Earnings Call: Q3 2019

Oct 23, 2019

Good morning, everyone, and welcome to this conference call where we will present the Telenet's results for the third quarter. My name is Ernesto. I'm communication and IR Director of Asset Center. Today's presentation is hosted by our CEO, Martin Tewis and Autonomous CFO, Fredrik Lager. And after the presentation, we'll open up for questions. By that, over to you, Martin. Thank you, Andreas. Good morning. I'll turn to the presentation, and I'm Fredrik Lager, our will take you through some numbers in more detail. Next slide, please. To summarize the key messages in this report, we present the stable results from our operations in Natandos, Scandinavia. We have initiated a turnaround in Natandos, Finland, and we have secured a new long term credit facility for the group that will allow us to maintain a higher flexibility during a transition period. Having said that, we're still delivering a result far below what long term should be expected from a company like Atandov, and I want to emphasize that we are only at the beginning of a three to four year turnaround journey with our operations in Finland. Our Scandinavian operations displayed underlying stable results in most segments. We see continued high interest for our own care homes, and we have many good projects in pipeline for 2020 and 2021. Home care is continuing to grow and develop well, while outsourcing continues to be challenging and is now only 15% of group sales. In Q4 twenty eighteen, we lost some favorable contracts in outsourcing, and we are still still struggling with profitability in this segment. In Finland, we reported a significant drop in profit versus last year. As we talked about in Q2, this is mainly an effect of two things: lower occupancy as a consequence of the aggressive opening pace of new units the past years and sharper staff requirements following the events earlier this year. In q three, we have stabilized the cost level, and sales on new beds improved slightly after a very slow q two. Lack of staff is still an obstacle for a certain new customer even though the situation has improved somewhat after the summer. Next slide, please. We reported a top line growth in the quarter of 6% year on year, excluding currency, mainly as a result of the high number of openings in the past twelve months in Finland and selected M and A activity. Growth in Finland was 16%, while we had a slight loss on net sales in LATAM to Scandinavia, as an effect of end of outsourcing contracts, and to some extent closures of home care and individual and family care units. Reported EBITDA, excluding capital gains, amounted to $263,000,000 kroner, corresponding to a margin of 8.7%. In all GAAP, without IFRS 16, that translates to an EBITDA of 173000006% margin. Profit in Scandinavia was roughly in line with previous year, where higher contribution from home care was offset by lower result in outsourcing. Finland reported on plan, a weak quarter year over year, but significantly higher versus Q2. The sequential improvement is mainly due to seasonal effects, but we can also see a slight improvement due to higher net sold belts. Quality index was 81% in the third quarter, slight drop versus second quarter, but still above our target of above 80. We're currently putting much emphasis on actions to further improve both technical and perceived quality in all of our tunnel, and we expect performance to improve as these actions take effect. We are now close to 16,500 belts in normal operations. In q three, we opened additional 430 beds and started the establishment of of 150 beds mainly in Sweden. Due to the occupancy and profitability situation, we're accepting very few new projects in Finland at the moment. Total occupancy in own operations was 80% in q three, same level as in q two, and one percentage point lower versus a year ago. Next slide, please. As we communicated earlier this year, we have initiated a turnaround program to restore trust and profitability in our Finnish operations. Past three years, we have almost tripled our operations in Finland, and the organization has not been equipped to handle the complexities surrounding this growth rate. We have now taken steps to ensure a more capable organization where each regional manager and area manager has less number of units to coordinate. Our new business area director is now on board. We have further strengthened the central team in Finland with a new finance director and new IT director. We're taking several actions to improve the occupancy occupancy situation. We have sharply reduced the number of new establishments in Finland, and we are working to exit some the contracting areas with poor prospects. Price negotiations is key to get compensation for the sharper staffing requirements. In existing contracts, the possibilities for compensation are limited. We are in the process of renegotiating prices for contracts regarding 2020, but it's still too early to estimate the average level for the year. Please note also that only a smaller part of the total volume is up for return for next year. Most contracts will only be index adjusted for salary and cost price inflation going into 2020. With these actions combined with the already running quality improvement program, we are confident that we will improve both reputation and financial performance over the coming years. Now turning to quality and objectives and status. Care work at Adando is based on our vision of empowering the individual, which has made a reality from day to day through our shared values. In Adelaide Scandinavia, newly appointed regional value coaches have been given responsibility for planning and structuring the values work and for supporting, training, and engaging local value coaches in operations. The customer survey conducted by the Swedish National Board of Health and Welfare was released at the end of the quarter. Overall, we see a like for like improvement in our home care units in 2019 compared to last year. Meanwhile, we noticed a small drop in like for like performance in our care homes, and it's clear that we still have work to do to further improve customer satisfaction in several units. On a positive note, four of our samples units achieved a 100% satisfaction score in the survey, a total of 34 units received satisfaction scores above 90%. During the 2019, we introduced a new good food culinary concept at all Atendo nursing homes in Scandinavia. The concept involves more locally prepared food and reduced usage of ready made dishes. In Finland, we have implemented a new digital system for food safety, and we also introduced new menus in Finland to follow updated national nutrition guidelines for older people. One important part of improving day over day working situation in the unit is to have stronger support functions, such as additional team leaders, and postal nurses, and assistant nurses to rapidly meet needs for substitutes. In Finland, there is now a government proposal on a new law from 2023 regarding staffing requirements in elderly care. Although there is still many uncertainties, the future direction is clear that more staff will be needed, and our ability to recruit and retain personnel will be more important. I'd also like to mention that one of our assistant nurses, Pia Jovalak, was selected for the Attendant Nurse of the Year award in Finland, acknowledged for professionalism, positive attitude, and ability to create team spirit, which has contributed to good care and a good work environment. Next slide, please. As I mentioned earlier, we are now around 16,500 owned beds in operation, an increase by 11% from corresponding period last year. In q three, we started construction of three new units that will add roughly a 150 new beds. Most of this relates to Sweden as we are very selective in adding new units in Finland. In total, we have 2,100 beds under construction by the end of Q3. And as you see on the chart, we are in the process of decreasing our pipeline in Finland. In Scandinavia, we continue to identify attractive opportunities, even if we in general are more cautious in our risk assessment in all geographies. Next slide, please. This chart shows the rolling twelve month opening phase and openings per quarter. The high number of openings had a clear negative impact on profit and margins in the quarter. We expect to open around 1,800 beds in 2019 and around 1,600 beds in 2020. In 2021, this number will be down significantly as we are adding less new projects in Finland. Please note that the increase in total beds will not be as high as the openings as we are discontinuing certain units that have not been as attractive in the long term. In Q3, we closed down almost two fifty belts. The majority of openings this year is in Finland, while there will be a more equal balance with Scandinavia next year. Next slide, please. This chart explains group margins in mature and start up units and sales. The top chart is key to understand the drop in margin, but also the potential of our start ups. The chart displays the profit margin rolling 12, stated in old GAAP for the growth total and for mature units. We also excluded midgeval units for comparability. Before q three two thousand seventeen, we opened roughly as many beds as the number of beds have entered into mature state. The recent two years, we have accelerated openings, which means that we have many more units in solar space. Also, time to fill new units have been prolonged, as we have previously stated. The profitability in mature business has historically been rather stable around the level of 10%. The downward trend in 2019 relates primarily to the higher cost level and lower occupancy situation in Finland, something that will continue to pressure margins in the remaining part of 2019 and 2020. Next slide, please. Now turning to occupancy per vintage. As you can see on the top green line, the occupancy is nearly above 90% level for units started in 2016 and earlier. As you can see in the large 2017 and '18 vintages, we are slowly and steadily increasing occupancy quarter by quarter. The main reason for average occupancy not lifting is that we are still opening more beds than we fill, and the high opening days will continue until mid next year before we can sharply reduce. It's too early early to judge how the 2019 vintages will develop over time. The filling rate is short term affected by lack of qualified staff for newly opened units in Finland. Another negative factor for the 2,019 vintages is that the time to get permits for newly opened units has increased from earlier a couple of weeks to now several months. We've had just a few new units in Sweden in 2,019. With that, we move over to financials for the quarter. And please go ahead, Frederic. Thank you, Martin. So let's turn to page 10. We can see that net sales continued to be strong. Total net sales amounted to SEK 3,000,000,000, up by 8% compared to the corresponding quarter last year. Adjusted for currency, net sales increased by 6.2%. Acquisitions contributed with 4.6% and organic growth amounted to 1.6% in the quarter. We see continued strong organic growth for our own nursing homes, but this was offset by negative effects in other areas. The quarter was negatively impacted by outsourcing contracts that ended earlier. Net sales are also still negatively affected by the closed units within the individual and family care business and some exited home care districts. Reported EBITDA amounted to $294,000,000 in the quarter, including a capital gain of SEK31 million from sold real estate in Sweden. I will come back with details on the underlying EBITDA development. Financial net was negative SEK137 million compared to negative SEK141 million in the 2018. IFRS 16 related interest expenses increased by SEK40 million, while interest expenses for our borrowing from banks decreased by SEK18 million. The lower bank related interest expenses are explained mainly by lower debt following the repayment we did in January. Income tax for the quarter was SEK 29,000,000, which equals a tax rate of 24% for the first nine months of twenty nineteen. Net profit amounted to $94,000,000 in the quarter, which equals an earnings per share after dilution of SEK0.58 kronor. Next slide, please. Based on our segment reporting, I will now comment a bit on Atendo Scandinavia and Atendo Finland separately. Overall, our Scandinavian business area is stable with similar trends as in the first half of this year. In summary, good development for our home care business, but more demanding for outsourcing. So a bit more in detail: Revenue for the business area decreased somewhat as acquisitions and more so bets in own homes could not fully compensate for the ended units within primarily outsourcing and individual and family care. Within Home Care, we also exited some geographical areas. For the largest service offering, own care homes, operating profit was stable as increased profits in homes opened in 2017 was offset by start up losses in homes opened in 2018 and 2019. We have a positive trend in home care based on increased customer concentration and improved planning and routing. We are actively acquiring smaller companies and exiting areas without the right prerequisites. Denmark continues to be loss making but at stable levels. The largest home care contract in Denmark ends now in the fourth quarter of this year. The improved profits in Home Care were offset by lower profits from our outsourcing homes. The lower profits are primarily a consequence of the contract that has ended since last year. In addition to the lost contracts, we have also experienced margin pressure in existing and new contracts. This is a trend we think will continue. During the contract, we have won two new contracts with an annualized estimated revenue of NOK 45,000,000. In the quarter, we had positive seasonality effects connected to summer vacations. We estimate those effects to be in line or somewhat larger than last year. We have also had a number of smaller positive timing effects that have supported the reported result. Next slide, please. Growth continues to be high for Atendo Finland and amounts to 19% reported and 16% in local currency. The growth primarily comes from more occupied beds in units opened in 2018 and 2019 as well as acquisitions. The special situation in Finland has impacted the quarter with close to SEK70 million in additional costs. Start up losses from units opened in 2018 and 2019 and more empty beds in general are also impacting negatively, together with some increased overhead costs following the healthcare divestment. The negative development is partly offset by more occupied beds. As in Scandinavia, we also had expected positive summer effects. Before we turn to slide, I just want to give a few comments on the coming quarters. First, you should note that we last year booked increased provisions of SEK60 million for terminated and loss making contracts. Further, we expect positive impact from more occupied beds. On the other hand, increased staffing and more empty beds in Finland will continue to have negative year on year effect, as the high opening pace continues. We will not have any positive effects from price negotiations yet in the fourth quarter. The negative effect in Scandinavian outsourcing we have experienced in the third quarter will remain, and calendar effects from timing of Christmas will result in high costs. And finally, we also expect extra costs from closing our largest home care unit in Denmark. Next slide, please. On this slide, you can see the complete cash flow statement. First, bear in mind that 2018 cash flow includes the healthcare operations in Finland. Free cash flow is lower this quarter as operating profit is down and the divestment of the cash flow positive healthcare operations in combination with higher rent payments. The rent payments are reported at IFRS 16 items. During the quarter, we sold a number of properties in Sweden in a lease and sell back transaction. This generated a positive cash flow of about SEK120 million, and this is why investment in assets is positive by SEK13 million. We have also continued to unwind our model of building new nursing homes in our own balance sheet. This has contributed with SEK $242,000,000 of positive cash flow reported under assets held for sale. Those proceeds have been utilized to lower our bank debt. Adjusted net debt amounted to 2,400,000,000.0, which equals an adjusted net debt to adjusted EBITDA ratio of 3.3. During the quarter, we have negotiated a new credit facility with a number of banks. Although the contract is still to be signed, we have agreed on the structure and main terms. The new facility gives Atento more headroom regarding leverage covenants for the next two years, which gives us ability to focus on the turnaround program. In connection with the new credit facility, we will get a one time charge of about SEK 10,000,000 in the fourth quarter. I also want to mention that given the recent development in Finland, we have during the quarter performed impairment tests of goodwill. The test shows that goodwill is not impaired, but that the margin to potential impairment for Attenda Finland is considerably smaller than in previous year. On Page 16 in our interim report, you can find more information about performance tests and sensitivities. With that, I hand back over to you, Martin. Thanks, Felix. I'd like to make a quick summary before we answer the Q and A session. The situation in general has stabilized after a very challenging first half of the year. The financing arrangement is also one important milestone to stabilize the company and to ensure that we can fully focus on developing the core business and the turnaround program in Finland. At Sandoz Scandinavia, this plays a stable development, while profitability in At Sandoz Finland remains on a very low level. The situation in Finland has no quick fix, and it will take time to recover. I am, however, confident that we take the right actions to restore both reputation and shareholder value with the ambitious change agenda that we have set forth for the business area. Most important for the long term value creation is to deliver high quality care to the benefit of customers and society. Our aim is to have a high technical quality of care, the highest level of satisfaction in every location in which we operate, to provide more care for money spent by local authorities and thereby creating value for our shareholders. Thank you for your attention. And with that, I hand back over to you, Andreas. Thank you. We'll now open up for questions, and let's just let the operator here to take the questions in line. Yes. We have one first question from Mr. Carolina Ilevinc from Danske Bank. Madam, please go ahead. Just a couple of questions from me. So the first one is, you said that you closed down some homes in q two. Could you elaborate on this, situation in Finland due to the need to close down further homes, and how is it easy to do that? We are, yeah, constantly evaluating our portfolio in Finland. There are Finland is basically 200 local markets rather than rather than one country in our perspective, and we looked at every local market individually. There are areas where we see overcapacity and where we don't see the long term prospect. We tend to get out of of agreement as part of us balancing the portfolio going forward. Often, these are old homes. So when we establish new homes, we can close down an old homes where we don't have long leasing agreements left. We can transfer clients to to new homes. This is something that we're balancing balancing continuously. Okay. Thank you. And also, from 2020, you said that you will open more homes in Scandinavia and less in Finland. What locations do you plan for and which ones is the most interesting on the Scandinavian market? Given the we have seen a positive outcome from from the elections in many of the LAs in in Sweden. We also see that in Sweden, capacity hasn't really grown in the market over the past couple of years. So there is a demand in in several municipalities in in Sweden where we look for for growth opportunities. We are more careful than historically in terms of selling new car business in Scandinavia. We we don't enter a new project without a ready agreement with the municipality. But we also said that we've been very careful in expanding our Scandinavian operations historically, and it's we will see more opportunities going forward. So I process national to expand growth rate somewhat in Scandinavia, but we think it's a balance risk. And in Finland, we will continue to have a high opening base up up until mid next year given already committed contracts before we will chart or reduce opening base in in Finland. And as you can see on the on the chart supply, the amount of projects in the pipeline in Finland is now on the lowest point in three and a half years, and it will continue to to decrease after after mid next year. Yes. Okay. Thank you. Just one last question. So you said that the situation for recruiting for new homes in Finland has been a bit better now, which is good. But when do you negotiate wages for 2020? And have and have you seen any wage cost inflation on the back of the recruitment situation? Not yet. We're following the agreement that we have in the market. We are currently in the process of negotiating new agreements from from next year. Current agreements run south in the spring, twenty something. So this is negotiation Yeah. Mhmm. That is also run by the industry association in Finland currently. Okay. That was all for now. Thank you. Thank you, madam. Next question is from mister Christopher Liesberg from Carniche. Sir, please go ahead. Thank you. Good morning. Can you hear me? Yes. Hi. Very good. Yeah. First, just to follow-up on on this that it's easier to to recruit in Finland. How important is that if you compare with other factors such as demand now for for filling up the capacity you're you're building? We haven't seen a specific demand problem. There are, you know, selective municipalities where where demand has been slightly weaker on the back of of most been happening over the past year, but in most LAs, you see a stable demand situation. Bear in mind that that we have built a bit too large costume in Finland that would take some time to to fill up. Now, of course, we see sales moving up a bit in q three from the very low level in q two. We're still not at the we you know, still not close to the the q one rate that we used to have. I'd say that recruitment situation is important. That's a that's a bigger factor than demand currently. But it's also a question of of sales focus on the organization that has been very occupied with with a lot of inspections during the first half of the year. But could you quantify how how much easier it has been to recruit? Is it still a a challenge, although it's, you know, somewhat better than than during the spring? Yeah. It's been challenging, and I think it will continue to be challenging. Made up in challenging in in certain municipalities for a for a long time. But it's also been slightly better system now than before the summer as we've had a lot of summer interns from from students over the summer that we can employ after the summer, which is, of course, better than than the pre summer status. Then we're doing quite, you know, quite a lot of initiatives to to improve both employee branding and recruitment channels going forward. Having said that, I also want to, you know, say that that media situation in Finland has calmed down significantly after the election. So and, of course, that that the media calming down after the the current situation that we experienced in the industry over the spring is also, I think, that's good in terms of recruitment situation going forward, but it will continue to be challenging. Okay. Thank you. And based on this, how do you see the possibilities to improve margins in Finland, you know, before next summer when the opening pace will slow down? It's difficult. You know, first, there there are basically, you know, two things behind the the use for the more than anything. One part is the the aggressive opening base for the past couple of years that let you know we're overcapacity. We have got it up to that, so we need to fill. Secondly, the sharpened requirement led into a cost level increase that we need to recoup by price negotiations. The first one, if you look at that, we will still continue to have open more bets than we can fill up to mid next year before we can short reduce the opening base in Finland. On on the pricing side, bear in mind that only about 10% of of our portfolio is up to return there to 2020, where most part of our revenues are index related, normally 1.5 to 2% for next year. So that gives an idea of of how we see the profitability situation in Finland for next year. Okay. Good. But we have to at the cost base. Yeah. But because that's also important, of course, you know, the spring was extremely terrible and a of different factors. Now at least it seems you have a better control of the situation. Have you become more confident that Finland will not deteriorate further at least? We have a new management in place. We have strengthened the management team, both on top management and regional level. We have initiated a very clear turnaround program in Finland that we then can also fully focus on given the new financial solution that we haven't paid to the bank. So, yes, I'm I'm a bit more calm about situation in Finland as a stabilized cost level and and know what we're doing on the way going forward. Still, there are, you know, number of uncertainties in terms of what we we will achieve in terms of both price negotiations and what's when comes in the new salary agreements, of course, for next year. But it's we have better control now than we have previously. Thank you. Then I have two more questions. I hope that's okay. One is if you could give some indication of the net new beds going forward, considering that you highlight that you would continue to close beds? And the final question relates to the lower margin in mature units. I didn't really hear what what you comment there during the call. Thank you. Yeah. Sorry. Could you repeat the the the first question there, if could? One question was how we should think about the net new beds, you know, if you Yeah. Opening beds also. Yeah. So closure rate, it's difficult to get to do. I don't wanna give a forecast on on closures for for coming quarters as those are, you know, individual situations. And we do that to do we we look at project after project. And there are normally, when we have a difficult situation with a facility or a unit, we look at several alternatives, and it's difficult to say beforehand how long time it takes to to reach an agreement or to reach a solution with us. So I don't wanna give a forecast on it, but we are we are working on it, and you can see on if you do your own calculation based on what we what we are what we are presenting in the report on occupancy and total number of belts, you can you can do rough you know, estimate yourself on on number of number of closures versus opening rate. A very difficult forecast. And and then on finding a margin in mature units going on. Yeah. I think when it comes to that curve, first of all, the the both remember that that top green line, mature margins going down, they are. They do include outsourcing and the 2017 vintages. So, you know, a couple of quarters back. So it's as we have both outsourcing contracts and 2017 is going down, that's also a pressure pressure. Further on, we will continue to have tough comparables over the next two quarters. So we would I think you should expect the continued pressure on that line the next two quarters. Okay. Thank you. Thank you, sir. Next question is from mister Victor Fraucel from ABG. Sir, please go ahead. Thank you very much. Can you hear me? Yes. Thank you for taking my question. So first, a quick one. You seem to have moved away from the €120,000,000 on EBITDA as your current underlying run rate, excluding the seasonal effect. Is that how we should look at, for example, Q4 and going forward? That's no longer your expectation from here. I don't give that type of specific guidance. And as mentioned as I mentioned during the call, it's hard to quantify, but exactly but our view is that the seasonality effect in the third quarter were in line or could even be larger than previous years. And we had another a number of smaller kind of timing effects that supported the reported result that not necessarily that was positive time effect, but not necessarily are recurring in the same way for the coming quarters. And then I also mentioned other factors that we need to take into account when looking at the fourth quarter, such as, you know, the closure we have ahead of us in Denmark, we have a calendar by the tough Christmas and a number of things. Normally, you know, second and fourth quarters are often quite similar seasonality wise. And then we have the the the bank agreement that will come with roughly an additional cost of 10,000,000, but that will be reported in financial net. And these, I mean, these positive effects that you're talking about, both seasonality wise and other smaller ones, is there some possibility for you to quantify that effect? I mean, is it 10,000,000? Is it 30,000,000? It's hard to be be exact, but it's it's enough. It's not less than 10,000,000. Okay. And my last one, I know you alluded to it a bit in your remarks here, but can you give us a rough figure of many or how many of your Finnish units that you've managed so far to rise to raise prices for in in next year and the average rate of those above the normal price index? That would be helpful. Thank you. We only, you know, so far, renegotiated very small part. Main part of of the concept we're tender are still up to be finalized during during the fourth quarter. What I can say is that for the contract up for each tender, our ambition is to cover our cost increases. While having said that, as I said earlier on, we tend to next year only come for about 10 percent of the revenue pool for 2020. Most of the revenues are indexed related for next year. Now we will have a larger part of return the next year and an even larger part year after that. So 500 number two, the vast majority of of agreements will have been returned. Yeah. Okay. So sort of still a small fraction of their units at the moment. Yep. Yep. Okay. Thank you very much. Thank you, We have next question from mister Hans Bostrom from Credit Suisse. Sir, please go ahead. Good morning. Think I'm going sort of continue on the theme of previous quest questions regarding how we should look at the run rate profitability because I I find it quite challenging to actually understand whether you are thinking the outlook is more uncertain or less uncertain. On the one hand, you're saying that the you feel you have better control of the Finnish situation. On the other hand, you obviously are not keen on providing any form of guidance or whether you would be generating 120,000,000 on a different figure on a normalized quarter. So I just want to understand, is your what has changed over the last three months in your assessment of the business? What are the different uncertainty factors and whether those are less or more uncertain? I suppose that's one way of asking the question. And then I had a few more detailed questions. Maybe we'll start with this one. So I'll start with that one, and this is Fredrik. I think what has changed is that we see that the cost level has stabilized, And it's not deteriorating that we can see that the cost level of the increased cost that is the aftermath of the crisis has stabilized in the third quarter compared to the second quarter. And of course, that gives us additional comfort. But if you take to really make progress in Finland, there are two factors that needs to happen financially, and that is to renegotiate prices and to reduce the number of empty bets. And both of these are long term efforts that will take multiple years, and the outcome is uncertain. And on top of that, we have an uncertainty about staffing costs, how will that develop in the Finnish market. So I think for today and also for a continuous time, we will have uncertainty and we will not be clear on exactly where we think the end state is and then we can reach it. And as for the Scandinavian operation, are there any changes in your assessment, this effect of pressure from on margins from the outsourcing business? And how significant I suppose that's something you might have some idea of how impactful that might be on a year or two year view in terms of the structural margins on a like for like basis, assuming no change in the composition of the business? Of course. This quarter, we still have, you know, tough comparables as we we lost some favorable outsourcing contracts in q four last year. So outsourcing, it's about 20,000,000 difference from from year on year on year quarter basis. We we foresee a continue continuing challenges situation in outsourcing. Now we have more gains sort of stabilized, but on a on a lower level than than than historically, while home care is continuing to improve. And that has been all stopping the the outsourcing pressure. While the big part of the the business in Scandinavia, which is on operations, is has a very stable development where we see that we with the coming two years, we'll open more own operated units in Scandinavia to build our future growth. Okay. That's very helpful. And then my specific detailed questions. I mean, you talk about the stabilization of costs in Finland. Yet the figure of $77.00 of extra staffing cost is clearly higher than the 50,000,000 a quarter we talked about. I mean, actually, the 70,000,000 combined. It it is about 50,000,000 in extra staffing cost, and then we have additional cost for for the restructuring program in Finland. And that's what we said in the second quarter as well. Yeah. So what was the 20,000,000 that related to restructuring? Or Yeah. Another cost related to the turnaround program. But it's around 50,000,000 in per quarter in in the starting. Then, of course, that really continue to increase somewhat as we as we continue to grow the business. Okay. Very good. And then on the interest expense, Frederic, I mean, you are markedly lower than the run rate from the net interest expense, financial expense I'm talking about for my modeling 10,000,000 less than a quarter, which is quite a lot. I mean, is there any special items here that we should be aware of? No. It's mainly an effect of lower debt that that reduces both the mainly the volume, and that's the big impact I have here. Okay. So can you give any indication how much your net borrowing costs are down year on year in terms of rates, I'm talking? I don't have that in my head, actually. I can follow-up on that. Okay. And finally, on the Danish contract, you highlight there will be some costs associated with its closure, yet, I think I certainly have understood that this was a loss making, certainly not a profitable contract. So could you give us an idea of what are the levers here in terms of how much is this going to cost? And secondly, what might you be gaining in terms of absence of losses next year? They haven't they haven't given the number exactly on how how much we're losing, but it continues including November. So we will have the, you know, the losses for the majority of the the of the time in the fourth quarter, and then there will be additional costs. But we we talk about, you know, it's it's not tens of millions Swedish kronor. It's maybe up to 10,000,000 Swedish kronor in an additional cost. The reason why the cost is going up before and after closure is that when we when we close down operations and we we still have a contract with ELA till November in the November. But then, of course, it's hard to keep staff on payroll as they know that we're exiting the contract. So that means that we have to pay for more and more rounds of stuff as our existing staff is looking for for new employment up until the closure. And that's also, you know, the main reason why closure period is driving extra cost. But then we're just a bit So so for next year, I mean, is this something that actually will have impact in the tens of basis points on your Scandinavian margins in terms of positive effect, or how significant is it? We will not give specific guidance on that. Okay. And very finally, I mean, do you have more capital gains you expect from property sales that we should think about? No. Nothing significant. Okay. Thank you. Thank you, sir. Next question is from madam Karina Amgren from Handelsbanken. Madam, please go ahead. Yes. Hello, everyone. I have a couple of questions. You previously talked about difficulties or prolonged period in in getting permission from you for opening new units in Finland. Has that changed, or is there any change in the in the in the time of getting permissions? We haven't seen that yet. Of course, that's something that that we follow. It's it still takes too much time to get get permission at start up. We expect that to go back to normal state eventually when the inspection of where the is is going back into normal operations. But we we during q three, we still didn't see any any rate effect on that. Okay. And then now when you're starting to to renew your contracts in in twenty twenty twenty twenty one, how confident are you that you will actually renew all of the contract contracts that you that you want to renew, or do you see any tendencies from tendencies from the municipality to to in source operations or something like that? No. We don't. On the contrary, actually, the public sector in Finland has been been reducing their own new project significantly over the past couple of years. Now it's close to close to zero. It may be a few $100 in in construction phase in in Finland. So it's on a very, very low level. So there is also bear in mind that the public sector in Finland, even if we ask for a cost increase to cover our our cost level, is still producing at a significantly higher cost than private sector in Finland. So there's no rational reason why why a Finnish municipality should start to try to insource capacity that would just simply cost too much. Okay. Makes sense. I just thought if there was something regarding reputations given the scandals during the past year, but but But, you know, the Finnish market is is far more privatized than the other Nordic markets. If you look at that share of private capacity in in Sweden and Denmark, for example, it's between 15 to 20%, while in Finland, it's more than 50% private share. So there is no debate in that sense in Finland regarding private operators or not. So that that trend seems to continue. Okay. Great. Then regarding the seasonality, did I understand you correctly that there was a positive effect of at least 10,000,000 in the quarter due to stronger seasonality? And if so, would you expect that to to reverse in q four or during the coming quarters? The q three effect historically have been around a 100,000,000. And now it's it's slightly yeah. It's a bit slightly larger this quarter. In combination with that after about the timing effect. Yeah. Okay. So the so now it's in combination with other effects above 110 approximately. Yeah. I think you mentioned something about 10,000,000. I thought less than the 10. No, no, okay. And then regarding financial costs, will there be any change in the level with the new loan agreements? Terms are overall quite similar to what we have today. The difference is that we have more flexibility when it comes to how high we can go and leverage over a transition period. But then, of course, as you know, the interest margin we pay is based on how high leverage we have. So over the next few years, we will have a higher net debt to EBITDA ratio, and that will involve higher interest margin spend. Thank you. Thank you, madam. We have another question from Mr. Hans Bostrom from Credit Suisse. Sir, please go ahead. Yeah. Actually, I want to ask you a question. You made a point about Norway and difficult political situation. And are you flagging that you are expecting to lose contracts there? Is that the potential upshot of of that statement you're making your press release? And in Finland, I just want to understand really how, because you're the only operator, which is slowing intake of new residents in your nursing homes. And I imagine, therefore, you might be having an increasing queue of eligible customers into the sector. I mean, how how is that panning out? I mean, at what point do you think we're going to actually get local authorities really being quite upset about the fact that there aren't enough places that can accommodate people in need. Thank you. So I'll take the Norwegian question first. As you know, we have a a small quite small operation in in Norway, about 3% of of turnover. That's mainly outsourcing contract in elderly care. We have one home in operation. The rest is outsourcing contracts, they run for a certain period of time. Given the outcome of the the September elections in Norwegian LA, we don't expect those LAs to renew any contract, at least not during this matter period. So that means that that our original version is likely very likely to to shrink over the next couple of years during this matter there. At, of course, it won't be renewed. It we don't foresee that we'll have any material, you know, effects. So it will, you know, it will have some effect on the on overall net sales. On Finland, the big, you know, demographic uplift is still four or five years away, whether it be whether it be a domestic increase or demand following the the elderly boom. If you look at current state in most local authorities, there are currently capacity enough. Of course, you know, it would be interesting to see how you know, in that going forward. But but for now, you know, we have built a lot of capacity over the past couple of years, so we have the cycle of too large cost. We have a lot of to in the next couple of years. Then, of course, you know, we're not taking down pipeline to zero, but we, you we would dramatically reduce. And we expect the other private operators to to do the same over the next couple of years. Then there there will come a point in a couple of years' time where there will be a growing capacity demand again in Finland. And with the sector as such, we'd need to build out new capacity, but not in the next two, three years. But to go to go back to this, I mean, you you're clearly slowing. I can't don't have the exact figure, but you would be slowing relative to your previous plans, the intake of residents to the tune of several 100 new residents a year or this year specifically, and I imagine you're not the only one to do that. So possibly, we're talking about thousand Finnish elderly people who are not getting into private nursing home. Where are these people going then? And this is a a you know, overall, the system is quite complex and and, you know, there are, how to say, there are many rubber bands in the system. So it's it's a question on how long does people stay in their homes with this work of home care, how strict are municipalities on their decisions on when you can move into the nursing homes, how quickly are they closing down on modern capacity that they have. And so so, you know, if we take shorter time periods and talk months and quarters, there's quite a bit of flexibility for the municipalities to act in different ways. Then if you take the long term perspective, it's clear that demographics will drive demand and there are still a lot of unmodern capacity in the Finnish market. And what they not typically do in the short term is that they add more home care hours where residents need more and more care, and then they could, for some time, actually, use more home care. And then, eventually, of course, they they they need some available places. Okay. That's helpful. Thank you very much. Thank you, sir. We have another question from mister Christopher Lieschberg from Carniche. Sir, please go ahead. Okay. Yeah. Yeah. A quick follow-up, Felix, regarding the interest rates you're paying dependent on the balance sheet gearing level. Is that the same setup as you have with the current loan agreement? Yes. Yes. Okay. It's very similar to the current. Okay. Thank you. Thank you, sir. We have no other questions. Ladies and gentlemen, I would like to remind you that if you wish to ask a question, please press 01 on your telephone keypad. We have no other questions, sir. Back to you for the conclusion. Okay. Thank you, everyone, for listening in. If you have further questions, please contact Andrea Cook, our head of IR, or you can also send the mail, of course, to to me and Fredrick if you want. Thank you all, and have a good day.