Ambea AB (publ) (AMBEA) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the Ambea Interim Report Third Quarter 2023 Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Mark Jensen. Please go ahead.

Good morning, everyone, and welcome to Ambea's Third Quarter 2023 Report Presentation. Speaking is Mark Jensen, CEO of Ambea, and presenting with me today is Benno Eliasson, CFO. I will give you an introduction to the quarter and information on our work on quality and sustainability. Benno will then describe the development of the financials for the group and for the different business areas in Ambea. After that, I will summarize the quarter and compare to our financial targets before we open for questions. I would like to begin with a brief overview of Ambea. Ambea today is a Scandinavian care provider. We have about 31,000 employees across Sweden, Norway and Denmark and revenues of more than SEK 13 billion. We offer a full range of services within elderly care, social care, staffing and competency solutions. We have more than 450 municipalities as our clients, and we are an important partner in solving challenges in the welfare system. Let's have a brief look at some of the reasons to invest in Ambea. Ambea delivers value to society, and we aspire to be the most attractive investment in the care sector. From a distance, care providers can look somewhat similar, but at a closer look, there are distinct differences, as you see on this slide. Today, I would like to highlight our market leadership in all three Scandinavian countries. As our focus is on every care receiver we hold responsibility for, market leadership is a sign of trust from our customers. We gain trust from living up to our promises made and through delivery of quality care that leads to better and more independent lives, being the foundation also for new placements. In most of our segments, the private sector holds a total market share of around 20%, while there's still plenty of room for Ambea to grow as a market leader in the private sector. Growth will come from market share gains in the private sector as well as through higher overall private sector share of the total market. We provide a qualitative and differentiated alternative to the public sector for care receivers, but also for care workers. And another bit of market leadership is we can invest in competency and leadership development, effective systems and innovation to constantly improve our care model and work environment. Market leadership is therefore not only a matter of market share, but of our ability to provide care that is differentiated by quality, delivers more value for money and guarantees a trustworthy freedom of choice. We will now turn to care quality. Quality ultimately arises in the interaction between care receivers and our employees. We always want to make it easy for our employees to do the right thing in any given situation so that they can spend their time on things that creates quality and value. We have a systematic approach to quality and sustainability where we carefully follow up on all our units every month. In the quarterly report, we highlight some of the activities that were carried out during the last quarter and relevant KPIs. External measurements of care receiver satisfaction are highly objective means of demonstrating the quality of care we provide. Every year, the Swedish National Board of Health and Welfare conduct a nationwide user survey for elderly care. This year, Vardaga's result for overall care receiver satisfaction reached 79.5%, an increase of 3.4 percentage points from last year. This is higher than the average results from both public and the private sector, respectively. The residents of 7 of our care facilities reported 100% satisfaction. We are incredibly proud of these results and of the local teams delivering them. As part of ongoing work to improve quality, our quality function conducts more than 250 inspections annually at Ambea's care facilities. These involve review and compliance with internal processes as well as relevant legislation regarding quality, work environment and environment. Action plans are created to address any issues discovered, which are then follow up over time. And this is a vital part of our systematic approach to quality improvement. Over to sustainability. Our focus on sustainability has been further reinforced during quarter 3. Meal times are of great importance to quality of life for the elderly. In Vardaga nursing homes, food is prepared according to the concept, Food Like Home. During quarter 3, we released a new cookbook with an increased focus on climate smart recipes. Greenhouse gas emissions are calculated for the ingredients used in the recipes. The new menus mean a total reduced climate impact of 271 tonnes of carbon dioxide equivalents annually. An important achievement illustrating our commitment to strong governance can be seen in Norway. Stendi published its first report detailing its work to ensure full compliance with the new Norwegian Transparency Act, which came into force on the 1st of July 2022. Areas included in the report are how Stendi has conducted a comprehensive screening of its suppliers in relation to their compliance with the new legislation as well as the implementation of a new purchasing system, which supports quality assurance of suppliers. The report is available on Stendi's website. You can read more about our quality and sustainability work in the quarterly report as well as in our annual report. In Q3, the own management pipeline remained strong, and we have 1,214 new beds in pipeline, most of them in Sweden. In Norway and in Denmark, we continue to build our pipeline in segments with good potential and fair commercial terms, in line with our updated strategy. The pipeline increased compared to the previous quarter where Vardaga could sign 2 new nursing homes in Täby that plans to open in 2026 and 2028 with a total of 140 beds. In this quarter, Vardaga opened a new nursing home, Villa Soldalen in Halmstad, at a great location near the sea, where care receivers show great interest in moving in and our ramp-up is progressing faster than forecasted. We also opened one new assisted living facility in Altiden in quarter 3. We have an active pipeline in all 3 markets, and we'll be pleased to see more municipalities welcome private operators to support the needed capacity expansion. With several years' time for planning, building permits and construction, the pace in establishing new care homes must increase to avoid a care crisis approaching 2030. We remain positive that the urgent need for increased supply will lead to more opportunities going forward. Let's have a look at revenue growth. The organic growth showed in the purple bars has been stable on a good level for several quarters now. The total organic growth this quarter is 6% compared to 5% in quarter 3 last year. In previous quarters, total growth has been helped by a stronger Norwegian currency, but the currency impact from Norway had almost no effect on top line this quarter. The effect from the disposal of the doctor staffing business in Klara, which we sold in late 2022, brings acquired divested growth to minus 1% compared to plus 2% in quarter 3 last year due to previous med acquisitions. We remain positive about our overall growth potential in the coming quarters, where both price/mix and volume is expected to contribute. We're also seeking for quality acquisitions that will contribute to total growth. I'm proud to conclude that this quarter, Ambea's reached the highest ever net sales and result in both EBITA and earnings before tax in a single quarter. Q3 is seasonally strong, but this was a positive achievement. Due to focused efforts across the organization and profitability improvements in Stendi and Vardaga, adjusted EBITA increased by 7% versus last year. Our group margin improved slightly to 11.4%. Good organic growth of 6% drives the revenue growth. We continue to increase our revenues by tender wins, new placements, price increases and better price mix. Our cash flow is strong this quarter and we reduced our debts. The cash flow gives opportunities for acquisitions and for continued active capital allocation. And now, over to you, Benno, for our presentation of the financial summary.

Thank you, Mark. The solid organic growth we have seen in the last quarters continues, as said, and almost all business areas contributed to the growth in local currency. This quarter, net sales grew by 5% in total versus last year. Net effect of acquisitions, divestments and currency was minus 1%, which means that the organic growth was 6% year-on-year. Except for Klara, all business areas showed growth in the quarter. Vardaga accounted for more than half of the growth and increased net sales by 9% versus last year. Like in previous quarters, there is an increased occupancy planned. Higher prices have also contributed to the revenue growth. And Vardaga opened one new nursing home with 60 beds, which will contribute to future growth. Stendi increased revenue by 5% in SEK but showed growth in local currency by 8%. Altiden increased revenue by 11% in SEK, but this growth was mainly currency-driven. Klara decreased by 12% due to the divestment of the staffing business for doctors and a lower external demand in other staffing solutions. Turning to EBITA. This slide shows how the different business areas have affected the EBITA of the group. EBITA in total growth by 7% compared to the same quarter last year. And this quarter, we reached the highest EBITA in Ambea's history and the margin of 11.4%. Vardaga was up SEK 24 million from improved occupancy and higher prices and operational improvements, and EBITA margin was up 1.3 percentage points. In Stendi, the positive effects of the improvements continue to give effect in the EBITA. Higher occupancy, higher prices and other operational improvements resulted totally in SEK 11 million higher EBITA than last year. Altiden's EBITA is SEK 6 million lower than last year due to higher start-up costs for our new nursing home and higher staffing costs. Klara generated a lower EBITA than last year, down 1.7 percentage points or SEK 4 million. We saw generally lower external demand for our staffing solutions in Klara. But all in all, the group EBITA was up SEK 24 million. Cash flow. Operating cash flow increased substantially compared to the same quarter last year. This reflects the weaker-than-expected cash flow last quarter and the strong EBITDA in this quarter. The rolling 12 operating cash flow is at roughly 92% of EBITDA. In Q3 rolling 12, we can see a more normalized free cash flow, as we communicated last quarter. This slide shows the way from the rolling 12 reported EBITA of SEK 960 million to the SEK 855 million in EBITDA, excluding IFRS 16 and down to the free cash flow post tax of SEK 442 million. We can see that we have, for example, invested SEK 105 million in fixed assets and paid SEK 110 million in interest and SEK 109 million in taxes. We still have a slightly negative effect from working capital of SEK 31 million. On this slide, we see how we have used the generated SEK 442 million in free cash flow. SEK 112 million was distributed to our shareholders as dividends, SEK 9 million was spent on acquisitions and SEK 226 million was spent on the share buyback program. Based on our strong free cash flow, we will continue an active and balanced capital allocation that includes further debt reduction and future acquisitions. Our net debt ratio is now 2.9x EBITDA, excluding IFRS 16, which is lower than our financial target of 3.25x EBITDA. And now over to the development of the different business areas, and we are starting with Nytida. Sales increased by 3%, mainly driven by new operation in both contract management and own management and higher prices. Own management homes showed slightly lower occupancy compared to last year due to some closed units. Nytida continued to win several tenders and have, at the end of the quarter, a net contract balance of plus SEK 38 million in annual sales that will commence operations during the coming 12 months, which will contribute to future revenue growth and EBITA growth. EBITA was slightly lower than last year and decreased 1% to SEK 168 million. This is still a very strong performance given the external cost pressure, which Nytida met with operational improvements and higher prices. EBITA margin in the quarter landed at 16.7% and rolling 12 EBITA now trend at 13.4%. In Vardaga, net sales increased by 9% year-over-year, driven by higher occupancy and higher prices. The own management portfolio increased net sales by 11%, while the contract management portfolio increased by 5%. EBITA ended at SEK 123 million, which is much higher than last year, up 24%. Vardaga will continue to compensate for underlying cost pressure by higher occupancy, operational improvements and by price increases. We saw in the quarter lower start-up costs and lower costs linked to the exit of 3 rental contracts earlier this year. Mature units showed a margin of 13.7%, which is 3 percentage points higher than average margin. And Vardaga has, at the end of Q3, balanced contract net of SEK 135 million in upcoming annual net revenue, which will contribute to future revenue and EBITA growth, of course. Stendi net sales increased by 5% in SEK and by 8% in local currency due to higher occupancy and higher prices. Stendi opened 4 new assisted living facilities during the quarter. We saw a stronger demand, and our own management portfolio increased net sales by 8% as well in local currency, with growth in all subsegments. EBITA increased by SEK 11 million to SEK 88 million, an increase of 14% versus a relatively strong Q3 last year. And the EBITA margin in the quarter was up to 10.9%. We saw a continuous margin growth in Stendi, thanks to higher occupancy, higher prices but also an effect of the actions we took in the first half of 2022, which gained full effect from Q3 last year and have continued to deliver since then. And we can see that the rolling 12 margin now increased to 5.4%, which is up from 3.8% full year 2022. Altiden. Altiden's net sales grew by 11%, but only 1% in local currency. In Q3, the EBITA was minus SEK 2 million, down SEK 6 million from last year. And underlying -- Altiden's underlying profitability is still at an unsatisfying low level. EBITA was impacted by start-up costs for our new nursing home under own management and high starting cost in general. Improvement measures were implemented to turn around the financial performance and to drive profitability in relation to capacity and organization, which will have a gradual effect in 2024. The transition will, however, take time, and we are integrating -- as we are integrating all units and companies acquired the last years into a new business platform and a new management structure. Klara. In Klara, net sales decreased by 12%, which was expected as we have divested a staffing solution for doctors last year. But we also saw a slightly weaker external demand for staffing solutions for nurses this quarter, while from 2023 reporting our training organization, Lära, together with Klara, and Lära had a lower external demand for a training quarter in the quarter mainly due to seasonality. EBITA decreased by SEK 4 million to SEK 14 million due to lower sales. The EBITA margin reached 13.2%, but are rolling 12 at high 12.0%. And with that, back to you, Mark.

Thank you, Benno. So to sum up our financial development versus our targets, our growth target is 8% to 10% through a combination of organic and acquired growth. We are close to our target in the third quarter with 6% growth rolling 12, driven by organic growth. We remain active on several dialogues when it comes to acquisitions. Over time, the growth target [indiscernible] reached as a combination of organic and acquired growth. The coming quarters, we aim to prioritize acquisitions as the market is now more active and we see good potential for bolt-on acquisitions. The leverage level is 2.9x EBITDA in quarter 3, which is below our financial target. We expect our solid cash conversion to continue, which gives us potential to grow and leads to financial flexibility. Free cash flow will be used for dividends according to our policy, bolt-on acquisitions, debt reduction and share buybacks. Looking at the profitability target, we have a mid-term adjusted EBITA target of 9.5%, which we have not yet reached. On the next slide, I will provide a view on the building blocks to reach our profitability target midterm. The rapid increase in inflation have made the target tougher to meet short term, but it's still reachable midterm. When looking at the present profitability level in our business areas, we see 3 of them with substantial midterm margin improvement potential. First, Altiden, which is loss-making today, but should midterm be able to deliver 7 to 9 percentage points higher margin. With the right common platform, operations in profitable segments and by increasing occupancy in social care and own management nursing homes, we will get the business on track. Since Altiden represents 10% of our business, that would impact the group margin by 0.7 to 0.9 percentage points. Next, Vardaga, where the mature units have been generating around 10% margin for some time with Q3 at 9.5%, rolling 12. The total margin for all units is now around 7%. With a better portfolio mix, increased occupancy and cost compensation over time, we expect another 2 percentage points improvement. Since Vardaga represents 35% of our business, therefore give another 0.6 to 0.8 percentage points impact on the group margin. And last, Stendi, where profitability has improved this year, we think that another 2 to 3 percentage points are reachable midterm. This will be delivered through higher occupancy and further operational improvements and will affect the group margin by 0.5 to 0.7 percentage points, with Stendi representing 24% of our business. The two remaining business areas, Klara and Nytida, will also have room for some margin improvement, but to a lesser degree. All in all, and with these building blocks, we see that our margin target is reachable within 2 to 3 years. And lastly, if we look beyond the third quarter before we open for questions. Ambea's organic growth is expected to continue through increased occupancy, new openings and price adjustments. We also expect higher margins year-on-year in Nytida, Vardaga and Stendi due to higher occupancy and operational improvements. Since last year, we have worked with several efficiency initiatives to mitigate the effects of cost inflation. Transition in Altiden will continue with building the right platform and improving profitability. We expect to see year-on-year performance improvements in the coming quarters and positive EBITA for the full year of 2024. In line with our updated strategy for future-proof care, we continue to invest in leadership development and additional competency development for operational staff. We are further improving our quality model through investing in a new group-wide digital workplace and a modern and improved quality management system for all business areas. In a combined effort to lower cost and reduce energy consumption and CO2 emissions, we are also investing in various energy efficiency initiatives in our care homes and investing in also an accelerated rollout of electrical cars. Finally, I would like to emphasize the dedication and hard work of our management teams and operational staff in all business areas. It is their committed work with our care receivers, making the world a better place one person at a time, combined with sustainable usage of resources that delivers our ability to improve our care services and results also post this quarter. And with that, I conclude our presentation and open for questions. Operator, can we have the first question, please?

Yes, of course. Now going to take our first question. And the first question comes from the line of Jakob Lembke from SEB.

My first question relates to Stendi, where I think it's quite strong growth here compared to Q2. Is there anything in particular behind that?

We see strong growth in all business segments in Stendi. And we also see, after the quarter ended, that the growth has continued in terms of new placements. So I would say, overall, relative high demand in the Norwegian market and we are able to match that demand in our care homes. So nothing else for that.

Okay, sounds good. And then on the margin in Stendi, I mean clearly, now your initiatives are having an effect. And sort of when we look forward, do you see that these kinds of initiatives will be the key driver for further margin expansions or will you book more of the volumes?

It will be a combination of better placements, more placements and also operational improvements, so a combination.

Okay. And then on Altiden, you now say that you expect some improvements here in Q4. It seems like the sort of the trough in Altiden, we have sort of been pushing that ahead of us for quite some time now. So I'm just wondering a bit on sort of what you have done now here in Q3 and what makes you confident that it will start to improve now?

So when you do this kind of rebasing of a business like we do in Denmark, sometimes things take a little longer time than you anticipated from the start. And I think that is what we have seen in Denmark. I mean so we have carried out the initiatives that we have planned for. That is some capacity reductions in some areas. It is some capacity expansion in other areas. And it always cost in the beginning when you expand capacity. So we have two -- as an example, we have two own managed nursing homes in Denmark and opened one in last quarter, which, of course, is expensive in the beginning until you have ramped it up. And as our business is relatively small in Denmark, I mean you will see a new nursing home of -- with 75 bed will weigh in quite heavily in the beginning. And of course, that will improve over time as we expect occupancy to improve in Denmark. So that is one thing. And then we are working on multiple fronts in terms of operational improvements, and that is everything from effective staffing to lowering our staff turnover, employing the right managers. It's some training activities. So it's a wide number of activities that are being carried out. And we can see that -- I mean some of these things will bide better in quarter 4, and that is why we can also communicate that we expect improvements versus quarter 4 last year and also into 2024. But it is, of course, a challenge, but it's a challenge that we believe we will overcome, and we see positive signs now.

Okay. And then just on sort of the pipeline, and you mentioned that you opened a unit now here. So how do you sort of assess the risk to fill the occupancy in Denmark going forward?

So I mean the demand is high in Denmark also as it is across Scandinavia. I mean we see an increased need for care, both in -- within elderly care and within social care. It's only a matter of our ability to match that demand. And of course, also to have attractive care homes and have the staff in place to meet the care receivers that are need of care. So I think we have good opportunity to match demand, and demand is increasing in Denmark as well as it is in Sweden and Norway. So yes, that's how we see it.

Okay. And just finally on prices. When we look into 2024, what do you see both on the care price index, but all sort of the other component which is not directly linked to an index?

We have, in Sweden, a lot of our contracts linked to some kind of index and some are not. And we think that it's going to be rather neutral next year, the level of cost increases and the level of pricing increasing on our running business. Then, of course, we can -- all our new businesses, as we are adding on, we can, of course, set the prices that we want to set on -- based on the market level. But rather neutral this year, we see -- if you look on a broader space.

[Operator Instructions] And the next question comes from the line of Kristofer Liljeberg from Carnegie.

It's Kristofer from Carnegie. Three questions. First, the margin -- positive margin trend here for Swedish elderly care in the quarter, I think it even accelerated somewhat further what we have seen in the first half of the year despite you should have seen a lower negative effect from the salary increases. So if you maybe could explain a little bit more what's driving that. My second question relates to -- it's an accounting question. The positive effects from IFRS lease accounting on EBITA suddenly seems much smaller here in the quarter versus that seen for a long time. And if you have a reason for that, it would be helpful. And then I wonder how we should think about working capital for the full year. Do you still think that will be a negative impact, i.e., an increase? Or do you think you will work that down further here in the fourth quarter?

Okay. I'll take the first one. Occupants in Vardaga and the improvements made in Vardaga, I think we have made a lot of operational improvements this quarter compared to the same quarter last year. I think we had more issues last year with staffing during the summer, and I think that's more smoothly operating this year. And of course, the high occupancy is, of course, also a factor. And the fact that we didn't open any new homes in the beginning of the year, in first and second quarter, we did last year, and we had a couple of these homes loss-making in the third quarter last year that we don't have this year at the same level. So it's a couple of different factors that have generated a higher EBITA and the higher margin. The next question around IFRS 16, there is a valuation done every quarter of the IFRS 16 portfolio, and it depends a little bit on what -- how many new lease agreements that you have signed and how many you have lost and how we have prolonged them. I think that this year -- this quarter, the lower IFRS 16 number will come back to a more normalized level next quarter again that as we have seen as trending before. And the third one, relating working capital. We think that the fourth quarter is rather [ near ] to us versus the close of the third quarter regarding working capital. It is, of course, we have a lot of invoices that are due on the very last day of the year, so there's always some uncertainty around the close of the full year. But looking at the calendar, we have no specific reason to say that the working capital will be on a different level on the close of Q4 than we have seen in Q3.

Actually, I have one more -- one more question. You said you expect to reach the margin target in 2 to 3 years. I don't know if -- would you be willing to say anything about how we should think about margin in 2024? I think you commented that you expect on an overall level to be able to compensate now for inflation. So does that mean with underlying improvements in Denmark, for example, higher occupancy rates, et cetera, that we should see a continued margin improvement in 2024?

Yes. We -- I think we said that we will see margin improvements in Stendi, Vardaga and Nytida. We think that, that is what we hope to see in 2024. And -- yes.

And I could understand that for Vardaga and Stendi, but why Nytida?

We think that the price/cost mix is rather neutral. And we think that the operational improvement and improved volume also could give us a little bit better margin next year than this year.

[Operator Instructions] And the next question comes from line of David Johansson from Nordea Markets.

Just two questions from me. The first on Vardaga, where you highlight quite strong improvements in occupancy in the quarter. Obviously, you have a strong pipeline here, looking at beds under construction and newly opened homes. But maybe you could comment a bit on your expectations on occupancy for the rest of the year and in 2024, and what do you believe is the potential now looking at margins for this business? That would be the first one. And then adding a question on Altiden, which still post negative earnings despite maybe a seasonally stronger quarter. Could you elaborate a bit more on the improvements in terms of profitability for Q4? And if these underlying improvements you talk about will be enough to bring this division to profitability next year?

Yes. So I can answer your question on what we think on occupancy in Vardaga in Q4. We expect the occupancy to improve in quarter 4. And we have seen a positive start also of the quarter. So that's our expectations for that. In terms of margin improvement potential. As we explained, we think there is a midterm 2 to 3 -- a potential of 2 percentage points margin improvement in Vardaga based on better portfolio mix, the increased occupancy and also better cost compensation over time. So that's our outlook in terms of the margin development in Vardaga. Then in Altiden, so when it comes to the measures that we have put in place, we believe that the measures we have put in place will deliver a better quarter 4 than the quarter 4 we saw last year. We are also now business planning for next year, and that process is not finally concluded yet. But so far, we have seen good initiatives from the Danish business in terms of the ability to improve also during 2024. Some of it with the initiatives that are already put in place and will give us effect next year and some of it with some additional initiatives that will be implemented next year. So our belief is that we will turn Altiden profitable during 2024 as a mix of a combination of initiatives already in place and some new initiatives that will be put in place from now on and during next year.

[Operator Instructions] And the next question comes from the line of Karl-Johan Bonnevier from DNB Markets.

Good Q3 progress. Benno, I wonder if you could help me a little just detailing what kind of cost inflation you are planning for in -- or seeing for 2024, looking at the rental contracts, labor agreements and similar kinds of things.

Yes, I can help you with that. We have -- in fact, start with Sweden. Sweden, we have a 2-year salary deal with a main labor organization unions. So we see something like 3.1 percentage points in some and -- up to 3.7% in some other from 1st of June or 1st of July. That's what we see in Sweden. We also know that there are rental agreement with October index, and that has not yet been finalized, but something like 6.5%, 7% increase for our rents next year will be the most probably the case. And in the other markets, we don't have any next year salary agreements yet. But we think that there are a little bit better structure of compensating in these markets where the average salary increase will also increase our prices with some time lag. So we don't think that there's a risk of being hit by inflation that we cannot compensate in Denmark and Norway.

Good. Then just also on the capital allocation. I heard your comment about maybe looking for a slightly lower gearing level in the midterm. I guess that makes sense given the current interest rates and so on. But what would be your, say, ambition, so to say? Obviously, you are already about -- below the group targets.

We don't have any other targets than the 3.25, but we are now below 3, and that is maybe -- maybe that's between 2.5 and 3 a level that is more probable than above 3 in the coming future.

Okay. So no further debt reduction. I interpreted your commentary [indiscernible].

No, we don't have any other targets than the 3 -- below 3.25.

And when we look at now, hopefully, the acquisition pipeline becoming more business generated for you as well, is that -- do you see gearing being a limitation for you for the moment to go for the deals? Or are there other things that are holding you back, so to say, in these discussions?

We don't see gearing as a limitation for that. And there's basically nothing holding us back more than, of course, we need to make and want to make quality bolt-on acquisitions and specifically in the business areas where we believe it's adding the most value. And as we explained, we have ongoing processes and dialogues now in the market, and we expect that growth lever to become -- to contribute more going forward after a period of time where it has been -- it's kind of difficult to meet kind of expectations between seller and buyer, so to speak. We see the market is in better balance now and we believe that we will see also growth contribution from acquisitions going forward.

And looking at the geographic part of that, would you, even at this stage, considering doing further transaction in Denmark? Or is this more related to Sweden and Norway given the underlying profitability you see there now?

We are not active in terms of acquisitions in Denmark at the moment. We are focusing and concentrating on what we have. And of course, we need to make sure that, that is stable and solid before we continue to acquire in the Danish market. But over time, we are sure we will get back to a position where that will become again a growth lever also in Denmark. But for the time being, we are not focusing on Denmark in terms of acquisitions.

And Mark, I also just want to pick your brains on the bridge, looking at the Vardaga component there. I can clearly see that you are -- that, that should be, say, the 2 percentage points upside for you to realize that. But I also noticed that we have now the good sign in this report that you are starting to rebuild a new opening pipeline. And I guess that is also starting to look quite good for at least 2025. And with that normally coming with a headwind, do you still see that there might be an even longer transition maybe for the Vardaga component to be able to deliver on those 2%?

No, we don't believe it will be a longer transition. We still believe that is reachable within 2 to 3 years.

Excellent. Good, if you can get both the growth component and the margin component to work together there.

Thank you. There are no further questions. I would now like to hand the conference over to Mark Jensen for any closing remarks.

So no more questions. Thank you all for calling in. The quarter 4 report for 2023 will be published on February 8, 2024. So I wish you all a nice day. Stay safe and healthy.

That does conclude our conference for today. Thank you for participating. You may now all disconnect. Have a nice day.