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 Sylvain, 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 Academedia is a small quarter when it comes to the revenue and the profit, but it's an important quarter for Academedia 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 favourite 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 Academedia 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 confirmity 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, the up and 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. 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 higher results 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 result. Thank you, Mark. Good morning,

everyone. It's... 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 achieved a good growth of 12%, with contributions from the acquisitions of Tula in Finland and Winfort 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, turn to the next page, please. Adjusted debit increased in upper secondary schools 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 plus 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 seasonal is almost driven of the seasonality effect of the acquired Tula. 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 1 million was marginal, but more vacancies are to be filled in the coming quarters. So let's continue to a couple of page, I think page 11. So if we look at the quarters development within each segment, and then we start with the preschool and international segment. The number of children increased by an impressive .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 Winport in the Netherlands and Tula in Finland. Along with new preschool openings in Germany. This quarter, the total sales in the quarter of the growth constituted 31% of international business. Net sales increased by .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 .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 quarter of the preschool are closed. Higher school vouchers in Germany compensated to larger extent for the higher cost levels. Please move on to next slide. At compulsory school, we know to .3% increase in student numbers. Net sales rose by .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 .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 cost. 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 next page. And then we observe a .4% increase in student numbers. The sales growth of .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 on inflation cost increases. Even so, the adjusted margin increased this year to .0% compared to last year's .7% due to higher capacity utilization and temporary lower cost. Move on to adult education. We see a .1% increase in sales driven by a higher number of students in higher vocational education. Adjusted EBIT increased to 67 million from previous years 48 with a margin of .1% compared to last year's 13.2. The first quarter is last year a strong quarter affected by lower personnel cost due to vacation. Unemployment is forecasted to increase during 2024 before it decreases in 2025. Even though this quarter in Q1 used to be strong for the adult education margin-wise, it's worth 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 next page where I think it's page 16. We talk about the pre-cash flow in investment. Pre-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 capex as a percentage of sales has slightly declined to .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 three. Including property related lease liabilities net debt was 1.5 billion higher due to growth, the acquisitions of Tula and indexation of REF. So continue to finally page 18 and our financial performance against target. Our organic growth including small bolt-ons and acquisitions stands at .0% and this is exceeding our financial target of 5 to 7% growth. Our adjusted ebb and margin of .2% fall below the target range of 7 to 8% and the leverage ratio of 0.6, 0.9 remains comfortably below the required threshold of three. 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 5 on your telephone keypad to enter the queue. If you wish to withdraw your question please dial pound key 6 on your telephone keypad. The next question comes from Stefan Nutsen 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 on 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 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 effects and we have this normal seasonal effects that which we verify in Q1 that it is for the preschools particularly a week quarter since they are are close to high degree. So this is in line with our expectations and it's in line with the view I communicated in Q4 for the full year.

Okay. Tuula wasn't in the number last year.

That's the major change.

That is the big change.

Perfect. Then on compulsory profitability as well just to get an understanding what what should be the expectation here because here we shouldn't have any difference in the 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.

Okay. The significant part of the cost 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 these costs to be temporarily and we withhold our expectations for the full year.

It is 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 had 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 have a significant comparison effect. So we have 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 are happy with the development I mean you increase 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 in all our segments although I mean this is a mature business the significant growth we have in our international market but we do have growth of children in all our segments and we are happy with that development. The only part of segment where we see decline of children is in the Swedish preschool business and that is mostly an effect of the demographic development.

Yeah is it like 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 the yeah the target level because I think you are at 93-94 percent 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. If you that is a specific program in Sweden and we see a decline in that in both compulsory schools and in our schools so that is that 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 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 Touland 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 and how would you compare it maybe to the Swedish operation or the the Norwegian operation in their margin potential?

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

And as we have communicated earlier our expectations that they will have that they will live with the margin this year of the range of three to four percent is still what we expect and have no other view on and then from there we want to take it higher but it will take longer time than here.

But mid long term it should be towards maybe the group average for the preschool or something like that.

Yes clearly that's 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 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 that's what you said higher and you mentioned okay yeah sorry. No we just I mean what we we don't single out any specific costs it's what Marcus said also that since they have had the low 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 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.

That is what we think that they have done a very good job but you because you know about you know about the school voucher and so so we are really a professional organization a really good manager really good managers.

That must be perfect if you can balance it already down 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 in the first quarter do we still looking at something more similar to the LTM trend you still confident within the 10 to 11 percent range this year given the the temporary effects you also highlight in adult education?

Yeah we don't expect we think the LTM trend is I mean generally speaking we have our expectation targets of nine to 11 percent. I think that it will be in the if it will be in the upper range I don't think it will be higher than the 10.4 percent we are probably something around 10 percent is our expectation.

Perfect you mentioned the the weak working capital and the impact of that in in the free on the free cash flow in the first quarter is there any 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 weak 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 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 it will be a shift to Q2 that is that is how we view 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 scheduled between the different quarters so it will over time it will be we see nothing has changed.

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

It was a good round number.

You know what is very 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 maths and also in the added dedication and so on 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 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 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 think personally that it's a quite good model it's possible to stay with your shares 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 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 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 it's a possibility for the board to continue with but no decision is taken

now good answer good answer this should be a strategy not a not a strategy 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 Lanslis Sundan from Carnegie please go ahead

Hi Marcus and Petter my question was actually on the adult the margin exhibition of 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 a

minute Maybe we just could comment on that so I you 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 they are now reaching a target of more than 100 000 person going into to vocational program and I'm gonna say that our adult education business has really the right focus we have the right position we have the right brands and so on so I think we have a good opportunity when it comes to what will happen and help Sweden with unemployment situation

The next question comes from Johan Lanslis Sundan from Carnegie please go ahead As a reminder if you wish to ask a question please dial pound key five 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 I wish you all a good day thank you very much thank you