Correction: Terveystalo Group Interim report 1 January – 31 March 2020
The COVID-19 crisis impacts the business heavily in the short term
Terveystalo Plc, Interim report, 6 May 2020 at 9:45 EEST
In the release published 6 May 2020 at 9:00 the full release attachment was missing from the English version. It is attached to this release.
This release is a summary of Terveystalo's Interim report 1 January – 31 March 2020. The full release is attached to this stock exchange release and is available on our website at: https://www.terveystalo.com/en/investors/Financial-information/.
January–March 2020 in brief
- Revenue decreased by 3.9 percent year-on-year to EUR 257.4 million (267.8) mainly due to expired outsourcing agreements.
- Adjusted1) earnings before interest, taxes, and amortization (EBITA) decreased by 29.4 percent to EUR 22.9 million (32.4), representing 8.9 (12.1) percent of revenue
- Adjusted items affecting comparability were EUR 2.3 (0.7) million.
- Profit for the period was EUR 8.8 million (17.2).
- Earnings per share, EPS were EUR 0.07 (0.14).
- Net debt / adjusted EBITDA1)2) was 3.2 (4.6).
Cash flow from operating activities was EUR 32.9 million (49.1).
The figures in parentheses refer to the corresponding period one year ago.
- Adjustments are material items outside the ordinary course of business, associated with acquisition-related expenses, restructuring-related expenses, net gains and losses on the sale of assets, strategic projects, and other items affecting comparability. Adjustments totaled EUR 2.3 (0.7) million in January–March 2020.
- The reference period includes only three months of Attendo Healthcare Services’ result.
Ville Iho, CEO: The exceptional measures impact the business heavily in the short term. By increasing flexibility, we enable a rapid recovery from the crisis
The COVID-19 epidemic and the restrictive measures imposed in mid-March to prevent it from spreading present an exceptional challenge to our business. In January–February, our business was still growing strongly, but in March the situation changed in a matter of days. In certain areas, such as remote appointments, the COVID-19 epidemic has increased the work of healthcare professionals. In some areas, the epidemic has led to a decrease or interruption of work, due to the authorities’ recommendations and measures imposed to restrict the movement of people. In the short term, the restrictive measures have a particularly strong effect on preventive and well-being services, nonurgent medical care, and oral health services.
However, in the first quarter of 2020, our revenue from corporate and private customer groups remained flat year-on-year, and a significant decrease was seen only in revenue from the public sector as a result of expired outsourcing contracts. Due to our strong operating leverage, our cost structure does not follow in line with the decrease in revenue in the short term. This was reflected in our profitability development. Furthermore, changes in the sales mix as well as the operating cost effects of the investments made in digitalization and other development activities had a negative impact on profitability. We are reviewing all cost items and investments on a broad scale in order to safe guard profitability and cash flow. We assume that the decline in demand will mainly affect the second quarter, but should the crisis persist, we are ready to carry out a necessary restructuring to adjust our cost structure accordingly.
We have worked very hard to adapt our operations to the changed circumstances. Even in exceptional circumstances, we aim to define as broad operating envelope as possible for our business, taking into account the restrictions imposed by the authorities, safety questions, the requirements of clinical quality, and our values. At the same time, we want to serve our customers and run our business with the maximum efficiency within this safe operating envelope.
We have implemented many concrete measures. Appointments have been directed mainly to remote channels, the service capacity of remote appointments has been multiplied, and the efficiency of customer guidance has been continuously improved. Cohort units for receiving patients with respiratory tract symptoms have been established at 32 locations already, and testing capacity has been increased at a record speed. At the same time, our customer satisfaction has remained at a very high level. We are making every effort to help reduce the acute and future workload of the public sector in this exceptional situation. Since the onset of the crisis, we have created dozens of service packages with the public sector, ranging from the testing for and tracking of COVID-19 infections to staffing services and sharing of the workload in surgical operations.
As a leading occupational health player, we want to be a partner for companies in managing the risk of Covid-19 and offer risk assessment, testing and tracking to maximize companies' ability to operate under this circumstanes and return to normal as quickly as possible. We already have multiple examples of a comprehensive covid-19 strategy implementation with our customers.
It is our duty as part of the Finnish healthcare sector to ensure that the corona epidemic is resolved as quickly as possible and that Finns have access to other health-related services during the crisis. According to Terveystalo’s data, a massive treatment gap is developing in the treatment of cardiovascular diseases alone. The burden of untreated illnesses will have long-term impacts on the economy and public health. If the treatment of other illnesses is not ensured during the epidemic, the number of life years lost because of the treatment gap will probably exceed those lost because of the coronavirus.
We believe that the COVID-19 epidemic is permanently transforming the traditional ways of providing healthcare services for customers. The COVID-19 epidemic has made remote appointments mainstream. According to our estimate, approximately up to 60–70 percent of physician’s appointments in primary healthcare can be provided remotely with modern technology. They save time and effort and enable more efficient use of healthcare resources also in the future. Our strength is that we have invested heavily in digitalisation and changes in service channels for a long time.
We expect the epidemic to be a temporary exceptional situation and we will come out of it stronger than ever. In the second quarter of the year, we will focus on defeating the crisis and securing our cash flow to ensure operational flexibility as well as rapid recovery after the epidemic. During the second half of the year, we aim to scale our activities to a new normal and strengthen our market position. The new situation provides many opportunities, such as closer cooperation with the public sector to clear the queues created during the crisis. As a leading occupational health service provider, we also have an important role in supporting the Finnish society in returning back to normal and rebuilding as soon as possible after the crisis. In the middle of the crisis, we are also finalizing our strategic agenda, and we believe we will return to it at the beginning of 2021.
Ville Iho
Outlook
- In the short term, the market environment is very uncertain because of the exceptional measures to control the COVID-19 epidemic. This decreases demand for Terveystalo’s services in the short term. The improvement of demand in the second half of 2020 would require gradual lifting of the restrictions, on movement of people in particular, during the spring and summer. In April 2020, the revenue from corporate and private customer goups declined by approximately 30 percent year-on-year.
- With respect to corporate customers, the restrictions on movement are expected to decrease revenue from nonurgent medical care, preventive services, and well-being services in the second quarter of 2020. On the other hand, demand for remote services will increase considerably.
- Among private customers, revenue from nonurgent medical care, well-being services, and oral health services is expected to decrease in the second quarter of the year. However, demand for remote services will increase considerably.
- Public sector demand will continue strong in service sales and staffing services. Compared with the first quarter of 2020, revenue from outsourcing is expected to develop positively in the second quarter of the year, as a new contract is starting at the beginning of April.
These views are based on the expected development of demand for Terveystalo’s services within the next six months, compared with the past six months.
Terveystalo issued a profit warning on 20 March and updated its market outlook due to the uncertain market situation.
Market Outlook published on 20 March 2020:
- The market environment is very uncertain in the short term due to the exceptional measures in mitigating the coronavirus epidemic.
- The situation is expected to have a significant impact on consumer behavior and demand for preventive and well-being services in the coming months and thus on Terveystalo's expected financial development.
- Demand for non-emergency medical care and oral health services are also expected to decline in the short term.
- At present, it is difficult to assess the duration of the situation, and hence the economic impact, due to the changing nature of the situation.
Key figures
| Terveystalo Group, EUR million | 1–3/2020 | 1–3/2019 | Change, % | 2019 |
| Revenue | 257.4 | 267.8 | -3.9 | 1,030.7 |
| Adjusted EBITDA * 1) | 38.2 | 47.8 | -20.1 | 176.3 |
| Adjusted EBITDA, % * 1) | 14.8 | 17.9 | – | 17.1 |
| EBITDA 1) | 35.9 | 47.1 | -23.8 | 171.2 |
| EBITDA, % 1) | 13.9 | 17.6 | – | 16.6 |
| Adjusted earnings before interest, taxes and amortization (EBITA) * 1) | 22.9 | 32.4 | -29.4 | 115.1 |
| Adjusted EBITA, % *1) | 8.9 | 12.1 | – | 11.2 |
| EBITA 1) | 20.6 | 31.7 | -35.1 | 110.0 |
| EBITA, % 1) | 8.0 | 11.8 | – | 10.7 |
| Adjusted EBIT * 1) | 15.4 | 25.6 | -40.1 | 86.5 |
| Adjusted EBIT, % * 1) | 6.0 | 9.6 | – | 8.4 |
| EBIT | 13.0 | 24.9 | -47.6 | 81.4 |
| EBIT, % | 5.1 | 9.3 | – | 7.9 |
| Return on equity (ROE), % 1) | 8.4 | 10.5 | – | 10.3 |
| Equity ratio, % 1) | 40.5 | 38.1 | – | 39.9 |
| Earnings per share (EUR) | 0.07 | 0.14 | – | 0.43 |
| Gearing, % 1) | 96.4 | 108.8 | – | 101.3 |
| Net debt/adjusted EBITDA (last 12 months) 1)2) | 3.2 | 4.6 | – | 3.1 |
| Total assets | 1,361.3 | 1,390.1 | -2.1 | 1,359.3 |
| Average personnel in person-years | 5,051 | 5,003 | 1.0 | 4,943 |
| Personnel (end of period) | 8,711 | 6,893 | -24.4 | 8,685 |
| Private practitioners (end of period) | 5,132 | 4,885 | 5.1 | 5,068 |
*) Adjustments are material items outside the ordinary course of business, associated with acquisition-related expenses, restructuring-related expenses, gain on sale of assets, strategic projects, and other items affecting comparability.
1) Alternative performance measure. In addition to the IFRS figures, Terveystalo presents additional, alternative performance indicators which the 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 performance, 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.
2) The reference period includes only three months of Attendo Healthcare Services’ result.
Briefing
Terveystalo will arrange a webcast in English on its result on May 6, 2020 starting at 11:00 EET.
You can watch the webcast online at: https://terveystalo.videosync.fi/2020-q1-results
To ask questions, please join the telephone conference 5–10 minutes prior to the start time using your local number (Finland: +358 (0)9 8171 0310, Sweden: +46 (0)8 5664 2651, UK: +44 (0)33 3300 0804, US:
+1 631 913 1422. If you are calling from another location, please use any of the numbers above. The Participant Passcode is 52849749#.
Helsinki, May 6, 2020
Terveystalo Plc
Board of Directors
For further information, please contact:
Ilkka Laurila, CFO
Tel. +358 30 633 1757
Kati Kaksonen, Director, Investor Relations and Financial Communications
Tel. +358 10 345 2034
Kati.kaksonen@terveystalo.com
Distribution:
Nasdaq Helsinki Oy
Main media
www.terveystalo.com