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Introduction & Market Context
Terveystalo Oy (HEL:TTALO) presented its half-year 2025 results on July 17, 2025, revealing a significant improvement in profitability despite revenue challenges. The Finnish healthcare provider, currently trading at €11.70 per share, continues to execute its strategy of enhancing operational efficiency and focusing on higher-margin services. This approach has yielded substantial bottom-line growth even as the company navigates a challenging market environment, particularly in its publicly funded segments and Swedish operations.
Quarterly Performance Highlights
Terveystalo reported a 5.5% year-over-year decline in Q2 2025 revenue to €322 million, but delivered impressive profitability improvements. Adjusted EBIT increased by 5.1% to €36.7 million, with the adjusted EBIT margin expanding to 11.4%, up 1.1 percentage points from the previous year. Most notably, earnings per share surged 55.1% to €0.18, demonstrating the company’s ability to enhance shareholder value despite top-line pressures.
As shown in the following chart of key financial metrics:
The company’s operating cash flow reached €40.5 million, representing an 8.8% year-over-year decrease. However, patient satisfaction remained strong with the NPS (Net Promoter Score) for appointments at 87, slightly up by 0.5% compared to the previous year.
Segment Performance Analysis
All three of Terveystalo’s business segments showed improved profitability despite revenue declines, highlighting the success of the company’s efficiency initiatives.
Healthcare Services (NASDAQ:HCSG), which accounts for 80% of the company’s revenue, saw a modest 1.6% decline in revenue to €257.4 million. However, adjusted EBIT increased by 1.5% to €35.7 million, with the margin improving to 13.9% from 13.5% in the previous year. The segment benefited from improved operational efficiency, a favorable sales mix, and increased revenue from insurance customers, which offset lower appointment volumes and reduced service sales to the public sector.
The following breakdown illustrates the segment’s performance:
Portfolio Businesses experienced the most significant revenue decline of 21.8% to €49.0 million, primarily due to the planned termination of low-margin outsourcing contracts. Despite this, adjusted EBIT surged by 33.1% to €3.8 million, with the margin improving dramatically to 7.7% from 4.5%. This transformation demonstrates the effectiveness of Terveystalo’s strategy to exit less profitable contracts and improve operational efficiency.
The Swedish operations continued to face difficult market conditions, with revenue declining 7.3% to €20.5 million due to expired contracts and weak demand amid high unemployment. Nevertheless, cost-saving measures implemented through the profit improvement program helped reduce losses, with adjusted EBIT improving by 20.8% to -€0.6 million and the margin improving to -2.7% from -3.2%.
Strategic Initiatives
Terveystalo is advancing several strategic initiatives to drive future growth and profitability. The company’s strategic agenda focuses on four key areas: employee engagement, delivering superior value through integrated care, organic growth, and efficiency improvements.
As illustrated in the following chart tracking progress across these strategic priorities:
A significant upcoming opportunity is the "freedom of choice trial" for individuals over 65, starting September 1, 2025. This new Kela reimbursement model will allow eligible individuals to use private general practitioner services up to three times a year for less than €30 per visit. Terveystalo is positioning itself to capture a significant share of the projected one million trial visits.
The company is also enhancing its occupational health services through a focused multi-year program that aims to achieve measurable effectiveness, significant cost efficiency improvements, and better transparency. This includes combining AI and cutting-edge technology to identify individual and organizational risks with greater accuracy.
Additionally, Terveystalo is targeting 90% lower production costs in digital channels through customer-focused product development and channel optimization, which should further drive efficiency gains.
Financial Position and Outlook
Terveystalo maintains a solid financial position with disciplined capital expenditure and improving debt metrics. The company’s net debt to EBITDA ratio improved to 2.2 in Q2 2025, down from 2.3 at the end of 2024 and 3.5 in 2018, reflecting consistent deleveraging.
The following chart illustrates the company’s improving financial position:
Capital expenditure remains focused on organic growth and digital investments, with a disciplined approach to physical assets and M&A opportunities. The company’s investment strategy prioritizes digital enhancements to improve user experience and productivity for healthcare professionals.
For the full year 2025, Terveystalo has maintained its guidance for adjusted EBIT to be in the range of €155-165 million. This outlook assumes a stable demand environment, employment levels, and typical morbidity rates. It also accounts for a decrease of approximately €30 million in revenue within the Portfolio Businesses segment due to the ending of outsourcing contracts, in line with the company’s strategy to reduce its legacy outsourcing portfolio from €120 million in 2022 to €10 million by 2028.
Despite the revenue challenges, Terveystalo’s focus on operational efficiency, strategic portfolio management, and digital transformation continues to drive profitability improvements. The company’s ability to significantly enhance earnings per share while navigating a difficult market environment demonstrates the resilience of its business model and the effectiveness of its strategic initiatives.
Full presentation:
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