Pihlajalinna Plc                  Financial Statements Release           17 February 2023 at 8:00 a.m.

Pihlajalinna Financial Statements Release 1 Jan-31 Dec 2022 (12 months)

Revenue increased due to successful increase in supply - measures to improve profitability and financial position initiated

This financial statements release is unaudited. The comparison figures in brackets refer to the corresponding period in the previous year.

• Revenue amounted to EUR 188,4 (154,7) million - an increase of EUR 33,7 million, or 21,8 per cent.
• COVID-19 services[1)] revenue amounted to EUR 2.8 (10.1) million - a decrease of EUR -7.3 million.
• Organic growth was EUR 11.4 million, or 7.4 per cent. Without COVID-19 services, organic growth would have been EUR 18.7 million, or 12.1 per cent.
• The effect of M&A transactions[2)] on revenue growth was EUR 22.4 million, or 14.5 per cent.
• Adjusted EBITDA³⁾ was EUR 12,0 (14,9) million - a decrease of -19,2 per cent.
• Adjusted EBITA³⁾ before the amortisation and impairment of intangible assets was EUR 2,2 (7,8) million - a decrease of -71,3 per cent.
• Earnings per share (EPS) was EUR -0,03 (0,19).
• The customer volumes[4)] of private clinics grew by 40 per cent year-on-year (grew by 17 per cent without M&A transactions), with remote services representing 36 per cent of all appointments.

• Revenue amounted to EUR 690,5 (577,8) million - an increase of EUR 112,7 million, or 19,5 per cent.
• COVID-19 services[1)] revenue amounted to EUR 16.7 (38.9) million - a decrease of EUR -22.2 million.
• Organic growth was EUR 34.9 million, or 6.0 per cent. Without COVID-19 services and the District Court decision concerning Jämsän Terveys, organic growth would have been EUR 59.4 million, or 10.3 per cent.
• The effect of M&A transactions[2)] on revenue growth was EUR 77.9 million, or 13.5 per cent.
• Adjusted EBITDA³⁾ was EUR 64,2 (65,3) million - a decrease of -1,7 per cent.
• Adjusted EBITA³⁾ before the amortisation and impairment of intangible assets was EUR 26,7 (37,3) million - a decrease of -28,5 per cent.
• Earnings per share (EPS) was EUR 0,42 (0,89).
• The Board of Directors proposes no dividend distribution for the financial year 2022.
• Net debt to adjusted EBITDA excluding IFRS 16 was 4.4 (2.3). Gearing excluding IFRS 16 stood at 139.95 (90.8).
• The customer volumes[4)] of private clinics grew by 45 per cent year-on-year (grew by 17 per cent without M&A transactions). Remote services represented 37 per cent of all appointments.

• The Group has initiated a number of measures to strengthen its financial position. Change negotiations commenced in January 2023 and efficiency improvement programmes in complete outsourcing agreements are expected to improve Pihlajalinna's profitability. Price increases are expected to compensate the effects of inflation.

¹⁾ COVID-19 services include COVID-19 testing, sample collection, vaccination and other potential services directly related to managing the COVID-19 pandemic.

²⁾ Työterveys Virta Oy 1 April 2021, Pohjola Hospital Ltd 1 February 2022, Etelä-Savon Työterveys Oy 1 April 2022, Lääkärikeskus Ikioma Oy 1 April 2022, Punkkibussi® business 1 April 2022, MediEllen Oy 1 September 2022, Seppämagneetti Oy and Seppälääkärit Oy 1 October 2022.

³⁾ Alternative performance measure. In addition to the IFRS figures, Pihlajalinna presents additional, alternative performance indicators which the company monitors internally and which provide the company's 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.

⁴⁾ Excluding municipal outsourcing, COVID-19 testing and dental care.

10-12/2 10-12/2021 change % 1-12/2022 1-12/2021 change %
022
3 month 3 months 12 months 12 months
s
INCOME
STATEMENT
Revenue, EUR 188,4 154,7 21,8 690,5 577,8 19,5
million
EBITDA, EUR 11,5 14,5 -21,2 54,4 62,6 -13,1
million
EBITDA, % 6,1 9,4 -35,3 7,9 10,8 -27,3
Adjusted 12,0 14,9 -19,2 64,2 65,3 -1,7
EBITDA, EUR
million ¹⁾
Adjusted 6,4 9,6 -33,6 9,3 11,3 -17,7
EBITDA, % ¹⁾
Adjusted 5,7 10,8 -47,3 40,2 49,3 -18,5
EBITDA
excluding
IFRS 16, EUR
million 12
months ¹⁾
Operating -0,6 5,6 -110,2 8,9 27,9 -68,1
profit
(EBIT), EUR
million
Operating -0,3 3,6 -108,4 1,3 4,8 -73,3
profit
(EBIT), %
Adjusted 0,1 6,0 -98,7 18,6 30,3 -38,7
operating
profit
(EBIT), EUR
million ¹⁾
Adjusted 0,0 3,9 -98,9 2,7 5,3 -48,7
operating
profit
(EBIT), % ¹⁾
Adjusted 2,2 7,8 -71,3 26,7 37,3 -28,5
operating
profit before
the
amortisation
andimpairment
of intangible
assets
(EBITA), EUR
million ¹⁾
Adjusted 1,2 5,1 -76,5 3,9 6,5 -40,2
operating
profit before
the
amortisation
andimpairment
of intangible
assets
(EBITA), % ¹⁾
Profit before -2,8 4,6 -161,6 1,5 24,2 -93,6
tax (EBT),
EUR million

SHARE-RELATED
INFORMATION
Earnings per -0,03 0,19 -116,7 0,42 0,89 -52,6
share (EPS),
EUR
Equity per 5,50 5,27 4,3
share, EUR
Dividend per 0,30
share, EUR

OTHER KEY
FIGURES
Return on 2,3 8,8 -74,0
capital
employed
(ROCE), %
Return on 6,2 16,1 -61,3
equity (ROE),
%
Equity ratio, 18,6 26,9 -30,9
%
Gearing, % 313,8 158,8 97,6
Interest 385,7 194,7 98,1
-bearing net
debt, EUR
million
Net 6,0 3,0 101,5
debt/adjusted
EBITDA, 12
months ¹⁾
Gearing, 139,95 90,8 54,2
excluding
IFRS 16, % ¹⁾
Interest 178,6 113,8 56,9
-bearing net
debt
excluding
IFRS 16, EUR
million ¹⁾
Net 4,4 2,3 92,5
debt/adjusted
EBITDA,
excluding
IFRS 16, 12
months ¹⁾
Gross 17,9 7,4 234,5 44,8
investments,
EUR million
²⁾
Cash flow 22,5 24,8 -9,6 64,9 56,9 14,0
from
operating
activities,
EUR million
Cash flow 15,5 19,0 -18,6 24,9 neg
after
investments,
EUR million
Average 5 167 4 746 8,9
number of
personnel
(FTE)
Personnel at 7 016 6 297 11,4
the end of
the period
(NOE)
Practitioners 1 812 1 070 69,3
at the end of
the period
NPS, private 77,1 76,5 0,78
clinic
appointments
NPS, complete 72,6 70,8 2,54
and partial
outsourcing
arrangements

[1)] Significant transactions that are not part of the normal course of business, are related to business acquisition costs (IFRS 3), are infrequently occurring events or valuation items that do not affect cash flow are treated as adjustment items affecting comparability between review periods. According to Pihlajalinna's definition, such items include, for example, restructuring measures, impairment of assets and the remeasurement of previous assets held by subsidiaries, the costs of closing down businesses and business locations, gains and losses on the sale of businesses, cost arising from operational restructuring and the integration of acquired businesses, costs related to the termination of employment relationships as well as fines and corresponding compensation payments. Pihlajalinna presents costs concerning cloud computing arrangements, and reversals of amortisation, as adjustment items.

EBITDA adjustments in the quarter amounted to EUR 0.6 (1.3) million and amounted to EUR 9,8 (2,7) million for the review period. Adjustments to operating profit in the quarter amounted to EUR 0.6 (0.4) million and EUR 9,7 (2,4) million for the review period.

[2)] Assets acquired via leases are regarded as equal to assets acquired by the Group itself, meaning that right-of-use assets pursuant to IFRS 16 are included in gross investments.

Pihlajalinna's outlook for 2023

• The Group expects the consolidated revenue to increase from the previous year's level (EUR 690.5 million in 2022).
• The Group expects the adjusted operating profit before the amortisation and impairment of intangible assets (EBITA) to improve from the previous year's level (EUR 26.7 million in 2022).
• The Group has initiated a number of measures to strengthen its financial position. Change negotiations commenced in January 2023 and efficiency improvement programmes in complete outsourcing agreements are expected to improve Pihlajalinna's profitability. Price increases are expected to compensate the effects of inflation.

The outlook for 2023 involves uncertainty related to the high inflation in the euro area, development of costs in general and the development of wages in particular. The impacts of the commancing wellbeing services counties and COVID-19 on the social and healthcare sector also remain uncertain. Slowed economic growth, weakened consumer confidence and rising market interest rates may affect Pihlajalinna's service demand and financial result more than expected.

Joni Aaltonen, CEO of Pihlajalinna:

In the year 2022 we focused on expanding our network of private clinics and hospital services and increas-ing our supply in line with our strategy. We also prepared for the start of the wellbeing services counties' operations by improving the efficiency of our operations in public services. Pihlajalinna's revenue increased by a notable 19.5 per cent to EUR 690.5 million (EUR 577.8 in 2021). Organic growth was 6.0 per cent. At the same time, the past year was a challenging period in many ways, with profitability weakening due to the decline of COVID-19 services and the continued high rate of sickness-related absences and high costs in public specialised care. Our adjusted EBITA for the year was EUR 26.7 million (EUR 37.3 million in 2021).

We made several acquisitions during the year that supported the growth of supply. In February, Pohjola Hospital became part of Pihlajalinna. Following the acquisition, Pihlajalinna has a comprehensive service network in high-value added hospital services as well as diverse emergency and on-call services in all of Finland's largest regional centers. In April, we acquired Etelä-Savon Työterveys and Lääkärikeskus Ikioma. At the beginning of September, we acquired MediEllen, a Kainuu-based provider of private medical services and leased physician and nurse services. The Jyväskylä-based private clinic Seppälääkärit and Seppämagneetti imaging centre were acquired by Pihlajalinna at the beginning of October. In addition, we acquired the Punkkibussi® vaccination business in April.  

The integration of the acquired operating locations and services was completed, but the synergy benefits were delayed. The synergies will become fully evident in 2023. We will also focus on ensuring economies of scale for the acquired businesses. Pihlajalinna is also clarifying its service portfolio. One example of this is the agreement signed in late 2022 regarding the sale of the Group's private dental care services. The plan is to complete the divestment by the end of March 2023.

The strong growth of remote services continued, having been accelerated by the COVID-19 pandemic. Remote appointments represented 37 per cent of all appointments at the end of the year. We started strategic projects in 2022 to further strengthen our multi-channel services. The use of remote services is also growing among our occupational healthcare customers. The number of people within the scope of Pihlajalinna's occupational healthcare services was over 270,000 at the end of 2022.

We carried out efficiency improvement measures in public services in 2022 in response to rising costs. We will continue to implement efficiency improvement programmes in our complete outsourcing agreements. Negotiations are continuing with the wellbeing services counties regarding service referrals and cost sharing in the context of urgent and demanding specialised care, for example. Our joint venture agreements in the regions of Pirkanmaa, Central Finland and South Ostrobothnia were transferred under the newly established wellbeing services counties at the turn of the year.

The growth of business has also led to an increase in the number of personnel and practitioners. Successful recruitment has enabled us to increase our supply and expand our emergency and on-call services in particular. The changes have been demanding on our personnel, and one of our strategic priorities in 2023 is to promote and develop wellbeing at work by making job duties clearer and developing leadership. At the end of 2022, Pihlajalinna had 7,016 (6,297) employees and 1,812 (1,070) practitioners.  

There were many changes in our operating environment in 2022. Russia's invasion of Ukraine further accelerated the general rise in costs. COVID-19 restrictions were widely lifted during the year. Nevertheless, COVID-19 and other respiratory infections significantly increased the rate of sickness-related absences among Pihlajalinna's personnel during the financial year, which caused both costs and operational challenges throughout the year.

We cannot be satisfied with the development of our profitability in 2022. Acquisitions increased the Company's indebtedness significantly, but their financial benefits have not yet been fully realized. We have initiated a number of measures to strengthen our profitability and financial position. Effective from the beginning of 2023, we increased service prices by 5-10 per cent on average and continued to improve operational efficiency in all of the Group's operations. Pihlajalinna commenced change negotiations in early January. We are considering the potential partial downscaling, combining or closure of individual operating locations and assessing the structure of the organisation. The effects of the measures taken to improve profitability will become evident gradually starting from the first quarter of 2023.

In spite of the external uncertainties, we purposefully executed our strategy and were successful in growing our business. I want to take this opportunity to thank all of our stakeholders for the past year, and I especially want to express my gratitude to our personnel. In 2023, we will focus on strengthening our financial position to ensure profitable growth. 

Pihlajalinna's financial reporting in 2023

Financial Statements and Board of Directors' report: no later than in week 11
Interim Report January-March: Friday, 28 April 2023
Half Year Financial Report January-June: Friday, 11 August 2023
Interim Report January-September: Friday, 3 November 2023

Pihlajalinna Plc's Annual General Meeting is scheduled for Tuesday, 4 April 2023.

Webcast for analyst and media

Pihlajalinna will organize a live webcast meeting for analysts, investors and media, on Friday, 17 February, 2023 at 10.00 a.m. at: https://pihlajalinna.videosync.fi/q4-2022-results. The event will be conducted in Finnish. The recording of the event will be available later on the same website as the live webcast.

Further information

Tarja Rantala, CFO, +358 40 774 9290 or tarja.rantala@pihlajalinna.fi
Tuula Lehto, VP, Communications and Sustainability, +358 40 5885 343 or tuula.m.lehto@pihlajalinna.fi

Distribution

Nasdaq Helsinki
Major media
investors.pihlajalinna.fi