2021-05-07 07:00:00 CEST

2021-05-07 07:00:12 CEST


REGULATED INFORMATION

English
Pihlajalinna Oyj - Interim report (Q1 and Q3)

Pihlajalinna Interim Report 1 January–31 March 2021 (3 months)


Pihlajalinna Plc                  Interim report           7 May 2021 at 8:00
a.m.

Pihlajalinna Interim report 1 January–31 March 2021 (3 months)

Revenue increased and profitability improved

The figures in this interim report are unaudited. The comparison figures in
brackets refer to the corresponding period in the previous year.

A brief look at January–March:

  · Revenue amounted to EUR 139.9 (133.0) million – an increase of 5.2 per cent
  · Adjusted EBITDA was EUR 15.2 (12.7) million – an increase of 20.2 per cent
  · Adjusted EBIT was EUR 6.7 (4.2) million – an increase of 58.7 per cent
  · IFRS 3 costs and amortisation related to M&A had a negative effect of EUR
0.7 (0.9) million on operating profit
  · Earnings per share (EPS) was EUR 0.20 (0.06)
  · Although the demand for healthcare services is returning to normal, the
customer volumes of Pihlajalinna’s private clinics were approximately 13 per
cent lower than in the comparison period.
  · COVID-19 testing volumes increased by 65 per cent compared to the previous
quarter. Remote services represented 39 per cent of all consultations.
  · Pihlajalinna won a public bidding competition for the sale of Työterveys
Virta Oy’s entire share capital and occupational healthcare services.
Pihlajalinna’s position in North Ostrobothnia will strengthen significantly due
to the acquisition. The transaction was completed on 1 April 2021.

                                                  1–3/2021  1–3/2020       2020
                                                  3 months  3 months  12 months
INCOME STATEMENT
Revenue, EUR million                                 139.9     133.0      508.7
EBITDA, EUR million                                   15.0      12.1       52.4
EBITDA, %                                             10.8       9.1       10.3
Adjusted EBITDA, EUR million*                         15.2      12.7       54.6
Adjusted EBITDA, %*                                   10.9       9.5       10.7
Operating profit (EBIT), EUR million                   6.5       3.3       18.2
Operating profit, %                                    4.7       2.5        3.6
Adjusted operating profit (EBIT), EUR million*         6.7       4.2       20.8
Adjusted operating profit, %*                          4.8       3.2        4.1
Profit before tax (EBT), EUR million                   5.6       2.0       13.8

SHARE-RELATED INFORMATION
Earnings per share (EPS), EUR                         0.20      0.06       0.39
Equity per share, EUR                                 5.02      4.54       4.85
Dividend per share, EUR                                                    0.20

OTHER KEY FIGURES
Return on capital employed (ROCE), %                   6.7       3.1        5.7
Return on equity (ROE), %                             10.3       3.7        8.1
Equity ratio, %                                       26.4      24.8       26.1
Gearing, %                                           160.0     186.6      169.4
Interest-bearing net debt, EUR million               189.6     201.2      194.8
Net debt/adjusted EBITDA, 12 months*                   3.3       3.6        3.6
Gross investments, EUR million**                       4.3      10.2       25.7
Cash flow from operating activities, EUR million      10.8      21.4       47.2
Cash flow after investments, EUR million               7.6      18.1       42.8
Average number of personnel (FTE)                    4,444     4,350      4,308
Personnel at the end of the period (NOE)             5,783     5,535      5,550

* Significant transactions that are not part of the normal course of business,
infrequently occurring events or valuation items that do not affect cash flow
are treated as adjustment items affecting comparability between review periods.
According to Pihlajalinna’s definition, such items include, for example,
restructuring measures, impairment of assets and the remeasurement of previous
assets held by subsidiaries, the costs of closing down businesses and business
locations, gains and losses on the sale of businesses, costs arising from
operational restructuring and the integration of acquired businesses, costs
related to the termination of employment relationships as well as fines and
corresponding compensation payments. Pihlajalinna does not recognise adjustments
affecting comparability for acquisition-related transfer taxes and expert fees
(IFRS 3 costs) or purchase price allocation (PPA) amortisation.

Adjustments to EBITDA totalled EUR 0.2 (0.5) million for the quarter.
Adjustments to operating profit for the quarter totalled EUR 0.2 (0.9) million.

** Assets acquired via leases are regarded as equal to assets acquired by the
Group itself, meaning that right-of-use assets pursuant to IFRS 16 are included
in gross investments.

Pihlajalinna’s outlook for 2021

It is still hard to assess and predict the financial impacts of the duration of
the COVID-19 situation. National or regional restrictions aimed at mitigating
the COVID-19 epidemic and potential delays in COVID-19 vaccinations may have a
negative impact on consumer demand. At the same time, extensive COVID-19
testing, vaccinations, working through the queues in the public sector and the
release of other pent-up demand help compensate for the decline in consumer
demand.

Pihlajalinna’s consolidated revenue is expected to increase clearly and adjusted
EBIT is expected to improve clearly compared to 2020.

Joni Aaltonen, CEO of Pihlajalinna:

Pihlajalinna’s profitability improved and revenue developed favourably in the
first quarter. Revenue increased by 5.2 per cent and adjusted operating profit
by 58.7 per cent year-on-year. The demand for healthcare services is returning
to normal, but the customer volumes of private clinics were still lower than in
the comparison period. COVID-19 testing volumes continued to grow in the first
quarter.

The renewal of Pihlajalinna’s sales strategy has been successful. In the public
sector, we have transitioned from the outsourcing market to the service sales
market, in which the impact of the planned reform of social, healthcare and
rescue services is low. The most significant agreements signed in the beginning
of the year are the extension of the COVID-19 sampling agreement with HUS, COVID
-19 testing services for the City of Oulu, health advisory services for the
ports of Helsinki, telephone services and the assessment of the need for
treatment for the City of Vantaa, staffing services concerning COVID-19
vaccination personnel in the Turku region and the City of Helsinki as well as
remote doctor consultations for the City of Helsinki. We also won the
competitive bidding processes for healthcare services for the municipality of
Hailuoto and specialist services for the City of Seinäjoki.

Occupational healthcare continues to grow and service demand has been strong in
spite of the COVID-19 epidemic. The key drivers of growth include digital
services and competitive pricing as well as successful acquisitions, including
Työterveys Virta in the Oulu region, which became part of Pihlajalinna Group at
the beginning of April. The agreements signed in the first quarter will see the
number of private persons within the scope of Pihlajalinna’s occupational
healthcare services increase to approximately 230,000.

In March, Pihlajalinna announced an investment in NONNA Group, a developer and
provider of modern housing solutions. NONNA Group is preparing to introduce a
completely new service concept to the market and we believe it will achieve a
significant market share as the population ages. There is no overlap between our
services. Instead, I see considerable synergies between our businesses. For
example, the companies could engage in joint city block projects in the future
to combine diverse types of housing and services. Pihlajalinna’s role would also
be to provide the necessary healthcare services for the residents.

Pihlajalinna published specifications to its strategy in the first quarter. We
have three strategic priorities:

  · the renewal of private services, for example through new service concepts
  · close cooperation with public sector entities and the future wellbeing
services counties
  · strengthening the role of digitalisation in the development of personnel,
customer experience and operational performance.

Our objective is to offer the most attractive and diverse range of services that
are the easiest to access in our industry and available without delay.

I believe we have two key competitive advantages. We have systematically
developed our operations with the aim of offering a service to suit each
customer’s situation as well as a genuinely multichannel service model. We will
continue to develop our offering broadly through new partnerships, for example.
Another key success factor is easy access to our services, both at our private
clinics and through remote channels. Approximately 8,000 people are currently
waiting for access to treatment having waited longer than the times stipulated
by the legislative provisions concerning the care guarantee. In February 2021, a
total of 28,417 people had waited for specialised care for more than three
months. This situation can be characterised as exceptional. Our job at
Pihlajalinna is to provide a channel through which the consumer can access the
service in need without unnecessary waiting. I believe that by taking
responsibility for the health of the individual as well as their quick and
appropriate access to care – regardless of the actions taken by legislators and
other parties – we will be able to continue to strengthen our position in the
market.

In the long term, the underlying drivers of our business will continue to grow
stronger. The ageing of the population will have a significant impact on the
demand for healthcare and wellbeing services in the 2020s. For example, the
number of people over the age of 75 will grow by an estimated 250,000 in Finland
during this decade. This will have a direct impact on service demand: the costs
of social and healthcare service for the 75–84 age group, for example, are
approximately three times higher than the population average. For people over
the age of 85, these costs are nearly seven times higher than the population
average.

This raises the question of how Finland will solve the sustainability gap and
how can the current welfare state model be maintained in the future. I believe
that private sector operators will play a key role in solving this challenge. In
primary healthcare in Sweden, the freedom of choice model has achieved good
access to care with lower spending than in Finland. The per capita costs of
primary healthcare are lower than in Finland and 89 per cent of customers can
get an appointment with a doctor within one week of initial contact. The
corresponding figure in Finland is 56 per cent. In Sweden, private sector
operators produce one-third of all services and the rate of service digitality
is higher than in Finland, for instance. In my opinion, this model deserves more
extensive examination in Finland.

The importance of preventive services will continue to increase and the
prolonged remote work situation, for example, has increased the need for these
services. Since the beginning of the 2000s, the most common causes of disability
have been mental health disorders and musculoskeletal disorders. This year, we
will focus particularly on the development of care paths for these types of
ailments in our digital service development. For example, we have launched a low
-threshold mental health service called Mielen huoli, in our remote service
channels. In the beginning of summer, our range of services will include
exercise referral. It is a comprehensive service that is produced together with
our fitness centres. The service improves the customer's quality of life based
on scientific evidence of the benefits of exercise.Digitality will also change
the roles of experts. Artificial intelligence, for example, can support the work
of doctors in the future. Nevertheless, we are still in the early stages of
digitality in the social and healthcare service sector compared to the banking
sector, for example. For the full benefits of digitality to be achieved, the
digital competencies of personnel will need to be developed further. To ensure
our ability to deliver the best employer experience in our industry, we will
provide professionals with a dedicated application and upgrade our personnel
-related ERP systems. We will also develop new employment models and career
paths for doctors and other experts.

Pihlajalinna’s financial reporting in 2021

Half-year financial report January–June: Friday, 13 August 2021
Interim report January–September: Thursday 4 November 2021

Briefing

Pihlajalinna will hold a briefing for analysts and the media on Friday, 7 May
2021 at 10:00 a.m. The event will be held remotely.

Helsinki, 6 May 2021
The Board of Directors of Pihlajalinna Plc

Further information

Joni Aaltonen, CEO, +358 40 524 7270
Tarja Rantala, CFO, +358 40 774 9290


Distribution

Nasdaq Helsinki
Major media
investors.pihlajalinna.fi

Pihlajalinna in brief

20-year-old Pihlajalinna is one of Finland’s leading private providers of
social, healthcare and wellbeing services. The Group provides services to
private individuals, companies, insurance companies and public sector entities,
such as municipalities and joint municipal authorities, across Finland. The
Group provides general practitioner and specialised care services, occupational
healthcare and dental care services, housing services and wellbeing services.
The Group, in cooperation with the public sector, offers social and healthcare
service provision models to public sector entities with the aim of providing
high-quality services for public pay healthcare customers.


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