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Edited Transcript of TTALO.HE earnings conference call or presentation 8-Aug-19 8:00am GMT

Half Year 2019 Terveystalo Oyj Earnings Call

Aug 15, 2019 (Thomson StreetEvents) -- Edited Transcript of Terveystalo Oyj earnings conference call or presentation Thursday, August 8, 2019 at 8:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Ilkka Laurila

Terveystalo Oyj - CFO

* Kati Kaksonen

Terveystalo Oyj - Director of IR & Financial Communications

* Yrjö Närhinen

Terveystalo Oyj - CEO

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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

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Presentation

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

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Good morning, ladies and gentlemen, and welcome to Terveystalo results briefing and live webcast for the first half of the year. My name is Kati Kaksonen, and I'm in charge of Investor Relations here at Terveystalo.

As usual, our CEO, Yrjö Närhinen; and our CFO, Ilkka Laurila, will give a short presentation on the results, and we'll follow that with a Q&A. We'll take questions through the phone lines as well as through the live webcast. So without further ado, I'll give over to Yrjö.

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Yrjö Närhinen, Terveystalo Oyj - CEO [2]

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Thanks, Kati. Good morning, everyone. And so now we are here at first half year and second quarter of 2019.

I guess the headline probably says -- what I hopefully says what we want to portray, which is of course, our absolute quarter-on-quarter growth is driven by Attendo, but actually, we're quite satisfied with the underlying growth, which is seen broadly across the customer groups.

And so if we start to kind of look at the Q2 highlights. As said, strong development in all customer groups in all physical regions. Attendo Health care integration proceeding as planned. Lots of work, very active, but basically all plans, integration, synergies, everything is progressing as budgeted and planned.

We see continued growth in prevention and well-being services. These, as you may recall, we've seen high double-digit growth. I think that the positive thing is we are also seeing a clear pickup on, I would say, classical health-care appointments, which we will classify as private business. Also, our health care -- sorry, the occupational health care is performing very solidly.

Maybe a little peculiarity, but our digital businesses continue to grow. And we've seen an all-time high in July on remote appointments, both be it chats or be it digital visits. And I think the real trick behind this is that it actually allows us to manage availability industrially better than previously. So we see a high demand on digital services or increasing demand as well as then we can see the operational impact of that business gradually coming in.

We have a new remote appointment app. So basically -- or actually My Health account is basically upgraded, and then we see -- we get very, very positive feedback from be it app stores or be it consumer feedback. All-time high on chats. And actually, if you look at even in some regions in Finland over summer time, you almost see digital visits being as large as physical visits. And so that clearly tells the story of an increased interest towards, I would say, next to physical doctor appointments and physical health-care activity, the long-term work on increasing digital presence clearly starts to play in.

We are testing small-scale still but basically the whole notion of prebookable remote appointment, and our vision there is that the consumer can, over time, choose live whether they want to have a physical visit or a digital visit. And I think that work is processing very well. Not 100% up and running yet, but on a better mode, and we can still gather some more learnings but very, very positive development there.

Look at the growth numbers, 37% growth quarter-on-quarter. Of course, a majority of this coming out of the Attendo acquisition basically, more than tripling our public business to a sizable EUR 74 million.

Next to it then, almost the same size, private growing by 13.8%, which I think is a very good number. It is a combination of well-being prevention as well as then classic doctor appointments. We do see appointments growing, and that of course then impacts the mix, and especially when we come more and more towards well-being, you'll see the appointments playing a larger role. So we always need to look at the sales mix effect of that.

Also very positively, you'll see growth in occupational health care, 7.1% year-on-year. And that despite having one less business there. Now without being too much of an educator, of course, the impact of one business day means that, that lost revenue basically almost fully leaves from the profitability line simply because the cost base remains broadly the same. So always on a quarter-on-quarter comparison, this kind of a working day comparison remains relevant and then on your full year basis, of course, loses meaning.

So that's the Q2. Basically, then puts us on a EUR 526 million growth or sales on first half year, 36% growth, more or less the same numbers. I think the point here to note is that our public and our private business start to be almost the same size. So we're really solidly standing on kind of 3 different business legs, which is also the way we try to look at our business increasingly, which is on kind of understand the differences and the similarities of these 3 different business groups: public, private and corporate. But very much solid growth, and I would say strong underlying growth and broad growth across all of these groups, customer-wise and geographically.

EBITDA, year-on-year comparison gets impacted by, as said, this kind of increase in appointments relative to other activity. Attendo coming in with initially lower margin, 1 working day. And then as you may recall, we had some positive one-offs on a comparison period. So if you look at that quarter-on-quarter, you actually see, I would say, a kind of a lesser impact or lesser growth that we see from a kind of an organic point of view. And so we -- and Ilkka will come on to talk about more on longer-term trend, but we are actually quite satisfied with how our business continues to drive efficiency despite Attendo coming in with somewhat different business mix and then coming with the different business model. So the EBITDA then comes at EUR 25.9 million, adjusted EBITDA percent at 10% of revenue and then profit at EUR 10.4 million.

Over to market, I think the big message with looking at the market is, despite there are clouds on the horizon on the kind of a broad scale of a macro albeit, be it internationally, and even changes in the way how private consumer looks at the confidence against the Finnish economy, we do see our market being currently unimpacted by it. So basically, we see strong demand for our services.

We don't see impact on health-care policies, be it reform or not reform basically impacting at all. We're basically busy developing our own business, driving our own efficiency. And of course making sure that our Attendo integration continues to play in, and so that we are ready for whatever may come or at the public side.

Despite, I would say, political discussions, I remain very confident that public-private partnerships is one clear way forward for Finland and for Terveystalo in that same sentence. However, 2019, I think the impact of any political decision is limited, and I think we'll see that playing in the longer term.

As said, market and the environment for us remains positive despite, I would say, somewhat weakened consumer confidence, and so we remain confident on the market outlook and basically are busy with our own work.

And with that, I would like to hand over to you, Ilkka, who can run through the financial numbers.

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Ilkka Laurila, Terveystalo Oyj - CFO [3]

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Good morning on my behalf as well and as usually, we take a closer look on the financial performance as well.

Starting with the profitability and especially EBITDA. So if you take a look at the longer trend of the EBITDA development as the result for Q2 was down at 9.9 percentages. If you would compare that to 2017 number, it's already clearly higher than that. And if you would compare it to 2018 numbers, it's somewhat lower still because of those mix issues that Yrjö already earlier sort of described.

But if you would compare our performance versus the Q1, so if you take a look at the Q1 '18, in which the EBITDA was at 13% and Q1 '19, having full impact from the Attendo acquisition, was 12%, so 1% relatively speaking lower. And if you would do sort of working day adjustment for the Q2 results, which is roughly at 1.7% for the top line, roughly 0.5 percentages for the margin level, you will end up having roughly 10.4% margin number for Q2 and which is already quite close to 2018 performance. And therefore, we are quite happy with the operating leverage and the operational sort of improvement and the profitability that we have achieved during the second quarter.

And that, as usually, the sort of the root cause for that is obviously the operating leverage of our business model that still applies, especially when it comes to the corporate and private customer segments as described earlier. The logic with the public business is somewhat different, but if you take a look at the cost structure again, if you take a look at other operating expenses, clearly increased less than top line.

Or if you take a look at the material expenses, which is sort of included in the materials and the service line, it has all increased some 5% to 6% versus the top line growth. Or if you would do sort of the IFRS 16 adjustment back to the rent leases and premises expenses, it has only increased some 17% or 18% roughly speaking. So also that has increased less than the top line. And that will end up sort of having the operational leverage impact that we are having in this kind of corporate and private businesses especially.

Then on the balance sheet side and the targets on the balance sheet. The leverage ratio target is 3x. Now we are having that close to EUR 300 million impact after the IFRS 16 impact. And -- but still, if you take a look at the leverage ratio, if you would explore that to put it sort of at comparable numbers, we are already quite close to the 3x leverage ratio. And if you will do that even any kind of sort of LTM adjustment for the Attendo acquisition, you will end up already having below that 3x leverage ratio, which is then why we see that we are not worried about the leverage ratio development. And that we are already sort of in our internal targets when it comes to the leverage ratio.

And one big reason for that is that we can see -- if you can see the operational sort of process improvement in the P&L side, you can also see it in the balance sheet side. So if you take a look at the working capital development like described already during the earlier quarters, sort of if you are able to operate efficiently your operations, you can see the improvement also in working capital development as we can see, again, during the second quarter of 2019. And also having, obviously, impact for the improvement in the leverage ratio.

As already also mentioned during the earlier quarters, we will continue our investments in the digitalization of the health care in our operations, the sort of increase in the CapEx level can be seen here again. So that if you take or compare it to the last 12-month investment intangible assets in Q2 -- Q4 in 2017 was EUR 5 million versus the Q2 2019 LTM number is EUR 14 million. So it has almost tripled during that time, which is according to our strategy and what we have said that we will continue investing in digitalization of our business and the health care.

Cash flow still sort of end result of both the P&L -- the positive P&L development as well as the working capital development and upon having a situation that you can see here that our operating cash flow even totaled you could do IFRS 16 conversion back to those numbers, the operating cash flow developed very positively during the second quarter 2019 and showing the good sort of operational development of the business during the second quarter and the first half of 2019.

Then I think that we can open the lines for further questions and to 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. Do we have any questions from the phone lines?

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Operator [2]

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(Operator Instructions) And our first question comes from the line of Panu Laitinmäki of Danske Bank.

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Panu Laitinmäki, Danske Bank Markets Equity Research - Senior Analyst [3]

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A couple of questions. Firstly, on the organic growth rate. I know you are not giving the number anymore, but can you kind of confirm whether it was roughly on the same level as in Q1 when you kind of gave the number?

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Yrjö Närhinen, Terveystalo Oyj - CEO [4]

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Ilkka is keen to answer, so...

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Ilkka Laurila, Terveystalo Oyj - CFO [5]

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Yes, I will open the logic a bit as a preemptive strike, we did fit in Q1 slides here already is an appendix. So if you take a look at the Q1 and the growth in these numbers, so basically, you can see that the impact from the Attendo for the private sector was roughly 9%. It had only immaterial impact for the corporate segment being less than 1%. And growth for the public segment, would be we already said during the -- also said during the second quarter. And if you would also put rough impact of the working day during the second quarter, you will end up -- you have to do some sort of math, but you will end up having end result that, during the second quarter, our growth was actually in line with our long-term targets as well being 6% to 8%.

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Panu Laitinmäki, Danske Bank Markets Equity Research - Senior Analyst [6]

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All right. That's clear. Second question, actually, on cash flow. So that was very strong in Q2. Do you think this is kind of a trend to continue? Or was there something in the working capital that will normalize in the second half?

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Ilkka Laurila, Terveystalo Oyj - CFO [7]

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First, you have to take into account that, that is -- even though the IFRS 16 is ridiculous, but even though the IFRS 16 is not cash flow item, it will have impact on the operating cash flow calculation. So the impact for the Q2 is roughly that EUR 10 million.

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Panu Laitinmäki, Danske Bank Markets Equity Research - Senior Analyst [8]

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Yes, sorry, I mean like excluding that?

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Ilkka Laurila, Terveystalo Oyj - CFO [9]

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Yes, and on top of that, if you take a look at the working capital, there's a certain nonrecurring impact from the pension-related payments in Finland with the governmental [cuts] system here in Finland is not operating as the government or the pension institutions planned, and that's why it has had a positive impact for the second quarter, working capital.

But even though that you would exclude that impact as well, we had a good, solid operational development for the working capital also for the Q2. But it's -- like I said, it's not that good as the number shows, but going forward, we also see that there is no reason why the historical development should change. And as we have been historically able to improve our operating cash flow and the working capital development, we continue to believe so that also in the future.

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Yrjö Närhinen, Terveystalo Oyj - CEO [10]

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And I think that's the key point, which is that as we continue to grow top line, our ability to drive efficiency down further down that the P&L continues, and I think operational -- operating cash flow, I think, is a great example of our continued ability to drive operational efficiency. And I think that is exactly as Ilkka says will continue and should continue.

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Panu Laitinmäki, Danske Bank Markets Equity Research - Senior Analyst [11]

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All right. My final question is a broader one on the market and the public side of that since you last reported there. We have a new government and some clarity on the kind of outlook on this, okay. So I think -- so what are your thoughts now, it seems that we are not seeing that many outsourcings, but something else on the public side. So any comments on the timing and your plans and what is the effect?

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Yrjö Närhinen, Terveystalo Oyj - CEO [12]

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So I think, yes, I mean not to dwell too much on kind of the political outlook, but it is a little bit unfortunate that Finland continues to struggle with renewing its, I would say, basic services, be it infrastructure, be it schooling, be it social care, health care. And so these things take a long, long time. And so we, as an operator, within that market, we need to be accustomed to that the demand, I judge, will be there and is there. And if you look at the kind of the status of municipalities, financially, there's the highest number of municipalities ever to make an operational loss, which means there's a financial situation out in municipalities in Finland is actually quite serious. And therefore, I think we do need solutions to help our public health care.

Now then the question there is much more how and when will that demand materialize. And so as we all knew, there was a kind of a period with quite a lot of complete outsourcing. And I think if you look at the political tonality right now, it's probably a little bit against that. There are other forms of collaboration being discussed. Now what does that mean? That means that the overall sentiment is probably more waiting and people are more in the waiting mode. We see a lot of interest and demand. We also see that the new government is a little bit trying to form their words into action, and we haven't really seen that in practice yet. Therefore, our focus is to make sure that if there are new types of services, be it staffing services, be it service vouchers, we need to be ready for those or other forms of tendering.

My current judgment is that we see less of a focus on complete outsourcing, and we see more of a focus on kind of specific activity going forward. But I'm struggling to see that the demand would lessen. But that probably means that whatever will happen in the next half of the year, second half of the year, we'll see quite modest financial impact of that because these tend to be long processes. And so the tendering process is when they start will take a while. So I think the market will be in a little bit of a waiting mode 2019. Having said that, there is a lot of demand. There is a lot of small -- a large number of small activity going on. So we remain quite positive on the developing and investing into the public business.

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Operator [13]

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

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Alexander Matthew Gibson, Morgan Stanley, Research Division - Equity Analyst [14]

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My first one is on staffing. I remember last year, you talked a lot about not being able to get in enough consultants to keep up with booking demand. Are you seeing any of these pressures? Or has that alleviated given the good growth rates that you've shown in the business?

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Yrjö Närhinen, Terveystalo Oyj - CEO [15]

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Staffing, yes, I think it's a very observant question. I think -- I mean staffing overall tends to vary quite a lot from one period to another, and rightly so, we had to spend quite a lot of time on the first half year actually to make sure that we stabilize the situation. I think it has stabilized. One of the key drivers, I think, is these are people who look for short-term employment. And given the fact that we were not -- had not closed the deal, there was uncertainty about kind of when will the deal close, and all of these impacts are gone now. And so we see the pipeline for professionals being better. And that helps our kind of let's say access for the physicians.

The second thing that, that does help is that we'll be able to stabilize the situation in terms of making sure that the deal base, if you wish, is more healthy. And so we've got a lot of work on stabilizing staffing and kind of turning that into growth more than I would -- my expectation is that the second half is significantly more stable than the first half where we, at least from a work base point of view.

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Alexander Matthew Gibson, Morgan Stanley, Research Division - Equity Analyst [16]

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And is that helped by the launch of that new app, the consumer booking app?

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Yrjö Närhinen, Terveystalo Oyj - CEO [17]

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No, it's a little bit -- I mean the consumer app basically allows us to serve, I would say, the private customer. The staffing business, okay sorry, now you have 2 different [areas]. So we need to specify. Staffing as a rental doctor staffing business or staffing physicians. And if I comment on the rental doctor, that was my first question -- there -- or first answer. There I think we have seen better access to professionals, and that business has clearly stabilized. There we see also demand -- almost indefinite demand you could argue. We're then getting access to physicians. And if that's your question, there the app will help because the whole point is to be able to I would say, even out the gaps between supply and demand. And the better we are at supplying health-care services digitally, the better we are on kind of evening out these gaps between supply and demand, so there, the new app at the digital services will definitely help.

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Ilkka Laurila, Terveystalo Oyj - CFO [18]

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That will especially help the availability of the specialty-care doctors for smaller municipalities and the smaller cities.

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Alexander Matthew Gibson, Morgan Stanley, Research Division - Equity Analyst [19]

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Did you -- have you seen a lot of those specialty doctors not be available in the past then because I always got a sense that at the initial bookings the...

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Yrjö Närhinen, Terveystalo Oyj - CEO [20]

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I mean basically if you recall, the discussion about a year ago where basically we saw very high booking rates and we were kind of talking about how do we even out the kind of -- one of the limitations for growth is our ability to provide access or offering, basically. And that indeed where we are seeing now the benefit of being able to provide digital services is that, that indeed opens up availability for some specific specialties in areas that there was not a doctor available earlier. And then at the same time, the other thing that it does is that it evens out gaps on supply.

So basically, my judgment is that, with lower individual percentages, so if you would look at availability gaps of 1%, 2%, 3%, digital tools will definitely help there to even out these gaps. And that is essentially the magnitude we saw a year ago in terms of a shortfall of supply. So I would say that these tools will allow us to withstand even if somebody -- even if there would be capacity increase, we are now more and more capable of supplying the required amount of services. Despite this, there would be new supply. So I think that just goes to show that we have a lot of ways, continuous possibilities and driving efficiency on managing supply and demand, if you excuse the term.

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Alexander Matthew Gibson, Morgan Stanley, Research Division - Equity Analyst [21]

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Okay. Yes. And then on those IT investments as well, because you've updated consumer bookings app, are there -- is there any other technology investments that you need to make significantly that are going to be large CapEx projects? We know the IT investments, particularly on building out infrastructure, can escalate. Do you have to do anything either with your existing business or a tender to get everything up to a new level of technology capabilities?

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Yrjö Närhinen, Terveystalo Oyj - CEO [22]

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Yes, we continue -- I mean basically -- basically, the answer for that is we continue to do immaterial investments, which is IT investments increasingly, our systems are fully operational assets, but I think we increasingly see a demand and need to be able to provide a new type of digital services, be it booking, connect that to billing, use the data better. And so we continue to invest in IT definitely, and I think the trend you've seen is probably a good indication of where we will continue to be. So the balance between IT and physical investments will continue to be growing more towards digital investments definitely.

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Alexander Matthew Gibson, Morgan Stanley, Research Division - Equity Analyst [23]

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And CapEx as a percentage of sales, do you anticipate that moving up further compared to the last 12 months?

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Ilkka Laurila, Terveystalo Oyj - CFO [24]

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We haven't sort of provided certain numbers and estimates, but as mentioned, we are not -- the intangible investments will increase. I mean you can see the trend line for the network and the machinery or the medical equipment investment. So trend-wise, it will continue as it is at the moment. And -- but should be taken into account as you would due to percentage calculation, you obviously have to take into account for the last 12 numbers also the Attendo impact for the full year.

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Yrjö Närhinen, Terveystalo Oyj - CEO [25]

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So absolute investment will continue to be significant, and I would say we're glad to somewhat upping the investment driven by IT. But then if you look at relative to sales, I think it's more stable.

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Alexander Matthew Gibson, Morgan Stanley, Research Division - Equity Analyst [26]

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Okay, great. And one final one from me. On the new CEO search. Is there any update there? What is the expertise and background that you're looking for with the new candidate?

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Yrjö Närhinen, Terveystalo Oyj - CEO [27]

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Yes. Yes, sorry, I did not have that slide here. I mean it is just basically for personnel add that so for the spirit of transparency. I think one of the key thing for us in terms of operational structure is really where I think we are quite unique, and we continue to be unique is that we have a, I would say, healthy balance between medical expertise and commercial expertise. And so the profile for the CEO does not need medical expertise, which I think is very critical. So that then allows us to look at individuals who are able to run service businesses, understand us, the need for digital and basically has an experience of running a large organization. Now that process is actually proceeding very well. And I think we are -- we can expect to hear some updates on that rather sooner than later. And I think -- and with that, I'm quite pleased that it is just progressing quite nicely, and hopefully we'll be able to come with some news quite soon.

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Operator [28]

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(Operator Instructions) And there are no further questions on the telephone lines at this time. Please go ahead, speakers.

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Kati Kaksonen, Terveystalo Oyj - Director of IR & Financial Communications [29]

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We have 1 question from Sami Sarkamies, Nordea Markets, or actually 3 questions through the webcast. Here's -- exactly.

The first one is that you mentioned softer consumer confidence in your outlook comments. Is this based on your own observations? Or are you just referring to changes induced by external forecasts?

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Yrjö Närhinen, Terveystalo Oyj - CEO [30]

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External.

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Ilkka Laurila, Terveystalo Oyj - CFO [31]

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External.

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Kati Kaksonen, Terveystalo Oyj - Director of IR & Financial Communications [32]

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So a single word answer to that.

The second one is, can you elaborate on magnitude and growth rate of sales currently taking place through the digital channels or remote appointments?

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Yrjö Närhinen, Terveystalo Oyj - CEO [33]

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Yes, trying to. I would say that the close rates are astonishingly high, but the base is very low. So quite typical. I mean if you look at, for example, give you a particular number in July, I think we did 12,000 chats. Now 12,000 chats on the digital front sounds like a lot. And if you look at an index, that's enormous. We're doubling the business. But if you contrast that to the number of physical visits, it's still quite modest.

So right now, I would say that the numbers are encouraging. It clearly goes to show that there is demand. It clearly goes to show that it kind of supports the existing infrastructure, but the numbers in itself would suggest that you would not want to run digital-only business. Or it would be quite modest in our scale.

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Kati Kaksonen, Terveystalo Oyj - Director of IR & Financial Communications [34]

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Fair enough. Third one is, can you still open up reasons for particularly strong private growth in Q2 and elaborate growth or your views regarding the expected growth rate during the remainder of the year.

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Yrjö Närhinen, Terveystalo Oyj - CEO [35]

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Well, I mean I would just take one point, which I am particularly pleased about it. It comes back into Alex' earlier question on availability. This business is driven by the operational ability to create space, i.e., basically open doctor times. And it's a very complex question. It basically means how can we connect supply and demand at any given time and space? How can we allocate that demand to right professional? And how do we make sure that people don't do work that they're not basically asked or trained for?

And so there are many types of activities going on. One is the digital front. One is how can we direct more work towards nurses, physiotherapists so basically take the burden away from the doctors' decisions. And the third point is look at ways on how can we drive development like labs without referrals, things like this. And the combination of those basically means that we can offer a larger availability, which then I think manifests itself in growth rates. Whereas then is there an increased demand, per se, on an absolute market. I don't have the data to indicate that. So we can only see that through our own data, but I think the key driver for us is the excellent daily work on managing availability.

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Ilkka Laurila, Terveystalo Oyj - CFO [36]

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Yes. And to add on that so it's basically that is the availability and the improvement in there, but on top of that, I would also like to add that, in the smaller businesses, be it dental, be it well-being, be it digital offering, we also saw high-growth numbers here in the second quarter, although the nominal value, like said, is considerably smaller versus the whole private business, but it had a significant positive impact for the second quarter.

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Yrjö Närhinen, Terveystalo Oyj - CEO [37]

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And well-being starts to be significant.

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Ilkka Laurila, Terveystalo Oyj - CFO [38]

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Yes, as well as the dental (inaudible).

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

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Great. Do we have any questions from the room?

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Iiris Theman, Carnegie Investment Bank AB, Research Division - Financial Analyst [40]

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Yes, Iiris Theman from Carnegie. Regarding your public customers. I understand that 2 full outsourcing agreements are terminating at the end of this year and also some pilot contracts will end in the second half. Are you all able to offset the sales decline coming from these contracts?

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Yrjö Närhinen, Terveystalo Oyj - CEO [41]

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Well point number one, they were budgeted for, i.e., we knew at the time of the acquisition the lifespan of these contracts. That's point number one.

Point number two, there are always certain amount of contracts terminating. You never really know how that will continue. Our judgment is that some of them may terminate completely. So that means that the service will end. If you would look at -- and if you ask this from the citizens, they would definitely not want this to terminate, we're quite confident. But these are political decisions, and that's -- now then the third point is this business, as said, some parts will terminate. Some parts will grow. And I think the key point is, of course, to be very alert on the new things. So it could be that complete outsourcings, there's less of, but then there are other types of activity that will offset.

So our aim is on a kind of a more mid- to long-term range is to be able to provide that growth. We're not 100% sure what terminates, what not. But from a paper point of view, there are 2 large contracts terminating. If you look at the pipeline, potentially, it could be quite significant. But then, of course, none of these tendering processes have actually been announced. So we don't know. So that's the situation. And so there may be variation from it quarter-on-quarter.

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Ilkka Laurila, Terveystalo Oyj - CFO [42]

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Yes. And right on that those freedom-of-choice trials, which are mentioned that those are really sort of immaterial and insignificant in our numbers. Those complete outsourced, like Yrjö said, those are bigger outsourcings, but you should also take into account that those complete outsources quite typically include quite significant part of the pass-through invoicing, meaning that the top line impact is bigger than the impact on the EBITDA, especially the fees and typically as it converts to some other sort of shapes or format of the public business.

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Iiris Theman, Carnegie Investment Bank AB, Research Division - Financial Analyst [43]

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Okay. That's clear. And secondly, given that you have had changes in the Board in early this year and also Yrjö will be stepping down, so are you going to review your strategy? Or is that already ongoing?

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Yrjö Närhinen, Terveystalo Oyj - CEO [44]

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Well, that's of course for the Board to look at. But it is fair to say that, very often when it comes to CEO change, I think they need to go inside. And of course, if you would look at from trying to answer it from my personal point of view, it is quite natural that should I have engaged in strategic work, that means that I would have been around for quite some time. So, so far, we have a solid strategy. We can continue with this strategy. We've had a Board discussion on the Spring. But I would say it's fair to expect that there is a new CEO, will look at and develop the strategy somewhere.

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Kati Kaksonen, Terveystalo Oyj - Director of IR & Financial Communications [45]

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Iiris, any other questions from the room? I assume not. So thank you.

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Ilkka Laurila, Terveystalo Oyj - CFO [46]

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Thank you.

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Yrjö Närhinen, Terveystalo Oyj - CEO [47]

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Thank you.