Terveystalo Group Half-Year Report 1 January - 30 June 2021: Strong growth in revenue and profit compared to lockdown-influenced reference period

Terveystalo Plc, Half-Year Report, 12 August 2021 at 9:00 EEST

This release is a summary of Terveystalo's Half-Year Report 1 January - 31March 2021. 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/.

April–June 2021 in brief

• Revenue increased by 31.6 percent year-on-year¹⁾ to EUR 275.3 (209.2) million.
• Adjusted²⁾ earnings before interest, taxes, and amortization (EBITA) increased to EUR 29.5 (8.8) million, representing 10.7 (4.2) percent of revenue.
• Adjusted items affecting comparability were EUR 0.8 (0.8) million.
• Profit for the period was EUR 16.2 million (-1.5).
• Earnings per share (EPS) were EUR 0.13 (-0.01).
• Cash flow from operating activities was EUR 47.3 (35.9) million.
• Acquisition of Feelgood Svenska AB (publ) proceeded according to expectations³⁾

January–June 2021 in brief

• Revenue increased by 18.7 percent year-on-year to EUR 554.0 (466.5) million.
• Adjusted²⁾ earnings before interest, taxes, and amortization (EBITA) increased to EUR 67.7 (31.7) million, representing 12.2 (6.8) percent of revenue.
• Adjusted items affecting comparability were EUR 1.0 (3.1) million.
• Profit for the period was EUR 40.1 (7.3) million.
• Earnings per share (EPS) were EUR 0.32 (0.06).
• Net debt/adjusted EBITDA was 2.7 (3.4).
• Cash flow from operating activities was EUR 78.4 (68.8) million.

The figures in parentheses refer to the corresponding period one year ago.
1) The figures for the comparison period were significantly affected by the first wave of the COVID-19 pandemic and the related restrictions introduced in late March 2020. Compared to the second quarter of 2019, revenue increased by 6.5% (4–6/2019: EUR 258.6 million) and adjusted EBITA increased by 13.9% (4–6/2019: EUR 25.9 million)
2) 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.
3) Feelgood has been consolidated in the balance sheet and personnel numbers for the reporting period and in the consolidated financial statements from the end of June 2021. There was no P&L impact for the reporting period, H1/21.
 

The demand for healthcare services continued to recover in the second quarter and the demand for appointments showed growth from the pre-pandemic period. In particular, visits from private customers increased. Booking rates for appointments have risen month by month. Terveystalo’s revenue for the second quarter grew by 32% compared to the weak reference period, to EUR 275.3 (209.2) million, and our business developed favorably in all customer groups. Services related to COVID-19 continued to increase revenue as COVID-19 testing volumes remained at a higher-than-anticipated level and vaccination volumes grew. Our profitability improved significantly from the previous year; adjusted EBITA increased to EUR 29.5 (8.8) million. The comparison period in 2020 was very challenging due to the first wave of COVID-19, which explains the exceptionally high growth rates for the past quarter. Revenue and EBITA both also increased compared to the comparison period in 2019; revenue by 6.5% and adjusted EBITA by 13.9%.

Trends driven by the corona pandemic were clearly reflected in the second-quarter sales mix. The number of appointments conducted via digital channels increased by 68% year-on-year to approximately 246,000 appointments. Revenue from well-being services increased by 41%, especially due to strong demand for mental well-being, nutrition therapy and physiotherapy services.  The share of laboratory services in the sales mix remained strong, while the low number of acute infections meant that the volume of general practitioners’ appointments remained substantially below normal.

Terveystalo is the clear market leader in occupational health services in the Nordics, and we have made long-term investments in occupational health processes, services and digital tools. The acquisition of Feelgood, which is one of the leading occupational healthcare companies in Sweden, represents a perfect first step for us in scaling our occupational healthcare capabilities beyond Finland’s borders. We completed the Feelgood acquisition process in early August and will now start working together on integration and drawing up a detailed business plan in Sweden. With an almost doubled customer base and our complementary occupational healthcare capabilities, we can create added value for our customers and professionals while also improving operational efficiency. Our goal is to develop the Swedish occupational healthcare market and grow both organically and through additional acquisitions. We also see potential for expanding the range of services in the Swedish market towards more integrated chains of care.

In the consumer business, we aim to accelerate our growth and further strengthen our leadership position. To accomplish these goals, we are developing a personalized and engaging customer experience and convenient use of services. Furthermore, we invest in the broad availability of leading expertise in our chosen specialties, and developing new service products that suit the various life stages of our customers. In May, we launched a strongly digital Children’s Terveystalo to serve families with children better, more comprehensively, and in an increasingly child-friendly manner. Remote appointments are a key element of the Children’s Terveystalo service package. The concept has been received very well by both families with children and pediatricians. Revenue of our services for children increased significantly during the second quarter. We will expand the Children’s Terveystalo concept to 13 new units in the autumn in addition to the 6 units launched earlier. On the consumer side, we have also invested heavily in the development and marketing of a personalized, digital service experience. The results of these efforts are reflected, among other things, in the growth of number of visits to terveystalo.com, the higher self-service rates in the booking phase, and in the improved conversion rate of services.

The Government’s proposal on the reform of social and healthcare services was approved by the Parliament at the end of June. Under the proposal, the responsibility for the organization of social and healthcare services will be transferred to the 21 well-being services counties to be established and the City of Helsinki. As a result of these reforms, some of Terveystalo’s outsourcing agreements for public services will need to be renegotiated so that the new contractual terms will enter into force at the beginning of 2026 at the latest. Furthermore, there will be restrictions on the subcontracting practices for public services produced as outsourced services, but these will not have a significant impact on Terveystalo. It is clear that there is demand in the publicly funded markets under the new SOTE model, services will adapt to the new legislation and high-quality supply will continue to find demand.

Indeed, we see a number of promising growth opportunities in public customer relationships that will enable us to leverage our expertise, customer insight, and extensive network. Terveystalo’s overall service sales have seen strong growth throughout the pandemic and cooperation with the public sector has become increasingly effective. The number of open tenders for outsourcing agreements is also currently at a good level.  We have been successful in several tenders, the latest of which is the launch of a partnership in the service production of Kannelmäki health center in Helsinki. This is the City of Helsinki’s first service purchase decision concerning a health center. Operations in Kannelmäki will start this fall. This represents a very important partnership for Terveystalo, which also enables us to pursue the development of our Health Center of the Future concept.

Our most important task is still to provide measured quality care at a reasonable cost - whether it is promoting well-being, preventing diseases or treating them. We can invest in new solutions and quickly upgrade our operations to meet changing customer needs. One important enabler for this is the ISO 13485 certificate we recently received for our software development as the first Finnish health service company. With our investments, we improve the productivity of operations and the value of our services to the customer. Our actions encourage the renewal of all healthcare to improve people's quality of life and well-being. As a forerunner in the industry, we are also the best possible partner for the public sector.

We at Terveystalo work towards a future where more and more people have fast and unhindered access to healthcare and well-being services.

Toward a better tomorrow,
Ville Iho

Outlook

• The market environment is normalizing, but predicting demand continues to be challenging in the short term.

• Demand for COVID-19 related services is expected to remain active during the second half of the year, and the demand for healthcare services in general is expected to grow clearly year-on-year.
• Demand from corporate customers for preventive and statutory occupational health services is expected to develop favorably. The recovery of demand for acute and non-urgent medical care is uncertain due to the reduction in general morbidity and the restrictions introduced in response to the pandemic. Significant changes in the employment rate may be reflected in the underlying demand.
• In the private customer segment, overall demand is expected to develop favorably and grow substantially year-on-year. However, there may be considerable differences between specialties and regions in the short term due to variation in general morbidity and regional restrictions related to the pandemic. Demand for remote services is expected to increase further. Significant changes in consumer confidence may be reflected in the underlying demand.
• Demand from the public sector is expected to remain strong in occupational health, service sales, and staffing services. Revenue from the outsourcing business is expected to remain stable. 

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

During the second quarter of 2021, Terveystalo’s service production was again characterized by various COVID-19-related services as well as well-being and digital services, which saw significant year-on-year growth in demand.

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 reflects relative indebtedness. Due to 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 13.

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.

*) 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.
3) Amount of mixed waste (metric tons) relative to total revenue (100 million)

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Briefing
Terveystalo will arrange a webcast in English on its result on August 12, 2021 at 10:30 EEST.

You can watch the webcast online at: https://terveystalo.videosync.fi/2021-08-12-terveystalo-q2

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: 32751256#

Helsinki, August 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@terveystalo.com

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

Terveystalo in brief 

Terveystalo is Finland's largest health service company in terms of revenue and network, with the aim of empowering lifelong health and well-being and building a healthier society. The company provides comprehensive well-being, primary care and specialist care services to corporate and private customers, as well as the public sector. Terveystalo's digital appointment serves are available 24/7, regardless of time and place. In addition, the company offers health and well-being services in more than 300 locations throughout Finland.

In 2020, Terveystalo had 1.2 million individual customers. Some 6.9 million customer visits were made, of which more than a quarter took place in remote channels. Terveystalo employs more than 13,000 health and well-being professionals.

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