Pihlajalinna Plc Interim Report 3 May 2024 at 8:00

Pihlajalinna Interim Report 1 January-31 March  2024

Profitability continued to improve, operating cash flow was strong

This interim report is unaudited. The comparison figures in brackets refer to the corresponding period in the previous year.

• Revenue was EUR 183.2 (187.8) million, a decrease of -2.5 per cent.
• In the Private Healthcare Services segment, revenue amounted to EUR 114.6 (113.0) million, an increase of 1.4 per cent. The divestment of dental care services decreased revenue by EUR 4.8 million.
• In the Public Services segment, revenue amounted to EUR 72.7 (79.4) million, a decrease of 8.5 per cent. The termination of cost liability for demanding specialised care, along with the gradual transfer of the services agreement of Jämsän Terveys decreased revenue by EUR 12.9 million.
• Comparable organic revenue growth[1)] was EUR 13.4 million, 7.9 per cent.
• Adjusted EBITDA was EUR 26.0 (21.4) million, an increase of 21.2 per cent.
• Adjusted operating profit before the amortisation and impairment of intangible assets (EBITA)[2]⁾ was EUR 14.9 (11.0) million, an increase of 35.0 per cent.
• Adjusted EBITA was 8.1 (5.9) per cent of revenue.
• Net cash flow from operating activities was EUR 31.1 (18.9) million.
• Earnings per share (EPS) was EUR 0.30 (0.24).
• Sickness-related absence rate decreased to 5.3 (6.2) per cent.
• NPS for Private Healthcare Services was 81.2 (78.2) and NPS for Public Services was 77.7 (70.1).

[1)] The following items have been excluded from the comparison period revenue: the divestment of dental care services, the transfer of cost liability for demanding specialised care, the gradual termination of Jämsän Terveys' service agreement, and COVID-19 services.

[2)] 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.

Key figures

1-3/2024 1-3/2023 change % 2023
INCOME STATEMENT
Revenue, EUR million 183.2 187.8 -2.5 720.0
EBITDA, EUR million 25.7 23.0 11.5 72.5
EBITDA, % 14.0 12.3 10.1
Adjusted EBITDA, EUR million ¹⁾ 26.0 21.4 21.2 80.6
Adjusted EBITDA, % ¹⁾ 14.2 11.4 11.2
Adjusted operating profit before the 14.9 11.0 35.0 37.8
amortisation andimpairment of intangible
assets (EBITA), EUR million ¹⁾
Adjusted operating profit before the 8.1 5.9 5.2
amortisation andimpairment of intangible
assets (EBITA), % ¹⁾
Operating profit (EBIT), EUR million 12.7 10.5 21.0 20.6
Operating profit (EBIT), % 6.9 5.6 2.9
Adjusted operating profit (EBIT), EUR 13.0 8.9 45.1 29.1
million ¹⁾
Adjusted operating profit (EBIT), % ¹⁾ 7.1 4.8 4.0
Profit before tax (EBT), EUR million 10.2 7.5 36.9 8.2

SHARE-RELATED INFORMATION
Earnings per share (EPS), EUR 0.30 0.24 23.6 0.19
Equity per share, EUR 6.78 6.58 3.0 6.56

OTHER KEY FIGURES
Return on capital employed (ROCE), % 4.5 4.1 11.4 4.0
Return on equity (ROE), % 4.5 8.1 -44.2 3.4
Equity ratio, % 23.1 22.2 4.1 22.0
Gearing, % 220.1 247.2 -11.0 243.9
Interest-bearing net debt, EUR million 331.0 364.7 -9.2 352.7
Net debt/adjusted EBITDA, 12 months ¹⁾ 3.9 5.3 -26.3 4.4
Gearing, excluding IFRS 16, % 81.3 100.5 -19.1 93.56
Interest-bearing net debt excluding IFRS 128.5 153.8 -16.4 142.0
16, EUR million
Net debt/adjusted EBITDA, excluding IFRS 2.3 3.5 -35.2 2.7
16, 12 months ¹⁾
Gross investments, EUR million ²⁾ 6.9 21.7 -68.1 66.5
Cash flow from operating activities, EUR 31.1 18.9 64.5 79.0
million
Cash flow after investments, EUR million 28.5 13.1 117.1 60.5
Average number of personnel (FTE) 4,813 4,882 -1.4 4,923
Personnel at the end of the period (NOE) 6,722 7,094 -5.2 6,880
Practitioners at the end of the period 2,110 2,072 1.8 2,208
NPS, Private Healthcare Services (private 81.2 78.2 3.84 79.1
clinics)
NPS, Public Services (municipal 77.7 70.1 10.84 77.8
outsourcing activities)

[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 businesses and business locations, gains and losses on the sale of businesses, costs 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 has also presented costs according to the IFRS Interpretations Committee's Agenda Decision concerning cloud computing arrangements, and reversals of amortisation, as adjustment items. Cloud computing arrangements costs and reversals of amortisation according to the IFRS Interpretations Committee's Agenda Decision has not been presented as adjustment items since 1 Jan 2024.

EBITDA adjustments amounted to EUR 0.3 (-1.6) million for the review period. Adjustments to operating profit (EBIT) amounted to EUR 0.3 (-1.6) 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 2024, specified

• The Group expects the consolidated revenue to decrease from the previous year's level (EUR 720.0 million in 2023) due to the cost liability for demanding specialised care being transferred to the well-being services county of South Ostrobothnia on 1 January 2024.
• The Group expects the adjusted operating profit before the amortization and impairment of intangible assets (EBITA) to improve from the previous year's level (EUR 37.8 million in 2023).
• The Group continues measures to strengthen its financial position. Efficiency measures are expected to improve Pihlajalinna's profitability.

Slowed economic growth and weakened consumer confidence may affect Pihlajalinna's service demand and financial result more than expected. Price increases are expected to compensate the effects of cost inflation.

Previous guidance, issued on 14 February 2024

• The Group expects the consolidated revenue to increase from the previous year's level (EUR 720.0 million in 2023).
• The Group expects the adjusted operating profit before the amortization and impairment of intangible assets (EBITA) to improve from the previous year's level (EUR 37.8 million in 2023).
• The Group continues measures to strengthen its financial position. Efficiency measures are expected to improve Pihlajalinna's profitability.

Slowed economic growth, weakened consumer confidence and changes in market interest rates may affect Pihlajalinna's service demand and financial result more than expected. Price increases are expected to compensate the effects of cost inflation.

Tuomas Hyyryläinen, CEO:

The year 2024 has begun according to plan for Pihlajalinna. Comparable organic revenue growth for the first quarter reached 7.9 per cent, and the Group's profitability and financial position improved.

We have continued to take determined measures to improve profitability, and the adjusted EBITA increased to EUR 14.9 (11.0) million. In the review period net cash flow from operating activities was EUR 31.1 (18.9) million. Alongside the improved result, cash flow was supported by the development of working capital management. Consolidated revenue decreased to EUR 183.2 (187.8) million. This was due to the termination of cost liability for demanding specialised care in the wellbeing services counties of South Ostrobothnia and Central Finland, and the gradual transfer of Jämsän Terveys' services to the wellbeing services county of Central Finland. These contract changes have strengthening effect on the profitability of operations, as well as the forecasted EBITA level for the financial year, and predictability of outsourcing agreements.

During the review period, we transitioned from Group-level segment reporting to reporting, that better reflects our business operations and organisational structure. The new segment reporting consists of two segments: Private Healthcare Services and Public Services.

Revenue from Private Healthcare Services segment amounted to EUR 114.6 (113.0) million. Comparable organic revenue growth in the segment was 8.8 per cent. Revenue was increased by successful commercial measures and stable demand. In addition, our cooperation with insurance companies strengthened further, and the number of end customers in occupational healthcare services rose to 290,000. During the quarter, we focused particularly on service processes and on streamlining internal operating models. The segment's adjusted EBITA increased to EUR 10.7 (8.2) million.

Revenue from the Public Services decreased to EUR 72.7 (79.4) million due to the termination of cost liability for demanding specialised care in the wellbeing services counties of South Ostrobothnia and Central Finland. During the quarter, we aligned our operations according to the needs of the wellbeing services counties and focused on impactful and efficient service delivery. The segment's adjusted EBITA was EUR 4.2 (2.8) million.  

The long-term work towards employee well-being continues. The sickness-related absence rate decreased further and was 5.3 (6.2) per cent. We also achieved strong development in customer satisfaction. The NPS for Private Healthcare Services was 81.2 (78.2) and NPS for Public Services was 77.7 (70.1). The well-being and engagement of professionals and customers are reflected in the company's profitability.

Our measures aimed at organic growth, strengthening profitability and our financial position, and developing the company's leadership are progressing. Together with our highly competent professionals and business partners, we will develop Pihlajalinna even more impactful. Thank you all for your great collaboration and valuable work.

Webcast for analysts and media
Pihlajalinna will organise a live webcast meeting for analysts and media, on Friday, 3 May, 2024 at 10:00 a.m. at https://pihlajalinna.videosync.fi/q1-2024 (https://eur01.safelinks.protection.outlook.com/?url=https%3A%2F%2Fpihlajalinna.videosync.fi%2Fq1-2024&data=05%7C02%7CHanna.Viskari%40pihlajalinna.fi%7Cf7f0b189cf26400b5d3408dc580506ce%7Cbf8efe09ca4c48bc9743d25df78218f9%7C0%7C0%7C638482025807790908%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C0%7C%7C%7C&sdata=eJnI%2F%2Bwf1sUBB9F81SGfa0zqIatpUCDfP798XxH1PfI%3D&reserved=0). The event will be conducted in Finnish. The recording of the event will be available later on the same website as the live webcast.

Pihlajalinna Plc's full Interim Report for 1 January-31 March 2024 is attached to this release and available at company's website (https://investors.pihlajalinna.fi/?sc_lang=en).

Pihlajalinna Plc

Further information:

Tarja Rantala, CFO, +358 40 774 9290 or tarja.rantala@pihlajalinna.fi
Tuula Lehto, Chief Communications and Sustainability Officer, +358 40 588 5343 or tuula.lehto@pihlajalinna.fi

Distribution:

Nasdaq Helsinki
Major media
investors.pihlajalinna.fi