Terveystalo Group Financial Statements Release 2022: Solid revenue growth, profit improvement program is well underway

Terveystalo Plc, Financial Statements Release 10 February 2023 at 09:00 EET

This release is a summary of Terveystalo's Financial Statements Release 2022. The full release is attached to this stock exchange release and is available on our website at:

https://www.terveystalo.com/en/company/investors/reports-and-presentations/
 

October-December 2022 in brief

•          Revenue increased by 2.2% year-on-year to EUR 334.8 (327.5) million. The revenue in Finland increased by 1.0%. The revenue of Sweden and others segment1) increased by 17.9% and came to EUR 27.6 (23.4) million.

•          Supply of appointments grew by 15% year-on-year

•          Adjusted2) earnings before interest, taxes, amortization, and impairment losses (EBITA) decreased by 29.1% year-on-year to EUR 29.7 (41.9) million, representing 8.9% (12.8%) of revenue.
Profitability was reduced year-on-year due to a decline in COVID testing, changes in the sales mix with a larger share of shorter care pathways, as well as increased costs.

•          Adjusted items affecting comparability2) were EUR 7.3 (1.0) million.

•          Result for the period was EUR 7.6 (25.8) million.

•          Earnings per share (EPS) was EUR 0.06 (0.20).

•          Cash flow from operating activities was EUR 76.5 (86.1) million.

•          The profit improvement program targeting at least 50-million-euro annualized (run-rate) EBITA improvement by the end of 2024, has progressed according to the plan. The measures implemented by the end of 2022 are estimated to have an annual run-rate impact on the profitability of around 11 million euros.

January-December 2022 in brief

•          Revenue increased by 9.0% year-on-year to EUR 1,259.1 (1,154.6) million. The revenue in Finland increased by 4.3%. The revenue of Sweden and others segment1) came to EUR 92.8 (36.9) million.

•          Supply of appointments grew by 11% year-on-year

•          Adjusted2) earnings before interest, taxes, amortization, and impairment losses (EBITA) decreased by 25.4% year-on-year to EUR 105.2 (141.0) million, representing 8.4 (12.2) percent of revenue.

•          Adjusted items affecting comparability2) were EUR 39.5 (4.3) million. The operating result was weakened by one-off write-downs of approximately EUR 29 million due to a decision to suspend certain sub-projects relating to development of basic IT-systems during the third quarter.

•          Result for the period was EUR 24.4 (80.4) million.

•          Earnings per share (EPS) were EUR 0.19 (0.63).

•          Net debt/adjusted EBITDA (last 12 months) was 3.2 (2.5).

•          Cash flow from operating activities was EUR 140.9 (195.2) million.

•          The Board of Directors proposes to the Annual General Meeting that a dividend of EUR 0.28 (0.28) per share be distributed for 2022 and the dividend payment would happen in two installments.

The figures in parentheses refer to the corresponding period one year ago.
1) Consists of the Group’s business operations in Sweden, Estonia, and the Netherlands. Feelgood (Sweden) has been consolidated from 1 July 2021 onwards.  Estonia and the Netherlands did not have a significant effect on revenue during the reporting period.

2) Adjustments are material items outside the ordinary course of business, associated with acquisition-related expenses, restructuring-related expenses, net gains, and losses on the sale of assets, impairment losses, strategic projects and other items affecting comparability. Expenses related to the profit improvement program were approximately EUR 4.9 million.

 

Ville Iho, President and CEO: Continued strong demand, profit improvement program proceeding as planned

Demand for health services continued to be strong in the fourth quarter of 2022. Challenges related to the sales mix continued, and demand in our core business continued to focus on appointments and lower-margin care chains, reducing revenue and profitability compared to the reference period, which coincided with the peak in coronavirus testing due to the spread of the Omicron variant. The share of diagnostics visits excluding COVID testing is gradually increasing but remains below the level of 2019. Surgical operations and digital services, which were in strong demand throughout the year, continued to grow. In the last quarter of the year, revenue overall increased by 2.2% year-on-year to EUR 334.8 million. Our business in Sweden accounted for about half of this growth.

 

Inflationary pressures and the dilution of the sales mix continued in the last quarter of the year. However, the actions taken throughout 2022 to increase our supply are starting to yield results. Our supply clearly improved at the end of the year, not only in terms of digital appointments but also in terms of appointments at the clinics. However, the clear improvement was not enough to compensate for the negative profit drivers and profitability still fell short of the targets. Adjusted EBITA for the fourth quarter decreased by 29.1% to EUR 29.7 million, representing 8.9% of revenue. Earnings per share were EUR 0.06. 

 

In connection with Q3, we communicated three sets of measures we are taking to react to the change in the operating environment: the profit improvement program, a change in the operating model, and the independent profitability improvement measures of the portfolio businesses. We have made progress in each of these areas. Our profit improvement program is progressing as planned and we are confident that we will achieve our goal of an annual run-rate EBITA improvement of EUR 50 million by 2024, most of which is estimated to be achieved already in 2023. The measures implemented by the end of 2022 are expected to generate an EBITA improvement of EUR 11 million in 2023. Our renewed management model, based on a clearer division of the core business, portfolio business, and Swedish business, has brought clarity to profit drivers and speed to decision-making; we will renew our reporting from 2023 in accordance with the new structure. 

 

In Finnish healthcare services, the conditions for growth are good. Demand is strong, and the utilization rate of total capacity is high, despite the dip in consumer confidence and the uncertain market environment. Poor access to treatment in public healthcare increases the demand for privately provided services, especially through voluntary health insurance. The situation in the public market is predictably quiet after the reform and there are few new tenders. We expect the market to pick up in the second half of the year 2023 after the start-up phase of the well-being services counties.

 

In the portfolio businesses, each business now has an independent plan to strengthen profitability in a timely manner and these plans are being promoted at full speed.

 

Our Swedish business developed as expected in 2022. Revenue grew organically and through acquisitions, and profitability strengthened compared to the reference period. We see growth potential and opportunities for value creation in Sweden in the medium term.

 

Our financial targets and strategy remain unchanged; in our core business, we aim for industry-leading profitability, and we want to keep our spot as the preferred choice for customers and professionals. Portfolio businesses aim at independent value creation, and in Sweden, we aim for significant and profitable growth in the medium term. Due to the changed operating environment, our primary focus is on the core business and organic growth, and we are clearly more selective in M&A in both of our home markets, Finland, and Sweden.

 

Our financial position is strong, and we are confident about the future. Our goal is to significantly improve the total return for shareholders in the coming years. The board proposes to the Annual General Meeting that the dividend remains at the 2021 level of 0.28 euros.

 

Our customer satisfaction is very strong, and we have maintained our position as the preferred employer among industry professionals. The clinical quality of our services is excellent, and our work to develop the effectiveness of treatment is particularly strongly reflected in the results of our investment areas, such as mental well-being, and in the results of treatment paths for the musculoskeletal system. In the business built around the musculoskeletal system, the number of customers has grown strongly during the year, and the number of referrals from insurance companies has increased thanks to the fast access to care and excellent treatment results based on multi-professional treatment paths.  In terms of mental well-being, Terveystalo has long been a pioneer in building low-threshold services for companies, and our extensive data shows that the services radically reduce sickness absences related to mental health.  Our mission is to fight for a healthier life. We want to keep our client companies moving and we will continue to invest in the effectiveness and high-quality of care pathways.

 

Ville Iho

 

Market outlook

• Demand for health services continues to be strong. However, demand is focused on short care pathways and services, the growth of which is limited by supply. A tight labor market and high inflation create growing pressure on operating costs, including wages.
• The demand for Covid-19 related services is expected to decrease and the demand for digital services to continue strong.
• Significant employment and consumer confidence changes may be reflected in demand.

These views are based on the expected development of demand for Terveystalo’s services within the next six months, compared with the past six months.

 

Financial targets

Terveystalo’s financial targets are:

• annual revenue growth of at least 5 percent through organic growth and acquisitions
• adjusted EBITA margin of at least 12–13 percent in the medium to long term
• net debt/adjusted EBITDA ratio 3.5x or less. However, indebtedness may temporarily exceed the target level, such as in conjunction with acquisitions.
• to distribute a minimum of 40 percent of net profit as dividends annually. However, the dividend proposal must take into account Terveystalo’s long-term development potential and financial position.
   

Key figures

Terveystalo Group, MEUR	10-12/ 2022	10-12/ 2021	Change, %	2022	2021	Change, %
Revenue	334.8	327.5	2.2	1,259.1	1,154.6	9.0
Adjusted EBITDA. * 1)	48.0	59.1	-18.8	178.0	206.1	-13.6
Adjusted EBITDA, % * 1)	14.4	18.1	-	14.1	17.8	-
EBITDA 1)	42.2	58.2	-27.5	168.8	201.8	-16.4
EBITDA, % 1)	12.6	17.8	-	13.4	17.5	-
Adjusted EBITA * 1)	29.7	41.9	-29.1	105.2	141.0	-25.4
Adjusted EBITA, % * 1)	8.9	12.8	-	8.4	12.2	-
EBITA 1)	23.8	40.9	-41.9	95.9	136.7	-29.8
EBITA, % 1)	7.1	12.5	-	7.6	11.8	-
Adjusted EBIT * 1)	20.1	34.8	-42.3	73.4	114.4	-35.8
Adjusted EBIT, % * 1)	6.0	10.6	-	5.8	9.9	-
EBIT	12.8	33.9	-62.3	33.9	110.1	-69.2
EBIT, %	3.8	10.3	-	2.7	9.5	-
Return on equity (ROE), % 1)	-	-	-	4.1	13.6	-
Equity ratio, % 1)	-	-	-	40.2	42.2	-
Earnings per share (EUR)	0.06	0.20	-70.4	0.19	0.63	-69.5
Weighted number of shares outstanding, in thousands	126,548	126,742	-	126,508	127,180	-
Net debt	-	-	-	566.6	519.0	9.2
Gearing, % 1)	-	-	-	95.7	85.2	-
Net debt/adjusted EBITDA (last 12 months) 1)	-	-	-	3.2	2.5	-
Total assets	-	-	-	1,479.4	1,448.6	2.1
Adjusted EBITDA (last 12 months), excluding IFRS 16*1)	-	-	-	122.2	156.9	-22.1
Net debt, excluding IFRS 16	-	-	-	386.8	340.6	13.6
Adjusted net debt/adjusted EBITDA (last 12 months), excluding IFRS 16*1)	-	-	-	3.2	2.2	-
Average personnel (FTEs)	-	-	-	6,552	5,643	16.1
Personnel (end of period)	-	-	-	10,933	9,805	11.5
Private practitioners (end of period)	-	-	-	5,928	5,754	3.0
Sustainability
Quality index2)				92.2	94.6	-2.5
Net Promoter Score (NPS), appointments				82.7	83.0	-0.4
Employee Net Promoter Score (eNPS)				29	32	-9.4
Mixed waste intensity3)				5.81	6.42	-9.6

*) Adjustments are material items outside the ordinary course of business, associated with acquisition-related expenses, restructuring-related expenses, gain on sale of assets, impairment losses, and strategic projects and other items affecting comparability.
1) Alternative performance measure. In addition to the IFRS figures, Terveystalo presents additional, alternative performance indicators which the company monitors internally, and which provide the company management, investors, stock market analysts, and other stakeholders with important additional information concerning the company’s financial performance, financial position, and cash flows. These performance indicators should not be reviewed separately from the IFRS figures and they should not be considered to replace the IFRS figures.

2) The quality index consists of seven effectiveness indicators that describe the clinical and experienced quality, access to care, and the proportion of preventive care.
3) Amount of mixed waste (metric tons) relative to total revenue (100 million)

 

Briefing
Terveystalo will arrange a webcast and a conference call in English on its result on Friday 10 February 2022 starting at 10:30 EET. You can watch the webcast online at: https://terveystalo.videosync.fi/2022-q4-results

 

You can access the teleconference by registering at the link below. After the registration, you will be provided phone numbers and a conference ID to access the conference. http://palvelu.flik.fi/teleconference/?id=10010208

 

 

Helsinki, 9 February 2023
Terveystalo Plc
Board of Directors

 

For further information, please contact:
CFO Juuso Pajunen
Tel. +358 40 584 9722
 

Kati Kaksonen, Vice President, Communications, IR & CR
Tel. +358 10 345 2034
[email protected]

 

Distribution:
Nasdaq Helsinki Oy
Main media
www.terveystalo.com