Terveystalo Group Half-Year Report January–June 2024: Strong and rapid progress towards the financial targets
Terveystalo Plc, Half-Year Report 17 July, 2024 at 09:00 EEST
This release is a summary of Terveystalo's Half-Year Report 2024. 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 2024 in brief
- Revenue increased by 5.5 percent year-on-year to EUR 340.1 (322.4) million.
Q2 had one more working day vs. the comparison period.
The Healthcare Services segment revenue increased by 11.4 percent and was EUR 261.4 (234.7) million. Portfolio Businesses revenue decreased by 8.7 percent and was EUR 62.7 (68.6) million. The revenue from Sweden decreased by 10.2 percent and came to EUR 22.1 (24.6) million. - Adjusted1) earnings before interest, taxes, amortization, and impairment losses (EBITA) increased by 49.1 percent year-on-year to EUR 42.5 (28.5) million, representing 12.5 (8.8) percent of revenue.
The profitability strengthened in Healthcare Services and Portfolio Businesses. The profit improvement program, including improved operational efficiency, better sales mix, and successful commercial actions drove profit improvement.
In Sweden, the profitability clearly weakened from the comparison period mainly due to decreased revenue caused by ended contracts and lower demand. - Items affecting comparability1) with a negative effect on EBITA were EUR 10.4 (5.5) million.
- The result for the period was EUR 14.3 (7.5) million.
- Earnings per share (EPS) was EUR 0.11 (0.06).
- Cash flow from operating activities was EUR 44.4 (25.9) million.
- NPS (Net Promoter Score) for appointments was 86.4 (85.8). NPS for hospitals was 95.2 (95.9).
January–June 2024 in brief
- Revenue increased by 4.1 percent year-on-year to EUR 690.4 (663.4) million.
The Healthcare Services segment revenue increased by 9.3 percent and was EUR 529.4 (484.5) million. Portfolio Businesses revenue decreased by 8.6 percent and was EUR 127.3 (139.4) million. The revenue from Sweden decreased by 9.9 percent and came to EUR 45.1 (50.1) million. - Adjusted1) earnings before interest, taxes, amortization, and impairment losses (EBITA) increased by 38.1 percent year-on-year to EUR 89.7 (64.9) million, representing 13.0 (9.8) percent of revenue.
The profitability strengthened in Healthcare Services and Portfolio Businesses. The profit improvement program, including improved operational efficiency, better sales mix, and successful commercial actions drove profit improvement.
In Sweden, the profitability clearly weakened from the comparison period, mainly due to decreased revenue caused by ended contracts and lower demand. A profit improvement program was launched in Sweden during the fourth quarter of 2023 targeting a structural improvement in profitability. The program progressed as planned during the first half of the year. - Items affecting comparability1) with a negative effect on EBITA were EUR 14.6 (14.9) million.
- The result for the period was EUR 37.9 (18.6) million.
- Earnings per share (EPS) was EUR 0.3 (0.1).
- Net debt/adjusted EBITDA was 2.5 (3.3).
- Cash flow from operating activities was EUR 93.5 (61.8) million.
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, gains and losses on the sale of assets, impairment losses, strategic projects, and other items affecting comparability. Adjustments related to the profit improvement programs were approximately EUR 4.9 million during the second quarter and EUR 9.4 million during January-June.
President and CEO Ville Iho: We are on track to reach our financial targets faster than anticipated
Terveystalo's second quarter of 2024 was record strong in terms of revenue and profitability, and the profit improvement program showed its strength especially in May-June. Revenue increased by approximately 6 percent to EUR 340 million and our profitability strengthened significantly year-on-year. Adjusted EBITA increased by nearly 50 percent to EUR 43 million, representing 12.5 percent of revenue. Earnings per share increased by 91 percent year-on-year to EUR 0.11. Our profit improvement measures have had an even faster impact than expected and clearly improved our profitability also during the seasonally lower demand in the summer. We have raised our guidance for 2024 on 11 July 2024: We expect our full-year 2024 adjusted EBITA to be 11.5–12.5 percent of revenue.
The Healthcare Services segment's excellent performance continued for the fifth quarter in a row. The segment's revenue grew by more than 11 percent year-on-year to EUR 261 million in the second quarter. In addition to a strong supply, revenue was boosted by a more favourable customer and service mix and successful commercial actions. Revenue growth and improved operational efficiency increased the segment's adjusted EBITA by 67 percent to EUR 39 million, representing 15 percent of revenue. After running the profit improvement program for 20 months, our core business is on a solid footing and continues to strengthen. We continue to focus on profitable growth through operational excellence and by delivering superior customer value.
The profitability of the Portfolio businesses also strengthened significantly. The segment's adjusted EBITA increased by almost 52 percent year-on-year to approximately EUR 3 million despite the decrease in revenue. EBITA margin was 5 percent. The segment's revenue decreased by approximately 9 percent to EUR 63 million. The planned contraction of the outsourcing agreement portfolio continued. Revenue was also reduced by the proactive customer selection of staffing services and the continued subdued demand for dental services. The sales pipeline in the public market continues to develop slowly, and new tenders have been seen mainly in digital services.
In Sweden, the revenue decreased by approximately 10 percent year-on-year due to expired contracts and weakened demand and was EUR 22 million. The turnaround of business operations is being built systematically. The cost structure has been adjusted to meet demand, and in the next phase, the program will focus on increasing operational efficiency and commercial activities. We expect the impact of the program to be visible as a turnaround from the beginning of 2025 and the full runrate impact to take place during 2025.
Over the past twenty months, we have turned the company around and created a very strong foundation for its development in the coming years. We are on track to reach our financial targets faster than anticipated.
The profit improvement program has demanded a lot from Terveystalo's employees. Achieving the turnaround has also required hard measures, which has inevitably been reflected in our eNPS results. As the program reaches its final stretch, our agenda will also change, and in the future, our actions to drive profitability will be guided even more strongly by customer and personnel experience.
I would like to thank everyone at Terveystalo for their excellent work. Our results are created through your work.
Meaningful matters,
Ville Iho
Guidance for 2024
Terveystalo expects its full-year 2024 revenue to grow (2023: EUR 1,286 million) and adjusted EBITA to be 11.5–12.5 percent of revenue (2023: 9.8 percent).
The estimates are based on the second quarter of 2024 projections for inflation, consumer demand and employment, and normal morbidity. The performance improvement program has significantly exceeded its initial target and the measures are having an impact faster than previously estimated. The estimates include an annual decrease of approximately EUR 10 million in revenue in the Portfolio Businesses segment's outsourcing business. The Sweden segment's revenue is expected to decline due to macro weakness and the exchange rate is expected to remain stable. The increase in the VAT rate in Finland does not significantly impact the 2024 result. The estimates do not include material acquisitions or divestments.
Guidance on 26 April 2024:
Terveystalo estimates its revenue for 2024 to grow (2023: EUR 1,286 million) and its adjusted EBITA margin to be between 10.5 and 11.5 percent (9.8 percent in 2023).
The estimates are based on the first quarter 2024 projections for inflation, consumer demand and employment, normal morbidity, and a predictable labour market in Finland. The estimates include the impact of the successful completion of the profit improvement program and an annual decrease of approximately EUR 10 million in revenue in the Portfolio Businesses segment's outsourcing business. The Sweden segment's revenue is expected to decline due to macro weakness and the exchange rate is expected to remain stable. The possible increase in the VAT rate in Finland is not expected to have a significant impact on the 2024 result. The estimates do not include 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
| EUR mill. unless stated otherwise | 4-6/2024 | 4-6/2023 | Change, % | 1-6/2024 | 1-6/2023 | Change, % | 2023 |
| Revenue | 340.1 | 322.4 | 5.5 | 690.4 | 663.4 | 4.1 | 1,286.4 |
| Adjusted EBITA * 1) | 42.5 | 28.5 | 49.1 | 89.7 | 64.9 | 38.1 | 125.6 |
| Adjusted EBITA, % * 1) | 12.5 | 8.8 | - | 13.0 | 9.8 | - | 9.8 |
| EBITA 1) | 32.1 | 25.0 | 28.5 | 75.1 | 52.0 | 44.4 | 104.4 |
| EBITA, % 1) | 9.4 | 7.7 | - | 10.9 | 7.8 | - | 8.1 |
| Operating profit (EBIT) | 24.6 | 15.0 | 64.2 | 60.3 | 34.0 | 77.1 | -14.7 |
| Operating profit (EBIT), % | 7.2 | 4.6 | - | 8.7 | 5.1 | - | -1.1 |
| Return on equity (ROE) (LTM), % 1) | - | - | - | -4.5 | 1.1 | - | -7.6 |
| Equity ratio, % 1) | - | - | - | 36.9 | 39.0 | - | 36.5 |
| Earnings per share, EUR | 0.11 | 0.06 | 90.8 | 0.30 | 0.15 | 103.4 | -0.3 |
| Weighted average number of shares outstanding, in thousands | 126,605 | 126,556 | - | 126,605 | 126,554 | - | 126,555 |
| Net debt 1) | - | - | - | 569.8 | 601.7 | -5.3 | 598.1 |
| Gearing, % 1) | - | - | - | 110.8 | 105.3 | - | 116.0 |
| Net debt/Adjusted EBITDA (LTM) * 1) | - | - | - | 2.5 | 3.3 | - | 3.0 |
| Adjusted EBITDA (LTM), excluding IFRS 16 * 1) | - | - | - | 169.3 | 124.5 | 36.0 | 142.8 |
| Net debt, excluding IFRS 16 1) | - | - | - | 365.2 | 399.9 | -8.7 | 379.0 |
| Net debt/Adjusted EBITDA (LTM), excluding IFRS 16 * 1) | - | - | - | 2.2 | 3.2 | - | 2.7 |
| Average personnel (FTEs) | - | - | - | 5,956 | 6,563 | -9.2 | 6,426 |
| Private practitioners (end of period) | - | - | - | 6,020 | 6,145 | -2.0 | 6,092 |
| Sustainability | |||||||
| PEI-index2) | 3.0 | 2.9 | 3.4 | 2.9 | |||
| Net Promoter Score (NPS), appointments | 86.4 | 85.8 | 0.7 | 84.8 | |||
| Net Promoter Score (NPS), hospitals | 95.2 | 95.9 | -0.7 | 94.5 | |||
| Employee Net Promoter Score (eNPS)3) | 10 | 23 | -56.5 | 18 |
*) 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) 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
3) Includes only Finland, as in Sweden eNPS is measured only once a year.
Result briefing
Terveystalo will arrange a webcast and a conference call in English on its result on Wednesday 17 July 2024 starting at 10:30 EEST. You can watch the webcast online at: https://terveystalo.videosync.fi/q2-2024
You can access the teleconference by registering at the link below.
https://palvelu.flik.fi/teleconference/?id=50048571
After the registration, you will be provided phone numbers and a conference ID to access the conference.
Helsinki, 16 July 2024
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