Terveystalo Oyj
OMXH:TTALO
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Good morning, everybody, and welcome to Terveystalo's Q4 and Full-Year 2022 Results Webcast and Conference Call. My name is Kati Kaksonen. I'm responsible for Investor Relations, Communications and Sustainability here at Terveystalo.Today, as usual, we'll have the results presented by our CEO, Ville Iho and followed by the presentation by our CFO, Juuso Pajunen, who has lately joined the company. Ville will go through the financial, operational highlights and the progress of the profit improvement program in his section. And Juuso will follow that with a more detailed analysis on the financial performance and progress against financial targets as well as the market outlook. As usual, we'll follow the presentation with a Q&A. We'll take questions first from the phone lines and then through the webcast after the presentation.Without further ado, over to you, Ville.
Thank you, Kati, and good morning from my behalf. Let's dive straight to the highlights of the quarter and also of the year. So during Q4, our profitability was still dampened by sales mix and inflation issues, but we are making progress in underlying business, which we will describe in more detail in mine and Juuso's presentation.Really, the turning tide and rock star of the quarter was the supply improvement. We were able to increase supply and improve that one with 15%, which is a really, really high number against really strong demand. Despite that one, our Q4 adjusted EBITA was down due to the known factors, inflation, sales mix, decrease in COVID sales, but as I said, underlying business showing signs of recovery.Our business can comfortably stand on high quality, both when it comes to operations, customer experience and medical quality. We showcase still a record-high customer satisfaction, 83 NPS, industry-leading employee satisfaction and high clinical quality where we have today showcased also presented. Our profit improvement program, which we disclosed after Q3 is making steady progress, good start for that one, and we have now clocked EUR11 million run rate for this year and continue pushing forward with the plan.Key numbers from Q4 and full year. So revenue grew still. Our full-year growth 9% is a solid one. As I said, the adjusted EBITA fell short of our targets last year, but there are positive signs also underneath. Appointments grew nicely, so 15% up. Activities are high and with the improving supply, of course, we can then take stock on that one. And full-year appointment number, impressive 6.5 million, out of which 34% took place in remote and that's really a high number.On quality side, I said NPS, very, very high and industrial-leading employee satisfaction and preferred choice for professionals to work in. Profit improvement program, which we disclosed after Q3 is concentrating on our core business, Healthcare Finland, there is a EUR50 million program. It's progressing as planned. We will share some more details later. We, while launching the program, we also changed the operating model and that's showing positive signs on a better focus and a better accountability throughout the organization.Portfolio businesses, which are now outside the [ coin ] in Finland have dedicated more independent value creation plans, and we are implementing those with rigor and there are also good commitment and good signs of a fee to turnover -- turnaround. Sweden progressing in our portfolio as planned, growing and also improving in profitability during Q4.So, our highlights from the profit improvement program. I said, we have new operating model, supporting core business turnaround. We have to make -- we have made good progress in that, especially in commercial area where also inflatiory environment has supported our efforts to improve the pricing schemes, our pricing models and really push also straightforward price increases in the market.Procurement is doing good job in fighting inflation, but not only fighting inflation, also getting cost savings in. And we are focused on getting sales mix improvement also in digital channels and there are lot of activities ongoing there. And some positive signs in underlying sales mix in -- also in digital channels can be seen in December, of course, early days, but moving to right direction.Thus far -- so as I said, we have clocked EUR11 million run rate improvement for this year, but this is, of course, only a start. With a strong start, we can with great confidence say that we will achieve the EUR50 million targeted improvement during '24 latest. And the target, as I said initially is during this year to get to over 50% of that mark and there also we have great, great confidence.Our operating model, just to recap on that one. As I said, we have now splitted the business in, let's say, more clear buckets. We have healthcare services in Finland, which is the core business than portfolio businesses consist of more independent platforms, healthcare-related and healthcare platforms and then we have Sweden.Healthcare services is the core business. If I put rough numbers into this one, we start reporting according to this structure after Q1. But roughly speaking, cutting some corners, healthcare services is EUR900 million business with already above-target profitability. Portfolio businesses is roughly EUR300 million business and Sweden roughly EUR100 million business. And of course, everybody can do the math if healthcare services is already above the targets than the other 2 are lagging there and some work to be done when it comes to profitability. But Sweden is the growth market and continues to be that one in the future.Then if we go closer to operation and then to more medical, some key highlights. 8.5 million customer visits, steady growth in there, goes to show how big player Terveystalo is in Finnish healthcare. 1.4 million digital appointments out of 6.4 million, and that's really, really a high number. 1.3 million individual customers, there's no changes from last year that also goes to show that our target has shifted from increasing the customer base to profitability and that can be seen, for example, in this KPI. As said already, very high customer satisfaction, industry-leading employee satisfaction.Then, making a deep dive into the core essence of Terveystalo, what we do. We deliver health. We are fighting for healthier lives. There are couple of focus areas in operations and medical. We have inside our core business, almost 50 different medical disciplines presented, but there are couple of key focus areas where we see growth and value-add with our services. Mental health has been one for a couple of years. It has grown nicely to be core part of our offering, especially in B2B where we have pioneered and develop new type of low-threshold services, early detection of issues and then low-threshold services deeper into the care chain. And we have now during Q4 studied.We have taken a stock on what we have achieved with these services. There will be, by the way, a scientific paper later on this one. But rough numbers, if company X takes our services in mental health into the use, the mental health-related sickness days are reduced almost to half. And as everybody knows, this is a post-pandemic new sort of a second or third pandemic mental health really trending to negative territory. So, this is a big issue. But with these numbers, with these services, one can showcase return on investment for a company, which is impressive. This is a prime example of what we do, what we are. We create great customer value, great medical quality and do good business. Those all [ 3 ] shake hands with this. This is just an example but an impressive one.Showcasing our confidence in the future, in our programs and improvements in our core business, Board of Directors have proposed a dividend of EUR0.28 per share, which is steady from last year, slightly up, obviously, when measured with adjusted EPS, but we are confident that we will deliver on our turnaround and hence, I can with confidence propose a stable dividend level.With that one, it's a great pleasure to invite for the first time with Terveystalo, our CFO, Juuso Pajunen, to present the number.
Yes. Thank you, Ville.It's a privilege to be here in front of all of you guys. And a couple of words about myself. So, my name is Juuso Pajunen. I have a 20-year history in engineering industry. The past 4 years in AFRY, listed in Stockholm -- Nasdaq Stockholm and before that one as the CFO of Poyry that was listed in Helsinki. But that's about me. Let's talk about financials.So if we look at the financial development during the fourth quarter and in total, it's solid financials. There are headwinds. There are definitely things that we can't be happy with, but there are also things that we can and we have to be happy. We are growing year-on-year 9% on full-year basis. If you put that one roughly to organic and EBITA, you can say that it's somewhat 50-50, 5% -- 4% to 5% organic growth is a strong performance.5% EBITA growth is also a strong performance in that front. Then, of course, when we look EBITA, 8.4%, doesn't meet our ambitions. It doesn't meet our financial targets, and obviously, we are working on to make that one turning around. But then there are quite understandable reasons underlying in the sales mix, and I will go further through those details in the coming slides.Then on the balance sheet part, we have a steady cash machine. We delivered EUR141 million of operating cash flow. We had net debt-to-EBITDA at 3.2x. So, we are below our peer group. We are fairly good in the balance sheet, and then we have been investing our cash flows back to operations, 4.6% in the CapEx. And then we are maintaining the dividend at EUR0.28 per share, giving it back to our owners.And then profit improvement program, definitely a highlight. The speed has been great. We have reached by end of '22 EUR11 million run rate, and we are speeding up to reach our ambition and target of EUR50 million in 2024. It also comes at a cost. We have roughly EUR5 million of restructuring and performance-based advisory fees recorded on the fourth quarter for this topic. But let's go a bit deeper into what has happened.So first of all, the revenue. So during the quarter, we have grown 2%. The biggest impacts in there is, like Ville mentioned, the appointments. The supply is now picking up. We have 15% increase in appointments and that's visible. Then on the headwind side, the big component is the diagnostics. We have a reduction of COVID tests by approximately 90,000 compared to '21 Q4, and that comes with a toll both in revenue and in EBITA, which will talk on the following slide a bit further. But it's good to note that we have the underlying diagnostics, excluding COVID, is now showing growth, but it's starts from a low levels compared to pre-COVID. So definitely, something that has a positive glimpse of our hope, little ray of light in that side.Then we have the outsourcing part, which is declining and also we have some contracts ending and the maturity of those contracts is fairly well known and part of the appendices of the presentation. Staffing had some supply issues. But then the other part of the public business, Sweden, growing both in Q4 and full year. Sweden is having a bit of headwind from the negative Swedish krona rate. It has devaluated compared to previous year, some 10%. So on that one, we are losing some growth. But that's FX. We are talking about the translational item.Then, as mentioned, in the first slide of financial, we have a 9% growth full year, which is a good number. It is a number to be happy about, and we are above our financial targets. Obviously then, the pricing and the inflation is supporting our revenue on that part. But then if we talk about the EBITA, here we can see that both full year and the quarter 4, we have the change in sales mix.90,000 COVID tests, that's come with a good margin and that is visible. We have in proportion more appointments compared to diagnostics and tests, and that comes with a negative impact. Then it's good to note that we have change in productivity. In full year, we're negative but in fourth quarter, we have now been bridging that gap partly with our profit improvement program, but partly also with other actions and we are now stabilizing in that front.Cost inflation is hitting us from various corners. There is especially the energy components and supply-chain related items that are impacted by the high inflation we see throughout the world. Public business is a place that we have lost in fourth quarter. It's coming materially from two different places. We have the outsourcing contracts, where we have a headwind from inflation compared to the price increases we can contractually push to our clients. And then on the other hand, this is always related on the underlying specialty care needs and such. And in fourth quarter, we see items related to this one is quite often.Then on the staffing part, we have had shortages of supply that has negatively impacted the public business part. Sweden is improving, both in absolute numbers despite the FX headwind and in relative numbers. And then also in fourth quarter, the other topics we have been able to start turning into green compared to previous year while in year-to-date, they are still on the negative side.So basically, we have many items to be happy about. We have shown that we can implement price increases and other positive pricing actions. We have been able to fight to certain degree in inflation, but we are suffering from that one. The underlying diagnostics is showing -- trending to right direction. So not happy with the relative profitability, not happy with the profitability, but we are working on it and we can demonstrate that we are clearly getting forward in that front.Then if we look quickly. Just a reminder, we will comment this one also in the market outlook. But on the COVID tests, the volumes peaked in Q1 2022, 178,000. And we do know as a fact that in first quarter and during '23, COVID tests will not be on these type of levels. So, this will come with an impact and then little by little then, phase out from the numbers.If we then go forward and look a bit of the charts, we went through the details. So, I don't dwell too long time on these slides. But we are delivering 14.4% EBITDA, 2.2% growth on the revenues in fourth quarter despite the headwinds in the COVID. So, we are little by little getting there. And you will see in the following slides on the cash flow that the EBITDA continues to turn into cash very steadily and in a very predictable manner. And then, as stated, and I'll reiterate 8.9% on the quarter, 8.4% in the year. It's not reaching our ambitions, but we know it and we are working on it.So CapEx and soon cash flow, we have now been stabilizing on the latest 12 months numbers into EUR58 million levels. It's still a bit on the high side, but we are already now in the smaller numbers what comes to digital investments. Then machinery and equipment is pretty clear when there are bottlenecks in imaging as such, it's a good place to invest and we will continue investing those once based on how we see the demand developing.So, let's look a bit deeper on the EUR26 million, EUR30 million digital part, what have we actually done in the past. And what we continue to do is that we can split out digital environment roughly into 3 different buckets. We have the front-end, the clear front-end, terveystalo.com. I would guess all of you here have visited that one. We have over 2 million monthly individual visits, our Terveystalo app and online 2.5 million registered users, very big numbers, no matter how you measure it, given that this is materially Finnish market.Then we have, for example, the Suunta work ability management for the occupational healthcare clients, so serious under -- to help our corporate clients to unleash the potential they have into high sickness leaves. So, this is the first part of the layer.Then we have, what we could call, services in the middle, which are such that are used for the better care parts, that are used almost in the front and we have different type of health queries, some that you can help yourselves how to get forward, different type of online coaching platforms and such. Those ones are also developed from business perspective. And then we have at the backend, we have a shared services platform were finance, recruiting, HR and so on are working, and then all of the operations are sharing that part. We have shared data models, reporting and analytics, that is then tying up the mid layer and front layer, critical on managing our care parts, for example.Then we have the financial backbone. ERP, accounting, CRM and so on. And then we have the electronic health record system, where we're basically making sure that we are doing the right diagnostics or reporting the right diagnostics and the tool that the doctors are using. So when we are talking about this one, we are the digital leader in our industry and we are especially strong in the front end. That is the most critical part of doing our business. So, this is where we have been investing.We are continuously evaluating the right investment levels and the CapEx levels. But just to give a bit more flavor on how it works. And then back from investments to cash flow. We have a steady cash flow, EUR141 million. High correlation to profitability, high cash conversion rates. It's a good place to be. It's a solid place to be. And then if we look our net debt-to-adjusted EBITDA 3.2x. It's below our target of 3.5x. It's a solid place when you compare to our peers in industry. It means that we have bandwidth to be opportunistic, if such opportunities would emerge. But, obviously, we are very selective under the current market conditions and concentrating on making the profitability materialize within our ambitions. But M&A is also part of our growth journey.Balance sheet and maturity. There has been some questions in the interest rate world, where we all know how interest rates have been peaking and how they have been behaving during the past 12 months, 18 months. We have a good maturity profile. We don't have big gaps in there. We have maturities from 1 year to 7 years. We have a solid RCF base to backup our corporate paper programs or commercial paper programs. So, we are in a good place. And from interest rate perspective, our financial policy is to hedge interest rate risks. So, we don't see immediately the impact of increasing interest rates, but obviously, over time, it will little by little come back to us.So then how did the year look like? Crystal clear. We delivered on growth, 9% year-on-year. We have almost doubled our business since 2017. Our EBITA continues to grow, but the margin is not where we want to be. 8.4%, once again is not enough. We are pushing for the 12% to 13%. That is our target.Then if we look at the balance sheet, how we have been doing. We have been excluding 2018, faring continuously below our 3.5x target, We are at the moment at 3.2x. So, we are pretty clearly where we want to be on that part. Obviously, with the improved profitability, this one also gears quite quickly downwards as a number.And then finally, EPS, obviously follows the profitability EUR0.2 is not enough. But signaling the confidence we have on the profit improvement program, which delivered EUR11 million already by end of '22 as a run rate. The Board of Directors is proposing a dividend of EUR0.28 per share. It's 145% of the EPS, but obviously, if you take the adjustment items, we are in a more reasonable number on that end.So not reaching all of our targets, we continue working on the profitability. But in other corners, we are quite okay. So with these ones, I will not reiterate the financial targets, but the market outlook. As the first reminder, you saw the COVID test numbers. We do know that the demand for COVID-related services continues to decrease and the digital services continue to be strong. We have high remote channel participation. The share of total appointments is high in the digital channels.Then if we look a bit further into the market, the demand for health services is strong. That goes across our regions. It goes Finland, Sweden. It's crystal clear that there is a strong demand. It still continues to focus on the shorter care pathways that correlates also with the COVID tests. But we have seen now the underlying diagnostics to pick up a bit in Q4. So let's see how that one develops.Then we have the inflation environment. So it is a tight labor market. We work on our supply. Now, we have some movement during this week. The benchmark industry have reached in Finland, the collective labor agreement, and now that one will reflect to our labor agreement probably shortly. It is within our expectations, but now we know how this one will behave.And then finally clouds. From the employment and consumer confidence perspective, we don't see it at the moment, but it is something that we all can read from media and we know that there are potential issues in there. But then, I would still like to iterate, strong underlying demand, strong operational machine. So, they are in the market outlook, always some clouds. But at the moment, we think that we are in a quite good place in the demand perspective.With these ones, I would turn back to Ville.
Thank you, Jusso. Well done for the first time.So, I'll focus just recapping what we have said already. Our focus for this year, obviously, in core business and this is a key driver for our ability to invest and create cash. We will deliver on the profit improvement program, as already explained. So, we are aiming at EUR50 million improvement by the end of '24 as a run rate and more than 50% of that one already this year. And we are confident that those targets will be reached and even more confident after seeing the initiation and first tracks on the program and also commitment from Terveystalo team.Portfolio businesses have now their own independent value creation plans, and those are being implemented with rigor and create a solid base for those entities to be inside the portfolio. And in Sweden, we are aiming in increasing our footprint and growing both organically and if the opportunity arises inorganically.So with that one, I think we can invite Kati back and go to Q&A.
Thanks, Ville and Jusso. First, we could take questions from the phone lines if we have people on the line.
[Operator Instructions] The next question comes from Sami Sarkamies from Danske Bank.
Okay. I have a couple of questions starting from the efficiency improvement program. You disclosed that EUR11 million run rate was achieved by the end of last year. Does it include price increases that became effective 1st of January?
Well, I can answer. You can continue Juuso. Yes, partly, not the full effect, but part of the price increases are already included into that number. But there's no full effect yet.
And then if you look on the EUR11 million, the methodology is such that we are trying to get above headwind type of an impact. So first, we take out certain part of the inflation and then the next part is within the profit target EUR11 million. But now you are asking from the 1st of January part, the 1st of January, not all of that one is included in there.
Okay. And then just curious. What will roughly be the pace of development going forward? I mean, are you going to be making strong progress also in the coming few quarters or will sort of pace slow down considerably after Q4?
Well, a very good and a central question. In successful programs, typically, what you see is that they are front loaded and that's what we are aiming as well. We have a strong start, and we aim at being front-loaded in our progress.
Okay. And then maybe continuing on that. I mean, if you look at your program, I think you're now disclosing that slightly more than 50% of the sort of impact will be achieved through measures that will be taken this year. I mean that's not highly front-loaded. So I mean, can you maybe elaborate on why so much of the work will be left for next year? And are there sort of any risks related to those measures?
Well, we continue tracking and disclosing the progress of the program during next quarters. More than 50% is what we said initially. But as I said, successful programs are front-loaded, and that's the minimum level that we have set out loud. Stay tuned for Q1 disclose.
Okay. So, I'm sort of understanding that you're sort of aiming to sort of exceed these disclosures, but your internal targets are much higher?
Well, we are not holding our troops back. Let's put it that way.
Okay. And then finally, would it be possible to elaborate on the weak sales growth in Finland? I mean, when we look at private and public segments, in particular, they're not growing at the moment. So are you able to provide some reasons for the situation in Q4?
Well, if I again start and Juuso, you can continue. In private, we have been supply restricted for the whole H2 as we have discussed earlier, even though we were able to increase supply in Q4. So, there was really nothing more to sell for the market. For the corporate, we have made changes in our policies, sales policies and we have been targeting at, let's say, broad-based customer base growth earlier. But now the focus has been on profitability and margin. And we have been much more selective. We have actually even terminated some unprofitable contracts. So, there's the -- well, some more transparency on that one and explaining why the revenue line is or was stagnant.
And then we need to remember that the material part of the COVID tests are coming from the private segment and the corporate segments. So it's pretty irrelevant in the public part of that portfolio.
Yes. Okay. And if we think about the outlook for this year in private and public segments, do you think you will be able to improve on the sales growth side?
Well, the focus with the corporates continues to be in the margins. So, we are not super aggressive when it comes to land grabs with new customers. We are much more selective. Our customer base is really strong. And there's more juice to get out of the customer base, so to speak. With consumers, of course, allowing that the demand continues high and our supply actions will bear fruit, the target is obviously grow that business. In Juuso's outlook of description, the consumer market, obviously, is the key question going forward. But if demand picture shows similar kind of a robustness that it has shown and our supply actions bear fruit, the consumer should grow as well.
Thanks, Sami. Do we have any further questions from the phone lines?
The next question comes from Joni Sandvall from Nordea.
Thanks for the presentation. I think Sami went through some of my questions. But maybe I'm still asking about the price increases now, especially on the corporate side, what you have been doing. So could you give some color on how large price increases we are speaking here?And then the second question relates to public sector contracts and the pricing models here. So how much you have the old legacy contracts left that are burdening your margins?
So -- yes. Again, if I start. So talking about corporate segment and price increases there. Well, typically, the starting number for the price increase negotiations has been roughly around 3% in previous years and then you negotiated, it's down this year. It's materially higher at the starting number and also the success rate in those negotiations is much higher than it has been. So the team has done a really good job in there. When it comes to public in our staffing business, the agreements are fairly short. So, that's -- we're evolving quite rapidly and we are able to improve the pricing there. But then when it comes to partnerships there, we have a long tail of sort of old contracts from Attendo.
Yes. Actually, the partnership contracts are in the appendix of the presentation. I think that the number in '22 was EUR120 million, and the number for '23 in that contract base is EUR80 million. Feel free to double check it from where it is now from the back of my head. And then, obviously, price increases on those contracts are contractual based, and they don't reach the level of inflation today.
Okay. Still one question from me, a bit about the CapEx outlook for '23. I think Juuso mentioned that investments on devices continue, but what level of sales should we look for '23 on the investment front?
Well, basically, our CapEx was EUR58 million in '22. And I would expect that we are below those levels in total. Obviously then, we will match the demand needs. So, we need to continuously evaluate, especially the fixed asset part of the CapEx or the tangible asset part of the CapEx as we see how demand develops. And then digital part, we are, compared to '22, continuing to ramp down.
The next question comes from Grace Lee from Jefferies.
Could I ask few, please? First, on the public side. I'm just curious post Suunta reform, there are few sort of challenges that's ongoing still. So can I just check in with you to see how you look at sort of outlook, the scope of opportunities there with the few tenders and outsourcing side of things? And yes, anything on that will be very helpful in terms of the timing and the phasing of that opportunity?
Yes. So in the midst of Suunta reform, as we have communicated earlier already, the public market and tenders, they have been fairly silent. That was expected. So the districts are basically concentrating on getting the act together and reorganizing. And I think we have said already earlier that we expect the market to start evolving during H2. So then I think we are in a place where the districts start new type of bidding and discussions about new type of service packages with us. But those discussions and new service bids are not materially impacting this year.
So from that, it's clear that in terms of when that benefit will flow through, you'll be more talking from 2024 onwards. But from that perspective, how do you see sort of growth potential from them?
Well, the full potential, obviously, is very difficult to predict. There's an upside. But due to the fact that we are in totally new place, there's a new type of procurement machine in districts. They are doing the independent evaluation on the market and opportunities. What type of cooperation they can do with us? We actually will not, at this stage, take any position on sort of trying to estimate the full potential.
My second question is on the profit improvement program. You've mentioned the sort of various buckets of where sort of the focus is going on at the moment, which includes pricing and procurement. But the EUR11 million that you achieved so far, can you just elaborate where, for example, you are seeing more benefits coming to us grew faster than the others buckets? And then how you sort of see this evolving? For example, what are the more easy sort of [ uphold services ] to more difficult ones?
Yes. I think that in the early stages of the profit improvement program, we have different streams that we have been tackling. For example, in Q4, we have taken some tough decisions related to the employees. And you saw also in the EBITA bridges that our productivity has stopped declining and our group costs compared to previous year have been now showing a green delta. So, you can interpret that one a bit, that it's potentially coming from the profit improvement program. Then obviously, we have price increases in the consumer side in November, which one part of that one is related to profit improvement program. But obviously, we would have increased the prices without the program in a certain manner in any case.And then finally, in the procurement, we have been able to reap some quick wins in various different pockets. Those are stream by stream, little wins here and there either to fight the inflation or actually to really reduce the costs. So, those are the quick ones. And those ones, obviously, we continue in the procurement. You are always a bit of victim of your contract maturities. And then in discontinuation points, you can start reaping the benefits or start rethinking. You can always think about what you buy and how you buy. And obviously, in the discontinuation point, you consider more to how, but now we are also working on what. So those are clear ones.And then obviously, the whole corporate part, pricing part and then how can we work on the efficiency mode and the referral part, the diagnostics part. That work is ongoing and there are small wins, but those are always longer perspective items to be developed. There are no short-term wins. Our machine was already in a fairly good condition. Like Ville indicated on the operating model and the new segment structure that the Healthcare Finland is providing fairly reasonable profitability already pre-profit improvement program. So there, we need to work further to reap the benefits. But we are in a really good pace and in a quite good place already now on that part.
And my last question on margin expectation for '23. I know you've given -- reiterated guidance margin for medium-term to long-term, but just can you share your thoughts on your margin expectation for '23 and whether it's including the improvement or excluding underlying basis?
Our current practice is not to disclose or give margin ranges for the ongoing period. So, our medium target is 12% to 13%, and we are fighting to reach that one. But we don't guide to 23%, not in revenue or margin perspective.
There are no more questions at this time. So, I hand the conference back to the speakers.
We have quite a few questions from the webcast.If I start with the savings. With the EUR11 million run rate in 2022 and the target of EUR50 million by 2024, can you compute EUR30 million savings for the full year of 2023? And what restructuring costs should be taken account for the ongoing year?
Maybe I'll take also this one. As I commented on the margin part, we don't give guidances -- forward-looking guidances, not in the profit improvement program either. So what I can reiterate is what we have in the texts of our presentation and then in the release is EUR50 million by 2024. And I think the wording was majority reached in '23. How that one then ties into '23 P&L remains to be seen. And stay tuned for Q1, Q2 releases as we go forward.
Yes. Then a question on the M&A. Are we planning to pause for a moment in order to focus on profitability? And with that, are we able to grow by 5% during this year without any M&A action?
We are not pausing M&A actions. But as I think, we said in the presentation, we are more selective. The market conditions are totally different than they were, for example, 3 or even 2 years ago. And we are more selective. As we know, in our core business, there's not too much to buy. In portfolios, we are highly selective. We need to get the basis right also when it comes to organic growth in those platforms prior to doing additional M&A. In Sweden, as we have said from the beginning, it is a growth market and we are actively looking for opportunities.
Yes. Anything that you want to add?
No, I think Ville covered that one.
Then maybe a question to you, Juuso. What percentage of sales are the energy costs? And are we hedged in our energy expenditure?
No. Unfortunately, I can't get it from back of my head, energy cost from sales, but obviously, it's not material when you look. In the total big picture, material part of our costs are employee-related and then comes IT facilities and then some -- normally now, this is a generic comment. You are talking about 8% to 10% of the facility costs that is everything else than the actual rents. So in that ballpark, we are talking. Unfortunately, we are not hedged at the moment in full for the energy price fluctuations due to some unfortunate incidents in Finnish market where some of the providers went bankrupt during the fall time. But we are continuously evaluating that one, and we are continuously working on the market to make sure that we are, at the same time, optimizing and prudent in the energy procurement part.
Yes. Then some questions on guidance for this year, next year, and I will not repeat what's already been said. But then a further follow-up question to you, Juuso, on CapEx. What should we be expecting for 2023?
Yes. As I commented on that one, we don't -- on any aspect give numeric guidances, about EUR58 million. We are expecting that to be below that one. But we are continuously evaluating different bottlenecks and different, especially tangible side of the investments based on the need and based on the investment cases. So, we work also on those ones.
Yes. We commented that the organic sales growth was roughly 5% last year. Should something similar be expected for the 2023? And are we letting go of some businesses? For example, the price lifts helped with the organic sales growth.
Well, I think we commented that one already. So, we are more selective when it comes to our sales activities and sales growth, for example, in corporate comes through prices, not expanding our customer base. When it comes to our consumers, we have some question marks around the market. But thus far, as Juuso said in his presentation, we have not seen a dip in demand. So if the demand holds, our supply keeps tracking as it has now been tracking for a couple of months, we can reach a growth with consumers as well.
Yes. Then a question on the outsourcing contract base. We disclosed the maturity profile that you can find from the appendix of the slide, Slide 28. But there's a question from Jutta regarding that one. Should that be read that we are not planning to take on any new public outsourcing contracts as they are presumably more lower-margin businesses today?
So yes, old fashion outsourcing contracts are a thing of the past. So, we don't exactly know how the health care districts are going to maneuver in their new space. But most probably, we will not see that type of very long term, very extensive outsourcing contracts going forward. So, we'll manage the existing ones well, but then the new type of services that will evolve from interplay between ourselves and then health care districts is yet to be seen. And as we said during H2, we will have more light on that issue.
Yes. Then I think we covered already the status of the Suunta reform and how it's affecting us today. So, I won't repeat that.Then a question on portfolio businesses. Are there any plans to divest some parts of it?
At this stage, we are concentrating on the independent value creation plans and getting them organically to right level and at this stage, no activities in exiting any of those.
A question on the clinic network. Are there any changes planned there, or perhaps having a fewer clinics in the midterm, considering the growth in the digital front?
In our profit improvement program, there's a stream on that one, dealing with the network and network efficiency. There are some individual cases actually now being planned. They are not sort of dramatic or huge, but some combining different units in play. What we have done though is that we are redefining the scope of different type of units. So if there's a very like, for example, occupational health care targeted or concentrating unit, then for example, we can take the front desk out from that one. And with that one, make it more sort of a light version of our units. So both of these are in play and inside the profit improvement program. But during this year, you should not expect anything dramatic to change. But we are, of course, reacting to new environment.
And these are, of course, such that you gradually tackle the topics. So every time you have a discontinuation point on a rental agreement allocation, you can rethink you take the new world into account on whatever you plan. So that is a continuous work.
Yes. But actually, we will look, for example, concentrating some part of the services locally so that instead of having like 4 units conducting certain type of service, we only have one, so to get better volumes and hence, better productivity.
Then we have couple of more questions left. Do send them in if you have any further questions. A question on comment. Any comments on the sustainability metrics as the trend on all aspects is not looking up? Maybe I can start and then, Ville and Juuso, you can further comment.We'll publish our sustainability report actually next week's Friday in connection to the annual report. But the KPIs that we did disclose in connection to Q4 were the key, key KPIs. So NPS, eNPS and then quality index, as well as some mixed waste intensity. Obviously, we are still on a high level in NPS as well as eNPS, if you compare to the industry standard. But anything that you want to comment on the shifts in these aspects during the last year?
Well, as you said, we are well above our targets. Of course, pushing even for higher numbers when it comes to NPS and eNPS and especially eNPS, which is a bedrock for growing our supply and recruiting more professionals going forward. And then when it comes to quality index, there really the issue has been tight supply and us not in all fronts meeting the supply targets. But well, I said on Q4 commentary, that has been now the rock star of our last quarter. So making progress.
Anything that you want to?
No. I think like Kati said, we will publish the report next week and you can read quite a lot on our UN targets and the GRI indexes. I think that you will find out that we are good corporate citizens. We have effective medical care. But like always, when you have KPIs, you can improve and you should have a high ambition in this topic. But we are in a fairly good place if you just take the absolute measure.
Yes. So further follow-up next week on that one.Then a more detailed question over to you, Juuso. What's the current interest rate hedge percentage for the year 2023?
I think we are roughly 50-50 hedged at the moment. But then it's a more complex question because the hedges have also a maturity like loan contracts and so on, but roughly 50-50 is a good place if you're updating your excels to use something like that.
Good. Then we have one more question from the webcast so far. What's the outlook for some of the new services that were launched last year? Are we going to see trimming or potentially new launches?
Well, our focus is not in our core business in expanding portfolio. Our focus is in profitability. There are some growth buckets still addressable for Terveystalo even into core markets. And then we would be talking about some medical disciplines where we have not as heavy foot yet as we should have taking into account a full potential and our market share in general. But this year, the focus is in profitability, not expanding the services.
Good. I think with that, we don't have any further questions and we are on the time mark. So, we thank you for joining us today, and have a good rest of the week and weekend.
Thank you.
Thank you.