Terveystalo Group Interim Report 1 January – 31 March, 2023: Solid earnings development driven by strong demand, Terveystalo issues guidance for 2023

Terveystalo Plc, Interim Report 28 April, 2023 at 09:00 EEST

This release is a summary of Terveystalo's Interim Report 1 January – 31 March, 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/

January-March 2023 in brief

• Revenue increased by 3.4% year-on-year to EUR 341.1 (329.7) million. The Healthcare Services segment revenue increased by 4.5% and was EUR 249.8 (239.0) million. Portfolio Businesses revenue decreased by 4.1% and was EUR 70.8 (73.8) million. The revenue from Sweden increased by 14.9% and came to EUR 25.5 (22.2) million.
• Adjusted¹⁾ earnings before interest, taxes, amortization, and impairment losses (EBITA) decreased by 6.4% year-on-year to EUR 36.5 (38.9) million, representing 10.7% (11.8%) of revenue.
  Profitability was reduced year-on-year due to a decline in COVID-19 testing and increased costs driven by the sales mix. Profitability was strengthened by the progress of the profit improvement program as planned and improved operational efficiency.
• Items affecting comparability¹⁾ were EUR 9.4 (0.7) million.
• Result for the period was EUR 11.1 (25.3) million.
• Earnings per share (EPS) was EUR 0.09 (0.20).
• Cash flow from operating activities was EUR 35.9 (24.8) 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 the reporting period are estimated to have an annual run-rate impact of approximately EUR 25 million on profitability. The company estimates the P&L impact for the full-year 2023 to be approximately 30 million euros.
• Terveystalo has changed its operating model and, as a result, the financial reporting structure to better highlight the performance of Terveystalo's businesses. The new reporting structure is aligned with the way the company’s management follows the operational performance of Terveystalo's businesses.
• Starting from 1 January 2023, Terveystalo Group comprises of 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. Expenses related to the profit improvement program were approximately EUR 9.7 million.

CEO Ville Iho: Solid earnings driven by robust demand, the profit improvement program is on track to deliver a 30-million-euro P&L impact in 2023

Strong demand continued in the first quarter of 2023, and Terveystalo's revenue grew by 3.4% to 341 million euros, driven especially by the Healthcare Services segment. We have managed well in an inflationary environment and have been able to increase our topline with the help of pricing and service sales growth, even though the record-high covid-19 testing in the comparison period has dropped close to zero and the outsourcing business lost 21% of revenue due to expired contracts.

Revenue from appointments continued to grow thanks to price increases, an increase in the supply of physical appointments, and an improvement in the customer mix. The share of corporate and consumer customers clearly increased in terms of revenue. The revenue of diagnostics cleared of Covid-19 testing continued its recovery that started in the fall and is already approaching the pre-pandemic level. In addition to brick-and-mortar, the continuity of care, including referrals has also improved in our digital channels. The demand for dental services, which reacted strongly to the pandemic, also seems to be recovering; In the Portfolio businesses, the revenue of Dental services increased by 17% year-on-year.

Swedish business developed positively. Revenue increased by 15% year-on-year to 26 million euros thanks to both acquisitions and organic growth. Comparable EBITA strengthened by 141% thanks to efficiency improvements and was at a record high of 7.2% of revenue.

Adjusted EBITA ended up at EUR 36.5 million and was 10.7% of revenue, which is slightly below the comparison period. Our profit improvement program has progressed quickly. We are satisfied with our rate of improvement, even though our profitability is not yet at our targeted level. The measures taken by the end of Q1 are estimated to have a run-rate impact of 25 million euros and the full-year 2023 P&L impact of the program is estimated to be approximately 30 million euros. The quickly implemented measures in the two-year program have now been taken, and the currently implemented and planned changes require longer-term operational development work.

At the beginning of the year, we changed the structure of our financial reporting in line with our new operating model to better highlight the development of the company's various businesses and their impact on profitability. Despite the volatility of the market environment, we are confident when we look to the future and are strengthening the predictability of our financial performance by issuing profit guidance for the year 2023.

Our priority for 2023–2024 is to carry out our profit improvement program and strengthen our core business, Healthcare services. Our strategy is to provide integrated care by combining the best medical information and digital tools. By focusing on integrated care paths, we strengthen not only the continuity and outcomes of treatment but also the customer experience and our financial performance. We will offer a deeper overview of Terveystalo's business environment, strategy, and new operating model as well as the progress of our two-year profit improvement program at our capital market day in Helsinki on May 10, 2023.

When it comes to health, quality care and smooth access to care are everything. Satisfied customers who feel they are getting the help and care they need are the foundation of everything we do. We are proud of our customer Net Promoter Score's record level of 84.5 and the excellent development of the PEI index, which measures the experienced effectiveness of treatment. These support our strong market position and future growth and tell us that we are doing the right things. At Terveystalo, we focus on health so that our customers can focus on the more important things in life.

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 %.
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 a 30-million-euro P&L impact in 2023, and moderate 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
• 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 consider Terveystalo’s long-term development potential and financial position.

Key figures

Terveystalo Group, MEUR	1–3/ 2023	1–3 2022	Change, %	2022
Revenue	341.1	329.7	3.4	1,259.1
Adjusted EBITA * 1)	36.5	38.9	-6.4	105.2
Adjusted EBITA, % * 1)	10.7	11.8	-	8.4
EBITA 1)	27.0	38.3	-29.4	95.9
EBITA, % 1)	7.9	11.6	-	7.6
EBIT	19.1	31.2	-38.9	33.9
EBIT, %	5.6	9.5	-	2.7
Return on equity (ROE), % 1)	1.8	13.2	-	4.1
Equity ratio, % 1)	37.9	42.7	-	40.2
Earnings per share (EUR)	0.09	0.20	-56.0	0.19
Weighted number of shares outstanding, in thousands	126,551	126,439	-	126,508
Net debt	584.0	536.8	8.8	566.6
Gearing, % 1)	103.0	85.0	-	95.7
Net debt/adjusted EBITDA (last 12 months) 1)	3.3	2.6	-	3.2
Adjusted EBITDA (last 12 months), excluding IFRS 16*1)	122.1	160.5	-23.9	122.2
Net debt, excluding IFRS 16	393.5	365.1	7.8	386.8
Adjusted net debt/adjusted EBITDA (last 12 months), excluding IFRS 16*1)	3.2	2.3	-	3.2
Average personnel (FTEs)	6,507	6,202	4.9	6,552
Private practitioners (end of period)	6,087	5,713	6.5	5,928
Sustainability
PEI-index2)	2.9	N/A	N/A	N/A
Net Promoter Score (NPS), appointments	84.5	82.8	2.1	82.7

*) 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.

Briefing
Terveystalo will arrange a webcast and a conference call in English on its result on Friday 28 April 2023 starting at 10:30 EEST. You can watch the webcast online at: https://terveystalo.videosync.fi/2023-q1-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=10010302

Helsinki, 27 April 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