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2021-11-04

Pihlajalinna Oyj: Pihlajalinna Interim Report 1 January-30 September 2021 (9 months)

Pihlajalinna Plc                          Interim Report              4 November 2021 at 8:00 a.m.

Pihlajalinna Interim report 1 January-30 September 2021 (9 months)

Revenue continued to increase, profitability improved
The figures in this interim report are unaudited. The comparison figures in brackets refer to the corresponding period in the previous year.

A brief look at July-September:

  • Revenue amounted to EUR 140.6 (123.9) million - an increase of EUR 16.8 million, or 13.5 per cent
  • Adjusted EBITDA was EUR 18.8 (17.2) million - an increase of 9.2 per cent
  • Adjusted EBIT was EUR 10.0 (8.7) million - an increase of 15.0 per cent
  • IFRS 3 costs and amortisation related to M&A had a negative effect of EUR 1.3 (0.8) million on operating profit
  • Earnings per share (EPS) was EUR 0.31 (0.20)
  • COVID-19 services* revenue amounted to EUR 11.8 (3.4) million - an increase of EUR 8.4 million.
  • The acquisition of Työterveys Virta Oy 1.4.2021 increased revenue by EUR 3.6 million, or 2.9 per cent.
  • Appointments at Pihlajalinna's private clinics grew by approximately 9 per cent year-on-year, with remote services representing 44 per cent of all appointments (excluding municipal outsourcings).

A brief look at January-September:

  • Revenue amounted to EUR 423.1 (371.5) million - an increase of EUR 51.6 million, or 13.9 per cent
  • Revenue amounted to EUR 423.1 (371.5) million - an increase of EUR 51.6 million, or 13.9 per cent
  • Adjusted EBITDA was EUR 49.2 (38.9) million - an increase of 26.5 per cent
  • Adjusted EBIT was EUR 23.1 (13.5) million - an increase of 71.3 per cent
  • IFRS 3 costs and amortisation related to M&A had a negative effect of EUR 3.5 (2.5) million on operating profit
  • Earnings per share (EPS) was EUR 0.71 (0.24)
  • COVID-19 services* revenue amounted to EUR 28.8 (4.1) million - an increase of EUR 24.7 million
  • The acquisition of Työterveys Virta Oy 1.4.2021 increased revenue by EUR 7.4 million, or 2.0 per cent
  • Appointments at Pihlajalinna's private clinics grew by over 8 per cent year-on-year, with remote services representing 42 per cent of all appointments (excluding municipal outsourcings).
  • Pihlajalinna will acquire Pohjola Hospital Ltd. In connection with the acquisition, Pihlajalinna will also sign a new five-year service agreement with Pohjola Insurance. The first phase of the notification proceedings, in accordance with the Competition Act, concluded on 2 November 2021 and the Finnish Competition and Consumer Authority (FCCA) commenced the second phase of the proceedings. According to the Finnish Competition Act, the second phase of the proceedings may not take more than 69 business days unless the Finnish Market Court grants extension upon application. Without the potential extension, the second phase of the proceedings will be completed no later than 10 February 2022.

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

7-9/202 7-9/202 1-9/202 1-9/202 2020
1 0 1 0
3 month 3 month 9 month 9 month 12
s s s s months
INCOME STATEMENT
Revenue, EUR million 140.6 123.9 423.1 371.5 508.7
EBITDA, EUR million 18.2 16.7 48.6 37.3 52.4
EBITDA, % 13.0 13.5 11.5 10.0 10.3
Adjusted EBITDA, EUR 18.8 17.2 49.2 38.9 54.6
million*
Adjusted EBITDA, %* 13.4 13.9 11.6 10.5 10.7
IFRS 3 costs* -0.5 0.0 -1.2 -0.1 -0.1
Adjusted EBITDA 19.3 17.2 50.4 39.0 54.8
excluding IFRS 3
costs, EUR
million*
Adjusted EBITDA 13.8 13.9 11.9 10.5 10.8
excluding IFRS 3
costs, %*
Operating profit 9.4 8.0 22.6 11.4 18.2
(EBIT), EUR million
Operating profit, % 6.7 6.4 5.3 3.1 3.6
Adjusted operating 10.0 8.7 23.1 13.5 20.8
profit (EBIT), EUR
million*
Adjusted operating 7.1 7.0 5.5 3.6 4.1
profit, %*
PPA amortisation* -0.8 -0.8 -2.2 -2.4 -3.1
Adjusted operating 11.2 9.4 26.6 15.9 24.0
profit (EBIT)
excluding
IFRS 3 costs and PPA
amortisation, EUR
million*
Adjusted operating 8.0 7.6 6.3 4.3 4.7
profit (EBIT)
excluding
IFRS 3 costs and PPA
amortisation, %*
Profit before tax 8.5 7.0 19.9 8.0 13.8
(EBT), EUR million

SHARE-RELATED
INFORMATION
Earnings per share 0.31 0.20 0.71 0.24 0.39
(EPS), EUR
Equity per share, EUR 5.12 4.70 4.85
Dividend per share, 0.20
EUR

OTHER KEY FIGURES
Return on capital 9.0 4.7 5.7
employed (ROCE), %
Return on equity 16.1 7.4 8.1
(ROE), %
Equity ratio, % 25.8 26.1 26.1
Gearing, % 175.5 185.4 169.4
Interest-bearing net 211.0 207.3 194.8
debt, EUR million
Net debt/adjusted 3.2 3.9 3.6
EBITDA, 12 months*
Gross investments, 9.3 3.5 37.8 20.1 25.7
EUR million**
Cash flow from 8.8 -3.0 32.5 28.6 47.2
operating activities,
EUR
million
Cash flow after 6.2 -4.6 5.8 26.1 42.8
investments, EUR
million
Average number of 4,731 4,303 4,308
personnel (FTE)
Personnel at the end 5,750 5,882 5,550
of the period (NOE)

* Significant transactions that are not part of the normal course of business, 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, 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 does not recognise adjustments affecting comparability for acquisition-related transfer taxes and expert fees (IFRS 3 costs) or purchase price allocation (PPA) amortisation. Starting from H1/2021, Pihlajalinna reports key figures adjusted EBITDA and adjusted operating profit also without acquisition-related IFRS 3 costs and PPA amortisation.

EBITDA adjustments amounted to EUR 0.6 (0.6) million for the quarter and EUR 0.7 (1.6) million for the review period. Adjustments to operating profit amounted to EUR 0.6 (0.7) million for the quarter and EUR 0.5 (2.1) million for the review period.

** 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 2021 unchanged

Pihlajalinna's consolidated revenue is expected to increase and adjusted EBIT is expected to improve clearly compared to 2020.

The acquisition of Pohjola Hospital does not have an impact on Pihlajalinna's outlook for the year 2021. The Finnish Competition and Consumer Authority (FCCA) has been notified of the transaction. The acquisition will be implemented after the FCCA's approval. The first phase of the notification proceedings, in accordance with the Competition Act, concluded on 2 November 2021 and the Finnish Competition and Consumer Authority (FCCA) commenced the second phase of the proceedings. According to the Finnish Competition Act, the second phase of the proceedings may not take more than 69 business days unless the Finnish Market Court grants extension upon application. Without the potential extension, the second phase of the proceedings will be completed no later than 10 February 2022.

Joni Aaltonen, CEO of Pihlajalinna:

Pihlajalinna's growth and the improvement of profitability have progressed according to plan. Revenue grew and profit performance improved substantially in the third quarter compared to the previous year. In September the Group's monthly revenue exceeded EUR 50 million and adjusted quarterly operating income exceeded EUR 10 million for the first time in Pihlajalinna's history.

COVID-19 testing nationally reached its peak in August, with over 25,000 daily tests. There has been a decline in testing volumes since August due to the revised testing recommendations and the increasing vaccination coverage. Pihlajalinna's result for the third quarter was improved by the normal seasonal variation of the company's operations as well as COVID-19 services and the customer volumes of Pihlajalinna's private clinics recovering towards the pre-pandemic levels. Remote services through various channels represented 44 per cent of all appointments (excluding municipal outsourcing arrangements).

Pihlajalinna announced its intention to acquire the entire share capital of Pohjola Hospital Ltd at the beginning of July. The Finnish Competition and Consumer Authority (FCCA) confirmed that it had received Pihlajalinna's acquisition control notification at the end of September. We expect the FCCA to approve the completion of the acquisition. We will elaborate the impact of the acquisition on Pihlajalinna's business after the FCCA has made its decision.

The intended acquisition concerns nationwide insurance company services, but also local private sector offering of orthopedic and traumatology in addition to hand surgery services. The Competition and Consumer Authority finds it necessary to further investigate possible effects of the acquisition. The preliminary investigation indicates potential negative impact to private customers covering their costs themselves, specifically in the areas of orthopedic and traumatology as well as in the hand surgery specified services in hospital districts of Pirkanmaa and Northern Savonia.

Kuusiolinna Terveys Oy, a social and health care service provider jointly owned by Pihlajalinna and the participating municipalities, operates in Alavus, Ähtäri, Kuortane and Soini in South Ostrobothnia. In August KuusSote, a local service agreement customer of Kuusiolinna Terveys Oy, agreed to compensate any increased costs originated with authority directives in residental services and the investment funding share of the Southern Ostrobothnia Hospital District. Compensation for any cost increases resulting from authority directives and new legislation is essential to us to be able to ensure the preconditions for operations and capacity to further development of services.

The renewal of the sales strategy carried out in the early part of the year is reflected in growth in revenue. We shifted the focus of public sector sales from the outsourcing market to the service sales market, which will only be affected to a minor extent by the planned reform of health and social services. The most significant new service sales agreements signed in the third quarter included health center services in Matinkylä Espoo, COVID-19 testing...

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