Terveystalo Group Interim Report 1 January – 31 March, 2022: Strong growth continued in a shifting demand environment

 Terveystalo Plc, Interim Report 28 April, 2022 at 09:00 EEST

This release is a summary of Terveystalo's Interim Report 1 January – 31 March, 2022. The full release is attached to this stock exchange release and is available on our website at:

https://www.terveystalo.com/en/company/investors/reports-and-presentations/

January–March 2022 in brief

• Revenue increased by 18.3% year-on-year to EUR 329.7 (278.7) million. The external revenue of the Sweden and others segment came to EUR 22.2 million representing 8.0 %-points of the revenue growth.
• Adjusted¹⁾ earnings before interest, taxes, and amortization (EBITA) increased by 2.0% to EUR 38.9 (38.2) million, representing 11.8% (13.7%) of revenue. Relative profitability was reduced year-on-year due to changes in the sales mix and increased costs.
• Adjusted items affecting comparability were EUR 0.7 (0.1) million.
• Profit for the period was EUR 25.3 (23.9) million.
• Earnings per share (EPS) was EUR 0.20 (0.19).
• Cash flow from operating activities was EUR 24.8 (31.1) million.

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: Transition to normal operations is underway

The first quarter of 2022 was strong despite the shifting demand environment. Terveystalo's revenue increased by 18.3% year-on-year to EUR 329.7 (278.7) million. Growth was strong in all customer groups. The Sweden and others segment's external revenue was EUR 22.2 million, representing 8.0 percentage- points of revenue growth. The balance between supply and demand was not optimal during the quarter. Balancing between changing Covid-19 testing volumes and the aim to increase the supply of other services caused temporary over-resourcing in Covid-19 related services, while the appointments still saw supply challenges. For the first time during the pandemic, supply was also significantly reduced by staff’s sick leaves due to Covid-19. On the expenditure side, the imbalance between supply and demand led to a relative increase in costs, which weakened profitability. Profitability was also weakened by costs related to acquisitions and launching of new services. Adjusted EBITA increased by 2.0% year-on-year to EUR 38.9 million and was 11.8% of revenue.

The transition to normal operations will continue, and balancing supply and demand will be in the management’s focus throughout the year. We are confident that our position as the most sought-after employer and our pioneering role in digital solutions will give us a good position to strengthen our supply and improve access to care as the situation normalizes. The number of supply-enhancing digital appointments also continued to grow in the first quarter.

The Swedish business developed according to our plans. During the first quarter, we completed a supplementary acquisition in occupational health and announced that we would expand our operations beyond occupational health by acquiring Nämndemansgården, which specializes in addiction treatment. We see strong growth potential in Sweden going forward both organically and through acquisitions.

Our digital business took its first steps with the launch of a white label digital platform for public sector customers. Our goal is to continue to accelerate the growth of our digital business. More efficient use of health data, better care management and the use of digital appointments can improve productivity, access to care as well as job satisfaction. As a pioneer in digital health services, we continue to be an excellent partner for the public sector.

The Finnish health care system has been operating under exceptional circumstances for two years. In public provision of health care, the exceptional circumstances continue due to the nurses' strike. The congestion of the system, which began before the pandemic, has worsened, and there is no immediate solution in sight, with the new well-being services counties focusing on organization rather than service solutions. At some point the lengthy care queues and growing care debt need to be addressed. Part of the solution is to make greater use of private resources and expertise.

Russia's invasion of Ukraine and the ensuing economic turmoil, as well as the humanitarian crisis, are directly or indirectly affecting the operating environment in all sectors. The effects of the war on our business are small, but like all Finns, our desire to help is great. We are in a privileged position to act as a partner in providing health care services for those fleeing from war to Finland.

Our mission to fight for a healthier life is more urgent than ever, and as the leading private healthcare provider in our core markets, we play a key role in the lives of people and work communities. We are committed to our vision of creating a world with fewer sick days and more healthy, happy years.

Towards a better tomorrow

Ville Iho

Outlook

• The market environment has normalized and the demand for health services is very strong and broad based. However, growth is restricted by supply.
• The demand for services related to COVID-19 is expected to decrease. However, predicting the volume is difficult. The overall demand for health services is expected to remain at a high level. The demand for digital services is expected to continue to grow.
• Demand from corporate customers for preventive and statutory occupational health services is expected to develop favourably. Demand for medical care is expected to continue strong. Significant changes in the employment rate may be reflected in the underlying demand.
• Overall demand is expected to remain strong in the private customer segment. Significant changes in consumer confidence may, however, be reflected in the 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.
• Demand in the Swedish occupational health market is expected to develop favourably due to pent-up demand in the wake of the pandemic.

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 first quarter of 2022, Terveystalo’ s service production was still characterized by various COVID-19-related services as well as well-being and digital services, which saw year-on-year growth in demand.

The impacts of the war in Ukraine

The indirect impacts of the war in Ukraine on Terveystalo are assessed to be minimal, as Terveystalo does not have business operations in, or with, countries that are subject to sanctions. Indirect impacts of the war may arise from supply chain disruptions, rising inflation, or potential disruptions in the financial markets. The war may also have a delayed economic impact through declining consumer purchasing power and employment. If the situation were to be prolonged, this could have a negative impact on the demand for Terveystalo’s services. In procurement, higher prices have been reflected in the prices of certain supplies (material purchasing accounts for approximately 3% of operating expenditure), but the most significant purchasing agreements for 2022 have already been concluded.  The rising price of electricity affects operating expenditure, but its impact at the Group level is relatively minor. Delivery times have become longer in certain categories of products and materials, such as healthcare equipment, due to component shortages.

Rising inflation creates growing pressure to increase wages. Wage increases are determined by collective bargaining in the Finnish healthcare industry with regard to nurses, for example (approximately 43% of employees). Most of the physicians who work for Terveystalo are private practitioners (approximately 96%). The financial risk associated with inflation is mitigated by Terveystalo’s strong pricing power.

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.
 

Briefing
Terveystalo will arrange a webcast in English on its result on 28 April 2022 starting at 10:30 EEST. You can watch the webcast online at: https://terveystalo.videosync.fi/2022-q1-results

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: 23096769#

Helsinki, 27 April, 2022
Terveystalo Plc
Board of Directors

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

Kati Kaksonen, Vice President, Communications, IR & CR
Tel. +358 10 345 2034
kati.kaksonen@terveystalo.com

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

Terveystalo in brief

Terveystalo is the largest private health care service provider in Finland in terms of revenue and network. Terveystalo is also a leading occupational health provider in the Nordic region. We offer a wide variety of primary health care, specialized care, and well-being services for corporate and private customers and the public sector. Terveystalo’ s digital services are available 24/7, regardless of time and place. Health and well-being services are also provided by Terveystalo’ s over 360 clinics across Finland. In Sweden, we offer occupational health services at 120 clinics. Terveystalo is listed on the Helsinki Stock Exchange and has a predominantly Finnish ownership.

In 2021, Terveystalo had approximately 1.3 million individual customers in Finland and the number of customer appointments was approximately 8 million, with more than a quarter of these taking place via remote channels. Terveystalo employs over 15,500 healthcare and well-being professionals. Terveystalo is a Key Flag company and member of Association for Finnish Work. www.terveystalo.com

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