Terveystalo Group Interim Report January–March 2024: Strong performance driven by improved operational efficiency

Terveystalo Plc, Interim Report 26 April 2024 at 09:00 EEST

This release is a summary of Terveystalo's Interim Report January – March 2024. 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 2024 in brief

• Revenue increased by 2.7 percent year-on-year to EUR 350.2 (341.1) million.
  The Healthcare Services segment revenue increased by 7.3 percent and was EUR 268.0 (249.8) million.
  Portfolio Businesses’ revenue decreased by 8.6 percent and was EUR 64.7 (70.8) million.
  The revenue from Sweden decreased by 9.6 percent and came to EUR 23.0 (25.5) million. In SEK terms, the revenue decreased by 9.0 percent.
• There was one working day less than during the comparison period.
• Adjusted¹⁾ earnings before interest, taxes, amortization, and impairment losses (EBITA) increased by 29.5 percent year-on-year to EUR 47.2 (36.5) million, representing 13.5 (10.7) percent of revenue.
  The profitability strengthened in Healthcare Services and Portfolio Businesses. Profitability was strengthened by improved operational efficiency, better sales mix, and successful commercial actions.
  In Sweden, the profitability clearly weakened from the comparison period, mainly due to decreased revenue caused by lower demand and ended contracts. A profit improvement program was launched in Sweden during the fourth quarter of 2023 targeting a structural improvement in profitability. The program progressed as planned during the first quarter.
• Items affecting comparability¹⁾ with an effect on EBITA were EUR 4.2 (9.4) million.
• The result for the period was EUR 23.6 (11.1) million.
• Earnings per share (EPS) was EUR 0.19 (0.09).
• Net debt/adjusted EBITDA was 2.7 (3.3).
• Cash flow from operating activities was EUR 49.2 (35.9) million.
• NPS (Net Promoter Score) for appointments was 86.4 (84.5).

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, gains and losses on the sale of assets, impairment losses, strategic projects, and other items affecting comparability. Adjustments related to the profit improvement programs were approximately EUR 4.5 million during the first quarter.

CEO Ville Iho: We are on track to meet our targets

Terveystalo's first quarter of 2024 was strong. Revenue increased by approximately 3 percent to EUR 350 million and our profitability strengthened for the fourth consecutive quarter. Adjusted EBITA increased by nearly 30 percent to EUR 47 million, representing 13.5 percent of revenue. Earnings per share increased by 112 percent to EUR 0.19.

The excellent performance of our core business, Healthcare Services drove this growth. The segment's revenue grew by more than 7 percent to EUR 268 million in the first quarter. The increase was driven by a more favourable customer and service mix and successful commercial measures. The segment's adjusted EBITA increased by 38 percent to EUR 43 million and 16 percent of revenue, driven by improved operational efficiency and revenue growth.

We started a profit improvement program in the fourth quarter of 2022 and reached the original target of 50 million euro run-rate impact ahead of schedule at the end of 2023. We now see a clear increase in our organization's performance in the first quarter results and we narrow the range of our guidance accordingly. In 2024, we will focus on further strengthening operational efficiency and continue our determined journey towards our EBITA target of 12 percent in 2025. By focusing on integrated care in line with our strategy, we strengthen not only the effectiveness of our healthcare services, but the professional and customer experience and our financial performance as well.

The independent profitability measures of the Portfolio businesses also paid off, and the segment's adjusted EBITA strengthened by almost 18 percent year-on-year to approximately EUR 3 million, representing 5 percent of revenue. The segment's revenue decreased by approximately 9% to EUR 65 million due to the proactive customer selection of staffing services and the continued subdued demand for dental care. The planned contraction of the outsourcing contract portfolio continued, but thanks to additional invoicing, the reported revenue of the business was close to flat year-on-year. The public sector market continues to be subdued due to funding challenges in the Wellbeing services counties and the sales pipeline is developing slowly. New tenders have been seen mainly in digital services.

The challenges in the Swedish market were clearly reflected in the results of the Sweden segment. Revenue declined by just under ten percent year-on-year due to weaker customer-specific demand, expired contracts, and the impact of working days, to EUR 23 million. Revenue is expected to decline further in the first half of the year. Adjusted EBITA decreased markedly and landed at a zero margin. The ongoing profit improvement program in Sweden, leveraging the best practices from the successful program executed in Finland, aims to generate a structural improvement in the business area's profitability. We expect the full impact to be realized in 2025.

When it comes to health, smooth access to high-quality effective care is critical. Satisfied customers who feel they receive the help and treatment they need are the foundation of everything we do. Our mental health services are an excellent example of effective, high-quality care. Although the number of mental health diagnoses has increased, we have successfully reduced the total number of related sickness absences in our customer organisations. The reduction in the length of mental health-related sickness absences seen in our occupational health population reflects our success in early intervention and the right treatment. For our customer organisations, this translates into lower costs and for the patients, into a healthier everyday life. The high quality of our work is also reflected in very high customer satisfaction and perceived effectiveness of our healthcare services. Our customer satisfaction index for appointments, NPS, exceeded 86 in the first quarter of the year and the PEI index, which measures the perceived effectiveness of care, showed excellent development. At Terveystalo, we focus on health so that our customers can concentrate on meaningful matters.

Meaningful matters,

Ville Iho

Guidance for 2024

Terveystalo estimates its revenue for 2024 to grow (2023: EUR 1,286 million) and its adjusted EBITA margin to be between 10.5 and 11.5 percent (9.8 percent in 2023).

The estimates are based on the first quarter 2024 projections for inflation, consumer demand and employment, normal morbidity, and a predictable labour market in Finland. The estimates include the impact of the successful completion of the profit improvement program and an annual decrease of approximately EUR 10 million in revenue in the Portfolio Businesses segment's outsourcing business. The Sweden segment's revenue is expected to decline due to macro weakness and the exchange rate is expected to remain stable. The possible increase in the VAT rate in Finland is not expected to have a significant impact on the 2024 result. The estimates do not include material acquisitions or divestments.

Guidance on 14 February 2024:

Terveystalo estimates its revenue for 2024 to grow (2023: EUR 1,286 million) and its adjusted EBITA margin to be between 10.1% and 11.5% (9.8% in 2023).

The estimates are based on the end of 2023 projections for inflation, consumer demand and employment, normal morbidity, and a predictable labour market in Finland. The estimates include the impact of the successful completion of the profit improvement program and an annual decrease of approximately EUR 10 million in revenue in the Portfolio Businesses segment's outsourcing business. The Sweden segment's revenue is expected to decline due to macro weakness and the exchange rate is expected to remain stable. The estimates do not include significant acquisitions or divestments.
 

Financial targets

Terveystalo’s financial targets are:

• annual revenue growth of at least 5 percent through organic growth and acquisitions
• an adjusted EBITA margin of at least 12 percent in 2025
• net debt/adjusted EBITDA ratio of 3.5x or less
  However, indebtedness may temporarily exceed the target level, such as in conjunction with acquisitions.
• to distribute a minimum of 40 percent of net profit as dividends annually
  However, the dividend proposal must consider Terveystalo’s long-term development potential and financial position.

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, impairment losses, strategic projects, and other items affecting comparability.
1) Alternative performance measure. In addition to the IFRS figures, Terveystalo presents additional, alternative performance indicators that 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 separately from the IFRS figures, and they should not be considered to replace the IFRS figures.
2) PEI index (Patient Enablement Instrument) is used to measure whether the patient feels that he is coping with his symptoms or illness much better, better, as before, or worse after the reception. The scale is 1-4.

Result briefing

Terveystalo will arrange a webcast and a conference call in English on its result on Friday 26 April 2024 starting at 10:30 EEST. You can watch the webcast online at: https://terveystalo.videosync.fi/q1-2024

You can access the teleconference by registering at the link below.
https://palvelu.flik.fi/teleconference/?id=50048570
After the registration, you will be provided phone numbers and a conference ID to access the conference.

Helsinki, 25 April 2024
Terveystalo Plc
Board of Directors

For further information, please contact:
CFO Juuso Pajunen
Tel. +358 40 584 9722

Kati Kaksonen, Vice President, Investor Relations, Sustainability & Communications
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 healthcare 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 s digital services are available 24/7, regardless of time and place. Health and well-being services are also provided by over 377 clinics across Finland. In Sweden, we offer occupational health services at 152 clinics. Terveystalo is listed on the Helsinki Stock Exchange.

In 2023, Terveystalo had approximately 1.2 million individual customers in Finland and the number of customer appointments was approximately 7.6 million. Terveystalo employs over 15,500 healthcare and well-being professionals. www.terveystalo.com

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