Attendo AB (publ) (ATT) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to this conference call. We will present Attendo's results for the second quarter. My name is Andreas Koch. I'm Communication and IR Director at Attendo. Today's presentation is hosted by our CEO, Martin Tiveus; and our CFO, Fredrik Lagercrantz. After the presentation, we will open up for questions from investors and analysts. We take media requests separately after the call. By that, over to you, Martin.

Thank you, Andreas, and good morning, everyone. We'll focus most part of the presentation today on Finland, partly due to the very weak result in Finland for the quarter, but also because of our ability to turn around Finland is essential for the long-term success of the company. While the situation in Finland has become even more challenging than we expected in Q1 and will likely remain so short term. We are given the outcome of the recent price negotiations for 2023, more confident today to reach sustainable conditions in 2023 and onwards. I'll start by giving you an update of the overall development and direction of Attendo, and Fredrik could then take you through the numbers in more detail. Sales in Scandinavia continued to be strong in Q2, and we're gradually increasing occupancy. At current pace, we are on track to get back to pre-pandemic occupancy levels during 2023. Reported profit in Scandinavia are slightly higher year-over-year, but adjusted for items of onetime character were roughly in line with the second quarter of '21. Profits in Finland declined SEK 75 million year-over-year as a result of increased staff requirements, high cost for overtime recruitments, high sick-leave costs and high inflation. Short term, we expect the challenges in Finland to remain while we're working in total to improve the situation. At the same time, the longer term prospect for Finland has improved recently, and we are starting to make good progress in price negotiations for 2023. During the quarter, we have finalized negotiations for around 20% of the total elderly care volume in Finland. The result was an average around 30% price increase starting April 2023. This can be compared with expected total cost increases of approximately 20%. While we still have the majority of the market volume we have to negotiate, this development supports our belief that we will be able to reach overall sustainable price level in Finland from April 2023 and onwards. Another concern regarding April 2023 and the final increase of staff requirements to 0.7 is, of course, acts as the qualified staff in a more readily strained labor market. Therefore, the regulatory release that was announced recently in June was much appreciated. The supervisory authorities between them have decided to open up to a much higher share of care assistants in the staff mix and nursing homes than in the original staffing law. With this release, the transition to staffing index of 0.7 in April next year will cause less additional turbulence in the labor market, as we can use the same number of nurses and practical nurses as today. Instead, we will employ more care assistance, a role which requires a much shorter period of education and training. This release shows that the authorities and politicians in Finland do finally recognize the need to adjust the implementation of the staffing reform. During the quarter, a new collective wage agreement between private providers and the unions in Finland was started in mid-June. This is expected to give some more stability in the labor market. We also have a number of initiatives in Attendo to improve the access of staff as well as the lower staff turnover as we have reported on previously. Given the price negotiations, the regulatory relief as well as the positive occupancy trend in Scandinavia, we expect to reach a profit level of SEK 4 per share, likely not for the full year 2023, given that new prices in Finland will be valid first from Q2, but with some delay. We achieved organic growth of 7% in the quarter, mainly due to more sold beds in Scandinavia and higher prices in Finland. Lease adjusted EBITA amounted to a loss of SEK 11 million, driven by the development in Finland. Overall occupancy remained at 84%, an increase in Scandinavia by the slight drop in Finland versus Q1. Quality Index remains on a high level. One key aspect of our quality work is customer satisfaction. During the quarter, we received the results of the national customer survey and care for all the people, carried out for the National Board of Health and Welfare in Sweden. Our long-term ambition is to become the most appreciated provider in every community we will operate. On average, we had a score in line with industry average in 12 out of 54 municipalities where we operate in Sweden at under what is the most appreciated care provider in either home care or nursing home segments. Next slide, please. This chart shows the openings per quarter and trailing 12-month opening pace. Prior to 2020, we had a strong pipeline of new projects to meet expected demand for new nursing homes in Scandinavia. So at the start of the pandemic, we've opened more than 1,000 new beds. In the initial phase of the pandemic, we adjusted and lowered our expansion plans with effect from 2022. During the first 6 months of this year, we opened 144 beds for the remaining part of the year, we plan to open another 200. In terms of new projects, we had around 350 own beds under construction by end of Q2. In line with our strategy, our current focus until next year is to improve occupancy and margins [indiscernible] rather than seeking expansion. Beyond 2023, we expect to return to a pace of a higher number of openings on the back of the upcoming elderly care. This top chart presents sales on a trailing 12-month basis on group level as well as for business areas. Churn is positive. And we have the ambition to continue to occupy empty beds, and we continue to export selective M&A opportunities. The lower chart displays trailing 12-month lease adjusted EBITA margin. The past 2 years, we reported development is heavily impacted by the corona pandemic. The situation in Q2 is heavily impacted by the staffing situation in Finland. So let's turn to occupancy development. So in Scandinavia, we managed to increase occupancy to 82% in spite of opening 84 new beds in the quarter. Sales momentum has remained strong in the past year and in our own operated nursing home business. We have lifted occupancy from 71% to 78% in [indiscernible]. With this case, we will be back at pre-pandemic occupancy levels we were in next year. In Finland, demand for nursing home beds remains on a healthy level, but we haven't been able to translate it into higher occupancy in recent quarters. Risk as a consequence of lack of staff in some units and also that the tender terminated agreements renegotiation in a number of municipalities that we're not satisfied with the terms. While this is necessary to achieve healthy terms long term, it also hampered short-term occupancy development as these local authorities restrict new customers to nursing homes. Let's take a closer look into the financials for the quarter. Please go ahead, Fredrik.

Thank you, Martin. So let's turn to Page 7. Net sales increased to SEK 3.5 billion, up 11% compared to the corresponding quarter last year. The organic growth for the quarter was 6.7%. Organic growth was more than 7% for Attendo Scandinavia, driven primarily by more customers in nursing homes. In Attendo Finland, organic growth was 6%, driven by higher prices. Lease adjusted EBITA amounted to negative SEK 11 million, down from positive SEK 53 million last year. The IFRS 16 effect on reported EBITA increased somewhat. Financial net was negative SEK 159 million compared to negative SEK 158 million in the second quarter of 2021. IFRS 16-related interest expenses increased by SEK 36 million, while interest expenses for our borrowing from banks was flat. Other fees and currency effects had a positive impact on the financial net. Income tax for the quarter was positive SEK 5 million. The adjusted earnings per share for the quarter was negative SEK 0.14, down from positive SEK 0.19 last year. The Scandinavian business area continues to attract new customers, although average occupancy is still below historic levels due to many openings over the last 2 years and the pandemic. Net sales for the business area increased by 9%. The strong growth is to a large extent driven by more customers in nursing homes for elderly people. Our new units opened over the last 2 years have successfully attracted customers. Further, during the last quarter of 2021, we did take over responsibility for 4 new outsourcing contracts. In the quarter, OP has increased by 1 percentage points to 82%. Acquisitions has also contributed to growth. Lease adjusted EBITA increased from SEK 74 million to SEK 84 million. This quarter's result was supported by SEK 30 million from nonrecurring items, mainly pension related. In comparison, Attendo received SEK 18 million in retroactive corona support in the second quarter of 2021. Underlying operative result is in line with last year. There is an underlying improvement for more customers and better occupancy in nursing homes, offset by cost inflation estimated at SEK 10 million and some efficiency issues, especially in Home Care. Looking ahead, units started during the last 2 years will continue to have a negative impact on profitability, while we expect a continued positive customer inflow. The balance between startup costs and positive fill-up effects will continue to gradually improve as the year progress. General cost inflation is estimated to continue to burden the result with at least SEK 10 million per quarter. This will, however, be compensated from January 2023 as most of our customer contracts have annual index adjustments. For the third quarter this year, we expect to see the normal positive seasonality mix. Growth has slowed down somewhat for Attendo Finland and amounts to 12% reported and 8% in local currency. The growth primarily comes from price increases. In many contracts, prices are adjusted in January, and the average price increase for 2022 was more than 5%. Lease adjusted EBITA decreased from 0 to negative SEK 75 million. Differences in corona effects impact the comparison with about SEK 15 million, but still the result is down by around SEK 60 million. The negative development is primarily driven by higher personnel costs, other cost inflation as well as fewer customers, only partly offset by higher prices. Impact from cost inflation is somewhat higher than we anticipated, and the estimated effect in the quarter to have been SEK 15 million to SEK 20 million. The significant increase in personnel cost comes from both increased staffing due to new regulations and higher hourly cost to labor market shortage. We have also lost some efficiency in scheduling due to new regulation being more rigid and inflexible. We are working hard to handle the situation with increasing staff costs, but we do not foresee any major improvements in the short term. Instead, the new cost level needs to be absorbed by higher prices in 2023. Some price adjustments will be seen from January 2023, mainly adjusting for historical cost increases. The full price effect will, however, come in April 2023. We expect a positive seasonality effect for the third quarter this year. This table shows our cash flow development. Free cash flow was positive by SEK 134 million in the quarter and SEK 230 million for the last 12 months. The total purchase price paid for acquisitions in the quarter is about SEK 200 million. Adjusted net debt amounted to SEK 1.6 billion, which equals an adjusted net debt to adjusted EBITA ratio of 3.2, up somewhat from previous quarter, but within our financial targets. With that, I hand back over to you, Martin.

Thank you, Fredrik. A few closing words before the Q&A session. Financially, we are delivering high growth but a poor result. Scandinavian business area shows an underlying stable development, but we are struggling in Finland with the staffing situation. We're taking several measures to improve access to staff and decrease the staff turnover. It's also satisfactory to see that politicians and authorities are getting aware about the challenges with the implementation of the new law. Most important, we're seeing good progress with the price negotiations for April 2023, when the new law will be fully implemented. This is expected to give sustainable conditions for the market already next year. In spite of the current heavy headwind in Finland, the underlying long-term trends are clearly favorable and our organization is focused on delivering on the key actions in the turnaround program. Thank you for listening, and over to you, Andreas.

Yes, we'll now open up for questions and we take questions over the phone first and then I will read out the questions we've got through the web. So operator, please go ahead.

[Operator Instructions] The first question comes from Victor Forssell at Nordea. Oh, sorry. I think that the line got -- you were out of the queue. So right now the question comes from Kristofer Liljeberg, Carnegie.

Okay. I thought 3 questions. First, would it be possible to comment on the occupancy level for own units in Scandinavia. I think the figure you show also includes other contracts. And also I wonder, you talked about rather flat earnings in Scandinavia year-over-year, but considering that you have, I think, SEK 50 million in extra costs in the second quarter last year for 2 extra vacation days. Based according to my calculations, earnings are actually down year-over-year. So if you could comment for the reasons there. And the SEK 10 million you mentioned for inflation, was that per quarter or per month? And also the final question is about your -- the assumptions we made when assuming calculating price increases of 20% in Finland next year?

Thank you, Kristofer. Okay. So I'll start. So the first question was around occupancy level in Scandinavia on operated nursing homes, which is a large segment in Scandinavia. So -- in the -- during the pandemic, I think we hit a low point at around 63% occupancy level on operating nursing homes, that was up to 71% by year-end. And by quarter close end of June, we were up to 78%. We have improved occupancy with 7 percentage points in own operating nursing homes in spite obviously opening this first half year in Scandinavia. So we have had a pretty strong sales momentum. If we expect that to continue, it will mean that we will be back at pre-pandemic levels next year.

Okay. And that leads us into the second one because with that strong occupancy development, I would expect earnings in Scandinavia to be much better. So I guess there's something else that's not doing so well.

Yes. It's -- the factor that you're missing is that they still have higher than normal sick-leave levels in Scandinavia. And last year, we had sick leave contributions or protection from the state. So we have corona-related costs of almost SEK 50 million this quarter that we didn't see last year because it was covered through the subsidies. So it is underlying in line with last year. But I also agree with you that given the occupancy development, we should have seen more progress, but we have some more temporary -- it is also causing some operational issues, especially in the home care where we're not getting full utilization, but we are working on that, and we will solve that. It's not a structural problem.

Is that SEK 50 million for higher sick leave than normal?

Yes. And it's also some others, that is mainly sick leave.

Okay. And then the SEK 10 million cost inflation you mentioned, was that Scandinavia and was that for the quarter?

Yes, it's for the quarter in Scandinavia. In Finland, we estimated between SEK 15 million and SEK 20 million per quarter.

Okay. And the sick leave cost, will they remain now in the third quarter? Or is getting more normal?

It has gradually improved during the second quarter. And it was kind of end of June, it was almost back to normal levels, a bit higher. But unfortunately, we've seen it start to increase again slightly in July. And it's -- if you read the news, you see it's a European trend that we see a bit more of corona all across Europe right now. So we need to see how it develops during the next few months.

Then Kristofer, the final question is around the price increase of 30%. What was the question on that?

No, no. The question was what assumptions you have made when you talked about the -- not pricing, but costs increases.

The cost increase on -- I mean what we have clearly seen over the past year is that one thing is a mathematical sort of cost increase. If you look at the increase in restarting density requirements. I mean now we're going from 0.5 to 0.55 to 0.6. And that is one thing, next year from 0.6 to 0.7. So what we have 0.6 to 0.7, that would be -- I mean that's almost a 17% increase, but it's -- if you look at our staff cost share on total costs, that would mathematically drive costs around sub-12% next year. We are assuming 20% as we have seen now, that is the dynamic effects -- there are dynamic effects in the labor market in terms of some solid inflation inefficiencies of how to actually staff because there are -- and also the way the new regulation is -- has been interpreted by the supervisor compared to how the law is written. So in those 20%, we don't assume that anything will improve from today's level. We expect the dynamic effect to be similar to what it has been this time. We're thinking good is that the new regulatory release that was announced by authorities in June makes 0.7 possible. Because we can use care systems instead of additional practical nurses and licensed nurses, which wouldn't have been available in the market to the extent needed for the total industry. Now it's actually -- now at least it's mathematically possible to -- for the industry to comply.

Now we have the next question from Victor Forssell at Nordea.

I hope you hear me. Starting with Scandinavia and perhaps circling back to last quarter where we talked about the margin progression here into the second half of the year. Just looking at today's results and the previous discussions here during this call, is it still feasible for you to have a sort of at least flattish margin in second half compared to last year? And what are the dynamics that need to improve here as you exited Q2?

Thank you, Victor. We still believe that Scandinavia will improve profits in -- measured in CF then for the second half compared to last year's second half. And that is based on the positive occupancy trend but also that we can become a bit more efficient again on some of the operational issues I mentioned.

Okay. And if I just come back to Kristofer's question regarding the trajectory of this 78% in nursing homes that you talk about now. When you say that you -- this pace would drive you to pre-pandemic levels into next year. Is that for your full sort of -- for all nursing homes? Or are we talking mature ones? Or how should we read your statement?

If you read it like in our own operating nursing homes, basically if we take all our nursing homes, we have outsourcing business in own operated. Own operated is the majority of the nursing homes, right. The average total occupancy has gone up from 71% to 78%. Of course, when we have mature units with higher occupancy already, but this is including also the startup and the more recently opened nursing homes. The total average occupancy is not 78%, that is a low number, I mean, in this industry. This -- we are used to operating at around 90% occupancy level historically. That's where we should be at to have, what we call, sort of, mature margins as well. And we expect to be able to return to that level, which we were at pre-pandemic during next year, given that the sales trend of the past year continues.

Okay, all clear. And on Finland and just noticed that you have a quite dramatic quarter-over-quarter change in FTEs. So if you could spend a minute around the figure itself, you provided last quarter. You anticipated 500 nurses, if I recall it correctly from the Philippines and also the need of around 1,000 employees to cover your -- or the occupancy rate that you currently have in Finland. So any comments regarding your employees now in Finland and what trend you're at?

First of all -- it's a good observation. First of all, you need to be aware that we always have higher FTEs in the second quarter compared to the first quarter, and that's a seasonality effect because some of the summer camps come in and go along to learn the work. So the delta you see from first quarter to second quarter is not the run rate delta, it is mainly a seasonality effect. Secondly, we've done some acquisitions. We bought a rehab hospital in June outside Helsinki that added a couple of -- a few hundred or a bit more than 100 FTEs. But then there is an effect of that we are preparing for the staffing increase. And part of it is to have Philippines coming in and also working more with apprentices. And given the regulation, we cannot utilize them in the law in the staff index according to the law from day 1. So that is part of kind of the inefficiency we talk about that the new regulation being more rigid. But that's -- if you have to look at the delta from the first quarter to the second quarter, that's a smaller part of the explanation.

Okay. And how do you see that develop, if we just talk about the Philippines, for example?

No, we will continue to recruit to that international channel. It's an important part of how are trying to solve for the shortage in the labor market. It's also part of the increased cost we've seen in this quarter because it's cost some. But it's not -- it's not dramatically changing in the second half of the year 2022 compared to the first half of the year 2022.

And this is also part of what we say that we think that the cost will go up to around 20% from April next year, the run rate compared to the price increases of 30% in those 20%. We include what we expect to be the new cost level, including that we will need to keep attracting around 500, 600, 700, health care nurses and licensed nurses from abroad every year. And just the last comment. There's also seasonality takes in the third quarter where the number at least goes up further and then from the seasonality perspective it falls back again in the fourth quarter.

That's understood. Just -- maybe just around this 20% cost increase as you talked about the base that they grow from that is we should not make any sort of, I mean, underlying adjustments to our cost base or to your cost base entering 2023. So we -- what you expect is 20% up from what you end full year '22 from. Is that correct?

Yes, correct. And we -- as we mentioned, we think more or less the run rate that we see in Finland for the second quarter is the run rate that we will see for the remaining of the year.

Remind you that the 200%. This is regarding the elderly care segment, which is around 70% of the volume -- the total turnover in Finland.

Right. At what stage do you think that you will have concluded all the negotiations? Is that something we can expect in the call during Q3 already?

No, I think that's going to be too early. Look, we expect to conclude by year-end all the negotiations and we're not steering the rhythm. So the every region or SOTE region and municipality, they go out with the new sort of tender in the wrong rhythm, but they all need to do it by the end of this year. So we can. Yes.

[Operator Instructions] The next question comes from Hans Bostrom at Trinity Delta.

A couple of questions, please. Would it be kind to elaborate a bit on this change that was proposed in June on easening up on the regulations from 2023. If you are able to put in auxiliary staff instead of nurses, doesn't it kind of defeat the purpose of this regulation anyway? Or are there some hard rules as to how many nurse staff that need to be per patient? And secondly, there was a comment you made regarding some of your voluntary cessation of contracts with local authorities, I believe that was in Sweden that you thought might have a short-term impact on occupancy. Would you care to elaborate a bit on that? I missed the actual scope of this.

Yes. Thank you, Hans. So if you take the staff increase and the [indiscernible]. So the way the law is written is that care staff to handle care in staff is going to increase from 0.6 to 0.7 FTEs for every client. What has changed now is what share of those 0.6 that can be performed by care assistance compared to practical nurses or licensed nurses. So it used to be roughly 1p or yes, or 0.07 out of the -- or 0.06 out of the 0.6. And -- but it's going to increase to 40% of the shares. So it's a large -- it's a much larger share of the care instances that can be performed by care assistance. And the implication of that is that the overall increase -- the implication is that we more or less have enough numbers of practical nurses and licensed nurses and the extra recruitment needed can be done from care assistance.

And then the voluntary cessation, that was for contracts in Finland, where in some situations where we have observed that the SOTE region or the municipality is not planning for a re-tender, they have given notice of termination. And for example, it was one municipality where there was a 12-month notice in the contract. And then we did give a notice, the last one in March because then it was 12 months until the new law came into force. And then the new -- and it was not only us, there was other providers also doing that, which made the municipality conduct a proper re-tendering and it ended up with what we think is a sustainable price level. And -- but during that process, the municipalities tried to be more restrictive for sending clients to us than if we have terminated agreement.

Sorry, I was just wondering, is this only one local authority it's a relatively...

No, it has been several. But -- and they timed it bit different depending on what the notice of termination terms in that specific agreement looks like.

Remind you, now it's not municipalities anymore. We are mainly negotiating with the new SOTE regions. Now there are 22 regions in Finland. It used to be close to 300 municipalities. So it's a different situation. So now when we cancel an agreement, we cancel agreement with the SOTE region, so it's a much larger market.

And finally, I understand that you have some challenges that [indiscernible] in Gothenburg area and placement stop with new clients. How long is this likely to last? And what is the impact on your business?

Yes. I'll take that. Yes. [indiscernible] is one newly started units in close to the Gothenburg area. And start-up processes always sometimes means some challenges, and we also acknowledge that. But we have a very good track there and good relationships with the municipalities et cetera. So I would say with the current action program we have, we are sure that this will be a successful unit. And -- but, of course, it's unlucky that the startup was made some hiccups, but overall, we're delivering good care there as well as a new fresh home and given the action program, we'll be very confident to deliver good units there.

We have a follow-up question from Victor Forssell at Nordea.

Yes. Thank you for taking the follow-up. I'm just curious to hear a bit more regarding your EPS target. I think it's fair to believe that it will be tough to reach for 2023. Nonetheless, it sounds as if you would have had the price -- the full price effect in Finland from Q1, it sounded as if you would be able to reach for. So I'm just -- just want to pick your brains a little bit about the equation here on your EPS targets.

Yes. Well, the EPS target is based on us reaching a number of sort of sub targets. So one quarter is, of course, price increases in Finland. Others are occupancy development in both markets, but also efficiency in Sweden, Scandinavia. And if you look at growth in occupancy development and efficiency in Scandinavia, we are on track to deliver that. So it's very much up to Finland, where -- if you look at Finland, we have roughly SEK 7 billion in turnover in Finland, where we're about SEK 5 billion of that being nursing homes or elderly care business. And of course, if we manage to get to the 30% price increases versus 20% cost increase in Finland, it's a pretty strong strengthening up of margins and well needed strengthening of margins in Finland for next year. We will get it from Q2, not Q1 next year. So if we keep the trend trajectory in Scandinavia, and if we manage to get through with all the price increases in Finland, yes, we believe that we will be -- we will fit to be at a profit level of SEK 4 in 2023, meaning that we can fulfill the profit target with a slight delay into 2024. If we would have it from January 2023, we think it would still be possible to reach the target already in 2023.

And what does this -- thanks for the answer there, Martin. And just to understand the underlying EBITA margins regarding you hitting the SEK 4.

We haven't translated that to exact margin, but we said it's roughly around making SEK 900 million in this adjusted EBITA.

Okay. And just a final one, if I may. Since you sound quite upbeat regarding profits improving into next year, the pace of it perhaps being the caveat, but still I think your balance sheet looks to be strengthening throughout the year as well. So just curious about your capital allocation. You made some smaller acquisitions, but do you think that's the way to go? Or do you see a chance of perhaps buybacks or something pointing to your perhaps low valuation?

This year, not. Next year will be a different because we know we are really going to see the real sort of profit pickup during next year, not this.

The next question comes from Kristofer Liljeberg, Carnegie.

Yes, a followup on Finland. I think you mentioned that you had terminated some contracts in Finland during the price negotiations. So to reach the 30% price increase you're targeting, how much of the contracts do you think you will have to leave. So should we assume a negative impact on sales in Finland and from next year?

No. We expect to come through with all the contracts in Finland, eventually.

Okay. So that's -- what's happening that's part of the negotiation?

That is not renegotiation, and that is part of what we have seen already in this quarter, that's part of it. But of course, it's we believe also that -- now the first around 20% of the contracts in Finland, meaning of the market in Finland has already concluded the prices for 2023. They also became public in Finland. So we believe also that the longer we go, the higher likelihood it gets that we'll actually lead to all the way in Finland because it becomes sort of a market standard. It becomes more and more difficult for the next municipality to argue for a lower price if the market level reaches a certain point.

The next questions come from Jakob Lembke at ABG.

I have 2 questions. First of all, with the new easing regulations you're seeing in Finland, are you now confident that you will have enough staff in 2023? Or is there something else that needs to happen before you are there?

No, I think it's a really good question because I mean we are seeing the quite dramatic effects on the labor market that just the current regulation is already inflicted going from 0.5 to 0.6. And going from 0.6 to 0.7 would arguably be more difficult for the market and creative and more turmoil next year, especially aftermath doesn't really make sense in terms of actually to qualify staff. So this is the regulatory ease that was announced was actually immensely important. So for us, I mean, we have -- there's 2 things that we do think that these 2 things need to happen. One, we need to get the pricing cases right to cover for the costs related to it. Secondly, we need to get the authorities to understand that they need to ease regulation because that's going to be too nasty otherwise. So the second part was really important. And that means that we still need higher to -- higher staff then from 0.6 to 0.7. But with a -- with staff roles that has much lower requirement and education and training. And that means that we can actually train them ourselves. So it now is more in our hands rather than to roll to overall market.

And my second question -- yes, very good. And my second question is on sort of the same topic. Previously, you have spoken about sort of not being able to take on customers in Finland due to the tougher labor market. Can you just sort of update us on where we are in sort of the demand supply balance and if there could be any sort of pent-up demand or elderly people not receiving care because of the situation?

Yes. That's exactly what we're seeing right now. We're seeing that the queues are getting longer in Finland because not only us, but the entire market has a challenge in finding staff enough to onboard new clients. So there is a -- we don't have really no balance now with supply demand. Although there is a balance sheet supply demand, but not supplier staff. So then that's what you're seeing also in our occupancy curve that is flat in Finland, and we expect it to remain flat actually to next year. So even if it's going to take some time to adjust in the Finnish market and to train and educate more staff to get the balance right. But right now, we have -- there is more demand then it's possible to cater for really in Finland right now. Sick leaves are increasing. Yes. Longer term, it would likely increase of the need for home care in Finland.

We have no more questions at this time. So I hand the word back over to the speakers.

Just a question there. There are some questions on the...

Yes. Well, that we've got now online, and many of them we've already talked about, but just to repeat them how do we achieve a profit of SEK 4 per share in margin, gave the key components there with the finished product side, the increased occupancy in both business areas as well as the efficiency gains we get in Sweden where we have a higher or rather normal occupancy level. So I think we talked very much that. And also about the timing of the EPS target of SEK 4 is that if the question was, can you assure it in '24 or could it take even to '25? There we clearly state that next year, we will achieve a level of SEK 4 per share during next year, but we don't see it in Q1. So that's why we say a delay somewhat shouldn't interpret that one or a couple of quarters rather than anything else. So that was related to the financial targets. And there is one question related to [indiscernible] could you maybe elaborate on.

Yes, we've gotten this question from time to time. And our financial target is that net debt-to-EBITA measured without the IFRS 16 should not exceed 0.75. And our banking agreement is somewhat more flexible than that. So all the way, we follow the development on our cash flow and balance sheet development, very detailed and then they also look ahead. But it does not we are not -- it's not keeping us awake at night because we're so worried that this will be a problem.

Yes. And then finally, 2 questions. One is about the price increases and how that relates to inflation? Maybe Fredrik, you can say some words about also how the pricing works in Scandinavia?

The same that we talked a lot about, and the 20% estimated cost increase includes also inflation. So that's part of that equation. But then in Sweden and Scandinavia, it's going to be more of a normal price adjustment. And in most the formality of our contracts, they have index adjustments and they are based on a weighted combination of labor cost increase and other cost inflation where the labor cost increase has the higher rate. So there will be higher than normal price adjustments going into January 2023, given the high cost inflation that we see right now in society.

And then the final question was about the, so to say, the high turnover of personnel at the Finnish market and we as well are having right now, how can we remain and make sure that the quality remains on a good level and also when you're taking a new staff from the Philippines. Maybe Martin can say a few words about.

Yes, we are -- staff turnover, especially in Finland are getting higher, but we're also used to having a fairly high staff turnover in Finland. And we have -- we are putting a lot of resources into education and training also. We spent quite a lot of investment also on leadership training for our leaders in Finland. And we did also, already 2 years ago, reorganized Finland into a smaller span of control for area managers to be able to cater for a bit more turbulent. I think we have catered for that. In terms of Philippines, we are working with bringing in Filipino-licensed nurses into Finland for the past 10 years in Finland. So there's nothing new, but we are scaling enough now. And we have very good experiences of bringing those in, they're much appreciated as colleagues. We also trained them in Finnish language for 9 months in Manila before they get a chance to come to Finland, and we offer the job. So they need to pass a Finnish language test in order to get employed in our Finnish operations. So we have a good experience in that and has worked well.

Thanks, Martin. Then I think we have taken all the questions we got online as well as on the phone. So with that, we'll now conclude this conference call. And as usual, you are always welcome to contact us afterwards now if you have further questions. So thank you for your participation. Thank you.