Earnings Call: Q4 2018

Feb 13, 2019

Good morning, everyone, and welcome to this conference call where we will present Atendo's results for the 2018. My name is Nirsch Kauss. I'm communication and IR director at Atendo. Today's presentation is hosted by Atendo's CEO, Martin Thewis and Atendo's CFO, Fredrik Lagerfeldt. And after the presentation, we will open up for questions. Over to you, Martin. Thank you, Andreas. Good morning, everyone. Welcome to the presentation of our fourth quarter results for 2018. I've now been at Atendo for almost six months. I spent significant part of my time to get to know the units, the staff and management. As I talked about last quarter's results presentation, what I've seen is a strong commitment and entrepreneurial spirit in Atendo on all levels. And I also believe that given our capabilities to provide high quality care and given the market trends, our growth opportunities long term are very strong. Having said that, the results in Q4 and for full year 2018 was not satisfying. We have seen a significant impact by the menu openings, in combination with costs related to closure of units, predominantly within individual and family care. The high rate of openings will continue in the coming years. This also means that we foresee limited opportunities to improve margins this and next year. Apart from the many openings, we'll we'll also see some headwind over 2019 and 2020, mainly regarding three year within three areas, outsourcing, Mika and overhead the synergies regarding the Finnish health care business. We'll come back more into those areas later on. And I will now turn into the presentation, starting by presenting the results in brief and by sharing some business and market highlights. Then Fredrik Georg Eklund, our CFO, will take you through the numbers in more detail. Next slide. We have had a very high activity in 2018. We had a record number of openings and construction starts. For the fourth quarter, net sales amounted to SEK2.8 billion. Growth was 12% adjusted for currency. That's a result of openings, recent quarters and acquisitions. Organic growth amounted to 4.5%, the best in many quarters, and will over time increase further as more beds get occupied. The underlying operating profit EBITDA amounted to DKK158 million corresponding to a margin of 5.6% for the quarter. Improved occupancy this year in units which were under start up in Q4 last year contributed positively to profits, as well as improvement in Home Care and contributions from acquisitions. Profit was continuously negatively impacted by costs for opening up new units. Project and facility related costs were significantly higher versus last year, and this is the number of smaller items that together adds up to a larger sum. Frederic will walk you through that more in detail. As we have indicated before, the loss from amended outsourcing contracts had a negative impact in Q4, as well as some calendar effects. In addition, we increased provisions during the 2018 by SEK60 million in relation to a few individual old units that we are closing and operations expected to be loss making in coming periods. We reported an operating cash flow of SEK155 million. And as previously announced, we finalized the divestment of our health care operations in Finland just before year end. The proceeds have significantly strengthened our balance sheet and will support our growth ambitions long term. Next slide, please. So let's take a closer look at our contract models. We can see that the quarter reflects continued growth in owned operations. Net sales in owned operations increased by 21% compared to Q4 twenty seventeen. This is explained by acquisitions, new nursing homes and higher occupancy in units that were under start up during the corresponding quarter of last year. During the fourth quarter, we opened 11 new owned units, with a total of close to 400 beds, higher versus previous quarter, but lower versus the average in 2018. The number is expected to be high in the coming quarters. For 2018 full year, we opened 76 care homes with 2,409 beds. Turning to outsourcing, outsourcing accounts for less than 20% of sales in Atendo, and it will continue to decrease as part of the group as we are growing in own operations. Net sales and profits in Outsourcing declined due to ended contracts in Q4. We have recently ended contracts with good profitability, something that will have a continued negative impact on the comparison numbers in 2019. We estimate the negative impact of up to minus SEK50 million on EBITDA year on year. Looking at the results of tendering processes in Q4, Atender lost contracts net of an annualized sales value of SEK50 million. For the full year, however, at tender won and lost contract volumes are in balance. Next slide, please. This chart shows the rolling twelve month opening base. And as I just mentioned, we opened close to 400 beds in Q4, isolated. The number of open beds rolling twelve months around Q4 was 2,409 beds, almost 30% higher than the same period last year, but clearly below the peak level of 2,900 beds. And the high number of openings have had a clear negative impact on profit and margin in 2018. The high rate of openings will continue in 2019 and 2020, even if the level will be lower versus the peak in Q2 twenty eighteen. Our mature units in non operations continue to demonstrate stable development related to occupancy and profitability, and we predict a good profit growth during the coming years. However, given the ongoing expansion and expected lower contribution from outsourcing, the possibility is to increase the margins from the existing level is expected to be limited during this period. Are carefully assessing the balance between growth opportunities and the increased exposure that expansion entails. In HIM Sight, we have taken too high risk historically in some projects, where we haven't been able to secure contracts with local authorities before an opening. Going forward, we are reducing our risk exposure in connection with new projects. In this context, bear in mind that units that were currently open up are based on decisions several years ago as they are long lead times. Finally, would like to mention that while we are setting up our sales efforts and are on record high sales levels, OpenBid still exceeds net sold belts, and we have not yet reached the inflection point. Later in the year, we'll provide more color on the long term projections. We will update long term financial targets based on our strategic plans and reflecting the new accounting standard IFRS 16. Next slide, please. Atendo now has around 15,700 own belts in operation. That's an increase by almost 20% from the corresponding period 2017. We have continued to find new opportunities, and we started construction of 10 new units that will add three seventy nine new vessels. In total, had almost 2,500 vessels under construction by end of Q4. This is a slight decline versus previous quarter, and we are on a lower level versus the peak now in 2017. Next slide, please. So let's turn to the overall market trend. I'll focus on the situation in Finland. An intensive debate about the conditions and care of older people has arisen recently with a focus on private providers. In recent days, we have received critique relating to newly opened nursing home at Tandupalimane in Alabos. This new unit received about 50 new residents with intensive care needs in only a few weeks. The unit has temporarily got its permit suspended by the local supervisory authority in Western Finland. We take this event very seriously, and relevant measures have been taken. I want to emphasize that Atender Finland is operating according to the Atender model. This implies continuous internal quality monitoring at every single unit, a value driven culture and clear accountability on all levels. Atenda has about 400 care homes in Finland, and we have historically had fewer incidents in relation to our sites compared to the care sector as a whole. Now turning to Sweden. After a long government formation process, the Social Democrats and the Greens were able to form a centric government early in the 2019 with support from the Liberal Party and the Centre Party. As part of the agreement between these parties, the question regarding profit limitation for private operators is taken out of the political agenda. On local level, we can see that the result of the election has increased the number of local authorities governed by Centre right wing coalitions. This could long term open up for more outsourcing contracts and own operation establishment. With that, I hand over to Fredrik for a financial review of the quarter. Thank you, Martin. As you remember from last quarter, all figures related to the income statement are presented without the Healthcare operation in Finland, unless we state otherwise. So let's turn to page seven. We can see that the net sales continued to be strong. Total net sales amounted to billion, up by 15% compared to the corresponding quarter last year. Adjusted for currency, net sales increased 12%. Acquisitions contributed with approximately 7%, a bit lower than previous quarters as a consequence of Mykiva being consolidated into Atendo in November 2017. Organic growth improved to 4.5% in the quarter and is over time expected to further increase due to our menu openings. The fourth quarter was, as earlier announced, negatively impacted by ended outsourcing contracts. You should also bear in mind that NetStates is still negatively affected by the closed units within Home Care and the Individual and Family Care business. In the coming quarter, we expect a small acquisition effect as there will be no year on year effect on the Mickiew acquisition. Reported EBITDA amounted to NOK98 million in the fourth quarter, including the increased provision for closure of operations and loss making contracts. EBITDA excluding the increased provisions was million with a margin of 5.6%. The cost of provisions of SEK60 million relates to an increase of existing provisions. In accordance with accounting standards, Appando regularly on a unit by unit basis makes assessment of potential future costs to close the unit or anticipated losses per unit that has passed the start up phase. The assessment during the fourth quarter resulted in a need to increase the existing provisions by SEK60 million. The increase relates to closure of an old nursing home in Southern Sweden, two individual and family care units, home care operations in Denmark being terminated and two continued losses post startup phase for a nursing home in Sweden, where we lack a contract with the local authority. We believe that new situations may arise also going forward, which would need a provision, but the total amount provided for should not increase. Hence, we forecast no further profit impact in 2019. Excluding the provisions, we see that also the underlying margin has declined compared to last year. The margin is pressured both by the large start up costs and by Mickova coming in with clear lower margins than Atendo. We also see that this quarter have had unusually high cost for a number of facility and project related items. I will come back with details on the underlying EBITDA development on the next page. Financial net was negative SEK38 million compared to negative SEK23 million in Q4 twenty seventeen. The higher interest expenses are explained both by higher debt and higher interest margins after the Mickiew acquisition. Income tax for the quarter was 6,000,000, which equals a tax rate of 25%. The high tax rate is mainly explained by the losses in the Danish Home Care business and to some extent of a lower share of remaining business in Finland. Net profit from continuing operations amounted to SEK18 million in the quarter, which equals an earnings per share after dilution of SEK0.11. Profit from divested operations amounted to SEK605 million, of which SEK579 million is related to capital gain of the divestiture. The capital gain was positively affected by currency effects. Next slide, please. As I mentioned, the underlying operating profit for the quarter was $188,000,000 lower than last year. The largest improvement comes from the units that were in the start of last year and now are entering into more mature phase. We continue to see positive development for our Home Care operations. Our efforts to improve planning and routing and to increase client concentration in the areas we operate have given results. Acquisitions also contributed positively, but with a smaller effect this quarter as there is only one month of Nikkeo, I think. Looking at the items pressuring our profit, we see the continued large impact from start ups, although somewhat lower sequentially compared to the 2018. As mentioned, we also have higher costs than usual this quarter for facility and project related items. A high activity level in combination with timing effects has led to high costs in the quarter, for example transfer costs for acquired real estate, facility maintenance costs and M and A related costs. We also had a negative development in outsourcing, mainly driven by a negative balance between started and annual contracts. The fourth quarter also included negative calendar trends, partly due to the number of public holidays, but also a consequence among many days in a sequence. Usually, we schedule recurring but not daily tasks to normal workdays, but this holiday season some of those activities were scheduled during public holidays. Before we turn the slide, I just want to give a few comments on the coming quarters. First, you should note that we last year did write downs of real estate of SEK20 million in the first quarter. However, we expect positive impact from units that were on the start up last year. As Easter this year occurs in the second half of April, we will on a year on year comparison have a positive calendar effect in the first quarter and a negative effect in the second quarter. Openings will at the same time have continued negative year on year effect. The negative effect on outsourcing we have experienced in the fourth quarter will remain. We will also have overhead dis synergies following the divestment in Finland to a magnitude of about million for 2019. Next slide, please. On this slide, you can see the complete cash flow statement. First, bear in mind that cash flow includes the healthcare operations in Finland. The large positive cash flow in the quarter is due to the divestment of the healthcare operations in Finland. After the quarterly close, we have repaid external debt corresponding to an amount of about SEK2 billion. At the end of the quarter, net debt amounted to SEK2.5 billion, which equals a net debt to EBITDA of SEK2.7 billion. Next slide please. From January 2019, Atenda is applying the new accounting standard IFRS 16. As Atenda is choosing to apply the full retrospective approach, we together with this quarterly report also show restated income statements and balance sheets for 2018. Quarterly statements for 2018 can be found on our website. The implementation of the standard means that essentially all leases will be recognized on the balance sheet as there is no longer any distinction between operating leases and finance leases. For Atendo, it is the rental agreements or premises where we operate with own operations that have material effect. External benchmarks of yield for public properties are used as the discount rate to calculate the lease liability. And for our most important geographies, yield varies between 46% for 2018. As you can see, both lease related assets and liabilities increased significantly. Liabilities increased more than assets and hence we also see a negative effect on equity. On the income statement, EBITDA increases as most rents now are excluded. EBITDA also increases, but not to the same degree, while net income is negatively impacted. Over the life cycle of a single contract, there will be no positive or negative effect on net income, which also will be the case for a company with a fully balanced profile of rental maturities in steady state. As from the Q1 release, we will report according to the new standard, but we will also disclose information to enable comparability with the old accounting standard. With that, I hand back over to you, Markus. Thank you, Fredrik. Next slide, please. Alteno's quality work is carried out continuously in all local units according to a thoroughly tested model we call it the Quality Wheel. During 2018, our operations scored an average quality index of 84%, a small increase from 2017 adjusted for the Danish health care operations. The annual employee survey was carried out during the fourth quarter to take the temperature and employee satisfaction. The year's survey showed stable figures, both for job satisfaction and satisfaction with the immediate manager. Results were 3.9 on a scale of one to five. The first new home designed according to the new Atendo Hem concept was opened at Atendo Inian Shopping. Atendo Hem is an assisted living housing form for people who receive home care and who want more security and social community in their everyday lives. Atendo initiated a program during the quarter aimed at enhancing the mealtime experience at nursing homes in Scandinavia. The idea is to transition to more locally produced food and increase the share of food that is prepared locally at individual homes. Finally, I would now like to make a short summary of the full year 2018. First, if we look at financials, net sales in 2018 amounted to SEK11 billion. Adjusted gross was 19 percent. Operating profit, excluding non recurring, amounted to SEK844 million, corresponding to an EBITDA margin of 7.7%. The lower margin versus 2017 is mainly due to three factors: high opening costs, lower margins from the acquired company Nikkeva unit and lower contributions from outsourcing. In addition, we have had nonrecurring items of million. Including these costs, EBITDA amounted to SEK711 million. Operating cash flow was stable, amounting to SEK709 million. And the Board of Directors proposes a dividend of SEK0.60 per share. This is 30% of net profit from continuing operations. To sum it up, Atanda has stable margins in the mature business. The expansion has had a significant impact on our profit, but is on the same time the base for our future organic growth. The market activity is high, and Atender has underestimated the impact of the very many openings. Going forward, we are reducing our overall risk level in new projects. Altogether, this means that we expect to see healthy income and profit growth in the coming period, but there will be limited possibilities to increase margins. Thank you for your attention and over to you Andreas. Okay. We will now open up for questions, and please take one question at a time. So operator, please go ahead. Thank you. Ladies and gentlemen, if you have questions for the speakers, We have a question from Christopher. Please go ahead. Yeah. It's Christopher Lilleberg from from Carnegie. Question regarding your commentary about margin. I could understand what you say about 2019, but the fact that you don't see much upside potential in in the margin for 2020, I think that must either signals that, you know, that this the start up phase is longer than than eighteen months or and that there are some problems with the Mitkiva acquisition. Homecare in Denmark, you said, has that been sold now completely? Or is that still a drag on margins here going forward? Homecare in Denmark is still a drag on margins until the end of this year. We are our largest sort of loss making contract in Honker and Denmark is expiring in November. So let me come to that. I think it's a good question. I think that first, I think that we have underestimated the impact from the ongoing expansion. There is more activity in the market as a whole. We have tripled opening pace over the past two years, and it does take longer time to fill the homes. We are, in some areas, creating a temporary local overcapacity, which take longer time to fill. But secondly, we we have faced headwinds in from other areas. Individual and family care, we have talked about lower profits from outsourcing. That's a significant impact. We assessed that to be around 40,000,000 this year. Nikiva acquisition, that that was a big acquisition in Finland that we did at 2017. It came in with significantly lower margins than Atendo as a whole, and it does take longer time than expected to raise margins to attend the level. So we have the over have the synergies from the divestment of the Finnish health care operations, which we expect to roughly 20,000,000 SEK. Okay. And and coming I was just Do we have the synergies? It also takes time And given the fact that the margin trend has been more negative here in the last few quarters than early twenty eighteen, but going forward, coming quarters, do you see further downside risk in margins? Or will margins start to stabilize here? Christoph, this is Fredrik. As we say is that we don't expect margins to increase from the current underlying level. And then we think about the full year 2018, excluding the one off items or the nonrecurring items. And then that's the information we give, and we're not talking about specific quarters or decimals exactly if it goes up and down, but that's the level where we anticipate the margin will be for the coming two years. Okay. But you don't see it becoming much worse first in the 2019 and then getting better in 2019 and stabilize there? We give guidance in the quarters. This this is is the statement we stated. Okay. Thanks. I think what he's mentioned is yeah. Is But I would like Yeah. Just tell him that, Christopher, that we we see a strong organic growth in in the portfolio in own operations and an overall strong top line growth. So we we do anticipate a profit growth over this period even though that we we said it will be challenging to increase margin from current level over this year and the next. Could you on that, could you say anything what type of organic growth you foresee for 2019 and 2020, approximate figure? We don't give an exact guidance yet, but you can see that our organic growth has been going up for several consecutive quarters now. And we'll continue to open on a high pace. Okay. Thank you. Thank you. So next question? Thank you. Our next question from Peter, over to you. Hi. Can you hear me? Yes. Okay. Yes. Just following on from Christopher's question, basically, I'm not sure you really answered the 2020 question, to be fair. When look at the fact that you have a similar number of beds opening or even lower number of beds opening in '19 and '20 versus '18, and you're gonna have a maturing base of beds, there'll be a larger pool, And Nick of, you know, the margins, I guess, shouldn't go down. Can you please explain why in 2020, the margins should not go up very clearly? Just explain that point clearly, please. Yeah. It's it's, this is Fredrik. So if we look at what we think will happen and and our pipeline and, you know, ongoing construction projects and what will open. It's not only about the number of openings, but it's also geographically where they are located and the size of each unit. And it's also so that, as we discussed, that the seal up times are beyond one year. It's eight we've been talking about eighteen months, that also differs on the local level. So when we do our estimates for 2020, the sum of this is that we will have a continued high pressure from the openings. And as Martin mentioned, you know, although our ability to fill the units are steadily increasing, it's still so that we're opening more beds than we are selling or filling new beds. So we're still on a negative balance on that. And we see that to continue in with having effect on the margin in 2020. Okay. And then with that, given that this has been a topic you've as a group, known about for a while in terms of the longer fill rate, is there anything you can do to work on, I would call it, in the broadest sense, marketing, especially in the agreements with the local authorities who help direct beds, the patients to beds, to try and improve that fill rate rather than just accept it as a as a, say, deteriorating factor? We don't accept it as a deteriorating factor, but per se. So and we are working on improving our sales capacity. And we can also see net full beds are going up, and we are actually selling more beds now than we have ever done before. But still, the opening rate is very high, so we're still not on balance. Okay. So you basically run with the organizational structure that you have and work through this opening rate. Is that what you're saying? We have added sales capacity, and we are adding sales capacity still. Okay. And you are adding. Okay. And then you mentioned on the pipeline that you needed to decrease the overall risk in new projects. Can you just talk a bit about what's working its way through? And what are the risk factors in particular, size of openings, geography of openings? But what is the, say, negative risk factor in the pipeline that you've identified? Yeah. So I think that, in hindsight, we have taken too high risk in the past in some projects where we haven't been able to secure contracts with local authorities before an opening, and the LA has, after completion, continued not to buy from us. Going forward, we are reducing the risk taking somewhat by, among among other things, more clearly securing the contractual situation with the municipality before establishment. Thus, the high rate of establishment is a prerequisite for good long term profit growth and future value creation as well. Right. And is that something you think you can work on with the existing pipeline, or is that only with new units that you start to develop? Pipeline is under construction or under construction, even though I must say that if you look at the increase of loss provisions that we did during Q4, parts of that was related to two individual projects where we haven't secured, the contract situation before opening. Looking at the pipeline, those kind of projects are very limited, going forward, and we are, sharpening our our, requirements in that respect to going forward. Okay. So so the the exercise of of not having that relationship established is something which you don't think is a significant issue going forward as you just had or something I didn't fully understand what how how you answer the point is, like, how you can manage that going forward. The way we manage that going forward is that that, we don't accept any new projects where we don't have a clear contract situation with the, with the local authority. Okay. And and two questions. One, is there any aspect of this in terms of staffing cost or staffing ratio assumption in in the in the start up phasing that you also have made an assumption, or is it merely a fill rate point? Mainly a fill rate point. Okay. And then last thing, just on on the in that, it's good to have, you know, to get some more perspective on that. I think we mentioned that before as well. But there is a underlying strong demographic growth of elderly people in the Nordic region. The we estimate 56% increase in plus 85 year olds or the with the coming to 100 ten to twelve years. That the bigger demographic growth is is also a couple of years ahead, which we're building for. And over the past two years, we have tripled opening pace. We are in some areas, slightly before the demand curve, so to speak. But we are not the only ones that have increased activity in the market. So has also competition. So that means that that, there are more activity in terms of building new capacity, overall in the market. And what we have seen is that, this is this is creating in some, I mean, some LAs temporary overcapacity that will be filled over time, but this is hurting hurting fill up times in short term. But that has a definite impact on on fill up times and and morning in those units. Okay, Lidro. Maybe she'll let some other entrants also in the Just okay. I'll go back in the queue. That's fine. Let's take another question on, operator. Please. Thank you. Our next question is from Thoms. Over to you. Yes, good morning. Follow-up question on this new approach on our risk profile in the pipeline. If we take your pipeline of 2,500 beds, how many of these beds are in locations where you don't have a contract in place? And how does this deviate between Finland and Sweden? And also how will this affect your sort of pace to grow pipeline going forward? Will this clearly affect the growth rate in how you would feel sort of the pipeline of bets on the construction? The the the pipeline that we have, 2,500 beds, is a pretty solid type of pipeline. We have Mhmm. Maybe, you know, the singles or project where we don't have a contract in place. So pipeline going forward is is is less risk in that than than what we have been building so far. So the short now we're doing now, which will you would we will see an effect of, you know, basically two years from now, it's eighteen to twenty four months from now. It's on the contract situation is one thing, but it also it's also an assessment of the the supply demand situation. But I I guess Sorry. It's important to note that overall, we want to take down our risk exposure within our new projects, the contract situation is part of the assessment. We do an overall holistic assessment whenever when we look at a new project. Contract situation, but also relationship with the local politicians and civil servants in that municipality are important. It's also how we see the supply and demand situation and estimates and judgments on what happening on the competitive side. And there are other things like what's existing capacity, are there homes that are about or should be closed and indications like that. So it is an overall assessment and we see that in hindsight, we have taken too high risk in some cases, and we want to take down our risk exposure going forward. The contract situation is one part of that. It's a concrete part, so it's more easy to mention, but it is still a holistic situation. Understand. But but if it's easy to mention, how much of the pipeline is without contract? It's a A It's it's a it's a few cases. So it's it's not, you know it's it's less than clearly, less than 10% of the pipeline if you talk about beds, like Okay. Even even more or less. Understand. And secondly, what have you discovered in connection with the divestment of the Finnish Healthcare that you didn't know in at the time of the transaction in terms of these synergies? It was really nothing you mentioned at the time of transaction. What is new? We have worked through more in detail what are which which part of the overhead costs and on overhead functions is it that we really need to stay with, what needs to be in place to operate our our own business. But as we grow, then we will have, you know, we we get the negative scale effect, so to say, now when we are divesting. But as we grow, we will get the positive scale effect back because the the overhead is not developing as, you know, in the same rate as revenue. So I see this as more a kind of a temporary midterm problem and over time, we will come back to good scalability also in terms of overhead costs. But but this is something you discovered after you closed the transaction? No. I wouldn't say it's something we discovered after. Okay. Alright. Thank you so much. I'll get back in queue. Thanks. Thank you. Our next question, we have Christopher. Over to you. Thanks. I must follow-up then on Hans' question. So you're saying that the current pipeline is seems much better than what you have opened in the past few years. So then again, I don't understand your comment about the margin in 2020. Is that a continued drag from homes that has already been opened? Or what it's a bit difficult to understand this? I I don't think we have stated that the current pipeline is much better than what we have have seen. Now. I think you just said that the pipeline is pretty solid, clearly less than 10% of the contracts, of of the projects that doesn't have have contracts. There's nothing wrong with the pipeline, I think you said also. What we said is that when we do the risk assessment, we take a holistic picture and weigh in several different factors and parameters. The contract situation is one part of it. And where we can see the difference between sometimes between a contract situation and some other parameters is that if we don't have a contract, it can really it can mean that the unit can be fully empty for some time or for some time before we solve that, a very low occupancy. If there are the more supply and demand issues, it means that the fill up rate can be slower than anticipated, but still is gradually increasing. So it's more a binary risk when it comes to contract situation. But I think what what we're saying is that we are adjusting our risk exposure, but based on that we have an existing pipeline that is consequence of earlier decisions. The existing pipeline is more, you know, in par in terms of risk profile on with the openings that we've done over the last one to two years. And one should just remember that, as Martin pointed out, this basically idea about margin projection and assumptions, of course, are based on many factors. So one is the openings, another is, as we talked about, the outsourcing situation also in also in the integration and the progression of Mikveva and other factors together. And also, as Fredrik pointed out, where the openings are, the bias actually towards Mauro, Sweden and then Finland, so they're different with different profiles. Okay. So so so when you talk about lowering the risk going forward, that's one about making sure you have contracts, but then it also sounds it's about, you know, opening in in the right areas where you knew that there is a strong demand immediately. It's a combination factor, yes. Correct. Okay. Great. Thanks. Okay. Makes sense. Thank you. Thank you. Operator? Thank you. Our next question, we have Peter. Over to you. Hi. A couple left, please. One, on the fill rate, do you have a sense as to whether to what extent the fill rate is extending beyond eighteen months in the pipeline? As we mentioned many times, the fill rate is very individual in cases or, you know, every every local market is is different. And and the units we open now, for obvious reasons, we don't we can't answer what the fill rate will be in eighteen or or twelve or or twenty four months. But but the fill rate has extended, and what we said is that if you go back two years, our expectation when we open the units was that they would be at good occupancy after twelve months. Our current expectation is that it will be on good occupancy around after around eighteen months. So there it has been extension, and and and that's where we stand currently. Yes. Okay. And then on the margin profile, can you give some sort of sense as to when you think the margins will bottom? I think we stay with, what we've said that we we don't expect to increase or improve the margins from the the current level, I. E, the underlying margin you've seen from 02/2008. But do you expect them to be down in 02/2019, therefore? No. That's not what I said. I said we don't expect them to increase. Okay. Okay. And last question, just on the you gave the pluses and minuses on the quarter, and you mentioned that facility and project item costs, M and A, etcetera, was an item and negative calendar was an item. Can you give some sort of quantification to what because these seem to be more timing factors, can happen quarter to quarter. But is there any way just to try to understand how significant they are so we can try and bridge what happened versus the forecast because obviously the analysts can't forecast these items? So if we start with the calendar effect, if you just look at the number of public holidays, that impact is around 10,000,000. But as I mentioned, we also have this issue, you could say, of many days in a sequence, and that estimate is harder to quantify, but we can see that we have had overall high cost and we have estimated that the effect is somewhere between 5,000,000 to 10,000,000 kronor. And if you talk about the other the unusually high cost related to project and facilities, I would say that the pure smaller items, but the pure, if we should call it one time, is around maybe SEK 10,000,000. And then we have maybe similar amount of timing effects, which is not necessarily one times, but it was many of them in the quarter. That's fine. Thank you very much. Thank you, Peter. Okay. Next question? Thank you. I'll move on to the next. Hi, Daniel, over to you. Yes. Thank you. I just wonder if you can elaborate a bit further on the halted operations in Finland and the potential or the next step going forward? And and also, are there some structural shift happening that we are missing out of? Know, in terms require requirement of of increased staffing due to the issues? Yeah. There is a, you know, political debate on on increasing staffing or sort of national minimums or recommended level of staffing in in Finland. And it's a bit too early to say what the conclusions can be drawn from that that to date. I think staffing requirements in Finland may change. It's a you know, it's it's election year in Finland. It's a no political debate. Finland is spending significantly less per capita on the underlikker than the other Nordic countries. So if those staffing requirements will change, we also expect that prices will be adjusted accordingly. On this specific unit, think it's important to say we have some 400 units in Finland. We've had remarks from the fourth in one of our units. Overall, remarks from the Finnish regulator in Finland, are at a significantly lower level than the market as a whole. Okay. Thank you. Okay. Thank you, Lance. Operator? Hello. Thank you. There are no questions in queue at the moment. So if you'd like to raise a question, please press 0 followed by 1. We have the next question from Victor. Over to you, please. Good morning. Victor Vercelli from ABG. I have a short one on on the maturity levels in in Sweden and Finland. Clearly, you are not growing the top line in Sweden in in own operations as much currently. Is that Is that more a mature level, you'd say, in Sweden? Or is it or how should we interpret it then? And you can also compare to Finland. Yeah. Yeah. Plus, we're adding much more of the openings are related to Finland. And as we talked about, the profile is that we have more openings late this year and next year actually in Sweden. So it's a bit different profile of openings, and that's the main explanation. And the reason of the situation, right? Yeah. And also some of the closures in in own operations, individual and family, etcetera, of course, are and also in home care are also reported in own operations. That's also one explanation for the development in where you see the revenues in Sweden. But if you look at the installed base of mature units in Finland that we're continuing with, there we have healthy occupancy, know, about 90%. Overall, both occupancy and margins in in our mature operations are very stable, both in Sweden and Finland. Alright. However Thank you. And, you know, around 70 of the growth is related to Finland, and that has that was one the factors. There is an ongoing health care reform in Finland. More than 50% of the market in Finland is already privatized. The public sector is is building a lot less in Finland than in Sweden. Over the past year, almost nothing at all. So private operators are have to build up the capacity. And if you look at the demographic curve in Finland, they foresee the largest growth. It's a 69% increase of 85 plus people in in Finland projected for the next ten years. So there's a big demand in in Finland, and that's mainly built by the private sector. So it's, that was that was the underlying sort of market reasons for us investing more in Finland than in Sweden currently. Yes. Yes. Of course. But but regarding the the risk that you mentioned earlier, I mean, is top line growth in Sweden also hampered by by units not being filled up due to these these risks of of no contract with local authorities, etcetera, or or, like, or? That's been sort of two individual cases. The the main thing affecting fill up times in Sweden is that on a general general level, we have 200 and you know, more than 290 local authorities in in Sweden, and there is still a very limited amount of those. We have 25 authority 21 authorities with with freedom of choice. We have about the similar amount of authorities where we have framework agreement. So most of the construction works, both or openings, both from us and from competition, is, is currently made in in those local authorities even though they are pretty big. I mean, some of those are Stockholm and Gothenburg, for example. And that that doesn't mean that that we have what we have seen is that both us and the market as such is and some of these delays currently building a bit ahead of the demand curve. That means that we are creating temporary temporary overcapacity, which will be filled over time as demographic takes care of it. But it does hurt Philippians. But also, yes, looking at the optical, the the revenue number in Sweden, please remember that we have closed down units in in in Sweden related to individual family care and home care. That's that's the main reason why you don't see the same organic growth development in non operations in Sweden. Yeah. Alright. Perfect. Thank you. Okay. By that, we will conclude this presentation and webcast. And please thank you very much for listening. And if you have any follow-up questions, you are more than welcome to contact us directly. Thank you.