Please stand by. We're about to begin. Good morning, afternoon, and evening. My name is Allie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Savaria Corporation Q4 2021 Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a Q&A session. If you would like to ask a question during this time, simply press Star, then the number one on your telephone keypad. If you would like to withdraw your question, please press star two. This call may contain forward-looking statements, which are subject to the disclosure statements contained in Savaria's most recent press release issued on March 23rd, 2022 with respect to its Q4 2021 results. Thank you. Mr. Bourassa, you may begin your conference.
Thank you, Allie. It was a challenging year, but a great year. A great year, and we are very excited, not just me, to 2022. I think 2021 was a good year. We prepare a lot of things for 2022. Don't forget that right now with some acquisitions that we'll make, and the major one is Handicare. So we will sell around CAD 800 million. How much EBITDA? You just have to choose the right number. We just announced to you before, at the beginning of the year that we'll make between CAD 120 million to CAD 130 million.
When we made the acquisition one year ago of Handicare, we were thinking that they were good, but they are better than we're thinking, okay. They have better people. On that, okay, I thank them, okay, to come aboard, okay, and say we want to work together. It's always in life, okay, teamwork. If you don't believe in teamwork, okay, you are the wrong place, okay. Because if you want to be successful, okay, you need all the people together. We have more than 2,200 employees. We are in, with this acquisition, we are in over 40 countries. That's major, okay. What we have done, we imported technology of Garaventa Lift from Handicare Europe, okay, to Toronto.
We are well advanced in the integration and we are in production, but just the bending machine will arrive in maybe 45 days. Right now we take the plane for the bending the tube arrive from Europe. So we miss a couple of CAD because it's quite expensive the freight. But even it's a challenge. This was a tough year, you know something. You know the materials was a challenge and is a challenge. The container freight was a challenge, and it continues to be a challenge. It's not easy, but that show that we have a good team. A good team find a problem and just discuss what we do.
That's the forte of Savaria. We have a good team, and we if we have to change people, we change people. We have some nice people, okay, come with us, okay, in 2022. Just an example in the patient handling, okay, we have a new director down there that's with Handicare. He has great experience in our industry, and he will bring this division at another level. Another level of EBITDA. What is very important, okay, for me and for my people is what kind of EBITDA? What is the percentage? We want, okay, to be, by 2025, we have a big goal, okay? Our big goal is to reach CAD 1 billion in sales, okay?
With the CAD 1 billion in sales, okay, we have to be around 20% in the EBITDA, and we will be around 20% because the synergy with all the people, okay. Thank you to be with us this morning, guys. We need you because that's you, okay, you write on Savaria. You, the emotion of my industry, you know, is always bad like it was 15 years ago. This is a fact, this is what it is. Thank you to follow Savaria and to be interested in the history of Savaria. I think we have a great history coming from when I got a company, we were like four people, and right now over 2,000.
At the beginning, we were selling CAD 200,000 a year. This year we will sell around CAD 800 million. That's good. If we are there, okay, because of the people. We have good customer, and as I repeat what I was doing, selling 15, 20 years ago. The customer write the check. For what they write the check? With a smile, okay, because what? That gave him, okay, more liberty to move. That's so important. Today, we have the pleasure, okay, I will pass to Steve, okay, that will tell you a bit where we are with our financials. After that, we will have a question that we'll answer to you with pleasure.
On the call this morning, we have Nicolas, we have Sébastien, and for sure that I tell you that Steve is the first one to speak. After that, okay, Nicolas and Seb and myself, we will answer the question that you have. First of all, okay, Steve?
Thanks, Marcel, and good morning, everyone. I will begin with some remarks regarding our 2021 fiscal year consolidated financial metrics. For the year, the corporation generated revenue of CAD 661 million, up CAD 306.5 million or 86.5% compared to 2020, mainly due to the acquisition of Handicare in March 2021, and also due to organic growth of 4%. Gross profit and gross margin stood at CAD 215.5 million and 32.6% respectively, compared to CAD 122.1 million and 34.5% for 2020. The increase in gross profit was mainly attributable to the addition of Handicare.
The decrease in gross margin was primarily due to additional costs related to the supply chain, including shipping costs and also the reduction of COVID-19 employment retention subsidies from the Government of Canada's program. Adjusted EBITDA and adjusted EBITDA margin stood at CAD 100.3 million and 15.2% respectively, compared to CAD 59.8 million and 16.9% in 2020. The increase in adjusted EBITDA dollars is again due to the addition of Handicare. The decrease in adjusted EBITDA margin is due most notably to significantly increased shipping costs in 2021 versus 2020, as well as a large reduction in Government of Canada COVID-19 employment retention subsidies. Total subsidies received for 2021 was CAD 3.2 million versus CAD 6.9 million in 2020, reflecting a decrease of CAD 3.7 million year-over-year. Now I'll move on to our segment results.
Revenue from our accessibility segment was CAD 484.3 million for the year, an increase of CAD 227 million or 88.2% compared to 2020. The increase in revenue was mainly attributable to the acquisition of Handicare, which provided 87.3% growth. Organic growth of 3.5% was driven by strong demand in the residential sector and was partially offset by a negative foreign exchange impact of 2.6%. While our residential sales were strong throughout the year, we continued to see weakness in the commercial sector. Adjusted EBITDA and adjusted EBITDA margin, both before head office costs, stood at CAD 86.2 million and 17.8% respectively, compared to CAD 51.1 million and 19.9% for 2020.
The improvement in adjusted EBITDA is mainly due to the acquisition of Handicare. The reduction in adjusted EBITDA margin is partially due to additional costs related to supply chain, including shipping costs, as well as a reduction of the government of Canada's subsidies. Revenue from our patient care segment was CAD 136.7 million for the year, an increase of CAD 57.4 million or 72.4% when compared to 2020. Revenue growth was mainly driven by the acquisition of Handicare, which contributed 71.3%. In addition, the segment saw 5.5% of organic growth for the year, which was driven in large part by the last quarter of 2021, which provided 17.1% organic growth.
The improvement in organic growth was driven in large part by the easing of pandemic restrictions and improved access to long-term care facilities. Adjusted EBITDA and adjusted EBITDA margin, both before head office costs, stood at CAD 16.7 million and 12.2% respectively, compared to CAD 10.4 million and 13.1% for 2020. The increase in adjusted EBITDA was mainly due to the acquisition of Handicare, and the reduction in adjusted EBITDA margin is primarily due to the aforementioned additional costs in the supply chain and a reduction of Government of Canada's subsidies. Revenue generated from the adapted vehicle segment was CAD 40 million, an increase of CAD 22.1 million or 123.4% when compared to 2020.
The Handicare vehicle division based in Norway provided 119.9% of acquisition growth for the year. The Canadian auto divisions experienced organic growth of 3.5% for the year, driven mainly by strong sales in Q4 2021 as a result of some pent-up demand from earlier in the year. Adjusted EBITDA and adjusted EBITDA margin, both before head office costs, finished at CAD 3.2 million and 8% respectively, compared to CAD 0.6 million and 3.4% for 2020. The increases in both metrics were mainly due to the acquisition of Handicare and some recovery from the economic slowdown caused by the global pandemic, partially offset by a reduction of Government of Canada COVID-19 subsidies. For the year, net finance costs amounted to CAD 15.8 million, compared to CAD 3.9 million for 2020.
The increase is mainly due to higher interest expenses due to additional long-term credit facilities related to the Handicare acquisition. Net earnings reached CAD 11.5 million or CAD 0.19 per diluted share for the year, compared to CAD 26.5 million or CAD 0.52 per diluted share for 2020. Net earnings was largely impacted by amortization of intangible assets related to the Handicare acquisition. Adjusted net earnings, excluding amortization of intangible assets related to acquisitions, reached CAD 41.8 million or CAD 0.67 per diluted share, compared to CAD 31.8 million or CAD 0.63 per diluted share for 2020. This reflects an increase of 31.3% or 6% on a diluted share basis. Returning now to capital resources and liquidity.
Savaria generated cash flows from operating activities of CAD 57.3 million for the year, compared to CAD 49.3 million in the prior year. The year-over-year increase is mainly due to increased adjusted net earnings from the addition of Handicare. Strategic investments in inventory caused an increase in non-cash operating items for the year of CAD 13 million versus a decrease of CAD 6.1 million in the prior year. As at December 31, 2021, Savaria had a net interest-bearing debt position of CAD 315.4 million and it was in compliance with all of its covenants. On a trailing twelve-month adjusted EBITDA basis, Savaria's debt to adjusted EBITDA ratio was approximately 3.5x. Savaria has funds available of approximately CAD 130 million to support working capital investments and growth opportunities.
Now looking forward, unpredictable changes in the macroeconomic environment make it difficult to predict future performance. However, considering our recent financial performance and our strategic integration plan with Handicare, we are confident that for fiscal 2022, we will generate revenue in excess of CAD 775 million with adjusted EBITDA in the range of CAD 120 million to CAD 130 million. With that, this completes my prepared remarks, and I'll turn the call back over to you, Marcel.
Steve, thank you very much. Very well done, okay. Just to add, okay, an information, okay, that maybe you don't know. Our booking that is very important, okay, if you want to see what will be the future quarter, okay, and what will be the year, okay? We're booking at Savaria, I take Savaria in Toronto, okay. It's three times that it was last year, not 20%, okay? Three times. You can see the backlog that we have in residential elevators, okay? It's amazing. Now we have another problem, okay? We have to deliver fast, okay? We upgrade ourself, okay, upgrade our people, and we work hard, okay, to make more production than we were doing. It's another time in our life, okay?
We never had the booking say that we have three times, okay, since it was the year per year. It's a fact right now. It's a great interest, okay, that I tell you this information, and I think that validates a little bit what I've said, Steve, before. We are ready for all the questions that you can ask. Allie?
Thank you. If you would like to ask a question, please press star one on your telephone keypad. If you're using a speakerphone, please pick up your handset and make sure mute function is turned off so that your signal reaches our equipment. Again, it is star one if you would like to ask a question. We'll go ahead and take our first question from Frederic Tremblay with Desjardins. Please go ahead.
Thank you. Good morning.
Bonjour, Frederic.
Hello, Marcel. I believe, Marcel, you mentioned that you'd like to get to 20% EBITDA margin in 2025. That would be, I think, the highest margin in company history on an annual basis. I was just wondering if you are referring to margin for the entire company or for the accessibility segment. I guess maybe if you could maybe provide a bit more details on the factors that would allow you to increase margin to around 20%.
Sébastien would complete my answer. My answer is this one. For sure, we have some division that get less EBITDA. But for me, when I say around 20%, it is for all the company together. It's why I'll say when we bring in North American manufacturer, the curved stairlift that Handicare is doing. That's a project that has a better margin. I would not say very high. It's never too high, but to be reasonable too on the pricing. For me, it's for all the company, the 20%, Frederic. Sébastien, you have something to add?
For sure, Fred. As you know, we're under transformation. We have acquired Garaventa a few years ago, Span-America, and now Handicare. There's a lot of moving pieces. I think, Accessibility always been first, patient lift first, and the car division, third. Definitely, I think we have a lot of activities to support this target goal. Hopefully we'll be able to deliver in the next, few quarter and few years on that. A lot of opportunity, Fred.
Okay. You mentioned the large backlog in Toronto. I'm just curious if you have any comments on, I guess, the split between residential and commercial. I guess I'm more interested in how the commercial side is evolving in terms of quotes or backlog in the recent months and what you're seeing in terms of a potential recovery from that particular market.
That's a good question again, Frédéric. For sure the residential, the number of elevators that we have in our backlog is incredible. For sure, the COVID affects a lot of commercial activity because people work at home. If we go with an example, downtown Montreal is not the activity it was before. They have to work from home. They make some adjustment at home. In reality, we think that all the commercial we will get a new push this year. Steve, you have something to add or on that?
No, for sure, the residential sector, Fred, okay. Residential is not just home elevator, okay? It's home elevators, it's incline platform, it is stair lift, okay? Now we are a big player in the stair lift industry. That's why this Handicare is very interesting because it position ourselves in a very good shape and bringing back the technology from Europe to Toronto to manufacture the curved stair lift. It will give us better lead time and we should be able to just continue to accelerate our growth into the stair lift. Commercial, like Marcel said, it has been slow, but it's recovering. Now the good news at least we have a good backlog so we can plan our growth. You know, people are more careful also than it was before.
I think with all this pandemic, the supply chain, people try to put their order in advance to make sure that the production will try to hit their date. I think it's we are lucky, Fred. A good year in front of us.
Great. Maybe last question for me, maybe for
And, and
Yeah. Sorry, go ahead.
Fred, I just want to add something, okay? With Handicare, okay, we split a little bit the territory. Like we handle more, okay, North America. For sure we always discuss with our people in Europe. Europe push, like, they work a lot with Garaventa. Okay. Garaventa is a great company, okay, but I think, okay, to work with somebody directly full-time, okay, and in the territory of Europe, I think this segment of Garaventa would be better. We have a lot of philosophy coming with this acquisition, okay? Just to mention, at beginning of this year, we make just a small acquisition, okay, about somebody who make the controller, okay?
We're buying from the guy in Europe, the controller, but now we want to be independent. We buy this guy. We are always looking what we can do to be better. As Steve mentioned, we have for sure our ratio is not what I want it to be, but I think this year we'll have a better ratio to go to put some little acquisition, just to be always better and deliver the best quality and the best service to the customer.
Great. That's a great segue into my last question. Maybe for Steve, in terms of capital allocation priority for the year, between CapEx, debt repayment, and potential M&A. Any comments there?
Yeah. It's just small M&A, okay? Small M&A, and we're looking everywhere. Now we are looking everywhere around the globe, okay? That's amazing, okay, what this acquisition of Handicare. I mention again, okay, man, they have good people like that. At the same time that we have good people when we buy Garaventa. With all these people that will work together, you will see, okay, that we'll make some small acquisition, but we work a lot to complete the integration, okay? Sometimes we have to look inside our company, okay, inside of each division, okay, we can be better, and instead of looking always for acquisition. No big acquisition in this year.
Just to add to that, Marcel, if I can. I mean, it's you know, looking at the deleveraging profile for this past year for 2021, we didn't delever since the date of the acquisition till the end of the year, which was about 10 months. That was, you know, expected because of all of the large one-off costs we had, acquisition and integration related. You know, most of that is behind us. There will be some integration costs ongoing. But we will be delevering further in 2022 as per our initial plan of at least half a turn per year, Fred. You know, we are being diligent with CapEx spending. We're being very diligent, and we.
As Marcel said, you know, there may be some funding for acquisitions, but they will be on the small sort of tuck-in side.
Very interesting as always, Steve. Thank you.
Thank you.
Frederic.
We'll go ahead and move on to our next.
Do we have a bit.
Yes, we'll go ahead and move on to our next question from Derek Lessard with TD Securities. Please go ahead.
Yeah. Good morning, everybody. Marcel, your English is perfect. I just wanted to hit on again on the bookings being up 3 times in the backlog there. It's a good problem to have, obviously. Maybe if you could just add a little bit more color on how you expect to deliver on that and clear through the backlog.
Good. Well, I will give you, and Sébastien will complete my answer because he's the guy responsible for the operation. I will just say, okay, like you know something, we on curved stair lift, okay? We can deliver, okay, like, with the new. We can deliver like 2000 curved stair lift, okay, with the system of Handicare. Before that, okay, we were at maybe 30, 40 a month, okay? Now, okay, just in that, if we can talk about the curved stair lift, we find that about residential elevators, okay? What is good, okay, and it's why the team work, okay.
We have somebody from Handicare come see us. I think in the recent weeks, Sébastien, I will tell you, and they will work with us. How can we pass, like from six, seven elevators a day to 10, 12 a day? New idea, experience, and it's all in the group. When it's only the same group of you, it's good consulting. When you have the talent inside, use that, and that's a value realization for them. They say, "Hey, I am, I don't know, in the Netherlands. But I have these guys in Toronto." That's everything. Everybody's proud about that. Sébastien, you have something to add?
Yeah, for sure, Derek, okay. We are lucky we're in a good industry. It has been a very good support last year with staying at home. The residential has been good and it continue to remain good. For sure, we had a bit of inflation on our sales price with our customer last year. When you announce some price increase, there's a direct effect on the booking, because we try to be respectful with our dealer to give them some time to pass on the order that they already have in them. Yes, there has been a bit of an over order because of some deadline on pricing, but which is good because what came in last year as a price increase from the supplier, we had to reset the price with our customers.
That has been done. Last year was challenging. Now, don't forget we had some a bit of COVID, we had some labor shortage, but I think this year we have made some activities to fill some gap where we needed to add some people. We are doing some strategic review in April with some key member of Handicare led by the team of Pete, that will work with our team here to see how we can improve and review how we can add automation those process to be a bit better. I think, yeah, the good news is that at least we have the order in in some of our division so that we can just execute on the growth plan that we want to have so.
That's what we want.
That's helpful. I was just wondering as well, do you have any updates on the Toronto plant expansion and how it's going, and maybe some production wins and maybe some areas where you still need to adjust?
I think the Toronto ex-Toronto expansion, yes, on a curved stair lift, now we are producing one of the two model of Handicare for the curve. We would like later this year to add in production the second model. All the distributions of the straight stair lift of Handicare is now done from our Span-America factory in Greenville or from Toronto for the Canadian market. That has been happening. The rest is, yeah, really expansion on our do more throughput to our different line, add some key labor at different place. I think the growth plan is what we are working on.
Okay, thanks for that. I'll cue, let somebody else in.
Thank you, Derek.
Our next question will come from Michael Glen with Scotiabank. Please go ahead.
Hey, good morning, guys. You know, I want to start a question with the 2022 revenue guidance. Now, the forecast implies 17% growth year-over-year, and I guess if I use the number on the call, it may be up to 21%. You know, I obviously understand Handicare will contribute two additional months, but I wonder if you can comment just generally on price versus volume dynamic in 2022 and what we should expect there.
Yeah. I think Steve will speak about that, okay. Yeah, I just want to tell you that we make some increase, okay, because we have to make some increase. We put some increase in 2021, okay? Another increase at the beginning of 2022. You will see that I think that will help our margin for sure, okay, when all this pricing will be in application. I see that coming at the end of March, okay? After that, for the second quarter, that would be. I would be very surprised if that's not a very good news that you will see in Q2. You may add a comment on that, Steve, please.
Yeah, sure. Good question, Michael. I mean, looking at what we're seeing for 2022, our guidance, our published guidance has been in excess of CAD 775 million, and it's just obviously difficult to peg an exact revenue number. Looking at our forecast and our budgeting for 2022, a significant piece is coming from Handicare. We have two more months, as you had pointed out, in 2022 than we had in 2021. Specifically on the organic growth side, what we are forecasting to achieve for 2022 is in line with our CAD 1 billion forecast for 2025. It's in that approximate same guideline, same approximate percentage increase. A good portion of that will come from pricing.
You know, we had mentioned that we have done price increases in Q3 at the end of Q3 in 2021, and we also have price increases in 2022 at the beginning of the year. As Sébastien said, it does take time for those to come through. So I mean, without specifically p inpointing how much, there's gonna be a good portion of that organic growth in 2022 coming from pricing.
That's helpful, guys. Thank you.
Yeah.
And the a second one. I guess maybe I wanted to focus on the supply chain. I mean, obviously that's been a challenge in 2021, you know, especially when you're thinking about all the freight costs you guys have had to push through. You know, with that being said, obviously I think you guys did a good job. I just wonder, you know, given the supply shocks, you know, are you thinking of potentially evolving your own supply chain and maybe your own production capabilities across, you know, the geographies a little bit differently, or do you think you have maybe the right formula today?
I think that you speak with Sébastien essentially, okay? Sébastien, can you take this question? Because I know that you know the answer.
For sure, Michael, it has been very challenging, the supply chain purchasing in the last year. I will say it remain challenging, you know, from one week to the other. There's some small issue, but we try to have a better planning to make some PO in advance with our key supplier, and we discover it was good and was not good. When we have some issue, we might work on some equivalent parts and do some testing to make sure we can not stop the production. Supply chain is not just about Asia, but at least in Asia, that's our own factory in Xiamen and in Wuzhou, so at least we control what's happening there.
As of right now, they are doing a very good job and they continue to ship what they are doing. For example, Marcel talked at the beginning of the call is the Ulc-tron acquisition, which was one of our key supplier of electronics. Electronics is a bit challenging those years, so we did an acquisition in electronics to be more vertically integrated to eliminate some of the risk. My friend Steve always remind me that I have a bit too much inventory. Yes, we have worked to make sure we have the right inventory on the shelf so that we can deliver this growth. One thing also to remember is in our key factory we have some machinery, so we are able to manufacture some parts by ourselves, some steel, some painting.
I think this is important to remain flexible. That will be my answer for that, Michael.
That's helpful. Thanks, guys. Those are my questions.
Thank you.
We'll take our next question from Nick Agostino from Laurentian Bank Securities. Please go ahead.
Yes. Good morning.
Bonjour, Nick.
Bonjour. If I could, on the supply chain side, I guess, two questions here. First, if you guys can talk about what impact did the flooding in Vancouver have on your Q4 results? Just trying to understand, was there any revenue opportunities missed as a result, or was there any margin pressures that you may have seen in Q4 that don't show up starting Q1?
Sebastian?
Yeah. Nick, for sure it was very unfortunate and you know, we have a factory in BC, so it was not so far from us. I cannot say that it has huge impact in term of supply because we have a few weeks always of inventory in stock. Yes, we had some trouble in Q4 on the timing of the container. Did it cost some additional cost? I think the answer is yes, okay? We air freight a few parts, pay additional money to move your container. Yes, it was not the best event with the flooding, no.
Okay. Just given with the situation in China currently with the shutdowns in Shenzhen, I know your factory is near there. Just wondering if you could provide an update on what you guys are seeing out of China and maybe if you're taking any precautions ahead of any further shutdowns within that region.
Sébastien, please.
Yeah, the good news, Nick, that's our own plant. We have really the truth of what's happening there. Yeah, since the Chinese New Year, our team continue to work every day. Yes, there has been so many lockdowns from one city to the other, but as of right now, it did not affect us. We have increased a bit maybe the raw material we have in our own factories to make sure we don't stop the assembly. But as of right now, I did not miss a week of shipping and, to the best of my knowledge, the Shenzhen border has reopened for the shipping, so that should not be an issue. There's not just one port also in China. Our second factory in Xiamen is quite far from Shenzhen.
I think so far we have been okay, Nick.
Okay. My last question, just wondering on staffing for the growth that you guys are seeing. Well, first of all, what was the staffing impact in Q1 related to Omicron just here in North America, and for that matter, in Europe? Secondly, are you guys incurring any additional staffing costs to keep staff, just given the fact that we're seeing lots of moving parts on the side in general?
Yeah. Sébastien answer that because, okay, you are there, okay, and you check your thing about all the different place that we manufacture, okay? Can you answer that please?
For sure, Nick, every year, okay, we try to give some increase to our different staff in our different locations. That's always part of our budget. Yes, I think we took care of your employees and that has helped us to fill some of the gaps where we had maybe some open positions. After that, 2022, maybe, I think, yes, we had some minor issues in two, three places, but for one or two weeks. As of right now, to the best of my knowledge, all our locations are healthy and they are all working.
Okay. Thanks, guys.
Okay. Thank you, Nick.
As a reminder to star one if you would like to ask a question. We'll go ahead and take our next question from Zachary Evershed with National Bank Financial. Please go ahead.
[Foreign language]
Bonjour, Zach.
I was wondering if you'd give us some insight into how the dynamics change in accessibility when we start to see interest rates rise. Do you see any issues on the residential side of things?
My answer is no. Not at all. No, not at all, okay. First of all, okay, they want to be at home, okay. They want maybe, okay, to buy an elevator. As I mentioned before, okay, the backlog on elevators has never been so great in all my life, okay. I see that the people, okay, work very well, okay, perhaps, okay, some time to be in the office and some time at home.
Thanks for that.
You have something to add, maybe, Nicolas?
No, Zach, I mean, I would say the products that we offer are more necessary, you know, as opposed to, you know, an extra deck that you might put on the back of your house or something. I mean, if somebody needs mobility in their home, whether it be a stair lift or a platform lift or what have you, I do think you'll see that it's a priority spending. Most of these individuals, it is private pay, so I mean, whether it be from their own cash or maybe they have a line of credit that they tap. So I would say no.
In the current environment with what we're seeing in terms of interest rates on the rise, and again, I'm not an economist, so I don't wanna predict where they might go, but for the moment, we don't see an impact. Again, given the kind of necessity of these products for these individuals to maintain their mobility, it is a priority for them. I, as Marcel had mentioned, we don't see a big impact given the current interest rate environment and where it might go.
Congratulations. Thank you, Nick Agostino. Congratulations to the Canadian government. I think during this crisis, they work very good to push some money to consumers during the recession. It was hard, the last two years, but people had some cash, so they have a lot of projects, and it's why I see this year will be a great year, and maybe it's very good to see that we will be on the road to make our CAD 1 billion in sales in 2025 or maybe a little bit earlier. Thank you, Nicolas Rimbert, for the answer.
Thank you very much. For my second question, can you give us an update on your outlook and objectives for the Vuelift, please?
For the Vuelift. That's an interesting question, okay, and a good guy to answer that, okay, will be Sébastien. Just add a note, okay, that Handicare is very excited about selling the Vuelift in Europe, and they already begin to sell that. And they believe, okay, the aesthetic is there. First of all, okay, you are in a house, okay, and you are accessible on two or three level, and it's not something that is hiding in the corner. You can put that in the center of a room, okay, and that's an art, okay. And it works quite well. Maybe, okay, the price, okay, is not affordable for everyone, but we have all kind of people in the society. The people who don't want to have that, maybe they would take a regular elevator.
I see the future of this product and that's good. Okay, this is why our growth will be there and better because this is a product, okay, that we will sell more and more year after year, okay. Because the people begin to see that. What is important, the architects around the world, okay, know more about Savaria, know more about this fantastic product. So Sébastien, you have something to add on that?
I guess yes. Yes. Basically, Zach, first Vuelift, if you remember, it's always a flagship product, okay, very. We do a lot of marketing effort on the Vuelift. It's always hard to evaluate also the exact success on the Vuelift because it has a big influence on the other home elevator. As Marcel say, backlog is very nice on the home elevator. I guess part of it, the numbers of leads, it is driven by the Vuelift. Now for sure we. It takes time, Vuelift project, you know, some time. Yes, if it is a renovation, might be a bit faster, but with a new construction we have to put a Vuelift just at the end of the construction.
Yeah, now we have some demo in Europe, okay, in our own offices in Switzerland and Germany and U.K. I think Garaventa to Europe, because we started a bit like 1.5 years, two years ago, start to have an interesting trend, especially in Germany. Now we have trained a team of Handicare and to present to the dealer of Handicare, and this is something that we'll expect to have a very nice growth with the Vuelift in Europe. If you remember, Vuelift is code compliant for Europe, so we did that two years ago. There's no reason why we cannot accelerate our growth of Vuelift with it. I think the team of Handicare put a lot of efforts also on the marketing and on training the people on the Vuelift.
Thank you very much. I'll turn it over.
Thank you.
We'll take our next question from Sepehr Manochehri with Eight Capital. Please go ahead.
Thanks and good morning. On the Patient Care segment, can you characterize the thinking behind the change of name from Patient Handling, and does it open you up to new product lines?
I am very happy that you touched this segment that it is Nicolas Rimbert's forte. Yeah, that's a good question, and you will see that he will explain that we make some change that will change this division in this year. Nicolas.
Sure. I wouldn't read too much into the name change of Patient Care to Patient Handling. Essentially, you know, Span-America or I guess prior to Handicare was the big driver of our legacy patient handling business, again, more in the pressure care, so in terms of those therapeutic support services and the bed frames. We had the pressure care side, and then with Handicare, obviously more in the safe patient handling with their lift products. We thought that Patient Care was maybe a better name that encompasses the entirety of that group. The opportunities I think in front of us for Patient Care won't necessarily come from the name change, but really from certain changes that we've made internally to that organization.
Again, Handicare brought with us a very, very strong team. Then again, combining that with Span-America as well as, you know, we brought on board a new commercial lead back in the fall, who's really kind of spearheaded much of the integration that's going on on kind of the sales strategy, the pricing strategy, our product, you know, rationalization that's ongoing. I think those are more of the initiatives that we're doing that are gonna have an impact on that division. Unless you have any other further questions as it relates to the name, I would say don't read too much into it.
Understood.
Okay.
No, yeah, I just saw patient care. I thought maybe you're broadening into wound care products 'cause I've been reading into kind of pressure products that you had and some of the patient handling solutions you could go into.
I think right now our main focus is we have a good portfolio of products of lifts, of slings, of bed frames, of mattresses. Again, with the team we have around us, it's a question of, you know, I guess, better focusing what we have and getting the best out of our current product portfolio, rationalizing our product portfolio in many cases, where there's some overlap between the Span and the Handicare divisions. Then from there, yes, there could be an opportunity for us to look to add new products. Right now I think we have a good mix with what we have now.
Understood.
Can you speak a little bit about our guy in Magog that handles this division right now for us?
Yes. Patrick Mongeau. A little shout-out to Pat.
Yeah.
Yes, Pat joined us back in the fall. Again, 20-plus odd years of experience on the sales side, on the product side. He joins kind of our two other leaders within patient care. You have Philip Marmina, who heads up, I guess, the sales front, and then Les Teague there in Greenville, South Carolina, for more of, I guess, the operational side of things, you know, in charge of the factories both in Greenville, but also in St. Louis and in Beamsville. Pat really, when he came on board, he's kind of taken all the commercial activities under his wing, under his direction there.
Really, you know, focusing first on, you know, we have these price increases that we've passed on over the past several quarters to kind of combat some of the inflationary pressures that we've been facing. You know, Pat's done a deep dive into all of our products. Looking at, you know, all that we offer both on the Span side, the Handicare side, and for Magog there on the Savaria side, looking at all of our products, all of the pricing, making sure that we're selling the right products at the right price to the right people. That's really what he's been, I guess his mandate has been since the start. Again, it's having a, I would say, a very positive effect on the team.
I think everybody's kind of buying into this one Savaria, if you can call it that, as it relates to patient care. It has been instrumental, and we're very happy and fortunate to have him on board and the rest of the team on board, and we feel very confident about where we're going with that division.
Understood.
Yeah, just to
Thank you for that. Sorry, go ahead.
Yeah, just to add on that, okay, you will see, okay, that the margin was not satisfied at all, okay. I cannot work with the low margin like that, okay. Pat, okay, is on board, okay, is working hard, okay, with his friend, okay, his colleague. You will see that we will produce EBITDA, okay, at the right ratio, okay, in 2022, okay, and we will put the to have a very good 2023 in terms of EBITDA number. Okay, that's something to have an EBITDA, but we have to be at the right ratio. That's why I focus, okay, to be at 20% by the end of 2025. I focus on that. My team work hard, and we will deliver.
Understood.
Thank you. Bye.
That right ratio for you is where? Where is that right ratio for you right now, basically you're talking about?
Oh, yeah. That's a good thing, okay. I think that the accessibility will turn around in 2023. I think we will be around 20% on this patient handling. We are very optimistic to deliver that. The first thing is having motivated people and the right products. For sure, we need that. We have this combination.
Understood.
Very optimistic.
I did notice there was a slight reduction in your staff from 2,300 to 2,250. Is that just a function of the increased automation? You also mentioned 2,000 staff. Is that just you rounding or are you looking at some staff reductions as you increase automation, I guess?
You know, okay, over the years, okay, our staff, okay, is very stable, okay? It's a question they like to be with us. For sure, okay, we have a company that we put, okay, our employee at the very big priority or maybe we pay them a little bit too much. The people like to work at Savaria. Me, okay, I am a guy, okay, that go in the shop, okay. Now, a little bit less, okay, but my people right now, Sébastien and the others, okay, we go in the shop and we speak with them. It's why, okay, it's just going higher, but we don't have a lot of change right now. For sure, okay, Sébastien can add something.
Can add an interesting comment about the curved stair lift that we make from Savaria. How many number he has to make to deliver 150-200 by the end of the year a month? With how many people, Sébastien?
For sure, like, we're always working on our productivity and to bring the Handicare product here for the curved is a major big change in terms of productivity output per person. Basically, Handicare is 4 times more productive in terms of the time it takes versus Savaria to manufacture a curved stairlift. I think, Steve, you wanted to comment a bit on the total number.
Yeah, I was just gonna say, Seb, it was 2,300, the initial estimate based on our first consolidation with Handicare. We've just fine-tuned the number down to 2,250. So 2,250 is the number of employees we have. There haven't been any significant changes in headcount. It was more just fine-tuning.
Understood. Thanks for the insight there, and I'll hop back in the queue. Appreciate it.
Thank you.
We'll go ahead and take a follow-up from Derek with TD Securities. Please go ahead.
Yeah, just a few follow-ups for me. It looks like, you know, excluding the government assistance of the CEWS program, you are actually able to keep your margins flat year-over-year. You did mention things like shipping costs in particular. I was just wondering how we should be looking at your margins progressing through 2022.
You are talking about the gross margin? Okay. I think, with the increase of the price that we have done, we have to be fair, and let everyone can live and be happy with the price that we get. So, us, we'll be very happy, to reach the gross profit of 35%. So I think we will reach that, by the end of 2025, and that's a base for us. We have the people, we have the territory, we have the number of dealers. Don't forget we sell direct, but we sell the majority of our sales is through dealers. We like to work with them and they are good with Savaria for so many years.
What is good, okay, the dealers, we have the roughly, okay, the number of dealers that we have, okay, a couple of years ago, many years ago, because they don't change. They are happy with us, okay. What is important, okay, we are the only company, okay, that can say to the people, "Hey, buy with us, okay, and you will have all the products to cover residential and commercial, okay. From the curved, the straight stair lift to the vertical, okay, to elevators, okay, to the, to." You know, something to be that give to your customer an accessibility to the Vuelift, okay. That's great. We have all, okay, commercial and residential, okay, at the same place, okay. That's major. We bring that, okay, this.
For sure we have some work to do, okay, that they made the code in Europe, okay. Some we are working on that right now. It's important to arrive down there and make some modification because the customer in Europe and in North America are different a little bit on aesthetic mainly, okay. We work on that, but that's major to offer to a dealer the complete line. They don't have to look at other place, okay. Just buy at one place. Sébastien, you have something to add?
No, I think that was a good answer. Maybe Steve, you want to add something?
Just Derek, specifically about the underlying margins. I mean, yes, there was a lot of pressure this year from decreased CEWS as I mentioned, and you mentioned. I think when we highlight the increased shipping costs, which were significant in the year, I mean, it just goes to show how much better of a year we could have potentially had. You know, we finished the year at CAD 100.3 million adjusted EBITDA, and we saw significant increased freight really from the end of Q2 through the end of the year. That's, you know, when we look at 2022 and beyond, where we have planned accordingly to incur similar freight rates. You know, yes, it, we did hit CAD 103 million. It could have been, sorry, CAD 100.3 million.
It could have been a decent size bigger if it weren't for additional freight costs. We, you know, we did incur them, and we are expecting them to continue in the future. Hopefully that gives you a little bit more color.
You're expecting flat high rates but flat year over year. You're not expecting them to grow.
Freight costs? No, we're not expecting it to grow on a sort of per shipment basis. Obviously as our business ticks up, you know, we're looking at different things, including the manufacturing of the curved stair lift in Brampton, which has a positive impact on freight. There are changes. You know, when we look on a per-container basis or per shipment basis, we're planning on it continuing at the current level.
Okay, that's helpful. Another one for me is I was wondering if you're seeing maybe any initial impacts on the European business, maybe just given the conflict that's going on in the area.
Not right now. Sébastien, you are in touch with them, okay? Better than me, okay? With my chat, okay, and when I speak, okay, to Clare, okay, it seems that it's not easy, okay? We wish that it will finish this war, okay? Sébastien, okay, you have some update to give?
No. Again, Marcel, it's very unfortunate, but yeah, customers we did not have real sales over there, so there's no impact. In terms of supply chain, so far we have not been impacted. We are monitoring that very closely because we have a sales office in Poland. There's a lot of trade going there, so that's something that in the long term could have impact, but we are monitoring.
Okay. Maybe just one last one for me in terms of housekeeping for Steve. You talked about strategic investments in inventory. Just wondering what your expectations for working capital are this year and maybe along the same lines, your CapEx in 2022.
Yes. Was specifically looking at working capital and within that on the inventory piece, you know, we did see a sizable increase in 2021 as we've talked about. You know, that was intentional to buffer ourselves against supply chain challenges. You know, we did see various challenges throughout the year. Vancouver floods were just one of them. Going forward for 2022, we have sufficient inventory on hand right now. On a dollar basis, we're not trying to increase that. We're trying to more redeploy that and keep the investment in inventory relatively flat for 2022. That's our goal. On the CapEx side, we are being diligent with CapEx.
Our spending estimate for 2022 is sort of in that 2% to 3% run rate that we have historically had, and that includes some investment in some of our facilities related to some of these projects that we're talking about, whether it's, you know, stair lift manufacturing in different cities or other investments. We are being very critical on CapEx and, you know, that is just going to show how focused we are on debt deleverage.
Thanks, everybody.
Thank you very much.
With that does conclude our Q&A session. I would now like to turn back over to our speakers for any additional or closing remarks.
Thank you very much, my dear. I think that was a great call, and thanks to my team. See you in three months.
With that does conclude today's call. Thank you for your participation. You may now disconnect.