Terveystalo Oy Ord

Good morning everybody and welcome to Terveystalo's Q4 and full year 2024 results webcast and call. My name is Kati Kaksonen. I'm responsible for investor relations and sustainability here at Terveystalo. As usual, our CEO Ville Iho and CFO Juuso Pajonen will go through the presentation of the results and we'll follow that with the Q&A. You have the opportunity to send in your questions via the webcast or then through phone lines, and we'll take the questions after the presentation. Without further ado, over to you, Ville.

Thank you, Kati. So let's recap shortly Q4 and then discuss the whole journey during 2024 and then take a look forward into Tervestalo's agenda and future journey. Q4, very shortly, numbers. This is the seventh consecutive quarter of clear improvement. This is sort of the final testament of our turnaround and improvement journey. A rock-solid quarter once again. Each and every number that we can see, regardless of it being financial or quality, is all-time high. So we have put ourselves in a very, very strong position for the next chapter of the Tervestalo journey. Clear improvement again in profitability, growth driven by health care services, individual customer satisfaction measured in NPS all time high, and especially a strong operating cash flow during a Q4 as per Tervestalo standard. Taking a step back a little bit and looking at the journey during the last three years. In 2022, of course, the situation was quite a bit more difficult. A lot of negative trends. We then took action. started the journey of improvement, been very, very consistent in improving the operations ever since, and have done that one against fairly tough macro conditions. That needs to be in mind. Against the tough macro conditions we have taken Tervestalo on to a new performance level and starting point for next chapter is stronger than ever. Not only financial numbers have been improving, also the satisfaction of our customers has steadily improved. We started the journey maybe five years ago on a roughly 70 NPS level. Now we are at 88 in appointments in hospitals. We are roughly at 95. So altogether it's an excellent, excellent level. We have done some tough things during our improvement journey, which has taken a toll on the Tervestalo team, but very happy to say that the engagement of our professionals, our employees, the full team, measured in engagement index is all-time high, clearly all-time high, 4.2. also the medical quality measured in a patient enablement index all-time high level 69 so this is a solid a full package of improvement we have delivered results at the same time lived according to our values and improved the value of our services to our customers and also the medical quality The journey in quarters, this has been shown since we started the journey. It's very consistent. One important thing or even more important thing than the improvement is that we are low risk company with the higher performance as we speak. So improvement all time or performance all time high in our finances at the same time. lower risk level due to more evenly mixed margin distribution in operations, especially in healthcare services, lower exposure to legacy contracts which are exposed to inflation and lower leverage ratio. So higher performance, lower risk and again very strong position to take the next step in InterVestalo journey. Looking a little bit into our different three businesses, of course, in their journeys, they are in different phases. Healthcare services has been driving the improvement since 22, be it growth or profitability. It's in more mature state and now ready for investments in the technology and continuous improvement. We are seeing a lot of opportunities for further improvement in healthcare services and targeting at higher level of performance and profitability going forward, which is also visible in our guidance. Portfolio businesses have started the improvement journey operationally against very, very tough market environment. In consumer businesses and also in public businesses, it has been able to improve, but market has been tough. The agenda is there, the improvement journey has started, we can see the results and the journey will continue so that we'll reach 10% of EBITDA level. Sweden is the final one of these three started the improvement journey latest. We are on track with the programme. Macro in Sweden is slightly tougher than we thought it would be, so recovery in the Swedish economy has taken a slight delay. But the most important thing is that the team has been able to deliver according to our plan, according to our programme, and even against tough conditions, they are showing month-to-month improvement. We'll turn around the business during this year. With our agenda, with our track record, with our view into the markets and into the future, We disclosed late last year our revised financial targets, demonstrating and showcasing more mature company, lower risk with the high performance. Our aim is to continue profitable growth with 10% on average annual EPS growth with more moderate leverage ratio than we have seen before. and with attractive dividends. And the first time showcasing our new dividend policy, the dividend proposal is 48 cents per share, representing 85% of net results from last year. Now, as I said, We have rock solid foundation. We have taken the company into new level of performance and journey continues. We have already accelerated our investments. A lot of the improvements that we are now seeking for and also forecasting are down to technology. We have very robust architecture in place. We have clear projects already ongoing, which will improve our efficiency, in our medical delivery and also in our support functions going forward. Projects are already ongoing, ship is sailing, and we'll see the yield from these initiatives going forward. And this is also reflected again, as I said, in our guidance for this year. We are in a place where we can invest, we are ready for it. We have the cash flow to invest, but also the platform is mature enough to yield the results. Our focus areas going forward throughout the company are in these five buckets. Engaged team, of course, very important going forward. Our supply is great. We have been able to improve that one. Throughout the journey, the engagement of the team is all-time high, but we need to invest even more into this area going forward. We'll invest more than we did during the program into our product services and customer value, especially in B2B and B2B. As you saw, individual customers are ever so happy in our services. There will be incremental improvements in that front as well, but special focus will be put in occupational healthcare, insurance customers and healthcare counties, so that the smoothness of our services, ease of dealing with us and value that we can demonstrate in our services will improve drastically over the next years. Organic growth is a key driver for future performance improvement. We have a focused agenda. We are targeting at certain specialties, at certain services, where we feel that the market is growing faster, or that we feel Tervestalo's position in market share is not at the level where our brand and strength would allow us to be. So very focused agenda there, and we'll drive organic growth. And with our improved operating leverage, of course, that's going to be a source of improved financial performance. Efficiency, even though the profitability improvement program has ended, efficiency will be a key, not only for TerraVersa, but for healthcare in general. Closing the gap will only happen through technology, improved processes, better leadership. We have In this field, we have dedicated focused projects ongoing already, transforming the way we deliver our services in physical and digital. We have projects enabling us to make support functions more efficient and our resourcing more lean and mean. We have a dry powder in the context of our cash flow and revised financial targets to do acquisitions. We will do those in a focused and disciplined manner, but it's in our agenda also in coming years. So with this agenda and with the track record, with the position that we are in, we are fully committed to continue the improvement journey. And as I said, that's visible also in our guidance for this year. With that one, over to you.

Good. Thank you, Ville. Good morning all. My name is Juuso Pörnen, I'm the CFO of Terve Stalo and really happy here and proud to present the numbers we have delivered in 2024. I will concentrate more on the full year, so I will talk a bit about the quarter and then come back to the guidance. So basically revenue growth, it was driven by strong supply, we have an improved sales mix and successful commercial actions and supported by the strong flu season. Then it's also good to say that the strong flu season slightly stabilized at the end of the quarter. We have seen that the upper respiratory diseases have been lower in December than they were in October and November level compared to previous year levels. The healthcare services were growing by 10%, which is a healthy good number in a muted volume environment. It's especially coming from all of the customer segments where we have been seeing positive development. We have the corporate customers growing by 12%. consumers by 10% and even public sector in a slightly positive level and this combined with a positive sales mix we have been able to increase the revenues by the set 10%. Then if we look portfolio businesses we have a bit of a mixed view if we see the total revenue development. On the other hand we have reduction of revenue by our own choice. We have the outsourcing contracts, the legacy contracts are declining. As we have been communicating earlier, within the pace we have been communicating earlier, and in staffing, like we have throughout the 24-year-old, we have done some client and service selection, where we have been concentrating on more value adding contracts. So part of this reduction of revenue is by choice. But at the same time, if we look first into the public sector market, it has been fairly soft in Q4. So many of our services, the demand has been not as robust as it has been earlier and the well-being counties have been now setting up their operations and we are seeing that little by little the market is coming back and the start of January is already fairly good. But looking to the macro environment and the market environment, public sector market has been soft. Then if we look at the private market, we have compared to the previous year figures, we are still reducing in dental and in massage, but we also have seen that the decline has stabilized and turned now into a slightly more positive angle. So we see that the volumes are coming back along with the consumer purchase powers that have been improving. Sweden, from revenue perspective, it is the story continued. The ended customer contracts and demand environment has been weak still in Q4. But at the same time, we have been able to make sure that our machine is little by little improving. So on the total revenue growth and revenue mix, we have a positive underlying demand, especially in healthcare services. We have an improving demand on the private services, what comes to portfolio businesses. We have a public sector market that is now also improving, but that was soft in Q4. And Sweden, we are now moving forward and progressing well with our a profit improvement program. Then if we look on the profitability, strong performance from healthcare services, we have the continued operational efficiency, you know the story about the profit improvement program. We are now running that really efficient machine and when we have a good demand environment, yet not growing in volume, but a good demand environment, we are reaping the benefits on that one. And when we have a solid sales mix throughout appointments, diagnostics and other services, it generates revenue. Then it's good to remember that in these numbers, we have the one-time expenses related to personnel. So we have paid an extra bonus to all of our employees, and then we have the collateral labor agreement, additional pay 500 euros per employee who are within that CLA. That is now burdening the Q4 results. That is a good segue to the portfolio businesses. So they paid those bonuses and those extra pay to CLA employees. If you clean out from the performance these numbers, the underlying operational performance is improving. It's not reaching our ambition at the moment, and we have the actions ongoing to make it better. So operationally improving, full year improving, but also we think that we can do better and we can do more. So that is a topic that we are addressing at the moment. And then we have Sweden, where we now see that the profit improvement program is proceeding according to plan. And at the same time, we see that despite weaker compared to previous year Q4 results, they are weaker. We see month-on-month improvement from Q3 and within Q4 that we are planning to continue in 2025. So all in all, a strong profit growth as a group, solid margins, remembering that we have taken also these one-time personal expenses, we delivered operationally really strong quarter for Q4. Then a bit further to highlight what I said earlier, if you look to healthcare services, we do see that all customer segments are growing, are delivering healthy growth, healthy margins. And then we have in the portfolio businesses, we do see that especially the public sector driven services have been declining. And as I said, the market has been somewhat soft in Q4. Sweden, story continued. but at the same time we are in a EBITDA making position or adjusted EBITDA making position in the quarter. So little by little stepping forward what comes to all segments and especially strong performance from healthcare services. If we take a quick view on the full year, this story continued from fourth quarter. We have increased our revenues. We have a 10% revenue growth in healthcare services, and we delivered 1 billion 340 million euros of revenues for full year. Adjusted EBITDA at 171. a million euros, 12.8% of the revenues, the biggest contribution coming from healthcare services, but it is good to note that also portfolios are improving, and Sweden, we have a clear track going forward on that one. If we think about then looking forward, our investments, they are now at 40 million euros or 3% of the revenues, like stated in the Capital Markets Day. This is something that we are accelerating. We will invest into the organic growth also, like Ville explained. We have plenty of positive investment initiatives and our balance sheet is in a really good shape to do so. So when going forward, it is clear that the organic growth and accelerating that one is a high priority in our agenda. What comes to M&A, disciplined M&A, something that adds our customer value that we can basically bring in to positively improve our position is very interesting to us. Then it is clear that healthcare services is something that we are always keen to work on. Then in portfolios, especially dental, we have been highlighting as a growth opportunity. Sweden will fix their base first before we will discuss about MFA for Swedish offering. Then talking about leverage and cash flow, we had a strong cash quarter in Q4, but then those ones who were listening the same presentation after Q3 may remember that in Q3 we had weaker network in capital development that we have caught up now in Q4. So this is normal timing difference. within the cash generation. Then if you look for the full year cash, it is really strong. But at the same time, if we look year backwards, we had in Q423 a weaker net working capital development that we were able then to catch up in Q1. So this is again a normal timing difference, but now at the end of Q4, we are benefiting a bit on that timing difference that was a bit more difficult in Q4-23 and Q3-24. So all in all, normal, we are a cash machine that ticks very reliably operational cash flow. And that one then is visible when we look at the net debt to adjusted EBITDA at 2.1 leverage ratio. That is a solid amount and highlights that we have plenty of powder if and when we choose to invest. So basically, If we take a look back to the full year, we think about what we have done. We have de-risked our offering. We have now all of our services are delivering healthy margins. Both appointments, diagnostics and so on, but also all of the channels are doing that one. We have a solid cash delivery that keeps our balance sheet in order. we have a foundation that is stronger than ever before. So we are building on that one when we go forward. So when we talk about year 25 and we talk about our guidance, we have updated our guidance structure. So in the future, we will guide on expectations on revenue. That has not changed. guided that one already earlier. But now we are turning our eyes to adjusted EBIT margin. Previously it was adjusted EBIT A margin. So now we are taking it one line below or one line lower in the income statement, just to highlight that all investments count. We are in for earnings per share growth at least 10% annually. And within that one then, whatever we invest, whether it's organic, whether it's inorganic, it counts and it needs to reap adjusted EBIT margins. So with that logic, our guidance for full year 2025 is we are expecting revenues to grow and we are expecting our adjusted EBIT to be in the range of 10.7% to 11.8% of revenues. And now just setting your eyes on the new structure, it was 10.5%. in 2024. So we are guiding that we will, under the scenarios we foresee, we are improving and we have still hefty room to improve further. So we are clearly continuing on the operational improvement part that we have continuously been talking about. These estimates always come with a disclaimer, explanations. So we have, this is based on the stable demand environment, employment levels and typical morbidity rates. So normal, world continues forward. in a normal manner. We have disclosed the legacy contracts maturity curve that has not changed and we are expecting roughly 25 million euro revenue reduction within the portfolio business segments outsourcing operations due to those legacy contracts. And then basically we are expecting that all business segments will improve their operations and profitability during the year. These don't, as usual, take into account any kind of significant acquisitions or divestments, so also a normal exclusion on that one. So with that said, as a summary, we had operationally strong fourth quarter, We have been able to improve our operations, especially in healthcare services, but also other segments are in a positive track going forward. We expect them to improve profitability. We have a healthy cash delivery, strong balance sheet enabling us to invest into the future and into the organic growth. So we have very good foundation when we start 2025. With these words, let's invite Kati and Ville back on stage and start the Q&A.