Pihlajalinna Half Year Financial Report 1 January–30 June 2021 (6 months)

Pihlajalinna Plc                            Half Year Financial Report                                   13 August 2021 at 8:00 a.m.

Pihlajalinna Half Year Financial Report 1 January–30 June 2021 (6 months)

Revenue increased, profitability improved substantially

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

A brief look at April–June:

• Revenue amounted to EUR 142.5 (114.7) million – an increase of EUR 27.9 million, or 24.3 per cent
• Adjusted EBITDA was EUR 15.2 (9.0) million – an increase of 68.7 per cent
• Adjusted EBIT was EUR 6.5 (0.6) million – an increase of 950.8 per cent
• IFRS 3 costs and amortisation related to M&A had a negative effect of EUR 1.5 (0.8) million on operating profit
• Earnings per share (EPS) was EUR 0.20 (-0.03)
• COVID-19 services* revenue amounted to EUR 8.1 million, or 5.7 per cent of the revenue for the quarter.
• Appointments at Pihlajalinna’s private clinics grew by approximately 33 per cent year-on-year, with remote services representing 41 per cent of all appointments (excluding municipal outsourcings).
• Pihlajalinna won a public bidding competition for the sale of Työterveys Virta Oy’s entire share capital and occupational healthcare services. The transaction was completed on 1 April 2021. The acquisition increased revenue by EUR 3.7 million, or 3.3 per cent.
• Pihlajalinna will acquire Pohjola Hospital Ltd. In connection with the acquisition, Pihlajalinna will also sign a new five-year service agreement with Pohjola Insurance. The acquisition will be implemented after the Finnish Competition and Consumer Authority’s approval, and its estimated time of completion is at the turn of year 2021–2022.
• The service hours of Pihlajalinna’s customer service and Nurse Telephone Service were extended to 24/7 in May. In addition, Pihlajalinna Health Application’s remote consultation now serves customers around the clock.

A brief look at January–June:

• Revenue amounted to EUR 282.4 (247.6) million – an increase of EUR 34.8 million, or 14.1 per cent
• Adjusted EBITDA was EUR 30.4 (21.7) million – an increase of 40.3 per cent
• Adjusted EBIT was EUR 13.2 (4.8) million – an increase of 172.4 per cent
• IFRS 3 costs and amortisation related to M&A had a negative effect of EUR 2.2 (1.7) million on operating profit
• Earnings per share (EPS) was EUR 0.40 (0.03)
• COVID-19 services* revenue amounted to EUR 16.9 million, or 6.0 per cent of the revenue for the period.
• Appointments at Pihlajalinna’s private clinics grew by approximately 6.4 per cent year-on-year, with remote services representing 40 per cent of all appointments (excluding municipal outsourcings).
• The acquisition of Työterveys Virta Oy increased revenue by EUR 3.7 million, or 1.5 per cent.

* COVID-19 services include COVID-19 testing, sample collection, vaccination and other potential services directly related to managing the COVID-19 epidemic.

* 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. Starting from H1/2021, Pihlajalinna reports key figures adjusted EBITDA and adjusted operating profit also without IFRS 3 costs and PPA amortisation.

EBITDA adjustments amounted to EUR -0.1 (0.5) million for the quarter and EUR 0.1 (1.0) million for the review period. Adjustments to operating profit amounted to EUR -0.3 (0.5) million for the quarter and EUR -0.1 (1.4) million for the review period.

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

The acquisition of Pohjola Hospital does not have an impact on Pihlajalinna’s outlook for the year 2021. The Finnish Competition and Consumer Authority (FCCA) will be notified of the transaction. The acquisition will be implemented after the FCCA’s approval, and its estimated time of completion is at the turn of year 2021–2022.

Joni Aaltonen, CEO of Pihlajalinna:

At the beginning of July, Pihlajalinna announced it will acquire the entire share capital of Pohjola Hospital Ltd. In connection with the acquisition, we will also sign a new five-year service agreement with Pohjola Insurance. The acquisition and service agreement represent a key strategic pillar with regard to our goal of expanding our network of locations and our range of specialised healthcare services in all regions, especially in areas with higher population density. We want to continue to work together with Finland’s leading insurance companies to provide all Finns with high-quality services and quick access to care regardless of where they live. Care chains that include sports services and produce genuine health benefits, along with digital services and the prevention of illnesses, are the focus areas of our development efforts.

The renewal of the sales strategy is now reflected in concrete growth in revenue. We shifted the focus of public sector sales from the outsourcing market to the service sales market, which will only be affected to a minor extent by the planned reform of health and social services. The most significant new service sales agreements signed during the first half of the year included 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 for the City of Helsinki, remote doctor consultations for the City of Helsinki, healthcare services for the municipality of Hailuoto and medical 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. The number of people within the scope of Pihlajalinna’s occupational healthcare services was approximately 240,000 at the end of the review period. During the summer we have signed new multi-year agreement on occupational healthcare services for example with the forest industry company UPM.

Our digital services were strengthened further in June when we added Digiterveys to our service offering. Pihlajalinna acquired a stake in Digital Health Solutions Ltd and agreed on the future acquisition of the company’s entire share capital from its current owners. The acquisition involves extensive cooperation with the company and its main shareholders. The Digiterveys service concept has been developed to support the wellbeing of the employees of companies and groups in various ways. It helps organisations look after individuals in times of change. The service concept is based on research and scientific data and it was developed by Pekko Vehviläinen, DSc (Technology), and Exercise Physiologist Minna Tervo, PhD (Sport Sciences). Vehviläinen and Tervo will continue to work on the development of the service concept after the transaction.

The global COVID-19 pandemic is not over. After a slower early summer, the number of infections has begun to rise again due to the rapid spread of virus variants, among other factors. However, it seems that the need for hospital treatment and the number of deaths have not increased at the same rate as the number of infections. In Finland, approximately two-thirds of people over the age of 12 have received at least one vaccine dose.

In my view, Pihlajalinna has two key competitive advantages. We have systematically developed our operations with the aim of offering a genuinely multichannel service to suit each customer’s situation. We will continue to develop our offering broadly through new partnerships, for example.

The other key success factor is easy access to our services, both at our private clinics and through remote channels. In April 2021, approximately 4,300 people had waited for access to public primary care for more than three months. At the end of April, a total of 26,709 people had waited for public specialised care for more than three months. This situation can be characterised as exceptional. If the Finnish Government’s planned tightening of the care guarantee to seven days is implemented, the situation will deteriorate further. Our job at Pihlajalinna is to provide consumers with a channel through which they can access the service they 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.

Over 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 is estimated to 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 that the social and welfare funding will be sufficient for wellbeing services like the current ones in the future as well. I believe that private sector operators will play a key role in solving this challenge. In primary care 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 care 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 companies 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.

In the coming years, Finnish healthcare will be subject to significant reforms. The national reform of health and social services is moving ahead and the private sector has developed new service models and care paths to ensure high-quality care and quick access to care in all circumstances. Our strong track record at Pihlajalinna proves that we are a pioneer in this transition. The COVID-19 epidemic has caused rapid changes in consumer behaviour and, for example, guided service users to digital channels. Some 41 per cent of all appointments at Pihlajalinna (excluding municipal outsourcings) took place in digital channels during the second quarter.

Pihlajalinna’s financial reporting in 2021

Interim report January–September: Thursday 4 November 2021

Briefing

Pihlajalinna will hold a briefing for analysts and the media on Friday, 13 August 2021 at 10:00 a.m. The event will be held remotely.

Helsinki, 12 August 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 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, residential services and wellbeing services, for example. 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.