Terveystalo Group Financial Statements Bulletin 2020

STRONG IMPROVEMENT IN PROFITABILITY IN THE FOURTH QUARTER

Terveystalo Plc, Financial Statements Bulletin, 11 February 2021 at 9:00 EET

This release is a summary of Terveystalo's Financial Statements Bulletin 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/.

October–December 2020 in brief

• Revenue increased by 3.5 percent year-on-year to EUR 279.7 million (270.3).
• Adjusted¹⁾ EBITA increased by 21.5 percent to EUR 39.3 million (32.3), representing 14.0 (12.0) percent of revenue.
• Profit for the period was EUR 22.4 million (16.1).
• Earnings per share (EPS) were EUR 0.18 (0.13).
• Cash flow from operating activities was EUR 66.3 million (49.5).
• Digital visits more than quadrupled to 242,000 (59,000) visits

January–December 2020 in brief

• Revenue decreased by 4.3 percent year-on-year to EUR 986.4 million (1,030.7).
• Adjusted¹⁾ EBITA decreased by 11.5 percent to EUR 101.9 million (115.1), representing 10.3 (11.2) percent of revenue.
• Profit for the period was EUR 45.8 million (54.1).
• Earnings per share (EPS) were EUR 0.36 (0.43).
• Net debt/adjusted EBITDA¹⁾ was 3.0 (3.1).
• Cash flow from operating activities was EUR 143.7 million (173.6).
• Digital visits more than quadrupled to 700,000 (171,000) visits  
• The Board of Directors proposes to the Annual General Meeting that a dividend of EUR 0.13 (0.13) per share be distributed for 2020 and that the Board of Directors be authorized to decide at its discretion on a further dividend payment, so that the maximum amount of dividend payable under the authorization is EUR 0.13 per share, the maximum dividend per share being EUR 0.26 in total.

The figures in parentheses refer to the corresponding period one year ago.
 

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.

Ville Iho, CEO: Agile response to fluctuations in demand was rewarded by strong financial performance

Businesswise, Terveystalo’s final quarter in 2020 was very similar to the previous quarter: revenue increased by 3.5 percent year-on-year, thanks to strong sales to private and corporate customers. In particular, demand for corona testing services was strong. Among public sector customers, strong demand for service sales and occupational health services compensated for the decrease in revenue resulting from expired outsourcing contracts. Our profitability improved clearly: adjusted EBITA increased by 21.5 percent to EUR 39.3 million (32.3), representing 14.0 (12.0) percent of revenue.

All things considered; the fluctuations of sales mix were quite unusual in 2020. The underlying demand was under pressure throughout the year, even though temporary recovery was seen in the summer. The situation resulted from an overall reduction in acute infections and a reduced number of people making appointments. On the other hand, the increasing trend of demand for well-being services continued, coronavirus testing compensated for the general reduction in demand, and startup-like growth figures were seen in digital services, of which the fifty-fold increase in video appointments was a prime example. Remote appointments through digital channels or over the phone accounted for up to 26 percent of all appointments. With respect to the most common diagnoses, the 30-percent reduction in seasonal upper respiratory tract infections was offset by increased mental health problems and illnesses of internal organs. We anticipated the growth of selected specialties already in our strategy and aim to further strengthen our role as a provider of specialized care with dedicated units. For this purpose, we established Fokus special units in selected specialties, starting with mental wellbeing, musculoskeletal disorders and issues within the abdominal area.

After the year dominated by the coronavirus, our organization is even more agile than before in responding to changes in the operating environment, and our clock speed from planning to action has increased. In 2020, it took an unusual amount of persistence to achieve good results. Therefore, we rewarded members of our front-line staff with a bonus of EUR 500 for their great effort. With statutory payments included, this meant an investment of EUR 3 million. Each one of the 6.9 million customer visits to Terveystalo has contributed to people’s health and helped to maintain society’s ability to function during this exceptional year. 

Healthcare digitalization took a great leap forward during the year. However, we can still see considerable potential in the improvement of customer value and productivity by means of digitalization: running basic occupational health processes digitally should be as uncomplicated as applying for a housing loan online, and parts of the routines of the treatment path can be automatized or provided remotely. Despite the coronavirus situation, we have kept our investments in the digital platform at a high level. Maintaining our pioneering status will also require increasing investments in the future. Thanks to our scale and financial strength, we have the opportunity to do so.

In the shadow of the at times sharp debate around the social and healthcare reform, the COVID-19 pandemic has improved the cooperation between the public and private sectors and the threshold for seeking new solutions together is now exceptionally low. Terveystalo’s service sales to the public sector have increased. For instance, in December, we started coronavirus vaccinations in cooperation with our public sector customers, and the swiftly renewed legislation enables extensive participation of occupational healthcare providers in giving coronavirus vaccinations. Whatever the final result of the social and healthcare reform will be, demand from the publicly funded market will continue in the future; the service models will adapt to new legislation, and high-quality supply will continue to find demand.

An important achievement in the coronavirus year is the increased confidence in Terveystalo among our customers and healthcare professionals alike. Our brand preference, an extensive indicator of consumers’ confidence in us, was on a record level. Our main indicator of customer satisfaction, appointment Net Promoter Score, reached a world class result, and the employee Net Promoter Score (eNPS) doubled from the reference period, despite the stressful year. In addition to NPS and eNPS, we also achieved our third, environment related sustainability goal that is tied to our financing agreement. Despite the COVID-19 crisis, we boosted our corporate responsibility efforts in several areas. We will report on these results in more detail in our Sustainability Report, which will be published in week 7.

Responding to the coronavirus situation will remain on the management agenda the first half of 2021. At the same time, the implementation of our strategy progresses as planned and our platform develops further. In December, we informed about the revision of our management structure, aiming for faster decision-making as well as better transparency, productivity, and responsibility for financial performance. The implementation of the new strategy was also boosted by changes in the management.
 

We start the second corona year from a position of strength.

Toward a better tomorrow,
Ville Iho

Outlook

• In the short term, the market environment is still uncertain because of the changes in consumer behavior resulting from the COVID-19 pandemic, and predicting demand is challenging in the short term. Demand for coronavirus testing is expected to remain high throughout the first half of 2021, and demand for healthcare services in general is expected to grow clearly year-on-year compared with the weak second-quarter reference period, providing that there will be no need to implement strict pandemic restriction measures as was the case in the first half of 2020.
• Demand from corporate customers for preventive and statutory occupational health services is expected to remain stable. The recovery of demand for acute and non-urgent medical care is uncertain, owing to a reduction in general morbidity and the measures to restrict the pandemic. The proportion of remote services will increase considerably. Significant changes in the employment rate may be reflected in the underlying demand.
• Overall demand from private customers is expected to remain normal, providing that, in particular, major restrictions to free movement can be avoided. However, there may be considerable differences between specialties in the short term because of variation in general morbidity and pandemic-related area-specific restrictive measures. Demand for remote services will increase considerably. Significant changes in consumer confidence may be reflected in the underlying demand.
• Stable demand from the public sector is expected to continue in occupational health, service sales, and staffing services. Revenue from outsourcing business will decrease, following the planned expiry of outsourcing contracts. 

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.

The impacts of COVID-19 and the measures taken by Terveystalo

To minimize the impacts of the pandemic, Terveystalo adjusted its operations to the exceptional circumstances to safeguard the cash flow and profitability of the business by means such as freezing service purchasing and re-evaluating investment needs, freezing replacement recruitment, and temporarily laying off employees. The need for adjustment as well as adjustment measures decreased clearly in the second half of the year as demand returned closer to normal. The focus of service production was particularly shifted toward coronavirus testing and digital services, and demand for these multiplied from the beginning of the year.

Because of the uncertainty caused by the pandemic, Terveystalo has assessed the impacts of the coronavirus on the reported figures and forecasts as described below. In the current situation, these forecasts strongly rely on assessments made by the company management. 

Because of the uncertainty in the economic operating environment, the credit loss risk of trade receivables and the impairment risk of assets were assessed in light of the changed market outlook and latest forecasts in connection with the financial reporting on the fourth quarter. The risk of credit losses related to trade receivables was not found to have increased significantly. The risk of asset impairment was not found to have increased. Goodwill impairment testing was carried out in accordance with the normal process in the final quarter of 2020.
 

The company’s liquidity and financing situation has remained strong. During the review period, the company fulfilled the covenant requirement included in the financing agreement that depicts relative indebtedness. Because of the prevailing uncertainty, Terveystalo continues the increased reporting of explanatory financial information on the company’s liquidity, assets, and liabilities as well as the maturity of loans in Note 12.

The company estimates that, in addition to the direct impacts of the crisis, changes in the employment rate and consumer confidence may be reflected in the underlying demand even after the acute phase has passed. Nevertheless, the company estimates that its diverse customer base and service selection will mitigate the impacts on its business from any changes in demand for individual services or in individual customer relationships.
 

Key figures

*) 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 quality index consists of seven effectiveness indicators that describe the clinical and experienced quality, access to care, and the proportion of preventive care.
eNPS is measured every six months; the reported figure is the result of the latest measurement.
Mixed waste intensity = Amount of mixed waste (metric tons) relative to total revenue (EUR 100 million)

Briefing
Terveystalo will arrange a webcast in English on its result on February 11, 2021, starting at 11:00 EET.

You can watch the webcast online at: https://terveystalo.videosync.fi/2021-02-11-q4

To ask questions, please join the telephone conference 5–10 minutes prior to the start time using your local number (Finland: +358 981 710 310, Sweden: +46 856 642 651, UK: +44 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 96403408#.

Helsinki, February 11, 2021
Terveystalo Plc
Board of Directors

For further information, please contact:
Ilkka Laurila, CFO
Tel. +358 30 633 1757

Kati Kaksonen, Vice President, Communications
Tel. +358 10 345 2034
Kati.kaksonen(at)terveystalo.com

Distribution:
Nasdaq Helsinki Oy
Main media
www.terveystalo.com

Terveystalo in brief

Terveystalo is the largest healthcare service company in Finland with respect to revenue and network. The company offers versatile primary and specialist medical care services as well as well-being services for corporate customers, private customers, and the public sector. Our nationwide network covers over 300 clinics across Finland. The clinic network is supplemented by 24/7 digital services.

In 2020, Terveystalo had approximately 1.2 million individual customers. The number of customer visits totaled approximately 6.9 million. Terveystalo employs over 13,000 healthcare and well-being professionals. Terveystalo is a Key Flag company and member of Association for Finnish Work. www.terveystalo.com