Pihlajalinna Oyj

Vuosikertomus 2024 74370058MTRLEDOCHV67 2024-01-01 2024-12-31 74370058MTRLEDOCHV67 2024-12-31 74370058MTRLEDOCHV67 2023-12-31 74370058MTRLEDOCHV67 2023-01-01 2023-12-31 74370058MTRLEDOCHV67 2022-12-31 74370058MTRLEDOCHV67 2022-12-31 ifrs-full:IssuedCapitalMember 74370058MTRLEDOCHV67 2023-12-31 ifrs-full:IssuedCapitalMember 74370058MTRLEDOCHV67 2022-12-31 PIH:ReserveForInvestedUnrestrictedEquityMember 74370058MTRLEDOCHV67 2023-12-31 PIH:ReserveForInvestedUnrestrictedEquityMember 74370058MTRLEDOCHV67 2022-12-31 ifrs-full:ReserveOfGainsAndLossesOnFinancialAssetsMeasuredAtFairValueThroughOtherComprehensiveIncomeMember 74370058MTRLEDOCHV67 2023-01-01 2023-12-31 ifrs-full:ReserveOfGainsAndLossesOnFinancialAssetsMeasuredAtFairValueThroughOtherComprehensiveIncomeMember 74370058MTRLEDOCHV67 2023-12-31 ifrs-full:ReserveOfGainsAndLossesOnFinancialAssetsMeasuredAtFairValueThroughOtherComprehensiveIncomeMember 74370058MTRLEDOCHV67 2022-12-31 ifrs-full:RetainedEarningsMember 74370058MTRLEDOCHV67 2023-01-01 2023-12-31 ifrs-full:RetainedEarningsMember 74370058MTRLEDOCHV67 2023-12-31 ifrs-full:RetainedEarningsMember 74370058MTRLEDOCHV67 2022-12-31 ifrs-full:NoncontrollingInterestsMember 74370058MTRLEDOCHV67 2023-01-01 2023-12-31 ifrs-full:NoncontrollingInterestsMember 74370058MTRLEDOCHV67 2023-12-31 ifrs-full:NoncontrollingInterestsMember 74370058MTRLEDOCHV67 2024-12-31 ifrs-full:IssuedCapitalMember 74370058MTRLEDOCHV67 2024-12-31 PIH:ReserveForInvestedUnrestrictedEquityMember 74370058MTRLEDOCHV67 2024-01-01 2024-12-31 ifrs-full:ReserveOfGainsAndLossesOnFinancialAssetsMeasuredAtFairValueThroughOtherComprehensiveIncomeMember 74370058MTRLEDOCHV67 2024-12-31 ifrs-full:ReserveOfGainsAndLossesOnFinancialAssetsMeasuredAtFairValueThroughOtherComprehensiveIncomeMember 74370058MTRLEDOCHV67 2023-12-31 PIH:HybridCapitalMember 74370058MTRLEDOCHV67 2024-01-01 2024-12-31 PIH:HybridCapitalMember 74370058MTRLEDOCHV67 2024-12-31 PIH:HybridCapitalMember 74370058MTRLEDOCHV67 2024-01-01 2024-12-31 ifrs-full:RetainedEarningsMember 74370058MTRLEDOCHV67 2024-12-31 ifrs-full:RetainedEarningsMember 74370058MTRLEDOCHV67 2024-01-01 2024-12-31 ifrs-full:NoncontrollingInterestsMember 74370058MTRLEDOCHV67 2024-12-31 ifrs-full:NoncontrollingInterestsMember 74370058MTRLEDOCHV67 2023-01-01 2023-12-31 PIH:HybridCapitalMember iso4217:EUR iso4217:EUR xbrli:shares Report by the Board of Directors REPORT BY THE BOARD OF DIRECTORS |AUDITED FINANCIAL STATEMENTS 2 Report by the Board of Directors for the financial year 1 Jan–31 Dec 2024 CONTENTS The operating environment 3 Pihlajalinna’s outlook for 2025 3 Consolidated revenue and result 3 Reporting segments 4 Consolidated statement of financial position and cash flow 4 Financing arrangements 5 Acquisitions and capital expenditure 5 Personnel 5 Share-based incentive schemes 6 Research and development 6 Risk management, risks and uncertainties in business operations 6 Shareholders’ Nomination Board 7 Board of Directors 7 Committees nominated by the Board 8 Remuneration of the members of the Board of Directors 8 Board authorisations 8 Repurchase and transfer of own shares 8 Flagging notifications 8 Shares and shareholders 8 The Board of Directors’ proposal for profit distribution and the Annual General Meeting 2025 11 Events after the financial year 11 Calculation of key financial figures and alternative performance measures 12 Key financial figures 14 Reconciliations with alternative key figures and ratios 15 Corporate Governance Statement 19 I Introduction 19 II Corporate Governance 19 III Internal Control And Risk Management Mechanisms 24 IV Other Information Required 27 Sustainability Statement 27 General disclosures (ESRS2) 28 Climate change (E1) 56 Own workforce (S1) 64 Consumers and end-users (S4) 79 Business Conduct (G1) 90 Dates and signatures to the report by the Board of Directors and the financial statements 148 This ESEF report is a translation and has been published voluntarily. REPORT BY THE BOARD OF DIRECTORS |AUDITED FINANCIAL STATEMENTS 3 Report by the Board of Directors for the financial year 1 Jan–31 Dec 2024 The operating environment The wellbeing services counties are undergoing major changes. The economy is being balanced through transformation programs, and cuts have been made by reducing social and healthcare services and laying off personnel. According to the law, the wellbeing services counties should cover their deficits accumulated since 2023 by 2026. As of the assessment made in autumn 2024, the total accumulated deficit of the wellbeing services counties is 2.7 billion euros. The regional board of the Wellbeing Services County of Pirkanmaa de- cided in January 2025 to search for social and healthcare service pro- vider for Northern Pirkanmaa through a tender process, in addition to in-house production, starting from early 2026. This is the first major new service production agreement between a private and public op- erator since 2020. According to the Finnish Institute for Health and Welfare, over 166,000 patients were waiting for access to non-urgent specialised care in the wellbeing services counties at the end of August 2024. Some 18 per cent of those in the queue had been waiting for over six months to access treatment. This is the highest figure on record in the statistics published by the Finnish Institute for Health and Wel- fare, which date back to 2007. Valvira has ordered 14 wellbeing ser- vices counties and the Helsinki and Uusimaa Hospital District (HUS) to bring access to non-urgent specialized healthcare in line with the law by March 31 2025, at the latest. Regulatory amendments concerning hospital emergency and on-call services and surgical operations entered into force at the beginning of 2025. Under the amendments, wellbeing services counties can con- tinue to use private service providers for day surgery and short-stay surgery, such as knee and hip replacement surgeries. According to the Finnish Institute for Health and Welfare, a total of 2,607 primary joint replacement surgeries were performed in private hospitals in 2023, which represents an increase of 772 compared to 2022 levels. One example is Pihlajalinna’s Jokilaakso freedom-of-choice hospital, where a record-high 893 joint replacement surgeries were performed in 2024. The Elderly Care Act was amended as of 1 January 2025. The new minimum staffing ratio stipulated by the Act for 24-hour elderly care in service housing is 0.6, which is lower than the previous require- ment of 0.65. The private sector produces more than half of all appointments with physicians. Approximately 2.1 million workers are covered by occupa- tional healthcare services. According to the Finnish Institute of Occu- pational Health, over 70 per cent of occupational healthcare agree- ments cover medical care in addition to statutory preventive occupa- tional healthcare. Approximately 1.3 million Finns have private medi- cal expenses insurance, and the trend is rising. Wages in the private healthcare service sector were subject to a gen- eral increase of 2.4 per cent in September 2024, and pay scales were increased by 0.51 per cent. In December 2024, employees were paid one-off compensation of EUR 500. In 2025, wages will be increased for the period 1 May 2025–30 April 2026 (12 months) by a general in- crease and a pay scale increase, the magnitude and timing of which will be determined in accordance with the wage increases in the ref- erence sectors. The collective bargaining agreement is valid until spring 2026. Pihlajalinna’s outlook for 2025 In 2025, Pihlajalinna will focus on organic growth especially in Private Healthcare Services, and continued improvement in profitability. ● The Group estimates consolidated revenue to remain on a par with the previous year’s level (EUR 704.4 million in 2024) ● The Group estimates the adjusted operating profit before the amortisation and impairment of intangible assets (EBITA) to in- crease to at least 9 per cent of revenue (7.8 per cent in 2024) The Group estimates demand to remain stable. Slow economic growth may affect Pihlajalinna’s service demand and financial result more than expected. Consolidated revenue and result Revenue Pihlajalinna’s revenue was EUR 704.4 (720.0) million, a decrease of - 2.2 per cent. In Private Healthcare Services, the divestment of dental care services decreased revenue by EUR 4.8 million and in Public Ser- vices, the termination of cost liability for demanding specialised care , the gradual transfer of the services agreement of Jämsän Terveys Oy and other changes to outsourcing agreements decreased revenue by EUR 61.0 million. Pihlajalinna’s comparable organic revenue 1) growth was EUR 51.1 million, or 7.8 per cent. ¹) The following items have been excluded from the comparison pe- riod revenue: the divestment of dental care services, the transfer of cost liability for demanding specialised care, the gradual transfer of Jämsän Terveys Oy’s service agreement, other changes to outsourc- ing agreements and COVID-19 services. Profitability Adjusted operating profit before amortisation and impairment of in- tangible assets (EBITA) was EUR 55.2 (37.8) million. Adjusted EBITA margin was 7.8 (5.2) per cent. Adjustments to EBIT amounted to EUR -0.8 (8.5) million. Profitability improved due to efficiency improve- ment measures in Public Services and in Private Healthcare Services, due to commercial measures, enhanced service processes and cost control. REPORT BY THE BOARD OF DIRECTORS |AUDITED FINANCIAL STATEMENTS 4 Profitability in the financial year was negatively affected by write downs related to business premises, which were recognised based on the management's judgment, and provisions for property renovation and maintenance responsibilities. These had a total negative effect of EUR 2.9 million on profitability. In December, the District Court ruled the City of Jämsä to pay Jämsän Terveys Oy additional costs caused by the COVID-19 pandemic, plus late payment interest and legal expenses. The difference of opinion on the impact of the transfer of personnel on the annual fee was set- tled before the court hearing. In total, these items improved EBITDA by EUR 1.5 million for the financial year, and they have been treated as EBITDA adjustment items. In the comparison period, the write-off of receivables from previous years reduced EBITDA by a total of EUR 7.8 million and was treated as an EBITDA adjustment items. The write-off in question also reduced financial items in the comparison period by EUR 0.4 million. In the comparison period, the write-off reduced profit before taxes by a to- tal of EUR 8.2 million and earnings per share by EUR 0.26. Pihlajalinna’s EBIT was EUR 48.5 (20.6) million. The Group’s net financial expenses amounted to EUR -9.8 (-12.4) mil- lion. Refinancing in June generated a total of EUR 0.6 million in non- recurring financial expenses recognised through profit or loss. Finan- cial expenses in the comparison period include impairment of loan re- ceivables of EUR 1.2 million. Profit before taxes was EUR 38.6 (8.2) million. Profit for the financial year was EUR 30.2 (4.6) million. Earnings per share (EPS) was EUR 1.13 (0.19) . Reporting segments Pihlajalinna changed its segment reporting effective from 1 January 2024. Pihlajalinna has two reportable segments: Private Healthcare Services and Public Services. The new reporting structure follows Pihlajalinna’s business model and organisational structure. The Private Healthcare Services operating segment consists of private clinic, diagnostics, hospital, occupational healthcare, remote and fit- ness center services. These comprehensive care path services are pro- vided by Pihlajalinna to corporate customers, insurance companies, the public sector, and private customers through its nationwide net- work of medical centers and diverse digital channels. The Public Services operating segment consists of social and healthcare services produced primarily for the public sector, which in- clude outsourcing and housing services, mainly remotely produced responsible doctor services, as well as a wide range of staffing and re- cruitment services. Private Healthcare Services Revenue Revenue from Private Healthcare Services was EUR 451.5 (423.1) mil- lion, an increase of 6.7 per cent. Revenue increased especially in in- surance company customers and occupational healthcare services. The divestment of dental care services decreased revenue by EUR 4.8 million. Comparable organic revenue growth 1) was EUR 45.0 million, or 11.1 per cent. The appointment volumes of Pihlajalinna’s private clinics increased slightly from the comparison period. Profitability Adjusted EBITA was EUR 33.6 (27.2) million, an increase of 23.8 per cent. Adjusted EBITA margin was 7.4 (6.4) per cent. Profitability im- proved particularly in occupational healthcare services and clinic op- erations due to commercial measures, improved efficiency of service processes and cost control. Conversion, which is the ratio of diagnos- tics revenue to revenue from appointments, was on a par with the comparison period. Adjustments totalled EUR 0.7 (0.5) million. Operating profit (EBIT) was EUR 25.8 (19.4) million. In the comparison period, EBIT was increased by a sales gain of EUR 3.6 million recog- nised on the divestment of dental care services. Public Services Revenue Revenue from Public Services was EUR 267.6 (314.3) million, a de- crease of 14.9 per cent. The termination of cost liability for demand- ing specialised care, the gradual transfer of the services agreement of Jämsän Terveys Oy and other changes to outsourcing agreements de- creased revenue by EUR 61.0 million. Comparable organic revenue growth 1) was EUR 3.4 million, or 1.3 per cent. Profitability Adjusted EBITA was EUR 21.5 (10.6) million, an increase of 103.1 per cent. Adjusted EBITA margin was 8.0 (3.4) per cent. Profitability was improved by efficiency improvement measures and contract changes in complete outsourcing. Profitability in the financial year was nega- tively affected by write downs related to business premises, which were recognised based on the management's judgment, and provi- sions for property renovation and maintenance responsibilities. These had a total negative effect of EUR 2.9 million on profitability. Adjust- ments totalled EUR -1.5 (8.5) million. EBIT amounted to EUR 22.7 (1.2) million. In December, the District Court ruled the City of Jämsä to pay Jämsän Terveys Oy additional costs caused by the COVID-19 pandemic, plus late payment interest and legal expenses. The difference of opinion on the impact of the transfer of personnel on the annual fee was set- tled before the court hearing. In total, these items improved seg- ment’s EBITDA by EUR 1.5 million for the financial year, and they have been treated as EBITDA adjustment items. In the comparison period, the write-off of receivables from previous years reduced EBITDA by a total of EUR 7.8 million and was treated as an EBITDA adjustment item. The write-off in question also reduced fi- nancial items in the comparison period by EUR 0.4 million. In the comparison period, the write-off reduced the segment’s profit before taxes by a total of EUR 8.2 million and earnings per share by EUR 0.26. ¹) The following items have been excluded from the comparison pe- riod revenue: the divestment of dental care services, the transfer of cost liability for demanding specialised care, the gradual transfer of Jämsän Terveys Oy’s service agreement, other changes to outsourcing agreements, COVID-19 services and transfers between segments. Consolidated statement of financial position and cash flow Statement of financial position Pihlajalinna Group’s total statement of financial position was EUR 630.2 (657.5) million. Consolidated cash and cash equivalents were EUR 30.9 (24.5) million. Consolidated net debt was EUR 296.6 (352.7) million. Net debt to adjusted EBITDA ratio developed to a level in line with the set targets, ending up at 2.9 (4.4). The consolidated equity ratio was 26.8 (22.0) per cent. Cash flow REPORT BY THE BOARD OF DIRECTORS |AUDITED FINANCIAL STATEMENTS 5 Net cash flow from operating activities was EUR 100.8 (79.0) million. Net cash flow from operating activities increased due to improved re- sult. The change in net working capital was EUR -2.1 (0.0) million. Net cash flow from investing activities was EUR -12.3 (-18.5) million. Investments in tangible and intangible assets were EUR -11.0 (-22.9) million. In the comparison period, the divestment of the Group’s den- tal care services improved net cash flow from investing activities by EUR 5.7 million. The Group’s cash flow after investments (free cash flow) was EUR 88.6 (60.5) million. Net cash flow from financing activities was EUR -82.2 (-49.2) million. The change in financial liabilities, including changes in credit limits, was EUR -32.6 (-29.0) million. During the financial year, Pihlajalinna amortised its long-term loan by a total of EUR 30.0 million. In the comparison period, Pihlajalinna issued a EUR 20 million hybrid bond. During the financial year, Pihlajalinna paid hybrid bond interests of EUR 2.4 (0.0) million which have been recorded as a deduction from retained earnings, net of tax. Interest paid and other financial ex- penses amounted to EUR -11.9 (-6.2) million. During the first quarter of 2023, the Group sold its interest rate swap agreement. The sale had an effect of approximately EUR 3.9 million on the net cash flow of interest paid and other financial expenses in the comparison period. At the end of June, due to refinancing, Pihlajalinna paid the accrued interest and expenses on its long-term loan as well as non-recurring refinancing costs. Financing arrangements In June 2024, Pihlajalinna rearranged its long-term debt financing with a sustainability-linked financing arrangement. The agreement in- cludes a EUR 110 million term loan for refinancing the Group’s previ- ous debt, and a revolving credit facility of EUR 60 million for general financing purposes. The financing agreement is for three years and in- cludes two option years. The new financing arrangement includes customary financial cove- nants equivalent to the previous arrangement, concerning leverage (ratio of net debt to pro forma EBITDA) and gearing covenants. IFRS 16 lease liabilities are not considered in the calculation of covenants. Additionally, the loan margin of the financing is linked to Pihla- jalinna’s main sustainability targets: patient satisfaction, access to surgical treatment and employee satisfaction. Sustainability objec- tives have a minor effect on the loan margin, depending on how many of the agreed-upon sustainability targets are achieved. During the financial year and at the end of it, the Group met the financial covenants agreed upon in the agreement. Also, the sustainability tar- gets set in the arrangement were met in 2024. At the end of the financial year, Pihlajalinna had EUR 70 million in un- used committed credit limits. Unused credit limits consist of EUR 10 million credit limit agreement and a EUR 60 million unused revolving credit facility. The Group has an interest rate swap agreement with a nominal value of EUR 65 million, which is used to convert the floating interest rate of the financing arrangement to a fixed interest rate. Cash flow hedge accounting is applied to the interest rate swap, which means that the effective portion of the change in fair value is recognised in other comprehensive income. The start date of the interest rate swap was in March 2023, and it is valid until 25 March 2027. Hybrid bond On 27 March 2023, Pihlajalinna issued a hybrid bond of EUR 20 mil- lion. The hybrid bond bears a fixed interest rate of 12.00 percent per annum until 27 March 2026 (Reset Date), and from the Reset Date, the interest rate will be floating as defined in the terms and condi- tions of the hybrid bond. The hybrid bond is an instrument subordinated to the company’s other debt obligations. The hybrid bond does not have a specified maturity date. Pihlajalinna is entitled to redeem the hybrid bond on the Reset Date and thereafter on each interest payment date. The hy- brid bond will be treated as equity in Pihlajalinna’s IFRS consolidated financial statements. The hybrid bond does not confer to its holders the rights of a shareholder or dilute the holdings of the current share- holders. Acquisitions and capital expenditure Gross investments, including acquisitions, amounted to EUR 31.1 (66.4) million. The Group’s gross investments which consisted of de- velopment, additional and replacement investments, amounted to EUR 14.0 (26.0) million. Gross investments in right-of-use assets amounted to EUR 14.0 (40.5) million. In the comparison period, extensions of lease agreements and rent increases significantly elevated gross investments in right-of- use assets. Gross investments in M&A transactions amounted to EUR 3.1 (0.7) million. On 1 May 2024, Pihlajalinna acquired full ownership of its for- mer associated company Kuura Digilääkäri Oy. The Group's previous holding in the company was 45 per cent. On 1 July 2024, Pihlajalinna acquired 41.34 per cent of its former associated company Digital Health Solutions Oy. After the transaction, Pihlajalinna holds 82.37 percent of the company's shares. Investment commitments for the Group’s development, additional and replacement investments amounted to approximately EUR 3.5 (2.9) million. The investment commitments are related to business premises, additional and replacement investments in clinical equip- ment and information system projects. Personnel At the end of the financial year, the number of personnel amounted to 6,493 (6,880), a decrease of -6 per cent. The Group’s personnel as full-time equivalents was 4,416 (4,821), a decrease of -8 per cent. As a result of the gradual transfer of the Jämsän Terveys Oy service agreement, the number of the Group's employees decreased by ap- proximately 470 from the end of 2023. Converted to full-time equiva- lents, the decrease in the number of employees was approximately 273. At the end of the financial year, Public Services had 3,428 (4,044) em- ployees and Private Healthcare Services 3,065 (2,836) employees. Converted into full-time equivalents, Public Services had 2,417 (2,775) employees and Private Healthcare Services 1,999 (2,046) em- ployees. Changes to complete outsourcing agreements and the adaptation of operations to the needs of the wellbeing services counties led to nu- merous change negotiations during 2024. The most significant in terms of size were the change negotiations carried out in Kuusiolinna Terveys in the early part of the year. The negotiations were con- cluded in April. The negotiations have generally addressed topics such as operational changes to the network of clinics in the outsourcing business, the downscaling of operations, termination of employment contracts and switching personnel to part-time employment. The Group employee benefit expenses totalled EUR 321.2 (322.8) mil- lion, a decrease of EUR -1.6 million. REPORT BY THE BOARD OF DIRECTORS |AUDITED FINANCIAL STATEMENTS 6 In the financial year, the sickness-related absences rate amongst the personnel was 5.6 (6.0) per cent. In the financial year the number of practitioners was 2 145 (2 103) 1) . 1) Dental care services divestment has been excluded from the com- parison period. Share-based incentive schemes Share-based incentive scheme for key personnel, LTIP 2022 In early 2022, Pihlajalinna's Board of Directors approved the launch of a share-based incentive programme (LTIP 2022) for selected key em- ployees. In its entirety, the incentive scheme formed a six-year pro- gramme and the share rewards based on the programme cannot be disposed of prior to the year 2026. The key employees selected for the programme were also required to make an investment in Pihla- jalinna shares as a precondition for participation. The performance- and quality-based share programme comprised four separate performance periods of one year each (the calendar years 2022, 2023, 2024 and 2025). The potential share rewards were paid out after the performance periods in the years 2023, 2024 and 2025. The Board of Directors annually decided the participants, per- formance indicators, targets and earning opportunities. Three perfor- mance periods were launched under the programme: 2022, 2023 and 2024. The earnings criteria applied to the 2024 performance-based and quality-based share plan were Pihlajalinna Group’s adjusted EBITA, the development of customer satisfaction (NPS), the develop- ment of employee Net Promoter Score (eNPS) and the development of the sickness-related absence rate. The programme was treated in its entirety as an equity-settled share- based payment. No performance and quality-based share rewards materialised for the performance periods 2022 and 2023 pursuant to the share-based programme, as the minimum targets set for the pro- gramme were not achieved. The maximum aggregate amount of share rewards payable based on the programme for the period 2024 is 186,920 shares (gross amount before the deduction of the applica- ble withholding tax). For the performance period 2024, the effect on the result for the financial year was EUR 1.4 million. The Board of Di- rectors decided on 13 December 2024 that the last performance pe- riod, corresponding to the calendar year 2025, will not be launched. Performance Share Plan (PSP) On 13 December 2024, Pihlajalinna's Board of Directors decided to establish a new long-term share-based incentive plan for key employ- ees of the Group. The plan replaces Pihlajalinna’s current share-based incentive plan. The Performance Share Plan 2025–2029 consists of three perfor- mance periods, covering the financial years 2025–2027, 2026–2028 and 2027–2029. The Board of Directors will decide annually on the commencement and details of every performance period. The target group in the performance period 2025–2027 consists of approximately 30 key employees, including the members of the Group Management Team and the CEO. The performance criteria of the performance period 2025–2027 are tied to relative Total Share- holder Value (rTSR), annual revenue growth, return on capital em- ployed and the rate of sickness-related absences. The value of the re- wards to be paid based on the plan corresponds to a maximum total of 553,000 Pihlajalinna shares. Research and development Increases to intangible assets totalled EUR 2.0 (7.4) million during the financial year. The digital projects implemented during the financial year did not meet the criteria for intangible asset capitalisation as de- fined by IFRS standards regarding the company’s own work, as ac- cording to the company's management, the projects have moved into operational phase and the economic benefit from the internal work is expected to be realised over a short term. In the comparison period, there was a total of EUR 2.4 million internal work recognised as an in- tangible asset, as it met the criteria. The development of remote services and chat appointments contin- ued in the financial year 2024. Digital AI-based assessment of the need for treatment was widely introduced for different customer groups, enabling efficient and high-quality care through the chat ser- vices. The PihlajalinnaPRO application was further developed for pro- fessionals and its use was extended to new professional groups. The website was extensively redesigned with the aim of improving the user experience in particular. The tools used in occupational healthcare customers’ work ability management were renewed to better meet their needs and support the maintenance of work ability. In appointment booking, functionalities related to direct reimburse- ment were introduced for insurance company customers. Pihlajalinna’s knowledge-based management capabilities will be de- veloped extensively in 2025. We are renewing our data platform and developing information management to better meet the needs of our customers and business operations. The services for occupational healthcare organisational customers will be further developed, with a particular focus on knowledge-based management tools that enable better decision-making support for organisations in promoting work ability. In the development of insurance customer services, the focus is on joint customer paths with insurance partners and on increasing the automation of customer path background functions to ensure a seamless customer experience. In the development of service chan- nels, online appointment booking in particular will be further devel- oped to better meet the needs of customers and business, while im- proving usability and accessibility. The information security of operations is actively developed and maintained both administratively and technically. This includes, for example, the introduction of new information security practices and technologies as well as continuous training of personnel in infor- mation security matters. Risk management, risks and uncertainties in busi- ness operations Pihlajalinna’s risk management goals, principles and operating meth- ods are described as a part of the Corporate Governance Statement in section Risk management . As part of sustainability reporting, the management of Pihlajalinna's significant impacts, risks, and opportu- nities (IRO) can be found on section General disclosures (ESRS2). Pihlajalinna’s operations are affected by strategic, operational, finan- cial and damage risks. In its risk management, Pihlajalinna’s aim is to operate as systematically as possible and incorporate risk manage- ment into normal business processes. The Group invests in quality management systems and the management of occupational safety and work ability risks. Pihlajalinna aims to limit the potential adverse impacts of risks. The assessment of sustainability-related risks plays an important role in risk management. Pihlajalinna operates only in Finland. Uncertainties in world politics, such as Russia’s invasion of Ukraine and the situation in the Middle East have indirect impacts on the Group’s operations due to the slow- ing of economic growth, potential supply chain disruptions, inflation, and changing market interest rates. REPORT BY THE BOARD OF DIRECTORS |AUDITED FINANCIAL STATEMENTS 7 In all its operations, Pihlajalinna considers data protection, infor- mation security and related requirements. Information security and jeopardised data protection can lead to significant reputational dam- age and claims for compensation, among other consequences. Pihla- jalinna has taken steps to prepare for the elevated risk of cyber-at- tacks related to the war in Ukraine and Finland's NATO membership. The company has identified uncertainties related to the availability of personnel in the social and healthcare sector and development of wages. The costs of wage harmonisation in the social and healthcare sector in relation to the creation of the wellbeing services counties also remain uncertain to some degree. In addition, high level of sick- ness-related absences among the personnel may reduce the com- pany’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. Successful implementation of these projects is a precondition for profitable growth in accordance with the company’s strategy. Monitoring and forecasting the covenants of the company’s financing agreements are a significant part of the company’s risk management. General cost inflation and wage inflation have a negative impact on the cost level and, consequently, on Pihlajalinna’s business opera- tions and profitability. In addition, inflation and high interest rates af- fect consumers' disposable income and employment trends, which in turn have an impact on the demand for private healthcare services. The most significant risks and uncertainties in social and healthcare services are linked to the policies and legislation implemented in the Finnish society. A company belonging to the Pihlajalinna Group is currently the sub- ject of a tax audit pertaining to a remuneration scheme that was in place. Changes to complete outsourcing agreements Jämsän Terveys Oy’s agreement with the Wellbeing Services County of Central Finland will expire in August 2025. The cost liability for de- manding specialised care specified in the agreement ended on 1 July 2023. It was agreed with the Wellbeing Services County of Central Finland that the services will gradually be transferred to the wellbeing services county starting in 2024. These changes in the service agree- ment have decreased the Group’s revenue by EUR 31 million from 2023 levels. The expiration of the service agreement in August 2025 will decrease the Group’s revenue by approximately EUR 19 million from 2024 levels. The primary and specialised care services provided by Jokilaakson Terveys Oy will continue at the Jokilaakso Hospital in accordance with the subcontracting agreement until August 2025. Jokilaakson Terveys has an exception permit issued by the Ministry of Social Affairs and Health for round-the-clock emergency and on-call services in primary healthcare, as required for its operations. The permit is currently valid until 31 August 2025. The expiration of the services provided in ac- cordance with the service agreement in August 2025 will decrease the Group’s revenue by approximately EUR 4 million from 2024 lev- els. 30 October 2023, the regional council of the South Ostrobothnia well- being services county decided to terminate the outsourcing agree- ment with Kuusiolinna Terveys, which was originally valid until 2030, with the termination set for the end of 2025. Kuusiolinna Terveys and Pihlajalinna Terveys appealed the decision, and an appeal regarding the matter was lodged with the Supreme Administrative Court. The parties subsequently negotiated on separating demanding specialised care from Kuusiolinna Terveys’ service agreement. The negotiations led to a settlement on the conditions for separating demanding spe- cialised care, and an agreement on the matter was signed on 30 April 2024. In accordance with the terms of the agreement, Kuusiolinna Terveys and Pihlajalinna Te rveys withdrew their appeals concerning the decision made by the wellbeing services county of South Ostro- bothnia on 30 October 2023 and the cost liability for demanding spe- cialised care specified in the agreement ended on 1 January 2024. This change in the service agreement decreased the Group’s revenue by EUR 30 million from 2023 levels. Other changes in the service agreement during 2025 will decrease the Group’s revenue by approxi- mately EUR 6 million from 2024 levels. The regional board of the Wellbeing Services County of Pirkanmaa de- cided at its meeting on 28 October 2024 to terminate Kolmostien Ter- veys Oy’s complete outsourcing agreement at the end of the year 2025. The regional board of the Wellbeing Services County of Pir- kanmaa decided on 27 January 2025 that a tender will be initiated to search for a service provider of social and healthcare services for North Pirkanmaa starting from early 2026. Pending legal proceedings Pihlajalinna is involved in certain pending legal proceedings concern- ing employment relationships, but they are not expected to have a significant financial impact on the Group. The company's subsidiary Jämsän Terveys Oy has taken legal action in the district court against the City of Jämsä, a former client. The dis- pute concerns mainly COVID-19-related costs which the City of Jämsä has not paid in breach of the service agreement. The District Court of Central Finland considered the case and rendered its decision in late December. The court ruled the City of Jämsä to pay Jämsän Terveys the COVID-19-related costs it had claimed, with interest. Other as- pects of the dispute, such as the impact of the transfer of personnel on the annual fee, were settled by the parties before the court hear- ing. The City of Jämsä has filed an appeal regarding the decision to the Vaasa Court of Appeal and, hence, the decision rendered by the District Court of Central Finland is not legally binding. On 22 November 2023, the Vaasa Court of Appeal handed down its ruling on the dispute concerning the service agreement between Jä- msän Terveys Oy and the City of Jämsä. The Court of Appeal decided to uphold the decision of the District Court. Pihlajalinna submitted an application for leave to appeal to the Supreme Court and an appeal concerning part of the judgment of the Vaasa Court of Appeal. The Supreme Court did not grant Pihlajalinna leave to appeal concerning the judgment of the Vaasa Court of Appeal. Shareholders’ Nomination Board The Shareholders’ Nomination Board is comprised of Jari Eklund (Lo- calTapiola-Group), Mikko Wirén (MWW Yhtiö Oy), Mika Manninen (Fennia Mutual Insurance Company) and Carl Petterson (Elo Mutual Pension Insurance Company). The Chair of the Board of Directors of Pihlajalinna Plc Jukka Leinonen has been part of the Board as an ex- pert member. Board of Directors The Annual General Meeting on 10 April 2024 resolved that the num- ber of the members of the Board of Directors shall be fixed at seven members instead of the previous eight. Kim Ignatius, Heli Iisakka, Hannu Juvonen, Tiina Kurki, Jukka Leinonen, Leena Niemistö and Mikko Wirén were re-elected to serve as members of the Board of Di- rectors until the next Annual General Meeting. The Annual General Meeting elected Jukka Leinonen as the Chair of the Board and Leena Niemistö as the Vice-Chair of the Board. REPORT BY THE BOARD OF DIRECTORS |AUDITED FINANCIAL STATEMENTS 8 Committees nominated by the Board Pihlajalinna Plc Board of Directors appointed the following members to its committees: ● Audit Committee: Kim Ignatius (chair), Heli Iisakka and Tiina Kurki ● People and Sustainability Committee: Hannu Juvonen (chair), Jukka Leinonen, Leena Niemistö and Mikko Wirén. 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 Di- rectors The Annual General Meeting of 10 April 2024 resolved that the fol- lowing annual remuneration will be paid to the members of the Board of Directors elected for the term of office ending at the 2025 Annual General Meeting: EUR 60,000 per year to the Chair of the Board of Di- rectors, EUR 40,000 per year to the Vice-Chair and to the Chair of the Audit Committee and to the Chair of the People and Sustainability Committee, and EUR 30,000 per year to the other members. The AGM resolved that annual remuneration shall be paid in com- pany shares and in cash, with approximately 40 per cent of the remu- neration used to acquire shares in the name and on behalf of the members of the Board of Directors, and the remainder paid in cash. The remuneration could be paid either entirely or partially in cash if the member of the Board of Directors was, on the day of the AGM, 10 April 2024, 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. If the term of a Board member ends before the Annual General Meeting of 2025, the Board is entitled to decide on the possible recovery of the remuneration in a manner it deems appropriate. The AGM decided that each Board member shall be paid a meeting fee of EUR 600 for each Board and Committee meeting. Reasonable travel expenses will also be reimbursed to the members of the Board in accordance with the company’s travel policy. Board authorisations The Annual General Meeting of 10 April 2024 authorised the Board of Directors to decide on the acquisition of a maximum of 2,260,000 shares, which is approximately 10 per cent of the Group’s current number of shares. Own shares may be repurchased on the basis of the authorisation only by using unrestricted equity. Targeted share acquisition is possible. The authorisation is effective until the next Annual General Meeting, or until 30 June 2025 at the latest. The Annual General Meeting also authorised the Board of Directors to decide on a share issue and other special rights conferring an entitle- ment to shares under Chapter 10, Section 1 of the Limited Liability Companies Act. The number of shares to be issued cannot exceed 2,260,000 shares, which corresponds to approximately 10 per cent of all the shares in the Group. The authorisation concerns both the issu- ance of new shares and the sale or transfer of the Group’s own shares. The authorisation permits a targeted share issue. The authori- sation is effective until the next Annual General Meeting, or until 30 June 2025 at the latest. Repurchase and transfer of own shares In January 2024, Pihlajalinna conveyed a total of 10,000 own shares to CEO Tuomas Hyyryläinen. The remuneration was related to the right agreed upon for the CEO to acquire shares at the beginning of the share-based incentive scheme, when Pihlajalinna conveyed shares in exchange for purchases. In May 2024, Pihlajalinna conveyed a total of 11,977 own shares to the members of Pihlajalinna’s Board of Directors as part of the Board of Directors' annual remuneration. On 27 March 2024, Pihlajalinna started repurchasing the company's own shares and completed the repurchase on 28 June 2024. The shares were repurchased for the payment of remuneration under the Group’s share-based incentive programme and the annual remunera- tion of the members of the Board of Directors. During the period, Pihlajalinna acquired a total of 109,181 own shares for an average price of EUR 8.5795 per share. Following the repurchase of own shares and the transfer of shares mentioned above, on 31 December 2024 Pihlajalinna held 141,184 own shares, corresponding approximately 0.62 per cent of the total number of shares and votes. Flagging notifications On 15 February 2024, Pihlajalinna received a notification under Chap- ter 9, Section 5 of the Securities Market Act, according to which the holding of LähiTapiola Keskinäinen Vakuutusyhtiö and LähiTapiola Keskinäinen Henkivakuutusyhtiö in Pihlajalinna Plc’s shares and votes has risen above 25 per cent on 14 February 2024. The holding of LähiTapiola Keskinäinen Vakuutusyhtiö and LähiTapiola Keskinäinen Henkivakuutusyhtiö has increased to 25.62% and 5 794 480 shares of the total of Pihlajalinna's shares and votes. On 9 April 2024, Pihlajalinna received a notification under Chapter 9, Section 5 of the Securities Market Act, according to which the holding of LähiTapiola Keskinäinen Henkivakuutusyhtiö in Pihlajalinna Plc’s shares and votes has risen above 10 per cent on 8 April 2024. The holding of LähiTapiola Keskinäinen Henkivakuutusyhtiö has increased to 10.15 per cent and 2,295,656 shares of the total of Pihlajalinna's shares and votes. Shares and shareholders Pihlajalinna’s share is listed in the Nasdaq Helsinki main market under the trading code PIHLIS. The total number of shares in the Group is 22,620,135. On 31 December 2024, 22,478,951 of the shares were outstanding and 141,184 were held by the company which corre- sponds to 0.62 per cent of all shares and votes. At the end of the fi- nancial year, the company had 15,202 (15,150) shareholders. REPORT BY THE BOARD OF DIRECTORS |AUDITED FINANCIAL STATEMENTS 9 Distribution of shareholding by size range, 31 Dec 2024 Private companies Financial and insurance institutions Public entities Households Non-profit organisations Nominee registered Distribution of shareholding by sector 31 Dec 2024 Number of shareholders % of shareholders Number of shares Percentage of shares, % Private companies 495 3.3 % 4,384,709 19.4 % Financial and insurance institutions 33 0.2 % 9,914,230 43.8 % Public entities 5 0.0 % 2,031,818 9.0 % Households 14,585 95.9 % 5,494,941 24.3 % Non-profit organisations 44 0.3 % 154,514 0.7 % Foreign shareholders 40 0.3 % 42,022 0.2 % Total 15,202 100.0 % 22,022,234 97.4 % Nominee registered 8 597,901 2.6 % Outstanding shares 22,620,135 100.0 % Share-related information, outstanding shares 2024 2023 No. of shares outstanding at end of period 22,478,951 22,566,155 Average no. of shares outstanding during period 22,511,765 22,557,957 Highest price, EUR 11.85 9.90 Lowest price, EUR 6.88 6.82 Average price, EUR ¹⁾ 8.29 8.20 Closing price, EUR 10.50 7.06 Share turnover, 1,000 shares 3,184 2 801 Share turnover, % 14.1 12.4 Market capitalisation at end of period, EUR million 236.0 159.3 ¹⁾ average rate weighted by trading level REPORT BY THE BOARD OF DIRECTORS |AUDITED FINANCIAL STATEMENTS 10 Distribution of shareholding by size range, 31 Dec 2024 Shares per shareholder Number of shareholders % of shareholders Number of shares Percentage of shares, % 1 - 100 8,891 58.5 % 365,963 1.6 % 101 - 1 000 5,488 36.1 % 1,866,078 8.2 % 1 001 - 10 000 714 4.7 % 1,966,116 8.7 % 10 001 - 100 000 87 0.6 % 1,986,128 8.8 % 100 001 - 500 000 15 0.1 % 2,948,955 13.0 % 500 001 - 7 0.0 % 13,486,895 59.6 % Total 15,202 100.0 % 22,620,135 100.0 % of which nominee-registered shares 8 597,901 2.6 % Outstanding shares 22,620,135 100.0 % Shares and shareholders Distribution of shareholding by size range, 31 Dec 2024 1 ̶ 100 Shares per shareholder 101 ̶̶ 1 000 1 001 ̶̶ 10 000 10 001 ̶̶ 100 000 100 001 ̶̶ 500 000 500 001 ̶̶ Major shareholders 31 Dec 2024 Number of shares Percentage of shares and votes 1 LOCALTAPIOLA GENERAL MUTUAL INSURANCE COMPANY 3,809,028 16.8 % 2 FENNIA MUTUAL INSURANCE COMPANY 2,357,965 10.4 % 3 MWW YHTIÖ LTD 2,319,010 10.3 % 4 LOCALTAPIOLA MUTUAL LIFE INSURANCE COMPANY 2,295,656 10.1 % 5 ELO MUTUAL PENSION INSURANCE COMPANY 1,267,161 5.6 % 6 ILMARINEN MUTUAL PENSION INSURANCE COMPANY 728,431 3.2 % 7 NIEMISTÖ LEENA KATRIINA 709,644 3.1 % 8 VIPUNEN CAPITAL OY 360,000 1.6 % 9 NORDEA LIFE ASSURANCE FINLAND LTD 352,140 1.6 % 10 FONDITA NORDIC MICRO CAP INVESTMENT FUND 285,000 1.3 % 10 largest, total 14,484,035 64.0 % Other shareholders 8,136,100 36.0 % Total 22,620,135 100.0 % REPORT BY THE BOARD OF DIRECTORS |AUDITED FINANCIAL STATEMENTS 11 The Board of Directors’ proposal for profit distri- bution and the Annual General Meeting 2025 The parent company’s total distributable funds amount to EUR 216,832,340.28 of which the profit for the financial year 2024 is EUR 15,823,303.76. The Board of Directors proposes that a dividend of EUR 0.38 per share be paid for the financial year that ended on 31 December 2024. On the financial statements date, 31 January 2024, the total number of outstanding shares was 22,478,951. The corre- sponding total dividend according to the Board of Directors’ proposal would be at most EUR 8,542,001.38. No material changes have taken place in the company’s financial posi- tion after the end of the financial year. The company’s liquidity posi- tion is good and, in the view of the Board of Directors, the proposed distribution does not jeopardise the company’s ability to fulfil its obli- gations. Earnings per share for the financial year was EUR 1.13. The proposed dividend of EUR 0.38 is 34 per cent of earnings per share. According to the Pihlajalinna’s dividend policy, Pihlajalinna aims to distribute dividend or capital repayment minimum of one-third of the earnings per share, taking into account the company’s financial position and strategy. Pihlajalinna Plc’s Annual General Meeting is planned to be held on 24 April 2025 in Tampere. The Board of Directors will decide on the no- tice of the General Meeting and the included proposals at a later date. Calculation of the parent company’s distributable funds: Calculation of the parent company's distributable funds: EUR 31 Dec 2024 Reserve for invested unrestricted equity 183,190,483.50 Retained earnings 17,818,553.02 Result for the period 15,823,303.76 Total 216,832,340.28 Events after the financial year Nothing material has happened after the end of the financial year. REPORT BY THE BOARD OF DIRECTORS |AUDITED FINANCIAL STATEMENTS 12 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 - Hy- brid bond interest expenses net of tax Average number of shares during the fi- nancial year Alternative performance measures Equity per share Equity attributable to owners of the par- ent company Number of shares at the end of the finan- cial period Dividend per share Dividend distribution for the financial year (or proposal) Number of shares at the end of the finan- cial 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 pe- riod x 100 Average number of shares Return on equity (ROE), % Profit for the period x 100 Return on equity indicates how much re- turn on equity has been accumulating dur- ing the financial year. It reflects the com- pany’s ability to manage the capital in- vested in the company by the owners. Equity (average) Return on capital employed, % (ROACE) Profit before taxes + financial expenses x 100 Return on capital employed measures the relative profitability of the company, that is the return that has been obtained for the capital invested in the company that requires interest or other returns. Total statement of financial position – non-interest-bearing liabilities (average) Equity ratio, % Equity x 100 Equity ratio measures the company’s sol- vency, loss tolerance and the ability to cope with commitments in the long term. It reflects how much of the company’s as- sets have been financed with equity. Total statement of financial position – prepayments received Gearing, % Interest-bearing net debt – cash and cash equivalents x 100 Gearing describes the indebtedness of the company. It reflects what the ratio of the owners’ own capital invested in the com- pany is and the interest-bearing debts bor- rowed from financiers. Equity EBITDA Operating profit + depreciation, amorti- sation and impairment EBITDA shows how much of the com- pany’s revenue is left over after deducting operating expenses. Assessments of whether EBITDA is sufficiently high should consider the company’s financial ex- penses, depreciation requirements and in- tended profit distribution. EBITDA, % Operating profit + depreciation, amorti- sation and impairment x 100 Revenue Adjusted EBITDA¹⁾ Operating profit + depreciation, amorti- sation and impairment + adjustment items Adjusted EBITDA provides significant addi- tional information on profitability by elimi- nating items that do not necessarily reflect the profitability of the company’s opera- tive business. Adjusted EBITDA improves comparability between periods. Adjusted EBITDA, % ¹⁾ Operating profit + depreciation, amorti- sation and impairment + adjustment items x 100 Revenue Adjusted operating profit be- fore the amortisation and im- pairment 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 impairment of intangi- ble assets (EBITA) x 100 Revenue Net debt/Adjusted EBITDA¹⁾ Interest-bearing net debt - cash and cash equivalents The key figure describes how quickly the company would get its financial liabilities paid at the current rate of earnings, if the EBITDA were used in full to pay the finan- cial liabilities, if the company does not, for example, invest or distribute dividends. Adjusted EBITDA Cash flow after investments Net cash flow from operating activities + net cash flow from investing activities REPORT BY THE BOARD OF DIRECTORS |AUDITED FINANCIAL STATEMENTS 13 Adjusted operating profit (EBIT)¹⁾ Operating profit + adjustment items Adjusted operating profit provides signifi- cant additional information on profitability by eliminating items that do not neces- sarily reflect the profitability of the com- pany’s operating business. Adjusted oper- ating profit improves comparability be- tween periods. 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 assets Comparable revenue for the previous period Revenue from the previous period - the effects of divestments to revenue - COVID-19 services - other items affecting comparability Comparable organic revenue growth Revenue for the period - comparable revenue for the previous period - revenue from M&A transactions x 100 Organic growth of revenue refers to the growth of existing business that has not been achieved through mergers or acquisi- tions. Comparable organic growth is calcu- lated excluding the divestments, the trans- fer of cost liability for demanding special- ized care, the gradual transfer of Jämsän Terveys Oy’s service agreement, COVID-19 services and transfers between segments. Comparable organic revenue growth, % Organic comparable revenue growth x 100 Comparable revenue for the previous pe- riod 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 has also presented costs according to the IFRS Interpretations Committee’s Agenda Decision concerning cloud computing arrangements, and reversals of amortisation, as adjustment items. Cloud computing arrangements costs and reversals of amortisation according to the IFRS Interpretations Committee’s Agenda Decision has not been presented as adjustment items since 1 January 2024. REPORT BY THE BOARD OF DIRECTORS |AUDITED FINANCIAL STATEMENTS 14 Key financial figures Scope of operations 2024 2023 2022 2021 2020 Revenue, EUR million 704.4 720.0 690.5 577.8 508.7 Change, % -2.2 4.3 19.5 13.6 -1.9 Organic revenue growth, EUR million 50.9 75.4 34.9 58.1 -11.3 Change, % 7.8 12.0 6.0 11.4 -2.2 Gross investments, EUR million 31.1 66.4 234.5 44.8 25.4 % of revenue 4.4 9.2 34.0 7.8 5.0 Capitalised development costs, EUR million 0.0 0.0 0.0 0.0 0.4 % of revenue 0.0 0.0 0.0 0.0 0.1 Employee benefit expenses, EUR million 321.2 322.8 296.6 255.2 214.2 Personnel at the end of the period (NOE) 6,493 6,880 7,016 6,297 5,550 Average number of personnel (FTE) 4,416 4,821 4,851 4,746 4,308 Profitability 2024 2023 2022 2021 2020 EBITDA, EUR million 101.5 72.5 54.4 62.6 52.2 EBITDA, % 14.4 10.1 7.9 10.8 10.3 Adjusted EBITDA, EUR million 100.7 80.6 64.2 65.3 54.8 Adjusted EBITDA, % 14.3 11.2 9.3 11.3 10.8 Operating profit (EBIT), EUR million 48.5 20.6 8.9 27.9 18.1 Operating profit, % 6.9 2.9 1.3 4.8 3.6 Adjusted operating profit before the amortisation and im- pairment of intangible assets (EBITA), EUR million 55.2 37.8 26.7 37.3 27.4 Adjusted EBITA, % 7.8 5.2 3.9 6.5 5.4 Net financial expenses, EUR million -9.8 -12.4 -7.4 -3.7 -4.4 % of revenue -1.4 -1.7 -1.1 -0.6 -0.9 Profit before tax, EUR million 38.6 8.2 1.5 24.2 13.7 % of revenue 5.5 1.1 0.2 4.2 2.7 Income tax, EUR million -8.5 -3.6 6.1 -5.1 -4.8 Profit for the period 30.2 4.6 7.7 19.1 8.9 Cash flow after investments, EUR million 88.6 60.5 0.0 24.9 43.7 Return on equity (ROE), % 19.2 3.4 6.2 16.1 8.1 Return on capital employed (ROCE), % 9.7 4.0 2.3 8.8 5.7 Financing and financial position 2024 2023 2022 2021 2020 Interest-bearing net financial debt, EUR million 296.6 352.7 385.7 194.7 194.8 % of revenue 42.1 49.0 55.9 33.7 38.3 Equity ratio, % 26.8 22.0 18.6 26.9 25.9 Gearing, % 175.5 243.9 313.8 158.8 170.6 Net debt/adjusted EBITDA 2.9 4.4 6.0 3.0 3.6 Share related information 2024 2023 2022 2021 2020 Earnings per share (EPS) 1.13 0.19 0.42 0.89 0.38 Equity per share, EUR 7.59 6.56 5.50 5.27 4.82 Dividend per share, EUR (Board propo- sal) 0.38 0.07 0.30 0.20 Dividend per share, % 33.6 37.3 33.7 52.0 Effective dividend yield, % 3.62 0.99 2.37 2.13 Number of shares at year-end 22,478,951 22,566,155 22 549 644 22,594,235 22,617,841 Average number of shares 22,511,765 22,557,957 22 560 271 22,589,383 22,586,212 Market capitalisation, EUR million 236.0 159.3 192.1 285.6 212.2 Dividends paid, EUR million (Board pro- posal) 8.5 1.6 6.8 4.5 P/E ratio 9.29 37.60 20.19 14.21 24.39 Closing price at year-end, EUR 10.50 7.06 8.52 12.64 9.38 * Alternative performance measure REPORT BY THE BOARD OF DIRECTORS |AUDITED FINANCIAL STATEMENTS 15 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 Return on equity (ROE), % EUR million 1–12/2024 1–12/2023 Profit for period 30.2 4.6 Equity (average) x 100 156.8 133.7 Return on equity (ROE), % 19.2 3.4 Return on capital employed (ROACE), % EUR million 1–12/2024 1–12/2023 Profit before taxes + 38.6 8.2 Financial expenses 10.9 12.7 Profit before taxes + financial expenses 49.6 20.9 Total statement of financial position - non-interest-bearing liabilities (average of beginning and end of the period) 509.1 522.3 Return on capital employed (ROACE), % 9.7 4.0 Equity ratio, % EUR million 1–12/2024 1–12/2023 Equity/ 169.0 144.6 Total statement of financial position - 630.2 657.5 Advances received x 100 0.0 0.3 Equity ratio, % 26.8 22.0 Gearing, % EUR million 1–12/2024 1–12/2023 Interest-bearing financial liabilities – 327.5 377.2 Cash and cash equivalents/ 30.9 24.5 Equity x 100 169.0 144.6 Gearing, % 175.5 243.9 Net debt/adjusted EBITDA EUR million 1–12/2024 1–12/2023 Interest-bearing financial liabilities - 327.5 377.2 Cash and cash equivalents 30.9 24.5 Net debt/ 296.6 352.7 Adjusted EBITDA 100.7 80.6 Net debt/adjusted EBITDA 2.9 4.4 EBITDA and Adjusted EBITDA EUR million 1–12/2024 1–12/2023 Profit for period 30.2 4.6 Income tax -8.5 -3.6 Financial expenses -10.9 -12.7 Financial income 1.1 0.4 Depreciation, amortisation and impairment -53.0 -51.9 EBITDA 101.5 72.5 IFRS 3 costs – 0.0 0.7 Entries related to the IFRIC Agenda Decision concerning cloud computing arrangements 1.0 Other EBITDA adjustments -0.8 6.4 Total EBITDA adjustments -0.8 8.1 Adjusted EBITDA 100.7 80.6 REPORT BY THE BOARD OF DIRECTORS |AUDITED FINANCIAL STATEMENTS 16 EBITDA, % EUR million 1–12/2024 1–12/2023 EBITDA/ 101.5 72.5 Revenue x 100 704.4 720.0 EBITDA, % 14.4 10.1 Adjusted EBITDA, % EUR million 1–12/2024 1–12/2023 Adjusted EBITDA/ 100.7 80.6 Revenue x 100 704.4 720.0 Adjusted EBITDA, % 14.3 11.2 Operating profit (EBIT) and Adjusted operating profit (EBIT) EUR million 1–12/2024 1–12/2023 Profit for the period 30.2 4.6 Income tax -8.5 -3.6 Financial expenses -10.9 -12.7 Financial income 1.1 0.4 Operating profit (EBIT) 48.5 20.6 Entries related to the IFRIC Agenda Decision concerning cloud compu- ting arrangements (reversal of amortisation ) - 0.0 -0.5 Other adjustments to amortisation and impairment 0.0 0.9 Total EBITDA adjustments -0.8 8.1 Total operating profit (EBIT) adjustments -0.8 8.5 Adjusted operating profit (EBIT) 47.7 29.1 PPA amortisation 2.1 2.1 Amortisation and impairment of other intangible assets 5.3 6.6 Entries related to the IFRIC Agenda Decision concerning cloud computing arrangements (reversal of amortisation) 0.0 0.5 Adjusted operating profit before the amortisation and impairment of intangible assets (EBITA) 55.2 37.8 Operating profit (EBIT), % EUR million 1–12/2024 1–12/2023 Operating profit/ 48.5 20.6 Revenue x 100 704.4 720.0 Operating profit (EBIT), % 6.9 2.9 Adjusted operating profit (EBIT), % EUR million 1–12/2024 1–12/2023 Adjusted operating profit/ 47.7 29.1 Revenue x 100 704.4 720.0 Adjusted operating profit (EBIT), % 6.8 4.0 Adjusted operating profit before the amortisation and impairment of intangible assets (EBITA), % EUR million 1–12/2024 1–12/2023 Adjusted operating profit before the amortisation and impairment of intangible assets (EBITA) / 55.2 37.8 Revenue x 100 704.4 720.0 Adjusted (EBITA), % 7.8 5.2 Cash flow after investments EUR million 1–12/2024 1–12/2023 Net cash flow from operating activities 100.8 79.0 Net cash flow from investing activities -12.3 -18.5 Cash flow after investments 88.6 60.5 REPORT BY THE BOARD OF DIRECTORS |AUDITED FINANCIAL STATEMENTS 17 Profit before taxes EUR million 1–12/2024 1–12/2023 Profit for period 30.2 4.6 Income tax -8.5 -3.6 Profit before taxes 38.6 8.2 Gross investments EUR million 1–12/2024 1–12/2023 Property, plant and equipment at end of period 63.6 65.8 Right-of-use assets at end of period 185.1 203.9 Other intangible assets at end of period 15.7 21.1 Goodwill at end of period 254.9 251.8 Depreciation, amortisation and impairment for the period 53.0 51.9 Property, plant and equipment at beginning of period 65.8 58.7 Right-of-use assets at beginning of the period 203.9 197.7 Other intangible assets at beginning of period 21.1 22.8 Goodwill at beginning of period 251.8 251.0 Proceeds from sale of tangible assets during period -1.4 -2.3 Gross investments 31.1 66.4 Organic revenue growth, % EUR million 1–12/2024 1–12/2023 Revenue for previous period 720.0 690.5 The impact of divestments on revenue during the period - -4.8 -12.0 Contractual changes in complete outsourcing agreements - -61.0 -32.1 Covid-19 services and write-downs of revenue - -0.9 -18.0 Comparable revenue for previous period (B) 653.3 628.4 Revenue from M&A transactions during period (C) 0.0 16.2 Revenue growth due to M&A transactions, % 0.0 2.6 Revenue for period (A) 704.4 720.0 Comparable organic revenue growth (A-B-C) 51.1 75.4 Organic revenue growth, % 7.8 12.0 Revenue change -15.5 29.5 Revenue change, % -2.2 4.3 REPORT BY THE BOARD OF DIRECTORS | CORPORATE GOVERNANCE STATEMENT 19 Corporate Governance Statement I INTRODUCTION The Corporate Governance of Pihlajalinna Plc (the Company) is based on effective legislation, the Company’s Articles of Association and the rules and regulations applied to companies listed on Nasdaq Helsinki. The Company complies with the Finnish Corporate Governance Code 2025 issued by the Securities Market Association. The Finnish Corpo- rate Governance Code is available on the www.cgfinland.fi/en web- site maintained by the Securities Market Association. Pihlajalinna did not depart from the recommendations of the Corpo- rate Governance Code in 2024. This Corporate Governance Statement was approved by Pihlajalinna Plc’s Audit Committee on 10 March 2025 and by the Board of Direc- tors on 19 March 2025. II CORPORATE GOVERNANCE General Meeting The General Meeting is Pihlajalinna’s highest decision-making body. According to the Company’s Articles of Association, the Annual Gen- eral Meeting is held annually within six (6) months of the end of the financial year. The Annual General Meeting decides on the matters determined by the Limited Liability Companies Act and the Articles of Association. These matters include, among other things, the approval of the Financial Statements, the distribution of profit shown in the Balance Sheet and the election of members of the Board of Directors and the auditor and their remuneration. The Annual General Meeting of Shareholders also decides upon discharge of the Board of Directors and of the CEO from liability. The Board of Directors is responsible for the invitations to the Gen- eral Meeting and decides its venue and timing. According to the Articles of Association, the notice of a General Meet- ing shall be delivered to shareholders no earlier than three (3) months and no later than three (3) weeks prior to the date of the Meeting, but no later than nine (9) days prior to the record date of the Meeting. The notice shall be delivered to shareholders by sending the notice by post to their addresses registered in the Company’s reg- ister of shareholders or by publishing a notice on the website of the Company or in at least one national daily newspaper determined by the Board of Directors. The notice of the General Meeting will be pub- lished as a separate release. The Agenda, the proposals of the Board of Directors and other General Meeting material will be available on the Company’s website at least three weeks prior to the General Meeting. Each shareholder has the right to have a matter within the remit of a General Meeting, under the Limited Liability Companies Act, to be discussed by the General Meeting if he or she requests this in writing from the Board of Directors by the date announced on the Company website. The date will be announced on the Company’s website no later than by the end of the financial year preceding the Annual Gen- eral Meeting. The Company’s Chair of the Board, members of the Board of Direc- tors, the CEO and the Auditor attend the General Meeting. In addi- tion, any candidates for the Board of Directors attend the General Meeting that decides on their election. If a member of the Board of Directors or a candidate is not present at the General Meeting, the Company informs the General Meeting of their absence at the begin- ning of the Meeting. After the General Meeting, its decisions are published in a stock ex- change release. The minutes of the General Meeting are published on the Company’s website within two weeks of the General Meeting. The documents of the General Meeting must be kept on the Com- pany’s website for at least five years from the Meeting. Pihlajalinna’s Articles of Association are available on the Company’s website at http://investors.pihlajalinna.fi/corporate-governance/arti- cles-of-association. Any amendments to the Articles of Association re- quire the decision of the General Meeting. Pihlajalinna Plc’s Annual General Meeting 2024 was held on 10 April 2024. The General Meeting was attended by 58 shareholders in per- son or by proxy. Approximately 63 per cent of the Company’s shares and votes were represented in the meeting. Board of Directors The composition and election procedure of the Board of Di- rectors The Board of Directors is elected on an annual basis by the Annual General Meeting. According to the Company’s Articles of Association, the General Meeting shall appoint a minimum of four (4) and a maxi- mum of ten (10) members on the Board of Directors. The General Meeting shall elect the Chair and Vice-Chair of the Board of Directors. The term of office of a member of the Board of Directors shall expire at the close of the first Annual General Meeting following the election. In case the Chair and Vice-Chair of the Board of Directors resign or become otherwise unable to act as chair during their term of office, the Board of Directors may elect a new Chair from among its members for the remaining term of office. Shareholders’ Nomination Board The Shareholders’ Nomination Board is tasked with preparing future proposals on the election and remuneration of the members of the Board of Directors to the General Meetings. The Nomination Board consists of four members nominated by the shareholders of the Company. In addition, the Chair of the Board of Directors of the Company participates in the work of the Nomination Board as an expert. The right to nominate members is vested with the four shareholders of the Company having the largest share of the votes represented by all the shares in the Company annually on 1 September based on the Company's shareholders' register held by Euroclear Finland Ltd. However, if a shareholder who has distributed his/her holdings e.g. into several funds and has an obligation under the Finnish Securities Markets Act to take these holdings into account when disclosing changes in his/her share of ownership makes a writ- ten request to such effect to the Chair of the Board of Directors no later than on 31 August. Such shareholder’s holdings in several funds or registers will be combined when calculating the share of votes that determines the nomination right. Should a shareholder not wish to exercise his/her nomination right, the right shall be transferred to the REPORT BY THE BOARD OF DIRECTORS | CORPORATE GOVERNANCE STATEMENT 20 next largest shareholder who otherwise would not be entitled to nominate a member. The Chair of the Board of Directors shall, on 1 September each year, request the four largest shareholders of the Company, based on their shareholding, to nominate one member each to the Nomination Board. The Nomination Board elects a Chair from among its mem- bers. The term of office of the members of the Nomination Board ex- pires annually when the new Nomination Board has been appointed. The Charter of the Shareholders’ Nomination Board is available on the Company’s website at http://investors.pihlajalinna.fi/corporate- governance/general-meeting/shareholders-nomination-board. The four largest registered shareholders of Pihlajalinna Plc (based on the shareholders’ register held by Euroclear Finland Ltd on 1 Septem- ber 2024) appointed the following representatives to the Sharehold- ers’ Nomination Board: ● Jari Eklund, Group Director, appointed by LocalTapiola General Mutual Insurance Company and LocalTapiola Mutual Life Insur- ance Company ● Mikko Wirén, Managing Director, appointed by MWW Yhtiö Oy ● Mika Manninen, deputy CEO, CFO, appointed by Fennia Mutual Insurance Company ● Carl Pettersson, CEO, appointed by Elo Mutual Pension Insur- ance Company. The Shareholders’ Nomination Board elected Jari Eklund as its Chair. Jukka Leinonen, Chair of Pihlajalinna Plc’s Board of Directors, served on the Shareholders’ Nomination Board as an expert member. The Shareholders’ Nomination Board convened 6 times. The attend- ance rate was 100 %. The Nomination Board submitted 17 January 2025 its proposal to Pihlajalinna’s Board of Directors for presentation at the Annual General Meeting. The proposals have been published in a stock exchange release. The qualifications and independence of the Board members and the diversity of the Board of Direc- tors The Board of Directors shall have sufficient and versatile expertise and experience with respect to its duties. In preparing a proposal for the composition of the Board of Directors, attention shall be paid to the requirements placed by the Company’s operations and its devel- opment stage. A person to be elected to the Board of Directors shall have the qualifications required by the duties and the possibility to devote a sufficient amount of time to the work. The number of the members and the composition of the Board of Directors shall make it possible for the Board of Directors to fulfil its duties in an efficient manner. For the versatile support and development of the Company’s busi- ness, the composition of the Company’s Board of Directors should be sufficiently diverse. The Company’s objective is that women and men are equally represented on the Board of Directors as defined in the Corporate Governance Code. The overall aim of the Board composi- tion is to achieve sufficiently extensive qualifications, expertise and experience. The sufficient diversity of the Board of Directors, includ- ing age and gender, as well as educational and professional back- ground, is considered in the preparation of a proposal for the compo- sition of the Board of Directors. The majority of the members of the Board of Directors must be inde- pendent of the Company. In addition, at least two of the members representing this majority shall be independent of major sharehold- ers of the Company. The members of the Board of Directors must provide the Board of Directors with sufficient information for the evaluation of their qualifications and independence and inform the Board of Directors about any changes in this information. The mem- bers of the Board shall not act as representatives of persons who have proposed them to the Board or who otherwise belong to their interest groups. The duties and responsibilities of the Board of Directors are defined in the Limited Liability Companies Act, the Company’s Articles of As- sociation and the Charter of the Board of Directors. The Board of Di- rectors conducts an annual evaluation of its operations and working methods and updates its Charter as needed. Any matters that are far-reaching from the viewpoint of the Com- pany’s business shall be considered and decided by the Board of Di- rectors. According to its Charter, the Board of Directors: ● considers and approves the Company’s long-term strategic plan and goals; ● approves the Company’s business plan, budget and financing plan and monitors their implementation; ● evaluates the use and presentation of alternative performance measures; ● confirms the principles of the Company’s internal control and risk management; ● reviews the material risks affecting the Company’s operations and their management, and supervises the adequacy, relevance and efficiency of the Company’s administrative processes; ● processes and approves business acquisitions and arrangements and other significant decisions; ● elects the CEO and Deputy CEO, releases them from their duties and decides on the terms and conditions of their service; ● confirms, based on the CEO’s proposal, the members of the Group’s Management Team, the Heads of Business Operations and other direct subordinates of the CEO; ● approves the incentive schemes of the CEO and other manage- ment and the Company’s remuneration principles; ● approves the Company’s Corporate Governance Statement, Re- muneration Report and statement of non-financial information; ● confirms the Company’s Insider Guidelines and Guidelines on Related Party Transactions and defines the principles concerning the monitoring and assessment of transactions with insiders and related parties and supervises compliance with these principles; ● decides on the Company’s disclosure policy and monitors com- pliance with it. The members of the Board of Directors are provided with sufficient information on the Group’s operations, operating environment and financial position, and new Board members must be introduced to the Company’s operations at the beginning of their term. The Board of Directors is regularly informed of matters considered by Pihla- jalinna Group’s Management Team, receives profit and loss reports and auditor’s reports and regularly (at least once a year) hears the au- ditor’s opinions of the Company’s financial situation and its develop- ments. The Board of Directors convenes regularly. The timing of the Board Meetings will be confirmed in advance for the Board’s entire term of office. When necessary, the Board holds additional meetings that can be organised as conference calls. At least one of the meetings is a strategy meeting and in at least one meeting the Board meets the Company’s auditor. In meetings marked on the annual calendar, the Board of Directors conducts an internal discussion without the pres- ence of management. The proposal for the composition of the Board of Directors was pre- pared by the Company’s largest shareholders in 2024. Represented on the Nomination Board were the LocalTapiola Group, MWW Yhtiö REPORT BY THE BOARD OF DIRECTORS | CORPORATE GOVERNANCE STATEMENT 21 Oy (Mikko Wirén), Fennia Mutual Insurance Company and Elo Mutual Pension Insurance Company, which together represented approxi- mately 48 per cent of the Company’s shares. The principles regarding the composition of the Board of Directors were observed in the Board of Directors elected in 2024. The Board of Directors has three female Board members and four male Board members (four female members until 10 April 2024). The members of the Board represent versatile experience from managerial and board duties. All members of the Board elected in 2023 hold a master’s de- gree and one has a doctoral degree. The members of the Board of Di- rectors have versatile industry-specific expertise as well as economic and business skills. Their age distribution is from 54 to 69 years. Members of the Board of Directors in the finan- cial year 2024 The members of the Board of Directors up to the Annual General Meeting of 10 April 2024 were Jukka Leinonen (Chair), Leena Nie- mistö (Vice-Chair), Kim Ignatius, Heli Iisakka, Hannu Juvonen, Tiina Kurki, Seija Turunen ja Mikko Wirén. The Annual General Meeting 2024 decided that the number of mem- bers of the Board of Directors shall be seven (7) at a time. The follow- ing individuals were elected as members of the Board of Directors: Kim Ignatius, Heli Iisakka, Tiina Kurki, Hannu Juvonen, Jukka Leinonen, Leena Niemistö and Mikko Wirén. The General Meeting elected Jukka Leinonen as the Chair of Pihlajalinna Plc’s Board of Directors and Leena Niemistö as the Vice-Chair. During the financial year 2024, the Board of Directors convened 14 times. The average attendance rate during the period was 100 %. Members of the Board of Directors JUKKA LEINONEN Chair of the Board since 2023 M.Sc. (Eng.) Finnish citizen, b. 1962 Independent of the Company and its major shareholders Principal occupation: Board Professional LEENA NIEMISTÖ Member of the Board since 2014 Vice-Chair of the Board of Directors until 2018 and again since 2019 D.Med.Sc., Specialist in Physiatrics Finnish citizen, b. 1963 Independent of the Company and its major shareholders principal occupation: Board Professional KIM IGNATIUS Member of the Board since 2023 M.Sc. (Econ) Finnish citizen, b. 1956 Independent of the Company and its major shareholders Principal occupation: Board Professional HELI IISAKKA Member of the Board since 2022 M.Sc. (Econ.) Finnish citizen, b. 1968 Independent of the Company and its major share- holders Principal occupation: Colliers Finland Oy, Chief Financial Officer HANNU JUVONEN Member of the Board since 2019 PhD, Specialist, MBA Finnish citizen, b. 1955 Independent of the Company and its major share- holders principal occupation: practitioner, management consultant TIINA KURKI Member of the Board since 2023 M.Sc. (Econ) Finnish citizen, b. 1970 Independent of the Company and its major shareholders Principal occupation: Alma Media Plc, Alma Media Solutions, Senior Vice President / Director MIKKO WIRÉN Member of the Board since 2016 Chair of the Board of Directors 2016-2023 Lic.Med. Finnish citizen, b. 1972 Not independent of the Company, not independent of major shareholders Principal occupation: MWW Yhtiö Oy, CEO More information on the Members of the Board of Directors is availa- ble in the Investors section of the Pihlajalinna website at http://inves- tors.pihlajalinna.fi . Information on the remuneration of the members of the Board of Di- rectors is presented in a separate Remuneration Report for Governing Bodies. Board Committees The Board of Directors may appoint committees, management groups and other permanent or temporary bodies to perform duties speci- fied by the Board of Directors. The Board of Directors confirms the charters of the Company’s committees and Management Team as well as the guidelines and authorisations of any other bodies ap- pointed by the Board of Directors. The Board of Directors has estab- lished from among its members an Audit Committee and a People and Sustainability Committee. These committees have written char- ters approved by the Board of Directors. Audit Committee Pihlajalinna Plc’s Board of Directors has established from among its members an Audit Committee which monitors the Company’s report- ing process of financial statements and the efficiency of the Com- pany’s internal control, potential internal audit and risk management systems. The Audit Committee also reviews the description of the main features of the internal control and risk management systems in relation to the financial reporting process, which is included in the Company’s Corporate Governance Statement, monitors the statutory audit of the financial statements and consolidated financial state- ments and evaluates the independence of the statutory auditor or au- dit firm, particularly the provision of related services to the Company. The members of the Audit Committee must have the expertise and experience necessary to perform the responsibilities of the Commit- tee and at least one of the members must have special expertise in accounting or auditing. The Audit Committee comprises three to five members who are elected from among the members of the Board of Directors. The ma- jority of the members of the Audit Committee must be independent REPORT BY THE BOARD OF DIRECTORS | CORPORATE GOVERNANCE STATEMENT 22 of the Company, and at least one member must be independent of major shareholders of the Company. The Board of Directors has confirmed a written Charter for the Audit Committee, according to which the Committee has the following du- ties, among other things: ● to monitor the Company’s financial standing and financing situa- tion; ● to evaluate the effects of exceptional or extensive business transactions; ● to review significant changes to recognition principles and items recognized in the balance sheet; ● to monitor the quality and reliability of the Company’s financial statements reporting process, the financial statements and other financial reports; ● to evaluate the use and presentation of alternative performance measures; ● to monitor the Company’s financial reporting process and M&A processes; ● to engage in quarterly discussions with the financial manage- ment and the auditors on the Company’s financial results and stock exchange release before the approval of the Board of Di- rectors; ● to discuss significant financial risks and the management’s measures regarding the monitoring, management and reporting of risks; ● to monitor the Company’s internal control, potential internal au- dit and risk management systems, plans and reports as well as the efficiency of these functions; ● to familiarize itself with the principles concerning the monitoring and assessment of related party transactions; ● to review the Corporate Governance Statement, including the description of the main features of the internal control and risk management systems related to the financial reporting process; ● To support the Company’s Board of Directors in the appropriate management of functions related to sustainability and ESG crite- ria, as well as the management of ESG risks; ● to regularly review sustainability-related reporting and pro- cesses, as well as risks and controls relating to sustainability; ● to monitor the statutory audit of the financial statements and consolidated financial statements and the assurance of the sus- tainability report; ● to evaluate the independence of the statutory auditor or audit firm and sustainability auditor and the provision of related ser- vices; ● to evaluate the auditor’s qualifications and performance; ● to prepare a proposal for a resolution on the election of the au- ditor and sustainability auditor; ● to maintain communication with the auditor and sustainability auditor and review the reports prepared by the auditor for the Audit Committee and the management’s responses to the re- ports; ● to monitor compliance with laws and regulations and the Com- pany’s policies, as well as the effectiveness of the Company’s compliance system; ● to monitor and evaluate the development of sustainability (CSRD obligations and the EU Taxonomy); ● to review the Board of Directors’ report in its entirety; ● to monitor and evaluate the results of the Group’s ESG assess- ments and analyses (EcoVadis, COP, etc.). The Audit Committee regularly provides the Board of Directors with a summary of matters considered by the Committee. Work on the committee is subject to remuneration as determined by the General Meeting. On 10 April 2024, the Board elected Kim Ignatius (Chair), Heli Iisakka and Tiina Kurki as the members of the Audit Committee. The Audit Committee convened eight times during the financial year 2024. The attendance rate of the Committee members was 100 %. People and Sustainability Committee Pihlajalinna Plc’s Board of Directors has established from among its members a People and Sustainability Committee, which assists the Board by preparing matters pertaining to the remuneration and nom- ination of the Company’s CEO and other management, as well as the Company’s remuneration principles. The Committee also prepares matters concerning organisational development and sustainability for the Board. The People and Sustainability Committee comprises three to five members who are elected from among the members of the Board of Directors. The majority of the members of the Committee must be in- dependent of the Company. The CEO or other executives of the Com- pany may not be appointed to the People and Sustainability Commit- tee. The Board of Directors has confirmed a written Charter for the People and Sustainability Committee, according to which the Committee has the following duties: ● to prepare matters related to the remuneration and other finan- cial benefits of the CEO and other management; ● to prepare proposals related to the Company’s incentive plans; ● to evaluate the remuneration of the CEO and other manage- ment and to ensure the appropriateness of the Company’s re- muneration systems; ● to answer any questions at the General Meeting that are related to the remuneration report and within the scope of the People and Sustainability Committee’s duties; ● to prepare matters related to the nomination of the CEO and other management and to look for prospective successors for them and specify the personal profiles; ● to plan the remuneration of other personnel and organisational development; ● to review the results of personnel surveys and monitor the di- versity of the personnel; ● to steer and evaluate the process of talent identification and de- velopment; ● to monitor and evaluate the development of the operating envi- ronment, regulations and stakeholder support; ● to monitor and evaluate sustainability-related target setting in the short and long term; ● to review and prepare personnel-related matters for the sus- tainability programme, including issues relating to occupational safety, work ability, equality and diversity; ● to review and prepare other matters of relevance to the sustain- ability programme, including quality, impact, data protection and the environment; ● to review and prepare matters pertaining to corporate govern- ance; ● to monitor and evaluate the results of the Group’s ESG assess- ments and analyses (EcoVadis, COP, etc.). Work on the committee is subject to remuneration as determined by the General Meeting. REPORT BY THE BOARD OF DIRECTORS | CORPORATE GOVERNANCE STATEMENT 23 On 10 April 2024, the Board of Directors elected Hannu Juvonen (Chair), Leena Niemistö, Jukka Leinonen and Mikko Wirén as the members of the People and Sustainability Committee. The People and Sustainability Committee convened seven times dur- ing the financial year 2024. The attendance rate of the Committee members was 100%. Attendance at Meetings by the Board of Directors and Com- mittee Members in 2024: Name Board meetings (1 Audit Committee meetings (1 People and Sustainability Committee meetings (1 Kim Ignatius Board member 14/14 8/8 - Heli Iisakka Board member 14/14 8/8 - Hannu Juvonen Board member 14/14 - 7/7 Tiina Kurki Board member 14/14 8/8 - Jukka Leinonen Chair 14/14 - 7/7 Leena Niemistö Vice-chair 14/14 - 7/7 Seija Turunen (2 Board member 3/3 1/1 - Mikko Wirén Board member 14/14 - 7/7 1) Attendance rates cover meetings held during each member’s term of office. All members of the Board of Directors may join both committee meetings. 2) Member of the Board of Directors until 10 April 2024. Pihlajalinna holdings of the members of Pihlajalinna Plc’s Board of Directors on 31 December 2024: Number of Shares Mikko Wirén, total 2 325 343 MWW Yhtiö Oy 2 319 010 Mikko Wirén 6 333 Leena Niemistö 709 644 Jukka Leinonen 15 302 Juvonen Hannu 5 291 Seija Turunen (until 10 April 2024) 4 392 Heli Iisakka 3 600 Ignatius Kim 3 095 Tiina Kurki 2 651 CEO The Board of Directors appoints the Chief Executive Officer and de- cides on the terms and conditions of his or her service contract. The CEO is in charge of the Company’s operational management and Pihlajalinna Group’s business in accordance with the instructions and orders issued by the Board of Directors. The CEO is responsible for ensuring that the Company’s accounting practices comply with the law and that the financial matters are handled in a reliable manner. The Management Team assists the CEO in leading the Company’s op- erations. Tuomas Hyyryläinen was the CEO of Pihlajalinna Plc during the finan- cial year 2024. Pihlajalinna Plc does not have a Deputy CEO. Group Management Team Pihlajalinna Group’s Management Team assists the CEO in operative business management. The Management Team prepares and steers the development of the Group’s business, processes and joint Group functions and promotes cooperation and the flow of information be- tween the various parts of the organisation. It also prepares the Group’s strategic planning and budgeting, monitors the implementa- tion of plans and reporting and prepares acquisitions and other major investments. In addition, the Management Team monitors and evalu- ates the profitability of the Company’s businesses as well as the func- tioning of its internal control and reporting systems. The Manage- ment Team convenes regularly by invitation of the CEO. The Manage- ment Team conducts an annual evaluation of its operations and work- ing methods. Group Management Team (31 December 2024): Tuomas Hyyryläinen b. 1977, M.Sc. (Econ.) employed by the Company since 2023 Chief Executive Officer Heikki Färkkilä b. 1980, M.Sc. (Technology) employed by the Company since 2024 EVP, Strategy and Group Operations Anu Kallio b. 1968, M.Sc. (B.A.), Accounting and Finance employed by the company since 2024 EVP, Private Healthcare Services Seppo Kariniemi b. 1983, MBA employed by the Company since 2022 EVP, Public Services Tuula Lehto b. 1973, M.Sc. in Political Science employed by the company since 2022 EVP, Communications and Sustainability Jaakko Liljeroos b. 1979, LL.M employed by the company since 2024 EVP, Chief Legal Officer REPORT BY THE BOARD OF DIRECTORS | CORPORATE GOVERNANCE STATEMENT 24 Lauri Muhonen b. 1984, Bachelor of Laboratory Sciences, eMBA employed by the company since 2024 EVP, Chief Information Officer Tarja Rantala b. 1972, M.Sc. (Econ.) employed by the Company since 2014 EVP, Chief Financial Officer Sari Riihijärvi b. 1977, D.Med.Sc., Specialist employed by the Company since 2021 EVP, Chief Medical Officer Mika Videman b. 1967, Master of Science, Employed by the Company since 2024 EVP, People and Culture In 2024, the Group Management Team also included Chief Infor- mation Officer Antti Jussi Aro (until 10 May 2024), Chief Operating Of- ficer, Private Healthcare Services Timo Harju (until 29 February 2024), Chief Operating Officer, Public services Eetu Salunen (until 21 May 2024) ja Chief Legal Officer Marko Savolainen (until 1 December 2024). The Management Team has met regularly, on a weekly basis. The ta- ble below presents the direct and indirect Pihlajalinna shareholdings of the CEO and other members of Pihlajalinna Group’s Management Team (31 December 2024). Number of shares Tuomas Hyyryläinen, CEO 40 000 Tarja Rantala 17 142 Seppo Kariniemi 7 100 Heikki Färkkilä 4 400 Sari Riihijärvi 4 004 Jaakko Liljeroos 4 000 Lauri Muhonen 4 000 Anu Kallio 2 876 Tuula Lehto 1 510 Mika Videman 0 III INTERNAL CONTROL AND RISK MANAGEMENT MECHANISMS Internal Control The purpose of the Group's internal control systems is to ensure that the Company's operations comply with the applicable laws and regu- lations and the Company's business principles. The goal of internal control associated with the financial reporting process is to ensure that the financial reports published by the Company are prepared in accordance with the accounting principles applied by the Company and that they provide materially correct information regarding the Group’s financial position and that financial reporting is accurate and reliable. The Group’s financial development is monitored by Group-wide re- porting systems. The systems cover financial information, the budget approved by the Board of Directors, monthly financial forecasts and operational performance indicators. The Group Management Team analyses the result and deviations, is responsible for budgeting and forecasting together with the CEO, monitors the integration and de- velopment of completed M&A transactions and other investments. The business controller function and financial management analyse and produce financial reports as well as prepare separate analyses for use by the management, the Audit Committee and the Board of Di- rectors. The Group’s financing is centralized. The Group’s financial management issues guidelines and instructions on the preparation of the financial statements and interim financial statements and, together with the Group communications function and the Chief Legal Officer, is responsible for the Group’s regular dis- closure obligations. Pihlajalinna’s financial and HR management functions have defined and documented control targets and control points (process-specific control catalogues) related to financial management, reporting and HR administration processes. The appropriateness and effectiveness of control targets and control points are evaluated at least once a year in cooperation with auditors. Internal control observations are analysed and, as a result, guidelines, practices and potentially also control points are updated. The control measures consist of automated and manual reconciliation of processes, controls, analytical checks and instructions aimed at en- suring the accuracy of financial reporting. Further key control mecha- nisms include the administration of access rights to information sys- tems and reporting systems as well as the controlled implementation of authorisations and changes to systems. The financial management function processes and regularly reports to the Board of Directors on exceptional items and items subject to management judgment and analyses the underlying reasons behind changes to forecasts. The CEO and the chief executives of the subsidiaries are in charge of ensuring that accounting and administration in the areas they are re- sponsible for comply with the law and that the Group’s guidelines are adhered to. The Group’s legal department is in charge of issuing oper- ational guidelines and instructions in its area of responsibility. The au- ditors audit the accounting and administration of the parent company and the subsidiaries annually. In all Group companies, auditing is con- ducted by a firm of authorised public accountants. The auditor of the parent company is responsible for the coordination of audit focus ar- eas, the analysis of audit observations from the point of view of the consolidated financial statements and communication with the Group’s financial management and the CEO. The detailed auditing re- sults are reported annually to the Group management, the Audit Committee and the Board of Directors. The Audit Committee verifies that accounting, financial administra- tion, finance, the internal audit and auditing are organised appropri- ately. The Board of Directors reviews and approves half-year reports, interim reports and financial statements bulletins. Internal controls related to sustainability reporting are described in more detail in the Board of Directors report as a part of the sustaina- bility statement in section General Information (ESRS2). REPORT BY THE BOARD OF DIRECTORS | CORPORATE GOVERNANCE STATEMENT 25 Internal audit The purpose of Pihlajalinna’s internal audit is to assess the appropri- ateness and performance of the Company’s internal control system, risk management, management processes and administrative pro- cesses. The internal audit supports organisational development and enhances the fulfilment of the Board of Directors’ supervisory duty. The internal audit assists the organisation in achieving its objectives by evaluating and surveying its functions and supervising compliance with Company guidelines and instructions. To this end, the internal audit produces analyses, estimates, recommendations and infor- mation for use by the Board of Directors and senior management. The assessments are reported upon completion to the CEO, the CFO and the management in charge of the function being assessed. They are also reported regularly to the Board’s Audit Committee. The internal audit function is based on internal standards (IIA). The in- ternal audit function is independent of the rest of the organisation. The point of departure for the internal audit is primarily manage- ment-oriented, and the work is coordinated in cooperation with the external audit. The annual audit plan and audit report are presented to the Audit Committee. The internal audit function also audits other areas by request of the Board of Directors and Pihlajalinna’s Manage- ment Team. Pihlajalinna’s internal audit activities continued in 2024 in accordance with the cooperation previously organised with PwC. The subject of PwC’s follow-up audit was information security and related controls. The audit also assessed asset and supply chain management as two new targets. In addition in 2024, Pihlajalinna developed in particular together with its external partner processes and controls related to invoicing. Risk management Pihlajalinna’s Risk Management Policy defines the goals, principles, operating methods and responsibilities of risk management. Risk management at Pihlajalinna has been carried out at the Group, busi- ness unit, service and process level in accordance with the Risk Man- agement Policy approved by Pihlajalinna’s Board of Directors. Fur- thermore, the Group invests in the management of occupational safety and health risks and in quality management systems, such as ISO 9001and ISO14001. The goal of Pihlajalinna’s risk management is to promote the achieve- ment the Group’s strategic and operational targets, customer and pa- tient safety, shareholder value, the Group’s operational profitability and the realisation of responsible operating methods. Risk manage- ment is used to ensure that the risks affecting the Company’s opera- tions are known, assessed and monitored, and that measures are im- plemented to control the risks. Internal risk reporting is included in the regular business reporting as well as in business planning and de- cision-making. The material risks and their management are reported to stakeholders regularly and, when necessary, on a case-by-case ba- sis. The assessment of sustainability-related risks plays an important role in risk management. This component has covered the identification and assessment of impacts and risks in terms of business risk assess- ment, human rights risk assessment, and double materiality assess- ment (DMA). These areas will be integrated into the Group's general risk management process in the coming financial years. Pihlajalinna’s risk management principles emphasise the necessary obligations related to operations and the resulting opportunities for organising risk management, standard-based quality management tools and self-monitoring. Risk management supports the manage- ment system and the day-to-day management of services. Risk man- agement is integrated into the service processes and the process owner is responsible for the risk management. The aim is to minimise the impact on Pihlajalinna's operations in the event of a risk material- ising. At the beginning of 2024, Pihlajalinna’s Management Team launched a qualitative risk management project to update the analysis of the Group-level risks targeted at the Company. Based on the analysis, Pihlajalinna’s new risk management principles were formed as the ba- sis for risk management work, Pihlajalinna’s risk management tem- plate table was updated, a risk management network representing Pihlajalinna’s various business and Group functions was compiled and a work plan was specified for the network. In connection with the analysis, the close connection between risk management and the business continuity and contingency planning was also identified. In 2024, Pihlajalinna’s risk management project identified the key tar- gets of risk management measures to be the changing operating envi- ronment in normal and exceptional circumstances, resources and su- pervisory work, organisation, strategy and prioritisation, systems and their development, personnel availability and work ability, infor- mation security, particularly from the perspective of cybersecurity, and patient safety, particularly from the perspective of self-monitor- ing. Group management and operative management are responsible for risk management according to their reporting responsibilities. In addi- tion, risk management specialists guide and develop the group’s risk management. The Group Management Team regularly discusses the key risks related to the Group’s business operations. Everyone work- ing at Pihlajalinna must also know and manage risks related to their responsibilities. The internal audit function evaluates the appropri- ateness and performance of the Company’s risk management as part of its annual audit plan. IV OTHER INFORMATION REQUIRED Insider administration and principles Pihlajalinna Plc complies with the Nasdaq Helsinki Ltd Guidelines for Insiders in effect at any given time, subject to the additional specifica- tions concerning Pihlajalinna and referred to in Pihlajalinna’s Insider Guidelines. The Pihlajalinna insider guidelines, which specify the in- sider guidelines of Nasdaq Helsinki Ltd, are approved annually by the Board of Directors. The Company’s insider information and the managers’ and their re- lated parties’ transactions in Company’s financial instruments are ad- ministered according to applicable legislation and the Insider Guide- lines of the Company. When necessary, the Company sets up project- specific insider lists which includes every person who receives pro- ject-specific inside information. The insider lists are not public. The Company’s insider lists are main- tained in the SIRE register of Euroclear Finland Ltd. In addition to the insider lists, the Company creates and maintains a list of persons discharging managerial responsibilities and related par- ties (natural or legal persons) who have the duty to notify their trans- actions related to Company’s financial instruments to the Company and the Financial Supervisory Authority within three business days af- ter the transaction. The Company publishes transactions notified to it with a release within the same time limit. Persons discharging mana- gerial responsibilities include Pihlajalinna’s members of the Board of Directors and members of the Management Team. Executives at Pihlajalinna and non-executive persons defined by the Company are prohibited from all trading in the Company’s securities or related derivatives and other financial instruments on their own REPORT BY THE BOARD OF DIRECTORS | CORPORATE GOVERNANCE STATEMENT 26 account or for the account of a third party during the period of 30 cal- endar days before the publication of the Company’s annual financial statements, interim report and half year financial report (closed win- dow) or on the publication date of the aforementioned information. Pihlajalinna Plc has published its insider principles (insider and related party principles) on the Company’s website. Related parties and principles for related party transactions Pihlajalinna complies with the legislation pertaining to related party transactions and, in accordance with the Corporate Governance Code for listed companies, ensures compliance with the requirements for the monitoring, assessment, decision-making and disclosure of re- lated party transactions. Pihlajalinna’s Guidelines on Related Party Transactions, which describe the principles for the monitoring and as- sessment of related party transactions, is approved annually by Pihla- jalinna’s Board of Directors, which is responsible for monitoring and assessing related party transactions. The purpose of Pihlajalinna Plc’s Guidelines on Related Party Transac- tions is to ensure that any business transactions involving persons be- longing to the Company’s related parties are made independently and based on market terms. The Company assesses and verifies that any related party transactions are in the best interests of the Com- pany overall and that any conflicts of interest are duly taken into ac- count when making decisions on related party transactions. The prin- ciples of the Guidelines on Related Party Transactions are observed throughout the Group and in the decision-making concerning all of the Group companies. Pihlajalinna Plc’s related parties include the Group’s executives, such as the members, deputy members (if any) and secretary of the Board of Directors, the CEO, Deputy CEO and members of the Management Team, and the aforementioned persons’ spouses and common-law spouses and other people living in the same household. In addition, related parties include organisations in which an above-mentioned related party, either alone or together with other related parties, ex- ercises significant influence or control. Related parties also include the Company’s subsidiaries, associated companies and joint ventures and their CEOs, Board members and potential deputy members, as well as any organisations in which the above-mentioned parties exer- cise significant influence or control. Furthermore, related parties in- clude the Company’s shareholders holding at least 10 per cent of the Company’s shares or the total votes carried by the Company’s shares. Pihlajalinna Plc maintains a related party register of major business transactions between the Company and its related parties, the parties involved and the key terms of such transactions. The information en- tered in the register is collected annually from the persons belonging to the Company’s related parties by means of control surveys. The Company’s related party register is not public, and any information entered in it will not be disclosed to third parties, with the exception of any authorities and the auditor entitled to receive such infor- mation. People considered as related parties are obliged to notify the Company’s related party administration of any related party transac- tions which are being planned, or which have come to their knowledge. Such notification must be made without delay after re- ceiving such information. The results of the monitoring of related party transactions are regularly reported to the Board’s Audit Com- mittee. Pihlajalinna may carry out transactions with related parties provided that the transactions are part of Pihlajalinna’s ordinary course of busi- ness and implemented under arms-length terms in compliance with the decision-making procedure specified in Pihlajalinna’s internal poli- cies and guidelines. Related party transactions that are not part of Pihlajalinna’s ordinary course of business or are not implemented un- der arms-length terms are decided on by Pihlajalinna’s Board of Di- rectors, with due consideration given to the regulations concerning conflicts of interest. Any related party transactions will be processed in accordance with the Guidelines on Related Party Transactions approved by Pihla- jalinna’s Board of Directors. Any major transactions to be executed with Pihlajalinna’s management and its related parties shall always be approved by the Board of Directors. Pihlajalinna reports on related party transactions annually in its finan- cial statements. Related party transactions that are of material signifi- cance from the shareholder’s perspective and are not part of the Company’s ordinary course of business or are not implemented under arms-length terms are disclosed in accordance with the Securities Markets Act and the rules of the Nasdaq Helsinki Ltd stock exchange. Pihlajalinna Plc has published its principles concerning related party transactions (insider and related party principles) on the Company’s website. Auditors and auditing According to the Articles of Association, the Company shall have one (1) Auditor that shall be a firm of authorised public accountants with an APA-certified Auditor acting as the Auditor with principal responsi- bility. The auditor will annually submit an auditor’s report to Pihlajalinna’s Annual General Meeting. When the Company’s Board of Directors re- views the financial statements, the principal auditor provides a state- ment on the implementation of the audit and on their audit observa- tions. Pihlajalinna Plc’s Annual General Meeting on 10 April 2024 resolved, in accordance with the Board’s proposal, to appoint KPMG Oy Ab as the Company’s auditor for a term ending at the conclusion of the An- nual General Meeting 2025. The responsible auditor appointed by KPMG Oy Ab was Assi Lintula, APA. KPMG Oy Ab has been the auditor of Group companies during the fi- nancial year 2024. The following fees have been paid to the auditor (amounts in thousands of euros): Auditor’s fees 2024 2023 Auditing, KPMG Oy Ab 328 328 Statements, KPMG Oy Ab 64 10 Non-audit services, KPMG Oy Ab 48 57 Total 441 395 Sustainability Statement REPORT BY THE BOARD OF DIRECTORS | SUSTAINABILITY STATEMENT 28 General disclosures (ESRS2) Basis for preparation of the sustainability statement (BP-1) 28 Boundaries and foundations of reporting (BP-2) 28 The role of senior management in sustainability management (GOV-1) 31 Information provided to and sustainability matters addressed by the administrative, management and supervisory bodies (GOV-2) 32 Integration of sustainability-related performance in incentive schemes (GOV-3) 33 Statement on due diligence (GOV-4) 34 Risk management and internal controls over sustainability reporting (GOV-5) 34 Strategy, business model and value chain (SBM-1) 35 Interests and views of stakeholders (SBM-2) 39 Material impacts, risks and opportunities in Pihlajalinna's activities and their interaction with strategy (SBM-3) 40 Process to identify and assess material impacts, risks and opportunities (IRO-1) 43 List of disclosure requirements in ESRS (IRO-2) 46 Table: Management of Pihlajalinna's material impacts, risks and opportunities (IRO) 49 Basis for preparation of the sustainability state- ment (BP-1) Pihlajalinna Plc's sustainability statement has been prepared in ac- cordance with the requirements laid down in chapter 7 of the Ac- counting Act and the sustainability reporting standards (ESRS). The sustainability statement for 2024 covers the period from 1 January to 31 December 2024, and it has been prepared in consolidation with the financial statements for 2024. The scope of consolidation in the sustainability statement is the same as in the financial statements. The Group companies are described on the note to the consolidated financial statements. No information relating to industrial design or copyright, know-how or innovation results has been omitted from the sustainability state- ment. The sustainability topics and sustainability KPIs reported in the sustainability statement are based on the requirements of the EU sus- tainability reporting standards and Pihlajalinna's double materiality analysis (DMA), which was conducted in late 2023. The relevant themes and sustainability topics based on the materiality analysis have been approved by the Board of Directors of Pihlajalinna. The DMA process described in IRO-1 contains impacts, risks and opportu- nities which cover Pihlajalinna's own operations and upstream and downstream in essential parts. The policies, measures, targets and metrics extending to Pihlajalinna's value chain are described in the sections connected to the relevant standards. For more detailed in- formation about Pihlajalinna's double materiality analysis process and its results see the ESRS 2 section, IRO-1: Process for identifying mate- rial impacts, risks and opportunities. Coverage of the upstream and downstream value chain The data in the sustainability statement is reported for the entire Pihlajalinna Group, covering Pihlajalinna's own operations and par- tially the upstream and downstream of the value chain. Pihlajalinna's material sustainability topics extend to the consumers and end users. The sustainability topics extend to upstream and downstream value chain workers through service and supplier partners. The material sustainability topics extend to consumers downstream through our own services and service partners. The sustainability topics extend to the environment upstream and downstream in the value chain as a result of personnel, customers and procurement through supplier and service partners' value chains. The sustainability statement covers the material value chain sustainability topics. Boundaries and foundations of reporting (BP-2) Time horizons This sustainability statement complies with the time horizons defined by the ESRS standards. Short term (1 year) describes the current fi- nancial year, medium term the following 1–5 years and long term the period beyond 5 years. Value chain estimation sources and outcome uncertainty Pihlajalinna Group's sustainability statement for 2024 has been pre- pared for the first time following the structures and principles of the European sustainability reporting standards (ESRS). Therefore, not all sustainability matters are presented for the comparison periods. Comparison period data is only disclosed with regard to GHG emis- sions accounting. The changes to the previous sustainability reports are mainly connected to the coverage of KPIs and their presentation and the structure of the report. Greenhouse gas (GHG) emissions ac- counting has been expanded with regard to reporting boundaries and emission sources included. More detailed emissions accounting can be read in section E1, under E1-6: Gross Scope 1, 2, 3 and Total GHG emissions. REPORT BY THE BOARD OF DIRECTORS | SUSTAINABILITY STATEMENT 29 The consolidation approach to emissions accounting is operational control, i.e. the emissions of energy from leased facilities has been in- cluded in Pihlajalinna's Scope 1 and 2 emissions. The biggest uncer- tainties in the outcomes of emissions accounting are included in spend-based emissions from purchases and procurement as well as emissions from customers’ travel and commuting emissions calcu- lated based on the personnel survey. As these categories account for more than two-thirds of emissions, it is necessary to consider the to- tal emissions with caution. Pihlajalinna's total emissions will become more accurate as data collection is enhanced. The spend-based ac- counting of indirect emission sources will be developed in the future. Identified development opportunities include improving the accuracy and availability of data. In particular, data sources concerning the up- stream value chain will be refined to enhance data quality and ac- counting accuracy. Development plans concerning emissions account- ing will be specified further over the coming financial years. . ESRS Standard Disclosure requirement (DR) Sustainability statement sections ESRS2 General disclosures BP-1 General basis for preparation of sustainability statements Basis for preparation of the sustainability statement (BP-1) BP-2 Disclosures in relation to specific circumstances Boundaries and foundations of reporting (BP -2) GOV-1 The role of the administrative, management and supervisory bodies The role of senior management in sustainability management (GOV-1) GOV-2 Information provided to and sustainability matters addressed by the administrative, management and supervisory bodies Information provided to and sustainability matters addressed by the administrative, management and supervisory bodies (GOV-2) GOV-3 Integration of sustainability-related performance in incentive schemes Integration of sustainability- related performance in incentive schemes (GOV-3) GOV-4 Statement on due diligence Statement on sustainability due diligence (GOV-4) GOV-5 Risk management and internal controls over sustainability reporting Risk management and internal controls over sustainability reporting (GOV -5) SBM-1 Strategy, business model and value chain Strategy, business model and value chain (SBM-1) SBM-2 Interests and views of stakeholders Interests and views of stakeholders (SBM-2) SBM-3 Material impacts, risks and opportunities and their interaction with strategy and business model Material sustainability topics in Pihlajalinna's activities and their link with the strategy (SBM -3) IRO-1 Description of the processes to identify and assess material impacts, risks and opportunities Process to identify and assess material impacts, risks and opportunities (IRO-1) IRO-2 Disclosure requirements in ESRS covered by the undertaking’s sustainability statement List of disclosure requirements in ESRS (IRO-2) Table: Management of Pihlajalinna's material impacts, risks and opportunities (IRO) ESRS E1 Climate change ESRS 2, GOV-3 Integration of sustainability- related performance in incentive schemes Integration of sustainability- related performance in incentive schemes (GOV-3) ESRS 2, IRO-1 A description of relevant climate-related impacts, risks and opportunities identification and assessment processes Process to identify and assess material impacts, risks and opportunities (IRO-1) ESRS 2, SBM-3 Material impacts, risks and opportunities and their interaction with strategy and business model Material sustainability topics in Pihlajalinna's activities and their link with the strategy (SBM -3) E1-1 Transition plan for climate change mitigation Transition plan for climate change mitigation (E-1) E1-2 Policies related to climate change mitigation and adaptation Policies related to climate change mitigation and adaptation (E1-2) E1-3 Actions and resources in relation to climate change policies Actions and resources in relation to climate change policies (E1-3) E1-4 Targets related to climate change mitigation and adaptation Targets related to climate change mitigation and adaptation (E1-4) E1-5 Energy consumption and mix Energy consumption and mix (E1-5) E1-6 Gross Scopes 1, 2, 3 and Total GHG emissions Gross Scope 1, 2, 3 and Total GHG emissions (E1-6) REPORT BY THE BOARD OF DIRECTORS | SUSTAINABILITY STATEMENT 30 ESRS S1 Own workforce ESRS 2, SBM-2 Interests and views of stakeholders Interests and views of stakeholders (SBM-2) ESRS 2, SBM-3 Material impacts, risks and opportunities and their interaction with strategy and business model Material impacts, risks and opportunities related to Pihlajalinna's own personnel and their management (SBM-3) S1-1 Policies related to own workforce Management of material topics and policies (S1-1) S1-2 Processes for engaging with own workers and workers’ representatives about impacts Engaging with own workforce (S1-2) S1-3 Processes to remediate negative impacts and channels for own workers to raise concerns Processes to remediate negative impacts and channels for own workers to raise concerns (S1-3) S1-4 Taking action on material impacts on own workforce, and approaches to mitigating mate- rial risks and pursuing material opportunities related to own workforce, and effectiveness of those actions Actions (S1-4, S1-5) S1-5 Targets related to managing material negative impacts, advancing positive impacts, and managing material risks and opportunities Actions (S1-4, S1-5) S1-6 Characteristics of the undertaking’s employees and S1-7 – Characteristics of non-em- ployee workers in the undertaking’s own workforce Characteristics of the undertaking’s employees (S1-6) S1-9 Diversity metrics Diversity metrics (S1-9) S1-10 Adequate wages Adequate wages (S1-10) S1-14 Health and safety metrics Health and safety metrics (S1-14) S1-16 Compensation metrics (pay gap and total compensation) Compensation metrics (S1-16) S1-17 Incidents, complaints and severe human rights impacts Incidents, complaints and severe human rights impacts (S1-17) ESRS S4 Consumers and end-users ESRS 2, SBM-2 Interests and views of stakeholders Identification and assessment of material impacts, risks and opportunities ESRS 2, SBM-3 Material impacts, risks and opportunities and their interaction with strategy and business model Material impacts, risks and opportunities related to consumers and end-users and their management (SBM-3) S4-1 Policies related to consumers and end-users Management of material topics and policies (S4-1) S4-2 Processes for engaging with consumers and end-users about impacts Engaging with consumers and end-users (S4-2) S4-3 Processes to remediate negative impacts and channels for consumers and end-users to raise concerns Processes to remediate negative impacts and channels for consumers and end-users to raise concerns (S4-3) S4-4 Taking action on material impacts on consumers and end-users, and approaches to man- aging material risks and pursuing material opportunities related to consumers and end- users, and effectiveness of those actions Measures (S4-4) S4-5 Targets related to managing material negative impacts, advancing positive impacts, and managing material risks and opportunities Ttargets and metrics (S4-5) ESRS G1 Business conduct ESRS 2, GOV-1 The role of the administrative, supervisory and management bodies The role of the administrative, management and supervisory bodies (ESRS2 GOV-1) ESRS 2, IRO-1 Description of the processes to identify and assess material impacts, risks and opportuni- ties Impact, risk and opportunity management related to business conduct (ESRS2 IRO -1) G1-1 Corporate culture and business conduct policies and corporate culture Business conduct policies and corporate culture (G1-1), Targets and metrics (G1) G1-5 Political influence and lobbying activities Political influence and lobbying activities (G1 -5), Targets and metrics (G1) REPORT BY THE BOARD OF DIRECTORS | SUSTAINABILITY STATEMENT 31 The role of senior management in sustainability management (GOV-1) By consistently managing sustainability, Pihlajalinna wants to ensure that the Group operates sustainably and ethically as well as promotes and facilitates the achievement of the goals set for sustainability. Pihlajalinna's operations are concentrated in Finland, so all adminis- trative, management and supervisory bodies have relevant experi- ence with regard to geographical location. In addition, all have rele- vant industry, product and service expertise available. Pihlajalinna's Board of Directors, its committees and management feature exten- sive expertise and skill with regard to important areas relating to busi- ness and sustainability. There is a high level of competence in quality, medical impact, ethical business practises, data protection and per- sonnel, for example. Pihlajalinna Group's Management Team has reviewed the manner of adding employee representation in the Group's senior administration during 2024. The matter has also been discussed with the Group's shop stewards. The decision on the matter will be made during 2025. Board of Directors Board's gender distribution and diversity Male % Female % Other % Total Executive members 4 57 3 43 0 0 7 Other members 0 0 0 0 0 0 0 Total members 4 57 3 43 0 0 7 Board's gender distribution (ratio of female to male members) 0.75 Percentage of Board members who are independent 86 Management Team's gender distribution and diversity Male % Female % Other % Total Pihlajalinna Group Management Team 6 60 4 40 0 0 10 Other members 0 0 0 0 0 0 0 Representation of workers 0 0 0 0 0 0 0 Management Team's gender distribution 0.66 At the end of the reporting period (31 December 2024), Pihlajalinna's Board of Directors had seven members: Jukka Leinonen (Chair), Leena Niemistö (Vice Chair), Kim Ignatius, Heli Iisakka, Hannu Juvonen, Tiina Kurki and Mikko Wirén. Until 31 November 2024, the regular secre- tary of the Board of Directors was Chief Legal Officer Marko Savo- lainen and as of 1 December, 2024 Chief Legal Officer Jaakko Liljeroos. Three (42 per cent) of the Board members are female and four are male. The Board's gender distribution is thus 0.75. There are no employees or other workers on the Board of Directors. Pihlajalinna's Board of Directors is the highest body responsible for sustainability. The Board of Directors approves the Group policies and principles guiding the Group's operations and internal control, such as the Pihlajalinna Code of Conduct, human rights principles and policies on corruption and bribery, HR, equality, quality, risk management, data protection, information security and environment. It reviews and approves the principles and policies concerning responsible business and related targets and results. The policies, principles and targets are regularly reviewed and updated, if necessary, to reflect changes in the operating environment. The Board of Directors approves the sus- tainability programme and strategic sustainability targets and moni- tors their progress. The Board of Directors has approved the material topics of double materiality (DMA) and this sustainability statement and is the highest body responsible for associated impacts, risks and opportunities (IRO). The CEO provides the Board of Directors with regular updates on impacts, risks and opportunities. The Board of Di- rectors also receives regular reviews of the progress of sustainability targets from the Executive Vice President, Communications and Sus- tainability. In addition, the Board of Directors regularly reviews the Group's key risks and their control and also reviews the big picture once a year. With regard to sustainability reporting, the Board of Directors and senior management have been trained and the theme is regularly ad- dressed. Pihlajalinna has recognised the increasing need for new ex- pertise also with regard to other responsibility topics and sustainabil- ity reporting and has systematically increased operational resources in these areas. The Executive Vice President, Communications and Sustainability is a member of the Group Management Team. On the whole, Pihlajalinna's Board of Directors features extensive ex- pertise and experience in themes relating to environment, social re- sponsibility and corporate governance, as well as solid expertise in the social and healthcare sector and medicine. In addition, the Board of Directors has diverse experience in material topics of the Group's sustainability reporting and the assessment of related risks and op- portunities. Several Board members have also accumulated experi- ence in working on the boards of other listed companies. They have broad insight into the requirements of responsibility and sustainabil- ity reporting from the perspectives of different industries, such as tel- ecommunications, the food industry, environmental and property business, retail, the pharmaceutical industry and logistics. In addition, the Board members have extensive experience in public healthcare administration and various advocacy organisations. The various di- mensions of corporate governance are part of the Board expertise in both board work and executive positions in large companies and their activities in extremely regulated sectors. Board diversity and assessment of independence In order to diversely support and develop Pihlajalinna's business, the Group's Board of Directors must have a sufficiently diverse lineup. The overall aim of the Board composition is to achieve sufficiently ex- tensive qualifications, expertise and experience. The sufficient diver- sity of the Board of Directors, including age and gender, as well as ed- ucational and professional background, is taken into account in the preparation of a proposal for the composition of the Board of Direc- tors. When preparing the proposal regarding the composition of the Board of Directors, each candidate for Board membership provides confidentially the information necessary for the assessment of qualifi- cations and time utilization, in accordance with the Group’s instruc- tions. The proposal concerning the composition of the Board of Direc- tors is prepared by the largest shareholders in the Shareholders’ Nomination Board. It is the duty of the Board of Directors to assess the independence of its members, the majority of the members must be independent of the Group. The independence rate is 86 per cent REPORT BY THE BOARD OF DIRECTORS | SUSTAINABILITY STATEMENT 32 for this reporting period. At least two of the independent Board members shall be independent of major shareholders of the Group. Ignatius Kim, Iisakka Heli, Juvonen Hannu, Kurki Tiina, Leinonen Jukka and Niemistö Leena are independent of major shareholders. Committees The Board of Directors has two committees: the Audit Committee and the People and Sustainability Committee. These have a clear-cut divi- sion of responsibilities in their agendas in thetotality of sustainable development and sustainability. The Audit Committee is responsible for sustainability reporting, and it supervises and develops sustaina- bility reporting. The Committee reviews the Board of Directors’ report in its entirety. The People and Sustainability Committee is responsible for monitoring the development of the operating environment, and steering the Group's sustainability programme and targets. Group Management Team All of the quantitative data related to senior management concern the composition as of 31 December 2024. The Group's businesses and corporate functions are represented in the Management Team. Em- ployee representation will be decided on in 2025. Pihlajalinna's Management Team is responsible for ensuring that the monitoring and implementation of the impacts, risks, and opportuni- ties of Pihlajalinna's material sustainability topics are carried out ac- cording to plans. The Management Team is responsible for setting Pihlajalinna's sustainability targets, monitoring progress and supervis- ing the operating methods that address the material impacts, risks and opportunities. In addition, it reviews the overall progress of sus- tainability efforts and sustainability on a quarterly basis. The Execu- tive Vice President, Communications and Sustainability, who is a member of the Management Team, is responsible for presentation. The Management Team also supervises the implementation of ap- proved sustainability measures for its own part. No special methods are currently used for managing impacts, opportunities and risks for the time being; instead, supervision is part of normal risk manage- ment and internal control processes. The Group CEO is responsible for the implementation of sustainabil- ity-related matters. The CEO holds delegated responsibility for sus- tainability matters covering the sustainable development action plan and capability. The CEO submits the whole to the Board of Directors for information twice a year and possibly for further decision making at least once a year. In addition, the director in charge of the relevant area is responsible for the control of the impacts, risks and oppor- tunties of different areas of sustainability topics and the decision making related to them. The Executive Vice President, Communica- tions and Sustainability is responsible for sustainability reporting and the progress of sustainability work at the strategic level. The wellbe- ing of the personnel is the responsibility of the Head of HR, the Chief Medical Officer is responsible for the health and safety of customers and the Chief Legal Officer is responsible for ethics-related areas. Information provided to and sustainability mat- ters addressed by the administrative, manage- ment and supervisory bodies (GOV-2) Different areas of sustainability are presented by management and specialists at the meetings of the Board and its committees. The re- views provide the members with information about the most material sustainability impacts, risk and opportunities, as well as up-to-date in- formation about sustainability in general and related regulation. The Executive Vice President, Communications and Sustainability, who is a member of the Management Team, is responsible for presenting sus- tainability-related matters to the Board of Directors, its committees and the Management Team. A presentation is given to the Board of Directors twice a year and quarterly to the committees and Manage- ment Team. These presentations also cover the progress of sustaina- bility targets. The Board is also given a review by the CEO on impacts, risks and opportunities twice a year. The Management Team, on the other hand, discusses sustainability-related themes at least on a quar- terly basis in accordance with the target setting and reporting. All of Pihlajalinna's material sustainability impacts, risks and opportunities have been reviewed by the Board of Directors in 2024. The results of Pihlajalinna's risk management, including material sus- tainability risks, are presented as part of the normal risk management and self-monitoring process to the Board of Directors once a year and quarterly to the Management Team by the Executive Vice President, Communications and Sustainability and experts responsible for the risk management process. During 2024, the results and effectiveness of the approved policies, measures, metrics and targets intended to manage material impacts, risks and opportunities have been pre- sented to the administrative, management and supervisory bodies by the Executive Vice President, Communications and Sustainability and topic experts. There have been several reviews due to the prepara- tions for the first report, but going forward, the Board of Directors will receive the reviews twice a year. The Board of Directors received an update of the implementation of the due diligence process with regard to human rights during the re- porting year 2024, but going forward, it will receive a more extensive presentation as part of regular reviews. The due diligence process on the whole will be specified further in 2025 and an HRDD module will also be incorporated into it. With regard to the themes presented in this report and to be developed further, as well as the results and ef- fectiveness of the policies, measures, metrics and targets set for them, the Board of Directors will receive updates from the Executive Vice President, Communications and Sustainability twice a year going forward. REPORT BY THE BOARD OF DIRECTORS | SUSTAINABILITY STATEMENT 33 When developing the strategic focus areas for 2024, the key impacts, risks and opportunities were taken into account to the extent that they were identified before the results of the actual double material- ity analysis. The prioritisation of consumers and end-users was taken into account by making the renewal of services for private customers one of the strategic focus areas. Pihlajalinna has, for instance, strengthened its multichannel services through new service concepts and digital innovation. This supports the availability of service throughout Finland, which is one of Pihlajalinna's positive impacts. Another important focus area is collaboration with the public healthcare sector. The Group has been identified as having an actual positive impact in this respect, as Pihlajalinna has long-standing tradi- tions in developing the operational prerequisites of the public healthcare sector in close collaboration with the public sector. Thirdly, Pihlajalinna invests in the digital development of work, lead- ership and managerial work. Remote working reduces the negative impact on stress when tools with better usability are used. This also supports work-life balance. In addition, well-managed operations and clearly defined duties contribute to the personnel's wellbeing at work and health through understandable duties and roles. In the future, impacts, risks and opportunities will be more integrated to the strategy work, the risk management process and major busi- ness decisions by discussing them at the level of the Management Team and Board of Directors and its committees in the processes of preparing the strategy and business decisions. When drawing up plans, efforts are made to take into account human resource needs in order to better manage personnel workload. Sustainability topics discussed in the meetings of the Board of Directors, its committees and the Group Management Team in the financial year 2024: • Sustainability programme and its targets • Results of the double materiality assessment • Sustainability reporting and related regulatory development • Verification of sustainability reporting • Emissions accounting and climate road map • Customer experience and satisfaction • Personnel wellbeing, development and personnel survey results • Personnel survey action plan (Group Management Team) • Occupational safety • Development of diversity, equity and inclusion (DEI) • Human rights principles and commitment • Information security and data protection • Risk management • Sustainability reporting and related regulatory development (Group Management Team) Integration of sustainability related performance in incentive schemes (GOV-3) Pihlajalinna's remuneration policy describes the principles of remu- neration and the total remuneration of the administrative, manage- ment and supervisory bodies. The remuneration policy and any mate- rial amendments to it are prepared by the People and Sustainability Committee of Pihlajalinna's Board of Directors. The Board of Directors reviews and approves the remuneration policy to be presented to the General Meeting and material amendments to it. The Board of Direc- tors of Pihlajalinna decides on the remuneration paid to the CEO in accordance with the remuneration policy. The People and Sustainabil- ity Committee prepares remuneration-related matters, if necessary, with the assistance of independent external experts. The maximum level of remuneration available in the CEO's short-term remuneration scheme in 2024 is, accounting for Pihlajalinna's EBIT multiplier, 60 per cent of the fixed annual salary. The remuneration is based on Pihlajalinna's adjusted EBITA (weight 60 per cent), organic revenue growth (30 per cent) and personnel satisfaction, eNPS (10 per cent). In addition, the CEO takes part in the long-term share- based incentive scheme, in which the remuneration available is tied to Pihlajalinna's adjusted EBITA (weight 60 per cent), development of sickness-related absence rate (20 per cent), customer satisfaction, NPS (10 per cent) and personnel satisfaction, eNPS (10 per cent). For the other Management Team members, the remuneration availa- ble in the long-term share-based incentive scheme is tied to the same metrics as for the CEO. The remuneration available in the short-term remuneration scheme in 2024 is, accounting for Pihlajalinna's EBIT multiplier, a maximum of 25–33 per cent of fixed annual salary. The remuneration is based on a weighted basis, on the Group's adjusted EBITA and organic revenue growth and personnel satisfaction. In ad- dition, it includes targets relating to one's own area of responsibility. Of the sustainability programme targets, customer satisfaction (NPS), sickness-related absence rate (SPO) and personnel satisfaction (eNPS) are tied to long- and short-term remuneration. These are key metrics from the point of view of Pihlajalinna's material sustainability topics (S4 Consumers and end-users and S1 Own workforce). Climate-re- lated aspects are not part of the remuneration paid to the administra- tive, management and supervisory bodies. Follow-up The Board of Directors' People and Sustainability Committee moni- tors the implementation of the remuneration policy and, if necessary, proposes measures to the Board of Directors to ensure the imple- mentation of the remuneration policy. The Board of Directors submits the remuneration policy to the General Meeting to review as neces- sary, however at least once every four (4) years. In addition, the Board of Directors annually presents the Annual General Meeting with the Remuneration Report which the shareholders can use as a basis to assess the implementation of the remuneration policy at Pihlajalinna. The General Meeting decides on approval of the Remu- neration Report. The General Meeting's resolution on the Remunera- tion Report is of an advisory nature. Description and implementation of the remuneration of the Board of Directors Pihlajalinna's General Meeting decides on the fees paid to the mem- bers of the Group's Board of Directors. The proposal for the remuner- ation of the Board members is prepared by the Shareholders’ Nomi- nation Board. Board members can be paid annual or monthly fees, for instance, and a meeting fee for meetings of the Board of Directors, its committees or other bodies. The remuneration of the Board of Direc- tors was comprised of shares and a cash component in 2024. A total of EUR 107,973 was paid in shares. The cash paid totalled EUR 250,227, including meeting fees. Description of the remuneration of the CEO Pihlajalinna's Board of Directors appoints the CEO and decides on the terms and conditions of their service contract. Before decision-mak- ing by the Board, the matter is prepared by the People and Sustaina- bility Committee. The CEO is not a member of the People and Sustain- ability Committee and does not take part in decision-making in mat- ters concerning their own remuneration. In accordance with the Re- muneration Policy, the remuneration of the CEO is based on a fixed REPORT BY THE BOARD OF DIRECTORS | SUSTAINABILITY STATEMENT 34 monthly salary including fringe benefits and separately decided varia- ble remuneration components, such as long-term share-based incen- tive schemes of short-term incentive schemes, for example. Statement on sustainability due diligence (GOV-4) Pihlajalinna's due diligence is part of the Group's operating and gov- ernance practices, which are based on the Finnish Corporate Govern- ance Code for listed companies. For governance, the process sets re- quirements for the transparency of the organisation, ethical manage- ment and stakeholder engagement in decision-making. In addition, Pihlajalinna's due diligence process has been expanded into safe- guarding human rights to prevent activities infringing fundamental rights. This includes working conditions, prevention of discrimination and prevention of other human rights infringements. The human rights risk assessment was carried out during 2024. The development of measures will continue during the coming financial years, including more extensive assesment of the environment. In addition, the due diligence process will be increasingly integrated into key business pro- cesses to support strategic decision-making and operational activities. In sustainability reporting, embedding due diligence in governance, strategy and business model is described in the following sections: ESRS 2 GOV-4: Statement on sustainability due diligence and SBM-1: Strategy, business model and value chain. The methods of identifying and assessing adverse impacts are de- scribed in sections: ESRS 2 IRO-1: Process to identify and assess material impacts, risks and opportunities and SBM-3: Material sustainability topics in Pihla- jalinna's activities and their link with the strategy, GOV-5: Risk man- agement and internal controls over sustainability reporting, S1-3 ja S4-3: Processes to remediate negative impacts and channels for own workers to raise concerns, Processes to remediate negative impacts and channels for consumers and end-users to raise concerns. Interaction with affected stakeholders in all due diligence processes is described in sections: SBM-2: Interests and views of stakeholders, IRO-1: Process to identify and assess material impacts, risks and opportunities, S1-2: Processes for engaging with own workers and workers’ representatives about impacts, G1-5: Political influence and lobbying activities and S4-2: Processes for engaging with consumers and end-users about impacts. Taking action to address the adverse impacts is described in sec-tions: S1-3: Processes to remediate negative impacts and channels for own workers to raise concerns, S1-4: Taking action on material impacts on own workforce, and approaches to mitigating material risks and pur- suing material oppor-tunities related to own workforce, and effec- tiveness of those actions, G1-1: Business conduct policies and corpo- rate culture, S4-3: Processes to remediate negative impacts and chan- nels for consumers and end-users to raise concerns and E1-3: Actions and resources in relation to climate change policies. Tracking the effectiveness of efforts and communications are ad- dressed in sections: SBM-2: Interests and views of stakeholders, S4-5: Targets related to managing material negative impacts, advancing positive impacts, and managing material risks and opportunities and S1-5: Targets related to managing material negative impacts, advancing positive impacts, and managing material risks and opportunities. Risk management and internal controls over sus- tainability reporting (GOV-5) Sustainability reporting complies with the principles of Pihlajalinna's statutory reporting, risk management and internal control. The Group services communications and sustainability team is centrally responsi- ble for sustainability reporting. Sustainability reporting is carried out by persons specialising in sustainability reporting and reporting stand- ards. Pihlajalinna's general risk management principles follow the ob- ligations set by legislation and public and private customers (e.g. So- cial Welfare and Health Care Supervision Act, Emergency Powers Act, NIS2). In addition, the risk management requirements related to the used ISO 9001:2015 and ISO 14001 standards are part of strategic and day-to-day management. The coverage of the standards is described in the policy table in section G1. In order to ensure the accuracy and timeliness of the reported data, Pihlajalinna has defined and deployed a governance model that de- fines the roles and responsibilities for sustainability reporting. The ca- pabilities required for producing the reported data have been identi- fied and defined in the different areas of Pihlajalinna's operations so that all reported areas are covered at a sufficient level. This includes engaging experts from financial administration, HR administration, communications and sustainability, as well as the legal department. The Board of Directors has the ultimate responsibility for the appro- priate organisation of internal control related to reporting. The Board of Directors annually reviews and approves the Board of Directors’ re- port, which includes the sustainability statement and financial state- ments. The Audit Committee assists the Board of Directors in moni- toring the effectiveness of the principles of internal control and risk management. The Audit Committee supervises the financial state- ments and financial reporting as well as the sustainability reporting processes to ensure the high quality and integrity of the annual re- porting and related data. Pihlajalinna's Board of Directors assesses the level of internal control at least once a year. The Board of Direc- tors may also use an external service provider for separate internal audit assignments. Pihlajalinna's first-time sustainability reporting compliant with the sustainability reporting standards (ESRS) involves risk of error due to data precision or human error concerning the new reporting method. The other identified sustainability reporting risks are the accuracy and reproducibility of the reported data and the timeliness of reporting. In addition, reporting must be independent of persons. These risks are mitigated and managed by following the principles of internal control and sustainability reporting governance model. Pihlajalinna has deployed a reporting system that supports compliance with re- porting requirements and data management. The persons responsible for reporting can verify the entered data, monitor progress and iden- tify and rectify any inconsistencies. Pihlajalinna has established re- porting process practises, regular progress monitoring and reviews by the Audit Committee, but not yet a separate risk management model for sustainability reporting. A model will be developed during the next financial year. The internal control of sustainability reporting is based on risk identi- fication, analysis and targeting of at the most material identified risks as well as the best practices of internal control. The data used for re- porting is generated as business processes progress, and everyone in- volved in the process is responsible for the accuracy of the data. Re- porting-related risks and their prioritisation have been assessed through the findings of the process participants, and any risks have been addressed with immediate measures. No specific critical risks emerged during the reporting process. The business areas and Group functions are responsible for Pihlajalin- na's process environment being able to provide transparency to the required reported data. The work roles in Pihlajalinna’s business ar- eas and Group functions specified in the governance model are re- sponsible for the content accuracy of the data as well as compliance with reporting schedules and provision to the person responsible for REPORT BY THE BOARD OF DIRECTORS | SUSTAINABILITY STATEMENT 35 sustainability reporting. Internal controls have been deployed to en- sure the accuracy and timeliness of the reported content. These are part of the common business processes and their systematic monitor- ing is part of internal control reporting. The risks and findings related to sustainability reporting have been reviewed as separate topics, and they have not been incorporated into the Group's other risk manage- ment processes during the first reporting year. The harmonisation of processes and approaches will be reviewed after the first reporting. Sustainability reporting and any risk findings are regularly reported to the Audit Committee and the Management Team by the Executive Vice President, Communications and Sustainability. Strategy, business model and value chain (SBM-1) Pihlajalinna is one of the leading private social and healthcare service providers in Finland. The Group offers comprehensive and high-qual- ity private clinic and hospital services as well as occupational healthcare and insurance company services. In addition, the Group offers social and healthcare services for wellbeing services counties. Pihlajalinna's customers, private individuals, businesses, insurance companies and the public sector are served with an extensive range of on-site, remote and digital services. Pihlajalinna’s shares are listed on Nasdaq Helsinki Ltd and 98.5 per cent of shares are held by Finnish shareholders. All of the Group's business operations are in Finland. Pihlajalinna pays all its taxes in Finland. At the end of the financial year 2024, the Group employed 6,493 (6,880) experts, in addition to which the Group had 2,145 (2,103) practitioners at the end of the financial year. Pihlajalinna is headquar- tered in Tampere and all of the Group's functions are located in Fin- land. Pihlajalinna’s values are energy, ethics and open-mindedness. Pihlajalinna builds effective social and healthcare services that pro- mote people's health, reduce morbidity and take care of the custom- ers of assisted living and special needs residential services. Pihla- jalinna wants to be an impactfully responsible industry pioneer that offers quick and high-quality care. This goal is promoted by building multichannel services for all customer groups. Private clinic and hospital services Pihlajalinna's private clinic networks covers all of Finland, focusing on the biggest regional centres. In addition to general practitioners, spe- cialists and nurses' appointments and emergency and on-call services, the private clinic services include, among other things, surgical opera- tions, physiotherapy and diverse examination services. Occupational health services For customer companies in occupational healthcare, Pihlajalinna of- fers services that help maintain working capacity with the aim of sup- porting organisations and helping them achieve their goals. The ser- vices are provided at Pihlajalinna's private clinics, hospitals and re- mote service channels. Examinations Pihlajalinna provides an extensive range of laboratory and imaging services. Imaging examinations include, for example, magnetic, X-ray and ultrasound examinations. The services also cover various clinical physiological examinations. Remote services Pihlajalinna invests in the multichannel approach to services. Remote services equalise regional differences and enable cost-effective ser- vice production. Pihlajalinna's remote services include assessments of need for treatment, general practitioner and medical specialist ser- vices and various service concepts, such as a national disease clinic (Kansantautiklinikka), responsible doctor services and digital health centres (Digiterveysasema). Fitness centre services The Group’s Forever fitness centres offer diverse wellbeing services for adults who exercise. Fitness centre services complement Pihla- jalinna’s preventive occupational healthcare services and rehabilita- tion services carried out after specialised care procedures. Public Services Pihlajalinna produces impactful social and healthcare services for wellbeing services counties. Pihlajalinna's outsourcing services in- clude care units, health centres and complete and partial out- sourcings as well as remote services, such as responsible doctor ser- vices. Additionally, Pihlajalinna offers various service production pack- ages as outsourcing, such as services produced with service vouchers and procurement packages covering a certain number of surgical op- erations. Studies have shown that the most cost-efficient approach to producing social and healthcare services in the public sector is the multi-producer model, which involves service production and provi- sion through cooperation between the public sector, the private sec- tor and non-profit organisations. Strategy Pihlajalinna’s two strategic priorities in 2024 were the renewal of ser- vices for private customers and cooperation in social and healthcare services. The Group continuously develops the customer experience and serves its customers across an increasingly broad range of chan- nels, where the services are needed. Wellbeing services counties have significantly changed the operating environment in social and healthcare services. Solid experience in working as a partner to public healthcare helps Pihlajalinna solve the challenges of society in coop- eration with wellbeing services counties. The most significant chal- lenges related to Pihlajalinna's operations and affecting sustainability issues are retaining and attracting professionals and implementing and further developing diverse services. Pihlajalinna sets targets to promote sustainable development by cus- tomer category and in stakeholder relations. Private clinic and hospi- tal services aim at quick, need-based and high-quality care for cus- tomers. High-quality assessment of need for care facilitates the opti- mum use of healthcare resources. Occupational health services, on the other hand, focus on maintaining the work ability of companies' employees and offering cost-efficient solutions to companies. Exten- sive geographical coverage aim to provide regionally equal services to all customers. Insurance company collaboration focuses particularly on cooperation to achieve mutual goals and continuously improve im- pactful services, not only to ensure quick and appropriate care for in- dividual customers but also securing cost-efficient solutions. The wellbeing of our own workforce is a key part of Pihlajalinna's strategy. The Group focuses on improving the personnel and practi- tioner experience. This ensures the Group's ability to offer high-qual- ity services and function as a responsible employer. Remote services enhance cost efficiency and balances out regional differences. As remote services grow and the assessment of the need for care becomes more efficient, GHG emissions from customer travel are reduced. This promotes the Group's goal of reducing negative cli- mate change impacts from the value chain. With regard to environ- mental sustainability, emissions are reduced, resources are used wisely, and the generation of waste is reduced, and its appropriate treatment is ensured. Pihlajalinna provides a broad range of social and healthcare services, designed to promote the health and wellbeing of customers. Pihla- jalinna's inputs and resources are presented in more detail in the “Ba- REPORT BY THE BOARD OF DIRECTORS | SUSTAINABILITY STATEMENT 36 sis of impact” figure below. The Group's key activities, outputs and re- sults in terms of the current and expected benefits for customers, in- vestors and other stakeholders are described under "Our services" and "Impacts". The customer segments are described under "Cus- tomer groups". As a provider of social and healthcare services, the Group does not have actual distribution channels. Pihlajalinna continuously develops its operations to ensure the high quality and availability of services and to safeguard human resources. Word equipment and properties are taken care of with the required maintenance measures. Risks assessments are made on a regular ba- sis, and the Group holds reliable ISO certificates (ISO 9001, ISO 27001 and ISO 14001), the coverage of which is described in the policy table in section G1. Digital software is taken care of with the required up- dates and by preparing for cyber-attacks, among other measures. Pihlajalinna aims to ensure the availability of purchased materials and equipment with long-term agreements and good supplier relations. The Group only operates in the health sector, so there are no other relevant industries. The link between the impacts, risks and opportu- nities with the Group's business model and value chain is described in more detail in section ESRS 2 SBM-3: Material sustainability topics in Pihlajalinna's activities and their link with the strategy. The cost struc- ture and revenues of the business segments according to IFRS 8 dis- closure requirements are described in note 1 in the financial report. REPORT BY THE BOARD OF DIRECTORS | SUSTAINABILITY STATEMENT 37 REPORT BY THE BOARD OF DIRECTORS | SUSTAINABILITY STATEMENT 38 Pihlajalinna's value chain is described in the figure below. The figure shows the main features of the upstream and downstream value chain and Pihlajalinna's position in the value chain. REPORT BY THE BOARD OF DIRECTORS | SUSTAINABILITY STATEMENT 39 Stakeholder Interests and views of stakeholders Purpose and development areas Engagement channels Private individuals High-quality and effective treatment and care Skilled and professional healthcare personnel Diverse remote services Smooth appointment booking and service use Reliability and data protection Professional skills and training of the personnel Developing multi-channel services Extensive and up-to-date data processing and information security Quality certifications Interaction in services Customer service channels Customer satisfaction surveys Feedback channels Social media Customer organisa- tions: wellbeing ser- vices counties, public sector entities, insur- ance companies and businesses Effective referral for treatment Cost control High-quality and effective services Data protection and information security Partnership models Professional skills and training of the personnel Adequate resources Continuous development of remote channels Providing solutions to the changes in the oper- ating environment Impact-based treatment and service models Personal interaction Customer service channels Customer satisfaction surveys Personnel and practi- tioners Clear job descriptions and targets Excellent leadership and supervisory work Collaboration in statutory employer -employee cooperation Management of wellbeing at work and occupa- tional safety and health Equality in all operations High-quality tools First-class facilities Motivating remuneration model Target-setting and development discussions at the individual and team level Development of leadership and supervisory work Active communication and dialogue Personnel, non-discrimination and equality poli- cies Development of tools Personal interaction Personnel briefings Target-setting and development discus- sions Training and coaching Intranet Pihlis Pulse personnel survey Statutory employer-employee coopera- tion, occupational safety and health meet- ings and Kimpassa forum Pihlajalinna Academy training portal Anonymous whistleblowing channel HSE Lite occupational safety and health notification system Shareholders The company’s strategic management and in- creasing shareholder value Transparent and regular communication Sharing of understanding regarding changes in the operating environment and their impacts Risk management Development of sustainability Up-to-date and reliable financial reporting Good leadership, promoting profitability and growth Consistent strategy and a goal-driven roadmap Active communication on the development and progress of business and strategy Extensive scanning and analysis of the operat- ing environment A comprehensive risk management process Progresson of sustainability efforts Quarterly and annual reporting Quarterly results release webcasts Stock exchange releases and website IR meetings General Meeting Media Reliability, openness, timeliness and speed of communication Quick responses to media requests Assigning the right experts to interviews Active dialogue Communication resources and ensuring profes- sional competence Disclosure policy Trained spokespersons Stock exchange releases and media re- leases E-mails and phone calls Social media Media meetings The public authorities and industry organi- sations Smooth cooperation that promotes the indus- try’s common goals Broad sharing of expertise Open dialogue on topics related to the industry Cooperation with the public authorities Sharing current themes and ideas Websites Participation in networks Responding to requests for information Personal meetings Interests and views of stakeholders (SBM-2) Pihlajalinna is a significant operator in social and healthcare services sector in Finland. The Group has various stakeholders whose expecta- tions it aims to meet through open dialogue. Engagement with differ- ent stakeholders is ensured with diverse communication channels. Key stakeholders include insurance companies, businesses, consum- ers and the public sector. With highly competent and professional personnel, Pihlajalinna can respond to the expectations of other stakeholders. Operating in the social services and healthcare sector requires close engagement with the public authorities, decision-mak- ers and industry organisations. In addition, as a listed company, Pihla- jalinna creates value for its shareholders and engages in open dia- logue with the media. Pihlajalinna engages in active dialogue with various industry partici- pants in meetings and through its own channels. Pihlajalinna is a member of the Finnish Association of Private Care Providers (HALI), which represents companies and organisations that produce social and healthcare services. HALI is a member of the Confederation of Finnish Industries EK. Pihlajalinna is also a member of the industry as- sociation Lääkäripalveluyhdistys LPY. Pihlajalinna has not changed its business or strategy on the basis of the stakeholder analysis during the reporting year, but aims to better consider the results going forward. Administrative, management and supervisory bodies are informed of the views of the affected stake- holders and the company's sustainability-related impacts by the Exec- utive Vice President, Communications and Sustainability, Sustainabil- ity Manager and managers of different functions, such as HR. Pihlajalinna's own personnel is the most essential group of the af- fected stakeholders. Pihlajalinna actively listens to it’s personnel. The Group's extensive personnel survey is carried out once a year and it is an important tool for assessing, monitoring and developing the well- being and practices of the work community, as well as for dialogue between personnel and supervisors. The broad personnel survey is supplemented with lighter mini-pulse surveys carried out regularly. In addition, there is a separate DEI survey in place. The results are used in both Group-level decision-making and development and at the team level. Pihlajalinna has used the open-ended feedback from the personnel survey as part of planning for the coming strategy pe- riod. The perceptions of professionals working at Pihlajalinna about the company itself are monitored not only through a dedicated sur- vey but also in regularly organized professional evenings. Pihlajalinna REPORT BY THE BOARD OF DIRECTORS | SUSTAINABILITY STATEMENT 40 respects its employees’ right to unionisation and develops coopera- tion based on trust and openness with employee representatives. Material sustainability topics in Pihlajalinna's activities and their link with the strategy (SBM-3) The material impacts, risks and opportunities identified in Pihlajalin- na's double materiality assessment are presented with the ESRS standards E1 (Climate change), S1 (Own workforce), S4 (Consumers and end-users) and G1 (Business conduct) in this sustainability state- ment. Pihlajalinna operates only in Finland, so all of the impacts are concen- trated in Finland. Primarily, the impacts take place in a similar manner in all facilities, but there is slight variation depending on whether they are an office, private clinic, hospital, service housing unit or a fitness centre. For example, worker stress occurs the most in care activities, not so much in ordinary office work. The impacts related to end-users materialise in both remote and on-site services. Climate (E1) and gov- ernance (G1) themes affect all of the Group's activities in a similar manner. Pihlajalinna's resilience analysis will be carried out in the coming financial years in connection with strategy updates. In the first reporting year under ESRS, Pihlajalinna has assessed the ability of its strategy and business model to address material sustainability-re- lated impacts and risks and, on the other hand, its ability to exploit material opportunities as part of the sustainability reporting process. Based on the results of the double materiality analysis, Pihlajalinna's material sustainability impacts are presented in the attached materi- ality matrix. REPORT BY THE BOARD OF DIRECTORS | SUSTAINABILITY STATEMENT 41 Climate change (E1) The double materiality assessment identified essential, actual nega- tive impacts related to climate change adaptation and mitigation in Pihlajalinna's own operations and at the beginning and end of the value chain. Due to the nature of Pihlajalinna's business no significant risks have been identified related to climate change adaptation or mitigation. The Group's resilience related to climate change and cli- mate change adaptation has been estimated to be high. The current and foreseen impacts of the material climate change impacts, risks and opportunities do not influence Pihlajalinna's strategy and busi- ness model, and they do not have significant financial effects. A more detailed climate change scenario and resilience analysis will be con- ducted in future financial years. PIhlajalinna's aim is to reduce carbon dioxide emissions, improve en- ergy efficiency and develop dialogue with stakeholders, as well as to create targets and measures with supplier partners to reduce emis- sions from procurement. Climate change adaptation and mitigation Pihlajalinna's own environmental footprint causes negative impacts on the climate, and no actual mitigation and adaptation measures have been taken yet. Greenhouse gas emissions from, for instance, procurement, as well as personnel and customer travel as a result of business activities have a negative impact on the climate and environ- ment and hinder climate change mitigation. The long supply chains required by the business are exposed to for example various weather- related events caused by climate change and hinder climate change adaptation. The impacts are caused throughout the value chain. Business opera- tions generate emissions with long supply chains, for example, with regard to products used in healthcare. The strategy to grow business activities also indirectly drives emissions to increase. Own workforce (S1) Pihlajalinna's material impacts concern own workforce, covering workers and self-employed practioners and any temporary work- force. The presence of material negative impacts concerning own per- sonnel is associated with impacts typical of the industry, such as occu- pational safety, working hours and wellbeing at work. In addition, there are negative impacts related to individual events. Pihlajalinna operates in a target-oriented manner in a growing and changing oper- ating environment in which maintaining personnel resources, skills and wellbeing is of paramount importance. The change in the indus- try and fast growth of business can have a potential negative impact on workers' wellbeing and working hours, among other things. These potential negative impacts affect workers in own operations. The overall workload in healthcare is typically high for the industry and can place an additional burden on personnel and resources. Pihla- jalinna's resilience is assessed as high and preparing for potential changes and risks typical for the industry is part of the continuous monitoring and improvement of operations. As part of the human rights risk assessment, Pihlajalinna has devel- oped its understanding of the special groups of personnel that may face negative impacts. Special groups included in Pihlajalinna's own workforce include young workers and workers belonging to special groups or minorities, who may be more exposed to impacts on their physical and mental development. Such impacts may include psycho- social workload factors, which refer to the features or characteristics of the duties, work dimensioning and design, working arrangements and management that may cause harmful stress on the worker. Psy- chosocial workload factors are not individual problems, rather they concern all workers. Special groups that may be subject to occupa- tional safety risks due to the nature of their duties are also typical of the sector. In addition, special groups include migrant workers and workers poorly familiar with their own rights who possibly do not have the capability or competence to use external help when needed, for example in recruitment processes or other employmentrelated matters. Pihlajalinna operates in Finland and does not have direct ac- tivities in areas with significant risks related to forced labour. Pihla- jalinna has, to a minor extent, international recruitment activities that could be subject to the risk of forced labour. Pihlajalinna operates an anonymous whistleblowing channel in case of harassment and an operating model for any incidents. Working conditions Pihlajalinna's actual positive impact on working conditions is con- nected to workers' job satisfaction, safety, adequate wages and well- being. Pihlajalinna invests in high-quality supervisory work, and the personnel also have access to flexible working hour arrangements, such as flexible working hours and high-quality occupational healthcare. As an expert in the field, Pihlajalinna can offer its person- nel premium healthcare. Working environment-related risks are regu- larly assessed and addressed, if necessary. Adequate wages can re- duce workers' financial worries, which may have a potential positive impact on the personnel. An actual negative impact, on the other hand, is related to heavy night work, which burdens part of the personnel, and accidents caused by violent situations in customer work. Work-life balance in- volves potential negative impacts due to work-related stress. Poten- tial negative impacts have also been observed in the personnel's psy- chological sense of safety and mental health. In addition, there are potential negative impacts associated with medical devices, such as the release of helium. These impacts materialise in the Group's own activities in the short term. Working conditions have an indirect im- pact on business, as workers who feel good are more productive. Op- timising the cost structure, on the other hand, can take away benefits and increase stress in the personnel. Ensuring the working conditions and wellbeing, as well as health and safety of the personnel is also significant from the point of view of fi- nancial risks and opportunities. Stress or accidents can result in long- term sickness absences. Maintaining competitive pay causes costs and can affect short-term profitability. On the other hand, good remuneration is an appeal and retention factor and increases work motivation. Seeing to working conditions results in longer careers and higher productivity. Taking care of the personnel and activities that support workers open up fi- nancial opportunities, creating a positive employer image and im- proving the reputation. Pihlajalinna's climate road map measures have not been identified as having negative impacts on the person- nel. These risks and opportunities materialise in own operations. Equal treatment and opportunities Pihlajalinna's material sustainability matters regarding our own work- force are mainly positive and materialise in the short or medium term. The measures focus particularly on workers' working condi- tions, wellbeing at work and psychological safety. Based on the per- sonnel surveys, workers feel that their work is meaningful, and they are appreciated, their job satisfaction has improved and they have good opportunities for learning and development. Particular atten- tion is paid to work-life balance, adequate wages and equal opportu- nities. These factors together support job satisfaction and the psycho- logical safety of workers. Pihlajalinna has an actual positive impact on equal opportunities for the personnel through on-the-job learning and development opportu- nities. Pihlajalinna provides its personnel with equal and equitable opportunities for training and competence development. Each worker REPORT BY THE BOARD OF DIRECTORS | SUSTAINABILITY STATEMENT 42 undergoes an annual development discussion. At Pihlajalinna, compe- tence development primarily involves on-the-job learning, the sharing of internal knowledge and training. The majority of on-the-job learn- ing takes place through actual work and interaction with others. Prac- tical tools also include onboarding and induction, team-specific and personal target and development discussions, independent studying, mentoring, work guidance and job rotation. Professional training is provided by both Pihlajalinna’s own experts and external training pro- viders. In annual target-setting and development discussions, an indi- vidual competence development plan is drafted for each employee. Efforts towards equality also include equal pay. The remuneration of the personnel is based on collective agreements and each employee's responsibilities, competence and adherence to the principles of equal treatment. Gender has no impact on pay. Pihlajalinna's most recent pay survey was conducted in September 2024. The pay survey re- viewed the breakdown of men and women in different positions, pay and pay gaps. The salary comparison did not indicate that there would be gender-related pay differences between men and women. These impacts materialise in the Group's own activities in the short term. Equality does not have significant interaction with strategy or busi- ness, but equality can support work motivation and productivity and thereby business. Maintaining equal pay is an appeal and retention factor and increases work motivation, thereby providing a positive opportunity. Seeing to equality and operating in a manner that equally supports all workers opens up financial opportunities, creates a positive employer image and builds reputation. This opportunity materialises in own activities. Consumers and end-users (S4) Material risks and opportunities affecting consumers and end users were identified as having financial impacts on Pihlajalinna's financial position, results and cash flows. Information-related impacts for consumers and end-users In conjunction with its personnel, Pihlajalinna produces and distrib- utes information about social and healthcare themes significant to so- ciety. This has an actual positive impact on customers. There are ac- tual negative impacts related to customers' privacy, such as patient safety and data protection, but no severe incidents were identified during the reporting year. In addition, a potential negative impact is related to cybersecurity threats to infrastructure and equipment, which may compromise the availability, confidentiality and integrity of systems. These materialise in the short term in the Group’s own ac- tivities. At Pihlajalinna, the purpose of data protection and the management of information security is to ensure the secure processing of all of Pihlajalinna’s data, particularly patient and personal data, as well as the protection of the privacy of patients and customers. Pihlajalinna has enhanced cooperation between the data protection and infor- mation security teams by establishing a cross-functional cooperation group that meets regularly. Pihlajalinna also has a cyber security de- velopment plan in place that guides the development of information security and the monitoring of the targets set for it. The management of information security aims to ensure the integrity, confidentiality and availability of information. Pihlajalinna has an external Security Operations Centre (SOC) that ensures the continuous monitoring of the organisation’s information security and identifies and responds to information security threats and deviations in order to protect the or- ganisation’s information systems and data. The strategy does not directly interact with privacy or the availability of information, but as a healthcare group Pihlajalinna's business model closely interacts with privacy, as it has to collect customers' health data, for example, as part of the day-to-day customer service work of hospitals and private clinics. Significant financial risks were also identified in relation to customer privacy, data protection and information security, as well as the abil- ity to obtain high-quality information. Most significant risks include cyber threats against infrastructure or hardware and resulting reputa- tional damage and potential liability for damages. The risks can mate- rialise in Pihlajalinna's own activities and downstream value chain in the short and medium term. Personal health and safety of consumers and end-users Pihlajalinna has a positive impact on customers' health and safety by offering diverse general practitioner and medical specialist services. Pihlajalinna has a comprehensive network of hospitals and private clinics, remote services and extensive diagnostics services. The Group produces actual positive impacts on various stakeholders, such as health benefits to private customers through quick access to treat- ment and savings to society and employers. Pihlajalinna aims for an excellent customer experience in all of its services. In addition physi- cal patient safety is at a strong level. A potential risk is related to physical patient safety, reputational dam- age and possible liability for damages. These are regularly assessed and taken into account in conjunction with the risk mapping and hu- man rights risk assessment. There are actual negative impacts related to customers' privacy and child protection, for example, in relation to patient safety and data protection. The impacts are identified by the number of reminders, complaints and patient injury notices. In 2024, there were no cases of patient injury subject to compensation. In ad- dition, both subtopics involve potential negative impacts through cyber-attacks. Pihlajalinna develops cyber security in accordance with the set targets. These impacts materialise in the Group's own activi- ties in the short term. As a healthcare company, Pihlajalinna's operating model is linked to customers' health and safety, privacy protection and child protection. Expanding and developing remote services strengthen customer in- clusion and also interact with the strategy. In addition good practices can support responsible business conduct and reduce the risks arising from dependencies related to consumers and end-users. Social inclusion of consumers and end-users Customers' social inclusion is at the heart of Pihlajalinna's activities and involves several actual positive impacts. Customers' equality can be increased by improving the availability of services with remote ser- vices even in locations where the required on-site services are not available. This helps the public service system and thereby society as a whole. As a social and healthcare services provider and listed com- pany, transparent, timely and reliable communications to stake-hold- ers are particularly important to Pihlajalinna and also constitute an actual positive impact. The cornerstones of Pihlajalinna’s market-ing and communications are professionalism, reliability, truthfulness and up-to-date medical knowledge, and they are seen as an actual posi- tive impact. The impacts materialise in Pihlajalinna's own activi-ties in the short term. The strategy and business activities do not have a direct impact on customers' social inclusion, but good practices in marketing, accessi- bility and non-discrimination of customers can support business oper- ations. Reputation can cause both financial risks and opportunities. The risk would materialise in the Group's own activities. Business conduct (G1) The material risks and opportunities of this topical standard were not identified as having significant financial effects on Pihlajalinna's finan- cial position, performance and cash flows. REPORT BY THE BOARD OF DIRECTORS | SUSTAINABILITY STATEMENT 43 Corporate culture Pihlajalinna has an actual positive impact on corporate culture, and the Group consistently builds it by strengthening leadership and man- agerial skills as well as work community skills. Moreover, Pihlajalinna complies with the current legislation, the orders issued by authorities and the rules and regulations applicable to listed companies and trains its personnel. This has a positive impact on society. The policies applied in Pihlajalinna's own activities are documented in the Code of Conduct and the anti-corruption and anti-bribery policy. Training on the Code of Conduct is mandatory for all Pihlajalinna per- sonnel, including practitioners, and it is part of Pihlajalinna's induc- tion training programme. Supervisors’ capabilities to address prob- lems are developed through training. Pihlajalinna also has internal controls and a confidential whistleblowing channel in place for re- porting misconduct and problems in the organisation. The impacts materialise in the Group's own activities and downstream value chain in the short term. Ethical business conduct has a positive impact on business relationships, such as smaller industry companies, in the value chain. Sustainable business and a strategy that takes into account the needs of the entire personnel can have a positive impact on corporate cul- ture. No direct impact was observed with the current strategy. The sub-topic is taken into account as an opportunity, as ethical business conduct increases trust among stakeholders. Different stakeholders, such as investors, partners, employees and customers, are of primary importance with regard to ensuring profitable business. Trust can in- crease share value, enable financing packages on better terms, im- prove the availability of workers, and enhance customer acquisition and retention. The opportunities can materialise in the Group's own activities and downstream value chain. Political engagement Pihlajalinna has an actual positive impact on political engagement. Pihlajalinna actively monitors legislation and its preparation, as well as political dialogue in general. Pihlajalinna has a long tradition of de- veloping the possibilities of public social and healthcare in coopera- tion with various parties, such as the current wellbeing services coun- ties. Pihlajalinna adapts operating practices in accordance with legis- lation. The Group also observes ethical policies in political en-gage- ment. Pihlajalinna is registered in the Finnish Transparency Register to ensure the transparency of lobbying activities. Pihlajalinna only en- gages in lobbying in Finland. The Group does not support political par- ties or their members. The impacts materialise in own activities in the long term. Political engagement can have a positive impact on business. One of the strategic focus areas of Pihlajalinna is to operate as a partner of public healthcare and thereby ensure operating prerequisites in pub- lic healthcare. Political engagement can contribute to a more favoura- ble legislative framework for private healthcare organisations and thus generate economic benefits. The sub-topic is seen as an oppor- tunity, although it can also involve reputational risk in conjunction with political influence. Both the risks and opportunities can material- ise in the Group's own operations. The following were assessed to be non-material topics: • ESRS E2 Pollution • ESRS E3 Water and marine resources • ESRS E4 Biodiversity and ecosystems • ESRS E5 Resource use and circular economy • ESRS S2 Workers in the value chain • ESRS S3 Affected communities As part of the double materiality analysis, Pihlajalinna identified im- pacts, risks and opportunities, taking into account the Group's loca- tion, activity, sector and the structure of the business. Pihlajalinna's operating area is Finland. Pihlajalinna provides social and healthcare services and fitness centre services. The Group's own operations are not linked to major water withdrawal, extraction of natural resources such as mining or deterioration of habitats through agriculture, for- estry or construction. The amount of waste generated in operations is estimated to be non-material in the double materiality assessment, and this has also taken into account the hazardous waste generated in health service operations. Pihlajalinna's operating locations are located in Finland, in city cen- tres and urban environments, in buildings which are primarily in of- fice and commercial use. Pihlajalinna does not engage in own produc- tion, property development activities or agriculture and forestry. The impacts on pollution, water and marine resources, deterioration of natural habitats and the habitats of species are potential in the up- stream value chain, but Pihlajalinna has not become aware of signifi- cant environmental impacts related to the supply chain. The impacts described above have been considered to be minor in the materiality assessment stage, and no remedial action related to biodiversity have been found to be necessary. Process to identify and assess material impacts, risks and opportunities (IRO-1) As part of the double materiality analysis, Pihlajalinna identified im- pacts, risks and opportunities, taking into account the Group's loca- tion, activity, sector and the structure of the business. Pihlajalinna op- erates in Finland, and it is one of the leading private social and healthcare service providers in Finland. The Group offers comprehen- sive private clinic and hospital services, as well as occupational healthcare and insurance cooperation services. In addition, the Group offers social and healthcare service production models for wellbeing services counties. In 2023, Pihlajalinna conducted a double materiality assessment in ac- cordance with the requirements of the ESRS and reports on material sustainability matters from 2025, using the data for 2024. The analy- sis has used EFRAG guidelines and a clear process that includes an ac- curate scoring logic and prioritises material sustainability topics with experts. Material topics are classified into environmental, social and governance themes in accordance with the ESRS. The double materiality analysis was comprised of several stages. The preliminary assessment screened the potential sustainability matters on the basis of ESRS and scientific research, and narrowed the topics down to a short list assessed by experts. The material sustainability topics identified in the assessment have been described and their ma- teriality have been assigned numerical values using the materiality as- sessment calculation model described in the ESRS 1 standard. The DMA process identified impacts, risks and opportunities which cover Pihlajalinna's own operations as well as upstream and down- stream value chains. The materiality assessment did not focus on spe- cific activities, business relationships or geographical areas; instead, it covered all own activities and the value chain. The impacts caused by the Group's own operations and value chain have been assessed sep- arately for each topic. The calculation matrix includes a separate col- umn to identify the stage of the value chain in which the impact is caused: downstream and/or upstream. The impact can thus be a con- sequence of either own activities and/or different stages of the value chain. Thus, the assessment takes into account impacts in which the undertaking is involved through its own operations or as a result of its business relationships. REPORT BY THE BOARD OF DIRECTORS | SUSTAINABILITY STATEMENT 44 Collecting stakeholder insight was an important part of the double materiality analysis, supplementing the understanding of the impacts on stakeholders and the kind of information expected by stakehold- ers as the basis of their own decision-making. Pihlajalinna actively en- gages with stakeholders, in addition to which a stakeholder survey was conducted as part of the analysis to obtain a deeper and more accurate insight into the views and expectations of stakeholders. In addition to the Group's own personnel, the stakeholders that re- sponded to the survey included customers, customer organisations, practitioners, shareholders, public authorities and decision-makers, partners and media. After the preliminary assessment and stakeholder consultation, an ex- pert assessment was carried out to identify and assess the impacts of Pihlajalinna on nature and society through the sustainability issues se- lected for the “short list”, as well as the risks and opportunities arising from these impacts and from nature and society (double materiality). The results of the expert assessment were discussed with Pihlajalinna experts in a workshop and a double materiality assessment was con- ducted based on it, identifying the sustainability themes material to Pihlajalinna. Pihlajalinna's Board of Directors has approved the choice of material topics, and the Group's sustainability reporting is verified by KPMG. The materiality assessment has been prepared in accordance with the requirements of ESRS 1, and it uses the criteria and time horizons provided by the standard. Based on the pre-screening, the materiality assessment defined which topics are probably material, and a numer- ical assessment was made for them. Impact materiality and financial materiality have been assessed for each topic. In assessing the mate- riality of a negative impact, its scale, scope and irremediable charac- ter were assessed, which combined make up the severity of the im- pact. The average severity of the impact is calculated based on this severity by dividing it by three. The average of severity is multiplied by probability, which results in the final impact materiality value be- tween 0 and 5. A value of 3 has been used as the threshold. If the impact value of a positive impact is equal to or higher than 3 or the materiality of a neg- ative impact is equal to or higher than 3, the topic is material. The topics have not been directly listed in order of priority, but the order can be seen based on the values. Positive impacts have not been listed in order of priority with regard to relative scope and probability, but the order can be seen in the assessment matrix. The more de- tailed criteria are tabulated below. With regard to material themes, it has been assessed how the identi- fied negative and positive impacts can influence risks and opportuni- ties arising from sustainability. Based on the assessment, material im- pacts and risks related to sustainability topics have been identified. Dependencies have typically been assessed for different sustainability matters from different perspectives, i.e. there can be dependencies with regard to personnel, economy and the environment, and they were taken into account in the assessment for the pre-screened top- ics. In addition, a consultation with the stakeholders was carried out at a general level in order to understand how the effects of the im- pacts will be targeted. For the time being, sustainability-related risks have not been listed in order of priority relative to other risks. The financial effects of risks and opportunities and the likelihood of the materialisation of the risks are also assessed in accordance with ESRS 1. The financial assessment has considered the business risks and opportunities of different sustainability matters and topics in monetary amounts; the assessment has been verified by external ex- perts. The financial significance was first assessed on a scale of 0–5 and then multiplied by the likelihood, which then yielded the final es- timate of materiality. The threshold was 3 here as well. Decision-making process Pihlajalinna implemented the materiality assessment in cooperation with external experts. Pihlajalinna’s Board of Directors approved the materiality result. Impacts, opportunities and risks as part of risk management and management processes Pihlajalinna has not yet incorporated the impact, risk and opportuni- ties identification, assessment and management process into the gen- eral risk management process or used it for assessing the general risk profile and risk management processes. Pihlajalinna's impact, risk and opportunity identification, assessment and management process has been developed during the past financial year. The risk management process has covered the identification and assessment of impacts with regard to business risk assessment, human rights risk assess- ment and double materiality assessment as part of the big picture. These areas will be harmonised with the Group's general risk man- agement process during future financial years. The opportunity iden- tification, assessment and management process was not yet incorpo- rated into the general management processes during the reporting year. Level of detail, sources and follow-up of the materiality as- sessment The first materiality assessment was reviewed generally at the stand- ard level, and with regard to the key topics, the impacts were detailed further to the sub-topic and sub-sub-topic level and their materiality assessment was calculated. In subsequent years, Pihlajalinna will deepen the assessment at the level of sub-topic, sub-sub-topic as well as individual impacts, and more thoroughly in its value chain. Pihla- jalinna has used the science-based and generally accepted Sixth As- sessment Report of the IPPC (2023) as its primary data source as well as sector-specific sources but intends to use sources even more com- prehensively going forward. The process of identifying material im- pacts, risks and opportunities has not changed compared to the previ- ous reporting period, as Pihlajalinna is reporting for the first time in accordance with the European Sustainability Reporting Standards (ESRS) for 2024. The double materiality analysis will be specified fur- ther and updated during 2025. Description of the processes to identify and as- sess material impacts, risks and opportunities (G1 IRO-1) Pihlajalinna Group has a business risk management plan in place. The Group has a risk management network owned by the Chief Medical Officer, and the chief administrative physician coordinates its man- agement. The network comprehensively includes persons in manage- rial positions at different Group functions. Pihlajalinna has surveyed the impacts, risks and opportunities, as well as risk management practices and tools and the content of the ISO quality management standards regarding risk management. The risk management princi- ples and policy have been prepared based on them. Pihlajalinna's risk management network annually submits the risk management policy to the Group Management Team, which presents the matter to the Group's Board of Directors. The Pihlajalinna Board of Directors has approved the Risk Management Policy and the risks and opportunities annually presented by the Management Team. The Risk Management Policy defines the content, goals, operating meth- ods, principles and responsibilities of Pihlajalinna's risk management. The results of the regularly conducted risk analysis are reviewed by the Group Management Team. Within the risk management network, there is a working group that works with risk management and plans the measures for risk management and its implementation. REPORT BY THE BOARD OF DIRECTORS | SUSTAINABILITY STATEMENT 45 As the risk management framework, Pihlajalinna uses the risk classifi- cation widely used in social and healthcare services, which defines the external and internal risks as well as risks caused to third parties. In addition, the customer, professional, health, finances and environ- ment are at the heart in accordance with Pihlajalinna's value creation model. The impact assessment of risks uses a five-step likelihood as- sessment that is reflected on the five-step risk impact scale in the theme’s finances, reputation, customer, personnel and data protec- tion. The risk management measures and risk owners are always identified as part of the risk work to ensure risk management in the area of each operational responsibility. Risk management at Pihla- jalinna has traditionally been carried out at the Group, business unit, service and process level. The key risks and disturbances are regularly identified and assessed, and continuity plans have been prepared for them so that if the risk materialises, Pihlajalinna's operations will con- tinue with minimum disturbance. The goal of Pihlajalinna’s risk management is to promote the achieve- ment the Group’s strategic and operational targets, share-holder value, the Group’s operational profitability and the realisation of re- sponsible operating practises. Risk management seeks to ensure that the risks affecting the Group's business operations are known, as- sessed and monitored. Risk management also includes practical measures and real-time monitoring to anticipate risks and mitigate or reduce their adverse impacts. The Group's general risk management principles have been approved by the Board of Directors. The Group’s Chief Financial Officer, in con- junction with the operative management, is responsible for identi- fying financial risks and for practical risk management. The goal of the Group’s financial risk management is to ensure sufficient liquidity, minimise financing costs and regularly inform the management about the Group’s financial position and risks. Description of the processes to identify and as- sess material climate-related impacts, risks and opportunities (E1 ESRS2 IRO-1) Pihlajalinna Group's impacts on climate change and GHG emissions are described in section E1-6: Gross Scope 1, 2, 3 and total GHG emis- sions. The double materiality analysis identified Pihlajalinna's impacts on environment and society. The assessment took into account the special characteristics of Pihlajalinna’s business model and value chain. Identified negative impacts include GHG emissions from the Group's own operations, sustainability of the supply chain and envi- ronmental footprint caused by personnel and customer travel and procurement. Due to the nature of Pihlajalinna's business activities, no significant risks related to climate change adaptation or mitigation have been identified. A scenario and resilience analysis related to the business impacts of climate-related physical and transition risks, iden- tifying the risks and related management methods and operational impacts more comprehensively, will be carried out during subsequent financial years. REPORT BY THE BOARD OF DIRECTORS | SUSTAINABILITY STATEMENT 46 List of disclosure requirements in ESRS (IRO-2) Datapoints in cross-cutting and topical standards that derive from other EU legislation The table below presents the datapoints of ESRS 2 and topical ESRSs derived from other European Union (EU) legislation in accordance with ESRS 2, Appendix B. The table indicates the location of the material datapoints in the sustainability statement and which datapoints are not material. Disclosure re- quirement Datapoint SFDR reference Pillar 3 refer- ence Climate Benchmark Standards Regulation reference EU Climate Law reference Materiality ESRS 2 GOV-1 21 d Board's gender distribution X X Roles of senior management in sustaina- bility management (GOV-1) ESRS 2 GOV-1 21 e Percentage of board members who are independent X Roles of senior management in sustaina- bility management (GOV-1) ESRS 2 GOV-4 30 Statement on due diligence X Statement on sustainability due diligence (GOV-4) ESRS 2 SBM-1 40 d i Involvement in activities related to fossil fuel activi- ties X X X Non-material ESRS 2 SBM-1 40 d ii Involvement in activities related to chemical produc- tion X X Non-material ESRS 2 SBM-1 40 d iii Involvement in activities related to controversial weapons X X Non-material ESRS 2 SBM-1 40 d iv Involvement in activities related to cultivation and production of tobacco X Non-material ESRS E1-1 14 Transition plan to reach climate neutrality by 2050 X Transition plan for climate change miti- gation (E-1) ESRS E1-1 16 g Undertakings excluded from Paris -aligned Bench- marks X X Transition plan for climate change miti- gation (E-1) ESRS E1-4 34 GHG emission reduction targets X X X Targets related to climate change mitiga- tion and adaptation (E1-4) ESRS E1-5 38 Energy consumption from fossil sources, disaggre- gated by source (only high climate impact sectors) X Non-material ESRS E1-5 37 Energy consumption and mix X Energy consumption and mix (E1-5) ESRS E1-5 40-43 Energy intensity associated with activities in high cli- mate impact sectors X Non-material ESRS E1-6 44 Gross Scopes 1, 2, 3 and Total GHG emissions X X X Gross Scopes 1, 2, 3 and total GHG emis- sions (E1-6) ESRS E1-6 53-55 Gross GHG emissions intensity X X X Gross Scopes 1, 2, 3 and total GHG emis- sions (E1-6) ESRS E1-7 56 GHG removals and carbon credits X Non-material ESRS E1-9 66 Exposure of the benchmark portfolio to climate -re- lated physical risks X Transitional provision applied ESRS E1-9 66 a 66 c Disaggregation of monetary amounts by acute and chronic physical risk; Location of significant assets at material physical risk X Transitional provision applied REPORT BY THE BOARD OF DIRECTORS | SUSTAINABILITY STATEMENT 47 ESRS E1-9 67 c Breakdown of the carrying value of its real estate assets by energy-efficiency classes X Transitional provision applied ESRS E1-9 69 Degree of exposure of the portfolio to climate-related opportunities X Transitional provision applied ESRS E2-4 28 Amount of each pollutant listed in Annex II of the E-PRTR Regulation (European Pollutant Re- lease and Transfer Register) emitted to air, water and soil X Non-material ESRS E3-1 9 Water and marine resources X Non-material ESRS E3-1 13 Dedicated policy X Non-material ESRS E3-1 14 Sustainable oceans and seas X Non-material ESRS E3-4 28 c Total water recycled and reused X Non-material ESRS E3-4 29 Total water consumption in m3 per net revenue of own operations X Non-material ESRS 2 SBM3 - E4 16 a i Activities negatively affecting biodiversity -sensitive areas x Non-material ESRS 2 SBM3 - E4 16 b Material negative impacts with regards to land degradation , desertification or soil sealing x Non-material ESRS 2 SBM3 - E4 16 c Operations that affect threatened species X Non-material ESRS E4-2 24 b Sustainable land / agriculture practices or policies X Non-material ESRS E4-2 24 c Sustainable oceans / seas practices or policies X Non-material ESRS E4-2 24 d Policies to address deforestation X Non-material ESRS E5-5 37 d Non-recycled waste X Non-material ESRS E5-5 39 Hazardous waste and radioactive waste X Non-material ESRS 2 – SBM-3 – S1 14 f Risk of incidents of forced labour X Material sustainability topics in Pihlajalinna's activities and their interaction with strategy (SBM -3) ESRS 2 – SBM-3 – S1 14 g Risk of incidents of child labour X Material sustainability topics in Pihlajalinna's activities and their interaction with strategy (SBM -3) ESRS S1-1 20 Human rights policy commitments X Policies ESRS S1-1 21 Due diligence policies on issues addressed by the fundamental International Labor Organisation Conventions X Policies ESRS S1-1 22 Processes and measures for preventing trafficking in human beings X Policies ESRS S1-1 23 Workplace accident prevention policy or management system X Processes to remediate negative impacts and channels for own workers to raise concerns (S1-3) ESRS S1-3 32 c Grievance/complaints handling mechanisms X Processes to remediate negative impacts and channels for own workers to raise concerns (S1-3) REPORT BY THE BOARD OF DIRECTORS | SUSTAINABILITY STATEMENT 48 ESRS S1-14 88 b, c Number of fatalities and number and rate of work-related accidents X X Health and safety metrics (S1-14) ESRS S1-14 88 e Number of days lost to injuries, accidents, fatalities or illness X Transitional provision applied ESRS S1-16 97 a Unadjusted gender pay gap X X Compensation metrics (S1-16) ESRS S1-16 97 b Excessive CEO pay ratio X Compensation metrics (S1-16) ESRS S1-17 103 a Incidents of discrimination X Incidents, complaints and severe human rights impacts (S1-17) ESRS S1-17 104 a Non-respect of UNGPs on Business and Human Rights principles and OECD guide- lines X X Incidents, complaints and severe human rights impacts (S1-17) ESRS 2 – SBM-3 – S2 11 b Significant risk of child labour or forced labour in the value chain X Non-material ESRS S2-1 17 Human rights policy commitments X Non-material ESRS S2-1 18 Policies related to value chain workers X Non-material ESRS S2-1 19 Non-respect of UNGPs on Business and Human Rights principles or OECD guide- lines x x Non-material ESRS S2-1 19 Due diligence policies on issues addressed by the fundamental International La- bor Organisation Conventions X Non-material ESRS S2-4 36 Human rights issues and incidents connected to upstream and downstream value chain paragraph 36 X Non-material ESRS S3-1 16 Human rights policy commitments X Non-material ESRS S3-1 17 Non-respect of UNGPs on Business and Human Rights, ILO principles or OECD guidelines X X Non-material ESRS S3-4 36 Human rights issues and incidents X Material ESRS S4-1 16 Policies related to consumers and end-users X Management and policies related to material topics (S4-1) ESRS S4-1 17 Non-respect of UNGPs on Business and Human Rights principles or OECD guide- lines X X Management and policies related to material topics (S4-1) ESRS S4-4 35 Human rights issues and incidents X Actions (S4-4) ESRS G1-1 10 b United Nations Convention against Corruption X Policies ESRS G1-1 10 d Protection of whistle-blowers X Non-material ESRS G1-4 24 a Fines for violation of anti-corruption and anti-bribery laws X X Non-material ESRS G1-4 24 b Standards of anti-corruption and anti-bribery X Non-material REPORT BY THE BOARD OF DIRECTORS | SUSTAINABILITY STATEMENT 49 Table: Management of Pihlajalinna's material impacts, risks and opportunities (IRO) E1 Climate change Sustainability mat- ter Impacts, risks and opportunities (IRO) Impact area Time hori- zon Stage of the value chain and stake- holder Management lever Climate change adapta- tion GHG emissions from own operations, sustainability of value chains, environmental footprint, tax footprint. The emissions from Pihlajalinna's own operations are caused by business, business travel and energy consumption of facili- ties, among others. The emissions generated have an actual negative impact on environment. Actual negative im- pact Widespread Medium term All / Environment, society Improving the quality of emissions accounting data makes it possible to target effective measures more accurately. Approving the climate road map (based on the SBTi framework) and managing and monitoring the impact of measures. Climate change mitiga- tion GHG emissions caused by customers' and workers' travel and procurement Actual negative im- pact Widespread Short Upstream value chain, downstream / Environment, society Strengthening remote services reduces emissions from customers' travel. Maintaining stakeholder dialogue with supplier partners to reduce emissions from procurement. REPORT BY THE BOARD OF DIRECTORS | SUSTAINABILITY STATEMENT 50 S1 Own workforce Sustainability mat- ter Impacts, risks and opportunities (IRO) Impact area Time hori- zon Stage of the value chain and stake- holder Management lever Stability of the employ- ment of own workforce Pihlajalinna offers stable employment relationships and the possibility of exercising a profession. Actual positive im- pact Widespread Short Own operations / Employees Pihlajalinna provides supervisors support in employment-related matters through central HR advice, investments are made in developing supervisors' leadership with targeted training. A working time bank and flexible working hours are in place in some functions in the Pihlajalinna Group. In addition, du- ties in which presence at the workplace is not required to carry them out may be performed remotely. Pihlajalinna offers extensive opportunities for operating as a practitioner, es- pecially as a doctor. The work can be customised flexibly based on the doc- tor's own interests, and work is supported by doctor customer account man- agers who provide assistance in making day-to-day life smooth and practical matters. The opportunities from the employer's perspective are major: attractiveness and retaining capacity as employer, work moti- vation, length of careers, coping at work, productivity, supervi- sory work and leadership. Opportunity Widespread All Ensuring the working conditions, wellbeing, health and safety of the personnel is also significant from the point of view of fi- nancial risks and opportunities. Stress or accidents can result in prolonged sickness-related absence, and offering competitive pay can have an impact on short -term profitability. Risk Individual All Working hours of own workforce Night work stresses the personnel Actual negative im- pact Individual Short Own operations / Employees Pihlajalinna has health examinations in place for work under conditions with special risks of illness. The Group has an early intervention model in place, and all supervisors are trained in it. Pihlajalinna complies with the applicable employment legislation and collective agreements. Pihlajalinna provides su- pervisors support in employment-related matters through central HR advice, investments are made in developing supervisors' employment-related exper- tise with targeted training. The opportunities from the employer's perspective are major: attractiveness and retaining capacity as employer, work moti- vation, length of careers, coping at work, productivity, supervi- sory work and leadership. Opportunity Widespread All Pihlajalinna provides supervisors support in employment-related matters through central HR advice, investments are made in developing supervisors' employment-related expertise with targeted training. A working time bank and flexible working hours are in place in some functions in the Pihlajalinna Group. In addition, duties in which presence at the workplace is not required to carry them out may be performed remotely. Ensuring the working conditions, wellbeing, health and safety of the personnel is also significant from the point of view of fi- nancial risks and opportunities. Stress or accidents can result in prolonged sickness-related absence, and offering competitive pay can have an impact on short -term profitability. Risk Individual All Pihlajalinna complies with the applicable employment legislation and collec- tive agreements. Pihlajalinna has a role architecture for workers with contrac- tual salary. The remuneration of the personnel is based, in addition to collec- tive agreements, on each employee's job grade, performance and adherence to the principles of equal treatment. Pihlajalinna acknowledges and rewards exemplary action and significant achievements at work with different forms of rewarding. In addition, personnel benefits are offered to support the well- being at work and satisfaction of the personnel. Adequate wages for own workforce The opportunities from the employer's perspective are major: attractiveness and retaining capacity as employer, work moti- vation, length of careers, coping at work and productivity. A positive employer image and reputation also result in financial benefits. Opportunity Widespread All Increasing wages may increase costs, affecting short-term prof- itability. Risk Individual All REPORT BY THE BOARD OF DIRECTORS | SUSTAINABILITY STATEMENT 51 Gender equality and equal pay for work of equal value among own workforce The remuneration of the personnel is based on the compe- tence of each employee and adherence to the principles of equal treatment. In jobs covered by collective agreements, re- muneration is based on the wage categories stipulated by the applicable agreement. Remuneration also takes into account job-specific responsibility premiums, years of experience and the job location’s cost of living category. Gender is not a factor in remuneration under any circumstances. The remuneration of senior salaried employees is determined by the demands of the job and the individual’s competence, experience, perfor- mance and results. Actual positive im- pact Widespread Short Own operations / Employees At Pihlajalinna, all decisions concerning remuneration, rewarding and promo- tions are based on each employee's skills and achievements. Pihlajalinna reg- ularly carries out wage surveys. Work-life balance of own workforce Attractiveness and retaining capacity as employer, increasing work motivation and length of careers, rehabilitative and flexi- ble activities that take the life stage into account and support the worker also provide financial opportunities, employer rep- utation as a responsible party. Opportunity Widespread All Own operations / Employees Pihlajalinna has a working time bank and flexible working hours in place in some functions. At Pihlajalinna, duties in which presence at the workplace is not required to carry them out may be performed remotely. Work-life bal- ance is supported with high-quality supervisory work and compliance with the active caring model. Sickness absence due to stress or accident Risk Individual All Health and safety of own workforce Psychological safety, mental health challenges Actual negative im- pact Individual Short Own operations / Employees The objectives of promoting employee wellbeing include healthy employees, a functional work community and the effective prevention of work-related ill- nesses. At Pihlajalinna, managing people's wellbeing is taken into account as part of all management. Occupational healthcare at Pihlajalinna is based on prevention and an active caring model, which involves training supervisors to address work ability issues among employees as early as possible. Pihlajalinna has an adjusted work operating model and Mental Care (Mielen huoli) ser- vices in place. The wellbeing of personnel is supported by high-quality day-to- day leadership. Work-related injuries Potential negative impact Individual Short The management of occupational safety and health risks identifies work-re- lated hazards, risks and adverse effects, and to systematically eliminate or re- duce these. Working environment risks are assessed by Pihlajalinna’s units at least once a year and whenever significant changes happen. The significance to health of the identified risks is also assessed in workplace surveys conducted by the occupational healthcare function. These are carried out in five-year intervals at a minimum and whenever significant changes happen. A safety walk is regularly carried out in the locations, intended to fa- miliarise the workers with the safety and occupational safety and health of their own workplace and its surroundings in practice. As an expert in the field, Pihlajalinna has the potential to offer its personnel premium healthcare Actual positive im- pact Widespread Short The objectives of promoting employee wellbeing include healthy employees, a functional work community and the effective prevention of work-related ill- nesses. Pihlajalinna regularly assesses the content of the occupational health agreement so that it supports the work ability of the personnel in the best manner possible. Attractiveness and retaining capacity as employer, increasing work motivation and length of careers, rehabilitative and flexi- ble activities that take the life stage into account and support the worker also provide financial opportunities, employer rep- utation as a responsible party. Opportunity Widespread All Sickness absence due to stress or accident Risk Individual All REPORT BY THE BOARD OF DIRECTORS | SUSTAINABILITY STATEMENT 52 Measures against vio- lence and harassment in the workplace in own workforce Pihlajalinna applies an operating model aimed at the preven- tion of inappropriate conduct. Accordingly, all forms of harass- ment or inappropriate treatment of employees are prohibited. Supervisors are under an obligation to address inappropriate conduct or harassment immediately after being informed of the issue. Actual positive im- pact Widespread Short Own operations / Employees Pihlajalinna has an operating model for the management of harassment and inappropriate treatment in place, and adherence to it promotes the wellbeing at work of the personnel. Training and skills de- velopment of own workforce Pihlajalinna offers its personnel equal and non-discriminating opportunities for training and skills devel- opment Actual positive im- pact Widespread Short Own operations / Employees All Pihlajalinna employees are within the scope of annual development dis- cussions. Pihlajalinna Academy is an online learning environment for the com- pany’s personnel that offers new content to support competence develop- ment. The Group's training plan compr ises Group-level training organised by target group based on the Group's strategy and business areas' competence needs. Taking workers under threat of incapacity for work and unemploy- ment into account. Taking the special needs of workers in different situations in life into account. Equal treatment and development of competence and skills is also significant from the point of view of financial risks and op- portunities. Attractiveness and retaining capacity as employer, increasing work motivation and length of careers, equality, ac- tivities that accumulate competence also provide financial op- portunities. Opportunity Widespread All REPORT BY THE BOARD OF DIRECTORS | SUSTAINABILITY STATEMENT 53 S4 Consumers and end-users Sustainability mat- ter Impacts, risks and opportunities (IRO) Impact area Time hori- zon Stage of the value chain and stake- holder Management lever Privacy of consumers and end-users Maintaining patient safety, data protection (cyber attacks against infrastructure and hardware) Actual and potential negative impact Widespread Short Own operations / Consumers and end-users At Pihlajalinna, the purpose of data protection and the management of infor- mation security is to ensure the secure processing of all of Pihlajalinna’s data, particularly patient and personal data, as well as the protection of the privacy of patients, customers and the company’s personnel. The management of in- formation security aims to ensure the integrity, confidentiality and availabil- ity of information. The cyber security development plan guides the develop- ment of information security and the monitoring of the targets set for it. An external Security Operation Centre (SOC) is used, which ensures the continu- ous monitoring of the organisation's information security and identifies and reacts to information security threats and incidents, thereby safeguarding the organisation's information systems and data Customers' privacy, data protection and information security involve significant financial risks. Significant risks include cyber threats against infrastructure or hardware and resulting repu- tational damage and potential liability for damages. Risk Widespread Short, me- dium Privacy protection of consumers and end-users Maintaining patient safety, data protection (cyber attacks against infrastructure and hardware) Actual and potential negative impact Widespread Short Own operations / Consumers and end-users Customers' privacy, data protection and information security involve significant financial risks. Significant risks include cyber threats against infrastructure or hardware and resulting repu- tational damage and potential liability for damages. Risk Widespread Short, me- dium Freedom of expression of consumers and end-users Reputational damage and customer satisfaction Risk Individual Medium term Own operations / Consumers and end-users Pihlajalinna's service principles guide customer service work and operating methods for customer encounters. Pihlajalinna instructs and trains the per- sonnel in communications in the areas of customer privacy protection, data protection and security of services, among others. Consumers' and end-us- ers' access to high-qual- ity information In conjunction with its personnel, Pihlajalinna produces and distributes information about social and healthcare themes relevant to society. However, communication may not jeop- ardise the privacy of customers or employees, data protection or the security of services. Actual positive im- pact Widespread Short Own operations / Consumers and end-users Pihlajalinna instructs and trains the personnel in communications in the areas of customer and worker privacy protection, data protection and security of services, among others. Health and safety of consumers and end-users Pihlajalinna provides customers with health benefits, society and employers with savings, access to care (reducing queues). Patient safety (physical patient safety) and positive impact are strong. Actual and potential positive impact Widespread Short Own operations / Consumers and end-users Pihlajalinna has a comprehensive network of hospitals and private clinics, re- mote services along with extensive diagnostic services. They ensure the quick availability of services and can help wellbeing services counties with the re- duction of queues. Pihlajalinna has enhanced the cooperation of the data protection and information security teams by establishing a regularly conven- ing cooperation group. Pihlajalinna has a cyber security development plan in place that guides the development of information security and the monitor- ing of the targets set for it in coming years. Pihlajalinna aims for an excellent customer experience in all of its services. The systematic collection and processing of feedback enables the company to develop services, processes and operating models according to the custom- ers’ wishes. Pihlajalinna uses the Net Promoter Score (NPS) to measure the customer experience. Significant compromise of patient safety Potential negative impact Individual All Patient safety-related risks are managed, among other measures, by main- taining the professional skills of the personnel, fulfilling quality criteria and ensuring the provision of high-quality services. Assessed and taken into ac- count regularly in conjunction with the risk survey and human rights assess- ment. Customers' health, safety and privacy protection are at the hear of Pihlajalinna's operations. Patient safety-related risks are reputationally damaging and potential liabilities for dam- ages. Risk Individual Short, me- dium REPORT BY THE BOARD OF DIRECTORS | SUSTAINABILITY STATEMENT 54 Protection of consum- ers' and end-users' children Maintaining patient safety, data protection (cyber attacks against infrastructure and hardware) Actual and potential negative impact Widespread Short Own operations / Consumers and end-users Pihlajalinna has enhanced the cooperation of the data protection and infor- mation security teams by establishing a regularly convening cooperation group. Pihlajalinna has a cyber security development plan in place that guides the development of information security and the monitoring of the targets set for it in coming years. Maintaining patient safety, data protection (cyber attacks against infrastructure and hardware) Risk Widespread Short, me- dium Non-discrimination of consumers and end-users Equal treatment of customers Actual positive im- pact Widespread Short Own operations / Consumers and end-users Customer equality can be increased by improving the availability of services through remote services, even in places where local services are not availa- ble. Non-discrimination of customers is also at the heart of Pihla- jalinna’s operations. The associated reputational damage can cause significant financial risks, but the reputational benefit can also provide opportunities. Risk and opportunity Widespread Short, me- dium Access to products and services The public service system is in a crisis. Pihlajalinna provides its customers, society and employers with savings through access to services Actual positive im- pact Widespread Short Own operations / Consumers and end-users Provision of diverse services that match the demand and improving access to remote services. Customer-related access to products and services is also at the heart of Pihlajalinna’s operations. The associated reputational benefit, as well as reputational damage, can cause both finan- cial risks and opportunities. Risk and opportunity Widespread Short, me- dium Own operations / Consumers and end-users Responsible marketing The cornerstones of Pihlajalinna’s marketing and communica- tions are professionalism, reliability, truthfulness and up-to- date medical knowledge. Actual positive im- pact Widespread Short Own operations / Consumers and end-users As a provider of social and healthcare services and a listed company, Pihla- jalinna places a high priority on transparent, timely and reliable stakeholder communications. The cornerstones of Pihlajalinna’s marketing and communi- cations are professionalism, reliability, truthfulness and up-to-date medical knowledge. Responsible marketing is also at the heart of Pihlajalinna's op- erations, and the associated reputational benefit, as well as reputational damage, can cause both significant financial risks and opportunities. Risk and opportunity Widespread Short, me- dium REPORT BY THE BOARD OF DIRECTORS | SUSTAINABILITY STATEMENT 55 G1 Governance Sustainability mat- ter Impacts, risks and opportunities (IRO) Impact area Time hori- zon Stage of the value chain Management lever Corporate culture (busi- ness ethics) As a large company, Pihlajalinna has an opportunity to spur the entire sector on. The industry is strongly regulated, as a result of which the in- dustry has strong ethical practices in patient work and pro- cessing data, for example. Developing transparent processes in business operations in particular, as the formal governance processes must be in or- der. Actual positive im- pact Widespread Short Upstream value chain, own operations / Soci- ety In its operations, Pihlajalinna complies with the currently valid legislation, the orders issued by authorities and the rules and regulations concerning listed companies. The principles applied in the company’s opera- tions are also documented in the Code of Conduct and the anti-corruption and anti-bribery policy. Training on the Code of Conduct is a mandatory part of Pihlajalinna's induction training programme. Supervisors’ capabilities to address problems are developed through training. Pihlajalinna has internal controls in place. Pihlajalinna has a confidential whistleblowing channel that can be used for reporting misconduct and problems in the organisation. Ethical conduct increases trust among stakeholders. Different stakeholders, such as investors, partners, employees and cus- tomers, are of primary importance with regard to ensuring profitable business. Trust can increase the value of the share, enable access to financing packages on better terms, improve the availability of workers, and enhance customer acquisition and retention. Opportunity Widespread Short Political engagement Pihlajalinna operates strongly in the public interface and en- gages in discussions at different levels. Sharing information about corporate activities as part of political decision-making strengthens the diverse knowledge capital for decision-makers. Pihlajalinna has a long tradition of operating as a partner to the public healthcare sector. Actual positive im- pact Widespread Long Own operations / Soci- ety Pihlajalinna actively monitors legislation and its preparation, as well as politi- cal dialogue in general. The company observes ethical policies in political en- gagement. Pihlajalinna is registered in the Finnish Transparency Register to ensure the transparency of lobbying activities. The company does not sup- port political parties or their members. Political engagement can lead to a more favourable legislative framework for private healthcare organisations and thus gen- erate economic benefits. Opportunity Widespread Short Active monitoring of legislation and its preparation and general political dia- logue. Political interaction may involve a reputational risk. Risk Individual Short All interaction takes place solely via the Executive Vice President, Communi- cations and Sustainability or with the approval of the Management Team and therefore can be managed and steered. REPORT BY THE BOARD OF DIRECTORS | SUSTAINABILITY STATEMENT 56 Climate change (E1) EU taxonomy reporting 56 The identification and assessment of material impacts, risks and opportunities (ESRS 2 IRO) 60 Transition plan for climate change mitigation (E1-1) 60 Policies related to climate change mitigation and adaptation (E1-2) 60 Actions and resources in relation to climate change policies (E1-3) 61 Targets related to climate change mitigation and adaptation (E1-4) 61 Energy consumption and mix (E1-5) 61 Gross Scope 1, 2, 3 and Total GHG emissions (E1--6) 62 Template 1: Nuclear and fossil gas related activities Nuclear energy related activities 1. The undertaking carries out, funds or has exposures to research, development, demonstration and deployment of innovative electricity generation facilities that produce energy from nuclear processes with minimal waste from the fuel cycle. No 2. The undertaking carries out, funds or has exposures to construction and safe operation of new nuclear installations to produce electricity or process heat, including for the purposes of district heating or industrial processes such as hydrogen production, as well as their safety upgrades, using best available technologies. No 3. The undertaking carries out, funds or has exposures to safe operation of existing nuclear installations that produce electricity or process heat, including for the purposes of district heating or industrial processes such as hydrogen production from nu- clear energy, as well as their safety upgrades. No Fossil gas related activities 4. The undertaking carries out, funds or has exposures to construction or operation of electricity generation facilities that pro- duce electricity using fossil gaseous fuels. No 5. The undertaking carries out, funds or has exposures to construction, refurbishment, and operation of combined heat/cool and power generation facilities using fossil gaseous fuels. No 6. The undertaking carries out, funds or has exposures to construction, refurbishment and operation of heat generation facilities that produce heat/cool using fossil gaseous fuels. No EU taxonomy reporting The EU taxonomy is a classification system for environmentally sus- tainable economic activities. The Taxonomy Regulation sets six envi- ronmental objectives: climate change mitigation, climate change ad- aptation, sustainable use and protection of water and marine re- sources, transition to a circular economy, pollution prevention and control, and protection and restoration of biodiversity and ecosys- tems. An economic activity that promotes any of these objectives while doing no significant harm to the other objectives can be consid- ered environmentally sustainable. Environmentally sustainable pro- jects should also respect human rights and labour rights. The scope of Pihlajalinna’s operations covered by the climate regula- tions 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 ac- tivities are not within the scope of the classification system, as the production of social and healthcare services is not among the indus- tries with the highest emissions. Pihlajalinna has assessed the taxon- omy eligibility of its economic activities and concluded that the taxon- omy-eligible share of turnover (totalling EUR 704.4 million), capital expenditure (totalling EUR 31.1 million) and operating expenditure (totalling EUR 12.3 million) is 0% for all three. Accordingly, the non-el- igible share of turnover, capital expenditure and operating expendi- ture is 100%. Pihlajalinna does not engage in economic activities re- lating to nuclear power or fossil gases. Information on taxonomy- aligned activities is presented in the tables below. REPORT BY THE BOARD OF DIRECTORS | SUSTAINABILITY STATEMENT 57 Proportion of turnover from products or services associated with Taxonomy-aligned economic activities REPORT BY THE BOARD OF DIRECTORS | SUSTAINABILITY STATEMENT 58 Proportion of CapEx from products or services associated with Taxonomy-aligned economic activities REPORT BY THE BOARD OF DIRECTORS | SUSTAINABILITY STATEMENT 59 Proportion of OpEx from products or services associated with Taxonomy-aligned economic activities REPORT BY THE BOARD OF DIRECTORS | SUSTAINABILITY STATEMENT 60 The identification and assessment of material im- pacts, risks and opportunities The material climate change impacts, risks and opportunities have been identified in the double materiality analysis. A description of the materiality assessment process and criteria is available in section ESRS 2, under IRO-1: Process to identify and assess material impacts, risks and opportunities. Pihlajalinna reports on its actions regarding the material topics identified in the double materiality analysis. Transition plan for climate change mitigation (E1-1) Pihlajalinna has started the preparation of a transition plan during the reporting year. The transition plan draft was reviewed by the Group Management Team in late 2024, and it will be submitted to the Board of Directors to review and approve during the year 2025. Based on the criteria presented in Commission Delegated Regulation (EU) 2020/1818 (Article 12), Pihlajalinna is not excluded from the EU Paris Agreement benchmarks. Policies related to climate change mitigation and adaptation (E1-2) E1 Connections between policies and targets related to climate change adaptation and mitigation Sustainability matter Impacts, risks and opportunities (IRO) Policy Target Metric Climate change adapta- tion GHG emissions from own operations The emissions from Pihlajalinna's own operations are caused by busi- ness, business travel and energy consumption of facilities, among oth- ers. The emissions generated have an actual negative impact on envi- ronment. Actual negative im- pact Environmental policy Risk management pol- icy Quality policy The targets will be published during 2025 once the climate road map is complete. Emissions Climate change mitiga- tion GHG emissions caused by customers' travel and procurement Actual negative im- pact Environmental policy Risk management pol- icy Quality policy More detailed targets will be published during 2025 once the climate road map is complete. The aim is to strengthen the assessment of the need for care and remote services to reduce emissions from cus- tomer travel. In addition, the aim is to develop dialogue with stakeholders and cre- ate targets and measures with supplier partners to reduce emissions from procurement. Emissions caused by cus- tomer travel. Scope 3 emissions from procure- ment. The scope of the measures is the entire value chain. The operating area of own operations is Finland (no other geographical areas). The base year is 2024, and the baseline values are the values for 2024. Result analysis and justifications: All results for 2024 are aligned with the achievement of the planned annual target and long-term target. The targets or metrics have not been validated by a third party. With regard to all future measures, the time horizon is future financial years, or the measures are continuous. The policies described below guide Pihlajalinna's activities to manage and assess material impacts and opportunities related to climate change adaptation and mitigation. The policies cover the following matters: climate change mitigation and climate change adaptation. The following policies cover impacts related to GHG emissions, cli- mate change mitigation and adaptation in own activities and up- stream and downstream value chain. The policies are applied to all Pihlajalinna workers and business throughout the value chain, and they must be complied with in all Pihlajalinna locations and operating countries. The policies are available on Pihlajalinna's website and in- tranet. Environmental policy Pihlajalinna Group's environmental policy compiles the policies for environmental management and practices, such as identifying the en- vironmental impacts of Pihlajalinna’s operations and the continuous development of operations. Pihlajalinna’s environmental policy lays out Pihlajalinna’s commitment to environmental work and guides de- cision-making. Pihlajalinna’s private healthcare services, i.e. occupa- tional health services and private clinics, and hospitals, are certified under the ISO 14001 environmental management standard. Activities are based on the ISO 14001 environmental management framework. As part of Pihlajalinna’s joint management system, it establishes con- sistent operating practices for the company. The impacts related to climate change mitigation and adaptation are assessed in accordance with the environmental policy. The environmental policy is also taken into account in procurement agreements and supplier selection, which is an important lever for Pihlajalinna for mitigating its negative impacts. Systematic environmental management compliant with the environmental policy ensures progress towards targets and is there- fore also aligned with the targets of the climate road map. The Qual- ity Director is the highest body responsible for implementation. As part of the monitoring process, the Chief Legal Officer, in coopera- tion with the Quality Director, maintains a list of acts and regulations concerning Pihlajalinna's environmental perspectives. Environmental perspectives are reviewed once a year by the respective person in charge. The private clinic and hospital service locations have desig- nated persons responsible for environmental affairs. They ensure that environmental perspectives are taken into account in the unit’s oper- ations and monitor the implementation of the environmental pro- gramme. They meet once a month with external waste management experts to review and develop location-specific environmental plans and guidelines. Binding obligations are taken into account in different activities so that there is a sufficient number of skilled personnel, ap- propriate facilities, equipment and functional information systems and a high level of information security. The personnel are required to comply with binding obligations. Compliance with binding obliga- tions is monitored at different levels and with different methods. Pihlajalinna's private clinics are supervised by both Valvira and Re- gional State Administrative Agencies. At Pihlajalinna, compliance with binding obligations is monitored through audits, quality management, feedback, incident reports and self-monitoring, for instance. REPORT BY THE BOARD OF DIRECTORS | SUSTAINABILITY STATEMENT 61 Risk Management Policy and Quality Policy In addition, climate change impacts, risks and opportunities have been taken into account in operations subject to Pihlajalinna's Risk Management Policy and Quality Policy. The Risk Management Policy is described in more detail in section G1-1: Business conduct policies and corporate culture. The Quality Policy is described in section S4-1: Management of material topics and policies. The Risk Management Policy and Quality Policy monitoring processes and sustainability top- ics related to each policy are described in the policy table in section G1. Actions and resources in relation to climate change policies (E1-3) Measures taken during the reporting year 2024 included preparing the climate road map draft and surveying the impacts of operations, such as by further specifying emissions accounting. The setting of emission reduction targets and measures has been started, and they will be approved during 2025. The effectiveness of the measures can- not be assessed yet. As part of the preparation work, Pihlajalinna has planned possible measures with which emissions will be reduced. The healthcare sec- tor consumes energy and resources from the procurement and prop- erty perspectives, but the carbon footprint can be reduced by reduc- ing energy consumption, using renewable energy and optimising op- erations. The use of digital services, such as remote services and elec- tronic communications, reduce travel and thereby emissions. Cus- tomer guidance in using remote services, for instance, has also been taken into account in the future climate road map. Below is a list of possible measures aimed to reduce emissions in future reporting pe- riods: Most important possible measures: procurement 1. The commitment of the biggest suppliers to climate tar- gets. Climate criteria for procurement and training those carrying out procurement in taking climate criteria into ac- count. 2. Encouraging partners to shift away from fossil industry. 3. Extending the service lives of equipment, more effective use of repair services. Most important possible measures: travel 1. Further increasing the capacity utilisation rate of remote appointments 2. Supporting low-emission commuting 3. Leased vehicles to run on renewable electricity, where possible. Most important possible measures: properties 1. Climate criteria used in new property agreements and fol- low-up agreements. 2. Energy overhauls, especially in connection with renova- tions. 3. Requiring or encouraging renewable energy in leased properties. Energy consumption and mix (E1-5) Energy consumption and mix 2024 Total renewable energyconsumption (MWh) 34,473 Share of renewable sources in total energy consumption, % 73% Energy consumption from biomass (MWh) 13,612 Share of purchased energy (MWh) 34,473 Share of self-generated energy (MWh) 0 Total fossil energyconsumption (MWh) 12,692 Share of fossil sources in total energy consumption % 27% Share of purchased energy 12,692 Share of self-generated energy (MWh) 0 Nuclear energy (MWh) 0 Share of nuclearenergy in energy consumption % 0% Total energy consumption(MWh) 47,165 The information is calculated market -based. The base year data includes vehi- cles. The data for 2024 only includes energy in properties, not vehicles. Pihlajalinna's future climate road map and action plan are not de- pendent on external financing. The requirements for financial re- sources will be calculated during 2025. The cost of the measures re- quired by implementing Pihlajalinna's action plan for properties and the cost impacts of measures to reduce emissions from procure-ment will be estimated during 2025. Therefore, Pihlajalinna has not yet as- sessed the amount of OpEx and CapEx in more detail. Targets related to climate change mitigation and adaptation (E1-4) Objectives pursuant to the requirements of the standard have not yet been drafted for sustainability matters, but they will be prepared in 2025. Sustainability matters and the implementation of the related policies and targets and the effectiveness of measures will be moni- tored once the emission reduction targets and measures have been set. The preparation of emission reduction targets has been started, and the aim is for the Board of Directors to approve them during 2025. The proposed targets or metrics have not been verified by a third party. With regard to all future measures, the time horizon is fu- ture financial years, or the measures are continuous. REPORT BY THE BOARD OF DIRECTORS | SUSTAINABILITY STATEMENT 62 GHG emissions (tCO2eq) 2024 Scope 1 emissions 446.09 Scope 2 emissions Location-based emissions 2,841.64 Market-based emissions 1,899.38 Scope 3 27,769.23 1. Purchased goods and services 18 049,31 3. Fuel and energy-related activities 1,093.15 4. Upstream transportation and distribution 39.45 5. Waste generated in operations 12.3 6. Business travelling 772.98 7. Employee commuting 4 617,95 9. Downstream transportation 3,115.89 13. Downstream leased assets 68.21 Total GHG emissions Location-based emissions 31 433,88 Market-based emissions 30,114.71 Gross Scope 1, 2, 3 and Total GHG emissions (E1-6) Biogenic GHG emissions (tCO2eq) 2024 Scope 1 0 Scope 2 2 523,00 Scope 3 55,66 Emissions intensity per net revenue (tCO2eq / MEUR) 2024 Location-based based on emissions 44.6 Market-based based on emissions 42.8 Net revenue used for calculating intensity (MEUR) 704.4 Revenue (other) 0.0 Total revenue (in financial statements) 704.4 REPORT BY THE BOARD OF DIRECTORS | SUSTAINABILITY STATEMENT 63 GHG emission accounting policies Pihlajalinna's energy and greenhouse gas calculations and measure- ment are based on the GHG Protocol Corporate Standard (version 2004) and GHG Protocol Corporate Value Chain (Scope 3) Accounting and Reporting Standard (version 2011). The consolidation method for the preparation of the data for the metrics is operational control. The data was collected from various systems and consolidated at the Group level. The data was validated by the respective persons in charge and input in a joint data collection platform. The emissions were calculated by linking the source data with emission factors. The base year of Pihlajalinna's GHG emissions accounting is 2023, which is the first representative year for which a GHG inventory re- port was prepared. The base year was re-calculated in 2025, as the data collection methods developed and the coverage of input data improved in conjunction with the accounting for 2024. However, the accounting data for the base year has not been published in this sus- tainability statement due to the lack of validation; instead, it will be published in conjunction with the next reporting period. No methodo- logical changes took place in the reporting between the base year and this report. The analysis includes the following greenhouse gases: carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), sulphur hexafluoride (SF6), nitrogen trifluoride (NF3), hydrofluorocarbons (HFCs) and per- fluorocarbons (PFCs). The emissions of these greenhouse gases are expressed as CO2 equiv- alent (CO2eq), which is based on their global warming potential on a 100-year time horizon (GWP100). The global warming potential (GWP) values of greenhouse gases are based on the fourth, fifth or sixth Assessment Report (AR4, AR5 or AR6) of the Intergovernmental Panel on Climate Change (IPCC) according to the methodological choices of the emission factor publishers used in the accounting. The emission factors of aviation have been expanded so as to take the radiative forcing impact caused by the emitted gases and aerosols and additional impacts caused by changing cloud cover into account. A centrally estimated factor applied to the GWP100 value is used for this purpose. The aim of this assessment is to take into account the additional impact based on best available scientific evidence while being consistent with the UNFCCC convention. The total emissions in this report include emissions from electricity according to both the market-based and location-based methods. There are no carbon offsets or removals, and therefore they are not deducted from the total. A local emission factor that is as relevant as possible has been chosen for each activity using best judgement. In addition to locality and rele- vance, other perspectives included the availability of emission factors and the consistency of the choice of emission factor publisher throughout the document. Scope 1 and 2 accounting used Exiobase, DEFRA and AIB emission fac- tors from the Carbon+Alt+Delete emission factor database. For dis- trict heating, the most recent nominal emission factors of district heating companies were used for all sites. In addition, Scope 1 ac- counting used direct emission data from partners' reports. Scope 3 accounting used Exiobase, EcoInvent and DEFRA emission factors from the Carbon+Alt+Delete emission factor database and Finnish En- vironment Institute and Statistics Finland emission factors. The ac- counting also used Posti and VR emission factors. The most recent nominal emission factors from AIB, DEFRA, IEA and district heating companies were used in calculating the life cycle impacts of energy generation. In addition, emission data provided by partners was used, where possible. The difference between market-based and location-based Scope 2 emissions and the difference between market-based and location- based total emissions is due to the life cycle emissions of purchased energy (category 3.3), which have also been calculated based on mar- ket and location. Other Scope 3 emissions have been calculated based on location according to the GHG protocol guidelines. The accounting data was collected with the maximum extensiveness and coverage within the resources available. Shortcomings were ob- served in the data collection systems with regard to properties and procurement in particular and therefore estimates made based on the previous year and the spend-based calculation method were used in the accounting. Pihlajalinna has excluded the following categories from its GHG ac- counting for the reporting year 2024, because they are not relevant to Pihlajalinna's activities or the emission data is included in other categories. 3.1.1 Cloud computing and data centre services 3.2 Capital goods 3.8 Upstream leased assets 3.10 Processing of sold products 3.11. Use of sold products 3.12 End-of-life treatment of sold products 3.14 Franchising 3.15 Investments REPORT BY THE BOARD OF DIRECTORS | SUSTAINABILITY STATEMENT 64 Own workforce (S1) The identification and assessment of material impacts, risks and opportunities 64 Material impacts, risks and opportunities related to Pihlajalinna's own personnel and their management (SBM-3) 64 Management of material topics and policies (S1-1) 66 Engaging with own workforce (S1-2) 66 Processes to remediate negative impacts and channels for own workers to raise concerns (S1-3) 67 Actions (S1-4, S1-5) 68 Characteristics of the undertaking’s employees (S1-6) 76 Diversity metrics (S1-9) 77 Adequate wages (S1-10) 77 Health and safety metrics (S1-14) 77 Compensation metrics (S1-16) 77 Incidents, complaints and severe human rights impacts (S1-17) 78 Identification and assessment of material im- pacts, risks and opportunities The material impacts, risks and opportunities related to the com- pany’s own workforce have been identified in the double materiality analysis described in section ESRS2 under IRO-1: Process to identify and assess material impacts, risks and opportunities. Pihlajalinna re- ports on its activities in the areas identified as material in the double materiality analysis. Material impacts, risks and opportunities related to Pihlajalinna's own personnel and their man- agement (SBM-3) A description of the material impacts, risks and opportunities and their interaction with the strategy and business model is presented in section ESRS2, under SBM-3: Material sustainability topics in Pihla- jalinna's activities and their link with the strategy. REPORT BY THE BOARD OF DIRECTORS | SUSTAINABILITY STATEMENT 65 S1 Links between policies related to own workforce and targets Sustainability matter Impacts, risks and opportunities (IRO) Stability of employment relationships in own workforce Pihlajalinna offers stable employment relationships and the possibility of exercising a profession Actual positive impact From the employer’s point of view, the opportunities are major: attractiveness and retention as an employer, work motivation, length of careers, coping at work, productivity, supervisory work and leadership. Opportunity Ensuring the working conditions and wellbeing of personnel as well as health and safety is also significant from the perspective of financial risks and opportuni- ties. Stress or an accident can result in long sickness absences, and offering competitive pay can affect short-term profitability. Risk Working hours of own workforce Night work puts a strain on the personnel Actual negative impact From the employer’s point of view, the opportunities are major: attractiveness and retention as an employer, work motivation, length of careers, coping at work, productivity, supervisory work and leadership. Opportunity Ensuring the working conditions and wellbeing of personnel as well as health and safety is also significant from the perspective of financial risks and opportuni- ties. Stress or an accident can result in long sickness absences, and offering competitive pay can affect short-term profitability. Risk Adequate wages for own workforce From the employer’s point of view, the opportunities are major: attractiveness and retention as an employer, work motivation, length of careers, coping at work and productivity. A positive employer image and reputation also provide financial benefits. Opportunity Wage increases can increase costs, affecting short-term profitability. Risk Gender equality and equal pay for equal work among own workforce The remuneration of the personnel is based on the competence of each employee and adherence to the principles of equal treatment. In jobs covered by collective agreements, remuneration is based on the wage categories stipulated by the applicable agreement. Remuneration also takes into account job-spe- cific responsibility premiums, years of experience and the job location’s cost of living category. Gender is not a factor in remuneration under any circum- stances. The remuneration of senior salaried employees is determined by the demands of the job and the individual’s competence, experience, performance and results. Actual positive impact Work-life balance of own workforce Attractiveness and retaining capacity as an employer, increasing work motivation and the length of careers, rehabilitative and flexible operations that take into account the life cycle stages and support the employee also provide financial opportunities, employer reputation as a responsible party. Opportunity Sickness absences due to stress or an accident Risk Health and safety of own workforce Psychological safety, mental health challenges Actual negative impact Work-related injuries Potential negative impact As an expert in the field, Pihlajalinna has the potential to offer its personnel premium healthcare Actual positive impact Sickness absences due to stress or an accident Risk Attractiveness and retaining capacity as an employer, increasing work motivation and the length of careers, rehabilitative and flexible operations that take into account the life cycle stages and support the employee also provide financial opportunities, employer reputation as a responsible party. Opportunity Measures against violence and harassment in the workplace in own workforce Pihlajalinna applies an operating model aimed at the prevention of inappropriate conduct. Accordingly, all forms of harassment or inappropriate treatment of employees are prohibited. Supervisors are under an obligation to address inappropriate conduct or harassment immediately after being informed of the issue. Actual positive impact Training and skills development of own work- force Pihlajalinna provides its personnel with equal opportunities for training and competence development Actual positive impact Equal treatment and the development of competence and skills are also significant from the point of view of financial risks and opportunities. Attractiveness and retaining capacity as an employer, increasing work motivation and the length of careers, equal, competence -building activities also provide financial op- portunities. Opportunity REPORT BY THE BOARD OF DIRECTORS | SUSTAINABILITY STATEMENT 66 Management of material topics and policies (S1-1) A description of Pihlajalinna’s management system and key policies can be found in section ESRS 2, under GOV-1: The role of senior man- agement in sustainability management. Information on the key poli- cies can be found in the policy table in section G1. In its human rights commitment, Pihlajalinna is committed to respect- ing the human rights of its own workforce and to complying with the following international principles for managing the impacts, risks and opportunities concerning its own workforce: UN Universal Declara- tion of Human Rights, International Labour Organization (ILO) Decla- ration on Fundamental Principles and Rights at Work, UN Guiding Principles on Business and Human Rights and OECD Guidelines for Multinational Enterprises. Pihlajalinna is committed to the UN Global Compact initiative and respects internationally recognised principles of human rights and equality. Pihlajalinna’s human rights assessment is reviewed every two years by the Group’s sustainability working group. The assessment is available on the company’s website. Pihlajalinna's Code of Conduct guides the activities of everyone at Pihlajalinna. The Code of Conduct describes the way the Group oper- ates, based on the principles of good corporate governance, legal compliance, transparency, fairness and confidentiality. Each Pihla- jalinna professional is responsible for knowing the Code of Conduct and complying with the Code in their work. Every Pihlajalinna em- ployee must complete mandatory training on the Code of Conduct and commit to complying with the Code, which also entails respecting human rights. The Group Management Team is in charge of preparing the Code of Conduct and the acting management is in charge of de- ploying the Code throughout the organisation. The follow-up is car- ried out actively and workers are personally reminded of the obliga- tion to complete training. In addition to the Code of Conduct, daily work is guided by the more detailed instructions and policies available in the intranet and on our website. Pihlajalinna is committed to promoting the diversity, equity and inclu- sion of its own workforce by e.g. signing the national FIBS diversity commitment. Pihlajalinna does not condone discrimination based on a person's origin, nationality, religious beliefs, ethnicity, gender, age or any other such factor. Engaging with own workforce (S1-2) Pihlajalinna regularly listens to its personnel. The regular personnel survey (Pihliksen pulssi) and the DEI survey on diversity, equity and inclusion help to monitor the impacts of actions and observe poten- tial areas for development. The Group's extensive personnel survey, Pihliksen pulssi, is conducted twice a year. The survey is an important tool for assessing, monitoring and developing the state and practices of the work community, as well as for dialogue between personnel and supervisors. The Pihliksen pulssi survey is supplemented by lighter mini-pulse surveys carried out at regular intervals. The results of the Pulse are used both for Group-level decision-making and devel- opment as well as team-specifically. Group-level results and their use is communicated to the personnel in Kimpassa meetings and person- nel information sessions. The results of the pulse surveys are dis- cussed and used in the team’s performance and development discus- sion. Pihlajalinna has also used the open-ended feedback from the personnel survey as part of planning for the coming strategy period. In addition to the pulse survey, the views and opinions of the com- pany among practitioners who work for Pihlajalinna are monitored by means of regular practitioner evenings. Pihlajalinna respects its employees’ right to unionisation and devel- ops cooperation based on trust and openness with employee repre- sentatives. Pihlajalinna is a member of the Finnish Association of Pri- vate Care Providers (HALI) and, based on its membership, obliged to comply with universally binding collective agreements, namely the collective agreement for the healthcare services sector and the col- lective agreement for the private social services sector. To promote interactive cooperation between Pihlajalinna and its per- sonnel, Pihlajalinna engages in Kimpassa ("Together") activities. It is a cooperative organisation spanning the entire Group. The Kimpassa cooperation organisation meets twice a year, in spring and autumn. The people involved in the activities include Kimpassa representatives selected by employees, shop stewards and the occupational safety and health organisation. The aim of the activities is to develop Pihla- jalinna’s equity, dialogue and trust between management and per- sonnel and to meet the requirements set out in the Act on Co-opera- tion within Undertakings. The meeting memos of the meetings are kept for everyone to see on the intranet. Everyone at Pihlajalinna is responsible for monitoring wellbeing at work and working conditions, ensuring safety and addressing prob- lems. The working conditions of the personnel are monitored contin- uously and reported regularly to the business and Group manage- ment. Pihlajalinna also actively cooperates with the occupational safety and health organisation. Pihlajalinna’s regional and company- specific occupational safety and health cooperation groups meet reg- ularly four times a year and discuss occupational safety and health matters in accordance with a uniform agenda. The key task of the co- operation groups is to ensure safe, healthy and fair working condi- tions and to promote the implementation of the occupational safety and health action programme. The cooperation group also discusses other matters covered by the Act on Co-operation within Undertak- ings with personnel representatives. The cooperation group includes the occupational safety and health delegate, regional shop steward, occupational safety manager, HR manager and the regional director or CEO as the chair. If necessary, a representative of occupational healthcare, for example, can also be invited to the meeting. The per- sonnel in the workplace are kept up to date on occupational safety and health cooperation, and the meeting memos are kept available to everyone on the intranet. Pihlajalinna’s CEO, Executive Vice President, Communications and Sustainability, and Executive Vice President, People and Culture meet with the chief shop stewards on a quarterly basis. The HR directors of the businesses engage in regular dialogue with the chief shop stew- ards of the Group on a monthly basis. In addition, HR managers and regional shop stewards meet at least once a quarter. Pihlajalinna Group’s HR administration has operational responsibility for ensuring that cooperation is carried out in accordance with legislation and that the decisions and actions are influenced by the perspectives of the personnel. In addition, the personnel are encouraged to engage in active dia- logue with supervisors or shop stewards in order to identify potential negative impacts and take corrective measures. Pihlajalinna has a re- porting system for personnel to report any occupational safety devia- tions they observe and their grievances. Pihlajalinna has identified and assessed its human rights impacts in accordance with its duty of due diligence, covering its own personnel and customers. In addition, Pihlajalinna has carried out a preliminary assessment on employees in its value chain, and this work will con- tinue in order to achieve a more comprehensive understanding. In ac- cordance with the duty of due diligence, practices and operating methods are continuously developed so that respect for human rights is taken into account in all operations. REPORT BY THE BOARD OF DIRECTORS | SUSTAINABILITY STATEMENT 67 Pihlajalinna has identified the need to develop its internal reporting channels and has taken measures to ensure that, in the coming years, even better information will be obtained from the perspective of em- ployees who may be particularly vulnerable to potential negative hu- man rights impacts. Since autumn 2024, the experience and perspec- tive of young employees has been surveyed as part of Pihlajalinna’s extensive personnel survey. Processes that follow the duty of due dili- gence aim to avoid, prevent and mitigate potential and actual adverse human rights impacts. Processes to remediate negative impacts and channels for own workers to raise concerns (S1-3) Processes to remediate negative impacts Pihlajalinna takes action on all observations of potential human rights violations and illegal activities in respect of values and agreements, regardless of whether the human rights violations have been commit- ted by a person belonging to its own or the value chain’s workforce, affected communities or consumers and end-users. Clear processes help to handle matters systematically so that human rights violations can be addressed and corrective measures can be taken immediately. Targeted measures to minimise and prevent negative impacts are de- fined for all the most critical potential and actual human rights im- pacts. Each Pihlajalinna professional is responsible for reporting any sus- pected breaches of legislation or infringement of Pihlajalinna’s Code of Conduct without delay. The supervisors must process any suspi- cions they have become aware of in an appropriate manner and take appropriate corrective action. The supervisors must treat all parties involved in a respectful manner and ensure that the employee does not suffer any negative consequences as a result of reporting their suspicion, as well as report any incidents or suspicions to the Group's legal department. Pihlajalinna also has a confidential whistleblowing channel. Pihlajalinna has an occupational safety and health action plan based on risk assessments. The action plan sets out responsibilities and per- formance indicators related to occupational safety. Drafting an occu- pational safety and health action plan is a legal requirement, and the action plan is reviewed annually. In accordance with the occupational safety and health action programme, the objective of occupational safety and health is to ensure healthy, safe and fair working condi- tions for everyone working at Pihlajalinna, to support measures to maintain work ability and to encourage everyone to contribute to fos- tering a good working atmosphere and an open flow of information. Pihlajalinna’s local occupational safety and health committees also prepare local action plans and set local occupational safety targets. Monitoring the working conditions and ensuring safety is every em- ployee’s responsibility. Pihlajalinna's operating principle for prevent- ing occupational accidents is to identify and assess the hazards that cause accidents and to eliminate or manage the risks. Pihlajalinna uses the HSE Lite electronic system for occupational safety manage- ment and development. Written documentation of the operating principles will be completed during the upcoming financial year. The personnel must report any occupational safety deviations they ob- serve with HSE Lite reporting system. This is a proactive occupational safety tool that Fennia offers to its occupational accident insurance customers to develop occupational safety. The tool is available to everyone at Pihlajalinna and reports can be submitted via an open link or QR code. The reporter’s supervisor is primarily responsible for processing safety observation reports. The reporter will be informed by email of the progress of processing and the corrective measures taken. Safety observations are discussed in a team meeting headed by the supervisor. The effectiveness of corrective actions is assessed on a case-by-case basis. In addition to safety observation reports, the system is also used for risk assessments and recording work-related accidents. Channel for bringing up grievances or needs Pihlajalinna's confidential whistleblowing channel can be used for re- porting misconduct and problems in the organisation. The whistle- blowing channel is implemented in partnership with a neutral third party to ensure that the anonymity of the person who submits the re- port is maintained. A more detailed description of the whistleblowing channel policies concerning the protection of persons using struc- tures and processes from countermeasures can be found in section G1, under Mechanisms for identifying, reporting and investigating concerns. The whistleblowing channel is available on Pihlajalinna’s in- tranet and website in Finnish, Swedish and English, and its function- ing will be regularly communicated to the personnel and stakehold- ers. Induction training on the cooperation organisation, incident and re- porting channels and the personnel survey is part of Pihlajalinna’s group-level general induction training for all Pihlajalinna employees. The supervisor is responsible for the implementation of the induction training. The personnel’s awareness and confidence in the process of reporting grievances is assessed as part of the self-monitoring survey. Working conditions, equal treatment and equal opportunities for all Pihlajalinna respects its employees’ right to unionisation and devel- ops cooperation based on trust and openness with employee repre- sentatives. Pihlajalinna’s Kimpassa cooperation organisation covers the entire Group and empowers employees to exercise influence on their jobs and working environments. Work-life balance of personnel, personnel health and safety, personnel working hours The purpose of occupational safety and health cooperation is to en- sure compliance with occupational safety and health regulations and to improve the working environment and working conditions through the regulatory control of occupational safety and health authorities and cooperation between the employer and employees. The Group’s cooperation groups meet regularly four times a year and discuss oc- cupational safety and health matters in accordance with a uniform agenda. In accordance with its duty of due diligence, Pihlajalinna has identi- fied that, as a significant health and social care operator, it has poten- tial and actual impacts on human rights and their realisation, both di- rectly and indirectly through its value chain. In 2024, Pihlajalinna con- vened a multidisciplinary working group to assess Pihlajalinna’s po- tential and actual impacts on human rights. Through these stake- holder discussions, Pihlajalinna has identified, for example, that young employees are in a vulnerable position. Pihlajalinna has policies concerning its own workforce that promote the inclusion of the workforce and positive behaviour, particularly with regard to vulnerable groups. Young employees have been partic- ularly taken into account in Pihlajalinna’s induction programme. Pihlajalinna's induction training coaching for supervisors describes concrete ways for supervisors to support new employees and strengthen the resources of young people at the beginning of their careers. Supervisors have also been provided with training on sup- porting young people’s mental health. REPORT BY THE BOARD OF DIRECTORS | SUSTAINABILITY STATEMENT 68 Measures (S1-4, S1-5) The scope of the measures for material impacts related to the risks and opportunities related to the own workforce is the own personnel and own operations in Finland (the Group has no other geographical areas). The financial resources allocated to all current and planned measures are personnel resources. For all measures, the time horizon is future financial years (2025–2026) or the measures are continuous. With regard to the measures, Pihlajalinna has not identified any nega- tive impacts on its own workforce caused by the transition to a greener and climate-neutral economy. Positive impacts Material positive impacts are related to the stability of employment relationships of our own workforce, adequate wages, health and safety, gender equality and equal pay for equal work among our own workforce, training and skills development of our own workforce and measures to prevent violence and harassment in the workplace in the workforce. During the past year, Pihlajalinna’s HR department has harmonised several employment-related practices and processes. In the coming financial years, Pihlajalinna’s HR will continue the ongoing work of identifying and harmonising areas for development of personnel pro- cesses. Pihlajalinna considers that managing people’s wellbeing is not a separate activity, but wellbeing is part of all management. Pihla- jalinna has continued the development of work ability themes that began in 2023. The work has been promoted in cooperation with oc- cupational healthcare and employment pension insurance compa- nies. In the coming financial years, Pihlajalinna’s HR will, in coopera- tion with occupational healthcare, clarify processes related to work ability and occupational healthcare cooperation to make them even smoother and more consistent at Group level. In order to support the efforts promoting the health and safety of the company’s own work- force, Pihlajalinna’s wellbeing at work team’s resources were strengthened with the appointment of a new occupational safety and health manager in autumn 2024. Employment stability Pihlajalinna offers stable employment relationships and the possibil- ity of exercising a profession. During the year under review, Pihla- jalinna has been building up a uniform recruitment process. With joint recruitment, a new recruitment organisation and processes have been created, recruitment practices have been harmonised and the resources of recruitment services have been strengthened. The effec- tiveness of the measures is monitored and assessed by Pihlajalinna’s recruitment steering group. The development of joint recruitment ac- tivity will continue in the coming financial years. Adequate wages At Pihlajalinna, the remuneration of workers is based on the demand- ing nature of each worker’s work, competence, performance at work and compliance with the principles of equal treatment. Pihlajalinna recognises and rewards exemplary action and significant achieve- ments. Pihlajalinna also offers personnel benefits to support the well- being and job satisfaction of personnel. Adequate wage can reduce fi- nancial pressure and improve the wellbeing of employees and in- crease social equality. Pihlajalinna carried out a wage survey in ac- cordance with the equality and non-discrimination plan and a job grading workers with contractual salary in 2024. In addition, Pihla- jalinna has invested in building remuneration as a whole. Remunera- tion measures apply to employees. The aim is to meet the require- ments of the upcoming EU Wage Transparency Directive and to bring transparency to job grades. The impacts of the measures are assessed as part of the wage survey and in regular dialogue with shop stew- ards. Pihlajalinna will continue to operate in accordance with the wage harmonisation plans and develop remuneration as a whole. Training and skills development of workforce Pihlajalinna provides its personnel with equal opportunities for train- ing and competence development. Successful induction training sup- ports the wellbeing of personnel. An independent general induction training course has been published in Pihlajalinna’s online learning environment, providing a good general understanding of Pihlajalinna as a company, basic knowledge and understanding of work-related rights and responsibilities, and how Pihlajalinna as an employer sup- ports the wellbeing and development of personnel. The development of Pihlajalinna’s induction training will continue in the coming finan- cial years. In addition to strengthening the professional competence of person- nel, Pihlajalinna will offer diverse, targeted training on topics such as diversity, living in change and modern work to its personnel in 2025. In addition, supervisors will be offered themed training courses re- lated to work ability management, change management, giving feed- back and employment relationship skills, among other things, during the coming year. Pihlajalinna uses internal expertise, external stake- holders and partners in the planning and implementation of training. The aim is for everyone at Pihlajalinna to have the necessary compe- tence to achieve the goals and the opportunity to develop and main- tain their own professional competence. Pihlajalinna regularly as- sesses the effectiveness of the measures in the light of the objectives set for competence management. Gender equality and equal pay for equal work among own work- force Pihlajalinna has an equality and non-discrimination plan to produce positive impacts for the company’s personnel. In 2024, Pihlajalinna developed remuneration as a whole, built a due diligence process concerning human rights and created a programme promoting diver- sity, equity and inclusion for the years 2025–2026. In accordance with the equality and non-discrimination plan, Pihla- jalinna focuses in particular on the development of equal pay and re- cruitment as well as work-life balance, strengthening a corporate cul- ture in line with values and strengthening the competence of its per- sonnel in terms of equality and non-discrimination. This development work will define Pihlajalinna’s work community principles, promote Pihlajalinna’s DEI programme, update Pihlajalinna’s current instruc- tions and operating models for managing harassment and inappropri- ate treatment and prepare for compliance with the Wage Transpar- ency Directive. The work is led by Pihlajalinna’s HR, and internal stakeholders are involved in the work. At Pihlajalinna, the equality and non-discrimination situation is moni- tored and assessed regularly through personnel surveys. In addition, data is collected on the positioning of women and men in different personnel groups and positions, for instance. In connection with the update of the plan, the achievement of the goals set for equality and non-discrimination work will be reported to the Group’s management and personnel. Group HR is responsible for monitoring, assessing and reporting on the implementation of equality and non-discrimination. Measures against violence and harassment at the workplace Pihlajalinna applies an operating model aimed at the prevention of in- appropriate conduct. Accordingly, all forms of harassment or inappro- priate treatment of employees are prohibited. Supervisors are under an obligation to address inappropriate conduct or harassment imme- diately after being informed of the issue. Pihlajalinna cooperates closely with the occupational accident insurance company in the pre- vention of work-related accidents and the prevention of violence and harassment at the workplace. To support the development of occupa- tional safety, the new position of occupational safety and health man- REPORT BY THE BOARD OF DIRECTORS | SUSTAINABILITY STATEMENT 69 ager was established in autumn 2024. During the past year, Pihla- jalinna has strengthened supervisors’ occupational safety manage- ment skills through targeted online training courses and increased communications related to the topic. The goal of occupational safety and health work is to ensure healthy, safe and fair working conditions for everyone at Pihlajalinna. The impacts are assessed through Pihla- jalinna’s occupational safety and health targets and metrics. During the next financial year, Pihlajalinna’s operating model for preparing for and preventing the threat of violence will be updated. Pihlajalinna also strives to improve the personnel’s wellbeing at work through high-quality supervisory work. Pihlajalinna has invested in the development of management, and as a result of this work, Pihla- jalinna’s leadership principles were defined and launched. Pihla- jalinna’s leadership principles describe what kind of leadership is aimed for and valued at Pihlajalinna. The leadership principles were defined in cooperation with the personnel. The impacts of the measures are assessed as part of the annual extensive personnel sur- vey and work ability management metrics. The assessment of psycho- social stress is carried out in cooperation with supervisors and Group HR’s occupational safety and health department. The assessment of psychosocial workload factors is part of the workplace survey carried out by occupational healthcare. Effectiveness of measures Pihlajalinna monitors and assesses the effectiveness of the measures in accordance with the operating principle of continuous develop- ment. Once a year, Pihlajalinna conducts an extensive Pihliksen pulssi personnel survey, supplemented by more frequent pulse surveys throughout the year. The purpose of the extensive personnel survey is to measure and monitor the implementation of Pihlajalinna’s man- agement principles, the functionality of the work community, the wellbeing at work of personnel and cohesion. The Pihliksen pulssi sur- vey helps to monitor the effects of the measures taken and to ob- serve potential areas for development. Smaller pulse surveys monitor the development of the employee experience and the work ability in- dex during the year. In addition to the extensive personnel survey and pulse surveys, Pihlajalinna’s HR, occupational safety and health, management and supervisors monitor the wellbeing and job satisfaction of the person- nel in their area of responsibility from the perspective of several dif- ferent metrics. Occupational healthcare monitors the work ability of workers through workplace surveys and health examinations, for ex- ample. Pihlajalinna also monitors the effectiveness of its activities in joint steering groups and meetings held with external stakeholders, such as occupational healthcare and earnings-related pension insurance companies. Pihlajalinna has internal working groups and steering groups responsible for the progress and monitoring of key measures and reporting on their effectiveness to senior management. The achievement of the objectives set for occupational safety and health is monitored by means of, for example, the number of safety observa- tion reports, the number of occupational accidents and commuting accidents, accident frequency, work ability assessments and work at- mosphere surveys. Cooperation groups and the Kimpassa organisa- tion are also key internal forums from the point of view of monitoring effectiveness. The management and the sustainability working group regularly re- view and assess human rights efforts, and related risks are addressed as part of the Group’s risk management process. In connection with the review, it is ensured that the actions taken in accordance with the duty of due diligence do not cause or promote material negative hu- man rights impacts related to the company’s own workforce. Pihla- jalinna strives to fulfil its duty of due diligence in human rights mat- ters as part of the company’s decision-making process. The due diligence process helps to identify current and potential im- pacts on people and to address any shortcomings immediately. Cor- rective processes support the principle and enable the respect and implementation of human rights as part of the operations. The as- sessment of adverse impacts on human rights and corrective measures are carried out as part of human rights due diligence and in cooperation between different functions. Material impact manage- ment is carried out in cooperation with different stakeholders. The work involves, among others, Group HR, regional and company-spe- cific HR managers, shop stewards, the occupational safety organisa- tion, occupational healthcare, the occupational accident insurance company and earnings-related pension insurance companies. Pihla- jalinna has described the available resources in connection with the implemented, planned and ongoing measures. Negative impacts At Pihlajalinna, there are potential and actual negative impacts on the working hours of employees, work-life balance and the health and safety of employees. During 2024, Pihlajalinna implemented several development measures aimed at developing leadership, strengthening wellbeing at work, promoting modern working methods and harmonising policies related to employment relationships and recruitment. The aim of the measures is to improve the employee experience of the company’s own personnel and prevent negative impacts on the company’s own workforce. Pihlajalinna aims to improve the wellbeing at work of its personnel through, for example, high-quality supervisory work, work arrangements, occupational health services and active support as well as development projects that support wellbeing at work. Pihlajalinna has a working time bank and flexible working hours in place in some functions. At Pihlajalinna, duties not tied to the employer's workplace may be performed remotely. The management of occupational safety and health risks aims to identify work-related hazards, risks and adverse effects, and to sys- tematically eliminate or reduce these. Working environment risks are assessed by Pihlajalinna’s units at least once a year and whenever sig- nificant changes happen. The significance to health of the identified risks is also assessed in workplace surveys conducted by the occupa- tional healthcare function. These are carried out in five-year intervals at a minimum and whenever significant changes happen. Pihlajalinna employees are covered by statutory occupational healthcare as well as occupational accident and occupational disease insurance. Work- related illnesses and the causes of absences are monitored at the an- nual level at Pihlajalinna. The effectiveness of the measures is moni- tored and analysed by Pihlajalinna’s HR. Working time of workforce Pihlajalinna prevents and mitigates negative impacts related to the working hours of its own workforce, such as the burden of night work, in many different ways. Pihlajalinna actively cooperates with occupational healthcare regarding the burden related to night work. Occupational healthcare monitors employees’ work ability through workplace surveys and health examinations, for example. Monitoring rest periods in accordance with collective agreements, providing se- curity services and planning work shifts also help to alleviate the bur- den caused by night work. Occupational safety and health plays a key role in preventing negative impacts related to working hours. Each Pihlajalinna unit annually carries out and updates a unit-specific risk assessment. Measures to prevent and mitigate the burden of night work are particularly aimed at personnel working in shifts. The out- come of these measures is reasonable working hours and ensuring safe and healthy working conditions. The impacts are assessed in co- operation with the supervisor, occupational healthcare and occupa- tional safety and health. Pihlajalinna will continue to implement the REPORT BY THE BOARD OF DIRECTORS | SUSTAINABILITY STATEMENT 70 current measures and invest further in the development of occupa- tional safety. The model Pihlajalinna has an active caring model in place, aimed at resolving challenges related to work ability and performance in a pro- active and systematic manner. The supervisor is responsible for allo- cating resources and for the occupational health and safety of work- ers. Active dialogue in accordance with Pihlajalinna’s active caring model and regular target and development discussions ensure that the supervisor is aware of the worker’s work ability and possible work-related workload factors, such as night work, in order to be able to react proactively to any workload factors. The impacts of the prevention and mitigation measures related to the negative impacts of the working hours of Pihlajalinna's own work- force are assessed in cooperation with occupational safety and health and occupational healthcare. Annual risk surveys, workplace surveys carried out every 3 to 5 years and the Regional State Administrative Agency’s inspection reports are discussed in cooperation groups. Sev- eral internal and external stakeholders participate in the prevention and mitigation of the impacts, such as Pihlajalinna’s HR and occupa- tional safety and health, supervisors and occupational healthcare. Pihlajalinna will continue to operate in accordance with the current measures and invest in the development of occupational safety in the coming financial years. Work-life balance There are potential negative impacts on the work-life balance of Pihlajalinna's own workforce. If the workload reaches unreasonable levels, it affects work-life balance and workers can become unreason- ably stressed. Pihlajalinna has prevented and mitigated potential neg- ative impacts through the following measures: monitoring working hours and limiting overtime and working hours in employment con- tracts, adopting an adjusted work operating model, working time bank and flexible working hours in some services and functions, and allowing remote work for tasks that are not tied to the employer’s workplace. Pihlajalinna takes into account the special needs of employees in dif- ferent situations in life as far as possible. Pihlajalinna wants to make it easier for workers to reconcile work and family life, and the aim is to enable them to return from family leave without problems. Pihla- jalinna takes a positive approach to different family situations and wants to make the related family leaves as smooth as possible. The employer and the worker can jointly agree on working time arrange- ments according to the worker’s needs and the employer’s possibili- ties. Agreed working time equalisation periods or a working time bank that are in use for as long as possible also promote the flexible reconciliation of work and family life. The conditions for the employment of employees with partial work ability are ensured by focusing on reconciling work and work ability in cooperation with the employee, supervisor and occupational healthcare in accordance with the active caring model. Means of sup- porting employees with partial work ability in returning to work in- clude a plan for returning to work, work arrangements, working time arrangements, enhanced support, work ability assessments and the insurance company’s vocational rehabilitation measures. The aim of occupational health negotiations held in cooperation with occupa- tional healthcare is to find out the best support and means for the employee to return to work. The desired outcome of these measures is to ensure safe and fair working conditions for all Pihlajalinna employees, support measures to maintain work ability and encourage everyone to contribute to fos- tering a good working atmosphere and an open flow of information. The impacts of measures affecting work-life balance are assessed at Group level as part of the annual extensive personnel survey. Supervi- sor use Pihlajalinna’s working time monitoring system to monitor and ensure that working hours are kept to a reasonable limit. Several in- ternal and external stakeholders, such as Pihlajalinna’s HR, supervi- sors and occupational healthcare, participate in the prevention and mitigation of the impacts. During the coming financial years, Pihla- jalinna will develop the workforce management system and the man- agement system for wellbeing at work. Pihlajalinna’s HR is responsi- ble for developing the working time monitoring system and the re- sources required for it. Health and safety of own workforce Both actual and potential negative impacts on the health and safety of our own workforce have been identified. To promote mental health and psychological safety, Pihlajalinna cooperates closely with occupational healthcare and pension insurance companies. At Pihla- jalinna, compliance with the occupational healthcare action plan and occupational safety and health action programme are at the core. Oc- cupational healthcare monitors the work ability of workers through workplace surveys and health examinations, for example. Pihlajalinna offers its employees services that support mental wellbeing, such as the Mielen huoli Line, occupational health psychologist consultations, short-term therapy, short-term psychotherapy and sleep coaching. In 2024, supervisors and all personnel were offered information and practical tools in the form of online training courses on supporting mental wellbeing in the working environment. Strengthening psycho- logical safety and work ability management are discussed as part of the induction training for supervisors. The change management train- ing programme, which began in autumn 2024, will continue in 2025. The training programme has been implemented in cooperation with an external partner. Risks and opportunities Ensuring the working conditions and wellbeing of personnel as well as health and safety is significant from the point of view of financial risks and opportunities. The material risks and opportunities related to the company’s own workforce have been identified in the double materi- ality analysis described in section ESRS 2, under IRO-1: Process to identify and assess material impacts, risks and opportunities. The fi- nancial risk management methods used at Pihlajalinna are also essen- tial from the point of view of opportunities. The ongoing measures are described in more detail in section ESRS 2, under SBM-3: Material sustainability topics in Pihlajalinna's activities and their link with the strategy. Equal treatment and development of competence and skills Equal treatment and the development of competence and skills are also significant from the point of view of financial risks and opportuni- ties. At Pihlajalinna, competence development involves particularly on-the-job learning, the sharing of internal knowledge and training. The majority of on-the-job learning takes place through actual work and interaction with others. Practical tools also include induction training and work guidance, team-level and personal target and de- velopment discussions, independent study, mentoring, work guidance and job rotation. Professional training is provided by both Pihla- jalinna’s own experts and external training providers. Pihlajalinna has a proprietary online learning environment, Pihla- jalinna Academy, that provides content in support of competence de- velopment. The Group’s training plan includes training courses or- ganised by target group at Group level based on the Group’s strategy and the competence needs of the business areas and medical exper- tise. Pihlajalinna’s leadership principles describe what kind of leader- ship is aimed for and valued at Pihlajalinna. By complying with the leadership principles, we contribute to ensuring equal treatment and equal opportunities for all. REPORT BY THE BOARD OF DIRECTORS | SUSTAINABILITY STATEMENT 71 In annual target-setting and development discussions, an individual competence development plan is drafted for each Pihlajalinna em- ployee. At Pihlajalinna, target-setting and development discussions involve two parts: a team discussion and a personal target-setting and development discussion. The discussion checks whether the em- ployee’s job description is up to date and discusses competence, suc- cesses, development areas, wellbeing at work and motivation. An im- portant part of the annual personal target-setting and development discussion is also giving feedback to the supervisor and evaluating the supervisor’s leadership in accordance with Pihlajalinna’s leadership principles. Pihlajalinna’s monitoring and feedback channels are de- scribed in more detail in section S1-2: Engaging with own workforce. Equal treatment and the development of competence and skills are also significant from the point of view of opportunities. Pihlajalinna wants to support the coping at work of older employees and the pos- sible extension of their careers. Special attention is paid to wellbeing at work and coping at work in target and development discussions and, if necessary, wellbeing at work discussions, with older employ- ees. The aim is to provide older employees with the opportunity for work arrangements, part-time work or partial old-age pension when- ever this is possible with regard to the work tasks. Objectives related to the management of material negative impacts, the promotion of positive impacts and the management of material risks and opportunities are presented in the attached table (S1-5). Pihlajalinna’s target setting is based on Pihlajalinna’s personnel, equality and non-discrimination policy. Senior management sets time-bound and result-oriented targets based on preparation by in- ternal stakeholders. Joint, Group-level targets are used to monitor the progress and effectiveness of measures related to actual material impacts. In addition, Pihlajalinna internally monitors the effectiveness and progress of individual measures in operations. The Group Man- agement Team is responsible for monitoring operations in accord- ance with the company’s targets. In setting and monitoring targets, we have used the feedback received from the personnel and their representatives in personnel surveys and stakeholder meetings, such as Kimpassa meetings. Pihlajalinna will define new work ability management steering group practices in 2025. With the new steering group practices, target set- ting and monitoring will be carried out with internal and external stakeholders. The Pihlajalinna Group Management Team confirms the targets set. Pihlajalinna develops the company’s operations and em- ployees’ opportunities to influence the decisions made in the com- pany concerning their work, working conditions and position in the company in mutual understanding. Pihlajalinna’s development plan is prepared and maintained as part of the dialogue required by the Act on Co-operation within Undertakings. Pihlajalinna monitors the development of the personnel’s wellbeing and working conditions using the eNPS metric, sickness absence rate and work ability index. The metrics are part of the extensive annual personnel survey. The work ability index (= work ability scores) used at Pihlajalinna is part of the seven-section metric developed by the Finnish Institute of Occupational Health. eNPS is an employee experi- ence metric that measures workers' willingness to recommend the company. The sickness absence rate is calculated in accordance with the model of the Confederation of Finnish Industries. The development of Pihlajalinna’s eNPS and work ability index has been jointly monitored in a meeting of Pihlajalinna’s Kimpassa organi- sation, in which personnel representatives were involved in identify- ing improvements as part of the monitoring of performance. Pihla- jalinna will develop the sickness absence rate monitoring processes in the coming financial years. REPORT BY THE BOARD OF DIRECTORS | SUSTAINABILITY STATEMENT 72 S1 Links between policies related to own workforce and targets Sustainability matter Impacts, risks and opportunities (IRO) Policy Result 2024/Target 2025 Metric Stability of employment relation- ships in own workforce Pihlajalinna offers stable employment relationships and the possibility of exercising a profession Actual positive impact Code of Conduct Personnel Policy Human rights principles Data Protection and Infor- mation Security Policy eNPS Result 2024: +9 Target 2025: 20 Willingness to recommend (eNPS) From the employer’s point of view, the opportunities are major: attractiveness and retention as an em- ployer, work motivation, length of careers, coping at work, productivity, supervisory work and leadership. Opportunity Ensuring the working conditions and wellbeing of per- sonnel as well as health and safety is also significant from the perspective of financial risks and opportuni- ties. Stress or an accident can result in long sickness absences, and offering competitive pay can affect short-term profitability. Risk Working hours of own workforce Night work puts a strain on the personnel Actual negative impact Personnel Policy Work ability index Result 2024: 8 Target 2025: >8 Sickness-related absence rate Result 2024: 5.6% Target 2025: 5.3% Work ability index Sickness-related absence per cent From the employer’s point of view, the opportunities are major: attractiveness and retention as an em- ployer, work motivation, length of careers, coping at work, productivity, supervisory work and leadership. Opportunity Ensuring the working conditions and wellbeing of per- sonnel as well as health and safety is also significant from the perspective of financial risks and opportuni- ties. Stress or an accident can result in long sickness absences, and offering competitive pay can affect short-term profitability. Risk Adequate wages for own workforce From the employer’s point of view, the opportunities are major: attractiveness and retention as an em- ployer, work motivation, length of careers, coping at work and productivity. A positive employer image and reputation also provide financial benefits. Opportunity Personnel Policy Equality and Non-Discrimina- tion Policy Human rights principles Data Protection and Infor- mation Security Policy eNPS Result 2024: +9 Target 2025: 20 Remuneration-related targets that Pihlajalinna monitors in internal forums. Willingness to recommend (eNPS) Remuneration metrics Wage increases can increase costs, affecting short- term profitability. Risk Remuneration-related targets that Pihlajalinna monitors in internal forums. Remuneration metrics REPORT BY THE BOARD OF DIRECTORS | SUSTAINABILITY STATEMENT 73 Gender equality and equal pay for equal work among own workforce The remuneration of the personnel is based on the competence of each employee and adherence to the principles of equal treatment. In jobs cov- ered by collective agreements, remuneration is based on the wage categories stipulated by the applicable agreement. Remuneration also takes into account job-specific responsibility premiums, years of experience and the job location’s cost of living category. Gender is not a factor in remuner- ation under any circumstances. The remuneration of senior salaried employees is determined by the demands of the job and the individual’s compe- tence, experience, performance and results. Actual positive impact Code of Conduct Personnel Policy Equality and Non-Discrimination Policy Human rights principles Data Protection and Information Se- curity Policy Remuneration-related targets that Pihlajalinna monitors in internal forums. The big picture will be reviewed during the com- ing financial year in order to set any specific tar- gets and metrics. Wage surveys Work-life balance of own workforce Attractiveness and retaining capacity as an em- ployer, increasing work motivation and the length of careers, rehabilitative and flexible operations that take into account the life cycle stages and support the employee also provide financial op- portunities, employer reputation as a responsible party. Opportunity Personnel Policy eNPS Result 2024: +9 Target 2025: 20 Work ability index Result 2024: 8 Target 2025: >8 Sickness-related absence rate Result 2024: 5.6% Target 2025: 5.3% There are several occupational safety and man- agement metrics in place with targets set for the coming years. Goals related to work ability management that Pihlajalinna monitors in internal forums. Willingness to recommend (eNPS) Sickness-related absence per cent Work ability index Occupational health and safety met- rics Work ability management metrics Sickness absences due to stress or an accident Risk Sickness-related absence rate Result 2024: 5.6% Target 2025: 5.3% Occupational health and safety goals monitored by Pihlajalinna in internal forums. Sickness-related absence per cent Occupational health and safety met- rics REPORT BY THE BOARD OF DIRECTORS | SUSTAINABILITY STATEMENT 74 Health and safety of own workforce Psychological safety, mental health challenges Actual negative impact Code of Conduct Personnel Policy Human rights principles Quality Policy Data Protection and Information Se- curity Policy Work ability index Result 2024: 8 Target 2025: >8 Sickness-related absence rate Result 2024: 5.6% Target 2025: 5.3% Work ability index Sickness-related absence per cent Work-related injuries Potential negative impact Our personnel are Pihlajalinna's most valuable as- set, and monitoring and responding to workers' work ability is a strategic target . Several targets have been set for occupational health and safety, which Pihlajalinna monitors in internal forums. Occupational health and safety met- rics As an expert in the field, Pihlajalinna has the po- tential to offer its personnel premium healthcare Actual positive impact Several targets have been set for occupational health and safety, which Pihlajalinna monitors in internal forums. Occupational health and safety met- rics Sickness absences due to stress or an accident Risk Sickness-related absence rate Result 2024: 5.6% Target 2025: 5.3% Several targets have been set for occupational health and safety, which Pihlajalinna monitors in internal forums. Sickness-related absence per cent Occupational health and safety met- rics Attractiveness and retaining capacity as an em- ployer, increasing work motivation and the length of careers, rehabilitative and flexible operations that take into account the life cycle stages and sup- port the employee also provide financial opportu- nities, employer reputation as a responsible party. Opportunity eNPS Result 2024: +9 Target 2025: 20 Sickness-related absence rate Result 2024: 5.6% Target 2025: 5.3% The big picture will be reviewed during the coming financial year in order to set specific targets. Willingness to recommend (eNPS) Sickness-related absence per cent Work ability management metrics Measures against violence and har- assment in the workplace in own workforce Pihlajalinna applies an operating model aimed at the prevention of inappropriate conduct. Accord- ingly, all forms of harassment or inappropriate treatment of employees are prohibited. Supervi- sors are under an obligation to address inappropri- ate conduct or harassment immediately after be- ing informed of the issue. Actual positive impact Code of Conduct Personnel Policy Equality and Non-Discrimination Pol- icy Human rights principles Several targets have been set for occupational health and safety, which Pihlajalinna monitors in internal forums. The big picture will be reviewed during the coming financial year in order to set specific targets. Occupational health and safety met- rics REPORT BY THE BOARD OF DIRECTORS | SUSTAINABILITY STATEMENT 75 Training and skills development of own workforce Pihlajalinna provides its personnel with equal opportunities for training and competence devel- opment Actual positive impact Code of Conduct Personnel Policy Equality and Non-Discrimination Policy Data Protection and Information Se- curity Policy eNPS Result 2024: +9 Target 2025: 20 Several targets have been set for competence de- velopment, which Pihlajalinna monitors in internal forums. Willingness to recommend (eNPS) Competence management metrics Equal treatment and the development of compe- tence and skills are also significant from the point of view of financial risks and opportunities. At- tractiveness and retaining capacity as an em- ployer, increasing work motivation and the length of careers, equal, competence-building activities also provide financial opportunities. Opportunity The scope of all activities is the company’s own operations, with Finland as the operating area (no other geographical areas). The base year is 2024 and the baseline values are 2024, as these are the first comparable values reported. The targets apply to employees. Analysis of the results and justifications: All results for 2024 are in line with the planned annual targets and the achievement of long-term goals. No external party has validated the targets or metrics. For all future actions, the time horizon is future financial years or the actions are continuous. REPORT BY THE BOARD OF DIRECTORS | SUSTAINABILITY STATEMENT 76 Characteristics of the undertaking’s employees (S1-6) In 2024, Pihlajalinna had 6,493 employees and 2,145 practitioners. All of Pihlajalinna’s operations are in Finland. 85 per cent of Pihlajalinna’s employees are women and 15 per cent men. The forms of employ- ment and working hours used at Pihlajalinna are based on collective agreements (collective agreement for the healthcare services sector and collective agreement for the private social services sector) and la- bour law. Employment data has been collected from the HR and payroll system, from which the data is retrieved for processing in the reporting sys- tem once a day. The payroll system administrators and payroll clerks are responsible for maintaining the data. Supervisors are responsible for reporting the data. The data is reported to the payroll system us- ing electronic forms. In the payroll system, all persons have either male or female as gender information. The information is based on the personal identity number. As the system develops, it will also be possible to collect information about other genders. The number of personnel is reported as the number of persons at the end of the reporting period, unless otherwise stated. The total num- ber of workers corresponds to the figures reported in Pihlajalinna’s fi- nancial statements for 2024. In the payroll system, employment relationships are broken down into fixed-term employment or permanent employment. In the pay- roll system, employment relationships are divided according to the nature of the employment relationship: full-time, part-time or on-call. The number of employees as full-time equivalent (FTE) by contract type and gender is reported as the average for the reporting year. In 2024, the employee turnover rate was 10.7 per cent and the total number of terminated employment relationships was 1.148. The fol- lowing reasons for termination have been taken into account in calcu- lating the turnover rate: termination during trial period by employer, termination during trial period by employee, death, other pension, personal request, production-related financial reasons, termination of employment, old-age pension, mutual agreement. The following situ- ations have not been taken into account in the calculation: fixed-term employment ends, transfer to another payment group, transfer to an- other payment group/company/merger, job rotation ends. Employees are only hired for fixed-term employment relationships when there is a legal and verifiable reason for it. The reason is ex- plained to the employee and recorded in the employment contract. Termination of a fixed-term employment contract before the end of the agreed term can be negotiated upon if the employee so wishes. Efforts will be made to arrange partial old-age pension, partial child- care leave and shortening of working hours to extend the working ca- reer whenever possible with regard to the performance of work tasks. Part-time employment relationships can be used in the com- pany for tasks for which part-time work is suitable when there is a justified reason on the part of the employer and/or employee. The grounds for part-time work are always considered on a case-by-case basis. Number of employees by contract type, broken down by gender (FTE) Type of employment relationship Female Male Total Total number of employees (FTE) 3.874 542 4.416 Number of permanent employees (FTE) 3.302 444 3.747 Number of fixed-term employees (FTE) 364 63 427 Number of non-guaranteed hours employees (FTE) 202 33 235 Number of full-time employees (FTE) 3.002 436 3.438 Number of part-time employees (FTE) 665 72 737 Number of employees broken down by gen- der Gender Number of persons Male 961 Female 5532 Other 0 Not reported 0 Total number of emloyees 6493 Number of employees by country Country Number of persons Finland 6493 REPORT BY THE BOARD OF DIRECTORS | SUSTAINABILITY STATEMENT 77 Diversity metrics (S1-9) In this context, senior management refers to employees working in the Pihlajalinna Group’s Management Team. Pihlajalinna’s senior management consists of 10 people, of whom 40 per cent (4) are women and 60 per cent (6) are men. 14.1 per cent (917) of Pihlajalinna’s personnel are under 30 years of age, 51.4 per cent (3340) are 30 to 50 years of age and 34.4 per cent (2236) are over 50 years of age. No external party has validated the metrics. Adequate wage (S1-10) All Pihlajalinna employees are paid adequate wages in accordance with the applicable benchmarks. No external actor has validated these metrics, but they are based on the background assumption that remuneration in accordance with Finnish collective agreements meets the definition of adequate wage at the European level. Pihla- jalinna operates only in Finland. Pihlajalinna is a member of the Finnish Association of Private Care Providers (HALI) and, based on its membership, obliged to comply with universally binding collective agreements, namely the collective agreement for the healthcare services sector and the collective agree- ment for the private social services sector. The remuneration of em- ployees is determined in accordance with the remuneration system of the applicable collective agreement. Pihlajalinna complies with the minimum wage specified in the collective agreements. If no collective agreement is applied to the employment relationship (e.g. doctors), the wage is defined as reasonable. The wages paid by Pihlajalinna are equal to or higher than the minimum salary in accordance with the collective agreement. Overtime is voluntary and the employee is compensated in accordance with legislation and any applicable collec- tive agreements. Occupational health and safety metrics (S1-14) Occupational safety and health statistics 2024 2023 Number of work-related fatalities 0 0 Number of work-related accidents 319 335 Accident severity 29.5 27.4 Number of work-related ill health cases 0 0 The figures presented in the table apply to Pihlajalinna’s employees (including Forever fitness centres) occupational accidents. Commut- ing accidents between the home and the workplace are not included in the figures. Every Pihlajalinna employee is covered by the occupational health and safety management system and is taken into account in the num- ber of incidents related to occupational accidents, occupational healthcare and work-related fatalities. In the first reporting year, Pihlajalinna does not report the number of fatalities caused by work-related accidents and cases of ill health for other employees working at the Group’s sites. The quality management system, environmental management system and information security management system are complied with in all of Pihlajalinna’s operations. Pihlajalinna's management is committed to constantly improving the operations and the quality management system and creates the prerequisites for achieving the quality-related objectives. Pihlajalinna carries out both internal and external audits. The standards ISO 9001:205, ISO 27001:2017 and ISO 14001:2015 are in use. Internal audits cover themes that are relevant to Pihlajalinna’s health and safety management system, such as safety practices and incident reports. External and internal audits are carried out every three years. The annual coverage of audit activities is ensured by en- suring that internal and external audits are not carried out in the same year for an individual unit. The audit observations made in in- ternal and external audits are used at each Pihlajalinna location ac- cording to the nature of the observations. Internal and external audit reports are available to the personnel electronically. The accident insurance company provides Pihlajalinna with a regular report on key occupational health and safety metrics. No external party has validated the metrics. Compensation metrics (S1-16) Pihlajalinna complies with the applicable employment legislation and collective agreements. See section S1-10: Adequate wage. Pihlajalinna’s internal salary survey indicates that the remuneration of employees belonging to nursing staff within the scope of the col- lective agreements of both the private social services sector and the healthcare services sector is equal regardless of gender. At Pihlajalinna, the pay gap between women and men among nursing staff is 3.44 per cent. The wages are equal in both job-specific wage components and personal wage components. At Pihlajalinna, the pay gap between women and men among doctors and dentists is 8.22 per cent. The number of men in doctors and den- tists is relatively the highest among all personnel groups. In the Group, the duties of a doctor and dentist are often carried out as practitioners, so reviewing employees does not provide a complete overview of all of the duties carried out at Pihlajalinna. The amount of wages is influenced, for example, by the job grade and the level of ed- ucation. For other personnel, the percentage pay gap between women and men is 8.38 per cent. The wages of other personnel are determined either in accordance with the collective agreements or according to the job grade, and there are no differences based on gender. It is not yet possible to carry out a comparable salary comparison for administrative personnel, as it consists of tasks with vastly different job grades. In order to ensure equal pay and a fair wage level, Pihla- jalinna worked during autumn 2024 to assess the job grade of tasks with contractual salary and determine the wage. In 2025, Pihlajalinna will analyse the contractual wages and any differences in these wages in more detail and decide on corrective measures. At Pihlajalinna, the pay gap between women and men among all em- ployees is 41.44 per cent. The average wage level of employees is EUR 25.24 per hour, of which the average hourly wage for women is EUR 22.95 and for men EUR 39.19. The median wage of employees in Pihlajalinna is EUR 33,942.75. The ratio of the highest-paid person's total annual earnings to the median total annual earnings (excluding the highest-paid person) was 15.3. The compensation paid to Pihlajalinna’s personnel is documented and reported on the basis of current information in the HR and payroll system. The data takes into account all wage components, including REPORT BY THE BOARD OF DIRECTORS | SUSTAINABILITY STATEMENT 78 fringe benefits, for both monthly and hourly paid employees. The re- port does not take into account whether the person has been paid wages in that month. No external party has validated the metrics. Incidents, complaints and serious human rights complaints (S1-17) Pihlajalinna does not tolerate discrimination, harassment or inappro- priate behaviour at the workplace or in the work carried out there or at work events. If a Pihlajalinna employee or service provider experi- ences or observes inappropriate behaviour or harassment, they are instructed to discuss the matter primarily with the person concerned or their own supervisor. Pihlajalinna’s operating model for inappropri- ate treatment and harassment will be developed in order to obtain sufficiently comprehensive data in the future. Currently, it is not pos- sible to systematically compile complaints or reports made in accord- ance with the inappropriate treatment and harassment operating model unless they lead to legal action. During the 2024 reporting period, the anonymous whistleblowing channel received a total of 17 HR-related reports (10 in 2023). The re- ports were related to the equal treatment of personnel, inappropri- ate behaviour of supervisors/employees or equal recruitment. Of these reports, 5 were related to harassment or discrimination. The HSE Lite system has received 19 reports of inappropriate treatment concerning our own personnel, of which 2 were related to harass- ment or discrimination. A total of 7 reports of harassment or discrimi- nation were received in 2024. Information on the total number of re- ports received through the Whistleblowing channel is also reported in the financial statements. In 2024, Pihlajalinna had one ongoing case of discrimination, on which a court decision was issued in April 2023. Pihlajalinna Lääkärikeskukset Oy has been ordered to pay compensation to a dis- missed employee on the basis of a violation of the Equality and Non- Discrimination Acts and compensation under the Employment Con- tracts Act for unjustified termination of the employment relationship. The district court’s decision is not yet final. However, the Court of Ap- peal’s permission to proceed further has only been granted for the amounts of compensatory and reparatory measures ordered. In 2024, Pihlajalinna had no fines, penalties or damages caused by se- rious human rights issues and incidents related to its own personnel. REPORT BY THE BOARD OF DIRECTORS | SUSTAINABILITY STATEMENT 79 Consumers and end-users (S4) Identification and assessment of material impacts, risks and opportunities 79 Material impacts, risks and opportunities related to consumers and end-users and their management (SBM-3) 79 Management of material topics and policies (S4-1) 80 Engaging with consumers and end-users (S4-2) 82 Processes to remediate negative impacts and channels for consumers and end-users to raise concerns (S4-3) 82 Measures (S4-4) 83 Metrics and targets (S4-5) 85 Identification and assessment of material im- pacts, risks and opportunities The material impacts, risks and opportunities related to consumers and end-users have been identified in the double materiality analysis described in more detail in section ESRS 2, IRO-1: Process to identify and assess material impacts, risks and opportunities. Pihlajalinna re- ports on its activities in the areas identified as material in the double materiality analysis. Material impacts, risks and opportunities related to consumers and end-users and their manage- ment (SBM-3) Pihlajalinna’s customer groups are corporate customers, insurance and private customers and public sector customers. The material sus- tainability topics related to consumers and end-users and their man- agement measures are described in section ESRS 2, table Managing the Material Impacts, Risks and Opportunities (IRO). A description of the material impacts, risks and opportunities and their interaction with the strategy and business model is presented in ESRS 2, section SBM-3: Material sustainability topics in Pihlajalinna's activities and their link with the strategy. REPORT BY THE BOARD OF DIRECTORS | SUSTAINABILITY STATEMENT 80 S4 Links between policies related to consumers and end-users and targets. During the reporting year, targets and metrics have not been set for all identified impacts, risks and opportunities, but during the coming financial year, the whole will be reviewed in order to set any dedicated targets and metrics. Sustainability matter Impacts, risks and opportunities (IRO) Consumer and end-user privacy Maintaining patient safety and data protection. (cyber attacks on infrastructure and hardware) Actual and potential negative impact There are significant financial risks related to customers’ privacy, data protection and information security. The most significant risks are cyber attacks on infrastructure or hardware and the resulting reputational damage and potential liability for damages. Risk Security of consumers and end-users Maintaining patient safety and data protection. (cyber attacks on infrastructure and hardware) Actual and potential negative impact There are significant financial risks related to customers’ privacy, data protection and information security. The most significant risks are cyber attacks on infrastructure or hardware and the resulting reputational damage and potential liability for damages. Risk Freedom of expression for consumers and end-users The risk related to consumers’ freedom of speech can manifest itself as reputational damage or customer satisfaction. Risk Access of consumers and end-users to high-quality information In cooperation with its personnel, Pihlajalinna produces and distributes information on social and healthcare themes that are relevant to society. However, communication may not jeopardise the privacy of customers or employees, data protection or the security of services. Actual positive impact Health and safety of consumers and end-users Pihlajalinna provides customers with health benefits, society and employers with savings, access to care (reducing queues). Patient safety (physical patient safety) and positive impact are strong. Actual and potential positive impact Significant compromise of patient safety Potential negative impact The health, safety and security of customers are at the heart of Pihlajalinna’s operations. Risks related to patient safety are reputational damage and poten- tial liability for damages. Risk Protecting children of consumers and end-users Maintaining patient safety and data protection. (cyber attacks on infrastructure and hardware) Actual and potential negative impact Maintaining patient safety and data protection. (cyber attacks on infrastructure and hardware) Risk Non-discrimination of consumers and end-users Equal treatment of customers Actual positive impact Non-discrimination of customers is also at the heart of Pihlajalinna’s operations. The related reputational damage can pose significant financial risks, but on the other hand, reputational benefits can also provide opportunities. Risk and opportunity Access to products and services The public service system is in a crisis. Pihlajalinna provides its customers, such as society and employers, with savings through access to services Actual positive impact The availability of services produced for customers is at the heart of Pihlajalinna’s operations. The related reputational benefit and, on the other hand, repu- tational damage can pose both financial risks and opportunities. Risk and opportunity Sustainable marketing The cornerstones of Pihlajalinna’s marketing and communications are professionalism, reliability, truthfulness and up-to-date medical knowledge. Actual positive impact Non-discrimination of customers, the availability of services and responsible marketing are also at the heart of Pihlajalinna’s operations. The related reputa- tional benefit and, on the other hand, reputational damage can pose both significant financial risks and opportunities. Risk and opportunity Management of material topics and policies (S4-1) The purpose of Pihlajalinna’s policies is to promote the excellent and high-quality service provided to customers and the realisation of hu- man rights. In addition, operations are guided by the Code of Conduct and the minimisation of adverse impacts on the environment so that the services offered to private customers and the products used meet the requirements set for them. Pihlajalinna’s operations are strongly based on the company’s values, vision and mission. Pihlajalinna’s guiding policies related to consum- ers and end-users include the Code of Conduct approved by the Board of Directors, Supplier Code of Conduct, human rights princi- ples, quality and risk management policy and data protection and in- formation security policy. The Chief Medical Officer is responsible for medical quality and effectiveness as a member of the Group Manage- ment Team. In addition, the Group Management Team is responsible for the policies related to the customer experience. Code of Conduct The aim of Pihlajalinna's Code of Conduct is to establish clear ethical standards that cover all aspects of Pihlajalinna’s operations and day- to-day work. The Code of Conduct provides guidance to the compa- ny's management, personnel and practitioners. The Code of Conduct describes the way Pihlajalinna operates, based on the principles of good corporate governance, legal compliance, transparency, fairness and confidentiality. Pihlajalinna’s procurement principles concerning partners are laid down in a separate Supplier Code of Conduct and separate ethical guidelines concerning sports cooperation. The pro- curement principles cover five areas: legislation and human rights, REPORT BY THE BOARD OF DIRECTORS | SUSTAINABILITY STATEMENT 81 the environment and customer health and safety. The Code of Con- duct is reviewed and updated as necessary. Pihlajalinna’s CEO is the most senior person in charge of compliance with the Code of Con- duct. Quality management Pihlajalinna’s quality policy and quality management system support the Group's strategy. The quality policy aims to ensure that the Group's operations comply with valid legislation, regulations issued by the authorities and any licences and requirements of the industry. Pihlajalinna's management is committed to compliance with the re- quirements and monitors the development of medical quality, cus- tomer experiences, employee satisfaction and process quality and takes the necessary action to achieve the quality-related objectives. Pihlajalinna’s quality management is based on comprehensive self- monitoring, external quality assurance and comprehensive monitor- ing by the authorities. The Social Welfare and Health Care Supervision Act, which entered into force at the beginning of 2024, regulates the supervision of social and healthcare services, as well as the operating conditions, registration and self-monitoring of service providers. A service provider such as Pihlajalinna must prepare a self-monitoring programme for the tasks and services for which it is responsible. The programme describes how the service provider organises and imple- ments its self-monitoring. The appendices to Pihlajalinna’s self-moni- toring programme include the Group’s pharmacotherapy plan, infor- mation security plan and environmental plan. The self-monitoring programme and plans are reviewed and updated annually or as nec- essary when there are changes in the activities or the operating envi- ronment. Self-monitoring makes it possible to quickly identify and ad- dress risks related to quality or safety. The self-monitoring pro- gramme and plan are available on Pihlajalinna’s website. Risk management Pihlajalinna’s risk management is guided by the Group’s risk manage- ment policy, which covers all of the Group’s companies and the objec- tives of which are patient safety, the wellbeing of professionals, busi- ness profitability and sustainability, and the continuity of the organi- sation’s operations. In social and healthcare services, the documenta- tion of statutory self-monitoring is also a risk management tool: self- monitoring programme and plans, pharmacotherapy and information security plans. Pihlajalinna uses quality management systems to sup- port risk management. An ISO 9001:2015 quality management sys- tem, ISO 27001 information security management system and ISO 14001 environmental management system are in place. These include requirements for risk management as part of the management sys- tem and practical management. Data protection and information security The purpose of high-quality data protection and information security management is to ensure the secure legal processing of all of Pihla- jalinna’s data, particularly patient and personal data, as well as the protection of the privacy of patients, customers and the company’s personnel. Pihlajalinna is committed to complying with the ISO27001 standard, which supports the implementation of information security and data protection. The Group’s information security principles are described in Pihlajalinna’s data protection and information security policy, which includes data protection and information security as an integral part of all operations. Developing and maintaining data pro- tection and information security is part of the Groups security activi- ties, risk management and internal control. Information security and data protection management ensure the confidentiality, integrity and availability of data. Data protection and information security are also an important part of Pihlajalinna’s ISO 9001-certified quality management system. Pihla- jalinna’s principles, guidelines and policies concerning information se- curity are reviewed and updated regularly, at least once a year. Infor- mation security and data protection training is mandatory for all per- sonnel and must be renewed once a year. This ensures that Pihla- jalinna’s information security policies are implemented and put into practice. In addition, Pihlajalinna regularly distributes information se- curity instructions to its personnel. Data protection and information security is managed and monitored by the CEO of Pihlajalinna. The CEO decides the development goals, organisation, resources and operating authorisations of the various sections of overall safety and security. The person in charge of data protection is the Chief Medical Officer, who appoints the company’s data protection officers. The Chief Information Officer is the manager responsible for information security and appoints the Chief Infor- mation Security Officer and the Information Security Manager. This is described in the data protection and information security policy docu- ment. Consumer and end-user human rights Pihlajalinna is committed to respecting the international human rights commitments, principles, guidelines and initiatives. In its human rights commitment, Pihlajalinna is committed to respecting the hu- man rights of consumers and end-users and to complying with the following international principles for managing the impacts, risks and opportunities related to consumers and end-users: UN Universal Dec- laration of Human Rights, International Labour Organization (ILO) Declaration on Fundamental Principles and Rights at Work, UN Global Compact initiative and Guiding Principles on Business and Human Rights, as well as the OECD Guidelines for Multinational Enterprises. The human rights principles are reviewed and updated as necessary. Pihlajalinna’s Chief Legal Officer is the most senior person in charge of compliance with the human rights principles. The human rights risk assessment is reviewed regularly and is part of the continuous devel- opment of operations. This ensures that the assessment reflects any changes in the business environment. The human rights risk assess- ment was carried out during the reporting year and is reviewed regu- larly as part of the continuous development of operations to ensure that the assessment reflects any changes in the business environ- ment. Pihlajalinna’s human rights commitment defines the expectations and requirements that the organisation has set for itself and its partners. All human rights policies have been approved by the Group Manage- ment Team. The human rights principles apply to all Pihlajalinna em- ployees, subcontractors, suppliers, business partners and communi- ties that may be affected by the Group's operations. Every Pihla- jalinna employee must complete mandatory training on the Code of Conduct and commits to complying with the Code, which also entails respecting human rights. Service providers, suppliers and partners are obliged to follow the principles, including the principles related to hu- man rights. PIhlajalinna's various functions actively work for human rights, including the legal service, HR department, procurement and the communications and sustainability team. The Group Management Team is responsible for ensuring that the personnel are familiar with the Code of Conduct, and supervisors are responsible for adherence to the Code of Conduct. New supervisors are familiarised with the Code of Conduct by means of induction training designed specifically for them. Pihlajalinna has addressed the need for corrective measures and pos- sible actions as part of the 2024 Human Rights due diligence process. Clear processes are in place to systematically address issues so that potential human rights violations can be addressed, and corrective measures can be taken immediately. For all the most critical potential REPORT BY THE BOARD OF DIRECTORS | SUSTAINABILITY STATEMENT 82 and actual human rights impacts, targeted measures are identified to minimise and prevent negative impacts. During the year under re- view, there have been no cases of non-compliance with the UN Guid- ing Principles on Business and Human Rights, the ILO Declaration on Fundamental Principles and Rights at Work or the OECD Guidelines for Multinational Enterprises concerning consumers or end-users have been reported during the year. Engaging with consumers and end-users (S4-2) Customer feedback channels The systematic collection and processing of customer feedback ena- bles Pihlajalinna to develop services, processes and operating models according to the customers’ wishes. Pihlajalinna uses several contact channels through which customers, end-users and other stakeholders can give customer feedback and raise concerns. The customer can provide feedback to Pihlajalinna on their own initiative through vari- ous channels, such as the website, the Pihlajalinna health app or by calling the customer service by phone. In addition, feedback is re- quested after using the services by means of an SMS questionnaire or directly in the digital service. The customer may be in direct contact or the contact can be made by their legitimate representative such as a patient ombudsman or other authority. A survey is sent daily to a random sample of customers who have used Pihlajalinna services. The feedback survey covers all customer groups. The feedback channels are available to all customers and end-users or persons and entities acting on their behalf on whom Pihlajalinna has a potential or actual material impact. These channels can be used to submit complaints or concerns related to Pihlajalinna’s own opera- tions. The development of services also uses qualitative engagement, such as target group interviews and user testing, and involves special groups, such as people who use digital services little and the elderly. In accordance with the feedback process, Pihlajalinna’s personnel rec- ord verbal feedback received from the customer at various points of contact on an electronic feedback form and forward it to Pihla- jalinna’s feedback processing. Customers are informed about the feedback channels and their utilisation on Pihlajalinna’s website and by the personnel. Feedback on customer service situations is also col- lected from the personnel in accordance with Pihlajalinna’s feedback process. Corporate customers are regularly asked for structured feed- back, including customer satisfaction measurement, the results of which Pihlajalinna monitors. Pihlajalinna’s customers particularly appreciate the highly competent and professional personnel and the quality of surgical operations and procedures. In 2024, the most critical customer feedback was related to customer guidance between services. Themes related to booking appointments and pricing emerged as development areas in the cus- tomer feedback. At Pihlajalinna, the continuous improvement of the customer experi- ence consists of regular and up-to-date quality and customer experi- ence measurements, continuous review of measurement methods, daily analysis and processing of customer feedback and the reporting and use of the results. The Chief Medical Officer is the highest operational decision-maker with regard to healthcare objections complaint process or similar feedback. The results of customer experience measurements are used in the development activities of the entire Group in accordance with the customer experience management model. Pihlajalinna’s management (Management Teams, regional and business manage- ment) monitors the overall feedback from the monthly reports and is responsible for the development measures. Clinical quality and impact are among Pihlajalinna’s key strategic pri- orities. Continuous development enhances dialogue with customers and other stakeholders, creates systematic structures and a measure- ment culture to support the management, development and monitor- ing of quality and efficacy to ensure safe and effective care for every- one. Marketing The aim of Pihlajalinna’s marketing measures is to increase custom- ers’ awareness of health-related issues. Pihlajalinna communicates its diverse service offering to its customers with the aim of generating positive impacts on consumers and end-users. The content of marketing and communications is based on careful fact-checking and is produced in close cooperation with medical ex- perts. This ensures that visitors can trust the quality and accuracy of the content. The content is designed to be easy to find with search engines, so that visitors can quickly and easily get answers to their questions, and the content responds to visitors’ searches for infor- mation and guides them to the right services in a timely and clear manner. Accessibility (e.g. readers) is taken into account in content production so that the content serves everyone as easily as possible. Content is developed to be increasingly diverse and inclusive. Processes to remediate negative impacts and channels for consumers and end-users to raise concerns (S4-3) Processes to remediate negative impacts Pihlajalinna has several channels through which its personnel, cus- tomers and other stakeholders can report any concerns and observa- tions they may have. Patient safety Pihlajalinna’s private healthcare services and Forever fitness centres use Pihlajalinna’s HaiPro system, with which the personnel can report incidents and hazards related to customer and patient safety. In joint ventures, notifications concerning patient safety are made in the joint venture’s HaiPro system or the wellbeing services county’s system. In services produced for wellbeing services counties, patient safety noti- fications are primarily submitted to the wellbeing services county. The HaiPro system is specifically designed for the development of op- erations and learning from hazardous events. Reporting and pro- cessing grievances and incidents related to patient safety is an im- portant part of the development of operations and the prevention of incidents. Customers report any problems they observe either di- rectly to the personnel or through Pihlajalinna’s feedback systems. The professional competence of the personnel is the foundation of patient safety, and it is actively developed. The professional qualifica- tions of employees are verified during recruitment, and all new em- ployees are trained for their duties in accordance with an induction training programme. Clinical quality and impact are among Pihla- jalinna’s key strategic priorities. Continuous development enhances dialogue with customers and other stakeholders, creates systematic structures and a measurement culture to support the management, development and monitoring of quality and efficacy to ensure safe and effective care. The Quality Policy is owned by the Group Quality Director, who is responsible for updating and amending it. The Chief Medical Officer is the authority responsible for the implementation of the Quality Policy. Information security Pihlajalinna’s suppliers and external service providers are required to commit to compliance with the specified information security stand- ards. Suppliers undergo audits and information security requirements REPORT BY THE BOARD OF DIRECTORS | SUSTAINABILITY STATEMENT 83 are reviewed in connection with changes to external services. Compli- ance with information security requirements, including the right to audit, is part of the supplier agreement, but the requirements do not yet fully cover all existing contracts. As a result of the ongoing reform, they will be incorporated into all contracts. The need for and imple- mentation of audits is assessed on a case-by-case basis and the audits are carried out according to the identified need. The information se- curity assessment of external suppliers is applied to all services, sys- tems, applications and devices procured that are related to Pihla- jalinna’s operations. An assessment of the need for external auditing and competitive tendering will be carried out during the coming fi- nancial year. Information security is continuously developed with a high priority. Projects are planned for the coming years to adopt new technologies, such as more advanced threat detection systems and AI-based analy- sis tools. In addition, Pihlajalinna is strengthening its personnel’s training and raising awareness of information security issues so that the entire organisation is better prepared for potential threats. An ex- tension of ISO27001 certification is also planned for 2025, strengthen- ing the commitment to a high level of information security. Processes for handling customer feedback Pihlajalinna ensures that all contacts are responded to appropriately and that whistleblowers are protected from retaliatory measures. The contact channels are discussed in section S4-2: Engaging with consumers and end-users, and more detailed information is available on Pihlajalinna’s website. The Chief Medical Officer is the highest op- erational decision-maker with regard to healthcare objections com- plaint process or similar feedback. The results of customer experience measurements are used in the development activities of the entire Group in accordance with the customer experience management model. Pihlajalinna’s management monitors the feedback in general with monthly reports and is responsible for the development measures. Pihlajalinna’s website explains the different feedback pro- cesses and links to any official process descriptions. The functionality of Pihlajalinna’s contact channels is tested regularly and, if necessary, they are developed taking into account stakeholder feedback. Consumers and end-users are involved in the development of operations and engagement data is collected from them for use in individual development projects, and it will be used more extensively in the future. Consumers and end-users have not participated in iden- tifying experiences or improvements directly based on the company's performance. Through the customer feedback channels, customers can give general feedback on Pihlajalinna’s services or submit a complaint. All feed- back is processed only by relevant and trusted persons in accordance with the feedback processes. Identifying personal data is only used if necessary (e.g. when responding to a complaint) and it is only visible to limited personnel. Pihlajalinna complies with the Act on the Pro- cessing of Client Data in Healthcare and Social Welfare. Pihlajalinna provides its personnel with mandatory data protection and patient in- formation training. Pihlajalinna’s operations are guided by complaints practices and, if necessary, individual compensation cases are han- dled separately. The persons handling healthcare objections, the complaint process or similar feedback have up-to-date training and expertise in the proper implementation of the process. If necessary, the customer will be directed to the official channels listed below. The wellbeing services counties and the City of Helsinki are responsi- ble for patient ombudsperson activities, including with regard to pri- vate service providers. If the customer needs help or advice with writ- ing a reminder, the patient ombudspersons (formerly patient om- budsmen) will help. The patient ombudsperson cannot take a stand on the medical treatment decisions or whether a patient injury has occurred during treatment. According to section 10 of the Act on the Status and Rights of Patients (785/1992), a patient who is not satis- fied with the healthcare or medical care and the related treatment re- ceived by then has the right to submit a healthcare objection to the director responsible for healthcare at the healthcare unit in question. If the customer is dissatisfied with the response to the objection, they can make an official complaint directly to the Regional State Adminis- trative Agency or Valvira. An official complaint is a notification of sus- pected misconduct or negligence that is made to a supervisory au- thority. If the customer suspects a patient injury, they can submit a patient injury notice to the Patient Insurance Centre. Whistleblowing channel Pihlajalinna has a confidential whistleblowing channel that can be used for reporting misconduct and problems in the organisation. For a more detailed description of the operating principles related to the whistleblowing channel is available in section G1-1: Business conduct policies and corporate culture. Human rights-related impacts Pihlajalinna is committed to remediating any negative impacts related to human rights. Pihlajalinna addresses all observations of possible adverse human rights impacts and any illegal activities that are con- trary to its values and agreements. Clear processes help to handle matters systematically so that human rights violations can be ad- dressed and corrective measures can be taken immediately. Targeted measures to minimise and prevent negative impacts are defined for all the most critical potential and actual human rights impacts. Pihla- jalinna has reviewed the need for corrective measures and possible measures as part of the human rights due diligence process imple- mented in 2024. Pihlajalinna uses internal and external feedback channels and surveys that enable monitoring the realisation of human rights and compli- ance in different areas of operations. The management and the sus- tainability working group review and assess the human rights work regularly, and related risks are addressed as part of the Group’s risk management process. The assessment of adverse impacts on human rights and corrective measures are carried out as part of human rights due diligence and in cooperation between different functions. Pihla- jalinna reports on the progress of its human rights work annually in the sustainability report that is part of the Board of Directors’ report. Progress with the various areas of the human rights principles is com- municated regularly, both internally and externally. Pihlajalinna will also develop the training it offers to its personnel and increase stake- holder dialogue on the topic. Pihlajalinna’s human rights commitment and human rights due diligence process can be found on Pihlajalinna’s website. Measures (S4-4) Measures to manage material impacts on consumers and end-users and to assess the effectiveness of the measures are described below. The scope of all activities is the company’s own operations, with Fin- land as the operating area (no other geographical areas). The base year is 2024 and the baseline values are 2024, as these are the first reported values. Analysis of the results and justifications: All results for 2024 are in line with the planned annual target and the achieve- ment of the long-term target. No other external party has validated the targets or metrics. For all future actions, the time horizon is fu- ture financial years or the actions are continuous. Positive impacts Clinical quality and impact are among Pihlajalinna’s key strategic pri- orities. Continuous development enhances dialogue with customers REPORT BY THE BOARD OF DIRECTORS | SUSTAINABILITY STATEMENT 84 and other stakeholders, creates systematic structures and a measure- ment culture to support the management, development and monitor- ing of quality and efficacy to ensure safe and effective care for every- one. Pihlajalinna’s quality management is based on comprehensive self-monitoring, external quality assurance and comprehensive moni- toring by the authorities. The realisation and development of patient safety is evaluated by measuring, for example, deviations, infection rates, patient injury notifications and the decisions of the Patient In- surance Centre. A service provider such as Pihlajalinna must prepare a self-monitoring programme for the tasks and services for which it is responsible. Read more in section S4-1: Management of material topics and policies. Pihlajalinna’s positive impact on customers and end-users is strong, and it materialises through the health benefits produced for custom- ers, the effects of which are also visible to society, for example, in the reduction of the need for expensive specialised care or for employers, for example, in the avoidance of early retirement. Patient safety (physical patient safety) and data protection are strong and therefore also material opportunities, the impact of which is reflected in Pihla- jalinna’s reputational benefits, among other things. These topics are regularly assessed in connection with the risk survey, for example. Equal treatment of customers, privacy, data protection and infor- mation security, access to high-quality information, health and safety, non-discrimination, availability of products and services and responsi- ble marketing have positive impacts. In cooperation with its person- nel, Pihlajalinna produces and distributes information on social and healthcare themes that are relevant to society. These measures sup- port the access of consumers and end-users to high-quality up-to- date information. Pihlajalinna has extensive experience in the development and imple- mentation of impact-based healthcare concepts. Pihlajalinna Syd- änkaista is an example of effective care that achieves treatment goals, reduces healthcare costs and morbidity and improves the pa- tient’s quality of life. Pihlajalinna Sydänkaista carried out a pilot fol- low-up period in the wellbeing services county of Southwest Finland in 2023–2024. In addition to the key clinical metrics, the pilot vali- dated, among other things, the degree of patient engagement and treatment outcomes. Negative impacts The material negative impacts on consumers and end-users are re- lated to maintaining customers' patient safety and data protection. The most significant risks are cyber attacks on infrastructure or hard- ware and the resulting reputational damage and potential liability for damages. Pihlajalinna defines the most significant information secu- rity and data protection incidents as follows: Has an impact as a likely negative risk of losing a strategically significant account or long-term loss of several customers. In addition, there is a significant loss of per- sonnel and significant difficulty in recruiting additional staff in the long term. The aim is that no significant incidents occur annually that would lead to financial or other losses. Pihlajalinna takes account of the continuously increasing information security requirements that come with the development of digital ser- vices. Pihlajalinna strengthens its information security by applying up- to-date and secure methods, such as strong authentication practices, external monitoring and continuous testing. In addition, Pihlajalinna invests in monitoring and preventive activities through vulnerability management, for example. Pihlajalinna has adopted a cyber security development plan that guides the development of information secu- rity and the monitoring of the targets set for information security in the coming years. During 2024, Pihlajalinna implemented several sig- nificant measures to improve information security. These measures include the restructuring of the organisation, strengthening the infor- mation security team with new experts and roles. In addition, re- sources were increased to better respond to growing information se- curity challenges and ensure rapid response to potential threats. In 2024, a new disaster recovery system was also procured to improve the organisation’s preparedness for exceptional situations. In addi- tion, development measures in vulnerability management and the au- tomation of response to incidents have improved the organisation’s ability to detect and handle threats quickly and efficiently. Pihlajalinna has mandatory information security and protection train- ing for all personnel, including practitioners. In addition, Pihlajalinna organises topical targeted training for its personnel. Such training was organised several dozen times during 2024. In addition, training ses- sions have been held for regional management teams, the HR man- agement team and the finance department, among others. Pihlajalinna uses an SOC service provider that monitors and analyses information security incidents and escalates critical incidents if neces- sary. Every month, the SOC assesses thousands of information secu- rity incidents, some of which have been escalated to Pihlajalinna’s own information security team for further investigation. Incidents are classified according to criticality. Pihlajalinna’s target for data protec- tion is zero successful attempts to gain unauthorised access. This tar- get was achieved in 2024. Customers can report suspected data pro- tection or information security incidents through feedback systems or directly to the personnel. All of Pihlajalinna’s operating locations have a reporting system for the personnel to report any observed data pro- tection or IT security deviations. The Group has defined procedures and tools for detecting information security deviations. Additionally, action plans are in place for exceptional situations. Each information security deviation is recorded and processed for further action. The incident management process is reviewed and updated regularly. It is of primary importance to Pihlajalinna that customers and end-users are provided with clear privacy notices and information on how confi- dential data is processed, and that they have the right to control their own data. More information on information security and data protec- tion measures is available in section S4-1: Management of material topics and policies. Risks and opportunities There are significant financial risks related to customers’ privacy, data protection and information security. The most significant risks are cyber attacks on infrastructure or hardware and the resulting reputa- tional damage and potential liability for damages. Pihlajalinna has en- hanced cooperation between the data protection and information se- curity teams by establishing a cross-functional cooperation group that meets regularly. Pihlajalinna has a cyber security development plan in place that guides the development of information security and the monitoring of the targets set for information security in the coming years. The risks related to customers’ privacy, data protection and in- formation security are managed using the processes and manage- ment methods related to data protection and information security described above. In addition, the risk related to consumers’ freedom of expression can manifest itself as damage to reputation or customer satisfaction. Non-discrimination of customers, the accessibility of services and re- sponsible marketing are also at the heart of Pihlajalinna’s operations. The related reputational benefit and, on the other hand, reputational damage can pose both significant financial risks and opportunities. 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. The provision of diverse and demand-oriented services and im- proving their availability are an essential part of the development of operations. Pihlajalinna Sydänkaista is an example of effective care and potential reputational benefit. As a provider of social and REPORT BY THE BOARD OF DIRECTORS | SUSTAINABILITY STATEMENT 85 healthcare services and a listed company, Pihlajalinna places a high priority on transparent, timely and reliable stakeholder communica- tions. The cornerstones of Pihlajalinna’s marketing and communica- tions are professionalism, reliability, truthfulness and up-to-date medical knowledge. Patient safety and impact indicators Results in 2024 Target for 2025 Healthcare objections * According to section 10 of the Act on the Status and Rights of Patients (785/1992), a patient who is not satisfied with the healthcare or medical care and the related treatment received by then has the right to submit a healthcare objection to the director responsible for healthcare at the healthcare unit in question. 8.87 * < 8.87 * Official healthcare complaints * Complaints to the supervisory authority of suspected misconduct or neglect or dissatisfaction with the response to the objec- tion. 0.52 < 0.52 Patient injury notifications submitted The Finnish Patient Insurance Centre (PIC) processes all patient injury notifications concerning healthcare and medical care in Finland. 0.04 * < 0.04 * Compensated patient injuries * The Finnish Patient Insurance Centre (PIC) decides on the basis of the legislation on patient injury whether the patient injury is compensated and pays compensation to the person entitled to compensation in accordance with the law. 0 * 0 * Personnel safety image (NSS) (Patient safety perceived by the personnel in their own unit, which is asked about in the personnel survey. Value range +100 to -100) +79 +60 Impact metrics Access to surgery in the target time (2024 target > 76%) 91% 78% Group healthcare services (2024 target NPS 80) 84 81 The share of preventive activities by occupational health physicians in occupational healthcare (2024 target 60 %) 70% > 60 % Share of preventive work by occupational health nurses (2024 target 75 %) 83% > 75 % Data protection measures aim at 0 detected successful attempts to gain unauthorised access 0 kpl 0 kpl Incidents classified as severe Severe patient injuries ** 0 kpl Severe data protection and information security breaches 0 kpl 0 kpl The number of appointments, objections, official complaints, patient injury notifications and compensated patient injuries include Pihlajalinna’s private healthcare services. The Group does not necessarily receive information about objections, official complaints or patient injury notifications related to the operations of practitioners working at Pihlajalinna’s clinics. * The number is reported per 100,000 appointments. ** Patient safety events have been categorised by severity since December 2024. Metrics and targets (S4-5) Pihlajalinna monitors and evaluates the effectiveness of the measures from the perspective of consumers and end-users through stake- holder consultations, feedback and testing of processes. Target levels have been set for the metrics and the development of the results is monitored regularly, internal reporting at monthly, quarterly and an- nual level. The base year is 2024 and the 2024 values are used as the baseline, as they are the first reported values. All 2024 results are in line with the planned annual target and long-term target achievement. No other external party has validated the targets or metrics. Patient safety The goal of patient safety is that care and the care environment do not cause the patient a hazard or harm that is not related to the care. Patient safety work is based on risk assessment, continuous develop- ment of operations and maintaining safety. The realisation and devel- opment of patient safety is evaluated by measuring, for example, de- viations, infection rates, patient injury notifications and the decisions of the Patient Insurance Centre. Pihlajalinna monitors the number of patient injury notifications and the decisions of the Patient Insurance Centre solutions in Private Healthcare Services and joint ventures in Public Services. With regard to patient safety in surgical operations, Pihlajalinna monitors the number of treatment-related deep infections in the surgical area, among other things. The implementation and effectiveness of the measures is monitored through, for example, customer feedback, customer surveys, internal and external audits and assessments. In addition, there are continuous development activities in different ar- eas of the business. Severe patient injuries Pihlajalinna defines the most severe incidents related to patient safety as follows: Severe patient safety incidents in healthcare are sit- uations in which the customer/patient experiences serious harm or REPORT BY THE BOARD OF DIRECTORS | SUSTAINABILITY STATEMENT 86 dies and which could have been avoided by following the safety rec- ommendations and instructions. The treatment and examination de- cisions of an individual physician are assessed on the basis of how an experienced specialist would have acted in the situation. The Finnish Centre for Client and Patient Safety has published hot line (never event) indicators that reflect events in which the customer/patient experiences serious harm or dies and which could be avoided by fol- lowing the safety recommendations and instructions and which should never happen. The hot line indicators are based on the criteria of the British NHS and they have been integrated into Pihlajalinna’s private healthcare services’ HaiPro patient safety incident and hazard reporting system deployed in December 2024. If the indicators indi- cate a serious safety incident, the organisation must immediately ini- tiate corrective and preventive measures. In the HaiPro system, each grievance and hazardous incident report is classified separately ac- cording to the harm suffered by the patient, even if the incident does not include a hot line indicator. Pihlajalinna set a target of zero significant incidents leading to loss of information or financial losses for 2024. No significant information se- curity incidents were observed in 2024. One incident resulted in mi- nor financial losses. Pihlajalinna defines the most serious data protec- tion/information security incidents according to how significant finan- cial or other damage the incidents lead to. A significant incident is de- fined using the risk significance of the information risk assessment. If the impact of the incident is significant or very high based on the as- sessment, it is interpreted as a significant incident. The aim is that no significant incidents occur annually that would lead to financial or other losses. Fast and high-quality care chain The objective of surgical operations is to implement a quick and high- quality chain of care, which Pihlajalinna continuously develops. The aim of the activities is to rehabilitate the customer as quickly as possi- ble and to restore their work ability after the accident or surgery. Ac- cess to treatment, the duration of sickness-related absences and re- habilitation are monitored by means of various tools, which makes it possible to address deviations and comprehensively develop the op- erations. Access to treatment within the target time is an important indicator of the effectiveness of surgical operations and chain of care for accident insurance customers. Hospital chief physicians monitor, report and correct overruns of the service promise times. The implementation of the service promise time is the regional responsibility of the chief physicians. The target and results are presented in the attached table. Preventive healthcare Pihlajalinna invests in services that can help to reduce prolonged sick- ness-related absences, permanent disability and human suffering as well as costs to the employer and society. The prevention of ill health is in everyone’s interest society-wise and helps to reduce costs in the long term. Focusing on prevention is a key objective, especially in oc- cupational healthcare. This is monitored on a vocational group-spe- cific basis. The target and results are presented in the attached table. The direction of development is correct and the results achieved are aligned with the targets. Pihlajalinna will continue to maintain good practices and actively monitor development needs in the future. Customer experience The results of customer experience measurements are used in the de- velopment activities of the entire Group in accordance with the cus- tomer experience management model. Pihlajalinna’s management (management teams, regional and business management) monitors the overall feedback through monthly and quarterly reports and is re- sponsible for development measures. In addition, consumers and end-users are regularly consulted and, on the basis of the feedback and suggestions received, Pihlajalinna develops its activities and sets targets and processes to monitor their progress. Customer experience is Pihlajalinna’s strategic focus, and measuring the customer experi- ence and feedback process is part of the customer experience man- agement model. The feedback process highlights topics for service development. The needs for quality development arising from the customer interface play a key role in the development of Pihla- jalinna’s operations. Pihlajalinna follows high data protection prac- tices in its management model and feedback process. In addition to customer feedback provided proactively by the customer, Pihlajalinna measures the customer experience on a daily basis by means of vari- ous surveys, SMS or directly in the digital service channel. Pihlajalinna uses the Net Promoter Score (NPS) to measure the cus- tomer experience, among others. In the sustainability report, Pihla- jalinna reports the NPS results and targets for health services for the coming financial years. Healthcare services include primary care and specialised care services, both for private healthcare services and public services (clinic private services, surgical operations, remote consultations, services in wellbeing services counties). Healthcare ser- vices do not include wellbeing services or customer service (gym ser- vices, contact centre). The target and results are presented in the at- tached table. At Pihlajalinna, the continuous improvement of the customer experi- ence consists of regular and up-to-date quality and customer experi- ence measurements, continuous review of measurement methods, daily analysis and processing of customer feedback and the reporting and use of the results REPORT BY THE BOARD OF DIRECTORS | SUSTAINABILITY STATEMENT 87 S4 Links between policies related to consumers and end-users and targets. During the reporting year, targets and metrics have not been set for all identified impacts, risks and opportunities, but the whole will be reviewed in order to set any targeted targets and metrics during the coming financial year. Sustainability matter Impacts, risks and opportunities (IRO) Policy Result 2024 / Target 2025 Metric Consumer and end-user privacy Maintaining patient safety and data protection. (cyber attacks on in- frastructure and hardware) Actual and potential negative impact Data Protection and Information Se- curity Policy. Risk Management Policy Data protection and information security targets: The number of detected successful intrusion attempts is zero. No significant incidents that would result in financial or other losses. Number of successful intru- sion attempts. The number of significant inci- dents. Annual completion rate of in- formation security and data protection training and the patient data protection exam (%) There are significant financial risks related to customers’ privacy, data protection and information security. The most significant risks are cyber attacks on infrastructure or hardware and the resulting reputational damage and potential liability for damages. Risk Data Protection and Information Se- curity Policy Quality Policy Risk Management Policy Data protection and information security targets. Data protection and infor- mation security metrics. Security of consum- ers and end-users Maintaining patient safety and data protection. (cyber attacks on in- frastructure and hardware) Actual and potential negative impact Data Protection and Information Se- curity Policy Quality Policy Risk Management Policy Patient safety targets and data protection and information se- curity targets. Patient safety targets and data protection and infor- mation security targets. There are significant financial risks related to customers’ privacy, data protection and information security. The most significant risks are cyber attacks on infrastructure or hardware and the resulting reputational damage and potential liability for damages. Risk Quality Policy Code of Conduct Human rights principles Supplier Code of Conduct Data protection and information security targets. Data protection and infor- mation security metrics. Freedom of expres- sion for consumers and end-users The risk related to consumers’ freedom of speech can manifest itself as reputational damage or customer satisfaction. Risk Code of Conduct Human rights principles Group healthcare services, customer experience (NPS) Result 2024: 84 Target 2025: 81 Customer experience metric (Net Promoter Score, NPS) Access of consum- ers and end-users to high-quality in- formation In cooperation with its personnel, Pihlajalinna produces and distrib- utes information on social and healthcare themes that are relevant to society. However, communication may not jeopardise the privacy of customers or employees, data protection or the security of ser- vices. Actual positive impact The cornerstones of Pihlajalinna’s marketing and communications are professionalism, reliability, truthful- ness and up-to-date medical knowledge. Group healthcare services, customer experience (NPS) Result 2024: 84 Target 2025: 81 Customer experience metric (Net Promoter Score, NPS) REPORT BY THE BOARD OF DIRECTORS | SUSTAINABILITY STATEMENT 88 Health and safety of consumers and end-users Pihlajalinna provides customers with health benefits, society and employers with savings, access to care (reducing queues). Patient safety (physical patient safety) and positive impact are strong. Actual and potential positive impact Quality Policy Risk Management Policy Pihlajalinna aims for an excellent customer experience in all service channels and at all business locations. There are sev- eral metrics in place with targets set for the coming years: Group healthcare services, customer experience (NPS), access to surgery in the target time, Net Safety Score (NSS), patient safety metrics and proportion of preventive care. Customer experience metric (Net Promoter Score, NPS) Access to surgical treatment within the target time Net Safety Score (NSS) Patient safety metrics (Objec- tions, official complaints, pa- tient injury reports and com- pensation) Proportion of preventive care KL1 (TTH) Significant compromise of patient safety Potential negative im- pact Quality Policy Risk Management Policy Patient safety targets . Patient safety metrics The health, safety and security of customers are at the heart of Pihlajalinna’s operations. Risks related to patient safety are reputa- tional damage and potential liability for damages. Risk Quality Policy Risk Management Policy Code of Conduct Patient safety targets and data protection and information se- curity targets. Patient safety metrics and data protection and infor- mation security targets. Protecting children of consumers and end-users Maintaining patient safety and data protection. (cyber attacks on in- frastructure and hardware) Actual and potential negative impact Data Protection and Information Se- curity Policy Risk Management Policy Patient safety targets and data protection and information se- curity targets. Data protection and infor- mation security metrics. Maintaining patient safety and data protection. (cyber attacks on in- frastructure and hardware) Risk Data Protection and Information Se- curity Policy Risk Management Policy Patient safety targets and data protection and information se- curity targets. Data protection and infor- mation security metrics Non-discrimination of consumers and end-users Equal treatment of customers Actual positive impact The Equality and Non-Discrimination Policy defines Pihlajalinna’s policies related to equality and non-discrimi- nation in all activities related to working life. Group healthcare services, customer experience (NPS) Result 2024: 84 Target 2025: 81 Customer experience metric (Net Promoter Score, NPS) Non-discrimination of customers is also at the heart of Pihlajalinna’s operations. The related reputational damage can pose significant fi- nancial risks, but on the other hand, reputational benefits can also provide opportunities. Risk and opportunity Quality Policy Code of Conduct Human rights principles Supplier Code of Conduct Group healthcare services, customer experience (NPS) Result 2024: 84 Target 2025: 81 Customer experience metric (Net Promoter Score, NPS) Access to products and services The public service system is in a crisis. Pihlajalinna provides its cus- tomers, such as society and employers, with savings through access to services Actual positive impact Quality Policy No targets in place in 2024. No metrics in place in 2024. The availability of services produced for customers is at the heart of Pihlajalinna’s operations. The related reputational benefit and, on the other hand, reputational damage can pose both financial risks and opportunities. Risk and opportunity Quality Policy Group healthcare services, customer experience (NPS) Result 2024: 84 Target 2025: 81 Customer experience metric (Net Promoter Score, NPS) REPORT BY THE BOARD OF DIRECTORS | SUSTAINABILITY STATEMENT 89 Sustainable market- ing The cornerstones of Pihlajalinna’s marketing and communications are professionalism, reliability, truthfulness and up-to-date medical knowledge. Actual positive impact Quality Policy Code of Conduct Group healthcare services, customer experience (NPS) Result 2024: 84 Target 2025: 81 Customer experience metric (Net Promoter Score, NPS) Non-discrimination of customers, the availability of services and re- sponsible marketing are also at the heart of Pihlajalinna’s opera- tions. The related reputational benefit and, on the other hand, repu- tational damage can pose both significant financial risks and oppor- tunities. Risk and opportunity Quality Policy Code of Conduct Human rights principles Group healthcare services, customer experience (NPS) Result 2024: 84 Target 2025: 81 Customer experience metric (Net Promoter Score, NPS) The scope of all activities is our own operations and the downstream value chain, with Finland as the operating area (no other geographical areas). The base year is 2024 and the baseline values are 2024, as these are the first reported values. Analysis of the results and justifications: All results for 2024 are in line with the planned annual target and the achievement of the long-term target. The targets or metrics have not been validated by an external assurance provider. For all future actions, the time horizon is future financial years or the actions are continuous. REPORT BY THE BOARD OF DIRECTORS | SUSTAINABILITY STATEMENT 90 Business Conduct (G1) The role of the administrative, management and supervisory bodies (ESRS2 GOV-1) 31 Impact, risk and opportunity management related to business conduct (ESRS2 IRO-1) 43 Business conduct policies and corporate culture (G1-1) 91 Political influence and lobbying activities (G1-5) 93 Targets and metrics 94 The role of the administrative, management and supervisory bodies (ESRS2 GOV-1) Information on the roles of the administrative, management and su- pervisory bodies is presented in section ESRS 2 GOV-1: The role of senior management in sustainability management. Impact, risk and opportunity management re- lated to business conduct (ESRS2 IRO-1) More detailed information on the description of impacts, risks and opportunities related to business conduct is presented in section ESRS 2 SBM-3: Material sustainability topics in Pihlajalinna's activities and their link with the strategy. The materiality assessment process and process for managing impacts, risks and opportunities related to business conduct are described in section ESRS 2 IRO-1: Process to identify and assess material impacts, risks and opportunities. A double materiality assessment and a risk assessment have been used in the identification of impacts, risks and opportunities. The identified material sustainability topics related to business conduct are corporate culture and political engagement, for which Pihla- jalinna’s impact is primarily positive and materialises in the short and medium term. Corporate culture Pihlajalinna has an actual positive impact on corporate culture. Pihla- jalinna manages its material impacts on corporate culture and builds corporate culture through compliance with the applicable legislation, regulations issued by the authorities and the rules and regulations ap- plicable to listed companies, and by training its personnel. These measures are enhanced by Pihlajalinna’s internal controls. The princi- ples applied in the company’s operations are also documented in the Code of Conduct and the anti-corruption and anti-bribery policy. Training on the Code of Conduct is a mandatory part of Pihlajalinna's induction training programme. Supervisors’ capabilities to address problems are developed through training. Pihlajalinna also has inter- nal controls in place. The company also has a confidential whistle- blowing channel that can be used to report misconduct and problems in the organisation. The company's business operations and strategy do not directly affect the corporate culture, but they can affect it indirectly. Sustainable business and a strategy that takes into account the needs of the en- tire personnel can have a positive impact on corporate culture and thereby also on business operations. This subtopic is considered as an opportunity, as ethical conduct increases trust among stakehold- ers. Different stakeholders, such as investors, partners, employees and customers, are of primary importance with regard to ensuring profitable business. Trust can increase the value of the share, enable access to financing packages on better terms, improve the availability of workers, and enhance customer acquisition and retention. Political engagement Pihlajalinna has a truly positive impact on political interaction. Pihla- jalinna actively monitors legislation and its preparation, as well as po- litical dialogue in general. Pihlajalinna has a long tradition of develop- ing opportunities in public social and healthcare in collaboration with the public sector. Pihlajalinna adapts its practices according to legisla- tion. The Group also adheres to ethical policies in political interaction. Pihlajalinna is registered in the Finnish Transparency Register to en- sure transparency in advocacy activities. The Group does not support political parties or their members. Political interaction can impact business positively. One of Pihlajalin- na's strategic focus areas is to act as a partner in public healthcare, thus ensuring operational conditions in public healthcare. Political in- teraction can facilitate a more favourable legislative framework for private healthcare providers, thereby enabling economic benefits. This topic is seen as an opportunity, although it also carries a reputa- tional risk in the context of political influence. Both risks and oppor- tunities can materialise in its operations. REPORT BY THE BOARD OF DIRECTORS | SUSTAINABILITY STATEMENT 91 G1 Connections between governance policies and targets Sustainability matter Impacts, risks and opportunities (IRO) Policy Result 2024 / Target 2025 Metric Corporate culture (business ethics) As a large group, Pihlajalinna can spur the entire industry on. The sector is highly regulated, which has created strong ethical practices in the sector for patient work and data processing, for example. Developing transparent processes, especially in business, as formal governance processes must be in place. Actual positive im- pact Quality policy Code of Conduct Human rights principles Supplier Code of Conduct Anti-Corruption and Anti-Bribery Policy All employees have completed the digital Code of Conduct training. The target is continuous. Incidents of corruption or bribery: 0. The aim is to expand stakeholder discussions to deepen the understanding of ethical policies and human rights princi- ples. The percentage of employees who have completed the digi- tal Code of Conduct training. Incidents of corruption or bribery. Ethical conduct increases trust among stakeholders. Different stakeholders, such as investors, partners, employees and custom- ers, are of primary importance with regard to ensuring profitable business. Trust can increase share value, enable access to financ- ing packages on better terms, improve the availability of workers, and enhance customer acquisition and retention. Opportunity Political engage- ment Pihlajalinna operates strongly in the public interface and engages in discussion at different levels. Sharing information about busi- ness operations as part of political decision-making strengthens the diverse knowledge capital for decision-makers. Pihlajalinna has operated as a partner to the public healthcare sec- tor for many years. Actual positive im- pact Code of Conduct Supplier Code of Conduct Anti-Corruption and Anti-Bribery Policy Disclosure Policy Incidents of corruption or bribery: 0. Incidents of corruption or bribery. Political engagement may lead to a more favourable legislative framework for private healthcare organisations and thus facilitate economic benefits. Opportunity Political engagement may involve a reputational risk. Risk The scope of all activities is our own operations and downstream value chain, with Finland as the operating area (no other geographical areas). The base year is 2024 and the baseline values are for 2024, as these are the first reported values. Result analysis and rationale: All of the results for 2024 are aligned with the achievement of the planned annual target and the long-term target. No external party has validated the targets or metrics. For all future actions, the time horizon is future financial years or the actions are continuous. Business conduct policies and corporate culture (G1-1) Business conduct policies The sustainability of Pihlajalinna's business conduct is guided by the applicable legislation and the company's guidelines and policies, which supplement the legal requirements and provide further specifi- cation. Pihlajalinna’s Code of Conduct guides the company's manage- ment, personnel and practitioners. The Code of Conduct describes the way the company operates, based on the principles of good cor- porate governance, legal compliance, transparency, fairness and con- fidentiality. Compliance with these policies and their realisation in the day-to-day actions of all Pihlajalinna professionals, customers and other stakeholders enable reliable operating relationships and have a positive impact on the well-being of customers and the personnel, thereby contributing to profitable and ethical business. The realisation of the principles of good governance and legal compli- ance is monitored regularly at Pihlajalinna as part of internal auditing. Compliance with the principles of openness and transparency is moni- tored twice a year by means of the Pihlis Pulse personnel survey, which examines material issues relating to the openness of the work community and management and the transparency of operations. The same survey is also used to examine the realisation of the princi- ples of fairness and confidentiality in the day-to-day work of Pihla- jalinna professionals. In addition to the Pihlis Pulse survey, compliance with policies and their realisation are monitored in bilateral development discussions between supervisors and employees. Issues arising from these discus- sions are also addressed by the management of the organisation in question as necessary. Compliance with the Code of Conduct and its realisation are also examined in all management activities, from day- to-day management to the Management Team and the Board of Di- rectors. The highest level of accountability lies with the Board of Di- rectors. Pihlajalinna’s procurement principles concerning partners are laid down in a separate Supplier Code of Conduct and separate ethical REPORT BY THE BOARD OF DIRECTORS | SUSTAINABILITY STATEMENT 92 guidelines concerning sports cooperation. The procurement princi- ples cover five areas: legislation and human rights, the environment, customers' health and safety, workers' rights and ethical business. The most senior level that is accountable for compliance with the pro- curement principles is the Chief Procurement Officer. The procure- ment organisation examines the ethical compliance of suppliers of goods and services as well as other stakeholders as part of procure- ment decisions and partnership cooperation. For Pihlajalinna, sustainable business means good corporate citizen- ship. Operating ethically and sustainably is key to achieving the Group’s strategic objectives. The company brings economic value to society by providing efficient and impactful social and healthcare ser- vices, procuring services and products from local operators, and pay- ing all taxes in Finland. Pihlajalinna is a significant employer across Finland. As a provider of healthcare and social welfare services and as a listed company, Pihlajalinna places a high priority on transparent, timely and reliable communications, both internally and with external stakeholders. The cornerstones of Pihlajalinna’s marketing and com- munications are professionalism, reliability, truthfulness and up-to- date medical knowledge. Pihlajalinna is committed to respecting the following international commitments, principles, guidelines and initiatives: • The Universal Declaration of Human Rights by the UN • International Labour Organization (ILO) Declaration on Funda- mental Principles and Rights at Work • The UN Guiding Principles on Business and Human Rights (UNGP) and the Global Compact initiative • The OECD Guidelines for Multinational Enterprises on Responsi- ble Business Conduct The Group's operations are also guided by the following principles and guidelines, among others: • Governance practices • Quality policy, environmental policy and risk management policy • Equality and non-discrimination plan • Data protection and information security policy and guidelines • Disclosure policy and the disclosure rules of Nasdaq Helsinki • Marketing guidelines for healthcare services These commitments, principles, operating guidelines and initiatives have been incorporated into Pihlajalinna’s operations at every level as applicable and in such a way that they serve employee well-being, customers and other stakeholders, and thereby contribute to Pihla- jalinna's business objectives. Each policy and operating principle is an integral part of Pihlajalinna’s operations. The commitments, policies, guidelines and initiatives are integrated into the company's Code of Conduct and procurement principles, and they are applied as part of the activities of Pihlajalinna’s management and the work of immediate supervisors. The implementation of these guidelines is monitored as part of personnel surveys and discussions, and any issues identified in the course of these monitoring activities are referred to the management for evaluation and further pro- cessing if necessary. If an issue or concern cannot or is preferred not to be raised without anonymity, Pihlajalinna has a whistleblowing channel that guarantees full anonymity. The system ensures that inci- dents and issues are reliably addressed by a group that is appointed by the management and operates under the leadership of the Chief Legal Officer. Corporate culture Pihlajalinna’s corporate culture is the sum of several components. The key building blocks of the corporate culture include the com- pany’s values – ethics, energy and open-mindedness – and Pihlajalin- na's way of working, which is driven by the values together with the Code of Conduct established by the company. Pihlajalinna's leader- ship principles describe the type of leadership that is aimed for and valued at Pihlajalinna. These principles have been defined in collabo- ration with the personnel. Pihlajalinna's approach to looking after its personnel, customers and partners, and taking them into consideration, is an integral part of the company's culture. Communications play an important role, as do the company's operating models in relation to stakeholders in different contexts. Pihlajalinna respects its employees’ right to unionisation and devel- ops cooperation based on trust and openness with employee repre- sentatives. The company engages in cooperation with elected em- ployee representatives, occupational safety and health delegates and representatives selected by the personnel. Pihlajalinna monitors and assesses the development of the employee experience with the help of the twice-yearly Pihlis Pulse personnel survey. More information on Pihlajalinna’s measures related to the company's own workforce is provided in the S1 section. Information on the organisation’s internal training with re- gard to business conduct Training on Pihlajalinna’s Code of Conduct applies to all employees and private practitioners working at Pihlajalinna. The members of the Board of Directors have reviewed the Code of Conduct in connection with the approval process. The training is implemented as an inde- pendently taken online course in Pihlajalinna’s e-learning environ- ment, the Pihlajalinna Academy. The training covers Pihlajalinna’s key ethical principles and encourages the personnel to act responsibly. Approved completion of the training is required of every Pihlajalinna professional, and completion of the training is monitored by supervi- sors. The course completion rates are also subject to regular monitor- ing by senior management. Necessary measures, such as activation measures, are agreed upon as needed. In addition to being the subject of a separate online course, the Code of Conduct is incorporated into Pihlajalinna’s general induction train- ing and induction training aimed at supervisors. The induction train- ing for supervisors is mandatory for all new supervisors, and the com- pletion of the training is also subject to regular monitoring. A re- minder is sent to new supervisors at two-month intervals to ensure that they complete the induction training. Pihlajalinna's Code of Con- duct includes a commitment to the prevention of bribery and corrup- tion. The Group Management Team is responsible for ensuring that the personnel is familiar with the Code of Conduct, and supervisors are responsible for adherence to the Code of Conduct. Regular dialogue between the personnel, supervisors, elected em- ployee representatives and other parties is part of work and day-to- day operations to maintain openness and trust in a safe work envi- ronment. The Pihlis Pulse survey is conducted regularly and the re- sults are monitored all the way up to senior management. By pur- posefully managing sustainability, Pihlajalinna wants to ensure that the company operates in a sustainable and ethical manner and ena- bles the achievement of the targets set for sustainability. The highest responsibility for the realisation of the policies lies with the Board of Directors and its People and Sustainability Committee. The most sen- ior person in charge of compliance with the Code of Conduct is the company's Chief Legal Officer. Mechanisms for identifying, reporting and investigating con- cerns Pihlajalinna has an operating model in place for the management of harassment and inappropriate treatment. The model and the related principles are communicated to the entire personnel. Supervisors and occupational safety and health delegates receive training on how to REPORT BY THE BOARD OF DIRECTORS | SUSTAINABILITY STATEMENT 93 identify and address harassment and inappropriate treatment. Super- visors are responsible for the monitoring of working conditions. At- tention is paid to working conditions in accordance with the operat- ing model for the management of inappropriate treatment. The oper- ating model for the management of harassment and inappropriate treatment is the subject of dialogue with personnel representatives in compliance with the Act on Co-operation within Undertakings. Inap- propriate behaviour or actions are not tolerated in any form. Pihla- jalinna’s intranet provides access to instructions on what to do if in- appropriate behaviour is encountered. Professional behaviour at work prevents inappropriate treatment. The key is for everyone to operate in accordance with the rules, instructions and schedules rele- vant to their work, and to take the initiative to offer and request help. The channels available to the personnel for raising concerns are de- scribed in more detail in the section on Pihlajalinna's own workforce (S1) of this report. Incidents identified as harassment or inappropriate treatment are handled objectively and confidentially in consultation with all of the parties concerned. Consistent decisions and measures are taken to put a stop to inappropriate treatment. The parties involved in any in- cident of harassment or inappropriate treatment, and the supervisor concerned, can request assistance and support from the occupational safety and health delegate, the elected employee representative, the occupational safety and health manager, the HR administration and occupational healthcare as necessary. The supervisor, or a person designated by the supervisor, will investigate the incident confiden- tially and without prejudice, as quickly as possible, primarily through discussion with the persons concerned and, if necessary, through other means. A memorandum is prepared on the discussions. The methods and timing of following up on the agreed measures are agreed upon with the parties concerned, and the supervisor informs, to the extent deemed necessary, the other members of the work community of the processing of the matter and its progress at a gen- eral level if the supervisor considers the matter to be of significance to the well-being of the work community as a whole. The parties con- cerned are informed in advance of any measures to inform the work community. Whistleblower protection Pihlajalinna aims to operate responsibly, in compliance with the law and in line with the Group's ethical values in all circumstances. Pihla- jalinna has an anonymous whistleblowing channel for reporting mis- conduct or illegal actions. The Group's personnel, customers and other stakeholders can use the channel to safely report any miscon- duct or violations of the company's values they have observed. The whistleblowing channel is accessible to stakeholders via Pihlajalinna’s website. If any irregularities are observed in the company’s operations, the in- formation is processed immediately. All reports are processed appro- priately and confidentially. According to the law, a person who has submitted a report through the whistleblowing channel may not be retaliated against for submitting a report. The whistleblower is always protected and the identities of the subject of the report and any other parties mentioned in the report are processed in strict confi- dentiality. The reports are only seen by the persons designated to process them. Where necessary, other experts may be used in the in- vestigation of whistleblower reports to ensure that they are pro- cessed appropriately. The aforementioned whistleblowing channel and the anonymity it provides are deemed adequate at Pihlajalinna, and the company has not considered it necessary to introduce any separate lines of opera- tion. Description of functions that are most at risk in respect of cor- ruption and bribery Pihlajalinna drew up a separate anti-corruption and anti-bribery pol- icy in late 2024, and the policy was approved by the Management Team at the end of 2024. The policy was implemented in December 2024. Themes related to this topic were previously addressed in Pihlajalinna's Code of Conduct. The new policy is aligned in its essen- tial aspects with the UN Convention against Corruption. No incidents of corruption or bribery have been detected at Pihla- jalinna. Therefore, based on the company's experience, no specific function can be identified as being most at risk. On a theoretical level, incidents of corruption could be possible in the procurement organi- sation, which is responsible for the entire Group's procurement deci- sions and their supervision under the leadership of the Chief Procure- ment Officer. Pihlajalinna’s Code of Conduct, Supplier Code of Con- duct and the new anti-corruption and anti-bribery policy state that all forms of corruption are prohibited. Pihlajalinna considers the general risk of corruption to be low and has therefore not assessed the topic to be material. Pihlajalinna operates in Finland, where the risk of brib- ery and corruption is generally low. (Transparency International Cor- ruption Perceptions index) Political influence and lobbying activities (G1-5) Pihlajalinna does not support any political activities and is therefore politically independent. Pihlajalinna was registered in the EU Trans- parency Register in autumn 2024 (register number: PIH-24-1415-R). Actual reporting on the topic will take place from 2025 onwards. Pihlajalinna's political lobbying activities can be considered to be mi- nor. Pihlajalinna is a member of the Finnish Association of Private Care Providers (HALI), which represents companies and organisations that produce social and healthcare services. HALI is a member of the Confederation of Finnish Industries EK. Pihlajalinna is also a member of the industry association Lääkäripalveluyhdistys LPY. Pihlajalinna does not have a statutory obligation to be a member of a Chamber of Commerce or any other advocacy organisation. The Executive Vice President, Communications and Sustainability is the senior representative in charge of matters related to political in- fluence and lobbying activities. All discussions, meetings or topics re- lated to the subject are reviewed to the extent deemed necessary with the Management Team and business management. The busi- ness and business management engage in interaction with the Execu- tive Vice President, Communications and Sustainability. The Executive Vice President, Communications and Sustainability communicates the matter in question to the extent deemed necessary to the senior management, such as the Board of Directors and the Management Team. Information on the most important topics related to lobbying activities and the company’s most significant views The overarching theme of Pihlajalinna’s political influence activities is to ensure the operating conditions of the multi-producer model, i.e. cooperation between public and private healthcare services. Utilising all existing healthcare resources in society not only promotes Pihla- jalinna’s business activities but also contributes to reducing the costs of healthcare in the national economy and promoting citizens’ well- being through timely access to care. In 2024, efforts were made to promote Pihlajalinna’s operating conditions under two separate themes related to regulatory changes and promoting the operating conditions of the wellbeing services counties. Reform of the Health Care Act, the Hospital Decree and the multi- producer model REPORT BY THE BOARD OF DIRECTORS | SUSTAINABILITY STATEMENT 94 In the organisation of healthcare services, the wellbeing services counties should be given as much flexibility as possible in service pro- duction, and no feasible methods should be ruled out in the applica- ble legislation. Legislation should enable different forms of ownership and production also in hospital operations, and avoid restrictions per- taining to the temporary nature of operations or medical terms being subject to interpretation. The financing model of the wellbeing services counties The current financing model of the wellbeing services counties needs to be overhauled. The current financing model is based on morbidity and rewards wellbeing services counties on the basis of services per- formed without ensuring effectiveness. The operating model in- creases costs and has an adverse impact on the health of citizens. Pihlajalinna has operated as a partner to the public healthcare sector for many years. The company has experience and evidence of how to ensure, together with the public sector, the best possible service structure from the perspective of overall effectiveness, in terms of both health impact and cost efficiency. Targets and metrics Pihlajalinna's Code of Conduct training is mandatory for all Pihla- jalinna professionals. In 2024, the digital training was completed by 59%. The target was for the digital training to be completed by a mini- mum of 70% of the personnel by the end of 2024. Going forward, the target for the completion rate of Code of Conduct training 100%. No external party has validated the targets or metrics. Pihlajalinna was not subject to any decisions, court judgments, fines or similar penalties for violations related to corruption or bribery. In- formation on cases and legal action is compiled by the legal depart- ment. No cases of such type were pending, nor were any reported to the auditors, who are otherwise reported to with regard to any dis- putes, criminal cases and other legal proceedings. Pihlajalinna has no reportable information regarding political dona- tions in cash or in-kind. . REPORT BY THE BOARD OF DIRECTORS | SUSTAINABILITY STATEMENT 95 Policy name Key contents and general objectives Follow-up process Highest decision- making party Related sustainability topics Code of Conduct The Code of Conduct describes the key values and principles that workers are ex- pected to follow. The aim of the Code of Conduct is to establish clear ethical stand- ards that cover all aspects of Pihlajalinna’s operations and day-to-day work. This is complemented by our human rights policy, which reinforces our commitment to respecting human rights in all of our activities and in the sphere of influence of our operations, and to eradicate all forms of modern slavery, forced labour, trafficking in human beings and child labour in accordance with the ILO Declaration on Funda- mental Principles and Rights at Work. Pihlajalinna has signed the UN Global Com- pact initiative's Guiding Principles on Business and Human Rights. The Code of Con- duct also includes themes related to corruption and bribery, for which there is also a separate policy. Pihlajalinna has a confidential whistleblowing channel that can be used for report- ing misconduct and problems in the organisation. Every Pihlajalinna employee must complete mandatory training on the Code of Conduct and commits to com- plying with the Code, which also entails respecting human rights. Pihlajalinna’s le- gal affairs unit is responsible for processing whistleblower notifications, and the Board of Directors monitors messages submitted via the whistleblowing channel and the actions taken in response to them. The Group Management Team is responsible for ensuring that the personnel are familiar with the Code of Conduct, and supervi- sors are responsible for adherence to the Code of Conduct. Board of Directors G1 Governance S1 Own workforce S4 Customers and end- users Supplier Code of Conduct and ethical sports cooperation policy The Supplier Code of Conduct describes our expectations of suppliers and partners to conduct business in an ethical and socially responsible manner. It covers five ar- eas: legislation and human rights, environment, customer health and safety, em- ployee rights and ethical business including anti-corruption and anti-bribery. Ser- vice providers, suppliers and partners are obliged to follow the principles. Monitoring commitment to the Supplier Code of Conduct is part of the supplier management process and agreements. A systematic monitoring process is under development and therefore was not yet complete during the reporting year. Pihlajalinna's CEO G1 Governance Anti-Corruption and Anti- Bribery Policy Pihlajalinna drew up a separate anti -corruption and anti-bribery policy in late 2024, and the policy was approved by the Management Team at the end of 2024. The new policy is essentially aligned with the UN Convention against Corruption. The theme of the anti-corruption and anti-bribery policy is also included in the Code of Conduct. The anti-corruption and anti-bribery policy was adopted at the end of the reporting year and the monitoring process will be deployed during 2025. Board of Directors G1 Governance Human rights principles Pihlajalinna’s human rights policy reinforces Pihlajalinna’s commitment to respect- ing human rights in all of activities and in the sphere of influence of operations, and to eradicate all forms of modern slavery, forced labour, trafficking in human beings and child labour in accordance with the ILO Declaration on Fundamental Principles and Rights at Work. These human rights principles describe how Pihlajalinna fulfils its obligation to re- spect human rights and implement continuous human rights due diligence, and how Pihlajalinna promotes stakeholder cooperation, corrective measures and the available grievance mechanisms. Pihlajalinna’s human rights policy is available The human rights risk assessment is reviewed annually and is part of the continu- ous development of operations. This ensures that Pihlajalinna responds to any changes in the business environment. PIhlajalinna's various functions actively monitor and work for human rights, includ- ing the legal service, HR department, procurement and the communications and sustainability team. Board of Directors S1 Own workforce S4 Customers and end- users Personnel Policy The Personnel Policy compiles the most important operating principles in different HR areas. The Personnel Policy includes requirements and expectations for the Group’s operations so that our personnel can perform meaningful work in a well- managed and healthy work community. At Pihlajalinna, the implementation of policies aligned with the Personnel Policy is monitored and assessed regularly through personnel surveys and discussions with personnel representatives. The Group’s Chief People and Culture Officer is the owner of the Personnel Policy. Group HR is responsible for updating/amending the policy. Board of Directors G1 Governance S1 Own workforce Equality policy The Equality and Non-Discrimination Policy defines Pihlajalinna’s policies related to equality and non-discrimination in all activities related to working life. At Pihlajalinna, equality and non-discrimination are regularly monitored and as- sessed through employee surveys and by collecting and analysing statistics on the placement of women and men in different personnel groups and positions. The survey of wages and pay gaps is carried out as part of the monitoring, and these statistics are included in the equality and non-discrimination plan. The Group’s Chief People and Culture Officer is the owner of the Equality and Non- Discrimination Policy. Group HR is responsible for updating/amending the policy. Board of Directors G1 Governance S1 Own workforce REPORT BY THE BOARD OF DIRECTORS | SUSTAINABILITY STATEMENT 96 Risk management policy Pihlajalinna’s risk management is guided by the Group’s Risk Management Policy. Continuity plans are prepared for the most important risks. Pihlajalinna describes the significant near-term risks and uncertainties related to its business in its in- terim reports and Board of Directors' report. Pihlajalinna uses quality management systems to support risk management. Pihlajalinna describes the significant near- term risks and uncertainties related to its business in its interim reports and Board of Directors' report. The Group Management Team regularly assesses risks, refines risk reporting if nec- essary and reports on key risks to the Board of Directors. The Board of Directors annually verifies that risk management is up to date. Pihlajalinna describes the sig- nificant near-term risks and uncertainties related to its business in its interim re- ports and Board of Directors' report. The Group Management Team regularly as- sesses risks, refines risk reporting if necessary and reports on key risks to the Board of Directors. Board of Directors G1 Governance S1 Own workforce S4 Customers and end- users Quality policy Pihlajalinna’s quality policy and quality control system support the strategy of Pihlajalinna Group. The aim is to ensure that Pihlajalinna's operations comply with valid legislation, authoritative regulations and any licences and requirements of the industry. Pihlajalinna’s quality management is based on comprehensive self-moni- toring, external quality assurance and comprehensive monitoring by the authori- ties. The quality policy is owned by the Group’s Quality Director, who is responsible for updating the policy and changes made to it. The quality policy includes the following certificates: ISO9001 certificate: Private clinic operations, occupational health services, hospital operations, inpatient ward operations, service housing with 24-hour assistance (Ikipihlaja, Uniikki), in-house support services and management and development. ISO27001 certificate: Pihlajalinna Dextra private clinic. ISO14001 Environmental management system: Private healthcare services Pihlajalinna's management agrees to comply with the requirements and monitors the development of customer experiences, medical quality, employee satisfaction and process quality and takes the necessary action needed to fulfil the quality-re- lated objectives. Pihlajalinna's management is committed to constantly improving operations and the quality management system and creates the prerequisites for achieving the quality-related objectives. Chief Medical Officer G1 Governance S1 Own workforce S4 Customers and end- users Data Protection and Infor- mation Security Policy The purpose of the Data Protection and Information Security Policy is to ensure that all personal data and other confidential information is processed securely and lawfully. The organisation is committed to complying with the ISO27001 standard and other similar initiatives that support the implementation of information secu- rity and data protection. This is described in the Data Protection and Information Security Policy. The implementation of data protection and information security is continuously monitored. Each employee is responsible for the implementation of data protec- tion and information security and required to report any threats or deviations they observe. The Chief Medical Officer is responsible for data protection. The Chief Information Officer is responsible for information security. Operations are guided by the ap- pointed Data Protection and Information Security Director. Pihlajalinna's CEO G1 Governance S1 Own workforce S4 Customers and end- users Environmental Policy Pihlajalinna Group’s Environmental Policy sets out the policies for environmental management and practices, such as the identification of the environmental im- pacts of Pihlajalinna’s operations and the continuous development of operations. Pihlajalinna’s Environmental Policy defines our commitment to environmental ef- forts and guides decision-making. Operations are based on the ISO 14001 environ- mental management framework, which, as part of Pihlajalinna’s joint management system, creates uniform operating methods for the Group. Pihlajalinna’s private healthcare services, i.e. private clinics, occupational health services and hospitals, are certified under the ISO 14001 environmental management standard. Together with the Quality Director, the Chief Legal Officer maintains a list of acts and decrees concerning Pihlajalinna’s environmental aspects. Environmental as- pects are reviewed once a year by the person in charge. Environmental officers have been appointed for private clinics and hospital service locations. They see to taking environmental aspects into account in the unit’s operations and monitoring the implementation of the environmental programme. They convene once a month with external waste manageme nt experts to review and develop location- specific environmental plans and guidelines. Communications and Sustainability Direc- tor E1 Climate change miti- gation and adaptation S1 Own workforce S4 Customers and end- users Whistleblowing channel in- structions for users Pihlajalinna's confidential whistleblowing channel can be used for reporting mis- conduct and grievances in the organisation. The whistleblowing channel is imple- mented in partnership with a neutral third party to ensure that the anonymity of the person who submits the report is maintained. The neutral party is only respon- sible for the technical provision of the service, not receiving the reports. Reports can only be viewed by the persons designated to handle reports, and all reports are handled appropriately and confidentially. Confidentiality regarding the identity of the person who submits the report, the person who is the subject of the report and any other parties mentioned in the report is maintained. The whistleblowing channel is available on Pihlajalinna’s website and the intranet for personnel, and its operations is regularly communicated to the personnel and stakeholders. Reports can be submitted in Finnish, Swedish and English. All reports are processed appropriately and confidentially. We always maintain confidentiality regarding the identity of the person who submits the report, the person who is the subject of the report and any other parties mentioned in the re- port. The reports are only seen by the persons designated to process them. Where necessary, other experts may be used in the investigation of whistleblower reports to ensure that they are processed appropriately. Chief Legal Officer G1 Governance S1 Own workforce S4 Customers and end- users REPORT BY THE BOARD OF DIRECTORS | SUSTAINABILITY STATEMENT 97 Remuneration Policy Pihlajalinna's Remuneration Policy is a remuneration policy for governing bodies as referred to in the Limited Liability Companies Act, the Securities Markets Act and the Corporate Governance Code. It sets out the principles for the remuneration of the members of the Board of Directors and the CEO. The main principle of the Re- muneration Policy is that the remuneration of the Board of Directors and the CEO should promote the achievement of the Group's objectives and offer a fair, engag- ing and competitive system which adheres to the market practices in its extent and structure. The purpose of all remuneration at Pihlajalinna Group is to encourage good perfor- mance and motivate the personnel to work long-term to achieve the company’s goals. Remuneration is one of the factors that the Group uses to ensure that we have talented and motivated people for each position at all levels of the organisa- tion. These principles also apply to the remuneration of Board members and the CEO. However, the characteristics required of Board members and the CEO and the measurement of success in these positions differ significantly from most other po- sitions in the Group. The terms of employment of the Group’s employees have no effect on this Remuneration Policy. Pihlajalinna’s General Meeting decides on the remuneration paid to the members of the Board of Directors. The proposal for the remuneration of the Board mem- bers is prepared by the Shareholders’ Nomination Board. Assisting the Board of Di- rectors, the People and Sustainability Committee prepares the principles applied to the remuneration of the CEO. Pihlajalinna's Board of Directors annually confirms the amount, targets and criteria for performance bonuses. General Meeting of Pihlajalinna Plc ESRS2 Disclosure Policy The Disclosure Policy approved by Pihlajalinna Plc’s Board of Directors describes the key principles and operating methods according to which the Group operates in investor communications and financial reporting. Pihlajalinna Group’s goal is to ensure that all market participants have access to relevant and sufficient infor- mation about factors affecting the price of Pihlajalinna’s shares. In its communica- tions, Pihlajalinna Group complies with EU and Finnish legislation, the rules of Nasdaq Helsinki Ltd, the guidelines and regulations of the Financial Supervisory Au- thority and other authorities, the Corporate Governance Code for listed companies and the company’s corporate governance principles, insider guidelines and other guidelines. Pihlajalinna’s principles for investor communications are timeliness, reliability, transparency, consistency and fairness. The Group communicates clearly and com- prehensively about both positive and negative matters. Pihlajalinna publishes re- leases as soon as possible and simultaneously to both the market and its key stake- holders. The Group publishes all stock exchange releases and investor news in Finnish and English. The Disclosure Policy is reviewed and updated as necessary. The Board of Directors reviews and approves the financial statements and interim reports. In addition, the Board of Directors approves significant stock exchange releases, such as the CEO’s appointment announcement. Other stock exchange releases are approved by the CEO or CFO. Board of Directors ESRS2 G1 Governance The scope of all policies is own personnel and operations in Finland (no other geographical areas), excluding the Supplier Code of Conduct, which covers suppliers. The financial resources associated with all current and planned policies are human resources. The policies are available on the website and intranet. REPORT BY THE BOARD OF DIRECTORS | SUSTAINABILITY STATEMENT 98 REPORT BY THE BOARD OF DIRECTORS | AUDITED FINANCIAL STATEMENTS 99 Financial statements 1 Jan–31 Dec 2024 CONTENTS Main statements included in the consolidated financial statements, IFRS ___ Consolidated statement of comprehensive income, IFRS 100 Consolidated statement of financial position, IFRS 101 Consolidated statement of cash flows, IFRS 102 Consolidated statement of changes in equity, IFRS 103 Notes to the consolidated financial statements, IFRS ___ Category No. Description General accounting policies 104 New and revised standards and interpretations applied in the past financial year 104 New and revised standards and interpretations to be applied in future financial years 105 Income statement 1 Segment information 107 Income statement 2 Revenue from contracts with customers 107 Income statement 3 Other operating income 111 Income statement 4 Materials and services 111 Income statement 5 Employee benefit expenses and the number of personnel 112 Income statement 6 Share-based payments 112 Income statement 7 Other operating expenses and audit fees 113 Income statement 8 Depreciation, amortisation and impairment 113 Income statement 9 Financial income 114 Income statement 10 Financial expenses 114 Income statement, taxes 11 Income taxes 114 EPS 12 Earnings per share 115 Statement of financial position 13 Property, plant and equipment 115 Statement of financial position 14 Intangible assets 117 Statement of financial position 15 Right-of-use assets 120 Statement of financial position 16 Other non-current receivables 121 Statement of financial position 17 Trade receivables and other receivables (current) 121 Statement of financial position 18 Provisions 122 Statement of financial position 19 Trade and other payables 123 Balance sheet, taxes 20 Deferred tax assets and liabilities 123 Equity 21 Financial assets and liabilities by measurement category 126 Equity 22 Notes on equity 128 Equity 23 Financial liabilities 129 Equity 24 Changes in financial liabilities with no impact on cash flow 129 Equity 25 Capital management 129 Risk management 26 Financial risk management 130 Group structure 27 Acquired business operations and divestments 133 Group structure 28 Subsidiaries and material non-controlling interests 135 Group structure 29 Interests in associates and joint arrangements 136 Other 30 Contingent assets and liabilities and commitments 136 Group structure 31 Subsidiaries 137 Other 32 Related party transactions 138 Other 33 Events after the balance sheet date 139 Parent company financial statements, FAS ___ Parent company income statement FAS 140 Parent company balance sheet FAS 141 Parent company cash flow statement FAS 141 Parent company notes to financial statements, FAS ___ Parent company notes to financial statements, FAS 142 Date of and signatures to the report by the board of directors and the financial statements 148 ___ REPORT BY THE BOARD OF DIRECTORS | AUDITED FINANCIAL STATEMENTS 100 Consolidated statement of comprehensive income, IFRS EUR 1,000 Note 1–12/2024 1–12/2023 Revenue 2 704,447 719,984 Other operating income 3 3,800 7,532 Materials and services 4 -200,369 -255,231 Employee benefit expenses 5 -321,203 -322,760 Other operating expenses 7 -85,141 -76,559 Share of profit in associated companies and joint ventures 29 -26 -478 EBITDA 101,508 72,487 Depreciation, amortisation and impairment 8 -53,018 -51,906 Operating profit (EBIT) 48,489 20,581 Financial income 9 1,090 355 Financial expenses 10 -10,930 -12,749 Financial income and expenses -9,840 -12,394 Profit before taxes 38,649 8,187 Income tax 11 -8,497 -3,587 Profit for the period 30,152 4,600 Attributable to: To the owners of the parent company 27,359 5,729 To non-controlling interests 2,793 -1,129 Earnings per share calculated on the basis of the result for the period attributable to the owners of the parent company (EUR) Basic 12 1.13 0.19 Diluted 1.13 0.19 Consolidated statement of comprehensive income EUR 1,000 Note 1–12/2024 1–12/2023 Profit for the period 30,152 4,600 Other comprehensive income that will be reclassified subse- quently to profit or loss Cash flow hedge 26 -1,961 -1,768 Recorded in equity -981 -1,020 Transferred to income statement -980 -748 Income tax on other comprehensive income 392 354 Other comprehensive income for the reporting period -1,569 -1,415 Total comprehensive income for the reporting period 28,583 3,185 Attributable to: To the owners of the parent company 25,790 4,314 To non-controlling interests 2,793 -1,129 REPORT BY THE BOARD OF DIRECTORS | AUDITED FINANCIAL STATEMENTS 101 Consolidated statement of financial position, IFRS EUR 1,000 Note 31 Dec 2024 31 Dec 2023 ASSETS Non-current assets Property, plant and equipment 13 63,565 65,807 Goodwill 14 254,875 251,773 Other intangible assets 14 15,731 21,071 Right-of-use assets 15 185,091 203,932 Interests in associates 29 26 1,591 Other investments 166 168 Other receivables 16 5,532 6,088 Deferred tax assets 20 7,746 14,595 Total non-current assets 532,732 565,025 Current assets Inventories 4 4,503 4,460 Trade and other receivables 17 61,156 61,498 Current tax assets 866 1,998 Cash and cash equivalents 30,908 24,517 Total current assets 97,434 92,473 Total assets 630,166 657,498 EUR 1,000 Note 31 Dec 2024 31 Dec 2023 EQUITY AND LIABILITIES Equity attributable to owners of the parent Share capital 80 80 Fair value reserve 1,107 2,676 Reserve for invested unrestricted equity 116,520 116,520 Hybrid loan 20,000 20,000 Retained earnings from previous years 5,654 3,032 Profit for the financial year 27,359 5,729 Equity attributable to owners of the parent company 170,720 148,036 Non-controlling interests -1,769 -3,445 Total equity 22 168,951 144,591 Deferred tax liabilities 20 7,901 8,452 Provisions 18 2,519 123 Lease liabilities 23 180,887 199,834 Financial liabilities 21 114,573 144,546 Other non-current liabilities 516 666 Total non-current liabilities 306,396 353,620 Trade and other payables 19 121,085 125,333 Current tax liabilities 798 119 Provisions 18 66 84 Lease liabilities 23 31,047 30,754 Financial liabilities 21 1,823 2,996 Total current liabilities 154,820 159,287 Total liabilities 461,216 512,907 Total equity and liabilities 630,166 657,498 REPORT BY THE BOARD OF DIRECTORS | AUDITED FINANCIAL STATEMENTS 102 Consolidated statement of cash flows, IFRS EUR 1,000 Note 1–12/2024 1–12/2023 Cash flow from operating activities Profit for the period 30,152 4,600 Taxes 11 8,497 3,587 Depreciation, amortisation and impairment 8 53,018 51,906 Financial income and expenses 9, 10 9,840 12,394 Other 273 6,450 Net cash generated from operating activities before change in working capital 101,781 78,937 Change in working capital -2,146 25 Interest received 724 409 Paid and received taxes 484 -370 Net cash flow from operating activities 100,842 79,002 Cash flow from investing activities Investments in tangible and intangible assets -11,029 -22,859 Proceeds from disposal of tangible and intangible assets and prepayments 912 311 Changes in other receivables and investments -15 -34 Sale of subsidiaries with time-of-sale liquid assets deducted 27 0 7,657 Granted loans and repayments 12 -2,078 Dividends received 31 3 Acquisition of subsidiaries less cash and cash equivalents at date of acquisition 27 -2,202 -1,460 Net cash flow from investing activities -12,289 -18,460 Cash flow from financing activities Changes in non-controlling interests 27 -172 -262 Acquisition of own shares 22 -937 0 Proceeds from long-term borrowings 24 110,000 5,000 Repayment of long-term borrowings 24 -142,560 -33,975 Repayment of lease liabilities 24 -32,068 -31,825 Interest and other financial expenses -11,873 -6,178 Dividends paid and other profit distribution 22 -2,152 -1,480 Proceeds from hybrid bond 22 0 20,000 Hybrid bond interest and expenses 22 -2,400 -432 Net cash flow from financing activities -82,161 -49,153 Changes in cash and cash equivalents 6,392 11,389 Cash at beginning of period 24,517 13,128 Cash at end of period 30,908 24,517 REPORT BY THE BOARD OF DIRECTORS | AUDITED FINANCIAL STATEMENTS 103 Consolidated statement of changes in equity, IFRS Equity attributable to owners of the parent company EUR 1,000 Note Share capital Reserve for invested unrestricted equity Fair value reserve Hybrid bond Retained earnings Non-controlling interests Equity Total Total equity, 1 Jan 2023 80 116,520 4,090 3,290 -1,092 122,888 Profit for the period 5,729 -1,129 4,600 Other comprehensive income items for the period 26 -1,415 -1,415 Total comprehensive income for the period -1,415 5,729 -1,129 3,185 Dividends paid - -730 -730 Share-based benefits 6 299 299 Total transactions with owners 299 -730 -431 Changes in NCI without a change in control 27 -202 -347 -550 Other changes 77 -146 -70 Total changes in subsidiary shareholdings -126 -494 -619 Proceeds from hybrid bond 22 20,000 20,000 Hybrid bond interests and expenses 22 -432 -432 Total equity, 31 Dec 2023 80 116,520 2,676 20,000 8,760 -3,445 144,591 Equity attributable to owners of the parent company EUR 1,000 Note Share capital Reserve for invested unrestricted equity Fair value reserve Hybrid bond Retained earnings Non-controlling interests Equity Total Total equity, 1 Jan 2024 80 116,520 2,676 20,000 8,760 -3,445 144,591 Profit for the period 27,359 2,793 30,152 Other comprehensive income items for the period 26 -1,569 -1,569 Total comprehensive income for the period -1,569 27,359 2,793 28,583 Dividends paid -1,579 -1,109 -2,688 Acquisition of own shares -937 -937 Share-based benefits 6 1,407 1,407 Investments in group subsidiaries -3 -3 Total transactions with owners -1,109 -1,112 -2,220 Changes in NCI without a change in control 27 -166 -6 -172 Other changes 88 - 88 Total changes in subsidiary shareholdings -78 -6 -84 Proceeds from hybrid bond 22 - 0 Hybrid bond interests and expenses 22 -1,920 -1,920 Total equity, 31 Dec 2024 80 116,520 1,107 20,000 33,013 -1,769 168,951 REPORT BY THE BOARD OF DIRECTORS | AUDITED FINANCIAL STATEMENTS 104 General accounting policies Company profile Pihlajalinna is one of the leading private social and healthcare service providers in Finland. The Group serves private persons, companies, insurance companies and public sector entities. Pihlajalinna provides a broad range of social and healthcare services as well as wellbeing services. The service selection includes general practitioner and medi- cal specialist services, occupational healthcare, social and healthcare outsourcing, fitness centre services, responsible doctor and remote consultation services as well as residential services and staffing ser- vices. At the end of the financial year, the total number of Pihlajalinna’s private clinics, hospitals, dental clinics, fitness centres and service housing units with 24-hour assistance was approximately 160. In ad- dition, Pihlajalinna has four major complete social and healthcare outsourcing agreements that collectively cover some 40 locations (in- cluding health centres, maternity and child health clinics, service housing units with 24-hour assistance and daytime activity centres). The Group’s parent company, Pihlajalinna Plc , is a Finnish public limited company established under the laws of Finland, whose Business ID is 2617455-1. The company is domiciled in Tampere, and its registered address is Kehräsaari B, FI-33200 Tampere, Finland . Pihlajalinna Plc ’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, Finland . The Board of Directors of Pihlajalinna Plc approved these financial statements in its meeting on 19 March 2025. In accordance with the Finnish Limited Liability Companies Act, the shareholders may adopt or reject the financial statements at the Annual General Meeting held after their publication and if needed, return the financial statements to the Board of Directors for modifications. 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 2024. 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. General accounting policies to the consolidated financial state- ments are described in this section. Accounting policies that influence a particular note to the consolidated financial statements are indi- cated with the heading Accounting policies in the note in question. The consolidated financial statements are presented in euros and all figures are rounded to the nearest thousand, unless otherwise specified. New and amended standards applied in the past financial year From the beginning of 2024, the Group has applied the following new and amended standards (effective for financial years beginning on or after 1 January 2024): Amendments to IFRS 16 Leases The amendments introduce a new accounting model for variable pay- ments and will require seller-lessees to reassess and potentially re- state sale-and-leaseback transactions entered into since the imple- mentation of IFRS 16 in 2019. Amendments to IAS 1 Presentation of Financial Statements The amendments are to promote consistency in application and clar- ify the requirements for determining if 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 cur- rent or non-current at the reporting date. The amendments require to disclose information about these covenants in the notes to the fi- nancial statements. The amendments also clarify transfer of a com- pany’s own equity instruments is regarded as settlement of a liability. Liability with any conversion options might affect classification as cur- rent or non-current unless these conversion options are recognized as equity under IAS 32. Amendments to IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments: Disclosures The amendments enhance the transparency of supplier finance ar- rangements and their effects on a company’s liabilities, cash flows and exposure to liquidity risk. Amendments require to disclose quan- titative and qualitative information about supplier finance programs. The new and amendment standards did not have a material impact on the Pihlajalinna’s consolidated financial statements. Other new or amended standards that entered effect on 1 January 2024 did not have 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 REPORT BY THE BOARD OF DIRECTORS | AUDITED FINANCIAL STATEMENTS 105 the acquiree’s net assets. The amount by which the consideration transferred, non-controlling interests in the acquiree and previously owned holding combined exceed the fair value of the acquired net as- sets is recognised as goodwill in the consolidated statement of finan- cial position. If the combined value of the consideration, non-control- ling interests and previously owned holding is lower than the fair value of the acquiree’s net assets, the difference is recognised in the statement of comprehensive income. Acquired subsidiaries are consolidated from the date when the Group obtained control, and disposed subsidiaries are consolidated until the date when the Group lost control. All intragroup transac- tions, receivables, liabilities, unrealised profits and internal profit dis- tribution are eliminated in the preparation of the consolidated finan- cial statements. Unrealised losses will not be eliminated in case of im- pairment losses. Profit or loss for the financial year attributable to the owners of the parent company and to the non-controlling interests is presented in the consolidated statement of comprehensive income. Comprehensive income is attributed to the owners of the parent company and to the non-controlling interests, even if this would lead to a situation where the portion attributable to the non-controlling interests is negative. The portion of equity attributable to the non- controlling interests is presented as a separate item under equity in the consolidated statement of financial position. Such changes in the parent company’s ownership interest in a subsidiary that do not lead to loss of control are treated as equity transactions. In connection with step-by-step acquisitions, the former ownership interest is measured at fair value, and the resulting gain or loss is rec- ognised in profit or loss. When the Group loses control of a subsidi- ary, any remaining interest is measured at fair value at the date of loss of control, and the resulting difference is recognised in profit or loss. Associates and joint arrangements Associates are companies over which the Group has significant influ- ence. As a rule, significant influence is established when the Group holds more than 20% of a company’s voting power or otherwise has significant influence but no control. A joint arrangement is an arrangement of which two or more par- ties have joint control. Joint control involves contractually agreed sharing of control of an arrangement, which exists only when deci- sions about relevant activities require the unanimous consent of the parties sharing control. A joint arrangement is either a joint operation or a joint venture. A joint venture is an arrangement whereby the Group has rights to the net assets of the arrangement, whereas in a joint operation the Group has rights to the assets, and obligations for the liabilities, relating to the arrangement. Associates are consolidated using the equity method. If the Group’s share of the loss of an associate exceeds the carrying amount of the investment, then the investment is carried at zero value, and the losses exceeding the carrying amount are not consolidated, un- less the Group is committed to fulfilling the obligations of the associ- ate. An investment in an associate includes the goodwill generated through the acquisition. Unrealised profits between the Group and an associate are eliminated in proportion to the Group’s ownership in- terest. The Group’s pro rata share of an associate’s profit for the fi- nancial year is included in operating profit. The Group owns 31 % in Kiinteistö Oy Levin Pihlaja, which is consol- idated 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. Key accounting estimates and uncertainties re- lated to estimates In the course of preparing the financial statements, it is necessary to make estimates and assumptions about the future. However, such es- timates and assumptions may later prove inaccurate compared with actual outcomes. The Group regularly monitors the realisation of the estimates and assumptions and changes in the underlying factors together with the business units by using several, both internal and external, sources of information. Any changes in estimates and assumptions are recog- nised in the financial year during which the estimate or assumption is corrected and in all subsequent financial years. The key accounting estimates and assumptions used in the prepa- ration of the consolidated financial statements that pose a significant risk of materially changing the carrying amounts of assets and liabili- ties during the next financial year are described in more detail in the following sections: Note Assumptions used in impairment testing 14 Assumptions used in provisions 18 Accounting policies requiring management judge- ment The Group’s management makes judgement-based decisions regard- ing the choice of accounting policies and their application in the fi- nancial statements. The management has exercised judgement in the application of accounting policies in the financial statements with re- gard to the measurement of lease assets and liabilities in the state- ment of financial position (note 15). 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 2024. IFRS 18 Presentation and Disclosure in Financial Statements (effective for financial years beginning on or after 1 January 2027, early application is permitted) IFRS 18 will replace IAS 1 Presentation of Financial Statements. The key new requirements are as follows: ● Income and expenses in the income statement to be classified into three new defined categories which are operating, investing and financing and two new subtotals: “Operating profit or loss” and “Profit or loss before financing and income tax”. ● Disclosures about management-defined performance measures (MPMs) in the financial statements. MPMs are subtotals of in- come and expenses used in public communications to communi- cate management’s view of the company’s financial perfor- mance. ● Disclosure of information based on enhanced general require- ments on aggregation and disaggregation. In addition, specific re- quirements to disaggregate certain expenses, in the notes, will be required for companies that present operating expenses by func- tion in the income statement. REPORT BY THE BOARD OF DIRECTORS | AUDITED FINANCIAL STATEMENTS 106 Other new or amended standards or interpretations are not expected to have a significant effect on Pihlajalinna’s consolidated financial statements. REPORT BY THE BOARD OF DIRECTORS | AUDITED FINANCIAL STATEMENTS 107 Notes to the consolidated financial statements, IFRS 1. Segment information Accounting policies Pihlajalinna has changed its segment reporting from 1 January 2024. The Group’s reporting segments are Private Healthcare Services and Public Services. The new reporting structure follows Pihlajalinna’s business model and organisational structure. The segment information is reported to the chief operating decision maker. Pihlajalinna’s chief operating decision maker is the CEO. The CEO monitors the revenue and profitability of the segments, makes signifi- cant operational decisions and is responsible for allocating resources to the segments. Segment information is reported in the same way as it is reported to the chief operating decision maker. The CEO uses alternative key figures in addition to the key figures in the IFRS financial statements in the Group’s financial reporting. The Group CEO assesses the segments’ profitability based on adjusted operating profit before amortisation and impairment of intangible assets (EBITA). With the exception of items affect- ing comparability, the reporting of the result corresponds to the accounting policies of the consolidated fi- nancial statements. The adjustment items for the adjusted operating profit are specified in note 25 Capital managemen t. The Private Healthcare Services operating segment consists of private clinic, diagnostics, hospital, occupa- tional healthcare, remote and fitness centre services. These comprehensive care path services are provided by Pihlajalinna to corporate customers, insurance companies, the public sector and private customers through its nationwide network of medical centres and diverse digital channels. The Public Services operating segment consists of social and healthcare services produced primarily for the public sector, which include outsourcing and housing services, mainly remotely produced responsible doctor services, as well as a wide range of staffing and recruitment services. Segment information 2024 EUR 1,000 Private Healthcare Services Public Services Total Revenue 451,488 267,615 719,103 of which intersegment -14,471 -185 -14,656 External revenue 437,018 267,430 704,447 Materials and services -165,360 -43,835 -209,195 of which intersegment 184 8,641 8,826 Materials and services, Group -165,176 -35,193 -200,369 Employee benefit expenses -157,508 -163,695 -321,203 Depreciation and impairment -44,699 -8,320 -53,018 Adjusting items affecting EBIT comparability 698 -1,477 -779 Adjusted operating profit before the amortisation and impairment of intangible assets (EBITA) 33,633 21,530 55,163 REPORT BY THE BOARD OF DIRECTORS | AUDITED FINANCIAL STATEMENTS 108 Segment information 2023 EUR 1,000 Private Healthcare Services Public Services Total Revenue 423,064 314,299 737,363 of which intersegment -16,493 -886 -17,379 External revenue 406,571 313,413 719,984 Materials and services -162,329 -105,689 -268,018 of which intersegment 887 11,900 12,786 Materials and services, Group -161,442 -93,789 -255,231 Employee benefit expenses -149,539 -173,221 -322,760 Depreciation and impairment -42,990 -8,916 -51,906 Adjusting items affecting EBIT comparability 474 8,533 9,007 Adjusted operating profit before the amortisation and impairment of intangible assets (EBITA) 27,174 10,603 37,777 Reconciliation of the segments total adjusted operating profit before amortization and impairment of intangible assets (EBITA) to the consolidated profit before taxes EUR 1,000 2024 2023 Profit before taxes 38,649 8,187 Net financial expenses 9,840 12,394 Amortisation and impairment of intangible assets 7,453 8,189 Adjustment items -779 9,007 Adjusted EBITA 55,163 37,777 2. 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 hospitals, responsible doctor services, diagnostics services and rehabilitation services. Pihlajalinna’s healthcare services are also extensively available via digital channels. A significant part of the consolidated revenue consists complete social and healthcare outsourcing. The Group also produces staffing and recruitment services of healthcare professionals to the public sector. The social services provided by the Group consist of services for the elderly, child welfare services, ser- vices for disabled, mental health services, substance abuse group services and family group home services. The Group’s Forever fitness 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 specialised care procedures. 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 practi- tioners are recognised in the income statement item External services, practitioners. As Pihlajalinna has pri- mary responsibility for the provision of services to its customers, and the Group is exposed to significant risks and benefits related to the sale of services, the Group acts as a principal with regard to practitioners with whom it has a contractual relationship. IFRS 15 Revenue from Contracts with Customers includes a five-step model that defines when, and at what amount, revenue from contracts with customers is recognised. Revenue can be recognised over time or at a point in time, and the transfer of control is the key criterion. The primary performance obligations for Pihlajalinna’s various revenue streams are as follows: Social and healthcare outsourcing ● statutory social and healthcare services for a municipality’s residents, separately described in contracts with customers, including possible public specialised care ● individual social and healthcare service visits by residents of other municipalities Private clinics ● individual customer visits to healthcare services at operating locations or digitally, including related sup- port services Surgical operations ● individual visits and related support services (e.g. private individuals who pay for their services them- selves or through insurance companies or through wellbeing services counties payment commitment) 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) REPORT BY THE BOARD OF DIRECTORS | AUDITED FINANCIAL STATEMENTS 109 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 Residential services, child welfare services, family group homes ● elderly care home services, child welfare services and family group home services on each day covered by the agreement ● individual separately charged additional services or health centre visits Digital services ● Remote doctor services ● Remote nurse services ● Other digital services related to appointment booking and assessing the need for care, other digital ser- vices ordered by the customer The services promised in a contract are treated as a single series of distinct services comprised performance obligation when the services provided are repeated in the same manner with respect to their substantial aspects and whose transfer to the customer takes place over time. The performance obligation in the Group’s social and healthcare outsourcing agreements is the municipality’s statutory social and healthcare service operations described in the customer agreement. The Group’s customer contracts for the outsourc- ing of social and healthcare services are considered to consist of a single performance obligation in which the services provided by the Group are combined into a bundle of services. Transaction prices mainly comprise 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 sepa- rate selling prices. The Group assesses the effect of the variable components on the amount of revenue rec- ognised using historical data, for example, and recognises them at the most likely amount. The performance obligations are fulfilled either over time (e.g. outsourcing, residential services, child wel- fare services, fitness centre services, recruitment services, responsible doctor services, fixed-price occupa- tional 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 performance. Revenue is recognised on the reporting date at the amount that Pihlajalinna considers itself to be enti- tled to in exchange for the services delivered. 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 agreements, the customer simultaneously receives and consumes the benefit from the service, which means that the conditions for recognising revenue over time are met. The payment terms and periods included in the contracts vary, but the payment periods are typically less than one year. The contracts do not include significant financing components or additional expenditure aris- ing from contractual receivables. In connection with outsourcing agreements, the client may provide Pihlajalinna, without financial consid- eration, with use of publicly owned infrastructure, or part thereof, which Pihlajalinna operates in service production under the outsourcing agreement. Infrastructure may include for example premises, machinery and equipment. The IFRIC 12 Service Concession Arrangements interpretation is applied to the recognition of outsourcing agreements if the outsourcing party decides on the scope and pricing of the services pro- vided by Pihlajalinna and Pihlajalinna returns the infrastructure, free of charge, at the conclusion of the out- sourcing agreement. In such cases, Pihlajalinna is not considered to have control over assets received with- out consideration from a public sector entity. Timing of the satisfaction of performance obligations EUR 1,000 2024 2023 At a point in time 334,377 315,864 Over time 370,070 404,119 Total 704,447 719,984 REPORT BY THE BOARD OF DIRECTORS | AUDITED FINANCIAL STATEMENTS 110 Contractual assets and liabilities There may be differences in timing between revenue recognition and invoicing. The Group recognises a con- tractual asset when revenue is recognised before invoicing and, correspondingly, a contractual liability when revenue is recognised after invoicing. Summary of contractual items EUR 1,000 2024 2023 Trade receivables 45,397 52,469 Contract assets Current 4,636 3,619 Contract liabilities Current 1,274 1,347 Revenue recognised during the financial year included in contract lia- bilities at the beginning of the period: Revenue recognised during the financial year included in contract liabilities at the beginning of the pe- riod: EUR 1,000 2024 2023 Revenue recognised from amounts included in contract liabilities 1,347 3,237 Revenue distribution between segments EUR 1,000 2024 2023 Private Healthcare Services 451,488 423,064 of which intersegment 14,471 16,493 Public Services 267,615 314,299 of which intersegment 185 886 Group Total 704,447 719,984 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, Kymenlaakso, Päijät-Häme and South Karelia. ● Mid-Finland includes Pihlajalinna’s business operations in the regions of Pirkanmaa, Satakunta, Kanta- Häme, Central Finland, South Ostrobothnia and Ostrobothnia. ● Western Finland includes Pihlajalinna’s business operations in the region of Southwest Finland. ● Eastern Finland includes Pihlajalinna’s business operations in the regions of South Savo, North Karelia and North Savo. ● Northern Finland includes Pihlajalinna’s business operations in the regions of North Ostrobothnia, Central Ostrobothnia, Kainuu and Lapland. ● Other operations include remote services, moving services and other administrative functions. EUR 1,000 2024 % 2023 % Southern Finland 153,235 22% 139,243 19% Mid-Finland 388,595 55% 445,854 62% Western Finland 40,209 6% 38,199 5% East Finland 64,221 9% 57,038 8% Northern Finland 54,802 8% 48,968 7% Other operations 74,511 11% 66,779 9% Intra-Group sales -71,126 -10% -76,098 -11% Consolidated revenue 704,447 100% 719,984 100% Sales revenue by customer group Pihlajalinna’s customer groups are corporate customers, private customers and public sector customers. ● The Group corporate customers consist of Pihlajalinna occupational healthcare customers, insurance company customers and other corporate customers. The number of people within the scope of the Group’s occupational healthcare services is over 190,000 in the corporate customers group. ● The Group private customers are private individuals who pay for services themselves and may subse- quently seek compensation from their insurance company. ● The Group public sector customers consist of public sector organisations in Finland, such as municipali- ties, congregations, wellbeing services counties and the public administration when purchasing either so- cial and healthcare outsourcing services or residential, occupational healthcare and staffing services. The number of people within the scope of the Group’s occupational healthcare services is approximately 85,000 in the public sector customers group. Private Healthcare Services EUR 1,000 2024 % 2023 % Corporate customers 286,522 63% 260,532 58% of which insurance company customers 152,715 34% 134,237 30% Private customers 102,364 23% 97,813 22% Public sector 62,602 14% 64,720 14% Segment's revenue 451,488 100 423,065 100 REPORT BY THE BOARD OF DIRECTORS | AUDITED FINANCIAL STATEMENTS 111 Public Services The segment’s revenue was EUR 267.6 (314.3) million. Revenue from the public sector amounted to EUR 257.71 (300.9) million, or 96.1 (95.7) per cent of the segment’s revenue. Revenue from complete outsour- cing agreements amounted to EUR 202.2 (258.8) million. Information on key customers The Group’s sales revenue from the four largest customers totalled approximately EUR 286.8 (313.4) mil- lion, representing approximately 41% (44%) of the consolidated revenue. Estimate of unsatisfied performance obligations related to Group’s social and healthcare out- sourcing arrangements, EUR million: 2024 2023 2024 2023 2024 209 2033 6 7 2025 162 193 2034 6 7 2026 46 75 2035 6 6 2027 47 76 2028 47 77 2029 48 78 2030 48 47 2031 31 47 2032 6 7 453 829 Service provider – client First year of service pro- duction under the current contract Ending time of the contract Jämsän Terveys Oy 2015 31 Aug 2025 Kuusiolinna Terveys Oy 2016 31 Dec 2025 Mäntänvuoren Terveys Oy 2016 31 Jul 2031 Kolmostien Terveys Oy 2015 31 Dec 2025 Bottenhavets Hälsa Ab - Selkämeren Terveys Oy 2021 2035-2040 3. Other operating income Accounting policies Government grants received as compensation for expenses already incurred are recognised in profit or loss for the period in which they become receivable. These grants are presented under other operating income. Government grants related to capitalised development projects are recognised as deductions from the car- rying amounts of intangible assets, when there is reasonable assurance that such grants will be received and that the Group will comply with the conditions for receiving them. The grants will be recognised as income over the useful life of an asset by way of reduced depreciation. The Group has subleased certain premises that are not used for business operations. These leases are classified as operating leases and income from these leases is presented under other operating income. Sale and leaseback With regard to sale and leaseback agreements completed prior to the adoption of IFRS 16, the Group will continue the allocation of capital gains as before in accordance with the transition provision of IFRS 16. If a finance lease is created as a result of a sale and leaseback agreement, the difference between the car- rying amount and the sales price will be recognised in the consolidated statement of financial position and recognised as income over the lease term under other operating income. The unrecognised portion of the difference between the carrying amount and the sales price is presented as Other liabilities in the statement of financial position. Sale of dental care services Pihlajalinna sold its dental care services to Hammas Hohde Oy on 31 March 2023. In the comparison period, the Group recognised a gain of EUR 3.6 million from the divestment in other operating income. EUR 1,000 2024 2023 Capital gains on property, plant and equipment 272 228 Rental income 2,622 2,265 Government grants 469 532 Other income items 438 907 Profit from sale of dental care services 0 3,600 Total 3,800 7,532 4. Materials and services Accounting policies The materials and services include expenses directly related to service production. Due to services produced without Value Added Tax (VAT), Pihlajalinna cannot deduct majority of the VAT related to purchases. Pihlajalinna employs several healthcare professionals from different fields as independent practitioners. The remuneration paid to independent practitioners is presented in materials and services. Pihlajalinna’s inventories include materials and supplies used in the provision of services. Inventories are measured at acquisition cost or lower probable net realisable value. REPORT BY THE BOARD OF DIRECTORS | AUDITED FINANCIAL STATEMENTS 112 EUR 1,000 2024 2023 Materials -28,345 -31,197 Change in inventories 138 162 External services, practitioners -138,608 -129,849 External services, other -33,554 -94,348 Total -200,369 -255,231 5. Employee benefit expenses Accounting policies Short-term employee benefits are recognised in the period in which they arise. Short-term incentive scheme is recognised as expense in that financial year when the obligation to make the payments arises. Pension plans are classified as defined benefit plans and defined contribution plans. The Group only has defined 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 payments is incapable of paying out said retirement benefits. Payments made into the defined contribution plans are recognised in profit or loss for the financial year for which they are charged. The long-term share-based incentive scheme is recognised as an expense over its accrual period. The incentive scheme and other share-based payments are described in more detail in note 6 Share-based payments . Information on related party employee benefits and loans are presented in Note 32 Related party transactions. EUR 1,000 2024 2023 Wages and salaries -267,456 -267,089 Share-based incentive schemes - implemented as shares -1,406 -269 Pension costs - defined contribution plans -45,614 -45,477 Other social security expenses -6,727 -9,926 Total -321,203 -322,760 Number of personnel 2024 2023 Personnel on average (FTE) 4,416 4,821 Personnel at the end of the period (NOE) 6,493 6,880 6. Share-based payments Share-based incentive scheme for key personnel , LTIP 2022 In early 2022, Pihlajalinna's Board of Directors approved the launch of a share-based incentive programme (LTIP 2022) for selected key employees. In its entirety, the incentive scheme formed a six-year programme and the share rewards based on the programme cannot be disposed of prior to the year 2026. The key em- ployees selected for the programme were also required to make an investment in Pihlajalinna shares as a precondition for participation. The performance- and quality-based share programme comprised four separate performance periods of one year each (the calendar years 2022, 2023, 2024 and 2025). The potential share rewards were paid out after the performance periods in the years 2023, 2024 and 2025. The Board of Directors annually decided the participants, performance indicators, targets and earning opportunities. Three performance periods were launched under the programme: 2022, 2023 and 2024. The programme was treated in their entirety as equity-settled share-based payments. The Board of Directors decided on 13 December 2024 that the last performance period, corresponding to the calendar year 2025, will not be launched. The maximum number of shares (gross amount prior to deduction of applicable withholding tax) for each one-year performance period was defined in the allocation per participant. The applicable withholding tax was deducted from the transferred shares, and the remaining net amount was paid to the participants in shares. Shares paid out as share rewards are subject to a two-year transfer restriction. The earnings criteria applied to the 2024 performance-based and quality-based share plan were Pihlajalinna Group’s adjusted EBITA, the development of customer satisfaction (NPS), the development of employee Net Promoter Score (eNPS) and the development of the sickness-related absence rate. No performance and quality-based share rewards materialised for the performance periods 2022 and 2023 pursuant to the share-based programme, as the minimum targets set for the programme were not achieved. For the performance period 2024, the effect on the result for the financial year was EUR 1.4 mil- lion. Performance-based long-term incentive programme (LTIP 2022) 2024 2023 Grant date 14 Mar 2024 21 Jun 2023 Share price at grant date, EUR 7.50 9.19 The year in which the shares are transferred 2025 2024 Amount of share-based rewards granted, maximum amount, number of shares 195,000 227,000 Actual share-based rewards, number of shares 181 377 0 Number of people within the scope of the programme at the end of the period 34 48 End of the vesting period 31 Dec 2024 31 Dec 2023 Form of payment In shares and cash In shares and cash REPORT BY THE BOARD OF DIRECTORS | AUDITED FINANCIAL STATEMENTS 113 CEO Tuomas Hyyryläinen is entitled to participate in the share-based incentive programme starting from the earnings period that begins on 1 January 2024. At the beginning of the share-based incentive scheme, the CEO had the right to purchase a maximum of 30,000 shares, so that for the first 10,000 shares, the company will give one share for each share purchased by the CEO, and for the next 20,000 shares, one share for each two shares purchased. If the CEO purchases the full quota of 30,000 shares, the company will give the CEO a total of 20,000 shares. Pihlajalinna conveyed a total of 20,000 own shares to CEO Tuomas Hyyryläinen (gross amount prior to deduction of applicable withholding tax). Performance Share Plan (PSP) On 13 December 2024, Pihlajalinna's Board of Directors decided to establish a new long-term share-based incentive plan for key employees of the Group. The plan replaces Pihlajalinna’s current share-based incen- tive plan. The Performance Share Plan 2025–2029 consists of three performance periods, covering the financial years 2025–2027, 2026–2028 and 2027–2029. The Board of Directors will decide annually on the com- mencement and details of every performance period. The target group in the performance period 2025–2027 consists of approximately 30 key employees, in- cluding the members of the Group Management Team and the CEO. The performance criteria of the perfor- mance period 2025–2027 are tied to relative Total Shareholder Value (rTSR), annual revenue growth, return on capital employed and the rate of sickness-related absences. The value of the rewards to be paid based on the plan corresponds to a maximum total of 553,000 Pihlajalinna shares Short-term incentive scheme (STI) Pihlajalinna has a short-term incentive scheme (STI), which is paid in cash in its entirety. C ompany’s Board of Directors confirms the amount, targets and criteria for the short-term incentive scheme annually. The earnings criteria applied in the short-term incentive scheme were Pihlajalinna Group’s adjusted EBITA and individual business and performance targets set by the manager of the participant. The CEO, members of the Executive Team and selected key employees are eligible to participate in the short-term incentive scheme. 7. Other operating expenses EUR 1,000 2024 2023 Voluntary indirect employee costs -6,390 -8,263 Facility expenses -13,306 -13,586 Vehicle operating costs -937 -904 Information management expenses -26,737 -26,311 Machinery and equipment expenses -6,942 -6,810 Travel expenses -3,604 -3,264 Sales and marketing expenses -5,305 -6,823 Other expenses -21,921 -10,598 Total -85,141 -76,559 Auditor remuneration Auditing, KPMG Oy Ab -328 -328 Statements, KPMG Oy Ab -64 -11 Non-audit services, KPMG Oy Ab Tax services -35 -3 Other services -14 -55 Total -441 -395 8. Depreciation and amortisation Accounting policies Property, plant and equipment will be depreciated using the straight-line method over their estimated eco- nomic useful lives. The estimated economic useful lives are as follows: Buildings 10–25 years Renovation expenses on real estate 5–10 years Machinery and equipment 3–10 years Other tangible assets 3–5 years For the magnetic imaging equipment at Turku, Oulu and Seinäjoki private clinics, the Group adopted a units- of-production based depreciation method effective from 1 January 2018. The amount of depreciation is based on the units of production derived from the equipment. The units-of-production based depreciation method is also applied to the imaging equipment in Helsinki, Tampere, Turku, Oulu and Kuopio that was transferred to Pihlajalinna as part of the acquisition of Pohjola Hospital (now Pihlajalinna Lääkärikeskukset Oy). The units-of-production method provides a more accurate reflection of the actual economic use of the magnetic imaging equipment in question. For the Group’s other machinery and equipment, the Group still uses straight-line depreciation. For intangible assets with finite economic useful lives, the amortisation periods are as follows: Trademarks 10 years Development costs 3–10 years Customer agreements 4 years Patient database 4 years Non-competition agreements 2–5 years Other intangible assets 3–7 years Right-of-use assets are depreciated on a straight-line basis over the shorter of economic useful life or lease term. The planned depreciation periods of right-of-use assets are as follows: Right-of-use plots 25 years Right-of-use buildings REPORT BY THE BOARD OF DIRECTORS | AUDITED FINANCIAL STATEMENTS 114 and business premises 1–15 years Right-of-use equipment 3–10 years Impairment is recognised pursuant to IAS 36 for onerous right-of-use buildings and business premises. Impairments During the financial year, Pihlajalinna has recognised an impairment of EUR 1.2 million related to right-of- use premises. In the comparison period, Pihlajalinna recognised an impairment of approximately EUR 0.6 million on its other investments. Depreciation, amortisation and impairment by asset type 2024 2023 Intangible assets Trademarks -564 -564 Capitalised development costs -287 -1,088 Customer relationship value -985 -985 Non-competition agreements -96 -116 Patient database -473 -473 Other intangible assets -5,009 -4,963 -7,415 -8,189 Property, plant and equipment Buildings -109 -109 Renovation expenses on real estate -3,312 -2,507 Machinery and equipment -10,002 -9,375 Other tangible assets -1 -1 -13,423 -11,993 Right-of-use assets Right-of-use plots -105 -101 Right-of-use buildings and business premises -29,721 -30,088 Right-of-use business premises and buildings, impairment -1,164 0 Right-of-use equipment -1,190 -901 -32,180 -31,090 Impairments 0 -634 Total depreciation, amortisation and impairment -53,018 -51,906 9. Financial income EUR 1,000 2024 2023 Dividend income from financial assets measured at fair value through profit or loss 31 3 Interest income from loans and receivables 993 275 Interest income from financial lease receivables 59 67 Other financial income 7 9 Total 1,090 355 10. Financial expenses EUR 1,000 2024 2023 Interest expenses from financial liabilities carried at amortised cost -5,969 -7,168 Interest expenses on lease liabilities -3,761 -3,724 Other financial expenses -1,199 -1,857 Total -10,930 -12,749 In June 2024, Pihlajalinna rearranged its long-term debt financing with a sustainability-linked financing ar- rangement, which is described in more detail in Note 23 Financial liabilities and Note 26 Financial risk man- agement . Financial expenses for the financial year are increased by refinancing, which generated a total of EUR 0.6 million in non-recurring financial expenses. In the comparison period, line Other financial expenses include impairments of loan receivables totalling approximately EUR 1.2 million. 11. 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 these 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. REPORT BY THE BOARD OF DIRECTORS | AUDITED FINANCIAL STATEMENTS 115 EUR 1,000 2024 2023 Current taxes -1,249 -502 Taxes for the previous financial years -66 -39 Deferred taxes -7,182 -3,047 Total -8,497 -3,587 Deferred taxes are described in more detail in note 20 Deferred tax assets and liabilities. Reconciliation of effective tax rate EUR 1,000 2024 2023 Profit before taxes 38,649 8,187 Taxes calculated on the basis of the Finnish tax rate (20%) -7,730 -1,637 Income not subject to tax 53 4 Non-deductible expenses -1,808 -1,422 Unrecorded deferred tax assets from tax losses -53 -921 Recorded deferred tax assets from tax losses 0 187 Utilised prior losses with unrecognised tax benefits 934 0 Share of associated company’s profit -5 28 Share-based remuneration -24 40 Other items 202 173 Taxes for prior financial years -66 -39 Taxes in the income statement -8,497 -3,587 Effective tax rate -22.0 % -43.8 % 12. Earnings per share Accounting policies Earnings per share is calculated by dividing the profit for the financial year attributable to owners of the par- ent by the weighted average number of shares outstanding during the financial year. When calculating earnings per share, the interest of the hybrid bond, net of tax, has been considered as a profit-reducing item. Earnings per share for the financial year attributable to owners of the parent are calculated by dividing the profit for the financial year attributable to owners of the parent by the weighted average number of shares outstanding during the financial year. When calculating diluted earnings per share, the average number of shares is adjusted by the dilution ef- fect of the share-based incentive scheme. EUR 1,000 2024 2023 Profit for the financial year attributable to owners of the parent, EUR 27,358,879.12 5,728,844.05 Hybrid bond interest -2,400,000.00 -1,866,666.67 Tax effect 480,000.00 373,333.33 Adjusted profit for the financial year 25,438,879.12 4,235,510.72 Number of shares outstanding, weighted average 22,511,765 22,557,957 Basic earnings per share (EPS) 1.13 0.19 Diluted earnings per share 1.13 0.19 13. 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. Units-of-production based depreciation method for the magnetic imaging equipment at Turku, Oulu and Seinäjoki private clinics is described in more detail in note 8 Depreciation and amortisation . REPORT BY THE BOARD OF DIRECTORS | AUDITED FINANCIAL STATEMENTS 116 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 2024 36 3,116 42,757 5,287 87,879 168 2,713 141,955 Additions 0 0 570 0 8,156 0 3,318 12,044 Transfers between items 0 0 5,870 0 0 0 -5,870 0 Disposals 0 0 -32 0 -2,096 0 -2 -2,130 Cost at 31 December 2024 36 3,116 49,165 5,287 93,939 168 159 151,869 Accumulated depreciation at 1 January 2024 0 -620 -23,057 0 -52,460 -11 0 -76,147 Depreciation and amortisation 0 -109 -3,312 0 -10,002 -1 0 -13,423 Disposals 0 0 7 0 1,260 0 0 1,267 Accumulated depreciation at 31 December 2024 0 -728 -26,362 0 -61,201 -12 0 -88,304 Carrying amount at 1 January 2024 36 2,496 19,700 5,287 35,419 157 2,713 65,807 Carrying amount at 31 December 2024 36 2,387 22,803 5,287 32,737 156 159 63,565 EUR 1,000 Land areas Buildings Renovation expenses on real estate Shares in real estate companies Machinery and equipment Other tangible assets Construction in progress Total Cost at 1 January 2023 36 3,029 34,263 5,472 75,341 167 5,246 123,553 Additions 0 90 832 0 13,319 4 5,135 19,379 Transfers between items 0 0 7,358 0 -352 -2 -7,667 -663 Disposals 0 -3 304 -186 -430 0 -1 -315 Cost at 31 December 2023 36 3,116 42,757 5,287 87,879 168 2,713 141,955 Accumulated depreciation at 1 January 2023 0 -511 -20,552 0 -43,743 -11 0 -64,817 Depreciation and amortisation 0 -109 -2,507 0 -9,375 -1 0 -11,993 Transfers between items 0 0 191 0 1,129 0 0 1,320 Disposals 0 0 -188 0 -470 1 0 -657 Accumulated depreciation at 31 December 2023 0 -620 -23,057 0 -52,460 -11 0 -76,147 Carrying amount at 1 January 2023 36 2,518 13,711 5,472 31,598 155 5,246 58,736 Carrying amount at 31 December 2023 36 2,496 19,700 5,287 35,419 157 2,713 65,807 REPORT BY THE BOARD OF DIRECTORS | AUDITED FINANCIAL STATEMENTS 117 14. 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 Group has no authority on the software are accounted as service agreements which entitle the Group to utilize the cloud service pro- vider's application software during the contract period. Application software license fees and related config- uration 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 amortized using the straight-line method. REPORT BY THE BOARD OF DIRECTORS | AUDITED FINANCIAL STATEMENTS 118 Intangible assets and goodwill 1000 € Goodwill Trademarks Development costs Customer relationship value Non-competition agreements Patient dadabase Other intangible assets Other long-term expenditures Prepayments Total Cost at 1 January 2024 251,773 10,910 6,424 12,612 7,788 7,837 7,690 27,742 84 332,859 Additions 3,102 0 56 0 0 0 129 1,838 52 5,177 Transfers between items 0 0 0 0 0 0 -129 152 -23 0 Disposals 0 0 0 0 0 0 -62 0 0 -62 Cost at 31 December 2024 254,875 10,910 6,480 12,612 7,788 7,837 7,628 29,732 112 337,974 Accumulated depreciation at 1 January 2024 0 -7,859 -6,036 -10,733 -7,673 -6,494 -6,982 -14,239 0 -60,015 Depreciation and amortisation 0 -564 -287 -985 -96 -473 -266 -4,743 0 -7,415 Disposals 0 0 0 0 0 0 62 0 0 62 Accumulated depreciation at 31 December 2024 0 -8,423 -6,323 -11,717 -7,769 -6,967 -7,186 -18,982 0 -67,368 Carrying amount at 1 January 2024 251,773 3,051 388 1,879 115 1,343 708 13,503 84 272,844 Carrying amount at 31 December 2024 254,875 2,487 156 895 19 870 442 10,863 0 270,606 1000 € Goodwill Trademarks Development costs Customer relationship value Non-competition agreements Patient dadabase Other intangible assets Other long-term expenditures Prepayments Total Cost at 1 January 2023 251,032 10,910 6,386 12,612 7,788 7,836 7,494 21,153 482 325,694 Additions 891 0 38 0 0 0 219 5,752 481 7,381 Transfers between items 0 0 0 0 0 0 -21 837 -823 -8 Disposals -150 0 0 0 0 0 -2 0 -57 -208 Cost at 31 December 2023 251,773 10,910 6,424 12,612 7,788 7,837 7,690 27,742 84 332,859 Accumulated depreciation at 1 January 2023 0 -7,295 -4,949 -9,748 -7,557 -6,020 -6,637 -9,654 0 -51,860 Depreciation and amortisation 0 -564 -1,088 -985 -116 -473 -368 -4,595 0 -8,189 Transfers between items 0 0 0 0 0 0 24 14 0 38 Disposals 0 0 0 0 0 0 0 -4 0 -4 Accumulated depreciation at 31 December 2023 0 -7,859 -6,036 -10,733 -7,673 -6,494 -6,982 -14,239 0 -60,015 Carrying amount at 1 January 2023 251,032 3,615 1,436 2,864 231 1,816 857 11,500 482 273,833 Carrying amount at 31 December 2023 251,773 3,051 388 1,879 115 1,343 708 13,503 84 272,845 REPORT BY THE BOARD OF DIRECTORS | AUDITED FINANCIAL STATEMENTS 119 Impairment testing Accounting policies The carrying amounts of goodwill, other intangible assets, property, plant and equipment, right-of-use as- sets and non-financial investments are reviewed regularly for potential indications of impairment. If there are any indications of impairment, the value of the asset item must be tested. Impairment loss is recognised through profit or loss to the extent that the carrying amount of an asset exceeds its recoverable amount. In addition, goodwill and intangible assets with an unlimited economic useful life and which are not depreciated are tested annually for impairment. The impairment testing is carried out even if there are no indications of impairment. Potential impairment loss on goodwill is recognised immediately in the income statement. Previously recognised impairment losses on goodwill are not reversed. Goodwill generated in M&A transactions is allocated to cash-generating units (CGU). Pihlajalinna changed the structure of its financial reporting during the financial year. In 2023, the cash-generating unit was the Group level. As of 1 January 2024, the Group’s reporting segments and, thereby, cash-generating units are Private Healthcare Services and Public Services. The new reporting structure follows Pihlajalinna’s business model and organisational structure, and both segments have their own budget, performance monitoring and Head of Business Operations. Due to the changed reporting structure, no comparison data is presented. 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. The Group carried out its annual impairment testing of goodwill based on the situation on 30 November 2024 (30 November 2023) 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 units for the financial year that ended on 31 December 2024. As a result of the change in the reporting structure, goodwill arising from acquisitions has been allocated to the cash-generating units in accordance with the table below in proportion to their fair values, and it in- cludes the Company’s management’s assessment of the share of goodwill attributable to the cash-generat- ing unit. Distribution of goodwill: EUR 1,000 2024 % Private Healtcare Services 247,664 97 Public Services 7,211 3 Goodwill at the end of the financial year 254,875 100 Assumptions used in calculating the value in use in 2024: Impairment testing of goodwill Private Healthcare Services Public Services Turnover growth, first three years on average 7.0 % -20.1 % EBIT margin, first three years on average 10.1 % 7.8 % Discount rate (pre tax WACC) 8.9 % 11.0 % Forecast period (years) 5 8 Terminal growth rate after the forecast period 2.0 % 2.0 % The terminal period’s share of the amount of expected cash flows 70% 30% Key accounting estimates and decisions based on management judgement In impairment testing, the recoverable amounts are determined based on value-in-use. The cash flow fore- casts used in the value-in-use calculations in impairment testing are based on cash flow forecasts of the seg- ments prepared by the management and approved by the Board of Directors. For the impairment testing, the cash flow forecasts cover a 5-year period in terms of the Private Healthcare Services and the terminal period. Regarding the Public Services, the cash flow forecasts cover an 8-year period and the terminal period. The management’s view is that using a 8-year forecast period is justi- fied because the Group has significant long-term and fixed-term complete social and healthcare outsourcing agreements. These agreements will expire during the 8-year forecast period, which is why management’s view is that extending the forecast period provides a more accurate picture of the segment’s future cash flow by making it possible to include the expiration of the agreements in the modelling of cash flows. The terminal growth rate applied after the forecast period is two per cent, which corresponds to the long-term inflation forecast for the Finnish economy. For the period 2025–2029, the management forecasts that revenue, operating profit and cash flows will develop in line with the Group’s long-term strategy. In addition, in terms of the Public Services, in the fore- casts for 2025–2031 consider the impacts of the expiration of the complete outsourcing agreements in ac- cordance with the agreement period of each agreement. More details on the duration of the agreements and unsatisfied performance obligations are provided in note 2 Revenue from contracts with customers . The assumptions of the development of prices and costs used in the cash flow estimates are based on the management’s estimates of the development of demand and the markets, which are compared with exter- nal information sources. The productivity and efficiency assumptions used in the calculations are based on internal targets, with previous actual development considered in their estimation. REPORT BY THE BOARD OF DIRECTORS | AUDITED FINANCIAL STATEMENTS 120 Key assumptions defined by the management and used in the calculation in 2024: Assumption Description Projected revenue Determined based on a segment-specific forecast prepared by the management and approved by the Board. Projected operating profit Determined based on a segment-specific forecast prepared by the management and approved by the Board. Duration of the forecast period The length of the forecast period is 5–8 years plus the terminal period. Terminal growth rate assumption 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 recoverable amount ex- ceeded the carrying amount by approximately EUR 243 million in the Private Healthcare Services segment and by approximately EUR 54 million in the Public Services segment. The management has conducted sensi- tivity analyses of the key factors. The table below shows the required change in assumptions that would lead to the recoverable amount being equal to the carrying amount, provided that the assumptions change one at a time. Sensitivity analysis 2024 Private Healthcare Services Public Services Decline in EBIT margin more than 3 percentage units more than 4 percentage units Decline in revenue volume more than 18 percentage units more than 40 percentage units Increase in discount rate more than 3,5 percentage units more than 100 percentage units Decline in the terminal growth rate more than 6 percentage units more than 100 percentage units 15. 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. Key accounting estimates and decisions based on management judgement When recognising leases on the balance sheet, estimates must be made concerning the lease term, the ex- ercising of extension options and the discount rate applied. When assessing the lease term of a new lease, extension options are not taken into account until a commitment has been made to exercise the extension option. Right-of-use assets EUR 1,000 Right-of- use plots Right-of-use buildings and premises Right-of-use equipment Total Cost at 1 Jan 2024 1,214 363,311 6,507 371,033 Additions 12 11,980 2,056 14,048 Disposals 0 -3,016 -467 -3,484 Cost at 31 Dec 2024 1,226 372,274 8,096 381,597 Accumulated depreciation at 1 Jan 2024 -682 -160,992 -5,428 -167,101 Depreciation and amortisation -105 -30,885 -1,190 -32,180 Disposals 0 2,464 311 2,775 Accumulated depreciation at 31 Dec 2024 -787 -189,413 -6,306 -196,506 Carrying amount at 1 Jan 2024 533 202,319 1,080 203,932 Carrying amount at 31 Dec 2024 440 182,862 1,790 185,091 REPORT BY THE BOARD OF DIRECTORS | AUDITED FINANCIAL STATEMENTS 121 Right-of-use assets EUR 1,000 Right-of- use plots Right-of-use buildings and premises Right-of-use equipment Total Cost at 1 Jan 2023 1,215 312,525 6,211 319,952 Additions -1 38,764 871 39,634 Transfers between items 0 18,413 -15 18,398 Disposals 0 -6,391 -560 -6,951 Cost at 31 Dec 2023 1,214 363,311 6,507 371,033 Accumulated depreciation at 1 Jan 2023 -580 -116,684 -4,936 -122,201 Depreciation and amortisation -101 -30,088 -901 -31,090 Transfers between items -18,413 28 -18,386 Disposals 4,194 382 4,576 Accumulated depreciation at 31 Dec 2023 -682 -160,992 -5,428 -167,101 Carrying amount at 1 Jan 2023 635 195,841 1,274 197,751 Carrying amount at 31 Dec 2023 533 202,319 1,080 203,932 Short-term leases recognised in the income statement, totalling EUR 31 (227) thousand, and minor leases recognised in the income statement, totalling EUR 866 (1,379) thousand, are practical exemptions provided by IFRS 16 applied by the Group. Lease liabilities relating to right-of-use items are specified in Note 23 Financial liabilities . 16. 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 2024 2023 Lease deposits paid 122 234 Non-current subleases 3,315 3,655 Non-current receivables 2,005 2,108 Other receivables 90 90 Total 5,532 6,088 Pihlajalinna subleased two care homes that it sold and leased back in May 2020 which form a significant part of sublease receivables. The table below presents the contractual maturity analysis of subleases. The figures are undiscounted and they include both future interest payments and repayments of the net investment. Maturity distribution of sublease receivables less than 1 year 1–2 years 2–3 years 3–4 years over 4 years Amount at 31 Dec 2024 3,655 341 346 351 357 2,261 17. Trade and other receivables Accounting policies At the end of each reporting period, the Group assesses whether there is objective evidence of impairment regarding any individual financial asset. Objective evidence of impairment of loans and other receivables includes significant financial distress of the debtor and payments being delinquent or substantially delayed. Impairment of loans is recognised in financial expenses in the income statement and impairment of other receivables is recognised in other operating expenses for the period in which the impairment was identified. The expected credit loss model is based on the amount of historical credit losses. The lifetime expected credit losses are calculated by multiplying the gross carrying amount of unpaid trade receivables by the ex- pected loss. EUR 1,000 2024 2023 Trade receivables 45,397 52,469 Prepayments and accrued income 9,953 4,739 Current subleases 341 431 Other receivables 830 241 Contract assets 4,636 3,619 Total 61,156 61,498 The carrying amount of trade receivables and other receivables corresponds to the maximum credit risk in- volved at the end of financial year. Pihlajalinna regularly reviews the credit risk of its receivables, and the procedures used to estimate the credit risk. No significant changes have been observed in customers’ pay- ment behaviour during the financial year. The management of credit risks related to trade receivables, see note 26 Financial risk management. The Group recognised impairment losses of EUR 0.9 (0.9) million on trade receivables during the financial year . REPORT BY THE BOARD OF DIRECTORS | AUDITED FINANCIAL STATEMENTS 122 Age distribution of trade receivables EUR 1,000 2024 Expected impairment losses Share of expected impairment losses Net 2024 Not due 37,010 -3 0.0 % 37,007 Less than 30 days 4,975 -5 0.1 % 4,970 30–60 days 749 -51 6.8 % 698 61–90 days 392 -102 25.9 % 291 More than 90 days 2,779 -348 12.5 % 2,431 Total 45,905 -509 45,397 EUR 1,000 2023 Expected impairment losses Share of expected impairment losses Net 2023 Not due 34,321 -5 0.0 % 34,316 Less than 30 days 12,924 -7 0.1 % 12,917 30–60 days 1,058 -47 4.4 % 1,012 61–90 days 617 -91 14.7 % 526 More than 90 days 4,013 -316 7.9 % 3,697 Total 52,934 -465 52,469 The Group’s expected credit loss model is based on the amount of historical credit losses. The share of ex- pected impairment losses varies between financial years because the Group’s expected credit losses based on historical information vary between different customer groups. Consequently, a particular customer group representing a higher or lower share of trade receivables can have a significant effect on the amount of expected credit losses. The Group’s trade receivables due more than 90 days mainly relate to open receivables from insurance company customers. The expected credit losses from contractual assets amount to EUR 0.0 (0.0) million, and the assets in question have not been taken into account in the table above. EUR 1,000 2024 2023 Credit loss provision at 1 January 465 781 Credit losses recorded -876 -920 Change in credit loss provision 920 605 Credit loss provision at 31 December 509 465 Material items incl. in prepayments and accrued income EUR 1,000 2024 2023 Personnel expenses 3,250 1,837 Expenses paid in advance 5,818 2,656 Hedging, interest rate swap 0 173 Other 884 73 Total 9,953 4,739 The carrying amounts of the receivables correspond materially to their fair values. 18. 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. During the financial year, based on management’s estimate, provisions amounted to EUR 1.7 million has been recorded related to premises for renovation and maintenance responsibilities. Other provisions relate mainly to employment matters. Key accounting estimates and decisions based on management judgement Estimates of the existence and amount of the obligation must be used when deciding on the existence of recognition requirements for provisions and determining the amount of provisions. The recognised amount is the best assessment of the costs caused by the obligation on the financial statements date. Assessment of the financial effects of the previous event requires management judgement based on previous similar events and, if necessary, the views of external experts. The assessments may differ in terms of the amount and existence of future obligations. EUR 1,000 2024 2023 Current provisions 66 84 Non-current provisions 2,519 123 Total 2,586 207 REPORT BY THE BOARD OF DIRECTORS | AUDITED FINANCIAL STATEMENTS 123 - Onerous contracts Restructuring provision Premises Other provisions Total EUR 1,000 1.1.2023 89 0 0 0 89 Increases in provisions 306 1,139 0 0 1,445 Provisions used -189 -1,139 0 0 -1,327 Reversals of unused provisions 0 0 0 0 0 31.12.2023 207 0 0 0 207 Increases in provisions 0 0 1,700 907 2,607 Provisions used -79 0 0 -150 -229 Reversals of unused provisions 0 0 0 0 0 31.12.2024 128 0 1,700 757 2,586 19. Trade and other payables EUR 1,000 2024 2023 Trade payables 24,075 27,051 Accrued liabilities 88,695 90,466 Prepayments 27 311 Other liabilities 8,288 7,503 Total 121,085 125,333 Material items included under Accrued liabilities: Wages and salaries and social security payments 53,139 53,823 Doctor’s fee liability 19,140 17,055 Allocation of purchase invoices 8,242 11,481 Current contract liabilities 1,274 1,347 Unpaid interest expenses 2,291 2,147 Other accrued liabilities 4,608 4,614 Total 88,695 90,466 20. Deferred tax assets and liabilities Accounting policies Deferred taxes are calculated on temporary differences between the carrying amount and the tax base. However, a deferred tax liability shall not be recognised on the initial recognition of goodwill, or on the ini- tial recognition of an asset or liability in a transaction which is a business combination and, at the time of the transaction, affects neither accounting profit nor taxable profit and, at the time of the transaction, does not give rise to equal taxable and deductible temporary differences. In the Group, the most significant temporary differences result from depreciation and amortisation of property, plant and equipment and intangible assets, fair value-based adjustments made in connection with business combinations, and unused tax losses. Deferred taxes are calculated by applying tax rates enacted or substantively enacted by the end of the reporting period. A deferred tax asset is only recognised to the extent that it is probable that taxable profit will be available against which the temporary difference can be utilised. However, a deferred tax asset is not recognised if it arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither accounting profit nor taxable profit and, at the time of the transaction, does not give rise to equal taxable and deductible temporary differences. Whether or not deferred tax assets can be recognised in this respect is always estimated at the end of each reporting pe- riod. The Group shall offset deferred tax assets and liabilities where these relate to the same taxation authority and the same taxable entity. Deferred tax assets and tax liabilities for leases are presented separately in the notes to the financial statements. REPORT BY THE BOARD OF DIRECTORS | AUDITED FINANCIAL STATEMENTS 124 Changes in deferred taxes during 2024: Deferred tax assets (EUR 1,000) 1 January 2024 Recognised in profit and loss Recognised in the statement of comprehensive income Business combinations Reclassification 31 December 2024 Tax losses carried forward confirmed by tax authorities 8,467 -7,186 1,281 Sales proceeds from sale and leaseback arrangements 163 -30 133 Provisions 186 202 389 Share-based incentive scheme 53 -46 6 Leases - lease liabilities 46,118 -3,705 42,412 Cloud computing arrangements 330 60 390 Other items 3,485 -20 -162 3,303 Net effect of deferred tax liabilities and assets -44,206 4,037 -40,170 Deferred tax assets on the statement of financial position 14,595 -6,688 -162 7,746 Deferred tax liabilities Tangible and intangible assets 5,588 19 5,607 Recognition of assets at fair value in business combinations 1,278 -424 854 Fair value hedging 669 -231 438 Leases - right-of-use assets 41,517 -3,836 37,681 Other items 481 16 498 Cloud Computing arrangements 0 67 67 Net effect of deferred tax liabilities and assets -41,081 3,837 -37,244 Deferred tax liabilities on the statement of financial position 8,453 -321 -231 7,901 REPORT BY THE BOARD OF DIRECTORS | AUDITED FINANCIAL STATEMENTS 125 Changes in deferred taxes during 2023: Deferred tax assets (EUR 1,000) 1 January 2023 Recognised in profit and loss Recognised in the statement of comprehensive income Business combinations Reclassification 31 December 2023 Tax losses carried forward confirmed by tax authorities 11,860 -3,394 8,467 Sales proceeds from sale and leaseback arrangements 193 -30 163 Provisions 227 -41 186 Share-based incentive scheme 5 48 53 Reclassification to assets held for sale -63 63 0 Leases - lease liabilities 45,915 203 46,118 Cloud computing arrangements 228 102 330 Other items 3,583 -98 3,485 Net effect of deferred tax liabilities and assets -44,623 417 -44,206 Deferred tax assets on the statement of financial position 17,324 -2,729 14,595 Deferred tax liabilities Tangible and intangible assets 5,344 244 5,588 Recognition of assets at fair value in business combinations 1,705 -428 1,278 Fair value hedging 1,023 -354 669 Leases - right-of-use assets 41,289 228 41,517 Other items 99 383 481 Net effect of deferred tax liabilities and assets -40,948 -133 -41,081 Deferred tax liabilities on the statement of financial position 8,512 294 -354 8,453 REPORT BY THE BOARD OF DIRECTORS | AUDITED FINANCIAL STATEMENTS 126 - Available tax losses Deferred tax assets recorded Deferred tax assets not recorded Tax losses 2024 2023 2024 2023 2024 2023 Maturing within five years 971 1,757 161 324 34 32 Maturing later than within five years 15,273 55,702 1,121 8,143 1,934 2,993 Total 16,244 57,460 1,281 8,467 1,968 3,025 Taxes calculated on the basis of the Finnish tax rate (20%) 3,249 11,492 21. Financial assets and liabilities by measurement category Accounting policies When a financial asset or liability is recognised on the transaction date, the Group measures it at its acquisi- tion cost, which is equal to the fair value of the consideration give or received. Derivative contracts are rec- ognised in the balance sheet at fair value on the trade day and subsequently remeasured at their fair value on the balance sheet date. Financial assets For the purpose of measurement after initial recognition, the Group’s financial assets are classified as finan- cial assets measured at amortised cost and financial assets measured at fair value through profit or loss. Fi- nancial assets are derecognised when the Group has lost its contractual right for the financial assets in ques- tion or has transferred substantially all risks and rewards outside the Group. The Group’s trade receivables, lease deposits and cash and cash equivalents have been classified as finan- cial assets measured at amortised cost using the effective interest method, taking any impairment into ac- count. Financial assets measured at fair value through profit or loss consist of quoted and unquoted shares and loan receivables. The Group has no holdings of shares quoted in public markets. Derivative contracts are recognised in the balance sheet at fair value on the trade date and subsequently remeasured at their fair value on the balance sheet date. Derivatives that do not meet the conditions of hedge accounting are recorded in the income statement. The change in fair value is recorded in equity in fair value reserve if the derivative contract meets the conditions of cash flow hedging. If hedge accounting is not applied derivatives are revalued to fair value at the end of the reporting period and the profit or loss dif- ference arising from the valuation is recorded in the income statement. Cash and cash equivalents Cash and cash equivalents consist of cash at hand and demand deposits. The account with credit limit in use is included in current financial liabilities. Financial liabilities The Group classifies loans from financial institutions, accounts with credit limits, lease liabilities, trade paya- bles and other liabilities as financial liabilities measured at amortised cost using the effective interest method. Transaction costs are included in the initial carrying amount. Arrangement fees for loan commit- ments are treated as transaction costs. The Group classifies contingent considerations arising from M&A transactions as financial liabilities measured at fair value through profit or loss. No interest is paid on liabili- ties arising from contingent considerations. Any contingent consideration is measured at fair value at the date of acquisition and classified as a liability. A contingent consideration classified as a liability is measured at fair value at the end of each reporting period, and any resulting gain or loss is recognised in profit or loss after the end of the measurement period. The valuation principles of derivatives are discussed above in the section Financial assets . Financial liabilities are classified as current liabilities, unless the Group has an unconditional right to postpone their repayment to a date that is at least 12 months subsequent to the end of the reporting period. REPORT BY THE BOARD OF DIRECTORS | AUDITED FINANCIAL STATEMENTS 127 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 2024 Carrying amounts of financial assets Non-current financial assets Other shares and participations level 3 166 166 166 Lease deposits 16 level 2 122 122 122 Other receivables 16 level 2 90 90 90 Loan receivables level 3 2,005 2,005 2,005 Current financial assets Trade receivables 17 45,397 45,397 45,397 Other receivables 17 level 2 830 830 830 Interest derivatives 26 level 2 Cash and cash equivalents 30,908 30,908 30,908 Total 2,171 77,348 79,519 79,519 Carrying amounts of financial liabilities Non-current financial liabilities Loans from financial institutions 23 level 2 113,203 113,203 113,203 Lease liabilities 23 level 2 180,887 180,887 180,887 Other liabilities 23 level 2 499 499 499 Contingent considerations level 3 871 871 871 Current financial liabilities Loans from financial institutions 23 level 2 1,823 1,823 1,823 Cheque account with credit li- mit 23 Contingent considerations level 3 Lease liabilities 23 level 2 31,047 31,047 31,047 Interest derivatives 26 level 2 808 808 808 Trade and other payables 19 24,075 24,075 24,075 Total 871 808 351,534 353,213 353,213 EUR 1,000 Note Fair value hierarchy Fair value through profit or loss Fair value - hedging instrument Amortised cost Total carrying amounts Fair values total 31 Dec 2023 Carrying amounts of financial assets Non-current financial assets Other shares and participations level 3 168 168 168 Lease deposits 16 level 2 234 234 234 Other receivables 16 level 2 90 90 90 Loan receivables level 3 2,108 2,108 2,108 Current financial assets Trade receivables 17 52,469 52,469 52,469 Other receivables 17 level 2 241 241 241 Interest derivatives 26 level 2 173 173 173 Cash and cash equivalents 24,517 24,517 24,517 Total 2,276 173 77,550 79,999 79,999 Carrying amounts of financial liabilities Non-current financial liabili- ties Loans from financial institutions 23 level 2 143,800 143,800 143,800 Lease liabilities 23 level 2 199,834 199,834 199,834 Other liabilities 23 level 2 536 536 536 Contingent considerations level 3 210 210 210 Current financial liabilities Loans from financial institutions 23 level 2 2,296 2,296 2,296 Cheque account with credit limit 23 Contingent considerations level 3 700 700 700 Lease liabilities 23 level 2 30,754 30,754 30,754 Trade and other payables 19 27,051 27,051 27,051 Total 910 404,271 405,181 405,181 REPORT BY THE BOARD OF DIRECTORS | AUDITED FINANCIAL STATEMENTS 128 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: Fair values are based on quoted prices in active markets for identical assets and liabilities. The Group has no financial assets or liabilities measured according to level 1 of the hierarchy. Level 2: The fair value is determined using valuation methods. The financial assets and liabilities are not sub- 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: The fair value is not based on verifiable market information, and information on other circum- 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. 22. Notes on equity Accounting policies The Group classifies all instruments it issues either as an equity instrument or a financial liability, depending on their nature. Equity instruments are any contracts evidencing a residual interest in the assets of the com- pany after deducting all of its liabilities. Costs relating to the issue or purchase of equity instruments are presented as a deduction from equity. Pihlajalinna’s equity consists of the share capital, fair value reserve, reserve for invested unrestricted eq- uity, hybrid bond, retained earnings and treasury shares held by the parent company. Reconciliation of the number of shares EUR 1,000 Number of outstanding shares, 1,000 pcs Number of treasury shares, 1,000 pcs Number of shares Share capital Reserve for invested unrestricted equity Treasury shares Total 1 January 2023 22,550 70 22,620 80 116,520 822 117,422 Share-based rewards 17 -17 -192 -192 31 December 2023 22,566 54 22,620 80 116,520 629 117,229 1 January 2024 22,566 54 22,620 80 116,520 629 117,229 Acquisition of treasury shares -109 109 937 937 Share-based rewards 22 -22 -231 -231 31 December 2024 22,479 141 22,620 80 116,520 1335 117,935 Treasury shares The total number of Pihlajalinna shares is 22,620,135. On the financial statements date, 22,478,951 shares were outstanding and 141,184 were held by the Company. Pihlajalinna conveyed a total of 10,000 own shares to CEO Tuomas Hyyryläinen in January 2024. The remuneration was related to the right agreed upon in the CEO’s contract to acquire shares at the beginning of the share-based incentive scheme, when Pihla- jalinna conveyed shares in exchange for purchases. Pihlajalinna conveyed, in May 2024, a total of 11,977 own shares as part of the remuneration of the Board of Directors. Share capital Pihlajalinna has one share series, with each share entitling its holder to one vote at a General Meeting of shareholders. The company’s shares have no nominal value. All shares bestow their holders with equal rights to dividends and other distribution of the Company’s assets. The shares belong to the book-entry sys- tem. Fair value reserve The fair value reserve includes an effective portion of the change in the fair value of derivatives for which cash flow hedge accounting is applied. The fair value reserve also includes the remaining value on the re- porting date of the derivative contract sold in early 2023. The gain on the sale is presented in the fair value reserve less taxes and transferred to be recognised through profit or loss in the same periods as the hedged expected future cash flows will affect the result, meaning the years 2023–2027. On the reporting date, the sold derivative contract’s share of the fair value reserve was approximately EUR 1.8 (2.5) million. REPORT BY THE BOARD OF DIRECTORS | AUDITED FINANCIAL STATEMENTS 129 Reserve for invested unrestricted equity The reserve for invested unrestricted equity contains other equity-like investments and the share subscrip- tion price to the extent that this is not entered in share capital under a specific decision. Hybrid Bond Pihlajalinna issued EUR 20 million hybrid bond on 27 March 2023. The coupon rate for the hybrid loan is a fixed interest rate of 12.00 per cent per annum until 27 March 2026 (“Reset Date”). From the Reset Date onwards, the hybrid bond will bear a floating interest rate of 14.00 per cent plus the three-month Euribor, as specified in the terms and conditions of the hybrid bond. The hybrid bond does not have a specified ma- turity date. Pihlajalinna is entitled to redeem the hybrid bond on the Reset Date and thereafter on each in- terest payment date. The hybrid bond is a financing instrument that is subordinated to the Company’s other debt obligations. The hybrid bond is treated as an equity item in accordance with its nature. For this reason, the accrued in- terest and the transaction costs related to the issue of the hybrid bond are also presented in equity accord- ing to their nature, less any tax effect. The hybrid bond does not confer on the holders the rights of a share- holder and do not dilute the holdings of the current shareholders. Interest on the hybrid bond of EUR 1.9 million and issue expenses of EUR 0.4 million in the comparison period have been recognised as deduction of retained earnings. On the financial statements date, the un- paid interest from the hybrid bond was EUR 1.9 (1.9) million. Distributable funds The parent company’s total distributable funds amount to EUR 216,832,340.28, of which the profit for the financial year accounts for EUR 15,823,303.76. Dividends A dividend of EUR 0.07 per share was distributed on the result for 2023. The Board of Directors proposes that, a dividend of EUR 0.38 per share be paid for the financial year that ended on 31 December 2024. No material changes have taken place in the Company’s financial position after the end of the financial year. The Company’s liquidity position is good and, in the view of the Board of Directors, the proposed dis- tribution does not jeopardise the company’s ability to fulfil its obligations. 23. Financial liabilities EUR 1,000 2024 2023 Non-current interest-bearing liabilities Loans from financial institutions 113,203 143,800 Other liabilities 499 536 Lease liabilities 180,887 199,834 294,589 344,169 Current interest-bearing liabilities Loans from financial institutions 1,823 2,296 Lease liabilities 31,047 30,754 Yhteensä 32,870 33,051 Interest-bearing financial liabilities total 327,459 377,220 Pihlajalinna’s financing arrangement is described in more detail in note 26 Financial risk management. The loan instalments drawn under the Group’s revolving credit facility are de facto long-term items in spite of their maturity being 1, 3 or 6 months, because Pihlajalinna has an unequivocal right to post- pone repayment by a minimum of 12 months from the reporting date. Lease liabilities EUR 1,000 2024 2023 Non-current lease liabilities Right-of-use plots 374 443 Right-of-use buildings and business premises 179,321 198,890 Right-of-use equipment 1,192 500 180,887 199,834 Current lease liabilities Right-of-use plots 77 100 Right-of-use buildings and business premises 30,120 30,076 Right-of-use equipment 850 578 31,047 30,754 24. Changes in interest-bearing liabilities with no impact on cash flow EUR 1,000 2023 Cash flow New instalments and lease liabilities Effective interest rate 2024 Non-current interest-bearing liabilities 144,336 -32,086 1,512 -60 113,702 Current interest-bearing liabilities 2,296 -473 0 0 1,823 Lease liabilities 230,588 -32,068 13,414 0 211,934 Total 377,220 -64,628 14,926 -60 327,459 25. 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 26 Financial risk management. REPORT BY THE BOARD OF DIRECTORS | AUDITED FINANCIAL STATEMENTS 130 EUR 1,000 Note 2024 2023 Equity 168,951 144,591 Total statement of fin. position – deferred revenue 630,139 657,187 Equity ratio¹⁾ 26.8 % 22.0 % Interest-bearing financial liabilities 23 327,459 377,220 Cash and cash equivalents -30,908 -24,517 Interest-bearing net debt 296,551 352,703 Gearing²⁾ 175.5 % 243.9 % EBITDA 101,508 72,487 EBITDA adjustment items* -779 8,133 Adjusted EBITDA 100,728 80,621 Net debt/adjusted EBITDA 2.9 4.4 * Significant transactions that are not part of the normal course of business, are related to business acquisition costs (IFRS 3), are infrequently occurring events or valuation items that do not affect cash flow are treated as adjustment items af- fecting comparability between review periods. According to Pihlajalinna’s definition, such items include, for example, 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 has also presented costs according to the IFRS Interpretations Committee’s Agenda Decision concerning cloud computing arrangements, and reversals of amortisation, as adjustment items. Cloud computing arrangements costs and reversals of amortisation according to the IFRS Interpreta- tions Committee’s Agenda Decision has not been presented as adjustment items since 1 January 2024. EBITDA ad- justments amounted to EUR -0.8 (8.1) million for the financial year that ended on 31 December 2024. 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. 26. Financial risk management The Group’s main financial risks consist of credit and counterparty risk as well as interest rate and liquidity risks. The Group operates in Finland and is therefore not exposed to material foreign exchange risks in its operations. The Group’s general risk management policies are approved by the Board of Directors. The Group’s Chief Financial Officer, together with the operative management, is responsible for identifying fi- nancial risks and for practical risk management. The goal of the Group’s risk management is to ensure suffi- cient liquidity, minimise financing costs and regularly inform the management about the Group’s financial position and risks. Group’s financial administration actively monitors compliance with the financial covenants and assesses financial leeway in relation to the covenant maximums as part of the Group’s business planning. Liquidity risk The Group monitors the amount of financing required by business operations by analysing cash flow fore- casts in order to make sure the Group has a sufficient amount of liquid assets for financing operations and repaying maturing loans. The Group aims to ensure the availability and flexibility of financing with adequate credit limits, a balanced maturity profile and sufficiently long maturities for borrowings, as well as by ob- taining financing through several financial instruments. Monitoring and forecasting financial covenants in- cluded in the Company’s financing agreements is continuous. In June 2024, Pihlajalinna rearranged its long-term debt financing with a sustainability-linked financing arrangement. The agreement includes a EUR 110 million term loan for refinancing the Group’s previous debt, and a revolving credit facility of EUR 60 million for general financing purposes. The financing agree- ment is for three years and includes two option years. Pihlajalinna has an interest rate swap agreement with a nominal value of EUR 65 million, which is used to convert the interest on a floating rate financing arrangement to a fixed rate. Cash flow hedge accounting is applied to the interest rate swap agreement, which means that the effective portion of the change in fair value is recognised in other comprehensive income. The interest rate swap entered into effect in March 2023 and will remain in effect until 25 March 2027. Its fair value was -0.8 (0.2) million at the end of the fi- nancial year. On 27 March 2023, Pihlajalinna issued a hybrid bond with an annual coupon of 12 per cent. The hybrid bond does not have a specified maturity date. Pihlajalinna is entitled to redeem the hybrid bond on the Re- set Date, 27 March 2026, and thereafter on each interest payment date. The hybrid bond is treated as an equity item in Pihlajalinna’s IFRS consolidated financial statements, and it is described in more detail in note 22 Notes on equity . On the financial statements date, the Group’s cash and cash equivalents amounted to EUR 30.9 (24.5) million, in addition to which the Group had EUR 70.0 (70,0) million in unused committed credit limits availa- ble. Unused credit limits consist of EUR 10 million credit limit agreement and EUR 60 million unwithdrawn revolving credit facility. The Group’s equity ratio at the end of the financial year was 26.8 (22.0) per cent. REPORT BY THE BOARD OF DIRECTORS | AUDITED FINANCIAL STATEMENTS 131 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. Interest payments related to the loan instalments drawn are presented in the table below according to the actual timing of their payment. EUR 1,000 Carrying amount at 31 Dec 2024 less than 1 year 1–2 years 2–3 years 3–4 years over 4 years Loans from financial institutions 115,026 -7,325 -7,065 -114,111 -843 Lease liabilities 211,934 -34,556 -30,970 -26,674 -22,858 -113,923 Other interest-bearing liabilities 499 -57 -57 -57 -57 -569 Contingent considerations 871 -6 -874 Trade payables 24,075 -24,075 Total 352,405 -66,020 -38,966 -140,842 -23,758 -114,492 EUR 1,000 Carrying amount at 31 Dec 2023 less than 1 year 1–2 years 2–3 years 3–4 years over 4 years Loans from financial institutions 136,096 -9,355 -8,607 -132,628 -1,239 -424 Revolving credit facility 10,000 -543 -541 -10,223 Lease liabilities 230,588 -34,452 -31,357 -26,340 -23,702 -134,500 Other interest-bearing liabilities 536 -57 -57 -57 -57 -589 Contingent considerations 910 -706 -216 Trade payables 27,051 -27,051 Total 405,181 -72,165 -40,779 -169,249 -24,998 -135,513 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. Additionally, the loan margin of the financing is linked to Pihlajalinna’ s main sustainability targets: patient satisfaction, access to surgical treatment and employee satisfaction. Sustainability objec- tives have a minor effect on the loan margin, depending on how many of the agreed-upon sustainability tar- gets are achieved. At the end of the financial year, the sustainability targets linked to the financing arrange- ment did not cause any changes in the loan margins. The gearing covenant of the financing arrangement is 115 per cent and the leverage covenant is 3.75. During the financial year and at the end of it, the Group met the financial covenants agreed upon in the agreement. At the end of the reporting period, 31 December 2024, the withdrawn loan amount to which the covenants apply was EUR 110.0 million (EUR 140.0 million). Interest rate risk The Group is exposed to interest rate risk through its external financing arrangement. In accordance with the Group’s risk management principles, the Board of Directors decides on the need for, and extent of, in- terest rate hedging for the Group’s loan portfolio. The Group has an interest rate swap agreement with a nominal value of EUR 65 million, which is used to to hedge its floating rate financing arrangement. Cash flow hedge accounting is applied to the interest rate swap agreement. The interest rate swap entered into effect in March 2023 and will remain in effect until 25 March 2027. The Group sold its earlier interest rate swap agreement in early 2023 and the fair value of the interest rate swap agreement at the time of concluding the agreement was approximately EUR 3.9 million. The gain on the sale is presented in the fair value reserve less taxes and is recognised through profit or loss in the same periods as the hedged expected future cash flows will affect the result, meaning the years 2023–2027. On the financial statements date, 66 (63) per cent of the interest-bearing liabilities were subject to fixed interest rates. During the financial year, the average annual interest rate on the Group’s interest -bearing liabilities and derivatives was approximately 2.9 (3.2) per cent. The duration, i.e. the fixed interest rate pe- riod, of the financing portfolio was 3.5 (3.6) years. The table below presents the Group’s interest rate position at the end of the financial year. EUR 1,000 2024 2023 Fixed rate financial liabilities 216,960 236,786 Variable rate financial liabilities 111,908 141,822 Financial liabilities subject to hedge accounting -65,000 -65,000 Total variable rate position 46,908 76,822 The table below presents the effects on consolidated profit before tax should market interest rates rise or fall, all other things being equal. The sensitivity analysis is based on the interest rate position at the closing date of the reporting period, including the hedging effect of derivatives. Since the Group has no material interest-bearing assets, its income and operating cash flows are not materially exposed to changes in mar- ket interest rates. EUR 1,000 2024 2024 2023 2023 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 -469 489 -768 1,418 REPORT BY THE BOARD OF DIRECTORS | AUDITED FINANCIAL STATEMENTS 132 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 an interest rate swap agreement with a nominal value of EUR 65 million, which is used to hedge its floating rate financing arrangement. Cash flow hedge accounting is applied to the interest rate swap agreement. The interest rate swap entered into effect in March 2023 and will remain in effect until 25 March 2027. Its fair value was EUR -0.8 (0.2) million at the end of the financial year. Under the contract, the Group pays a fixed interest of 2.8 per cent and receives the floating six-month Euribor interest beginning from the start date. The Group sold its earlier interest rate swap agreement in early 2023 and the fair value of the interest rate swap agreement at the time of concluding the agreement was approximately EUR 3.9 million. The gain on the sale is presented in the fair value reserve less taxes and is recognised through profit or loss in the same periods as the hedged expected future cash flows will affect the result, meaning the years 2023-2027. The table below shows the annual cash flows of the derivative calculated at market interest rates. In addi- tion, a sensitivity analysis of the derivative is presented below, illustrating the change in the market value of the derivative when the yield curve rises or falls and other factors remain unchanged. Interest rate swap agreement cash flows EUR 1,000 2025 2026 2027 Total Interest rate swap agreement cash flow 31 Dec 2024 Interest rate swap agreement -21 -440 -176 -637 EUR 1,000 2024 2025 2026 2027 Total Interest rate swap agreement cash flow 31 Dec 2023 Interest rate swap agreement 632 -314 -536 -235 -453 Interest rate swap agreement sensitivity analysis EUR 1,000 2024 2024 Change in the yield curve 1.0 percentage units lower 1.0 percentage units higher Market value change of the interest rate swap agreement -1,300 1,282 EUR 1,000 2023 2023 Change in the yield curve 1.0 percentage units lower 1.0 percentage units higher Market value change of the interest rate swap agreement -1,928 1,868 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 wellbeing services counties, insurance companies or large and solvent listed companies. The Group’s key credit risks are presented in Note 17 Trade and other receiva- bles. 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 17 Trade and other receivables. The amount 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 21 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 | AUDITED FINANCIAL STATEMENTS 133 27. Acquired business operations and divestments Accounting policies When the Group acquires assets either through business arrangements or through other arrangements, the management evaluates the actual nature of the asset and the business when determining whether it is a business combination. When an asset or a group of assets does not form a business operation, the acquisition is not treated as a business combination and in that case the Group records the acquisition of individual assets and liabilities. The acquisition cost is allocated to individual assets and liabilities in proportion to their current values at the time of acquisition, and no goodwill is generated. Acquisitions defined as business operations are treated as business combinations. The Group records business combinations using the acquisition method. The transferred consideration, including the contin- gent consideration and the identifiable assets and liabilities of the acquired company, are valued at fair value at the time of acquisition. Acquisition related expenses are recorded as expenses in the period in which they have incurred. The acquired business operations are consolidated to the financial statements from the moment the Group obtains control over the acquired business. The share of non-controlling inter- ests is recorded for each acquisition either at fair value or at an amount that corresponds to the relative share of the non-controlling interests in the net assets of the target of acquisition. If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group presents these acquisitions as preliminary in its financial state- ments. Preliminary items are adjusted, and new assets and liabilities are recorded retrospectively, if new information is received that concerns the facts and circumstances that existed at the time of acquisition and which, if it had been known, would have affected the amounts recorded at that time. The measurement pe- riod may not exceed one year from the acquisition date. 27.1. Acquired business operations Acquired business operations 2024 On 1 May 2024, Pihlajalinna acquired full ownership of its former associated company Kuura Digilääkäri Oy. Pihlajalinna's previous holding in the company was 45 per cent. On 1 July 2024, Pihlajalinna acquired 41.34 per cent of the shares of its former associated company Digital Health Solutions Oy. Following the transaction, Pihlajalinna holds 82.37 per cent of the company’s shares. Pihlajalinna consolidates the com- panies as an acquisition achieved in stages. The pre-existing interest in the acquirees were remeasured to fair value and the capital gain, amounting to EUR 78 thousand, was recognised in other operating in- come. Since the acquisitions are not material individually, the following acquisition calculations on the acquired business operations have been consolidated: EUR million 2024 Consideration transferred Cash 3.6 Total acquisition cost 3.6 Assets and liabilities acquired for consideration at the time of acquisitions were as follows: EUR million Note 2024 Trade and other receivables 0.2 Cash and cash equivalents 0.5 Total assets 0.7 Other liabilities 0.2 Total liabilities 0.2 Acquired net assets 0.5 Goodwill generated in the acquisitions: EUR million Note 2024 Consideration transferred 2.0 Previous holding measured at fair value 1.6 Share of the acquisition allocated to non-controlling interest 0.0 Net identifiable assets of acquirees -0.5 Goodwill 14 3.1 Transaction price paid in cash in the financial year 2.0 Cash and cash equivalents of acquirees -0.5 Effect on cash flow in the financial year 1.5 The business combination generated goodwill of EUR 3.1 million. The goodwill generated is not tax-de- ductible. EUR 0.1 million in costs related to the acquisition has been recognised under other operating expenses (IFRS 3 costs). Revenue recognised as a result of the business combination and the effect on the result for the financial period is not material. REPORT BY THE BOARD OF DIRECTORS | AUDITED FINANCIAL STATEMENTS 134 Acquired business operations 2023 Pihlajalinna had no business acquisitions in the financial year 2023. 27.2. Acquistions of non-controlling interest Acquisitions 2024 Company Acquisition date Acquired share, % New ownership interest, % Suomen Yksityiset Hammaslääkärit Oy 1 Sep 2024 5% 100% Kuusiolinna Terveys Oy 1 Dec 2024 3% 100% Eur 1,000 Acquisition price Change in non-controlling interest share Impact in Group earnings Suomen Yksityiset Hammaslääkärit Oy 52 -40 -12 Kuusiolinna Terveys Oy 120 34 -154 Acquisitions 2023 Company Acquisition date Acquired share, % New ownership interest, % Suomen Yksityiset Hammaslääkärit Oy 7 Jul 2023 and 16 Oct 2023 32% 95% Pihlajalinna Ikioma Oy 1 Jan 2023 6% 100% EUR 1,000 Acquisition price Change in non-controlling interest share Impact in Group earnings Suomen Yksityiset Hammaslääkärit Oy 262 -278 15 Pihlajalinna Ikioma Oy 287 -70 -218 Accounting principles Transactions with non-controlling interests that do not lead to a loss of control are treated as transactions with owners. Changes in the share of ownership lead to adjustments of the carrying amounts of the Group’s share and the share of non-controlling interests. The difference between the adjustment made to non-con- trolling interests’ share and the paid or received consideration is recognised in earnings. 27.3. Divestments 2024 There are no divestments during the financial year 2024. 2023 Pihlajalinna sold its dental care services to Hammas Hohde Oy on 31 March 2023. In the comparison period, as a result of the divestment, net assets totaling approximately EUR 5.1 million were removed from the con- solidated statement of financial position. The Group recognized a gain of EUR 3.6 million from the divest- ment in other operating income in the comparison period. As part of the transaction, the Group sold the entire share capital of Wiisuri Oy and Pihlajalinna Hammasklinikat Oy, along with the dental care business operations of certain Group companies . REPORT BY THE BOARD OF DIRECTORS | AUDITED FINANCIAL STATEMENTS 135 28. Subsidiaries and material non-controlling interests The Group’s structure The Group had 26 (28) subsidiaries in 2024. Of these subsidiaries, 16 (17) are wholly owned and 10 (11) are partially owned. A list of all of the Group’s subsidiaries is presented in Note 31 Subsidiaries . In 2024, the Group had 1 (3) associated companies and 1 (1) joint operation. Breakdown of material non-controlling interests in the Group Main busines lo- cation Non-controlling interests’ share of the votes Non-controlling interests’ share of profit or loss Non-controlling interests’ share of equity EUR 1,000 2024 2023 2024 2023 2024 2023 Jämsän Terveys Oy Jämsä 49% 49% 2,176 -1,288 -2,997 -5,173 Pihlajalinna Erityisasumispalvelut Oy Hämeenlinna 30% 30% 31 129 30 -1 Dextra Lapsettomuusklinikka Oy Helsinki 49% 49% 368 166 953 584 Pihlajalinna Liikuntakeskukset Group several 30% 30% -210 -417 826 1,036 Total 2,365 -1,410 -1,189 -3,554 Summary of financial information on subsidiaries with a material non-controlling interest Jämsän Terveys Oy Pihlajalinna Erityisasumispalvelut Oy Dextra Lapsettomuusklinikka Oy Pihlajalinna Liikuntakeskukset Group 2024 2023 2024 2023 2024 2023 2024 2023 Current assets 2,934 3,725 757 1,136 2,356 1,439 1,098 1,430 Non-current assets 409 876 3,898 4,126 3,378 3,651 36,917 37,916 Current liabilities 9,459 15,059 1,337 1,254 1,124 936 18,662 18,136 Non-current liabilities 80 3,215 3,996 2,041 2,321 17,483 18,632 Revenue 38,771 69,204 7,176 6,848 5,445 5,100 15,327 14,489 Operating profit 4,351 -2,663 168 595 904 364 538 -127 Profit/loss 4,440 -2,628 104 430 751 338 -707 -1,401 Share of profit/loss attributable to owners of the parent 2,264 -1,340 73 301 383 172 -497 -984 Non-controlling interests’ share of profit/loss 2,176 -1,288 31 129 368 166 -210 -417 Net cash flow from operating activities -3,833 1,925 913 826 1,478 1,085 5,066 4,808 Net cash flow from investing activities 241 -85 91 -184 -1,015 -669 20 -599 Net cash flow from financing activities 3,652 -2,403 -1,004 -642 -465 -418 -5,060 -4,496 of which dividends paid to non-controlling interests REPORT BY THE BOARD OF DIRECTORS | AUDITED FINANCIAL STATEMENTS 136 29. Interests in associates and joint arrangements Changes in interests during the financial year On 1 May 2024, Pihlajalinna acquired full ownership of its former associated company Kuura Digilääkäri Oy. Pihlajalinna's previous holding in the company was 45 per cent. On 1 July 2024, Pihlajalinna acquired 41.34 per cent of the shares of its former associated company Digital Health Solutions Oy. Following the transaction, Pihlajalinna holds 82.37 per cent of the company’s shares. For more information, refer to Note 27 Acquired business operations and divestments . In the comparison period, the share of profit in associated companies and joint ventures include approximately EUR 0.5 million impairment on Pihlajalinna’s holdings in Digital Health Solutions Oy. EUR 1,000 2024 2023 Interests in associates Ullanlinnan Silmälääkärit Oy 26 34 Digital Health Solutions Oy 0 0 Kuura Digilääkärit Oy 0 1,557 Interests in joint operations Koy Levin Pihlaja Oy 40 40 Total carrying amount 66 1,631 Interests in associates Main busi- ness location Holding, % Name 2024 2023 Ullanlinnan Silmälääkärit Oy Helsinki Healthcare services 37% 37% 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 2024 2023 Sureties 5,806 5,300 Properties’ VAT refund liability 4 7 Lease commitments for off-balance sheet leases 897 1,606 Lease deposits 122 234 Hybrid bond interests Pihlajalinna issued EUR 20 million hybrid bond on 27 March 2023. On the financial statements date, the un- paid interest on the hybrid bond was EUR 1.9 (1.9) million. Lawsuits and official proceedings The City of Jämsä took legal action against Jämsän Terveys Oy regarding a matter concerning the price ad- justment provision in the service agreement. The difference in views was regarding whether the fixed an- nual price for social and healthcare services can decrease due to price. Jämsän Terveys filed an additional counterclaim against the City of Jämsä. The additional counterclaim concerns the effect of changes in the services under the service agreement on price and the service provider’s liability for financing investments by the Pirkanmaa Hospital District insofar as such investments serve operations after the term of the service agreement. The service provider is entitled to price adjustments corresponding to increases in costs and the contractual parties are under an obligation to negotiate and try to reach an agreement. On 4 April 2022, the District Court of Central Finland handed down its ruling on the dispute concerning the service agreement between Jämsän Terveys Oy and the City of Jämsä. The District Court did not deny the validity of the grounds for the variable charges in Jämsän Terveys’ service agreement, but the District Court found that the evidence presented regarding the realisation of the costs was insufficient. Pihlajalinna submitted an application for leave to appeal to the Supreme Court and an appeal concerning part of the judgement of the Vaasa Court of Appeal. On 22 November 2023, the Vaasa Court of Appeal handed down its ruling on the dispute. The Court of Appeal decided to uphold the decision of the District Court. Pihlajalinna submitted an application for leave to appeal to the Supreme Court and an appeal concerning part of the judgement of the Vaasa Court of Ap- peal. The Supreme Court did not grant Pihlajalinna leave to appeal concerning the judgement of the Vaasa Court of Appeal. Jämsän Terveys Oy has taken legal action in the District Court against the The City of Jämsä, a former client, mainly concerning COVID-19-related costs which the City of Jämsä has not paid in breach of the service agreement. In addition, a difference of opinion has emerged between the company and the city during the 2022 financial year on the impact of the transfer of personnel on the annual fee under the service agree- ment. The District Court of Central Finland considered the case and rendered its decision in late December 2024. The Court ruled the City of Jämsä to pay Jämsän Terveys Oy the COVID-19 related costs it had claimed, with interest. Other aspects of the dispute, such as the impact of the transfer of personnel on the annual fee, were settled by the parties before the Court hearing. The City of Jämsä has filed an appeal re- garding the decision to the Vaasa Court of Appeal and, hence, the decision rendered by the District Court of Central Finland is not legally binding. Pihlajalinna is involved in certain pending legal proceedings concerning employment relationships, but they are not expected to have a significant financial impact on the Group. Contingent assets At the end of the financial year 2024, Pihlajalinna has EUR 0.0 (8.2) million in contingent receivables in ac- cordance with IAS 37. In 2024, EUR 1.5 million of the receivables have been returned as receivables to the financial statements. The receivables are related to receivables of Jämsän Terveys from the City of Jämsä, for which the financial benefit to Pihlajalinna has become certain following the District Court’s decision. Otherwise, regarding the contingent receivables presented in the 2023 financial statements, Pihlajalinna no longer considers probable that it will benefit from them financially. REPORT BY THE BOARD OF DIRECTORS | AUDITED FINANCIAL STATEMENTS 137 31. Subsidiaries The Group’s parent company and subsidiary relationships 31.12.2024 The Group’s parent company is Pihlajalinna Plc, which owns all of Pihlajalinna Terveys Oy’s Series A shares. Company Domicile Holding % of votes Pihlajalinna Terveys Oy Parkano 100% 100% Ikipihlaja Johanna Oy Jämsä 100% 100% Jokilaakson Terveys Oy Jämsä 90% 90% Mäntänvuoren Terveys Oy Mänttä-Vilppula 91% 91% Ikipihlaja Kuusama Oy Kokemäki 100% 100% Ikipihlaja Sofianhovi Oy Mänttä-Vilppula 100% 100% Ikipihlaja Matinkartano Oy Lieto 100% 100% Ikipihlaja Setälänpiha Oy Lieto 100% 100% Ikipihlaja Oiva Oy Raisio 100% 100% Kolmostien Terveys Oy Parkano 96% 96% Jämsän Terveys Oy Jämsä 51% 51% Kuusiolinna Terveys Oy Alavus 100% 100% Lääkäriasema DokTori Oy Lappeenranta 100% 100% Mediapu Oy Oulu 100% 100% Pihlajalinna Erityisasumispalvelut Oy Hämeenlinna 70% 70% Dextra Lapsettomuusklinikka Oy Helsinki 51% 51% Bottenhavets Hälsa Ab - Selkämeren Terveys Oy Kristiinankaupunki 75% 75% Linnan Klinikka Oy Hämeenlinna 100% 100% Pihlajalinna Liikuntakeskukset Oy Tampere 70% 70% Forever Helsinki Oy Helsinki 70% 70% Suomen Yksityiset Hammaslääkärit Oy Tampere 100% 100% Laihian Hyvinvointi Oy Laihia 100% 100% Digital Health Solutions Oy Sotkamo 82% 82% Pihlajalinna Lääkärikeskukset Oy Helsinki 100% 100% Pihlajalinna Ikioma Oy Mikkeli 100% 100% Pihlajalinna Kainuu Oy Sotkamo 100% 100% Information on the associates is presented in Note 29 Interests in associates and joint arrangements. Changes in Group Structure The following changes in Group Structure were implemented during the financial year: Merged Company Target Company Month of the merge Pihlajalinna Seppälääkärit Oy Pihlajalinna Lääkärikeskukset Oy 1 Mar 2024 Kuura Digilääkäri Oy Pihlajalinna Lääkärikeskukset Oy 1 Oct 2024 Kompassi Lääkärikeskus Oy Pihlajalinna Lääkärikeskukset Oy 1 Nov 2024 The following changes in Group Structure were implemented during 2023: Merged Company Target Company Month of the merge Pihlajalinna Lääkärikeskukset Oy Pihlajalinna Lääkärikeskukset Oy (former Pihlajalinna Omasairaala Oy 1.2.-31.12.2022) 1 Jan 2023 Pihlajalinna Turku Oy Pihlajalinna Lääkärikeskukset Oy (former Pihlajalinna Omasairaala Oy 1.2.-31.12.2022) 1 Jan 2023 Etelä-Savon Työterveys Oy Pihlajalinna Lääkärikeskukset Oy (former Pihlajalinna Omasairaala Oy 1.2.-31.12.2022) 1 Jan 2023 Pihlajalinna Oulu Oy Pihlajalinna Lääkärikeskukset Oy (former Pihlajalinna Omasairaala Oy 1.2.-31.12.2022) 1 April 2023 Pihlajalinna Seppämagneetti Oy Pihlajalinna Lääkärikeskukset Oy (former Pihlajalinna Omasairaala Oy 1.2.-31.12.2022) 1 May 2023 Acquired and sold business operations are described in more detail in note 27 Acquired business operations and divestments. REPORT BY THE BOARD OF DIRECTORS | AUDITED FINANCIAL STATEMENTS 138 32. 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, the Management Team, including the CEO, and their family members and companies controlled by them. Subsidiaries are described in more detail in note 31 Subsidiaries . Associate and joint ventures are described in more detail in note 29 Interests in associates and joint arrangements . Transactions with related parties which are not eliminated in the consolidated financial statements are presented as related party transactions. Employee benefits of management EUR 1,000 2024 2023 Monetary salaries, Management Team 1,713 1,768 Share-based rewards, Management Team 143 0 Fringe benefits, Management Team 12 36 Post-employment benefits, Management Team 390 277 Management Team, total 2,258 2,081 Salaries and remuneration Tuomas Hyyryläinen acted as the CEO of Pihlajalinna starting from 1 September 2023. During the financial year 2023, Joni Aaltonen served as Pihlajalinna's CEO until 8 March 2023 and Mikko Wirén as the interim CEO from 9 March to 31 August 2023. In 2023, Joni Aaltonen received a total of EUR 353,000 in salaries and remuneration and Mikko Wirén received EUR 174,000. EUR 1,000 2024 2023 Tuomas Hyyryläinen Monetary salaries 378 120 Share-based rewards 143 0 Fringe benefits 0 0 Total 521 120 In January 2024, Pihlajalinna conveyed a total of 20,000 shares to CEO Tuomas Hyyryläinen (gross amount before deduction of withholding tax). The remuneration was related to the right agreed upon in the CEO's contract to acquire shares at the beginning of the share-based incentive scheme, when Pihlajalinna con- veyed shares in exchange for purchases. The arrangement is described in more detail in note 6 Share-ba- sed payments. EUR 1,000 2024 2023 Board of Directors Chair of the Board Jukka Leinonen 72 68 Vice-Chair of the Board Leena Niemistö 52 54 Chair of the Audit Committee Kim Ignatius 53 38 Board member Heli Iisakka 43 43 Chair of the People and Sustainability Committee Hannu Juvonen 52 54 Board member Tiina Kurki 43 37 Board member (until 3 April 2023) Mika Manninen 0 6 Chair of the Audit Committee (until 10 April 2024) Seija Turunen 2 53 Board member Mikko Wirén 42 44 Total 358 397 Of the annual remuneration paid in shares, a total of 2,662 (2,636) shares held by the company were trans- ferred to the Chair of the Board of Directors, 1,774 (1,757) shares transferred to the Vice Chair and the Chairs of the People and Sustainability Committee and Audit Committee each, and 1,331 (1,318) shares to each member of the Board of Directors. According to the CEO’s contract, the notice period for dismissal is 6 months. The company is liable to pay the CEO one-time compensation for termination amounting to eight months’ total salary. The CEO’s pension benefits are according to the statutory pension scheme. The CEO Tuomas Hyyryläinen is not a member of the Board of Directors. REPORT BY THE BOARD OF DIRECTORS | AUDITED FINANCIAL STATEMENTS 139 Related party transactions and related party receivables and liabilities: 2024 2023 Key management personnel Rents paid 1,103 1,014 Services procured 949 1,277 Other payments 138 0 Prepayments -76 -99 Trade payables 87 179 Interests in associates and joint arrangements Rents paid 38 29 Services procured 321 944 Other payments 14 75 Trade payables 6 197 During the financial year, the Group has leased its business premises in Karkku, Tampere and Kangasala from Mikko Wirén's controlling company. Mikko Wirén is a member of the Board of Directors. The Group also has an agreement with MWW Oy, a company controlled by Mikko Wirén, under which the Group buys healthcare professionals’ services and consulting. In addition, during the financial year the Group has paid old receivables, late payment interests and premises renovation costs to a company controlled by Mikko Wirén. Business transactions with associates and joint venture companies comprise mainly of healthcare profes- sionals’ services obtained from Kuura Digilääkäri Oy in addition to rents paid to Kiinteistö Oy Levin Pihlaja. 33. Events after the balance sheet date There are no material events after the end of the financial year. REPORT BY THE BOARD OF DIRECTORS | AUDITED FINANCIAL STATEMENTS 140 PARENT COMPANY FINANCIAL STATEMENTS, FAS Parent company income statement, FAS EUR Note 2024 2023 Revenue 1.1. 11,988,270.96 9,077,280.90 Other operating income 1.2. 529,576.34 395,721.08 Personnel expenses 1.3. -1,505,644.20 -1,397,212.74 Depreciation, amortisation and impairment 1.4. -2,808,741.76 -2,672,301.20 Other operating expenses 1.5 -11,742,181.16 -8,876,588.58 Operating profit (loss) -3,538,719.82 -3,473,100.54 Financial income and expenses 1.6 -621,839.96 -5,353,946.60 Profit (loss) before appropriations and taxes -4,160,559.78 -8,827,047.14 Appropriations 1.7 Change in depreciation difference 265,842.71 -783,600.41 Group contribution 22,200,000.00 537,000.00 Income taxes 1.8. -2,481,979.17 1,364,318.99 Profit (loss) for the financial year 15,823,303.76 -7,709,328.56 REPORT BY THE BOARD OF DIRECTORS | AUDITED FINANCIAL STATEMENTS 141 Parent company balance sheet, FAS EUR Note 2024 2023 Assets Non-current assets Intangible assets 2.1 2,152,146.73 3,377,107.41 Property, plant and equipment 2.2 4,960,479.89 6,397,913.16 Investments 2.3 384,535,075.95 384,535,075.95 Total non-current assets 391,647,702.57 394,310,096.52 Current assets Non-current receivables 2.4 6,062.31 2,488,041.48 Current receivables 2.5 72,586,162.82 50,925,791.76 Cash and cash equivalents 30,637,684.94 24,278,891.96 Total current assets 103,229,910.07 77,692,725.20 Total assets 494,877,612.64 472,002,821.72 Equity and liabilities Equity 2.6 Share capital 80,000.00 80,000.00 Reserve for invested unrestricted equity 183,190,483.50 183,190,483.50 Retained earnings 17,818,553.02 28,043,605.15 Profit/loss for the financial year 15,823,303.76 -7,709,328.56 Total Equity 216,912,340.28 203,604,760.09 Accumulated appropriations 2.7 1,431,643.08 1,697,485.79 Liabilities 2.8 Non-current liabilities 132,559,107.60 163,649,827.42 Current liabilities 143,974,521.68 103,050,748.42 Total liabilities 276,533,629.28 266,700,575.84 Total equity and liabilities 494,877,612.64 472,002,821.72 Parent company cash flow statement, FAS EUR 2024 2023 Cash flow from operating activities Profit for the period 15,823,303.76 -7,709,328.56 Depreciation, amortisation and impairment 2,808,741.76 2,672,301.20 Financial income and expenses 621,839.96 5,353,946.60 Other adjustments (appropriations and taxes) -19,972,927.67 -1,157,402.06 Cash flow before change in working capital -719,042.19 -840,482.82 Change in net working capital 1,062,114.17 -1,039,744.79 Operating cash flow before financial items and taxes 343,071.98 -1,880,227.61 Interest received 3,486,952.95 3,308,330.35 Direct taxes paid 0.00 1,489,667.78 Cash flow from operating activities 3,830,024.93 2,917,770.52 Cash flow from investing activities Investments in tangible and intangible assets -207,283.68 -1,502,075.32 Proceeds from sale of intangible and tangible assets 50,000.00 52,000.00 Income from dividends 10,000,000.00 0.00 Cash flow from investing activities 9,842,716.32 -1,450,075.32 Cash flow from financing activities Proceeds from short-term borrowings from group companies 35,823,456.62 29,052,037.78 Loans granted to group companies 3,751,291.99 5,349,810.60 Proceeds from long-term borrowings 110,000,000.00 5,000,000.00 Repayment of long-term borrowings -141,096,795.80 -33,063,486.74 Group contributions received 537,000.00 0.00 Hybrid bond 0.00 20,000,000.00 Hybrid bond interests and expenses -2,402,500.00 -431,860.20 Interest paid -11,410,677.51 -7,317,894.98 Dividends paid -1,579,002.46 0.00 Acquisition of own shares -936,721.11 0.00 Cash flow from financing activities -7,313,948.27 18,588,606.46 Change in cash and cash equivalents 6,358,792.98 20,056,301.66 Cash at the beginning of the financial year 24,278,891.96 4,222,589.95 Cash at the end of the financial year 30,637,684.94 24,278,891.96 REPORT BY THE BOARD OF DIRECTORS | AUDITED FINANCIAL STATEMENTS 142 Notes to the financial statements 31 December 2024 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 3–7 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 1 200) 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 value if the impairment 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 0 (96) thousand at the end of the financial year. Recognition of pension schemes The personnel’s statutory pension security is handled by an external pension insurance company. Pension costs are recognised as expenses during the year of their accrual. Derivative financial instruments The company has an interest swap agreement that is used to hedge floating rate financing arrangement. The company present the interest swap agreement according to prudent basis (Accounting Board 2016/1963). The negative value of the interest swap agreement is recorded based on the lowest value as an expense and a liability. The positive unrealized value is presented as an off balance sheet item and income statement item and presented only in the Notes. Additional information on the derivative is presented in the parent company’s Other notes . Hybrid Bond On March 27, 2023, Pihlajalinna Oyj issued a hybrid bond of EUR 20 million. The hybrid bond is presented in liabilities in the balance sheet and the interest is presented in financial expenses in the income statement. 1.1. Revenue EUR 2024 2023 Revenues by sector Sale of services 0.00 3,160.00 Sale of services, intracompany 11,988,270.96 9,074,120.90 11,988,270.96 9,077,280.90 1.2. Other operating income EUR 2024 2023 Rental income 0.00 116,400.00 Lease income from equipment 416,086.56 239,637.60 Other income 113,489.78 0.00 Capital gains on property, plant and equipment 0.00 39,683.48 529,576.34 395,721.08 1.3. Personnel expenses EUR 2024 2023 Wages and salaries -1,311,778.04 -1,245,387.37 Pension costs -173,110.81 -132,917.15 Other social security expenses -20,755.35 -18,908.22 -1,505,644.20 -1,397,212.74 Average number of employees during the financial year 3 3 REPORT BY THE BOARD OF DIRECTORS | AUDITED FINANCIAL STATEMENTS 143 The remuneration of the Board of Directors of Pihlajalinna Plc is included in the company’s personnel ex- penses. The Annual General Meeting of 10 April 2024 resolved that the Board of Directors would be paid the following annual remuneration for the term ending at the conclusion of the 2025 Annual General Meeting: to the Chair of the Board of Directors EUR 60,000 per year; to the Vice-Chair of the Board and the Chairs of the Committees EUR 40,000 per year, and to members EUR 30,000 per year. The annual remuneration shall be paid in company shares and in cash, with approximately 40 per cent of the remuneration used to acquire shares in the name and on behalf of the members of the Board of Direc- tors, and the remainder paid in cash. The remuneration can be paid either entirely or partially in cash if the member of the Board of Directors has, on the day of the General Meeting, 10 April 2024, been in possession of over EUR 1,000,000 worth of company shares. The company was responsible for the expenses and trans- fer tax arising from the acquisition of the shares. The remuneration to be paid in company's own shares was completed by handing over to the members of the Board a total of 11,977 own shares in May. Rest of the annual remuneration was paid at the same time in cash. If the term of a Board member ends before the Annual General Meeting of 2025, the Board is entitled to decide on the possible recovery of the remuneration in a manner it deems appropriate. In addition, the Annual General Meeting decided that each Board member shall be paid a meeting fee of EUR 600 for each Board and Committee meeting. furthermore, reasonable travel expenses of the members of the Board of Directors are reimbursed in accordance with the Company's travel policy. 1.4. Depreciation and impairment EUR 2024 2023 Depreciation according to plan Intangible assets -1,377,555.98 -1,849,409.00 Property, plant and equipment -1,431,185.78 -822,892.20 Total depreciation according to plan -2,808,741.76 -2,672,301.20 1.5. Other operating expenses EUR 2024 2023 Voluntary social security expenses -54,775.34 -12,692.29 Facility expenses -209,775.52 -172,718.41 Vehicle expenses -2,744.54 -15,432.06 ICT expenses -10,389,136.69 -7,359,055.50 Machinery and equipment expenses -5,475.60 Sales, marketing and travel expenses -73,238.70 -66,666.55 Administrative expenses -996,098.90 -1,250,023.77 Losses on disposal of fixed assets -10,935.87 Other operating expenses, total -11,742,181.16 -8,876,588.58 Auditor’s fees Audit fees 104,206.91 74,677.92 Auxiliary services 60,309.22 34,871.13 Total 164,516.13 109,549.05 1.6. Financial income and expenses EUR 2024 2023 Dividends from Group companies 10,000,000.0 Income from interests in Group companies Interest income from non-current investments From Group companies 2,960,678.03 3,174,052.50 From others 517,545.88 359,351.18 Interest income from non-current investments, total 13,478,223.91 3,533,403.68 Interest expenses and other financial expenses To Group companies -3,389,503.31 -2,552,589.11 To others -10,710,560.56 -6,334,761.17 Interest expenses and other financial expenses, total -14,100,063.87 -8,887,350.28 Financial income and expenses, total -621,839.96 -5,353,946.60 1.7. Appropriations EUR 2024 2023 Difference between depreciation according to plan and dep- reciation in taxation 265,842.71 -783,600.41 Group contributions received 22,200,000.00 537,000.00 Total 22,465,842.71 -246,600.41 1.8. Income taxes EUR 2024 2023 Change in deferred tax assets -2,481,979.17 1,364,318.99 Income taxes on actual operations during the financial year Income taxes total -2,481,979.17 1,364,318.99 REPORT BY THE BOARD OF DIRECTORS | AUDITED FINANCIAL STATEMENTS 144 Notes to the balance sheet 2.1. Intangible assets EUR 2024 2023 Development costs Acquisition cost at the start of the financial year 1,606,814.06 1,606,814.06 Acquisition cost at the end of the period 1,606,814.06 1,606,814.06 Accumulated depreciation at beginning of period -1,510,619.52 -1,348,490.86 Depreciation and amortisation for the period -96,194.54 -162,128.66 Carrying amount at the end of period 0.00 96,194.54 Other intellectual property rights Acquisition cost at the start of the financial year 1,658,013.65 1,658,013.65 Acquisition cost at the end of the period 1,658,013.65 1,658,013.65 Accumulated depreciation at beginning of period -1,618,867.23 -1,464,460.93 Depreciation and amortisation for the period -26,288.61 -154,406.30 Carrying amount at the end of period 12,857.81 39,146.42 Other long-term expenditures Acquisition cost at the start of the financial year 8,972,575.87 7,448,657.25 Additions 100,564.00 1,251,142.00 Transfers between items 189,079.81 272,776.62 Acquisition cost at the end of the period 9,262,219.68 8,972,575.87 Accumulated depreciation at beginning of period -5,867,857.93 -4,334,983.89 Depreciation and amortisation for the period -1,255,072.83 -1,532,874.04 Carrying amount at the end of period 2,139,288.92 3,104,717.94 Prepayments for intangible assets Acquisition cost at the start of the financial year 137,048.51 165,678.66 Additions 52,031.30 244,146.47 Transfers between items -189,079.81 -272,776.62 Carrying amount at the end of period 0.00 137,048.51 Intangible assets, total Acquisition cost at the start of the financial year 12,374,452.09 10,879,163.62 Additions 152,595.30 1,495,288.47 Acquisition cost at the end of the period 12,527,047.39 12,374,452.09 Accumulated depreciation at beginning of period -8,997,344.68 -7,147,935.68 Depreciation and amortisation for the period -1,377,555.98 -1,849,409.00 Carrying amount at the end of period 2,152,146.73 3,377,107.41 2.2. Property, plant and equipment EUR 2024 2023 Machinery and equipment Acquisition cost at the start of the financial year 8,965,291.18 3,585,374.34 Additions 54,688.38 5,490,765.53 Disposals -135,413.04 -110,848.69 Acquisition cost at the end of the period 8,884,566.52 8,965,291.18 Accumulated depreciation at beginning of period -2,567,378.02 -1,843,017.99 Depreciation and amortisation for the period 74,477.17 98,532.17 Accumulated depreciation on disposals -1,431,185.78 -822,892.20 Carrying amount at the end of the period 4,960,479.89 6,397,913.16 Total tangible assets Acquisition cost at the start of the financial year 8,965,291.18 3,585,374.34 Additions 54,688.38 5,490,765.53 Disposals -135,413.04 -110,848.69 Acquisition cost at the end of the period 8,884,566.52 8,965,291.18 Accumulated depreciation at beginning of period -2,567,378.02 -1,843,017.99 Depreciation and amortisation for the period 74,477.17 98,532.17 Accumulated depreciation on disposals -1,431,185.78 -822,892.20 Carrying amount at the end of the period 4,960,479.89 6,397,913.16 2.3. Investments EUR 2024 2023 Other shares and participations Acquisition cost at the start of the financial year 50,000.00 50,000.00 Acquisition cost at the end of the period 50,000.00 50,000.00 Shares in subsidiaries Acquisition cost at the start of the financial year 384,485,075.95 384,485,075.95 Acquisition cost at the end of the period 384,485,075.95 384,485,075.95 Total investments 384,535,075.95 384,535,075.95 A full list of the Group’s subsidiaries is presented in Note 31 Subsidiaries in the the consolidated financial statements. REPORT BY THE BOARD OF DIRECTORS | AUDITED FINANCIAL STATEMENTS 145 2.4. Non-current receivables EUR 2024 2023 Receivables from others Deferred tax assets 6,062.31 2,488,041.48 Total non-current receivables 6,062.31 2,488,041.48 2.5. Current receivables EUR 2024 2023 Receivables from others Trade receivables 0.00 12,028.00 Other receivables 678,769.65 42,542.85 Prepayments and accrued income 5,345,447.22 1,565,976.02 Total 6,024,216.87 1,620,546.87 Receivables from Group companies Trade receivables 1,103,518.86 1,808,354.87 Loan receivables 41,781,347.28 45,532,639.27 Prepayments and accrued income 23,677,079.81 1,964,250.75 Total 66,561,945.95 49,305,244.89 Material items included in Prepayments and accrued income Group contribution 22,200,000.00 537,000.00 Accrued social security expenses 54,009.11 64,005.82 Accrued trade payables 5,829,141.88 2,462,106.74 Other 939,376.04 467,114.21 Total 29,022,527.03 3,530,226.77 Total current receivables 72,586,162.82 50,925,791.76 2.6. Equity EUR 2024 2023 Restricted equity Share capital at the beginning 80,000.00 80,000.00 Share capital at the end 80,000.00 80,000.00 Total restricted equity 80,000.00 80,000.00 Unrestricted equity Reserve for invested unrestricted equity at the beginning 183,190,483.50 183,190,483.50 Reserve for invested unrestricted equity at the end 183,190,483.50 183,190,483.50 Retained earnings at the beginning 20,334,276.59 28,043,605.15 Dividends paid -1,579,002.46 0.00 Acquisition of own shares -936,721.11 0.00 Retained earnings 17,818,553.02 28,043,605.15 Profit for the period 15,823,303.76 -7,709,328.56 Total unrestricted equity 216,832,340.28 203,524,760.09 Total equity 216,912,340.28 203,604,760.09 Retained earnings 17,818,553.02 28,043,605.15 Result for the period 15,823,303.76 -7,709,328.56 Reserve for invested unrestricted equity 183,190,483.50 183,190,483.50 Capitalised development costs 0.00 -96,194.54 Distributable unrestricted equity 216,832,340.28 203,428,565.55 Shares in subsidiaries 22,620,135 22,620,135 of which treasury shares 141,184 53,980 Number of outstanding shares 22,478,951 22,566,155 2.7. Accumulated appropriations EUR 2024 2023 Accumulated depreciation difference 1,431,643.08 1,697,485.79 REPORT BY THE BOARD OF DIRECTORS | AUDITED FINANCIAL STATEMENTS 146 2.8. Liabilities EUR 2024 2023 2.8.1 Non-current liabilities Liabilities to others Loans from financial institutions 110,000,000.00 140,000,000.00 Hybrid Bond 20,000,000.00 20,000,000.00 Other non-current liabilities 2,559,107.60 3,649,827.42 Non-current liabilities, total 132,559,107.60 163,649,827.42 2.8.2 Current liabilities Liabilities to others Trade payables 6,289,126.00 1,373,176.58 Other liabilities 1,145,783.75 1,212,740.53 Accrued liabilities 5,050,694.19 4,643,388.60 12,485,603.94 7,229,305.71 Liabilities to Group companies Trade payables 453.50 85,105.25 Accrued liabilities 35,244.00 106,573.84 Other liabilities 131,453,220.23 95,629,763.61 131,488,917.73 95,821,442.70 Material items included under Accrued liabilities Personnel expense allocations 419,860.59 173,339.05 Interest allocations 4,157,410.10 4,013,966.92 Other items 508,667.50 562,656.47 5,085,938.19 4,749,962.44 Current liabilities, total 143,974,521.67 103,050,748.41 REPORT BY THE BOARD OF DIRECTORS | AUDITED FINANCIAL STATEMENTS 147 Other notes EUR 2024 2023 Collaterals and contingent liabilities Other sureties 157,270.00 157,270.00 Pihlajalinna’s financing arrangements In June 2024, Pihlajalinna rearranged its long-term debt financing with a sustainability-linked financing ar- rangement. The agreement includes a EUR 110 million term loan for refinancing the Group’s previous debt, and a revolving credit facility of EUR 60 million for general financing purposes. The financing agreement is for three years and includes two option years. 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. Additionally, the loan margin of the financing is linked to Pihlajalinna’ s main sustainability targets: patient satisfaction, access to surgical treatment and employee satisfaction. Sustainability objec- tives have a minor effect on the loan margin, depending on how many of the agreed-upon sustainability tar- gets are achieved. At the end of the financial year, the sustainability targets linked to the financing arrange- ment did not cause any changes in the loan margins. During the financial year and at the end of it, the Group met the financial covenants agreed upon in the agreement. At the end of the reporting period, 31 December 2024, the withdrawn loan amount to which the cove- nants apply was EUR 110.0 million (EUR 140.0 million) . Pihlajalinna has an interest rate swap agreement with a nominal value of EUR 65 million, which is used to convert the interest on a floating rate financing arrangement to a fixed rate. The interest rate swap entered into effect in March 2023 and will remain in effect until 25 March 2027. Its fair value was -0.8 (0.2) million at the end of the financial year . Derivative contract is presented in the parent company’s financial statements based on the principle of prudence, and the positive unrealized difference between the value at the time of execution and the value on the balance sheet date has not been recorded as income in the financial state- ments. The negative unrealized difference between the value at the time of execution and the value on the balance sheet date has been recorded as an expense and a liability. The Group sold its previous interest rate swap agreement on early 2023. The fair value of the interest rate swap agreement at the time of concluding the agreement was approximately EUR 3.9 million. In com- parison period, the gain on the sale is presented reducing financial expenses in the parent company’s in- come statement. On 27 March 2023, Pihlajalinna issued a hybrid bond with an annual coupon of 12%. The hybrid bond does not have a specified maturity date. Pihlajalinna is entitled to redeem the hybrid bond on the Reset Date, 27 March 2026, and thereafter on each interest payment date. The hybrid bond is presented in the parent company’s financial statements in liabilities in the balance sheet and the interest is presented in fi- nancial expenses in the income statement. Pihlajalinna had EUR 70.0 (70,0) million in unused committed credit limits available. Unused credit limits consist of EUR 10 million credit limit agreement and EUR 60 million unwithdrawn revolving credit facility. EUR 2024 2023 Lease commitments Within one year 166,880.64 158,211.96 Between one and five years 278,134.40 395,529.90 REPORT BY THE BOARD OF DIRECTORS | AUDITED FINANCIAL STATEMENTS 148 Dates and signatures to the report by the Board of Directors and the financial statements Tampere, 19 March 2025 The financial statements, prepared in accordance with applicable accounting regulations, give a true and fair view of the assets, liabilities, financial position, and profit or loss of both the company and the group of compa- nies included in its consolidated financial statements. The management report contains a fair review of the development and performance of the business operations of both the company and the group of companies included in its consolidated financial statements, as well as a description of the most significant risks and uncertainties and other aspects of the company's condition. The sustainability report included in the management report has been prepared in accordance with the reporting standards referred to in Chapter 7 of the Finnish Accounting Act as well as Article 8 of the EU Taxonomy Regulation. Jukka Leinonen Kim Ignatius Heli Iisakka Hannu Juvonen Chair Tiina Kurki Leena Niemistö Mikko Wirén Tuomas Hyyryläinen CEO Auditor’s Note A report on the performed audit has been issued today. On the date of the electronic signature KPMG Oy Ab Assi Lintula Authorised Public Accountant REPORT BY THE BOARD OF DIRECTORS | AUDITED FINANCIAL STATEMENTS 149 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 2024. 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 7 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 | AUDITED FINANCIAL STATEMENTS 150 The key audit matter How the matter was addressed in the audit Valuation of Goodwill (refer to note 14 Intangible assets and goodwill to the consolidated financial statements) ● In the consolidated financial statements as of 31 December 2024, the goodwill balance is EUR 254.9 million, accounting for approx- imately 40% of the balance sheet total and 151% of the consolidated equity. ● At the beginning of the 2024 financial year, Pihlajalinna adopted a new reporting structure that is in line with the Group's business model and organisational structure. At the same time, goodwill was allocated to the cash-generating units in accordance with the new reporting structure. ● Goodwill is not amortised but is tested at least annually for possible impairment. Determining the cash flow projections underlying impairment testing requires management judgment, including revenue growth rate, profitability, discount rate and long-term growth rate, among others. ● Due to the high level of management judgement related to the forecasts used, and the significant carrying amounts involved, valu- ation of goodwill is considered a key audit matter. ● We considered the change in the reporting structure and assessed the calcula- tions used to allocate goodwill to the cash-generating units at the beginning of the financial year. ● We assessed the historical accuracy of the forecasts made by management by comparing the actual cash flows with the previous forecasts. ● We assessed the key assumptions underlying the impairment calculations such as revenue growth rate, profitability, discount rate and long-term growth rate by reference to budgets and longer-term forecasts, data sources external to the Group and our own views. In examining the forecasts, we exercised professional judgement in evaluating and testing key assumptions. ● We utilised our own valuation specialists in assessing the accuracy of the tech- nical implementation of the calculations and comparing the assumptions used with market and industry-specific data. ● In addition, we considered the appropriateness of the notes to the consolidated financial statements provided on goodwill and impairment testing. Revenue recognition (refer to note 2 Revenue from contracts with customers to the consolidated financial statements) ● The consolidated revenue for the financial year 2024 totalled EUR 704.4 million and comprised many types of services and service packages. The performance obligations are satisfied both over time and at a point in time, and services are provided across multi- ple locations and channels for different customer and user groups. ● The number of sales transactions processed through the IT systems is high and the Group has a variety of pricing and contracting structures in place. ● There were significant contractual changes in the long-term social and healthcare outsourcing agreements during the financial year. ● Due to the variety and large number of contract structures and sales transactions, revenue recognition is considered a key audit matter. ● Our audit procedures included an assessment of the internal control environ- ment related to sales processes and testing of key controls, as well as substan- tive testing. ● We evaluated the IT systems relevant to sales and associated general IT con- trols. ● We tested recording of sales transactions, operation of the invoicing and pricing processes and assessed the appropriateness and timeliness of revenue recogni- tion transactions. ● We performed substantive audit procedures on changes in social and healthcare outsourcing agreements and resulting impacts on revenue recognition. ● In addition, we considered the appropriateness of the notes to the consolidated financial statements on revenue recognition. We have not identified key audit matters relating to the parent company’s financial statements. REPORT BY THE BOARD OF DIRECTORS | AUDITED FINANCIAL STATEMENTS 151 Responsibilities of the Board of Directors and the Managing Director for the Financial State- ments The Board of Directors and the Managing Director are responsible for the preparation of consolidated finan- cial statements that give a true and fair view in accordance with IFRS Accounting Standards as adopted by the EU, and of financial statements that give a true and fair view in accordance with the laws and regula- tions governing the preparation of financial statements in Finland and comply with statutory requirements. The Board of Directors and the Managing Director are also responsible for such internal control as they de- termine is necessary to enable the preparation of financial statements that are free from material misstate- ment, whether due to fraud or error. In preparing the financial statements, the Board of Directors and the Managing Director are responsible for assessing the parent company’s and the group’s ability to continue as a going concern, disclosing, as ap- plicable, matters relating to going concern and using the going concern basis of accounting. The financial statements are prepared using the going concern basis of accounting unless there is an intention to liqui- date the parent company or the group or cease operations, or there is no realistic alternative but to do so. Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that in- cludes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with good auditing practice will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the ag- gregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. As part of an audit in accordance with good auditing practice, we exercise professional judgment and maintain professional scepticism throughout the audit. We also: ● Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstate- ment resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, for- gery, intentional omissions, misrepresentations, or the override of internal control. ● Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effective- ness of the parent company’s or the group’s internal control. ● Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. ● Conclude on the appropriateness of the Board of Directors’ and the Managing Director’s use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the parent company’s or the group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evi- dence obtained up to the date of our auditor’s report. However, future events or conditions may cause the parent company or the group to cease to continue as a going concern. ● Evaluate the overall presentation, structure and content of the financial statements, including the disclo- sures, and whether the financial statements represent the underlying transactions and events so that the financial statements give a true and fair view. ● Obtain sufficient appropriate audit evidence regarding the financial information of the entities or busi- ness activities within the group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsi- ble for our audit opinion. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other mat- ters that may reasonably be thought to bear on our independence, and where applicable, related safe- guards. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes pub- lic disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. REPORT BY THE BOARD OF DIRECTORS | AUDITED FINANCIAL STATEMENTS 152 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 eleven 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 and the Annual Report prior to the date of this auditor’s report. 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 compliance with the applicable provi- sions, excluding the sustainability report information on which there are provisions in Chapter 7 of the Ac- counting Act and in the sustainability reporting standards. 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 compliance with the applicable provisions. Our opinion does not cover the sustainability report information on which there are provisions in Chapter 7 of the Accounting Act and in the sustainability reporting standards 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. March 2025 KPMG OY AB Assi Lintula Authorised Public Accountant, KHT REPORT BY THE BOARD OF DIRECTORS | AUDITED FINANCIAL STATEMENTS 153 Assurance Report on the Sustainability Report To the Annual General Meeting of Pihlajalinna Oyj We have performed a limited assurance engagement on the group sustainability report of Pihlajalinna Oyj (business identity code 2617455–1) that is referred to in Chapter 7 of the Accounting Act and that is in- cluded in the report of the Board of Directors for the financial year 1.1.–31.12.2024. Opinion Based on the procedures we have performed and the evidence we have obtained, nothing has come to our attention that causes us to believe that the group sustainability report does not comply, in all material re- spects, with 1) the requirements laid down in Chapter 7 of the Accounting Act and the sustainability reporting standards (ESRS); 2) the requirements laid down in Article 8 of the Regulation (EU) 2020/852 of the European Parliament and of the Council on the establishment of a framework to facilitate sustainable investment, and amending Regulation (EU) 2019/2088 (EU Taxonomy). Point 1 above also contains the process in which Pihlajalinna Oyj has identified the information for reporting in accordance with the sustainability reporting standards (double materiality assessment) and the tagging of information as referred to in Chapter 7, Section 22 of the Accounting Act. Our opinion does not cover the tagging of the group sustainability report with digital XBRL sustainability tags in accordance with Chapter 7, Section 22, Subsection 1(2), of the Accounting Act, because sustainability reporting companies have not had the possibility to comply with that provision in the absence of the ESEF regulation or other European Union legislation. Basis for Opinion We performed the assurance of the group sustainability report as a limited assurance engagement in com- pliance with good assurance practice in Finland and with the International Standard on Assurance Engage- ments (ISAE) 3000 (Revised) Assurance Engagements Other than Audits or Reviews of Historical Financial Information . Our responsibilities under this standard are further described in the Responsibilities of the Authorized Group Sustainability Auditor section of our report. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Other Matter We draw attention to the fact that the group sustainability report of Pihlajalinna Oyj that is referred to in Chapter 7 of the Accounting Act has been prepared and assurance has been provided for it for the first time for the financial year 1.1.–31.12.2024. Our opinion does not cover the comparative information that has been presented in the group sustainability report. Our opinion is not modified in respect of this matter. Authorized group sustainability auditor's Independence and Quality Management We are independent of the parent company and of the group companies in accordance with the ethical re- quirements that are applicable in Finland and are relevant to our engagement, and we have fulfilled our other ethical responsibilities in accordance with these requirements. The authorized group sustainability auditor applies International Standard on Quality Management ISQM 1, which requires the authorized sustainability audit firm to design, implement and operate a system of quality management including policies or procedures regarding compliance with ethical requirements, pro- fessional standards and applicable legal and regulatory requirements. Responsibilities of the Board of Directors and the Managing Director The Board of Directors and the Managing Director of Pihlajalinna Oyj are responsible for: ● the group sustainability report and for its preparation and presentation in accordance with the provisions of Chapter 7 of the Accounting Act, including the process that has been defined in the sustainability re- porting standards and in which the information for reporting in accordance with the sustainability report- ing standards has been identified as well as the tagging of information as referred to in Chapter 7, Section 22 of the Accounting Act and ● the compliance of the group sustainability report with the requirements laid down in Article 8 of the Reg- ulation (EU) 2020/852 of the European Parliament and of the Council on the establishment of a frame- work to facilitate sustainable investment, and amending Regulation (EU) 2019/2088; ● such internal control as the Board of Directors and the Managing Director determine is necessary to ena- ble the preparation of a group sustainability report that is free from material misstatement, whether due to fraud or error. Inherent Limitations in the Preparation of a Sustainability Report Preparation of the sustainability report requires company to make materiality assessment to identify rele- vant matters to report. This includes significant management judgement and choices. It is also characteristic to the sustainability reporting that reporting of this kind of information includes estimates and assumptions as well as measurement and estimation uncertainty. Furthermore, when reporting forward looking infor- mation company has to disclose assumptions related to potential future events and describe company´s possible future actions in relation to these events. Actual outcome may differ as forecasted events do not always occur as expected. REPORT BY THE BOARD OF DIRECTORS | AUDITED FINANCIAL STATEMENTS 154 Responsibilities of the Authorized Group Sustainability Auditor Our responsibility is to perform an assurance engagement to obtain limited assurance about whether the group sustainability report is free from material misstatement, whether due to fraud or error, and to issue a limited assurance report that includes our opinion. Misstatements can arise from fraud or error and are con- sidered material if, individually or in the aggregate, they could reasonably be expected to influence the deci- sions of users taken on the basis of the group sustainability report. Compliance with the International Standard on Assurance Engagements (ISAE) 3000 (Revised) requires that we exercise professional judgment and maintain professional skepticism throughout the engagement. We also: ● Identify and assess the risks of material misstatement of the group sustainability report, whether due to fraud or error, and obtain an understanding of internal control relevant to the engagement in order to design assurance procedures that are appropriate in the circumstances, but not for the purpose of ex- pressing an opinion on the effectiveness of the parent company’s or the group’s internal control. ● Design and perform assurance procedures responsive to those risks to obtain evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement re- sulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, in- tentional omissions, misrepresentations, or the override of internal control. Description of the Procedures That Have Been Performed The procedures performed in a limited assurance engagement vary in nature and timing from, and are less in extent than for, a reasonable assurance engagement. The nature, timing and extent of assurance proce- dures selected depend on professional judgment, including the assessment of risks of material misstate- ment, whether due to fraud or error. Consequently, the level of assurance obtained in a limited assurance engagement is substantially lower than the assurance that would have been obtained had a reasonable as- surance engagement been performed. Our procedures included for ex. the following: ● We interviewed group management and persons responsible for the preparation and gathering of the sustainability information. ● We familiarized with interviews to the key processes related to collecting and consolidating the sustaina- bility information. ● We got acquainted with the relevant guidances and policies related to the sustainability information dis- closed in the sustainability report. ● We acquainted ourselves to the background documentation and other records prepared by the company, as appropriate and assessed how they support the information included in the sustainability report. ● In relation to the double materiality assessment process, we interviewed persons responsible for the pro- cess and familiarized ourselves with the process description prepared of the double materiality assess- ment and other documentation and background materials. ● In relation to the EU taxonomy information we interviewed the management of the company and per- sons with key roles in reporting taxonomy information, we obtained evidence supporting the interviews and reconciled the reported EU taxonomy information to supporting documents and to the bookkeeping, as applicable. ● We assessed the application of the ESRS sustainability reporting standards reporting principles in the presentation of the sustainability information. Tampere 20. March 2025 KPMG OY AB Assi Lintula Authorized Sustainability Auditor, KRT REPORT BY THE BOARD OF DIRECTORS | AUDITED FINANCIAL STATEMENTS 155 Independent Auditor’s report on the ESEF financial statements of Pihlajalinna Plc To the Board of Directors of Pihlajalinna Plc We have performed a reasonable assurance engagement on the financial statements 74370058MTRLEDOCHV67-2024-12-31-0-en.zip of Pihlajalinna Plc (Business ID 2617455-1) that have been prepared in accordance with the Commission’s regulatory technical standard for the financial year ended 31.12.2024. The Responsibility of the Board of Directors and Managing Director The Board of Directors and Managing Director are responsible for the preparation of the company’s report of the Board of Directors and financial statements (the ESEF financial statements) in such a way that they comply with the requirements of the Commission’s regulatory technical standard. This responsibility includes: ● preparing the ESEF financial statements in XHTML format in accordance with Article 3 of the Commis- sion’s regulatory technical standard ● tagging the primary financial statements, notes and company’s identification data in the consolidated fi- nancial statements that are included in the ESEF financial statements with iXBRL tags in accordance with Article 4 of the Commission’s regulatory technical standard and ● ensuring the consistency between the ESEF financial statements and audited financial statements. The Board of Directors and the Managing Director are also responsible for such internal control as they de- termine is necessary to enable the preparation of ESEF financial statements in accordance with the require- ments of the Commission’s regulatory technical standard. Auditor’s Independence and Quality Management We are independent of the company in accordance with the ethical requirements that are applicable in Fin- land and are relevant to the engagement we have performed, and we have fulfilled our other ethical respon- sibilities in accordance 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 compliance with ethical requirements, professional standards and applicable legal and regulations require- ments Auditor’s Responsibility Our responsibility is to, in accordance with Chapter 7, Section 8 of the Securities Markets Act, provide assur- ance on the financial statements that have been prepared in accordance with the Commission’s regulatory technical standard. We express an opinion on whether the consolidated financial statements that are included in the ESEF financial statements have been tagged, in all material respects, in accordance with the require- ments of the Article 4 of the Commission’s regulatory technical standard. Our responsibility is to indicate in our opinion to what extent the assurance has been provided. We con- ducted a reasonable assurance engagement in accordance with International Standard on Assurance Engage- ments (ISAE 3000). The engagement includes procedures to obtain evidence on: ● whether the primary financial statements in the consolidated financial statements that are included in the ESEF financial statements have been tagged, in all material respects, with iXBRL tags in accordance with the requirements of Article 4 of the Commission’s regulatory technical standard and ● whether the notes and company’s identification data in the consolidated financial statements that are included in the ESEF financial statements have been tagged, in all material respects, with iXBRL tags in accordance with the requirements of Article 4 of the Commission’s regulatory technical standard and ● whether there is consistency between the ESEF financial statements and the audited financial state- ments. The nature, timing and extent of the selected procedures depend on the auditor’s judgement. This includes an assessment of the risk of a material deviation due to fraud or error from the requirements of the Commis- sion’s regulatory technical standard. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. REPORT BY THE BOARD OF DIRECTORS | AUDITED FINANCIAL STATEMENTS 156 Opinion Our opinion pursuant to Chapter 7, Section 8 of the Securities Markets Act is that the primary financial state- ments, notes and company’s identification data in the consolidated financial statements that are included in the ESEF financial statements of Pihlajalinna Plc 74370058MTRLEDOCHV67-2024-12-31-0-en.zip for the year ended 31 December 2024 have been tagged, in all material respects, in accordance with the requirements of the Commission’s regulatory technical standard. Our opinion on the audit of the consolidated financial statements of Pihlajalinna Plc for the financial year ended 31 December 2024 has been expressed in our auditor’s report dated 20.3.2025. With this report we do not express an opinion on the audit of the consolidated financial statements nor express another assurance conclusion. Tampere 28. March 2025 KPMG OY AB Assi Lintula KHT

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