AcadeMedia AB (publ)

So good morning, everybody, and thank you very much for your time when we will present our quarter one interim report for 2024. And I will do this together with Petter Sylvan, that is the CFO, and I will give you a short update about the business development in the first quarter and also some comments on the quality development in the company. And the first quarter in Academiedia is a small quarter when it comes to the revenue and the profit, but it's an important quarter for Academiedia as a company. And we think that we have started this year very stable with a growth of 12% where 6% is organic and the international development is still strong in the company. And we are now reaching for 100 units in Germany. We are at 98 for the moment. And we see a strong development when it comes to our international business. And the government in Sweden, they really invest now in vocational training. I think it will be more than 100,000 students. The budget for this year is very important that to go ahead with the supply of skills. And Academedia, we are really the leading vocational trainer in Sweden. We are the leading actor when it comes to skill supply. And that's why we also see this very positive development when it comes to the adult education. We also have reported our 13th quality report. And we focus a lot on reading. And we see now a positive result. And we have seen this over many years. But this year is really, really positive. And the next step for us is my favorite subject. That is mathematics. That is really a challenge for the Nordic countries and also in Sweden. But we really focus on that for the moment. And I will just give you some short information from our quality report. And as I mentioned, this is the 13th year that we report. You can continue to the next page where we report the quality result. And our model that we call the academia quality model is really top of the line. It's a role model for a lot of other companies. And one very important subject in Sweden is that we should have the best conformity when we compare our grades with the natural average. And we are very proud to announce these numbers now that we are really a role model when it comes to grading both in compulsory schools and as this picture shows up in secondary schools. And if you go to the next page, same as the finance sector, we are really watched out when it comes to the school inspection. They do a lot of inspections. I would like to say that they do more inspection when it comes to the private schools than the public schools. And if you look at these numbers, we are also really outperforming the rest of the schools in Sweden. We have really good results. when it comes to leadership, when it comes to quality development and also the order in schools. So if you look at the most objective quality result, that is the school inspections result, we also perform very well. And then when it comes to the absolute number, I just put this slide, which shows the result in the compulsory schools. And we are very sorry to say that some of the schools in Sweden is now performing a little bit weaker, but the positive development when it comes to Academedia is still good. We have a higher result than the national average, and we are at a stable level. And you should keep in mind that this is also, if you look at the comparability with the national test. So the quality development in Academedia is strong and that is something that we continue to invest a lot in. And now I hand over to Petter that could comment on the financial results. Thank you, Marcus, and good morning, everyone.

I'm glad to have the ability to present the financial outcome that is great, while we at the same time have such quality improvement. So if we start at this page, as Marcus mentioned earlier, we see the good growth of 12% with contributions from the acquisitions of Tula in Finland and Windfort College in the Netherlands amounting to 7.1%. Our adjusted profit increased from 151 to 157 million in absolute terms. And as Marcus mentioned briefly, the first quarter is a seasonally small quarter as part of the business are closed. And this impacts the net sales profit and thereby margin development. Our newly finished preschool business that we acquired, Tula, follow this seasonal pattern. And in addition, last year's net sales and profitability was positively affected by energy grants of 15 million. So furthermore, the free cash flow development of minus 225 million was more negative than last year's 127. And this was because of unfavorable networking capital development. Now I'll turn to my page piece. Adjusted a bit increased in upper secondary school and adult education segment, whereas it decreased on preschool and international and compulsory school segment. The positive change is most notable in the adult education of class 20 million. And this is driven by increased demand in higher vocational education, which is countered by the 11 million negative effect in preschool and international business. And this is foremost driven of the seasonality effect of the acquired tool. As we mentioned in the previous quarters, the increase in group overhead cost is a natural outcome of our growth. And the increase in this quarter of one million was marginal. but more vacancies are to be filled in the coming quarters. So let's continue to a couple of pages, I think page 11. So if we look at the quarter's development within each segment, and then we start with the preschool and international segment. The number of children increased by an impressive 29.6%, with growth witnessed across all countries except Sweden. And there we had six units that were closed last year. Our growth was primarily driven by the acquisitions of Windford in the Netherlands and Thula in Finland, along with new preschool openings in Germany. This quarter, the total sales in the quarter of the group constituted 31% of international business. Net sales increased by 24.6% compared to last year with organic growth of 7.1%. Adjusted EBIT margin and EBIT decreased compared to the previous year. This year's margin was minus 0.8% down from last year's zero result and the operating profit was minus 11 million compared to last year's zero. And as mentioned, it was this acquisition of Tula that amplified the seasonal pattern of the first more quarter of the preschools are closed. Higher school vouchers in Germany compensated to a larger extent for the higher cost levels. Please move on to the next slide. At compulsory school, we note a 2.3% increase in student numbers. Net sales rose by 7.6%, driven by increased number of students and the positive impact of the annual school voucher revision. Adjusted EBIT and margin decreased compared to the previous year, and this year's margin reached 5.1% down from last year's 6.4%. And the operating profit was 44 million compared to last year's 51. The somewhat lower result was a consequence of higher personnel and maintenance costs. And part of that cost of high personnel was related to efforts in quality improvement. Last year, net sales and EBIT was positively affected by an energy grant by 5 million. Please move on to upper secondary school on the next page. And then we observe a 0.4% increase in student numbers. The sales growth of 3.4% was driven by more students, as well as the annual school voucher revision. Although it's worth noting that this revision hasn't been sufficient to offset inflation cost increases. Even so, the adjusted margin increased this year to 6.0% compared to last year's 5.7% due to higher capacity utilization and temporary lower costs. Move on to adult education. We see a 7.1% increase in sales driven by a higher number of students in higher vocational education. Adjusted EBIT increased to 67 million from previous year's With a margin of 17.1% compared to last year's 13.2%. The first quarter is last year a strong quarter affected by lower personnel costs due to vacations. Unemployment is forecasted to increase during 2024 before it decreases in 2025. And even though this quarter in Q1 used to be strong for the adult education margin-wise, it worked to notice that for the last 12 months, the profitability has been 10.4%. So overall time, a slightly lower margin. Let's continue to the next page, where I think it's page 16. We talk about the free cash flow in investments. Free cash flow for the last 12 months was 98 million, which was lower than last year, attributed to more unfavorable network and capital development. Maintaining capital as a percentage of the sales has slightly declined to 1.6%. and the significant increase in other expansion capex is associated with the acquisitions of Winford and Tula. Proceed to page 17, the financial position. Net debt, excluding IFRS 16, increased by 146 million compared to last year, with a leverage ratio including IFRS at 0.9%, well below the financial target of less than 3. including property related lease liabilities net debt was 1.5 billion higher due to growth the acquisitions of tula and indexation of rest so continue to finally page 18 and our financial performance against targets our organic growth including small bolton and acquisitions stands at 7.0 percent and this is exceeding our financial target of five to seven percent growth Our adjusted ebb and margin of 6.2% falls below the target range of 7 to 8%. And the leverage ratio of 0.9 remains comfortable below the required threshold of 3. And with these words, I end the presentation and we open up for questions.

If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Stefan Knutson from ABG. Please go ahead.

Hello and good morning. A couple of questions from me. First on the preschool profitability. I know that you commented last time around that you saw that you were in a higher level in terms of profitability in H2 and that you expected that level sort of to be the new level. Just to comment here because now you came in lower in Q1. It might be an effect of of the acquisition in Finland, but just if you still see the same full year effect that you alluded to on the previous call.

Yeah, correct. I actually said at that call that my view was also to be adjusted with the normal seasonal effect. We have this normal seasonal effect which we verify in Q1 that it is the preschools particularly a weak quarter since they are are close to high degree so this is in line with with our expectations and it's in line with the view i communicated in q4 for the full year okay there wasn't the number last year that's the major change that is that is the big change yeah yeah perfect

Then on compulsory profitability as well, just to get an understanding what should be the expectation here, because here we shouldn't have any differences in LTE effects. But yeah, just to comment, because you are 1.3 percentage points lower this quarter compared to last year in terms of profitability here.

The significant part of the costs we see are related to more temporary costs in terms of maintenance and other spendings and some of it are related to later periods in the year and some of it are related to efficiency measures that we expect to be lower so we see The major part of this cost to be temporarily. And we withhold our expectations for the full year.

It's important to keep in mind that this is really a small quarter. And if you buy a little more books or if you compare it with last year, it affects the margin. So you have to keep in mind that this is really, really small quarter.

And in addition to that, you have the five million grant. In the compulsory school, you also had it in the upper secondary school, but in the compulsory school, where you look closer, in this small quarter, it also had a significant comparison effect. We had the grant, but we didn't have the cost last year.

Perfect. And then lastly, just on the student intake in the upper secondary school segment, and if you're happy with the development, I mean, you increased the capacity utilization somewhat, but there is still some way to go, I suspect, given that you have opened a couple of new schools here in the last couple of years.

Yeah, we are happy with that we have a growth of students uh in all our segments although uh i mean this is a mature business the significant growth we have in our niche international market but we do have growth of children in all our segments and we are happy with that development uh the only the only part of segment where we see decline of children is in the the swedish preschool business and that is mostly an effect of the demographic development.

If we think a bit more long term is it comparable to see what you have in terms of capacity utilization in the compulsory schools versus upper secondary or can you comment anything on that?

You mean long term if they are comparable in terms of

I mean, what's the target level? Because I think you are at 93-94% somewhere in the compulsory schools.

Maybe we can't reach that level when it comes to upper secondary. What we see now when it comes to upper secondary is that the vocational program is really developing very well. And we have really made a lot of effort in that area. We have also developed our campus. They are also performing quite well. What is a little bit more challenging now when it comes up to secondary is the technical program. That is a specific program in Sweden and we see a decline in that in both compulsory schools and in our schools. So there we have a little weaker capacity utilization, so it's a potential for the future. But we also know that the students, they could change between different years. So this year, the economic program is very popular, and the technical program is a bit less popular. So we have worked a little with the unit management when it comes to compulsory schools. But the overall picture is stable and good. And we have a very good portfolio when it comes to the upper secondary schools.

Okay, thank you very much for your answers. That was all for me.

The next question comes from Carl Johan Bonnevier from DNB Markets. Please go ahead.

Yes, good morning, Marcus. I'm Peter. Just a couple of questions from me. Looking at Tooland, you have now owned it for a while and obviously the seasonality you pointed to is similar to a lot of the other operations. When you look at it now, does it seem to have the potential you were looking for when you acquired it? How would you compare it maybe to the Swedish operation or the Norwegian operation in their margin potential?

It absolutely has the potential that we see in Sweden. But as we have commented on, they are coming from a tough situation. I think we made a good acquisition and we are taking step by step. But the potential is still there.

MS, we have communicated earlier our expectations that they will leave a margin this year of the range of 3-4%. It's still what we expect and have no other And then from there, we want to take it higher, but it will take longer time than.

But mid long term, it should be up to two words, maybe the group average for the preschool or something like that.

Yes, clearly that our expectation.

Excellent. In the upper secondary, you single out that it was favored temporary costs there. Is there anything you could quantify as you didn't single it out in the compulsory school segment, so to say, in a similar way where it was negative?

In the upper secondary, I don't think we mentioned... Yeah, okay. Yeah, so I thought you said high, and you mentioned, okay. No, we are, I mean, what we don't think about any specific cost. It's what Marcus said also that since they have had low revision of voucher revision, they have been very keen on keeping cost control. And typically when you have started the quarter, which is typically where you have spending for the season, they have been very, very cautious in their spending in books and literature and related things. So we expect that this little improved margin is nothing that over the year is a trap.

Excellent, and I understand the wording.

We think that they have done a very good job because you know about the school voucher and so we are really a professional organization, really good managers.

That must be perfect if you can balance it already done on the unit level rather than having some sort of central kind of effort on it. Looking at adult education, obviously amazing margins in the first quarter. Are we still looking at something more similar to the LTM trend? Are you still confident within the 10-11% range this year, given the temporary effects you also highlight in adult education?

Yeah, we don't expect... We think the LTM trend is... Generally speaking, we have our expectation targets of 9-11%. I think that if it will be in the upper range, I don't think it will be higher than the 10.4%. Probably something around 10%. It's our expectation.

Perfect. You mentioned the weak working capital and the impact of that on the free cash flow in the first quarter. thing that is recurring in that or is that going to neutralize over the next couple of quarters? Or how do you see it?

It's a quite typical pattern a that we have a week or an unfavorable development of networking capital in Q1. But the development has been more unfavorable this quarter than the last year. And this is mainly related to that we have had invoices, suppliers paid earlier than the other year, and that we have had more revenues that we haven't been able to, that we have recognized, but we haven't been able to invoice yet. So all of that will normally be compensated and will be shifted to Q2. That is how we will use it.

We have seen this many quarters and so because it depends when we pay the rent, when we pay the invoice and how is the date schedule between the different quarters. So it will, over time it will be, we see nothing has changed.

Good to know there's nothing structural behind it.

And just would be interesting to hear your reasoning. I saw the release on the board suggesting of a redemption program of a maximum of 300 million. obviously a slight uptick there compared to last year. But how did you come to that kind of number and that kind of ambition, given your super strong financials?

It was a good round number.

You know, what is important for us, that is to, first of all, continue to invest in quality. We see really positive improvement. So we will continue to invest in early reading, early math. and also in the added dedication and so on. And we also want to make acquisition on the international market. And we want to have a good financial structure. And we saw that the last year it was good numbers. We think it's impacted the overall capital structure in a good way. And we think we have the same potential this year. We made the big acquisition in Finland. And now we have a pipeline when it comes to international acquisitions. But nothing maybe will happen the coming coming months but we will continue with that and we think that this is good number and we think it's also important to continue with the same model because now i think a lot of people understand how this model works and i i think personally that it's a quite good model it's possible to stay with your chairs it's possible to to sell your shares if you want to so i think it's a voluntary and it's a good model and we have got quite good uh comments on it from investors.

And we should see as this is the second year now in a row that you come with this redemption program. Should we see it as a recurring event going forward if the financial situation looks in a similar way coming up to the end of this fiscal year?

This is absolutely a possibility. Now we learned it. We know how it works. But the key question is, will we make big acquisitions? So if we make big acquisitions, this could change. But if we don't do it, I think this is something that is a possibility for the board to continue with. But no decision is taken.

Good answer. Good answer. This should be a strategy, not a strategy. It should be a tactical thing if you use it, I guess. I'm looking forward to see on your acquisition moves and all the best out there.

The next question comes from Johan Lankvist Sundin from Carnegie. Please go ahead.

Hi, Marcus and Petter. My question was actually on the adult, the margin execution of the adult business going forward. I think we covered it well, so I'm happy with the answer I received. Thanks a lot and congratulations. Good development. We'll get back in line.

Maybe we just could comment on that. You have this really right because the government in Sweden, they are really investing now in adult education. So if you look at the budget, they are now reaching a target of more than 100,000 person going into vocational program. And I'm going to say that our adult education business has really the right focus. We have the right position. We have the write the brands and so on. So I think we have a good opportunity when it comes to what will happen and help Sweden with the unemployment situation.

The next question comes from Johan Lankvist Sundin from Carnegie. Please go ahead. As a reminder, if you wish to ask a question, please dial pound key 5 on your telephone keypad. There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.

So then we would like to say thank you for your time and wish you all a good day. Thank you very much. Thank you.