CEO review

Ville Iho, CEO: Demand is strong, but supply challenges limit growth and weigh on profitability

Strong continuous demand supported Terveystalo's growth in the second quarter of the year. Revenue increased by almost 16 % year-on-year, of which Sweden's share was approximately 9%-points. Acquisitions contributed about a half of the revenue growth in Finland. Booking rates for health services remained very high and supply limited organic sales growth in most services. The supply that fell short of the targets, the weakened sales mix and the personnel costs raised by acquisitions, among other things, weighed on profitability despite strong demand and growth. Adjusted EBITA decreased by 18.2 percent to 24.1 million euros and was 7.6 percent of the revenue.

The supply grew modestly compared to a year ago, still focusing on digital services. However, we succeeded in recruiting new professionals during the period and the number of private practitioners increased by more than 10 percent. This positive development will be reflected in the actual supply figures with a delay. To strengthen the supply, we are moving even more of our development efforts into solutions that help our professionals work more efficiently. Job satisfaction at Terveystalo continues at high level with Employee Net Promoter Score, eNPS reaching 30 in the latest survey.

The number of Covid-19 tests decreased according to our assumptions, while other diagnostics are yet to return to the pre-pandemic levels. The sales mix was also negatively affected by the supply falling short of the targets, as the appointments of contracted customers took capacity from higher-margin private customer care chains. Personnel costs increased because of acquisitions, growth investments in new businesses, and proactive recruitment.

The Swedish business continued to develop according to our plans. In the second quarter, we continued with complementary acquisitions and expanded the range of services for new payer groups.

The number of digital appointments continued to grow strongly, 28 percent year-on-year. Outside of our own services, Terveystalo's digital solutions are being piloted for the first time by public sector customers. Our goal is to continue to lead the renewal of our industry in Finland, Sweden and in the future in new markets. With more efficient use of health data, better care management and the use of digital appointments it is possible to improve access to care, job satisfaction, as well as productivity . During the fall, in addition to developing digital partnerships in the public healthcare, we will take the occupational health digital suite to Sweden.

Terveystalo's market position and competitiveness are strong. We have grown rapidly, especially in digital services, new businesses, and the Swedish market, and have exceeded our growth targets many times over. In a strong demand environment, our focus has been on growth and customer experience, which is also reflected in relatively faster growing personnel costs. In an environment where inflationary pressures are combined with a tight labor market and general economic uncertainty, we will emphasize profitability in relation to growth. We continue to invest in the long-term competitiveness of our business, but the changing environment will be reflected in investment priorities, criteria for acquisitions in new business areas and timing of recruitments. We also need to review the pricing of our services so that it is in line with the general cost level increase.

The megatrends driving demand for health services have intensified during the pandemic, and despite economic uncertainty, demand is very high. Our mission to fight for a healthier life is more relevant than ever, and as the leading private healthcare service provider in our core market, we play a key role in the lives of people and work communities. We are committed to our vision of creating a world with fewer sick days and more healthy, happy years.

Towards a better tomorrow,

Ville Iho