QUARTERLY REPORT Q1 Joni Aaltonen CEO Q1 2019: REVENUE GREW AND - - PowerPoint PPT Presentation

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QUARTERLY REPORT Q1 Joni Aaltonen CEO Q1 2019: REVENUE GREW AND OPERATING PROFIT IMPROVED IN THE FIRST QUARTER Revenue amounted to EUR 132.5 (119.2) million an increase of 11.2 per cent Organic growth 2.8 per cent Adjusted

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SLIDE 1

QUARTERLY REPORT Q1

Joni Aaltonen CEO

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SLIDE 2
  • Revenue amounted to EUR 132.5 (119.2) million – an increase of 11.2 per

cent

  • Organic growth 2.8 per cent
  • Adjusted EBITDA was EUR 12.6 (6.9) million – an increase of 81.6 per cent
  • Adjusted operating result (EBIT) was EUR 3.9 (-0.1) million
  • IFRS 3 costs related to M&A transactions had a negative effect of EUR 0.1

(1.2) million on operating profit

  • Earnings per share (EPS) was EUR 0.06 (-0.06)
  • Pihlajalinna adopted the new IFRS 16 Leases standard fully retrospectively
  • n 1 January 2019. Restated comparable financial figures were published on

18 April 2019 for each reporting period in 2018.

2

Q1 2019: REVENUE GREW AND OPERATING PROFIT IMPROVED IN THE FIRST QUARTER

Q1 quarterly report 2019, 3 May 2019

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SLIDE 3

Q1 JANUARY-MARCH 2019 KEY FIGURES BY BUSINESS AREA

  • Southern Finland: +31 %. The revenue of the Southern Finland business area grew mainly due to the

acquisitions of Doctagon and the Forever fitness centre chain in the previous year as well as the growth of customer volumes at Pihlajalinna Turku.

  • Mid Finland: + 5 %. Revenue was increased by the acquisition of the occupational health service provider
  • Verso. price adjustments implemented in accordance with the service agreements of social and healthcare
  • utsourcing arrangements and the acquisition of Linnan Klinikka.
  • Ostrobothnia: + 6%. The business area’s revenue was increased by the provision of residential and services

for senior and disabled citizens in Laihia and the start of operations of Pihlajalinna Seinäjoki in March 2018.

  • Northern Finland: +11 %. The business area’s revenue was increased by the start of operations at Pihlajalinna

Oulu in January 2018. Occupational health care contracts with Stora Enso and Kolari municipalities.

3

MEUR 1-3/2019 % 1-3/2018 % 2018 % Southern Finland 31.1 21 23.7 18 107.6 20 Mid-Finland 83.0 56 79.0 59 311.9 57 Ostrobothnia 27.9 19 26.4 20 108.8 20 Northern Finland 3.7 2 3.3 2 12.3 2 Other 1.7 1 0.9 1 4.8 1 Internal sales of the Group

  • 14.9
  • 14.2
  • 57.6

Group Revenue 132.5 100 119.2 100 487.8 100

Q1 quarterly report 2019, 3 May 2019

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SLIDE 4

REVENUE BY CUSTOMER GROUP

4

21 % 18 % 61 %

REVENUE BY CUSTOMER GROUP Q1 2019, %

Corporate customers Private customers Public sector

28 32 22 27 83 89

20 40 60 80 100 120 140 160

Q1 2018 Q1 2019

REVENUE BY CUSTOMER GROUP, EUR MILLION

Corporate customers Private customers Public sector

Q1 quarterly report 2019, 3 May 2019

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SLIDE 5

PROFITABILITY

5

  • 2,0

0,0 2,0 4,0 6,0 8,0 10,0 12,0 14,0 16,0 20 40 60 80 100 120 140 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18* Q2/18* Q3/18* Q4/18* Q1/19* Adjusted EBITDA Adjusted EBIT Revenue, EUR million

* Pihlajalinna adopted the new IFRS 16 Leases standard fully retrospectively on 1 January 2019. Restated comparable financial figures were published on 18 April 2019 for each reporting period in 2018.

Q1 quarterly report 2019, 3 May 2019

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SLIDE 6

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME - IFRS 16 BRIDGE

6

EUR million 1-3/2019

  • excl. IFRS 16

effect IFRS 16 effect 1-3/2019 restated 1-3/2018 reported IFRS 16 effect 1-3/2018 restated Revenue 132.5 0.0 132.5 119.2 0.0 119.2 Other operating income 0.4

  • 0.1

0.4 1.3 0.0 1.3 Materials and services

  • 50.7

0.0

  • 50.7
  • 48.6

0.0

  • 48.6

Employee benefit expenses

  • 57.0

0.0

  • 57.0
  • 52.0

0.0

  • 52.0

Other operating expenses

  • 17.1

4.1

  • 13.0
  • 15.7

3.0

  • 12.6

Share of profit in associated companies and joint ventures 0.0 0.0 0.0 0.0 0.0 0.0 EBITDA 8.1 4.0 12.2 4.3 3.0 7.3

  • Depreciation. amortisation and impairment
  • 4.6
  • 4.0
  • 8.6
  • 4.2
  • 2.8
  • 7.0

Operating profit (EBIT) 3.5 0.0 3.5 0.1 0.2 0.3 Financial income 0.0 0.0 0.0 0.0 0.0 0.0 Interest expenses on right-of-use assets

  • 0.2
  • 0.3
  • 0.5
  • 0.3
  • 0.2
  • 0.5

Financial expenses

  • 0.5

0.0

  • 0.5
  • 0.5

0.0

  • 0.5

Profit before taxes 2.8

  • 0.2

2.5

  • 0.6

0.0

  • 0.6

Income taxes

  • 0.7

0.0

  • 0.7

0.0 0.0 0.0 Profit for the period* 2.1

  • 0.2

1.9

  • 0.7

0.0

  • 0.7

Total comprehensive income for the period 2.1

  • 0.2

1.9

  • 0.7

0.0

  • 0.7

Total comprehensive income for the period attributable: To the owners of the parent company 1.6

  • 0.2

1.4

  • 1.3

0.0

  • 1.3

To non-controlling interests 0.5 0.0 0.4 0.6 0.0 0.6 Earnings per share calculated on the basis of the result for the period attributable to the owners of the parent company (EUR) Basic and diluted 0.07

  • 0.01

0.06

  • 0.06

0.00

  • 0.06

Q1 quarterly report 2019, 3 May 2019

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SLIDE 7

THE GROUP’S OPERATIONAL PROJECTS Q1-Q2

Q1 quarterly report 2019, 3 May 2019 7

  • Finish implementation of

responsible doctor model and remote services

  • Reinforcement of

telephone services

WE PROMISED WE COMPLETED

MAIN MID LOW

  • Piloting joint service

models for fitness centres and occupational healthcare

  • Implementing customer

loyalty program

  • Expanding the
  • ccupational healthcare

portal’s service models

  • Centralised telephone

services and renewed remote service models in use

  • Responsible doctor model in

use

  • Specialised care responsible

doctor model started

  • Service pilots for fitness

centres and occupational healthcare ready

  • Developing a fixed-price

service model for

  • ccupational healthcare
  • Occupational healthcare

portal’s work ability application in use

  • The optimisation of online

appointment booking was continued and language versions were made

  • Developing multi-channel

services

  • Mobile healthcare

services to municipal

  • utsourcings
  • Establishment of the

customer loyalty program as a modus operandi

  • Expanding the service

selection of the online store

  • Expanding the use of the
  • ccupational healthcare

portal

  • Improving customers’

service paths in all segments

WE PROMISE TO

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SLIDE 8

Q2 ACTIONS TO IMPROVE PROFITABILITY

  • Beginning private clinic operation at acquired occupational

healthcare business locations

  • Management focus on improving the profitability of

weak/unprofitable units

  • Beginning private clinic operation in Vaasa
  • Regionally strengthening general practitioner and medical

specialist services at clinic locations and by using mobile services

  • Expanding the services and customer base of Laihia and

Hattula

Q1 quarterly report 2019, 3 May 2019 8

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SLIDE 9

OPERATING ENVIRONMENT – STATUS AFTER ELECTION

  • The structural reform of social and healthcare services in Finland

ultimately collapsed. The new government may resume the process of health and social services reform because the sustainability gap in public finances still exists and savings are

  • needed. Municipalities continue to bear the responsibility for the

cost-efficient organisation of social and healthcare services.

  • Following the collapse of social and healthcare service reform,

municipalities have become more active in contacting private sector service providers

9 Q1 quarterly report 2019, 3 May 2019

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SLIDE 10

AGING POPULATION IS THE MAIN DRIVER FOR THE INCREASING HEALTHCARE AND CARE EXPENDITURE. WHICH WILL ADD PRESSURE ON MUNICIPALITIES ECONOMY

100 120 140 160 180 200 220 240 260 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020E

HC&C- expenditure BKT

Healthcare and care expenditure and GDP development 2000-2020E HC&C expenditure1) and GDP development. Index year 2000 = 100

1) Includes HC&C services expenditure and related costs. Doesn’t include service fees paid by customers Sources: National institute for health and welfare. Finnish centre for pensions. Statistics Finland. VALOR-analysis 10 Q1 quarterly report 2019, 3 May 2019

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SLIDE 11

THE STRONG AGING OF THE FINNISH POPULATION IS ONLY AHEAD - THE STRONGEST EFFECT WILL BE REALIZED IN 2020-2025…

Sources: Statistics Finland. VALOR-analysis

8,8% 9,1% 9,1% 9,3% 9,5% 9,9% 10,4% 10,9% 11,4% 11,9% 12,3% 12,6% 13,0% 13,3% 13,6% 13,9% 2024 2015 2028 2016 480 839 2021 2020 2022 2023 2025 2026 2027 527 750 2029 804 447 2019 721 593 2018 2017 501 067 503 516 514 795 552 074 582 847 614 369 645 204 673 773 699 393 785 524 745 116 765 452 2030 +2.8% +4.8% +2.8% % Of the population over 75 years of age Number of people over 75 years

Nationwide demographic development in years 2015-2030E Number of people over 75 years of age and percentage share in total population

11

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SLIDE 12

WITH THE AGING OF THE POPULATION. THE PROPORTION OF PEOPLE OVER 75 WILL INCREASE OVER 50 % IN EACH BUSINESS AREAS

Sources: Statistics Finland. VALOR-analysis

2025E 2020E 2015 2030E 57 395 64 212 80 927 96 030 +2% +5% +3% 2030E 2025E 2015 44 113 2020E 48 293 59 577 67 679 +2% +4% +3% 2030E 2015 2020E 2025E 172 809 192 685 240 181 274 506 +2% +5% +3% 203 991 2015 2030E 314 858 2020E 2025E 243 835 361 694 +4% +5% +3% Development of population over 75 years of age 2020E-2030E Number of people over 75 and the average annual growth rate Proportion of population over 75 years of age 2015-2030E %-share and %-change 8,6% 9,5% 11,9% 14,1% 2015 2020E 2025E 2030E +64% 9,9% 10,8% 13,2% 14,9% 2015 2020E 2030E 2025E +50% 9,9% 11,0% 13,6% 15,5% 2015 2020E 2025E 2030E +56% 7,8% 9,1% 11,4% 12,8% 2020E 2015 2025E 2030E +64%

Northern Finland Ostrobothnia Middle Finland Southern Finland

12

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SLIDE 13

THE AGING OF THE BABY BOOMERS WILL CHALLENGE THE MUNICIPAL ECONOMY BY VIGOROUSLY INCREASING HEALTHCARE AND CARE SPENDING

Sources: THL - Miesten ja naisten terveysmenot ikäryhmittäin 2011. VALOR-analysis

85- 0-2 3-6 65-74 41-64 21 236 7-17 18-40 75-84 1 196 Keskiarvo 9 705 2 212 1 442 1 944 2 878 4 867 3 352 +189.5% +533.5%

Distribution of social and health care costs by age group per capita nationally (2011). € per capita in age group and %-difference compared to population average 75-84-year olds HC&C-expenditure is on average 2.9x higher compared to population average

Respectively over 85-year olds HC&C-expenditure is on average

6.3x higher compared to population average

13

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SLIDE 14

THE NUMBER OF LEGALIZED DOCTORS HAS GROWN FASTER THAN NUMBER OF DOCTOR POSITIONS IN PUBLICLY FINANCED HEALTH CENTERS – SHORTAGE OF DOCTORS VARIES REGIONALLY

Sources: Lääkäriliitto – Statistics on physicians and the health care system 2016. Terveyskeskusten lääkäritilanne 2012. 2014 ja 2018. Sotkanet. VALOR-analysis

2006 2008 2012 2010 2014 2016 3 786 19 643 17 607 3 670 18 260 3 716 18 933 3 729 20 110 3 876 20 970 3 944 +19.1% +7.5% Legalized doctors of working age Health centre doctor positions in total Number of legalized doctors and doctor positions in health centers 2006-2016 Number of doctors and %-change Shortage of doctors in health centres by hospital region 2018 Unfulfilled doctor positions share of all health centre positions. % 19,6% 15,2% 15,2% 14,9% 14,2% 9,2% 6,7% 5,8% 5,6% 5,3% 4,0% 3,0% 2,9% 2,7% 2,7% 2,2% 1,7% 1,5% Keski-Suomi Ahvenanmaa Kainuu Satakunta Etelä-Savo Etelä-Karjala Etelä-Pohjanmaa Vaasa Pirkanmaa Kymenlaakso Päijät-Häme Keski-Pohjanmaa HUS Varsinais-Suomi Pohjois-Savo Lappi Itä-Savo Kanta-Häme Pohjois-Pohjanmaa Pohjois-Karjala Länsi-Pohja 0.0% 0.0% 0.0%

14

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SLIDE 15

THE ANNUAL MARGINS OF PIHLAJALINNA'S PARTNER MUNICIPALITIES HAVE DEVELOPED VERY STRONGLY DURING THE COOPERATION PERIOD

1) The annual margin shows the income financing that remains after paying current expenses. margin is available for investments and loan repayments Sources: Sotkanet. Statistics Finland. VALOR-analyis

45 102 +126.7%

Development of Pihlajalinna’s partner municipalities annual margins during the cooperation period Average per capita annual margin two years before Pihlajalinna cooperation and two years after. € per capita

Mänttä-Vilppula 2013- Juupajoki 2014- Kihniö 2016- Parkano 2016- Alavus 2016- Kuortane 2016- Ähtäri 2016- Soini 2016-

  • 2

575 n/a

  • 171

270 n/a 314 468 +49.1% 259 429 +66.0% 285 595 +109.0% 444 540 +21.5% 100 597 +499.5%

15

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SLIDE 16

OPERATING ENVIRONMENT – FROM PIHLAJALINNA PERSPECTIVE

  • Pihlajalinna seeks to complement the public sector’s

service offering particularly in basic-level specialised care and non-urgent specialised care as the public sector has implemented cuts in operations and centralised specialised care in fewer units.

  • The situation in the private market remains
  • unchanged. The occupational healthcare market is

expected to grow as many municipalities and other public sector entities are interested in divesting the

  • ccupational healthcare providers they currently
  • wn.

16 Q1 quarterly report 2019, 3 May 2019

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SLIDE 17

2019 STRATEGIC TARGETS: GROWTH IN ALL CUSTOMER SEGMENTS – PROFITABILITY THROUGH GROWTH

  • Extension of service network to county centres by

acquisitions and smooth and fast integration

  • Effective cross selling of services
  • Organic growth with a strong focus on sales and

marketing

  • Expansion and establishment of the municipal

service portfolio

17 Q1 quarterly report 2019, 3 May 2019

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SLIDE 18

OUTLOOK 2019

  • Pihlajalinna’s consolidated revenue is

expected to increase from the 2018 level.

  • Adjusted EBIT is expected to improve clearly

compared to 2018.

18 Q1 quarterly report 2019, 3 May 2019

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SLIDE 19

PIHLAJALINNA’S FINANCIAL REPORTING IN 2019

  • Capital Markets Day 17 May 2019
  • Interim Report January–June: Thursday 15 August 2019
  • Interim Report January–September: Tuesday 5 November 2019

19 Q1 quarterly report 2019, 3 May 2019

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SLIDE 20

THANK YOU!

Q1 quarterly report 2019, 3 May 2019