Attendo AB (publ)

Thank you and good morning everyone. Sorry if we keep you waiting a few minutes. We have some issues with the financial hearings line. Today we present the attendance Q3 results showing continued improvements both financially and operationally. Before diving into the development and the quarter let me just take a few moments to reflect on what company we are today and where we're going. Slide two please. Today, we serve almost 30,000 people with different care needs daily, with more than 34,000 employees across almost 800 care units. Thanks to a strong focus on both the financial and operational turnaround over the past few years, we have grown net sales to well over 18 billion SEK on a rolling 12-month basis and recovered our profitability significantly compared to where we were just a few years ago. We've also become more diversified, dedicated to serving an increasing amount of people in not only elderly care, but also in disabled care, individual and family and social psychiatry segments, which needs a stronger specialization for those with more complex care needs. And maybe most important, I'm happy to see strong progress in terms of customer satisfaction in our nursing home operations. This was confirmed during the quarter in the national user surveys from both THL in Finland and Socialstyrelsen in Sweden, where Tando scores higher than both industry average and public sector. At the same time, recent studies show that we are providing care at a clearly lower cost to society than public sector, hence creating value to both customers, society and shareholders. Next slide, please. Strategically, we believe that this makes us well positioned for further long-term value creation. Demographic trends will support long-term growth in elderly care segments for the foreseeable future, and in the disabled care and individual family care segments, we see a trend that public payers need increasing support with taking care of more complex care needs. Hence, our recent acquisition of Team Olivia not only adds valuable competence and footprint in these segments, It also provides the necessary volume to enable increased investments in competence, quality and methodology development. Investments that are needed to capture the future growth opportunities within more complex care needs in these segments. With a new financial and long-term plan for 2024 to 26, a clear path for value creation, I'm happy to present our Q3 results. I'll start by giving you an overview of the development during the quarter, followed by a more detailed financial analysis from our CFO Mikael Malmgren. Next slide, please. So let's look at the Q3 highlights. In the quarter, we showed a rolling 12-month growth in sales of 9%, mainly driven by the integration of Team Olivia in our Scandinavian business area. Underlying adjusted EBITDA improved by 21%, or 74 million to 420 million, an effect of the Team Olivia acquisition in combination with underlying operational improvements. In Finland, we had a positive impact from lower cost of care staff during the summer months and higher price effects in disabled care and social psychiatry. These improvements were partly offset by the timing of price and wage increases in the fall of 2023. Scandinavia continues to show a steady progress in earnings growth, mainly attributed to the integration of Team Olivia and continued improvements in our own nursing home operations. As in previous quarters in 2024, the result was hampered by one-off costs related mainly to integration, excess costs in Denmark and ended outsourcing contracts. Cash flow was slightly lower than the comparison quarter, mainly due to higher vacation salary payout. Still, we see a positive trend in working capital and we maintain a strong balance sheet after the acquisition of Timo Lidia, with net debt to EBITDA improving slightly to 2.1. Consequently, We still have ample headroom to continue with active capital allocation with share buybacks, investment in own operation, as well as selective Bolton acquisitions. All in all, this quarter shows that we're heading firmly towards our operation and financial targets. After Q3, I'm happy to announce that the effects of our long-term work to improve customer satisfaction is now also visible in external surveys. In the national survey from Socialstyrelsen in Sweden, our customer satisfaction score for nursing homes this year was 81%. Three points above publicly run nursing homes in the geographies where we operate. Six of our units were awarded 100%, one more unit than last year. The national THL survey for nursing homes in Finland shows a similar trend. This survey uses net promoter scores to find out to which degree customers would recommend the services provided. The MPS for 2024 came in at 49 points above last survey and a significant rise above the national average that remained unchanged. Moreover, recent study shows that private providers run nursing homes more cost effectively. According to a new study from industry organization Hali, private care costs 23 percent less than public care in Finland. A study from Vårdföretagarna in Sweden shows that privately financed new nursing homes in Sweden cost 8% less than the average cost for the public sector of nursing homes. This proves that there is a strong case for increased cooperation between the public sector and private providers to meet future demand for care. Next slide, please. Let's turn to the development of occupancy, a key factor for long-term profitability. Group occupancy at the end of the third quarter was 86% stable compared to last year. Scandinavia shows a slightly lower occupancy, which is mainly a temporary effect related to the openings of three new homes with 112 beds in the quarter. In Finland, underlying development is slightly stronger since we have added around 170 beds net since Q3 last year. As visible in the graph, occupancy in Finland has been flat the past years, while staffing density requirements has been steadily increasing. With the recent political shift and the return to lower staffing density requirements from 2025, we believe that the supply-demand balance on the labor market for qualified care staff will improve. We also believe that this will lead to better opportunities to increase occupancy going forward. Next slide, please. This graph shows rolling 12-month sales growth and least adjusted EBITDA margin. The most significant factor for sales development over the past 12 months has been the acquisition of Team Olivia in Sweden and improved terms in our Finnish operations. Group margin improvement in the past 18 months was mainly driven by the performance in the Finnish elderly care segment and now we start to see clear improvements in Scandinavia as well. Let's take a closer look at the financials for the quarter. Please go ahead Mikael. Thank you Martin and good morning everyone.

Let's turn to page 8 please. Net sales in the quarter increased to 4.8 billion, up 9% compared to quarter last year. The organic growth for the quarter was 2%. Organic growth was slightly negative in Attendo, Scandinavia, where we saw continued organic growth in our own nursing homes. However, growth was as previous impacted by outsourcing contracts that ended end of last year. Including acquisitions, Scandinavia grew 18%. In Attendo, Finland, the organic growth was 6% and primarily driven by improved terms. Currency had a negative effect in the quarter. Slide nine, please. Excluding one-offs of 18 million, the reported result improved to 554 million, and correspondingly, the lease adjusted EBITDA increased from 346 to 420 million. As is visible in the graph, occupancy in Finland has been lease adjusted EBITDA in Scandinavia, excluding one-offs improved by 48 million year over year. while Finland lease adjusted EBITDA improved 32 million euro every year. Currency had a 4 million negative effect on lease adjusted EBITDA. Next slide, please. Growth to attended Finland amounts to 3% reported and 6% in local currency. Lease adjusted EBITDA including currency effect improved by 28 million versus last year to 277 million. The quarter was impacted by higher personnel costs due to the annual salary increase effective as of August versus September last year. However, the negative impact was more than offset by continued improved terms in social psychiatry and disabled care year over year, as well as better operational efficiency during the important vacation period. Occupancy rate was also slightly positive. As mentioned earlier, the Finnish government announced in April that staffing requirements will be reduced from 0.65 to 0.6 for care staff per resident from January 2025. The negotiations with welfare regions are ongoing or about to start, and it's still early days as the law has only been presented, but not yet passed in the parliament. However, we are well prepared for the expected change, and we believe that the reform will ease the balance on the finished labor market going forward. Slide 11, please. Organic growth in Scandinavia was slightly negative. We saw continued underlying growth in own nursing homes and welcomed more net new customers to home care. However, growth was upset by lower revenue due to the outsourcing contracts that ended at the end of last year. Acquisitions had a considerable effect on sales, and in total, Scandinavia grew 18%. Lease adjusted a bit, excluding one of costs relating to the Danish exit, and integration costs increased 48 million to 164 million. The improvement was primarily driven by Team Olivia acquisition and improved results from our own nursing homes. Improved result was partially offset by ended outsourcing contracts, which had a $20 million impact versus Q3 last year. Ended outsourcing contracts will continue to impact the result while gradually less in Q4 as the majority of contracts ended in December last year. Please note that we expect Q4 to be impacted by a minor non-recurring Team Olivia integration cost of up to $5 million. Finally, I would like to highlight that we recently, and as part of the integration team Olivia, introduced two new brands to bring together our businesses in disabled care and IOF in Sweden, Unica and Vilja. With two distinct brands, we believe we will have a better opportunity to build a leading player in these two important segments. When we look at the cash flow, the rolling 12 months, as previously communicated, has been affected by two one-off items in Q1 and Q2. But still, our free cash flow remains healthy at 714 million. In the quarter, working capital, due to better vacation planning, and which now also includes Team Olivia, was impacted by higher vacation payoffs. CapEx was also slightly higher, and we will, as previously communicated, continue to normalize this at more historical levels compared to last year's low. During the quarter, we repurchased 86 million worth of share, and in October, we have repurchased almost 30 million more worth of shares. And today we can announce that we will continue our repurchases in Q4 under a new program. The new program aims to repurchase up to 150 million up until next report and will be executed under safe harbor regulation. Next slide, please. Over the course of the last 12 months, we have utilized our free cash flow to do a dividend according to policy. And in February, we also initiated continued share buybacks. These two elements make up more than 50% of our free cash flow utilization to date. In addition, we've made a transformative acquisition with Team Olivia and which was financed by own cash and additional debt. Next slide, please. Let's look at the top left chart. The adjusted earnings per share improved by 0.41 sec per share or 0.46 sec per share when excluding integration costs, which is equal to more than 30% uplift versus last year. Improvement primarily due to higher lease adjusted EBITDA and continued share buybacks, and what is expected slightly offset by increased income tax. Now let's turn to the top right figure. Adjusted for non-recurring items, we continue to improve the lease adjusted EBITDA margin. In Q3, the 12-month margin amounted to 4.9%, which is up from 4.6% last quarter and up from 4.3% end of last year. The figure at the bottom left shows the least adjusted net debt to EBITDA ratio, which decreased, a trend we continue and expect to gradually continue. As indicated in the figure to the bottom right, the net interest expense in the quarter was 42 million. The increase in Q2 and Q3 is explained by higher financing costs due to the recent acquisitions. Going forward, we expect our interest rates to gradually come down as our loans gradually roll over to the new and now lower stable Euribor market interest rates. Next slide, please. I would like to briefly recap on our adjusted EPS development. In 2022, our adjusted EPS was 0.68 sec per share. In 2023, we made a significant turnaround based on the plan we set out in 2021, and we achieved an EPS of 3.02 sec per share. Since then, our reported adjusted EPS has continued to improve and now amounts to 3.65 SEC on a rolling 12-month basis when we include integration costs. And when we exclude the integration costs of Team Olivia of 20 million year to date, our EPS is actually at 3.76 SEC per share. And if we also adjust the EPS with our continued share buybacks to date, I divide with the outstanding shares at the end of the Q3 in the run rate, we are actually now at 3.84 SEC per share. With that, I hand over to you, Martin.

Thank you, Mikael. Before we move on to the questions and answers, let me just briefly summarize the quarterly development. We continue to see an overall stable growth in both sales and profits quarter on quarter. Improvement was driven by the acquisition of Team Olivia in combination with underlying positive development in Scandinavia. In Finland, we managed to increase profits year over year, despite continued headwind from strained public finances. We have many opportunities in the years ahead, and we're both well equipped and committed to solving society's complex care needs while empowering even more individuals. So now let's turn to the Q&A session. Operator, please go ahead.

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 David Johansen from Nordea Markets. Please go ahead.

Hi, good morning. Thank you for taking my questions. First one I had was from Scandinavia. Are you able to say anything on the underlying profit development in the quarter and also the contribution from Team Olivia? And then on that business, Team Olivia then specifically. If you strip out the integration costs you talked about. Do you see this business tracking better on profitability against the, I think it was 9.6% from when you acquired it? Thank you.

Yes, thank you. So in regards to the underlying profitability in Scandinavia, as we mentioned, the outsourcing had a 20 million negative. Team Olivia contributed around 40 million, and then the rest is a mix of slightly positive from Denmark as well as the elderly care providing the rest of the upside. And in terms of tracking versus original estimates we hold the same as we have said before we see underlying performing in line with our expectations for Team Olivia.

Understood. Then I was also curious on the development then for Denmark What can you say about Q3 specifically, you know, on an underlying basis? And would you also say your track, how do you say your track, I guess, versus your profitability target from Q4 on a run rate basis? I think you talked about profitability entering 2025.

Yes, you talked about reaching breakeven during Q4, and that is still our plan.

Okay, perfect. And then just the last one from me on Finland. Maybe, you know, the result in Elevacare wasn't what you hoped for. But also, you also said you have an elevated, you know, staffing situation against the current regulation there. So with the staffing change that could take place beginning in next year, would you say this, you know, changed the dynamic at all for Elevacare in Finland and your ability to receive new customers? Thank you.

Yes, I mean, still early days, but we're overall positive towards the new lowering staffing requirement. It's actually not just decided in Parliament yet, but we expect it to be very shortly. You know, a few things around that. One thing is lower staffing requirements in the market, it will ease the pressure on the labour market for care staff, which is important. It will also make it less costly for welfare regions to give more people access to care services. So we are overall long-term positive to this change for us is also more easy to adopt to a lower staffing ratio than to a higher one so we think that this will be good for the market and also positive for for long-term occupants development okay maybe there's a follow-up there would you say this is sort of the main lever for for improving profitability in Finland I think

I think previously, I think you sounded more cautious on more compensation in previous telcos.

Thank you. Yeah, I mean, it's still early days on compensation because given that the parliament has not decided yet on the law change, it also means that very few welfare regions have actually come out to start tendering the 0.6. So we still have limited visibility on the outcome of those negotiations, which we expect will be ready by the time of the Q4 report. But having said that, we think it will be positive for future possibilities of increasing occupancy in Finland, which is, of course, the main long term lever for profitability.

Perfect. Thank you. Those are my questions.

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

Thank you. Given your commentary that you expect to be break-even in Denmark in Q4, could you maybe tell us how large the losses have been in Denmark this quarter and in recent quarters? Then I just wonder about Finland. You talked about lower costs for summer employees there, but given the year-over-year trend, it also seems that you are handling costs better in Finland versus recent quarters. Do you agree on that and what's the reason behind that? And then you talked about the new staffing regulations in Finland being positive for occupancy rates going forward. What about Scandinavia and what do you think will drive occupancy there into 2025? Thank you.

Yes, thank you, Kristoffer. Let me start with the first question and then I'll hand over to Martin for the second and third. So I think we mentioned earlier an estimate of around 30 million for Denmark on a negative losses will we improved as we mentioned in last quarter by five And we improved by another five in this quarter and we expect similar development and going forward as well Then I came in to the you mean that you have improved on extra sequentially by five million like water Yeah, and yes exactly

And you expect a similar trend in Q4? Yeah. So we could assume a loss of around 5 million in the third quarter, approximately. Given that you said you expect to be breaking even in Q4.

Yeah, that's correct. Okay.

Okay, moving into efficiency in Finland. And you're correct, I mean, it has been improving. I mean, we have been, it's easy to forget, but we have been in a challenging period in Finland over three years time with increasing staffing density requirements year over year for three consecutive years. That means that there's been a fight for staff. It also means that we haven't been To increase occupancy to welcome new clients, we have to have the staffing beforehand. So we have had, given the stress on the labor market, given this reform, we have had the inflated staff turnover and had a bit more staff than we've needed. So it's been difficult to work with staff efficiency, which has been getting better gradually. For us, we have seen increasing staff EMPS numbers and also decreasing staff turnover. Now it's actually on a very modest level, which, of course, improves efficiency also in terms of staff and general staff costs. What we also have to do now is also right sizing the organization because we have both the slower occupancy development in some welfare regions than anticipated, but also the fact that regulation has turned from increasing staff requirements to decreasing. The anticipated final step of the increase will not happen. So that means that we can also rise our staff. And this implies also better efficiency overall in Finland. And that is something that we believe will continue. Thirdly, you asked for occupancy in Scandinavia. and what will drive that. Our occupancy in the in the main cities are good if you look at for Stockholm for example you know we have very little room for raising occupancy we're quite close to 100 percent. We opened a new one about 100 beds during the quarter that we expect to fill up but it is also a good opportunity to continue to improve occupancy in other regions in Sweden next year.

From the new unit in Stockholm, this larger one, given the fact that other units have closed 100% occupancy, how soon do you expect this new home to be break-even?

We expect it to be, we expect it to fill up and we have normally we have you know fill up the times from 18 to 24 months we think that that given what we've seen so far that we like to go a bit faster break even as you know normally is reached at around 70 occupancy thank you

As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. The next question comes from Christopher Liljeberg from Carnegie Investment Bank. Please go ahead.

Yeah, one more as there seems to be no one else in the queue. The improved customer satisfaction you highlighted, is that uh would you say that's a tender specific or do you have you seen better for the overall private sector or the overall market here after the pandemic and and if it's a tender specific would you be able to highlight what you think are maybe the two three most important factors for that

Yeah, what we see is that the general private sector overall in all the geographies where we operate, I think was 80 overall, which is also stronger than the public sector. We were at 81, so a bit higher. Of course, I mean, we are also part of the industry average of 80. And of course, contributed to that. we have seen increasing numbers we you know we do our own uh service every quarter so for the past two years actually we've seen uh gradual improvements both in customer satisfaction and empty satisfaction uh which has partly we what we can see is that we have been investing more in leadership and leadership development uh we have better stability in the among the leadership and workforce we have installed also um Group or team managers. So for all the larger units, you have several team managers. So you have a smaller span of control and closer to your immediate manager. And that has created the better stability in the workforce. and also higher employee satisfaction, which also is a driver of customer satisfaction in the long run. So what we see now in the external survey for Socialstyrelsen is something that we have seen in our internal surveys gradually improving for the past two years.

Thank you.

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

Well, with that, then we're closing the call. Thank you for listening in. And if there's any more questions, then please feel free to mail directly to me or Mikael. Thank you very much.