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Edited Transcript of TTALO.HE earnings conference call or presentation 31-Oct-19 9:00am GMT

Q3 2019 Terveystalo Oyj Earnings Call

Nov 8, 2019 (Thomson StreetEvents) -- Edited Transcript of Terveystalo Oyj earnings conference call or presentation Thursday, October 31, 2019 at 9:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Ilkka Laurila

Terveystalo Oyj - Interim CEO & CFO

* Kati Kaksonen

Terveystalo Oyj - Director of IR & Financial Communications

* Lauri Saarivuori;Development Manager, Tribe Leader - Digital Health

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Conference Call Participants

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* Alexander Matthew Gibson

Morgan Stanley, Research Division - Equity Analyst

* Iiris Theman

Carnegie Investment Bank AB, Research Division - Financial Analyst

* Panu Laitinmäki

Danske Bank Markets Equity Research - Senior Analyst

* Sami Sarkamies

Nordea Markets, Research Division - Senior Analyst of TMT

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Presentation

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Kati Kaksonen, Terveystalo Oyj - Director of IR & Financial Communications [1]

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Happy Halloween, and welcome to Terveystalo Q3 results webcast and call. My name is Kati Kaksonen, and I'm in charge of Investor Relations here at Terveystalo. Today, our CFO and Interim CEO, Ilkka Laurila, will go through the presentation, and we'll follow that with a Q&A as usual. But in addition to the usual presentation, we also have special guests here today, our digital health team will give a short presentation on our new My Health app and digital appointment. But without further ado, I will give over to Ilkka.

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Ilkka Laurila, Terveystalo Oyj - Interim CEO & CFO [2]

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Good morning on my behalf as well. And as usually, we will go through the sort of the key achievements during the Q3 and also the financial result for the Q3.

Q3 highlights. Overall, we are quite pleased to have, again, broad scale of growth across all customer groups, especially the private -- in the private customer groups, we saw a very good growth rates during the Q3. And that is partly driven by the new processes that we have been able to establish during the, say, last 18 months and the digital solutions that we have been able to launch during the year and during the Q3.

And as Kati mentioned, we will also go slightly more deeper on that and so that you can see what does it actually mean the own health solution that we so much talk about.

Our profitability. The EBITDA margin has also improved, thanks to especially strong sales in private and corporate customer groups, which again sort of shows the operating leverage model of the business and which applies to sort of the fee-for-service type of business that we are doing in the corporate and private business.

And obviously, the strong cash flow, we are happy with the strong cash flow from the operating activities, and we continue our rather high level on the digital type of investments, and those most likely will continue to grow as well.

As mentioned, clearly, higher growth rates than during the last quarter. So I would say, 10% -- 10.4% in the corporate segment, 21% in private segment. Without Attendo public segment, growth was 18.5% and on top of that, obviously, the Attendo impact is that roughly EUR 50 million.

What should be taken into account when taking a look at these numbers is that there was 1 working day more, having rough impact of that 1.5% positive effect for the revenue. And obviously, the impact of the Attendo's private dental business have also impact on the private growth. But despite of that, the growth compared to earlier quarters this year was clearly higher in the private segment versus a year ago.

What else should be taken into account when taking a look at these numbers is that if we go back to the last year's quarters where we always compare our numbers is that we had a sort of weaker performance in Q2 last year. We had a slightly improving performance in Q3 last year, which still gives us sort of the easier comparison period and -- but we had an excellent or good sort of performance already during the Q4 last year, which makes the sort of the comparison period for Q4 tougher than in Q3.

Here are the year-to-date growth numbers. Here, also, you can see that the growth has -- the growth rates have been higher now in Q3 than during the earlier quarters. Overall, the pie chart here shows that the private and public business from the top line perspective are now basically completely evenly balanced, with the corporate segment still creating 42% of the total revenue.

Numbers-wise, it means that the adjusted EBITDA before the IFRS 16 impact grew from EUR 14.8 million to EUR 24 million. The margin improved from 9.2% to 10.2%, and we will take a closer look on that as well shortly.

The profit for -- the net profit for the period declined from EUR 16 million to EUR 10.4 million. The key reason for the decline, obviously, is that for the comparison period, we had a capital gain from selling one of our businesses in Latvia at that time and that there were also some other sort of nonrecurring capital gains related to sort of the comparison period.

This is the sort of the way that we are trying to sort of open the logic that where we are, and we are saying that we are in the middle of the transformation within our company and also in the health care sector in general. This is sort of the -- our sort of -- what we try to show here is that if you think about traditionally how the private health care in Finland has operated is that, historically, the customer has entered to doctor appointment, and doctor has sent through the referrals to [bring] the customer to the labs to the imaging or to the surgery.

Now with what we have done and what we try to do is that for the last 1.5 years is that we try to sort of open the bottleneck for the doctor appointment, which is having very high utilization rates, which we have reported, I would say, since the Q2 '18 is that we have developed both sort of, if you want to call it, analogical processes as well as the new digital tools, so that the customers can bypass the bottleneck for the doctor appointment, go directly to the different kind of -- to the different sort of health care professional appointments or go directly to the lab, having a sort of referral [for your] labs, et cetera, et cetera.

In addition to those, we have developed those digital tools, which enables customers first of all sort of easier access to our services. And on the other hand, it will sort of even out the supply and demand so that from -- as an example, from the remote areas, you can take the digital appointment, although you are not physically close to the physical doctor or the health care center. And that all sort of dozens of different kind of activities and tools that we have developed starts to sort of, even though that the absolute numbers and the absolute revenue from these different sources are quite small, it starts to sort of to open the bottleneck for the doctor appointments and improves the patient -- the customers' availability to access -- and access to our sort of health care services.

Market outlook. Even though that we see -- if anyone sort of follows Finnish newspapers or news, you can see that the -- all the economists are taking sort of more negative view on the coming economic development. We still see that within the corporate customers, the sort of the demand will remain rather stable. And especially the preventive services relatively speaking is -- will continue to increase. And that -- which is further sort of emphasize that the slight legislation [says] for the corporate customers related to that Kela reimbursement that the corporate customers are receiving from using occupational health care services.

For the private customers, we see continuing trend for the comprehensive well-being, which will further create strong demand or stronger and broad demand for different kind of sort of services overall, and we continue our work and development of those comprehensive well-being services within our organization and work on that will continue in the future as well.

In the public segment, even though that the reform has been delayed, like we all know, we see -- especially when it comes to the public sector occupational health care customers, we see increase in demand for those services as well as the specialty care services for the public sector customers.

Then like Kati already said, we thought that it would make sense to sort of we talk so much on the digital appointment, even though that is not having yet that significant impact from the revenue perspective. We thought that it might make sense to have a sort of short demo here and to show you what kind of tool that is. And for all those things that have not yet used it, you can actually see it. And especially those sort of international listeners that you can at least see it, what kind of tool that we are talking about.

And with that, I will sort of invite Lauri Saarivuori, our Development Manager from the digital team to sort of show how it actually works.

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Lauri Saarivuori;Development Manager, Tribe Leader - Digital Health, [3]

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Thank you, Ilkka. Good day, everyone. My name is Lauri Saarivuori. I work as a Development Manager for our e-health services here in Terveystalo. And I will give you a brief demo about our new Oma Terveys app, so basically, My Health. And just to make things happen, I will do some video checks first.

So here, actually, I'm going to show you our app straight from our production environment. So this is the app that you can already download from App Store or Google Play. This is from my actually personal app, but you won't be seeing any personal health data here.

So here, straight from my phone, I have our new Terveystalo Oma Terveys, so My Health app, which can use face ID, fingerprints, et cetera. Of course, you need to -- when your first time taking the app into use, you need to use a strong authentication method, for example, bank credentials.

But when you come into the app, firstly, you see the home screen. This is now in Finnish, but I will guide you through it. Basically, what you could see here is your lab results, your appointments, your coming appointments, your vaccinations, et cetera. So here, you would have full home screen with your history and your future appointments.

Here, actually, you can see just now that there's a payment, for example. So it is possible with Terveystalo to actually pay all your visits to our doctors through the app.

And then what else do we have here? Well, we don't yet have actually possibility to make the appointment straight from the app, but that is coming. Then we have our own health plan, (foreign language) Finnish, where you can make your personal health plans with your doctors or other professionals and then you can have your goals, you can communicate with your personal professional in Terveystalo, et cetera.

But the thing that we wanted to demonstrate the most is our remote services. So there has been a lot of talk about different remote services. And here, you can actually now see that we have a lot of different chats here, for example, for your occupational health or your private health.

Here, actually, just for your information, currently, our chat levels are about 3,000 chats per week, and they're growing. Here, we also have the opportunity for offline messaging with your own occupational health team for those matters that are not so urgent.

But what I wanted to show you is the -- our newest developments, so our video appointments. We currently have already the possibility to go for a video appointment already without queuing. So on weekdays, we have this (foreign language), which is basically an MD answering for your questions through video. And I'm now going to show you how it works.

So here we have some more information on when it's open, how much it costs, et cetera, and now I'm just going to join the queue. And this is our live production environment. Now let's see when our professional picks me up, okay? So now our professional has picked me up. The conversation has started. Here, you can see our doctor is answering. She's already asking if I want to video. And now the doctor asks me if I want to join the video conversation. And there she is, you cannot actually hear the sound now, but it's because of the audio setup here. But of course, you can then hear the sound when you're having the discussion.

And here, you also have the possibility to attach different attachments, do the chat as well. And then you can always, of course, you can just put the video off and continue the chat as well. So it's that easy, and this is already in production. And you can also do this by appointment. Now I'm just going to -- she closed it already. And then, we have our customer feedback, and that was it.

We're actually -- this app has been released about a month ago. And during the last month, about 40,000 people have registered for it, that's growing day by day, and we're all the time developing more features into the app. Basically, every 2 weeks we're publishing a new version.

So here's the demo. Now I'll give the floor back to Ilkka. Thank you.

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Ilkka Laurila, Terveystalo Oyj - Interim CEO & CFO [4]

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Thank you. That was an excellent demo without any demo effect even. And I think that the sort of the key takeaway also is that nowadays, these kind of tools and gadgets, these are really easy to use. So that enables us sort of to use those by the wider audience. It's not just our digital teams that can use it, you don't have to be an engineer to be able to use those, but sort of the easiness and the convenience to use those kind of services is all the time improving.

Then a few words still on the financial performance on Q3. Here are the adjusted EBITDA picture that we have shown on every quarter. Now you can see if you take a look at the right-hand side of the picture, you can see how the adjusted EBITDA margin has developed. If -- during the Q1 and Q2, we were still on a lower level versus a year ago because we acquired the Attendo business with significantly lower margin levels. During the Q3, we were able to sort of even improve our margin despite of the Attendo integration from that 9.2 to that 10.2 level, which is in my books, an excellent result when it comes to the Q3 performance and operating leverage -- shows the operating leverage of the business and the efficiency improvements that we have been able to carry out.

The same table that we have shown every quarter is here, so that you can see that the top line, again, has increased at 46%. Most of the cost line items is not growing as fast as the top line. In the materials and the services, the growth has been significantly lower than in the revenue line. And that also applies to other operating expenses, which has increased at 32% versus 46% top line growth.

One thing to sort of note on that is that, of course, when the sort of digital investments are growing all the time, obviously, the IT expenses are also growing, and that is the sort of the, I would say, the biggest cost line item in there that is obviously growing within the other operating expenses.

From the balance sheet side, the sort of -- the strengthening of the balance sheet further continues. The net debt amount at the moment without the IFRS 16 impact is that EUR 390 million and that IFRS 16 impact is that EUR 177 million, roughly.

The development, you can see here show that we are now sort of at the level of our financial target, which is that 3x leverage before the IFRS 16 impact. And obviously, if and when the cash flow from the operating activities continues to develop favorably, we expect that our sort of balance sheet will further deleverage going forward.

On the working capital, positive trend further continues as during the earlier quarters. This year as well, which also shows the operational efficiency development and the fact that we don't have any major problems and major issues when it comes to the basic processes within our sort of environment.

On the investments, the development you can see here, the trend further continues as said in the Q2 reporting. When the intangible asset investment was at EUR 14 million, now it's at EUR 16 million and versus when it was in Q1 '18, the LTM level was at EUR 6 million and during the earlier quarters, it was EUR 4 million or EUR 5 million. So we have more than tripled (sic) [doubled] our investments in LTM numbers for the development of the digital and other IT solutions. And as evident from the picture when it has grown from EUR 10 million to EUR 16 million this year, the trend will further, obviously, continue in the near future as well.

And as said strong operating cash flow has continued, and we don't expect to have any sort of -- based on the historical facts that we have within our hands. We don't expect to have any negative developments in there as well.

One more thing to highlight that -- is that the corporate responsibility has, I would say, even almost always has been one of the strategic focus areas for us. And we have -- we are pleased to see that investor interest on those themes are also increasing. That's definitely positive thing, and we also sort of improve our performance here, and we are continuously working hard on that area as well. And just a few days ago, we also received sort of the Prime status from the ISS sort of a rating agency when it comes to the ESG standards.

And we will also publish -- in addition to quality book, we will also publish our first corporate responsibility report regarding 2019 sort of activities when we sort of will report the annual report as well.

Then finally, the upcoming IR events and the financial reporting for the next year, which have already been released. But then I think we have time for the Q&A.

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Questions and Answers

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Kati Kaksonen, Terveystalo Oyj - Director of IR & Financial Communications [1]

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Thank you, Ilkka and Lauri. Do we have any questions for either Ilkka or Lauri? I see somebody is having his hand up already, so I'll give over to you.

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Sami Sarkamies, Nordea Markets, Research Division - Senior Analyst of TMT [2]

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Sami Sarkamies, Nordea Markets. I have a couple of questions. Can you give us a bit more flavor regarding the organic growth rates within corporate and private segments in third quarter? I know that you are not reporting those anymore, but perhaps a comparison against Q2 levels could still be useful.

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Ilkka Laurila, Terveystalo Oyj - Interim CEO & CFO [3]

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So if you ever think about it that way that in Q1 when we have not yet integrated our Attendo's dental services or Attendo's corporate customers, the numbers, you can see here that the private customers grew at that time to 12.6% and corporate customers that 6.9%. Without that impact, the growth was 3.7% in private and 6% in corporate.

So what it means that in the corporate segment, the Attendo's impact is really not material, I would say. The private customers, the impact is that roughly 9% like there is here in Q1 as well. So overall, if you do that kind of math and adjust it with sort of having 1 working day more, having that 1.5% impact for the Q3, you will end up -- it's not rocket science, you will end up having 11%, 12%, whatever sort of close to that level of number in Q3 overall, including public and private and corporate.

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Sami Sarkamies, Nordea Markets, Research Division - Senior Analyst of TMT [4]

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Okay. And then on private segment, could you open up some reasons behind the strong growth you had in the third quarter?

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Ilkka Laurila, Terveystalo Oyj - Interim CEO & CFO [5]

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I think the biggest reason is the work that has been, like I said, the work that has started, I would say, 18 months ago with regards to that sort of funnel picture that I showed to you. Obviously, the 1 quarter is too short a period in health care and I think almost in any industry to make a strong sort of conclusions on the development. You should take -- obviously take a sort of longer trend line and -- if you want to make a sort of projection for the future. So the straight line basis from 1 quarter is not sort of a fair adjustment when it comes to the -- especially when it comes to the private customers.

As you can see from the historical trend, the private sort of sales, the fluctuation within the private sales is somewhat bigger versus the corporate segment and also versus the sort of the public sector customers, should there not be any major changes in public sector contracts.

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Sami Sarkamies, Nordea Markets, Research Division - Senior Analyst of TMT [6]

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Then your outlook statements, I think you can read them so that you have become a bit more positive regarding private and corporate segments or maybe a bit more cautious regarding the public segment. Could you just walk us through the changes in your thinking related to those areas?

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Ilkka Laurila, Terveystalo Oyj - Interim CEO & CFO [7]

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Overall, I would say actually that the sort of the view is pretty much the same, I would say, as during the earlier quarters. The only sort of impact is that the sort of the macroeconomic environment that we are seeing and the development in there that we are seeing at the moment. So that -- but as we all know, the macroeconomic environment is -- has somewhat weakening trend at the moment. But the sort of the positive sort of tonality, I would say, comes from that, that we don't, at the moment, believe that the sort of the weakening macroeconomic development should have a major impact to our development relative to sort of the overall market development. And that's the sort of the, I would say, that change in the view.

When it comes to the public segment, what we see and what we have shown already during the earlier quarters is that there's most likely or the sort of -- there's a limited amount of major complete outsourcings, but the demand is -- continues to be strong, but the sort of the service mix within the public sector customers is somewhat different than it used to be, say, 2, 3 years ago when we had a -- all had a strong pipeline, and there was a lot of tender processes related to complete outsourcing. Now it's more and more episodes, different sort of the specialty care, smaller outsourcing as well as these occupational health care sort of contracts and also outsourcing. So the top -- from the top line perspective, the development in the public is slower. But on the other hand, the sort of the number of the activities obviously is higher and that the profit pool impact is not that high as the top line sort of development in the public market because typically, those complete outsourcing contracts are having sort of typically lower margin levels than the smaller contracts.

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Sami Sarkamies, Nordea Markets, Research Division - Senior Analyst of TMT [8]

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And finally, you're talking about Kela reimbursement changes next year becoming a tailwind for the corporate business. What kind of impact are we talking about?

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Ilkka Laurila, Terveystalo Oyj - Interim CEO & CFO [9]

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It's a -- yes, it applies to -- first of all, it applies to the corporate customers. And the change in that is that during the -- this year, there has been sort of the -- a roof for reimbursement both in Kela I and Kela II, meaning the sickness care and the preventive care.

For the next year, the rules are changing in that way that you can use basically -- the whole compensation level can be directed to preventive services, meaning Kela I services. So it -- the total compensation level as such is not changing, but what is changing that it will most likely have a slightly increase in impact on the continuing trend when the preventive and well-being services are increasing. So it will sort of enhance that development, but it will not have a dramatic impact either way because the actual sort of the amount and the actual sort of compensation or the reimbursement levels are not changing. It's more steered to preventive work than earlier.

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Kati Kaksonen, Terveystalo Oyj - Director of IR & Financial Communications [10]

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Thanks. I think we have other questions from the room, but I think we'll take a couple of questions through the phone lines in between, if that's okay. Do we have any questions from the phone lines at the moment?

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Operator [11]

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We have a question from the line of Panu Laitinmäki from Danske Bank.

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Panu Laitinmäki, Danske Bank Markets Equity Research - Senior Analyst [12]

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I would have a couple of questions. Firstly, on the very good growth in the corporate segment. Could you kind of specify where it came from, given that we are not having that many new employees in Finland, and you already have a very high market share. So was it really kind of more billing per customer? Or how do you see that? And how sustainable is this kind of a growth rate going forward?

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Ilkka Laurila, Terveystalo Oyj - Interim CEO & CFO [13]

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Yes. It's the -- it's more like, I think, we have said that the sort of -- we have already seen during this year and during earlier seasons that the sort of the historical correlation in the corporate segment development when it was quite -- you were able to quite nicely tie the corporate sales development with the sort of the end user amount. That is actually -- the correlation is actually weakening. And what we see is that the customers, the change in behavior within the customers when it comes to the spend level, how much they use to acquire health care and preventive services, that sort of is widening the scope of different kind of services. And that is where the sort of the growth is coming from, so that we have been able to sort of support the existing demand for the preventive services as well as those well-being services so that the average spend per customer has actually developed positively and that is where it comes from.

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Panu Laitinmäki, Danske Bank Markets Equity Research - Senior Analyst [14]

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All right. And then on the cash flow, which was very good in the first 9 months, is there something in the Q4 that we should expect to reverse in terms of working capital? Or is this kind of a trend that we should look for the full year?

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Ilkka Laurila, Terveystalo Oyj - Interim CEO & CFO [15]

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Historically speaking, in the sort of the old Terveystalo side, the -- there is not going to be any sort of unusual changes expected. The only sort of factual change in the working capital has been the sort of the pension-related payment and the payment cycle for all of the [period] pensions is not quarterly based in Finland anymore, but it's on a monthly based. So that will -- but that impact you can see already in Q1, Q2 and Q3 result. But that's the only sort of difference when you compare last year numbers.

Then when it comes to the Attendo's sort of working capital and the sort of the impact of that integrations, that is somewhat more difficult to say at the moment obviously because we haven't owned the business during the last year Q4. And -- but we would not expect to have -- that to have any sort of major impact for the complete or the total working capital development.

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Panu Laitinmäki, Danske Bank Markets Equity Research - Senior Analyst [16]

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All right. My final question is on the acquisitions. What is your acquisition strategy going forward now you have kind of integrated the Attendo acquisition and debt is coming down a bit. So are you looking for any larger ones? Or is it small bolt-ons? Or what are you thinking?

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Ilkka Laurila, Terveystalo Oyj - Interim CEO & CFO [17]

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Yes. Regarding Attendo acquisition, the integrations -- integration goes as planned. And the sort of the technical takeover will take place at the year-end so that the sort of the TSA contract will end during the first quarter 2020. And then it will be sort of from the technical perspective, will be integrated within our sort of technical environment people keeping (inaudible) HR services. And then we get, obviously, better sort of -- or we are able to build a better sort of transparency and the visibility for those operations when we have the numbers and the bookkeeping and the HR processes within our sort of infrastructure.

When it comes to the M&A, you have seen that we have done during this year. Unfortunately, can't remember the exact number, but it's 7 or 8 acquisitions that we have done during this year. Those are mostly smaller bolt-on acquisitions, but I said earlier also that we will continue to look all opportunities in the market, and we don't close the window for the larger acquisitions, but not -- obviously, not either for the smaller acquisition and most likely, we'll continue to do both whenever the sort of situation and opportunities arise.

But as you can see from the smaller sort of acquisitions is that the sort of what kind of acquisitions we are doing is slightly different from -- versus the earlier years. There's more sort of the public sector related, this occupational health care related, it's a provide -- have provided the municipality owned public sector, the municipality owned occupational health care service providers and there's more sort of a technological-driven and competence-driven services that we have acquired. Latest one being that Evalua just during this month. And those are the type of the sort of the acquisitions that we believe that will further continue. And obviously, on the well-being side as well, we have acquired a handful of physiotherapy service providers and, hopefully, continue to do so in the future as well.

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Panu Laitinmäki, Danske Bank Markets Equity Research - Senior Analyst [18]

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That's all from me.

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Operator [19]

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And the next question comes from the line of Alex Gibson from Morgan Stanley.

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Alexander Matthew Gibson, Morgan Stanley, Research Division - Equity Analyst [20]

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I have 2 questions. I know it's difficult for you to determine what the organic underlying growth of the business is. But if we go forward 12 months when Attendo is not a major contributor, what levels of growth should we expect -- be expecting across each of the customer groups? And if you can talk about that compared to market growth rates as well, that would be helpful.

And then my second question is just on synergies update. I didn't see anything highlighted in the release, but if you could let us know what the impact of synergies was in the quarter, that would be helpful.

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Ilkka Laurila, Terveystalo Oyj - Interim CEO & CFO [21]

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When it comes to sort of the revenue development for the different sort of customer groups, like reported earlier in the public sector, there's a couple of larger complete outsourcing contracts which are ending at the year-end. I think the total impact of those is some EUR 30 million to EUR 40 million or so. Obviously, there's also new contracts, so the -- for sort of the net impact is not that high, but inevitably, that will have an impact for the public sector development.

For the corporate and the private segment, like I said earlier, we believe that sort of we see market develop quite positively, and we see that we are able to increase our market share relative to market growth rates. What then would be the market growth rate? We don't expect the market grow that fast, that it has been historically because of the fact that weakening environment, but we believe that our relative performance to the market will continue to overperform. And now because I don't have a pen and paper I already forgotten the second question. If you, Alex, can repeat that?

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Alexander Matthew Gibson, Morgan Stanley, Research Division - Equity Analyst [22]

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Okay. Yes, I'll do the second, and then I have a couple of follow-ups on what you just said, but the second one was on synergies in the quarter for the Attendo acquisition. I think you were talking about EUR 5 million for the full year. Was it EUR 5 million in the quarter?

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Ilkka Laurila, Terveystalo Oyj - Interim CEO & CFO [23]

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EUR 5 million is the run rate impact starting from the 2020 -- start from the 2020. So that's the run rate impact. That's not the financial impact for 2019. Of those synergies, all sort of activities have been already covered out and implemented with the exception of that transition service agreement, which is still in place with the Attendo, which relates mainly to bookkeeping, financial reporting and HR services and some other sort of support services. So I would say that, clearly, the biggest proportion of the synergies, you can already see within the numbers.

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Alexander Matthew Gibson, Morgan Stanley, Research Division - Equity Analyst [24]

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Okay, great. And just following up on what you said earlier. So should we assume the public customer group declines next year because of the ending of those 2 larger outsourcing contracts? And then for corporate and private, you say you don't expect the market to grow fast. Should we be thinking that means 2% to 3% and you doing a bit better than that? Or is it higher?

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Ilkka Laurila, Terveystalo Oyj - Interim CEO & CFO [25]

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In the public sector, we like said at the sort of the impact of those 2 larger outsourcing or handful of larger outsourcing contract is that EUR 30 million to EUR 40 million, obviously, still we are in the middle of the year and there's tender processes ongoing all the time. So even though that -- we would publish it, we don't know it yet because quite typically, those sort of initial -- start of those new services will only be at the year-end or at the -- start from the 2020. So for that, we don't actually have yet the sort of the information.

For the corporate and private market development, like typically in health care, the movements are not that fast, I would say. If historically, the development of the market growth has been that roughly between 3.5% to 4%, I don't believe at the moment that it will dramatically be lower, but somewhat lower. I don't have, obviously, the exact number for that, but because of the macroeconomic development, it will be most likely somewhat lower, but how much then that will then -- then some third-party service providers that can provide the market growth estimates, that is something that needs to be discussed with them.

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Kati Kaksonen, Terveystalo Oyj - Director of IR & Financial Communications [26]

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Thanks. And then I think we have more questions from the room and also through the webcast. I think [Olli] was next in line. Do you still have a question?

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Unidentified Analyst, [27]

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No. Not anymore.

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Kati Kaksonen, Terveystalo Oyj - Director of IR & Financial Communications [28]

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Okay. Anybody else from the room?

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Iiris Theman, Carnegie Investment Bank AB, Research Division - Financial Analyst [29]

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Iiris Theman from Carnegie. Two questions, please. Just to follow up on your organic growth, can we expect the year-to-date organic growth level, which seemed to be about 7% to 8%, to continue in Q4? Or do you see any headwinds?

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Ilkka Laurila, Terveystalo Oyj - Interim CEO & CFO [30]

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I would say, like I said, I think the 1 or 2 quarters are too short period to take average number. I think you should take a longer trend from 2 to 3 years in health care to be able to have a -- and adjust that with economic development to be able to sort of have a better sort of view on the coming future. Like you can see from the numbers, if the Q2 last year was quite weak, and this quarter was very, very good, actually, the variations will continue. That's typical for the private sector. That there is a quite big sort of variations in the growth rates between the sort of different quarters and we always need to take a sort of the longer trend views to be able to see a big picture on the private customer development.

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Iiris Theman, Carnegie Investment Bank AB, Research Division - Financial Analyst [31]

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Okay. And then on your digital services, how would you compare those to your competitors? Are you ahead of your competitors? Or in line with competition?

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Ilkka Laurila, Terveystalo Oyj - Interim CEO & CFO [32]

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Like I have said that the best thing in Finland is that we have good competitors in health care. That is a great thing to have because that puts a lot of effort for our development and we try to put a lot of sort of pressure to competitors that they should develop their services and their sort of IT and digital tools. It's different -- I would say that it's, from the objective perspective, it's always difficult to argue that who is having a best kind of sort of solutions or tools. I think that we -- with our best competitors are developing our services side-by-side, so that in 1 month or in 1 quarter, we are improving our services, and we are better and in some quarter they sort of develop their services and we take a benchmark from their services and we continue to develop our services, and that's the brilliance of the competition. And we hope that from the health care development services or for the general sort of health care in Finland should develop. We hope that, that will continue in the future as well so that the challenge to ourselves and our competitors, so that we are even further able to develop better and better services to our customers.

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Kati Kaksonen, Terveystalo Oyj - Director of IR & Financial Communications [33]

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Thank you. And then we have a couple of questions from the webcast. Jutta Rahikainen from SEB has some questions. Firstly, were we able to take market share in the private and corporate segment? Or was the market growing faster than earlier in Q3? And also, we are growing significantly in the public segment, also excluding Attendo, were we aggressive in pricing in the outsourcing tenders? Or what's the root cause of that?

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Ilkka Laurila, Terveystalo Oyj - Interim CEO & CFO [34]

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I would say that when it comes to the corporate and private customers, unfortunately, within this industry, we don't have the facts for the market development. We only know the fact of how the employed persons have developed. It has slightly increased versus last year. For the private segment, we only know how the private consumptions has developed in the economy in general, and we know where the Kela compensation levels are. Those are the only existing data points that are available for everybody. And if you compare our performance on those data points, obviously, we believe that we have been growing much faster than the market, but we don't have facts for that, unfortunately.

For the public segment, the main driver for sort of the organic growth, excluding the Attendo, is exactly those specialty care and occupational health care customer contract, not so much on those larger complete outsourcing contracts. With the public customers, we don't actually see that high pressure when it comes to the pricing. Overall, obviously, the market is tight as always, especially with larger customers and larger corporate customers, but we don't see any major changes on that environment in the short term either, even though that the competition is, of course, has been tight and will continue to be tight.

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Kati Kaksonen, Terveystalo Oyj - Director of IR & Financial Communications [35]

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Then we have one more follow-up question on the Attendo margin diluting impact. Was it lower in this quarter than in the previous quarters? Are you just trying to figure out why the group EBITDA, clean margin improved as much as it did in this quarter?

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Ilkka Laurila, Terveystalo Oyj - Interim CEO & CFO [36]

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If you think it through that way that has there been any sort of the service or the sales mix changes within the Attendo having an impact on the EBITDA margins, there's no that material impact coming from that. But obviously, if you compare it to, for example, in Q2, like I said, we are excluding that transition service agreement. We are now sort of running full speed with the synergies of the Attendo acquisition and almost full speed and that impact is included in the numbers, but rest than that, there's no any major sort of service sales or any other sort of sales mix or mix changes versus earlier quarters this year.

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Kati Kaksonen, Terveystalo Oyj - Director of IR & Financial Communications [37]

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Thank you, Ilkka. Do we have any additional questions from the room or from the phone lines?

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Operator [38]

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There are no questions on the phone.

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Kati Kaksonen, Terveystalo Oyj - Director of IR & Financial Communications [39]

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Thanks. And there are no further questions in the room. So I thank you for your time, and have a good Halloween, everybody.

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Ilkka Laurila, Terveystalo Oyj - Interim CEO & CFO [40]

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Thank you.