Pihlajalinna
REPORT BY THE BOARD OF DIRECTORS
AND FINANCIAL STATEMENTS 2022
2022
>
REPORT BY THE BOARD OF DIRECTORS
|AUDITED FINANCIAL STATEMENTS 2
Report by the Board of Directors for the
financial year 1 Jan – 31 Dec 2022
CONTENTS
Auditor’s report
REPORT BY THE BOARD OF DIRECTORS
|AUDITED FINANCIAL STATEMENTS 3
Report by the Board of Directors for the
financial year 1 Jan – 31 Dec 2022
Joni Aaltonen, CEO of Pihlajalinna
In the year 2022 we focused on expanding our network of private
clinics and hospital services and increasing our supply in line with our
strategy. We also prepared for the start of the wellbeing services
counties’ operations by improving the efficiency of our operations in
public services. Pihlajalinna’s revenue increased by a notable 19.5 per
cent to EUR 690.5 million (EUR 577.8 in 2021). Organic growth was
6.0 per cent. At the same time, the past year was a challenging period
in many ways, with profitability weakening due to the decline of
COVID-19 services and the continued high rate of sickness-related ab-
sences and high costs in public specialised care. Our adjusted EBITA
for the year was EUR 26.7 million (EUR 37.3 million in 2021).
We made several acquisitions during the year that supported the
growth of supply. In February, Pohjola Hospital became part of Pihla-
jalinna. Following the acquisition, Pihlajalinna has a comprehensive
service network in high-value added hospital services as well as di-
verse emergency and on-call services in all of Finland’s largest re-
gional centers. In April, we acquired Etelä-Savon Työterveys and
Lääkärikeskus Ikioma. At the beginning of September, we acquired
MediEllen, a Kainuu-based provider of private medical services and
leased physician and nurse services. The Jyväskylä-based private clinic
Seppälääkärit and Seppämagneetti imaging centre were acquired by
Pihlajalinna at the beginning of October. In addition, we acquired the
Punkkibussi® vaccination business in April.
The integration of the acquired operating locations and services was
completed, but the synergy benefits were delayed. The synergies will
become fully evident in 2023. We will also focus on ensuring econo-
mies of scale for the acquired businesses. Pihlajalinna is also clarifying
its service portfolio. One example of this is the agreement signed in
late 2022 regarding the sale of the Group’s private dental care ser-
vices. The plan is to complete the divestment by the end of March
2023.
The strong growth of remote services continued, having been acceler-
ated by the COVID-19 pandemic. Remote appointments represented
37 per cent of all appointments at the end of the year. We started
strategic projects in 2022 to further strengthen our multi-channel ser-
vices. The use of remote services is also growing among our occupa-
tional healthcare customers. The number of people within the scope
of Pihlajalinna’s occupational healthcare services was over 270,000 at
the end of 2022.
We carried out efficiency improvement measures in public services in
2022 in response to rising costs. We will continue to implement effi-
ciency improvement programmes in our complete outsourcing agree-
ments. Negotiations are continuing with the wellbeing services coun-
ties regarding service referrals and cost sharing in the context of ur-
gent and demanding specialised care, for example. Our joint venture
agreements in the regions of Pirkanmaa, Central Finland and South
Ostrobothnia were transferred under the newly established wellbeing
services counties at the turn of the year.
The growth of business has also led to an increase in the number of
personnel and practitioners. Successful recruitment has enabled us to
increase our supply and expand our emergency and on-call services in
particular. The changes have been demanding on our personnel, and
one of our strategic priorities in 2023 is to promote and develop well-
being at work by making job duties clearer and developing leadership.
At the end of 2022, Pihlajalinna had 7,016 (6,297) employees and
1,812 (1,070) practitioners.
There were many changes in our operating environment in 2022. Rus-
sia’s invasion of Ukraine further accelerated the general rise in costs.
COVID-19 restrictions were widely lifted during the year. Neverthe-
less, COVID-19 and other respiratory infections significantly increased
the rate of sickness-related absences among Pihlajalinna’s personnel
during the financial year, which caused both costs and operational
challenges throughout the year.
We cannot be satisfied with the development of our profitability in
2022. Acquisitions increased the Company's indebtedness signifi-
cantly, but their financial benefits have not yet been fully realized.
We have initiated a number of measures to strengthen our profitabil-
ity and financial position. Effective from the beginning of 2023, we in-
creased service prices by 5–10 per cent on average and continued to
improve operational efficiency in all of the Group’s operations. Pihla-
jalinna commenced change negotiations in early January. We are con-
sidering the potential partial downscaling, combining or closure of in-
dividual operating locations and assessing the structure of the organi-
sation. The effects of the measures taken to improve profitability will
become evident gradually starting from the first quarter of 2023.
In spite of the external uncertainties, we purposefully executed our
strategy and were successful in growing our business. I want to take
this opportunity to thank all of our stakeholders for the past year, and
I especially want to express my gratitude to our personnel. In 2023,
we will focus on strengthening our financial position to ensure profit-
able growth.
Pihlajalinna’s strategy 2023–2025
REPORT BY THE BOARD OF DIRECTORS
|AUDITED FINANCIAL STATEMENTS 4
Pihlajalinna is one of the leading private social and healthcare service
providers in Finland and the Group’s mission is to help people to live
better lives. The service selection includes general practitioner and
medical specialist services, occupational healthcare and residential
services and staffing services. The Group serves private persons, com-
panies, insurance companies and public sector entities. Pihlajalinna’s
vision is to bring wellbeing to everyone and be impactfully present.
Pihlajalinna’s values are ethics, energy and open-mindedness.
Strategic priorities
1. The renewal of services for private customers
Pihlajalinna will strengthen its multichannel services and consumer
business through new service concepts and digital innovation.
2. Cooperation in social and healthcare services
Pihlajalinna will engage in close cooperation with the future wellbeing
services counties and build a strong market position in public
healthcare.
3. Enhancing digitalisation
Pihlajalinna has a strong focus on digitalisation in the development of
personnel, the customer experience and operational performance.
Objectives for the strategy period
●
Pihlajalinna offers the most attractive and diverse range of ser-
vices.
●
Pihlajalinna is the number one choice of consumers and profes-
sionals.
●
Pihlajalinna services are easy to access and available without delay.
●
Revenue growth of EUR 250 million by the end of 2025, using 2021
as the baseline. One third of the growth is expected to arise from
the public sector and the rest two thirds from corporate and pri-
vate customers.
●
Adjusted operating profit before the amortisation and impairment
of intangible assets (EBITA) over 9 per cent of revenue in the long
term.
●
Long term target for net debt is less than 3x adjusted EBITDA.
●
Distributing at least one-third of the profit for each financial year
to shareholders as dividends or capital repayment.
Performance indicators
The achievement of goals is measured by, for example, financial indi-
cators, an increase in the number of appointment times and proce-
dures available to customers, and in the Net Promoter Score (NPS),
which measures the
customer and employee experience.
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 approxi-
mately 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, joint municipal authori-
ties, congregations, hospital districts and the public administration
when purchasing either social 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 over 70.000 in the public sector customers
group.
January–December 2022
Revenue from corporate customers amounted to EUR 225.3 (137.7)
million, an increase of EUR 87.5 million, or 63,5 per cent. Sales to in-
surance company customers increased by EUR 57.2 million, or 162.7
per cent. M&A transactions contributed EUR 54.8 million to the in-
crease in revenue. Organic growth was EUR 32.7 million, or 23.8 per
cent. In the corporate customer group, revenue from COVID19-ser-
vices amounted to EUR 7.8 (8.4) million, a decrease of EUR -0.6 mil-
lion. The customer volumes of Pihlajalinna’s private clinics increased
by 54 per cent year-on-year. Without the effect of M&A transactions,
customers volumes would have increased by 21 per cent year-on-
year.
Revenue from private customers amounted to EUR 103.2 (85.2) mil-
lion, an increase of EUR 18.0 million, or 21.1 per cent. M&A transac-
tions contributed EUR 15.2 million to the increase in revenue from
private customers. Organic growth was EUR 2.8 million, or 3.3 per
cent. In the private customer category, revenue from COVID19 -ser-
vices amounted to EUR 1.6 (2.3) million, representing a decrease of
EUR -0.7 million. The customer volumes of Pihlajalinna’s private clin-
ics increased by 30 per cent. Without the effect of M&A transactions,
customer volumes would have increased by 15 per cent year-on-year.
The streamlining of insurance companies’ financial obligations and di-
rect payment practices reduces the reported sales for the private cus-
tomer segment.
Revenue from the public sector amounted to EUR 435.5 (427.8) mil-
lion, an increase of EUR 7.7 million, or 1.8 per cent. M&A transactions
increased revenue from public sector by EUR 7.8 million. Revenue
from COVID-19 services amounted to EUR 7.3 (28.2) million, repre-
senting a decrease of EUR -20.9 million. The factors that compen-
sated for the decrease included price adjustments of EUR 3.0 million
to complete and partial outsourcing agreements and, in particular,
revenue from remote services, residential services and surgical opera-
tions for the public sector growing by EUR 12 million. The customer
volumes of Pihlajalinna’s private clinics increased by 37 per cent year-
on-year. Without the effect of M&A transactions, customer volumes
would have been increased by 7 per cent year-on-year.
REPORT BY THE BOARD OF DIRECTORS
|AUDITED FINANCIAL STATEMENTS 5
29 %
14 %
40 %
17 %
REVENUE BY CUSTOMER GROUP
YTD Q4 2022, %
Corporate customers
Private customers
Complete and partial outsourcing
Other services to public sector
138
225
85
103
301
304
127
132
2021 YTD
2022 YTD
REVENUE BY CUSTOMER GROUP
YTD Q4, EUR MILLION
Other services to public sector
Complete and partial outsourcing
Private customers
Corporate customers
+64 %
+21 %
+1 %
+4 %
578
690
+19,5 %
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. At
the quarterly level, seasonal fluctuations have historically had
a posi-
tive effect on profitability for the third quarter of
the year.
Consolidated revenue and result
January–December 2022
Pihlajalinna’s revenue totalled EUR
690.5 (577.8)
million, an increase
of EUR
112.7
million, or
19.5
per cent. Revenue from COVID-19 ser-
vices came to EUR 16.7 (38.9) million, representing a decrease of EUR
-22.2 million. Organic growth was EUR
34.8
million, or
6.0
Organic growth would have been EUR 59.4 million, or 10.3 per cent,
excluding the effect of COVID-19 services and the EUR -2.4 million ad-
justment to revenue in accordance with the District Court decision on
the case between Jämsän Terveys Oy and the City of Jämsä. M&A
transactions accounted for EUR
77.9
million, or
13.5
per cent, of the
growth in revenue.
Organic revenue growth during the financial year was based on the
strong growth of supply throughout the network of operating loca-
tions. The organic growth of appointments, surgical operations, re-
mote services and occupational health services has compensated for
the significant decline of COVID-19 services.
Some 37 (36) per cent of all customer appointments, excluding com-
plete outsourcing arrangements, vaccinations and COVID-19 testing,
took place via remote services during the financial year. The number
of remote appointments increased by 40 per cent year-on-year. The
total number of appointments increased by 33 per cent.
January-December 2022
EUR million
2022
2021
change
change %
Corporate customers
225.3
137.7
87.5
63.5 %
98.4
35.1
63.3
180.2 %
Private customers
103.2
85.2
18.0
21.1 %
Public sector
435.5
427.8
7.7
1.8 %
of which complete and partial outsourcing
agreements
303.9
300.8
3.1
1.0 %
of which staffing
24.8
26.1
-1.3
-4.9 %
of which occupational healthcare and other
services
106.8
100.9
5.9
5.8 %
Intra-Group sales
-73.5
-73.0
-0.5
0.7 %
Total consolidated revenue
690.5
577.8
112.7
19.5 %
REPORT BY THE BOARD OF DIRECTORS
|AUDITED FINANCIAL STATEMENTS 6
EBITDA was EUR
54.4 (62.6)
-8.2
million, or
-13.1
per cent. Adjusted EBITDA was EUR
64.2 (65.3)
million, a de-
crease of EUR -1.1 million, or -1.7 per cent. EBITDA adjustments to-
talled EUR
9.8 (2.7)
million. The adjustment recognised due to the
outcome of the District Court hearing concerning the dispute be-
tween Jämsän Terveys Oy and the City of Jämsä had an effect of EUR
-4.7 million on EBITDA. This item was treated as an adjustment item.
Other adjustment items included EUR 1.8 million in integration ex-
penses related to M&A transactions, EUR 1.1 million in IFRS 3 ex-
penses, EUR 0.7 million in retrospective cost adjustments with no
cash flow effect, and EUR 1.2 million in other expense items.
Employee benefit expenses were exceptionally high during the finan-
cial year. The share of various respiratory infections in the sickness-
related absences among Pihlajalinna’s personnel increased in particu-
lar. Substitutes and recruitment services have been used to compen-
sate for shortages in personnel. The increased sickness-related ab-
sences are estimated to have had an effect of approximately EUR 4.0
million on employee benefit expenses for the financial year.
Profitability has been significantly weakened by the decline of COVID-
19 services. Furthermore, the growth of supply has increased costs in
occupational health services and private clinic operations. The profit-
ability of surgical operations and remote services was higher than in
the previous financial year due to higher volumes. The costs of com-
plete and partial outsourcing arrangements remained at a high level,
but profitability improved during the financial year due to efficiency
improvement programmes, price adjustments stipulated by outsourc-
ing agreements, COVID-19 cost compensation and refunds of the
South Ostrobothnia Hospital District’s service fees.
Depreciation, amortisation and impairment amounted to EUR 45.5
(34.7) million. Adjustments to depreciation, amortisation and impair-
ment amounted to EUR -0.1 (-0.3) million. Depreciation of intangible
assets amounted to EUR 7.7 (6.7) million, of which depreciation re-
lated to purchase price allocations amounted to EUR 2.7 (3.0) million.
Depreciation, amortisation and impairment of property, plant and
equipment amounted to EUR 10.6 (9.2) million, and depreciation and
impairment of right-of-use assets totalled EUR 27.2 (18.8) million.
The acquisition of Pohjola Hospital increased Pihlajalinna’s deprecia-
tion of right-of-use assets, i.e. leased business premises, by EUR 6.6
million.
Adjusted operating profit before the amortisation and impairment of
intangible assets (EBITA) was EUR
26.7 (37.3)
EBITA margin was
3.9 (6.5)
to EUR
9.7 (2.4)
million.
Pihlajalinna’s EBIT was EUR
8.9 (27.9)
million, a decrease of EUR
-19.0
million. Adjusted EBIT amounted to EUR
18.6 (30.3)
million, a de-
crease of EUR -11.7 million.
The Group’s net financial expenses amounted to EUR
-7.4 (-3.7)
mil-
lion. The acquisition of Pohjola Hospital increased Pihlajalinna’s inter-
est expenses associated with leases by EUR 1.8 million. The financing
rearrangements in March and the waiver expenses paid in the latter
part of the year due to a temporary increase to financial covenants
caused non-recurring financial expenses totalling EUR 0.8 million.
M&A transactions have also increased Pihlajalinna’s debt and interest
expenses. Profit before taxes amounted to EUR
1.5 (24.2)
million.
Taxes in the income statement amounted to EUR
6.1 (-5.1)
million.
The Finnish Tax Administration granted Pihlajalinna the right to de-
duct Pohjola Hospital Ltd’s confirmed 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 6.3 million, was rec-
ognised through the income statement during the financial year, as
the plan concerning the use of tax losses has now been completed.
Profit came to EUR
7.7 (19.1)
million. Earnings per share (EPS) was
EUR
0.42 (0.89)
.
The operating environment
COVID-19 and queues for treatment
The COVID-19 epidemic continued to have extensive impacts on
healthcare in Finland. In late summer, the Finnish Institute for Health
and Welfare announced that the COVID-19 pandemic was moving on
to an endemic phase and that the virus was likely to occur from one
year to the next in the form of recurring epidemics characterised by
seasonal variation. The healthcare system needs to adapt to the new
situation so that the provision of other essential care will not suffer.
This requires resources from both the public and private sectors.
The queues for non-urgent specialised care continued to grow. In the
autumn, over 152,000 customers were waiting for access to non-ur-
gent specialised care at the hospitals operated by the hospital dis-
tricts.
Labour availability and the development of wages in the social
and healthcare sector
The shortage of social and healthcare professionals is one of the big-
gest issues facing Finnish society, and labour availability has deterio-
rated substantially over the past few years. The Ministry of Finance
forecasts that, by 2035, the social and healthcare sector will need
70,000 more employees compared to the current situation.
The increase to the staffing requirement for round-the-clock nursing
units for the elderly to 0.7 employees per customer, which has been
decided on by the Parliament, was postponed to December 2023. It
has been estimated that the number of nurses in the sector needs to
be increased by over 3,400 in order to satisfy the higher staffing re-
quirement by the time the change enters into effect. For service pro-
viders in the social and healthcare sector, the labour issues are re-
flected in recruitment challenges. Consequently, professionally skilled
personnel are increasingly viewed as a key resource by companies in
the industry. The significance of successful recruitment, effective co-
operation with educational institutions and international recruitment
projects, for example, continued to grow.
The collective agreement for the healthcare service sector (TPTES) en-
tered into effect in May 2022. The agreement is valid for two years.
According to the agreement, individual monthly wages and pay scales
were raised by 2 per cent at the beginning of October 2022, with a
further general increase of at least 1.9 per cent to take effect on 1
June 2023.
REPORT BY THE BOARD OF DIRECTORS
|AUDITED FINANCIAL STATEMENTS 7
The collective agreement for the private social services sector
(SOSTES) is valid for a period of 1+1 years, and that agreement also
entered into effect in May 2022. Wages were increased by 2 per cent
at the be-ginning of September 2022. Pay scales were also subject to
lower boundary increases of 0.8 per cent targeted at the minimum
wages of the wage groups. Wage increases for 2023 will be deter-
mined by the wage increases in the benchmark sectors, but the in-
crease in wages will be at least 1.9 per cent.
After an industrial dispute, municipal and wellbeing services county
employers and the nurse unions Tehy and Super approved a proposal
for a new collective agreement on 3 October 2022. The agreement,
together with the municipal sector agreement approved earlier in the
summer, will increase the earnings of the personnel by at least 13 per
cent on average during the agreement period 2022–2024. The SOTE
collective agreement covers some 180,000 employees whose annual
labour costs amount to approximately EUR 8.6 billion.
Economic forecasts and inflation
Russia began a war of aggression in Ukraine in February 2022. The
war has had a major impact on the economy in the euro area as a
whole. Economic growth has slowed, inflation has accelerated and
market interest rates have increased. According to Statistics Finland,
the year-on-year increase in consumer prices in December 2022 was
mainly driven by the higher price of electricity, the average interest
rate of housing loans and the interest rates of consumer credit, and
higher diesel prices. According to a forecast published by the Bank of
Finland in December 2022, the Finnish economy will drift into a slight
recession in 2023, with GDP contracting by 0.5 per cent. The forecast
projects a short-lived recession followed by a recovery of economic
growth to 1.1 per cent in 2024.
The general uncertainty has weakened consumers’ purchasing power
and reduced investment. During the year under review, consumer
confidence fell to the lowest level on record. The consumer confi-
dence indicator’s balance figure was -18.5 in December 2022, com-
pared to -3.5 at the corresponding time last year.
Russia’s invasion of Ukraine has also increased the likelihood of cyber
attacks.
Wellbeing services counties and ensuring the provision of so-
cial and healthcare services for the population
The year 2022 was characterised by preparations for the wellbeing
services counties starting their operations at the beginning of 2023.
The wellbeing services counties’ expectations for private service pro-
viders are particularly focused on agile and scalable service models as
well as digital solutions that are easy to integrate with the counties’
own platforms. Cooperation between the private and public sectors is
essential as the wellbeing services counties started their operations
under challenging circumstances.
The ageing population, the reduced level of physical activity among
people in general and lifestyle changes are reflected in the higher in-
cidence of illnesses. The number of people over the age of 75 will in-
crease by 250,000 in Finland during this decade. This will have a di-
rect impact on service demand and costs: the costs of social and
healthcare services for the 75–84 age group are approximately three
times higher than the population average. For people over the age of
85, these costs are nearly seven times higher than the population av-
erage.
The crises affecting society also increased general uncertainty among
people, which creates challenges to the promotion of overall health
and wellbeing. Mental health problems have increased dramatically.
Half of all disability pensions are now granted for reasons related to
mental health. Employers’ social responsibility is growing in signifi-
cance, and cooperation with pension insurance companies is increas-
ingly important.
Efforts to address cost issues and cost responsibilities in the welfare
state must increasingly focus on maintaining health and wellbeing
and the prevention of problems.
Consolidated statement of financial
position and cash flow
Pihlajalinna Group’s total statement of financial position amounted to
EUR 661.6 (457.1) million. The growth is mainly attributable to busi-
ness acquisitions. Consolidated cash and cash equivalents amounted
to EUR 13.1 (4.3) million. The Group’s interest rate swap fair value
was EUR 5.1 million at the end of the financial year.
Net cash flow from operating activities during the financial year
amounted to EUR 64.9 (56.9) million. Taxes paid amounted to EUR -
6.9 (-2.6) million. The change in net working capital was EUR 16.8 (-
3.3) million. Working capital totalling EUR 24.2 (14.7) million was re-
leased from trade and other payables. Working capital amounting to
EUR -6.0 (-16.8) million was tied up in trade receivables and other re-
ceivables and EUR -0.8 (-0.3) million in inventories. Changes in provi-
sions tied up EUR -0.7 (-0.9) million in working capital.
Net cash flow from investing activities totalled EUR -83.4 (-32.1) mil-
lion for the financial year. Acquisitions of subsidiaries had an impact
of EUR -52.3 (-16.4) million on net cash flow from investing activities.
Investments in tangible and intangible assets amounted to EUR -29.0
(-14.8) million, and the proceeds from the disposal of tangible assets
amounted to EUR 0.4 (0.5) million. Pihlajalinna redeemed the clinical
equipment lease liabilities of Pohjola Hospital EUR 5.8 million on the
acquisition date 1 February 2022. During the financial year the Group
has invested an extraordinary amount in expanding and renewing its
service network.
The Group’s cash flow after investments (free cash flow) was EUR -
18.6 (24.9) million for the financial year.
Net cash flow from financing activities during the financial year to-
talled EUR 27.4 (-33.9) million. The change in financial liabilities, in-
cluding changes in credit limits, amounted to EUR 75.2 (-1.6) million.
Payments for financial lease liabilities amounted to EUR -29.0 (-19.8)
million, and interest paid and other financial expenses amounted to
EUR -8.3 (-4.0) million. Pihlajalinna rearranged its long-term debt fi-
nancing in March 2022. A total of EUR -1.8 (-0.4) million in dividends
was paid to non-controlling interests. Pihlajalinna Plc distributed in
April dividends of EUR -6.8 (-4.5) million for the financial year 2021.
The Group has acquired its own shares for its incentive scheme and
remuneration of the Board of Directors in the amount of EUR -1.5 (-
0.6) million.
REPORT BY THE BOARD OF DIRECTORS
|AUDITED FINANCIAL STATEMENTS 8
The Group’s gearing was 313.8 (158.8) per cent. Interest-bearing net
debt amounted to EUR 385.7 (194.7) million, an increase of EUR
190.9 million. The M&A transactions increased the amount of finan-
cial debts by EUR 56.1 million. Also, the M&A transactions increased
the amount of Pihlajalinna’s lease liabilities by EUR 129.5 million.
Return on capital employed was 2.3 (8.8) per cent and return on eq-
uity was 6.2 (16.1) per cent.
Financing arrangements
Pihlajalinna rearranged its long-term debt financing with a sustaina-
bility-linked financing arrangement on 22 March 2022. The EUR 200
million unsecured financing arrangement, for three years with an op-
tion for a further two years, was concluded with Danske Bank, OP
Corporate Bank and Swedbank (the creditor banks). The financing
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 supplementary loan from the funding providers.
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 taken into account in the
calculation of the covenants (Frozen GAAP). The loan margin of the fi-
nancing is additionally linked to Pihlajalinna’s annual sustainability
objectives related to patient satisfaction (NPS), employee engage-
ment (eNPS) and access to surgical treatment within the target time.
At the end of the financial year, the sustainability targets linked to the
financing arrangement caused no changes in the loan margins.
Due to the acquisition of Pohjola Hospital Ltd, Pihlajalinna and the
creditor banks agreed on increasing the gearing covenant to 140 per
cent and the leverage covenant to 4.00 for 2022.
Pihlajalinna and the creditor banks agreed on a temporary adjust-
ment to the covenants of the financing arrangement twice in the lat-
ter part of the year. According to the acquired waivers, the leverage
cove-nant was set at 5.5 for the fourth quarter of 2022, 4.5 for the
first quarter of 2023, and 4.0 for the second quarter of 2023. For the
fourth quarter of 2022 and the first three quarters of 2023, gearing
must not exceed 140 per cent. The financing arrangement’s original
gearing covenant of 115 per cent will enter into effect on the fourth
quarter of 2023. Starting from the beginning of the third quarter of
2023, the leverage covenant according to the financing arrangement
will be 3.75.
At the end of the financial year, leverage in accordance with the fi-
nancing arrangement stood at 5.23 and gearing was 139.95 per cent.
The Group met the set covenants on 31 December 2022. Had the
Group’s profit after taxes been lower by approximately EUR 40 thou-
sand, the gearing covenant would have been breached. At the same
time, however, the company’s interest rate swap had a fair value of
EUR 5.1 million on the financial statements date. Had the interest
rate swap been sold on the financial statements date, gearing would
have fallen to 136.0 per cent and the leverage ratio would have fallen
to 5.08. Breaching the covenants can lead to the financing arrange-
ment falling due.
Under the waiver agreement, the highest margin level of the financ-
ing arrangement increased to one percent units from the beginning of
2023 until the third quarter of the year. The increase to the highest
margin level and the other waiver terms will be discontinued by the
end of 2023. If the company proposes to remain below the original
covenant levels for the next 12 months, the additional provisions de-
scribed above may be discontinued earlier.
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 43
million in unused committed credit limits. 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 starting
date is in March 2023 and it is valid until 25 March 2027.
Acquisitions and capital expenditure
Gross investments, including acquisitions, amounted to EUR 234.5
(44.8) million. Gross investments in M&A transactions including right-
of-use assets (e.g. lease commitments) amounted to EUR 176.6 (44.8)
million. The share of lease commitments amounted to EUR 106.6 mil-
lion. The Group’s gross investments in property, plant and equipment
and intangible assets, which consisted of development investments,
additional investments and replacement investments required for
growth, amounted to EUR 25.4 (13.8) million. Pihlajalinna redeemed
Pohjola Hospital’s clinical equipment leasing liabilities for EUR 5.8
million on the acquisition date 1 February 2022. Gross investments in
connection with the opening of new units amounted to EUR 6.1 (1.1)
million. Gross investments in right-of-use assets amounted to EUR
26.5 (9.8) million, including investments in the opening of new units.
Investment commitments for the Group’s development, additional
and replacement investments amounted to approximately EUR 3.5
(2.0) million. The investment commitments are related to additional
and replacement investments in clinical equipment, change of prem-
ises and information system projects.
On 1 February 2022, Pihlajalinna acquired the entire share capital of
Pohjola Hospital Ltd from Pohjola Insurance Ltd. The net debt-free
purchase price, paid in cash, was EUR 35.2 million.
Pihlajalinna acquired, on 1 April 2022, the entire share capital of
Etelä-Savon Työterveys Oy and the majority interest of Lääkärikeskus
Ikioma Oy. In addition, on 1 April 2022, Pihlajalinna acquired the
Punkkibussi
®
business from Saaristolääkärit Oy.
On 1 September 2022, Pihlajalinna acquired a majority interest in Me-
diEllen Oy.
The deed of sale concerning the acquisition of the entire share capital
of Seppälääkärit Oy and Seppämagneetti Oy was completed on 1 Oc-
tober 2022.
REPORT BY THE BOARD OF DIRECTORS
|AUDITED FINANCIAL STATEMENTS 9
Research and development
Increases to intangible assets totalled EUR 7.4 (4.0) million during the
financial year. During the financial year 2022 new digital appointment
booking system was released together with general improvements
regarding the usage and appearance of the system. A wider range of
remote services has been added for example with new chat services
and by renewing transaction paths. Pihlajalinna Health App (Ter-
veyssovellus) -mobile application has received new appearance and
significant content improvements have been made to the application.
The service offering through the occupational health portal was fur-
ther expanded for example with digital workplace survey, secure
messaging and reporting. In hospital business a new ERP system was
deployed in surgical operations. A new PihlajalinnaPRO-mobile appli-
cation was released for healthcare professionals working in Pihla-
jalinna. Other deployments were also made for information security,
document management system and marketing related solutions and
new imaging archive and communications system (PACS) was taken
into use.
During the financial year 2023 private customer services development
will be continued in all channels in digital appointment booking sys-
tem as well as in the remote services.
New features will be added into our portal for the occupational
healthcare care customers to benefit and application to support work
ability will be developed . New features are developed continually in
PihlajalinnaPRO-mobile application based on feedback received and
needs of the healthcare professionals. The ERP system in surgical op-
erations is developed more for example in reporting related to insur-
ance company customers. A new ERP system will be deployed for HR
management.
Personnel
At the end of the financial year, the number of personnel was 7,016
(6,297), an increase of 719 persons, or 11 per cent. The Group per-
sonnel averaged 5,167 (4,746) persons as full-time equivalents, an in-
crease of 421 persons, or 9 per cent. The Group employee benefit ex-
penses totalled EUR 296.6 (255.2) million, an increase of EUR 41.4
million, or 16 per cent.
KIRJANMERKKI
Complete and partial outsourcing agreements
Company
Pihlajalinna’s
holding
31 Dec 2021
Pihlajalinna’s
holding
30 Jun 2022
First year of service
production under
the current contract
Duration of 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
More information on the profitability of complete outsourcing agreements is presented in this report in the section Items that
may, according to the management estimate, influence the profitability of complete outsourcing agreements with a delay.
Summary of the revenue and profitability of complete and partial outsourcing agreements (intra -Group sales eliminated):
Complete and partial outsourcing agreements
2022
2021
INCOME STATEMENT
Revenue, EUR million
281.4
277.0
EBITDA, EUR million
6.0
6.6
EBITDA, %
2.1
2.4
Adjusted EBITDA, EUR million
11.5
6.7
Adjusted EBITDA, %
4.1
2.4
Adjusted operating profit before the amortisation and
impairment of intangible assets (EBITA), EUR million
8.8
4.1
Adjusted operating profit before the amortisation and
impairment of intangible assets (EBITA), %
3.1
1.5
REPORT BY THE BOARD OF DIRECTORS
|AUDITED FINANCIAL STATEMENTS 10
Acquisitions increased the number of personnel by approximately
450 persons year-on-year. In Pihlajalinna’s network of operating loca-
tions, the number of personnel increased by approximately 150 per-
sons. The number of personnel in residential services and complete
outsourcing arrangements increased by just over 100 persons.
Employee benefit expenses were exceptionally high during the finan-
cial year. Sickness-related absences among Pihlajalinna’s personnel
were increased particularly by various respiratory infections. Sick-
ness-related absences increased by two percent units year-on-year.
Substitutes and recruitment services have been used to compensate
for shortages in personnel. Increasing supply and strengthening the
company’s governance have also contributed to higher employee ex-
penses.
Pihlajalinna is assessing its operations and organisation. On 10 Janu-
ary 2023, the company announced it will commence change negotia-
tions. The aim is to use open dialogue with personnel representatives
to find long-term solutions for the company. The company is also con-
sidering the potential partial downscaling, combining or closure of in-
dividual operating locations.
The change negotiations concern the network of private clinics, re-
gional management and the Group's general management. Approxi-
mately 650 persons are within the scope of the functions in question.
With a few minor exceptions, the negotiations do not concern
healthcare professionals engaged exclusively in clinical work with cus-
tomers. Other areas excluded from the negotiations include remote
services, digital development, the medical unit, recruitment and pub-
lic services functions, with the exception of the Group’s general ad-
ministration.
According to a preliminary estimate, the negotiations may lead to a
reduction of 40–60 positions in Pihlajalinna, and the administrative
duties of 30–40 employees may be discontinued or reduced.
The provision of health advisory services for the ports of Helsinki
ended on 3 April 2022. The change negotiations concerning those op-
erations concerned 40 persons. In February 2022, change negotia-
tions were commenced to improve the efficiency of operations in Jä-
msän Terveys, concerning all of the personnel, and in Jokilaakson Ter-
veys, concerning approximately 50 persons. The change negotiations
in Jämsä did not lead to reductions in personnel. Change negotiations
concerning operational efficiency improvements in Kolmostien Ter-
veys commenced in March 2022 and were completed in May. The
change negotiations did not lead to reductions in personnel.
Management Team
CEO Joni Aaltonen serves as the Chairman of the Management Team.
The Management Team also includes CFO Tarja Rantala, CLO Marko
Savolainen, CIO Antti-Jussi Aro, CMO Sari Riihijärvi, CCO Sari Nevan-
linna, COO Public Services Eetu Salunen, COO Private Clinic and Hospi-
tal Services Timo Harju and Chief People and Culture Officer Kati
Raassina.
Board of Directors
The Annual General Meeting on 13 April 2022 resolved that the num-
ber of the members of the Board of Directors shall be seven members
instead of the previous six. Hannu
Juvonen, Mika Manninen, Leena
Niemistö, Kati Sulin, Seija
Turunen and Mikko Wirén were re-elected
to serve as members of the Board of
Directors until the next Annual
General Meeting. Heli Iisakka was elected as a new Board Member.
The Annual General Meeting elected Mikko Wirén as
the Chairman of
the Board and Leena Niemistö as the
Vice-Chairman of the Board.
Kati Sulin resigned from the Board of Directors as of 12 June 2022.
Shareholders’ Nomination Board
The Shareholders’ Nomination Board is comprised of the following
representatives:
●
Juha Koponen, Group Director and Chairman of the Board of Direc-
tors, LocalTapiola General Mutual Insurance Company and Local-
Tapiola Mutual Life Insurance Company
●
Mikko Wirén, Managing Director, MWW Yhtiö Oy
●
Antti Kuljukka, CEO, Fennia Mutual Insurance Company
●
Hanna Hiidenpalo, deputy CEO, Elo Mutual Pension Insurance
Company
Committees nominated by the Board
Pihlajalinna Plc Board of Directors appointed the following members
to its committees at its constitutive meeting on 13 April 2022:
●
Audit Committee: Seija Turunen (chairman), Mika Manninen,
Hannu Juvonen and Heli Iisakka
●
People Committee: Mikko Wirén (chairman), Leena Niemistö, Kati
Sulin (until 12 June 2022) and Hannu Juvonen (from 13 June 2022
onwards)
It was agreed that all members of the Board of Directors may join any
of the committee meetings.
Remuneration of the members of the
Board of Directors
The Annual General Meeting of 13 April 2022 resolved that the remu-
neration of the Chairman of the Board of Directors will remain un-
changed and that the remuneration is increased for Vice-Chairman of
the Board of Directors and the Chairman of the Audit Committee
along with the members of the Board of Directors. The following an-
nual remuneration will be paid to the members of the Board of Direc-
tors elected for the term of office ending at the 2023 Annual General
Meeting: EUR 250,000 per year to the full-time Chairman of the
Board of Directors, EUR 39,000 per year to the Vice-Chairman and to
the Chairman of the Audit Committee, and EUR 26,000 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, 13
April 2022, 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
REPORT BY THE BOARD OF DIRECTORS
|AUDITED FINANCIAL STATEMENTS 11
interim report for 1 January–31 March 2022. 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 2023, 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 500 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 13 April 2022 authorised the Board of
Directors to decide on the acquisition of a maximum of 2,061,314
shares, which is approximately 9 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 2023 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
3,091,971 shares, which corresponds to approximately 14 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 2023 at the latest.
Auditors and auditing
At Pihlajalinna’s Annual General Meeting held on 13 April 2022,
KPMG Oy Ab, a firm of authorised public accountants, was elected as
the company’s auditor for the financial year 1 January–31 December
2022. Lotta Nurminen, APA, is the principal auditor.
Shares and shareholders
At the end of the financial period, Pihlajalinna Plc’s share capital en-
tered in the Trade Register amounted to EUR 80,000 and the total
number of shares was 22,620,135, of which 22,549,644 were out-
standing and 70,491 were held by the company. The company has
one share series, with each share entitling its holder to one vote at
the Annual General Meeting. All of the outstanding shares bestow
their holders with equal rights to dividends and other distribution of
the company’s assets. At the end of the review period, the company
had 15,811 (15,126) shareholders. A list of the largest shareholders is
available on the company’s investor website at investors.pihla-
jalinna.fi.
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. Pihlajalinna’s Risk Management Policy defines goals of risk
management, risk management principles, operating 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 2022, 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.
Share-related information, outstanding shares
2022
2021
No. of shares outstanding at end of period
22,549,644
22,594,235
Average no. of shares outstanding during period
22,560,271
22,589,383
Highest price, EUR
13.18
12.98
Lowest price, EUR
8.48
9.26
Average price, EUR ¹⁾
11.06
11.18
Closing price, EUR
8.52
12.64
Share turnover, 1,000 shares
3 770
6 929
Share turnover, %
16.7
30.7
Market capitalisation at end of period,
EUR million
192.1
285.6
¹⁾ average rate weighted by trading level
REPORT BY THE BOARD OF DIRECTORS
|AUDITED FINANCIAL STATEMENTS 12
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 absence. 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
risks, financial risks and damage risks. In its risk management, Pihla-
jalinna’s aim is to operate as systematically as possible and incorpo-
rate risk management in normal business processes. The Group in-
vests in quality management systems and the management of occu-
pational safety and health risks. Pihlajalinna aims to limit the poten-
tial adverse impacts of risks. The assessment of sustainability-related
risks plays an important role in risk management.
Pihlajalinna operates only in Finland. Russia’s invasion of Ukraine has
indirect impacts on the Group’s operations due to the slowing eco-
nomic growth, supply chain disruptions, high inflation and rising mar-
ket interest rates. Pihlajalinna has also taken steps to prepare for po-
tential disruptions in energy distribution. Pihlajalinna will refrain from
all business activities with parties subject to economic sanctions.
In all of its operations, Pihlajalinna takes into account data protection,
information 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.
The COVID-19 pandemic has had a twofold impact on Pihlajalinna’s
business: on the one hand, the demand for COVID-19 services has at
times driven the growth of Pihlajalinna’s business but COVID-19 re-
strictions have at times led to weaker demand for services. The in-
crease in respiratory infections has led to a higher rate of sickness-re-
lated absences among the personnel, which reduces the company’s
profitability and complicates service provision.
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 growth in accordance with the
company’s strategy.
Monitoring and forecasting financial covenants included in the Com-
pany’s financing agreements is a significant part of the Company's
risk management. The situation concerning the company’s financing
agreement is discussed in more detail in the section
Financing ar-
rangements.
The company has identified uncertainties related to the availability of
personnel in the social and healthcare sector. In addition, the costs of
wage harmonisation in the social and healthcare sector in relation to
the creation of the wellbeing services counties remain uncertain to
some degree.
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 the availability of additional financ-
ing.
Complete and partial outsourcings
The reforms concerning the organisation of social, healthcare and res-
cue services may lead to changes in Pihlajalinna’s outsourcing agree-
ments for social and healthcare services.
Processes stipulated by the legislation concerning the reform of
healthcare and social services are being carried out in cooperation
with the wellbeing services counties to ensure the application of the
service agreements as part of the organisation and production of ser-
vices in the wellbeing services counties. This may affect the term of
validity of Pihlajalinna’s service agreements and the scope of the ser-
vices provided. Pursuant to the legislation concerning the reform of
social and healthcare services, the wellbeing services counties are re-
quired to indicate the possible changes to their subcontracting agree-
ments by the end of October 2023. The new con-tract terms will how-
ever enter into force at the beginning of 2026 at the latest. According
to the assessment of the company’s management, its fixed-term ser-
vice agreements will remain in effect, as agreed, with the wellbeing
services counties until the end of the term for each agreement.
Determining the annual profitability of the Group’s fixed-term com-
plete social and healthcare services outsourcing agreements may be-
come accurate with a delay. The group may not always know the ac-
tual costs of the agreements at the time of preparing the financial
statements, and the agreements include variable elements of com-
pensation. The cost accumulation of public specialised care involves
random fluctuation. In addition, individual cases falling within the
scope of the hospital districts’ pooling system for high-cost care may
REPORT BY THE BOARD OF DIRECTORS
|AUDITED FINANCIAL STATEMENTS 13
influence the costs of specialised care during the financial year, and
between financial periods, in Pihlajalinna’s municipal companies.
The fixed-term service agreements for the Group’s complete out-
sourcing arrangements are highly similar with regard to their princi-
ples and basic terms. Pihlajalinna has calculated and recognised the
variable compensation components and cost compensation under
the agreements using the same criteria and model for all clients. De-
mands for the compensation of cost increases due to changes in ser-
vices corresponding to the actual costs and investment costs that
serve operations after the end of the term of the contract being the
client’s responsibility constitute the majority of costs and variable
compensation components that are specified with a delay.
The management has assessed the impact of the decision handed
down on 4 April 2022 by the District Court of Central Finland on Pihla-
jalinna’s other service agreements. 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. The
ruling is not final.
Pihlajalinna has recognised only part of its legally justified claims in its
income statement. The parties to the agreements are bound by an
obligation to negotiate and negotiation is the primary procedure. If
the obligation to negotiate does not lead to payment, the receivables
are sought through legal action, which may further delay the collec-
tion of items presented in current receivables in the financial state-
ments.
Items that may, according to the management’s estimate, in-
fluence the profitability of complete out-sourcing agreements
with a delay:
On 4 April 2022, the District Court of Central Finland handed down its
ruling on the dispute concerning the service agreement between Jä-
msän Terveys Oy and the City of Jämsä. The ruling is not final.
As a result of adjustment items in accordance with the court's ruling,
the profit attributable to the owners of Pihlajalinna Group's parent
company decreased by EUR 2.8 million during the financial year. The
ruling decreased revenue by EUR 2.4 million, and EBITDA was encum-
bered by EUR 4.6 million. The City of Jämsä owns 49 per cent of the
company and Pihlajalinna 51 per cent. Earnings per share were weak-
ened by EUR 0.12 per share by the ruling. The ruling did not have an
immediate material impact on cash flow. For the sake of comparabil-
ity, the effects of the District Court's ruling have been processed as
adjustment items. Jämsän Terveys has filed an appeal regarding the
District Court’s ruling to the Court of Appeal. The operating precondi-
tions for Jämsän Terveys’ service production have been secured with
an efficiency improvement programme and temporary parent com-
pany funding.
During the financial year, Jämsän Terveys Oy has recognised as reve-
nue and recorded in its receivables EUR 1.2 million, mainly COVID-19-
related costs for the current year, which the client 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 financial
year on the impact of the transfer of personnel on the annual fee un-
der the service agreement. The parties are actively engaged in negoti-
ations with a view to resolving outstanding issues. The above matters
have been agreed with the new client, i.e. the Wellbeing Services
County of Central Finland, as presented to the City of Jämsä as of 1
January 2023.
The total amount of contractually and legally justified variable com-
pensation from the City of Mänttä-Vilppula that Mäntänvuoren Ter-
veys Oy has recognised as revenue and recorded in its receivables
amounts to EUR 4.3 (4.1) million. The variable compensation recog-
nised as revenue in accordance with the agreement includes an esti-
mate of compensation for specialised care costs to the service pro-
vider of the Pirkanmaa Hospital District’s investment costs allocated
to the client. The receivables from variable compensation compo-
nents are also related to cost increases caused by service changes
and compensating such increases in accordance with the actual costs.
A preliminary agreement has been made with the new client repre-
sentatives, i.e. the Wellbeing Services County of Pirkanmaa, to trans-
fer the cost liability of demanding specialised care away from the
company.
The total amount of contractually and legally justified variable com-
pensation from the City of Parkano that Kolmostien Terveys Oy has
recognised as revenue and recorded in its receivables amounts to
EUR 1.3 (1.7) million. The amount has been influenced by the deci-
sion of the Parkano City Council on 26 Septem-ber 2022 to allocate
an additional appropriation to the budget of the basic welfare com-
mittee for 2022. The variable compensation recognised as revenue in
accordance with the agreement includes an estimate of compensa-
tion for specialised care costs to the service provider of the Pir-
kanmaa Hospital District’s investment costs allocated to the client.
Other receivables from variable compensation are mainly related to
COVID-19 cost compensation for the year 2022. The client has al-
ready previously approved cost increases arising from changes to ser-
vices for the elderly as part of the annual fee under the service agree-
ment. A preliminary agreement has been made with the new client
representatives, i.e. the Well-being Services County of Pirkanmaa, to
transfer the cost liability of demanding specialised care away from
the company.
The total amount of contractually and legally justified variable com-
pensation that the lead contracting partner for complete outsourcing
Pihlajalinna Terveys Oy has recognised as revenue and recorded in its
receivables amounts to EUR 0.6 (0.2) million.
The Group's receivables include the above-mentioned items totalling
EUR 7.4 (9.8) million.
Pending legal processes:
On 4 April 2022, the District Court of Central Finland handed down its
ruling on the dispute concerning the service agreement between Jä-
msän Terveys Oy and the City of Jämsä, as mentioned above in the
section Items that may, according to the management’s estimate, in-
fluence the profitability of complete out-sourcing agreements with a
delay. Jämsän Terveys has filed an appeal regarding the District
Court’s ruling to the Court of Appeal.
The City of Jämsä has criticised the decision of Jämsän Terveys Oy’s
Annual General Meeting 2022 concerning an increase in working cap-
ital in accordance with the shareholder agreement. The case is pend-
ing in the District Court of Central Finland.
REPORT BY THE BOARD OF DIRECTORS
|AUDITED FINANCIAL STATEMENTS 14
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.
Impairment testing of goodwill:
At the end of the financial year, goodwill on Pihlajalinna’s statement
of financial position amounted to EUR 251.0 (188.9) 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
2022. 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 223 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
The company did not receive any flagging notifications under Chapter
9, Section 5 of the Securities Markets Act during the financial year.
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, 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 pro-
vided that the performance and quality-based targets as set by the
board are reached. 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.
Shares paid off as share rewards shall be subject to a two-year trans-
fer restriction. The criteria for the performance and quality based ad-
ditional share program are adjusted EBITA as well as key operative
and quality indicators of Pihlajalinna Group.
A total of 42 key persons are entitled to participate to the share-
based incentive program. In case all the persons entitled to partici-
pate do participate to the program by meeting the condition of in-
vestment in full and in case the performance targets set to the pro-
gram are achieved in total, the total amount of the share rewards
payable under the program is a maximum of approximately
1,100,000 shares (gross amount prior to the deduction of applicable
withholding tax) and the total value of the share reward pro-gram is
approximately EUR 12.8 million. In case the program materializes in
full, the above amount of shares equals approximately to 4.8 per cent
of the total amount of the shares of the company.
No performance- and quality-based share rewards materialised for
the first performance period 2022 pursuant to the incentive plan, as
the minimum objectives set for the programme were not achieved.
Repurchase of own shares
Pihlajalinna has repurchased, between 24 March and 20 April 2022,
its own shares totaling 120,000 shares with an average price of EUR
12.2896 per share.
Pihlajalinna conveyed, in March, a total of 8,867 own shares to the
key employees in accordance with the earlier incentive program (LTIP
2019). Pihlajalinna conveyed, in April, a total of 59,900 own shares as
con-sideration in a transaction to redeem non-controlling interests of
its subsidiary. Pihlajalinna conveyed, in May, a total of 6,642 own
shares as part of the remuneration of the Board of Directors.
The number of own shares was 70,491 at the end of the review pe-
riod, corresponding to approximately 0,31 per cent of the total num-
ber of shares and votes.
Own shares can be used for payments for the incentive program cur-
rently in effect.
The Board of Directors’ proposal for profit distri-
bution and the Annual General Meeting 2022
The Board of Directors proposes no dividend distribution for the fi-
nancial year that ended on 31 December 2022.
On the balance sheet date, the number of shares outstanding was
22,594,644.
Pihlajalinna Plc’s Annual General Meeting will be held on 4 April 2023
in Tampere. The Board of Directors will decide on the notice of the
General Meeting and the included proposals at a later date.
The annual report for 2022, 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 11.
Calculation of the parent company's distributable funds:
EUR
31 Dec 2022
Reserve for invested unrestricted equity
183,190,483.50
Retained earnings
32,547,508.75
Profit for the period
-4,503,903.60
Capitalised development costs
-258,323.20
Total
210,975,765.45
Pihlajalinna’s outlook for 2023
In 2023, Pihlajalinna will focus on improving its profitability and finan-
cial position.
●
The Group expects the consolidated revenue to increase from the
previous year’s level (EUR 690.5 million in 2022).
●
The Group expects the adjusted operating profit before the amorti-
sation and impairment of intangible assets (EBITA) to improve from
the previous year’s level (EUR 26.7 million in 2022).
●
The Group has initiated a number of measures to strengthen its fi-
nancial position. Change negotiations commenced in January 2023
and efficiency improvement programmes in complete outsourcing
REPORT BY THE BOARD OF DIRECTORS
|AUDITED FINANCIAL STATEMENTS 15
agreements are expected to improve Pihlajalinna’s profitability.
Price increases are expected to compensate the effects of inflation.
The outlook for 2023 involves uncertainty related to the high inflation
in the euro area, development of costs in general and the develop-
ment of wages in particular. The impacts of the commencing wellbe-
ing services counties and COVID-19 on the social and healthcare sec-
tor also remain uncertain. Slowed economic growth, weakened con-
sumer confidence and rising market interest rates may affect Pihla-
jalinna’s service demand and financial result more than expected.
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 11. 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. Pihla-
jalinna’s annual reporting also includes information on social, eco-
nomic and environmental responsibility reported in accordance with
the Core level of the GRI (Global Reporting Initiative) reporting frame-
work.
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 providers of healthcare and
wellbeing services in Finland. The Group provides general practitioner
and specialised care services, occupational healthcare and dental
care services, and residential services, for example. Pihlajalinna’s
shares are listed on Nasdaq Helsinki.
Pihlajalinna’s customers include private individuals, corporations, in-
surance companies and wellbeing services counties, for whom the
company provides a wide range of local, remote and digital services.
In the public sector, the company provides social and healthcare pro-
duction models in which cooperation guarantees high-quality ser-
vices.
The company’s values are energy, ethics and open-mindedness. Pihla-
jalinna offers its personnel meaningful work in safe working condi-
tions. Each employee is important as a member of the work commu-
nity and as a developer of the customer experience and operational
quality.
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 11.
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 respects internationally recognised human rights and
equality. Pihlajalinna does not condone discrimination based on em-
ployees’ and practitioners’ origin, nationality, religious beliefs, ethnic-
ity, gender, age or any other such factor.
Pihlajalinna's responsibility work is also based on the materiality defi-
nition set in 2021, where management and stakeholders were con-
sulted. The aim is to re-evaluate the materialities from the perspec-
tive of the double materiality required by the EU's Corporate Sustain-
ability Reporting Directive (CSRD) during 2023.
Three sustainability themes have been identified for Pihlajalinna
based on materiality: responsibility for health and wellbeing, respon-
sibility for personnel, 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 satisfaction, and employee satisfaction. The themes and re-
sults are described in more detail in the section Sustainability themes
and key results. Some of the indicators are also incorporated into the
company’s long-term loan agreement signed in 2022. Pihlajalinna
monitors the GRI reporting framework indicators in its Annual Re-
port, which is published in week 11, simultaneously with the Board of
Directors’ 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 will continue to specify
and promote its sustainability strategy in 2023.
In addition to Global Compact reporting and the GRI Standards, Pihla-
jalinna’s sustainability efforts are also assessed in accordance with
the EcoVadis sustainability assessment. In 2022, Pihlajalinna achieved
a bronze medal in the EcoVadis rating, which assesses companies’
sustainability from the perspective of environmental issues, labour
and human rights, ethical operating practices and sustainable sourc-
ing.
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
sustainability efforts are led by the Group’s communications and sus-
tainability team and a corporate responsibility working group led by
the Vice President for Communications and Sustainability, which con-
sists of representatives of the Group’s businesses as well as medical
experts and specialists in Group functions such as finance, properties
and law. The working group prepares and ensures measures in line
with the company’s sustainability targets and reports to the Manage-
ment Team on the progress of sustainability efforts four times per
year. The Management Team approves and monitors the sustain-abil-
ity strategy and related actions, and ensures that the necessary re-
sources are available. The highest decision-making body concerning
the company’s sustainability is the Board of Directors, which also
REPORT BY THE BOARD OF DIRECTORS
|AUDITED FINANCIAL STATEMENTS 16
monitors progress on the chosen themes at the annual level. The
Board of Directors also decides on guidelines and policies.
Pihlajalinna respects internationally recognised human rights and
equality. Pihlajalinna does not condone discrimination based on em-
ployees’ and practitioners’ origin, nationality, religious beliefs, ethnic-
ity, gender, age or any other such factor. Pihlajalinna’s Code of Con-
duct describes the way the company operates, based on the princi-
ples of good governance and law, transparency, fairness and confi-
dentiality. The Code of Conduct also includes the company’s commit-
ment to the prevention of bribery and corruption, compliance with
competition law and cooperation with stakeholders. Training on the
Code of Conduct is part of the induction training programme, and all
Pihlajalinna professionals are required to complete the training.
Pihlajalinna has a confidential whistleblowing channel that can be
used for reporting activities that violate the Code of Conduct. Pihla-
jalinna’s Board of Directors monitors compliance with the Code of
Conduct. During the 2022 reporting period, a total of four notifica-
tions were received via the whistleblowing channel. Each whistle-
blower report was investigated and none of them led to any further
action. In addition, no activities contrary to legislation or the Code of
Conduct or misconduct were identified on the basis of the reports.
Pihlajalinna manages sustainability in a clear manner to ensure that
the company operates in a responsible and ethical manner and pro-
motes and enables the achievement of the set targets.
Sustainability risks and opportunities
The most significant risks associated with the material sustainability
themes are assessed and efforts are made to limit their potential im-
pacts as part of the company’s general risk management process. The
most material identified sustainability risks are related to clinical
quality and safety, the availability and retention of highly competent
professionals, information security and values, ethics and consistent
operating practices.
Limiting risks related to clinical quality, patient safety, values, ethics
and consistent operating practices is among Pihlajalinna’s most signif-
icant risk management measures. Pihlajalinna also has an ISO
9001:2105 quality management system certificate. Pro-moting the
continuous training of the company’s professionals as well as promot-
ing consistent operating practices by means of Pihlajalinna’s quality
and patient safety policy and Code of Conduct play a key role. This en-
sures consistent quality and impactful services for the company’s cus-
tomers. The development of operations enables the development of
new innovations for work with patients. Pihlajalinna participates in
research to promote clinical quality and impact.
Pihlajalinna has identified uncertainties related to the availability of
personnel in the field of social and healthcare services. By promoting
the employee experience through good leadership, career develop-
ment and equality, the company aims to attract and retain healthcare
professionals – both experienced professionals and those who are in
the early stages of their career. Pihlajalinna also participates in pro-
jects that promote international recruitment.
In all of its operations, Pihlajalinna takes into account data protection,
information security and the related requirements. The company has
taken preparations for the risk of cyber attacks, which has been ele-
vated by Russia’s invasion of Ukraine. The aim is to ensure the secure
processing of patient and personal data as well as the protection of
the privacy of patients, customers and the company’s personnel. A
further goal is the prevention of disruptions in the functioning of criti-
cal information systems that could jeopardise service availability.
Data protection and information security are an important part of
Pihlajalinna’s ISO 9001 certified quality management system.
Due to the nature of its operations, the company’s carbon intensity is
low. Pihlajalinna has not identified significant environmental or cli-
mate related risks that directly impact its operations. However, the
company is aware of long-term and medium-term environmental and
climate-related risks related to, for example, the availability of financ-
ing and operating costs. The company is preparing to introduce an
ISO 14001 environmental management system in part of its opera-
tions during 2023 and will continue to assess climate risks in 2023.
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. The self-monitoring plan was updated in 2022. Self-moni-
toring makes it possible to quickly identify risks related to quality or
safety. The business locations have a reporting system for the per-
sonnel 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 2022, the target for this was set at 66 per
cent, and the target was achieved.
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. Pihlajalinna’s minimum target for the share of
preventive work in the invoicing of occupational health physicians
was 60 per cent in 2022. In 2022, preventive work accounted for 61.1
per cent of invoicing.
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. Pihlajalinna reports
NPS in two parts. The NPS for Pihlajalinna’s appointments was 77.1
REPORT BY THE BOARD OF DIRECTORS
|AUDITED FINANCIAL STATEMENTS 17
(76.5) and the NPS for complete and partial outsourcing arrange-
ments was 72.6 (70.8). The NPS target for 2025 is 80. The perfor-
mance indica-tors will be developed further in 2023 to correspond to
the Group’s current structure.
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 expert in question may not be availa-
ble. In 2022, some 37 (36) per cent of Pihlajalinna’s appointments
(excluding complete outsourcing arrangements and COVID-19 test-
ing) were conducted remotely.
Responsibility for personnel
Pihlajalinna systematically promotes its responsibility for personnel.
The company has a comprehensive equality and non-discrimination
policy and a general HR policy. Pihlajalinna wants to be the first
choice among professionals in its industry.
The number of personnel at Pihlajalinna grew substantially in 2022
due to a number of M&A transactions. The increase in Pihlajalinna’s
supply also increased the number of practitioners. At the end of the
year, the company had 7,016 (6,297) employees and 1,812 (1,070)
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 in business. Investments in
the development and wellbeing of the personnel also help to ensure
Pihlajalinna’s competitiveness in a rapidly changing market. The de-
velopment of work ability is one of the company’s key themes for the
current strategy period. In 2022, Pihlajalinna launched a unique coop-
eration project with pension insurance companies. One of the main
objectives of the project is to reduce sickness-related absences. Pihla-
jalinna’s sickness-related absence rate in 2022 was 9.8 (7.8) 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 2022 was -1.5 (+1.0),
while the target set for 2022 was +5. The Group’s eNPS excluding
complete and partial outsourcing arrangements in 2022 was +11
(+15) and the eNPS of the Group’s complete and partial outsourcing
arrangements in 2022 was -17 (-14).
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 weekly updated con-
tent to support competence development. The total amount of train-
ing for the personnel came to 71,085 hours in 2022.
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 low in 2022: only 5 (5) serious accidents were
reported in the Group as a whole during the year. The accident fre-
quency was 34.4, below the industry average of 35 and representing
a significant improvement when compared to the previous year
(49.0). The accident frequency indicates the number of accidents
leading to an absence of at least one day per million hours worked.
Sustainable business
Pihlajalinna was founded more than 20 years ago to solve regional la-
bour availability challenges in healthcare. The company continues to
operate under the joint venture model it has developed, in which
Pihlajalinna establishes a joint venture with the municipality or joint
municipal authority – or, effective from the beginning of 2023, the
wellbeing services county – in question, with Pihlajalinna owning a
majority stake. Effective from the beginning of 2023, all agreements
have been transferred to the newly established wellbeing services
counties.
Pihlajalinna’s operations generate economic added value in Finland,
especially in the regions of Pirkanmaa, South Ostro-bothnia 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, all of the goods
and services purchased by Pihlajalinna are purchased from Finnish
companies.
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 2022, Pihlajalinna’s operations generated a
total of EUR 155.7 (131.9) million in payments to society. In addition,
Pihlajalinna paid a total of EUR 112.5 (73.0) million in fees to practi-
tioners, for which the practitioners themselves pay the taxes in-
volved.
REPORT BY THE BOARD OF DIRECTORS
|AUDITED FINANCIAL STATEMENTS 18
Tax footprint
EUR million
2022
2021
Direct tax payable for the period
Income tax (business income tax)
2.0
5.3
42.0
35.3
3.3
3.2
ributions
4.3
3.5
group life insurance
1.6
1.6
Employer contributions, total
51.2
43.7
Property taxes
0.2
0.1
Transfer taxes
0.9
0.4
Direct tax payable for the period, total
54.2
49.5
Value added tax of acquisitions payable by the
company
Value added taxes, estimate
20.1
14.3
Tax for the period
57.8
48.0
18.4
15.8
butions
3.6
2.9
Payroll tax, total
79.8
66.7
Net value-added tax
1.5
1.4
Total tax for the period
81.3
68.1
Tax footprint
155.7
131.9
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.
For Pihlajalinna, the management of data protection and information
security is of vital importance, and its purpose is to ensure the secure
processing of patient and personal data as well as the protection of
the privacy of patients, customers and the company’s personnel. A
further goal of information security management is the prevention of
disruptions in the functioning of critical information systems that
could jeopardise service functionality or availability. Pihlajalinna’s tar-
get for data protection is zero successful attempts to gain unauthor-
ised access. This target was achieved in 2022. A further target is for
100 per cent of information security updates to be installed within
the first week of their release. The result in 2022 was approximately
89 per cent. More information on information security is provided 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.
Pihlajalinna began assessing and calculating its carbon footprint in
2022. An emission calculation for the greenhouse gas emissions of
Pihlajalinna’s operations and value chain was carried out in accord-
ance with the internationally recognised GHG Protocol (Scope 1, 2
and 3). The emission accounting model can be used to report the sig-
nificant direct and indirect greenhouse gas emissions of the value
chain. More details on the emission calculation are included in the
Annual Report. In 2023, Pihlajalinna will continue to improve the cal-
culations and draft a climate roadmap that will support the setting of
climate targets throughout the Group. Pihlajalinna is also preparing
for the partial deployment of an ISO 14001 environmental manage-
ment system in the Group in 2023.
As the company’s first climate action, Pihlajalinna switched to zero-
emission electricity at the end of 2022. The purchasing of zero-emis-
sion 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.
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 690.5 million), capital expenditure (totalling EUR 234.5
million) and operating expenditure (totalling EUR 22.15 million) is 0%
for all three. Accordingly, the non-eligible share of turnover, capital
expenditure and operating expenditure is 100%. Information on tax-
onomy-aligned activities is presented in the tables below.
REPORT BY THE BOARD OF DIRECTORS
|AUDITED FINANCIAL STATEMENTS 19
Proportion of turnover from products or services associated with Taxonomy-aligned economic activities - disclosure covering year 2022
Substantial contribution criteria
DNSH criteria
(‘Does Not SignJOSicantly Harm’)
Economic activities
Code(s)
Absolute turnover
Proportion of turnover
Climate change mitigation
Climate change adaptation
Water and marine resources
Circular economy
Pollution
Biodiversity
and ecosystems
Climate change mitigation
Climate change adaptation
Water and marine resources
Circular economy
Pollution
Biodiversity and ecosystems
Minimum safeguards
Taxonomy-
aligned pro-
portion of
turnover
2022
Taxonomy-
aligned pro-
portion of
turnover
2021
Category
(enabling
activity)
Category
(transitional
activity)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(13)
(14)
(15)
(16)
(17)
(18)
(19)
(20)
(21)
MEUR
%
%
%
%
%
%
%
Y/N
Y/N
Y/N
Y/N
Y/N
Y/N
Y/N
%
%
E
T
A. TAXONOMY-ELIGIBLE ACTIVITIES
%
A.1. Environmentally sustainable activities (Taxonomy -aligned)
Activity 1 [1]
N/A
N/A
N/A
N/A
N/A
N/A
Activity 2
N/A
N/A
N/A
N/A
N/A
N/A
Turnover of environmentally sustainable activities (Taxonomy-
aligned) (A.1)
A.2 Taxonomy-Eligible but not environmentally sustainable activi-
ties (not Taxonomy -aligned activities)
Activity 1
Activity 3
Turnover of Taxonomy -eligible but not environmentally sustaina-
ble activities (not Taxonomy -aligned activities) (A.2)
Total (A.1 + A.2)
0
0%
B. TAXONOMY-NON-ELIGIBLE ACTIVITIES
Turnover of Taxonomy -non-eligible activities (B)
690.5
100%
Total (A + B)
690.5
100%
REPORT BY THE BOARD OF DIRECTORS
|AUDITED FINANCIAL STATEMENTS 20
Proportion of CapEx from products or services associated with Taxonomy-aligned economic activities - disclosure covering year 2022
Substantial contribution criteria
DNSH criteria
(‘Does Not SignJOSicantly Harm’)
Economic activities (1)
Code(s)
Absolute CapEx
Proportion of CapEx
Climate change mitigation
Climate change adaptation
Water and marine resources
Circular economy
Pollution
Biodiversity and ecos
ystems
Climate change mitigation
Climate change adaptation
Water and marine resources
Circular economy
Pollution
Biodiversity and ecosystems
Minimum safeguards
Taxonomy-
aligned pro-
portion of
CapEx 2022
Taxonomy-
aligned pro-
portion of
CapEx 2021
Category
(enabling
activity)
Category
(transitional
activity)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(13)
(14)
(15)
(16)
(17)
(18)
(19)
(20)
(21)
MEUR
%
%
%
%
%
%
%
Y/N
Y/N
Y/N
Y/N
Y/N
Y/N
Y/N
%
%
E
T
A. TAXONOMY-ELIGIBLE ACTIVITIES
A.1. Environmentally sustainable activities (Taxonomy -aligned)
Activity 1 [1]
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Activity 2
N/A
N/A
N/A
N/A
N/A
N/A
N/A
CapEx of environmentally sustainable activities (Taxonomy-
aligned) (A.1)
A.2 Taxonomy-Eligible but not environmentally sustainable activi-
ties (not Taxonomy -aligned activities)
Activity 1
Activity 3
CapEx of Taxonomy -eligible but not environmentally sustainable
activities (not Taxonomy -aligned activities) (A.2)
Total (A.1 + A.2)
0
0%
B. TAXONOMY-NON-ELIGIBLE ACTIVITIES
CapEx of Taxonomy -non-eligible activities (B)
234.5
100%
Total (A + B)
234.5
100%
REPORT BY THE BOARD OF DIRECTORS
|AUDITED FINANCIAL STATEMENTS 21
Proportion of OpEx from products or services associated with Taxonomy-aligned economic activities - disclosure covering year 2022
Substantial contribution criteria
DNSH criteria
(‘Does Not SignJOSicantly Harm’)
Economic activities (1)
Code(s)
Absolute OpEx
Proportion of OpEx
Climate change mitigation
Climate change adaptation
Water and marine resources
Circular economy
Pollution
Biodiversity and ecosystems
Cli
mate change mitigation
Climate change adaptation
Water and marine resources
Circular economy
Pollution
Biodiversity and ecosystems
Minimum safeguards
Taxonomy-
aligned pro-
portion of
OpEx 2022
Taxonomy-
aligned pro-
portion of
OpEx 2021
Category
(enabling
activity)
Category
(transitional
activity)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(13)
(14)
(15)
(16)
(17)
(18)
(19)
(20)
(21)
MEUR
%
%
%
%
%
%
%
Y/N
Y/N
Y/N
Y/N
Y/N
Y/N
Y/N
%
%
E
T
A. TAXONOMY-ELIGIBLE ACTIVITIES
A.1. Environmentally sustainable activities (Taxonomy -aligned)
Activity 1 [1]
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Activity 2
N/A
N/A
N/A
N/A
N/A
N/A
N/A
OpEx of environmentally sustainable activities (Taxonomy -aligned)
(A.1)
A.2 Taxonomy-Eligible but not environmentally sustainable activi-
ties (not Taxonomy -aligned activities)
Activity 1
Activity 3
OpEx of Taxonomy -eligible but not environmentally sustainable ac-
tivities (not Taxonomy -aligned activities) (A.2)
Total (A.1 + A.2)
0
0%
B. TAXONOMY-NON-ELIGIBLE ACTIVITIES
OpEx of Taxonomy -non-eligible activities (B)
22.15
100%
Total (A + B)
22.15
100%
REPORT BY THE BOARD OF DIRECTORS
|AUDITED FINANCIAL STATEMENTS 22
Events after the financial period
On 10 January 2023, the Group announced it would commence
change negotiations. The change negotiations are still under way and
the aim is to complete them within the target time of six weeks. The
change negotiations concern the network of private clinics, regional
management and the Group’s general management. Approximately
650 persons are within the scope of the functions in question. Ac-
cording to the company’s preliminary estimate, the negotiations may
lead to a reduction of
40–60 positions in Pihlajalinna, and the admin-
istrative duties of 30–40 employees may be discontinued or reduced.
The allocation of the planned measures and their impacts in the per-
sonnel will be discussed in more detail during the negotiations.
REPORT BY THE BOARD OF DIRECTORS
|AUDITED FINANCIAL STATEMENTS 23
Key financial figures
Scope of operations
2022
2021
2020
2019
2018
Revenue, EUR million
690.5
577.8
508.7
518.6
487.8
Change, %
19.5
13.6
-1.9
6.3
15.0
Organic revenue growth, EUR million*
11.3
58.1
-11.3
13.4
-2.0
Change, %
2.0
11.4
-2.2
2.8
-0.5
Gross investments, EUR million*
234.5
44.8
25.4
44.1
160.0
% of revenue
34.0
7.8
5.0
8.5
32.8
Capitalised development costs, EUR million*
0.0
0.0
0.4
0.5
1.3
% of revenue
0.0
0.0
0.1
0.1
0.3
Employee benefit expenses, EUR million
296.6
255.2
214.2
222.0
208.4
Personnel at the end of the period (NOE)
7,016
6,297
5,550
5,815
5,850
Average number of personnel (FTE)
5,167
4,746
4,308
4,649
4,868
Profitability
2022
2021
2020
2019
2018
EBITDA, EUR million
54.4
62.6
52.2
47.8
44.8
EBITDA, %
7.9
10.8
10.3
9.2
9.2
Adjusted EBITDA, EUR million*
64.2
65.3
54.8
55.7
45.9
Adjusted EBITDA, %
9.3
11.3
10.8
10.7
9.4
Operating profit (EBIT), EUR million
8.9
27.9
18.1
10.2
13.2
Operating profit, %
1.3
4.8
3.6
2.0
2.7
Adjusted operating profit (EBIT), EUR million*
18.6
30.3
21.1
21.4
14.4
Adjusted operating profit, %
2.7
5.3
4.2
4.1
3.0
Adjusted operating profit before the amortisation and im-
pairment of intangible assets (EBITA), EUR million*
26.7
37.3
27.4
28.9
21.6
Adjusted EBITA, %
3.9
6.5
5.4
5.6
4.4
Net financial expenses, EUR million
-7.4
-3.7
-4.4
-3.9
-2.8
% of revenue
-1.1
-0.6
-0.9
-0.8
-0.6
Profit before tax, EUR million
1.5
24.2
13.8
6.3
10.0
% of revenue
0.2
4.2
2.7
1.2
2.0
Income tax, EUR million
6.1
-5.1
-4.8
-1.8
-2.7
Profit for the period
7.7
19.1
9.0
4.5
7.2
Cash flow after investments, EUR million
-18.6
24.9
42.8
17.4
-18.8
Return on equity (ROE), %*
6.2
16.1
8.1
3.8
5.7
Return on capital employed (ROCE), %*
2.3
8.8
5.7
3.1
5.9
Funding and financial position
Interest-bearing net financial debt, EUR million
385.7
194.7
194.8
192.7
178.0
% of revenue
55.9
33.7
38.3
37.2
36.5
Equity ratio, %*
18.6
26.9
26.1
24.3
29.9
Gearing, %*
313.8
158.8
170.6
181.7
136.6
Net debt/adjusted EBITDA*
6.0
3.0
3.6
3.5
3.9
Share related information
2022
2021
2020
2019
2018
Earnings per share (EPS)
0.42
0.89
0.38
0.16
0.16
Equity per share, EUR*
5.50
5.27
4.82
4.44
5.36
Dividend per share, EUR (the Board of
Directors’ proposal)
0.30
0.20
0.10
Dividend per share, % (the Board of Di-
rectors’ proposal)*
33.72
52.00
63.96
Effective dividend yield, % (the Board of
Directors’ proposal)*
0.00
2.37
2.13
1.20
1.16
Number of shares at year-end
22 549 644
22,594,235
22,617,841
22,620,135
22,620,135
Average number of shares
22 560 271
22,589,383
22,586,212
22,620,135
22,224,236
Market capitalisation, EUR million
192.1
285.6
212.2
345.6
195.0
Dividends paid, EUR million (the Board of
Directors’ proposal)
6.8
4.5
2.3
P/E ratio*
0.05
0.07
0.04
0.01
0.02
Highest quotation, EUR
13.18
12.98
15.66
15.88
15.28
Lowest quotation, EUR
8.48
9.26
8.72
8.70
8.56
Average quotation, EUR
11.06
11.18
12.09
12.77
12.18
Closing price at year-end, EUR
8.52
12.64
9.38
15.28
8.62
Trading volume of shares, 1,000 shares*
3 770
6,929
6,620
4,062
6,182
Trading volume of shares, %*
16.7
30.7
29.3
18.0
27.8
* Alternative performance measure
REPORT BY THE BOARD OF DIRECTORS
|AUDITED FINANCIAL STATEMENTS 24
Quarterly information
EUR million
Q4/22
Q3/22
Q2/22
Q1/22
Q4/21
Q3/21
Q2/21
Q1/21
INCOME STATEMENT
Revenue
188.4
165.2
173.7
163.1
154.7
140.6
142.5
139.9
Other operating income
0.9
0.4
1.8
1.7
1.6
0.7
0.2
1.1
Materials and services
-74.8
-61.8
-66.5
-64.2
-56.3
-49.3
-50.7
-53.2
Employee benefit expenses
-80.4
-68.4
-74.6
-73.2
-69.3
-60.5
-64.1
-61.2
Other operating expenses
-22.7
-17.4
-18.9
-18.2
-16.2
-13.3
-12.9
-11.7
EBITDA
11.5
18.1
15.6
9.3
14.5
18.2
15.0
14.9
EBITDA, %
6.1
10.9
9.0
5.7
9.4
12.9
10.5
10.6
Adjusted* EBITDA
12.0
18.9
16.9
16.5
14.9
19.3
15.9
15.2
Adjusted* EBITDA, %
6.4
11.4
9.7
10.1
9.6
13.8
11.1
10.9
IFRS3 expenses
-0.2
-0.1
-0.2
-0.8
-0.2
-0.5
-0.7
0.0
Depreciation and amortisation
-12.0
-11.5
-11.5
-10.5
-9.0
-8.8
-8.5
-8.5
Operating profit (EBIT)
-0.6
6.6
4.1
-1.2
5.6
9.4
6.5
6.4
Operating profit, %
-0.3
4.0
2.4
-0.7
3.6
6.7
4.6
4.6
Adjusted operating profit (EBIT)
-0.2
7.3
5.0
5.2
5.8
10.0
6.3
6.6
Adjusted operating profit (EBIT), %
-0.1
4.4
2.9
3.2
3.7
7.1
4.4
4.7
Adjusted operating profit before the amortisation and impairment of in-
tangible assets (EBITA)
2.2
9.4
7.3
7.8
7.8
12.3
8.9
8.3
Adjusted EBITA, %
1.2
5.7
4.2
4.8
5.1
8.7
6.3
5.9
Financial income
0.4
0.1
0.1
0.1
0.1
0.1
0.1
0.1
Financial expenses
-2.7
-2.1
-1.7
-1.6
-1.1
-0.9
-1.0
-1.0
Profit before taxes (EBT)
-2.8
4.5
2.5
-2.7
4.6
8.5
5.6
5.5
Income tax
1.7
-0.5
-0.3
5.2
-1.2
-1.7
-1.1
-1.1
Profit for the period
-1.1
4.0
2.1
2.6
3.3
6.8
4.5
4.4
Share of the result for the period attributable to owners of the parent
company
-0.7
3.3
1.7
5.3
4.3
7.0
4.3
4.5
Share of the result for the period attributable to non-controlling interests
-0.4
0.8
0.4
-2.7
-0.9
-0.1
0.2
-0.1
EPS
0.0
0.5
0.1
-0.7
0.2
0.7
0.2
-0.2
Average number of personnel (FTE)
5,167
5,092
5,061
4,819
4,746
4,731
4,665
4,444
Change in personnel during the quarter
75
31
243
73
15
66
221
136
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
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
2022
2021
Return on equity (ROE), %
Profit for period (rolling 12 months)/
7.7
19.1
Equity at beginning of period
122.6
114.2
Equity at end of period
122.9
122.6
Equity (average) x 100
122.7
118.4
Return on equity (ROE), %
6.2
16.1
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
2022
2021
Return on capital employed (ROCE), %
Profit before taxes (rolling 12 months) +
1.5
24.2
Financial expenses (rolling 12 months)
8.1
4.0
/
9.6
28.2
Total statement of financial position at beginning of period -
457.1
441.3
non-interest-bearing liabilities at beginning of period
135.5
119.0
321.6
322.3
Total statement of financial position at end of period -
661.6
457.1
Non-interest-bearing liabilities at end of period
138.9
135.5
522.8
321.6
Average x 100
422.2
321.9
Return on capital employed (ROCE), %
2.3
8.8
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
2022
2021
Equity ratio, %
Equity/
122.9
122.6
Total statement of financial position -
661.6
457.1
Advances received x 100
0.0
0.9
Equity ratio, %
18.6
26.9
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
2022
2021
Gearing, %
Interest-bearing financial liabilities –
398.8
199.0
Cash and cash equivalents/
13.1
4.3
Equity x 100
122.9
122.6
Gearing, %
313.8
158.8
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
2022
2021
Net debt/adjusted EBITDA, rolling 12 months
Interest-bearing financial liabilities -
398.8
199.0
Cash and cash equivalents
13.1
4.3
Net debt/
385.7
194.7
Adjusted EBITDA (rolling 12 months)
64.2
65.3
Net debt/adjusted EBITDA, rolling 12 months
6.0
3.0
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
2022
2021
EBITDA and Adjusted EBITDA
Profit for period
7.7
19.1
Income tax
6.1
-5.1
Financial expenses
-8.1
-4.0
Financial income
0.7
0.2
Depreciation, amortisation and impairment
-45.5
-34.7
EBITDA
54.4
62.6
IFRS 3 costs –
1.3
1.4
Entries related to the IFRIC Agenda Decision concerning
cloud computing arrangements
0.3
0.6
Other EBITDA adjustments
8.2
0.7
Total EBITDA adjustments
9.8
2.7
Adjusted EBITDA
64.2
65.3
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
2022
2021
EBITDA, %
EBITDA/
54.4
62.6
Revenue x 100
690.5
577.8
EBITDA, %
7.9
10.8
EUR million
2022
2021
Adjusted EBITDA, %
Adjusted EBITDA/
64.2
65.3
Revenue x 100
690.5
577.8
Adjusted EBITDA, %
9.3
11.3
EUR million
2022
2021
Operating profit (EBIT) and Adjusted operating profit (EBIT)
Profit for the period
7.7
19.1
Income tax
6.1
-5.1
Financial expenses
-8.1
-4.0
Financial income
0.7
0.2
Operating profit (EBIT)
8.9
27.9
Entries related to the IFRIC Agenda Decision concerning
cloud computing arrangements (reversal of amortisation ) -
-0.4
-0.3
Other adjustments to amortisation and impairment
0.3
0.0
Total adjustments to depreciation, amortisation and impairment
0.4
0.3
Total EBITDA adjustments
9.8
2.7
Total operating profit (EBIT) adjustments
9.7
2.4
Adjusted operating profit (EBIT)
18.6
30.3
PPA amortisation
2.7
3.0
Amortisation and impairment of other intangible assets
5.4
4.0
Entries related to the IFRIC Agenda Decision concerning
cloud computing arrangements (reversal of amortisation)
0.4
0.3
Adjusted operating profit before the amortisation and
impairment of intangible assets (EBITA)
26.7
37.3
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
2022
2021
Operating profit (EBIT), %
Operating profit/
8.9
27.9
Revenue x 100
690.5
577.8
Operating profit (EBIT), %
1.3
4.8
REPORT BY THE BOARD OF DIRECTORS
|AUDITED FINANCIAL STATEMENTS 28
EUR million
2022
2021
Adjusted operating profit (EBIT), %
Adjusted operating profit/
30.3
30.3
Revenue x 100
690.5
577.8
Adjusted operating profit (EBIT), %
2.7
5.3
EUR million
2022
2021
Adjusted operating profit before the amortisation and
impairment of intangible assets (EBITA), %
Adjusted operating profit before the amortisation and
impairment of intangible assets (EBITA) /
26.7
37.3
Revenue x 100
690.5
577.8
3.9
6.5
EUR million
2022
2021
Cash flow after investments
Net cash flow from operating activities
64.9
56.9
Net cash flow from investing activities
-83.4
-32.1
Cash flow after investments
-18.6
24.9
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
2022
2021
Profit before taxes
Profit for period
7.7
19.1
Income tax
6.1
-5.1
Profit before taxes
1.5
24.2
EUR million
2022
2021
Gross investments
Property, plant and equipment at end of period
58.7
45.0
Right-of-use assets at end of period
197.7
95.6
Other intangible assets at end of period
22.8
14.9
Goodwill at end of period
251.0
188.9
Depreciation, amortisation and impairment for period are added
45.5
34.7
-
Property, plant and equipment at beginning of period
45.0
44.0
Right-of-use assets at beginning of the period
95.6
102.8
Other intangible assets at beginning of period
14.9
15.3
Goodwill at beginning of period
188.9
173.6
Proceeds from the sale of property, plant and equipment during period
-3.0
-1.5
Gross investments
234.5
44.8
Gross investments refers to the acquisition of long-term factors of production, including M&A transactions.
Divestments and proceeds from the sale of property, plant and equipment are not deducted from invest-
ments. Investments are also presented on a cash flow basis in the cash flow statement.
EUR million
2022
2021
Organic revenue growth, %
Revenue for period -
690.5
577.8
Revenue from M&A transactions during period
77.8
11.0
Revenue for previous period
577.8
508.7
Organic revenue growth /
34.9
58.1
Revenue for previous period x 100
577.8
508.7
Organic revenue growth, %
6.0
11.4
Revenue growth due to M&A transactions, %
13.5
2.2
Revenue growth
112.7
69.1
Revenue growth, %
19.5
13.6
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 es-
tablished by the group itself are included in organic growth.
REPORT BY THE BOARD OF DIRECTORS
|AUDITED FINANCIAL STATEMENTS 29
Distribution of shareholding by size
range, 31.12.2022
1 ̶100 Shares per shareholder
101 ̶̶1 000
1 001 ̶̶10 000
10 001 ̶̶100 000
100 001 ̶̶500 000
500 001 ̶̶
Shares and shareholders
Distribution of shareholding by size range, 31 Dec 2022
Shares per shareholder
Number of shareholders
% of shareholders
Number of shares
Percentage of shares, %
1 - 100
8,892
56.2 %
384,440
1.7 %
101 - 1 000
6,009
38.0 %
2,052,496
9.1 %
1 001 - 10 000
794
5.0 %
2,150,386
9.5 %
10 001 - 100 000
93
0.6 %
2,395,639
10.6 %
100 001 - 500 000
16
0.1 %
3,350,700
14.8 %
500 001 -
7
0.0 %
12,286,474
54.3 %
Total
15,811
100.0 %
22,620,135
100.0 %
of which nominee-registered
shares
9
581,326
2.6 %
Outstanding shares
22,620,135
100.0 %
Major shareholders, 31 Dec 2022
1
LOCALTAPIOLA GENERAL MUTUAL INSURANCE COMPANY
3,481,641
15.4 %
2
MWW YHTIÖ OY
2,309,010
10.2 %
3
FENNIA MUTUAL INSURANCE COMPANY
1,998,965
8.8 %
4
LOCALTAPIOLA MUTUAL LIFE INSURANCE COMPANY
1,895,156
8.4 %
5
ELO MUTUAL PENSION INSURANCE COMPANY
1,267,161
5.6 %
6
NIEMISTÖ LEENA KATRIINA
706,110
3.1 %
7
ILMARINEN MUTUAL PENSION INSURANCE COMPANY
628,431
2.8 %
8
SKANDINAVISKA ENSKILDA BANKEN AB (PUBL), HELSINKI BRANCH
430,000
1.9 %
9
FONDITA NORDIC MICRO CAP MUTUAL FUND
325,143
1.4 %
10
OP-FINLAND SMALL CAP FUND
316,480
1.4 %
10 largest, total
13,358,097
59.1 %
Other shareholders
9,262,038
40.9 %
Total
22,620,135
100.0 %
REPORT BY THE BOARD OF DIRECTORS
|AUDITED FINANCIAL STATEMENTS 30
Distribution of shareholding by size
range, 31.12.2022
Private companies
Financial and insurance institutions
Public entities
Households
Non-profit organisations
Nominee registered
Distribution of shareholding by sector, 31.12.2022
Number of
shareholders
% of shareholders
Number of shares
Percentage of
shares, %
Private companies
561
3.5 %
4,728,794
20.9 %
Financial and insurance institutions
40
0.3 %
9,306,538
41.1 %
Public entities
6
0.0 %
2,052,718
9.1 %
Households
15,125
95.7 %
5,776,389
25.5 %
Non-profit organisations
41
0.3 %
135,572
0.6 %
Foreign shareholders
38
0.2 %
38,798
0.2 %
Total
15,811
100.0 %
22,038,809
97.4 %
Nominee registered
581,326
2.6 %
Outstanding shares
22,620,135
100.0 %
Direct holding
Indirect holdings
Number of
shares
Percentage of shares
and votes
Number of
shares
Percentage of shares
and votes
Board of Directors
Mikko Wirén (MWW Yhtiö Oy)
2,309,010
10.2 %
Mikko Wirén
5,000
0.0 %
Leena Niemistö
706,110
3.1 %
Hannu Juvonen
1,757
0.0 %
Mika Manninen
1,757
0.0 %
Heli Iisakka
949
0.0 %
Seija Turunen
2,635
0.0 %
Management Team
Joni Aaltonen (Vendero Oy)
37,633
0.2 %
Eetu Salunen
5,831
0.0 %
Tarja Rantala
5,088
0.0 %
Kati Raassina
17,142
0.1 %
Marko Savolainen
4,002
0.0 %
Timo Harju
10,694
0.1 %
Antti-Jussi Aro
4,500
0.0 %
Riihijärvi Sari
4,001
0.0 %
Antti-Jussi Aro
4,001
0.0 %
Riihijärvi Sari
4,004
0.0 %
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
31
Financial statements 1 Jan – 31 Dec 2022
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
Group structure 27
Group structure 28
Group structure 29
Other 30
Other 31
Other 32
Parent company financial statements, FAS
Parent company notes to financial statements, FAS
Auditor’s report
Information for shareholders
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
32
Consolidated statement of comprehensive income, IFRS
Note
1-12/2022
1-12/2021
EUR 1,000
Revenue
1
Other operating income
2
Materials and services
3
-267,224
-209,516
Employee benefit expenses
4
-296,572
-255,164
Other operating expenses
6
-77,164
-54,151
Share of profit in associated companies and joint ventures
29
-15
-9
EBITDA
Depreciation, amortisation and impairment
7
-45,498
-34,701
Operating profit (EBIT)
Financial income
8
Financial expenses
9
-8,074
-3,956
Financial income and expenses
-7,353
-3,715
Profit before taxes
Income tax
10
-5,130
Profit for the period
Attributable to:
-1,859
-1,004
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
Note
1-12/2022
1-12/2021
1 000 euroa
Profit for the period
Other comprehensive income that will be reclassified subse-
quently to profit or loss
Cash flow hedge
Income tax on other comprehensive income
-1,023
Other comprehensive income for the reporting period
Total comprehensive income for the reporting period
Attributable to:
-1,859
-1,004
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
33
Consolidated statement of financial position, IFRS
EUR 1,000
Note
31 Dec 2022
31 Dec 2021
ASSETS
Non-current assets
Property, plant and equipment
12
Goodwill
13
Other intangible assets
13
Right-of-use assets
14
Interests in associates
29
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
27
Total current assets
Total assets
EUR 1,000
Note
31 Dec 2022
31 Dec 2021
EQUITY AND LIABILITIES
Equity attributable to owners of the parent
Share capital
Fair value reserve
Reserve for invested unrestricted equity
Retained earnings
Non-controlling interests
-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
27
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
1-12/2022
1-12/2021
Cash flow from operating activities
Profit for the period
Taxes
-6,110
Depreciation, amortisation and impairment
Financial income and expenses
Other
-121
-45
Net cash generated from operating activities before change in working capital
Change in working capital
-3,336
Interest received
Taxes paid
-6,892
-2,564
Net cash flow from operating activities
Cash flow from investing activities
Investments in tangible and intangible assets
-29,033
-14,833
Proceeds from disposal of property,
Changes in other receivables and investments
-1,775
-1,350
Granted loans
-738
Dividends received
Acquisition of subsidiaries less cash and cash equivalents at date of acquisition
26
-52,308
-16,414
Net cash flow from investing activities
-83,439
-32,064
Cash flow from financing activities
Changes in non-controlling interests
-408
-3,017
Acquisition of own shares
-1,475
-582
Proceeds from and repayment of borrowings
23
Proceeds from long-term borrowings
23
Repayment of long-term borrowings
23
-128,779
-21,584
Repayment of lease liabilities
23
-29,014
-19,822
Interest and other operational financial expenses
-8,307
-3,986
Dividends paid and other profit distribution
-8,589
-4,932
Net cash flow from financing activities
-33,923
Changes in cash and cash equivalents
-9,050
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
Retained
earnings
Non-controlling
interests
Equity
Total equity, 1 Jan 2021
-7,633
Profit for the period
-1,004
Dividends paid
-4,517
-315
-4,832
Acquisition of own shares
-582
-582
Share-based benefits
Total transactions with owners
-5,085
-315
-5,400
Changes in NCI without a change in control
26
-4,875
-395
-5,270
Total changes in subsidiary shareholdings
-4,875
-395
-5,270
Total equity, 31 Dec 2021
Equity attributable to owners of the parent company
EUR 1,000
Note
Share
capital
Reserve for
invested
unrestricted
equity
Fair
value
reserve
Retained
earnings
Non-controlling
interests
Equity
Total equity, 1 Jan 2022
Profit for the period
-1,859
Total comprehensive income for the period
25
Dividends paid
-6,767
-2,987
-9,754
Acquisition of own shares
-1,475
-1,475
Share-based benefits
-49
-49
Investments in group subsidiaries, reported
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
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 140. In ad-
dition, Pihlajalinna has four major complete social and healthcare
outsourcing agreements that collectively cover some 60 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
, 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 Plc approved these financial
statements in its meeting on 16 February 2023. 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 2022. 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
The Group has applied the following standards, which are already in
effect, for the first time in its IFRS reporting:
IFRS 9 Financial Instruments – Hedge Accounting
accounting in respect of an interest rate swap entered into during the
financial year 2022. 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 interest
rate swap is subject to cash flow hedge accounting. The accounting
policies concerning hedge accounting are described in more detail in
note 25
Financial risk management
.
IFRS 5 Non-current Assets Held for Sale and Discontinued Opera-
tions
Pihlajalinna has classified its dental health services as assets held
for sale effective from 31 December 2022. The accounting policies are
described in more detail in note 27
Assets held for sale
.
Starting from the beginning of 2022, the Group has applied the fol-
lowing new and amended standards (effective for financial years
starting on or after 1 January 2022):
Amendments to IAS 37
Provisions, Contingent Liabilities and Contin-
gent Assets – Onerous Contracts – Costs of Fulfilling a Contract
When an onerous contract is accounted for based on the costs of ful-
filling the contract, the amendments clarify that these costs comprise
both the incremental costs and an allocation of other direct costs.
The amendments to the standard have not had a material effect on
Pihlajalinna’s consolidated financial statements.
Other new or amended standards that entered into effect on 1 Janu-
ary 2022 did not have a material effect on Pihlajalinna’s consolidated
financial statements.
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
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
37
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
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 and joint ventures are consolidated using the equity
method. If the Group’s share of the loss of an associate or a joint ven-
ture exceeds the carrying amount of the investment, then the invest-
ment is carried at zero value, and the losses exceeding the carrying
amount are not consolidated, unless the Group is committed to ful-
filling 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 associ-
ate’s or a joint venture’s profit for the financial year is included in op-
erating 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 9.8 (2.7) million for the financial year, while adjust-
ments to EBIT totalled EUR 9.7 (2.4) million.
Accounting policies requiring management judge-
ment and major sources of estimation uncertainty
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 to-
gether with the business units by using several, both internal and ex-
ternal, sources of information. Any changes in estimates and assump-
tions are recognised in the financial year during which the estimate or
assumption is corrected and in all subsequent financial years. Addi-
tionally, it is necessary to exercise judgement in the application of the
accounting policies.
Information on the key uncertainties based on assumptions and es-
timates that give rise to a significant risk of a material change in the
carrying amounts of assets and liabilities during the next financial
year, and the decisions based on the management’s judgement that
Pihlajalinna’s management has made in applying the accounting poli-
cies to the consolidated financial statements and which have the
most impact on the figures presented in the consolidated financial
statements, is presented in the following sections:
Note
Assumptions used concerning the profitability of the
Group’s fixed-term complete social and healthcare ser-
vices outsourcing agreements
1
Assumptions used in impairment testing
13
Assumptions related to the measurement of trade receiv-
ables
16
Assumptions used in the recognition of deferred tax as-
sets
19
Fair value measurement of assets and liabilities acquired
in business combinations and contingent considerations
26
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
38
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
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 2022.
Amendments to IAS 1 Presentation of Financial Statements and IFRS
Practice Statement 2 Making Materiality Judgements
(Effective for annual periods beginning on or after 1 January 2023,
early application is permitted)
The amendments clarify the application of the materiality principle to
disclosures of accounting policies.
Amendments to IAS 8 Accounting Policies, Changes in Accounting
Estimates and Errors*
(Effective for annual periods beginning on or after 1 January 2023,
early application is permitted)
The amendments clarify how reporting entities should separate
changes in accounting policies from changes in accounting estimates.
The amendments are focused on clarifying the definition of an ac-
counting estimate.
Amendments to IAS 12 Income Taxes concerning the recognition of
deferred tax assets and liabilities
(Effective for annual periods beginning on or after 1 January 2023)
The amendments narrow the initial recognition exemption 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.
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 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 aim to promote consistency in application and clar-
ify the requirements on determining whether a liability is current or
non-current. The amendments specify that covenants to be complied
with after the reporting date do not affect the classification of debt as
current or non-current at the reporting date. The amendments re-
quire the disclosure of information about such covenants in the notes
to the financial statements.
Amendments to IFRS 10 Consolidated Financial Statements and IAS
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, rehabilitation services and dental care services. The
social services provided by the Group consist of services for the elderly and the disabled, mental health ser-
vices and substance 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 fit-
ness centres offer diverse wellbeing services for adults who exercise. Fitness centre services complement
Pihlajalinna’s preventive occupational healthcare services and rehabilitation services carried out after spe-
cialised 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 and dental care
●
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 perfor-
mance obligation when the services provided are repeated in the same manner with respect to their sub-
stantial 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
outsourcing 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 variable consideration and costs
recognised on the reporting date are partly based on estimates of their amounts.
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. The IFRIC 12 Service Concession Arrangements interpretation
is applied to the recognition of outsourcing agreements if the out-sourcing party decides on the scope and
pricing of the services provided by Pihlajalinna and Pihlajalinna returns the infrastructure, free of charge, at
the conclusion of the outsourcing agreement. In such cases, Pihlajalinna is not considered to have control
over assets received without consideration from a public-sector entity.
Timing of the satisfaction of performance obligations
EUR 1,000
2022
2021
At a point in time
318,950
223,856
Over time
371,531
353,918
Total
690,481
577,774
Key accounting estimates and decisions based on management judgement
During the financial year, the management used particular judgment with regard to the measurement and
recognition of variable consideration and legal claims related to complete outsourcing agreements for social
and healthcare services. 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, and the agree-
ments may also include variable components. Consequently, the reported profitability of such agreements
may be specified with a delay, and the actual outcomes may deviate from the estimates made by the man-
agement on the reporting date. The cost accumulation of public specialised care also involves random fluc-
tuation. In addition, individual cases falling within the scope of the hospital districts’ 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.
The fixed-term service agreements for all of the Group’s complete outsourcing arrangements are highly
similar with regard to their principles and basic terms. Pihlajalinna has calculated and recognised the varia-
ble compensation components and cost compensation under the agreements using the same criteria and
model for all clients. Demands for the compensation of cost increases due to changes in services to corre-
spond to the actual costs and investment costs that serve operations after the end of the term of the con-
tract being the client’s responsibility constitute the majority of costs and variable compensation compo-
nents that are specified with a delay. For 2022, the detailed specification of investment costs and COVID-19
related costs included in invoicing by hospital districts can only be carried out after the hospital districts
have published their financial statements.
Pihlajalinna has recognised only part of these legally justified claims in its income statement. The parties
to the agreements are bound by an obligation to negotiate and negotiation is the primary procedure. If the
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
41
obligation to negotiate does not lead to payment, the receivables are sought through legal action, which
may further delay the collection of items presented in current receivables in the financial statements.
Items that may, according to the management’s estimate, influence the profitability of com-
plete outsourcing agreements with a delay:
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 ruling is not final. As a result of
adjustments recognised in accordance with the court’s ruling, the profit attributable to the owners of Pihla-
jalinna Group’s parent company decreased by EUR 2.8 million for the financial year. The ruling decreased
revenue by EUR 2.4 million, and EBITDA was reduced by EUR 4.6 million. The City of Jämsä owns 49 per cent
of the company and Pihlajalinna 51 per cent. Earnings per share were weakened by EUR 0.12 per share by
the ruling. The ruling did not have an immediate material impact on cash flow. For the sake of comparabil-
ity, the effects of the District Court's ruling have been processed as adjustment items. Jämsän Terveys has
filed an appeal regarding the District Court’s ruling to the Court of Appeal. The operating preconditions for
Jämsän Terveys’ service production have been secured with an efficiency improvement programme and
temporary parent company funding.
During the financial year, Jämsän Terveys Oy has recognised as revenue and recorded in its receivables
EUR 1.2 million, mainly COVID-19-related costs for the current year, which the client 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 financial year on the impact of the transfer of personnel on the annual fee under the service
agreement. The parties are actively engaged in negotiations with a view to resolving outstanding issues. The
above matters have been agreed with the new client, i.e. the Wellbeing Services County of Central Finland,
as presented to the City of Jämsä as of 1 January 2023.
The total amount of contractually and legally justified variable compensation from the City of Mänttä-
Vilppula that Mäntänvuoren Terveys Oy has recognised as revenue and recorded in its receivables amounts
to EUR 4.3 (4.1) million. The variable compensation recognised as revenue in accordance with the agree-
ment includes an estimate of compensation for specialised care costs to the service provider of the Pir-
kanmaa Hospital District’s investment costs allocated to the client. The receivables from variable compensa-
tion components are also related to cost increases caused by service changes and compensating such in-
creases in accordance with the actual costs. A preliminary agreement has been made with the new client,
i.e. the representatives of the Wellbeing Services County of Pirkanmaa, to transfer the cost liability of de-
manding specialised care away from the company.
The total amount of contractually and legally justified variable compensation from the City of Parkano
that Kolmostien Terveys Oy has recognised as revenue and recorded in its receivables amounts to EUR 1.3
(1.7) million. The amount has been influenced by the decision of the Parkano City Council on 26 September
2022 to allocate an additional appropriation to the budget of the basic welfare committee for 2022. The var-
iable compensation recognised as revenue in accordance with the agreement includes an estimate of com-
pensation for specialised care costs to the service provider of the Pirkanmaa Hospital District’s investment
costs allocated to the client. Other receiv-ables from variable compensation are mainly related to COVID-19
cost compensation for 2022. The client has already previously approved cost increases arising from changes
to services for the elderly as part of the annual fee under the service agreement. A preliminary agreement
has been made with the new client, i.e. the representatives of the Wellbeing Services County of Pirkanmaa,
to transfer the cost liability of demanding specialised care away from the company.
The total amount of contractually and legally justified variable compensation that the lead contracting
partner for complete outsourcing Pihlajalinna Terveys Oy has recognised as revenue and recorded in its re-
ceivables amounts to EUR 0.6 (0.2) million.
The Group's receivables include the above-mentioned items totalling EUR 7.4 (9.8) million.
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. The sales accrual information previously presented in the mate-
rial items of deferred assets and deferred liabilities in the notes to trade receivables and trade payables are
now presented as either contractual assets or contractual liabilities.
Summary of contractual items
EUR 1,000
2022
2021
Trade receivables
54,568
79,701
Contract assets
Current
6,052
6,661
Contract liabilities
Current
3,237
920
The amount of revenue recognized during the financial year that was included in contract liabilities at
the beginning of the period:
EUR 1,000
2022
2021
Revenue recognized from amounts included in contract liaibilities
920
909
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.
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
42
EUR 1,000
2022
%
2021
%
Southern Finland
164,073
21%
148,291
23%
Mid-Finland
374,741
49%
330,820
51%
Ostrobothnia
132,465
17%
128,335
20%
Northern Finland
43,440
6%
29,934
5%
Other operations
49,267
6%
13,374
2%
Intra-Group sales
-73,505
-72,980
Consolidated revenue
690,481
100%
577,774
100%
Sales revenue by customer group
Pihlajalinna’s customer groups are corporate customers, private customers and public sector customers.
●
The Group’s corporate customer group consists of Pihlajalinna’s occupational health customers, insur-
ance company customers and other corporate contract customers.
●
The Group’s private customers are private individuals who pay for services themselves and may subse-
quently seek compensation from their insurance company.
●
The Group’s public sector customer group consists of public sector organisations in Finland, such as mu-
nicipalities, joint municipal authorities, congregations, hospital districts and the public administration
when purchasing social and healthcare outsourcing services, residential services, occupational health ser-
vices and staffing services.
EUR 1,000
2022
%
2021
%
Corporate customers
225,270
33
137,773
21
of which insurance company customers
98,447
14
34,798
5
Private customers
103,243
15
85,320
13
Public sector
435,476
63
427,661
66
of which complete outsourcing
303,902
44
300,813
46
of which staffing
24,797
4
26,073
4
of which occupational healthcare
and other services
106,777
15
100,775
15
Intra-Group sales
-73,508
-72,980
Consolidated revenue
690,481
100
577,774
100
Information on key customers
The Group’s sales revenue from the four largest customers totalled approximately EUR 281.4 (277.9) mil-
lion, representing approximately 41% (48%) of the consolidated revenue.
Estimate of unsatisfied performance obligations related to Group’s social and healthcare out-
sourcing arrangements, EUR million:
EUR 1,000
31 Dec 2022
31 Dec 2021
EUR 1,000
31 Dec 2022
31 Dec 2021
2022
263
2031
30
37
2023
245
266
2032
7
6
2024
249
269
2033
7
6
2025
226
247
2034
7
6
2026
177
199
2035
7
6
2027
179
201
2028
182
204
2029
184
206
2030
156
167
1,656
2,083
Service provider – client
First year of service
production
under the current con-
tract
Duration of contract
(years)
Jämsän Terveys Oy - Jämsän kaupunki
2015
10
Kuusiolinna Terveys Oy - KuusSote
2016
15
Mäntänvuoren Terveys Oy -
Mänttä-Vilppulan kaupunki
2016
15
Kolmostien Terveys Oy - Parkanon kaupunki
2015
15
Bottenhavets Hälsa Ab - Selkämeren Terveys Oy -
Kristiinankaupunki
2021
15 - 20 years
As part of the new legislation governing social and healthcare services in Finland, the responsibility for or-
ganising social and healthcare services was transferred to the newly established wellbeing services coun-
ties on 1 January 2023. In connection with this change, agreements previously signed by municipalities
were transferred in accordance with the responsibility for service provision. Pursuant to the legislation
concerning the reform of social and healthcare services, the wellbeing services counties are required to
indicate by the end of 2023 whether their subcontracting agreements will continue. According to the as-
sessment of the company’s management, its fixed-term service agreements will remain in effect, as
agreed, with the wellbeing services counties until the end of the term for each agreement.
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. 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.
EUR 1,000
2022
2021
Capital gains on property, plant and equipment
275
209
Rental income
503
528
Government grants
1,339
1,160
Other income items
2,779
1,807
Total
4,896
3,704
Effects of COVID-19
In June 2020, the Finnish Government decided on support for business costs for companies that had suf-
fered a significant decrease in revenue due to the COVID-19 pandemic and that have had costs that are diffi-
cult to adjust. In 2022, the Finnish Government carried out the fifth round of cost support for companies. In
the financial year 2022, Pihlajalinna recorded in the other operating income in the government grants EUR
488 thousand cost support for covering the fixed costs of the Group’s fitness centres. In 2021, Pihlajalinna
received EUR 628 thousand in cost support for covering the fixed costs of the Group’s fitness centres.
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. Agreement on the compensation
principles was reached with the client municipalities in 2021. Municipalities and joint municipal authorities
are compensated for costs directly related to the COVID-19 pandemic by means of government grants.
3. Materials and services
Accounting policies
Inventories are measured at acquisition cost or lower probable net realisable value.
EUR 1,000
2022
2021
Materials
-30,975
-20,452
Change in inventories
648
153
External services, practitioners
-112,527
-73,042
External services, other
-124,370
-116,176
Total
-267,224
-209,516
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
gross amount of the incentive scheme includes the share component
and the cash component.
Approximately half of the gross remuneration, corresponding
to withholding taxes, is paid in cash.
Information on related party employee benefits and loans are presented in Note 31
Related party
transactions.
EUR 1,000
2022
2021
Wages and salaries
-245,289
-211,095
Share-based incentive schemes
- implemented as shares
-97
-357
Pension costs - defined contribution plans
-42,010
-35,344
Other social security expenses
-9,176
-8,368
Total
-296,572
-255,164
Number of personnel
2022
2021
Personnel on average (FTE)
5,167
4,746
Personnel at the end of the period (NOE)
7,016
6,297
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
44
5. Share-based incentive scheme for key personnel
At its meeting on 23 March 2022, the Board of Directors approved the terms of a share-based incentive pro-
gram (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 program are not allowed to be disposed of prior to year
2025. 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 provided that the performance and quality-
based targets as set by the board are reached. The maximum number of shares (gross amount prior to de-
duction of applicable withholding tax) for each one year performance period is defined in the allocation per
participant. Shares paid off as share rewards shall be subject to a two-year transfer restriction. The criteria
for the performance and quality based additional share program are adjusted EBITA as well as key operative
and quality indicators of Pihlajalinna Group.
A total of 42 key persons are entitled to participate to the share-based incentive program. In case all the
persons entitled to participate do participate to the program by meeting the condition of investment in full
and in case the performance targets set to the program are achieved in total, the total amount of the share
rewards payable under the program is a maximum of approximately 1,100,000 shares (gross amount prior
to the deduction of applicable withholding tax) and the total value of the share reward pro-gram is approxi-
mately EUR 12.8 million. In case the program materializes in full, the above amount of shares equals approx-
imately to 4.8 per cent of the total amount of the shares of the company.
No performance- and quality-based share rewards materialised for the first performance period 2022
pursuant to the incentive plan, as the minimum objectives set for the programme were not achieved.
6. Other operating expenses
EUR 1,000
2022
2021
Voluntary indirect employee costs
-7,896
-4,997
Facility expenses
-14,309
-9,908
Vehicle operating costs
-913
-664
Information management expenses
-26,170
-17,531
Machinery and equipment expenses
-7,061
-5,040
Travel expenses
-2,867
-2,383
Sales and marketing expenses
-6,441
-5,449
Other expenses
-11,508
-8,180
Total
-77,164
-54,151
Facility expenses
Auditing, KPMG Oy Ab
-343
-288
Statements, KPMG Oy Ab
-20
-10
Non-audit services, KPMG Oy Ab
-51
Total
-414
-298
7. Depreciation and impairment
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 new 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. For the Group’s other machinery and equipment, the Group still
uses straight-line depreciation. As the utilisation rate of imaging capacity is low during the first years of a
new operating location, the units-of-production method provides a more accurate reflection of the actual
economic use of the magnetic imaging equipment in question.
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
Right-of-use equipment 3–10 years
Impairment is recognised pursuant to IAS 36 for onerous right-of-use buildings and business premises.
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
45
Depreciation, amortisation and impairment by asset type
2022
2021
Intangible assets
Trademarks
-1,040
-776
Capitalised development costs
-930
-961
Customer relationship value
-1,233
-1,622
Non-competition agreements
-60
-355
Patient database
-378
-232
Other intangible assets
-4,036
-2,752
-7,677
-6,699
Property, plant and equipment
Buildings
-104
-96
Renovation expenses on real estate
-2,217
-2,463
Machinery and equipment
-8,327
-6,604
Other tangible assets
-1
-1
-10,649
-9,163
Right-of-use assets
Right-of-use plots
-97
-91
Right-of-use buildings and business premises
-26,178
-17,885
Right-of-use equipment
-898
-863
-27,173
-18,840
Total depreciation, amortisation and impairment
-45,498
-34,701
8. Financial income
EUR 1,000
2022
2021
Dividend income from financial assets measured at fair value
through profit or loss
7
7
Interest income from loans and receivables
533
118
Interest income from financial lease receivables
135
83
Other financial income
46
35
Total
721
242
9. Financial expenses
EUR 1,000
2022
2021
Interest expenses from financial liabilities carried at amortised
cost
-3,392
-1,726
Interest expenses on lease liabilities
-3,439
-1,706
Other financial expenses
-1,243
-524
Total
-8,074
-3,956
Pihlajalinna rearranged its long-term debt financing with a sustainability-linked financing arrangement in
March 2022 which is described in more detail in Note 22
Financial liabilities
Financial risk man-
agement
. Acquisitions and investments in connection with the opening of new units as well as renovations
of existing units have increased Pihlajalinna’s indebtedness and thus interest costs.
The acquisition of Pohjola Hospital increased the interest expenses of Pihlajalinna’s lease liabilities by EUR
1.8 million.
The financing rearrangement 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.
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
2022
2021
Current taxes
-1,931
-5,291
Taxes for the previous financial years
-37
2
Deferred taxes
8,078
159
Total
6,110
-5,130
The change in deferred taxes for the year 2022 is related to de-
ferred tax assets recorded from confirmed losses, which are de-
scribed in more detail in note 19 Deferred tax assets and liabili-
ties.
.
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
46
Reconciliation of effective tax rate
EUR 1,000
2022
2021
Profit before taxes
1,550
24,222
Taxes calculated on the basis of the Finnish tax rate (20%)
-310
-4,844
Income not subject to tax
2
2
Non-deductible expenses
-309
-284
Unrecorded deferred tax assets from tax losses
-70
-635
Recorded deferred tax assets from tax losses
6,381
Utilised prior losses with unrecognised tax benefits
333
495
Share of associated company’s profit
-3
-2
Share-based remuneration
-13
24
Other items
137
112
Taxes for prior financial years
-37
2
Taxes in the income statement
6,110
-5,131
Effective tax rate
-21.2 %
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.
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
2022
2021
Profit for the financial year attributable to owners of the parent,
EUR
9,518,830.97
20,094,607.63
Number of shares outstanding, weighted average
22,560,271
22,589,383
Basic earnings per share (EPS), EUR/share
0.42
0.89
Diluted earnings per share, EUR/share
0.42
0.89
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.
In 2018, the Group opened private clinics in Turku, Oulu and Seinäjoki. The Group acquired 3 Tesla high-
field magnetic imaging equipment for the clinics in Oulu and Turku and a 1.5 Tesla high-field magnetic imag-
ing device for the clinic in Seinäjoki. For the magnetic imaging equipment at these green field 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 magnetic imaging equipment.
The same depreciation method is also applied for Pohjola Sairaala’s 3 Tesla high field magnetic imaging
equipment in Helsinki, Tampere, Turku, Oulu and Kuopio. For the Group’s other machinery and equipment,
the Group still uses straight-line depreciation.
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
47
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 2022
36
3,026
30,549
5,572
63,496
172
1,344
104,195
Additions
0
3
482
0
15,972
2
8,316
24,774
Business combinations
0
0
131
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
123,554
Accumulated depreciation at 1 January 2022
-505
-19,131
0
-39,560
-10
0
-59,206
Depreciation and amortisation
-104
-2,217
0
-8,327
-1
0
-10,649
Transfers between items
98
-10
0
-124
0
0
-37
Reclassifications
0
807
0
4,070
0
0
4,877
Disposals
0
0
0
197
0
0
197
Accumulated depreciation at 31 December 2022
-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
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 2021
36
2,937
29,370
5,572
55,584
172
539
94,209
Additions
0
0
792
0
8,337
0
1,793
10,921
Business combinations
0
0
4
39
0
0
43
Transfers between items
0
89
384
0
101
0
-785
-212
Disposals
0
0
0
0
-564
0
-202
-766
Cost at 31 December 2021
36
3,026
30,549
5,572
63,496
172
1,344
104,195
Accumulated depreciation at 1 January 2021
-410
-16,665
0
-33,130
-7
0
-50,212
Depreciation and amortisation
-96
-2,463
0
-6,604
-1
0
-9,163
Transfers between items
0
-3
0
-112
-3
0
-118
Disposals
0
0
0
286
0
0
286
Accumulated depreciation at 31 December 2021
-505
-19,131
0
-39,560
-10
0
-59,206
Carrying amount at 1 January 2021
36
2,527
12,703
5,572
22,454
165
539
43,996
Carrying amount at 31 December 2021
36
2,521
11,417
5,572
23,936
162
1,344
44,987
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
48
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.
●
Specialised care referral forwarding and coordination operating model developed for the Parkano so-
cial and healthcare partnership area
●
Takeover of social and healthcare services in Mänttä-Vilppula and the development of operating
models
●
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
49
Intangible assets
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
-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
-6,255
-4,019
-8,515
-7,497
-5,642
-6,096
-6,149
0
-44,174
Depreciation and amortisation
-1,040
-930
-1,233
-60
-378
-533
-3,503
0
-7,677
Transfers between items
0
0
0
0
0
-8
-1
0
-9
Accumulated depreciation at 31 December 2022
-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
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 2021
173,607
7,762
6,348
8,397
7,507
5,677
6,605
10,404
47
226,355
Additions
0
0
21
0
0
0
232
2,773
985
4,011
Business combinations
15,301
0
0
2,175
0
0
9
8
17,493
Transfers between items
0
0
0
0
0
0
48
358
-316
89
Cost at 31 December 2021
188,909
7,762
6,368
10,572
7,507
5,677
6,894
13,543
715
247,948
Accumulated depreciation at 1 January 2021
-5,479
-3,057
-6,893
-7,142
-5,411
-5,511
-3,919
-37,411
Depreciation and amortisation
-776
-961
-1,622
-355
-232
-538
-2,215
-6,699
Transfers between items
0
0
0
0
0
-48
-16
-64
Accumulated depreciation at 31 December 2021
-6,255
-4,019
-8,515
-7,497
-5,642
-6,096
-6,149
-44,174
Carrying amount at 1 January 2021
173,607
2,284
3,290
1,505
365
267
1,095
6,483
47
188,944
Carrying amount at 31 December 2021
188,909
1,508
2,349
2,057
10
35
798
7,394
715
203,775
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
50
Impairment testing of goodwill
Accounting policies
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
2022 (30 November 2021) 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 2022. The Group’s
recoverable amount exceeded the carrying amount by approximately EUR 223 (218) million.
In early 2023, the Group announced it will sell its dental care services. The assets related to the business
functions in question have been treated as assets held for sale in accordance with IFRS 5. The forecasts used
in the calculations have included the future cash flows of the assets held for sale, but the future cash flows
of these assets have been estimated close to zero and goodwill associated with the assets is included in the
impairment testing. Goodwill related to the assets in question is presented separately from the Group’s
other goodwill on 31 December 2022 in accordance with IFRS 5.
Goodwill:
EUR 1,000
2022
2021
Tested goodwill in total, Group
254,264
188,909
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
251,032
188,909
During the year, goodwill has increased due to acquired business operations. The acquired business opera-
tions have been specified in more detail in Note 26 Acquired business operations.
Assumptions used in the calculation of utility value for each testing period:
Impairment testing of goodwill
2022
2021
Turnover growth, first three years, approximately
5.30%
2.80%
EBIT margin, first three years, approximately
6.90%
5.60%
Discount rate (pre tax WACC)
8.70%
7.68%
Discount rate (after tax WACC)
7.25%
6.36%
Forecast period (years)
10
5
Terminal growth rate after the forecast period (5 years)
2.00%
1.30%
The terminal period’s share of the amount of expected cash flows
46%
73%
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 2022, the cash flow forecasts cover a 10-year period and the
terminal period. The management’s view is that using a 10-year forecast period is justified because the
Group has significant long-term and fixed-term complete social and healthcare outsourcing agreements.
According to the assessment of the company’s management, its fixed-term service agreements will remain
in effect, as agreed, with the wellbeing services counties until the end of the term for each agreement.
These agreements will expire during the 10-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. The ter-
minal growth rate applied after the forecast period is two per cent, which corresponds to the long-term in-
flation forecast for the Finnish economy.
For the period 2023–2025, 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.
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.
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
51
Key assumptions defined by the management and used in the calculation in 2022:
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 2022, the forecast period is 10 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 223 (218) 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
2022
2021
Decline in EBIT margin
more than 2 percentage
units
more than 2 percentage
units
Decline in volume
more than 15 percentage
units
more than 21 percentage
units
Increase in discount rate
more than 3 percentage
units
more than 4 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 2022 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
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.
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
52
Right-of-use assets
EUR 1,000
Right-of- use
plots
Right-of-use
buildings 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
0
16
16
Disposals
1,435
255
1,690
Accumulated depreciation at 31 De-
cember 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
EUR 1,000
Right-of- use
plots
Right-of-use
buildings and
business
premises
Right-of-use
equipment
Total
Cost at 1 January 2021
756
176,820
5,350
182,926
Additions
84
8,917
805
9,807
Business combinations
0
2,802
0
2,802
Transfers between items
0
-670
-77
-747
Disposals
0
-1,972
-491
-2,463
Cost at 31 December 2021
840
185,897
5,587
192,325
Accumulated depreciation at 1 January
2021
-393
-75,838
-3,863
-80,094
Depreciation and amortisation
-91
-17,885
-863
-18,840
Transfers between items
0
670
77
747
Disposals
1,112
336
1,448
Accumulated depreciation at 31 De-
cember 2021
-484
-91,941
-4,314
-96,738
Carrying amount at 1 January 2021
363
100,981
1,487
102,832
Carrying amount at 31 Dec 2021
357
93,956
1,273
95,586
Short-term leases recognised in the income statement, totalling EUR 140 (115) thousand, and minor leases
recognised in the income statement, totalling EUR 1,172 (734) thousand, are practical exemptions provided
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.
EUR 1,000
2022
2021
Lease deposits paid
561
535
Non-current subleases
7,750
4,586
Other receivables
90
90
Total
8,402
5,211
Pihlajalinna subleased two care homes that it sold and leased back in May 2020.
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
2022
8,697
947
851
649
623
5,628
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
53
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.
Key accounting estimates and decisions based on management judgement
Determining the annual profitability of the Group’s fixed-term complete social and healthcare services out-
sourcing agreements may become accurate with a delay. The Group may not always be aware of the actual
costs of the agreements at the time of preparing the financial statements, and the agreements may involve
variable elements of compensation. The cost accumulation of public specialised care involves random fluc-
tuation. In addition, individual cases falling within the scope of the hospital districts’ 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.
The fixed-term service agreements for all of the Group’s complete outsourcing arrangements are highly
similar with regard to their principles and basic terms. Pihlajalinna has calculated and recognised the varia-
ble compensation components and cost compensation under the agreements using the same criteria and
model for all clients. Demands for the compensation of cost increases due to changes in services corre-
sponding to the actual costs and investment costs that serve operations after the end of the term of the
contract being the client’s responsibility constitute the majority of costs and variable compensation compo-
nents that are specified with a delay. For 2022, the assessment of investment costs and COVID-19 related
costs included in invoicing by hospital districts can only be carried out after the hospital districts have pub-
lished their financial statements.
Pihlajalinna has recognised only part of these legally justified claims in its income statement. The parties
to the agreements are bound by an obligation to negotiate and negotiation is the primary procedure. If the
obligation to negotiate does not lead to payment, the receivables are sought through legal action, which
may further delay the collection of items presented in current receivables in the financial statements. The
estimated items included in receivables are described in more detail in Note 1
Revenue from contracts with
customers
Items that may, according to the management’s estimate, influence the profitability of
complete outsourcing agreements with a delay
.
EUR 1,000
2022
2021
Trade receivables
54,568
78,455
Prepayments and accrued income
20,102
12,608
Current subleases
947
601
Other receivables
1,189
479
Total
76,806
92,143
Contract assets are described in more detail in connection with Note 1
Revenue from contracts with custom-
ers
The carrying amount of trade receivables and other receivables corresponds to the maximum credit risk
involved at the end of the reporting period.
credit risk. No significant changes have been observed in customers’ payment behaviour.
, if the ne-
gotiation obligation does not lead to payment, the receivables will be collected through legal action. This
may further delay the collection of items presented in current receivables in the financial statements.
The Group recognised EUR 0.4 (0.5) million in impairment losses on trade receivables during the financial
year. The estimated impairment loss on contract assets is EUR 0.0 (0.0) million.
Age distribution of trade receivables
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
11,106
-522
4.7 %
10,584
Total
55,349
-781
54,568
EUR 1,000
2021
Impairment
losses
Share of expected
impairment losses
Net 2021
Not due
24,651
-8
0.0 %
24,643
Less than 30 days
4,152
-12
0.3 %
4,140
30–60 days
2,333
-67
2.9 %
2,266
61–90 days
1,965
-133
6.8 %
1,832
More than 90 days
46,053
-479
1.0 %
45,574
Total
79,153
-698
78,455
Key accounting estimates and the use of management judgement are discussed in Note 1
Revenue from con-
tracts with customers
.
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
54
The management of credit risks related to trade receivables is discussed in more detail in Note 25
Finan-
cial risk management
.
EUR 1,000
2022
2021
Credit loss provision at 1 January
698
689
Credit losses recorded
-781
-547
Change in credit loss provision
864
556
Credit loss provision at 31 December
781
698
Material items incl. in prepayments and accrued income
EUR 1,000
2022
2021
Personnel expenses
1,843
1,876
Expenses paid in advance
6,528
3,061
Hedging, interest rate swap
5,113
0
Contract assets
6,052
6,661
Other
566
1,009
20,102
12,608
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
2022
2021
Current provisions
0
71
Non-current provisions
89
134
Total
89
205
-
Onerous
contracts
Restructuring
provision
Total
EUR 1,000
1.1.2021
762
762
Increases in provisions
20
300
320
Provisions used
-645
-232
-877
Reversals of unused provisions
31.12.2021
137
68
205
Increases in provisions
Provisions used
-48
-68
-116
Reversals of unused provisions
0
31.12.2022
89
0
89
18. Trade and other payables
EUR 1,000
2022
2021
Trade payables
41,673
52,571
Accrued liabilities
78,267
65,915
Pre-payments
33
938
Other liabilities
7,556
5,683
Total
127,529
125,107
Material items included under Accrued liabilities:
Wages and salaries and social security payments
43,846
42,425
Doctor’s fee liability
15,376
8,261
Allocation of sales
0
18
Allocation of purchase invoices
10,261
11,057
Current liabilities held for sale
3,237
0
Financial items
212
65
Other accrued liabilities
5,334
4,087
Total
78,267
65,915
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
55
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
transaction, affects neither accounting profit nor taxable profit.
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. Whether or not de-
ferred tax assets can be recognised in this respect is always estimated at the end of each reporting period.
The Group shall offset deferred tax assets and liabilities where these relate to the same taxation authority
and the same taxable entity.
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. On 31 December 2022, the Group recorded more deferred tax assets arising
from unused confirmed tax losses. The most significant deferred tax assets from confirmed unused losses
have been recorded for Pihlajalinna Omasairaala Oy (approximately EUR 5 million), Pihlajalinna Oyj (approx-
imately EUR 1.1 million) and Pihlajalinna Oulu Oy (approximately EUR 1 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
56
Changes in deferred taxes during 2022:
Recognised in profit
and loss
Recognised in the
statement of compre-
hensive income
Deferred tax assets (EUR 1,000)
1 January
2022
Business combinations
Reclassification to as-
sets 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
Effect of IFRS 16
774
518
1,291
Cloud computing arrangements
255
-27
228
Other items
584
-767
3,766
3,583
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 busi-
ness combinations
722
-542
1,526
1,705
Fair value hedging
1,023
1,023
Effect of IFRS 16
337
4
0
341
Other items
22
77
0
99
Deferred tax liabilities on the statement of financial position
5,884
58
1,023
1,547
8,512
Changes in deferred taxes during 2021:
Tax losses carried forward confirmed by tax authorities
2,438
108
0
2,547
Sales proceeds from sale and leaseback arrangements
253
-30
0
223
Provisions
590
-297
0
293
Share-based incentive scheme
122
-62
0
60
IAS 37, contingent assets
527
223
0
749
Effect of IFRS 16
715
58
0
774
Cloud computing arrangements
200
55
255
Other items
710
-209
83
584
Deferred tax liabilities on the statement of financial position
5,555
-154
83
5,484
Deferred tax liabilities
Property, plant and equipment and intangible assets
4,498
304
0
4,803
Recognition of property, plant and equipment and intangible assets at fair value in busi-
ness combinations
884
-597
435
722
Effect of IFRS 16
337
0
0
337
Other items
42
-19
0
22
Deferred tax liabilities on the statement of financial position
5,761
-312
435
5,884
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
57
-
Maturing within five years
2022
2021
2022
2021
2022
2021
Maturing within five years
9,178
1,944
1,843
2,547
16
2,225
Maturing later than within
five years
53,139
21,916
10,017
587
Total
62,317
23,860
11,860
2,547
603
2,225
Taxes calculated on the basis of
the Finnish tax rate (20%)
12,463
4,772
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.
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. The
Group has no financial instruments classified as derivatives nor financial assets measured at fair value
through other comprehensive income. Financial assets are derecognised when the Group has lost its con-
tractual right for the financial assets in question or has transferred substantially all risks and rewards out-
side the Group.
The Group’s trade receivables, loan receivables, lease deposits and cash and cash equivalents have been
classified as financial assets measured at amortised cost using the effective interest method, taking any im-
pairment into account.
Financial assets measured at fair value through profit or loss consist of quoted and unquoted shares. The
Group has no holdings of shares quoted in public markets.
Derivative contracts are entered 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.
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 participa-
tions
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
54,568
54,568
54,568
Other receivables
16
level 2
1,189
1,189
1,189
Interest derivatives
level 2
5,113
5,113
5,113
Cash and cash equivalents
13,128
13,128
13,128
Total
1,167
5,113
69,536
75,816
75,816
Carrying amounts of financial liabilities
Non-current financial liabilities
Loans from financial institu-
tions
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
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
58
Loans from financial institu-
tions
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
Note
Fair value
hierarchy
Fair value
through
profit or
loss
Fair value -
hedging
instrument
Amortised
cost
Total
carrying
amounts
Fair values
total
31 Dec 2021
Carrying amounts of financial assets
Non-current financial assets
Other shares and participa-
tions
level 3
1,476
1,476
1,476
Lease deposits
15
level 2
535
535
535
Other receivables
15
level 2
90
90
90
Current financial assets
Trade receivables
16
78,455
78,455
78,455
Other receivables
16
level 2
479
479
479
Cash and cash equivalents
4,257
4,257
4,257
Total
1,476
83,816
85,291
85,291
Carrying amounts of financial liabilities
Non-current fin. liabilities
Loans from financial institu-
tions
22
level 2
90,838
90,838
90,838
Lease liabilities
22
level 2
87,857
87,857
87,857
Other liabilities
22
level 2
607
607
607
Current financial liabilities
Loans from financial institu-
tions
22
level 2
1,283
1,283
1,283
Cheque account with credit
limit
22
Lease liabilities
22
level 2
18,392
18,392
18,392
Trade and other payables
18
52,571
52,571
52,571
Total
251,548
251,548
251,548
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.
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
59
Reconciliation of the number of shares
EUR 1,000
Number of
shares
Share
capital
Reserve for in-
vested unre-
stricted equity
Total
Shares, total, 1 January 2021
22,620,135
80
116,520
116,600
Treasury shares held by the parent company on
31 December 2021
25,900
Outstanding shares on 31 December 2021
22,594,235
80
116,520
116,600
Shares, total, 1 January 2022
22,620,135
80
116,520
116,600
Treasury shares held by the parent company on
31 December 2022
70,491
Outstanding shares on 31 December 2022
22,549,644
80
116,520
116,600
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.
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.
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.
Distributable funds
The parent company’s total distributable funds amount to EUR 210,975,765.50, of which the result for the
financial year accounts for EUR -4,503,903.60.
Dividends
The Board of Directors proposes that no dividends be paid for the financial year that ended on 31 December
2022.
22. Financial liabilities
EUR 1,000
2022
2021
Non-current interest-bearing liabilities
Loans from financial institutions
167,255
90,838
Other liabilities
573
607
Lease liabilities
201,235
87,857
369,063
179,302
Current interest-bearing liabilities
Loans from financial institutions
1,386
1,283
Lease liabilities
28,338
18,392
Yhteensä
29,723
19,675
Interest-bearing financial liabilities total
398,786
198,977
Pihlajalinna rearranged its long-term debt financing with a sustainability-linked financing arrangement
on 22 March 2022. The EUR 200 million unsecured financing arrangement, for three years with an option
for a further two years, was concluded with Danske Bank, OP Corporate Bank and Swedbank (the creditor
banks). The financing comprises a long-term loan of EUR 130 million and a revolving credit facility of EUR
70 million for general financing needs and a 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 supplemen-
tary loan from the funding providers. The covenants related to the new financing arrangement is dis-
cussed in more detail in Note 25 Financial Risk Management.
maturity is 1, 3 or 6 months.
Lease liabilities
EUR 1,000
2022
2021
Non-current lease liabilities
Right-of-use plots
546
305
Right-of-use buildings and business premises
200,092
86,963
Right-of-use equipment
597
588
201,235
87,857
Current lease liabilities
Right-of-use plots
99
63
Right-of-use buildings and business premises
27,569
17,715
Right-of-use equipment
670
614
28,338
18,392
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
60
23. Changes in interest-bearing liabilities with no impact on cash flow
EUR 1,000
2021
Cash flow
Acquired busi-
ness operations
New instal-
ments and lease
liabilities
Effective in-
terest rate
2022
Non-current
interest-bearing
liabilities
91,445
75,221
438
606
-383
167,327
Current
interest-bearing
liabilities
1,283
0
27
576
0
1,887
Lease liabilities
106,248
-29,014
129,549
22,789
0
229,573
Total
198,977
46,208
130,015
23,970
-383
398,786
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
2022
2021
Equity
122,888
122,611
Total statement of fin. position – deferred revenue
661,606
456,127
Equity ratio 1)
18.6 %
26.8 %
Interest-bearing financial liabilities
22
398,786
198,977
Cash and cash equivalents
-13,128
-4,257
Interest-bearing net debt
385,659
194,720
Gearing 2)
313.8 %
158.8 %
EBITDA
54,401
62,638
Adjustment items**
9,828
2,698
Adjusted EBITDA
64,229
65,336
Net debt/adjusted EBITDA
6.0
3.0
** 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 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 9.8 (2.7) million for the financial year that ended on 31 December 2022.
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
During the financial year, the Group has repurchased its own shares totalling 120,000 shares with an aver-
age price of EUR 12.2896 per share. Pihlajalinna conveyed, in March, a total of 8,867 own shares to the key
employees in accordance with the earlier incentive program (LTIP 2019). Pihlajalinna conveyed, in April, a
total of 59,900 own shares as con-sideration in a transaction to redeem non-controlling interests of its sub-
sidiary. Pihlajalinna conveyed, in May, a total of 6,642 own shares as part of the remuneration of the Board
of Directors. On the financial statements date, the Group held 70,491 treasury shares.
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
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
61
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 rearranged its long-term debt financing with a sustainability-linked financing arrangement on
22 March 2022. The EUR 200 million unsecured financing arrangement, for three years with an option for a
further two years, was concluded with Danske Bank, OP Corporate Bank and Swedbank (the creditor banks).
The financing 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 supplementary loan
from the funding providers.
The Group has entered in March 2022 into 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 por-
tion of the change in fair value is recognised in other comprehensive income. The interest rate swap is valid
until 25 March 2027 and the interest rate swap fair value was EUR 5.1 million at the end of the financial
year. The interest rate swap starting date is in March 2023. According to the interest rate swap the Group
pays fixed 1,12 percent interest rate and receives variable interest 6 months Euribor rate.
On the financial statements date, the Group’s cash and cash equivalents amounted to EUR 13.1 (4.3) mil-
lion, in addition to which the Group had EUR 43.0 (45,0) million in unused committed credit limits available.
In addition, EUR 100.0 (45.0) million of an additional credit limit, which is subject to a separate credit de-
cision, was unused on the financial statements date.
The Group’s equity ratio at the end of the financial year was 18.6 (26.9) per cent.
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. The Group has entered into an interest rate swap agree-
ment with a nominal value of EUR 65 million during the financial year, which is used to convert the interest
on a floating rate financing arrangement to a fixed rate. The interest rate swap starting date is in March
2023.
On the financial statements date, 58% (54%) 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 including the interest rate swap agreement was approximately 3,20% (1.68%). The duration, i.e. the
fixed interest rate period, of the financing portfolio was 3.7 (3.2) years.
The table below presents the Group’s interest rate position at the end of the reporting period.
EUR 1,000
2022
2021
Fixed rate financial liabilities
230,143
107,567
Financial liabilities subject to hedge accounting
65,000
0
Variable rate financial liabilities
104,136
91,521
Total variable rate position
104,136
91,521
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.
EUR 1,000
2022
2022
2021
2021
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
-1,700
1,700
-915
0
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.
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
168,641
-7,529
-5,810
-167,453
-4
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
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
92,121
-2,958
-90,984
-265
Lease liabilities
106,248
-19,934
-16,175
-14,029
-11,942
-51,236
Other interest-bearing lia-
bilities
607
-20
-57
-57
-57
-738
Trade payables
52,571
-52,571
Total
251,548
-75,483
-107,216
-14,351
-11,999
-51,974
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
62
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. At the end of the financial year, the sustainability targets linked
to the financing arrangement caused no changes in the loan margins.
Due to the acquisition of Pohjola Hospital Ltd, Pihlajalinna and the creditor banks agreed on increasing
the gearing covenant to 140 per cent and the leverage covenant to 4.00 for 2022.
Pihlajalinna and the creditor banks agreed on a temporary adjustment to the covenants of the financing
arrangement on two occasions in the latter part of the year. According to the acquired waivers, the lever-
age covenant was set at 5.5 for the fourth quarter of 2022, 4.5 for the first quarter of 2023, and 4.0 for the
second quarter of 2023. For the fourth quarter of 2022 and the first three quarters of 2023, gearing must
not exceed 140 per cent. The financing arrangement’s original gearing covenant of 115 per cent will enter
into effect in the review of the fourth quarter of 2023. Starting from the beginning of the third quarter of
2023, the leverage covenant according to the financing arrangement will be 3.75.
At the end of the financial year, leverage in accordance with the financing arrangement stood at 5.23 and
gearing was 139.95 per cent. Had the Group’s profit after taxes been lower by approximately EUR 40 thou-
sand, the gearing covenant would have been breached. At the same time, however, the company’s interest
rate swap had a fair value of EUR 5.1 million on the financial statements date. Had the interest rate swap
been sold on the financial statements date, gearing would have fallen to 136.0 per cent and the leverage
ratio would have fallen to 5.08. Breaching the covenants can lead to the financing arrangement falling due.
Under the waiver agreement, the highest margin level of the financing arrangement increased to 1.0 per-
cent units from the beginning of 2023 until the third quarter of the year. The increase to the highest margin
level and the other waiver terms will be discontinued by the end of 2023. If the company proposes to re-
main below the original covenant levels for the next 12 months, the waiver described above may be discon-
tinued earlier.
At the end of the reporting period, 31 December 2022, the loan amount to which the covenants apply
was EUR 167.0 (90.0) million.
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
The Group has started to apply hedge accounting after entering in March 2022 into an interest swap to
hedge a new floating rate financing arrangement. The Group has entered into an interest rate swap agree-
ment with a nominal value of EUR 65 million during the financial year, 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 inter-
est 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 is valid until 25 March 2027 and the interest rate swap
fair value was EUR 5.1 million at the end of the financial year. The interest rate swap starting date is in
March 2023. According to the interest rate swap the Group pays fixed 1,12 percent interest rate and re-
ceives variable interest 6 months Euribor rate.
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
63
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 aperations 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.
Key accounting estimates and decisions based on management’s judgement
For acquired assets and liabilities, the fair values are determined according to the available market values. If
market values are not available, the valuation is based on estimates of the asset’s ability to generate income
and the purpose of use in Pihlajalinna’s business.
Regarding the tangible assets, comparisons have been made with the market prices of similar assets and
the decrease in value caused by the age, wear and tear and other similar factors of the purchased assets has
been estimated. In particular, the valuation of intangible assets is based on the present values of future cash
flows and requires management’s estimates of future cash flows and the use of assets.
The fair value of the contingent consideration at the time of acquisition is recorded as part of the trans-
ferred consideration. When the contingent consideration is classified as a financial liability, it is valued at
fair value at the end of the reporting period, and the changes are recorded with an effect on profit.
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
64
Acquired business operations, 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 on the Pohjola Hospital acqui-
sition has been finalized as of 31 January 2022. Adjustments have been made to the opening balance
sheet of the Pohjola Hospital. Fair value adjustments were mainly made to right-of-use assets, other pro-
visions and deferred taxes. Pihlajalinna has updated preliminary adjustments as follows: right-of-use as-
sets EUR -9.8 million, other provisions EUR -4.3 million, financial lease liabilities 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 preliminary values of the assets and liabilities acquired for consideration at the time of acquisition
were as follows:
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
Preliminary goodwill
13
42,759
Transaction price paid in cash:
35,193
Cash and cash equivalents of acquirees
-1,809
Preliminary effect on cash flow
33,384
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. 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).
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
65
Acquired business operations, 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. The purchase
price allocations on the acquisitions are currently being finalized and will be completed within one year
from the acquisition date. Preliminary information on the acquisitions is presented combined below be-
cause the acquisitions are not individually material:
EUR 1,000
2022
Consideration transferred
Cash
20,893
Contingent concideration
1,905
Total acquisition cost
22,798
The preliminary values of the assets and liabilities acquired for consideration at the time of acquisition
were as follows:
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
2,331
Cash and cash equivalents
1,969
Total assets
11,330
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
471
Preliminary goodwill generated in the acquisition:
EUR 1,000
Note
2022
Consideration transferred
22,798
Share of the acquisition allocated to non-controlling interest
41
Net identifiable assets of acquirees
-471
Preliminary goodwill
13
22,368
Transaction price paid in cash:
20,893
Cash and cash equivalents of acquirees
-1,969
Preliminary effect on cash flow
18,924
In the preliminary determination of fair values, intangible assets based on customer relationships, trade-
marks, patient databases and non-compete agreements were identified. The preliminary 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.
the expected 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).
Pro forma information
If the business activities acquired in the 2022 fiscal year had been combined in the consolidated financial
statements from the beginning of the fiscal year, the consolidated turnover for the fiscal year would have
been EUR 706.5 million and the operating result would have been EUR 8.8 million.
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
66
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
Acquisition of non-controlling interests during the financial year 2022
In April 2022, Pihlajalinna redeemed 8 % of Pihlajalinna Turku Oy’s shares from the company’s non-control-
ling interests. After the transaction, the Group’s ownership is 100 %.
In November, Pihlajalinna redeemed 19 % of Laihian Hyvinvointi Oy’s shares from the company’s non-con-
trolling interests. After the transaction, the Group’s ownership is 100 %.
Acquired business operations 2021
EUR 1,000
Acquired entity
Month of acquisi-
tion
Industry
Domicile
Työterveys Virta Oy
04/2021
Occupational health
services
Oulu
Finla Työterveys Oy's Mänttä-Vilppula
11/2021
Occupational health
services
Mänttä-Vilppula
EUR 1,000
2021
Consideration
Cash, basic transaction price
17,941
Total cost of the combination
17,941
On the date of acquisition, the values of assets acquired and liabilities assumed were as follows:
EUR 1,000
Note
2021
Property, plant and equipment
12
30
Intangible assets
13
2,195
Right-of-use assets
14
2,801
Available-for-sale financial assets
1
Deferred tax assets
83
Trade and other receivables
1,552
Cash and cash equivalents
1,527
Total assets
8,188
Deferred tax liabilities
435
Restructuring provision
300
Lease liabilities
22
2,801
Other liabilities
2,012
Total liabilities
5,549
Acquired net assets
2,640
Creation of goodwill in acquisition
EUR 1,000
Note
2021
Consideration transferred
17,941
Net identifiable assets of acquirees
-2,640
Goodwill
13
15,301
Transaction price paid in cash
17,941
Cash and cash equivalents of acquiree
-1,527
Effect on cash flow
16,414
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
67
Customer contracts, non-compete agreements and patient databases were recognised in the acquisition as
intangible assets separate from goodwill. The fair value of intangible assets has been determined on the
basis of the standardised price level in business combinations and the discounted values of future cash
flows. The remaining goodwill consists of expectations about returns, the skilled workforce of the acquired
companies and synergy benefits.
The acquisition-related expenses, a total of EUR 366 thousand, have been recorded
under other operating expenses.
Had the acquired business operations been consolidated since the beginning of the financial year, the con-
solidated revenue for the review period would have amounted to EUR 616.3 million and operating profit
would have totalled EUR 27.4 million.
Acquisition of non-controlling interests during the financial year 2021
In August 2021, Pihlajalinna increased its holding in Kuusiolinna Terveys Oy, a joint venture with the munici-
palities of Alavus, Ähtäri, Kuortane and Soini. The transaction was made with the municipality of Kuortane.
After the transaction, the Group owns 97 per cent of the company.
27. Assets held for sale
Accounting principles
Non-current assets and assets and liabilities related to discontinued operations are classified as held for sale
if their carrying amounts are expected to be recovered primarily through sale rather than through continu-
ing use. Classification as held for sale requires that the asset (or disposal group) must be available for imme-
diate sale in its present condition subject only to terms that are usual and customary for sales of such assets
(or disposal groups) and its sale must be highly probable.
Prior to classification as held for sale, the assets or assets and liabilities related to a disposal group in ques-
tion are measured according to the respective IFRS standards. From the date of classification, non-current
assets held for sale are measured at the lower of the carrying amount and the fair value less costs to sell,
and the recognition of depreciation and amortisation is discontinued. Non-current assets held for sale are
presented in the statement of financial position separately from other items. The comparison figures for the
statement of financial position are not restated.
Pihlajalinna has classified its dental health services as assets held for sale effective from 31 December
2022. The Group has announced it will sell its dental care services to Hammas Hohde Oy. The deal in-
cludes 16 clinics around Finland. About 200 oral health professionals work in them. The deal is expected
to be finalized by the end of March.
EUR 1,000
31 Dec 2022
Goodwill
3,004
Other intangible assets
-19
Property, plant and equipment
1,585
Investments
-5
Deferred tax assets
63
Inventories
372
Other receivables, current
205
Assets held for sale
5,255
Other liabilities, current
1,081
Liabilities directly attributable to assets held for sale
1,081
Net assets
4,175
28. Subsidiaries and material non-controlling interests
The Group’s structure
The Group had 34 (28) subsidiaries in 2022. Of these subsidiaries, 20 (14) are wholly-owned and 14 (14) are
partially owned. A list of all of the Group’s subsidiaries is presented in Note 31 Related party transactions. In
2022, the Group had 3 (2) associated companies and 1 (1) joint operation.
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
68
Breakdown of material non-controlling interests in the Group
Non-controlling interests’
share of the votes
Non-controlling interests’
share of profit or loss
Non-controlling interests’
share of equity
EUR 1,000
Main busines loca-
tion
2022
2021
2022
2021
2022
2021
Jämsän Terveys Oy
Jämsä
49%
49%
-2462
-1653
-3885
-1422
Pihlajalinna Eritysasumispalvelut Oy
Hämeenlinna
30%
30%
79
-72
-130
-209
Dextra Lapsettomuusklinikka Oy
Helsinki
49%
49%
227
414
418
851
Pihlajalinna Liikuntakeskukset Group
several
30%
30%
-401
-245
1453
1854
Suomen Yksityiset Hammaslääkärit Group
several
37%
37%
76
-3
469
393
Total
-2,482
-1,559
-1,675
1,467
Summary of financial information on subsidiaries with a material non-controlling interest
Jämsän Terveys Oy
Pihlajalinna Erityisa-
sumispalvelut Oy
Dextra Lapsettomuusklinikka
Oy
Pihlajalinna Liikun-
takeskukset Group
Suomen Yksityiset Ham-
maslääkärit Group
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
Current assets
5,381
42,550
767
544
1,026
1,715
1,742
1,326
248
270
Non-current assets
1,233
1,808
4,306
4,524
3,720
1,369
37,168
37,694
1,962
2,087
Current liabilities
14,144
46,686
1,464
1,672
860
695
17,278
15,392
807
1,193
Non-current liabilities
324
481
4,016
4,062
2,342
18
17,603
18,239
19
20
Revenue
75,231
75,022
6,370
4,302
5,201
5,980
12,653
12,579
4,401
4,392
Operating profit
-4,522
-3,576
407
-214
584
1,149
-922
-458
276
12
Profit/loss
-4,984
-3,376
268
-238
519
897
-1,532
-818
85
8
Share of profit/loss attributable to owners of the parent
-2,521
-1,722
190
-212
292
483
-1,130
-573
10
11
Non-controlling interests’ share of profit/loss
-2,462
-1,653
79
-72
227
414
-401
-245
76
-3
Net cash flow from operating activities
-1,783
-3,911
852
18
1,157
1,386
4,122
4,158
531
155
Net cash flow from investing activities
18
-137
423
-2,164
6,064
-600
5,989
-1,512
-114
298
Net cash flow from financing activities
2,120
-201
-1,274
2,146
-7,217
-793
-9,912
-2,620
-494
-435
of which dividends paid to non-controlling interests
-660
-215
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
69
29. 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.
EUR 1,000
2022
2021
Interests in associates
Ullanlinnan Silmälääkärit Oy
31
20
Digital Healt Solutions Oy
609
288
Kuura Digilääkärit Oy
1,428
0
Interests in joint operations
Koy Levin Pihlaja Oy
40
40
Total carrying amount
2,109
348
Interests in associates
Name
Holding, %
Name
2022
2021
Ullanlinnan Silmälääkärit Oy
Helsinki
Healthcare services
37%
37%
Digital Health Solutions Oy
Sotkamo
All legal business
41%
18%
Kuura Digilääkärit Oy
Helsinki
Healthcare services
45%
The Group's pro rata share of an associate's or a joint venture's profit for the financial year is presented
separately in operating profit up to the carrying amount of the Group’s investment in their shares.
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.
30. Contingent assets and liabilities and commitments
Collateral given on own behalf
2022
2021
Sureties
4,158
4,407
Properties’ VAT refund liability
33
59
Lease commitments for off-balance sheet leases
1,312
849
Lease deposits
561
535
Contingent liability
Pihlajalinna has complete outsourcing agreements with entities that were part of Pirkanmaa Hospital Dis-
trict. The operations of Pirkanmaa Hospital District ended on 31 December 2022 as the Pirkanmaa wellbe-
ing services county started its operations on 1 January 2023. In accordance with Pirkanmaa Hospital Dis-
trict’s basic agreement, Pirkanmaa Hospital District has, due to the termination of its operations, invoiced
its member municipalities for their share of covering the hospital district’s negative result. As some of the
member municipalities have a complete outsourcing agreement with Pihlajalinna for the provision of so-
cial and healthcare services, the Group has received invoice attachments totalling approximately EUR 0.5
million in early 2023 in relation to covering the hospital district’s negative result. The management’s as-
sessment is that covering the negative result arising from the termination of the hospital district’s opera-
tions is not the responsibility of the Group companies, but rather the responsibility of the hospital district’s
member municipalities. Consequently, the management does not consider it likely that the matter will lead
to an outflow of economic resources from the Group, which means that, according to the Group’s interpre-
tation, the invoiced amounts constitute a contingent liability in accordance with IAS 37.
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.
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
70
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. The situa-
tion and the effects of the dispute are described in more detail in note 1
Revenue from contracts with cus-
tomers
plete outsourcing agreements with a delay
. Jämsän Terveys has filed an appeal regarding the District Court’s
ruling to the Court of Appeal.
The City of Jämsä has criticized the decision of the 2022 annual general meeting of Jämsän Terveys Oy re-
garding the increase in working capital according to the shareholders’ agreement. The case is pending in the
District Court of Central Finland.
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.
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.
The Group’s parent company and subsidiary relationships
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%
Pihlajalinna Lääkärikeskukset Oy
Helsinki
100%
100%
Mäntänvuoren Terveys Oy
Mänttä-Vilppula
91%
91%
Ikipihlaja Kuusama Oy
Kokemäki
100%
100%
Ikipihlaja Sofianhovi Oy
Mänttä-Vilppula
100%
100%
Wiisuri Oy
Jyväskylä
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 Turku Oy
Turku
100%
100%
Pihlajalinna Erityisasumispalvelut Oy
Hämeenlinna
70%
70%
Pihlajalinna Oulu Oy
Oulu
100%
100%
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
63%
63%
Pihlajalinna Hammasklinikat Oy
Tampere
63%
63%
Laihian Hyvinvointi Oy
Laihia
100%
100%
Pihlajalinna Omasairaala Oy
Helsinki
100%
100%
Pihlajalinna Etelä-Savo Oy
Mikkeli
100%
100%
Pihlajalinna Ikioma Oy
Mikkeli
93%
93%
Pihlajalinna Kainuu Oy
Sotkamo
70%
70%
Seppämagneetti Oy
Jyväskylä
100%
100%
Seppälääkärit Oy
Jyväskylä
100%
100%
Information on the associates is presented in Note
28 Interests in associates and joint arrangements.
.
Employee benefits of management
EUR 1,000
2022
2021
Monetary salaries, Management Team
1,030
1,054
Share-based rewards, Management Team
65
226
Fringe benefits, Management Team
10
16
Post-employment benefits, Management
Team
182
Salaries and other short-term employee benefits, Management Team, total
1,288
1,297
Salaries and remuneration
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
71
EUR 1,000
2022
2021
Joni Aaltonen, CEO
Monetary salaries
287
283
Share-based rewards
32
100
Fringe benefits
20
21
Total
339
405
Based on the CEO's salary and bonuses, accrual-based pension costs of 21 thousand euros in 2022 (2021: 20
thousand euros) in accordance with the Employee Pension Act (TyEL) have been recorded.
EUR 1,000
2022
2021
Board of Directors
Vice-Chairman of the Board
Leena Niemistö
53
58
Chairman of the Board
Mikko Wirén
261
345
Chairman of the Audit Committee
Seija Turunen
50
53
Board member
Kati Sulin (until 12 June 2022)
17
42
Board member
Matti Jaakola (until 15 June 2021 )
0
9
Board member
Hannu Juvonen
40
41
Board member
Heli Iisakka (since 13 April 2022)
34
0
Board member
Mika Manninen
36
41
Total
491
588
Of the annual remuneration paid in shares, a total of 0 (5,000) shares held by the company were transferred
to the Chairman of the Board of Directors, with 1,423 (1,212) shares transferred to the Vice Chairman and
the Chairman of the Audit Committee each, and 949 (808) shares to each member of the Board of Directors.
According to the CEO’s contract, the notice period for dismissal is 3 months. The company is liable to pay the
CEO one-time compensation for termination amounting to six months’ total salary. The CEO’s pension bene-
fits are according to the statutory pension scheme. The CEO is not a member of the Board of Directors.
Related party transactions and related party receivables and liabilities:
2022
2021
Key management personnel
Rents paid
919
834
Services procured
1,064
958
Prepayments
-96
0
Trade payables
105
83
The Group has leased several of its business premises from the Chairman of the Board of Directors: the
premises in Nokia, Karkku, Tampere and Kangasala.
A Group company has an agreement with the Chairman of the Board of Directors, under which the Group
buys healthcare professionals’ services.
32. Events after the balance sheet date
On 10 January 2023, the Group announced it would commence change negotiations. The change negotia-
tions are still under way and the aim is to complete them within the target time of six weeks. The change
negotiations concern the network of private clinics, regional management and the Groups’s general man-
agement. Approximately 650 persons are within the scope of the functions in question. According to the
company’s preliminary estimate, the negotiations may lead to a reduction of 40
–
60 positions in Pihlajalinna,
and the administrative duties
of 30
–
40 employees may be discontinued or reduced. The allocation of the
planned measures and their impacts on the personnel will be discussed in more detail during the negotia-
tions.
The Group has, on 2 February 2023, sold the interest rate swap. The fair value of the interest rate swap at
the time the agreement was concluded was approximately EUR 3.9 million. On the same day, the Group has
signed a new interest rate swap agreement with a nominal value of EUR 65 million to protect its financing
arrangement from variable interest rates. Cash flow hedge accounting is applied to the interest rate swap.
The start date of the interest rate swap agreement is in March 2023. Based on the agreement, the Group
pays a fixed interest rate of 2.80 per cent and receives a variable 6-month Euribor interest rate from the
start date.
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
72
PARENT COMPANY FINANCIAL STATEMENTS, FAS
Parent company income statement, FAS
EUR 1,000
Note
2022
2021
Revenue
1.1.
6,757
5,205
Other operating income
1.2.
444
459
Personnel expenses
1.3.
-1,228
-1,350
Depreciation, amortisation and impairment
1.4.
-2,215
-2,004
Other operating expenses
1.5
-6,283
-4,795
Operating profit (loss)
-2,526
-2,486
Financial income and expenses
1.6
-3,207
-565
Profit (loss) before appropriations and taxes
-5,732
-3,051
Appropriations
1.7
Change in depreciation difference
104
-32
Group contribution
0
20,350
Income taxes
1.8.
1,124
-3,373
Profit (loss) for the financial year
-4,504
13,893
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
73
Parent company balance sheet, FAS
EUR 1,000
Note
2022
2021
Assets
Non-current assets
Intangible assets
2.1
3,731
4,048
Property, plant and equipment
2.2
1,742
2,155
Investments
2.3
384,535
284,835
390,009
291,038
Current assets
Non-current receivables
2.4
1,160
37
Current receivables
2.5
59,571
82,787
Cash and cash equivalents
4,223
2,179
64,954
85,002
Total assets
454,963
376,040
Equity and liabilities
Equity
2.6
Share capital
80
80
Reserve for invested unrestricted equity
183,190
183,190
Retained earnings
32,548
26,152
Profit/loss for the financial year
-4,504
13,893
211,314
223,316
Accumulated appropriations
2.7
914
1,018
Mandatory provisions
2.8
0
21
Liabilities
2.9
Non-current liabilities
167,003
90,368
Current liabilities
75,732
61,316
242,735
151,685
Total equity and liabilities
454,963
376,040
Parent company cash flow statement, FAS
EUR 1,000
2022
2021
Cash flow from operating activities
Profit for the period
-4,504
13,893
Depreciation, amortisation and impairment
2,215
2,004
Financial income and expenses
3,207
565
Other adjustments (appropriations and taxes)
-1,228
-16,944
Cash flow before change in working capital
-310
-482
Change in net working capital
667
-2,699
Cash flows from operating activities before financial items and
taxes
357
-3,181
Interest received
4,507
1,449
Direct taxes paid
-4,259
-2,416
Cash flow from operating activities
605
-4,149
Cash flow from investing activities
Investments in tangible and intangible assets
-1,486
-904
Other investments
300
-350
Investments in subsidiaries
-100,000
0
Cash flow from investing activities
-101,186
-1,254
Cash flow from financing activities
Proceeds from short-term borrowings from group companies
9,543
11,724
Loans granted to group companies
9,650
-17,973
Proceeds from long-term borrowings
209,000
20,000
Repayment of long-term borrowings
-132,774
-20,771
Group contributions received
20,350
14,000
Interest paid
-4,903
-2,139
Dividends paid
-6,767
-4,517
Acquisition of own shares
-1,475
-582
Cash flow from financing activities
102,624
-258
Change in cash and cash equivalents
2,044
-5,661
Cash at the beginning of the financial year
2,179
7,840
Cash at the end of the financial year
4,223
2,179
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
74
Notes to the financial statements 31 December 2022
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 258 (489) 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.
1.1. Revenue
EUR 1,000
2022
2021
Revenues by sector
Sale of services
6,757
5,205
6,757
5,205
1.2. Other operating income
EUR 1,000
2022
2021
Rental income
116
116
Lease income from equipment
328
328
Government grants received
0
14
444
459
1.3. Personnel expenses
EUR 1,000
2022
2021
Wages and salaries
-1,096
-1,234
Pension costs
-115
-100
Other social security expenses
-16
-16
-1,228
-1,350
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 13 April 2022 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 250,000
per year; to the Vice-Chairman of the Board and the Chairman of the Audit Committee EUR 39,000 per year,
and to members EUR 26,000 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
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
75
member of the Board of Directors has, on the day of the General Meeting, 13 April 2022, 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 6,642 own shares in May. Rest of the an-
nual 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 500 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
2022
2021
Depreciation according to plan
Intangible assets
-1,802
-1,593
Property, plant and equipment
-413
-411
-2,215
-2,004
1.5. Other operating expenses
EUR 1,000
2022
2021
Voluntary social security expenses
32
-111
Facility expenses
-130
-120
Vehicle expenses
-17
-19
ICT expenses
-4,983
-3,560
Machinery and equipment expenses
-1
Sales, marketing and travel expenses
-48
-77
Administrative expenses
-1,136
-848
Other operating expenses, total
-6,283
-4,735
Auditor’s fees
Audit fees
126
113
Auxiliary services
6
126
119
1.6. Financial income and expenses
EUR 1,000
2022
2021
Interest income from non-current investments
From Group companies
1,841
1,449
From others
2
0
Interest income from non-current investments, total
1,842
1,449
Interest expenses and other financial expenses
To others
-5,049
-2,013
Interest expenses and other financial expenses, total
-5,049
-2,013
Financial income and expenses, total
-3,207
-565
1.7. Appropriations
EUR 1,000
2022
2021
Difference between depreciation according to plan and depreci-
ation in taxation
104
-32
Group contributions received
20,350
104
20,318
1.8. Income taxes
EUR 1,000
2021
2021
Change in deferred tax assets
1,124
Income taxes on actual operations during the financial year
-3,373
Income taxes total
1,124
-3,373
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
76
Notes to the balance sheet
2.1. Intangible assets
EUR 1,000
2022
2021
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
-1,118
-854
Depreciation and amortisation for the period
-230
-264
Carrying amount at the end of period
258
489
Other intellectual property rights
Acquisition cost at the start of the financial year
1,658
1,615
Additions
0
43
Acquisition cost at the end of the period
1,658
1,658
Accumulated depreciation at beginning of period
-1,249
-1,028
Depreciation and amortisation for the period
-215
-221
Carrying amount at the end of period
194
409
Other long-term expenditures
Acquisition cost at the start of the financial year
6,051
5,264
Additions
1,331
787
Transfers between items
67
0
Acquisition cost at the end of the period
7,449
6,051
Accumulated depreciation at beginning of period
-2,979
-1,871
Depreciation and amortisation for the period
-1,356
-1,108
Carrying amount at the end of period
3,114
3,072
Prepayments for intangible assets
Acquisition cost at the start of the financial year
79
6
Additions
153
73
Transfers between items
-67
0
Carrying amount at the end of period
166
79
Intangible assets, total
Acquisition cost at the start of the financial year
9,394
8,492
Additions
1,485
903
Acquisition cost at the end of the period
10,879
9,394
Accumulated depreciation at beginning of period
-5,346
-3,753
Depreciation and amortisation for the period
-1,802
-1,593
Carrying amount at the end of period
3,731
4,048
2.2. Property, plant and equipment
EUR 1,000
2022
2021
Machinery and equipment
Acquisition cost at the start of the financial year
3,584
3,472
Additions
1
112
Acquisition cost at the end of the period
3,585
3,584
Accumulated depreciation at beginning of period
-1,430
-1,018
Depreciation and amortisation for the period
-413
-411
Carrying amount at the end of the period
1,742
2,155
Other intellectual property rights
Acquisition cost at the start of the financial year
3,584
3,472
Additions
1
112
Acquisition cost at the end of the period
3,585
3,584
Accumulated depreciation at beginning of period
-1,430
-1,018
Depreciation and amortisation for the period
-413
-411
Carrying amount at the end of the period
1,742
2,155
2.3. Investments
EUR 1,000
2022
2021
Other shares and participations
Acquisition cost at the start of the financial year
350
0
Additions
0
350
Disposals
-300
0
Acquisition cost at the end of the period
50
350
Shares in subsidiaries
Acquisition cost at the start of the financial year
284,485
284,485
Additions
100,000
0
Acquisition cost at the end of the period
384,485
284,485
Total investments
384,535
284,835
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
77
A full list of the Group’s subsidiaries is presented in Note 31 “Related party transactions” to 'the consoli-
dated financial statements.
2.4. Non-current receivables
EUR 1,000
2022
2021
Receivables from others
Lease deposits given
37
37
Deferred tax assets
1,124
Total non-current receivables
1,160
37
2.5. Current receivables
EUR 1,000
2022
2021
Receivables from others
Trade receivables
12
26
Other receivables
865
376
Prepayments and accrued income
5,553
2,195
6,431
2,597
Receivables from Group companies
Trade receivables
771
-43
Loan receivables
50,882
59,788
Prepayments and accrued income
1,487
20,445
53,140
80,190
Material items included under Prepayments and accrued in-
come
Group contribution
0
20,350
Accrued direct taxes
1,490
Allocation of sales
672
95
Accrued social security expenses
112
85
Accrued trade payables
3,952
2,051
Other
815
58
7,040
22,639
Total current receivables
59,571
82,787
2.6. Equity
EUR 1,000
2022
2021
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
40,045
31,251
Dividends paid
-6,767
-4,517
Acquisition of own shares
-1,475
-582
Retained earnings
32,548
26,152
Profit for the period
-4,504
13,893
Total unrestricted equity
211,234
223,236
Total equity
211,314
223,316
Retained earnings
32,548
26,152
Result for the period
-4,504
13,893
Reserve for invested unrestricted equity
183,190
183,190
Capitalised development costs
-258
-489
Distributable unrestricted equity
210,976
222,747
Shares in subsidiaries
22,620,135
22,620,135
of which treasury shares
70,491
25,900
Number of outstanding shares
22,549,644
22,594,235
2.7. Accumulated appropriations
EUR 1,000
2022
2021
Accumulated depreciation difference
914
1,018
2.8. Mandatory provisions
EUR 1,000
2022
2021
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
78
Onerous contracts
0
21
2.9. Liabilities
EUR 1,000
2022
2021
2.9.1 Non-current liabilities
Liabilities to others
Loans from financial institutions
167,000
90,000
Other non-current liabilities
3
332
Lease deposits received
0
36
Non-current liabilities, total
167,003
90,368
2.9.2 Current liabilities
Liabilities to others
Trade payables
5,430
297
Other liabilities
365
811
Accrued liabilities
651
3,062
6,447
4,170
Liabilities to Group companies
Trade payables
4
1
Accrued liabilities
2,703
111
Other liabilities
66,578
57,035
69,285
57,147
Material items included under Accrued liabilities
Personnel expense allocations
171
149
Interest allocations
2,876
65
Taxes
0
2,769
Other items
307
189
3,354
3,172
Current liabilities, total
73,067
61,316
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
79
Other notes
EUR 1,000
2022
2021
Collaterals and contingent liabilities
Collaterals given on behalf of Group companies
Other sureties
121
121
Pihlajalinna’s financing arrangements
Pihlajalinna rearranged its long-term debt financing with a sustainability-linked financing arrangement on 22
March 2022. The EUR 200 million unsecured financing arrangement, for three years with an option for a fur-
ther two years, was concluded with Danske Bank, OP Corporate Bank and Swedbank (the creditor banks).
The financing 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 supplementary loan
from the funding providers.
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. At the end of the financial year, the sustainability targets linked
to the financing arrangement caused no changes in the loan margins.
Due to the acquisition of Pohjola Hospital Ltd, Pihlajalinna and the creditor banks agreed on increasing
the gearing covenant to 140 per cent and the leverage covenant to 4.00 for 2022.
Pihlajalinna and the creditor banks agreed on a temporary adjustment to the covenants of the financing
arrangement twice in the latter part of the year. According to the acquired waivers, the leverage covenant
was set at 5.5 for the fourth quarter of 2022 and the first three quarters of 2023, gearing must not exceed
140 per cent. The financing arrangement’s original gearing covenant of 115 per cent will enter into effect on
the fourth quarter of 2023. Starting from the beginning of the third quarter of 2023, the leverage covenant
according to the financing arrangement will be 3.75.
At the end of the financial year, leverage in accordance with the financing arrangement stood at 5.23 and
gearing was 139.95 per cent. If the Group’s result after taxes had been around 40 thousand euros lower, the
gearing covenant level would have been broken. On the other hand, the fair value of the company’s interest
rate swap agreement was EUR 5.1 million in the financial statements. If the interest rate swap had been sold
at the time of the financial statements, gearing would have decreased to 136.0 per cent and leverage to
5.08. Violation of the covenant conditions can lead to the maturity of the financing arrangements.
Under the waiver agreement, the highest margin level of the financing arrangement increased to one per
cent units from the beginning of 2023 until the third quarter of the year. The increase to the highest margin
level and the other waiver terms will be discontinued by the end of 2023. If the company proposes to re-
main below the original covenant levels for the next 12 months, the additional provision described above
may be discontinued earlier.
The raised loan amount in the financial statements on 31 December 2022, to which the covenant terms
are applied, is EUR 167.0 (90.0) million.
The company has entered in March 2022 into 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.
The
interest rate swap is valid until 25 March 2027 and the interest rate swap fair value was EUR 5.1 million at
the end of the financial year. The interest rate swap starting date is in March 2023. The company present
the interest swap agreement according to prudent basis and the positive unrealized value has not been rec-
orded as a profit to the parent company’s financial statement.
The Group has credit limit agreements valid until further notice, totalling EUR 10 million. The notice pe-
riod of the credit limit agreements is one month. At the end of the financial year, Pihlajalinna had EUR 43.0
(45.0) million in unused committed credit limits. Furthermore, an additional credit limit of EUR 100 million,
which is subject to a separate credit decision, is unused.
EUR 1,000
2022
2021
Lease commitments
Within one year
146
23
Between one and five years
230
569
Over five years later
0
71
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
80
Dates and signatures to the report by the Board of Directors and the financial statements
Tampere, 16 February 2023
Mikko Wirén
Leena Niemistö
Heli Iisakka
Seija Turunen
Chairman
Hannu Juvonen
Mika Manninen
Joni Aaltonen
Auditor’s Note
A report on the performed audit has been issued today.
Tampere 20 February 2023
KPMG Oy Ab
Lotta Nurminen
Authorised Public Accountant
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
81
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 2022. 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 of our report.
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
82
The key audit matter
How the matter was addressed in the audit
Judgmental items relating to municipality outsourcing contracts (refer to notes 1 Revenue from contracts with customers, 16 Trade and other receivables and 30 Contingent assets and liabilities and commitments in the
consolidated financial statements) and emphasis of matter
We draw attention to note 1 and the receivables totalling EUR 7.4 million presented in sections
Key accounting estimates and decisions based on management judgement and Items that may, according to the management’s
estimate, influence the profitability of complete outsourcing agreements with a delay.
respect of this matter.
●
A notable proportion of the Group’s revenue is based on long-term outsourcing contracts with municipalities. These include both
complete outsourcing contracts for social and healthcare services as well as other outsourcing contracts.
●
The Group’s profitability of complete outsourcing contracts for social and healthcare services may become more accurate with a de-
lay. The Group may not always be aware of the actual costs of the agreements during the financial year and there may be variable
considerations included.
●
High level of management judgement, which can have a significant impact on the consolidated result and statement of financial posi-
tion, 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.
●
In note 1 section
Items that may, according to the management’s estimate, influence the profitability of complete outsourcing agree-
ments with a delay
●
During the financial year, Jämsän Terveys Oy has recognised as revenue and recorded in its receivables EUR 1.2 million, mainly
COVID-19-related cost compensation for the current year, which the client has not paid in breach of the service agreement. In
addition, a difference of opinion has emerged between the company and the client during the financial year on the impact of the
transfer of personnel on the annual fee under the service agreement. Jämsän Terveys Oy has filed an appeal regarding the District
Court’s ruling to the Court of Appeal in the dispute regarding the service agreement. The company has made accounting entries in
accordance with the District Court’s ruling in the consolidated financial statements, but the ruling is not final.
●
Mäntänvuoren Terveys Oy has receivables totaling EUR 4.3 million from a client. The receivables are associated with an estimate
of the investment cost liability in specialised care and cost increases caused by service changes.
●
Kolmostien Terveys Oy has receivables of EUR 1.3 million from a client. The receivables are associated with an estimate of the in-
vestment cost liability in specialised care and COVID-19 cost compensation.
●
Pihlajalinna Terveys Oy, the lead contracting partner for complete outsourcing, has recorded in its receivables variable compensa-
tion totaling EUR 0.6 million based on the agreements
●
Due to the significant amount of accounting estimates in relation to the result for the period and equity and the receivables being
past due, recognized judgmental items relating to the municipality outsourcing contracts are considered a key audit matter.
●
We observed the judgmental items recorded in the consolidated financial
statements through discussions with management, analytically and by per-
forming substantive testing. We obtained related agreements, calculations
and administrative documents.
●
We obtained legal opinions on the service agreements and juridical basis for
recognizing these items from a law firm used by the Group.
●
We obtained legal representation letter about the pending legal dispute in the
Court of Appeal.
●
We assessed the recognition principles applied to judgmental income and ex-
pense items against IFRS principles and considered the appropriateness of the
Group’s disclosures in respect of judgmental items.
●
We assessed how the Group has received payments relating to previously rec-
ognized judgmental items and obtained a representation letter from the man-
agement about the collectability of these receivables.
●
We reported in more detail about the contents of these judgmental items to
the Audit Committee and the Board of Directors.
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
83
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 2022 includes goodwill totalling 251.0 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.
Changes in Group structure and their accounting treatment (refer to notes 26 Acquired business operations, 27 Assets held for sale, 28 Subsidiaries and material non-controlling interests and 31 Related party transactions
in the consolidated financial statements)
●
Several changes have taken place in the Group structure in the financial year ended due to business combinations and share pur-
chases of non-controlling interests. In addition, dental health services have been classified as assets held for sale in the consoli-
dated financial statements.
●
In business combinations, the assets and liabilities of the acquiree are measured at fair value at the date of the acquisition. Ar-
rangements may also involve contingent considerations which are measured at fair value at each reporting date. Their determina-
tion requires management to make estimates. Also classification and valuation of assets held for sale require management judge-
ment.
●
The accounting entries recorded resulting from the changes in the Group structure are considered a key audit matter due to man-
agement judgement relating to the entries and valuation matters among other things.
●
For business combinations we considered the purchase agreements, evalu-
ated the valuation principles of the assets and liabilities of the acquiree and
the underlying assumptions used, as well as assessed the technical accu-
racy of the purchase price allocations. We also assessed the existence of in-
tangible assets based on the transferred business and goodwill generated
in the acquisition.
●
Our audit procedures also included assessing fair values of any additional
or contingent considerations for business combinations made in the cur-
rent and previous financial years.
●
We involved KPMG valuation specialists that assessed as applicable the ap-
propriateness of the valuation principles applied.
●
Regarding assets held for sale and related liabilities we have assessed the
appropriateness of the classification and valuations aspects.
●
Furthermore, we considered the appropriateness of the Group’s disclo-
sures in respect of the changes in the Group structure.
REPORT BY THE BOARD OF DIRECTORS |
FINANCIAL STATEMENTS
84
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 International Financial Reporting Standards
(IFRS) as adopted by the EU, and of financial statements that give a true and fair view in accordance with the
laws and regulations 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 con-
trol as they determine is necessary to enable the preparation of financial statements that are free from ma-
terial misstatement, 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
85
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 eight
years. In Pihlajalinna Terveys Oy we were first appointed as auditors for the financial year ended 31 Decem-
ber 2010. Pihlajalinna Plc became a public interest entity on 8 June 2015. We have been the company’s au-
ditors 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 20 February 2023
KPMG OY AB
Lotta Nurminen
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, 2022 included in the digital financial statements
74370058MTRLEDOCHV67-2022-12-31-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
86
●
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 74370058MTRLEDOCHV67-2022-12-31-en.zip for the year ended 31 December, 2022
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, 2022 is set out in our Auditor’s Report dated 20 February, 2023. In this report, we do not ex-
press any audit opinion or other assurance conclusion on the consolidated financial statements.
Tampere 10 March, 2023
KPMG OY AB
Lotta Nurminen
Authorised Public Accountant, KHT