Pihlajalinna Interim Report 1 January–30 September 2018 (9 months)

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Pihlajalinna Plc     Interim Report     1 November 2018 at 8.00 a.m.

Pihlajalinna Interim Report 1 January–30 September 2018 (9 months)

Pihlajalinna’s profitability is improving, outlook unchanged

Brief look at July–September:
  • Revenue amounted to EUR 116.3 (99.4) million – an increase of 17.0 per cent
  • EBITDA amounted to EUR 10.7 (9.1) million
  • Adjusted EBITDA was EUR 10.7 (9.0) million – an increase of 18.3 per cent
  • Operating profit (EBIT) was EUR 5.9 (5.5) million
  • Adjusted operating profit (EBIT) was EUR 5.9 (5.4) million – an increase of 10.8 per cent
  • IFRS 3 costs related to M&A transactions had a negative effect of EUR 0.1 (0.2) million on operating profit
  • Earnings per share (EPS) was EUR 0.11 (0.09)
Brief look at January–September:
  • Revenue amounted to EUR 360.8 (316.1) million – an increase of 14.2 per cent
  • EBITDA amounted to EUR 20.6 (25.2) million
  • Adjusted EBITDA was EUR 21.2 (25.6) million
  • Operating profit (EBIT) was EUR 6.8 (14.6) million
  • Adjusted operating profit (EBIT) was EUR 7.5 (15.1) million
  • IFRS 3 costs related to M&A transactions had a negative effect of EUR 1.6 (0.6) million on operating profit
  • The number of personnel at the end of the review period was 5,867 (4,767)
  • Earnings per share (EPS) was EUR 0.05 (0.34)
3 months
3 months
9 months
9 months
12 months
Revenue, EUR million 116.3 99.4 360.8 316.1 424.0
EBITDA, EUR million 10.7 9.1 20.6 25.2 33.3
EBITDA, % 9.2 9.2 5.7 8.0 7.9
Adjusted EBITDA, EUR million* 10.7 9.0 21.2 25.6 34.1
Adjusted EBITDA, %* 9.2 9.1 5.9 8.1 8.0
Operating profit (EBIT), EUR million 5.9 5.5 6.8 14.6 19.1
Operating profit, % 5.1 5.5 1.9 4.6 4.5
Adjusted operating profit (EBIT), EUR million* 5.9 5.4 7.5 15.1 20.0
Adjusted operating profit, %* 5.1 5.4 2.1 4.8 4.7
Profit before tax (EBT), EUR million 5.2 5.0 4.8 13.3 17.4
Earnings per share (EPS), EUR 0.11 0.09 0.05 0.34 0.46
Equity per share, EUR 5.27 4.80 4.87
Return on capital employed (ROCE), % 5.2 11.4 11.8
Return on equity (ROE), % 5.8 13.3 13.6
Equity ratio, % 38.1 43.0 41.8
Gearing, % 75.5 41.7 32.3
Interest-bearing net debt, EUR million 96.3 43.4 34.2
Net debt/adjusted EBITDA, 12 months* 3.2 1.3 1.0
Gross investments, EUR million** 2.5 12.8 87.9 20.5 30.4
Cash flow from operating activities, EUR million 3.8 4.2 6.8 18.6 34.9
Cash flow after investments, EUR million 1.7 -4.3 -41.0 3.7 16.4
Average number of personnel (FTE) 4,463 3,881 3,879
Personnel at the end of the period (NOE) 5,867 4,767 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 adjustments affecting comparability for acquisition-related transfer taxes and expert fees (IFRS 3 costs) or purchase price allocation (PPA) amortisation.  

EBITDA adjustments totalled EUR 0.0 (-0.1) million for the quarter and EUR 0.6 (0.4) million for the review period. Adjustments to operating profit totalled EUR 0.0 (-0.1) million for the quarter and EUR 0.6 (0.5) million for the review period. 

** Finance leases are not included in the gross investments 

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.

Joni Aaltonen, CEO of Pihlajalinna:

The Group’s revenue growth remained strong in the third quarter. Profitability also improved, but is still not at the targeted level. The profitability of occupational healthcare increased in particular, while the start-up of new units continued to weigh down the Group’s profit.

The changes in organisational structure and efficiency improvement measures implemented during the first part of the year are starting to deliver results. We have been able to correct our course after the year-on-year decline in profit seen in the first six months of the year. 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 Finnish healthcare. Open-minded business development and profitable growth are currently our key goals.

The development of our occupational healthcare operations has been positive. We have expanded our network of business locations, which has also enabled us to take on larger occupational healthcare accounts, such as our cooperation with Stora Enso, which is set to begin on 1 January 2019.

Laihian Hyvinvointi Oy, a company jointly owned by Pihlajalinna and the municipality of Laihia, started its operations on 1 September 2018. The company produces residential services for senior citizens and people with disabilities. Elsewhere, the municipality of Laitila is continuing negotiations with Pihlajalinna regarding the provision of services for senior citizens.

We have achieved a concrete expansion of our range of services. Doctagon’s municipal responsible doctor model, for example, improves our competitiveness in public sector services and tendering. We are also piloting shared services with Forever fitness centres in the areas of occupational healthcare and rehabilitation.

We launched the Long live life customer relationship programme at the beginning of October. The programme is aimed at increasing the awareness of Pihlajalinna’s entire service offering, cross-selling services and creating added value by promoting good health.

New private clinics (Turku, Oulu and Seinäjoki) had an effect of EUR -0.8 million on the profit of the third quarter and EUR -3.1 million on the Group’s profit for the year to date. Expanding to regional capitals remains a long-term goal for us. The expansion will be primarily achieved by acquisitions and municipal projects. We have no plans to open new surgical units next year.

The decline in insurance company sales nearly levelled off in the third quarter. The decline still had a negative effect on the Group’s private surgical operations. Closer cooperation with Fennia will support insurance company sales going forward.

The legislation related to the reform of Finland’s regional government, healthcare and social services is in parliament in late 2018. Under the current timetable, the responsibility for organising healthcare and social services would be transferred to the counties on 1 January 2021. The first county elections are planned for May 2019.

We believe 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.

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 national service networks of private service providers and to implement economic pricing models, namely 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.

In our opinion, 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.

We are preparing for health and social services reform particularly by engaging in geographical expansion. However, our strategy and growth are not dependent on the planned reforms.

Pihlajalinna’s financial reporting and Annual General Meeting in 2019

Financial Statements Bulletin 2018: Friday, 15 February 2019

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

Interim Report January–March: Friday, 3 May 2019

Half-year 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. 


Pihlajalinna Plc will hold a briefing for analysts and the media on Thursday, 1 November 2018 at 10:00 a.m. in the Paavo Nurmi room at Hotel Kämp, Pohjoisesplanadi 29, 00100 Helsinki, Finland.

Helsinki, 31 October 2018
Pihlajalinna Plc’s Board of Directors

Further information:
Joni Aaltonen, CEO, +358 40 524 7270
Ville Lehtonen, CFO, +358 40 759 7084

Nasdaq Helsinki
Major media

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.