Terveystalo Group Half-Year Report January-June 2023: Good profit development across segments in the second quarter of the year

Terveystalo Plc, Half-Year Report 18 July, 2023 at 09:00 EEST

This release is a summary of Terveystalo's Half-Year Report 2023. 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/

April-June 2023 in brief

• Revenue increased by 1.3% year-on-year to EUR 322.4 (318.2) million.
  The Healthcare Services segment revenue increased by 4.7% and was EUR 234.7 (224.1) million.
  Portfolio Businesses revenue decreased by 7.7% and was EUR 68.6 (74.3) million.
  The revenue from Sweden increased by 6.8% in SEK terms. In euro terms, the revenue decreased by 2.4% due to the weakening of the exchange rate and came to EUR 24.6 (25.2) million.
• Adjusted¹⁾ earnings before interest, taxes, amortization, and impairment losses (EBITA) increased by 18.1% year-on-year to EUR 28.5 (24.1) million, representing 8.8% (7.6%) of revenue.
  Profitability was strengthened across segments by the normalisation of the sales mix, price increases, the progress of the profit improvement program as planned, and improved operational efficiency. Continued high inflation dampened the strengthening of profitability.
• Items affecting comparability¹⁾ with an effect on EBITA were EUR 3.5 (1.7) million.
• Result for the period was EUR 7.5 (11.1) million.
• Earnings per share (EPS) was EUR 0.06 (0.09).
• Cash flow from operating activities was EUR 25.9 (34.8) million.
• The profit improvement program targeting at least 50-million-euro annual (run-rate) EBITA improvement by the end of 2024 has progressed according to the plan. The measures implemented by the end of the reporting period are estimated to have an annual run-rate impact of approximately EUR 40 million on profitability. The company estimates the P&L impact for the full-year 2023 to be over EUR 30 million.

January-June 2023 in brief

• Revenue increased by 2.4% year-on-year to EUR 663.4 (647.9) million. The Healthcare Services segment revenue increased by 4.6% and was EUR 484.5 (463.1) million. Portfolio Businesses revenue decreased by 5.9% and was EUR 139.4 (148.1) million.The revenue from Sweden increased by 14.3% in SEK terms. In euro terms, the revenue grew by 5.7% and came to EUR 50.1 (47.4) million.
• Adjusted¹⁾ earnings before interest, taxes, and amortization (EBITA) increased by 3.0% to EUR 64.9 (63.1) million, representing 9.8 (9.7) percent of revenue.
• Items affecting comparability with an effect on EBITA were EUR 13.0 (2.3) million.
• Profit for the period was EUR 18.6 (36.4) million.
• Earnings per share (EPS) were EUR 0.15 (0.29).
• Net debt/adjusted EBITDA was 3.3 (2.7).
• Cash flow from operating activities was EUR 61.8 (59.6) million.
• Starting from 1 January 2023, Terveystalo Group comprises three reporting segments: Healthcare Services, Portfolio Businesses, and Sweden. Comparative data for the 2022 fiscal year in accordance with the new reporting structure was published on 28 March 2023.

The figures in parentheses refer to the corresponding period one year ago.

1) 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. Adjustments related to the profit improvement program were approximately EUR 3.8 million during the second quarter and 13.5 million during January-June.

CEO Ville Iho: Clearly strengthened profitability across segments

Terveystalo's revenue increased by 1.3% to 322.4 million euros in the second quarter of 2023, driven by the Healthcare Services segment. As expected, the revenue of the Portfolio businesses decreased year-on-year due to the expired outsourcing contracts. Sweden's revenue continued to increase in local currency but decreased for the first time in euro terms due to the weakening of the exchange rate.

Revenue from appointments continued to grow thanks to an improved supply of physical appointments, price increases, and an improvement in the customer mix. The recovery of underlying diagnostics excluding Covid-19 testing continued until the beginning of the summer, when the demand fell due to a clearly reduced number of infections in addition to the normal holiday season impact. We have successfully strengthened our brick-and-mortar offering for three consecutive quarters to meet record demand. The supply is now more balanced compared to the aftermath of the pandemic, which is also reflected in the variation of booking rates according to the holiday and infection seasons.

We have managed to strengthen our profitability despite continued high inflation and the end of Covid-19 testing. Adjusted EBITA increased by 18.1% from the comparison period to 28.5 million euros. The profitability of the Healthcare services segment was strengthened by a more favourable sales mix, successful pricing measures, and the profit improvement program progressing as planned. Portfolio businesses and Sweden also strengthened their profitability significantly from the comparison period.

The profit improvement program measures implemented by the end of the second quarter are estimated to have an approximately EUR 40 million annual run-rate impact on profitability, and the P&L effect of the program for the entire year 2023 is estimated to exceed EUR 30 million. The rise in the general interest rate and continued high inflation underlines the importance of the profit improvement program during the next quarters.

During the second quarter, we issued our first 100-million-euro sustainability-linked bond, and we are very proud of the successful issuance. As a leading operator in private healthcare, we want to set an example and reform healthcare in a more sustainable direction.

Our most important sustainability goal is to fight for a healthier life, and we are constantly working towards more integrated and data-driven care with best-in-class care outcomes and people experience. The key means to achieve the goal are successful investments in automation and digital customer paths. At the end of the second quarter, we took a significant step towards smoother treatment paths, when our care need assessment tool using artificial intelligence was introduced to the first occupational health client. This is software as a medical device that directs the patient to the right treatment path and professional at the right time, thus improving care outcomes and resource management. We will continue to invest in the utilization of innovative technology, and we see the technological transformation in healthcare accelerating further.

The direction in which our operating environment is developing is about to change significantly through the healthcare-related entries and goals in the new government program, published at the end of the second quarter. The new government program contains many entries aimed at increasing cooperation between private and public healthcare to improve the effectiveness and cost-efficiency of the healthcare system. We estimate that the measures will support the growth of demand for private provision. When it comes to health, smooth access to treatment, effective patient-centric treatment paths, and high-quality care are everything. We welcome the government’s strong intent to utilize private operators as a part of the solution by using our full capacity, know-how, and investment ability.

Meaningful Matters,
Ville Iho
 

Guidance for 2023

Terveystalo estimates its revenue for the full year 2023 to grow (2022: EUR 1,259 million) and its adjusted EBITA margin to be between 9.1% and 10.1% (8.4% in 2022).

Estimates are based on consumer demand and the number of employed remaining on current levels both in Finland and Sweden, the profit improvement program delivering over 30-million-euro P&L impact in 2023, and prolonged inflation during 2023. Additionally, the estimates assume no material changes in public sector behaviour, excluding the reduction of public outsourcing revenue from 2022 levels. Estimates exclude any material acquisitions or divestments.

Financial targets

Terveystalo’s financial targets are:

• annual revenue growth of at least 5 percent through organic growth and acquisitions
• an adjusted EBITA margin of at least 12 percent in 2025
• net debt/adjusted EBITDA ratio of 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 consider Terveystalo’s long-term development potential and financial position.

Key figures

Terveystalo Group, MEUR	4–6/ 2023	4–6/ 2022	Change, %	1–6/ 2023	1–6/ 2022	Change, %	2022
Revenue	322.4	318.2	1.3	663.4	647.9	2.4	1 259.1
Adjusted EBITA * 1)	28.5	24.1	18.1	64.9	63.1	3.0	105.2
Adjusted EBITA, % * 1)	8.8	7.6	-	9.8	9.7	-	8.4
EBITA 1)	25.0	22.5	11.2	52.0	60.7	-14.4	95.9
EBITA, % 1)	7.7	7.1	-	7.8	9.4	-	7.6
EBIT	15.0	14.6	2.8	34.0	45.8	-25.7	33.9
EBIT, %	4.6	4.6	-	5.1	7.1	-	2.7
Return on equity (ROE), % 1)	-	-	-	1.1	12.6	-	4.1
Equity ratio, % 1)	-	-	-	39.0	40.6	-	40.2
Earnings per share (EUR)	0.06	0.09	-32.3	0.15	0.29	-48.8	0.19
Weighted number of shares outstanding, in thousands	126,556	126,548	-	126,554	126,472	-	126,508
Net debt	-	-	-	601.7	557.3	8.0	566.6
Gearing, % 1)	-	-	-	105.3	92.1	-	95.7
Net debt/adjusted EBITDA (last 12 months) 1)	-	-	-	3.3	2.7	-	3.2
Adjusted EBITDA (last 12 months), excluding IFRS 16*1)	-	-	-	124.5	155.5	-19.9	122.2
Net debt, excluding IFRS 16	-	-	-	399.9	383.0	4.4	386.8
Adjusted net debt/adjusted EBITDA (last 12 months), excluding IFRS 16*1)	-	-	-	3.2	2.5	-	3.2
Average personnel (FTEs)	-	-	-	6,563	6,470	1.4	6,552
Private practitioners (end of period)	-	-	-	6,145	5,813	5.7	5,928
Sustainability
PEI-index2)				2.9	N/A	-	N/A
Net Promoter Score (NPS), appointments				85.7	82.6	-	82.7
Employee Net Promoter Score (eNPS)				23	30	-	29

*) 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, strategic projects, and other items affecting comparability.
1) Alternative performance measure. In addition to the IFRS figures, Terveystalo presents additional, alternative performance indicators that 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 PEI index (Patient Enablement Instrument) is used to measure whether the patient feels that he is coping with his symptoms or illness much better, better, as before, or worse after the reception. The scale is -1-4.


Result briefing
Terveystalo will arrange a webcast and a conference call in English on its result on Tuesday 18 July 2023 starting at 10:30 EEST. You can watch the webcast online at: https://terveystalo.videosync.fi/2023-q2-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=10010303

Helsinki, 17 July 2023
Terveystalo Plc
Board of Directors

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

Kati Kaksonen, Vice President, Investor Relations, Sustainability & Communications
Tel. +358 10 345 2034
[email protected]

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