Terveystalo Plc, Financial Statements Release 14 February 2024 at 09:00 EET
This release is a summary of Terveystalo's Financial Statements Release 2023. The full release is attached to this stock exchange release and is available on Terveystalo's website at: https://www.terveystalo.com/en/company/investors/reports-and-presentations/
October-December 2023 in brief
•Revenue increased by 2.3% year-on-year to EUR 342.4 (334.8) million.
The Healthcare Services segment revenue increased by 6.4% and was EUR 254.7 (239.5) million.
Portfolio Businesses revenue decreased by 8.8% due to expired outsourcing contracts and was EUR 67.3 (73.8) million.
The revenue from Sweden decreased by 3.6% and came to EUR 26.6 (27.6) million. In SEK terms, the revenue decreased by 1.0%.
•Adjusted1) earnings before interest, taxes, amortization, and impairment losses (EBITA) increased by 33.2% year-on-year to EUR 39.5 (29.7) million, representing 11.5% (8.9%) of revenue. The profitability strengthened in Healthcare Services and Portfolio Businesses. Profitability was improved due to the normalisation of the sales mix, and the progress of the profit improvement program including pricing actions and improved operational efficiency. The impact of prolonged inflation dampened the profitability improvement. In Sweden, the profitability weakened mainly due to decreased revenue caused by lower demand and the weakening of the Swedish krona. A profit improvement program was launched in Sweden targeting a structural change in the profitability in 2025.
• Items affecting comparability1) with an effect on EBITA were EUR 5.5 (5.9) million. The operating result was weakened by write-offs related to goodwill and purchase price allocations relating to public outsourcing customer relationships within the Portfolio Businesses, in total amounting to EUR 84.6 million.
• The result for the period was EUR -64.1 (7.6) million.
• Earnings per share (EPS) was EUR -0.51 (0.06).
• Cash flow from operating activities was 60.6 (76.5) million.
• The profit improvement program had an approximately EUR 13 million impact on the adjusted EBITA in the fourth quarter.
January-December 2023 in brief
•Revenue increased by 2.2% year-on-year to EUR 1,286.4 (1,259.1) million.
The Healthcare Services segment revenue increased by 5.7% and was 948.6 (897.8) million.
Portfolio Businesses revenue decreased by 8.1% and was EUR 267.2 (290.7) million.
The revenue from Sweden decreased by 0.4% and came to EUR 92.5 (92.8) million. In SEK terms, the revenue grew by 7.2%.
•Adjusted1) earnings before interest, taxes, and amortization (EBITA) increased by 19,4% to EUR 125.6 (105.2) million, representing 9.8 (8.4) percent of revenue.
• Items affecting comparability with an effect on EBITA were EUR 21.2 (9.2) million. The operating result was weakened by write-offs related to goodwill and to purchase price allocations relating to public outsourcing customer relationships within the Portfolio Businesses, in total amounting to EUR 84.6 million.
• Profit for the period was EUR -42.2 (24.4) million.
• Earnings per share (EPS) were EUR -0.33 (0.19).
•Net debt/adjusted EBITDA was 3.0 (3.2).
• Cash flow from operating activities was EUR 158.0 (140.9) million.
• The profit improvement program's initial target of a run-rate EBITA improvement of at least EUR 50 million by the end of 2024 was exceeded ahead of schedule. The measures implemented by the end of the reporting period are estimated to have an annual run-rate impact of over EUR 60 million on profitability. In 2023, the adjusted EBITA impact of the profit improvement program was EUR 37 million. Execution of the profit improvement initiatives will continue in 2024.
• Starting from 1 January 2023, Terveystalo Group comprises three reporting segments: Healthcare Services, Portfolio Businesses, and Sweden.
• The Board of Directors proposes to the Annual General Meeting that a dividend of EUR 0.30 (0.28) per share be distributed for 2023 and the dividend payment would happen in two installments.
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, impairment losses, strategic projects, and other items affecting comparability. Adjustments related to the profit improvement programs were approximately EUR 5.3 million during the fourth quarter and 21.7 million in 2023.
President and CEO Ville Iho: We are making determined progress towards our financial targets
Terveystalo's fourth quarter of 2023 was a strong end to a solid year, in line with our expectations. Revenue increased by 2.8% year-on-year to EUR 342.8 million. COVID-19 testing in the comparison period, expired outsourcing contracts and the weakening of the Swedish Krona decreased revenue year-on-year. Underlying organic growth was approximately 4% excluding these changes. Our profitability strengthened further and adjusted EBITA increased by 33% year-on-year to EUR 39.5 million, representing 11.5% of revenue.
Our core business, Healthcare Services, had a great quarter and the segment's revenue increased by 6.4% year-on-year. Revenue was boosted by a more favourable customer and service mix and the successful implementation of successful pricing actions. Profitability strengthened thanks to the outstanding progress of the profit improvement program, improved operational efficiency, and a stronger top line.
The profit improvement program focused on our core business and a clear organizational structure have brought excellent results and create a solid foundation for the future. The program exceeded the target set ahead of schedule and achieved a run-rate profit improvement of EUR 60 million in 2023. The adjusted EBITA impact for 2023 was EUR 37 million. With the target exceeded, the estimated one-off costs of the program will also increase slightly from the original estimate. Our strengthened line organisation will continue to execute profit improvement initiatives in 2024.The conditions for growth in Healthcare Services remain favourable and demand is strong despite the uncertain economic environment. Poor access to treatment in public healthcare increases the demand for privately produced services, notably through increasing health insurance.
Independent profitability improvement measures in the portfolio businesses paid off, and the profitability of the entire segment strengthened markedly year-on-year. The segment's revenue decreased by 8.8% in the fourth quarter, due to the planned contraction of the outsourcing agreement portfolio. The situation in the public pay market is still pending due to the funding challenges of the wellbeing services counties, and there are few new tenders. It is not easy to see a substantial recovery in the market before the second half of 2024.
Macroeconomic and exchange rate weakness impacted the Sweden segment's revenue, which decreased by 3.6% year-on-year in the fourth quarter. Lower revenue and prolonged inflation also weakened profitability. We reacted to the change in the operating environment with the launch of a profit improvement program at the end of 2023 to strengthen the business area's structural profitability in 2025.
I am proud of the committed work of Terveystalo employees. During 2023, we strengthened our profitability significantly in all segments despite headwinds and without compromising the high quality of our operations. In 2023, the Group's adjusted EBITA margin strengthened by 1.4 percentage points to 9.8% of revenue in line with our guidance. Our financial position is strong, and we are advancing with a clear agenda towards our financial target of an EBITA margin of 12% in 2025. Our earnings per share excluding non-recurring items for 2023 were EUR 0.47. The Board of Directors proposes to the Annual General Meeting that the dividend be increased from the previous year and a dividend of EUR 0.30 per share be distributed.
As a company, we have a clear purpose; We fight for a healthier life. Investments in data-driven integrated healthcare in line with our strategy are paying off. We are at the forefront of our industry in adopting technology that streamlines healthcare processes and improves customer value. Our customer satisfaction is record high. We have maintained our position as the preferred employer of professionals in the field, and the medical quality of our services and the effectiveness of treatment are excellent. We will continue to be at the forefront of the industry and build efficient, caring, and effective care for our customers.
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 10.1% 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
Terveystalo Group, MEUR | 10-12/ | 10-12/ | Change, % | 2023 | 2022 | Change, % |
Revenue | 342.4 | 334.8 | 2.3 | 1 286.4 | 1 259.1 | 2.2 |
Adjusted EBITA * 1) | 39.5 | 29.7 | 33.2 | 125.6 | 105.2 | 19.4 |
Adjusted EBITA, % * 1) | 11.5 | 8.9 | - | 9.8 | 8.4 | - |
EBITA 1) | 34.1 | 23.8 | 43.2 | 104.4 | 95.9 | 8.9 |
EBITA, % 1) | 9.9 | 7.1 | - | 8.1 | 7.6 | - |
EBIT | -58.9 | 12.8 | >-200.0 | -14.7 | 33.9 | -143.3 |
EBIT, % | -17.2 | 3.8 | - | -1.1 | 2.7 | - |
Return on equity (ROE), % 1) | - | - | - | -7.6 | 4.1 | - |
Equity ratio, % 1) | - | - | - | 36.5 | 40.2 | - |
Earnings per share (EUR) | -0.51 | 0.06 | >-200.0 | -0.33 | 0.19 | >-200.0 |
Weighted number of shares outstanding, in thousands | 126,556 | 126,548 | - | 126,555 | 126,508 | - |
Net debt | - | - | - | 598.1 | 566.6 | 5.6 |
Gearing, % 1) | - | - | - | 116.0 | 95.7 | - |
Net debt/adjusted EBITDA (last 12 months) 1) | - | - | - | 3.0 | 3.2 | - |
Adjusted EBITDA (last 12 months), | - | - | - | 142.8 | 122.2 | 16.8 |
Net debt, excluding IFRS 16 | - | - | - | 379.0 | 386.8 | -2.0 |
Adjusted net debt/adjusted EBITDA (last 12 months), excluding IFRS 16*1) | - | - | - | 2.7 | 3.2 | - |
Average personnel (FTEs) | - | - | - | 6 426 | 6 552 | -1.9 |
Private practitioners (end of period) | - | - | - | 6 092 | 5 928 | 2.8 |
Sustainability | ||||||
PEI index2) | - |
- | - | 2.9 | 2.9 | -2.5 |
Net Promoter Score (NPS), appointments | - | - | - | 84.8 | 82.7 | 2.5 |
Employee Net Promoter Score (eNPS) | - | - | - | 19 | 28 | -32.1 |
*) 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 Wednesday 14 February 2024 starting at 11:00 EET. You can watch the webcast online at: https://terveystalo.videosync.fi/q4-2023
You can access the teleconference by registering at the link below.
https://palvelu.flik.fi/teleconference/?id=50048569
After the registration, you will be provided phone numbers and a conference ID to access the conference.
Helsinki, 13 February 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
Principal 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
