REPORT BY THE BOARD OF DIRECTORS
|AUDITED FINANCIAL STATEMENTS 2
Report by the Board of Directors for the
financial year 1 Jan–31 Dec 2023
CONTENTS
REPORT BY THE BOARD OF DIRECTORS
|AUDITED FINANCIAL STATEMENTS 3
Report by the Board of Directors for the
financial year 1 Jan–31 Dec 2023
Pihlajalinna’s strategy 2021–2025
Pihlajalinna is one of the leading private social and healthcare service
providers in Finland. The Group offers comprehensive, high-quality
and impactful private clinic and hospital services, as well as occupa-
tional healthcare and insurance cooperation services. Pihlajalinna’ s
shares are listed on Nasdaq Helsinki Ltd.
Pihlajalinna’s customers include private individuals, corporations, in-
surance companies and wellbeing services counties, for whom the
company provides a wide range of local and remote services. In the
public sector, the company provides social and healthcare production
models in which cooperation guarantees high-quality and impactful
services.
Pihlajalinna’ s mission is to help to live a better life. The company’s
values are energy, ethics and open-mindedness.
Strategic priorities
Pihlajalinna’s two strategic priorities under the company’s strategy
for 2021–2025 are the renewal of services for private customers and
cooperation in social and healthcare services.
We continuously develop the service experience for consumers, serve
our customers on an increasingly multi-channel basis, and have an
impactful presence where our customers are.
In 2023, the wellbeing services counties significantly changed the op-
erating environment in social and healthcare services. Our strong ex-
perience of working as a partner to public healthcare helps us solve
the future challenges of society in cooperation with the wellbeing
services counties.
The strategy is executed by enhancing digitalisation and the cus-
tomer, employee and practitioner experience, and by focusing on the
development of operational performance, impactful and sustainable
business, and data orientation.
Objectives for the strategy period
Revenue growth of EUR 250 million by the end of 2025, using 2021 as
the baseline (EUR 577.8 million). One-third of the growth is expected
to arise from the public sector and the remaining two-thirds from cor-
porate and private customers.
Adjusted operating profit before the amortisation and impairment of
intangible assets (EBITA) over 9 per cent of revenue in the long term.
The long-term target for net debt is less than 3x adjusted EBITDA.
In accordance with Pihlajalinna’s specified dividend policy, Pihla-
jalinna aims to distribute dividend or capital repayment minimum of
one-third of the earnings per share, taking into account the com-
pany’s strategy and financial position.
Performance indicators
Operating ethically, sustainably and responsibly provides the founda-
tion for achieving the strategic objectives. Their achievement is meas-
ured by, for example, financial indicators, the increase in the number
of appointment times and procedures available to customers, and
Net Promoter Scores (NPS), which measure the customer experience
and employee experience.
The operating environment
The demand for healthcare services in Finland
The size of the Finnish healthcare service market is estimated to be
about EUR 15 billion, of which approximately 75 per cent is funded
and produced by the public sector. During 2023, the use of healthcare
ser-vices was considerably higher than in the previous year (Nordea
Kulutusmittari 12/2023). The demand for private medical expense in-
surance is also continuing to grow. Over 1.3 million people are al-
ready covered by private medical expenses insurance in Finland. Of
these, approximately 466,000 are children, 556,000 adults and
285,000 insured through companies.
REPORT BY THE BOARD OF DIRECTORS
|AUDITED FINANCIAL STATEMENTS 4
Queues for treatment and the care guarantee
Queues for non-urgent specialised care continue to grow in the public
sector. According to the National Institute for Health and Welfare,
nearly 178,000 patients were waiting for access to non-urgent spe-
cialised care at the end of August 2023. Of these, 17 per cent had
been waiting for access to care for over six months.
The legislation concerning the care guarantee in primary care was
amended on 1 September 2023. Following the amendment, patients
must receive access to care within 14 days of the assessment of the
need for care, compared to three months under the previous legisla-
tion. This led to a levelling off in the trend of growing queues for
treatment, which had continued for the two preceding years. Waiting
times de-creased in October 2023. In outpatient care in October, 82
per cent of appointments took place within a week and 89 per cent
within two weeks. From November 2024 onwards, patients must re-
ceive access to care within seven days.
Wellbeing services counties and ensuring the provision of so-
cial and healthcare services for the population
The responsibility for organising and producing social and healthcare
services was transferred to the 21 wellbeing services counties and the
City of Helsinki on 1 January 2023. The need for social and healthcare
services will grow further due to the ageing of the population, and to
address the situation, cooperation between public and private ser-
vices is required. Private sector operators produce approximately 22
per cent of all social and healthcare services. Various studies have
shown that the service production model with the highest efficiency
in terms of costs and resources is the multi-producer model, which in-
volves service production and provision through cooperation be-
tween the public sector, the private sector and non-profit organisa-
tions.
The new government programme aims to control the increase of the
costs of social and healthcare services, tighten the management of
the wellbeing services counties, and increase the share of private
companies in the provision of legally required social and healthcare
services. In the government programme, a total of EUR 335 million
has been allocated to reducing queues for treatment. The more ac-
tive use of ser-vice vouchers and other outsourced services to
shorten the queues for treatment is evident in the wellbeing services
counties, for example in North Savo and Western Uusimaa. In the
HUS area particularly queues for treatment in artificial joint and back
surgery and neurosurgery are reduced. In September 2023, the Minis-
try of Social Affairs and Health announced that the Kela reimburse-
ments for private medical appointments will increase from EUR 8 to
an average of EUR 30 for in-person consultations and EUR 25 for re-
mote consultations. The change took effect at the beginning of 2024.
Labour force availability and development of wages in the so-
cial and healthcare sector
The labour shortages in the social and healthcare sector make access
to treatment slower, and the recruitment of competent personnel is
challenging. The 2023 labour forecast for the municipal sector esti-
mates that the shortage of social and healthcare service professionals
in the public sector alone was nearly 38,000 persons in 2022. The
Ministry of Finance estimates that as many as 200,000 new workers
will be needed in social and healthcare services over the period
2020–2035.
The implementation of the 0.7 staffing ratio for 24-hour elderly care
is postponed from 2023 to 2028 due to the new government pro-
gramme. The government programme also notes that the staffing ra-
tio should be met by utilising all employee groups approved by law
and leveraging the opportunities presented by technology.
The two-year collective agreement for the private healthcare service
sector (TPTES) will expire in the spring of 2024. In accordance with
the current terms and conditions, the monthly wages and pay scales
were increased by a total of 2.95 per cent in 2023. The collective bar-
gaining negotiations are expected to be difficult in spring 2024, and
industrial action is also likely. The collective agreement for the private
social services sector (SOSTES) will remain in force until the end of
2025, and wages will increase by a total of 13.07 per cent during the
agreement period.
Economic forecasts and inflation
Consumers' expectations regarding both their personal financial situ-
ations and the Finnish economy improved slightly in 2023 compared
to the previous year. In January 2024, the consumer confidence indi-
cator balance was -9.1 (-12.7).
The Finnish economy is in a recession, and the increase in prices,
tighter monetary policy and weak export demand are weighing down
economic growth. Inflation slowed down during 2023, partly due to
the decrease in energy prices, which supports household purchasing
power. High interest rates dampen the growth of both private con-
sumption and investments in the coming years, and the economic
growth forecast of Ministry of Finance for 2024 is only 0.7 per cent. In
2025, economic growth is projected to accelerate to 2.0 per cent.
Revenue by customer group
Pihlajalinna customer groups are corporate customers, private cus-
tomers, and public sector customers.
●
The
Group corporate customers consist of Pihlajalinna occupa-
tional healthcare customers, insurance company customers and
other corporate customers. The number of people within the
scope of the Group’s occupational healthcare services is over
200,000 in the corporate customers group.
●
The Group private customers are private individuals who pay for
services themselves and may subsequently seek compensation
from their insurance company.
●
The Group public sector customers consist of public sector organi-
sations in Finland, such as municipalities, congregations, wellbeing
services counties and the public administration when purchasing
either social and healthcare outsourcing services or residential, oc-
cupational healthcare and staffing services. The number of people
within the scope of the Group’s occupational healthcare services is
approximately 80,000 in the public sector customers group.
REPORT BY THE BOARD OF DIRECTORS
|AUDITED FINANCIAL STATEMENTS 5
January–December 2023
Revenue from corporate customers amounted to EUR 268.1 (225.3)
million, an increase of EUR 42.8 million, or 19.0 per cent. Sales to in-
surance company customers increased by EUR 37.4 million, or 38.0
per cent. M&A transactions increased revenue by EUR 7.1 million. Or-
ganic growth was EUR 35.7 million, or 16 per cent. In the corporate
customer group, revenue from COVID-19 services decreased by EUR -
7.5 million. The customer volumes of Pihlajalinna’s private clinics in-
creased by 13 per cent year-on-year. Without the effect of M&A
transactions, customer volumes would have increased by 9 per cent.
Revenue from private customers amounted to EUR 102.1 (103.2) mil-
lion, a decrease of EUR -1.2 million, or -1.1 per cent. The divestment
of dental care services at the end of March decreased revenue from
private customers by EUR -10.5 million. Revenue from COVID-19 ser-
vices decreased by EUR -1.5 million. M&A transactions increased rev-
enue from the private customers by EUR 4.6 million. Organic growth
was EUR 4.8 million, or 4.6 per cent. The customer volumes of Pihla-
jalinna’s private clinics increased by one per cent. Without the effect
of M&A transactions, customer volumes would have decreased by 4
per cent year-on-year. The streamlining of insurance companies’ pay-
ment authorisations and direct payment practices reduces reported
sales to private customer segment.
Revenue from the public sector amounted to EUR 426.0 (435.5) mil-
lion, a decrease of EUR -9.5 million, or -2.2 per cent. M&A transac-
tions increased revenue from the public sector by EUR 4.5 million.
Revenue from COVID-19 services decreased by EUR -6.9 million. The
removal of the cost liability for demanding specialised care in the
wellbeing services county of Pirkanmaa and Central Finland de-
creased revenue by EUR -32.1 million. The decrease is compensated
by annual price increases in complete and partial out-sourcing ar-
rangements, as well as the growth of revenue of reception center op-
erations, occupational healthcare services and staffing services. The
customer volumes of Pihlajalinna’s private clinics decreased by one
per cent year-on-year. Without the effect of M&A transactions, cus-
tomer volumes would have increased by 4 per cent.
REPORT BY THE BOARD OF DIRECTORS
|AUDITED FINANCIAL STATEMENTS 6
January-December 2023
EUR million
2023
2022
change
change %
Corporate customers
268.1
225.3
42.8
19.0 %
135.8
98.4
37.4
38.0 %
Private customers
102.1
103.2
-1.2
-1.1 %
Public sector
426.0
435.5
-9.5
-2.2 %
of which complete and partial outsourcing
agreements
283.2
303.9
-20.7
-6.8 %
of which staffing
29.3
24.8
4.5
18.0 %
of which occupational healthcare and other
services
113.5
106.8
6.7
6.3 %
Intra-Group sales
-76.1
-73.5
-2.6
3.5 %
Total consolidated revenue
720.0
690.5
29.5
4.3 %
Seasonal variation
Pihlajalinna’s business operations are to a certain extent
influenced
by seasonal fluctuations. Pihlajalinna’s complete
outsourcing for so-
cial and healthcare services and
other fixed-price invoicing is accom-
panied by a steady
period of recognition of revenue as income. Dur-
ing the
summer holidays, especially in July, staff costs related to
such
agreements are reduced and profitability improves
mainly due to
wage accruals. On the other hand, service
demand by Pihlajalinna’s
private and corporate customers
is lower and profitability is weaker
during holiday
seasons, especially in July–August and December.
Consolidated revenue and result
January–December 2022
Pihlajalinna’s revenue totalled EUR 720.0 (690.5) million, an increase
of EUR 29.5 million, or 4.3 per cent. The divestment of dental care
services and reduction in COVID-19 services and in the cost liability of
demanding specialised care decreased consolidated revenue by EUR -
59.9 million, or -8.7 per cent. Without COVID-19 services and the re-
moval of the cost liability for demanding specialised care, organic
growth was EUR 72.9 million, or 10.6 per cent. M&A transactions
amounted for EUR 16.2 million, or 2.3 per cent, of the growth in reve-
nue.
EBITDA was EUR 72.5 (54.4) million, an increase of EUR 18.1 million,
or 33.2 per cent. Adjusted EBITDA was EUR 80.6 (64.2) million, an in-
crease of EUR 16.4 million, or 25.5 per cent. EBITDA adjustments to-
talled EUR 8.1 (9.8) million.
Adjusted operating profit before the amortisation and impairment of
intangible assets (EBITA) was EUR 37.8 (26.7) million, an increase of
EUR 11.1 million, or 41.5 per cent. The adjusted EBITA margin was 5.2
(3.9) per cent.
Profitability was negatively affected by the decreased COVID-19 ser-
vices and the significantly increased and retrospective costs of de-
manding specialised care. In the wellbeing services county of Pir-
kanmaa, the cost liability for demanding specialised care ended on 1
January 2023, and in Central Finland, it ended on 1 July 2023.
34 %
13 %
35 %
18 %
REVENUE BY CUSTOMER GROUP
2023, %
Corporate customers
Private customers
Complete and partial outsourcing
Other services to public sector
225
268
103
102
304
283
132
143
2022
2023
REVENUE BY CUSTOMER GROUP
2023, EUR MILLION
Other services to public sector
Complete and partial outsourcing
Private customers
Corporate customers
+19 %
-1 %
-7%
+9 %
690
720
+4,3 %
REPORT BY THE BOARD OF DIRECTORS
|AUDITED FINANCIAL STATEMENTS 7
We still have cost liability for demanding specialised care in the well-
being services county of South Ostrobothnia.
The efficiency improvement measures that started in 2022 in the
public sector have improved the profitability of primary care and so-
cial services in complete outsourcing arrangements. The profitability
of private clinics improved due to price increases and the growth of
supply. The profitability of occupational health services improved due
to price increases and the growth of the customer base. The profita-
bility of surgical operations improved due to higher net sales. A rec-
ord-high number of over 800 joint replacement surgeries were per-
formed at the Jokilaakso freedom-of-choice hospital during the finan-
cial year. The divestment of dental care services has also had positive
impact on profitability.
EBITA adjustments totalled EUR 8.5 (9.7) million. As a result of the es-
tablishment of the wellbeing services counties, Pihlajalinna aimed in
2023 to finalise the negotiations related to open receivables with pre-
vious contract counterparties, namely the municipalities of Jämsä,
Parkano and Mänttä-Vilppula. The negotiations did not lead to the
desired outcome. The company has commenced legal actions for
debt recovery with regard to some of the receivables and is consider-
ing legal actions to recover the other receivables. Consequently, the
items in question no long-er met the definition of contract assets at
the end of the financial year, and Pihlajalinna has booked these items
as expenses in the income statement. The items are classified as con-
tingent off-balance sheet assets in accordance with IAS 37. Contin-
gent assets are not recognised in the financial statements. The
change in classification had the following effects on EBITDA: a de-
crease of EUR 1.4 million for Jämsän Terveys Oy, a decrease of EUR
4.8 million for Mäntänvuoren Terveys Oy, a decrease of EUR 1.3 mil-
lion for Kolmostien Terveys Oy, and a decrease of EUR 0.4 million for
Pihlajalinna Terveys Oy. The items, which may have a delayed effect
on the profitability of complete outsourcing agreements according to
the management’s estimate, reduced EBITDA by a total of EUR 7.8
million and are presented as EBITDA adjustments. The entries also
had a negative effect of EUR 0.4 million on financial items. The finan-
cial year profit before taxes the entries reduced total of EUR 8.2 mil-
lion and earnings per share by EUR 0.26.
Complete and partial outsourcing agreements
Company
Pihlajalinna’s
holding
31 Dec 2022
Pihlajalinna’s
holding
31 Dec 2023
First year of service
production under
the current contract
Duration of the origi-
nal
contract
(years)
Jokilaakson Terveys Oy
90%
90%
internal
service provision
internal
service provision
Jämsän Terveys Oy
51%
51%
2015
10
Kuusiolinna Terveys Oy*
97%
97%
2016
15
Mäntänvuoren Terveys Oy
91%
91%
2016
15
Kolmostien Terveys Oy
96%
96%
2015
15
Bottenhavets Hälsa Ab - Selkämeren Terveys Oy
75%
75%
2021
15–20 years
* On 30 October 2023, the county council of the wellbeing services county of South Ostrobothnia decided to terminate the out-
sourc-ing agreement with effect at the end of 2025, in accordance with the Act on the Implementation of the Reform of Health,
Social and Rescue Services and on the Entry into Force of Related Legislation. The council’s decision is not yet legally binding, and
an appeal has been lodged with the Supreme Administrative Court.
Summary of the revenue and profitability of complete and partial outsourcing agreements (intra -Group sales eliminated):
Complete and partial outsourcing agreements
2023
2022
INCOME STATEMENT
Revenue, EUR million
259.4
281.4
EBITDA, EUR million
6.5
6.0
EBITDA, %
2.5
2.1
Adjusted EBITDA, EUR million
14.0
11.5
Adjusted EBITDA, %
5.4
4.1
Adjusted operating profit before the amortisation and
impairment of intangible assets (EBITA), EUR million
11.5
8.8
Adjusted operating profit before the amortisation and
impairment of intangible assets (EBITA), %
4.4
3.1
REPORT BY THE BOARD OF DIRECTORS
|AUDITED FINANCIAL STATEMENTS 8
Pihlajalinna has carried out impairment testing concerning its non-
current investments and its interests in associates and loan receiva-
bles. Based on this, impairments of EUR 2.4 million were recognised.
During the period under review, the impairments reduced EBITDA by
a total of EUR 0.5 million and EBITA by EUR 1.1 million. The entries
have been treated as adjustments to EBITDA and EBITA. The entries
had a negative effect of EUR 1.2 million on financial items. Earnings
per share in the financial year was reduced by EUR 0.11 due to the
impairments.
In the comparison period, a write-down of EUR -4.7 million recog-
nised due to the outcome of the District Court hearing concerning the
dispute between Jämsän Terveys Oy and the City of Jämsä, and costs
of EUR 1.8 million arising from the integration of acquired businesses,
were treated as an adjustment items.
Pihlajalinna’s EBIT was EUR 20.6 (8.9) million, an increase of EUR 11.7
million.
The Group’s net financial expenses amounted to EUR -12.4 (-7.4) mil-
lion. The interest expenses increased due to the higher market inter-
est rates and a one percentage point increase in the highest margin
level in accordance with the waiver agreement related to the com-
pany’s financing arrangement. The waiver terms expired at the end of
April due to the issue of hybrid bond, the divestment of dental care
services and Pihlajalinna’s improved profitability. Profit before taxes
amounted to EUR 8.2 (1.5) million.
Taxes in the income statement amounted to EUR -3.6 (6.1) million.
The impairments recognised during the quarter are not fully tax-de-
ductible. In the previous financial year, the Finnish Tax Administration
granted Pihlajalinna the right to deduct Pohjola Hospital Ltd’s con-
firmed tax losses for previous fiscal years and confirmed tax losses for
the fiscal years 2021–2022. The deferred tax asset in question,
amounting to EUR 6.2 million, was recognised through the income
statement during the financial year 2022.
Profit amounted to EUR 4.6 (7.7) million. Earnings per share (EPS) was
EUR 0.19 (0.42). Impairments recognised during the financial year re-
duced the company’s earnings per share by a total of EUR 0.37.
Consolidated statement of financial
position and cash flow
Pihlajalinna Group’s total statement of financial position amounted to
EUR 657.5 (661.6) million. Consolidated cash and cash equivalents
amounted to EUR 24.5 (13.1) million.
Net cash flow from operating activities during the financial year was
EUR 79.0 (64.9) million. The change in net working capital was EUR
0.0 (16.8) million.
Net cash flow from investing activities was EUR -18.5 (-83.4) million
for the financial year. The M&A transactions had an impact of EUR -
1.5 (-52.3) million on net cash flow from investing activities. Invest-
ments in tangible and intangible assets was EUR -22.9 (-29.0) million.
The divestment of the Group’s dental care services improved net cash
flow from investing activities in the financial year by EUR 5.7 million.
The Group’s cash flow after investments (free cash flow) was EUR
60.5 (-18.6) million in the financial year.
Net cash flow from financing activities during the financial year was
EUR -49.2 (27.4) million. The change in financial liabilities, including
changes in credit limits, amounted to EUR -29.0 (75.2) million. Pihla-
jalinna issued EUR 20 million hybrid bond during the financial year.
The net proceeds from the hybrid bond were used for the repayment
of drawings under Pihlajalinna’s existing revolving credit facility. In-
terests paid and other financial expenses was EUR -6.2 (-8.3) million.
During the first quarter of 2023, the Group sold the interest swap that
was effective on the financial statements date. The sale had an effect
of approximately EUR 3.9 million on the net cash flow of interests
paid and other financial expenses.
Hybrid Bond
Pihlajalinna issued EUR 20 million hybrid bond on 27 March 2023. The
hybrid bond bears a fixed interest rate of 12.00 percent per annum
until 27 March 2026 (“Reset Date”), and from the Reset Date, a float-
ing interest rate as defined in the terms and conditions of the capital
securities.
The hybrid bond is instrument that is subordinated to the company’s
other debt obligations. The hybrid bond does not have a specified
maturity date. Pihlajalinna is entitled to redeem the hybrid bond on
the Reset Date and thereafter on each interest payment date. The hy-
brid bond will be treated as equity in Pihlajalinna’s IFRS consolidated
financial statements. The hybrid bond does not confer to the holders
the rights of a shareholder and do not dilute the holdings of the cur-
rent shareholders.
The net proceeds from the hybrid bond were used for the repayment
of drawings under Pihlajalinna’s existing revolving credit facility and
for general financing purposes.
Financing arrangements
Pihlajalinna’s financing arrangement comprises a long-term loan of
EUR 130 million and a revolving credit facility of EUR 70 million for
general financing needs and acquisitions. It also includes an oppor-
tunity to later increase the total amount by EUR 100 million (to EUR
300 million), subject to separate decisions on a supplementary loan
from the funding providers.
Under the original agreement, Pihlajalinna’s financing arrangement
was set to have a term of three years and a maturity date in March
2025. In December 2023, Pihlajalinna and the creditor banks agreed
on re-structuring the financing arrangement. According to the new
agreement, the financing arrangement will mature in March 2026,
and the loan margin will change effective from 1 July 2024.
The financing arrangement includes the customary financial cove-
nants concerning leverage (ratio of net debt to pro forma EBITDA)
and gearing. IFRS 16 lease liabilities are not considered in the calcula-
tion of the covenants (Frozen GAAP). The loan margin of the financing
is additionally linked to Pihlajalinna’s annual sustainability objectives
related to patient satisfaction (NPS), employee engagement (eNPS)
and access to surgical treatment within the target time. Sustainability
objectives have a minor effect on the loan margin, depending on how
many of the agreed-upon sustainability targets are achieved.
REPORT BY THE BOARD OF DIRECTORS
|AUDITED FINANCIAL STATEMENTS 9
In late 2022, Pihlajalinna and the creditor banks agreed on a tempo-
rary increase to the covenants of the financing arrangement and in-
creasing the highest margin by one percentage point from the begin-
ning of 2023 until the third quarter of the year. The creditor banks
waived off the increase to the highest margin and the other waiver
terms in late April when the company demonstrated it would remain
under the original covenants for the next 12 months.
The original gearing covenant of the financing arrangement is 115 per
cent and the leverage covenant is 3.75. At the end of the financial
year, gearing in accordance with the financing arrangement was 93.6
per cent and leverage stood at 3.09.
The Group has credit limit agreements valid until further notice, total-
ling EUR 10 million. The notice period of the credit limit agreements is
one month. At the end of the financial year, Pihlajalinna had EUR 70
million in unused committed credit limits. Unused credit limits consist
of EUR 10 million credit limit agreement and EUR 60 million unused
revolving credit facility. Furthermore, an additional credit limit of EUR
100 million, which is subject to a separate credit decision, is unused.
The company has an interest rate swap agreement with a nominal
value of EUR 65 million, which is used to convert the interest on a
floating rate financing arrangement to a fixed rate. Cash flow hedge
accounting is applied to the interest rate swap agreement, which
means that the effective portion of the change in fair value is recog-
nised in other comprehensive income. The interest rate swap entered
effect in March 2023 and remain in effect until 25 March 2027.
Acquisitions and capital expenditure
Gross investments, including acquisitions, amounted to EUR 66.5
(234.5) million. Gross investments in M&A transactions including
right-of-use assets (e.g. lease commitments) amounted to EUR 0.7
(176.6) million. The Group has not done any business acquisitions
during the financial year. Acquisition items during the financial year
were related to adjustments to the contingent considerations of the
acquisitions made during the financial year 2022. The Group’s gross
investments in property, plant and equipment and intangible assets,
which consisted of development, additional and replacement invest-
ments required for growth, amounted to EUR 26.0 (28.3) million.
Gross investments in connection with the opening of new units
amounted to EUR 0.0 (3.1) million. Gross investments in right-of-use
assets amounted to EUR 40.5 (26.5) million. Gross investments in
right-of-use assets were increased in the financial year due to exten-
sions to business premises agreements and rent increases.
Investment commitments for the Group’s development, additional
and replacement investments amounted to approximately EUR 2.7
(3.5) million. The investment commitments are related to business
premises investments, additional and replacement investments in
clinical equipment and information system projects.
Research and development
Increases to intangible assets totalled EUR 7.4 (7.5) million during the
financial year. During the financial year 2023, the digital appointment
booking system was developed for both occupational healthcare cus-
tomers and private customers. In services for private customers
whose identity has been authenticated, new self-service opportuni-
ties were introduced for customers both on the website and the
Pihlajalinna health application, and chat appointment opportunities
were developed. In chat appointments in occupational healthcare, a
digital assessment of the need for care was deployed.
In occupational health services, tools to support work ability and
manage work ability risks were developed. Digital workplace surveys,
automatic job lists and reporting were developed to support the work
of occupational healthcare teams. In hospital operations, the use of
the guidance system for surgical operations was expanded to new
hospitals and the system was developed further in tandem with Pihla-
jalinna’s surgical processes. The use of the PihlajalinnaPRO mobile ap-
plication for healthcare professionals was also extended to new pro-
fessional groups, and the range of mobile services available to profes-
sionals was expanded. In addition, the Group invested in a new data
centre environment and deployed a new HRM system as well as a
new identity and access management solution.
The development of Pihlajalinna’s services for customers and profes-
sionals will continue in the financial year 2024.
The website will be comprehensively updated from the perspectives
of recruitment and private customers. In occupational health services,
the development of tools to support work ability and manage work
ability risks will continue, and the takeover of new occupational
healthcare customer accounts and occupational healthcare communi-
cations will also be developed. Chat appointments and remote service
use will be developed in accordance with the needs of private cus-
tomers, organisational customers and healthcare professionals. Pihla-
jalinnaPRO will continue to be developed to facilitate smoother day-
to-day work for professionals. In addition to the development of ser-
vice channels and the harmonisation of services, Pihlajalinna’s digital
and data platforms will be significantly renewed to even better re-
spond to the requirements of customers and business development.
Personnel
At the end of the financial year, the number of personnel amounted
to 6,880 (7,016), a decrease of -136 persons or -2 per cent. The
Group’s personnel averaged 4,923 (4,851) persons as full-time equiv-
alents, an increase of 72 persons or 1 per cent. The Group employee
benefit expenses totalled EUR 322.8 (296.6) million, an increase of
EUR 26.2 million or 9 per cent.
In the financial year, sickness-related absences rate amongst the
Group’s own personnel was 5.7 (6.7) per cent.
At the end of the financial year, the number of practitioners was 2
208 (1 812), an increase of 396 or 22 per cent.
Management Team
The Management Team includes CEO Tuomas Hyyryläinen, CIO Antti-
Jussi Aro, COO Private Clinic and Hospital Services Timo Harju, CFO
Tarja Rantala, CMO Sari Riihijärvi, COO Public Services Eetu Salunen
and CLO Marko Savolainen.
Board of Directors
The Annual General Meeting of 4 April 2023 resolved that the num-
ber of the members of the Board of Directors shall be fixed at eight
members instead of the previous seven. Heli Iisakka, Hannu Juvonen,
Leena Niemistö, Seija Turunen and Mikko Wirén were re-elected to
serve as members of the Board of Directors until the next Annual
REPORT BY THE BOARD OF DIRECTORS
|AUDITED FINANCIAL STATEMENTS 10
General Meeting. Kim Ignatius, Tiina Kurki and Jukka Leinonen were
elected as new Board Members.
The Annual General Meeting elected Jukka Leinonen as
the Chair of
the Board and Leena Niemistö as the
Vice-Chair of the Board.
Shareholders’ Nomination Board
The Shareholders’ Nomination Board is comprised of Juha Koponen
(LocalTapiola-Group), Mikko Wirén (MWW Yhtiö Oy), Tomi Yli-Kyyny
(Fennia Mutual Insurance Company) and Carl Petterson (Elo Mutual
Pension Insurance Company). The Chair of the Board of Directors of
Pihlajalinna Plc Jukka Leinonen has been part of the Board as an ex-
pert member.
Committees nominated by the Board
Pihlajalinna Plc Board of Directors appointed the following members
to its committees:
●
Audit Committee: Seija Turunen (chairman), Kim Ignatius, Heli Ii-
sakka and Heli Tiina Kurki
●
People and Sustainability Committee: Hannu Juvonen (chairman),
Leena Niemistö, Jukka Leinonen and Mikko Wirén
At its October meeting, the Board elected Mikko Wirén, who served
as Pihlajalinna’s temporary CEO until 31 August 2023, as a member of
the People & Responsibility Committee. It was agreed that all mem-
bers of the Board of Directors may join any of the committee meet-
ings.
Remuneration of the members of the
Board of Directors
The Annual General Meeting of 4 April 2023 resolved that the follow-
ing annual remuneration will be paid to the members of the Board of
Directors elected for the term of office ending at the 2024 Annual
General Meeting: EUR 60,000 per year to the Chairman of the Board
of Directors, EUR 40,000 per year to the Vice-Chairman and to the
Chairman of the Audit Committee and to the Chairman of the People
and Sustainability Committee, and EUR 30,000 per year to the other
members.
The AGM resolved that annual remuneration shall be paid in com-
pany shares and in cash, with approximately 40 per cent of the remu-
neration used to acquire shares in the name and on behalf of the
members of the Board of Directors, and the remainder paid in cash.
The remuneration could be paid either entirely or partially in cash if
the member of the Board of Directors was, on the day of the AGM, 4
April 2023, in possession of over EUR 1,000,000 worth of company
shares. The company was responsible for the expenses and transfer
tax arising from the acquisition of the shares. The share-based remu-
neration can be paid by distributing company’s own shares to the
members of the Board of Directors or by acquiring shares directly on
behalf of the board members after three weeks of the release of the
interim report for 1 January–31 March 2023. If this is not possible for
legal or other statutory reasons, such as taking insider regulations
into account, at the earliest possible time after this. Alternatively, the
remuneration is then paid in cash. If the term of a Board member
ends before the Annual General Meeting of 2024, the Board is enti-
tled to decide on the possible recovery of the remuneration in a man-
ner it deems appropriate.
The AGM decided that each Board member shall be paid a meeting
fee of EUR 600 for each Board and Committee meeting. Reasonable
travel expenses will also be reimbursed to the members of the Board
in accordance with the company’s travel policy.
Board authorisations
The Annual General Meeting of 4 April 2023 authorised the Board of
Directors to decide on the acquisition of a maximum of 2,260,000
shares, which is approximately 10 per cent of the Group’s current
number of shares. Own shares may be repurchased on the basis of
the authorisation only by using unrestricted equity. Targeted share
acquisition is possible. The authorisation is effective until the next An-
nual General Meeting, or until 30 June 2024 at the latest.
The Annual General Meeting also authorised the Board of Directors to
decide on a share issue and other special rights conferring an entitle-
ment to shares under Chapter 10, Section 1 of the Limited Liability
Companies Act. The number of shares to be issued cannot exceed
2,260,000 shares, which corresponds to approximately 10 per cent of
all the shares in the Group. The authorisation concerns both the issu-
ance of new shares and the sale or transfer of the Group’s own
shares. The authorisation permits a targeted share issue. The authori-
sation is effective until the next Annual General Meeting, or until 30
June 2024 at the latest.
Auditors and auditing
At Pihlajalinna’s Annual General Meeting held on 4 April 2023, KPMG
Oy Ab, a firm of authorised public accountants, was elected as the
company’s auditor for the financial year 1 January–31 December
2023. Assi Lintula, APA, is the principal auditor.
REPORT BY THE BOARD OF DIRECTORS
|AUDITED FINANCIAL STATEMENTS 11
Share-related information, outstanding shares
10–12/2023
10–12/2022
2023
2022
No. of shares outstanding at end of period
22,566,155
22,549,644
22,566,155
22,549,644
Average no. of shares outstanding during period
22,563,931
22,549,741
22,557,957
22,560,271
Highest price, EUR
8.11
9.70
9.90
13.18
Lowest price, EUR
6.90
8.48
6.82
8.48
Average price, EUR ¹⁾
7.19
8.88
8.20
11.06
Closing price, EUR
7.06
8.52
7.06
8.52
Share turnover, 1,000 shares
803
773
2 801
3 770
Share turnover, %
3.6
3.4
12.4
0.2
Market capitalisation at end of period,
EUR million
159.3
192.1
159.3
192.1
¹⁾ average rate weighted by trading level
Shares and shareholders
At the end of the financial period, Pihlajalinna Plc’s total number of
shares was 22,620,135, of which 22,566,155 were outstanding and
53,980 were held by the company which corresponds to approxi-
mately 0.26 per cent of all shares and votes. At the end of the finan-
cial year, the company had 15,150 (15,811) shareholders.
The trading code for the shares on the Nasdaq Helsinki main market
is PIHLIS. Pihlajalinna Plc has been classified as a Mid Cap company in
the Healthcare sector.
Risk management
In its risk management, Pihlajalinna’s aim is to operate as systemati-
cally as possible and incorporate risk management in normal business
processes. Furthermore, the group invests in management of occupa-
tional safety and health risks and in quality management systems like
ISO9001 and ISO14001. Pihlajalinna’s Risk Management Policy de-
fines goals of risk management, risk management principles, operat-
ing methods and responsibilities.
Internal risk reporting is included in the regular business reporting as
well as in business planning and decision-making. The material risks
and their management are reported to stakeholders regularly and,
when necessary, on a case-by-case basis.
In 2023, Pihlajalinna reviewed and further specified the previously de-
veloped and implemented comprehensive Enterprise Risk Manage-
ment process, which involves classifying risks according to the 2021
strategy which are profitable growth, quality and impactfulness, cus-
tomer and personnel experience and digitalisation of Pihlajalinna. In-
side these themes risks are reviewed as strategic, operational and fi-
nancial risks. In addition, the comprehensive risk management pro-
cess includes a review of sustainability risks, which are reported as
part of the section Statement of non-financial information.
Under the profitable growth has been gathered strategic and busi-
ness risks that refer to uncertainty related to the implementation of
the Group’s short-term and long-term strategy. An example is struc-
tural changes in society that can affect Pihlajalinna as a private pro-
vider of social and healthcare services. In addition, risks related to
profitability, business transactions, financing and other financial activ-
ities, such as contractual partnerships, are processed under the
theme.
Under the theme of quality and impactfulness have been gathered
comprehensive patient safety, operational quality and safety, as well
as risks related to the uninterrupted continuity of operations, includ-
ing unforeseen and surprising information security risks.
Pihlajalinna has identified under the theme of customer and person-
nel satisfaction, in particular, the risks related to the availability and
retention of personnel, as well as the risks related to work ability and
sickness absences. In addition, risks related to the company's values,
ethics and uniform operating methods are taken into account under
this theme.
The use of digitalisation and the risks associated with the strong
growth of multi-channel transactions have been gathered under to
the theme of digitalisation of Pihlajalinna. In addition for example the
compromise of risks related to data security or protection may lead to
financial losses, claims for compensation and loss of reputation.
The goal of Pihlajalinna risk management is to promote the achieve-
ment the Group’s strategic and operational targets, shareholder
value, the Group’s operational profitability and the realisation of re-
sponsible operating methods. Risk management seeks to ensure that
the risks affecting the company’s business operations are known, as-
sessed and monitored as well as taking care of practical measures and
real-time monitoring to anticipate and mitigate risks.
The Group and operative management are responsible for risk man-
agement according to reporting responsibilities. In addition, risk man-
agement specialists guide and develop the group’s risk management.
The Group Management Team regularly discusses the key risks re-
lated to the Group’s business operations. Everyone working at Pihla-
jalinna must also know and manage risks related to their responsibili-
ties. The internal audit function evaluates the appropriateness and
performance of the Company’s risk management as part of its annual
audit plan.
Risks and uncertainties in business operations
Pihlajalinna’s operations are affected by strategic risks, operational,
financial and damage risks. In its risk management, Pihlajalinna’s aim
is to operate as systematically as possible and incorporate risk man-
agement in normal business processes. The Group invests in quality
management systems and the management of occupational safety
REPORT BY THE BOARD OF DIRECTORS
|AUDITED FINANCIAL STATEMENTS 12
and health risks. Pihlajalinna aims to limit the potential adverse im-
pacts of risks. The assessment of sustainability-related risks plays an
important role in risk management.
Pihlajalinna operates only in Finland. Uncertainties in world politics,
such as the Russia’s invasion of Ukraine and conflicts in the Middle
East has indirect impacts on the Group’s operations due to the slow-
ing of economic growth, supply chain disruptions, high inflation and
rising market interest rates. Pihlajalinna will refrain from all business
activities with parties subject to economic sanctions.
In all its operations, Pihlajalinna considers data protection, infor-
mation security and related requirements. Information security
threats and jeopardised data protection can lead to significant repu-
tational damage and claims for compensation, among other conse-
quences. Pihlajalinna has taken steps to prepare for the elevated risk
of cyber-attacks related to the war in Ukraine.
High sickness-related absences among the personnel may reduce the
company’s profitability and complicates service provision. The com-
pany has also identified uncertainties related to the availability of
personnel in the social and healthcare sector and development of
wages. The costs of wage harmonisation in the social and healthcare
sector in relation to the creation of the wellbeing services counties
also remain uncertain to some degree.
Pihlajalinna has recognised risks associated with projects related to
the company’s growth, including acquisitions, digital development
and information system projects. The successful implementation of
these projects is a precondition for profitable growth in accordance
with the company’s strategy.
Monitoring and forecasting the covenants of the company’s financing
agreements is a significant part of the company’s risk management.
The company’s financing agreement and the hybrid bond issued on
27 March 2023 are described in more detail in the section
Financing
arrangements
.
The development of the Finnish economy, general cost inflation,
wage inflation and rising market interest rates have a negative impact
on the cost level and, consequently, on Pihlajalinna’s business opera-
tions, profitability and potentially access to additional financing. In
addition, inflation and high interest rates affect consumers' disposa-
ble income and employment trends, which in turn have an impact on
the demand for private healthcare services.
The most significant risks and uncertainties in social and healthcare
services are linked to the policies and legislation implemented in
Finnish society.
A company belonging to the Pihlajalinna Group is currently a subject
of a tax audit pertaining to a remuneration scheme used by the com-
pany.
Complete and partial outsourcings
Negotiations stipulated by the legislation concerning the reform of
healthcare and social services have been carried out in cooperation
with the wellbeing services counties. The negotiations were con-
ducted in order to ensure the application of the service agreements
as part of the organisation and production of services in the wellbe-
ing services counties. Pursuant to the legislation concerning the re-
form of social and healthcare services, the wellbeing services coun-
ties were required to indicate by the end of October 2023 whether
their subcontracting agreements will end. This affects the term of va-
lidity of Pihlajalinna’s service agreements and the scope of the ser-
vices provided.
The service agreements between the wellbeing services county of Pir-
kanmaa and Mäntänvuoren Terveys and Kolmostien Terveys will con-
tinue until the original termination date of the agreements. The cost
liabil-ity for demanding specialised care specified in the agreements
ended on 1 January 2023.
Jämsä Terveys’s agreement with the wellbeing services county of
Central Finland will expire in August 2025. The cost liability for de-
manding specialised care specified in the agreement ended on 1 July
2023. In August 2023, it was agreed with the wellbeing services
county of Central Finland that the services will gradually be trans-
ferred to the wellbeing services county in the first half of 2024. These
changes will decrease Jämsä Terveys’s revenue approximately by 31
million euros from 2023 levels.
The primary and specialised care services provided by Jokilaakson
Terveys will continue at Jokilaakso Hospital in accordance with the
subcontracting agreement until 2025. Jokilaakson Terveys has an ex-
ception permit issued by the Ministry of Social Affairs and Health for
round-the-clock emergency and on-call services in primary
healthcare, as required for its operations. The permit is currently
valid until the end of 2024, but the wellbeing services county of Cen-
tral Finland has applied in January 2024 an extension of the permit
until the end of 2025.
On October 30, 2023, the regional council of the South Ostrobothnia
wellbeing services county decided to terminate the outsourcing
agreement with Kuusiolinna Terveys, which was originally valid until
2030, with the termination set for the end of 2025. The regional
council's decision is not yet legally binding, and an appeal has been
lodged with the Supreme Administrative Court.
Pending legal processes
Pihlajalinna is involved in certain pending legal proceedings concern-
ing employment relationships, but they are not expected to have a
significant financial impact on the Group.
The company's subsidiary Jämsän Terveys Oy has taken legal action in
the district court against the City of Jämsä, a former client, mainly
concerning COVID-19-related costs which the City of Jämsä has not
paid in breach of the service agreement. In addition, a difference of
opinion has emerged between the company and the city during the
2022 financial year on the impact of the transfer of personnel on the
annual fee under the service agreement.
On 22 November 2023, the Vaasa Court of Appeal handed down its
ruling on the dispute concerning the service agreement between Jä-
msän Terveys Oy and the City of Jämsä. The Court of Appeal decided
to uphold the decision of the District Court. Pihlajalinna has submit-
ted an application for leave to appeal to the Supreme Court and an
appeal concerning part of the judgment of the Vaasa Court of Appeal.
REPORT BY THE BOARD OF DIRECTORS
|AUDITED FINANCIAL STATEMENTS 13
Impairment testing of goodwill
At the end of the financial year, goodwill on Pihlajalinna’s statement
of financial position amounted to EUR 251.8 (251.0) million. Pihla-
jalinna checks annually, and whenever necessary, that the carrying
amount of goodwill does not exceed the fair value. The annual im-
pairment testing was conducted on the situation on 30 November
2023. Pihlajalinna observed no indications of the carrying amount of
goodwill being greater than its estimated recoverable amount. The
cash-generating unit’s recoverable amount exceeded the carrying
amount by approximately EUR 186 million. If permanent negative
changes were to occur in the development of Pihlajalinna’s profit and
growth, this could lead to an impairment of goodwill.
Flagging notifications
On 11 May 2023, Pihlajalinna Plc received a notification under Chap-
ter 9, Section 5 of the Securities Market Act, according to which the
holding of Fennia Mutual Insurance Company in Pihlajalinna Plc’s
shares and votes had risen above 10 per cent on 11 May 2023. The
holding of Fennia Mutual Insurance Company increased to 2,262,965
shares, or 10.004 per cent of the total of Pihlajalinna’s shares and
votes.
Share-based incentive schemes
At its meeting on 23 March 2022, the Board of Directors approved
the terms of a share-based incentive program (LTIP 2022) for the key
persons of the company. In its entirety the incentive scheme is to
form a six- year program and the share rewards based on the pro-
gram are not allowed to be disposed of prior to year 2025. In addi-
tion, to participate the program, a key person must invest in Pihla-
jalinna shares.
The performance and quality-based share programme comprises four
separate performance periods of one year each (the calendar years
2022, 2023, 2024 and 2025). The potential share rewards will be paid
out after the performance periods in the years 2023, 2024, 2025 and
2026. The Board of Directors annually decides on the participants,
performance indicators, targets and earning opportunities. Two earn-
ings periods have been launched under the programme: 2022 and
2023. For the earnings period 2023, a total of 48 key persons are enti-
tled to participate to the share-based incentive programme. The pro-
grammes are treated in their entirety as equity-settled share-based
payments.
The maximum number of shares (gross amount prior to deduction of
applicable withholding tax) for each one-year performance period is
defined in the allocation per participant. The applicable withholding
tax will be deducted from the transferred shares, and the remaining
net amount will be paid to the participants in shares. Shares paid out
as share rewards are subject to a two-year transfer restriction. The
earnings criteria for the performance and quality-based share pro-
gramme are Pihlajalinna Group’s adjusted EBITA, as well as key oper-
ational, quality-related and sustainability-related indicators.
No performance and quality-based share rewards materialised for the
performance period 2022 pursuant to the matching share plan, as the
minimum targets set for the programme were not achieved. For the
performance period 2023, the performance and quality-based share
award did not materialize due to impairments recorded during the fi-
nancial year.
In case all the persons entitled to participate do participate to the
program by meeting the condition of investment in full and if the per-
formance targets set for the performance periods are fully achieved
in the future, the maximum aggregate amount of share rewards that
may be paid out based on the programme is approximately 618,000
shares (gross amount before the deduction of the applicable with-
holding tax) and the total value of the share rewards payable is ap-
proximately EUR 5.7 million. The above number of shares corre-
sponds to approximately 2.7 per cent of the company’s total number
of shares.
Repurchase and transfer of own shares
Pihlajalinna conveyed, in May, a total of 11,861 own shares as part of
the remuneration of the Board of Directors.
Pihlajalinna conveyed, in November, a total of 4 650 own shares in ac-
cordance with the termination agreement to Joni Aaltonen who
acted as CEO until 8 March 2023.
The number of own shares held by Pihlajalinna was 53,980 at the end
of the financial year, corresponding to approximately 0,26 per cent of
the total number of shares and votes.
The Board of Directors’ proposal for profit distri-
bution and the Annual General Meeting 2024
The parent company’s total distributable funds amount to EUR
203,428,565.55, of which the result for the financial year 2023 is EUR
-7,709,328.56. The Board of Directors proposes that a dividend of
EUR 0.07 per share be paid for the financial year that ended on 31
December 2023. On the financial statements date, 31 January 2023,
the total number of out-standing shares was 22,566,155. The corre-
sponding total dividend according to the Board of Directors’ proposal
would be at most EUR 1,579,630.85.
No material changes have taken place in the company’s financial posi-
tion after the end of the financial year. The company’s liquidity posi-
tion is good and, in the view of the Board of Directors, the proposed
distribution does not jeopardise the company’s ability to fulfil its obli-
gations.
Earnings per share for the financial year was EUR 0.19. The proposed
dividend of EUR 0.07 is 37 per cent of earnings per share. According
to the Pihlajalinna’s specified dividend policy, Pihlajalinna aims to dis-
tribute dividend or capital repayment minimum of one-third of the
earnings per share, taking into account the company’s financial posi-
tion and strategy.
Pihlajalinna Plc’s Annual General Meeting is planned to be held on 10
April 2024 in Tampere. The Board of Directors will decide on the no-
tice of the General Meeting and the included proposals at a later
date.
The annual report for 2023, including the Board of Directors’ report
and the financial statements, will be published on the company’s in-
vestor website at investors.pihlajalinna.fi in week 12.
REPORT BY THE BOARD OF DIRECTORS
|AUDITED FINANCIAL STATEMENTS 14
Calculation of the parent company's distributable funds:
EUR
31 Dec 2023
Reserve for invested unrestricted equity
183,190,483.50
Retained earnings
28,043,605.15
Result for the period
-7,709,328.56
Capitalised development costs
-96,194.54
Total
203,428,565.55
Pihlajalinna’s outlook for 2024
In 2024, Pihlajalinna will focus on organic growth and improving its
profitability and financial position.
●
The Group expects the consolidated revenue to increase from the
previous year’s level (EUR 720.0 million in 2023).
●
The Group expects the adjusted operating profit before the amorti-
zation and impairment of intangible assets (EBITA) to improve from
the previous year’s level (EUR 37.8 million in 2023).
●
The Group continues measures to strengthen its financial position.
Efficiency measures are expected to improve Pihlajalinna’s profita-
bility.
Slowed economic growth, weakened consumer confidence and
changes in market interest rates may affect Pihlajalinna’s service de-
mand and financial result more than expected. Price increases are ex-
pected to compensate the effects of cost inflation.
Corporate Governance Statement
Pihlajalinna publishes its Corporate Governance Statement separately
on the company’s investor website at investors.pihlajalinna.fi at the
same time as the Board of Directors’ report during week 12. Up-to-
date information about compliance with and deviations from the Cor-
porate Governance Code is maintained on the investor site at inves-
tors.pihlajalinna.fi.
Statement of non-financial information
Pihlajalinna reports non-financial information in accordance with the
Finnish Accounting Act and the EU Taxonomy Regulation. The report-
ing standards established by the Global Reporting Initiative (GRI)
have been used as the framework for sustainability information in the
annual report.
This statement of non-financial information included in the Board of
Directors’ report covers the operating principles, risks, results and in-
dicators related to Pihlajalinna’s sustainability themes.
Values, business and value creation
Pihlajalinna is one of the leading private social and healthcare service
providers in Finland. The Group offers comprehensive, high-quality
and impactful private clinic and hospital services, as well as occupa-
tional healthcare and insurance cooperation services. Pihlajalinna’s
shares are listed on Nasdaq Helsinki Ltd.
Pihlajalinna’s customers include private individuals, corporations, in-
surance companies and wellbeing services counties, for whom the
company provides a wide range of local and remote services. In the
public sector, the company provides social and healthcare production
models in which cooperation guarantees high-quality and impactful
services.
The company’s values are energy, ethics and open-mindedness. Pihla-
jalinna offers its personnel meaningful work in safe working condi-
tions. Each professional is important as a member of the work com-
munity and as an enabler and developer of the customer experience,
operational quality and impact.
Pihlajalinna has an impact on, and generates value for, its various
stakeholders ranging from societal operators to customers, the per-
sonnel, shareholders and the environment. The more detailed value
creation framework, including the basis of impact and the company’s
impacts, is described in Pihlajalinna’s Annual Report. Pihlajalinna’s
Annual Report will be published on the company’s investor website at
investors.pihlajalinna.fi at the same time as the Board of Directors’
report in week 12.
Material themes, key indicators and management
of sustainability
Pihlajalinna is committed to the UN Sustainable Development Goals
and the Global Compact principles of responsible business, which
guide the company’s business planning and sustainability efforts.
Pihlajalinna’s sustainability efforts are based on the identification of
materiality. In 2023, Pihlajalinna began to integrate the requirements
of the EU’s Corporate Sustainability Reporting Directive (CSRD) in to
the company’s reporting so that Pihlajalinna can report in compliance
with the CSRD from 2024 onwards. A double materiality assessment
(DMA) was carried out in 2023, which involved extensive stakeholder
engagement and a comprehensive expert assessment and workshop
analysis of impacts, risks and opportunities (IRO).
Pihlajalinna continued to focus on three sustainability themes in
2023: responsibility for health and wellbeing, responsibility for per-
sonnel, and sustainable business. The key indicators specified for the
themes are access to surgical treatment within the target time, the
share of preventive work in occupational healthcare, customer satis-
faction, and employee satisfaction. The themes and results are de-
scribed in more detail in the section Sustainability themes and key re-
sults. Some of the indicators are also incorporated into the com-
pany’s long-term loan agreement signed in 2022. Pihlajalinna moni-
tors the GRI reporting framework indicators in its Annual Report,
which is published in week 12, simultaneously with the Board of Di-
rectors’ report on the company’s investor pages at investors.pihla-
jalinna.fi. A more comprehensive overview of sustainability indicators
is provided in the Annual Report.
Pihlajalinna reports in accordance with the GRI standards. Each year,
the company also completes Global Compact reporting and the
EcoVadis sustainability assessment.
Pihlajalinna’s sustainability actions have a clear administrative struc-
ture, and they are carried out in accordance with guidelines and poli-
cies drawn up on the basis of international principles. Pihlajalinna’s
REPORT BY THE BOARD OF DIRECTORS
|AUDITED FINANCIAL STATEMENTS 15
sustainability efforts are led by the Vice President for Communica-
tions and Sustainability. She heads the corporate responsibility work-
ing group, which consists of representatives of the Group’s busi-
nesses as well as medical experts and specialists in Group functions
such as finance, HR administration, properties and law. The working
group prepares and ensures measures in line with the company’s sus-
tainability targets and reports to the Management Team on the pro-
gress of sustainability efforts four times per year. The Management
Team approves and monitors the sustainability programme and re-
lated actions, and ensures that the necessary resources are available.
The highest decision-making body concerning the company’s sustain-
ability is the Board of Directors, which monitors progress on the cho-
sen themes at the annual level. The Board of Directors has appointed
a committee to promote sustainability: the People and Sustainability
Committee. The Audit Committee of the Board of Directors also has a
significant role in promoting the renewal of sustainability reporting.
The Board of Directors also decides on the company’s guidelines and
policies.
Theme
Example of impacts
Examples of risks and opportunities
Responsibility for environment
Greenhouse gas emissions
Damages caused by extreme weather events, for
example, to properties
Responsibility for personnel
Job satisfaction, continuous development opportuni-
ties
Job creation
Attraction and retention as an employer, enhancing
productivity
Responsibility for health and
wellbeing
Population health and prevention
Availability of services
Patient safety, for example, cyber attacks on infrastruc-
ture or equipment, leading to significant reputation da-
mage and potential liability
Sustainable business
Shareholder value
Creating economic value for society
Availability of workforce
Loss of company value
Business opportunities
Pihlajalinna respects internationally recognised human rights and
non-discrimination. Pihlajalinna does not condone discrimination
based on employees’ and practitioners’ origin, nationality, religious
beliefs, ethnicity, gender, age or any other such factor. Pihlajalinna’s
Code of Conduct describes the way the company operates, based on
the principles of good governance and law, transparency, fairness
and confidentiality. The Code of Conduct also includes the company’s
commitment to the prevention of bribery and corruption, compliance
with competition law and cooperation with stakeholders. Code of
Conduct training is mandatory for all Pihlajalinna professionals.
The new Code of Conduct training introduced in October was com-
pleted by the end of the year by 1,935 people, representing approxi-
mately 30 per cent of Pihlajalinna professionals.
Pihlajalinna has a confidential whistleblowing channel that can be
used for reporting misconduct and problems in the organisation.
Pihlajalinna’s legal affairs unit is responsible for processing whistle-
blower notifications, and the company’s Board of Directors monitors
messages submitted via the whistleblowing channel and the actions
taken in response to them. A total of 10 notifications were submitted
via the whistleblowing channel in 2023 (4 in 2022). The investigation
has been completed for nine of these cases. The whistleblower notifi-
cations concerned incidents related to the equal treatment of em-
ployees, bullying and the Code of Conduct. Two of the investigated in-
cidents led to further action.
Sustainability risks and opportunities
Pihlajalinna completed a double materiality analysis in autumn 2023
to identify the company’s impacts on the environment and society,
and the resulting financial business risks and opportunities. The as-
sessment took into account the special characteristics of Pihla-
jalinna’s business model and value chain.
Pihlajalinna’s operations and business relationships give rise to a vari-
ety of positive and negative impacts on the environment and society.
A high-level assessment of the impacts and financial risks and oppor-
tunities to Pihlajalinna’s operations arising from the impacts and the
operating environment is provided in the table below.
Sustainability themes and key results
Pihlajalinna’s key sustainability themes are responsibility for health
and wellbeing, responsibility for personnel, and sustainable business.
Responsibility for health and wellbeing
Clinical quality and impact are among the company’s highest priori-
ties. The professional competence of the personnel is the foundation
of patient safety. The qualifications of employees are verified during
recruitment and they receive induction training in accordance with
the applicable induction training programme. We actively develop
the professional competence of our personnel.
Pihlajalinna’s quality management is based on comprehensive self-
monitoring, external quality assurance and comprehensive monitor-
ing by the authorities. Pihlajalinna has an ISO 9001 quality manage-
ment certificate. Self-monitoring makes it possible to quickly identify
risks related to quality or safety. The business locations have a re-
porting system for the personnel to report any deviations. Customers
report any problems they observe either directly to the personnel or
through Pihlajalinna’s feedback systems.
Pihlajalinna is a significant operator in specialised care. The objective
of surgical operations is to implement a quick and high-quality chain
of care, enabling quick recovery and rehabilitation for patients. Ac-
cess to surgical treatment within the target time has been highlighted
as one of the company’s key sustainability indicators. With regard to
access to surgical procedures for customers who are unable to work,
Pihlajalinna aims to offer the first available surgical appointment
within five weekdays. In 2023, the target for this was set at 67.5 per
cent. The target was achieved, with the outcome being 81.1 per cent.
In occupational health services, the prevention of illness is in every-
one’s interest and helps reduce costs. The emphasis on preventive
activities in occupational healthcare is monitored on a professional
group-specific basis. In 2023, Pihlajalinna’s minimum target for the
share of preventive work was 60 per cent for occupational health
physicians and 75 per cent for occupational health nurses. In 2023,
preventive work accounted for 65.8 (61.1) per cent of invoicing for
occupational healthcare physicians and 81.4 (79.7) per cent of invoic-
ing for occupational healthcare nurses.
REPORT BY THE BOARD OF DIRECTORS
|AUDITED FINANCIAL STATEMENTS 16
Pihlajalinna aims for an excellent customer experience in all of its ser-
vices. The systematic collection and processing of feedback enables
the company to develop services, processes and operating models ac-
cording to the customers’ wishes. Pihlajalinna uses the Net Promoter
Score (NPS) to measure the customer experience. The NPS for Pihla-
jalinna’s appointments in 2023 was 79.1 (77.1) and the NPS for com-
plete and partial outsourcing arrangements was 74.7 (72.3). The 2025
target for the Group’s combined NPS is 80. NPS can range from +100
to -100.
Customer equality can be increased by improving the availability of
services through the provision of remote services, even in areas
where in-person services or the necessary expert may not be availa-
ble. In 2023, a total of 40 (38) per cent of Pihlajalinna’s appointments
were conducted remotely.
Responsibility for personnel
Pihlajalinna systematically promotes the wellbeing of personnel, and
the company has a comprehensive equality and non-discrimination
policy. Pihlajalinna wants to be the first choice among professionals in
its industry.
Pihlajalinna’s number of personnel remained stable in 2023, but the
number of practitioners continued to grow as supply increased. At
the end of the year, the company had 6,880 (7,016) employees and
2,208 (1,812) practitioners. Key personnel indicators are reported in
more detail as part of the Annual Report.
Employees are a key asset for the company: their expertise and com-
petence are the basic conditions for an excellent customer experi-
ence, the fulfilment of the strict quality requirements in the social
and healthcare sector, and sustainability and impactfulness in busi-
ness. Investments in the development and wellbeing of the personnel
also help to ensure Pihlajalinna’s competitiveness in a rapidly chang-
ing market. The development of work ability was one of the most im-
portant themes in 2023. We continued the unique cooperation pro-
ject to develop work ability management with pension insurance
companies, which was launched in 2022. One of the main objectives
of the project is to reduce sickness-related absences by means of an
early intervention model, among other measures. Pihlajalinna’s sick-
ness-related absence rate in 2023 was 5.7 (6.7) per cent.
The company actively listens to the personnel to obtain information
on the state of the work community. Employee satisfaction is meas-
ured by the eNPS indicator, which is also one of Pihlajalinna’s key sus-
tainability indicators. Pihlajalinna’s eNPS for 2023 improved from the
previous year and was +4 (-1). The target set for 2023 was +8. The
Group’s eNPS excluding complete and partial outsourcing arrange-
ments in 2023 was +10 (+11) and the eNPS of the Group’s complete
and partial outsourcing arrangements in 2023 was -4 (-17). The eNPS
can range from +100 to -100.
All Pihlajalinna employees are within the scope of annual develop-
ment discussions. Pihlajalinna Academy is an online learning environ-
ment for the company’s personnel that offers new content to support
competence development. The total amount of training for the per-
sonnel came to 77,104 hours in 2023, which corresponds to 11.2
hours per employee.
At Pihlajalinna, the management of occupational safety is aimed at
maintaining a healthy and safe working environment and the effec-
tive prevention of accidents through training and the improvement of
operating practices, for example. The most common causes of acci-
dents were falling, slipping and unexpected behaviour by a customer.
The number of serious accidents that resulted in an absence of more
than 30 days remained fairly low in 2023: only 2 (6) serious accidents
were reported in the Group as a whole during the year. The accident
frequency decreased significantly from the previous year and was 26
(34), as measured by the number of accidents leading to an absence
of at least one day per million hours worked. This was lower than the
industry average of 35 by a clear margin.
Sustainable business
Pihlajalinna was founded more than 20 years ago to solve regional la-
bour availability challenges in healthcare. Pihlajalinna’s has its roots,
and strong expertise, in local cooperation to promote people’s well-
being. The company still has extensive outsourcing operations in
three wellbeing services counties: South Ostrobothnia, Central Fin-
land and Pirkanmaa. Pihlajalinna also provides wellbeing services
counties with a wide range of services under the service voucher sys-
tem and other service cooperation to help reduce queues for treat-
ment, which have escalated into a significant problem in society.
Pihlajalinna’s operations generate economic added value in Finland,
especially in the regions of Pirkanmaa, South Ostrobothnia and Cen-
tral Finland. The most significant direct economic impacts arise from
procurement, the remuneration of personnel and practitioners, and
the payment of taxes and tax-like charges. As a rule, the services and
goods procured by Pihlajalinna are purchased from domestic enter-
prises or the EU.
Pihlajalinna’s parent company and all of its subsidiaries are registered
in Finland. Pihlajalinna is a public limited company and 98.6 (98.6) per
cent of the company’s shares are owned by Finnish shareholders.
Pihlajalinna complies with Finnish legislation in the collection, remit-
tance and payment of taxes and tax-like charges. The Group pays all
of its taxes to Finland. In 2023, Pihlajalinna’s operations generated a
total of EUR 164.8 (155.7) million in payments to society. In addition,
Pihlajalinna paid a total of EUR 129.8 (112.5) million in fees to practi-
tioners, for which the practitioners themselves pay the taxes.
Pihlajalinna’s procurement principles are documented in a Supplier
Code of Conduct, which service providers, suppliers and partners are
required to comply with. The document was incorporated into all new
cooperation agreements and significant existing agreements in late
2022. Among Pihlajalinna’s large framework agreement partners, 30
out of 45 have signed the Supplier Code of Conduct. Pihlajalinna will
further specify its principles of sustainable procurement in 2024, and
the sustainability criteria for agreements will be more comprehen-
sively incorporated into the procurement process.
REPORT BY THE BOARD OF DIRECTORS
|AUDITED FINANCIAL STATEMENTS 17
Tax footprint
EUR million
2023
2022
Direct tax payable for the period
Income tax (business income tax)
0.5
2.0
45.5
42.0
4.0
3.3
ributions
4.6
4.3
group life insurance
1.2
1.6
Employer contributions, total
55.3
51.2
Property taxes
0.1
0.2
Transfer taxes
0.0
0.9
Direct tax payable for the period, total
56.0
54.2
Value added tax of acquisitions payable by the
company
Value added taxes, estimate
20.5
20.1
Tax for the period
62.4
57.8
20.0
18.4
butions
3.9
3.6
Payroll tax, total
86.3
79.8
Net value-added tax
2.1
1.5
Total tax for the period
88.3
81.3
Tax footprint
164.8
155.7
For Pihlajalinna, the management of data protection and information
security is of vital importance, and its purpose is to ensure the secure
processing of all of Pihlajalinna’s data – especially patient and per-
sonal data – and the protection of the privacy of patients, customers
and the company’s personnel. The management of information secu-
rity aims to ensure the integrity, confidentiality and availability of in-
formation. Pihlajalinna’s target for data protection is zero successful
attempts to gain unauthorised access. This target was achieved in
2023. In 2023, Pihlajalinna not only increased its own level of infor-
mation security but also conducted information security audits of
partners and enhanced the operations of the external Security Opera-
tions Centre (SOC). More information on information security is pro-
vided in the Annual Report.
In 2022, Pihlajalinna began developing measures to increase the well-
being of the environment. The company’s environmental policy sets
out the approach to environmental issues. The environmental im-
pacts of Pihlajalinna’s operations arise mainly from energy consump-
tion, carbon dioxide emissions and waste. Due to the nature of its op-
erations, the company’s carbon intensity is low. The company has an
ISO14001 environmental management system that was certified in
2023.
The greenhouse gas emissions of Pihlajalinna’s operations and value
chain are calculated in accordance with the internationally recognised
GHG Protocol (Scope 1 and 2). The emission accounting model can be
used to report the significant direct and indirect greenhouse gas
emissions of the value chain. More details on the emission calculation
are included in the Annual Report. The company will continue to de-
velop emission calculation as part of its preparations for sustainability
reporting obligations. The company will also set objectives concerning
climate change mitigation and adaptation.
Pihlajalinna switched to zero-emission electricity at the end of 2022.
The purchasing of zero-emission electricity is an important part of
managing Pihlajalinna’s climate impacts.
EU taxonomy reporting
The EU taxonomy is a classification system for environmentally sus-
tainable economic activities.
The Taxonomy Regulation sets six environmental objectives: climate
change mitigation, climate change adaptation, sustainable use and
protection of water and marine resources, transition to a circular
economy, pollution prevention and control, and protection and resto-
ration of biodiversity and ecosystems. An economic activity that pro-
motes any of these objectives while doing no significant harm to the
other objectives can be considered environmentally sustainable. En-
vironmentally sustainable projects should also respect human rights
and labour rights.
At this stage, the scope of Pihlajalinna’s operations covered by the cli-
mate regulations is limited to the economic activities that have the
greatest need and potential to substantially contribute to climate
change mitigation and adaptation. The company’s interpretation is
that its business activities are not within the scope of the classifica-
tion system, as the production of social and healthcare services is not
among the industries with the highest emissions.
Pihlajalinna has assessed the taxonomy eligibility of its economic ac-
tivities and concluded that the taxonomy-eligible share of turnover
(totalling EUR 720.0 million), capital expenditure (totalling EUR 66.5
million) and operating expenditure (totalling EUR 20.0 million) is 0%
for all three. Accordingly, the non-eligible share of turnover, capital
expenditure and operating expenditure is 100%. Pihlajalinna does not
engage in economic activities relating to nuclear power or fossil
gases. Information on taxonomy-aligned activities is presented in the
tables below.
REPORT BY THE BOARD OF DIRECTORS
|AUDITED FINANCIAL STATEMENTS 18
Proportion of turnover from products or services associated with Taxonomy-aligned economic activities
REPORT BY THE BOARD OF DIRECTORS
|AUDITED FINANCIAL STATEMENTS 19
Proportion of CapEx from products or services associated with Taxonomy-aligned economic activities
REPORT BY THE BOARD OF DIRECTORS
|AUDITED FINANCIAL STATEMENTS 20
Proportion of OpEx from products or services associated with Taxonomy-aligned economic activities
REPORT BY THE BOARD OF DIRECTORS
|AUDITED FINANCIAL STATEMENTS 21
Template 1: Nuclear and fossil gas related activities
Nuclear energy related activities
1.
The undertaking carries out, funds or has exposures to research, development, demonstration and
deployment of innovative electricity generation facilities that produce energy from nuclear processes
with minimal waste from the fuel cycle.
No
2.
The undertaking carries out, funds or has exposures to construction and safe operation of new nuclear
installations to produce electricity or process heat, including for the purposes of district heating or in-
dustrial processes such as hydrogen production, as well as their safety upgrades, using best available
technologies.
No
3.
The undertaking carries out, funds or has exposures to safe operation of existing nuclear installations
that produce electricity or process heat, including for the purposes of district heating or industrial pro-
cesses such as hydrogen production from nuclear energy, as well as their safety upgrades.
No
Fossil gas related activities
4.
The undertaking carries out, funds or has exposures to construction or operation of electricity genera-
tion facilities that produce electricity using fossil gaseous fuels.
No
5.
The undertaking carries out, funds or has exposures to construction, refurbishment, and operation of
combined heat/cool and power generation facilities using fossil gaseous fuels.
No
6.
The undertaking carries out, funds or has exposures to construction, refurbishment and operation of
heat generation facilities that produce heat/cool using fossil gaseous fuels.
No
REPORT BY THE BOARD OF DIRECTORS
|AUDITED FINANCIAL STATEMENTS 22
Events after the financial period
Kuusiolinna Terveys Oy, company part or Pihlajalinna Group, an-
nounced 31 January 2024 it would commence change negotiations.
The premature termination of the service agreement, as decided by
the wellbeing services county, significantly impacts the company's op-
erating conditions, necessitating the initiation of change negotiations.
The change negotiations are still ongoing and involve the entire staff,
excluding administrative support services. According to preliminary
estimates, the outcome of the negotiations may result in a reduction
of approximately 190 full-time equivalent positions within the com-
pany. The negotiations are expected to last approximately six weeks
in total.
Pihlajalinna conveyed, in January 2024, a gross amount total of 20
000 own shares to CEO Tuomas Hyyryläinen. Compensation was pro-
vided in the form of shares and cash. The applicable withholding tax
was deducted from the transferred shares, and the remaining net
amount was paid in shares. The compensation was related to the
CEO's agreed right to acquire shares at the beginning of the share-
based incentive program, during which the company releases shares
in exchange for purchases. After conveying, the number of own
shares held by Pihlajalinna was 43,980 at the end of the financial
year, corresponding to approximately 0,19 per cent of the total num-
ber of shares and votes.
REPORT BY THE BOARD OF DIRECTORS
|AUDITED FINANCIAL STATEMENTS 23
Key financial figures
Scope of operations
2023
2022
2021
2020
2019
Revenue, EUR million
720.0
690.5
577.8
508.7
518.6
Change, %
4.3
19.5
13.6
-1.9
6.3
Organic revenue growth, EUR million*
25.3
34.9
58.1
-11.3
13.4
Change, %
3.7
6.0
11.4
-2.2
2.8
Gross investments, EUR million*
66.5
234.5
44.8
25.4
44.1
% of revenue
9.2
34.0
7.8
5.0
8.5
Capitalised development costs, EUR million*
0.0
0.0
0.0
0.4
0.5
% of revenue
0.0
0.0
0.0
0.1
0.1
Employee benefit expenses, EUR million
322.8
296.6
255.2
214.2
222.0
Personnel at the end of the period (NOE)
6,880
7,016
6,297
5,550
5,815
Average number of personnel (FTE)
4,923
4,851
4,746
4,308
4,649
Profitability
2023
2022
2021
2020
2019
EBITDA, EUR million
72.5
54.4
62.6
52.2
47.8
EBITDA, %
10.1
7.9
10.8
10.3
9.2
Adjusted EBITDA, EUR million*
80.6
64.2
65.3
54.8
55.7
Adjusted EBITDA, %
11.2
9.3
11.3
10.8
10.7
Operating profit (EBIT), EUR million
20.6
8.9
27.9
18.1
10.4
Operating profit, %
2.9
1.3
4.8
3.6
2.0
Adjusted operating profit (EBIT), EUR million*
29.1
18.6
30.6
21.1
21.6
Adjusted operating profit, %
4.0
2.7
5.3
4.2
4.2
Adjusted operating profit before the amortisation and im-
pairment of intangible assets (EBITA), EUR million*
37.8
26.7
37.3
27.4
28.9
Adjusted EBITA, %
5.2
3.9
6.5
5.4
5.6
Net financial expenses, EUR million
-12.4
-7.4
-3.7
-4.4
-3.9
% of revenue
-1.7
-1.1
-0.6
-0.9
-0.8
Profit before tax, EUR million
8.2
1.5
24.2
13.7
6.4
% of revenue
1.1
0.2
4.2
2.7
1.2
Income tax, EUR million
-3.6
6.1
-5.1
-4.8
-1.8
Profit for the period
4.6
7.7
19.1
8.9
4.6
Cash flow after investments, EUR million
60.5
-18.6
24.9
43.7
18.3
Return on equity (ROE), %*
3.4
6.2
16.1
8.1
3.9
Return on capital employed (ROCE), %*
4.0
2.3
8.8
5.7
3.1
Funding and financial position
Interest-bearing net financial debt, EUR million
352.7
385.7
194.7
194.8
192.7
% of revenue
49.0
55.9
33.7
38.3
37.2
Equity ratio, %*
22.0
18.6
27.0
25.9
24.1
Gearing, %*
243.9
313.8
158.8
170.6
181.7
Net debt/adjusted EBITDA*
4.4
6.0
3.0
3.6
3.5
Share related information
2023
2022
2021
2020
2019
Earnings per share (EPS)
0.19
0.42
0.89
0.38
0.16
Equity per share, EUR*
6.56
5.50
5.27
4.82
4.44
Dividend per share, EUR (the Board of
Directors’ proposal)
0.07
0.30
0.20
Dividend per share, % (the Board of Di-
rectors’ proposal)*
37.3
33.7
52.0
Effective dividend yield, % (the Board of
Directors’ proposal)*
0.99
2.37
2.13
Number of shares at year-end
22,566,155
22 549 644
22,594,235
22,617,841
22,620,135
Average number of shares
22,557,957
22 560 271
22,589,383
22,586,212
22,620,135
Market capitalisation, EUR million
159.3
192.1
285.6
212.2
345.6
Dividends paid, EUR million (the Board of
Directors’ proposal)
1.6
6.8
4.5
P/E ratio*
37.60
20.19
14.21
24.39
98.58
Highest quotation, EUR
9.90
13.18
12.98
15.66
15.88
Lowest quotation, EUR
6.82
8.48
9.26
8.72
8.70
Average quotation, EUR
8.20
11.06
11.18
12.09
12.77
Closing price at year-end, EUR
7.06
8.52
12.64
9.38
15.28
Trading volume of shares, 1,000 shares*
2 801
3 770
6,929
6,620
4,062
Trading volume of shares, %*
12.4
16.7
30.7
29.3
18.0
* Alternative performance measure
REPORT BY THE BOARD OF DIRECTORS
|AUDITED FINANCIAL STATEMENTS 24
Quarterly information
EUR million
Q4/23
Q3/23
Q2/23
Q1/23
Q4/22
Q3/22
Q2/22
Q1/22
INCOME STATEMENT
Revenue
183.0
165.6
183.6
187.8
188.4
165.2
173.7
163.1
Other operating income
-0.4
1.0
2.1
4.8
0.9
0.4
1.8
1.7
Materials and services
-65.3
-56.6
-66.4
-66.9
-74.8
-61.8
-66.5
-64.2
Employee benefit expenses
-84.4
-72.6
-82.8
-82.9
-80.4
-68.4
-74.6
-73.2
Other operating expenses
-21.2
-17.3
-18.8
-19.8
-22.7
-17.4
-18.9
-18.2
EBITDA
11.6
20.1
17.7
23.0
11.5
18.1
15.6
9.3
EBITDA, %
6.4
12.1
9.7
12.3
6.1
10.9
9.0
5.7
Adjusted* EBITDA
20.7
20.5
18.0
21.4
12.0
18.9
16.9
16.5
Adjusted* EBITDA, %
11.3
12.4
9.8
11.4
6.4
11.4
9.7
10.1
IFRS3 expenses
0.0
0.0
-0.2
-0.5
-0.2
-0.1
-0.2
-0.8
Depreciation and amortisation
-13.6
-13.0
-12.8
-12.5
-12.0
-11.5
-11.5
-10.5
Operating profit (EBIT)
-1.9
7.1
4.9
10.5
-0.6
6.6
4.1
-1.2
Operating profit, %
-1.1
4.3
2.7
5.6
-0.3
4.0
2.4
-0.7
Adjusted operating profit (EBIT)
7.6
7.3
4.8
8.2
-0.2
7.3
5.0
5.2
Adjusted operating profit (EBIT), %
4.1
4.4
2.6
4.4
-0.1
4.4
2.9
3.2
Adjusted operating profit before the amortisation and impairment of in-
tangible assets (EBITA)
9.9
9.6
7.3
11.0
2.2
9.4
7.3
7.8
Adjusted EBITA, %
5.4
5.8
4.0
5.9
1.2
5.7
4.2
4.8
Financial income
-0.1
0.2
0.2
0.1
0.4
0.1
0.1
0.1
Financial expenses
-4.1
-2.8
-2.7
-3.1
-2.7
-2.1
-1.7
-1.6
Profit before taxes (EBT)
-6.1
4.4
2.4
7.5
-2.8
4.5
2.5
-2.7
Income tax
-0.3
-1.1
-0.6
-1.6
1.7
-0.5
-0.3
5.2
Profit for the period
-6.4
3.3
1.8
5.9
-1.1
4.0
2.1
2.6
Share of the result for the period attributable to owners of the parent
company
-5.2
3.5
2.0
5.5
-0.7
3.3
1.7
5.3
Share of the result for the period attributable to non-controlling interests
-1.2
-0.2
-0.2
0.4
-0.4
0.8
0.4
-2.7
EPS
-0.2
0.2
0.1
0.2
0.0
0.1
0.1
0.2
Average number of personnel (FTE)
4,923
4,976
4,978
4,882
4,851
4,793
4,990
4,474
Change in personnel during the quarter
-53
-1
95
31
58
-197
516
-272
REPORT BY THE BOARD OF DIRECTORS
|AUDITED FINANCIAL STATEMENTS 25
Calculation of key financial figures and alternative performance measures
Key figures
Earnings per share (EPS)
Profit for the financial period attributable to owners of the parent
company - Hybrid bond interest expenses net of tax
Average number of shares during the financial year
Alternative performance measures
Equity per share
Equity attributable to owners of the parent company
Number of shares at the end of the financial period
Dividend per share
Dividend distribution for the financial year (or proposal)
Number of shares at the end of the financial period
Dividend/result, %
Dividend per share
x 100
Earnings per share (EPS)
Effective dividend yield, %
Dividend per share
x 100
Closing price for the financial year
P/E ratio
Closing price for the financial year
Earnings per share (EPS)
Share turnover, %
Number of shares traded during the period
x 100
Average number of shares
Return on equity (ROE), %
Profit for the period (rolling 12 months)
x 100
Equity (average)
Return on capital employed, % (ROCE)
Profit before taxes (rolling 12 months) + financial expenses
(rolling 12 months)
x 100
Total statement of financial position – non-interest-bearing liabili-
ties (average)
Equity ratio, %
Equity
x 100
Total statement of financial position – prepayments received
Gearing, %
Interest-bearing net debt – cash and cash equivalents
x 100
Equity
EBITDA
Operating profit + depreciation, amortisation and impairment
EBITDA, %
Operating profit + depreciation, amortisation and impairment
x 100
Revenue
Adjusted EBITDA¹⁾
Operating profit + depreciation, amortisation and impairment +
adjustment items
Adjusted EBITDA, % ¹⁾
Operating profit + depreciation, amortisation and impairment +
adjustment items
x 100
Revenue
Adjusted operating profit before the amortisa-
tion and impairment of intangible assets
(EBITA)¹⁾
Operating profit + adjustment items + amortisation
and impairment of intangible assets
Adjusted EBITA, %¹⁾
Adjusted operating profit before the amortisation and impair-
ment of intangible assets (EBITA)
x 100
Revenue
Net debt/Adjusted EBITDA¹⁾,
Interest-bearing net debt - cash and cash equivalents
rolling 12 months
Adjusted EBITDA (rolling 12 months)
Cash flow after investments
Net cash flow from operating activities + net cash flow from in-
vesting activities
Adjusted operating profit (EBIT) ¹⁾
Operating profit + adjustment items
Adjusted operating profit, % ¹⁾
Adjusted operating profit (EBIT)
x 100
Revenue
Profit before taxes
Profit for the financial year + income tax
Gross investments
Increase in tangible and intangible assets and in right of-use as-
sets
Organic revenue growth, %
Revenue for the period - revenue from M&A transactions
for the period - revenue for the previous period
x 100
Revenue for the previous period
¹⁾ Significant transactions that are not part of the normal course of business, are related to business acquisition costs (IFRS 3), are 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 presents costs concerning cloud computing arrangements, and reversals of amortisation, as
adjustment items.
REPORT BY THE BOARD OF DIRECTORS
|AUDITED FINANCIAL STATEMENTS 26
Reconciliations with alternative key figures and ratios
Pihlajalinna publishes a wide range of alternative performance measures, i.e. key figures that are not based
on financial reporting standards, because they are considered to be significant for investors, the manage-
ment and the Board of Directors in assessing the group’s financial position and profitability. The alternative
performance measures should not be considered to be replacements for the key figures defined in IFRS
standards. The table below presents the reconciliation calculations for the alternative performance
measures and the justifications for their presentation.
Reading notes:
/divide by the next number/numbers
- deduct the next number/numbers
+ add the next number/numbers
EUR million
2023
2022
Return on equity (ROE), %
Profit for period (rolling 12 months)/
4.6
7.7
Equity at beginning of period
122.9
122.6
Equity at end of period
144.6
122.9
Equity (average) x 100
133.7
122.7
Return on equity (ROE), %
3.4
6.2
Return on equity is one of the most important indicators of a company’s profitability used by shareholders
and investors. The indicator illustrates the company’s ability to look after the capital invested by sharehol-
ders in the company. The figure indicates how much return was accumulated on equity during the financial
year.
EUR million
2023
2022
Return on capital employed (ROCE), %
Profit before taxes (rolling 12 months) +
8.2
1.5
Financial expenses (rolling 12 months)
12.7
8.1
/
20.9
9.6
Total statement of financial position at beginning of period -
661.6
457.1
non-interest-bearing liabilities at beginning of period
138.9
135.5
522.8
321.6
Total statement of financial position at end of period -
657.5
661.6
Non-interest-bearing liabilities at end of period
135.7
138.9
521.8
522.8
Average x 100
522.3
422.2
Return on capital employed (ROCE), %
4.0
2.3
Return on capital employed is one of the most important indicators produced by financial statements ana-
lysis. It measures the company’s relative profitability, or the return on capital invested in the company that
requires interest or other returns.
EUR million
2023
2022
Equity ratio, %
Equity/
144.6
122.9
Total statement of financial position -
657.5
661.6
Advances received x 100
0.3
0.0
Equity ratio, %
22.0
18.6
The equity ratio measures the company’s solvency, the capacity to tolerate losses and the ability to ma-
nage commitments in the long term. The indicator shows the percentage of the company’s assets that are
financed by equity.
EUR million
2023
2022
Gearing, %
Interest-bearing financial liabilities –
377.2
398.8
Cash and cash equivalents/
24.5
13.1
Equity x 100
144.6
122.9
Gearing, %
243.9
313.8
Gearing illustrates the company’s indebtedness. The figure reveals the ratio between the equity invested
in the company by shareholders and the interest-bearing debt borrowed from lenders.
EUR million
2023
2022
Net debt/adjusted EBITDA, rolling 12 months
Interest-bearing financial liabilities -
377.2
398.8
Cash and cash equivalents
24.5
13.1
Net debt/
352.7
385.7
Adjusted EBITDA (rolling 12 months)
80.6
64.2
Net debt/adjusted EBITDA, rolling 12 months
4.4
6.0
This figure illustrates how quickly, at the current profit rate, the company would have paid off its debts if
the EBITDA were to be used in full to repay the debts, if the company does not, for example, invest or dis-
tribute any dividend.
REPORT BY THE BOARD OF DIRECTORS
|AUDITED FINANCIAL STATEMENTS 27
EUR million
2023
2022
EBITDA and Adjusted EBITDA
Profit for period
4.6
7.7
Income tax
-3.6
6.1
Financial expenses
-12.7
-8.1
Financial income
0.4
0.7
Depreciation, amortisation and impairment
-51.9
-45.5
EBITDA
72.5
54.4
IFRS 3 costs –
0.7
1.3
Entries related to the IFRIC Agenda Decision concerning
cloud computing arrangements
1.0
0.3
Other EBITDA adjustments
6.4
8.2
Total EBITDA adjustments
8.1
9.8
Adjusted EBITDA
80.6
64.2
EBITDA indicates how much is left of the company’s revenue after deducting operating expenses. Assess-
ments of whether EBITDA is sufficiently high should take into account the company’s financial expenses,
depreciation requirements and intended profit distribution. Adjusted EBITDA provides significant additi-
onal information on profitability by eliminating items that do not necessarily reflect the profitability of the
company’s operative business. Adjusted EBITDA improves comparability between periods and is frequently
used by analysts, investors and other parties. The Group Management Team and operative management
monitor and forecast adjusted EBITDA on a monthly basis.
EUR million
2023
2022
EBITDA, %
EBITDA/
72.5
54.4
Revenue x 100
720.0
690.5
EBITDA, %
10.1
7.9
EUR million
2023
2022
Adjusted EBITDA, %
Adjusted EBITDA/
80.6
64.2
Revenue x 100
720.0
690.5
Adjusted EBITDA, %
11.2
9.3
EUR million
2023
2022
Operating profit (EBIT) and Adjusted operating profit (EBIT)
Profit for the period
4.6
7.7
Income tax
-3.6
6.1
Financial expenses
-12.7
-8.1
Financial income
0.4
0.7
Operating profit (EBIT)
20.6
8.9
Entries related to the IFRIC Agenda Decision concerning
cloud computing arrangements (reversal of amortisation ) -
-0.5
-0.4
Other adjustments to amortisation and impairment
0.9
0.3
Total adjustments to depreciation, amortisation and impairment
0.5
0.4
Total EBITDA adjustments
8.1
9.8
Total operating profit (EBIT) adjustments
8.5
9.7
Adjusted operating profit (EBIT)
29.1
18.6
PPA amortisation
2.1
2.7
Amortisation and impairment of other intangible assets
6.6
5.4
Entries related to the IFRIC Agenda Decision concerning
cloud computing arrangements (reversal of amortisation)
0.5
0.4
Adjusted operating profit before the amortisation and
impairment of intangible assets (EBITA)
37.8
26.7
Operating profit indicates how much is left of the proceeds of actual business operations before financial
items and taxes. With operating profit, the company must cover, among other things, financial expenses,
taxes and the distribution of dividends. Adjusted operating profit provides significant additional informa-
tion on profitability by eliminating items that do not necessarily reflect the profitability of the company’s
operative business. Adjusted operating profit improves comparability between periods and is frequently
used by analysts, investors and other parties.
The Group Management Team and operative management monitor and forecast adjusted operating profit
(EBIT) and adjusted operating profit before the amortisation and impairment of intangible assets (EBITA)
on a monthly basis.
EUR million
2023
2022
Operating profit (EBIT), %
Operating profit/
20.6
8.9
Revenue x 100
720.0
690.5
Operating profit (EBIT), %
2.9
1.3
REPORT BY THE BOARD OF DIRECTORS
|AUDITED FINANCIAL STATEMENTS 28
EUR million
2023
2022
Adjusted operating profit (EBIT), %
Adjusted operating profit/
18.6
18.6
Revenue x 100
720.0
690.5
Adjusted operating profit (EBIT), %
4.0
2.7
EUR million
2023
2022
Adjusted operating profit before the amortisation and
impairment of intangible assets (EBITA), %
Adjusted operating profit before the amortisation and
impairment of intangible assets (EBITA) /
37.8
26.7
Revenue x 100
720.0
690.5
Adjusted operating profit before the amortisation and
impairment of intangible assets (EBITA), %
5.2
3.9
EUR million
2023
2022
Cash flow after investments
Net cash flow from operating activities
79.0
64.9
Net cash flow from investing activities
-18.5
-83.4
Cash flow after investments
60.5
-18.6
Cash flow after investments (free cash flow) indicates how much cash is left for the company after deduc-
ting the cash tied up in operative business and investments. It indicates how much the company has left
for its shareholders and creditors. Free cash flow indicates how sustainable the foundation of the com-
pany’s profitability is, and it is used as the basis of the company’s valuation.
EUR million
2023
2022
Profit before taxes
Profit for period
4.6
7.7
Income tax
-3.6
6.1
Profit before taxes
8.2
1.5
EUR million
2023
2022
Gross investments
Property, plant and equipment at end of period
65.8
58.7
Right-of-use assets at end of period
203.9
197.7
Other intangible assets at end of period
21.1
22.8
Goodwill at end of period
251.8
251.0
Depreciation, amortisation and impairment for period are added
51.9
45.5
-
Property, plant and equipment at beginning of period
58.7
45.0
Right-of-use assets at beginning of the period
197.7
95.6
Other intangible assets at beginning of period
22.8
14.9
Goodwill at beginning of period
251.0
188.9
Proceeds from the sale of property, plant and equipment during period
-2.3
-3.0
Gross investments
66.5
234.5
Gross investments refers to the acquisition of long-term factors of production, including M&A transactions. Di-
vestments and proceeds from the sale of property, plant and equipment are not deducted from investments. In-
vestments are also presented on a cash flow basis in the cash flow statement.
EUR million
2023
2022
Organic revenue growth, %
Revenue for period -
720.0
690.5
Revenue from M&A transactions during period
16.2
77.8
Revenue from divestments during period
-12.0
Revenue for previous period
690.5
577.8
Organic revenue growth /
25.3
34.9
Revenue for previous period x 100
690.5
577.8
Organic revenue growth, %
3.7
6.0
Revenue growth due to M&A transactions, %
2.3
13.5
Revenue growth
29.5
112.7
Revenue growth, %
4.3
19.5
Organic revenue growth is growth in existing business operations that has not come about as a result of M&A
transactions. Organic growth can be achieved through increasing the service offering, new customer acquisition,
growth in custom from existing customers, price increases and digitalisation. Social and healthcare outsourcing
contracts won through public competitive bidding and new business locations established by the group itself are
included in organic growth. Organic growth is calculated also excluding divestments.
REPORT BY THE BOARD OF DIRECTORS
|AUDITED FINANCIAL STATEMENTS 29
Shares and shareholders
Distribution of shareholding by size
range, 31 Dec 2023
1
̶
100
Shares per shareholder
101
̶̶
1 000
1 001
̶̶
10 000
10 001
̶̶
100 000
100 001
̶̶
500 000
500 001 ̶̶
Distribution of shareholding by size range, 31 Dec 2023
Shares per shareholder
Number of shareholders
% of shareholders
Number of shares
Percentage of shares, %
1 - 100
8,612
56.8 %
364,162
1.6 %
101 - 1 000
5,645
37.3 %
1,907,467
8.4 %
1 001 - 10 000
779
5.1 %
2,104,422
9.3 %
10 001 - 100 000
91
0.6 %
2,217,556
9.8 %
100 001 - 500 000
16
0.1 %
3,374,297
14.9 %
500 001 -
7
0.0 %
12,652,231
55.9 %
Total
15,150
100.0 %
22,620,135
100.0 %
of which nominee-registered
shares
9
498,983
2.2 %
Outstanding shares
22,620,135
100.0 %
Major shareholders, 31 Dec 2023
1
LOCALTAPIOLA GENERAL MUTUAL INSURANCE COMPANY
3,481,641
15.4 %
2
MWW YHTIÖ LTD
2,309,010
10.2 %
3
FENNIA MUTUAL INSURANCE COMPANY
2,262,965
10.0 %
4
LOCALTAPIOLA MUTUAL LIFE INSURANCE COMPANY
1,895,156
8.4 %
5
ELO MUTUAL PENSION INSURANCE COMPANY
1,267,161
5.6 %
6
ILMARINEN MUTUAL PENSION INSURANCE COMPANY
728,431
3.2 %
7
NIEMISTÖ LEENA KATRIINA
707,867
3.1 %
8
FONDITA NORDIC MICRO CAP INVESTMENT FUND
430,000
1.9 %
9
NORDEA LIFE ASSURANCE FINLAND LTD
351,700
1.6 %
10
VIPUNEN CAPITAL OY
350,000
1.5 %
10 largest, total
13,783,931
60.9 %
Other shareholders
8,836,204
39.1 %
Total
22,620,135
100.0 %
REPORT BY THE BOARD OF DIRECTORS
|AUDITED FINANCIAL STATEMENTS 30
Distribution of shareholding by size
range, 31 Dec 2023
Private companies
Financial and insurance institutions
Public entities
Households
Non-profit organisations
Nominee registered
Direct holding
Indirect holdings
Number of
shares
Percentage of shares
and votes
Number of
shares
Percentage of shares
and votes
Board of Directors
Jukka Leinonen
12,636
0.1 %
Leena Niemistö
707,867
3.1 %
Mikko Wirén (MWW Yhtiö Oy)
2,309,010
10.2 %
Mikko Wirén
5,000
0.0 %
Heli Iisakka
2,267
0.0 %
Hannu Juvonen
3,514
0.0 %
Seija Turunen
4,392
0.0 %
Kim Ignatius
1,318
0.0 %
Tiina Kurki
1,318
0.0 %
Management Team
Tuomas Hyyryläinen
30,000
0.1 %
Eetu Salunen
18,431
0.1 %
Tarja Rantala
17,142
0.1 %
Marko Savolainen
10,694
0.1 %
Timo Harju
11,500
0.1 %
Antti-Jussi Aro
4,001
0.0 %
Riihijärvi Sari
4,004
0.0 %
Shareholding of the management 31 Dec 2023
Distribution of shareholding by sector 31 Dec 2023
Number of
shareholders
% of shareholders
Number of shares
Percentage of
shares, %
Private companies
531
3.5 %
4,928,734
21.8 %
Financial and insurance institutions
37
0.2 %
9,290,587
41.1 %
Public entities
5
0.0 %
2,031,818
9.0 %
Households
14,496
95.7 %
5,680,571
25.1 %
Non-profit organisations
42
0.3 %
147,678
0.7 %
Foreign shareholders
39
0.3 %
41,764
0.2 %
Total
15,150
100.0 %
22,121,152
97.8 %
Nominee registered
8
498,983
2.2 %
Outstanding shares
22,620,135
100.0 %
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
31
Financial statements 1 Jan–31 Dec 2023
CONTENTS
Main statements included in the consolidated financial statements, IFRS
Notes to the consolidated financial statements, IFRS
Category
No.
Description
Income statement 1
Income statement 2
Income statement 3
Income statement 4
Income statement 5
Income statement 6
Income statement 7
Income statement 8
Income statement 9
Income statement, taxes 10
EPS 11
Statement of financial position 12
Statement of financial position 13
Statement of financial position 14
Statement of financial position 15
Statement of financial position 16
Statement of financial position 17
Statement of financial position 18
Balance sheet, taxes 19
Equity 20
Equity 21
Equity 22
Equity 23
Equity 24
Risk management 25
Group structure 26
Acquired business operations
Group structure 27
Subsidiaries and material non-controlling interests
Group structure 28
Interests in associates and joint arrangements
Other 29
Contingent assets and liabilities and commitment
Group structure 30
Other 31
Other 32
Parent company financial statements, FAS
Parent company notes to financial statements, FAS
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
32
Consolidated statement of comprehensive income, IFRS
EUR 1,000
Note
1–12/2023
1–12/2022
Revenue
1
Other operating income
2
Materials and services
3
-255,231
-267,224
Employee benefit expenses
4
-322,760
-296,572
Other operating expenses
6
-76,559
-77,164
Share of profit in associated companies and joint ventures
28
-478
-15
EBITDA
Depreciation, amortisation and impairment
7
-51,906
-45,498
Operating profit (EBIT)
Financial income
8
Financial expenses
9
-12,749
-8,074
Financial income and expenses
-12,394
-7,353
Profit before taxes
Income tax
10
-3,587
Profit for the period
Attributable to:
-1,129
-1,859
Earnings per share calculated on the basis of the result for
the period attributable to the owners of the parent company
(EUR)
11
Consolidated statement of comprehensive income
EUR 1,000
Note
1–12/2023
1–12/2022
Profit for the period
Other comprehensive income that will be reclassified subse-
quently to profit or loss
Cash flow hedge
25
-1,768
Recorded in equity
-1,020
Transferred to income statement
-748
Income tax on other comprehensive income
-1,023
Other comprehensive income for the reporting period
-1,415
Total comprehensive income for the reporting period
Attributable to:
-1,129
-1,859
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
33
Consolidated statement of financial position, IFRS
EUR 1,000
Note
31 Dec 2023
31 Dec 2022
ASSETS
Non-current assets
Property, plant and equipment
12
Goodwill
13
Other intangible assets
13
Right-of-use assets
14
Interests in associates
28
Other investments
Other receivables
15
Deferred tax assets
19
Total non-current assets
Current assets
Inventories
3
Trade and other receivables
16
Current tax assets
Cash and cash equivalents
Current assets held for sale
26
Total current assets
Total assets
EUR 1,000
Note
31 Dec 2023
31 Dec 2022
EQUITY AND LIABILITIES
Equity attributable to owners of the parent
Share capital
Fair value reserve
Reserve for invested unrestricted equity
Hybrid loan
Retained earnings
-6,229
Profit for the financial year
Non-controlling interests
-3,445
-1,092
Total equity
21
Deferred tax liabilities
19
Provisions
17
Lease liabilities
22
Financial liabilities
20
Other non-current liabilities
Total non-current liabilities
Trade and other payables
18
Current tax liabilities
Provisions
17
Lease liabilities
22
Financial liabilities
20
Current liabilities held for sale
26
Total current liabilities
Total liabilities
Total equity and liabilities
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
34
Consolidated statement of cash flows, IFRS
EUR 1,000
Note
1–12/2023
1–12/2022
Cash flow from operating activities
Profit for the period
Taxes
-6,110
Depreciation, amortisation and impairment
Financial income and expenses
Other
-121
Net cash generated from operating activities before change
in working capital
Change in working capital
Interest received
Taxes paid
-370
-6,892
Net cash flow from operating activities
Cash flow from investing activities
Investments in tangible and intangible assets
-22,859
-29,033
Proceeds from disposal of property,
plant and equipment and intangible assets and prepayments
Changes in other receivables and investments
-34
-1,775
Sale of subsidiaries with time-of-sale liquid assets deducted
26
Granted loans
-2,078
-738
Dividends received
Acquisition of subsidiaries less cash and cash equivalents
at date of acquisition
26
-1,460
-52,308
Net cash flow from investing activities
-18,460
-83,439
Cash flow from financing activities
Changes in non-controlling interests
-262
-408
Acquisition of own shares
-1,475
Proceeds from long-term borrowings
23
Repayment of long-term borrowings
23
-33,975
-128,779
Repayment of lease liabilities
23
-31,825
-29,014
Interest and other financial expenses
-6,178
-8,307
Dividends paid and other profit distribution
-1,480
-8,589
Proceeds from hybrid bond
21
Hybrid bond expenses
21
-432
Net cash flow from financing activities
-49,153
Changes in cash and cash equivalents
Cash at beginning of period
Cash at end of period
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
35
Consolidated statement of changes in equity, IFRS
Equity attributable to owners of the parent company
EUR 1,000
Note
Share
capital
Reserve for
invested
unrestricted equity
Fair
value
reserve
Hybrid bond
Retained
earnings
Non-controlling
interests
Equity
Total equity, 1 Jan 2022
Profit for the period
-1,859
Comprehensive income for the period
25
Total comprehensive income for the period
-1,859
Dividends paid
-6,767
-2,987
-9,754
Acquisition of own shares
-1,475
-1,475
Share-based benefits
5
-49
-49
Investments in group subsidiaries
Total transactions with owners
-8,290
-2,945
-11,236
Changes in NCI without a change in control
26
-610
-408
Other changes
Total changes in subsidiary shareholdings
-439
-236
Total equity, 31 Dec 2022
-1,092
Equity attributable to owners of the parent company
EUR 1,000
Note
Share
capital
Reserve for
invested
unrestricted equity
Fair
value
reserve
Hybrid bond
Retained
earnings
Non-controlling
interests
Equity
Total equity, 1 Jan 2023
-1,092
Profit for the period
-1,129
Comprehensive income for the period
25
-1,415
-1,415
Total comprehensive income for the period
-1,415
-1,129
Dividends paid
-730
-730
Share-based benefits
5
Total transactions with owners
-730
-431
Changes in NCI without a change in control
26
-202
-347
-550
Other changes
-146
-70
Total changes in subsidiary shareholdings
-126
-494
-619
Proceeds from hybrid bond
21
Hybrid bond interests and expenses
21
-432
-432
Total equity, 31 Dec 2023
-3,445
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
36
Accounting policies
Company profile
insurance companies and public sector entities. Pihlajalinna provides
a broad range of social and healthcare services as well as wellbeing
services. The service selection includes general practitioner and medi-
cal specialist services, occupational healthcare, social and healthcare
outsourcing, fitness centre services, responsible doctor and remote
consultation services as well as residential services and staffing ser-
vices.
At the end of the financial year, the total number of Pihlajalinna’s
private clinics, hospitals, dental clinics, fitness centres and service
housing units with 24-hour assistance was approximately 160. In ad-
dition, Pihlajalinna has four major complete social and healthcare
outsourcing agreements that collectively cover some 40 locations (in-
cluding health centres, maternity and child health clinics, service
housing units with 24-hour assistance and daytime activity centres).
The Group’s parent company,
, is a Finnish public
limited company established under the laws of Finland, whose
Business ID is 2617455-1. The company is domiciled in Tampere, and
its registered address is
.
’s shares are listed on the NASDAQ OMX Helsinki main
market. A copy of the consolidated financial statements is available
on the internet at investors.pihlajalinna.fi or can be obtained at the
head office of the Group’s parent company, address Kehräsaari B,
33200 Tampere,
.
The Board of Directors of Pihlajalinna
statements in its meeting on 13 February 2024. In accordance with
the Finnish Limited Liability Companies Act, the shareholders may
adopt or reject the financial statements at the Annual General Meet-
ing held after their publication. The Annual General Meeting can also
decide on modifications to be made to the financial statements.
Basis of preparation
The consolidated financial statements have been prepared in accord-
ance with the International Financial Reporting Standards (IFRS), and
their preparation complies with the IAS and IFRS as well as SIC and
IFRIC interpretations effective on 31 December 2023. International Fi-
nancial Reporting Standards, as intended in the Finnish Accounting
Act and the regulations issued pursuant to the Act, refer to the stand-
ards that have been approved for application within the EU in accord-
ance with Regulation (EC) No. 1606/2002 and interpretations thereof.
The notes to the consolidated financial statements also comply with
the Finnish accounting and company legislation that complements
the IFRS regulations.
Accounting policies that influence a particular note to the consoli-
dated financial statements are indicated with the heading
policies
The consolidated financial statements are presented in euros and
all figures are rounded to the nearest thousand, unless otherwise
specified.
New and amended standards applied in the past
financial year
From the beginning of 2023, the Group has applied the following
standards, which are already in effect, for the first time in its IFRS re-
porting:
Changes to IAS 1
Presentation of Financial Statements
Practice Statement 2
Making Materiality Judgements
The amendments clarify the application of materiality to disclosure of
accounting policies.
Changes to IAS 8
Accounting Principles, Changes in Accounting Esti-
mates and Errors
The amendments clarify how companies should distinguish changes
in accounting policies from changes in accounting estimates, with a
primary focus on the definition of and clarifications on accounting es-
timates.
Amendments to IAS 12
Income Taxes
The amendments narrow the initial recognition exemption (IRE) and
clarify that the exemption does not apply to transactions such as
leases and decommissioning obligations which give rise to equal and
offsetting temporary differences. From 2023 onwards, a deferred tax
liability and assets from leases has been presented separately in the
notes. The figures for comparison period 2022 have been adjusted
correspondingly.
Other new or amended standards that entered effect on 1 January
2023 did not have effect on Pihlajalinna’s consolidated financial state-
ments.
Consolidation principles
Subsidiaries
Subsidiaries are entities in which the Group exercises control. The
Group has control of an entity when it is exposed, or has rights, to
variable returns from its involvement with the entity and has the abil-
ity to affect those returns through its power over the entity.
Intragroup shareholdings are eliminated using the acquisition
method. The consideration transferred and the acquired entity’s
identifiable assets and assumed liabilities are measured at fair value
at the date of acquisition. Acquisition-related costs are expensed. Any
contingent consideration is measured at fair value at the date of ac-
quisition and classified as a liability. If the initial accounting for a busi-
ness combination is incomplete by the end of the reporting period in
which the combination occurs, the Group reports in its financial state-
ments provisional amounts for the items for which the accounting is
incomplete. During the measurement period, the Group retrospec-
tively adjusts the provisional amounts recognised at the acquisition
date to reflect any new information. The measurement period may
not exceed one year from the acquisition date. A contingent consider-
ation classified as a liability is measured at fair value at the end of
each reporting period, and any resulting gain or loss is recognised in
profit or loss after the end of the measurement period.
Non-controlling interests in the acquiree are recognised either at
fair value or an amount that corresponds to their pro rata share of
the acquiree’s net assets. The amount by which the consideration
transferred, non-controlling interests in the acquiree and previously
owned holding combined exceed the fair value of the acquired net as-
sets is recognised as goodwill in the consolidated statement of finan-
cial position. If the combined value of the consideration, non-control-
ling interests and previously owned holding is lower than the fair
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
37
value of the acquiree’s net assets, the difference is recognised in the
statement of comprehensive income.
Acquired subsidiaries are consolidated from the date when the
Group obtained control, and disposed subsidiaries are consolidated
until the date when the Group lost control. All intragroup transac-
tions, receivables, liabilities, unrealised profits and internal profit dis-
tribution are eliminated in the preparation of the consolidated finan-
cial statements. Unrealised losses will not be eliminated in case of im-
pairment losses. Profit or loss for the financial year attributable to the
owners of the parent company and to the non-controlling interests is
presented in the consolidated statement of comprehensive income.
Comprehensive income is attributed to the owners of the parent
company and to the non-controlling interests, even if this would lead
to a situation where the portion attributable to the non-controlling
interests is negative. The portion of equity attributable to the non-
controlling interests is presented as a separate item under equity in
the consolidated statement of financial position. Such changes in the
parent company’s ownership interest in a subsidiary that do not lead
to loss of control are treated as equity transactions.
In connection with step-by-step acquisitions, the former ownership
interest is measured at fair value, and the resulting gain or loss is rec-
ognised in profit or loss. When the Group loses control of a subsidi-
ary, any remaining interest is measured at fair value at the date of
loss of control, and the resulting difference is recognised in profit or
loss.
Associates and joint arrangements
Associates are companies over which the Group has significant influ-
ence. As a rule, significant influence is established when the Group
holds more than 20% of a company’s voting power or otherwise has
significant influence but no control.
A joint arrangement is an arrangement of which two or more par-
ties have joint control. Joint control involves contractually agreed
sharing of control of an arrangement, which exists only when deci-
sions about relevant activities require the unanimous consent of the
parties sharing control. A joint arrangement is either a joint operation
or a joint venture. A joint venture is an arrangement whereby the
Group has rights to the net assets of the arrangement, whereas in a
joint operation the Group has rights to the assets, and obligations for
the liabilities, relating to the arrangement.
Associates are consolidated using the equity method. If the
Group’s share of the loss of an associate exceeds the carrying amount
of the investment, then the investment is carried at zero value, and
the losses exceeding the carrying amount are not consolidated, un-
less the Group is committed to fulfilling the obligations of the associ-
ate. An investment in an associate includes the goodwill generated
through the acquisition. Unrealised profits between the Group and an
associate are eliminated in proportion to the Group’s ownership in-
terest. The Group’s pro rata share of an associate’s profit for the fi-
nancial year is included in operating profit.
The Group owns 31% in Kiinteistö Oy Levin Pihlaja, which is consoli-
dated as a joint operation according to the pro rata share, using the
proportionate consolidation method.
Foreign currency translation
The consolidated financial statements are presented in euros, which
is the functional currency and presentation currency of the Group’s
parent company and of the subsidiaries engaged in business activi-
ties. In their own accounting, Group companies translate day-to-day
transactions denominated in foreign currency into their functional
currency applying the exchange rates of the transaction date. Foreign
exchange gains and losses related to the business are included in the
corresponding expense items.
Segment reporting
Pihlajalinna’s CEO is the Group’s chief operating decision maker. The
CEO monitors the Group’s result and makes significant operating de-
cisions at the Group level. The Group operates only in Finland and its
management system is based on a regional organisation structure.
Under Pihlajalinna’s operating structure, the Group’s CEO, with the
help of the Chief Operating Officers and the other members of the
Management Team, is responsible for the Group’s business opera-
tions and service offering to both the private and public sectors. The
Chief Operating Officers prepare budgets for the Group’s businesses
with the help of regional directors and the managing directors of the
municipal companies. The Group CEO is responsible for the resources,
investments and profitability of the Group’s businesses. Pihlajalinna’s
group of cash-generating units corresponds to the reporting segment,
i.e. the Group level. Group-level figures are reported as segment in-
formation.
The Group CEO uses the key figures from the IFRS financial state-
ments in reporting on the Group’s result. The Group CEO assesses the
result and profitability on the basis of the adjusted EBIT and adjusted
EBITDA, and the reporting of the result complies with the accounting
principles applied in the consolidated financial statements. The ad-
justment items for the adjusted EBIT and adjusted EBITDA are speci-
fied in Note 24
Capital management
. Adjustments to EBITDA
amounted to EUR 8.1 (9.8) million for the financial year, while adjust-
ments to EBIT totalled EUR 8.5 (9.7) million.
Key accounting estimates and uncertainties re-
lated to estimates
In the course of preparing the financial statements, it is necessary to
make estimates and assumptions about the future. However, such es-
timates and assumptions may later prove inaccurate compared with
actual outcomes.
The Group regularly monitors the realisation of the estimates and
assumptions and changes in the underlying factors together with the
business units by using several, both internal and external, sources of
information. Any changes in estimates and assumptions are recog-
nised in the financial year during which the estimate or assumption is
corrected and in all subsequent financial years.
The key accounting estimates and assumptions used in the prepa-
ration of the consolidated financial statements that have the greatest
effect on the figures presented in the consolidated financial state-
ments are described in more detail in the following sections:
Note
Assumptions used concerning revenue recognition and
the profitability of the Group’s fixed-term complete so-
cial and healthcare services outsourcing agreements
1
Assumptions used in impairment testing
13
Assumptions used in the recognition of deferred tax as-
sets
19
Accounting policies requiring management judge-
ment
The Group’s management makes judgement-based decisions regard-
ing the choice of accounting policies and their application in the fi-
nancial statements. The management has exercised judgement in the
application of accounting policies in the financial statements with re-
gard to the measurement of lease assets and liabilities in the state-
ment of financial position (note 14). The management has also exer-
cised judgement in determining the number of reporting segments
(note Accounting policies, Segment reporting).
New and revised standards and interpretations to
be applied in future financial years
The International Accounting Standards Board has published the fol-
lowing new or amended standards and interpretations which the
Group has not yet applied, but which are expected to have an effect
on the consolidated financial statements. The Group will adopt them
as from the effective date of each standard and interpretation, or if
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
38
the effective date is some date other than the first day of the finan-
cial year, as from the beginning of the financial year that first follows
the effective date.
* = The regulation in question was not approved for application in the
EU by 31 December 2023.
Amendments to IFRS 16
Leases
(Effective for annual periods beginning on or after 1 January 2024,
early application is permitted)
The amendments introduce a new accounting model for variable pay-
ments and will require seller-lessees to reassess and potentially re-
state sale-and-leaseback transactions entered into since the imple-
mentation of IFRS 16 in 2019.
Amendments to IAS 1
Presentation of Financial Statements
*
(Effective for annual periods beginning on or after 1 January 2024,
early application is permitted)
The amendments are to promote consistency in application and clar-
ify the requirements for determining if a liability is current or non-cur-
rent. The amendments specify that covenants to be complied with af-
ter the reporting date do not affect the classification of debt as cur-
rent or non-current at the reporting date. The amendments require
to disclose information about these covenants in the notes to the fi-
nancial statements. The amendments also clarify transfer of a com-
pany’s own equity instruments is regarded as settlement of a liability.
Liability with any conversion options might affect classification as cur-
rent or non-current unless these conversion options are recognized as
equity under IAS 32.
Amendments to IFRS 10
Consolidated Financial Statements
28
Investments in Associates and Joint Ventures
*
(Available for optional application, effective date deferred indef-
initely)
The amendments address the conflict between the existing guidance
on consolidation and equity accounting and require the full gain to be
recognised when the assets transferred meet the definition of a busi-
ness under IFRS 3
Business Combinations
.
The new or amended standards listed above, or other new or
amended standards, are not expected to have a significant effect on
Pihlajalinna’s consolidated financial statements.
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
39
Notes to the consolidated
financial statements, IFRS
1. Revenue from contracts with customers
Accounting policies
The Group’s revenue consists of payments related to the sale of healthcare services, social services and
wellbeing services measured at fair value, adjusted by any variable consideration. The healthcare services
provided by the Group consist of occupational health services, services provided at private clinics and hospi-
tals, responsible doctor services, diagnostics services and rehabilitation services. The social services pro-
vided by the Group consist of services for the elderly and the disabled, mental health services and sub-
stance abuse group services. A significant part of the consolidated revenue consists complete social and
healthcare outsourcing, which also includes the provider’s liability for the costs of specialised care. The
Group produces recruitment services related to healthcare professionals. The Group’s Forever fitness cen-
tres offer diverse wellbeing services for adults who exercise. Fitness centre services complement Pihla-
jalinna’s preventive occupational healthcare services and rehabilitation services carried out after specialised
care procedures. Pihlajalinna’s services are also extensively available via digital channels.
The Group recognises revenue from services produced by employees and independent practitioners on
a gross basis, i.e. based on total customer invoicing, and the fees charged to the Group by independent
practitioners are recognised in the income statement item External services, practitioners. As Pihlajalinna
has primary responsibility for the provision of services to its customers, and the Group is exposed to signifi-
cant risks and benefits related to the sale of services, the Group acts as a principal with regard to practition-
ers with whom it has a contractual relationship.
IFRS 15 Revenue from Contracts with Customers includes a five-step model that defines when, and at
what amount, revenue from contracts with customers is recognised. Revenue can be recognised over time
or at a point in time, and the transfer of control is the key criterion.
The primary performance obligations for Pihlajalinna’s various revenue streams are as follows:
Social and healthcare outsourcing
●
statutory social and healthcare services for a municipality’s residents, separately described in contracts
with customers, including possible public specialised care
●
individual social and healthcare service visits by residents of other municipalities
Private clinics
●
individual customer visits to healthcare services at operating locations or digitally, including related sup-
port services
Surgical operations
●
individual visits and related support services (e.g. private individuals who pay for their services them-
selves or through insurance companies)
Occupational healthcare
●
individual occupational healthcare customer visits (e.g. appointments with occupational healthcare
nurses and doctors, laboratory tests) at operating locations or digitally
●
preventive and health-promoting separately agreed services (e.g. occupational health check-ups, work-
place-specific occupational health surveys)
●
other additional services agreed upon with the customer (e.g. first aid course)
Fitness centre services
●
obligations related to monthly and annual fees for fitness centre services
●
individual separately charged additional services
Recruitment services
●
customer-specific monthly fees for recruitment services
●
individual separately charged recruitment services
Responsible doctor services
●
location-specific daily charges described in the customer agreement
Staffing service
●
selling a healthcare professional’s labour event-specifically or based on time
●
customer-specific monthly fees for emergency and on-call services
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
40
Residential services
●
elderly care home services on each day covered by the agreement
●
individual separately charged additional services or health centre visits
Digital services
●
Remote doctor services
●
Remote nurse services
●
Other digital services related to appointment booking and assessing the need for care, other digital ser-
vices ordered by the customer
The services promised in a contract are treated as a single series of distinct services comprised performance
obligation when the services provided are repeated in the same manner with respect to their substantial
aspects and whose transfer to the customer takes place over time. The performance obligation in the
Group’s social and healthcare outsourcing arrangements is the municipality’s statutory social and healthcare
service operations described in the customer agreement. The Group’s customer contracts for the outsourc-
ing of social and healthcare services are considered to consist of a single performance obligation in which
the services provided by the Group are combined into a bundle of services.
Transaction prices mainly comprises individual services according to the price list or annual, monthly,
daily or hourly rates based on customer contracts. The outsourcing agreements are, as a rule, based on a
fixed annual price. In most cases, the price concerns an individual performance obligation. In some cases,
the price includes a variable component of consideration (e.g. discount, penalty charge, bonus, additional
price, additional service), which is allocated to one or more performance obligations in proportion to their
separate selling prices. The Group assesses the effect of the variable components on the amount of revenue
recognised using historical data, for example, and recognises them at the most likely amount. The recogni-
tion of revenue from the Group’s complete social and healthcare services outsourcing agreements may be-
come more accurate with a delay and may also include variable consideration. The Group may not always be
aware of the actual costs of the agreements, which may also affect revenue recognition.
The performance obligations are fulfilled either over time (e.g. outsourcing, residential services, fitness
centre services, recruitment services, responsible doctor services, fixed-price occupational health services)
or at a point in time (e.g. occupational healthcare services, individual customer visits, additional services). In
the services, the customer simultaneously receives and consumes the benefit from Pihlajalinna’s perfor-
mance.
tled to in exchange for the services delivered. Sales revenue from individual services is recognised at a point
in time according to the time of the appointment or the use of the service. Revenue from outsourcing agree-
ments for social and healthcare services under fixed annual prices is recognised over time. In outsourcing
arrangements, the customer simultaneously receives and consumes the benefit from the service, which
means that the conditions for recognising revenue over time are met.
The payment terms and periods included in the contracts vary, but the payment periods are typically less
than one year. The contracts do not include significant financing components or additional expenditure aris-
ing from contractual receivables.
In connection with outsourcing agreements, the client may provide Pihlajalinna, without financial consid-
eration, with use of publicly owned infrastructure, or part there of, which Pihlajalinna operates in service
production under the outsourcing agreement. Infrastructure may include for example premises, machinery
and equipment. The IFRIC 12 Service Concession Arrangements interpretation is applied to the recognition
of outsourcing agreements if the outsourcing party decides on the scope and pricing of the services pro-
vided by Pihlajalinna and Pihlajalinna returns the infrastructure, free of charge, at the conclusion of the out-
sourcing agreement. In such cases, Pihlajalinna is not considered to have control over assets received with-
out consideration from a public-sector entity.
Timing of the satisfaction of performance obligations
EUR 1,000
2023
2022
At a point in time
315,864
318,950
Over time
404,119
371,531
Total
719,984
690,481
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
41
Key accounting estimates and decisions based on management judgement
The recognition of revenue from complete outsourcing agreements for social and healthcare services may
become more accurate with a delay, and it may include variable compensation. During the financial year,
the management has used particular judgement with regard to the measurement and recognition of
variable compensation and legal claims related to complete outsourcing agreements for social and
healthcare services.
In previous years, Pihlajalinna recognised revenue related to contractual variable compensation from its
former complete outsourcing partners, namely the municipalities of Jämsä, Parkano and Mänttä-Vilppula.
The client has not paid the amounts in question in breach of the service agreement.
As a result of the establishment of the wellbeing services counties, Pihlajalinna aimed in 2023 to finalise
the negotiations related to open receivables from previous years. The negotiations did not lead to the
desired outcome. The company has commenced legal actions for debt recovery with regard to some of the
receivables, and is considering legal actions to recover the other receivables. Consequently, the items in
question no longer met the definition of contract assets at the end of the financial year, and Pihlajalinna has
booked these items as expenses in the income statement. The items are classified as contingent off-balance
sheet assets in accordance with IAS 37. Contingent assets are not recognised in the financial statements.
The change in classification had the following effects on EBITDA: a decrease of EUR 1.4 million for Jämsän
Terveys Oy, a decrease of EUR 4.8 million for Mäntänvuoren Terveys Oy, a decrease of EUR 1.3 million for
Kolmostien Terveys Oy, and a decrease of EUR 0.4 million for Pihlajalinna Terveys Oy. The items, which may
have a delayed effect on the profitability of complete outsourcing agreements according to the
management’s estimate, reduced EBITDA by a total of EUR 7.8 million and are presented as EBITDA ad-
justments. The entries also had a negative effect of EUR 0.4 million on financial items. The financial year
profit before taxes the entries reduced total of EUR 8.2 million and earnings per share by EUR 0.26.
The exact actual costs of the Group’s fixed-term complete outsourcing agreements for social and
healthcare services are not always known to the Group on the reporting date, as the cost accumulation of
public specialised care involves random fluctuation. In addition, individual cases falling within the scope of
the wellbeing services counties’ pooling system for high-cost care may influence the cost liability of
specialised care considerably during the financial year, and between financial periods, in Pihlajalinna’s
municipal companies. Consequently, the management exercises judgement in determining the profitability
of the agreements.
On the financial statements date, Pihlajalinna’s only remaining cost liability for specialised care was under
the complete outsourcing agreement with the wellbeing services county of South Ostrobothnia. For other
complete outsourcing agreements, liability for the costs of specialised care ended during the financial year
2023. The ending of the cost liability under the agreements has improved the predictability of the
profitability of the company’s agreements.
Contractual assets and liabilities
There may be differences in timing between revenue recognition and invoicing. The Group recognises a con-
tractual asset when revenue is recognised before invoicing and, correspondingly, a contractual liability
when revenue is recognised after invoicing.
Summary of contractual items
EUR 1,000
2023
2022
Trade receivables
52,469
47 168*
Contract assets
Current
3,619
13 452*
Contract liabilities
Current
1,347
3,237
*Pihlajalinna has adjusted the figures for the comparison period and transferred EUR 7.4 million receiva-
bles from trade receivables to contract assets.
The amount of revenue recognized during the financial year that was
included in contract liabilities at the beginning of the period:
The amount of revenue recognized during the financial year that was included in contract liabilities at
the beginning of the period:
EUR 1,000
2023
2022
Revenue recognized from amounts included in contract liabilities
3,237
920
Revenue by region
Pihlajalinna reports its sales revenue divided into the following geographical regions:
●
Southern Finland includes Pihlajalinna’s business operations in the regions of Uusimaa, South West Fin-
land, Päijät-Häme, Kymenlaakso and South Karelia.
●
Mid-Finland includes Pihlajalinna’s business operations in the regions of Pirkanmaa, Satakunta, Kanta-
Häme, Central Finland, South Savo, North Karelia and North Savo.
●
Ostrobothnia includes Pihlajalinna’s business operations in the regions of Southern Ostrobothnia, Ostro-
bothnia and Central Ostrobothnia.
●
Northern Finland includes Pihlajalinna’s business operations in the regions of North Ostrobothnia, Kainuu
and Lapland.
●
Other operations include remote services, moving services and other administrative functions.
EUR 1,000
2023
%
2022
%
Southern Finland
179,008
25%
164,073
24%
Mid-Finland
368,317
51%
369,542
54%
Ostrobothnia
134,577
19%
132,465
19%
Northern Finland
48,968
7%
43,440
6%
Other operations
65,211
10%
54,466
8%
Intra-Group sales
-76,098
-73,505
Consolidated revenue
719,984
100%
690,481
100%
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
42
Sales revenue by customer group
Pihlajalinna’s customer groups are corporate customers, private customers and public sector customers.
●
The Group corporate customers consist of Pihlajalinna occupational healthcare customers, insurance
company customers and other corporate customers. The number of people within the scope of the
Group’s occupational healthcare services is over 200,000 in the corporate customers group.
●
The Group private customers are private individuals who pay for services themselves and may subse-
quently seek compensation from their insurance company.
●
The Group public sector customers consist of public sector organisations in Finland, such as municipali-
ties, congregations, wellbeing services counties and the public administration when purchasing either so-
cial and healthcare outsourcing services or residential, occupational healthcare and staffing services. The
number of people within the scope of the Group’s occupational healthcare services is approximately
80,000 in the public sector customers group.
EUR 1,000
2023
%
2022
%
Corporate customers
268,050
37
225,270
33
of which insurance company customers
135,780
19
98,447
14
Private customers
102,060
14
103,243
15
Public sector
425,970
59
435,476
63
of which complete outsourcing
283,240
39
303,902
44
of which staffing
29,260
4
24,797
4
of which occupational healthcare
and other services
113,470
16
106,777
15
Intra-Group sales
-76,100
-73,508
Consolidated revenue
719,980
100
690,481
100
Information on key customers
The Group’s sales revenue from the four largest customers totalled approximately EUR 313.4 (281.4) mil-
lion, representing approximately 44% (41%) of the consolidated revenue.
Estimate of unsatisfied performance obligations related to Group’s social and healthcare out-
sourcing arrangements, EUR million:
31 Dec 2023
31 Dec 2022
31 Dec 2023
31 Dec 2022
2023
245
2032
7
7
2024
209
249
2033
7
7
2025
193
226
2034
7
7
2026
75
177
2035
6
7
2027
76
179
2028
77
182
2029
78
184
2030
47
156
2031
47
30
829
1,656
Service provider – client
First year of service
production
under the current con-
tract
Duration of the original
contract (years)
Jämsän Terveys Oy
2015
10
Kuusiolinna Terveys Oy*
2016
15
Mäntänvuoren Terveys Oy
2016
15
Kolmostien Terveys Oy
2015
15
Bottenhavets Hälsa Ab - Selkämeren Terveys Oy
2021
15 - 20 years
*On 30 October 2023, the county council of the wellbeing services county of South Ostrobothnia decided
to terminate the outsourc-ing agreement with effect at the end of 2025, in accordance with the Act on the
Implementation of the Reform of Health, Social and Rescue Services and on the Entry into Force of Related
Legislation. The council’s decision is not yet legally binding, and an appeal has been lodged with the Su-
preme Administrative Court.
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
43
2. Other operating income
Accounting policies
Government grants received as compensation for expenses already incurred are recognised in profit or loss
for the period in which they become receivable. These grants are presented under other operating income.
Government grants related to capitalised development projects are recognised as deductions from the car-
rying amounts of intangible assets, when there is reasonable assurance that such grants will be received and
that the Group will comply with the conditions for receiving them. The grants will be recognised as income
over the useful life of an asset by way of reduced depreciation.
The Group has subleased certain premises that are not used for business operations. These leases are
classified as operating leases and income from these leases is presented under other operating income.
Sale and leaseback
With regard to sale and leaseback agreements completed prior to the adoption of IFRS 16, the Group will
continue the allocation of capital gains as before in accordance with the transition provision of IFRS 16.
If a finance lease is created as a result of a sale and leaseback agreement, the difference between the car-
rying amount and the sales price will be recognised in the consolidated statement of financial position and
recognised as income over the lease term under other operating income. The unrecognised portion of the
difference between the carrying amount and the sales price is presented as Other liabilities in the statement
of financial position.
Effects of COVID-19
In 2022, Pihlajalinna recognised a total of EUR 488 thousand in financial support intended to cover the fixed
costs of the Group’s fitness centres in other operating income under government grants. No corresponding
financial support was received in 2023.
Compensation for the costs of pandemic-related services under the Group’s complete outsourcing agree-
ments is presented in other operating income under other income items.
Sale of dental care services
Pihlajalinna announced in late 2022 that it will sell its dental care services to Hammas Hohde Oy. The Group
recognised a gain of EUR 3.6 million from the divestment in other operating income during the financial
year. More detailed information on the divestment of dental care services is provided in note 26
Acquisi-
tions and divestments
.
EUR 1,000
2023
2022
Capital gains on property, plant and equipment
228
275
Rental income
2,265
503
Government grants
532
1,339
Other income items
907
2,779
Profit from sale of dental care services
3,600
0
Total
7,532
4,896
3. Materials and services
Accounting policies
Inventories are measured at acquisition cost or lower probable net realisable value.
EUR 1,000
2023
2022
Materials
-31,197
-30,975
Change in inventories
162
648
External services, practitioners
-129,849
-112,527
External services, other
-94,348
-124,370
Total
-255,231
-267,224
4. Employee benefit expenses
Accounting policies
Pension plans are classified as defined benefit plans and defined contribution plans.
The Group only has de-
fined contribution plans. In defined contribution plans, the Group
makes fixed payments to a separate unit.
The Group has no legal or constructive obligation
to make additional payments if the recipient of the pay-
ments is incapable of paying
out said retirement benefits. Payments made into the defined contribution
plans are
recognised in profit or loss for the financial year for which they are charged.
The long-term share-based incentive scheme is recognised as an expense over its
accrual period. The
incentive scheme and other share-based payments are described in more detail in note 5
Share-based
payments
.
Information on related party employee benefits and loans are presented in Note 31
Related party
transactions.
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
44
EUR 1,000
2023
2022
Wages and salaries
-267,089
-245,289
Share-based incentive schemes
- implemented as shares
-269
-97
Pension costs - defined contribution plans
-45,477
-42,010
Other social security expenses
-9,926
-9,176
Total
-322,760
-296,572
Number of personnel
2023
2022
Personnel on average (FTE)
4,923
4,851
Personnel at the end of the period (NOE)
6,880
7,016
5. Share-based payments
Share-based incentive scheme for key personnel
On 23 March 2022, Pihlajalinna’s Board of Directors approved the establishment of share-based incentive
programme (LTIP 2022) for selected key employees. In its entirety the incentive scheme is to form a six-
year program and the share rewards based on the program are not allowed to be disposed of prior to year
2026. In addition, in order to participate to the program, a key person must invest into Pihlajalinna shares.
Performance and quality-based share program shall comprise of four separate performance periods of
one year each (calendar years 2022, 2023, 2024 and 2025). Potential share rewards shall be paid out after
the performance periods in years 2023, 2024, 2025 and 2026. The Board of Directors annually decides on
the participants, performance indicators, targets and earning opportunities. Two earnings periods have
been launched under the programme: 2022 and 2023. The programmes are treated in their entirety as eq-
uity-settled share-based payments.
The maximum number of shares (gross amount prior to deduction of applicable withholding tax) for each
one-year performance period is defined in the allocation per participant. The applicable withholding tax will
be deducted from the transferred shares, and the remaining net amount will be paid to the participants in
shares. Shares paid out as share rewards are subject to a two-year transfer restriction. The earnings criteria
for the performance and quality-based share programme are Pihlajalinna Group’s adjusted EBITA, as well as
key operational, quality-related and sustainability-related indicators.
No performance- and quality-based share rewards materialised for the performance period 2022 pursu-
ant to the share plan, as the minimum objectives set for the programme were not achieved. Share rewards
also did not materialise for the performance period 2023 due to impairments recognised during the finan-
cial year.
Performance-based long-term incentive
programme (LTIP 2022)
2023
2022
Grant date
21 Jun 2023
23 Mar 2022
Share price at grant date, EUR
9.19
11.90
The year in which the shares are transferred
2024
2023
Amount of share-based rewards granted,
maximum amount, number of shares
227,000
188,000
Actual share-based rewards, number of shares
0
0
Number of people within the scope of
the programme at the end of the period
48
42
End of the vesting period
31 Dec 2023
31 Dec 2022
Form of payment
In shares and cash
In shares and cash
CEO Tuomas Hyyryläinen is entitled to participate in the share-based incentive programme starting from the
earnings period that begins on 1 January 2024. At the beginning of the share-based incentive scheme, the
CEO has the right to purchase a maximum of 30,000 shares, so that for the first 10,000 shares, the company
will give one share for each share purchased by the CEO, and for the next 20,000 shares, one share for each
two shares purchased. If the CEO purchases the full quota of 30,000 shares, the company will give the CEO a
total of 20,000 shares. Shares purchased by and given to the CEO are subject to the transfer restrictions of
the LTIP programme. The effect of the remuneration on the result for the financial year was approximately
EUR -0.2 million.
Short-term incentive scheme (STI)
The short-term incentive scheme (STI) is designed for the CEO. Starting from 2024, the CEO is entitled to a
potential annual performance-based bonus (STI) that corresponds to 60% of the CEO’s annual salary at a
maximum. The target level is 30% of the annual salary. The company’s Board of Directors confirms the
amount, targets and criteria for the short-term incentive scheme annually.
Other share-based payments
On 13 October 2023, Pihlajalinna’s Board of Directors decided on share-based remuneration for Joni Aalto-
nen under the terms of the termination agreement. Aaltonen served as the CEO until 8 March 2023. The
remuneration was linked to performance- and quality-based earnings criteria. In connection with this, a
gross amount of 10,000 shares was transferred to Joni Aaltonen on 13 November 2023. The remuneration
was implemented in shares and cash. The applicable withholding tax was deducted from the transferred
shares, and the remaining net amount was paid in shares. The effect of the remuneration on the result for
the financial year was approximately EUR -0.1 million.
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
45
6. Other operating expenses
EUR 1,000
2023
2022
Voluntary indirect employee costs
-8,263
-7,896
Facility expenses
-13,586
-14,309
Vehicle operating costs
-904
-913
Information management expenses
-26,311
-26,170
Machinery and equipment expenses
-6,810
-7,061
Travel expenses
-3,264
-2,867
Sales and marketing expenses
-6,823
-6,441
Other expenses
-10,598
-11,508
Total
-76,559
-77,164
Facility expenses
Auditing, KPMG Oy Ab
-328
-343
Statements, KPMG Oy Ab
-11
-20
Non-audit services, KPMG Oy Ab
-57
-51
Total
-396
-414
7. Depreciation and amortization
Accounting policies
Property, plant and equipment will be depreciated using the straight-line method over their estimated eco-
nomic useful lives. The estimated economic useful lives are as follows:
Buildings 10–25 years
Renovation expenses on real estate 5–10 years
Machinery and equipment 3–10 years
Other tangible assets 3–5 years
For the magnetic imaging equipment at Turku, Oulu and Seinäjoki private clinics, the Group adopted a units-
of-production based depreciation method effective from 1 January 2018. The amount of depreciation is
based on the units of production derived from the equipment. The units-of-production based depreciation
method is also applied to the imaging equipment in Helsinki, Tampere, Turku, Oulu and Kuopio that was
transferred to Pihlajalinna as part of the acquisition of Pohjola Hospital (now Pihlajalinna Lääkärikeskukset
Oy). The units-of-production method provides a more accurate reflection of the actual economic use of the
magnetic imaging equipment in question. For the Group’s other machinery and equipment, the Group still
uses straight-line depreciation.
For intangible assets with finite economic useful lives, the amortisation periods are as follows:
Trademarks 10 years
Development costs 3–10 years
Customer agreements 4 years
Patient database 4 years
Non-competition agreements 2–5 years
Other intangible assets 3–7 years
Property, plant and equipment is depreciated on a straight-line basis over the shorter of economic useful
life or lease term.
The planned depreciation periods of property, plant and equipment are as follows:
Right-of-use plots 25 years
Right-of-use buildings
and business premises 1–15 years
Right-of-use equipment 3–10 years
Impairment is recognised pursuant to IAS 36 for onerous right-of-use buildings and business premises.
Impairments for the financial year 2023
Pihlajalinna has performed an impairment test review regarding its other investments. Based on the review,
Pihlajalinna has recorded an impairment of approximately EUR 0.6 million in its other investments. Refer to
note 13
Impairment testing
for more details.
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
46
Depreciation, amortisation and impairment by asset type
2023
2022
Intangible assets
Trademarks
-564
-1,040
Capitalised development costs
-1,088
-930
Customer relationship value
-985
-1,233
Non-competition agreements
-116
-60
Patient database
-473
-378
Other intangible assets
-4,963
-4,036
-8,189
-7,677
Property, plant and equipment
Buildings
-109
-104
Renovation expenses on real estate
-2,507
-2,217
Machinery and equipment
-9,375
-8,327
Other tangible assets
-1
-1
-11,993
-10,649
Right-of-use assets
Right-of-use plots
-101
-97
Right-of-use buildings and business premises
-30,088
-26,178
Right-of-use equipment
-901
-898
-31,090
-27,173
Impairments
-634
Total depreciation, amortisation and impairment
-51,906
-45,498
8. Financial income
EUR 1,000
2023
2022
Dividend income from financial assets measured at fair value
through profit or loss
3
7
Interest income from loans and receivables
275
533
Interest income from financial lease receivables
67
135
Other financial income
9
46
Total
355
721
9. Financial expenses
EUR 1,000
2023
2022
Interest expenses from financial liabilities carried at amortised
cost
-7,168
-3,392
Interest expenses on lease liabilities
-3,724
-3,439
Other financial expenses
-1,857
-1,243
Total
-12,749
-8,074
The increased interest rates during 2023 have increased the interest expenses for the financial year.
The other financial expenses line contains write-downs of loan receivables granted to associated compa-
nies and other parties totaling approximately EUR 1.2 million, which were made based on the impairment
testing. Refer to note 13
Impairment testing
rangement and the waiver costs paid at the end of the year due to the increase in the temporary covenant
levels caused a total of EUR 0.7 million in one-time financing costs.
Pihlajalinna’s financing arrangements and interest rate risk management have been explained in more
detail in connection with notes 22
Financial liabilities
Financial risk management
.
10. Income taxes
Accounting policies
The income taxes on the consolidated income statement consist of current tax, adjustments to taxes for
previous periods, and deferred taxes. Taxes are recognised in profit or loss, except when they are directly
attributable to items recognised under equity or other comprehensive income. In such cases, also the tax is
recognised under the item in question. Current tax is calculated on taxable profit, based on the enacted tax
rate. Tax is adjusted with any taxes associated with prior financial years. Any penal interests related to said
taxes are recognised under financial expenses. The share of associates’ profit is presented in the statement
of comprehensive income as calculated from net profit and thus including the income tax charge.
EUR 1,000
2023
2022
Current taxes
-502
-1,931
Taxes for the previous financial years
-39
-37
Deferred taxes
-3,047
8,078
Total
-3,587
6,110
Deferred taxes are described in more detail in note 19 Deferred tax assets and liabilities.
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
47
Reconciliation of effective tax rate
EUR 1,000
2023
2022
Profit before taxes
8,187
1,550
Taxes calculated on the basis of the Finnish tax rate (20%)
-1,637
-310
Income not subject to tax
4
2
Non-deductible expenses
-1,422
-309
Unrecorded deferred tax assets from tax losses
-921
-70
Recorded deferred tax assets from tax losses
187
6,381
Utilised prior losses with unrecognised tax benefits
0
333
Share of associated company’s profit
28
-3
Share-based remuneration
40
-13
Other items
173
137
Taxes for prior financial years
-39
-37
Taxes in the income statement
-3,587
6,110
Effective tax rate
-43.8 %
-
11. Earnings per share
Accounting policies
Earnings per share is calculated by dividing the profit for the financial year attributable to owners of the par-
ent by the weighted average number of shares outstanding during the financial year. When calculating
earnings per share, the interest of the hybrid bond, net of tax, has been considered as a profit-reducing
item.
Earnings per share for the financial year attributable to owners of the parent are calculated by dividing
the profit for the financial year attributable to owners of the parent by the weighted average number of
shares outstanding during the financial year.
When calculating diluted earnings per share, the average number of shares is adjusted by the dilution ef-
fect of the share-based incentive scheme.
EUR 1,000
2023
2022
Profit for the financial year attributable to owners of the parent,
EUR
5,728,844.05
9,518,830.97
Hybrid bond interest
-1,866,666.67
Tax effect
373,333.33
Adjusted profit for the financial year
4,235,510.72
9,518,830.97
Number of shares outstanding, weighted average
22,557,957
22,560,271
Basic earnings per share (EPS), EUR/share
0.19
0.42
Diluted earnings per share, EUR/share
0.19
0.42
12. Property, plant and equipment
Accounting policies
Property, plant and equipment are measured at cost less accumulated depreciation and impairment losses.
Cost includes expenditures incurred directly from the acquisition of an item of property, plant and equip-
ment. Costs incurred subsequently are included in the carrying amount of an asset only if it is deemed prob-
able that any future economic benefits related to the asset will flow to the Group and that the cost of the
asset can be reliably determined. Other repair and maintenance costs will be expensed at the time they are
incurred.
The residual value, the useful life of an asset and the depreciation method applied are reviewed at least
at the end of each financial year and adjusted as necessary to reflect the changes in the expectations con-
cerning the economic benefits attached to the asset. Capital gains generated from decommissioning and
disposing of property, plant and equipment are included under other operating income, and capital losses
are included under other operating expenses.
Assets are depreciated from the time when they are ready for use; i.e. when their location and condition
allow them to be applied as intended by the management.
For the magnetic imaging equipment at Turku, Oulu and Seinäjoki private clinics, the Group adopted a
units-of-production based depreciation method effective from 1 January 2018. The amount of depreciation
is based on the units of production derived from the equipment. The units-of-production based depreciation
method is also applied to the imaging equipment in Helsinki, Tampere, Turku, Oulu and Kuopio that was
transferred to Pihlajalinna as part of the acquisition of Pohjola Hospital (now Pihlajalinna Lääkärikeskukset
Oy). The units-of-production method provides a more accurate reflection of the actual economic use of the
magnetic imaging equipment in question. For the Group’s other machinery and equipment, the Group still
uses straight-line depreciation.
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
48
Property, plant and equipment
EUR 1,000
Land areas
Buildings
Renovation expenses on
real estate
Shares in real
estate
companies
Machinery and
equipment
Other tangible
assets
Construction in
progress
Total
Cost at 1 January 2023
36
3,029
34,263
5,472
75,341
167
5,246
123,553
Additions
0
90
832
0
13,320
4
5,135
19,380
Transfers between items
0
0
7,358
0
-352
-2
-7,669
-665
Disposals
0
-3
304
-186
-430
0
-1
-315
Cost at 31 December 2023
36
3,116
42,757
5,287
87,879
168
2,711
141,952
Accumulated depreciation at 1 January 2023
0
-511
-20,552
0
-43,743
-11
0
-64,817
Depreciation and amortisation
0
-109
-2,507
0
-9,375
-1
0
-11,993
Transfers between items
0
0
191
0
1,129
0
4
1,323
Reclassifications
0
0
0
0
0
0
0
0
Disposals
0
0
-188
0
-470
1
-1
-659
Accumulated depreciation at 31 December 2023
0
-620
-23,056
0
-52,460
-11
2
-76,145
Carrying amount at 1 January 2023
36
2,518
13,711
5,472
31,598
155
5,246
58,737
Carrying amount at 31 December 2023
36
2,496
19,700
5,287
35,419
157
2,713
65,807
EUR 1,000
Land areas
Buildings
Renovation expenses on
real estate
Shares in real
estate
companies
Machinery and
equipment
Other tangible
assets
Construction in
progress
Total
Cost at 1 January 2022
36
3,026
30,549
5,572
63,496
172
1,344
104,194
Additions
0
3
482
0
15,972
2
8,316
24,774
Business combinations
0
0
131
0
1,272
0
0
1,403
Transfers between items
0
0
4,384
0
157
0
-4,414
127
Reclassifications to assets held for sale
0
0
-1,282
-100
-5,072
-7
0
-6,461
Disposals
0
0
0
0
-484
0
0
-484
Cost at 31 December 2022
36
3,029
34,263
5,472
75,341
167
5,246
123,553
Accumulated depreciation at 1 January 2022
0
-505
-19,131
0
-39,560
-10
0
-59,206
Depreciation and amortisation
0
-104
-2,217
0
-8,327
-1
0
-10,649
Transfers between items
0
98
-10
0
-124
0
0
-37
Reclassifications
0
0
807
0
4,070
0
0
4,877
Disposals
0
0
0
0
197
0
0
197
Accumulated depreciation at 31 December 2022
0
-511
-20,552
0
-43,743
-11
0
-64,817
Carrying amount at 1 January 2022
36
2,521
11,417
5,572
23,936
162
1,344
44,987
Carrying amount at 31 December 2022
36
2,518
13,711
5,472
31,598
155
5,246
58,737
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
49
13. Intangible assets and goodwill
Accounting policies
Goodwill
Goodwill generated through business combinations is measured at the amount by which the consideration
transferred, non-controlling interests in the acquiree and previously owned holding combined exceed the
fair value of the identifiable acquired net assets. Goodwill typically reflects the value of acquired market
share, business expertise and synergies.
Goodwill is not amortised, but it is tested for impairment annually and whenever there is an indication
that the asset may be impaired. Goodwill is allocated to cash-generating units (CGUs). Goodwill is measured
at original cost less accumulated impairment.
Cloud computing arrangement
Accounting treatment of cloud service arrangements depends on whether the cloud-based software is clas-
sified as an intangible asset or a service contract. The arrangements in which the the Group has no authority
on the software are accounted as service agreements which entitle the Group to utilize the cloud service
provider's application software during the contract period. Application software license fees and related
configuration or customization costs are recognized (for example, in other operating expenses) when the
services are received. Prepayments to the cloud service provider for software customization that are not
separable are recognized as an expense during the contract period.
Capitalised development costs
Assets are amortised from the time when they are ready for use. Assets that are not yet available for use are
tested annually for impairment. Subsequent to their initial recognition, capitalised development costs are
measured at cost less accumulated amortisation and impairment. The amortisation period for development
costs is 3 to 10 years, during which capitalised development costs are amortised using the straight-line
method.
The Group’s capitalised development costs that have not been amortised are associated
with the following projects:
●
New operating model for fixed-price occupational healthcare agreements and a related occupational
healthcare portal
●
Renewal of primary care service models, involving remote service models for municipal residents and
mobile solutions (social and healthcare service centre concept)
●
Pihlajalinna mobile application and website development with the aim of making AI-assisted digital
services available to all customers.
●
The three-year SYKKI project, funded with Tekes subsidies, aimed at creating an effective and cost-
efficient model for public social and healthcare services
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
50
Intangible assets and goodwill
1000 €
Goodwill
Trademarks
Development
costs
Customer
relationship
value
Non-
competition
agreements
Patient
dadabase
Other
intangible
assets
Other long-term
expenditures
Pre-pay-
ments
Total
Cost at 1 January 2023
251,032
10,910
6,386
12,612
7,788
7,836
7,494
21,153
482
325,694
Additions
891
0
38
0
0
0
219
5,752
481
7,381
Transfers between items
0
0
0
0
0
0
-21
837
-823
-8
Disposals
-150
0
0
0
0
0
-2
0
-57
-208
Cost at 31 December 2023
251,773
10,910
6,424
12,612
7,788
7,837
7,690
27,742
84
332,859
Accumulated depreciation at 1 January 2023
0
-7,295
-4,949
-9,748
-7,557
-6,020
-6,637
-9,654
0
-51,860
Depreciation and amortisation
0
-564
-1,088
-985
-116
-473
-368
-4,595
0
-8,189
Transfers between items
0
0
0
0
0
0
24
14
0
38
Disposals
0
0
0
0
0
0
0
-4
0
-4
Accumulated depreciation at 31 December 2023
0
-7,859
-6,036
-10,733
-7,673
-6,494
-6,982
-14,239
0
-60,015
Carrying amount at 1 January 2023
251,032
3,615
1,436
2,864
231
1,816
857
11,500
482
273,834
Carrying amount at 31 December 2023
251,773
3,051
388
1,879
115
1,343
708
13,503
84
272,845
1000 €
Goodwill
Trademarks
Development
costs
Customer
relationship
value
Non-
competition
agreements
Patient
dadabase
Other
intangible
assets
Other long-term
expenditures
Pre-pay-
ments
Total
Cost at 1 January 2022
188,909
7,762
6,368
10,572
7,507
5,677
6,894
13,543
715
247,948
Additions
0
0
18
0
0
0
547
6,224
663
7,451
Business combinations
65,127
3,148
0
2,040
281
2,159
59
496
0
73,310
Reclassifications to assets held for sale
-3,004
0
0
0
0
0
-13
-6
0
-3,023
Transfers between items
0
0
0
0
0
0
7
897
-896
8
Cost at 31 December 2022
251,032
10,910
6,386
12,612
7,788
7,836
7,494
21,153
482
325,695
Accumulated depreciation at 1 January 2022
0
-6,255
-4,019
-8,515
-7,497
-5,642
-6,096
-6,149
0
-44,173
Depreciation and amortisation
0
-1,040
-930
-1,233
-60
-378
-533
-3,503
0
-7,677
Transfers between items
0
0
0
0
0
0
-8
-1
0
-9
Accumulated depreciation at 31 December 2022
0
-7,295
-4,949
-9,748
-7,557
-6,020
-6,637
-9,654
0
-51,860
Carrying amount at 1 January 2022
188,909
1,508
2,349
2,057
10
35
798
7,394
715
203,775
Carrying amount at 31 December 2022
251,032
3,615
1,436
2,864
231
1,816
857
11,500
482
273,834
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
51
Impairment testing of goodwill
Accounting policies
The carrying amounts of goodwill, other intangible assets, property, plant and equipment, right-of-use as-
sets and non-financial investments are reviewed regularly for potential indications of impairment.
If there are any indications of impairment, the value of the asset item must be tested. Impairment loss is
recognised through profit or loss to the extent that the carrying amount of an asset exceeds its recoverable
amount. In addition, goodwill and intangible assets with an unlimited economic useful life and which are not
depreciated are tested annually for impairment. The impairment testing is carried out even if there are no
indications of impairment.
Goodwill generated in M&A transactions is allocated to cash-generating units (CGU). Under Pihlajalinna’s
operating structure, the Group’s CEO, with the help of the Chief Operating Officers and the other members
of the Management Team, is responsible for the Group’s business operations and service offering to both
the private and public sectors. The Chief Operating Officers prepare budgets for the Group’s businesses with
the help of regional directors and the managing directors of the municipal companies. The Group CEO is re-
sponsible for the resources, investments and profitability of the Group’s businesses. Pihlajalinna’s cash-gen-
erating unit corresponds to the reporting segment, i.e. the Group.
The recoverable amount is determined by value-in-use calculations. Cash flow-based value-in-use is de-
termined by calculating the discounted present value of expected cash flows. The discount rate used in the
calculations is determined using the weighted average cost of capital (WACC), which describes the total cost
of equity and liabilities, taking into account the time value of money and the specific risks associated with
Pihlajalinna’s business. The discount rate is a pre-tax rate. The risk-free interest rate, risk multiplier (beta)
and the additional risk premium and market risk premium parameters used in determining the discount rate
are based on information obtained from the market. Cash flow estimates have been validated by comparing
them to Pihlajalinna’s market capitalisation.
Potential impairment loss on goodwill is recognised immediately in the income statement. Previously rec-
ognised impairment losses on goodwill are not reversed.
The Group carried out its annual impairment testing of goodwill based on the situation on 30 November
2023 (30 November 2022) using the carrying amounts on the date in question and calculations of future
amounts. The result of the testing was that no impairment losses were recognised for the Group’s cash-gen-
erating unit, i.e. the Group as a whole, for the financial year that ended on 31 December 2023. The Group’s
recoverable amount exceeded the carrying amount by approximately EUR 186 (223) million.
Goodwill:
EUR 1,000
2023
2022
Tested goodwill in total, Group
251,773
254,264
Goodwill related to current assets held for sale
-3,004
Changes that have occurred after testing in the preliminary purchase
price allocations for the acquired businesses
-228
Goodwill as per the statement of financial position at the end of the fi-
nancial year
251,773
251,032
Assumptions used in the calculation of utility value for each testing period:
Impairment testing of goodwill
2023
2022
Turnover growth, first three years, approximately
-4.70%
5.30%
EBIT margin, first three years, approximately
7.00%
6.90%
Discount rate (pre tax WACC)
9.50%
8.70%
Discount rate (after tax WACC)
8.00%
7.25%
Forecast period (years)
9
10
Terminal growth rate after the forecast period (5 years)
2.00%
2.00%
The terminal period’s share of the amount of expected cash flows
54%
46%
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
52
Key accounting estimates and decisions based on management judgement
In impairment testing, the recoverable amounts are determined on the basis of value-in-use. The cash flow
forecasts used in the value-in-use calculations in impairment testing are based on cash flow forecasts pre-
pared by the management and approved by the Board of Directors.
For the impairment testing carried out in 2023, the cash flow forecasts cover a 9-year period and the ter-
minal period. The management’s view is that using a 9-year forecast period is justified because the Group
has significant long-term and fixed-term complete social and healthcare outsourcing agreements. These
agreements will expire during the 9-year forecast period, which is why management’s view is that extending
the forecast period provides a more accurate picture of the company’s future cash flows by making it possi-
ble to include the expiration of the agreements in the modelling of cash flows. The terminal growth rate ap-
plied after the forecast period is two per cent, which corresponds to the long-term inflation forecast for the
Finnish economy.
For the period 2024–2025, the management forecasts that revenue, operating profit and cash flows will
increase in line with the Group’s long-term strategy. Thereafter, in the forecasts for 2026–2032, the Group
has taken into account the impacts of the expiration of the complete outsourcing agreements in accordance
with the agreement period of each agreement.
More details on the duration of the agreements and unsatis-
fied performance obligations are pro-vided in note 1
Revenue from contracts with customers
.
The assumptions of the development of prices and costs used in the cash flow estimates are based on the
management’s estimates of the development of demand and the markets, which are compared with exter-
nal information sources. The productivity and efficiency assumptions used in the calculations are based on
internal targets, with previous actual development taken into account in their estimation.
Key assumptions defined by the management and used in the calculation in 2023:
Assumption
Description
Projected revenue
Determined on the basis of a forecast prepared by the manage-
ment and approved by the Board of Directors, and the agreement
periods of the complete outsourcing agreements.
Projected operating profit
Determined on the basis of a forecast prepared by the manage-
ment and approved by the Board of Directors, and the agreement
periods of the complete outsourcing agreements.
Duration of the forecast period
For testing carried out in 2023, the forecast period is 9 years plus
the terminal period.
Terminal growth rate assump-
tion
The terminal growth rate assumption is 2%.
Discount rate
Determined using the weighted average cost of capital (WACC),
which describes the total cost of equity and liabilities, taking into
account the time value of money and the specific risks associated
with Pihlajalinna’s business. Uncertainty in forecasting has been
taken into account in determining the additional risk premium.
Sensitivity analyses in impairment testing
Based on the testing calculations, there is no need to recognise impairment. The cash-generating unit’s re-
coverable amount exceeded the carrying amount by approximately EUR 186 (223) million. The management
has conducted sensitivity analyses of the key factors. The table below shows the required change in as-
sumptions that would lead to the recoverable amount being equal to the carrying amount, provided that
the assumptions change one at a time.
Sensitivity analyses
2023
2022
Decline in EBIT margin
more than 2 percentage
units
more than 2 percentage
units
Decline in volume
more than 14 percentage
units
more than 15 percentage
units
Increase in discount rate
more than 2,5 percentage
units
more than 3 percentage
units
Decline in the terminal growth rate
more than 2 percentage
units
more than 2 percentage
units
The management has conducted a sensitivity analysis for 2023 also with a five-year forecast period plus
the terminal period. Also based on testing under a five-year period, the cash-generating unit's recovera-
ble amount exceeded the carrying amount.
14. Right-of-use assets
Accounting policies
Most of the Pihlajalinna rental arrangements in line with the IFRS 16 are leases for business premises. The
other lease arrangements in line with the standard concern land areas, machinery and equipment (exercise
equipment, clinical equipment, cars and other equipment). Pihlajalinna applies the IFRS 16 exemption that
allows lessees to elect not to recognise a right-of-use asset and corresponding lease liability for assets with
a lease term of 12 months or less as well as assets of low value. Assets of low value include, for example, IT
equipment and office furniture. Furthermore, to make the accounting of leases easier, Pihlajalinna elects
not to separate service components from leases, instead treating the entire agreement as a lease in its con-
solidated financial statements. For lease arrangements valid until further notice, with a short notice period,
Pihlajalinna will estimate the probable lease term.
Right-of-use assets are measured at cost, which includes the following items:
●
original amount of the lease liability
●
direct expenses of the initial phase and
●
expenses due to restoring to original condition
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
53
Right-of-use assets are presented under property, plant and equipment and lease liabilities are presented
under financial liabilities. The right-of-use asset is initially measured at cost and depreciated over the
economic life of the asset. The right-of-use asset is also subject to IAS 36 Impairment of Assets. The lease
liability is initially measured at the present value of future lease payments. In later periods, the lease liability
is measured using the effective interest rate method, according to which the lease liability is measured at
amortised cost and the interest expense is amortised over the lease term. The standard allows the lessee to
also include non-lease elements of an agreement (typically services) in the lease liability.
Key accounting estimates and decisions based on management judgement
When recognising leases on the balance sheet, estimates must be made concerning the lease term, the ex-
ercising of extension options and the discount rate applied. When assessing the lease term of a new lease,
extension options are not taken into account until a commitment has been made to exercise the extension
option.
Right-of-use assets
EUR 1,000
Right-of- use
plots
Right-of-use build-
ings and business
premises
Right-of-use
equipment
Total
Cost at 1 January 2023
1,215
312,525
6,206
319,947
Additions
-1
38,764
871
39,634
Transfers between items
0
18,413
-15
18,398
Disposals
0
-6,391
-560
-6,951
Cost at 31 December 2023
1,214
363,311
6,503
371,028
Accumulated depreciation at 1 January
2023
-580
-116,684
-4,936
-122,201
Depreciation and amortisation
-101
-30,088
-901
-31,090
Transfers between items
0
-18,413
32
-18,381
Disposals
0
4,194
382
4,576
Accumulated depreciation at 31 Decem-
ber 2023
-682
-160,992
-5,423
-167,097
Carrying amount at 1 January 2023
635
195,841
1,270
197,747
Carrying amount at 31 Dec 2023
533
202,319
1,080
203,932
Right-of-use assets
EUR 1,000
Right-of- use
plots
Right-of-use build-
ings and business
premises
Right-of-use
equipment
Total
Cost at 1 January 2022
840
185,897
5,587
192,325
Additions
375
25,090
1,025
26,490
Business combinations
0
105,458
4
105,463
Transfers between items
0
138
-41
97
Disposals
0
-4,059
-368
-4,427
Cost at 31 December 2022
1,215
312,525
6,206
319,947
Accumulated depreciation at 1 January
2022
-484
-91,941
-4,314
-96,738
Depreciation and amortisation
-97
-26,178
-898
-27,173
Transfers between items
20
20
Disposals
1,435
255
1,690
Accumulated depreciation at 31 Decem-
ber 2022
-580
-116,684
-4,937
-122,201
Carrying amount at 1 January 2022
357
93,956
1,273
95,586
Carrying amount at 31 Dec 2022
635
195,841
1,270
197,746
Short-term leases recognised in the income statement, totalling EUR 227 (140) thousand, and minor leases
recognised in the income statement, totalling EUR 1,379 (1,172) thousand, are practical exemptions pro-
vided by IFRS 16 applied by the Group.
Lease liabilities relating to right-of-use items are specified in Note 22
Financial liabilities
.
15. Other non-current receivables
Accounting policies
Right-of-use assets that have been transferred to a lessee under a sublease and classified as financial leases
have been derecognised from fixed assets and presented on the balance sheet as net investments in a
sublease.
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
54
EUR 1,000
2023
2022
Lease deposits paid
234
561
Non-current subleases
3,655
7,750
Non-current receivables
2,108
759
Other receivables
90
90
Total
6,088
9,160
Pihlajalinna subleased two care homes that it sold and leased back in May 2020 which form a significant part
of sublease receivables.
The table below presents the contractual maturity analysis of subleases. The figures are undiscounted
and they include both future interest payments and repayments of the net investment.
Maturity distribution of sublease receivables
less than 1
year
1–2 years
2–3 years
3–4 years
over 4
years
Carrying amount at 31 Dec
2023
4,087
431
341
346
351
2,618
16. Trade and other receivables
Accounting policies
At the end of each reporting period, the Group assesses whether or not there is objective evidence of im-
pairment regarding any individual financial asset. Objective evidence of impairment of loans and other re-
ceivables includes significant financial distress of the debtor and payments being delinquent or substantially
delayed. Impairment of loans is recognised in financial expenses in the income statement and impairment
of other receivables is recognised in other operating expenses for the period in which the impairment was
identified.
The expected credit loss model is based on the amount of historical credit losses. The lifetime expected
credit losses are calculated by multiplying the gross carrying amount of unpaid trade receivables by the ex-
pected loss.
EUR 1,000
2023
2022
Trade receivables
52,469
47 168*
Prepayments and accrued income
4,739
14,051
Current subleases
431
947
Other receivables
241
1,189
Contract assets
3,619
13 452*
Total
61,498
76,806
*Pihlajalinna has adjusted the figures for the comparison year and transferred EUR 7.4 million from re-
ceivables included in trade receivables in 2022 to contract assets
The carrying amount of trade receivables and other receivables corresponds to the maximum credit risk in-
volved at the end of the reporting period. Pihlajalinna regularly reviews the credit risk of its receivables and
the procedures used to estimate the credit risk. No significant changes have been observed in customers’
payment behaviour during the financial year. The management of credit risks related to trade receivables,
see note 25
Financial risk management.
The Group recognised impairment losses of EUR 0.9 (0.5) million on
trade receivables during the financial year.
At the end of the financial year, the Group classified receivables amounting to EUR 8.2 million as contin-
gent off-balance sheet assets in accordance with IAS 37. The items were recognised as expenses during the
financial year 2023. In the comparison figures shown in the table above, the receivables in question are pre-
sented as contract assets. The change in the classification is described in more detail in note 1
Revenue from
contracts with customers
.
Pihlajalinna has also reviewed its loan receivables and recognised an impairment of EUR 1.2 million on
the loan receivables. The write-downs of loan receivables are described in more detail in note 9
Financial
expenses.
Age distribution of trade receivables
EUR 1,000
2023
Impairment
losses
Share of expected
impairment losses
Net 2023
Not due
34,321
-5
0.0 %
34,316
Less than 30 days
12,924
-7
0.1 %
12,917
30–60 days
1,058
-47
4.4 %
1,012
61–90 days
617
-91
14.7 %
526
More than 90 days
4,013
-316
7.9 %
3,697
Total
52,934
-465
52,469
EUR 1,000
2022
Impairment
losses
Share of expected
impairment losses
Net 2022
Not due
33,342
-25
0.1 %
33,317
Less than 30 days
8,469
-10
0.1 %
8,459
30–60 days
1,515
-72
4.7 %
1,443
61–90 days
918
-152
16.6 %
766
More than 90 days
3,706
-522
14.1 %
3,184
Total
47,949
-781
47,168
The Group’s expected credit loss model is based on the amount of historical credit losses. The share of ex-
pected impairment losses varies between financial years because the Group’s expected credit losses based
on historical information vary between different customer groups. Consequently, a particular customer
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
55
group representing a higher or lower share of trade receivables can have a significant effect on the amount
of expected credit losses.
The Group’s trade receivables due more than 90 days mainly relate to open receivables from insurance
company customers.
The expected credit losses from contractual assets amount to EUR 0.0 (0.0) million, and the assets in
question have not been taken into account in the table above.
EUR 1,000
2023
2022
Credit loss provision at 1 January
781
698
Credit losses recorded
-920
-504
Change in credit loss provision
605
587
Credit loss provision at 31 December
465
781
Material items incl. in prepayments and accrued income
EUR 1,000
2023
2022
Personnel expenses
1,837
1,843
Expenses paid in advance
2,656
6,528
Hedging, interest rate swap
173
5,113
Other
73
566
Total
4,739
14,051
The carrying amounts of the receivables correspond materially to their fair values.
17. Provisions
Accounting policies
A provision is recognised when the Group has a legal or constructive obligation resulting from a past event,
when it is probable that the payment obligation will materialise and when the amount of the obligation can
be reliably estimated. The amount recognised as a provision equals the best estimate of the costs required
to fulfil the present obligation on the date of the financial statements.
A restructuring provision is recognised when the Group has in place a detailed plan for such restructuring
and its implementation has commenced or the interested parties have been informed of the main points of
such a plan.
The Group recognises a provision for onerous contracts when the expected benefits to be derived from a
contract are less than the unavoidable expenses of meeting the obligations under the contract.
EUR 1,000
2023
2022
Current provisions
84
0
Non-current provisions
123
89
Total
207
89
-
Onerous
contracts
Restructuring
provision
Total
EUR 1,000
1.1.2022
137
68
205
Increases in provisions
Provisions used
-48
-68
-116
Reversals of unused provisions
31.12.2022
89
0
89
Increases in provisions
306
1,139
1,445
Provisions used
-189
-1,139
-1,327
Reversals of unused provisions
31.12.2023
207
0
207
18. Trade and other payables
EUR 1,000
2023
2022
Trade payables
27,051
41,673
Accrued liabilities
90,466
78,267
Pre-payments
311
33
Other liabilities
7,503
7,556
Total
125,333
127,529
Material items included under Accrued liabilities:
Wages and salaries and social security payments
53,823
43,846
Doctor’s fee liability
17,055
15,376
Allocation of purchase invoices
11,481
10,261
Current liabilities held for sale
1,347
3,237
Unpaid interest expenses
2,147
212
Other accrued liabilities
4,614
5,334
Total
90,466
78,267
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
56
19. Deferred tax assets and liabilities
Accounting policies
Deferred taxes are calculated on temporary differences between the carrying amount and the tax base.
However, a deferred tax liability shall not be recognised on the initial recognition of goodwill, or on the ini-
tial recognition of an asset or liability in a transaction which is a business combination and, at the time of
the transaction, affects neither accounting profit nor taxable profit and, at the time of the transaction, does
not give rise to equal taxable and deductible temporary differences.
In the Group, the most significant temporary differences result from depreciation and amortisation of
property, plant and equipment and intangible assets, fair value-based adjustments made in connection with
business combinations, and unused tax losses.
Deferred taxes are calculated by applying tax rates enacted or substantively enacted by the end of the
reporting period.
A deferred tax asset is only recognised to the extent that it is probable that taxable profit will be available
against which the temporary difference can be utilised. However, a deferred tax asset is not recognised if it
arises from the initial recognition of an asset or liability in a transaction that is not a business combination
and, at the time of the transaction, affects neither accounting profit nor taxable profit and, at the time of
the transaction, does not give rise to equal taxable and deductible temporary differences. Whether or not
deferred tax assets can be recognised in this respect is always estimated at the end of each reporting pe-
riod.
The Group shall offset deferred tax assets and liabilities where these relate to the same taxation authority
and the same taxable entity. Deferred tax assets and tax liabilities for leases are presented separately in the
notes to the financial statements.
Key accounting estimates and decisions based on management’s judgement
The management uses judgement when determining the deferred assets to be recorded in respect of tax
losses confirmed in the Group. The most significant deferred tax assets from confirmed unused losses have
been for Pihlajalinna Lääkärikeskukset Oy (approximately EUR 4.3 million) and Pihlajalinna Oyj (approxi-
mately EUR 2.5 million).
Deferred tax assets have been recorded up to the amount that, according to the management’s assess-
ment, it is probable that taxable income will be generated in the future, against which the unused tax losses
can be utilized. Estimates are based on forecasts made by management and how profitability develops in
different companies. Actual results may differ materially from the estimates made at the time of preparing
the financial statements.
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
57
Changes in deferred taxes during 2023:
Deferred tax assets (EUR 1,000)
1 January
2023
Recognised in profit
and loss
Recognised in the statement
of comprehensive income
Business combinations
Reclassification to
assets held for sale
31 December
2023
Tax losses carried forward confirmed by tax authorities
11,860
-3,394
8,467
Sales proceeds from sale and leaseback arrangements
193
-30
163
Provisions
227
-41
186
Share-based incentive scheme
5
48
53
Reclassification to assets held for sale
-63
63
0
Leases - lease liabilities
45,915
203
46,118
Cloud computing arrangements
228
102
330
Other items
3,583
-98
3,485
Net effect of deferred tax liabilities and assets
-44,623
417
-44,206
Deferred tax liabilities on the statement of financial position
17,324
-2,729
14,595
Deferred tax liabilities
Property, plant and equipment and intangible assets
5,344
244
5,588
Recognition of property, plant and equipment and intangible assets at fair value
in business combinations
1,705
-428
1,278
Fair value hedging
1,023
-354
669
Leases - right-of-use assets
41,289
228
41,517
Other items
99
383
481
Net effect of deferred tax liabilities and assets
-40,948
-133
-41,081
Deferred tax liabilities on the statement of financial position
8,512
294
-354
8,452
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
58
Changes in deferred taxes during 2022:
Deferred tax assets (EUR 1,000)
1 January
2022
Recognised in profit
and loss
Recognised in the statement
of comprehensive income
Business combinations
Reclassification to
assets held for sale
31 December
2022
Tax losses carried forward confirmed by tax authorities
2,547
9,314
11,860
Sales proceeds from sale and leaseback arrangements
223
-30
193
Provisions
293
-65
227
Share-based incentive scheme
60
-55
5
Reclassification to assets held for sale
-63
-63
IAS 37, contingent assets
749
-749
0
Leases - lease liabilities
21,250
24,665
45,915
Cloud computing arrangements
255
-27
228
Other items
584
-767
3,766
3,583
Net effect of deferred tax liabilities and assets
-20,476
-24,147
-44,623
Deferred tax liabilities on the statement of financial position
5,484
8,138
3,766
-63
17,324
Deferred tax liabilities
Property, plant and equipment and intangible assets
4,803
520
22
5,344
Recognition of property, plant and equipment and intangible assets at fair value
in business combinations
722
-542
1,526
1,705
Fair value hedging
1,023
1,023
Leases - right-of-use assets
20,155
21,134
41,289
Other items
22
77
99
Net effect of deferred tax liabilities and assets
-19,818
-21,130
-40,948
Deferred tax liabilities on the statement of financial position
5,884
58
1,023
1,547
8,512
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
59
-
Available tax
losses
Deferred tax assets
recorded
Deferred tax
assets not
recorded
Maturing within five years
2023
2022
2023
2022
2023
2022
Maturing within five years
1,757
9,178
324
1,843
32
16
Maturing later than within
five years
55,702
59,071
8,143
10,017
2,993
1,773
Total
57,460
68,249
8,467
11,860
3,025
1,790
Taxes calculated on the basis of
the Finnish tax rate (20%)
11,492
13,650
0
20. Financial assets and liabilities by measurement category
Accounting policies
When a financial asset or liability is recognised on the transaction date, the Group measures it at its acquisi-
tion cost, which is equal to the fair value of the consideration give or received. Derivative contracts are rec-
ognised in the balance sheet at fair value on the trade day and subsequently remeasured at their fair value
on the balance sheet date.
Financial assets
For the purpose of measurement after initial recognition, the Group’s financial assets are classified as finan-
cial assets measured at amortised cost and financial assets measured at fair value through profit or loss. Fi-
nancial assets are derecognised when the Group has lost its contractual right for the financial assets in ques-
tion or has transferred substantially all risks and rewards outside the Group.
The Group’s trade receivables, lease deposits and cash and cash equivalents have been classified as finan-
cial assets measured at amortised cost using the effective interest method, taking any impairment into ac-
count.
Financial assets measured at fair value through profit or loss consist of quoted and unquoted shares and
loan receivables. The Group has no holdings of shares quoted in public markets.
Derivative contracts are recognised in the balance sheet at fair value on the trade date and subsequently
remeasured at their fair value on the balance sheet date. Derivatives that do not meet the conditions of
hedge accounting are recorded in the income statement. The change in fair value is recorded in equity in
fair value reserve if the derivative contract meets the conditions of cash flow hedging. If hedge accounting is
not applied derivatives are revalued to fair value at the end of the reporting period and the profit or loss dif-
ference arising from the valuation is recorded in the income statement.
Cash and cash equivalents
Cash and cash equivalents consist of cash at hand and demand deposits. The account with credit limit in use
is included in current financial liabilities.
Financial liabilities
The Group classifies loans from financial institutions, accounts with credit limits, lease liabilities, trade paya-
bles and other liabilities as financial liabilities measured at amortised cost using the effective interest
method. Transaction costs are included in the initial carrying amount. Arrangement fees for loan commit-
ments are treated as transaction costs. The Group classifies contingent considerations arising from M&A
transactions as financial liabilities measured at fair value through profit or loss. No interest is paid on liabili-
ties arising from contingent considerations. Any contingent consideration is measured at fair value at the
date of acquisition and classified as a liability. A contingent consideration classified as a liability is measured
at fair value at the end of each reporting period, and any resulting gain or loss is recognised in profit or loss
after the end of the measurement period. The valuation principles of derivatives are discussed above in the
section
Financial assets
.
Financial liabilities are classified as current liabilities, unless the Group has an unconditional right to
postpone their repayment to a date that is at least 12 months subsequent to the end of the reporting
period.
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
60
EUR 1,000
Note
Fair value
hierarchy
Fair value
through
profit or
loss
Fair value -
hedging
instrument
Amortised
cost
Total
carrying
amounts
Fair values
total
31 Dec 2023
Carrying amounts of financial assets
Non-current financial assets
Other shares and
participations
level 3
168
168
168
Lease deposits
15
level 2
234
234
234
Other receivables
15
level 2
90
90
90
Loan receivables
level 3
2,108
2,108
2,108
Current financial assets
Trade receivables
16
52,469
52,469
52,469
Other receivables
16
level 2
241
241
241
Interest derivatives
25
level 2
173
173
173
Cash and cash equivalents
24,517
24,517
24,517
Total
2,276
173
77,550
79,999
79,999
Carrying amounts of financial liabilities
Non-current financial liabilities
Loans from financial
institutions
22
level 2
143,800
143,800
143,800
Lease liabilities
22
level 2
199,834
199,834
199,834
Other liabilities
22
level 2
536
536
536
Contingent considerations
level 3
210
210
210
Current financial liabilities
Loans from financial
institutions
22
level 2
2,296
2,296
2,296
Cheque account with credit
limit
22
Contingent considerations
level 3
700
700
700
Lease liabilities
22
level 2
30,754
30,754
30,754
Trade and other payables
18
27,051
27,051
27,051
Total
910
404,271
405,181
405,181
EUR 1,000
Note
Fair value
hierarchy
Fair value
through
profit or
loss
Fair value -
hedging
instrument
Amortised
cost
Total
carrying
amounts
Fair values
total
31 Dec 2022
Carrying amounts of financial assets
Non-current financial assets
Other shares and
participations
level 3
1,167
1,167
1,167
Lease deposits
15
level 2
561
561
561
Other receivables
15
level 2
90
90
90
Current financial assets
Trade receivables
16
47,168
47,168
47,168
Other receivables
16
level 2
1,189
1,189
1,189
Interest derivatives
25
level 2
5,113
5,113
5,113
Cash and cash equivalents
13,128
13,128
13,128
Total
1,167
5,113
62,136
68,416
68,416
Carrying amounts of financial liabilities
Non-current fin. liabilities
Loans from financial
institutions
22
level 2
167,255
167,255
167,255
Lease liabilities
22
level 2
201,235
201,235
201,235
Other liabilities
22
level 2
573
573
573
Contingent considerations
level 3
203
203
203
Current financial liabilities
Loans from financial
institutions
22
level 2
1,386
1,386
1,386
Cheque account with credit
limit
22
Contingent considerations
level 3
1,704
1,704
1,704
Lease liabilities
22
level 2
28,338
28,338
28,338
Trade and other payables
18
41,673
41,673
41,673
Total
1,907
440,459
442,367
442,367
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
61
Fair value assessment
Financial assets and liabilities recognised at fair value on the consolidated statement of financial position are
classified according to their valuation-based hierarchy levels and measurement methods as follows:
Fair value hierarchy levels
Level 1:
Group has no financial assets or liabilities measured according to level 1 of the hierarchy.
Level 2:
ject to trading in active and liquid markets. The fair values can be determined based on quoted market
prices and deduced valuation. The carrying amount of the trade receivables and financial assets essentially
corresponds to their fair value, as the effect of discounting is not significant taking the maturity of the re-
ceivables into consideration. The fair values of lease liabilities are based on discounted cash flows. The fair
values of loans essentially correspond to their carrying amount since they have a floating interest rate and
the Group’s risk premium has not materially changed. The carrying amount of other financial liabilities es-
sentially corresponds to their fair value, as the effect of discounting is not significant taking the maturity of
the receivables into consideration. Derivative financial instruments are initially recognized at fair value on
the trade date and are subsequently remeasured at their fair value on the balance sheet date.
Level 3:
stances affecting the value of the financial asset or liability is not available or verifiable.
The Group’s other shares and participations consist solely of shares in unlisted companies.
21. Notes on equity
Accounting policies
The Group classifies all instruments it issues either as an equity instrument or a financial liability, depending
on their nature. Equity instruments are any contracts evidencing a residual interest in the assets of the com-
pany after deducting all of its liabilities. Costs relating to the issue or purchase of equity instruments are
presented as a deduction from equity.
Pihlajalinna’s equity consists of the share capital, fair value reserve, reserve for invested unrestricted equity,
hybrid bond, retained earnings and treasury shares held by the parent company.
Reconciliation of the number of shares
EUR 1,000
Number of
outstanding
shares,
1,000 pcs
Number
of
treasury
shares,
1,000 pcs
Number of
shares
Share
capital
Reserve for
invested
unrestricted
equity
Treasury
shares
Total
Shares, total, 1
January 2022
22,594
25.9
22,620
80
116,520
256
116,856
Acquisition of
treasure shares
-120
120
1475
1,475
Treasury shares held
by the parent com-
pany on 31
December 2022
75
-75
-909
-909
Outstanding shares
on 31 December
2022
22,550
70
22,620
80
116,520
822
117,422
Shares, total,
1 January 2023
22,550
70
22,620
80
116,520
822
117,422
Treasury shares held
by the parent com-
pany on 31 Decem-
ber 2023
17
-17
-192
-192
Outstanding shares
on
31 December 2023
22,566
54
22,620
80
116,520
629
117,229
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
62
Treasury shares
The total number of Pihlajalinna shares is 22,620,135. On the financial statements date, there were
22,566,155 outstanding shares and the company held 53,980 treasury shares. In May, Pihlajalinna conveyed
a total of 11,861 shares held by the company as part of the remuneration of the Board of Directors. In No-
vember, Pihlajalinna transferred 4,650 treasury shares to Joni Aaltonen under the terms of the CEO’s termi-
nation agreement. Aaltonen served as the CEO until 8 March 2023.
Share capital
Pihlajalinna has one share series, with each share entitling its holder to one vote at a General Meeting of
shareholders. The company’s shares have no nominal value. All shares bestow their holders with equal
rights to dividends and other distribution of the company’s assets. The shares belong to the book-entry sys-
tem.
Fair value reserve
The fair value reserve includes the effective portion of the change in the fair value of derivatives for which
cash flow hedge accounting is applied The fair value reserve also includes the remaining value on the report-
ing date of the derivative contract sold on 2 February 2023. The gain on the sale is presented in the fair
value reserve less taxes and transferred to be recognised through profit and loss in the same periods as the
hedged expected future cash flows will affect the result, meaning the years 2023–2027. On the reporting
date, the sold derivative contracts’s share of the fair value reserve was approximately EUR 2.5 (4.1) million.
Reserve for invested unrestricted equity
The reserve for invested unrestricted equity contains other equity-like investments and the share subscrip-
tion price to the extent that this is not entered in share capital under a specific decision.
Hybrid Bond
Pihlajalinna issued EUR 20 million hybrid bond on 27 March 2023. The hybrid bond bears a fixed interest
rate of 12.00 percent per annum until 27 March 2026 (“Reset Date”), and from the Reset Date, a floating
interest rate as defined in the terms and conditions of the capital securities. Starting from the reset date,
the interest rate is variable at 14.00 percent plus 3-month Euribor according to the terms of the hybrid
bond. The hybrid bond does not have a specified maturity date. Pihlajalinna is entitled to redeem the hybrid
bond on the Reset Date and thereafter on each interest payment date.
The hybrid bond is instrument that is subordinated to the company’s other debt obligations. The hybrid
bond is treated as equity according to its nature and its accumulated interest and the transaction costs re-
lating to the issuance of a hybrid bond, net of possible tax, are presented in equity as well. The hybrid bond
does not confer to the holders the rights of a shareholder and do not dilute the holdings of the current
shareholders.
Expenses from the issuance of the hybrid bond EUR 0.4 million has been recognised as reduction of re-
tained earnings. At the end of the financial year, the unpaid interest from the hybrid bond was EUR 1.9 mil-
lion.
Distributable funds
The parent company’s total distributable funds amount to EUR 203,428,565.55, of which the result for the
financial year accounts for EUR -7,709,328.56.
Dividends
The Board of Directors proposes that, in accordance with the dividend policy, a dividend of EUR 0.07 per
share be paid for the financial year that ended on 31 December 2023. On the financial statements date, 31
December 2023, the total number of outstanding shares was 22,566,155. The corresponding total dividend
according to the Board of Directors’ proposal would be EUR
.
No material changes have taken place in the company’s financial position after the end of the financial
year. The company’s liquidity position is good and, in the view of the Board of Directors, the proposed distri-
bution does not jeopardise the company’s ability to fulfil its obligations.
Earnings per share for the financial year was EUR 0.19. The proposed dividend of EUR
of earnings per share.
In accordance with Pihlajalinna’s specified dividend policy, Pihlajalinna aims to distribute dividend or capi-
tal repayment minimum of one-third of the earnings per share, taking into account the company’s strategy
and financial position.
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
63
22. Financial liabilities
EUR 1,000
2023
2022
Non-current interest-bearing liabilities
Loans from financial institutions
143,800
167,255
Other liabilities
536
573
Lease liabilities
199,834
201,235
344,169
369,063
Current interest-bearing liabilities
Loans from financial institutions
2,296
1,386
Lease liabilities
30,754
28,338
Yhteensä
33,051
29,723
Interest-bearing financial liabilities total
377,220
398,786
Pihlajalinna’s financing arrangement is described in more detail in note 22 Financial liabilities and note 25
Financial risk management.
spite of their maturity being 1, 3 or 6 months, because Pihlajalinna has an unequivocal right to postpone
repayment by a minimum of 12 months from the reporting date.
Lease liabilities
EUR 1,000
2023
2022
Non-current lease liabilities
Right-of-use plots
443
546
Right-of-use buildings and business premises
198,890
200,092
Right-of-use equipment
500
597
199,834
201,235
Current lease liabilities
Right-of-use plots
100
99
Right-of-use buildings and business premises
30,076
27,569
Right-of-use equipment
578
670
30,754
28,338
23. Changes in interest-bearing liabilities with no impact on cash flow
EUR 1,000
2022
Cash flow
New instalments and
lease liabilities
Effective in-
terest rate
2023
Non-current
interest-bearing
liabilities
167,327
-28,975
5,968
16
144,336
Current
interest-bearing
liabilities
1,887
0
410
0
2,296
Lease liabilities
229,573
-31,825
32,840
0
230,588
Total
398,786
-60,800
39,218
16
377,220
24. Capital management
The goal of the Group’s capital management is to ensure that the normal requirements of business opera-
tions are met, enable investments in line with the Group’s strategy and increase long-term shareholder
value. The Group influences its capital structure mainly through the distribution of dividend and share is-
sues.
The key indicators concerning capital management are the equity ratio, the ratio of net debt to adjusted
EBITDA and gearing. Loan covenants related to financing arrangement are described in more detail in the
note 25
Financial risk management.
EUR 1,000
Note
2023
2022
Equity
144,591
122,888
Total statement of fin. position – deferred revenue
657,187
661,606
Equity ratio 1)
22.0 %
18.6 %
Interest-bearing financial liabilities
22
377,220
398,786
Cash and cash equivalents
-24,517
-13,128
Interest-bearing net debt
352,703
385,659
Gearing 2)
243.9 %
313.8 %
EBITDA
72,487
54,401
Adjustment items**
8,133
9,828
Adjusted EBITDA
80,621
64,229
Net debt/adjusted EBITDA
4.4
6.0
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
64
* Significant transactions that are not part of the normal course of business, are related to business acquisition costs (IFRS
3), are infrequently occurring events or valuation items that do not affect cash flow are treated as adjustment items af-
fecting comparability between review periods. According to Pihlajalinna’s definition, such items include, for example, re-
structuring 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 also presents costs according to the IFRS Interpreta-
tions Committee’s new Agenda Decision concerning cloud computing arrangements as adjustment items. EBITDA adjust-
ments amounted to EUR 8.1 (9.8) million for the financial year that ended on 31 December 2023.
¹⁾ The formula for calculating the equity ratio is 100 x Equity / (Total statement of financial position – de-
ferred revenue)
²⁾ The formula for calculating gearing is 100 x Interest-bearing net debt / Equity.
25. Financial risk management
The Group’s main financial risks consist of credit and counterparty risk as well as interest rate and liquidity
risks. The Group operates in Finland and is therefore not exposed to material foreign exchange risks in its
operations. The Group’s general risk management policies are approved by the Board of Directors. The
Group’s Chief Financial Officer, together with the operative management, is responsible for identifying fi-
nancial risks and for practical risk management. The goal of the Group’s risk management is to ensure suffi-
cient liquidity, minimise financing costs and regularly inform the management about the Group’s financial
position and risks.
Group’s financial administration actively monitors compliance with the financial covenants and assesses
financial leeway in relation to the covenant maximums as part of the Group’s business planning.
Liquidity risk
The Group monitors the amount of financing required by business operations by analysing cash flow fore-
casts in order to make sure the Group has a sufficient amount of liquid assets for financing operations and
repaying maturing loans. The Group aims to ensure the availability and flexibility of financing with adequate
credit limits, a balanced maturity profile and sufficiently long maturities for borrowings, as well as by ob-
taining financing through several financial instruments. Monitoring and forecasting financial covenants in-
cluded in the Company’s financing agreements is continuous.
Pihlajalinna’s financing arrangement comprises a long-term loan of EUR 130 million and a revolving credit
facility of EUR 70 million for general financing needs and acquisitions. It also includes an opportunity to later
increase the total amount by EUR 100 million (to EUR 300 million), subject to separate decisions on a sup-
plementary loan from the funding providers.
Under the original agreement, Pihlajalinna’s financing arrangement was set to have a term of three years
and a maturity date in March 2025. In December 2023, Pihlajalinna and the creditor banks agreed on re-
structuring the financing arrangement. According to the new agreement, the financing arrangement will ma-
ture in March 2026, and the loan margin will change effective from 1 July 2024.
Pihlajalinna has an interest rate swap agreement with a nominal value of EUR 65 million, which is used to
convert the interest on a floating rate financing arrangement to a fixed rate. Cash flow hedge accounting is
applied to the interest rate swap agreement, which means that the effective portion of the change in fair
value is recognised in other comprehensive income. The interest rate swap entered into effect in March
2023 and will remain in effect until 25 March 2027. Its fair value was EUR 0.2 (5.1) million at the end of the
financial year.
On 27 March 2023, Pihlajalinna issued a hybrid bond with an annual coupon of 12%. The hybrid bond
does not have a specified maturity date. Pihlajalinna is entitled to redeem the hybrid bond on the Reset
Date, 27 March 2026, and thereafter on each interest payment date. The hybrid bond is treated as an equity
item in Pihlajalinna’s IFRS consolidated financial statements and it is described in more detail in note 21
Notes on equity
.
On the financial statements date, the Group’s cash and cash equivalents amounted to EUR 24.5 (13.1)
million, in addition to which the Group had EUR 70.0 (43,0) million in unused committed credit limits availa-
ble. Unused credit limits consist of EUR 10 million credit limit agreement and EUR 60 million unwithdrawn
revolving credit facility. In addition, EUR 100.0 (100.0) million of an additional credit limit, which is subject to
a separate credit decision, was unused on the financial statements date. The Group’s equity ratio at the end
of the financial year was 22.0 (18.6) per cent.
Financial liabilities repayment schedule
The table below presents the contractual maturity of financial liabilities. The figures are undiscounted, and
they include both future interest payments and repayments of principal. In the table below, the loan in-
stalments drawn under the Group’s revolving credit facility are presented as long-term items in spite of
their maturity being 1, 3 or 6 months, because Pihlajalinna has an unequivocal right to postpone the re-
payment of the loan instalments by a minimum of 12 months from the reporting date. Interest payments
related to the loan instalments drawn are presented in the table below according to the actual timing of
their payment.
EUR 1,000
Carrying
amount at 31
Dec 2022
less than 1
year
1–2 years
2–3 years
3–4 years
over 4
years
Loans from financial insti-
tutions
136,096
-9,355
-8,607
-132,628
-1,239
-424
Revolving credit facility
10,000
-543
-541
-10,223
Lease liabilities
230,588
-34,452
-31,357
-26,340
-23,702
-134,500
Other interest-bearing lia-
bilities
536
-57
-57
-57
-57
-589
Contingent considerations
910
-706
-216
Trade payables
27,051
-27,051
Total
405,181
-72,165
-40,779
-169,249
-24,998
-135,513
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
65
EUR 1,000
Carrying
amount at 31
Dec 2021
less than 1
year
1–2 years
2–3 years
3–4 years
over 4
years
Loans from financial insti-
tutions
131,641
-6,128
-4,404
-130,110
-4
Revolving credit facility
37,000
-1,402
-1,406
-37,343
Lease liabilities
229,573
-31,699
-29,751
-26,129
-21,944
-132,924
Other interest-bearing lia-
bilities
573
-59
-57
-57
-57
-644
Contingent considerations
1,907
-1,710
-6
-6
-206
Trade payables
41,673
-41,673
Total
442,367
-82,671
-35,624
-193,645
-22,210
-133,568
Loan covenants
The Group’s key loan covenants are reported to the financiers on a quarterly basis. If the Group breaches
the loan covenant terms, the creditors may accelerate the repayment of the loans. The management moni-
tors the fulfilment of loan covenant terms and reports on them to the Board of Directors on a regular basis.
The financing arrangement includes the customary financial covenants concerning leverage (ratio of net
debt to pro forma EBITDA) and gearing. IFRS 16 lease liabilities are not taken into account in the calculation
of the covenants (Frozen GAAP). The loan margin of the financing is additionally linked to Pihlajalinna’s an-
nual sustainability objectives related to patient satisfaction (NPS), employee engagement (eNPS) and access
to surgical treatment within the target time. Sustainability targets have a minor effect on the loan margin,
depending on how many of the agreed-upon sustainability targets are achieved. At the end of the financial
year, the sustainability targets linked to the financing arrangement caused no changes in the loan margins.
In late 2022, Pihlajalinna and the creditor banks agreed on a temporary increase to the covenants of the
financing arrangement and increasing the highest margin by one percentage point from the beginning of
2023 until the third quarter of the year. The creditor banks waived off the in-crease to the highest margin
and the other waiver terms in late April 2023 when the company demonstrated it would remain under the
original covenants for the next 12 months.
The original gearing covenant of the financing arrangement is 115 per cent and the leverage covenant is
was 3.75 at the end of the financial year 2023. At the end of the financial year 2022, the covenants agreed
on a temporary basis were gearing of 140 per cent and leverage of 5.5. At the end of the financial year,
gearing in accordance with the financing arrangement was 93.6 (139.95) per cent and leverage was 3.09
(5.23).
At the end of the reporting period, 31 December 2023, the withdrawn loan amount to which the cove-
nants apply was EUR 140.0 million (EUR 167.0 million).
Interest rate risk
The Group is exposed to interest rate risk through its external financing arrangement. In accordance with
the Group’s risk management principles, the Board of Directors decides on the need for, and extent of, in-
terest rate hedging for the Group’s loan portfolio.
During the financial year 2022, the Group entered into an interest rate swap agreement with a nominal
value of EUR 65 million to hedge its floating rate financing arrangement. The Group sold the interest rate
swap agreement in question on 2 February 2023. The fair value of the interest rate swap agreement at the
time of concluding the agreement was approximately EUR 3.9 million. The gain on the sale is presented in
the fair value reserve less taxes and transferred to be recognised through profit or loss in the same periods
as the hedged expected future cash flows will affect the result, meaning the years 2023–2027. On 2 Febru-
ary 2023, the Group signed a new interest rate swap agreement with a nominal value of EUR 65 million. The
interest rate swap is subject to cash flow hedge accounting. The interest rate swap entered into effect in
March 2023 and will remain in effect until 25 March 2027.
On the financial statements date, 63% (58%) of the interest-bearing liabilities were subject to fixed inter-
est rates. During the financial year, the average annual interest rate on the Group’s interest-bearing liabili-
ties and derivatives was approximately 3.20 per cent (2.5). The duration, i.e. the fixed interest rate period,
of the financing portfolio was 3.6 (3.7) years.
The table below presents the Group’s interest rate position at the end of the reporting period.
EUR 1,000
2023
2022
Fixed rate financial liabilities
236,786
230,143
Variable rate financial liabilities
141,822
169,136
Financial liabilities subject to hedge accounting
-65,000
-65,000
Total variable rate position
76,822
104,136
The table below presents the effects on consolidated profit before tax should market interest rates rise or
fall, all other things being equal. The sensitivity analysis is based on the interest rate position at the closing
date of the reporting period, including the hedging effect of derivatives. Since the Group has no material
interest-bearing assets, its income and operating cash flows are not materially exposed to changes in mar-
ket interest rates.
EUR 1,000
2023
2023
2022
2022
Change
1.0 percentage
units higher
1.0 percentage
units lower
1.0 percentage
units higher
1.0 percentage
units lower
Effect on profit before tax
-768
1,418
-1,700
1,700
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
66
Derivative financial instruments and hedge accounting
Accounting policy
The Group applies hedge accounting to reduce the future cash flow variation in profit due to the variation in
interest rates. Derivative financial instruments are initially recognized at fair value on the trade date and are
subsequently remeasured at their fair value on the balance sheet date. Derivative contracts are included in
current assets or liabilities, except derivatives maturities greater than 12 months after the balance sheet
date, which are classified as non-current assets or liabilities. The effective portion of the changes in the fair
value of derivative financial instruments that are designated and qualified as cash flow hedges are recog-
nized in the fair value reserve of equity.
In cash flow hedges the critical terms in hedged item and hedging instruments are the same and hedge
ratio is 1:1. When a hedging arrangement is entered into, the relationship between the hedged item and the
hedging instrument, as well as the objectives of the Group's risk management are documented. The effec-
tiveness of the hedge relationship is tested regularly and the effective portion is recognised, according to
the nature of the hedged item, against the change in the fair value of the hedged item in the fair value re-
serve of equity. The ineffective portion is recognized in the income statement either in operating profit or
financial income and expenses. Hedge accounting is discontinued when the hedging instrument expires or is
sold, or when the contract is terminated or exercised. Any cumulative gain or loss existing in equity at that
time remains in equity until the forecast transaction has occurred.
Deriatives used for hedging
During the financial year 2022, the Group entered into an interest rate swap agreement with a nominal
value of EUR 65 million to hedge its floating rate financing arrangement. The Group sold the interest rate
swap agreement in question on 2 February 2023. The fair value of the interest rate swap agreement at the
time of concluding the agreement was approximately EUR 3.9 million. The gain on the sale is presented in
the fair value reserve less taxes and transferred to be recognised through profit or loss in the same periods
as the hedged expected future cash flows will affect the result, meaning the years 2023–2027.
On 2 February 2023, the Group signed a new interest rate swap agreement with a nominal value of EUR
65 million. The interest rate swap is subject to cash flow hedge accounting. The interest rate swap entered
into effect in March 2023 and will remain in effect until 25 March 2027. Its fair value was EUR 0.2 (5.1) mil-
lion at the end of the financial year. Under the contract, the Group pays a fixed interest of 2.8 per cent and
receives the floating six-month Euribor interest beginning from the start date.
The table below shows the annual cash flows of the derivative calculated at market interest rates. In addi-
tion, a sensitivity analysis of the derivative is presented below, illustrating the change in the market value of
the derivative when the yield curve rises or falls and other factors remain unchanged.
Interest rate swap agreement cash flows
EUR 1,000
2024
2025
2026
2027
Total
Interest rate swap agreement cash
flow 31 Dec 2023
Interest rate swap agreement
632
-314
-536
-235
-453
EUR 1,000
2024
2025
2026
2027
Total
Interest rate swap agreement cash
flow 31 Dec 2022
Interest rate swap agreement
1,584
1,312
1,229
621
4,746
Interest rate swap agreement sensitivity analysis
EUR 1,000
2023
2023
Change in the yield curve
1.0 percentage units
lower
1.0 percentage units
higher
Change in market value of the interest rate swap
agreement
-1,928
1,868
EUR 1,000
2022
2022
Change in the yield curve
1.0 percentage units
lower
1.0 percentage units
higher
Change in market value of the interest rate swap
agreement
-2,383
2,261
Credit risk
The Group’s credit risk mostly consists of credit risks involved in customer receivables related to business
operations. The Group’s largest customers are municipalities, joint municipal authorities or large and sol-
vent listed companies. The Group’s key credit risks are presented in Note 16
Trade and other receivables.
The payment information of corporate and private customers is checked at every appointment. For the
collection of payments, the Group uses an external collections agency. The Group offers private customers
financing via SveaRahoitus. This arrangement includes a check of the customer’s creditworthiness.
The age distribution of trade receivables is presented in Note 16
Trade and other receivables.
of credit losses recorded in profit or loss during the financial year was not significant. The maximum amount
of the Group’s credit risk equals to the carrying amount of financial assets at the end of the financial year
(see Note 20
Financial assets and liabilities by measurement category
).
Currency risk
The Group operates mainly in Finland and is not therefore exposed to material foreign exchange risks in its
operations. The Group’s annual procurements in foreign currencies are insignificant.
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
67
26. Acquired business operations
Accounting policies
When the Group acquires assets either through business arrangements or through other arrangements, the
management evaluates the actual nature of the asset and the business when determining whether it is a
business combination.
When an asset or a group of assets does not form a business operation, the acquisition is not treated as a
business combination and in that case the Group records the acquisition of individual assets and liabilities.
The acquisition cost is allocated to individual assets and liabilities in proportion to their current values at the
time of acquisition, and no goodwill is generated.
Acquisitions defined as business operations are treated as business combinations. The Group records
business combinations using the acquisition method. The transferred consideration, including the contin-
gent consideration and the identifiable assets and liabilities of the acquired company, are valued at fair
value at the time of acquisition. Acquisition related expenses are recorded as expenses in the period in
which they have incurred. The acquired business operations are consolidated to the financial statements
from the moment the Group obtains control over the acquired business. The share of non-controlling inter-
ests is recorded for each acquisition either at fair value or at an amount that corresponds to the relative
share of the non-controlling interests in the net assets of the target of acquisition.
If the initial accounting for a business combination is incomplete by the end of the reporting period in
which the combination occurs, the Group presents these acquisitions as preliminary in its financial state-
ments. Preliminary items are adjusted, and new assets and liabilities are recorded retrospectively, if new
information is received that concerns the facts and circumstances that existed at the time of acquisition and
which, if it had been known, would have affected the amounts recorded at that time. The measurement pe-
riod may not exceed one year from the acquisition date.
26.1. Acquired business operations
Acquired business operations 2023
Pihlajalinna had no business acquisitions in the financial year 2023.
Acquired business operations 2022
Pohjola Hospital Ltd
Pihlajalinna acquired the entire share capital of Pohjola Hospital Ltd from Pohjola Insurance Ltd. The ac-
quisition was completed on 1 February 2022. The purchase price allocation fair value adjustments were
mainly made to right-of-use assets EUR -9.8 million, other provisions EUR -4.3 million, financial lease lia-
bilities EUR -6.0 million and goodwill EUR 0.5 million.
EUR 1,000
2022
Consideration transferred
Cash
35,193
Total acquisition cost
35,193
The values of the assets and liabilities acquired for consideration at the time of acquisition were as fol-
lows:
EUR 1,000
Note
2022
Property, plant and equipment
12
430
Intangible assets
13
5,989
Right-of-use assets
14
103,048
Deferred tax assets
19
3,705
Trade and other receivables
13,196
Cash and cash equivalents
1,809
Total assets
128,176
Deferred tax liabilities
1,100
Restructuring provision
413
Lease liabilities
22
125,771
Other liabilities
8,458
Total liabilities
135,742
Acquired net assets
-7,566
Goodwill generated in the acquisition:
EUR 1,000
Note
2,022
Consideration transferred
35,193
Net identifiable assets of acquirees
7,566
Goodwill
13
42,759
Transaction price paid in cash
35,193
Cash and cash equivalents of acquirees
-1,809
Effect on cash flow
33,384
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
68
In the determination of fair values, intangible assets based on customer relationships, trademarks and
patient databases were identified. The fair value of these was defined as EUR 5.5 million. The fair value
was determined using an income-based approach, which requires a forecast of cash flows. In connection
with the above, EUR 1.1 million were identified as a deferred tax liability.
synergy benefits and skilled labour. Synergy benefits are based, for example, on an increase in the utiliza-
tion rate of surgery, reception visits and diagnostic services and premises and administrative synergies.
The generated goodwill is not tax deductible.
tially corresponds to their book value, and there is no significant impairment risk associated with the re-
ceivables.
cial year 2022 was EUR 76 million, and the impact on the result of the financial year has been EUR 12.5
million. Costs related to acquisitions EUR 0.6 million have been recorded in other business expenses (IFRS
3 expenses).
Acquired business operations 2022
Others
Pihlajalinna completed the acquisitions of Etelä-Savon Työterveys Oy, Lääkärikeskus Ikioma Oy and Punk-
kibussi® unit on 1 April 2022. Pihlajalinna completed the acquisition of Mediellen Oy on 1 September
2022 and the acquisitions of Seppälääkärit Oy and Seppämagneetti Oy on 1 October 2022. Information
on the acquisitions is presented combined below because the acquisitions are not individually material:
EUR 1,000
2022
Consideration transferred
Cash
22,352
Contingent consideration
1,101
Total acquisition cost
23,454
The values of the assets and liabilities acquired for consideration at the time of acquisition were as fol-
lows:
EUR 1,000
Note
2022
Property, plant and equipment
12
961
Intangible assets
13
2,194
Right-of-use assets
14
3,591
Available-for-sale financial assets
1
Deferred tax assets
19
61
Inventories
223
Trade and other receivables
2,291
Cash and cash equivalents
1,969
Total assets
11,290
Deferred tax liabilities
19
447
Provisions
153
Financial liabilities
22
466
Lease liabilities
3,778
Other liabilities
6,014
Total liabilities
10,858
Acquired net assets
432
Goodwill generated in the acquisition:
EUR 1,000
Note
2022
Consideration transferred
23,454
Share of the acquisition allocated to non-controlling interest
41
Net identifiable assets of acquirees
-432
Goodwill
13
23,063
Transaction price paid in cash
22,352
Cash and cash equivalents of acquirees
-1,969
Effect on cash flow
20,384
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
69
In the determination of fair values, intangible assets based on customer relationships, trademarks, pa-
tient databases and non-compete agreements were identified. The fair value of these was defined as EUR
2.2 million. Fair value has been determined using an income-based approach, which requires a forecast
of expected cash flows. In connection with the above, a calculated deferred tax liability of EUR 0.4 million
was identified.
synergy benefits and skilled labour. About EUR 8 million of the generated goodwill is tax deductible.
tially corresponds to their book value, and there is no significant impairment risk associated with the re-
ceivables.
cial year 2022 was EUR 16.5 million, and the impact on the result of the financial year has been EUR 1.5
million.
nised in other operating expenses (IFRS 3 costs).
Acquisitions and capital expenditure
Acquired entity
Month of
acquisition
Industry
Domicile
Pohjola Hospital Oy
2/2022
Private clinic operations
Helsinki
Etelä-Savon Työterveys Oy
4/2022
Occupational healthcare
services
Mikkeli
Lääkärikeskus Ikioma Oy
4/2022
Private clinic operations,
Dental care
Mikkeli
Punkkibussi®-business
4/2022
Private clinic operations
Several
Mediellen Oy
9/2022
Private clinic operations
Sotkamo
Seppälääkärit Oy
10/2022
Private clinic operations
Jyväskylä
Seppämagneetti Oy
10/2022
Private clinic operations
Jyväskylä
26.2. Acquistions of non-controlling interest
Acquisitions 2023
Company
Acquisition
date
Acquired share,
%
New ownership
interest, %
Suomen Yksityiset Hammaslääkärit Oy
7 Jul 2023 and
16 Oct 2023
32%
95%
Pihlajalinna Ikioma Oy
1 Jan 2023
6%
100%
Eur 1,000
Acquisition
price
Change in
minority share
Impact in
Group
earnings
Suomen Yksityiset Hammaslääkärit Oy
Tampere
-278
15
Pihlajalinna Ikioma Oy
287
-70
-218
Acquisitions 2022
Company
Acquisition
date
Acquired share,
%
New ownership
interest, %
Suomen Yksityiset Hammaslääkärit Oy
Tampere
8%
100%
Laihian Hyvinvointi Oy
12/20/2022
19%
100%
Eur 1,000
Acquisition
price
Change in
minority share
Impact in
Group
earnings
Suomen Yksityiset Hammaslääkärit Oy
Tampere
246
-618
Laihian Hyvinvointi Oy
36
-43
7
Accounting principles
Transactions with non-controlling interests that do not lead to a loss of control are treated as transactions
with owners. Changes in the share of ownership lead to adjustments of the carrying amounts of the Group’s
share and the share of non-controlling interests. The difference between the adjustment made to non-con-
trolling interests’ share and the paid or received consideration is recognised in earnings.
26.3. Divestments
Sale of dental care services
Pihlajalinna announced in late 2022 that it will sell its dental care services to Hammas Hohde Oy. Pihla-
jalinna classified its dental health services as assets held for sale effective from 31 December 2022. The di-
vestment was completed on 31 March, 2023. As a result of the divestment, net assets totalling approxi-
mately EUR 5.1 million were removed from the consolidated statement of financial position. The Group rec-
ognized a gain of EUR 3.6 million on the sale in other operating income for the financial year. As part of the
transaction, the Group sold the entire share capital of Wiisuri Oy and Pihlajalinna Hammasklinikat Oy, along
with the dental care business operations of certain Group companies
.
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
70
27. Subsidiaries and material non-controlling interests
The Group’s structure
The Group had 28 (34) subsidiaries in 2023. Of these subsidiaries, 17 (20) are wholly-owned and 11 (14) are partially owned. A list of all of the Group’s subsidiaries is presented in Note 30
Related party transactions
. In 2023,
the Group had 3 (3) associated companies and 1 (1) joint operation.
Breakdown of material non-controlling interests in the Group
Main busines loca-
tion
Non-controlling interests’
share of the votes
Non-controlling interests’
share of profit or loss
Non-controlling interests’
share of equity
EUR 1,000
2023
2022
2023
2022
2023
2022
Jämsän Terveys Oy
Jämsä
49%
49%
-1288
-2462
-5173
-3885
Pihlajalinna Erityisasumispalvelut Oy
Hämeenlinna
30%
30%
129
79
-1
-130
Dextra Lapsettomuusklinikka Oy
Helsinki
49%
49%
166
227
584
418
Pihlajalinna Liikuntakeskukset Group
several
30%
30%
-417
-401
1036
1453
Total
-1,410
-2,558
-3,554
-2,144
Summary of financial information on subsidiaries with a material non-controlling interest
Jämsän Terveys Oy
Pihlajalinna Erityisasumispalvelut
Oy
Dextra Lapsettomuusklinikka Oy
Pihlajalinna Liikuntakeskukset
Group
2023
2022
2023
2022
2023
2022
2023
2022
Current assets
3,725
5,381
1,136
767
1,439
1,026
1,430
1,742
Non-current assets
876
1,233
4,126
4,306
3,651
3,720
37,916
37,168
Current liabilities
15,059
14,144
1,254
1,464
936
860
18,136
17,278
Non-current liabilities
80
324
3,996
4,016
2,321
2,342
18,632
17,603
Revenue
69,204
75,231
6,848
6,370
5,100
5,201
14,489
12,653
Operating profit
-2,663
-4,522
595
407
364
584
-127
-922
Profit/loss
-2,628
-5,025
430
262
338
463
-1,401
-1,348
Share of profit/loss attributable to owners of the parent
-1,340
-2,563
301
183
172
236
-984
-947
Non-controlling interests’ share of profit/loss
-1,288
-2,462
129
79
166
227
-417
-401
Net cash flow from operating activities
1,925
-1,783
826
852
1,085
1,157
4,808
4,070
Net cash flow from investing activities
-85
-83
-184
-18
-669
546
-599
-453
Net cash flow from financing activities
-2,403
2,221
-642
-834
-418
-1,699
-4,496
-3,419
of which dividends paid to non-controlling interests
-660
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
71
28. Interests in associates and joint arrangements
Accounting policies
Associates are companies over which the Group has significant influence. As a rule, significant influence is
established when the Group holds more than 20% of a company’s voting power or otherwise has significant
influence but no control.
A joint arrangement is an arrangement of which two or more parties have joint control. Joint control in-
volves contractually agreed sharing of control of an arrangement, which exists only when decisions about
relevant activities require the unanimous consent of the parties sharing control. A joint arrangement is ei-
ther a joint operation or a joint venture. A joint venture is an arrangement whereby the Group has rights to
the net assets of the arrangement, whereas in a joint operation the Group has rights to the assets, and obli-
gations for the liabilities, relating to the arrangement.
Associates and joint ventures are consolidated using the equity method. If the Group’s share of the loss of
an associate or a joint venture exceeds the carrying amount of the investment, then the investment is car-
ried at zero value, and the losses exceeding the carrying amount are not consolidated, unless the Group is
committed to fulfilling the obligations of the associate or joint venture. An investment in an associate or a
joint venture includes the goodwill generated through the acquisition. Unrealised profits between the
Group and an associate or a joint venture are eliminated in proportion to the Group’s ownership interest.
The Group’s pro rata share of an associate’s or a joint venture’s profit for the financial year is included in
operating profit.
Changes in interests during the financial year
The share of profit in associated companies and joint ventures for 2023 includes approximately EUR 0.5
million in impairment recognised during the financial year on Pihlajalinna’s holdings in Digital Health
Solutions Oy and a share of approximately EUR -0.1 million of the company’s result. The impairment was
recognised on the basis of impairment testing.
More information is provided in note 13
Impairment testing
.
EUR 1,000
2023
2022
Interests in associates
Ullanlinnan Silmälääkärit Oy
34
31
Digital Health Solutions Oy
0
609
Kuura Digilääkärit Oy
1,557
1,428
Interests in joint operations
Koy Levin Pihlaja Oy
40
40
Total carrying amount
1,631
2,109
Interests in associates
Name
Holding, %
Name
2023
2022
Ullanlinnan Silmälääkärit Oy
Helsinki
Healthcare services
37%
37%
Digital Health Solutions Oy
Sotkamo
All legal business
41%
41%
Kuura Digilääkärit Oy
Helsinki
Healthcare services
45%
45%
Interests in joint operations
The Group owns 31% in Kiinteistö Oy Levin Pihlaja, which is consolidated as a joint operation according to
the pro rata share.
29. Contingent assets and liabilities and commitments
Collateral given on own behalf
2023
2022
Sureties
5,300
4,158
Mortgage on company assets
0
200
Properties’ VAT refund liability
7
33
Lease commitments for off-balance sheet leases
1,606
1,312
Lease deposits
234
561
Hybrid bond interests
Pihlajalinna issued EUR 20 million hybrid bond on 27 March 2023. At the end of the financial year, the un-
paid interest was EUR 1.9 million.
Lawsuits and official proceedings
The City of Jämsä has taken legal action against Jämsän Terveys Oy regarding a matter concerning the price
adjustment provision in the service agreement. The difference in views regarding whether the fixed annual
price for social and healthcare services can decrease due to price. Jämsän Terveys filed an additional coun-
terclaim against the City of Jämsä. The additional counterclaim concerns the effect of changes in the ser-
vices under the service agreement on price and the service provider’s liability for financing investments by
the Pirkanmaa Hospital District insofar as such investments serve operations after the term of the service
agreement. The service provider is entitled to price adjustments corresponding to increases in costs and the
contractual parties are under an obligation to negotiate and try to reach an agreement.
On 4 April 2022, the District Court of Central Finland handed down its ruling on the dispute concerning
the service agreement between Jämsän Terveys Oy and the City of Jämsä. The District Court did not deny
the validity of the grounds for the variable charges in Jämsän Terveys’ service agreement, but the District
Court found that the evidence presented regarding the realisation of the costs was insufficient. Pihlajalinna
has submitted an application for leave to appeal to the Supreme Court and an appeal concerning part of the
judgement of the Vaasa Court of Appeal.
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
72
On 22 November 2023, the Vaasa Court of Appeal handed down its ruling on the dispute. The Court of
Appeal decided to uphold the decision of the District Court. Pihlajalinna has submitted an application for
leave to appeal to the Supreme Court and an appeal concerning part of the judgement of the Vaasa Court of
Appeal.
Jämsän Terveys Oy has taken legal action in the District Court against the The City of Jämsä, a former client,
mainly concerning COVID-19-related costs which the City of Jämsä has not paid in breach of the service
agreement. In addition, a difference of opinion has emerged between the company and the city during the
2022 financial year on the impact of the transfer of personnel on the annual fee under the service agree-
ment.
On 30 October 2023, the county council of the wellbeing services county of South Ostrobothnia decided to
terminate the outsourcing agreement with Kuusiolinna Terveys Oy with effect at the end of 2025, in accord-
ance with the transition period stipulated by the Act on the Implementation of the Reform of Health, Social
and Rescue Services and on the Entry into Force of Related Legislation. The decision of the county council is
not yet legally valid, and an appeal has been lodged with the Supreme Administrative Court.
Pihlajalinna is involved in certain pending legal proceedings concerning employment relationships, but they
are not expected to have a significant financial impact on the Group.
Contingent assets
At the end of the financial year 2023, Pihlajalinna had EUR 8.2 million in contingent receivables in accord-
ance with IAS 37. The items in question have not been recognised in the financial statements as receivables
because the realisation of the income involves uncertainty due to the potential collection of the receivables
through legal action. Nevertheless, the inflow of economic benefits to the company is still considered prob-
able. The matter is described in more detail in note 1
Revenue from contracts with customers.
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
73
30. Group Companies
The Group’s parent company and subsidiary relationships 31.12.2023
The Group’s parent company is Pihlajalinna Plc, which owns all of Pihlajalinna Terveys Oy’s Series A shares.
Company
Domicile
Holding
% of votes
Pihlajalinna Terveys Oy
Parkano
100%
100%
Ikipihlaja Johanna Oy
Jämsä
100%
100%
Jokilaakson Terveys Oy
Jämsä
90%
90%
Mäntänvuoren Terveys Oy
Mänttä-Vilppula
91%
91%
Ikipihlaja Kuusama Oy
Kokemäki
100%
100%
Ikipihlaja Sofianhovi Oy
Mänttä-Vilppula
100%
100%
Ikipihlaja Matinkartano Oy
Lieto
100%
100%
Ikipihlaja Setälänpiha Oy
Lieto
100%
100%
Ikipihlaja Oiva Oy
Raisio
100%
100%
Kolmostien Terveys Oy
Parkano
96%
96%
Jämsän Terveys Oy
Jämsä
51%
51%
Kuusiolinna Terveys Oy
Alavus
97%
97%
Lääkäriasema DokTori Oy
Lappeenranta
100%
100%
Kompassi Lääkärikeskus Oy
Seinäjoki
100%
100%
Mediapu Oy
Oulu
100%
100%
Pihlajalinna Erityisasumispalvelut Oy
Hämeenlinna
70%
70%
Dextra Lapsettomuusklinikka Oy
Helsinki
51%
51%
Bottenhavets Hälsa Ab -
Selkämeren Terveys Oy
Kristiinankaupunki
75%
75%
Linnan Klinikka Oy
Hämeenlinna
100%
100%
Pihlajalinna Liikuntakeskukset Oy
Tampere
70%
70%
Forever Helsinki Oy
Helsinki
70%
70%
Suomen Yksityiset Hammaslääkärit Oy
Tampere
95%
95%
Laihian Hyvinvointi Oy
Laihia
100%
100%
Pihlajalinna Lääkärikeskukset Oy
Helsinki
100%
100%
Pihlajalinna Ikioma Oy
Mikkeli
100%
100%
Pihlajalinna Kainuu Oy
Sotkamo
100%
100%
Pihlajalinna Seppälääkärit Oy
Jyväskylä
100%
100%
Information on the associates is presented in Note 28 Interests in associates and joint arrangements.
Changes in Group Structure
The following changes in Group Structure were implemented during the financial year:
Merged Company
Target Company
Month of
Acquisition
Pihlajalinna Lääkärikeskukset Oy
Pihlajalinna Lääkärikeskukset Oy (former Pihlajalinna
Omasairaala Oy 1.2. – 31.12.2022)
1.1.2023
Pihlajalinna Turku Oy
Pihlajalinna Lääkärikeskukset Oy (former Pihlajalinna
Omasairaala Oy 1.2. – 31.12.2022)
1.1.2023
Etelä-Savon Työterveys Oy
Pihlajalinna Lääkärikeskukset Oy (former Pihlajalinna
Omasairaala Oy 1.2. – 31.12.2022)
1.1.2023
Pihlajalinna Oulu Oy
Pihlajalinna Lääkärikeskukset Oy (former Pihlajalinna
Omasairaala Oy 1.2. – 31.12.2022)
1.4.2023
Pihlajalinna Seppämagneetti Oy
Pihlajalinna Lääkärikeskukset Oy (former Pihlajalinna
Omasairaala Oy 1.2. – 31.12.2022)
1.5.2023
Mergers were not implemented during the 2022 financial year.
Acquired and sold business operations are described in more detail in note 26
Acquired business operations
and divestments.
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
74
31. Related party transactions
The Group’s related parties consist of the subsidiaries, associates and joint ventures. Key management per-
sonnel considered related parties consist of the members of the Board of Directors and the Management
Team, including the CEO and their family members.
Employee benefits of management
EUR 1,000
2023
2022
Monetary salaries, Management Team
1,768
1,030
Share-based rewards, Management Team
0
65
Fringe benefits, Management Team
36
10
Post-employment benefits, Management Team
277
182
Salaries and other short-term employee benefits,
Management Team, total
2,081
1,288
Salaries and remuneration
Joni Aaltonen acted as CEO of Pihlajalinna until 8 March 2023. Mikko Wirén acted as interim CEO from 9
March to 31 August 2023. Tuomas Hyyryläinen started as CEO of Pihlajalinna on 1 September 2023.
EUR 1,000
2023
2022
Joni Aaltonen
Monetary salaries
140
287
Share-based rewards
0
32
Fringe benefits
9
20
Post-employment benefits
203
Total
353
339
Mikko Wirén
Monetary salaries
160
0
Share-based rewards
0
0
Fringe benefits
14
0
Total
174
0
Tuomas Hyyryläinen
Monetary salaries
120
0
Share-based rewards
0
0
Fringe benefits
0
0
Total
120
0
EUR 1,000
2023
2022
Board of Directors
Chair of the Board
Jukka Leinonen
68
0
Vice-Chair of the Board
Leena Niemistö
54
53
Board member
Mikko Wirén
44
261
Board member
Heli Iisakka
43
34
Chair of the People and
Sustainability Committee
Hannu Juvonen
54
41
Chair of the Audit Committee
Seija Turunen
53
50
Board member
Kim Ignatius
38
0
Board member
Tiina Kurki
37
0
Board member (until 3 April 2023)
Mika Manninen
6
37
Board member (until 12 June 2022)
Kati Sulin
0
17
Total
397
491
Of the annual remuneration paid in shares, a total of 2,636 (0) shares held by the company were transferred
to the Chair of the Board of Directors, 1,757 (1,423) shares transferred to the Vice Chair and the Chair of the
People and Sustainability Committee and Audit Committee each, and 1,318 (949) shares to each member of
the Board of Directors.
According to the CEO’s contract, the notice period for dismissal is 6 months. The company is liable to pay
the CEO one-time compensation for termination amounting to eight months’ total salary. The CEO’s pension
benefits are according to the statutory pension scheme. The CEO Tuomas Hyyryläinen is not a member of
the Board of Directors.
Related party transactions and related party receivables and liabilities:
2023
2022
Key management personnel
Rents paid
1,014
919
Services procured
1,277
1,064
Prepayments
-99
-96
Trade payables
179
105
The Group has leased its business premises in Karkku, Tampere and Kangasala from Mikko Wirén's control-
ling company. Mikko Wirén acted as the interim CEO from 9 March to 31 August 2023 and is a member of
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
75
the Board of Directors. The Group also has an agreement with Mikko Wirén's controlling company MWW
Oy, under which the Group buys healthcare professionals’ services and consulting.
32. Events after the balance sheet date
Pihlajalinna Group company Kuusiolinna Terveys Oy commenced change negotiations on 31 January 2024.
The premature termination of the service agreement by a decision of the wellbeing services county will
have a significant impact on the company’s operating conditions, which is why the company had to com-
mence change negotiations. The change negotiations were still incomplete at the time of signing the finan-
cial statements and they concern the entire personnel of Kuusiolinna Terveys Oy except administrative sup-
port services. According to a preliminary estimate, the negotiations may result in a reduction of approxi-
mately 190 person-years in the company. The duration of the negotiations is expected to be six weeks.
Pihlajalinna conveyed in 2 January 2024 a gross amount of 20,000 shares to CEO Tuomas Hyyryläinen. The
remuneration was implemented in shares and cash. The applicable withholding tax deducted from the
transferred shares, and the remaining net amount was paid in shares. The remuneration was related to the
agreed-upon right for the CEO to acquire shares at the beginning of the share-based incentive scheme, with
Pihlajalinna transferring matching shares corresponding to the purchased shares. The arrangement is de-
scribed in more detail in note 5
Share-based payments.
treasury shares, corresponding to approximately 0.19 per cent of the total number of shares and votes in
the company.
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
76
PARENT COMPANY FINANCIAL STATEMENTS, FAS
Parent company income statement, FAS
EUR
Note
2023
2022
Revenue
1.1.
9,077,280.9
6,756,645.1
Other operating income
1.2.
395,721.1
444,262.1
Personnel expenses
1.3.
-1,397,212.7
-1,228,082.9
Depreciation, amortisation and impairment
1.4.
-2,672,301.2
-2,215,305.4
Other operating expenses
1.5
-8,876,588.6
-6,283,335.7
Operating profit (loss)
-3,473,100.5
-2,525,816.7
Financial income and expenses
1.6
-5,353,946.6
-3,206,505.2
Profit (loss) before appropriations and taxes
-8,827,047.1
-5,732,322.0
Appropriations
1.7
Change in depreciation difference
-783,600.4
104,453.1
Group contribution
537,000.0
0.0
Income taxes
1.8.
1,364,319.0
1,123,722.5
Profit (loss) for the financial year
-7,709,328.6
-4,504,146.4
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
77
Parent company balance sheet, FAS
EUR
Note
2023
2022
Assets
Non-current assets
Intangible assets
2.1
3,377,107.4
3,731,227.9
Property, plant and equipment
2.2
6,397,913.2
1,742,356.4
Investments
2.3
384,535,076.0
384,535,076.0
Total non-current assets
394,310,096.5
390,008,660.2
Current assets
Non-current receivables
2.4
2,488,041.5
1,160,236.5
Current receivables
2.5
50,925,791.8
59,571,221.5
Cash and cash equivalents
24,278,892.0
4,222,590.0
Total current assets
77,692,725.2
64,954,048.0
Total assets
472,002,821.7
454,962,708.2
Equity and liabilities
Equity
2.6
Share capital
80,000.0
80,000.0
Reserve for invested unrestricted equity
183,190,483.5
183,190,483.5
Retained earnings
28,043,605.2
32,547,508.8
Profit/loss for the financial year
-7,709,328.6
-4,503,903.6
Total Equity
203,604,760.1
211,314,088.7
Accumulated appropriations
2.7
1,697,485.8
913,885.4
Liabilities
2.9
Non-current liabilities
163,649,827.4
167,003,079.1
Current liabilities
103,050,748.4
75,731,655.0
Total liabilities
266,700,575.8
242,734,734.2
Total equity and liabilities
472,002,821.7
454,962,708.2
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
78
Parent company cash flow statement, FAS
EUR
2023
2022
Cash flow from operating activities
Profit for the period
-7,709,328.6
-4,503,903.6
Depreciation, amortisation and impairment
2,672,301.2
2,215,305.4
Financial income and expenses
5,353,946.6
3,206,505.2
Other adjustments (appropriations and taxes)
-1,157,402.1
-1,228,175.5
Cash flow before change in working capital
-840,482.8
-310,268.6
Change in net working capital
-1,039,744.8
667,238.7
Cash flows from operating activities before financial items and
taxes
-1,880,227.6
356,970.2
Interest received
3,308,330.4
4,507,029.1
Direct taxes paid
1,489,667.8
-4,258,649.6
Cash flow from operating activities
2,917,770.5
605,349.7
Cash flow from investing activities
Investments in tangible and intangible assets
-1,502,075.3
-1,485,750.2
Proceeds from sale of intangible and tangible assets
52,000.0
0.0
Other investments
0.0
300,000.0
Investments in subsidiaries
0.0
-100,000,000.0
Cash flow from investing activities
-1,450,075.3
-101,185,750.2
Cash flow from financing activities
Proceeds from short-term borrowings from group companies
29,052,037.8
9,543,151.0
Loans granted to group companies
5,349,810.6
9,649,797.8
Proceeds from long-term borrowings
5,000,000.0
209,000,000.0
Repayment of long-term borrowings
-33,063,486.7
-132,774,286.9
Group contributions received
0.0
20,350,000.0
Hybrid bond
20,000,000.0
0.0
Hybrid bond interests and expenses
-431,860.2
0.0
Interest paid
-7,317,895.0
-4,902,504.2
Dividends paid
0.0
-6,767,176.5
Acquisition of own shares
0.0
-1,474,755.6
Cash flow from financing activities
18,588,606.5
102,624,225.5
Change in cash and cash equivalents
20,056,301.7
2,043,825.1
Cash at the beginning of the financial year
4,222,590.0
2,178,764.9
Cash at the end of the financial year
24,278,892.0
4,222,590.0
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
79
Notes to the financial statements 31 December 2023
Accounting policies
Pihlajalinna Plc (2617455-1), domiciled in Tampere, is the parent company of Pihlajalinna Group. The com-
pany was established on 15 April 2014.
Valuation of non-current assets
Intangible assets and tangible assets have been recognised in the balance sheet at cost. Depreciation and
amortisation according to plan is calculated using the straight-line method over the economic useful lives of
the assets.
The planned depreciation periods are as follows:
Development costs 5–7 years
Other intellectual property rights 5–7 years
Other long-term expenditures 5–7 years
Machinery and equipment 3–10 years
Acquisition costs of assets included in non-current assets with a probable economic useful life of less than 3
years, and small-scale acquisitions (value under EUR 850) have been expensed in the financial year during
which they were acquired in full. Financial assets are measured at the lower of cost or fair market, if the im-
pairment is considered to be permanent.
Recognition of deferred taxes
Deferred tax liabilities or assets have been calculated on the temporary differences between taxation and
the financial statements, using the prevailing tax base at balance sheet date. The balance sheet includes de-
ferred tax liabilities in their entirety and deferred tax assets in the amount of the estimated probable receiv-
ables.
Revenue recognition
The sale of products and services is recognised in connection with their delivery.
Capitalised development costs (Accounting Ordinance 2:4, 3-4)
The company’s capitalised product development expenditure relating to the Pihlajalinna mobile application
and the company website will be amortised over their economic useful lives. Unamortised development ex-
penditure included in intangible assets, which restricts profit distribution, amounted to EUR 96 (258) thou-
sand at the end of the financial year.
Recognition of pension schemes
The personnel’s statutory pension security is handled by an external pension insurance company. Pension
costs are recognised as expenses during the year of their accrual.
Derivative financial instruments
The company has an interest swap agreement that is used to hedge floating rate financing arrangement.
The company present the interest swap agreement according to prudent basis (Accounting Board
2016/1963). The negative value of the interest swap agreement is recorded based on the lowest value as an
expense and a liability. The positive unrealized value is presented as an off balance sheet item and income
statement item and presented only in the Notes. Additional information on the derivative is presented in
the parent company’s
Other notes
.
The company has sold its valid interest rate swap agreement during the beginning of 2023. The fair value of
the interest rate swap agreement at the time of closing the agreement was approximately EUR 3.9 million.
Sales profit is presented as reducing the financial expenses of the financial year in the income statement of
the parent company.
Hybrid Bond
On March 27, 2023, Pihlajalinna Oyj issued a hybrid bond of EUR 20 million. The hybrid bond is presented in
liabilities in the balance sheet and the interest is presented in financial expenses in the income statement.
1.1. Revenue
EUR 1,000
2023
2022
Revenues by sector
Sale of services
3
0
Sale of services, intracompany
9,074
6,757
9,077
6,757
1.2. Other operating income
EUR 1,000
2023
2022
Rental income
116
116
Lease income from equipment
240
328
Capital gains on property, plant and equipment
40
0
396
444
1.3. Personnel expenses
EUR 1,000
2023
2022
Wages and salaries
-1,245
-1,096
Pension costs
-133
-115
Other social security expenses
-19
-16
-1,397
-1,228
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
80
Average number of employees during the financial year
3
3
The remuneration of the Board of Directors of Pihlajalinna Plc is included in the company’s personnel ex-
penses. The Annual General Meeting of 4 April 2023 decided that remuneration shall be paid to the mem-
bers of the Board of Directors as follows: to the full-time Chairman of the Board of Directors EUR 60,000 per
year; to the Vice-Chairman of the Board and the Chairman of the Audit Committee EUR 40,000 per year, and
to members EUR 30,000 per year.
The annual remuneration shall be paid in company shares and in cash, with approximately 40 per cent of
the remuneration used to acquire shares in the name and on behalf of the members of the Board of Direc-
tors, and the remainder paid in cash. The remuneration can be paid either entirely or partially in cash if the
member of the Board of Directors has, on the day of the General Meeting, 4 April 2023, been in possession
of over EUR 1,000,000 worth of company shares. The company is responsible for the expenses and transfer
tax arising from the acquisition of the shares. The remuneration to be paid in company's own shares was
completed by handing over to the members of the Board a total of 11,861 own shares in May. Rest of the
annual remuneration was paid at the same time in cash. If the term of a Board member ends before the An-
nual General Meeting of 2023, the Board is entitled to decide on the possible recovery of the remuneration
in a manner it deems appropriate.
In addition, the Annual General Meeting decided that each Board member shall be paid a meeting fee of
EUR 600 for each Board and Committee meeting. furthermore, reasonable travel expenses of the members
of the Board of Directors are reimbursed in accordance with the Company's travel policy.
1.4. Depreciation and impairment
EUR 1,000
2023
2022
Depreciation according to plan
Intangible assets
-1,849
-1,802
Property, plant and equipment
-823
-413
Total depreciation according to plan
-2,672
-2,215
1.5. Other operating expenses
EUR 1,000
2023
2022
Voluntary social security expenses
-13
32
Facility expenses
-173
-130
Vehicle expenses
-15
-17
ICT expenses
-7,359
-4,983
Machinery and equipment expenses
Sales, marketing and travel expenses
-67
-48
Administrative expenses
-1,250
-1,136
Other operating expenses, total
-8,877
-6,283
Auditor’s fees
Audit fees
75
126
Auxiliary services
35
Total
110
126
1.6. Financial income and expenses
EUR 1,000
2023
2022
Interest income from non-current investments
From Group companies
3,174
1,841
From others
359
2
Interest income from non-current investments, total
3,533
1,842
Interest expenses and other financial expenses
To Group companies
-2,553
-428
To others
-6,335
-4,621
Interest expenses and other financial expenses, total
-8,887
-5,049
Financial income and expenses, total
-5,354
-3,207
1.7. Appropriations
EUR 1,000
2023
2022
Difference between depreciation according to plan and dep-
reciation in taxation
-784
104
Group contributions received
537
Total
-247
104
1.8. Income taxes
EUR 1,000
2023
2022
Change in deferred tax assets
1,364
1,124
Income taxes on actual operations during the financial year
Income taxes total
1,364
1,124
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
81
Notes to the balance sheet
2.1. Intangible assets
EUR 1,000
2023
2022
Development costs
Acquisition cost at the start of the financial year
1,607
1,607
Acquisition cost at the end of the period
1,607
1607
Accumulated depreciation at beginning of period
-1,348
-1118
Depreciation and amortisation for the period
-162
-230
Carrying amount at the end of period
96
258
Other intellectual property rights
Acquisition cost at the start of the financial year
1,658
1,658
Acquisition cost at the end of the period
1,658
1,658
Accumulated depreciation at beginning of period
-1,464
-1,249
Depreciation and amortisation for the period
-154
-215
Carrying amount at the end of period
39
194
Other long-term expenditures
Acquisition cost at the start of the financial year
7,449
6,051
Additions
1,251
1,331
Transfers between items
273
67
Acquisition cost at the end of the period
8,973
7,449
Accumulated depreciation at beginning of period
-4,335
-2,979
Depreciation and amortisation for the period
-1,533
-1,356
Carrying amount at the end of period
3,105
3,114
Prepayments for intangible assets
Acquisition cost at the start of the financial year
166
79
Additions
244
153
Transfers between items
-273
-67
Carrying amount at the end of period
137
166
Intangible assets, total
Acquisition cost at the start of the financial year
10,879
9,394
Additions
1,495
1,485
Acquisition cost at the end of the period
12,374
10,879
Accumulated depreciation at beginning of period
-7,148
-5,346
Depreciation and amortisation for the period
-1,849
-1,802
Carrying amount at the end of period
3,377
3,731
2.2. Property, plant and equipment
EUR 1,000
2023
2022
Machinery and equipment
Acquisition cost at the start of the financial year
3,585
3,584
Additions
5,491
1
Disposals
-111
0
Acquisition cost at the end of the period
8,965
3,585
Accumulated depreciation at beginning of period
-1,843
-1,430
Depreciation and amortisation for the period
99
0
Accumulated depreciation on disposals
-823
-413
Carrying amount at the end of the period
6,398
1,742
Other intellectual property rights
Acquisition cost at the start of the financial year
3,585
3,584
Additions
5,491
1
Disposals
-111
0
Acquisition cost at the end of the period
8,965
3,585
Accumulated depreciation at beginning of period
-1,843
-1,430
Depreciation and amortisation for the period
99
0
Accumulated depreciation on disposals
-823
-413
Carrying amount at the end of the period
6,398
1,742
2.3. Investments
EUR 1,000
2023
2022
Other shares and participations
Acquisition cost at the start of the financial year
50
350
Disposals
0
-300
Acquisition cost at the end of the period
50
50
Shares in subsidiaries
Acquisition cost at the start of the financial year
384,485
284,485
Additions
0
100,000
Acquisition cost at the end of the period
384,485
384,485
Total investments
384,535
384,535
A full list of the Group’s subsidiaries is presented in Note 30 Group Companies in the the consolidated
financial statements.
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
82
2.4. Non-current receivables
EUR 1,000
2023
2022
Receivables from others
Lease deposits given
0
37
Deferred tax assets
2,488
1,124
Total non-current receivables
2,488
1,160
2.5. Current receivables
EUR 1,000
2023
2022
Receivables from others
Trade receivables
12
12
Other receivables
43
865
Prepayments and accrued income
1,566
5,553
Total
1,621
6,431
Receivables from Group companies
Trade receivables
1,808
771
Loan receivables
45,533
50,882
Prepayments and accrued income
1,964
1,487
Total
49,305
53,140
Material items included under Prepayments and accrued in-
come
Group contribution
537
0
Accrued direct taxes
0
1,490
Allocation of sales
0
672
Accrued social security expenses
64
112
Accrued trade payables
2,462
3,952
Other
467
815
Total
3,530
7,040
Total current receivables
50,926
59,571
2.6. Equity
EUR 1,000
2023
2022
Restricted equity
Share capital at the beginning
80
80
Share capital at the end
80
80
Total restricted equity
80
80
Unrestricted equity
Reserve for invested unrestricted equity at the beginning
183,190
183,190
Reserve for invested unrestricted equity at the end
183,190
183,190
Retained earnings at the beginning
28,044
40,136
Dividends paid
0
-6,767
Acquisition of own shares
0
-822
Retained earnings
28,044
32,548
Profit for the period
-7,709
-4,504
Total unrestricted equity
203,525
211,234
Total equity
203,605
211,314
Retained earnings
28,044
32,548
Result for the period
-7,709
-4,504
Reserve for invested unrestricted equity
183,190
183,190
Capitalised development costs
-96
-258
Distributable unrestricted equity
203,429
210,976
Shares in subsidiaries
22,620,135
22,620,135
of which treasury shares
53,980
70,491
Number of outstanding shares
22,566,155
22,549,644
2.7. Accumulated appropriations
EUR 1,000
2023
2022
Accumulated depreciation difference
1,697
914
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
83
2.8. Mandatory provisions
EUR 1,000
2023
2022
Onerous contracts
0
0
2.9. Liabilities
EUR 1,000
2023
2022
2.9.1 Non-current liabilities
Liabilities to others
Loans from financial institutions
140,000
167,000
Hybrid Bond
20,000
0
Other non-current liabilities
3,650
3
Non-current liabilities, total
163,650
167,003
2.9.2 Current liabilities
Liabilities to others
Trade payables
1,373
5,430
Other liabilities
1,213
365
Accrued liabilities
4,643
651
7,229
6,447
Liabilities to Group companies
Trade payables
85
4
Accrued liabilities
107
2,703
Other liabilities
95,630
66,578
95,821
69,285
Material items included under Accrued liabilities
Personnel expense allocations
173
171
Interest allocations
4,014
2,876
Other items
563
307
4,750
3,354
Current liabilities, total
103,051
75,732
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
84
Other notes
EUR 1,000
2023
2022
Collaterals and contingent liabilities
Other sureties
157
121
Pihlajalinna’s financing arrangements
Pihlajalinna’s financing arrangement comprises a long-term loan of EUR 130 million and a revolving credit
facility of EUR 70 million for general financing needs and acquisitions. It also includes an opportunity to later
increase the total amount by EUR 100 million (to EUR 300 million), subject to separate decisions on a sup-
plementary loan from the funding providers.
Under the original agreement, Pihlajalinna’s financing arrangement was set to have a term of three years
and a maturity date in March 2025. In December 2023, Pihlajalinna and the creditor banks agreed on re-
structuring the financing arrangement. According to the new agreement, the financing arrangement will ma-
ture in March 2026, and the loan margin will change effective from 1 July 2024.
The financing arrangement includes the customary financial covenants concerning leverage (ratio of net
debt to pro forma EBITDA) and gearing. IFRS 16 lease liabilities are not taken into account in the calculation
of the covenants (Frozen GAAP). The loan margin of the financing is additionally linked to Pihlajalinna’s an-
nual sustainability objectives related to patient satisfaction (NPS), employee engagement (eNPS) and access
to surgical treatment within the target time. Sustainability targets have a minor effect on the loan margin,
depending on how many of the agreed-upon sustainability targets are achieved. At the end of the financial
year, the sustainability targets linked to the financing arrangement caused no changes in the loan margins.
In late 2022, Pihlajalinna and the creditor banks agreed on a temporary increase to the covenants of the
financing arrangement and increasing the highest margin by one percentage point from the beginning of
2023 until the third quarter of the year. The creditor banks waived off the in-crease to the highest margin
and the other waiver terms in late April 2023 when the company demonstrated it would remain under the
original covenants for the next 12 months.
The original gearing covenant of the financing arrangement is 115 per cent and the leverage covenant is
was 3.75 at the end of the financial year 2023. At the end of the financial year 2022, the covenants agreed
on a temporary basis were gearing of 140 per cent and leverage of 5.5. At the end of the financial year,
gearing in accordance with the financing arrangement was 93.6 (139.95) per cent and leverage was 3.09
(5.23).
At the end of the reporting period, 31 December 2023, the withdrawn loan amount to which the cove-
nants apply was EUR 140.0 million (EUR 167.0 million)
.
During the financial year 2022, the Pihlajalinna entered into an interest rate swap agreement with a nom-
inal value of EUR 65 million to hedge its floating rate financing arrangement. The Group sold the interest
rate swap agreement in question on 2 February 2023. The fair value of the interest rate swap agreement at
the time of concluding the agreement was approximately EUR 3.9 million. The gain on the sale is presented
reducing financial expenses in the parent company’s income statement.
On 2 February 2023, the Pihlajalinna signed a new interest rate swap agreement with a nominal value of
EUR 65 million. The interest rate swap is subject to cash flow hedge accounting. The interest rate swap en-
tered into effect in March 2023 and will remain in effect until 25 March 2027. Its fair value was EUR 0.2 (5.1)
million at the end of the financial year. Derivative contract is presented in the parent company’s financial
statements based on the principle of prudence, and the positive unrealized difference between the value at
the time of execution and the value on the balance sheet date has not been recorded as income in the fi-
nancial statements.
On 27 March 2023, Pihlajalinna issued a hybrid bond with an annual coupon of 12%. The hybrid bond
does not have a specified maturity date. Pihlajalinna is entitled to redeem the hybrid bond on the Reset
Date, 27 March 2026, and thereafter on each interest payment date. The hybrid bond is presented in the
parent company’s financial statements in liabilities in the balance sheet and the interest is presented in fi-
nancial expenses in the income statement.
Pihlajalinna had EUR 70.0 (43,0) million in unused committed credit limits available. Unused credit limits
consist of EUR 10 million credit limit agreement and EUR 60 million unwithdrawn revolving credit facility. In
addition, EUR 100.0 (100.0) million of an additional credit limit, which is subject to a separate credit deci-
sion, was unused on the financial statements date
.
EUR 1,000
2023
2022
Lease commitments
Within one year
158
146
Between one and five years
396
230
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
85
Dates and signatures to the report by the Board of Directors and the financial statements
Tampere, 13 February 2024
Jukka Leinonen
Kim Ignatius
Heli Iisakka
Hannu Juvonen
Chairman
Tiina Kurki
Leena Niemistö
Seija Turunen
Mikko Wirén
Tuomas Hyyryläinen
CEO
Auditor’s Note
A report on the performed audit has been issued today.
On the date of the electronic signature
KPMG Oy Ab
Assi Lintula
Authorised Public Accountant
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
86
Auditor’s Report
To the Annual General Meeting of Pihlajalinna Plc
Report on the Audit of the Financial Statements
Opinion
We have audited the financial statements of Pihlajalinna Plc (business identity code 2617455-1) for the year
ended 31 December 2023. The financial statements comprise the consolidated statement of financial posi-
tion, statement of comprehensive income, statement of changes in equity, statement of cash flows and
notes, including a summary of significant accounting policies, as well as the parent company’s balance
sheet, income statement, cash flow statement and notes.
In our opinion
●
the consolidated financial statements give a true and fair view of the group’s financial position, financial
performance and cash flows in accordance with International Financial Reporting Standards (IFRS) as
adopted by the EU
●
the financial statements give a true and fair view of the parent company’s financial performance and fi-
nancial position in accordance with the laws and regulations governing the preparation of financial state-
ments in Finland and comply with statutory requirements.
Our opinion is consistent with the additional report submitted to the Audit Committee.
Basis for Opinion
We conducted our audit in accordance with good auditing practice in Finland. Our
responsibilities under
good auditing practice are further described in the
Auditor’s Responsibilities
for the Audit of the Financial
Statements section
We are independent of the parent company and of the group companies in accordance with the ethical
requirements that are applicable in Finland and are relevant to our audit, and we have fulfilled our other
ethical responsibilities in accordance with these requirements.
In our best knowledge and understanding, the non-audit services that we have provided to the parent
company and group companies are in compliance with laws and regulations applicable in Finland regarding
these services, and we have not provided any prohibited non-audit services referred to in Article 5(1) of reg-
ulation (EU) 537/2014. The non-audit services that we have provided have been disclosed in note 6 to the
consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Materiality
The scope of our audit was influenced by our application of materiality. The materiality is determined based
on our professional judgement and is used to determine the nature, timing and extent of our audit proce-
dures and to evaluate the effect of identified misstatements on the financial statements as a whole. The
level of materiality we set is based on our assessment of the magnitude of misstatements that, individually
or in aggregate, could reasonably be expected to have influence on the economic decisions of the users of
the financial statements. We have also taken into account misstatements and/or possible misstatements
that in our opinion are material for qualitative reasons for the users of the financial statements.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our au-
dit of the financial statements of the current period. These matters were addressed in the context of our
audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters. The significant risks of material misstatement referred to in the EU Reg-
ulation No 537/2014 point (c) of Article 10(2) are included in the description of key audit matters below.
We have also addressed the risk of management override of internal controls. This includes consideration
of whether there was evidence of management bias that represented a risk of material misstatement due to
fraud.
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
87
The key audit matter
How the matter was addressed in the audit
Items containing management’s estimates related to social and healthcare outsourcing agreements (refer to notes 1 Revenue from contracts with customers, 16 Trade and other receivables and 29 Contingent assets and
liabilities and commitments in the consolidated financial statements)
●
A significant proportion of the Group’s revenue is based on long-term complete and partial social and healthcare outsourcing agree-
ments. A high level of management judgement, which can have a significant impact on the consolidated result and statement of fi-
nancial position, is involved in the accounting for outsourcing contracts due to the extent of the contracts, definitions of contractual
obligations and amendment clauses for changed situations.
●
The client of the Group’s social and healthcare outsourcing agreements changed from the municipalities to the wellbeing services
counties as of 1.1.2023. The wellbeing services counties had the right to terminate the agreements by 31.10.2023, and one material
agreement has been terminated to expire in accordance with the transition period of the enforcement law at the end of year 2025.
●
In some outsourcing agreements, the responsibility for the costs of demanding specialised care has during the financial year based on
negotiations been transferred to the wellbeing services county. The change reduces risks related to costs and income.
●
Note 1, section
Key accounting estimates and decisions based on management judgement
explains the challenges related to the collection of receivables related to complete social and healthcare outsourcing agreements
with the previous clients. The company has commenced legal actions for debt recovery with regard to some of the receivables and is
considering legal actions to recover other receivables. These items in question do no longer meet the definition of contract assets at
the end of the financial year, and Pihlajalinna is presenting these items as contingent off-balance sheet assets in accordance with IAS
37.
●
The write-downs of these items reduced the EBITDA by a total of 7.8 million euros during the financial year, and in addition also had
a negative effect of 0.4 million euros on the financial items. The write-downs have a significant impact on the Group's result for the
financial year.
●
Due to the amount of changes related to the outsourcing agreements, the amount of items containing management’s estimates at
the beginning of the year, as well as the material impact on the result for the period of the write-downs of receivables, items contain-
ing management’s estimates related to social and healthcare outsourcing agreements are considered a key audit matter.
●
We assessed the items containing management’s estimates related to social
and healthcare outsourcing agreements recorded in the consolidated financial
statements through discussions with management, analytically and by per-
forming substantive testing. We obtained agreements, calculations and ad-
ministrative documents related to the items.
●
We have discussed matters related to the change of the client with the man-
agement. In addition, we have reviewed the renewed service agreements,
contract amendments and decisions related to contract terminations in the
wellbeing services counties, as well as the impact of these changes on the
Group's revenue and costs.
●
We have obtained legal representation letter about pending legal disputes. In
addition, we have reviewed the legal opinions of the law firms used by the
Group regarding the Court of Appeal’s ruling in the dispute between Jämsän
Terveys Oy and the City of Jämsä and its effects on outstanding receivables
from the previous municipalities clients.
●
We have reviewed the write-downs of receivables and the basis for them.
●
We assessed the recognition principles applied to income and expense items
containing management’s estimates compared to IFRS principles and consid-
ered the appropriateness of the Group’s disclosures in respect of items con-
taining management’s estimates.
●
We reported in more detail about the contents and the changes of these
items containing management’s estimates to the Audit Committee and the
Board of Directors.
Goodwill impairment assessment (refer to note 13 Intangible assets and goodwill in the consolidated financial statements)
●
The Group has expanded its activities through acquisition of companies. As a result, the consolidated statement of financial position
31 December 2023 includes goodwill totalling 251.8 million euros.
●
Goodwill is not amortized but is tested at least annually for impairment. Determining the cash flow forecasts underlying the impair-
ment tests requires management make judgments over certain key inputs, for example revenue growth rate, discount rate, long-
term growth rate and inflation rates.
●
Due to the high level of judgement related to the forecasts used, and the significant carrying amounts involved, goodwill impairment
assessment is considered a key audit matter.
●
Our audit procedures included, among others, assessing key inputs in the im-
pairment calculations such as revenue growth rate, profitability and discount
rate, by reference to the parent company’s Board approved budgets, data ex-
ternal to the Group and our own views.
●
We assessed the historical accuracy of forecasts prepared by management by
comparing the actual results for the year with the original forecasts.
●
We involved KPMG valuation specialists that assessed the technical accuracy
of the calculations and compared the assumptions used to market and indus-
try information.
●
Furthermore, we considered the appropriateness of the Group’s disclosures in
respect of goodwill and impairment testing.
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
88
Responsibilities of the Board of Directors and the Managing Director for the Financial State-
ments
The Board of Directors and the Managing Director are responsible for the preparation of consolidated finan-
cial statements that give a true and fair view in accordance with IFRS Accounting Standards as adopted by
the EU, and of financial statements that give a true and fair view in accordance with the laws and regula-
tions governing the preparation of financial statements in Finland and comply with statutory requirements.
The Board of Directors and the Managing Director are also responsible for such internal control as they de-
termine is necessary to enable the preparation of financial statements that are free from material misstate-
ment, whether due to fraud or error.
In preparing the financial statements, the Board of Directors and the Managing Director are responsible
for assessing the parent company’s and the group’s ability to continue as a going concern, disclosing, as ap-
plicable, matters relating to going concern and using the going concern basis of accounting. The financial
statements are prepared using the going concern basis of accounting unless there is an intention to liqui-
date the parent company or the group or cease operations, or there is no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that in-
cludes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with good auditing practice will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are considered material if, individually or in the ag-
gregate, they could reasonably be expected to influence the economic decisions of users taken on the basis
of the financial statements.
As part of an audit in accordance with good auditing practice, we exercise professional judgment and
maintain professional scepticism throughout the audit. We also:
●
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud
or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is
sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstate-
ment resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, for-
gery, intentional omissions, misrepresentations, or the override of internal control.
●
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effective-
ness of the parent company’s or the group’s internal control.
●
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates
and related disclosures made by management.
●
Conclude on the appropriateness of the Board of Directors’ and the Managing Director’s use of the going
concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty
exists related to events or conditions that may cast significant doubt on the parent company’s or the
group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are
required to draw attention in our auditor’s report to the related disclosures in the financial statements
or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evi-
dence obtained up to the date of our auditor’s report. However, future events or conditions may cause
the parent company or the group to cease to continue as a going concern.
●
Evaluate the overall presentation, structure and content of the financial statements, including the disclo-
sures, and whether the financial statements represent the underlying transactions and events so that the
financial statements give a true and fair view.
●
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or busi-
ness activities within the group to express an opinion on the consolidated financial statements. We are
responsible for the direction, supervision and performance of the group audit. We remain solely responsi-
ble for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including any significant deficiencies in internal control
that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant
ethical requirements regarding independence, and communicate with them all relationships and other mat-
ters that may reasonably be thought to bear on our independence, and where applicable, related safe-
guards.
From the matters communicated with those charged with governance, we determine those matters that
were of most significance in the audit of the financial statements of the current period and are therefore the
key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes pub-
lic disclosure about the matter or when, in extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse consequences of doing so would reasonably
be expected to outweigh the public interest benefits of such communication.
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
89
Other Reporting Requirements
Information on our audit engagement
We were first appointed as auditors by the Annual General Meeting when Pihlajalinna Plc was established
on 15 April 2014 and our appointment represents a total period of uninterrupted engagement of ten years.
In Pihlajalinna Terveys Oy we were first appointed as auditors for the financial year ended 31 December
2010. Pihlajalinna Plc became a public interest entity on 8 June 2015. We have been the company’s auditors
since it became a public interest entity.
Other Information
The Board of Directors and the Managing Director are responsible for the other information. The other in-
formation comprises the report of the Board of Directors and the information included in the Annual Re-
port, but does not include the financial statements and our auditor’s report thereon. We have obtained the
report of the Board of Directors prior to the date of this auditor’s report, and the Annual Report is expected
to be made available to us after that date. Our opinion on the financial statements does not cover
the other information.
In connection with our audit of the financial statements, our responsibility is to read the other infor-
mation identified above and, in doing so, consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially
misstated. With respect to the report of the Board of Directors, our responsibility also includes considering
whether the report of the Board of Directors has been prepared in accordance with the applicable
laws and regulations.
In our opinion, the information in the report of the Board of Directors is consistent
with the information in the financial statements and the report of the Board of Directors has been prepared
in accordance with the applicable laws and regulations.
If, based on the work we have performed on the other information that we obtained prior to the date of
this auditor’s report, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard.
Tampere 16 February 2024
KPMG OY AB
Assi Lintula
Authorised Public Accountant, KHT
Independent Auditor’s Reasonable Assurance Report on Pihlajalinna Plc’s ESEF
Financial Statements
To the Board of Directors of Pihlajalinna Plc
We have undertaken a reasonable assurance engagement in respect of whether the consolidated financial
statements for the year ended 31 December, 2023 included in the digital financial statements
74370058MTRLEDOCHV67-2023-12-31-en.zip of Pihlajalinna Plc (Business ID 2617455-1) have been marked
up with iXBRL markups in accordance with the requirements of Article 4 of EU Delegated Regulation 2018/815
(ESEF RTS).
The Responsibility of the Board of Directors and Managing Director
The Board of Directors and Managing Director are responsible for preparing the report of the Board of Direc-
tors and financial statements (ESEF financial statements) that comply with the requirements of ESEF RTS. This
responsibility includes:
●
preparation of ESEF financial statements in XHTML format in accordance with Article 3 of the ESEF
RTS
●
marking up the primary statements and the notes to the consolidated financial statements, and
the company identification data included in the ESEF financial statements with iXBRL tags in ac-
cordance with Article 4 of the ESEF RTS; and
●
ensuring consistency between ESEF financial statements and audited financial statements.
The Board of Directors and the Managing Director are also responsible for such internal control as they deem
necessary to prepare the ESEF financial statements in accordance with the requirements of the ESEF RTS.
Auditor’s Independence and Quality Management
We are independent of the company in accordance with the ethical requirements applicable in Finland, which
apply to the engagement we have performed, and we have fulfilled our other ethical responsibilities in ac-
cordance with these requirements.
The auditor applies International Standard on Quality Management ISQM 1, which requires the firm to design,
implement and operate a system of quality management including policies or procedures regarding compli-
ance with ethical requirements, professional standards and applicable legal and regulations requirements.
Auditor’s Responsibility
In accordance with the Engagement Letter our responsibility is to express an opinion on whether the marking
up of the consolidated financial statements included in the ESEF financial statements comply in all material
respects with the Article 4 of the ESEF RTS. We conducted our reasonable assurance engagement in accord-
ance with
International Standard on Assurance Engagements 3000
.
The engagement involves procedures to obtain evidence whether;
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
90
●
the primary statements of the consolidated financial statements included in the ESEF financial
statements are, in all material respects, marked up with iXBRL tags in accordance with Article 4 of
the ESEF RTS, and;
●
whether the notes to the consolidated financial statements and the company identification data
included in the ESEF financial statements data, have been marked up, in all material respects, with
iXBRL tags in accordance with Article 4 of the ESEF RTS; and
●
whether the ESEF financial statements and the audited financial statements are consistent with
each other.
The nature, timing and the extent of procedures selected depend on practitioner’s judgement. This includes
the assessment of the risks of material departures from the requirements set out in the ESEF RTS, whether
due to fraud or error.
We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Opinion
In our opinion, the primary statements of the consolidated financial statements, the notes to the consolidated
financial statements and the company identification data included in the ESEF financial statements of Pihla-
jalinna Plc identified as 74370058MTRLEDOCHV67-2023-12-31-en.zip for the year ended 31 December, 2023
are, in all material respects, marked up in compliance with the ESEF Regulatory Technical Standard.
Our audit opinion on the audit of the consolidated financial statements of Pihlajalinna Plc for the year ended
31 December, 2023 is set out in our Auditor’s Report dated 16 February, 2024. In this report, we do not ex-
press any audit opinion or other assurance conclusion on the consolidated financial statements.
Tampere 14 March, 2024
KPMG OY AB
Assi Lintula
Authorised Public Accountant, KHT