Terveystalo Oyj (TTALO) Earnings Call Transcript & Summary

Good morning, everybody, and welcome to Terveystalo's Q4 and Full Year 2021 Results Webcast. My name is Kati Kaksonen. I'm responsible for Terveystalo's Communications, Investor Relations and Corporate Responsibility. Today, as usual, we'll have a presentation by our CEO, Ville Iho; and our CFO, Ilkka Laurila, on the key highlights of the results and then we'll follow that with a Q&A. We'll take questions through the phone lines as well as through the webcast so that you remember, and we'll get back to the questions after the presentation. But without further ado, I'll give over to Ville.

Thank you, Kati. From my behalf, good morning from Helsinki. It's a great pleasure to introduce Terveystalo's last year's results and key highlights. Before going into results from last year, I just want to remind us all who we are. Terveystalo is a Nordic health care company with a clear purpose. We are fighting for healthier lives for our customers. We have very strong core markets. We are a leader in Finland, in Finnish health care market. We have made successful entry into Sweden and intend to be leader in that market over time as well. We have a stable and strong core business, generating strong cash flow. We are #1 employer in this industry. Looking at 2021, there are 3 key highlights that we want to make today. First of all, we finished last year very strongly. We'll comment on that one. We are growing as a stronger business. The core business is doing great. And finally, we have opened new growth avenues for Terveystalo. So we are back on track when it comes to growth. So exciting times ahead for Terveystalo. Key highlights from 2021. As you can see, we have been hitting the targets in all fronts. Revenue was up by 17% to almost EUR 1.2 billion. And as I said, growth is back, and we'll discuss growth opportunities in a later stage of the presentation. Adjusted EBITA profitability grew nicely also up to EUR 141 million and adjusted EBITA margin over 12%, which exceeds our long-term financial targets. So financials were performing great last year. Indebtedness, net debt-to-EBITDA at 2.5x, which is all-time low for Terveystalo during its life as a listed company. So the balance sheet is strong, very important for us going forward, especially when we are discussing new growth opportunities and our investment capability looking at those. So financials in great shape, giving us great strength when we are going forward as a business. Financials were not the only areas where we exceeded our targets last year. When you look at almost any operational KPI, we were hitting targets last year. Customer satisfaction, very important, of course, in our business, all-time high at 83; employee satisfaction also at all-time high at 32. We are, again, and still #1 employer in Finland, which is very important going forward. We all know that health care is a supply-constrained business and our ability to increase productivity, but also recruit new people is a key to our success in the coming years. So all in all, a great performance, great year from Terveystalo in all fronts. And with that one, I want to express my humble thanks to Terveystalo team, both in Finland and Sweden, great job from everybody, great effort. 2 key levers that I'll comment on last year's results. Behind great performance, first of all, our good operational performance, we were in high demand environment during last 2 quarters, so latter part of the year. And to really squeeze out the result that we got from that environment, we have improved the productivity of our service system. So as you can see from the graph, firstly, on the left side, our historical max when it comes to our sort of productivity KPI -- our utilization KPI, doctor booking rate has been at 93%. Now due to the fact that we have been investing in our system, in demand supply management, customer steering, et cetera, we have been able to increase the max level of the utilization by 3 percentage points, so up to 96%, which is a new max level. This corresponds obviously to higher productivity and more services to our customers, more help to patients. At the same time, and partly with the help of development in digital visits, we are able to provide -- digital visits in addition to physical visits, so physical visits with higher productivity, more services to our customers. On top of that one, digital visits with higher productivity compared to physical visits. And all in all, this development during last year, when you net-net it corresponds to roughly 1 million appointments more from the same physical capacity, from the same fixed assets. So there's a benchmark for every and any health care organization, be it public or private. So great development from Terveystalo on that front. This also tells a story about our sort of nimbleness agility, ability to react to a changing environment. We all know the volatility that we have been experiencing during pandemic. The other driver for results obviously has been COVID-testing, the development you can see here. It has been giving us a tailwind, but one needs to remember that this is not a free lunch. First of all, Terveystalo team has worked hard to cater for this new demand. We have been able to gain market share in this field. And once pandemic eventually and hopefully fades away during the course of this year, we'll see that underlying demand for different services will then compensate for this service. So all in all, it has been operationally great year. We have been able to react to changing circumstances, improve our productivity, meet the demand from our customers, operating in high demand environment. And that gives us great confidence going forward and continue development during this year. With that confidence, with the strong performance, Terveystalo is proposing a dividend of EUR 0.28 per share from last year, up by EUR 0.02 from a previous year. We are able to reward our shareholders due to our strong balance sheet, due to our strong cash flow. At the same time, it's very important to note that this increased dividend level does not, in any way, jeopardize our ability to invest in growth. So balance sheet is strong. We are able to both reward our shareholders with an increased dividend, at the same time, when we are later looking at the growth opportunities, we have dry powder to go in the direction chosen by Terveystalo and in those growth opportunities. So with that one, I will hand over to Ilkka, who will dive deeper into nuts and bolts of financial statements. Over to you, Ilkka.

Thanks, Ville. Good morning on my behalf as well. So you've just heard that our continued progress and strong performance operationally, our core business is in a good shape and has been growing stronger. Plus, we have been making strong strategic progress when it comes to our sort of -- our development, and we are seeing actually more exciting growth opportunities also in the future. And obviously, growing as a stronger business also means stronger financials. The highlights for '21 are that we have delivered strong revenue growth and profitability. We achieved our financial targets in revenue. Our revenue was at EUR 1.5 million, a nice 17% year-on-year growth. Our EBITA was at EUR 141 million, excellent 38% year-on-year growth and was 12.2% of the revenue in relative terms. We have maintained our disciplined financial strategy and grown our financial strength, increasing our capacity to further invest in growth in the future. So our net debt was at 3.5x EBITDA and cash flow from the operating activities amounted EUR 195 million. And we have continued to invest in our strong digital platform. And like Ville said, we exceeded all our financial targets in '21, be it in revenue growth, profitability, capital structure and the dividend. And if we take a look at the operational performance. As Ville said, we are hitting a lot of new records operationally in '21, 8 million visits -- customer visits in Finland; 1 million digital appointments; 2 million remote appointments, which is actually 25% of the all appointments in '21; 1.3 million individual customers; and 1.5 million occupational health care end user, Finland and Sweden combined. So these sort of strong operational performance metrics was a key enabler for our revenue growth as well. So first, we achieved strong growth in our core business. One height, obviously, is that our largest customer group, corporate segment, typically very stable business, growing now 15% year-on-year. Private business, growing 13% after a tough season 2020 due to COVID-19 situation and now it's growing steadily. So our core business is in a good shape, and we are seeing strong performance in all customer groups. And you can actually see this strong momentum and high growth in our Q4 numbers as well. So in Q4, high growth continued across all the businesses. So if we compare to pre-pandemic levels, our corporate segment growth is again at 15% and the private customer group growth compared to pre-pandemic level is at 13% in Q4. In addition to that strong top line growth, we delivered even stronger growth in profitability so that our underlying profitability, both reached actually our targeted level and stands above the pre-COVID-level. So if you take a look at the right-hand side of the slide, you can see that our EBITA was now at 12.8% compared to 12% in Q4 2019, when we had no pandemic yet. It was actually slightly down compared to last -- or compared to 2020, 14%. And the reason for that is actually 2-fold. It's good to remember that we had a -- first of all, we still had cost saving measures in place at the end of 2020. Then secondly, there has been a clear sales mix change after end of 2020. So we acquired that Feelgood business in Sweden and our appointments-driven business is developing even more strongly than other businesses. So you can see that the business is in a good shape and performing strongly. We delivered clear step-up in profitability, achieving now EBITDA of EUR 202 million, up by 27%. And this was actually despite the increased personnel costs, which were mainly related to COVID-related services as well as, again, the Feelgood acquisition in Sweden. In addition, our other operating expenses increased 31%. And again, the sort of the key driver behind that is that during 2020, we had cost saving measures in place. Now we are investing more in marketing, IT, et cetera, et cetera. But then on the other hand, if you take a look at the material expenses, it has remained actually quite stable even though that we've been growing quite strongly. Also in surgeries, which typically increases the material expenses and also in COVID-related sales, which typically increases the protective equipment usages. And the reason for that is actually, you can call it maybe a global situation that we had in 2021, when all the sort of the material expenses related to protective gearings actually ten-folded within a quite short period of time. And now the situation on that front has also normalized. So that's why we were able -- even though that our short service developed favorably, and our COVID-related sales developed favorably, we were able to keep our material costs on a stable level. One further aspect behind our step-up in profitability is the strong trend in digital sales as well as in well-being. So well-being sales still was growing 9% against quite tough comparison period at the end of 2020, but the digital visits are growing still 20% and obviously, are in a completely different ballpark if we compare to pre-pandemic levels. And we are actually seeing that these areas growing in its importance also in the future. And they will also facilitate the growth in our key sort of strategic focus areas that Ville already explained and we'll explain you further later as well. So we continue to invest well in our digital platform. Investments in intangible assets for the last 12 months amounted now at EUR 25 million compared to as an example, for the period before pandemic, if you take a look at the Q4. Last Q4 2019, it amounted EUR 18 million, so significant sort of increase in our digital investments in our platform. So digital is already an important part of our business, and we are seeing lots of exciting opportunities in the future, which I will talk about more in the next section. At the same time, we maintained our disciplined financial strategy. We are growing our financial strength. Like Ville said, we had our lowest leverage ratio since the IPO. And importantly, we have a greater capacity to invest in attractive growth opportunities. So as we are generating a good solid cash flow, amounting at EUR 195 million last year, we have a sort of strong cash flow to invest in growth, be it in organic or inorganic M&A driven growth. And at the same time, we are even able to increase our dividend like we now propose for the last year. In terms of short-term outlook. We finished '21 strongly with actually very good momentum. The underlying growth drivers in all our businesses remained strong. This means that we expect to see demand continuing to grow in our core markets. And to meet this growing demand, we are working really hard to minimize the supply restriction, and we are recruiting more staff and using our digital services to increase the operational efficiency. Overall, we expect further good progress in both our core business and in our new market in Sweden. So to summarize, you have seen strong business, strong financial performance in '21. You have seen how the business is growing stronger, has a good positive momentum ongoing and on top of that, we are actually seeing quite interesting new growth opportunities in the future. And with that, I would now want to hand back to Ville, who will talk you about -- more about those future growth opportunities.

Thank you, Ilkka. So you just heard about the performance Terveystalo during 2021. Strong KPIs on all fronts, records are being broken on all of the key KPIs that we follow and that, of course, creates a great momentum for Terveystalo going forward. I want to talk about growth a little bit in more detail. We are back on track, as Ilkka said already with growth. And there, I want to highlight 3 elements. First of all, our core business. Core business fundamentals are there, operational machine is working fine and underlying currents of health care demand in Finland are in place. So demand for health care services will continue to grow. At the same time, we have opened new growth avenue in Sweden. I will talk about that one in a little bit more detail. And then finally, we see new exciting opportunities also in digital health care. First, a little bit alongside on our core business. Now we are talking about 2021, but obviously, one needs to remember that Terveystalo is not a 1-year wonder. Looking at the progress of the company, we have been able to grow our business way beyond Finnish health care market growth, both organically, but especially on top of that one with acquisitions. So throughout the years, we have been able to roughly double the organic growth of Finnish health care market and then on top of that one, do value-adding, value-creating acquisitions. So growth trajectory is there. And as I said, growth fundamentals in our core market Finland are in place. If you look at the health care system as a total, there's a need for new services, trends are supporting that one, be it the mental health or long tail of COVID-related issues, there's a scarcity of resources. We are #1 employer in this field, so we can play a role in there. So undercurrent is very strong for our core business. Then Sweden, we made our move across Finnish borders last year. The assumptions behind Terveystalo becoming a Nordic company was basically 2-fold. First of all, we felt that Terveystalo has capabilities when it comes to integrated care and especially when it comes to digital capabilities that are scalable across Finnish borders. Also, we saw an opportunity in Sweden in a form of Sweden being much less consolidated market and us being, as you all know, highly experienced M&A machine, also we saw a great opportunity to consolidate market as we have done in Finland during the past years. Now we, of course, have been there for slightly over half a year, and we know more. But the assumptions are still valid. So we felt that we are good in digital. We are good in care chains and now we still feel that we are very good in those areas. So we have a role to play in Sweden to improve health care to create value for customers -- for Swedish customers as well as Finnish customers. We have seen that the market consolidation is a possibility for us. At the same time, of supporting Feelgood's organic growth and improving their core services, they have been able to jointly supported by us to do already 3 bolt-on acquisitions. And the growth funnel in Sweden looks good. So all in all, I'm really excited about the fact that we have -- with one move, we have doubled the addressable market. The assumptions when going into Sweden are valid and prospects for growth in that market are really, really positive and good. So really excited, that's a very important step for Terveystalo. Then finally, digital front. As I said, when entering into Swedish market, we, of course, cannot 100% copy what we are doing in Finland, but we still felt that digital capabilities that we have shown in Finland, it's already part of our core business, can be deployed in Sweden and scale there and support Swedish health care. As I said, in Finland, digital is already a core business. Last year, we had 1 million digital visits, 1.5 million customers on our digital platform. So that tells a clear story. Now we are seeing 2 imminent opportunities for digital business emerging on top of what we are already today doing. Firstly, public sector in Finland is in need for digital solutions. As we all know, the health care districts are organizing themselves and part of that need that they have is digital tools, digital infrastructure to support hybrid models also in public primary health care services. And we want to be in that space, we want to be able to provide solutions for public sector. And we invest in the area. Secondly, we have now thoroughly studied Swedish market. We are now the gaps that, that market has digitally. We have benchmark market opportunities against our tools and now we have a clear and crisp plan how to scale our tools into the Swedish market. We'll step up the game. We'll see opportunities, these 2 imminent opportunities. In longer term, we see also inbound demand for our digital tools from other health care companies and that will follow in longer term. But primary target for us with the digital is to accelerate the scaling of our hybrid model and secondary goal is to provide services for public organizations and other health care organizations alike as a solution. So the exciting opportunities, just to sum up 2021, very strong finish for '21, as Ilkka explained, good momentum in the business. The core business, the growth drivers are there. There will be some volatility when it comes to COVID and Omicron fading away and may be coming back. But of course, we all hope for normalized situation in that environment, the health care demand will be -- the drivers are very, very strong, and our operational machine, as explained earlier, is in good shape. And finally, very exciting for Terveystalo is the fact that we have opened new growth avenues for us. And as Ilkka explained, with our strong balance sheet, we have the dry powder to do the investments needed into the targets and areas that we choose in those new areas. And with that one, I will thank and close the session, and I'm sure we'll continue into Q&A.

Yes. Thank you, Ville and Ilkka. And we are now ready for your questions. Do we have any questions from the phone lines?

[Operator Instructions] And the first question comes from Grace Lee, Jefferies.

I've got 2 questions, please. On Sweden, you sort of mentioned about the growth outlook in terms of organic and bolt-on acquisitions you've done. Can I ask you to a little bit quantify that growth you aim to achieve sort of near term as well as midterm and sort of relevant margin expectations are you expecting it to that would be helpful? So that's my first question, and I'll follow up with my second question.

If I start and Ilkka can then continue. When we are talking about first the core of Swedish platform, which is occupational health care, that's unconsolidated market with a lot of small players and the bolt-ons that we are seeing in our radar right now are fairly small, but they are value-creating big time. We are concentrating -- as to the margin question, we are concentrating in the first phase in the growth of the platform. We have seen in our Finnish model that you need to have a certain scale to really then bump up the margins. But the funnel for the bolt-ons is strong. They are small pieces, but there's plenty of them for us to go after and digest. At a later stage, we'll obviously look beyond our core and extend our portfolio to new services in excess of occupational health care.

Yes. I think Ville summarized it quite well. So now we are sort of in a growth mode and looking for further consolidation opportunities in Sweden. And that's why, actually, as we don't know, obviously, the profitability of the future -- of the acquired entities that we will acquire in the future, that's why we haven't even internally set the specific target Feelgood being only kind of a platform for our opportunities in Sweden.

Can I just a little bit follow up on that? If you can sort of mention a little bit about organic growth and on the inorganic growth you mentioned internally not that specific target. But are we sort of -- are we saying sort of inorganic growth, potentially, that doubling the organic growth that you're looking? Just any sort of quantification would be really helpful.

Specifically, if the question relates to Sweden, it's really difficult to sort of specify any number, and that is due to the fact that we are seeing actually our sort of M&A funnel is quite strong. So we've been in the market now for that a bit more than half a year. The funnel is strong, but like always, with the M&A, it's kind of difficult to forecast and budget the M&A. And that's why it's a sort of ticketing to put any number for the M&A activities. But I think the sort of -- the key point is that we see actually quite good value-creating opportunities and quite good M&A pipeline in Sweden at the moment. And obviously, there is a sort of organic growth opportunities in Sweden as well as in our home market and -- but that's then maybe a different question than Ville can take.

Yes, just sort of thinking about long-term target of Sweden, of course, we intend to be a major player in that market. Also, Sweden needs to be a major business for Terveystalo. And with that one, of course, you can quantify the long-term targets. We have inside the company now 3 customer groups that we are driving as internal separate businesses, and they have certain sizes and to be a sort of equal player in that field, of course, you need to grow to certain size. And all of these businesses are growing at the same time.

Okay. My second question is on the digital side, which was one of the growth opportunities you highlighted. Can I ask you about those sort of public sector you mentioned as well as the Swedish market? Can you give us how much sort of opportunity do you see in terms of the materiality of that growth opportunity and maybe the competition you might face and the time frame of those different opportunities you've sort of highlighted for us?

So if I got it right, you were asking about the sort of magnitude of the opportunity and then the time frame and competition. Okay. So first of all, we specifically mentioned these 2 opportunities, which are imminent. We know these opportunities well, we also know what we are facing as the competition. So these are very short going into public solution business in Finland and deploying our occupational health care digital to Sweden on the agenda for this year. When it comes to occupational health care tools that we have in our suite, we are -- I would say that we are #1 in the market. So the competition needs to really catch up with us. Of course, we need to productize the tools, and we need to adjust them to the markets that we are then the approaching. But from a competitive point of view, we are in a good shape when it comes to occupational health care. And these are the solutions that are spearheading this digital business for us in countries outside Finland. Then as to the magnitude, priorities are such that scaling this digital business. Firstly and primarily serves scaling of our hybrid model in new markets. So that's number one. Secondly, it can serve as a separate business if and when there will be inbound demand for our tools as we are seeing today. But that's the sort of priority order.

And our next question comes from Sami Sarkamies, Nordea Markets.

I have 3 questions. Firstly, on the financial targets, where you made the point that all of those were met last year. Do you think you will be able to meet this also in the coming few years despite the potential impacts from these in pandemic and expansion in Sweden?

Well, first of all, targets, our targets, and we are not about to change them right now. So we are targeting at meeting the targets, that's self-evident.

Okay. And then on capital allocation, you're hitting possibilities for higher shareholder remuneration going forward. Do you think this will be the case even if you end up making larger acquisitions in Sweden?

Looking at the cash flow profile and our balance sheet at the moment, as Ilkka said in the presentation, we are able to increase the returns for shareholders. As dividends at the same time, it doesn't limit our capacity to invest into basically any potential acquisition targets. So it's a good place to be. We have new opportunities to allocate capital and then we have good capacity to allocate capital.

So basically, maybe to put it into number context, even though that we made 11 acquisitions last year, including that a bit more sizable acquisition in Sweden, and at the same time, we obviously shared dividend during the last year, not so much less than that is now proposed and in addition to that, we had a share buyback program. And all these combined, our cash flow is still such that we were able to decrease our leverage ratio with sort of 0.5 down to 2.5.

Yes. Maybe still continuing on the target setting of Terveystalo, of course, what you see now as a company profile, it's -- when we are talking about these new growth opportunities, of course, we are stepping into a higher growth phase of a company. So there will always, of course, be a balance of growth and then margin. Now we have the growth opportunities. But as I said, long-term targets and midterm targets will, for the time being, remain as they are.

Okay. And then finally, on the public segment outlook, you're saying that you're expecting stable revenues from the outsourcing business. Are you not seeing opportunities to grow this related to the sort of pending health care reform?

Well, of course, outlook is for coming 6 months, right. So that's what we are commenting here. The health care districts, of course, are only getting the act together. They are now in the process of really designing the service processes that they are then deploying. There will be, of course -- we see opportunities there, but it will take time until we see the final shape of any solution in any district. And hence, for this half year period, it's warranted to say that it's stable.

Yes. Maybe still commenting on that, it's Ilkka, the one thing that I would like to highlight that whatever will happen with the pandemic, it's good to note that when taking a look at our sort of market outlook and outlook itself, we will have our hands full when it comes to post-pandemic backlog and pent-up demand. So it's quite obvious that the demand, even in the post-pandemic situation will remain on a high level for the time being, at least. So we can see the sort of the wide range of services that we are able to provide for that demand be it in research or be it in mental health services and other kinds of services. The customer itself can be either private or the public, it doesn't necessarily mean that we have much more sort of public contracts, it can as well be private customer, which sort of opts out the public system and the public cues.

And the next question comes from Panu Laitinmaki, Danske Bank.

I had 2 questions. So first one is on the acquisitions. You have done several in Finland. Would you have a kind of rough number what is the revenue contribution for '22 that will kind of add to your growth? And I'm not meaning Feelgood, but the small ones in Finland. And then secondly, on the outlook for '22, you don't obviously give a guidance, and just commented that you would like to reach the targets also this year. But can you kind of give any color on the like main drivers, where do you see the biggest organic growth opportunity and which would be the slower segment this year? And then on the margins, what are the main drivers? So probably this would assume that operating leverage works, but then how do you see the kind of margin impact from decreasing COVID tests and so? So any color on the '22 drivers basically is the question.

So on that M&A, the sort of the impact of the acquired entities in Finland, in Q4, the sort of the impact was at roughly EUR 7 million. For the full year '21, it's a ballpark, let's say, EUR 12 million to EUR 13 million or so. Obviously, then '22 it depends how the sort of the acquired businesses will develop, but that's kind of a ballpark of the impact that it had for '21 numbers.

When it comes to growth drivers in our core business, actually, the demand drivers are strong in all of the customer groups that we are serving in Finland, we discussed Sweden in the presentation. We will have our hands full in meeting the demand based on the backlogs and society normalizing. It will take a lot of effort from the organization on the other hand to sort of reorganize our setup for normal times to ramp up the supply for normal services. And hence, it's safe to say that given that we are able to ramp up the supply as we intend to, as #1 employee in the industry and with our investments in efficiency, meeting the growth targets will be, let's say, easier than meeting the margin targets because of all of the hassle-related to mix changing over time. But as I said, targets are targets and that's what we are driving for.

All right. Can I just ask a follow-up on this kind of demand outlook? I mean, it sounds quite positive how you comment on the market. And if I think about 2 years ago, when we spoke, the market outlook was quite good back 10 as well, but maybe not the toll was not as positive. So what -- has the pandemic kind of changed things structurally? Or is this about pent-up demand? Or what has changed for the weather, how would you say?

If I first comment on the public supply of services, there has been a lot of discussion in Finland around the fact that sort of pandemic is hindering the supply and services for reaching the customers. And that's partly to -- but actually, what we have seen over the 2 years and even longer is the sort of supply all the time lagging behind the increasing demand. So demand drivers as megatrends are there. So health care demand will grow in Finland. Supply has not been able to keep the pace with that one on public side. And it's evident more than ever after pandemic. So there is pent-up demand, but there's also sort of a structural deficit of services that we see emerging.

And the next question comes from Sami Sarkamies, Nordea Markets.

Sorry to bother. Can you still repeat the impact from M&A in Finland regarding last year and then sort of tailwinds going into this year? I missed the numbers.

So the impact in Finnish operations, it was roughly EUR 7 million in Q4. And roughly in the ballpark, let's say, I tried to do it in my head, it's roughly EUR 12 million to EUR 13 million for the full year '21.

Okay. And what's going to be the sort of tailwind for this year from the acquisitions that we made during the year?

Obviously, the sort of the run rate impact for this year is somewhat higher than that EUR 12 million to EUR 13 million. But obviously, it depends as well how the sort of the acquired entities will develop, but it's higher than EUR 12 million to EUR 13 million, obviously, that's the sort of the financial impact for the last year.

And we haven't received further questions at this point. I will hand back to the speakers.

Great. Thanks. We have a couple of questions from the webcast. Just as a reminder, if you have any other questions, please send them over through your webcast link. First one, maybe broadly speaking on the inflation impact going forward for this year, how do you see it affecting the cost base this year? And for example, how relevant are energy costs in our P&L?

Well, yes, I think we are all facing now first time in many, many years, the kind of the inflation, we are now -- or the health care sector is now in the middle of the sort of the -- so every negotiation, so it's still too early comment on that. But when it comes to procurement, most likely, we are seeing -- historically, we have said that we have been able to tackle the sort of the inflation by outgrowing it, so to speak. But now I think it's quite evident that we are facing some kind of impact from that to quantify it for the full year, it's obviously quite difficult as it is for all industries and all businesses. The good thing is that our sort of procurement is heavily sort of tilt to services. So -- and the expectations for the inflation in services is not as high this is for materials and that kind of supplies. And when it comes to electricity, that is not that significant part of our P&L. Obviously, it will have an impact, but we have also hedging in place in our electricity so we have fixed prices for that for a certain period of time. And it's good to know that our operation model is such that we don't own our real estate. So the sort of the electricity that we use is mainly related to sort of the lightening and sort of the laptops and PCs and the medical equipment. So it's not that significant. Typically, we don't in clear majority of our facilities, we don't pay, let's say, heating and air condition and sort of that kind of sort of expenses.

Great. Thanks, Ilkka. And then maybe following on the social and health care reform and new regions, how do you see the regional election result impacting our business opportunities going forward and especially the outsourcing of public health care services to do private sector?

Well, it's maybe not our role to comment on any election results. But what I see in the discussions with health care districts, I see a pragmatic and balanced approach to health care and providing services for tax payers and patients. So there was -- before the health care reform was locked in the parliament, there was a lot of discussion, which was a lot on ideological front. Now we are in a phase when rubber hits the road and these districts need to start delivering health care services. And this pragmatic solution-driven space is where we want to be. And as I said, discussions are balanced. They are pragmatic. And I think that's a very good pace for developing new type of cooperation.

Good. We don't have any other questions from the webcast. So with that, we thank you for your time, and have a great rest of the week.

Thank you.

Thank you.