Terveystalo Group Interim Report January–September 2024: Strong earnings growth driven by improved operational efficiency
Terveystalo Plc, Interim Report, 25 October 2024 at 09:00 EEST
This release is a summary of Terveystalo's Interim Report for January–September 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/
July–September 2024 in brief
- Revenue increased by 5.4 percent year-on-year to EUR 295.8 (280.5) million.
Q3 had one more working day vs. the comparison period.
The Healthcare Services segment revenue increased by 10.8 percent and was EUR 232.0 (209.3) million. Portfolio Businesses revenue decreased by 9.9 percent and was EUR 54.5 (60.5) million. The revenue from Sweden decreased by 9.7 percent and amounted to EUR 14.2 (15.8) million. - Adjusted1) earnings before interest, taxes, amortization, and impairment losses (EBITA) increased by 62.2 percent year-on-year to EUR 34.3 (21.1) million, representing 11.6 (7.5) percent of revenue.
Profitability strengthened in Healthcare Services and Portfolio businesses. Improved operational efficiency, a more favourable sales mix, a more balanced margin mix, and successful commercial measures, as a result of the profit improvement program, led to both absolute and margin-level adjusted EBITA growth. In Sweden, however, profitability declined compared to the previous period, primarily due to reduced revenue from terminated contracts and lower demand. - Items affecting comparability1) with a negative effect on EBITA were EUR 1.8 (2.7) million.
- The result for the period was EUR 14.7 (3.3) million.
- Earnings per share (EPS) quadrupled year-on-year and amounted to EUR 0.12 (0.03).
- Cash flow from operating activities was EUR 41.3 (35.6) million.
- NPS (Net Promoter Score) for appointments was 86.8 (85.8). NPS for hospitals was 96.0 (96.8).
January–September 2024 in brief
- Revenue increased by 4.5 percent year-on-year to EUR 986.1 (944.0) million.
The Healthcare Services segment revenue increased by 9.7 percent and was EUR 761.5 (693.8) million. Portfolio Businesses revenue decreased by 9.0 percent and was EUR 181.8 (199.9) million. The revenue from Sweden decreased by 9.9 percent and amounted to EUR 59.4 (65.9) million. - Adjusted1) earnings before interest, taxes, amortization, and impairment losses (EBITA) increased by 44.0 percent year-on-year to EUR 124.0 (86.1) million, representing 12.6 (9.1) percent of revenue.
Profitability strengthened in Healthcare Services and Portfolio businesses. Improved operational efficiency, a more favourable sales mix, a more balanced margin mix, and successful commercial measures, as a result of the profit improvement program, led to both absolute and margin-level adjusted EBITA growth. In Sweden, however, profitability declined compared to the previous period, primarily due to reduced revenue from terminated contracts and lower demand. In Q4 2023, Sweden launched a profit improvement program aimed at boosting profitability by 2025. The program is on track, with cost adjustments to match weakened demand, including reduced personnel costs in Q3. The focus now shifts to enhancing operational efficiency and commercial measures. - Items affecting comparability1) with a negative effect on EBITA were EUR 16.4 (15.7) million.
- The result for the period was EUR 52.7 (21.9) million.
- Earnings per share (EPS) increased by 140.4 percent year-on-year and amounted to EUR 0.42 (0.17).
- Net debt/adjusted EBITDA was 2.3 (3.1).
- Cash flow from operating activities was EUR 134.9 (97.4) 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 1.9 million during the third quarter and EUR 11.3 million during January-September.
President and CEO Ville Iho: Strong earnings growth continued, building a solid foundation for future value creation
Terveystalo continued its strong development in the third quarter of 2024. Our revenue increased by approximately 5 percent to EUR 296 million, and our profitability improved significantly from the comparison period. Our profit improvement measures have also proven effective during seasonally lower demand. Adjusted EBITA increased by more than 62 percent to EUR 34 million, corresponding to 11.6 percent of revenue. Our earnings per share quadrupled year-on-year, reaching EUR 0.12.
The Healthcare services segment's excellent performance continued for the sixth quarter in a row. The segment's revenue grew by almost 11 percent year-on-year, reaching EUR 232 million in the third quarter. Strong supply, improved sales mix, successful commercial operations, and an early and strong flu season each contributed to revenue growth. Revenue grew in all customer groups. Growth and improved operational efficiency increased the segment's adjusted EBITA by 67 percent to EUR 34 million, representing approximately 15 percent of revenue. The foundations of our core business are solid and will continue to strengthen as we focus on profitable growth, operational efficiency, medical quality, and value-creating services for our customers.
Despite a 10% drop in revenue, Portfolio businesses saw a significant improvement in profitability. Adjusted EBITA rose by 70% year-on-year to about EUR 3 million, making up 6% of the segment's EUR 54 million revenue. Loss-making outsourcing deals have for the most part ended, and Staffing Services now selects customers more carefully to boost profitability. However, demand for oral health services remains subdued and sales in the restructured public market continue to progress slowly. Only digital services have seen new tenders.
Revenue from the Swedish business decreased by approximately 10 percent year-on-year due to expired contracts and weakened demand and was EUR 14 million. The turnaround in profitability is being built systematically. The cost structure has been adjusted to meet demand, and in the next phase, we will focus on increasing operational efficiency and commercial activities. We expect a turnaround in profitability from the beginning of 2025 and the full run-rate effect to materialize during 2025.
Over the past 24 months, we have built a solid structure and foundation for future value creation. We have adjusted our guidance range for 2024 adjusted EBITA margin to 12-12.5% and we anticipate meeting our financial target for profitability one year earlier than planned. At the same time, our medical quality and customer satisfaction are consistently high, thanks to the dedication and hard work of our employees and professionals. We aim to further develop integrated healthcare and provide more fluent, caring, and effective services for our customers. We will discuss the next stage of our strategy at our December Capital Markets Day.
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 12.0–12.5 percent of revenue (2023: 9.8 percent).
The estimates are based on the third 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 estimates include the increase in the VAT rate that has entered into force, the salary increases based on the collective labour agreement for nurses, as well as a one-off payments impacting all personnel costs in the fourth quarter. The estimates do not include material acquisitions or divestments.
Guidance on 17 July 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.
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 | 7-9/2024 | 7-9/2023 | Change, % | 1-9/2024 | 1-9/2023 | Change, % | 2023 |
| Revenue | 295.8 | 280.5 | 5.4 | 986.1 | 944.0 | 4.5 | 1,286.4 |
| Adjusted EBITA * 1) | 34.3 | 21.1 | 62.2 | 124.0 | 86.1 | 44.0 | 125.6 |
| Adjusted EBITA, % * 1) | 11.6 | 7.5 | - | 12.6 | 9.1 | - | 9.8 |
| EBITA 1) | 32.5 | 18.4 | 76.4 | 107.5 | 70.4 | 52.8 | 104.4 |
| EBITA, % 1) | 11.0 | 6.6 | - | 10.9 | 7.5 | - | 8.1 |
| Operating profit (EBIT) | 25.0 | 10.2 | 144.0 | 85.2 | 44.3 | 92.6 | -14.7 |
| Operating profit (EBIT), % | 8.4 | 3.6 | - | 8.6 | 4.7 | - | -1.1 |
| Return on equity (ROE) (LTM), % 1) | - | - | - | -2.2 | 5.1 | - | -7.6 |
| Equity ratio, % 1) | - | - | - | 37.8 | 39.0 | - | 36.5 |
| Earnings per share, EUR | 0.12 | 0.03 | >200,0 | 0.42 | 0.17 | 140.4 | -0.33 |
| Weighted average number of shares outstanding, in thousands | 126,605 | 126,556 | - | 126,605 | 126,554 | - | 126,555 |
| Net debt 1) | - | - | - | 545.4 | 597.2 | -8.7 | 598.1 |
| Gearing, % 1) | - | - | - | 103.0 | 103.5 | - | 116.0 |
| Net debt/Adjusted EBITDA (LTM) * 1) | - | - | - | 2.3 | 3.1 | - | 3.0 |
| Adjusted EBITDA (LTM), excluding IFRS 16 * 1) | - | - | - | 182.3 | 133.1 | 37.0 | 142.8 |
| Net debt, excluding IFRS 16 1) | - | - | - | 350.0 | 391.5 | -10.6 | 379.0 |
| Net debt/Adjusted EBITDA (LTM), excluding IFRS 16 * 1) | - | - | - | 1.9 | 2.9 | - | 2.7 |
| Average personnel (FTEs) | - | - | - | 5,889 | 6,471 | -9.0 | 6,426 |
| Private practitioners (end of period) | - | - | - | 6,037 | 6,126 | -1.5 | 6,092 |
*) 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.
Result briefing
Terveystalo will arrange a webcast and a conference call in English on its result on Friday 25 October 2024 starting at 10:30 EEST. You can watch the webcast online at: https://terveystalo.videosync.fi/q3-2024
You can access the teleconference by registering at the link below.
https://palvelu.flik.fi/teleconference/?id=50048572
After the registration, you will be provided phone numbers and a conference ID to access the conference.
Helsinki, 24 October 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
Tel. +358 10 345 2034
[email protected]
Distribution:
Nasdaq Helsinki Oy
Main media
www.terveystalo.com
