Terveystalo Group Financial Statements Bulletin 2019
Strong revenue growth and profitability
Terveystalo Plc, Financial Statements Bulletin, 13 February 2020 at 9:00 EET
This release is a summary of Terveystalo's Financial Statements Bulletin 2019. 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/.
October–December 2019 in brief
- Revenue increased by 36.6 percent year-on-year to EUR 270.3 million (197.9)
- Adjusted1) earnings before interest, taxes and amortization (EBITA) before IFRS 16 impact (comparable) increased by 17.5 percent to EUR 31.9 million (27.1), representing 11.8 (13.7) percent of revenue
- Earnings before interest, taxes and amortization (EBITA)2) were
11.6 (10.7) percent of revenue - Profit for the period2) amounted to EUR 16.1 million (10.1)
- Operating cash flow2) amounted to EUR 49.5 million (38.6)
- Earnings per share2) (EPS) were EUR 0.13 (0.08).
There were 62 business days in October–December, which is equal to the reference period (62).
2019 in brief
- Revenue increased by 38.4 percent year-on-year to EUR 1,030.7 million (744.7)
- Adjusted1) earnings before interest, taxes and amortization (EBITA) before IFRS 16 impact (comparable) increased by 29.3 percent to EUR 113.4 million (87.7), representing 11.0 percent (11.8%) of revenue
- Earnings before interest, taxes and amortization (EBITA)2) were
10.7 (12.8) percent of revenue - Profit for the period2)3) amounted to EUR 54.1 million (68.7) The net profit of the reference period was improved by non-recurring net capital gains of EUR 15.8 million and a non-recurring deferred tax asset of EUR 13.0 million related to confirmed losses.
- Net debt/adjusted EBITDA1)2) was 3.1 (3.8)
- Net debt/adjusted EBITDA1) before IFRS 16 impact (comparable) was 2.7 (3.8)
- Operating cash flow2) amounted to EUR 173.6 million (100.6)
- Earnings per share2)3) (EPS) were EUR 0.43 (0.54).
- The Board of Directors proposes to the Annual General Meeting that a dividend of EUR 0.26 (20) per share in total be distributed in two installments4)
Unless otherwise stated, the figures in parentheses refer to the corresponding period one year ago.
Terveystalo adopted the IFRS 16 Lease standard on January 1, 2019. Figures for the reference period in 2018 have not been adjusted. Additional information on the application of the IFRS 16 standard and other significant principles concerning the financial statement can be found in section 1 of the notes to the financial statement.
1) 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 1.0 (5.9) million in October–December and EUR 5.1 (-7.7) million for January–December.
2) Not comparable because of the adoption of IFRS 16. The adoption of IFRS 16 had a material effect on adjusted EBITDA, which increased by EUR 10.2 million in October–December and by EUR 39.9 million in January–December. The impact of IFRS 16 on earnings before interest, taxes, and amortization (EBITA) was not material. Operating cash flow increased due to the impact of IFRS 16 by EUR 39.9 million in January–December. In addition, the adoption of IFRS 16 increased interest-bearing lease liabilities by EUR 178.7 million.
The net profit of the reference period was improved by a non-recurring deferred tax asset of EUR 13.0 million related to confirmed losses and non-recurring net capital gains totaling EUR 15.8 million.
4) The Board of Directors proposes to the Annual General Meeting that a dividend of EUR 0.13 (0.20) per share be distributed for 2019, totaling EUR 16.6 (25.5) million. The Board of Directors further proposes that the Board of Directors be authorized to resolve in its discretion on the payment of additional dividend. The amount dividend to be paid based on the authorization shall not exceed EUR 0.13 per share and EUR 16.6 million in aggregate.
Ville Iho, CEO: A year of financial and operational excellence
Terveystalo had an excellent year in 2019 in terms of our financial and operational results. The broad-based growth of our business continued across all customer groups and our revenue for the full year grew by more than 38 percent year-on-year, exceeding one billion euros for the first time. Organic growth clearly exceeded the long-term growth target of 6-8 percent and was close to 10 per cent year-on-year. Adjusted earnings before interest, taxes and amortization (EBITA) grew to EUR 115 million. Operating cash flow saw strong growth and our investments in digitalization continued to increase. We also strengthened our balance sheet and our comparable net debt/adjusted EBITDA ratio decreased to 2.7.
We have achieved growth in our service provision while ensuring high service quality and quick access to care for our customers in spite of the resource-related challenges in our industry. Our growth in customer volume was paralleled by our customer satisfaction rising to an all-time high.
We are also increasingly challenging ourselves in the area of corporate responsibility. As a concrete example of this is the loan financing agreement of EUR 410 million we made in the fourth quarter. The interest rate margin takes into account Terveystalo's achievement of corporate responsibility targets for improvement in customer satisfaction, employee satisfaction and well-being as well as the reduction of mixed waste.
Technological progress and the service innovations it brings are reshaping all industries, and digital services are also becoming more common in health care. The significance of comprehensive well-being is growing and the industry megatrends, along with customer comparisons against services in other sectors, are shaping customer expectations in health care. The ageing of the Western population will increase service demand and lead to higher health care costs. At the same time, there are widespread shortages of health care professionals.
At Terveystalo, the leading private company in our field, we have a unique opportunity — and responsibility — to be a trendsetter in this regard. We create new operating models that help society as a whole respond to the challenges presented by ageing, diseases of affluence, and growing health care costs. We challenge ourselves to open up bottlenecks in chains of care and we invest in the development of new service solutions and processes with the aim of supporting the overall health of our customers more accurately and effectively.
Our digital tools are a good example of the solutions we have implemented to respond to our customers’ needs effectively regardless of time and place, around the clock. Our remote chat appointments with physicians, for example, are available with an average waiting time of seven seconds. We make purposeful use of our experts time and guide our customers to meet the right expert through the appropriate service at the appropriate time, using the appropriate channel.
The transformation of the industry provides Terveystalo with new opportunities for taking advantage of its key competencies. As we move forward, we will continue to drive the industry’s development towards more individual-oriented and preventive care and even smoother chains of care. We are building our industry’s strongest working community and the best team. We want our customers to feel that they are receiving the best possible care regardless of the service or channel they use.
As Terveystalo’s new CEO, I am very impressed by the company’s strong culture and competencies. The people of Terveystalo possess in-depth professional expertise in their field along with a strong work ethic and the desire to find new, concrete solutions to the industry’s needs.
Our strengths provide an excellent foundation for our future development and making the right future strategic choices.
Ville Iho
Market outlook
- The market environment remains favorable in spite of weakened consumer confidence.
- Corporate customers keep up a steady demand. Price competition is intensifying in certain customer groups in occupational health. At the same time, the relative share of preventive services is increasing, which is a trend that will be further strengthened by the upcoming change in legislation concerning Kela reimbursements, due to be introduced at the beginning of 2020.
- Private customer demand also remains strong, and the trend of comprehensive well-being is creating broad growth in service demand. This is particularly reflected in growth in the demand for services other than physician appointments.
- Public sector demand remains strong in various service categories.
These views are based on the expected market development within the next six months, compared to the past six months.
Changes in reporting
Terveystalo adopted the IFRS 16 standard on 1 January 2019. In accordance with the IFRS 16 standard, previous lease expenses are replaced with depreciation charges for right-of-use assets and interest expense on lease liabilities in the income statement. As a result, the IFRS 16 standard has a low impact on the operating profit and the profit for the financial year 2019. In 2019, the adoption of IFRS 16 will have a positive impact of approximately EUR 40 million on the operating margin, and it will increase net debt and right-of-use assets on the balance sheet by approximately EUR 180 million. The figures for 2018 have not been adjusted. The adoption of IFRS 16 has affected the income statement, balance sheet, and cash flow. For additional information on the accounting principles, please refer to page 16.
Financial targets
The financial target pertaining to the capital structure has been revised to take into account the computational impact of IFRS 16 adoption. Going forward, the target for the net debt/adjusted EBITDA ratio is 3.5 or less. However, indebtedness may temporarily exceed the target level, such as in conjunction with acquisitions.
Key figures
| Terveystalo Group, EUR million | 10–12/ 2019 | 10–12/ 2018 | Change, % | 2019 | 2018 | Change, % |
| Revenue | 270.3 | 197.9 | 36.6 | 1,030.7 | 744.7 | 38.4 |
| Adjusted EBITDA * 1) 2) | 47.8 | 32.5 | 47.1 | 176.3 | 108.9 | 62.0 |
| Adjusted EBITDA, % * 1) 2) | 17.7 | 16.4 | - | 17.1 | 14.6 | - |
| EBITDA 1) 2) | 46.8 | 26.6 | 76.2 | 171.2 | 116.6 | 46.9 |
| EBITDA, % 1) 2) | 17.3 | 13.4 | - | 16.6 | 15.7 | - |
| Adjusted earnings before interest, taxes and amortization (EBITA) * 1) 2) | 32.3 | 27.1 | 19.2 | 115.1 | 87.7 | 31.2 |
| Adjusted earnings before interest, taxes and amortization (EBITA), % * 1) 2) | 12.0 | 13.7 | - | 11.2 | 11.8 | - |
| Adjusted earnings before interest and taxes (EBIT) * 1) 2) | 24.8 | 22.0 | 12.5 | 86.5 | 67.7 | 27.7 |
| Adjusted earnings before interest and taxes (EBIT), % * 1) 2) | 9.2 | 11.1 | - | 8.4 | 9.1 | - |
| Earnings before interest and taxes (EBIT) 2) | 23.8 | 16.1 | 47.9 | 81.4 | 75.4 | 7.9 |
| Net profit 2) 3) | 16.1 | 10.1 | 59.6 | 54.1 | 68.7 | -21.3 |
| Net debt 2) | - | - | - | 548.2 | 413.3 | 32.7 |
| Net debt/adjusted EBITDA (last 12 months) * 1) 2) | - | - | - | 3.1 | 3.8 | - |
| Return on equity (ROE), % 1) 2)3) | - | - | - | 10.3 | 14.2 | - |
| Equity ratio, % 1) 2) | - | - | - | 39.9 | 44.1 | - |
| Gearing, % 1) 2) | - | - | - | 101.3 | 80.8 | - |
| Earnings per share (€) 2) 3) | 0.13 | 0.08 | - | 0.43 | 0.54 | - |
| Operating cash flow 2) | 49.5 | 38.6 | 28.2 | 173.6 | 100.6 | 72.5 |
| Personnel (end of period) | - | - | - | 8,685 | 6,018 | 44.3 |
| Private practitioners (end of period) | - | - | - | 5,068 | 4,877 | 3.9 |
| Number of working days | 62 | 62 | 251 | 251 |
| Before IFRS 16 impact (comparable), EUR million | 10–12/ 2019 | 10–12/ 2018 | Change, % | 2019 | 2018 | Change, % |
| Adjusted EBITDA * 1) | 37.6 | 32.5 | 15.6 | 136.4 | 108.9 | 25.3 |
| Adjusted EBITDA, % * 1) | 13.9 | 16.4 | - | 13.2 | 14.6 | - |
| Adjusted earnings before interest, taxes and amortization (EBITA) * 1) | 31.9 | 27.1 | 17.5 | 113.4 | 87.7 | 29.3 |
| Adjusted earnings before interest, taxes and amortization (EBITA), % * 1) | 11.8 | 13.7 | - | 11.0 | 11.8 | - |
| Adjusted net debt * 1) | - | - | - | 369.5 | 413.3 | -10.6 |
| Adjusted net debt/adjusted EBITDA (last 12 months) * 1) | - | - | - | 2.7 | 3.8 | - |
* 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. Additional information is provided in notes 13 and 14.
2) Not comparable because of the adoption of IFRS 16.
The adoption of IFRS 16 had a significant effect on adjusted EBITDA, which increased by EUR 10.2 million in October–December and by EUR 39.9 million in January–December. The impact of IFRS 16 on earnings before interest, taxes, and amortization (EBITA) was not material. Operating cash flow increased due to the impact of IFRS 16 by EUR 39.9 million in January–December. In addition, the adoption of IFRS 16 increased interest-bearing lease liabilities by EUR 178.7 million.
3) The net profit of the January–December reference period was improved by a non-recurring deferred tax asset of EUR 13.0 million related to confirmed losses and non-recurring capital gains, totaling EUR 15.8 million.
Briefing
Terveystalo will hold a result briefing and live webcast in English on February 13, 2020, starting at 11:00 a.m. EET, at Terveystalo Piazza, Jaakonkatu 3 B, 3rd floor, 00100 Helsinki, Finland.
You can watch the webcast online at: https://terveystalo.videosync.fi/2019-q4-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:
+1 855 857 06 86. If you are calling from another location, please use any of the numbers above. The Participant Passcode is 53618519#.
Helsinki, February 13, 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
Terveystalo in brief
Terveystalo is a listed company on the Helsinki Stock Exchange. Terveystalo is the largest health care service company in Finland with net sales and network. The company offers versatile primary and secondary health care services for corporate and private customers and the public sector. The nationwide network covers approximately 300 clinics across Finland. The clinic network is complemented by 24/7 digital services.
In 2019, Terveystalo had approximately 1.2 million individual customers and approximately 3.7 million visits to a physician. Less than half of Terveystalo’s over 13,000 health care professionals are independent practitioners. Terveystalo’s services carry the Key Flag symbol and the company is a member of the Association for Finnish Work. www.terveystalo.com
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