AddLife AB (publ)

Good morning, everyone, and warm welcome to the AdLife fourth quarter presentation. We're very happy to present the fourth quarter to you today, and then after that, we will open up for questions and answers. And after that, there's also going to be an opportunity to review a very nice video describing our biomedical and research business unit, as well as one of our very exciting Italian companies, Euroclon. Thank you. So let's move on to the numbers. I'm very happy to present today a very healthy fourth quarter for AdLife. We had a strong growth and a significant improvement in cash flow. Customer demand remains very healthy across the board, and we saw a growth of 9% in the quarter. And with that, we conclude the 2023 with 10% organic growth, which is a quite strong number for us. In the Labtech business area, we saw a growth of 13%, so quite strong, and 6% in Medtech. EBITDA grew by 7%, keeping margins relatively stable. However, in Labtech, we had a very strong margin at 14.5%, and in Medtech, in around 9%. Here in Medtech, though, we saw some negative impacts from admission and home care. And after a number of months of significant work and analysis to assess this situation, we have taken a number of efforts in the past few months That will significantly improve the profitability in these businesses, and we will start to see effects of that already early 2024. Last, but certainly not least, we're very pleased to announce a very strong cash flow in the quarter. $450 million in cash flow compared to $350 in the corresponding quarter of last year. We also saw a significant improvement compared to the previous quarter, and we were very pleased to see the release in inventory. So with that, we were able to reduce the debt with around $400 million in the quarter as well. So now moving towards the net sales development and EBITDA development. Of course, the COVID revenue is now gone. But as we've seen now in many quarters, our organic growth is able to well compensate for that. And in this quarter as well, we had a little bit of a help from the currencies. Looking at the EBITDA development, we can see that both Labtech and Medtech are contributing nicely and in a balanced way. We have a number of one-off items, but this will be presented by Christina when she does the financial presentation. So, Christina.

So, yes. Thank you, Fredrik. So, let's start with the write-down and one-offs that has impacted the fourth quarter with a total of 134 million. They are all actions related to admission and Camagno, and Fredrik will speak more about this later. We had a recurring cost or the restructuring cost in admission of $8 million. Then we have a write-down of fixed assets within Camagno of $19 million. And we had the write-downs of intangible assets within both Camagno Health and Camagno Care, summarizing to $106 million. The annual savings from those actions will be a total of 80 million. In admission, there will be savings of 20 million starting in January going forward. In Kamanu Health, 10 million also starting in January going forward. For Kamanu Care, there will be a saving of 50 million. This will be gradually realized until the third quarter of this year. So the total annual positive cash flow impact from those activities is a total of 110 million. This will also be gradually realized during the year. In the interim report, there is a table that explains and shows the allocations in the income statements for the ones that want to know more. The write-down in Camano also had a tax impact, since losses are not carried forward. If those would have been excluded, that is the write-downs, we would have had a tax rate of approximately 34%, which we talked about in the third quarter. In the quarter, we have also made a reversal of the continued consideration related to Health Care 21. They had an ambitious goal and the performance came in just below that ambition goal, meaning that there will not be a payout for this contingent consideration. Moving into the profit and loss, strong sales growth again, 9%. Also, the organic growth excluding currency impact and COVID was 9%. There is a slightly lower gross margin, mainly related to high instrument sales. Also, the increased operating expenses mainly relates to increased commercial activities and strengthening of the sales organization within areas where we see future growth. There is also a component on the currency in the operating expenses. 30% of the increase relates to this. Other income and expenses, there we have the reversal of the continued consideration. Interest costs increased in the quarter, but we had positive exchange rate gains, meaning that the net was plus 15%. If we then take out the write-down and the one-offs of 134, we end up with the profit before tax of 2 million Swedish kronor. Operating cash flow in the beginning of the year was weak due to the fact that we did use cash flow for investing in current as well as future growth. But we did end 2023 in a strong way. This is both relating to seasonality, as you can see, the fourth quarter is normally the strongest one, but also to release of working capital. Now we have left COVID behind us. We have an increased MedTech business, meaning more orthopedics, more consignment stock, demand for fast deliveries, etc. With a strong ending of the year, I would say that we are back on track on the cash conversion with 76% ending the year. Operating cash flow was strong, 448 million in the quarter. There has been a huge focus on working capital during the last half year, and our companies have done an amazing job with the working capital release of 264 million. We have seen inventories decline, accounts payables increase, and with no surprise, accounts receivables have also increased due to continued strong growth. Working capital will continue to be a focus entering into 2024. The net debt was reduced with approximately 400 million and leverage decreased to 3.5. The aim is still to continue to reduce debt via self-generated cash flow. And if we look at our loans, the majority of them are in euros, meaning that we did have a positive FX impact in the quarter, but we also repaid loan of 276 million euros. And looking at the structure of our loans, which are traditional bank loans, approximately half is short-term, half is long-term. The short-term loans are due in Q1 2025 and the long-term is due in Q3 2027. We have variable interest following durable, meaning that the interest rate increased in the fourth quarter since we had one quarter delay. So now we are hoping that this was the last increase. And the average interest rate for the quarter was 5.9%. We have two covenants. One is interest coverage ratio, and the other is equity ratio. We have good headroom in both of them. And with that, I will hand over to Fredrik again.

Well, thank you, Christina, for that thorough review of the financials. And now we move on to market trends and implications for ad life. Clearly, we are in a post-pandemic environment, and the healthcare systems are addressing the significant need for surgical procedures. So with that, we see elective surgery procedures increasing. That has been the fact for us in 2023, and we expect that trend to continue. So for AdLife, that means an additional boost in demand for all of the businesses that we have that are engaged in surgery. There is a staffing shortage in the healthcare system and some healthcare capacity constraints. With that, we see an increased demand for time and resource-saving products and services, and this is something that the AdLife companies are really, really good at, so an opportunity for sure for us as a company. The healthcare systems are back to more normal budgets, so we see some hesitancy in investments in larger capital-intensive projects, That, for AdLife, is not a big piece of our revenues, so it's not a huge impact for us. However, we are quite strong in value and productivity selling, and we see the greater interest from customers in that area, and that is something that we are quite good at within our different companies. And finally, and quite interestingly, this trend that we have seen now for a couple of quarters with larger global manufacturing really reassessing their go-to-market strategy, that trend continues. It means that some of the companies are reducing their product portfolios. They are going back to a distribution model. And this is, of course, for ad life and opportunity both to take market share and add new products. So many of these trends are really a positive for us as a company. So Labtech had a very strong fourth quarter with a currency adjusted growth rate of 13%. The EBITDA was strong at 14.5%. The diagnostics business was quite stable as is the nature of that business unit and the margins were quite good. Biomedical and Research had a very strong quarter, we're happy to see, with both strong growth and margins. And after the Q&A session, you'll have an opportunity to get to know that business unit a little bit better and also one of our key companies in that group. In general, we see a high customer activity in all the businesses and all companies within the lab tech business area. And in particular, the activity was high in the pharma industry. And that's a very important customer group for us, so we're very pleased to see that positive development. In addition to that, we did talk in the third quarter about expectation of invoicing in Eastern Europe, and I'm very pleased to see that that indeed materialized. So that triggered extra revenue, profitability, and also inventory reduction. So all in all, a quite strong quarter for Labtech. Moving on to MedTech, we have also a solid quarter. Organic currency adjusted growth at 6%. The elevated elective surgery activity that we have seen continues. It varies a little bit country by country, but all in all and on a European scale, we do expect this positive trend to continue as well in the coming quarters. The hospital companies in general are performing quite well, so that's very great to see. In admission and home care though, there are some challenges and we can see that those challenges are indeed reducing the overall EBITDA margin for that business area. But I am pleased to note that we have been reviewing that situation for quite some time now and taking some firm actions that will indeed improve the profitability, both in admission and home care, and we will start to see those effects quite soon during 2024. So taking a look at the priorities for 2024, they do remain the same. Our first priority is to protect and improve profit, and that's why we will focus a little bit soon here now on the measures we are taking within admission and in home care. Organic growth and cash flow are two very important factors for us, and you can see in our numbers as we present them today a very strong improvement in both of those areas. And, of course, that opens up for us in the mid- to long-term to, again, increase the activity in terms of acquisitions. So as I mentioned, improving the profitability is of high priority, and as many of you know, we have had some challenges within the Advision group over 2023. However, we think that the foundation of that business is indeed strong, and our goal here is to position Advision for success in a market that is indeed undergoing a lot of changes in terms of reimbursement, competitive landscape, and customer structure. So the improvements that are required can really be divided in three areas. We need to do a cost reduction effort. We need to become more agile and efficient as an organization. And we need to improve the commercial offering as well as the working methods. So we have taken a number of actions to improve things in AdVision. And the first one is restructuring. So we're restructuring the admission group, removing the headquarters function, and that will, of course, reduce cost, but more importantly, improve the efficiency of the decision-making and make it more decentralized and more able to respond to local customer needs. Then in the local businesses, the subsidiaries by country, we have also reviewed the organizational working methods, and we have made organizational changes in Germany, in UK, and in Switzerland. This will lead to greater efficiency and more customer focus, but also cost reductions. On the commercial side, we have worked a lot on improving the portfolio, replacing some products that we have taken out of the portfolio with new ones. We have clarified the priority in terms of profit and revenue potential, and we have improved the working methods in the whole commercial team. We have strengthened the sales team significantly in many of our markets, and we have put a lot of effort in training of the sales teams to improve efficiency and customer focus. And then finally, we have also invested in increased manufacturing. We have had a situation where we have had capacity constraints and not being able to respond to customer demand. Now we have invested in new manufacturing capacity, and now we are ready to meet that growing demand. So all in all, these efforts are expected to result in a cost reduction of around 20 million coming to effect in early 2024. But most importantly, bringing a more decentralized and agile business model back to Advision. And with that, we expect to see additional and gradual performance improvement throughout 2024. As I mentioned earlier, we have had some challenges with the profitability in home care, and this challenge is centered around digital development projects that we have in that business. We have taken a thorough review of that product portfolio, the digital development product portfolio, during 2023, and we have taken a few decisions in that area. So Camonio Health, which is the remote patient monitoring development project, has been discontinued in the fourth quarter of 2023. Camonio Care, the safety alarm development project, in this area we have initiated trade union negotiation regarding a planned closure of that development project as well as the whole subsidiary Camonio. This will lead to a cost reduction of around 60 million and a positive cash flow impact of around 90 million. This was not an easy decision to make. We feel strongly for the employees as well as the users and the customers. But we will make sure that the customers and users will be provided with support and functionality during this discontinuation period. And we will also make sure that they are offered attractive alternative solutions. The home care companies will continue to offer digital products and services, but no longer internally developed. As we wrap up this presentation, I want to start by thanking everyone within the AdLife Group for an amazingly strong contribution and dedication during 2023. I'm very pleased that we were able to wrap up 2023 in such a strong way with a very solid fourth quarter. If we take a look at the market, we see that the customer demand is solid and expected to continue that way, and our companies are very well positioned to benefit from that customer demand. The companies are doing a fantastic job developing the products and the service portfolio always with the customer in focus. We have taken significant actions during the quarter that will improve profitability going forward. And I'm very pleased to see that we have a strong cash flow generation in quarter three, but even more so in quarter four. And that has been the result of a lot of efforts across all the companies. This increased cash flow, of course, gives us a lot of confidence in our ambition to reduce debt through our own generated cash flow. And doing that, we will gradually be able to increase our pace of acquisition again. So this past few weeks, I've been fortunate enough to go visit many of our companies and attend many of the sales meetings that we have in the beginning of each year. And the impression from all those meetings has been amazingly positive. We have a very, very strong team in all parts of the organization. The commitment is very, very strong and the passion about what we do. Everyone in this company is very much focused on the patient and improving people's lives. So with that, I'm very confident in saying that we have a very positive team Perspective on 2024, we expect to see continued growth, continuous focus on improvements in profitability and cash flow, and we see a lot of new and exciting growth initiatives. So with that, we start by opening up for the questions and answers sessions. And for those of you who have time, do take a few minutes to listen to a very nice video of the Biomedical and Research Business Unit and the exciting activities we have there. Thank you. All right. Hello, everyone. So now we're ready to open up for any questions that you may have. I hope that you found the presentation informative, but apologies for the little bit of a glitch in the beginning there. So let's go. I think we saw some questions coming up. Did I see Carl? Did you have a question?

Yes, good morning. Good morning, good morning, good morning. I have quite a few questions, but maybe we should start from the MedTech margin. I mean, yeah, it looks weak, of course, and I guess it's the worst, I think, margin for MedTech in a Q4 ever. And Q3 was relatively okay, I guess. So can you just elaborate a bit on what has happened in AdVision? Because I guess that's most parts of the delta sequentially. What has happened in AdVision? And can you say anything what the margin actually is in AdVision right now?

Yeah, you're right. I mean, AdVision did pull down the overall margin in MedTech in a not insignificant way. I think it's important to keep in mind that Q4 of last year was an okay-ish margin, if you will, in AdVision. We had a little bit of an improvement there from the previous quarter, but this... Q4 now, 2023, really was not good. Unfortunately, we dropped down into negative numbers for admissions, so that was painful, but on the other hand, we are pleased that we have been, for a number of months now, implementing a number of changes in that business area and in that company that we're confident will turn the trend. But yes, that's a big drag in the margin for for Medtech this quarter, clearly. But I think it's also important to note that in general, the Medtech Q4 is a bit weak due to seasonal effects. We have always a little bit of a slowdown in surgical procedures during the Christmas and New Year's holidays. And for our largest company, Healthcare 21, that's normally a fairly weak quarter as well because of the fiscal year of NHS in the UK. So, Yes, it's a weak quarter, but I think we understand pretty well what it is, and we're taking strong actions to improve it. And I think those improvements will start to show relatively soon, because they're pretty firm and quite clear.

That's clear. And around that, you've mentioned 20 million in savings in a vision, but I mean, if we say that a vision is a 700 million sales business, 20 million, and if you're in negative territory, I guess it's really not a lot, so... I mean, is it sales growth that is needed to come back to better margins, or is there more to do in terms of cost savings, so to say?

You're right. I mean, 20 million, that counts, but it's not enormous. But I think the point is not to really take out tons of cost. The main thing is really to improve how that company operates and get the commercial piece of the business back in a more healthy state. And I think... Many of the parts of the companies are quite healthy. I mean, we have subsidiaries within that group that are doing very well. So this is a bit of a turnaround from a commercial standpoint, more product portfolio and efficiency of the sales. So picking up the pace in sales, but also, very importantly, fixing the product portfolio, moving it towards more high-margin products.

Yeah. And just one quick one on healthcare 21. You mentioned a reversal of earn out there. Should we be worried regarding that company's performance? Not at all, not at all.

Yeah, they're doing really well. But we do set the targets pretty high in those types of deals, yeah.

Okay. And then just one on the lab tech. I mean, the margins look very strong during Q4. And it was 12.5%, I think, adjusted for the full year, which is higher than your 10% to 12% guidance, so to say. Is there any reason why we should not believe 2023's levels as sustainable also going forward?

I think Q4 tends to be quite strong in that business. So that's one factor. So 14.5 is a very strong margin. I think we've talked about that business stabilizing post-COVID in that range that you just described, 10 to 12. But I think we're always striving to improve, always. And we've been consistently, I would say, in the very... high end of that range during 2023. So I don't want to start extrapolating trends here, but I think Q4 are normally quite strong and the business is very healthy.

There was nothing dramatic that impacted Q4 other than maybe the deliveries to Eastern Europe.

Yeah, we had some clear strength there. And biomedical research had a fantastic impact. quarter as well. And yeah, for those who have time, take five minutes to listen to that video afterwards. So I guess, yeah. So should we open up for a few others as well? And then you can come back to you, Carl. A lot of good questions. Thank you so much. So I think, Mattias, you raised your hand, right? Yeah. Yeah. Good morning.

Good morning. Good morning. Two questions, please, then. As you enter 24 now, the comparables for MedTech will become more challenging starting in Q1, given the strength you've shown in 23. You know, the 6% growth, organic growth you saw here in Q4, is that a good proxy for how we should frame our expectations for MedTech? Or is there anything else to add from waiting lines, staffing shortages, et cetera, in terms of trends that you see that could either help or not? you know, challenge that number I just threw out.

Yeah, I think you have a good point there. I mean, we have had throughout 2023 that tailwind from surgical procedures. And now we start to see that in the comps as well. So that is a good point. We do think that tailwind is will remain. I think the surgical procedures will still be elevated. I think some countries have done well in addressing the waiting lists, like Spain seemed to be one of those, for example. As you probably know, the waiting lists have increased over the entire 2023 in places like the UK, even though in November we start maybe to see a bit of a shift in trend. So that could be a positive for us as well if there is a more concerted effort to really reduce that waiting list, to stop the growth and start to address it. That could be beneficial for us since that's a big market. So I think it will continue. We don't want to give a guidance for growth projection or growth guidance. But I think the main trends remain, but the comps will be slightly more challenging.

And then secondly, on lab tech, surprisingly strong organic growth of 13% in the quarter. Just want to make sure there were no large one-off orders that helped the growth you called out.

eastern europe and biomedical research but nothing that you would classify as you know one of rather strength driven by those elements yeah eastern europe was good i mean we we we were expecting and you know and had been promised that there will be a lot of invoicing in q4 and indeed that happened so that was that was great you know so that team is doing very well and delivering on their promises. So that's great. Biomedical research, very strong. I think that's, it's not like a one-off thing there. It's more reflecting the strength in demand in general in that business. So nothing big in terms of one-offs.

Is there something you'd like to add? No, it's only the Eastern Europe that was slightly slower in Q3 than butter ketchup in Q4. So of course that was...

And then just a final follow up on Medtech and the margin trajectory. You called out some cost savings for both admission and home care for a total of 80 million krona. So isolated those translates into roughly 140 base points improvement on an annual basis for Medtech, but they don't come into effect immediately. Maybe help us think about the margin uplift for MedTech Division. Is it more going to be tilted towards 2025, or help us think about the facing of the margin improvement you see in front of yourself?

Do you want to comment on that, Christina?

I think, like Freddie said, the Camano thing will take a while, so we won't see an impact of that until the latter part of the year. It will happen gradually, of course, but not in the first quarter. Then it starts Q2 Q3 and then in Q4 it will have full impact. So yes, you're correct in the fact that it won't be until actually the latter part of the year that we see the full impact.

Okay, thanks so much.

Good. So have we got any other questions?

Yes, it's Gustav here from Nordic.

Sorry.

Yeah, okay. Thank you. I was just on the MedTech margin. I mean, as you say, significant impact from home care and admission. But are these basically the only things or are there a mixed effect if we were to compare to Q3 this year? Because Q3 was really strong.

Yeah.

yeah I think I'm not sure if I you know to make sure I understand your question correctly I think it's important here to note that yes we did have an impact of the admission and it did decline you know compared to but also compared to Q3, unfortunately. So there has been a decline, and it's not insignificant. Then home care was unusually weak, to be frank, as well. Part of it is, of course, related to Camonio and all that, but there was a little bit of a... Weakness in demand as well, primarily related to remodeling and new construction projects in assisted living. So that, we think, is a short-term effect. The healthy demand prospects are clearly there for the mid to long term, but we did see a bit of a weakness also in home care. So there are a few factors here that... That impacted margin in MedTech for sure. For sure. But all of them, I would say, are being addressed.

Yeah, okay. I was more looking for, I mean, the margin of almost 10% in Q3. If we exclude admission and home care and all of that, is there a big mix effect also, or a worsening mix effect in Q4 here?

Q4 is normally a slower quarter. considering that it is Christmas, New Year, et cetera, and the hospital is pretty much closed down, actually. And I also think that we said in Q3 that the margin was maybe unusually strong since we had vacations in that period. But I think Q4 is normally a slower one for MedTech, actually.

Yeah, it is, for many reasons.

For many reasons, yeah.

Okay, perfect. And then maybe on the reversal of continued consideration to H.C. Chuet here. I mean, was this based on a margin threshold or what was this based on? And then also if you can specify anything in regards to that.

It was based on EBDA that should be reached. And like we said, it's quite ambitious, the goals that were set, and they are not far away from that one, so... But normally, the structures are normal when you put the consider consideration. Often, the goals are set quite high. And I would say that they were quite close, so no worries. No worries.

That business is performing really well. I think if we would have seen that it would be hard to meet it, we could have made an adjustment earlier, right? But they were really close, so we couldn't tell until we were... We really had wrapped up the full year. So that business is doing very well.

So we're very comfortable with that. Okay, good. And then just the last one here on UK, maybe. I mean, I think the numbers we're seeing there from the backlogs and NHS is... Turning more positive, actually, but I mean, of course, you have the strikes and so on. Can you give anything in regards to what you're seeing right now and maybe in the start of Q1, given sort of that Healthcare 21 does have its strong quarter in Q1 here?

That's right. I mean, so it was great to see that turn of the trend, actually, in terms of patient waiting lists. It's been increasing as well now up until November of 2023. So there was a change in the trend. Of course, if you read the articles around that, to really make a dent in that massive patient waiting list, there has to be a significantly increased surgical activity for many quarters, maybe even years, to get to that. So I think that would be a a solid tailwind for us, and I think it seems to be accelerating. We do see, and we hear from our teams, I've had the opportunity to chat with many of our team members over the past few weeks, and we see that there is indeed an increased activity. We also see that the healthcare system are taking new approaches to more efficiently reduce the numbers. So there is a bit of a trend shift there. Okay, perfect. Thank you. All right. Thank you so much. Let's see who else has a question. Charles Weston.

That's great. Thank you, Charles Weston from RBC. Three questions, please, if I can, on MedTech. The first one is on the rationale for the MedTech companies. that strategic shift that you talked about more towards the use of distributors. Could you give us a bit more colour on that with regard to perhaps, you know, the product categories, the complexity of those products, you know, whether they're more commodity or high complex products and perhaps what, you know, any other sort of trends you can pull out there?

Well, I think there seems to be a review ongoing with many of the larger global manufacturers to take a look at product portfolios, where to focus, where they perceive they have an edge and where they think they're not. maybe not efficient as they need to be. So that's happening. So that means for us that maybe some competitive products will disappear, so we can take market share that way. Or if we find attractive and we have good discussions along those lines with many global suppliers, that we can also take over some of those product lines. Of course, we are pretty... particular about in terms of the profitability we can generate from those products. So that's one thing. And I think in addition to that, many companies are seeing that it's very complex and costly to set up an own direct sales force for the vast and fairly complex European markets. So if you have a partner with a strong foundation in place in a particular country and very importantly, service and support resource. That can be extremely valuable. And I think for someone like us who has a pretty broad product portfolio and the ability to continuously evolve it and with that we can defend having a very strong commercial and service field team. That is becoming even more attractive of an asset. So there are a lot of dynamics going on here. I think it gives us an opportunity to take on some really high-tech products that do require a lot of service and support, but also more volume products if we decide that that makes sense for us. Did that answer your question? Yeah.

Yes, that gave me some more colour. Thank you. And the second question is on like-for-like pricing. What was your tailwind in 2023? And given the pricing discussions you've had at the beginning of this year, how would you anticipate that looking in 2024?

So I think for us, we have a very broad product range, as you probably know, about 18 million SKUs. So it's hard to say a specific number. But we have seen, of course, price increases from suppliers. We have been able to pass most of those on. Not immediately always, because a large share of our business is indeed linked to tenders and long-term contracts. So it has been a process where the majority of it we could relatively quickly pass on. The others have been a little bit more of a protracted process. So we have been gaining a little bit, of course, from that price increase. It's hard to say the exact number, but a few percentage points, I think, is coming from price increases.

Okay, so a few percentage points, but perhaps not as much as mid-single digits?

No. I would say two, three, something like that. Maybe four, yeah, yeah.

Okay, thank you. And then just lastly, on the competitive landscape and pricing for M&A opportunities that you're seeing in Europe, given valuations in the public markets have declined, I know it always takes a lot longer for private transaction multiples or expectations to decline as well. But have you started to see that? What's your view on sort of deal volume in the markets?

We are involved in a few discussions. We think that the multiples are a little bit lower than what was our traditional multiple levels of around 7, 8 maybe. I think the discussions we're having at this point in time are lower than that, and that's also confirmed by some of the transactions that we have been able to read about. So I think that the prices have come down. It's been a bit of a slow process, as we have stated before. So I think that it's starting to become a more attractive market for us. you know, luckily for us that coincides with, you know, that we foresee an increased ability for us to do more transactions now since we see a positive, quite positive development on the cash flow and that situation as well.

And has there been a pickup in potential exits from owners?

Well, it depends on what category of companies you think about. There might be... You know, private equity companies that want to realize investments and whatnot, that may not be the most interesting for us. We are more looking at the small to medium-sized companies. They tend to be owned by the entrepreneur themselves, you know, the founders. There, the dynamic is slightly different. It's not like they need to exit at a certain point or the deadline expires or whatever. This is more... a longer-term consideration, looking after the well-being and the future life of that company and finding a new home for the company that will allow it to grow and that will be a good experience for the customers and the team. And that's where I think we have a huge benefit. So there's no timelines or anything like that, but That need is there. We are quite attractive as a potential new home for these companies, and we are having multiple and increasing number of discussions around that.

Great. Thank you for taking my questions.

Thanks, Charles. So I think that, Carl, you have some follow-up questions, it looks like, right?

Yes, I have some follow-ups. First one is on the cash flow here and on the working capital. So could you comment anything of Are you done with the working capital improvements or do you think that your sales could come down more?

Efficient working capital is one of the hallmarks for AdLife. That's something that we spend a lot of time on from day one in the trainings we have for new companies that we take on board and that we continuously drive in our target setting, in our board meetings, our business reviews and everything. No, for sure it's not done. But we are pleased, though, with the fact that on top of all those measures, we did ask all the companies to commit to a goal, to complete that goal during the second half of 2023. Most of the companies have been able to meet those goals and, in many cases, overachieve them as well. Some companies did not quite, but on the total, we're satisfied with the result. It doesn't mean that we will stop the activity. Rather, on the contrary, I think it's been... It's been very helpful because we have had a lot of discussions about the importance of this, and that's been well received. It's been a somewhat new approach to some of the companies, but over the past six months or so, this message has really been consistently communicated, and I think it's been well received, and we're seeing a lot of actions taking place. Some of it has a bit of a short-term side of it, but most of it is more long-term, behavioral and process change. And that's the key here. So we're certainly not done.

And where do you think working capital to sales should be for AdLife? I mean, it's been quite volatile and with acquisition changing. Do you have a picture now of where it should be?

Well, I think, you know, if we look at the numbers that Christina just presented, I think we start to see cash conversion and so on and the profit to versus working capital and so on, you know, starting to look a little bit better. It looked, you know, at mid-year this year, it looked quite weak, but now it's picked up again, so I think we're certainly on the right track now.

Yeah, and I have one question also on the CapEx investments, because CapEx has come up quite a lot in AdLife, and I know it's related to some extent to rental, etc., but I mean, it's It seems quite high, at least to me here, in the quarter of 92 million. Can you say anything what that's related to? And if 92 or is that the reasonable trend going forward also?

I think that you should look at the full year figure and divide it maybe by four. I think that's probably more realistic. But as I think I said previous as well, it's mainly related to. instruments, et cetera, to the customers. And with new hospitals as new customers, et cetera, you need to do an investment. So it's mainly that is driving the increase in Q4. But I wouldn't take Q4 as the new run rate. Okay.

Understood. But it is a good thing. Every new customer we sign up triggers a little bit of investment for that type of customer. And so in a way, it's a positive sign. Yeah.

Yeah. And then I had a question on Q4 lab tech. Have you seen any trends of COVID-19 testing coming up? Because I'm hearing that in some countries you are testing a bit more. So just to make sure it's not that that is beating.

I agree with you, Carl, that, you know, the influenza impact has picked up. You know, we see that, you know, when traveling in some countries, you know, It seems to be more people staying at home because of fear of influenza or whatever. So I think that's happening, but it doesn't trigger an enormous amount of COVID testing. So I think that is firmly behind us.

Yeah, that's good. And just one final one on the strikes we have seen in the UK. Has that impacted you in any sense in the beginning of 2014?

Yeah, it has impacted us a bit. Not enormously, though, but it has impacted and it has kind of reduced the surgery activity. And I think it's partly, you know, this is one of the reasons why the waiting lists haven't been coming down during the year. But now, you know, we're cautiously optimistic here. You know, we're reading the numbers, seeing the fact that the trend seems to have changed. We're picking that up also from our sales team that indeed the activity seems to be picking up and new measures are being put into place. I think there's an increased willingness and activity in terms of engaging the private healthcare systems as well to address the waiting list. So that is... potentially a change in trend could be linked to politics as well who knows you know elections may be coming up and we certainly saw that trend in Spain in 2023 yeah that's good that's all for me all right thank you thank you Carl thank you good questions and thanks everyone for listening in do we have any further questions No? Okay. Well, then thanks, everyone, for calling in. Good questions. And, again, we're super happy with the quarterly numbers that we were able to present. The team has been doing an excellent job. Now, for those who have a few more minutes, do stay on to see the video that we put together focusing on biomedical research, which was a part of our business that did really well this quarter. So thanks, everyone, and see you soon. Take care. Bye-bye.

It's great working with Franco and the Euroclone team. He is the perfect example of entrepreneurship, passion and engagement. This is the type of company we are looking for when we build our pipeline for future growth.

When I sold, I thought, let us see. I had to stay a couple of years. I did it with enthusiasm, with commitment, with everything. At the end, he told me, if you want to stay, you can stay. And I said, yeah, I want to stay. I enjoy it, and still I enjoy it. And I see this as an opportunity to continue the journey I started. And not only as I did, but even in a more constructive manner, because there are a lot of things to do in a group. because there are many other companies and supported by the ad-life management, I am exploring other areas that can contribute a lot to the growth of the company, growth of the group. So I am enjoying the same passion as you. European route go back to the mainland and everything started with a dream as an entrepreneur to create a company to be able to bring to the Italian scientific community innovative products available in other parts of the world as soon as possible to give them the best analysis to continue their research. In fact, I will mention the result. Self-science through innovation. This generated a solid relationship with the Italian scientific community. Why distribution? Distribution is first. You can change according to the change of the technology. You can change according to the needs of the customers. That means, at life, as a parent company, I could invest in something useful in that time that created important revenue, important profit, that was invested to strengthen the company and to look for new ventures. New ventures is new technologies that are emerging. Spatial transcriptomics and next generation sequencing. Now we can enter in this market that is growing double digit and then we'll continue to grow long, long term. We created good partnership and we are now continuing in our strategy to serve science through innovation.

At Adlife, we know the decentralized model works very well. I mean, in the Eurocrown case, we know that it enables Frank and his team to develop something which is more agile, a bit more adaptable, and kind of the market changes that occurs in Italy. For example, they have built a very strong relationship with the scientific community, but also suppliers. And you know, that's something that we want to occur also after the acquisition. The Euroclon growth strategy was developed closely with Adlife and primarily the Euroclon board. Within the Adlife group there are a number of distributing companies with identical focus area and that gives us a unique opportunity to develop not only customer application but also product application and market knowledge. Apart from being the chairman of Euroclone board, my role is to facilitate the information flow between the companies. Our way of doing that is to create informal networks within various groups inside the company. We now have an opportunity to sell the next generation sequencing, where Euroclone successfully has been working with a major player, and now we have an opportunity to expand that collaboration geographically to other subsidiaries within AdLife.