Terveystalo group interim report 1 January-30 September 2017

Terveystalo Plc Interim report 14 November at 8:30 a.m. EET

Terveystalo group interim report
1 January-30 September 2017

Acquisitions and broad based organic growth increased revenue by
30.4% year-on-year in the third quarter
 

Highlights of the review period July-September 2017

• Revenue increased by 30.4 % year-on-year to EUR 155.4 million (119.2)
• Adjusted* EBITDA increased by 19.6 % year-on-year to EUR 17.3 million (14.5)
• EBITDA decreased by 47.7% year-on-year to EUR 7.5 million (14.3)
• Adjusted* EBITA was 7.9% (8.6%) of revenue
• EBITA was 1.6% (8.5%) of revenue
• Net profit amounted to EUR -6.9 million (0.8)
• Operating cash flow amounted to EUR -2.4 million (4.9)

Highlights of the review period January-September 2017

• Revenue increased by 24.7 % year-on-year to EUR 499.6 million (400.5)
• Adjusted* EBITDA increased by 21.5% year-on-year to EUR 63.2 million (52.0)
• EBITDA decreased by 6.9% year-on-year to EUR 43.3 million (46.5)
• Adjusted* EBITA was 9.8% (10.0%) of revenue
• EBITA was 5.8% (8.6%) of revenue
• Net profit amounted to EUR 1.1 million (5.1)
• Net debt increased by 10.5% and was EUR  377.8 million (341.9)
• Operating cash flow amounted to EUR 32.5 million (23.9) 

During the nine months ended 30 September 2017, the Group has made several business acquisitions. The financial statements of Pori Lääkäritalo Oy Group have been included in the consolidated financial statements of Terveystalo Group since the beginning of January 2017 and Diacor terveyspalvelut Oy Group since the end of March 2017.
EBITDA = Earnings Before Interest, Taxes, Depreciation, Amortization and Impairment Losses
EBITA= Earnings Before Interest, Taxes, Amortization and impairment losses
*) Adjustments are material items outside the ordinary course of business and these relate to acquisition related expenses, restructuring related expenses, gain on sale of assets, strategic projects including the IPO, new operations and other items affecting comparability. Adjustments totalled EUR 9.8 (0.1) million in Q3 and EUR 19.9 (5.5) million in Jan-Sep 2017.

Yrjö Närhinen, CEO:  "Terveystalo continues its strong growth"       

"In the third quarter of 2017, Terveystalo revenues continued to develop strongly, growing by 30.4% year-on-year, supported by acquisitions and broad based organic growth.  The growing domestic economy, increase in the number of employed people and improved consumer confidence all contributed to strong demand, both in occupational health care and private customer groups in the review period. Solid demand and strong operational performance allowed Terveystalo to continue to grow market share.

All customer groups continued to perform strongly, partly driven by supportive market fundamentals, partly by our robust commercial performance.  Both corporate and private customer groups grew strongly and the public customer group gained successfully momentum. Our digital offering is popular among customers, visible in the rapid uptake of our digital tools.  

The acquisitions of Porin Lääkäritalo in January 2017 and Diacor in March 2017 contributed significantly to our growth. Integrations have progressed well in terms of personnel, processes and sites and realized synergies are well in line or ahead of original schedule. All the necessary decisions for the implementation of cost synergies have already been done and we estimate that the cost synergies from these acquisitions, EUR 14.6 million in total, will be realized almost in full by 2018. 

Our third quarter adjusted EBITA margin was at 7.9% (8.6% ) as our strong operational performance and timely execution of M&A integrations compensated for the most part for lower average margins deriving from M&A cases In addition, the review period had one working day less than in the previous year, which computationally reduces revenue, especially from corporate customers. Significant acquisition, restructuring and IPO related cost items affected comparability of reported margins in the third quarter and as a result, the EBITA margin decreased by 6.9 percentage points to 1.6%.

I am very happy and satisfied with the great investor interest towards Terveystalo's IPO that was completed after the review period. I would like to thank all of the new shareholders for your trust in private healthcare and Terveystalo. We continue from here with our determined work towards building the healthcare services and healthcare system of the future for the benefit of our customers and the society.

There is uncertainty regarding the planned healthcare and social welfare reform framework in terms of the overall market impact.  The scope of the freedom of choice is currently under discussion, but the current legislative proposal which also includes specialized care, would mean a wider opening of public services to private health care providers than previously anticipated. Terveystalo is well positioned to grow in current market structure and thus the political decision to postpone the reform implementation does not impact our outlook short term. 

Market trends we see impacting the healthcare industry near term are the spread of subscriber-producer model, customer empowerment and digitalization. Terveystalo is well prepared to tap on the business opportunities that these trends bring and we are committed to continuously develop our services to meet the changing customer needs and expectations." 

Outlook on 14 November 2017

The improvement in the domestic economy supports the corporate and private customer business and the company expects the market to continue to develop favourably.

Long term financial targets

The Board of Directors has adopted the following long-term financial targets for Terveystalo.  

• Growth: 6-8% annual growth in revenue in the long term through a combination of organic growth and bolt-on acquisitions;  
  
• Profitability: An Adjusted EBITA margin *) 12-13% of revenue in the medium to long term; 
  
• Capital Structure: Interest-bearing Net Debt** / Adjusted EBITDA not to exceed 3 times. However, indebtedness may temporarily exceed the target level, for example, in conjunction with acquisitions; and 
  
• Dividend Policy: The aim is to distribute at least 30% of net profit as dividends annually. The proposed dividend shall take Terveystalo's long-term development potential and financial position into account.

            Any dividends to be paid in future years, their amount and the time of payment will depend on the Company's future earnings, financial condition, cash flows, investment needs, solvency and other factors.

Any financial targets discussed herein are targets only and are not, and should not be viewed as, forecasts, projections or estimates of the Company's future performance.
*) Earnings before Interest, Taxes, Amortization, impairment losses and adjustments. Adjustments are material items outside the ordinary course of business and these relate to acquisition related expenses, restructuring related expenses, gain on sale of assets, strategic projects including the IPO, new operations and other items affecting comparability.
**Net debt / adjusted EBITDA is calculated by dividing net debt (interest-bearing liabilities - interest-bearing receivables and cash equivalents) with an adjusted EBITDA of 12 months.

Key figures

*) Adjustments are material items outside the ordinary course of business and these relate to acquisition related expenses, restructuring related expenses, gain on sale of assets, strategic projects including the IPO, new operations and other items affecting comparability.
** Number of shares has significantly changed after the reporting period due to combination of old share classes and IPO.

Publication schedule for financial reporting in 2018

Terveystalo will publish the 2017 financial statement bulletin on Wednesday, 28 February 2018. The 2018 Publication schedule and the date of the 2018 Annual General Meeting will be published by the end of the year.

Briefings

Terveystalo will hold a result press conference on 14 November 2017 at 10:30 a.m. at Terveystalo, Keskuskatu 7 (1^st floor, meeting room "Atski"), 00100 Helsinki. An English-language telephone conference and webcast will begin at 11:45 a.m. Finnish time. The conference may be attended by dialling your local access number +358 (0)9 7479 0361 (Finland), +46 (0)8 5033 6574 (Sweden), +47 2100 2610 (Norway) or +44 (0)330 336 9105 (UK). The confirmation code is 7023400#. To join the live webcast, please register at: https://slideassist.webcasts.com/starthere.jsp?ei=1169944 

Terveystalo follows the disclosure procedure enabled by the Finnish Financial Supervisory Authority and hereby publishes its Interim report attached as a PDF file to this stock exchange release. The Interim report is also available at:
https://www.terveystalo.com/en/investors/Financial-information/  

In Helsinki, 14 November 2017
Terveystalo Plc
The 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
Kati.kaksonen@terveystalo.com 

Terveystalo in brief
Terveystalo is a leading private healthcare service provider in Finland offering primary and outpatient secondary healthcare services to corporate, private and public sector customers. The Company's healthcare service offering includes general practice and specialist medical care, diagnostic services, outpatient surgery, dental services and other adjacent services, which comprise its integrated healthcare care chain. The Company also offers a suite of digital healthcare services. Terveystalo is able to provide nationwide reach through its approximately 180 clinics, covering all 20 of Finland's largest cities, together with its digital platforms.

Terveystalo's operations are driven by its scale and supported by centralized functions and standardized operating practices. At the core of Terveystalo's strategy is a focus on providing medical quality and positive customer experiences, maintaining a competent and satisfied base of healthcare professionals and developing a variety of customized digital tools.

In 2016, the Company had approximately 1.0 million individual customers as well as approximately 2.7 million doctor visits, accounting for 12 percent of the total doctor visits in Finland. The Company's customers are divided into three groups: corporate customers, who the Company partners with to provide, for example, occupational healthcare services to their employees, private customers and public customers, who the Company partners with to provide public healthcare services and occupational healthcare services to municipal employees. Terveystalo had approximately 4,445 employees (including part-time employees) and approximately 4,400 private practitioners as at June 30, 2017.