Attendo AB (publ)

Thank you and good morning everyone. Today we present the Tando's year-end and Q4 results. Before diving into the development in the quarter, let me just take a few moments to reflect on Tando's current state and a road ahead. Next slide please. At the turn of 2024, we served around 30,000 people with different care needs on a daily basis across almost 800 care units in the Nordics. Over the past few years, we had a strong focus on both the financial and operational turnaround that was completed in 2023. In 2024, we entered the next phase with the acquisition and integration of Timo Livie in Sweden and a return to focus on operational efficiency in Finland. Net sales for the year was almost 19 billion SEK on a rolling 12-month basis and with the 1 billion SEK in lease adjusted to beta, our profitability has recovered significantly compared to where we were just a few years ago. With the acquisition of Timo Livie, we entered 2025 with the more diversified operations in Sweden and we intend to keep growing our disabled care and individual and family care business going forward. These are attractive segments where there is a growing need in society for stronger specialisation for those with more complex care needs. From an operational point of view, we are making good progress in terms of satisfaction among both customers, relatives, employees and payers in both Finland and Scandinavia. Recent service in Sweden also shows that with the launch of our new brands, Unika and Viljan, we have continued to improve customer satisfaction both in disabled care and individual and family care. Further, external data shows that on top of higher customer satisfaction and quality of care, we are also providing care at a clearly lower cost to society and public sector. Hence, we deliver in line with our vision to provide better care for more people, creating value for both society and to shareholders. Looking forward, we see a number of opportunities that a tender is well positioned to address. With an expected 30% increase in elderly population over the coming five years, demographic trends are supporting strong growth for elderly care in all of our markets. Given that people are becoming healthier for longer in combination with the higher cost to serve in nursing homes, we also believe that demand for home care services will increase faster than for nursing home placements over the coming years. In disabled care and individual and family care, we see a trend that public payers need increasing support with taking care of more complex and specialized care needs that neither smaller municipalities nor smaller providers can cater to. The recent acquisition of Team Olivia hence gives us the size to enable increased investments in the competence, quality and methodology development needed to capture these future growth opportunities. Finally, we're looking forward to keep growing through a combination of greenfield expansion, acquisitions and through improving occupancy in our existing business in the coming years. With a strong underlying cash flow, we can also continue our path with active capital allocation through shared buybacks and dividends to create increasing shareholder value as we continue to grow. Slide four please. So to summarize 2024, I'm really happy to say that we achieved record high satisfaction numbers for both customers, relatives and employees in both Finland and Sweden. In Finland, we continued a positive development in 2024, especially in the second half of the year where we focus more on operational efficiency after several years of increasing staffing density requirements. In Scandinavia, we completed integration of Team Olivia and built a stronger platform for profitable future growth in both home care, disabled care and in IOF. We continue to generate strong cash flow, which has enabled us to continuously buy back shares. And all in all, we deliver on our 2024 lease adjusted EPS target set in 2021, coming in slightly above our target of four sec per share. I'll now give an overview of the development in the last quarter, followed by a more detailed financial analysis from our CFO, Mikael Malgä. Next slide please. In the quarter, we took a growth pace back to double digits, showing a -over-year sales growth of 10%, mainly driven by pricing in Finland and the addition of Team Olivia in our Scandinavian business area. Underlying adjusted EBITDA improved by almost 90%, or 118 million to 254 million, an effect of both underlying operational improvements and the acquisition of Team Olivia. In Finland, we had continued positive impact from pricing in disabled care and social psychiatry, and slightly more sold bets. We also saw improvements in operational efficiency from Q3, continued into Q4, and a testimony to the efforts we made to improve staffing, reduce sick leave, and have the right planning in light of ongoing changes in regulation. Scandinavia continues to show progress in earnings growth, mainly attributed to the integration of Team Olivia and improvements in our nursing operations. On the downside, the result was hampered by ended outsourcing contracts and a significant calendar effect in December versus last year. So although we're not fully satisfied with the result in the fourth quarter, we have achieved a lot structurally over the year. With integration completed, a stronger organisation in place, and new offerings, we had good opportunities to improve profitability in Sweden during 2025. Occupancy was slightly down, mainly due to a mix of new bets added, seasonal effects, and a slight net outflow of customers in Finland. One of our primary ways to show how we create value for society is to measure satisfaction among key stakeholders. I'm happy to report that we have taken a significant leap in the national user service for elderly care both in Finland and Sweden during the autumn, putting us well ahead of both public sector and national average in the nursing home segment. In Q4, we received similar positive results in the disabled care and individual and family segment in Sweden. Internally, we continuously measure and report the net promoter scores among key stakeholders, and in Q4, we see continued improvements in all three of our main target groups, employees, customers, and relatives. This is a testimony to our dedicated work to improve conditions for employees, strengthen local leadership, and provide better tools for planning and running an efficient and appreciated -to-day care operation. It also strengthens our belief that there is a strong correlation between engaged employees and stakeholder satisfaction. So let's turn to occupancy development. Group occupancy at the end of the year was 85%, a slight dip compared to last year. In Scandinavia, occupancy remained at 87%, in line with both last year and last quarter. Due to contracts ended in the quarter, we have slightly fewer beds in operation compared to Q3. Despite slightly more sold beds in Finland in the quarter, occupancy was slightly down compared to last year, mainly a temporary seasonal effect as more customers than usual went home for Christmas holidays, but also to added capacity. Occupancy in Finland has been fairly flat in the past years while staffing density requirements has been steadily increasing. The return to lower staffing density requirements from January 1st will improve the supply-demand balance on the labour market for qualified care staff. It should also somewhat reduce the financial pressure on the welfare regions. Hence, we believe that this will lead to higher demand for nursing home placements going forward. This graph shows rolling 12-month sales growth in least adjusted EBITDA margin. The most significant driver for sales development over the past 12 months has been improved terms in our Finnish operations and the acquisition of Team Olivia in Sweden. Looking at the group margin, it has continued to improve during the year, mainly driven by better terms and higher operational efficiency in Finland. In Scandinavia, we have managed to further improve margins somewhat in nursing homes, but having said this, the integration of Team Olivia has taken more focus and effort than we anticipated during the second half of the year. With integration now successfully completed, we will direct more focus on operational efficiency and margin improvement in Scandinavia going forward. So, let's take a look at financials for the quarter. Please go ahead, Mikael. Thank

you, Martin, and good morning, everyone. So, let's turn to page nine. Net sales in the quarter increased to 4.9 billion SEK, up 10% compared to quarter last year. The organic growth for the quarter was 2%. Organic growth was slightly negative in Entendo, Scandinavia, where we saw continued organic growth in primarily owned nursing homes. However, growth was impacted by outsourcing contracts that ended end of last year, including acquisitions, Scandinavia grew 19%. In Entendo Finland, the organic growth was 5% and primarily driven by improved terms with several of our key segments showing positive growth. Currency had no material effect in the quarter. Slide 10, please. Excluding non-recurring items of 29 million, the reported result improved to 423 million and correspondingly the lease adjusted EBITDA increased from 136 to 254 million, up 87% versus last year. Lease adjusted EBITDA in Scandinavia improved by 8 million year over year, while Finland lease adjusted EBITDA improved 103 million year over year. Currency had no effect on lease adjusted EBITDA. Next slide, please. Growth for Entendo Finland amounts to 5% reported and 5% in local currency. Lease adjusted EBITDA excluding non-recurring items was 201 million and an improvement of 103 million compared to last year. The quarter was and as same as previous quarters impacted by better terms across main segments. However, the quarter was further improved by and as already seen in last quarter, a better operational efficiency. Occupancy rate was fairly flat when adjusting for seasonality with more sold belts and also more capacity added. The Finnish Parliament announcement of change staffing requirements and care for older people from 0.55 to 0.60 care staff per resident was passed in the quarter and took effect from 1st of January 2025. We believe that we are well prepared for the change and expect that the reform will ease the balance on the Finnish labour market going forward. Finally, a majority of price negotiations with welfare regions are done, which indicate a stable and flat price versus cost development in 2025. Organic growth in Scandinavia was slightly negative and we saw a continued underlying growth in nursing homes. However, growth was offset by lower revenues due to the outsourcing contracts that ended end of last year. Acquisitions had a considerable effect on sales and in total Scandinavia grew by 19%. Lease adjusted a bit, excluding non-recurring items relating to finalizing the integration of Team Olivia increased by 8 million to 69 million. The improvement was primarily driven by Team Olivia acquisitions and improved results from own nursing homes. Improved results was partially offset by ended outsourcing contracts, which had a negative 15 million SAC impact versus Q4 last year. Going forward, ended outsourcing contracts would have minor to no impact on the result in 2025. Similarly, calendar effect with more unsocial hours and also cancelled care hours and especially home care during the holiday impacted the result negatively and is estimated to 50 million SAC. By the end of the quarter, the Team Olivia integration was successfully concluded. And while the integration took more focus from the -to-day operations than planned, we now look forward to turning our full focus to realizing the full potential and as a first step to further improve our profitability during 2025. Slide 13, please. While the rolling 12-month and as previously communicated has been affected by 2-1 of items in Q1 and Q2, our free cash flow still improved to 732 million SAC. Where Q4 free cash flow reached 422 million versus 404 million last year. In the quarter, networking capital was slightly lower due to timing effects between quarters and versus last year. CapEx was higher and will, as previously communicated, continue to normalize at more historical levels compared to last year's flow. During the quarter, we had a strong share repurchase outcome, buying back a total of 124 million worth of shares. In Q1, we have continued to repurchase an additional 45 million worth of shares. And today we announced that we will continue our repurchases until next quarterly report under a new program. The new program aims to repurchase up to 150 million and will be executed as previously under safe harbor regulation. Slide 14, please. Over the course of the last 12 months, we have, in line with our financial plan for 2024 to 2026, initiated a more active capital allocation. As a result, we utilized more than 70% of our free cash flow for dividend and continued share buybacks. In addition, we had made a transformative acquisition with Team Olivia in April, and which was financed by both own cash and additional debt. And during the latter part of the year, we also paid down some of our debt. Next slide, please. Let's look at our key financial metrics, and I'm happy to share that all key metrics are improving in the right direction. If we start at the top left, the adjusted earnings per share improved by 0.43 SEC per share or 0.49 SEC per share when excluding integration costs, which is equal to more than 90% uplift versus last year. Improvement primarily due to higher lease adjusted to VITA and continued share buybacks, and was, as expected, slightly offset by increased income tax. If we turn our attention to the top right figure and our lease adjusted margin in percent, adjusted for non-recurring items, we continue to improve our lease adjusted to VITA. In Q4, the rolling 12-month margin was 5.4%, up from .9% last quarter and up .1% compared to Q4 last year. If we instead look at the figure at the bottom left, we can see that we also continue to improve our lease adjusted net debt to EBITDA ratio, down to 1.7 times by end of Q4. And finally, when we look at the figure on the bottom right, net interest expense in the quarter was 36 million. The increase in Q2 and in Q3 is explained by higher financing costs due to the recent acquisition. While in Q4, we now see the effects of improved market interest rates and improved debt utilization. Next slide, please. I'd 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 adjusted EPS of 3.02 SEC per share. In 2024, our reported adjusted EPS reached our next milestone, i.e. an EPS of more than 4 SEC per share, an important step towards our long-term goal of reaching at least 5.50 per share in 2026. We can also see the effect of continuous share buybacks, which has a lagging effect on the reported EPS, since we divide each month adjusted net profit with average shares outstanding at that time. So when we adjust our EPS with closing balance shares end of the year versus average shares during the year, the run rate EPS improves to 4.19 SEC per share. And if we exclude the communicate the non-recurring items relating to the integration of Team Olivia, the EPS run rate amounts to 4.37 SEC per share. With that, I hand over

to you, Martin. Thank you, Mikael. Before we move on to the Q&A, let me just briefly summarize. For the full year 2024, we can conclude steady improvements both financially and operationally with higher stakeholder satisfaction and improved profitability. In Finland, we have continued to adapt to the new conditions imposed by the changes in staffing ratios. In spite of changing regulatory environment, we've been able to improve our quality of services, stakeholder satisfaction and profitability during 2024. In Sweden, we have strengthened our market position by adding Team Olivia to our operations and launching the new brands Unika and Viljan. All in all, the integration has taken more effort than anticipated, but with the integration now concluded, I see good potential going forward to continue growing in the area of complex care needs and to refocus the organization on occupancy growth and operational efficiency. We have a strong financial position with stable cash flow, allowing us to continue with active capital allocation in 2025. As I've already suggested, EPS has improved by almost 35% since last year. The board is proposing to the AGM that we raise the dividend to 1.20 SEC per share for 2024, as well as a continuation of share buybacks. That concludes our presentation, so let's turn to the Q&A session operator. Please go ahead.

If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from David Johansson from Nordia Markets. Please go ahead.

Hello, good morning. Thank you for taking my questions. I have two. So starting off with the results in Finland, obviously a very strong margin here at 7%. You talk about both price and efficiency contributing a favor here. So first, if you can comment on the implementation of the new staffing reform in Finland and whether this has had any effect in the quarter. And then just in terms of what we should expect in terms of margin improvements going forward here. And would you say Q4 is a good indication of what we should expect here in Finland going forward as we look to 2025? I'll stop there for my first one. Thank you.

Good. Thanks. So the first question around the staffing reform. As you know, we've been increasing staffing requirements in Finland over three years. The last race came in April last year up to 0.65 and we were expecting a last race to 0.7 from December 1st. They changed that, the politicians in Finland, because they realized it became too expensive and also too difficult to reach given the available qualified care staff in the labor market. So instead of continuing to raise, they lowered it, decided to lower it from January to 0.6. That was a relief, I think, for the entire sector. It also, for us, it also meant that it became easier for us and we got stronger momentum in our operational efficiency efforts during the autumn. We've also been right sizing our staff a bit. I think as you saw, we released around 300 staff in the autumn. And we basically became quite ready from January to move down to 0.6. That didn't have an effect on Q4 though, because we still had to comply with 0.65 during Q4. But our efficiency measures,

they

got better momentum during Q4. And I think in terms of operational efficiency, that is something that we expect to continue now into 2025, even though the staffing ratios have decreased a bit further down. My view is that from January 1st, it's almost impossible to go down to 0.6 precisely directly from January 1st. It's a gradual process. It takes somewhere between 4 to 10 weeks to firmly assimilate to the new staffing standards completely. So I think that in terms of operational efficiency, we've seen a lot of good work in Q4. And that is something that we should expect going forward, maybe with a slight lag during Q1.

Okay, thank you. Then my second question is on Scandinavia. And if you're able to quantify the negative impacts from the calendar effect in the quarter, and then just to follow up on the new homes that you opened last quarter, how these are tracking versus your own expectations so far? Thank you.

Yes, so thank you, David. In relation to the calendar effect in Scandinavia, we estimated to be around 15 million sick due to the more favorable holiday schedule compared to last year. Also, it was quite negatively impacted by the fact that in home care, we had quite a lot of cancelled care hours during the planning. And in relation to the occupancy development in our new houses opened, we see a continued positive inflow in Scandinavia in the house that was opened. The new houses that has also now opened in Finland, we also see a positive start to the year.

Okay, thank you. Those are my questions.

Thank you. The next question comes from Christopher Lilleberg from Carnegie. Please go ahead.

Thank you. Good morning. Trying to understand the earnings development here in Scandinavia, and you mentioned a lot of negative factors. So did you say that ended contracts impacted earnings a negative 15 million year over year?

Yes, that's correct. And another round 15.

So round 15 on outsourcing contracts that have been running out and another round 15 is in seasonality calendar effect.

Okay, that explains things. But for ended contracts, for the full year 2025 versus 2024, how big do you think this effect will be?

In 2025, we don't expect it to have a rather big effect.

Okay, why not? I guess you had those contracts first half of the year.

No, I mean, the ones that ended end of last year in December, they have now that were more than average profitable, they have now run out. So they will not have an impact for 2025. The ones that are ending into 2025 have a very low profitability.

Okay, so if we instead look at the potential positive earnings driver for Scandinavia in 2025, it's going to have the full year impact from Bolivia, right?

Yes,

we will have one more quarter. And how much did Bolivia contribute in Q4?

I think acquisitions contribute somewhere between 20 to 25.

Okay. Okay. And then I guess you still have losses in Denmark.

Very limited. We expect that to be a break even from 2025 onwards.

Okay, so the earnings improvement in Denmark, how much is that going to contribute to the earnings improvement in Scandinavia in 2025?

If we exclude the opening of new house, we expect at least 20 million.

Okay. But yes, to summarize my question around Scandinavia, do you think it's fair to assume kind of a more step change improvement in the Scandinavia margin in 2025? Okay.

I mean, we target, of course, an improvement in margin in Scandinavia for 2025. There are several key blocks that we have talked about before that we believe will structurally improve that. You mentioned the team Bolivia as one, the reduced losses in Denmark, as well as the expected synergies that we have announced previously of a run rate of 20 million. Okay.

And

then in Finland, did you have some additional price increases here towards the end of the year that impacted Q4? Was that -over-year effects from earlier increases?

Yes.

Okay. And we've improved the operational efficiency in Finland and the new staffing requirements. The previous question, I think you didn't answer if the Q4 margin is a good proxy for 2025. I think Q4 margin in Finland has been pretty weak.

Yeah, I mean, we don't guide, as you know, on margins, Christopher. So if we look at just Finland, and we have, as we now announced, quite a stable to flat price versus cost development in 2025. So we are looking more into growing occupancy and continuing our operational efficiency. That we saw in the Q3 and Q4.

Okay.

Good. Thank you. Thank you. The next question

comes from Jakob Lemke from SEB. Please go ahead.

Hi. First question on profitability in Finland. I'm trying to understand why the increase here happens so suddenly in Q4.

Now, I think we're reaching an operational efficiency level that we've been struggling for for quite some time, but we haven't been able to reach due to constantly changing or actually increasing staffing requirements. So it's basically the same measures that we've been working on for quite some time that really starting to give effect. So this is operational efficiency driven. It's nothing about occupancy. It's rather that we're seeing that after the last race in April, which was the last, you know, out of a three year period of constantly increasing staffing requirements, which created a terminal on the staffing market. And constant work on adapting staffing. We've been able to get a better grip on it and be faster to adapt scheduling and so forth. But also we've seen that we managed to basically cut staff turnover in half versus just two years ago. So much more stability now in the workforce. And then, of course, it's easier to work with these measures. So this is operational efficiency driven and that is something that we expect to continue.

And just to mention also that Q4 last week was rather weak. So that with higher over staffing at that period, it's not fully comparable to say that it jumped that much.

Then there's a comment on the on the slight occupancy drop that we saw in the end of the year in Finland. It's basically bounced back in January. It's quite clear seasonal effect that was higher than we had expected due to the holidays in December. Given that it was a more red days and better holidays, we saw more people, basically more relatives taking their relatives out of nursing homes and other care homes to bring them home for Christmas. And then occupancy falls down, but we also see it fully coming back in January. So that was very seasonal drop.

OK, and a follow on this one. I mean, you mentioned that you expect further sort of impact from lower staffing requirements, if I understand you correctly. So there is further efficiency upside to the Finland margin from sort of this Q4 level as a base.

But not in Q1, I would say, because as I said, we have a new level in Q1. As they actually decreased staff and industry requirements from January 1st. And even though we were really good in adapting to the former requirements in Q4, we had a change, another change in January. And as I said, I think it's going to take us somewhere between four and 10 weeks basically during Q1 to fully adapt to that. So I think that operation efficiency might go down a bit in Q1 and then further improve to the right level. But overall, I think this lower staff is good for the market, is good for us. It will make nursing home placements relatively less costly to the municipalities, meaning that they will afford to place more customers and lower the queues. So I think it will be positive for occupancy development in Finland, which is of course the foremost driver, apart from operation efficiency to profitability in Finland as well.

Okay, and just a final question here on Finland. When we look at the profitability level here in Q4, is there anything in that figure that we sort of should be mindful of not extrapolating to Q1, or is it pure underlying development?

I'm not sure about the extrapolation, what you mean, Jacob. I think you should. But

there's no one of the elements. It's a clean quarter, so to speak.

It sounds quite convincing then. My next question is on the cash flow. I'm just noticing that paid tax here in Q4 is quite low and particularly for the full year as well. And given the sort of earnings uplift we've seen, I guess we should expect paid tax to increase quite substantially in 2025. So if you can give some guidance on that, if possible. I

think the tax was slightly elevated in Q4 due to both a mix of when taxes were booked and then it was for the year slightly elevated due to the losses in the early stages for Denmark. In tax rate, but paid

tax

in Kroner will increase.

Yeah, can it take double or how much, you think? I think we will have to come back to that

question.

Okay, understood. That's all for me today. Thank you.

We had a question from Jon Findring. That is a bit puzzled over our record high results in Finland while the occupancy is reduced. Well, as I think I said, the occupancy drop was very temporary and it did not affect revenues. When we have people just going home for Christmas, they still, even though it becomes according to our occupancy numbers and empty bed, it doesn't affect revenues because they still pay for the room as they come back in January. So that's like occupancy drop has no impact on numbers. With that, I hope that answered the last question. With that, thank you for calling in and thank you for interesting questions. And if there's anything else that you want to ask about, we are available through on email or phone. Thank you. Thank you very much.