Pihlajalinna Oyj : INTERIM REPORT 1 JANUARY-30 SEPTEMBER 2015 (9 months)

PIHLAJALINNA          INTERIM REPORT            16 November 2015 at 8:30

PIHLAJALINNA: INTERIM REPORT 1 JANUARY-30 SEPTEMBER 2015 (9 months)

STRONG REVENUE GROWTH CONTINUED, INVESTMENTS IN GROWTH AFFECTED THE RESULT 

BRIEF LOOK AT JULY-SEPTEMBER (Q3/2014 FIGURES IN BRACKETS):

  • Revenues amounted to EUR 50.9(32.6) million - an increase of 56 per cent
  • EBITDA excluding non-recurring items amounted to EUR 2.9 (3.8) million
  • Operating profit excluding non-recurring items amounted to EUR 0.9 (2.3) million
  • Operating profit (EBIT) amounted to EUR 1.0 (1.1) million
  • Net cash flow from operating activities amounted to EUR 1.1 (0.1) million
  • The provision of healthcare and social care services in Jämsä started on 1 September 2015

BRIEF LOOK AT JANUARY-SEPTEMBER:

  • Revenues amounted to EUR 150.7(96.9) million - an increase of 56 per cent
  • EBITDA excluding non-recurring items amounted to EUR 9.0 (10.5) million.
  • Operating profit excluding non-recurring items amounted to EUR 3.2 (6.2) million
  • Net cash flow from operating activities amounted to EUR 10.6 (4.4) million
  • Gross investments in the reporting period amounted to EUR 17.1 (21.8) million
  • Number of personnel at the end of the reporting period 2,905 (1,688)
  • Earnings per share EUR -0.01 (0.05)
KEY FIGURES AND RATIOS 7-9/
2015
7-9/
2014
change% 1-9/
2015
1-9/
2014
change% 2014
  3 mths 3 mths   9 mths 9 mths   12 mths
INCOME STATEMENT           
Revenue, EUR million 50.9 32.6 56 150.7 96.9 56 148.9
EBITDA excluding non-recurring items, EUR million 2.9 3.8 -22 9.0 10.5 -14 14.0
EBITDA % excluding non-recurring items 5.8 11.7 -50 6.0 10.8 -44 9.4
EBITDA, EUR million 3.1 2.6 17 8.2 8.8 -8 11.8
EBITDA % 6.0 8.0 -25 5.4 9.1 -41 7.9
Operating profit excluding non-recurring items (EBIT), EUR million 0.9 2.3 -63 3.2 6.2 -49 8.2
Operating profit % excluding non-recurring items 1.7 7.1 -76 2.1 6.4 -67 5.5
Operating profit (EBIT), EUR million 1.0 1.1 -14 2.3 4.6 -50 6.0
Operating profit % 1.9 3.4 -45 1.5 4.7 -68 4.0
Profit before tax (EBT), EUR million 0.4 0.2 78 0.3 2.1 -86 2.9
            
SHARE RELATED INFORMATION           
Earnings per share (EPS), EUR 0.01 -0.03 -139 -0.01 0.05 -125 0.11
Equity per share, EUR      3.48 0.64 447 0.70
            
OTHER INFORMATION            
Return on capital employed (ROCE), %      3.1 7.3   7.1
Return on equity, % (ROE)      1.6 7.7   7.7
Equity ratio, %      43.0 8.3   8.0
Gearing, %      42.2 737.6   691.1
Net debt / adjusted EBITDA, rolling 12 mths      2.3 5.4   5.1
Interest bearing net debt, EUR million       28.6 72.8 -61 71.6
Gross investments, EUR million 1.1 8.8 -87 17.1 21.8 -22 28.3
Cash flow from operating activities 1.1 0.1 865 10.6 4.4 141 9.4
Cash flow after investments -2.2 -6.1 -64 -1.2 -10.0 -88 -8.1
Average number of personnel       2,363 1,574 50 1,619
Personnel at the end of the period       2,905 1,688 72 1,714

Mikko Wirén, CEO of Pihlajalinna:

Pihlajalinna Group's strong growth continued during the third quarter. Our revenue grew by 56 per cent reaching EUR 50.9 (32.6) million. The majority of this was due to organic growth, such as the complete healthcare and social care outsourcings in Parkano (since 1 January 2015), Kihniö (since 1 May 2015) and Jämsä (since 1 September 2015). Investments in the strengthening of administration and the support functions required by future growth affected profitability. The transfer of the healthcare and social care services of the Kuusiokunnat sub-region to Kuusiolinna Terveys Oy, a joint venture of the sub-region and Pihlajalinna, in line with the complete outsourcing agreement (as of 1 January 2016) and the taking over of the entire specialised care services in Jämsä (as of 1 January 2016) continued to cause considerable expenses during the reporting period.

Our January-September revenue grew by 56 per cent reaching EUR 150.7 (96.9) million. The reinforcement of the Group's administration and supporting functions affected our profitability. In the complete healthcare and social care outsourcings, the electronic ERP system was expanded to cover the patient referral flow of specialised care services. This ensures rapid, high-quality services and the increasingly cost-effective provision of specialised care services. Low capacity utilisation rates in the new units, which burdened the Group's bottom line during the first half of the year, developed favourably towards the end of the reporting period, and I am pleased with the capacity utilisation rates achieved since the end of Q3.

The implementation of the Group restructuring announced in connection with our previous interim report and the related cost savings plan has proceeded as planned. We expect most probably to reach the targeted annual cost savings level of EUR 3 million during 2016.

Pihlajalinna Group signed a new five-year EUR 60 million revolving credit facility with two of its core banks. This new financing agreement considerably increases flexibility in areas such as M&A transactions. The Group is actively looking for opportunities to expand operations via M&A according to its strategy.

In October 2015, Pihlajalinna expanded into asylum seeker reception centre operations by opening four reception centres (Hämeenlinna, Kokemäki, Kihniö and Jämsä) in areas where we had either existing vacant premises or major healthcare and social care resources. Pihlajalinna plans to open a new reception centre in the Karkku area of Sastamala in November 2015. Expansion of the Pihlajalinna business operations into asylum seeker reception centre operations will benefit from significant synergies with the company's current social services production.

The preliminary results of the SYKKI study (the growth and internationalisation project of a Finnish healthcare and social care services company), carried out by the National Institute for Health and Welfare (THL) were completed in September. The study compared the effect of the complete outsourcing of healthcare and social care services in the town of Mänttä-Vilppula (to a joint venture between the town and Pihlajalinna) with 16 other municipalities. The study indicated cost savings of 12.1-13.3 per cent in Mänttä-Vilppula as opposed to the comparison municipalities after only 12 months of operational development. Pihlajalinna is the market leader in complete healthcare and social care outsourcings and it is delightful to see that an external independent body has now verified the benefits of complete outsourcing to individual municipalities, citizens, patients and society.

After the end of the reporting period, in October 2015 Pihlajalinna joined the Association for Private Healthcare Services. This decision was welcomed by both employee and employer organisations. Membership provides Pihlajalinna with the opportunity to participate in and influence negotiations between the various organisations.

On 9 November, the Finnish Government published more information about its policies on the reform package on healthcare, social welfare and autonomous regions, and on how the regions will be divided. We regard increased freedom of choice for customers as a major reform, enabling operations to be made more agile, customer-oriented and responsive to patient needs. I believe that if it is implemented as planned the freedom of choice can have a positive impact on Pihlajalinna's business operations on the long term. The government policy of the freedom of choice will mainly be implemented in the basic healthcare service level and where appropriate in specialized healthcare and social services. Also the division of responsibility of organizing and producing of services in the autonomous regions enables genuine comparison of quality and access to services between various service providers.

Pihlajalinna's operating model for healthcare and social care services is already in line with best practices in the sector. We provide basic healthcare and social care services efficiently and hence save on the expensive resources of specialised care services. In addition to Mänttä-Vilppula, Omapihlaja health centers are another example of fast and efficient service model. Tampere city outsourced the health centre services of 11 000 inhabitants to Pihlajalinna in 2007. When in 2011 it became possible to use the city health centre of one's choosing the amount of customers in Omapihlaja has more than doubled.

Pihlajalinna Oyj will monitor the preparation of the new Act on the Organisation of Social and Health Services and investigate its practical impact.

GUIDANCE ON GROUP OUTLOOK

Pihlajalinna's guidance is unchanged: Pihlajalinna's consolidated revenue is expected to exceed EUR 200 million in 2015.

PRESS AND ANALYST MEETING

The press and analyst meeting for the announcement of financial results of the third quarter of 2015 will be held on November 16, 2015 at 10:00 in the Kämp hotel congress centre, meeting room Paavo Nurmi, Pohjoisesplanadi 29, 00100, Helsinki.

An audio webcast and teleconference in English will be held on the same day starting at 13.00 p.m. EET. +44 20 3059 8125. Participant password: Pihlajalinna. The event can be followed live as an audio webcast at investors.pihlajalinna-konserni.fi.

The event can be followed live as an audio webcast at investors.pihlajalinna-konserni.fi. The event will be recorded and can be accessed on the website later on the same day.

FINANCIAL REPORTING IN 2016

Pihlajalinna will publish its financial information in 2016 as follows:

Report, publication date
Financial statements release 2015, Thursday 18 February 2016
Interim report January-March 2016, Tuesday 10 May 2016
Interim report January-June 2016, Wednesday 17 August 2016
Interim report January-September 2016, Friday 11 November 2016

The online annual report including financial statements 2015 and the Board of Director's report will be available on the company website www.pihlajalinna-konserni.fi during week 11, 2016 at the latest.

Pihlajalinna's Annual General Meeting is scheduled for Monday, April 4, 2016 at 3.00 p.m., in Tampere, Finland. Pihlajalinna's Board of Directors will convene the AGM at a later date.

Helsinki, 16 November 2015

Pihlajalinna Oyj's Board of Directors

FURTHER INFORMATION
Mikko Wirén, CEO, tel. +358 50 3220 927
Virpi Holmqvist, CFO, tel. +358 40 537 6133
Terhi Kivinen, SVP Communications, Marketing and IR, tel. +358 40 848 4001

DISTRIBUTION
NASDAQ OMX Helsinki
Major media
www.pihlajalinna-konserni.fi

Pihlajalinna in brief
Pihlajalinna is one of the leading private social and healthcare services providers in Finland. The Company provides social and healthcare services for households, companies, insurance companies and public sector entities in private clinics, health centres, dental clinics and hospitals around Finland. Pihlajalinna provides general practitioner and specialised care services, including emergency and on-call services, a wide range of surgical services as well as occupational healthcare and dental care services, in private clinics and hospitals operating under the Dextra brand. Under the Pihlajalinna brand the Company, 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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