Terveystalo Group Half-Year Report 1 January – 30 June 2019
Strong growth driven by Attendo acquisition and good underlying growth
Terveystalo Plc Half-Year Report 8 August 2019 at 9:00 am EEST
This release is a summary of Terveystalo's Half-Year Report for 1 January – 30 June 2019. The full release is available as an attachment to this stock exchange release and is available on our website at https://www.terveystalo.com/en/investors/Financial-information/ .
April–June 2019 in brief
- Revenue increased by 36.8 percent year-on-year to EUR 258.6 million (189.0)
- Adjusted1)2) earnings before interest, taxes, and amortization (EBITA) increased by 28.2 per cent to EUR 25.9 million (20.2) and were 10.0 percent (10.7) of the revenue
- Earnings before interest, taxes and amortization (EBITA)2) were 9.2 (14.3) percent of the revenue
- Profit for the period2) amounted to EUR 10.4 million (15.4)
- Operating cash flow2) amounted to EUR 48.6 million (30.2)
- Earnings per share2) (EPS) were EUR 0.08 (0.12).
In April–June, there was one less business day than in the reference period, which reduced revenue and profitability. Figures for the reference period were impacted by the non-recurring capital gains totaling EUR 7.8 million (including the sale of Porin Linnankulma Mutual Real Estate Company).
January–June 2019 in brief
- Revenue increased by 36.2 percent year-on-year to EUR 526.4 million (386.5)
- Adjusted1)2) earnings before interest, taxes, and amortization (EBITA) increased by 27.3 percent to EUR 58.3 million (45.8) and were 11.1 percent (11.9) of the revenue
- Earnings before interest, taxes and amortization (EBITA)2) were 10.5 (13.5) percent of the revenue
- Profit for the period2)3) amounted to EUR 27.6 million (42.6)
- Net debt / adjusted EBITDA1)2)4) was 4.1
- Net debt/Adjusted EBITDA 1)4 before IFRS 16 impact (comparable) was 3.2 (2.1)
- Operating cash flow2) amounted to EUR 97.7 million (48.6)
- Earnings per share2)3) (EPS) were EUR 0.22 (0.33).
Unless otherwise stated, the figures in parentheses refer to a corresponding period one year ago.
Terveystalo adopted the IFRS 16 Lease standard on 1 January 2019. Figures for reference period 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, gain on sale of assets, strategic projects, and other items affecting comparability. Adjustments totaled EUR 2.2 (-6.8) million in April–June and EUR 2.9 (-6.2) million in January–June.
2) Not comparable because of the adoption of IFRS 16. Adoption of IFRS 16 had a significant effect on adjusted EBITDA, which increased by EUR 10.0 million in Q2 and EUR 19.8 million in H1. IFRS 16 adoption increased operating cash flow by EUR 19.8 million in H1. IFRS 16 also increased lease-related interest-bearing debt by EUR 181.4 million.
3) The result for the comparison 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 7.8 million
4) Last 12 months EBITDA includes six-month impact of the Attendo acquisition
Yrjö Närhinen, CEO: Strong organic growth continues, Attendo Integration progressing according to expectations
Our revenue for the second quarter of the year was the highest ever at EUR 258.6 million. Once again, we were able to deliver broad scale growth across regions and customer groups. Revenue was driven by Attendo acquisition and improved organic growth. Quarter’s relative profitability was negatively impacted by change in sales mix towards more appointment driven services, lower margin of Attendo business, negative working day impact and positive one offs in the comparison period. Overall, profitability developed in line with our expectations.
The strong momentum in private pay continues as our new power tools; the new My Health app, remote appointments and well-being services spur growth. We were successful in expanding our offering year-on-year, and our growing network of other health professionals alongside physicians is particularly supportive of the growth of the well-being business. Profitability is driven by continued operational efficiency where new digital tools help efficiently manage supply and demand.
Our comprehensive occupational health product development is reflected in the continued growth of preventive and well-being services. Mental health is the subject of much media coverage as number of absences due to mental health problems has increased dramatically in the last three years. Luckily more and more employers are waking up to early prevention, which is reflected in a strong increase in demand for mental health services. Occupational health customers are also increasingly using our services as private customers. We are delighted that we have succeeded in convincing them of our services and that they increasingly choose Terveystalo as their health partner and that of their families.
The demand in the public sector customer group remains strong. Our focus as a group is still on Attendo integration, which continues well on track. Public demand is strongly fueled by the issues in public sector emergency services and doctor shortage, as well as ongoing political speculation about tightening the Restriction Act on outsourcings. While the objective may be correct, we fear that these restrictive measures lead only to increased uncertainty and, at worst, decrease availability of services without improving cost-effectiveness. We at Terveystalo believe that broad scale public-private partnerships would be more beneficial for Finland than the current attempts to curtail cooperation. We see ourselves as a part of the solution as our ability to deliver cost-effective, including digital, solutions for municipalities continues to increase.
Furthermore, Terveystalo continues its strong digital product development. Our new operating models and products such as the pre-bookable remote appointment illustrate how Terveystalo continues to deliver traditional physical healthcare services while enriching these services with digital options. Digital service development is aimed at both improving the quality, availability and transparency of our services, while streamlining management of our operations at the same time. We see a growing need for these solutions also in the public sector.
Overall, I am pleased with Terveystalo’s performance in the second quarter and our continued progress in executing our strategy. The company is well positioned to respond to market changes and future challenges.
Market environment remains positive despite weakened consumer confidence. With the healthcare and social welfare reform still being delayed, demand in public sector is expected to grow.
Corporate customers keep up a steady demand, and the relative share of preventive services is increasing. Private customer demand also remains at a steady level but new capacity that entered the market at beginning of 2018 still has a negative impact on Terveystalo’s revenue growth. This capacity growth has reached its peak, however. These views are based on the expected market development within the next six months, compared to the last 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, adoption of the IFRS 16 standard has 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 200 million. The figures for 2018 have not been adjusted. Adoption of the IFRS 16 standard has effected the income statement, balance sheet and cash flow. For additional information about the accounting principles, see pages 17 of the notes.
|EUR million||4–6/2019||4–6/2018||Change, %||1–6/2019||1–6/2018||Change, %||2018|
|Adjusted EBITDA1) 2)||40.9||25.5||60.5||88.7||56.3||57.7||108.9|
|Adjusted EBITDA, %1) 2)||15.8||13.5||-||16.9||14.6||-||14.6|
|EBITDA, %1) 2)||15.0||17.1||-||16.3||16.2||-||15.7|
|Adjusted earnings before interest, taxes
and amortization (EBITA) 1) 2)
|Adjusted earnings before interest, taxes
and amortization (EBITA), % 1) 2)
|Earnings before interest and taxes (EBIT) 2)||16.7||22.1||-24.5||41.6||42.0||-1.1||75.4|
|Net profit 2) 3)||10.4||15.4||-32.6||27.6||42.6||-35.3||68.7|
|Net debt 2)||-||-||-||572.9||218.0||162.7||413.3|
|Net debt/adjusted EBITDA
(last 12 months) 1) 2) 4)
|Return on equity (ROE), %1) 2)||-||-||-||10.5||8.8||-||14.2|
|Equity ratio, %1) 2)||-||-||-||37.8||52.9||-||44.1|
|Gearing, % 1) 2)||-||-||-||111.4||44.2||-||80.8|
|Earnings per share 2) 3)||0.08||0.12||-||0.22||0.33||-||0.54|
|Operating cash flow2)||48.6||30.2||97.7||48.6||100.6|
|Personnel (end of period)||7,165||4,531||52.1||6 018|
|Private practitioners (end of period)||5,000||4,629||5.5||4 877|
|Number of working days||60||61||-1.6||123||124||-0.8||251|
|Before IFRS 16 impact (comparable), EUR million||4–6/ 2019||4–6/ 2018||Change, %||1–6/ 2019||1–6/ 2018||Change, %||2018|
|Adjusted EBITDA, % 1)||11.9||13.5||-||13.1||14.6||-||14.6|
|Adjusted EBITA 1)||25.5||20.2||26.1||57.6||45.8||25.7||87.7|
|Adjusted EBITA, % 1)||9.9||10.7||-||10.9||11.9||-||11.8|
|Adjusted net debt1)||-||-||-||391.4||218.0||79.5||413.3|
|Adjusted EBITDA (last 12 months) 1) 4)||-||-||-||3.2||2.1||-||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 indicator. Additional information in note 14.
2) Not comparable because of the adoption of IFRS 16.
Adoption of IFRS 16 had a significant effect on adjusted EBITDA, which increased by EUR 10.0 million in Q2 and EUR 19.8 million in H1. IFRS 16 adoption increased operating cash flow by EUR 19.8 million in H1. IFRS 16 also increased lease-related interest-bearing debt by EUR 181.4 million.
3) The result for the comparison 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 7.8 million.
4) Last 12 months EBITDA includes only six-month impact of the Attendo acquisition.
Terveystalo will hold a result briefing and live webcast in English on 8 August 2019, 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-q2-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 63 1913 1422). If you are calling from another location, please use any of the numbers above. The Participant Passcode is 29217680#.
Helsinki 8 August 2019
Board of Directors
For more information, please contact:
Ilkka Laurila, CFO
Tel. +358 30 633 1757
Kati Kaksonen, Director, Investor Relations and Financial Communications
Tel. +358 10 345 2034
Nasdaq Helsinki Oy
Terveystalo in brief
Terveystalo is a listed company on the Helsinki Stock Exchange. Terveystalo is the largest healthcare service company in Finland with net sales and network. The company offers versatile primary and secondary healthcare services for corporate and private customers and the public sector. The nationwide network covers 260 locations across Finland. The clinic network is complemented by 24/7 digital services.
In 2018, Terveystalo had approximately 1.2 million individual customers and approximately 3.5 million visits to a physician. Around half of Terveystalo’s 10,000 health care professionals are employees of Terveystalo, while the other half 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