Terveystalo Group Interim Report 1 January - 30 September 2018

Terveystalo Plc. Interim report 14 November 2018 at 9:00 a.m. EET

Strong earnings trend continued

July-September 2018 in brief

• Revenue increased by 3.2 percent year-on-year to EUR 160.3 million (155.4) 
• Adjusted* EBITDA increased by 15.2 percent year-on-year to EUR 20.1 million (17.5) 
• EBITDA more than tripled year-on-year to EUR 27.6 million (7.6) 
• Adjusted* earnings before interest, taxes, and amortization (EBITA) were 9.2 percent (8.0) of revenue 
• Earnings before interest, taxes, and amortization (EBITA) were 13.9 (1.7) percent of revenue 
• Profit for the period amounted to EUR 16.0 million (-6.9) 
• Operating cash flow amounted to EUR 13.5 million (-2.4) 
• Earnings per share** were EUR 0.13 (-0.06)

January-September 2018 in brief

• Revenue increased by 9.4 percent year-on-year to EUR 546.8 million (499.6) 
• Adjusted* EBITDA increased by 20.7 percent year-on-year to EUR 76.4 million (63.3) 
• EBITDA increased by 107.3 percent year-on-year to EUR 90.0 million (43.4) 
• Adjusted* earnings before interest, taxes, and amortization (EBITA) were 11.1 percent (9.8) of revenue 
• Earnings before interest, taxes, and amortization (EBITA) were 13.6 percent (5.8) of revenue 
• Profit for the period amounted to EUR 58.7 million (1.1) 
• Net debt decreased by 44.3 percent to EUR 210.5 million (377.8) 
• Net debt/Adjusted EBITDA was 2.0, down from 4.5 
• Operating cash flow amounted to EUR 62.1 million (32.5) 
• Earnings per share** were EUR 0.46 (0.01)

EBITDA = Earnings Before Interest, Taxes, Depreciation, and Amortization
EBITA = Earnings Before Interest, Taxes, and Amortization
*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 including the IPO, new business operations, and other items affecting comparability. In July-September, adjustments totalled EUR -7.4 (9.8) million and in January-September EUR -13.6 (19.9) million.
 ** The effects of share conversion and share split have been taken into account in the weighted average number of shares.

Yrjö Närhinen, CEO: Strong financial performance continued - we strengthen our investments in digitalisation

Terveystalo's competitive strength was reflected in the broad based revenue growth, high utilization rates, and the increased number of physicians. Capacity growth in the market has stalled, and we have taken measures to ensure availability of our services locally. According to our estimate, we have seen the full extent of investments in additional capacity in health care in Finland for the time being, and consolidation in the industry is likely to continue.

We will continue develop our organization in order to be even more customer oriented and cost efficient. Healthcare remains our strategic focus and we further invest in preventive services*, customer experience, and digitalization. Our objective remains to be the preferred provider of health care services for all customer groups. We continuously develop our extensive service range and network in order to cater for all customer needs. Superior customer experience enhances the commitment and loyalty of our customers. The renewed Oma Suunnitelma ("Own Plan") personal health plan, launched in May, is an important tool for the development of customer loyalty. By the end of September, as many as 150,000 new Oma Suunnitelma health plans were prepared, and 65,000 follow-up visits were scheduled. We have set a target to prepare a personal health plan, including next steps for health care, for every customer coming for a health examination in 2019.

In the third quarter, revenue increased by 3.2 percent year-on-year mainly driven by record strong organic growth in public customer group. Recognising the changes in service mix and implemented investments, we continue to improve our profitability: adjusted EBITDA margin increased by over 15 percent to EUR 20.1 million in the third quarter. Adjusted EBITA in relation to revenue improved by 1.2 percentage points to 9.2 percent.

We continue to aim for annual revenue growth of 6-8 percent over the long term through organic growth and bolt-on acquisitions. We believe that, despite the changing customer and service mix, we are capable of improving profitability through economies of scale and the continuous improvement of the efficiency of operations. Our target is an adjusted EBITA margin of 12-13 percent in the medium to long term. A strong balance sheet supports the preparations for the Attendo acquisition.

Market outlook

Employment and consumer confidence remain at a high level in Finland, and the market environment is positive. If the government's Social and health care reform (the so-called Sote-reform) is delayed, demand for outsourcing and other services from the public sector is expected to grow. Corporate customers keep up a steady demand, and the relative share of preventive services is increasing. Demand from private customers remains at a steady level but new capacity on the market affects Terveystalo's revenue growth negatively. However, the peak of capacity growth has passed. These views are based on the expected market development within the next six months, compared to the last six months.

Previous market outlook (published on August 17, 2018)
The positive development of the domestic economy supports the corporate and private customer businesses. Health care and social welfare reform is important to Finland and would change the environment for all health care companies and create new opportunities, especially for those who invest in meeting the new needs created by the reform. Terveystalo expects its markets to continue to develop favorably, but the new supply that has entered the market is estimated to influence particularly the private customer business.

*The statutory task of occupational healthcare is to prevent work-related adverse health effects. Preventive OH includes for example workplace survey to examine the conditions and exposures at the workplace, health examinations, proposed measures to improve work conditions and to promote the employees' work ability, advice and guidance, participation in the planning and implementation of measures that maintain work ability, promotion of coping at work and, when necessary, referrals to rehabilitation in case of reduced work ability, guidance in the first aid preparedness at the workplace and assessment and monitoring of the quality and impact of occupational health care activities.
Wellbeing services include for example physiotherapy, mental health services (psychologists and psychotherapists), nutrition therapy, work ability training and Rela massage therapists (Terveystalo's subsidiary).

Key figures

* Alternative performance measure. Additional information in note 14.
** The effects of share conversion and share split have been taken into account in the weighted average number of shares.
Diacor is included in the consolidated figures for the comparison period for the balance sheet and personnel as of March 31, 2017.

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 report is also available at: https://www.terveystalo.com/en/investors/Financial-information/

Financial reporting and Annual General Meeting in 2019

In 2019, Terveystalo Plc will publish financial reports as follows:

• Financial Statements Bulletin 2018 on Thursday, February 14, 2019
• Annual Report 2018 on week 9, 2019
• Interim report for January-March 2019 on Thursday, May 9, 2019
• Half-Year Report for January-June 2019 on Thursday, August 8, 2019
• Interim report for January-September 2019 on Thursday, October 31, 2019

The Financial Statements Bulletin 2018 and financial reviews 2019 will be published at approximately 9:00 a.m. EET. Financial reports are published in Finnish and English.

Terveystalo Financial Statements and the Report of the Board of Directors are published as a part of the Annual Report 2018. 

Annual General Meeting of Terveystalo Plc will be held on Thursday, April 4, 2019 in Helsinki.

Briefing
Terveystalo will hold a result briefing and live webcast in English on November 14, 2018, starting at 11:30 a.m. EET, at Terveystalo Keskuskatu, Keskuskatu 7, 00100 Helsinki, Finland. You can watch the webcast online at: https://terveystalo.videosync.fi/2018-11-14-q3-webcast

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 43225604#.

In Helsinki, November 14, 2018
Terveystalo Plc
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

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 healthcare 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 180 locations across Finland, complemented by 24/7 digital services.

In 2017, Terveystalo had approximately 1.2 million individual customers and approximately 3.3 million doctor visits. Nearly 9,000 healthcare professionals work in Terveystalo, about half of whom are private practitioners. Terveystalo's services carry the Key Flag symbol and the company is a member of the Association for Finnish Work. www.terveystalo.com