Terveystalo Oyj
OMXH:TTALO
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
7.09
10.38
|
| Price Target |
|
We'll email you a reminder when the closing price reaches EUR.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
Earnings Call Analysis
Q3-2023 Analysis
Terveystalo Oyj
Terveystalo's third quarter painted a narrative of an organization not just meeting, but exceeding its targets amidst an economic climate that has seen better days. They have managed a slight increase in revenue, and the adjusted EBITA margin, which is now comfortably at 7.5%, is on track with Terveystalo's 2025 target of 12%. Their profit improvement program appears to be their north star, proving resilient and efficient enough to deliver expectations ahead of schedule. Amidst macroeconomic challenges, the team's overachievement reflects their ability to excel even with a volatile consumer segment. Boosting this confidence is an upcoming bump in Kela reimbursement levels, expected to mitigate the impact of low consumer confidence on their businesses.
The company's adjusted EBITA soared by almost 70% thanks to an improved sales mix and profitability initiatives, while simultaneously coping with the loss of revenue from COVID tests and contending with a weak Swedish crown. Acknowledging these counterwinds, the company has maintained its 2023 guidance for revenue growth and an adjusted EBITA percentage between 9.1% and 10.1%. The backbone of the company's revenue growth stems primarily from Healthcare Services, which has seen robust growth in appointments and diagnostics, correcting for the absence of COVID-19 related testing. Currency fluctuations in Sweden have posed challenges, but Terveystalo's diversified approach across different segments and disciplined cost control have allowed overall growth and improved financial metrics.
There has been a significant improvement in earnings from the Healthcare segment, demonstrating a EUR 5 million increase due to a strategic alterations in sales mix and price structuring that offset inflationary pressures. As for the balance sheet, it shows resilience with a strong cash flow of EUR 174 million (rolling basis) and a steady debt to EBITDA ratio at 3.1, reflecting a well-managed financial structure. The company has actively managed its debt portfolio by extending term loans to avoid material maturity points in the near term, ensuring financial stability to support long-term strategies and potential growth initiatives. Capital expenditures have been thoughtfully managed, balancing out to around 4% of revenue - reflecting investments made into enhancing their offerings with cutting-edge AI products, digital services, and necessary infrastructure upgrades.
With all improvements considered, Terveystalo stands solid on its previously stated guidance, confidently expecting to hit the midpoint in their projected adjusted EBITA range for the year. This projection assumes no significant deterioration in consumer demand or employment levels and excludes material changes in public sector behavior or mergically large acquisitions or divestitures. The company's ability to navigate the current economic landscape while delivering on profitability improvements and organic growth showcases their operational competency and disciplined execution of business strategy.
You don't have any saved screeners yet
Good morning, everybody, and welcome to Terveystalo's Q3 results call and webcast. My name is Kati Kaksonen, I'm responsible for Terveystalo's Investor Relations, Sustainability and Communications. Today, as usual, we'll have a short presentation by our CEO, Ville Iho, and our CFO, Juuso Pajunen, and we'll follow that with a Q&A. We'll take questions both from the phone lines as well as through the webcast.Without further ado, over to you, Ville.
So diving into Q3 key highlights. The main headlines for this quarter can be seen here. So margin improvement, which is, of course, the most important takeaway for this quarter is progressing well and is progressing as planned. The key contributor for the margin improvement obviously is our profit improvement program, which is on track and will deliver the targets ahead of schedule, which is a very, very good place to be right now.So organization has worked hard and we are overachieving against the targets set earlier. Of course, we are now working against worsening macro and we need that overachievement. But looking at our agenda, looking at different businesses, different segments and customer groups we are working with, we can be confident with our Alpha agenda -- profit improvement agenda and a versatile customer base and a diverse service portfolio, we can progress also during worsening macro environment and headwind.Key numbers from this Q3, a slight uptick in our revenue. Most importantly, of course, the EBITA is progressing as planned against the target of 12% in 2025. So again, we can say that we are at plan comfortably. NPS customer satisfaction all time high. So the latest number is 86.3. Given any service industry, any service, this level is world class. And we have been improving our profitability, but as you can see, at the same time, we have been investing into the services, into the products. And our customers are more satisfied at Terveystalo than ever before.The same can be said of our professionals. We are again voted as number one workplace in healthcare in Finland, which, of course, going forward is extremely important for continuing to improve our supply to grow our business. So good numbers and a very good place to be here today.Looking at our business segments that were cause for the profit improvement, obviously is Healthcare Services, bolstered by our profit improvement program. So nice uptick in the profitability in Healthcare Services.Portfolio businesses is also improving. There you have a little bit more diversified -- a bit choking at each business. And there, for example, you can see some softening in consumer-related services. But overall, they are also -- Portfolio businesses and the businesses under that portfolio are making good progress.Sweden during Q3 had a slow start from summer season and holiday season and that can be seen in the numbers. There also we can say that Swedish macro is not good and there's slight impact from that headwind also seen in the numbers. And of course, we'll work hard on Sweden with the Swedish team to face that headwind, but also to diversify the business portfolio so that it will be more resilient as we are in Finland with more versatile service portfolio.As said, profit improvement program is progressing as a steam train. We are ahead of our schedule. We'll achieve the targets ahead of schedule. And the financial target of 12% in '25 is at sight. The macro environment, as everybody knows, is not the most positive, not in Finland, nor in Sweden. But we have -- as said, we have a versatile customer demand, we have a versatile service portfolio. The most volatile and sensitive customer segment in our services, obviously, is consumers. And consumer-driven businesses are mostly impacted.But for our main business with the consumers the positive balancing factor will be that Kela reimbursement levels will be increased during next year. So even in the consumer segment with the low consumer confidence there's no reason for Terveystalo to be negative going into next year. So Kela reimbursement uptake is a positive news for this fairly sensitive part of the business and will support the growth of Terveystalo going into next year and also profit improvement.All in all, we can take one step back, look at the situation 1 year ago. It has been a steady improvement for Terveystalo and we are here with great confidence saying that we are on track and we will deliver our targets.On the side of financial progress, as said, our customers are extremely happy with our services. We continue investing in integrative care, impactful health care with digital, with processes and also bringing new technology in healthcare. And for Terveystalo this is not testing, this is not piloting, this is not sort of sugarcoating something tiny to make headlines and stories. We are doing this already in scale today.So for example, our AI-driven symptom tracker is in scale, in use for 0.5 million -- or close to 0.5 million people already in Finland. And same will apply for Nightingale diagnostics, which will be implemented for B2B customers step-by-step. So in scale, new technology, value adding services for our customers, and continuous improvement, end-to-end services which are fluent and work in physical and digital alike.With that one, over to Juuso.
Thank you, Ville, and good morning all. So let's talk about Terveystalo financial performance. I am Juuso Pajunen, I'm the CFO of the group. If we look executive summary, we continue on the strong profit development. We are improving our profit -- adjusted EBITA by almost 70%. And that's coming from the improved sales mix and the progress of the profit improvement program. We have the top line growing. It's mainly driven by the successful pricing and the sales mix, but we have some underlying volume growth also in there. From the headwind perspective, we have the COVID tests, some 40,000 tests compared to previous year Q3 not being done anymore. And then we have the ending of outsourcing contracts and a weak Swedish crown that are having a negative impact on the revenue.So with this type of a performance and macro looking ahead, we are happy to reiterate our guidance for '23, which remains unchanged and saying that we will grow in the top line perspective and the adjusted EBITA percentage will be between 9.1 and 10.1.So then if we take a couple of steps deeper and we start thinking about the revenues. What has happened? If we start from the Healthcare Services, we have a really solid growth in the appointments. We are going forward both with our pricing and then on the sales mix perspective. The diagnostics despite looking negative, we need to remember that we had the 40,000 COVID tests that we don't have this year anymore.So actually, the underlying diagnostic has been recovering really well and we are continuously approaching the pre-COVID levels also on the relative terms. However, the appointment mix is different compared to 2019. And we had the delay in the flu season, which is also visible both in the appointment perspective but also in the diagnostics and in the care parts. All other services are continuing positive growth. This includes imaging, it includes the operations and so on. So Healthcare Finland despite the loss of COVID and despite having one working day less is showing a solid growth forward.If we look Portfolio businesses, we have -- the biggest impact in here is coming from the outsourcing contracts. This is mainly coming from the ending contracts, but we also do see changes in the contract structures such as the specialty care that has been earlier within a contract, and in some contracts, it is not there anymore. It is a pass-through item for us, so it doesn't come with a profit impact. But it means that we don't have the cost and we don't have the income, which is then visible on this one.If we look everything else underneath there, we have the staffing that continues on a normal cycle, normal pace, normal revenues, normal profitabilities. But then what we do see in the other part -- we're having the dental and to certain extent in the massage services, we do see that now the weakening consumer demand is -- or consumer confidence is impacting the demand of these type of services. However, we don't see it elsewhere. But we do note that there is the weakening macro that is impacting some parts of the portfolio.If we then look Sweden, we had a slow start after the holiday period. So basically, when we are talking about preventive healthcare, which is mainly driven by the corporate clients or basically only driven by the corporate clients -- when the clients come back later on the vacation and our people follows that type of a vacation pattern, it has had a negative impact. But at the same time, Sweden is having a weaker macro. So both of those ones have impacted negatively. But obviously then the EUR 2.1 million is mainly driven by the weak Swedish crown.And then I remind you, like always, this is a translation difference. The amount of Swedish crowns translates in a different number to euros due to the almost SEK 12 per crown (sic) [ euro ] current FX rates. So with all of this one, with 1 day less lost COVID sales, we are delivering adjusted or underlying organic growth of 6%, give or take. I think that within a normalizing seasonality quarter we are getting to a right direction.If we then look the revenues a bit further in a timeline, we have the 1.5% growth, our adjusted EBITA is 7.5% compared to 4.5% previous year. And now on a rolling 12-month basis, we are at 9%, which is a clear improvement and a steady improvement.If we looked at Q2, if we looked at Q1, we have actually been walking the talk. We have been implementing our profit improvement program, and you can see the results clearly in our bottom line. We are 1 percentage point ahead from the lowest point and we have been continuously been able to bring it further forward. If we then take a little bit look on what has happened from EUR 12.5 million to EUR 21.1 million, almost a 70% improvement in the numbers.The big machine, Healthcare Services, has improved EUR 5 million. The sales mix that was impacting positively in the top line is contributing heavily on the profit improvement. The pricing actions we have taken have been over compensating the inflation impact. So we have been successful not only in the price increase perspective, but also the pricing structure and channel leadership or channelling of our clients.So we clearly see the profit improvement program with a positive impact. And at the same time, the cost control has continued. If we look the whole group under personnel expenses, we are below previous year Q3 numbers. So we have been able to progress in all fronts when it comes to Healthcare Services.Portfolio businesses are basically flat in absolute terms. In relative terms, it has a 0.4 percentage points improvement compared to previous year. The main factor in here is that -- the outsourcing contracts. We are diminishing in revenues. They are not highly profit making either. But then the other part of the business is doing quite well. The inflation hits here in a different manner due to mainly the outsourcing contracts.Then if we look the Swedish part, EBITA is decreasing slightly and this is driven by the slow start post summer and the weakening macro in there. And at the moment, the weakening macro as far as we understand continues in the coming quarters.If we then look a bit on the segment other, almost EUR 4 million improvement. The segment other is a result of a conscious decision to have the IFRS adjustments included in this one. So basically, it would not be totally unfair to allocate material part of this EUR 3.8 million first to Portfolio businesses and some part of that one back to Healthcare Services. But in our current structure, the IFRS adjustments are included in here. And this one is then correlating into what you saw in Q3 2022 report, where there was a red column "Public, minus 4". So a big component is related on that part.We do not operate in that type of a segment structure anymore and we have now a clear, far better reporting structure. But these type of IFRS adjustment have been at the moment carried in the segment other.So basically, we have the strong performance in Healthcare Services. We have -- the Portfolio's relative profitability is improving. And we have the FX headwinds in Sweden, including then the slow start after summer. So, all in all, operationally we are improving quite well.If we look our CapEx, we have now stabilized on the rolling 12 months basis into the EUR 48 million. We are now somewhat on par CapEx and depreciation levels from the same topics. And we are slightly below 4% in relation to revenue. I think Ville demonstrated quite well in his technology part or last slide that what we are doing. We are improving our offering. We are bringing in world class AI products, digitalization. But at the same time, we are investing in the machinery. We are investing into the premises. And that is visible throughout our operations.If we then look a bit on the balance sheet, we have continued solid balance sheet and our credit profile is good. We have delivered a strong cash flow, EUR 174 million, on a rolling basis. In Q3, especially, we had positive net working capital development. If you recall the Q2 results call and the presentation, we had some delays in recovering our accounts receivables, especially from public sector. Now that ketchup bottle is open again and we have been able to normalize our accounts receivables levels, which is visible then in our cash flow.At the same time, the net debt to EBITDA is at 3.1, including the IFRS 16. And if we take a bit deeper look on that one, our interest-bearing debt is continuously going down, supported by solid operating cash flow.At the same time, our IFRS 16 liabilities have been going up and most likely continue on that path. We are in a phase in our operations and in our lease portfolio that we are evaluating which ones to take further, in which place. And in the current real estate market condition, it is a good moment to go through your real estate portfolio, to renew your lease agreements. At the moment, we have a positive momentum for our perspective on that part. So we will continue on those efforts looking forward also.Then a positive note. If we look our debt portfolio, we have -- alongside with the Q3 release, we are telling that we have renewed our term loans, EUR 135 million, with a minor maturity point in '23, but material maturity points in late '24. We have renewed those ones with a 3-year agreement forward. So now we don't have maturity points or any kind of material maturity points in '24.So we have a very solid, very stable debt portfolio that supports our agenda. So that is very good to note. And at the same time, we have renewed our revolving credit facility on EUR 40 million. That works, of course, as a backup for any kind of growth initiatives we may have.So solid cash flow, strong balance sheet and a good credit profile with no maturity points in the coming 12 to 18 months. So at least no material maturity points. So this is a good base to go forward with our agenda.So with all of this one, 70% improvement in Q3 profitability, 6% underlying organic growth. We are happy to reiterate our guidance. It is a 9.1% and 10.1% range. It has been the same since we initiated the guidance. And it is fair to say that our current assumption is in the middle of the range.The estimates are based on the same expectations as earlier: solid development on our profit improvement program, that the consumer demand is not materially weakening or the consumer confidence doesn't materially weaken the Healthcare Services demand, and that the employment levels continue to be on the reasonable levels at the moment.At the same time, it doesn't include any material changes in the public sector behavior. And it's fair to say that the current known changes will also present it on the Kela [ reimbursement ], expected to impact then '24 forward. So we are not expecting a material impact on Q4 what comes to the public sector behavior. And finally, any M&A/D, as normal, is excluded from these figures.So with this, once again reiterate our guidance. We have a strong momentum especially in our profit improvement program. We will grow in the revenues, and we will deliver 9.1 to 10.1 percentage point EBITA -- adjusted EBITA this year.With these ones, thank you.
Thanks, Juuso. I think that we are now ready for Q&A. Do we have any questions from the phone lines?
[Operator Instruction] The next question comes from Anssi Raussi from SEB.
I have 3 questions, and I'll go one by one. And the first one is about your profit improvement program. So you mentioned that the adjusted EBITA impact of the profit improvement program was EUR 23 million in the first 3 quarters of this year, and at the same time, your EBITA improved roughly EUR 10 million to EUR 11 million. So basically, your underlying EBITA decreased by 16% from the last year if you exclude the profit improvement program. So what I'm trying to understand here is that is this underlying trend something we should expect in the coming quarters as well? Or how should we think about this? And how much of this actual EUR 10 million to EUR 11 million EBITA improvement would have been achieved even without this profit improvement program?
Okay. So if I start with the answer. So of course, looking the numbers, you need to remember the COVID tests, 40,000 COVID test. So if you adjust the EUR 12.9 million EBITA from previous year and you take the COVID tests, some 40,000 out, you see that the baseline is significantly below. So the underlying operations were also improving, excluding the COVID, quite clearly actually. And on the continuation of that one, I think that there is similar amount of COVID tests in Q4 '22 also included in the figures. So that one you need to, of course, take down from the baseline and then start building up the changed bridge as you see best. So that is pretty clear at least in my opinion. And can you remind me on the second question.
I was just thinking about...
No, go ahead, Anssi.
Anssi is only starting. So no second question yet.
Yes. That was the first one. And the second one is about Sweden. And, of course, we saw that profitability was not there where you would have liked it to be, I guess. So what about the coming quarters and the big picture here? Like what are your plans regarding Sweden going forward?
Well, if I start from sort of a helicopter perspective, when we went in the Swedish market, the plan, as I stated very clearly many times, has been all along that we will diversify the portfolio outside of the current occupational healthcare sphere. And that is still the strategy. We are not there yet. And that's why, as Juuso also described in his presentation, the portfolio in Sweden is more sensitive to macro changes. And special impact this -- during this quarter was the slow start from the summer season. Macro is what macro is. Of course, we'll fight against that one with normal measures. There will be some added focus jointly into the current business with the Swedish team, but long-term target is to diversify the business portfolio in Sweden, make it, of course, more profitable, but also more resilient to different changes in the macro landscape.
Yes. And then if we look forward, we -- as far as I understand, Swedish macro continues to be weak on Q4. Then maybe a reminder that in Q3, we had 1 working day less, and in Q4 there will be 1 working day less. And in a heavily corporate business model driven by working days, it's normally 1.5, 1.6 percentage points of the total quarterly working time when you have that one less. So those 2 headwinds we will have in any case in Sweden at least in the quarter 4. Also, if we reflect the Swedish results from quarter 3, they were weak, not within our ambition. But if you adjust it for that seasonality, we can still see that on a year-to-date basis we are making progress, not on the pace we would like to and not on an absolute level that we should be, but we are making progress. So we have an agenda and we will continue on that one.
Okay. Understand. And maybe just if you think about the current macro environment in Sweden, do you think that it's like offering you some opportunities in terms of M&A/D? Or is it so that maybe you have to first picture profitability and build the base of so-called how do you see?
If I start again. So I think we have a solid model for occupational healthcare preventive services in Sweden. So Swedish team is doing a very good job in there. There's not so many tricks that you can do to improve that core business in current structure. And macro, as I said, is impacting that one more than our Finnish business. So there will be a drive to diversify the portfolio. And as per to your question, yes, the M&A market is interesting for us in Sweden and we can see from the valuations that there are opportunities. Of course, a lot of things need to come together whenever you are making an acquisition, but it is in our agenda.
Do you have further questions from the phone line?
The next question comes from Sami Sarkamies from Danske Bank.
I have 3 questions. We'll take this one-by-one. Starting from seasonality, you didn't say anything about this regarding Q4. Are you expecting a normal seasonality and what would be normal in your case?
Yes, I think that from a seasonality perspective, one component in Q4 that is good to remember is that Q4 is pretty much the most volatile quarter if you look at the past data. And the volatility is driven from unknown factors, so how flu season comes. And that one is not yet ongoing. So it is very difficult to estimate what type of a flu season we are getting. Normally, that starts in November and then continues up to February. So that one we are expecting with the current information a normal flu season.Then the second part is coming from calendar, where we do know that we have one working day less compared to previous year. And then, obviously, the second part of the calendar impact is coming which working day you are missing. Mondays are, let's say, from a revenue perspective, better working days to have. And Friday is missing, then is a different thing. But that one we do know and we are expecting it impacting negatively compared to previous year with the 1-day impact.So a couple of million euros less revenue. And then you can calculate some kind of a margin out of that one and you get kind of that calendar seasonality impact compared to previous year bridges.
And if I continue a little bit. As Jusso said, the volatility comes from the fact that during Q3 -- it's a big season for acute care, especially for respiratory infections and care related. Those -- what we can say today that we have supply in place. So we are ready to meet the big demand better than last year. But it's very difficult to estimate what type of -- as Jusso said, what type of flu season we'll get at the end of the day.
Then moving on to macro, which you talked about perhaps more than in the previous quarters. Can you speak of what have been your own observations so far? And what are you assuming thinking about Q4 and next year?
Yes. Well, from our perspective, of course, macro needs to be mentioned because this is a fairly dire season for Finland, also for Sweden. But against that one, as I said in the presentation, we do have versatile business portfolio, customer portfolio. And we are able to row against the wind even in a more negative macro. That will be supported, as I said in my part, by Kela reimbursement, especially with the consumers. That's going to in a way hedge the consumer demand against worsening consumer confidence, as said by Juuso earlier. But we are not isolated in this environment, and it in a way warrants a comment also from our part.
Yes, I have nothing further to add to that one.
And you think about your business in Finland, have you seen softening demand, both at private and corporate segments?
Corporate is very solid, very stable. What we have done willingly is that we have in a way discontinued some of the unprofitable contracts, and that can be seen in the volumes. But as I said, that's per our will and design. For consumers, we don't see any decline. It's fairly flattish. But from a seasonality point of view, you will see some more volatility. But as said, based also on the Kela reimbursement renewal, I'm not worried about that segment either. Then there are some smaller segments where, as we saw also during COVID, the consumer confidence is impacting fairly fast, dental care, massage therapies. Our services are typically those kind of businesses where one can see a softening of the demand. We are able to in a way tackle that one with the profitability measures. But as per to your question, there are a couple of smaller segments where you can actually see there what's happening outside Terveystalo.
Nothing to add on that either.
And then, finally, regarding outsourcing contracts. I think you have earlier given a number of the headwind for this year. So how is that looking at the moment? And do you expect more to come next year?
Basically, we have the slide in the appendix. We put it back after previous year. And the question -- so our current best estimate is that '24 looks flattish. And then we have the EUR 20 million decline. At the same time, I would encourage you to read carefully the news, because as you see from our peer group, Pihlajalinna and Mehilainen, they have had their -- it's a far bigger topic for them and they have been disclosing what is happening in their portfolio. So in this one, we are not living in an isolated world and public sector is continuously looking to this direction to evaluate what to do with various types of contracts.
The next question comes from Joni Sandvall from Nordea.
Maybe I'll start with the public sector demand. Have you seen any pickup? And what are your expectations actually for '24?
Yes, a very good question. We estimated earlier that we'll see some sort of practical new applications of private-public cooperation during H2 this year. There are some small elements moving actually in the pipeline. But what you can see today is that the sales pipeline for the public segment grew nicely up until post summer. Now, it has basically stalled. And the reason for that is simply the fact that healthcare districts are running out of money. So they are trying to not buy. It's not going to be sustainable. We all know that one. The care deficit is growing in a uncontrollable way. But it's -- the progress is not as fast as we thought it would be for this year.For next year, one can still say that we expect that market to come alive. Care deficit is growing, as I said. It's on record high level and people need their services.
Okay. Then maybe continuing with your 12% EBITDA margin target in '25, I think you mentioned that you are now tracking towards the midpoint of the margin guidance. And given the prolonged inflation, do you need some additional actions to actually reach the target? So could you give us some road map towards this 12% target?
Yes. So basically, I can reiterate what we have been discussing earlier. We are very confident on reaching that target. We have now shown 9.1% to 10.1% guidance this year and midpoint obviously is 9.6% on that part. We do know when we have reported the run rate achievements, we will obviously update you after the year has gone so that you have capability to evaluate '24 better. But at the moment, above EUR 50 million, about EUR 30 million profit impact means that there's some EUR 20 million at least for the next year on the run rate improvements, that after EUR 1.3 billion, EUR 1.4 billion revenue. Obviously, then translates already a material improvement for next year. And at the same time then, we have a road map, including similar type of items that we have today within our profit improvement program to bridge the final gap for '25. So obviously, pricing, sales mix is one topic on that one and the continued operational improvement and efficiency items will be the other part of that.
Okay. That's clear. Last question from my side. Sales are now up 2% after 3 quarters. How should we read your guidance of revenue to grow? So does this 2% growth reflect your guidance?
Yes, I would reiterate what I have said earlier after Q1 and after Q2 that growth would probably mean something in that direction. And as you know, the headwinds on the outsourcing contracts and so on and then the positives that we have demonstrated on the underlying organic growth. So what can I say? I reiterate what I have said in previous quarters that this is the ballpark we are talking about.
I think that we don't have any further questions from the phone lines.
There are no more questions at this time. So I hand the conference back to the speakers.
Thank you. Then we'll move on to questions through the webcast. Ronnie has sent a question on the weakening purchasing power of the consumer. And we've already talked about it. So I won't go into that again. But then a question on the diagnostics on the underlying basis. What are the factors behind the fact that we are still below the pre-COVID levels in the diagnostics volumes? If you 2 could talk about a little bit of that.
Well, what we have been able to achieve over last couple of quarters, basically after Q3 last year is that in digital channels we are clearly improving in diagnostics. So the care parts are closer to care guidelines in our digital channels. Also the flow steering or channel steering has improved, so that the brick-and-mortar is winning a little bit more than digital channel.Respiratory infections, so talking about flu season coming up. There in this type of short-term needs, we have been improving also clearly. But where we are not seeing yet the improvement is chronic diseases, and that's an area that the organization is currently working hard to get that one back on track and to care guidelines, which we are always talking about when we are talking about diagnostics. We are not inventing any diagnostics by ourselves. We are basing all of our actions on care guidelines.
Yes. And then a minor note on the Q3 was the fact that the flu season started a bit -- a couple of weeks later. So...
Yes. And that relates back to the fact that, that's the part that we have been able to fix, but we did not have the load.
Yes. Then we've already talked about Sweden a bit, but maybe just to reiterate. How do we see the weaker demand environment in Sweden impacting the outlook for the end of the year and next year? Or was there some timing specific issues on this quarter alone?
Well, the timing specific issue is a long holiday season. I don't know why Swedes are enjoying the summer so much. I guess the weather was good or something. But it was a very slow start, specifically in August. So that's specific. The macro, of course, we need to fight against and find measures to still improve the business.
Yes, I think we have covered this question quite well. Actually, Swedes have 2 weeks more vacation than we have in Finland, so.
Lucky them. All right. Then maybe just reflecting on the overall macro bit question from Iiris Theman, Carnegie. If we look at the history, how has the sales developed in a softer market environment in general, in health care services in particular?
Healthcare Services -- when we are talking about full healthcare, has been really defensive and resilient against macro shifts. And we are not expecting that one to change.
Yes. Good. Then a reminder. If you're following the webcast, please send your questions. We still have a couple of minutes left. But while we wait for new questions, maybe just a reflection on -- we started the profit improvement program from a quite different note a year ago. If you reflect a bit on the past 12 months, where do you see that we have made the biggest improvements? And what are the biggest successes so far?
I think it has been a fairly 360 overhaul of what we are doing in many parts of Healthcare Services. So we have a better structure, better transparency, better accountability, clear targets, clear goals. Then on top of that one, of course, we have the Alpha program, a profit improvement program, which is boosting the speed of the improvements. And I said many, many times today, we are ahead of schedule. So organization has met the challenge very nicely and they are delivering. Going forward, we can more and more base our actions and improvements on the normal business structure rather than Alpha program. One needs to remember also that this has not only been profit improvement during last year -- of course, that's significant and that's most important change -- but we have invested in our services. And as I said in the presentation, the customers are more pleased with our services than ever before. We are bringing in the market totally new type of services, totally new type of ways to deliver healthcare services. And we are doing that one in scale, not tiny bits.
Good. We don't have any further questions from the webcast, so over to you. Juuso, any final words or closing words.
No. I would like to thank you all attending this situation or this event, however you want to call it, and wish you a pleasant fall time, and reiterate we are confident what we are doing. We are confident with our guidance, and we are confident with our '25 12% target. Thank you.
Thanks.
Thank you.