HBI Deals+Insights / White Paper

Covid and Sweden provide boost for Terveystalo

Terveystalo, one of Finland’s two for-profit healthcare giants, saw strong growth in 2021, helped by its recent move into Sweden and a Covid boost. We speak to Terveystalo’s head of investor relations and two analysts, to analyse growth drivers.

Click here to read more about Terveystalo and here to read our cross-national report on the occupational healthcare sector in HBI Intelligence.

Terveystalo’s revenue grew 17% to €1.2bn in 2021. Adjusted EBITDA grew 38.4% to €141m – a 12% margin (above the company’s long term target). Its net debt to EBITDA ratio was 2.5x, an all-time low. Net profit for the period was up 75.5%, to €80.4m. Earnings per share (EPS) were up 75%, to €0.63. Despite results being above expectations, Terveystalo’s share price barely budged.

The results are very strong,” explains Olli Vilppo, equity research analyst at financial services company Inderes. “The current share price slightly undervalues the company in my opinion. We have a target price of €13 per share. The Ukraine/Russia situation, the political risk of SOTE reform and the shortage of healthcare professionals may have contributed to a dampening of investor confidence.” 

Kati Kaksonen, vice president of communications and investor relations at Terveystalo, tells HBI: “The 17% revenue growth for 2021 was helped by pent-up demand from the Covid-19 pandemic and, to some extent, the large backlog in the public sector. We also had a boost from Covid testing.”

Vilppo tells us: “Covid-testing reached over 10,000 tests a week at its peak. Over three months, the company gained about €20m from Covid testing alone in Finland.”

In 2021 Terveystalo moved into Sweden with its acquisition of one of Sweden’s largest occupational healthcare groups, Feelgood.

“Our long-term target is to achieve at least 5% revenue growth on an annual basis,” says Kaksonen. 

Vilppo says this is achievable: “It’s realistic, the company has a clear plan and has always exceeded this in the past. The market is growing at 2-3%, so consolidation will be required. In Sweden there are still a lot of opportunities to consolidate.”

Kaksonen tells us: “We see opportunities to expand our service portfolio and introduce new value adding services to all payor groups in Sweden. We could expand to primary and secondary care and create a more integrated care system, as we have in Finland. In Finland, we see strong growth in underlying demand for healthcare services, due to global trends such as ageing population and people becoming more interested in their health and wellbeing, as well as the long queues in the public sector.”

Vilppo says: “The Swedish market is very different from the Finnish market, occupational healthcare currently only covers preventive care there. But Terveystalo is now consolidating the preventive occupational care sector in Sweden, it has done two bolt-on acquisitions through Feelgood and it is now the second biggest in that market. Corporates in Sweden are interested in having a more comprehensive coverage, as exists in Finland, so there is no reason why Terveystalo won’t be able to achieve its goal of expanding into other service areas there.”

Carlo Gylling, equity analyst at OP Markets, tells us: “The expansion offers more opportunities for growth and capital allocation. The Swedish market is very fragmented, the addressable market is approximately €30bn, divided into private and public sector, of which the public is €23bn. This is twice as large as in Finland, giving a growth platform for the company. The M&A history for Terveystalo is impressive, but from our point of view, the small steps into a new market environment should be closely monitored. The target is to build a diversified operation in Sweden – with cross-border synergies especially in digital.”

Terveystalo’s CEO Ville Iho said in a results webcast: “In 2022 we will have our hands full with meeting the demand based on the backlog. Given we have the capability to ramp up supply to meet that demand, meeting our growth targets will be easier than meeting our margin targets, which are made more difficult because of the hassle relating to the changing mix over time.”

We would welcome your thoughts on this story. Email your views to David Farbrother or call 0207 183 3779.