Pihlajalinna Oyj: Pihlajalinna Half Year Financial Report 1 January-30 June 2024: Profitability and customer satisfaction continued to improve

Pihlajalinna Plc Half Year Financial Report 9 August 2024 at 8:00 a.m.

Pihlajalinna Half Year Financial Report 1 January-30 June 2024

Profitability and customer satisfaction continued to improve

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

A brief look at April-June:

• Revenue amounted to EUR 174.8 (183.6) million - a decrease of EUR -8.8 million, or -4.8 per cent.
• Comparable organic revenue growth¹⁾ was EUR 10.7 million, or 6.5 per cent.
• In the Private Healthcare Services segment, revenue amounted to EUR 112.3 (105.9) million. Comparable organic revenue growth¹⁾ was 9.5 per cent.
• In the Public Services segment, revenue amounted to EUR 66.1 (81.9) million. The termination of cost liability for demanding specialised care, the gradual transfer of the services agreement of Jämsän Terveys and other changes to outsourcing agreements decreased revenue by EUR 19.3 million. Comparable organic revenue growth¹⁾ was 0.5 per cent.
• Adjusted EBITDA²⁾ was EUR 22.7 (18.0) million, an increase of 26.2 per cent.
• Adjusted EBITA²? before the amortisation and impairment of intangible assets was EUR 11.4 (7.3) million, an increase of 56.7 per cent.
• Net cash flow from operating activities amounted to EUR 27.5 (27.3) million.
• Earnings per share (EPS) was EUR 0.19 (0.07).
• Sickness-related absence rate decreased to 4.6 (5.4) per cent.
• Customer satisfaction improved. NPS for Private Healthcare Services was 85.3 (78.2) and NPS for Public Services was 78.8 (73.5).
• Profit guidance for 2024 was upgraded on 17 July. The full year adjusted EBITA is expected to exceed EUR 48 million (EUR 37.8 million in 2023).

A brief look at January-June:

• Revenue amounted to EUR 358.0 (371.4) million - a decrease of EUR -13.4 million, or -3.6 per cent.
• Comparable organic revenue growth¹⁾ was EUR 24.1 million, or 7.2 per cent.
• In the Private Healthcare Services segment, revenue amounted to EUR 226.9 (218.5) million. Comparable organic revenue growth¹⁾ was 9.3 per cent.
• In the Public Services segment, revenue amounted to EUR 138.8 (161.7) million. The termination of cost liability for demanding specialised care, the gradual transfer of the services agreement of Jämsän Terveys and other changes to outsourcing agreements decreased revenue by EUR 32.3 million. Comparable organic revenue growth¹⁾ was 2.8 per cent.
• Adjusted EBITDA²⁾ was EUR 48.6 (39.4) million, an increase of 23.5 per cent.
• Adjusted EBITA²? before the amortisation and impairment of intangible assets was EUR 26.3 (18.3) million - an increase of 43.6 per cent.
• Net cash flow from operating activities amounted to EUR 58.7 (46.3) million.
• Earnings per share (EPS) was EUR 0.49 (0.31).
• Sickness-related absence rate decreased to 4.9 (5.8) per cent.
• Customer satisfaction improved. NPS for Private Healthcare Services was 83.6 (77.9) and NPS for Public Services was 78.3 (72.1).

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, other changes to outsourcing agreements 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
	4-6/2024	4-6/2023	change %	1-6/2024	1-6/2023	change %	2023
	3 months	3 months		6 months	6 months
INCOME STATEMENT
Revenue, EUR million	174.8	183.6	-4.8	358.0	371.4	-3.6	720.0
EBITDA, EUR million	22.7	17.7	27.8	48.3	40.8	18.6	72.5
EBITDA, %	13.0	9.7		13.5	11.0		10.1
Adjusted EBITDA, EUR million ¹?	22.7	18.0	26.2	48.6	39.4	23.5	80.6
Adjusted EBITDA, % ¹?	13.0	9.8		13.6	10.6		11.2
Adjusted operating profit before the amortisation andimpairment of intangible assets (EBITA), EUR million ¹?	11.4	7.3	56.7	26.3	18.3	43.6	37.8
Adjusted operating profit before the amortisation andimpairment of intangible assets (EBITA), % ¹?	6.5	4.0		7.3	4.9		5.2
Operating profit (EBIT), EUR million	9.5	4.9	93.9	22.2	15.4	44.2	20.6
Operating profit (EBIT), %	5.5	2.7		6.2	4.2		2.9
Adjusted operating profit (EBIT), EUR million ¹?	9.6	5.1		22.5	14.0	60.4	29.1
Adjusted operating profit (EBIT), % ¹?	5.5	2.8		6.3	3.8		4.0
Profit before tax (EBT), EUR million	6.7	2.4	173.9	16.9	9.9	70.7	8.2
SHARE-RELATED INFORMATION
Earnings per share (EPS), EUR	0.19	0.07	190.1	0.49	0.31	59.7	0.19
Equity per share, EUR				6.94	6.69	3.9	6.56
OTHER KEY FIGURES
Return on capital employed (ROCE), %				5.5	4.2	30.9	4.0
Return on equity (ROE), %				6.9	7.8	-11.4	3.4
Equity ratio, %				24.3	22.1	10.0	22.0
Gearing, %				211.0	236.4	-10.8	243.9
Interest-bearing net debt, EUR million				325.1	354.1	-8.2	352.7
Net debt/adjusted EBITDA, 12 months ¹?				3.6	5.0	-28.2	4.4
Gearing, excluding IFRS 16, %				75.8	95.7	-20.7	94.38
Interest-bearing net debt excluding IFRS 16, EUR million				122.1	147.9	-17.4	142.0
Net debt/adjusted EBITDA, excluding IFRS 16, 12 months ¹?				2.0	3.4	-40.9	2.7
Gross investments, EUR million ²?	16.0	14.7		23.0	36.4	-36.9	66.5
Cash flow from operating activities, EUR million	27.5	27.3	0.8	58.7	46.3	26.8	79.0
Cash flow after investments, EUR million	21.6	22.3		50.0	35.4	-41.4	60.5
Average number of personnel (FTE)				4,753	4,978	-4.5	4,923
Personnel at the end of the period (NOE)				6,721	7,479	-10.1	6,880
Practitioners at the end of the period				2,124	2,121	0.1	2,208
NPS, Private Healthcare Services	85.3	78.2		83.6	77.9	7.32	78.2
NPS, Public Services	78.8	73.5		78.3	72.1	8.60	75.5

¹⁾ Significant transactions that are not part of the normal course of business, are related to business acquisition or divestment costs (IFRS 3), are infrequently occurring events or valuation items that do not affect cash flow are treated as adjustment items affecting comparability between financial years. 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, 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 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 in the quarter amounted to EUR 0.0 (0.2) million and EUR 0.3 (-1.4) million in the financial year. Adjustments to operating profit in the quarter amounted to EUR 0.0 (0.2) million and EUR 0.3 (-1.4) million in the financial year.
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, upgraded 17 July 2024

In 2024, Pihlajalinna will focus on organic growth and improving its profitability and financial position.

• 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 exceed EUR 48 million (EUR 37.8 million in 2023).

The Group expects the demand to remain steady.

Slowed economic growth and weakened consumer confidence may affect Pihlajalinna's service demand and financial result.

Previous guidance (issued on 30 April 2024, repeated 3 May 2024)

In 2024, Pihlajalinna will focus on organic growth and improving its profitability and financial position.

• 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.

Tuomas Hyyryläinen, CEO:

We have continued our determined efforts to strengthen organic growth and profitability. The work is progressing as planned, and the impacts of the measures have been in line with our objectives. The Group's adjusted EBITA increased to EUR 11.4 (7.3) million in the review period. Contract changes in outsourcing operations decreased Group's revenue as expected. Pihlajalinna's comparable organic revenue growth was 6.5 per cent.

The Private Healthcare Services segment revenue amounted to EUR 112.3 (105.9) million in the second quarter. The segment's comparable organic revenue growth was 9.5 per cent. Demand for services has remained stable, but as expected, seasonal fluctuations in June impacted the segment's profitability. Adjusted EBITA increased to EUR 6.2 (5.7) million. Profitability improved positively in occupational healthcare, and cooperation with insurance companies continued strong.

The Public Services segment revenue declined to EUR 66.1 (81.9) million in the second quarter due to contract changes in outsourcing operations. We continued to adapt our operations to the needs of the wellbeing services counties and focused on service development. The segment's adjusted EBITA increased to EUR 5.2 (1.6) million.

Pihlajalinna' s financial position has strengthened as planned. In June, we signed a new unsecured EUR 170 million sustainability-linked loan facilities agreement with two our partner banks. The terms and financing costs of the new agreement are in line with our anticipation.

Our long-term work to develop leadership, employee well-being, and customer satisfaction continues. The sickness absence rate decreased to 4.9 (5.8) per cent. The customer satisfaction developed strongly. The NPS for Private Healthcare Services was 85.3 (78.2) and the NPS for Public Services was 78.8 (73.5). Customer satisfaction in our surgical operations was 95.4 (93.3).

Due to the changes in Pihlajalinna's Public Services, personnel will be transferred in an orderly manner to the employment of the wellbeing services counties. At the end of June, the number of Pihlajalinna professionals was 6,721 (7,479). The decrease is mainly due to the services of Jämsän Terveys being gradually transferred to the wellbeing services county. The number of practitioners remained stable and was 2,124 (2,121).

In 2023 started determined measures to improve the profitability of Pihlajalinna will continue with the entire organisation. We also promote the development of leadership by strengthening leadership work and performance management, as well as ensuring employee well-being. Our competent and well-being professionals ensure impactful services for our customers every day. Thank you to all Pihlajalinna professionals for your decisive work in developing our operations and for your meaningful work to ensure our customers well-being every day.

Webcast for analysts and media

Pihlajalinna will organise a live webcast meeting for analysts and media, on Friday, 9 August, 2024 at 10:00 a.m. at https://pihlajalinna.videosync.fi/q2-2024/register. 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 Half Year Financial Report 1 January-30 June 2024 is attached to this release and available at company's website.

Pihlajalinna Plc

Further information:

Tarja Rantala, CFO, [phone], [e-mail]
Tuula Lehto, Chief Communications and Sustainability Officer, [phone], [e-mail]

Distribution:

Nasdaq Helsinki
Major media
investors.pihlajalinna.fi

Pihlajalinna in brief

Pihlajalinna is one of the leading providers of private healthcare and social services in Finland. The Group provides comprehensive and quality private clinic and hospital services as well as occupational healthcare and insurance cooperation services. To the wellbeing services counties Pihlajalinna offers social and healthcare service production models, in which the cooperation between the public and private sectors guarantees effective services for citizens. Appoximately 7,000 employees and 2,200 practitioners work at Pihlajalinna. In 2023, Pihlajalinna's revenue was 720 million euros. Pihlajalinna's shares are listed on Nasdaq Helsinki Oy. Read more www.pihlajalinna.fi.