announced recently in June was much appreciated. The supervisory authorities in Finland have decided to open up to use a much higher share of care assistants in the staff mix in nursing homes than in the original staffing law.
With this relief, the transition to staffing index of 0.7 in April next year will cause less additional turbulence in the labor market, as we can use the same number of nurses and practical nurses as today. Instead, we will employ more care assistants, a role which requires a much shorter period of education and training. This relief shows that the authorities and politicians in Finland do finally recognize the need to adjust the implementation of the staffing reform. During the quarter, a new collective wage agreement between private providers and the unions in Finland was signed in mid-June. This is expected to give some more stability in the labor market. We also have a number of initiatives in Attendo to improve the access to staff, as well as to lower staff turnover, as we have reported on previously.
Given the price negotiations, the regulatory relief, as well as the positive occupancy trend in Scandinavia, we expect to reach a profit level of SEK 4 per share, likely not for the full year 2023, given that new prices in Finland will be valid first from Q2, but with some delay. We achieved organic growth of 7% in the quarter, mainly due to more sold beds in Scandinavia and higher prices in Finland. Lease-Adjusted EBITDA amounted to a loss of SEK 11 million, driven by the development in Finland. Overall occupancy remained at 84%, an increase in Scandinavia, but a slight drop in Finland versus Q1. Quality index remains on a high level. One key aspect of our quality work is customer satisfaction.
During the quarter, we received the results from the National Customer Survey in Care For Older People, carried out by the National Board of Health and Welfare in Sweden. Our long-term ambition is to become the most appreciated provider in every local community where we operate. On average, we had a score in line with industry average, and in 12 out of 54 municipalities where we operate in Sweden, Attendo was the most appreciated care provider in either home care or nursing home segments. Next slide, please. This chart shows the openings per quarter and rolling twelve-month opening base. Prior to 2020, we had a strong pipeline of new projects to meet expected demand for new nursing homes in Scandinavia. Since the start of the pandemic, we've opened more than 1,000 new beds.
In the initial phase of the pandemic, we adjusted and lowered our expansion plans with effect from 2022. During the first six months of this year, we opened 144 beds, and for the remaining part of the year, we plan to open another 200. In terms of new projects, we had around 350 own beds under construction by end of Q2. In line with our strategy, our current focus up until next year is to improve occupancy and margins in current footprint rather than seeking expansion. Beyond 2023, we expect to return to a phase of a higher number of openings on the back of the upcoming elderly boom. This top chart presents sales from trailing 12 months basis on group level as well as from business areas.
Trend is positive, and we have the ambition to continue to occupy empty beds, and we continue to explore selective M&A opportunities. The lower chart displays trailing 12 months lease-Adjusted EBITDA margin. The past two years, the reported development is heavily impacted by the corona pandemic. The situation in Q2 is heavily impacted by the staffing situation in Finland. Let's turn to occupancy development. In Scandinavia, we managed to increase occupancy to 82% in spite of opening 84 new beds in the quarter. Sales momentum has remained strong in the past year, and in our own operated nursing home business, we have lifted occupancy from 71% to 78% since the year-end. With this pace, we will be back at pre-pandemic occupancy levels already next year.
In Finland, demand for nursing home beds remains on a healthy level, but we haven't been able to translate this into higher occupancy in recent quarters. This as a consequence of lack of staff in some units, and also that Attendo have terminated agreements through negotiation in a number of municipalities where we're not satisfied with the terms. While this is necessary to achieve healthy terms long term, it also hampers short-term occupancy development as these local authorities restrict new customers to nursing homes. Let's take a closer look into the financials for the quarter. Please go ahead, Fredrik Lagercrantz.
Thank you, Martin. Let's turn to page seven. Net sales increased to SEK 3.5 billion, up 11% compared to the corresponding quarter last year. Organic growth for the quarter was 6.7%. Organic growth was more than 7% for Attendo Scandinavia, driven primarily by more customers in nursing homes. In Attendo Finland, organic growth was 6%, driven by higher prices. Lease-Adjusted EBITDA amounted to -SEK 11 million, down from SEK 53 million last year. IFRS 16 effect on reported EBITDA increased somewhat. Financial net was -SEK 159 million, compared to -SEK 158 million in the second quarter of 2021. IFRS 16 and related interest expenses increased by SEK 6 million, while interest expenses for our borrowing from banks was flat. Other fees and currency effects had a positive impact on the financial net.
Income tax for the quarter was + SEK 5 million. The adjusted earnings per share for the quarter was - SEK 0.14, down from + SEK 0.90 last year. Attendo Scandinavia continues to attract new customers, although average occupancy is still below historic levels due to many openings over the last two years and the pandemic. Net sales for the business area increased by 9%. The strong growth is to a large extent driven by more customers in nursing homes for elderly people. Our new units opened over the last two years have successfully attracted customers. Further, during the last quarter of 2021, we did take over responsibility for four new outsourcing contracts. In the quarter, occupancy increased by 1 percentage point to 82%. Acquisitions has also contributed to growth. Lease-Adjusted EBITDA increased from SEK 74 million to SEK 84 million.
This quarter's result was supported by SEK 30 million from non-recurring items, mainly pension-related. In comparison, Attendo received SEK 18 million in retroactive corona support in the second quarter of 2021. Underlying operative result is in line with last year. There is an underlying improvement for more customers and better occupancy in nursing homes, offset by cost inflation estimated at SEK 10 million, and some efficiency issues, especially in home care.
Looking ahead, units started during the last two years will continue to have a negative impact on profitability, while we expect a continued positive customer inflow. The balance between startup costs and positive fill-up effects will continue to gradually improve as the year progress. General cost inflation is estimated to continue to burden the result with at least SEK 10 million per quarter. This will, however, be compensated from January 2023, as most of our customer contracts has annual index adjustment.
For the third quarter this year, we expect to see the normal positive seasonality effect. Growth has slowed down somewhat for Attendo Finland and amounts to 12% reported and 8% in local currency. The growth primarily comes from price increases. In many contracts, prices are adjusted in January, and the average price increase for 2022 was more than 5%. Lease-Adjusted EBITDA decreased from SEK 0 to -SEK 75 million. Differences in corona effects impact the comparison with about SEK 15 million, but still the result is down by around SEK 60 million. The negative development is primarily driven by higher personnel costs, other cost inflation, as well as fewer customers, only partly offset by higher prices. Impact from cost inflation is somewhat higher than we anticipated, and we estimate the effect in the quarter to have been SEK 15 million-SEK 20 million.
The significant increase in personnel costs comes from both increased staffing due to new regulations and higher hourly costs due to labor market shortage. We have also lost some efficiency in scheduling due to new regulation being more rigid and inflexible. We are working hard to handle the situation with increasing staff costs, but we do not foresee any major improvements in the short term. Instead, the new cost level needs to be absorbed by higher prices in 2023. Some price adjustments will be seen from January 2023, mainly adjusting for historical cost increases. The full price effect will however come in April 2023. We expect a positive seasonality effect for the third quarter this year. This table shows our cash flow development. Free cash flow was positive by SEK 134 million in the quarter and SEK 230 million for the last 12 months.
The total purchase price paid for acquisitions in the quarter is about SEK 200 million. Adjusted net debt amounted to SEK 1.6 billion, which equals an adjusted net debt to Adjusted EBITDA ratio of 3.2, up somewhat from previous quarter, but within our financial target. With that, I hand back over to you, Martin.
Thank you, Fredrik. A few closing words before the Q&A session. Financially, we are delivering high growth but a poor result. Attendo Scandinavia shows an underlying stable development, but we are struggling in Finland with the staffing situation. We're taking several measures to improve access to staff and decrease the staff turnover. It's also satisfactory to see that politicians and authorities are getting aware about the challenges with implementation of the new law. Most important, we're seeing good progress with the price negotiations for April 2023, when the new law will be fully implemented. This is expected to give sustainable conditions for the market already next year. In spite of the current heavy headwind in Finland, the underlying long-term trends are clearly favorable, and our organization is focused on delivering on the key actions in the turnaround program. Thank you for listening, and over to you, Andreas.
Yes. We'll now open up for question, and we take questions over the phone first, and then, I will read out the questions we got, through the web. Operator, please go ahead.
Thank you. If you do wish to ask a question, please press zero one on your telephone keypad. If you wish to withdraw your question, you may do so by pressing zero two. The first question comes from Viktor Forssell at Nordea. Please go ahead. Your line is now open. Oh, sorry. I think that the line got, you accidentally went out of the queue, Viktor. Right now the question comes from Kristofer Liljeberg at Carnegie. Please go ahead.
Okay. I'll start. I have three questions. First, would it be possible to comment on the occupancy level for own units in Scandinavia? I think the figure you show also includes other contracts. I wonder, you talk about rather flat earnings in Scandinavia year-over-year, but considering that you had, I think SEK 50 million in extra cost in the second quarter last year for two extra vacation days, at least according to my calculations, earnings are actually down year-over-year. If you could comment for the reasons there. The SEK 10 million you mentioned for inflation, was that per quarter or per month? The final question is about the assumptions you made when calculating price increases of 20% in Finland next year. Thank you.
Thank you, Kristofer. Okay. I'll start. The first question was around occupancy level in Scandinavia on operated nursing homes, which is our largest segment in Scandinavia. During the pandemic, I think we hit a low point at around 63% occupancy level on own operated nursing homes. That was up to 71% by year-end, and by quarter close, end of June, we were up to 78%. We have improved occupancy with seven percentage points in own operated nursing homes, in spite of a few openings this first half year in Scandinavia. We've had a pretty strong sales momentum. If we expect that to continue, that would mean that we will be back at pre-pandemic levels next year.
Considering
Thank you, K ristofer.
Okay. That leads us into the second one, because with that strong occupancy development, I would have expected earnings in Scandinavia to be much better. I guess there's something else that's not going so well.
The factor that you're missing is that we still have higher than normal sick leave levels in Scandinavia. Last year we had sick leave contributions or protection from the state. We have corona-related costs of almost SEK 50 million this quarter that we didn't see last year because it was covered through the subsidies. It is underlying in line with last year. You know, I also agree with you that given the occupancy development, we should have seen more progress. We have some, you know. You know, the sick leave is also causing some operational issues, especially in the home care where we're not getting full utilization. We are working on that and we will solve that. It's not a structural problem.
SEK 15 million for higher sick leave than normal?
Yes. It's also some others, but it's mainly sick leave.
Okay. The SEK 10 million cost inflation you mentioned, was that Scandinavia?
Yeah.
Was that for a quarter?
Yeah, it's for a quarter in Scandinavia. In Finland, we estimate it to be between EUR 15 million and EUR 20 million per quarter.
Okay. The sick leave costs, will they remain now in the third quarter or is this getting more normal?
It has gradually improved during the second quarter. It was kind of at the end of June, it was almost back to normal levels, a bit higher. Unfortunately, we've seen it start to increase again slightly in July. You know, if you read the news, you see it's a European trend that we see a bit more of corona all across Europe right now. We need to see how it develops during the next few months. Now because I have a final question around the price increase of 30%. What was the question around that?
No, no. The question was what assumptions you have made when you talked about, not pricing, but, cost increase.
Cost increase on the
Sorry.
20%.
Yeah.
I mean, what we have clearly seen over the past year is that one thing is the mathematical sort of cost increase. If you look at the increasing staffing density requirements, I mean, now going from 0.5 to 0.65 to 0.6, that is one thing. Next year from 0.6 to 0.7. When we are 0.6 to 0.7, that is almost a 17% increase. But it's if you look at our staff cost share of total costs, that would mathematically drive costs around 12% next year.
We are assuming 20%, as we have seen now that there are dynamic effects on the labor market in terms of some salary inflation, inefficiencies of how to actually staff. Because also the way the new regulation has been interpreted by the supervisor compared to how the law is written. In those 20%, we don't assume that anything will improve from today's level. We expect the dynamic effect to be, you know, similar to what it has been this time. What I think is good is that the regulatory relief that was announced by authorities in June makes 0.7 possible.
Because we can use care assistants instead of additional practical nurses and licensed nurses, which wouldn't have been available in the market to the extent needed for the total industry. Now it's actually, you know, at least it's mathematically possible for the industry to comply.
Okay. That's very clear. Thank you.
Thank you. Now we have the next question from Viktor Forssell at Nordea. Please go ahead.
Yeah, thanks a lot. Hope you hear me. Starting with Scandinavia and perhaps circling back to last quarter where we talked about the margin progression here into the second half of the year. Just looking at today's results and the previous discussions here during this call, is it still feasible for you to have a sort of at least flat-ish margin in second half compared to last year? And what are the dynamics that need to improve here as you exited Q2?
Thank you, Viktor. I would still believe that Scandinavia will improve profits measured in SEK than for the second half compared to last year second half. That is based on the positive occupancy trend, but also that we can become a bit more efficient again on some of the operational issues I mentioned.
Okay. If I just come back to Kristofer's question regarding the trajectory of this 78% in nursing homes that you talk about now. When you say that you in this pace would drive you to pre-pandemic levels into next year, is that for your full sort of for all nursing homes? Or are we talking, you know, mature ones or how should we read your statement?
If you read it like in our own operated nursing homes, we basically take all our nursing homes. We have outsourcing business and our own operated. Own operated is the majority of the nursing homes, right? The average total occupancy has gone up from 71%-78%. Of course, then we have mature units that are with higher occupancy already, but this is including also the startups and the more recently opened nursing homes. The total average occupancy is now 78%. That is a low number. I mean, in this industry, this, we are used to operating at around 90% occupancy level historically. That's, you know, where we should be at to have what we call sort of mature margins as well.
We expect to be able to return to that level, which we were at pre-pandemic, during next year, if you know, given that the sales trend of the past year continues.
Okay. All clear. On Finland and just noticed that you have a quite dramatic quarter-over-quarter change in FTE. If you could spend a minute around the figure itself, you provided last quarter, you anticipated 500 nurses, if I recall it correctly, from the Philippines, and also the need of around 1,000 employees to cover your or the occupancy rate that you currently have in Finland. Any comments regarding your employees now in Finland and what trend you're at?
Yeah. First of all, it's a good observation. First of all, you need to be aware that we always have higher FTEs in the second quarter compared to the first quarter. That's a seasonality effect because some of the summer temps come in and go along to learn the work. The delta you see from first quarter to second quarter is not the run rate delta. It's mainly a seasonality effect. Secondly, we've done some acquisitions. We bought a rehab hospital in June outside Helsinki that added a bit more than 100 FTEs. There is an effect of that we are preparing for the staffing increase, and part of it is to have Filipinos coming in and also working more with apprentices.
Given the regulation, we cannot utilize them in the staffing index according to the law from day one. That is part of kind of the inefficiency we talk about that the new regulation being more rigid. That if you ask to look at the delta from the first quarter to the second quarter, that's a smaller part of the explanation.
Okay. How do you see that develop if we just talk about the Philippines, for example?
Now we will continue to recruit through that international channel. It's an important part of how we are trying to solve for the shortage in the labor market. It's also part of the increased cost we're seeing in this quarter because it costs some. It's not, you know, dramatically changing in the second half of the year 2022 compared to the first half of the year 2022.
This is also part of what, when we say that we think that cost will go up to around 20% from April next year as a run rate compared to the price increases of 30%. In those 20%, we include what we expect to be the new cost level, including that we will need to keep attracting around, you know, 500, 600, 700 practical nurses or licensed nurses from abroad every year.
Just the last comment, there's also seasonality effects in the third quarter where the number of FTEs goes up further, and then from a seasonality perspective, it falls back again in the fourth quarter.
Thanks. That's understood. Maybe it's just me. Around this 20% cost increase as you talk about the base that they grow from, that is, we should not make any sort of, I mean, underlying adjustments to our cost base or to your cost base, entering 2023. What you expect is 20% up from what you end full year 2022 from. Is that correct?
Yes, that's correct. We, as we mentioned, we think the, you know, more or less the run rate that we see in Finland for the second quarter is the run rate that we will see for the remaining of the year.
Mind you that the 20%, this is regarding the elderly care segment, which is around 70% of the total turnover in Finland.
At what stage do you think that you will have concluded all the negotiations? Is that something we can expect in the call during Q3 already?
No, I think that's gonna be too early. Look, we expect it to conclude by year-end all the negotiations. We're not steering the rhythm. Every region or sort of region and municipality, they go out with the new sort of tender in their own rhythm. Then they all need to do it by the end of this year. We can. Yeah.
All right. Thanks a lot. I'll head back to queue.
Thank you. Just as a reminder, if you do wish to ask a question, please press zero one on your telephone keypad. The next question comes from Hans Bostrom at Trinity Delta. Please go ahead.
Good morning. A couple of questions, please. Would you be so kind to elaborate a bit on this change that was proposed in June on easing up on the regulations from 2023? If you are able to put in auxiliary staff instead of nurses, doesn't it kind of defeat the purpose of this regulation anyway? Or are there some hard rules as to how many nurse staff that need to be per patient? And secondly, there was a comment you made regarding some of your voluntary cessation of contracts with local authorities, I believe that was in Sweden, that you thought might have a short-term impact on occupancy. Would you care to elaborate a bit on that? I missed the actual scope of this. Thank you very much.
Yeah. Thank you, Lars Hevreng. If you take the staffing creation and the release of information that was announced now in June. The way the law is written is that care staff to handle care instances is going to increase from 0.6 to 0.7 FTEs for every client. What has changed now is what share of those 0.6 that can be performed by care assistants compared to practical nurses or licensed nurses. It used to be roughly one-tenth or zero point zero seven out of the zero point zero six out of the 0.6. But it's gonna increase to 40% of the share. It's a much larger share of the care instances that can be performed by care assistants instead. The implication is that we more or less have enough numbers of practical nurses and licensed nurses, and the extra recruitment needed can be done from care assistants.
Okay. That's very helpful.
The voluntary cessation, that was for contracts in Finland, where in some situations we have observed that the region or the municipality is not planning for a re-tender, they have given notice of termination. You know, for example, there was one municipality where there was a 12-month notice in the contract, and then we did give a notice end of March, because then it was 12 months until the new law came into force. You know, it was not only us, it was other providers also doing that, which made the municipality conduct a proper re-tendering, and it ended up with what we think is sustainable price levels. During that process, the municipalities try to be more restrictive of sending clients to us than if we have terminated agreement.
And how-
Depending on what the lo-
Sorry, I was just wondering, is this only one local authority, since it's a relatively-
No, it's been several. They timed a bit differently depending on what the notice of termination terms and that specific agreement looks like.
Mind you, now it's not municipalities anymore. We are mainly negotiating with the new sort of regions. There are now 22 regions in Finland. It used to be close to 300 municipalities. It's a different situation. Now, when we cancel an agreement with the sort of region, it's a much larger sub-market.
Finally, I understand that you have some challenges at the Säteriet in Gothenburg area and placement stop of new clients. I mean, how long is this likely to last, and what is the impact on your business?
Also Hans. Säteriet is one newly started unit in close to the Gothenburg area. You know, a startup process is always sometimes meets some challenges and we also acknowledge that. We are very good track there and good relationships with the municipality, et cetera. I would say with the current action program we have, we are sure that this will be a successful unit. You know, of course, it's unlucky that the startup was made some hiccups. Overall, we delivered good care there as well. It's a new, fresh home. Given the action program, we're very confident to deliver good units there.
Okay, great. Thank you very much.
Thank you.
Thank you. We have a follow-up question from Viktor Forssell at Nordea. Please go ahead.
Yeah. Thank you for taking the follow-up. I'm just curious to hear a bit more regarding your EPS target. I think it's fair to believe that it will be tough to reach for 2023. Nonetheless, it sounds as if you would have had the full price effect in Finland from Q1, it sounded as if you would be able to reach for. So I'm just want to pick your brains a little bit about the equation here.
Yeah.
On your EPS target.
Yeah. Well, the EPS target, you know, is based on us reaching a number of sort of sub-targets. Well, one part is, of course, price increases in Finland. Others are occupancy development in both markets, but also efficiency in Sweden, I mean Scandinavia. If you look at growth in occupancy development and efficiency in Scandinavia, we are on track to deliver that. It's very much up to Finland, where if you look at Finland, we have roughly, you know, EUR 7 billion in turnover in Finland, where we're about, you know, EUR 5 billion of that being nursing homes or elderly care business.
Of course, if we manage to get the 30% price increases versus 20% cost increase in Finland, that it's pretty strong strengthening of margins. A well-needed strengthening of margins in Finland for next year. We will get it from Q2, not Q1, next year. If we keep the trend trajectory in Scandinavia, and if we manage to get through with all the price increases in Finland, yes, indeed we would expect to be at a profit level of SEK 4 in 2023, meaning that we can fulfill the profit target we delayed to 2024. If we would had had it from January 2023, we think it would still be possible to reach the target already in 2023.
Thanks for the answer, there, Martin. Just to understand the underlying EBITDA margins regarding you hitting the SEK 4.
We haven't translated that to exact margin, but we said it's roughly around making SEK 900 million in this Adjusted EBITDA.
Okay. Just a final one, if I may. Since you sound quite upbeat regarding profits improving into next year, the pace of it perhaps being the caveat, but still, I think your balance sheet looks to be strengthening throughout the year as well. Just curious about your capital allocation. You made some smaller acquisitions, but do you think that's the way to go, or do you see a chance of perhaps buybacks or something pointing to your perhaps low valuation?
This year, not. Next year will be different story because we're, you know, going to see the overall sort of profit pickup during next year, not this.
Okay. Thanks a lot.
Thank you.
The next question comes from Kristofer Liljeberg at Carnegie. Please go ahead.
Yeah. Just a follow-up on Finland. I think you mentioned that you had terminated some contracts in Finland during the price negotiations. To reach the 30% price increase you're targeting, how much of the contracts do you think you will have to leave? Should we assume a negative impact on sales in Finland from next year? Thank you.
No, we expect to come through with all the contracts in Finland eventually.
What's happening that's part of the negotiation?
That is part of the negotiation, and that is part of what we have seen already in this quarter. That's part of it. Of course.
Okay.
We believe also that, now, you know, the first around 20% of the contract in Finland, meaning of the market in Finland, has already, you know, has concluded the prices for 2023. They also become public in Finland. We believe also that, the longer we go, the higher likelihood it gets that we'll actually reach you all the way in Finland because it becomes sort of a market standard. It becomes, you know, more and more difficult for, you know, the next municipality to argue for a lower price if, you know.
Yep.
The market level, you know, reaches a certain point.
Okay. Thank you.
Thank you.
Thank you. The next question comes from Jakob Lembke at ABG. Please go ahead.
Hi. I have two questions. First of all, with the new easing regulations you're seeing in Finland, are you now confident that you will have enough staff in 2023, or is there something else that needs to happen before you are there?
No, that I think it is a really good question because I mean, we're seeing the quite dramatic effects on the labor market that just the current regulation has already inflicted going from 0.5 to 0.6. Going from 0.6 to 0.7 would arguably be even more difficult for the labor market and create even more turmoil next year, especially as the math doesn't really make sense in terms of access to qualified staff. This easing, the regulatory easing that was announced was actually immensely important. For us, I mean, there was two things that we think that these two things need to happen.
One, we need to get the price increases right, to cover for all the costs related to it. Secondly, we need to get the authorities to understand that they need to ease regulation because it's gonna be too messy otherwise. The second part was really important. That means that we still need higher, you know, to provide higher staff density from 0.6-0.7. With staff roles that has much lower requirement on education and training. That means that we can actually train them ourselves. It's now more in our hands rather than the overall market.
Okay. Thanks.
Does that answer your que-
Yeah, very good. My second question is on the sort of the same topic. Previously you have spoken about sort of not being able to take on customers in Finland due to the tougher labor market. Can you just sort of update us on where we are in sort of the demand-supply balance, and if there could be any sort of pent-up demand or elderly people not receiving care because of the situation?
Yeah. That's exactly what we're seeing right now. We're seeing that the queues are getting longer in Finland because not only us, but the entire market has a challenge in finding enough staff to onboard new clients. We don't really have, you know, balance now with supply and demand. There is a balance in supply and demand, but not supply of staff. That's what you're seeing also in our occupancy rate, that it's flat in Finland, and we expect it to remain flat actually to next year. Even if it's gonna take some time to adjust in the Finnish market and to train and educate more staff and to get the balance right. Right now we have there is more demand than is possible to cater for really in Finland right now. Queues are increasing.
Okay. That's very clear.
Yeah.
Thank you.
We think that, longer term, it would likely increase also the need for home care in Finland.
Okay. That was all of my questions. Thanks.
Thank you.
Thank you. We have no more question at this time, so I hand the word back to the speakers.
Yeah.
Yeah. Just, question there. There are some questions on the. Well, that we've got now online, and many of them we've already talked about. Just to repeat them. How do we achieve a profit of SEK 4 per share? Martin gave the key components there with the Finnish price hikes, the increased occupancy in both business areas, as well as the efficiency gains we get in Sweden when we have a higher or rather normal occupancy level. I think we talked very much that.
Also about the timing of the EPS target of SEK 4 per share is that if the question was can you achieve it in 2024 or could it take even to 2025? They will clearly state that next year we'll achieve a level of SEK 4 per share during next year, but we don't see it in Q1.
That's, you know, why we say a delay somewhat shouldn't be interpreted as one or a couple of quarters rather than anything else. That was related to the financial targets. There's one question related to governance level that Fredrik could maybe elaborate on.
Yeah, we've gotten this question from time to time, and our financial target is that net debt to EBITDA measured without the IFRS 16 should not exceed 3.75x. Our banking agreement is somewhat more flexible than that. Although we follow the development on our cash flow and balance sheet development very detailed, and then we also look ahead. That's not keeping us awake at night because we're so worried that this will be a problem.
Yes. Finally, two questions. One is about the price increases and how that relates to inflation. Maybe, Fredrik, you can say some words about also how the pricing works in Scandinavia.
Yeah.
We already talked about Finland.
The thing that we talked a lot about, the 20% estimated cost increase includes also inflation. That's part of that equation. For in Sweden and Scandinavia, it's gonna be more of a normal price adjustment. The far majority of our contracts, they have index adjustments, and they are based on a weighted combination of labor cost increase and other cost inflation, where the labor cost increase has the higher weight. There will be higher than normal price adjustments going into January 2023, given the high cost inflation that we see right now in society.
The final question was about the sort of high turnover of personnel at the Finnish market and we as well are having right now. How can we remain and make sure that the quality remains on a good level and also when taking a new staff from the Philippines? Maybe Martin, you say a few words about that.
Yeah. I mean, we are, you know, staff turnover, especially in Finland are getting higher. We're also used to having a fairly high staff turnover in Finland. We are putting a lot of resources into education and training of staff. We spent quite a lot investment also on leadership training for our leaders in Finland. We did also already two years ago reorganized Finland into a smaller span of control for area managers to be able to cater for a bit more turbulent. I think we have catered for that. In terms of Philippines, we are working with the bringing in Filipino licensed nurses into Finland for the past 10 years in Finland.
It's nothing new, but we are scaling it up now. We have very good experiences of bringing those in. They're much appreciated as colleagues. We also train them in Finnish language for nine months in Manila before they get the chance to come to Finland and be offered a job. They need to pass a Finnish language test in order to get employed in our Finnish operation. We have a good experience in that, and it worked well.
Thanks, Martin. I think we have taken all the questions we got online as well as on the phone. With that, we'll now conclude this conference call. As usual, you're always welcome to contact us afterwards now if you have further questions. Thank you for your participation. Thank you.