Pihlajalinna Half Year Financial Report 1 January–30 June 2018 (6 months)
Pihlajalinna Plc Half Year Financial Report 16 August 2018 at 8.00 a.m.
Pihlajalinna Half Year Financial Report 1 January–30 June 2018 (6 months)
Pihlajalinna’s result weighed down by expansion and structural reforms
Brief look at April–June:
• Revenue amounted to EUR 125.3 (106.7) million – an increase of 17.5 per cent
• EBITDA amounted to EUR 5.6 (7.1) million
• Adjusted EBITDA was EUR 6.6 (7.4) million
• Operating profit (EBIT) was EUR 0.8 (3.7) million
• Adjusted operating profit (EBIT) was EUR 1.9 (4.0) million
• IFRS 3 costs and amortisation related to M&A transactions had a negative effect of EUR 1.8 (1.2) million on operating profit
• Earnings per share (EPS) was EUR 0.00 (0.10)
Brief look at January–June:
• Revenue amounted to EUR 244.5 (216.7) million – an increase of 12.8 per cent
• EBITDA amounted to EUR 9.9 (16.0) million
• Adjusted EBITDA was EUR 10.5 (16.5) million
• Operating profit (EBIT) was EUR 0.9 (9.1) million
• Adjusted operating profit (EBIT) was EUR 1.6 (9.7) million
• IFRS 3 costs and amortisation related to M&A transactions had a negative effect of EUR 4.0 (2.3) million on operating profit
• The number of personnel at the end of the review period was 5,918 (4,898)
• Earnings per share (EPS) was EUR -0.06 (0.25)
Pihlajalinna’s outlook for 2018
Revised outlook for 2018 (published on 20 June 2018):
Pihlajalinna’s consolidated revenue is expected to increase clearly from 2017 level especially due to M&A transactions. Adjusted EBIT is expected to remain below 2017 level.
Previous outlook for 2018 (published on 13 February 2018):
Pihlajalinna’s consolidated revenue is expected to increase clearly from 2017 level especially due to M&A transactions. Adjusted EBIT is expected to improve compared to 2017.
In the financial year 2017, revenue was EUR 424.0 million and the adjusted EBIT was EUR 20.0 million.
| KEY FIGURES AND RATIOS | 4–6/2018 3 months |
4–6/2017 3 months |
1–6/2018 6 months |
1–6/2017 6 months |
2017 12 months |
| INCOME STATEMENT | |||||
| Revenue, EUR million | 125.3 | 106.7 | 244.5 | 216.7 | 424.0 |
| EBITDA, EUR million | 5.6 | 7.1 | 9.9 | 16.0 | 33.3 |
| EBITDA, % | 4.4 | 6.7 | 4.0 | 7.4 | 7.9 |
| Adjusted EBITDA, EUR million* | 6.6 | 7.4 | 10.5 | 16.5 | 34.1 |
| Adjusted EBITDA, %* | 5.3 | 6.9 | 4.3 | 7.6 | 8.0 |
| Operating profit (EBIT), EUR million | 0.8 | 3.7 | 0.9 | 9.1 | 19.1 |
| Operating profit, % | 0.6 | 3.5 | 0.4 | 4.2 | 4.5 |
| Adjusted operating profit (EBIT), EUR million* | 1.9 | 4.0 | 1.6 | 9.7 | 20.0 |
| Adjusted operating profit, %* | 1.5 | 3.7 | 0.6 | 4.5 | 4.7 |
| Profit before tax (EBT), EUR million | 0.2 | 3.3 | -0.4 | 8.3 | 17.4 |
| SHARE-RELATED INFORMATION | |||||
| Earnings per share (EPS), EUR | 0.00 | 0.10 | -0.06 | 0.25 | 0.46 |
| Equity per share, EUR | 5.18 | 4.84 | 4.87 | ||
| OTHER INFORMATION | |||||
| Return on capital employed (ROCE), % | 5.1 | 10.6 | 11.8 | ||
| Return on equity (ROE), % | 5.9 | 11.8 | 13.6 | ||
| Equity ratio, % | 36.9 | 44.7 | 41.8 | ||
| Gearing, % | 78.8 | 32.4 | 32.3 | ||
| Interest-bearing net debt, EUR million | 97.4 | 33.5 | 34.2 | ||
| Net debt/adjusted EBITDA, 12 months* | 3.5 | 1.1 | 1.0 | ||
| Gross investments, EUR million** | 6.3 | 3.1 | 85.6 | 7.8 | 30.4 |
| Cash flow from operating activities, EUR million | 0.5 | 0.8 | 3.0 | 14.3 | 34.9 |
| Cash flow after investments, EUR million | -5.0 | -1.5 | -42.7 | 8.0 | 16.4 |
| Average number of personnel (FTE) | 4,320 | 3,812 | 3,879 | ||
| Personnel at the end of the period (NOE) | 5,918 | 4,898 | 4,753 |
* 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 as adjustments affecting comparability acquisition-related transfer taxes and expert fees (IFRS 3 costs) or purchase price allocation (PPA) amortisation.
EBITDA adjustments totalled EUR 1.1 (0.2) million for the quarter and EUR 0.7 (0.5) million for the review period. Adjustments to operating profit totalled EUR 1.1 (0.3) million for the quarter and EUR 0.7 (0.6) million for the review period.
** Finance leases are not included in the gross investments
Joni Aaltonen, CEO of Pihlajalinna:
"The Group’s revenue in the second quarter increased in line with expectations, but profitability declined compared to the previous year. EBITDA and the operating result continued to be weighed down by the start-up of new units, the lower profitability of occupational health services and the lower volume of reception centre services and surgical operations.
While the result for the second quarter was better than the result for the first quarter, it was not at the level we aim to achieve. We have taken measures to improve profitability and the result for the second quarter represents a step in the right direction. The implementation of the planned measures will continue. As we announced in June, putting into practice the structural reforms we initiated early in the year has taken more time than we expected. While the first half of the year has been weak, we remain confident that our planned measures, reforms and new services will improve our profitability in the second half of the year. However, as we previously announced, they will not be sufficient to elevate our adjusted operating profit to last year’s level or above it.
In June, Pihlajalinna increased its holdings in Pihlajalinna group companies that are jointly owned with municipalities. Pihlajalinna now owns 81 per cent of the share capital of Mäntänvuoren Terveys Oy and Kolmostien Terveys Oy as well as 90 per cent of the share capital of Jokilaakson Terveys Oy. In addition, the company signed a conditional agreement with the Kuusiokunnat municipalities according to which it will increase its holding in Kuusiolinna Terveys Oy to 97 per cent by the end of the year. Service provision contracts and the shareholders’ agreements of the companies remain unchanged.
In July, Pihlajalinna announced its withdrawal from the freedom of choice experiment in Jyväskylä. As the capitation payment set by the City of Jyväskylä does not cover the costs, the experiment has been unprofitable. The freedom of choice experiments currently underway in different locations across Finland use different capitation criteria, and there are also differences between the services included in the experiments. Pihlajalinna is continuing its involvement in the freedom of choice experiments in Tampere and Hämeenlinna.
The parliamentary Constitutional Law Committee issued a statement on the legislation package related to the reform of healthcare, social services and regional government at the beginning of June. The government amended the schedule of the healthcare and social welfare reform after the statement of the Constitutional Law Committee. The aim is to have parliament decide on all legislation pertaining to the reform of Finland’s regional government, healthcare and social services in autumn 2018, and for the responsibility for organising healthcare and social services to be transferred to the counties on 1 January 2021. County elections are planned for spring 2019.
Pihlajalinna’s view is that there is still a strong need for health and social services reform and that the reform is worth implementing in spite of the drawbacks of the proposed model. In any case, the model must be reviewed and developed as more experience is accumulated. We are preparing for health and social services reform particularly by engaging in geographical expansion, but our strategy and growth are not dependent on the planned reforms.
In our view, the health and social services reform would provide faster access to basic-level care while also improving service quality. Achieving the financial goals would largely depend on the counties’ capacity and willingness to take advantage of the opportunities presented to them, such as fixed compensation, a performance-based share and incentives. In our view, freedom of choice should be developed in such a way as to give the service providers of health and social services centres the obligation and the opportunity to take more extensive responsibility for customers, excluding demanding specialised care services. This could be achieved by introducing services from various specialised branches of medicine to the health and social service centres. This would allow customers to obtain care from a single location and avoid the fragmentation of the care path, unnecessary chains of referrals and needless bureaucracy."
Pihlajalinna’s financial reporting in 2018
Interim Report January–September: Thursday, 1 November 2018
Briefing
Pihlajalinna Plc will hold a briefing for analysts and the media on Thursday, 16 August 2018 at 10:00 a.m. in the Paavo Nurmi room at Hotel Kämp, Pohjoisesplanadi 29, 00100 Helsinki, Finland.
Helsinki, 15 August 2018
Pihlajalinna Plc’s Board of Directors
Further information:
Joni Aaltonen, CEO, +358 40 524 7270
Ville Lehtonen, CFO, +358 40 759 7084
Siri Markula, Head of Communications and IR, +358 40 743 2177
Distribution:
Nasdaq Helsinki
Major media
investors.pihlajalinna.fi
Pihlajalinna in brief
Pihlajalinna is one of the leading private social and healthcare services providers in Finland. The company serves private individuals, businesses, insurance companies and public sector entities, such as municipalities and joint municipal authorities. Pihlajalinna provides general practitioner services, specialised care, emergency and on-call services, a wide range of surgical services, occupational healthcare, dental care and wellbeing services. In addition, the company offers innovative social and healthcare service provision models to public sector entities.