Pihlajalinna Interim Report 1 January–31 March 2021 (3 months)

Pihlajalinna Plc                  Interim report           7 May 2021 at 8:00 a.m.

Pihlajalinna Interim report 1 January–31 March 2021 (3 months)

Revenue increased and profitability improved

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

A brief look at January–March:

• Revenue amounted to EUR 139.9 (133.0) million – an increase of 5.2 per cent
• Adjusted EBITDA was EUR 15.2 (12.7) million – an increase of 20.2 per cent
• Adjusted EBIT was EUR 6.7 (4.2) million – an increase of 58.7 per cent
• IFRS 3 costs and amortisation related to M&A had a negative effect of EUR 0.7 (0.9) million on operating profit
• Earnings per share (EPS) was EUR 0.20 (0.06)
• Although the demand for healthcare services is returning to normal, the customer volumes of Pihlajalinna’s private clinics were approximately 13 per cent lower than in the comparison period.
• COVID-19 testing volumes increased by 65 per cent compared to the previous quarter. Remote services represented 39 per cent of all consultations.
• Pihlajalinna won a public bidding competition for the sale of Työterveys Virta Oy’s entire share capital and occupational healthcare services. Pihlajalinna’s position in North Ostrobothnia will strengthen significantly due to the acquisition. The transaction was completed on 1 April 2021.

* 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 0.2 (0.5) million for the quarter. Adjustments to operating profit for the quarter totalled EUR 0.2 (0.9) million.

** 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

It is still hard to assess and predict the financial impacts of the duration of the COVID-19 situation. National or regional restrictions aimed at mitigating the COVID-19 epidemic and potential delays in COVID-19 vaccinations may have a negative impact on consumer demand. At the same time, extensive COVID-19 testing, vaccinations, working through the queues in the public sector and the release of other pent-up demand help compensate for the decline in consumer demand.

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

Joni Aaltonen, CEO of Pihlajalinna:

Pihlajalinna’s profitability improved and revenue developed favourably in the first quarter. Revenue increased by 5.2 per cent and adjusted operating profit by 58.7 per cent year-on-year. The demand for healthcare services is returning to normal, but the customer volumes of private clinics were still lower than in the comparison period. COVID-19 testing volumes continued to grow in the first quarter.

The renewal of Pihlajalinna’s sales strategy has been successful. In the public sector, we have transitioned from the outsourcing market to the service sales market, in which the impact of the planned reform of social, healthcare and rescue services is low. The most significant agreements signed in the beginning of the year are 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 the City of Helsinki as well as remote doctor consultations for the City of Helsinki. We also won the competitive bidding processes for healthcare services for the municipality of Hailuoto and 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, including Työterveys Virta in the Oulu region, which became part of Pihlajalinna Group at the beginning of April. The agreements signed in the first quarter will see the number of private persons within the scope of Pihlajalinna’s occupational healthcare services increase to approximately 230,000.

In March, Pihlajalinna announced an investment in NONNA Group, a developer and provider of modern housing solutions. NONNA Group is preparing to introduce a completely new service concept to the market and we believe it will achieve a significant market share as the population ages. There is no overlap between our services. Instead, I see considerable synergies between our businesses. For example, the companies could engage in joint city block projects in the future to combine diverse types of housing and services. Pihlajalinna’s role would also be to provide the necessary healthcare services for the residents.

Pihlajalinna published specifications to its strategy in the first quarter. We have three strategic priorities:

• the renewal of private services, for example through new service concepts
• close cooperation with public sector entities and the future wellbeing services counties
• strengthening the role of digitalisation in the development of personnel, customer experience and operational performance.

Our objective is to offer the most attractive and diverse range of services that are the easiest to access in our industry and available without delay.

I believe we have two key competitive advantages. We have systematically developed our operations with the aim of offering a service to suit each customer’s situation as well as a genuinely multichannel service model. We will continue to develop our offering broadly through new partnerships, for example. Another key success factor is easy access to our services, both at our private clinics and through remote channels. Approximately 8,000 people are currently waiting for access to treatment having waited longer than the times stipulated by the legislative provisions concerning the care guarantee. In February 2021, a total of 28,417 people had waited for specialised care for more than three months. This situation can be characterised as exceptional. Our job at Pihlajalinna is to provide a channel through which the consumer can access the service in 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.

In 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 will 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 the sustainability gap and how can the current welfare state model be maintained in the future. I believe that private sector operators will play a key role in solving this challenge. In primary healthcare 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 healthcare 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 operators 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.

The importance of preventive services will continue to increase and the prolonged remote work situation, for example, has increased the need for these services. Since the beginning of the 2000s, the most common causes of disability have been mental health disorders and musculoskeletal disorders. This year, we will focus particularly on the development of care paths for these types of ailments in our digital service development. For example, we have launched a low-threshold mental health service called Mielen huoli, in our remote service channels. In the beginning of summer, our range of services will include exercise referral. It is a comprehensive service that is produced together with our fitness centres. The service improves the customer's quality of life based on scientific evidence of the benefits of exercise.Digitality will also change the roles of experts. Artificial intelligence, for example, can support the work of doctors in the future. Nevertheless, we are still in the early stages of digitality in the social and healthcare service sector compared to the banking sector, for example. For the full benefits of digitality to be achieved, the digital competencies of personnel will need to be developed further. To ensure our ability to deliver the best employer experience in our industry, we will provide professionals with a dedicated application and upgrade our personnel-related ERP systems. We will also develop new employment models and career paths for doctors and other experts.

Half-year financial report January–June: Friday, 13 August 2021
Interim report January–September: Thursday 4 November 2021

Briefing

Pihlajalinna will hold a briefing for analysts and the media on Friday, 7 May 2021 at 10:00 a.m. The event will be held remotely.

Helsinki, 6 May 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 of 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, housing services and wellbeing services. 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.