Pihlajalinna Financial Statements Release 1 Jan–31 Dec 2018 (12 months)

Pihlajalinna Plc                  Financial Statements Release           15 February 2019 at 8:00

Pihlajalinna Financial Statements Release 1 Jan–31 Dec 2018 (12 months)

Pihlajalinna’s revenue for the financial year increased substantially, actions to improve profitability continue

Review period October–December:

• Revenue amounted to EUR 127.0 (107.9) million – an increase of 17.6 per cent
• EBITDA amounted to EUR 10.6 (8.1) million
• Adjusted EBITDA was EUR 11.1 (8.5) million – an increase of 30.2 per cent
• Operating profit (EBIT) was EUR 6.0 (4.6) million
• Adjusted operating profit (EBIT) was EUR 6.5 (4.9) million – an increase of 32.2 per cent
• IFRS 3 costs related to M&A transactions had a negative effect of EUR 0.1 (0.3) million on operating profit

Review period January–December:

• Earnings per share (EPS) was EUR 0.12 (0.12)
• Revenue amounted to EUR 487.8 (424.0) million – an increase of 15.0 per cent
• EBITDA amounted to EUR 31.2 (33.3) million
• Adjusted EBITDA was EUR 32.3 (34.1) million – a decrease of 5.2 per cent
• Operating profit (EBIT) was EUR 12.8 (19.1) million
• Adjusted operating profit (EBIT) was EUR 14.0 (20.0) million – a decrease of 29.9 per cent
• IFRS 3 costs related to M&A transactions had a negative effect of EUR 1.6 (0.9) million on operating profit
• The number of personnel at the end of the financial year was 5,850 (4,753)
• Earnings per share (EPS) was EUR 0.17 (0.46)

* 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 0.4 (0.4) million for the quarter and EUR 1.1 (0.7) million for the financial year. Adjustments to operating profit totalled EUR 0.6 (0.4) million for the quarter and EUR 1.2 (0.9) million for the financial year. 

** Finance leases are not included in the gross investments 

Pihlajalinna’s outlook for 2019

Pihlajalinna’s consolidated revenue is expected to increase from the 2018 level. Adjusted EBIT is expected to improve clearly compared to 2018.

Joni Aaltonen, CEO of Pihlajalinna:

In the fourth quarter, the Group’s revenue growth remained strong. Profitability improved, particularly due to complete outsourcing arrangements, while the start-up of new units weighed down the result. We launched the customer loyalty programme at the beginning of October. The programme is aimed at increasing the awareness of Pihlajalinna’s entire service offering, cross-selling of the services and creating added value by promoting good health.

Changes in the organizational structure and efficiency improvement measures implemented during the early part of the year are clearly beginning to produce results. While we want to improve the efficiency of our operations, we do not want to compromise our future development or the direction that we believe is right for the Finnish healthcare. The open-minded development of our business and profitable growth are our key goals at the present time.

Fiscal year 2018 was a year of business development for Pihlajalinna. In addition to changing our organizational structure, we expanded geographically, developed new services and invested in creating a stronger brand and digital services. Even if all this development work eroded our profitability, we now enter the year 2019 in a good position. The major changes have now been completed—for the time being—and we can focus on the continued improvement of our profitability.

We are now a genuinely national operator. In line with our strategy, we have expanded our operations to new regional capitals through acquisitions. We opened new full-service private clinics- hospitals in Oulu, Seinäjoki and Turku. Complementing the national network supports especially the expansion of occupational healthcare services. We provided occupational healthcare to approximately 60,000 end customers in 2015, the amount of end customers has risen over 170,000 at the end of the year 2018. In addition, the acquisition of Doctagon during the review period strengthens our presence in the Swedish-speaking areas. In areas where we do not have medical specialists comprehensively available, for example, we can provide medical specialist services from another location using digital channels. The use of remote services enables us to balance regional differences in demand and supply. In the fourth quarter, we acquired the entire share capital of Terveyspalvelu Verso Oy. This transaction saw Verso’s 17 clinics in Pohjois-Savo become part of the chain of Pihlajalinna’s private clinics. 

We have also achieved a concrete expansion of our range of services: the responsible doctor model is being expanded geographically and we are increasing the service offering of our fitness centres in occupational healthcare and rehabilitation. We have expanded our partner network and for example, in cooperation with the psychotherapy centre Vastaamo, we are providing low-threshold therapy services in municipal joint ventures that generate significant savings in specialized care and improved health outcomes for our customers.

The growth of the municipal business was weakened in 2018 by the effect of uncertainty around health and social services reform on municipal decision-making. In spite of the prevailing uncertainty, our joint venture in Laihia began its operations on 1 September 2018, while in Hattula, a partial outsourcing arrangement for social and healthcare services started at the beginning of 2019.  

In our view, the proposed health and social services reform and bringing services close to people would provide faster access to basic-level care while also improving service quality. In order for the economic objectives of healthcare and social welfare reform to be achieved, counties must have the capacity and willingness to take advantage of the national service networks of private service providers and implement economic pricing models, such as fixed compensation, a performance-based share and incentives. Bringing services close to people would provide significantly faster access to care and ensure high-quality care for all Finns, including those who live outside growth centres.  

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 is interested in broader service solutions that are more effective in creating value for the society. The recent public discussion surrounding the poor quality of care for the elderly is a sign of how serious the situation is. Addressing these problems calls for close cooperation between the public sector and private enterprises. The issue is not the price at which a day of care can be produced but the challenge is much broader. The service chain must be examined as a whole to ensure that every customer receives the care that his or her condition requires. Complete outsourcing enables this by providing a more comprehensive service offering, which makes it possible to choose the appropriate location of treatment.

If the health and social services reform is not implemented, we expect that municipalities will again become active in working with us to develop service models that make it possible to maintain services for their residents while keeping costs under control and producing the services in an ethically sustainable manner. In 2019, we expect our consolidated revenue to increase and our adjusted EBIT to improve clearly compared to 2018.

Pihlajalinna’s financial reporting and Annual General Meeting in 2019

Financial Statements and Board of Directors’ report: no later than in week 11

Interim Report January–March: Friday, 3 May 2019

Interim Report January–June: Thursday, 15 August 2019

Interim Report January–September: Tuesday, 5 November 2019

Pihlajalinna Plc’s Annual General Meeting is scheduled for Thursday, 4 April 2019, in Tampere, Finland. The notice of the General Meeting will be published as a separate release.

Briefing

Pihlajalinna Plc will hold a briefing for analysts and the media on Friday, 15 February 2019 at 10:00 a.m. in the Paavo Nurmi room at Hotel Kämp, Pohjoisesplanadi 29, 00100 Helsinki, Finland.

Helsinki, 14 February 2019
Pihlajalinna Plc’s Board of Directors

Further information

Joni Aaltonen, CEO, +358 40 524 7270
Taina Erkkilä, Director, Communications and Investor Relations, +358 40 457 7897
Ville Lehtonen, CFO, +358 40 759 7084

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.