Pihlajalinna Half Year Financial Report 1 January–30 June 2022 (6 months)

Pihlajalinna Plc                   Half Year Financial Report                         12 August 2022 at 8:00 a.m.

Pihlajalinna Half Year Financial Report 1 January–30 June 2022 (6 months)

Revenue increased considerably, Pohjola Hospital’s services have been integrated as a part of the expansion of service network

This half year financial report is 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 173.7 (142.5) million – an increase of EUR 31.2 million, or 21.9 per cent.
• COVID-19 services¹⁾ revenue amounted to EUR 3.2 (8.2) million – a decrease of EUR -5.0 million.
• The effect of M&A transactions²⁾ on revenue growth was EUR 23.7 million, or 16.6 per cent. Organic growth was EUR 7.5 million, or 5.3 per cent.
• Adjusted EBITDA³⁾ was EUR 16.9 (15.9) million – an increase of 6.2 per cent.
• Adjusted EBITA³⁾ before the amortisation and impairment of intangible assets was EUR 7.3 (8.9) million – a decrease of -18.6 per cent.
• Earnings per share (EPS) was EUR 0.08 (0.19).
• Customer volumes⁴⁾ grew by 69 per cent year-on-year (grew by 28 per cent without M&A transactions), with remote services representing 38 per cent of all appointments.

A brief look at January–June:

• Revenue amounted to EUR 336.8 (282.4) million – an increase of EUR 54.4 million, or 19.3 per cent.
• COVID-19 services¹⁾ revenue amounted to EUR 11.6 (17.0) million – a decrease of EUR -5.4 million.
• The effect of M&A transactions²⁾ on revenue growth was EUR 39.6 million, or 14.0 per cent. Organic growth was EUR 14.9 million, or 5.3 per cent.
• Adjusted EBITDA³⁾ was EUR 33.3 (31.1) million – an increase of 7.2 per cent.
• Adjusted EBITA³⁾ before the amortisation and impairment of intangible assets was EUR 15.1 (17.2) million – a decrease of -12.6 per cent.
• Earnings per share (EPS) was EUR 0.31 (0.39).
• Customer volumes⁴⁾ grew by 42 per cent year-on-year (grew by 13 per cent without M&A transactions). Remote services represented 40 per cent of all appointments.
• Pihlajalinna strengthened its network of operating locations and range of specialised care services by acquiring the entire share capital of Etelä-Savon Työterveys Oy and a majority interest in Lääkärikeskus Ikioma Oy on 1 April 2022. Pihlajalinna also acquired the Punkkibussi® business from Saaristolääkärit Oy on 1 April 2022.
• Pihlajalinna will strengthen its position in the market and range of services in Jyväskylä by acquiring Seppälääkärit Oy and Seppämagneetti Oy on 1 October 2022.
• Pihlajalinna’s network of operating locations and range of care services will expand to Kainuu by acquiring a majority interest in MediEllen Oy, providing private clinic services and hiring of medical staff, on 1 September 2022.

¹⁾ COVID-19 services include COVID-19 testing, sample collection, vaccination and other potential services directly related to managing the COVID-19 pandemic.

²⁾ Työterveys Virta Oy 1 April 2021, Pohjola Sairaala Oy 1 February 2022, Etelä-Savon Työterveys Oy 1 April 2022, Lääkärikeskus Ikioma Oy 1 April 2022, Punkkibussi® -business 1 April 2022

³⁾ Alternative performance measure. In addition to the IFRS figures, Pihlajalinna presents additional, alternative perfomance indicators which company monitors internally and which provide the company management, investors, stock market analysts and other stakeholders with important additional information concerning the company’s financial perfomance, financial position and cash flows. These performance indicators should not be reviewed separate from the IFRS figures and they should not be considered to replace the IFRS figures.

⁴⁾ Excluding municipal outsourcing arrangements and COVID-19 testing

¹⁾ Pihlajalinna has changed its accounting policies and begun to retrospectively apply, effective from 1 January 2020, the IFRS Interpretations Committee’s Agenda Decision publish in April 2021 regarding the recognition of configuration or customisation costs in a cloud computing arrangement (Software as a Service, SaaS). The information about the effects of the Agenda Decision on the company’s income statement and financial position has been published in the financial statements 2021 and the information of the comparison period has been restated.

²⁾ Significant transactions that are not part of the normal course of business, are related to business acquisition costs (IFRS 3), are 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, cost 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. From financial statements 2021 onwards, Pihlajalinna presents costs according to the IFRS Interpretations Committee’s new Agenda Decision concerning cloud computing arrangements, and reversals of amortisation, as adjustment items. Adjusted operating profit before the amortisation and impairment of intangible assets (EBITA) is presented as a new alternative performance measure.

EBITDA adjustments amounted to EUR 8.5 (1.2) million for the review period. Adjustments to operating profit amounted to EUR 8.3 (0.9) million for the review period.

³⁾ 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 2022 unchanged

Pihlajalinna’s full year consolidated revenue is expected to increase substantially, and full year adjusted operating profit before the amortisation and impairment of intangible assets (EBITA) is expected to be on a par with 2021. Due to Pohjola Hospital integration and efficiency improvement programs in municipal companies, the adjusted EBITA from the first half of the year stayed below the bar of the previous year as anticipated.

The acquisition of Pohjola Hospital will increase consolidated revenue by at least EUR 50 million in the financial year 2022. Revenue from COVID-19 services is expected to decline from the level of 2021. In 2022, Pihlajalinna will focus on the integration of Pohjola Hospital operations to be a seamless part of its Medical Center for All of Finland -concept. Maintaining profitability on a par with 2021 will require success in increasing supply, realization of the planned synergies of the acquisitions, and successful implementation of efficiency improvements in municipal companies.

Joni Aaltonen, CEO of Pihlajalinna:

Pihlajalinna’s revenue increased by 21.9 per cent to EUR 173.7 (142.5) million in the second quarter. The effect of M&A transactions on revenue growth was EUR 23.7 million, or 16.6 per cent. Organic growth was EUR 7.5 million, or 5.3 per cent. We are particularly satisfied with the organic growth of occupational healthcare services and surgical operations.

We completed the integration of the services of Pohjola Hospital, which we acquired at the beginning of February. The integration of information systems was accomplished as planned, and everyone who was involved in the integration process deserves special thanks. Good progress is also being made with regard to getting organised at shared business locations and achieving synergies related to premises, administration and increasing the supply of services. First-class specialised care services, combined with supporting services and extended opening hours, will ensure a continued high level of customer satisfaction for Pohjola Hospital’s operating locations going forward. Increasing the share of specialised care services is one of our key strategic objectives, and we have got off to a good start in promoting that goal. 

In line with our strategy, we are also focusing on the growth of our network of operating locations and our service offering, and progress is being made according to plan. At the beginning of April, Pihlajalinna acquired the entire share capital of Etelä-Savon Työterveys Oy and a majority interest in Lääkärikeskus Ikioma Oy, which provides a comprehensive range of services. Pihlajalinna also acquired the Punkkibussi® business from Saaristolääkärit Oy on 1 April 2022. We opened four new private clinics during the beginning of the year: in Lahti, Espoo and Vantaa and Rovaniemi in May. The opening of new private clinics is initially reflected in lower profitability.

We will strengthen our market position and range of services in Central Finland this autumn. Share purchase transactions concerning Seppälääkärit Oy and Seppämagneetti Oy, both of which operate in Jyväskylä, will be carried out on 1 October 2022. We will also expand to Kainuu by acquiring a majority interest in MediEllen Oy, a provider of private medical services and leased physician and nurse services, on 1 September 2022.

We have continued to increase the supply of our services by focusing on the recruitment and retention of healthcare professionals and through systematic supply management. The supply of appointments and imaging services increased by nearly 38 per cent compared to the reference quarter in spite of increased sickness-related absences among the personnel, particularly involving respiratory infections. Over 300 new practitioners joined Pihlajalinna in the first half of the year, for which the business acquisitions had their own positive effect.

The share of revenue from COVID-19 services decreased significantly year-on-year during the quarter as the pandemic eased. In July, the Finnish Institute for Health and Welfare issued a new recommendation regarding the expansion of fourth doses of COVID-19 vaccinations. Experts are concerned by the new BA.5 subvariant of the Omicron variant of COVID-19, which effectively evades immunity and is highly contagious. A new wave of COVID-19 caused by the new subvariant may start in Finland even before the autumn.

The number of respiratory infections during the past quarter was again high compared to the very low number of infections in 2021. Based on the data collected on our occupational healthcare customers, sickness-related absences caused by respiratory infections more than quadrupled compared to the reference quarter and grew by a factor 1.5 compared to the corresponding period in 2019. Pihlajalinna’s employee benefit expenses were also exceptionally high during the review period. Sickness-related absences increased employee benefit expenses by approximately EUR 2.5 million.

The development of the volumes and profitability of surgical operations exceeded expectations during the past quarter. However, the profitability of private clinic and occupational healthcare services declined due to the decrease in COVID-19 services, the opening of new private clinics, sickness-related absences and the growth of supply. We expect the growth of our supply to have a favourable impact on our result for the second half of the year.

The costs of complete outsourcing arrangements remained at a fairly high level, but profitability improved slightly during the past quarter thanks to efficiency improvement programmes, index adjustments stipulated by annual agreements and refunds of the South Ostrobothnia Hospital District’s service fees.

Sales of occupational healthcare services continued to grow, and we were also successful with customer retention. The key drivers of growth include digital services, competitive pricing and successful acquisitions. The number of people within the scope of the Group’s occupational healthcare services is now nearly 280,000.

We resumed reception centre operations for asylum seekers due to the refugee situation caused by the war in Ukraine. The first of our new reception centres was opened in Karkku, Sastamala at the beginning of April. For us at Pihlajalinna, the provision of reception centre services is, first and foremost, an activity that is significant to society. We have good experience from reception centre operations during the period 2015–2019, when large numbers of refugees entered Finland in a short period of time due to the war in Syria.

Our business has seen strong growth in recent times, and the strengthening of demand has been a significant driver for the growth of our service offering. Strengthening our service offering also helps us prepare for the changes brought by the upcoming healthcare and social welfare reform. The first agreements concerning the implementation of the digital assessment of the need for care for the new wellbeing services counties have already been signed. This represents a significant first move with respect to the wellbeing services counties that will become operational at the beginning of the year. We at Pihlajalinna are in an excellent position as we enter the autumn season.

Pihlajalinna’s financial reporting in 2022

Interim Report January–September: Friday, 4 November 2022

Press and analyst meeting

Pihlajalinna will hold a briefing for analysts and the media on Friday, 12 August 2022 at 10:00 a.m. in the Studio Eero at Sanomatalo, Helsinki. The event can also be followed as a live webcast at: https://pihlajalinna.videosync.fi/q2-2022.

Helsinki, 11 August 2022
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

Pihlajalinna (Nasdaq HELSINKI: PIHLIS) is one of the leading private service providers of social, healthcare and wellbeing services in Finland. 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. Read more www.pihlajalinna.fi.