Pihlajalinna Oyj : Half Year Financial Report 1 January-30 June 2020 (6 months)

Pihlajalinna Plc                            Half Year Financial Report      14 August 2020 at 8:00 a.m.

Pihlajalinna Half Year Financial Report 1 January-30 June 2020 (6 months)

 

Revenue and profitability declined due to the coronavirus epidemic

The figures in this half year financial report are 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 114.7 (129.7) million - a decrease of 11.6%
· Adjusted EBITDA was EUR 9.0 (10.8) million - a decrease of 16.2%
· Adjusted EBIT was EUR 0.6 (2.1) million
· IFRS 3 costs and amortisation related to M&A had a negative effect of EUR 0.8 (1.4) million on operating profit
· Earnings per share (EPS) was EUR -0.03 (-0.02)

A brief look at January-June:

· Revenue amounted to EUR 247.6 (262.2) million - a decrease of 5.5%
· Adjusted EBITDA was EUR 21.7 (23.3) million - a decrease of 7.1%
· Adjusted EBIT was EUR 4.8 (6.0) million
· IFRS 3 costs and amortisation related to M&A had a negative effect of EUR 1.7 (2.6) million on operating profit
· Earnings per share (EPS) was EUR 0.03 (0.04)
· Pihlajalinna temporarily withdrew its financial outlook issued for 2020 due to the uncertainties caused by the coronavirus epidemic. The long-term financial targets remained unchanged.
· The voluntary tender offer by Mehiläinen Yhtiöt Oy is expected to be completed in the third quarter of 2020 at the latest.

4-6/2020 4-6/2019 1-6/2020 1-6/2019 2019
3 months 3 months 6 months 6 months 12 months
INCOME STATEMENT
Revenue, EUR million 114.7 129.7 247.6 262.2 518.6
EBITDA, EUR million 8.5 10.4 20.6 22.6 47.8
EBITDA, % 7.4 8.1 8.3 8.6 9.2
Adjusted EBITDA, EUR 9.0 10.8 21.7 23.3 55.1
million*
Adjusted EBITDA, %* 7.9 8.3 8.8 8.9 10.6
Operating profit (EBIT), 0.1 1.6 3.4 5.1 10.2
EUR million
Operating profit, % 0.1 1.2 1.4 2.0 2.0
Adjusted operating 0.6 2.1 4.8 6.0 20.8
profit (EBIT), EUR
million*
Adjusted operating 0.5 1.6 2.0 2.3 4.0
profit, %*
Profit before tax (EBT), -0.9 0.6 1.1 3.2 6.3
EUR million

SHARE-RELATED
INFORMATION
Earnings per share -0.03 -0.02 0.03 0.04 0.15
(EPS), EUR
Equity per share, EUR 4.50 5.26 4.47

OTHER KEY FIGURES
Return on capital 2.6 4.9 2.9
employed (ROCE), %
Return on equity (ROE), 2.6 7.5 3.8
%
Equity ratio, % 25.0 29.7 24.3
Gearing, % 187.6 148.6 181.7
Interest-bearing net 199.8 191.9 192.7
debt, EUR million
Net debt/adjusted 3.7 3.7 3.5
EBITDA, 12 months*
Gross investments, EUR 7.0 8.4 17.2 22.4 44.1
million**
Cash flow from operating 10.1 11.2 31.5 14.5 36.8
activities, EUR million
Cash flow after 12.6 4.0 30.7 2.9 17.4
investments, EUR million
Average number of 4,306 4,666 4,515
personnel (FTE)
Personnel at the end of 5,640 6,100 5,815
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.

EBITDA adjustments amounted to EUR 0.5 (0.3) million for the quarter and EUR 1.0 (0.7) million for the review period. Adjustments to operating profit amounted to EUR 0.5 (0.5) million for the quarter and EUR 1.4 (0.9) 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 2020

Due to the coronavirus epidemic, Pihlajalinna temporarily withdrew its outlook for 2020, which had been issued on 14 February 2020. It is hard to assess and predict reliably the financial impact caused by the duration of the coronavirus epidemic on Pihlajalinna's business operations. Pihlajalinna estimates that it will issue an updated outlook for 2020 later this year, or when issuing an outlook statement is possible.

In Pihlajalinna's business, it currently appears that the dip in demand has passed for the time being. In June, the demand for services reached - and, in some areas, exceeded - the volumes seen in June in the previous year. The aim of the restrictions and recommendations issued by the authorities in response to the coronavirus epidemic is to prevent the spread of the epidemic to minimise its negative impacts on people, businesses, society and the realisation of basic rights. The Finnish Government began to gradually lift its coronavirus restrictions and recommendations starting from the beginning of June. The Emergency Powers Act was lifted on 16 June 2020 after it had been in effect for three months.

Although the coronavirus situation in Finland is calm and the number of new infections has remained low, the epidemic continues to overshadow and complicate the predictability of Pihlajalinna's business. The financial impacts cannot be fully determined at present, as they depend on the duration and scope of the measures taken to reduce the spread of the virus. Globally, the pandemic is not yet over, and a second wave of the pandemic is possible in Finland according to the forecasts of the Finnish Institute for Health and Welfare.

Long-term financial objectives remain the same

The trends and megatrends that accelerate the growth of Pihlajalinna's business operations have not changed because of the coronavirus epidemic. The use of digital services and the structural changes in the production of social services and healthcare may even increase because of the coronavirus epidemic. Pihlajalinna's long-term objectives - net debt less than 3 times EBITDA and operating profit over seven per cent of revenue - remain the same.

Joni Aaltonen, CEO of Pihlajalinna:

Pihlajalinna was able to mitigate the business impacts of the decline in demand caused by the coronavirus epidemic fairly well in the second quarter. The coronavirus epidemic and the related restrictions reduced customer flows the most in Pihlajalinna's fitness centres, private clinics and dental clinics. Well over half of Pihlajalinna's business volume remained stable in spite of the coronavirus epidemic. The Finnish Institute for Health and Welfare considers it possible that Finland will see a second wave of the epidemic, which creates continued business uncertainty for the remainder of the year.

Due to the changes in the operating environment caused by the coronavirus epidemic, the Group carried out cooperation negotiations on temporary lay-offs concerning all of its personnel in April. The negotiations were fully completed on 24 April 2020. The personnel adjustment measures were implemented in several stages with the aim of returning service operations to normal as quickly as possible when a recovery in customer flows occurs.

Pihlajalinna's Medical Management Team and the Group Management Team have monitored the development of the situation and the recommendations issued by authorities on a daily basis during the epidemic. Service demand has also been monitored on a daily basis. Starting from June, demand has clearly recovered in private clinics, occupational healthcare services and dental care services, and we are now fairly close to a normal situation. The coronavirus testing services launched in April continue.

Forever fitness centres, which were closed in the spring due to the epidemic, were reopened in May on a restricted basis. Since the beginning of August, the fitness centres have operated normally while taking the safety of customers and personnel into consideration.

Mehiläinen Yhtiöt Oy has extended the offer period under the voluntary recommended cash tender offer for all shares in Pihlajalinna Plc until 14 September 2020. The Finnish Competition and Consumer Authority has applied for, and the Finnish Market Court has granted, an additional extension of 23 working days for concluding the Phase II Investigation. Currently, the tender offer is expected to be completed during the third quarter of 2020.

The Finnish Government's draft legislation on the reform of healthcare and social services was circulated for consultation in June. The services are currently produced through strong cooperation between the public sector, private enterprises and the third sector. The ageing of the population, amongst other factors, will increase the demand for services in the future. The private sector will continue to play an important role in ensuring the availability of services.

Pihlajalinna has extensive experience in the provision of public social and healthcare services. Before outsourcing agreements were signed, the costs of social and healthcare services had grown quickly and unpredictably for a long time in many municipalities. The municipalities that have entered into a complete outsourcing arrangement with Pihlajalinna have been able to bring costs under control. Moreover, the outsourcing agreements have helped ensure the continued provision of services as well as jobs in social and healthcare services in certain cases, such as in the peripheral areas of regions. The continued provision of social and healthcare services ensures that members of the workforce and families with children can reside in the municipality in question. This means that the provision of social and healthcare services has extensive indirect impacts. Focusing on strong primary care and prevention is amongst the objectives in all of Pihlajalinna's complete outsourcing agreements. Even under the exceptional circumstances created by the epidemic, we have been able to secure service provision in all of our municipal companies and adapt the operations to ensure the effective management of the epidemiological situation.

The development of occupational healthcare services has been positive and fixed-price services have supported profitability during the exceptional circumstances this past spring and summer. The customer flows of insurance company partners improved in the first quarter and we expect that insurance company sales will develop favourably also in the autumn season that is now beginning. In private clinic operations, demand is expected to normalise when responsible behaviour of individuals becomes the new normal and the strategy based on testing, tracing and isolation works effectively.

Pihlajalinna's financial reporting in 2020

Interim report January-September: Wednesday, 4 November 2020

Briefing

Pihlajalinna will hold a briefing for analysts and the media on Friday, 14 August 2020 at 10:00 a.m. The event will be held remotely.

Helsinki, 13 August 2020
The Board of Directors of Pihlajalinna Plc

Further information

Joni Aaltonen, CEO, [phone]
Tarja Rantala, CFO, [phone]

Distribution

Nasdaq Helsinki
Major media
investors.pihlajalinna.fi

Pihlajalinna in brief

Pihlajalinna is one of the leading private social and healthcare services providers in Finland. The company provides social and healthcare services as well as wellbeing services for households, companies, insurance companies and public sector entities in private clinics, health centres, dental clinics, hospitals and fitness centres around Finland. Pihlajalinna provides general practitioner and specialised care services, including emergency and on-call services, a wide range of surgical services, occupational healthcare and dental care services, in private clinics and hospitals. The company, in cooperation with the public sector, offers social and healthcare service provision models to public sector entities with the aim of providing high quality services for public pay healthcare customers.

https://news.cision.com/pihlajalinna-oyj/r/pihlajalinna-half-year-financial-report-1-january-30-june-2020--6-months-,c3168361

https://mb.cision.com/Public/15465/3168361/82a9bfd24b067f3b.pdf

(c) 2020 Cision. All rights reserved., source Press Releases - English