Silmäasema Oyj's Interim Report for 1 January-31 March 2018

Silmäasema Oyj
Stock Exchange Release
17 May 2018 at 9:00 EEST

Silmäasema's planned growth continued

January-March 2018 in brief:

  • Net sales increased by 4.1% from January-March 2017 and amounted to EUR 30.9 million (29.7).
  • Like-for-like net sales decreased by 2.4%.
  • The adjusted EBITDA increased by 0.5% and was EUR 2.8 million (2.8), or 9.1% of net sales (9.4%).
  • The adjusted operating result decreased by 9.4% to EUR 1.4 million (1.6).
  • Cash flow from business operations amounted to EUR 4.4 million (4.1).
  • The net debt to adjusted EBITDA ratio on 31 March 2018 was 2.8 (4.9).
  • Outlook for 2018 was complemented after the review period: Silmäasema's net sales are estimated to grow compared to the previous year. Silmäasema's adjusted EBITDA is estimated to be 9-13% of net sales.

The figures in parenthesis represent comparable data from 2017, unless otherwise stated.

Key figures

EUR thousand, unless otherwise stated 1-3/2018 1-3/2017 Change, % 1-12/2017
Net sales 30,870 29,651 4.1% 118,322
Like-for-like net sales growth, % -2.4% 8.6%   3.5%
EBITDA 2,520 2,028 24.3% 6,894
Adjusted EBITDA* 2,797 2,783 0.5% 11,760
- adjusted EBITDA, % 9.1% 9.4%   9.9%
Operating result 1,118 798 40.0% 1,589
Adjusted operating result* 1,406 1,553 -9.4% 6,472
- adjusted operating result, % 4.6% 5.2%   5.5%
Basic earnings per share, EUR 0.04 -0.01   -0.05
Net debt / adjusted EBITDA 2.8 4.9   2.9
Investments - operational 3,107 1,123 176.6% 6,058
Investments - acquisitions 694 4,700 -85.2% 6,699
Investments - total 3,801 5,824 -34.7% 12,757
Number of locations, Silmäasema chain 177  168  5.4%  172

 *) Silmäasema presents both its adjusted EBITDA and adjusted operating result, which have been adjusted for significant unusual items. It is the company's view that adjusted EBITDA best illustrates the profitability development of its business operations. 


CEO Pasi Kohmo:

Silmäasema continued its planned growth during the first quarter of 2018 and net sales grew 4.1% to EUR 30.9 million. We opened a new eye clinic in Oulu and expanded our optical retail store network with three stores in Finland and one store in Estonia. At the end of March 2018, Silmäasema had a total of 145 own stores in Finland and Estonia, which is, in fact, 18 more stores than at the end of March 2017. Taking into consideration the rapid growth of the network and the investments required to achieve this growth, we are satisfied with the fact that in this period of considerable growth, adjusted EBITDA remained at the same level as the previous year.

In practice, the increase in net sales came from new stores that were opened in 2017-2018, stores acquired through company and business acquisitions and from the new eye clinic that was opened in Oulu in February 2018. Like-for-like net sales decreased by 2.4%. A large part of the decline is due to the timing of Easter this year, which was between the end of March and the beginning of April.

The gross profit improved due to the net sales growth, improvement in purchase prices and the optical retail sales structure that was better than in the comparative period. On account of a rise in fixed costs, mainly personnel and rent costs, the adjusted EBITDA was, however, at the same level as the previous year. A significant share of the increase in costs came from the costs of the optical retail stores that were acquired and opened in Finland in 2017 and from the costs related to operating as a listed company. There were hardly any of these types of costs in the comparative period. In addition, the review period's fixed costs include costs related to, among others, the development of our organisation and network, and these costs will not be permanent.

Relative profitability weakened slightly from the previous year, which is mainly due to the large number of optical retail stores that were opened over the years 2016-2018. As a whole these stores reduced the relative profitability of the entire Group. New units have previously, on average, reached their normal profitability level in one to two years from start-up, but there can be significant variation in the development of individual stores. However, the profitability of stores acquired in Finland in 2017 through business acquisitions is already close to the target level. We are continuing our persistent work to ensure that the new stores reach their target level for profitability. The overall profitability of the rest of the store network was at a good level.

The net sales of the Eye Clinics segment increased slightly, mainly due to the new eye clinic that was opened in Oulu. The opening of the clinic was successful, and we now have a truly nationwide chain of eye clinics. While the number of cataract surgeries remained at the previous year's level, the number of refractive surgeries increased from the comparative period and the previous quarter. Though we are pleased with the trend in the number of refractive surgeries during the early part of the year, it is difficult to predict the level of future demand both in refractive and cataract surgeries.

The Finnish Government submitted its proposal for the Freedom of Choice Act for social and health services to Parliament on 8 March 2018. The final content and implementation of the act will determine its effects on freedom of choice with regard to cataract surgeries. Silmäasema is committed to the goals of the Government's health and social services reform and regional government reform. We believe that the increasing freedom of choice will support the development of cost-efficient and equal eye healthcare services. The legislative reform is an opportunity for us if it increases the number of cataract surgeries in the private sector. However, our financial targets are not dependent on or tied to this reform.

We announced earlier this year that we are in the process of starting a development program, which will last about two years, that involves changes to operating models and the renewal of information systems. The program focuses on the improvement of existing operating models and increasing profitability with new operating methods and information system solutions that support these methods. The program will generate costs while it is ongoing but procurements related to the program are likely to be booked as capital expenditure. During the first months of the year we have selected a partner through competitive bidding to design the information system renewals related to the development program. We will provide regular reports on the progress of the development program in our financial reports.

We complemented our outlook for 2018 in April, after the review period. We estimate that our net sales will grow compared to the previous year and that our adjusted EBITDA will be 9-13% of net sales.

Outlook for 2018

On 12 April 2018, Silmäasema complemented its outlook for 2018 by announcing a net sales guidance and guidance for the adjusted EBITDA.

Previous outlook provided on 7 March 2018

Silmäasema's net sales are estimated to grow compared to the previous year.

In 2017, Silmäasema's net sales were EUR 118.3 million.

New outlook provided on 12 April 2018

Silmäasema's net sales are estimated to grow compared to the previous year. In 2017, the company's net sales were EUR 118.3 million.

Silmäasema's adjusted EBITDA is estimated to be 9-13 per cent of net sales.

Basis for the outlook

The competitive situation in optical retail continues to be tough. However, Silmäasema's net sales are expected to increase, mainly due to new optical retail stores to be opened or acquired in 2018, as well as sales growth with regard to stores opened in 2016 and 2017. Silmäasema has identified several possible locations for optical retail stores in different parts of Finland. However, the number of stores to be established or acquired during the year is difficult to predict. It depends on successful business acquisition negotiations, the local market situation and the availability of suitable business properties, among other factors. In addition, the good general economic situation and the favourable development of private consumption are expected to support demand in optical retail.

The ageing population and Finns' increased investment in health and well-being are factors that are expected to increase the demand for optical retail and eye healthcare services. This trend is expected to support the development of the net sales of Silmäasema's Eye Clinics segment in 2018. Its net sales are also expected to increase because of sales growth as a result of opening the eye clinic in Oulu in February 2018.

Due to the high sales margin, the level of adjusted EBITDA is highly dependent on the performance of net sales. Over the short term, variation in net sales of the established network is the only significant factor affecting the EBITDA level. Over the longer term, the increase in productivity resulting from changes in operating models will change this level but will not remove the variation.

Expenses are also expected to increase as a result of the expansion of business operations and growth in net sales. The most significant expenses are related to salaries, rents and marketing. These expenses can be predicted relatively accurately for the full year. The development program initiated in 2018 will generate costs while it is ongoing but the timing of these expenses is yet difficult to predict. Procurements related to the program are likely to be booked as capital expenditure. 

Near-term business risks and uncertainties

Silmäasema's strong growth strategy increases its business risks. Opening new stores and finding the most suitable business locations, as well as company acquisitions, require careful preparation and strong expertise in integration. The growth strategy will continue to require skilled personnel and investment in organisational development and key persons. Learning new things and managing profitable growth require special attention to motivating and target-oriented leadership, and to the development and controlled implementation of new operating models. In 2018, the company will be starting a significant development program that involves changes to operating models and the renewal of information systems. The development program involves uncertainty in terms of the amount and timing of costs and investments. The project will tie up resources, which may have temporary effects on the company's business operations.

Silmäasema has strongly expanded its network of stores in recent years. In the early stages, the profitability of new stores is burdened by investments in the start-up of operations and the achievement of a strong market position. Earlier new stores have reached their normal level of profitability in one or two years, but this involves uncertainty.

The profitability level of optical retail may vary between quarters within the year and in relation to the comparative period, due to variations in the structure of sales. The factors affecting the structure of sales, such as the effectiveness of Silmäasema's and its competitors' sales promotion measures, may be difficult to predict.

The competition in eye surgery has moved closer to regular consumer markets. Silmäasema must be able to adapt its business models in a more demand- and consumer-oriented direction. Silmäasema monitors the changes in the market and continuously observes its competition, among other measures. Highly competent healthcare professionals lay the foundation for the operations of Silmäasema's Eye Clinics segment. Its growth and success depend on the company's ability to recruit and keep the best experts in the field.

Silmäasema participates in competitive bidding processes organised by public hospital districts looking to partner with private service providers in the treatment of eye diseases. The competitive bidding processes and their results always involve uncertainty. However, the results of individual bidding processes are not expected to have a significant effect on the Group as a whole.

Silmäasema uses various information systems in its business operations. The critical role of the systems is analysed, and risks are minimised as part of risk management. In addition, Silmäasema is currently carrying out and planning several significant information system projects. The risks involved in information system projects are minimised by meticulous project management, among other measures. The company is in the process of starting a development program to renew most of its information systems over the next two years. The project concerns at least cash register, patient information and reporting systems, as well as category management and digital services for customers.

Healthcare involves patient liabilities, which are mainly borne by doctors. The company has prepared for these risks with appropriate liability insurance policies. The company protects itself against other damage risks with statutory insurance policies and with optional insurance policies related to property, disruption of business and certain responsibilities, among other aspects.

Structural changes in the public sector and changes in healthcare regulation may impact Silmäasema's business operations. The total impact of the planned health and social services reform and other changes in the organisation of social and healthcare services in Finland are difficult to predict. Policy alignments may affect Silmäasema's profitability and growth prospects. However, more than 90 per cent of Silmäasema's net sales come from operations such as the sales of spectacles, contact lenses and refractive surgeries, which are already provided through free competition. These activities are not directly dependent on the health and social services reform that is currently being planned. The reform is estimated to impact this portion of net sales only slightly.

Audiocast and conference call for investment analysts and press

A briefing for investment analysts and the press will be arranged today on Thursday, May 17, 2018 at 10:30 AM Finnish time (EEST) through a live audiocast combined with a conference call. The briefing will be hosted by CEO Pasi Kohmo and CFO Anu Kankkunen. Link to the audiocast is available at

Conference call numbers:
Finland  +358 (0) 981 710 465
UK          +44 (0) 203 194 0552
USA        +1 855 716 1597
Sweden +46 (0) 856 642 702

Recording of the audiocast and conference call as well as Finnish audiocast presentations will be later available on the company's website


Calendar for 2018

Half Year Financial Report                                17 August 2018
Interim Report January-September                                9 November 2018


Board of Directors

For further information, please contact:

CEO Pasi Kohmo, tel. +358 50 331 7015, pasi.kohmo(a)

CFO Anu Kankkunen, tel. +358 50 669 69, anu.kankkunen(a)

Head of Communications and Investor Relations Tuukka Hirvonen, tel. +358 50 416 7700, tuukka.hirvonen(a)

Silmäasema is a Finnish company, which offers all products and services for optical retail and eye healthcare nationwide. Silmäasema is the largest private eye clinic provider in Finland offering eye surgeries and the second largest optical retail chain. The Silmäasema chain has over 150 stores and 14 eye clinics in Finland as well as ten stores in Estonia. The Silmäasema chain employs close to 1,000 eye healthcare professionals. Silmäasema Group's net sales were 118.3 million euros in 2017 and adjusted EBITDA was EUR 11.8 million.