Attendo AB (publ)

Thank you and good morning. Today we present Attendo's Q2.

The results showing clear improvements both financially and operationally. To start with, I'm very pleased that Attendo's OliviaCare business is now a part of Attendo. Together we integrate the leading private provider in disabled care and individual and family care in Sweden The first part of the integration has been successful and financially, Team Olivia is delivering well in line with our expectations. In May this year, we presented a new medium term target of achieving an EPS of at least 550 kronor per share in 2026. I see this quarter as a milestone on the way to deliver on this target and as an indication of our ability to create significant shareholder value in the years to come. I'm also pleased to say that our most recent measurements in employee engagement and customer satisfaction continues to show strong progress. A last thought, we've given you an update on the development during the quarter, followed by a more detailed financial analysis from our CFO, Mikael Malmgren. Slide two, please. In the second quarter, we managed to grow sales with 12%, mainly driven by M&A, foremost Team Olivia Care. Underlying adjusted EBITDA improved by 40 million to 187 million SEK and affected the Team Olivia acquisition in combination with underlying operational improvements in Scandinavia. In Finland, we managed to maintain profit year over year in spite of a negative cost price effect in the quarter due to the high wage increase in 2023. For the full year, we expect the cost to be fully offset by price adjustments. And further, a lower result in nursing homes was compensated by higher result in disabled care and social psychiatry. According to the new elderly care law in Finland, we need to step up beforehand in order to welcome new customers. Since customer inflow was initially lower than expected, we've had more staff than necessary during most of the quarter. However, I'm pleased to see that we've had better inflow in June, which in turn allowed for better staff efficiency. In Scandinavia, we almost doubled our profit year on year, adjusted for one loss. Team Olivia was the biggest contributor to the improvement, but we also improved performance from our own nursing homes. Customer influence has been strong, and we have increased occupancy by one percentage point since last quarter and last year. Finally, we report strong cash flow during the quarter as a result of the profit improvement and positive working capital, and we maintained a strong balance sheet in spite of the acquisition. Post-acquisition of Team Olivia, we're at 2.2 in NetApp WTA. This means that we still have headroom to continue with our active capital allocation, with buybacks, investments and non-operations, as well as selective acquisitions. Next slide, please. Now a few comments on the progress for sustainability work and non-financial KPIs. In my introduction, I mentioned progress on key metrics related to employee engagement and customer and relative satisfaction. These metrics are particularly important because they go to the heart of what we do. In recent years, we have placed a strong focus on leadership, employee engagement and culture. During the second quarter, we hosted leadership events with all our managers in each business area, and in these we share experiences, listen to inspiring talks and award good performance. Having the ambition to be seen as the preferred employer with the best leaders in the care industry, The results of our employee survey shows that we are on the right track. Net promoter score of employee recommendation is now at an all-time high at 26, an increase of 15 points since last year, well above the industry average. When it comes to customer satisfaction, results of our survey shows a similar trend. Customer MPS was 45 in Q2, up from 40 last year. Engaged employees are the basis for customer satisfaction, and we see a strong connection between these measures. Next slide, please. So let's turn to the development of occupancy, which is a key factor for our long-term profitability. Group occupancy at the end of the second quarter was unchanged at 86%. Underlying, however, we can report an increase in occupancy in Scandinavia during the quarter with one percentage point from 86 to 87%, mainly as an effect of internal efforts to increase sales and slightly better market conditions locally. In Finland, the market was slow in the beginning of 2024, reflecting the challenging financial situation in the welfare regions. We also added net 100 beds in the quarter. Still, the underlying demand is strong and we expect customer inflow to start increasing again as welfare regions over time needs to fulfill their commitments to their citizens. Overall, we see growing underlying needs in society in all our markets. We continue to see an increasing number of customers who choose to live in our nursing homes. Next slide, please. The left graph shows sales on a rolling 12-month basis, both for the group and for each business area. The most significant factor for sales development over the past 12 months has been improved business terms in Finland. With the acquisition of Team Olivia and in combination with underlying operational improvements, we're starting to see an upturn also in Scandinavia. The chart to the right shows rolling 12 months least adjusted to beta margin. Group margin improvement has over the past 18 months been driven by the performance in the Finnish elderly care segment, but now we start to see margin improvements in Scandinavia as well. We expect the financial improvements in Scandinavia to continue as a result of higher occupancy and further operational improvements. The acquired parts of Tim Olivia will also improve the business area performance year on year from now on. Now let's take a closer look at the financials for the quarter, and please go ahead, Mikael.

Thank you, Martin. So let's turn to the next page. So net sales in the quarter increased to 4.8 billion SEK, which is up 12% compared to quarter last year. The organic growth for the quarter was 3%. Organic growth was flat in attended Scandinavia, where we saw continued organic growth in own nursing homes. However, growth was offset by outsourcing contracts that ended end of last year. Including acquisitions, Scandinavia grew 21%. In Atendo Finland, the organic growth was 6% and primarily driven by improved terms. Currency effects had a minor effect on sales. Slide seven, please. Excluding Atendo Scandinavia's one-offs, the reported result improved to 323 million SEK, and correspondingly, the lease adjusted EBITDA increased from 147 to 187 million. Lease adjusted EBITDA in Scandinavia improved, excluding one of us, by 39 million year over year, while Finland lease adjusted EBITDA was in line with previous year. Next slide, please. Growth for Attendo Finland amounts to 6% reported and in local currency. Lease adjusted EBITDA was in line with last year at 131 million. The quarter was impacted by high personnel costs and negative cost versus price effects in own nursing homes, and which will also impact the result in Q3 before improving again in Q4. The negative development in nursing homes was offset by improved terms in social psychiatry and disabled care, as well as improved operational KPIs, including reduced staff turnover, recruitment, and sick leave cost. Occupancy rates remained unchanged. However, sold beds increased at the end of the quarter, and we added 100 net new beds. As mentioned earlier, the Finnish government announced in April that staffing requirements and care for older people will be reduced from 0.65 to 0.6 care staff per resident from January 25. We maintain a positive view of the change requirements, and although still early days, our assumption is that this will have a neutral effect on profitability in absolute terms. Slide nine, please. In tender Scandinavia, the organic growth was flat. We saw a continued underlying growth in own nursing homes driven by price and net new sold beds. However, growth was offset by lower revenue from the outsourcing contracts that ended end of last year. And acquisitions had a considerable effect on sales, and in total, Scandinavia grew by 21%. Lilly suggested a beta, excluding one of more than double to 75 million. The improvement was driven by Team Olivia acquisition, as well as improved results from our own nursing homes and lower losses in Denmark. The positive development was partly offset by the ended outsourcing contracts, which had a negative 15 million impact versus Q2 last year. Ended outsourcing contracts will continue to impact the result, while gradually less throughout the remaining part of the year. As part of our turnaround plan in Denmark, we exited our home care operations in Q2, and this will have a positive 10 million in beta effect going forward on an annualized basis. In addition, and in line with our strategic plan to focus on own nursing homes, we signed an agreement to divest our outsourced nursing home at the beginning of July and we expect closing beginning of August. Please note, though, that we expect Q3 to be impacted by additional non-recurring integration and divestment costs for Denmark of around 20 million. Slide 10, please. Our cash flow on a rolling 12 month basis remains strong at 820 million and continues to improve. And please note that in the quarter working capital was impacted by end of quarter timing effects and the non-recurring lump sum collective agreement salary payment in Finland. CapEx was also slightly higher and will, as previously communicated, continue to normalize at more normal historical levels compared to last year's low level. Also note that during the quarter we repurchase shares to a value of 110 million, and we will continue our repurchases in Q3 under a new program. The program, which is decided quarterly by the board, aims to repurchase up to 150 million up until next quarterly report, and will be, as before, executed under the Safe Harbor regulation. Next slide, please. Let's start at the top left. The adjusted earnings per share improved due to the improved lease adjusted EBITDA and was as expected slightly offset by increased financing costs and increased income tax. On the top right, we note that the lease adjusted EBITDA margin, excluding the Q2 one-offs in Scandinavia, continued to improve to 4.6% on a rolling 12-month basis. On the bottom left, lease adjusted net debt EBITDA ratio increased, and the increase is primarily due to the acquisitions concluded in April. Net interest expense in the quarter was 40 million and driven by increased financing costs due to the recent acquisition. On a rolling 12-month basis, the net interest expense increased and will going forward continue to increase due to the reasons mentioned. Next slide, please. I'd just like to briefly recap on our new financial targets that we introduced in May. Our new APS target is to reach at least 550 SEC per share by 26. This target is not a best case, and it represents what we target to at least and are committed to deliver as a minimum. The target is made up of three building blocks, the first block being Team Olivia, where we expect the positive contribution of at least 0.5 sec per share from 2025 when fully integrated. Second building block is a beta improvement. We expect underlying and beta growth of at least 10% per year, driven by increased occupancy, operational efficiency, price adjustments, new units, and continued add-on acquisitions in existing segments. Thirdly, we see good opportunities to increase shareholder value through active capital allocation. We will continue, and when favorable, to seek board approval for quarterly continuous buybacks, as well as annually seek mandate from the annual general meeting. So far to date this year, we have repurchased shares to about 180 million SEK, which corresponds to about 5% to 6% of outstanding shares on an annualized basis. And as mentioned, a new program will start on Monday and which will run up until our next quarterly report. The program has a mandate to repurchase up to 150 million SEC and will be executed under safe harbor. These three building blocks add up to at least 550 EPS in 26. So let me now turn to the debt target. The adjusted net debt to adjusted EBITDA should be in the range of 1.5 to 2.5. We could temporarily exceed 2.5, for example, in connection with a major acquisition. In regard to the dividend, we maintain our previous target of paying out 30% of adjusted net profit. With that, I hand over to you, Martin.

Thank you, Mikael. Before we move on to the Q&A, let me briefly summarize the quarterly development. So, once again, we delivered a quarter-on-quarter improvement. Improvement was driven by the acquisition of Team Olivia in combination with underlying operational improvements in Scandinavia. As a result, we doubled the profit in Scandinavia compared to last year, adjusted for one-offs. In Finland, we managed to maintain profits year over year, in spite of negative cost-price effect in the quarter due to the high wage increase in 2023. It's also encouraging to see that our investments in leadership and MPV engagement are paying off, with record high MPS figures during the quarter. We also delivered a solid cash flow in the quarter, and despite the recent acquisition, our debt level is well within our target range. Hence, We're well positioned to continue to create value through capital allocation and selective investments. All in all, I see good progress both operationally and financially. We have many opportunities in the years ahead and both well equipped and committed to solving society's complex candidates while empowering even more individuals. Now let's turn to the Q&A session.

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 6 on your telephone keypad the next question comes from David Johansen from Nordia Markets please go ahead hello good morning I thank you for taking my question first one if you could quantify the earnings impact from Team Olivia

that was one question I had and then I wanted to follow up on Finland I think you have been pretty clear on improving occupancy ahead which I guess now are expected for the second half of the year but if you could remind us of the drivers here and what your expectations are from the new staffing regulation thank you thank you David and let me first comment on Olivia and then I'll hand over to Martin regarding the occupancy in Finland

So Team Bolivia delivered close to 30 million SEK, which was in line to slightly better than our expectations. We see that the seasonality for Team Bolivia is fairly similar to us with a little bit less impact in Q3 and Q4 versus attendance normal seasonality, but fairly similar.

Yeah and going over to Finland this is Martin again. On occupancy we have experienced a slower development than anticipated in H1 due to the financial constraints in the welfare regions. We expected that the financial situation would still be tough during H2 even though we've seen some positive signs in the end of this quarter, but we hope for a slight improvement in occupancy during H2. Having said that, there is also a lot of work to be done still on efficiency in Finland, which is something that we will continue to work with during the second half, also to counter the slower occupancy development that we expect. We think that the financial pressure on the welfare regions will get better from next year on. Given the new staffing regulations of 0.6 we think that is positive for the welfare regions. It will be easier to find staff. It will release some of the expected cost increase going into next year. And also the next year, it's also time for the welfare regions to reset their budgets going forward. So we believe that we see the regulation being positive for occupancy outlook in Finland from 2025 onwards.

Thank you for the clarity there, Martin. Then I wanted to ask on the development in social psychiatry and disabled care in Finland. Is this mainly related to price adjustments that you did not expect before? And do you think this will be enough to maybe improve earnings now for Q3? Thank you.

Let me answer on that. I think we saw both the improved terms that we had anticipated coming through, but we also saw a growth in occupancy in our disabled care segment, which further improved the result. We don't foresee an improvement in EBITDA in Q3, but expect a similar pattern to Q2.

Okay, thank you. That's great. And then lastly, if I could follow up on Denmark. Could you comment on the improvements that you're expecting now in terms of profitability? I guess you expect Denmark to show black numbers suggested for the one after talked about in for Q3 but any indications for Q4 I think could be helpful thank you.

Yeah I mean we have the actions that we wanted to implement in terms of improving operations has been successful and we see a continued increase in occupancy We maintain our previous communicate that we will target the break-even in Q4. Yes.

Was that on a rolling basis or a run rate going into 25?

That would be run rate going into 25. Perfect.

Thank you.

The next question comes from Christopher Liljeberg from Carnegie. Please go ahead.

Thank you, and good morning. Four questions. First, if you could comment on the net wins of new outsourcing contracts in Sweden. That was quite a while ago, so if you have any changed strategy there or any reason for that happening now. Second question, EPS target for this year, is that with or without Olivia acquisition? My third question relates to prices in Finland next year. Do you expect them to be net up, or could we actually see downward adjustments with the new staffing regulation? And finally, if you could quantify the loss you had in Denmark in the second quarter. Thank you.

Okay, I'll start and then Mika will continue with the last question on Denmark later. So on outsourcing, yes, we're happy to... Glad you noticed that we started to win in outsourcing again. We have done quite some job in... reorganizing the way we work with outsourcing, focus on quality tenders, not price. We still think that winning prices on price tenders are too low in the business, but on the quality tenders, it's possible to win and make both a good quality work and a good operation in terms of financials. So we have done work on revamping our tendering department and the way we work with tenders. So that has started to pay off and hopefully that will continue as well, which we're happy about. On the FORSEC, that's including Team Olivia. pricing next year in Finland. There are a number of moving parts. We have the regulation, of course. I mean that the staff density requirements going from 65 to 0.6, which will lower cost of more care somewhat. Then we have inflation on top of that going up. We have the change in VAT, which also increases costs. a bit and then we have the salary movement next year so if you look at that all in all um we don't expect any any major moves in price for last uh for next year we think that that uh if we look at cost of operations it would be quite similar to uh to this year all in all um so uh here we don't expect any any larger movements in in price uh effects and we also expect profitability to remain similar to this year. But on the other hand, we expect positive, we have a positive view on our ability to improve occupancy next year, given this.

And your comment about similar profitability, that's on a like for like basis then?

Yes.

Yeah, okay.

And just on Denmark, the losses were improved by approximately 5 million compared to last year.

And what's that in absolute terms?

I think we previously communicated that we had about 40 million right on a yearly basis, and Q2 is fairly similar to the average.

Okay.

thank you the next question comes from jacob lemka from seb please go ahead yes hi and good morning i have a few questions i'll take them one by one uh starting with finland and this non-recurring payments you mentioned was that incurred in the P&L in this quarter and if so can you quantify the amount?

Yes so this did not impact the P&L since this was communicated as part of the 2023 salary agreement we have according to accounting standards made a provision monthly up until June, when it was fully released.

Okay, and then on occupancy in Finland, looking at the occupancy chart, it seemed that it trended down slightly here in the quarter. Is that the new homes opened or is there anything underlying there?

No, it is the net new homes that we added in the quarter.

And a follow-up on that is, how much sort of extra cost do you foresee for those in Q3 and Q4?

I think they are not substantial to comment on.

Okay, and then finally,

if it's possible to quantify the the annually data impact of the businesses you have left here in Denmark so the the home care business we we believe will have a positive 10 million annualized impact positive and the outsourcing contract would likely have another two million positive on an annualized basis

Okay, that's all for me.

Thank you very much.

There are no more phone questions at this time, so I hand the conference back to the speakers for any written questions and closing comments.

Okay, this is Andreas from IR. No, we don't have any more questions, no questions on the chat either.

Thank you for participating and please contact us directly if you have any further questions during the day.

Thank you everybody. Thank you very much.