Cedergrenska AB (publ)

Uppbildningskoncernen C.D. Grenska har släppt bokslutskommuniqué för det brutna räkenskapsåret 2023-2024. Vi ska med anledning av det intervjua Niklas Pålsson som är grundare, största ägare och också arbetande styrelseledamot. Mycket välkommen Niklas. Tack så mycket. You are entering the channel, could you please give a short description of yourself and the company?

My name is Niklas Poulsson, I am a working board member at Cedrienska and the founder of the company. I have a special responsibility in the company for, for example, strategic growth and also IR work. Cd Grenska is one of Sweden's ten largest educational companies. A company that has contributed during 14 years of work with collecting many strong educational companies that have a common desire to cooperate to solve future challenges and school development issues. So a group of very strong school brands that have united under this CD Grenska umbrella.

What would you say is remarkable about CD Granska compared to your colleagues in the industry?

I think what is remarkable about us is that we have gathered this group of very exciting educational activities that want to collaborate, but at the same time want to maintain their local profile, their local strength and way of working and name, but at the same time take advantage of collaborating with others to be able to develop themselves in the future. In addition to that, we have a number of exciting and unique strategic approaches. For example, all educational activities work with focusing on the teacher. So it's unique for CDGN to have a lot of focus on strong, experienced teachers, because research has shown that this is what lifts the children's and students' learning in the best way. If you have strong, central resources and a broad range of competences, the educational companies will have access to all the competences they need to be able to develop, something they wouldn't have been able to do if they had just continued as a single school.

And what does that mean that you have a background as a teacher?

I think it has been very important for me to be legitimized and be a teacher in history and economics. For the leadership job I previously had and for the administrative duties and ownership responsibilities I now have. I think it will be easier to understand the life of the teachers. Back to our business idea, the teacher is the focus. We have more in our board and in our management who have a teacher background. I think it's an advantage if you have the strategy we have.

You have been noted since May 2021, so you have had some experience with your staff and management here. But before we go over the numbers and look at them, what are you most proud of with this quarter?

I think there are three things that stand out that we are extra proud of this quarter. To begin with, it is the ability of the business to quickly lift the salary back to the level with our financial goals. They have done this through a comprehensive and quickly implemented savings program. And I think that if we look ahead, the ability of the business to handle this very surprising cost pressure that last year's inflation gave us, that ability really gives us a crutch in the back for the future. The other thing we want to highlight is the security and predictability that exists in the company, which has led to the company choosing to make a prognosis for the financial development for the first time. With an EBITDA margin of at least 6%, a turnover growth of at least 10% and a goodwill-adjusted profit per share of at least SEK 4. The third thing we want to highlight is the strong cash flow, the strong cash flow. It's something that allows us to see more tension towards the idea of division and acquisition, and it creates opportunities for the company. To sum up these points, CDG is and will be a safe growth company. I think the things I highlight in the report strengthen that image.

Yes, thank you. If we look at the figures, starting with the quarter from April to June, the revenues increased by 7.5% to SEK 241 million and the turnover with a total of 191% to SEK 17.9 million. A clear improvement. What is it that has driven this development?

First of all, I'd like to say that the 7.5% growth rate is not really the level we want to be at. CDEnska is a growth company and we have averaged over 20% growth per year in the last six years. So this is lower than our goal. But that is explained by the fact that we consciously, a while ago, decided that pausar tillväxten lite och fokuserar på ett antal interna åtgärder. De interna åtgärderna, den interna strukturen som vi nu tycker att vi har fått jobba med, med lugn och ro och fått på plats, i kombination med ett väldigt kraftfullt besparingsprogram, which we are very proud of in the report, has had its full effect now. That's what makes the margins rise. In combination with, as we say in the industry, this long-awaited reaction from the municipalities in the form of increases in school money, But when you get an effect like that, where school fees go up and you at the same time get the full effect of your internal measures, then you see this kind of powerful marginal improvements. So I wanted to highlight that.

Yes, and if you look at the whole year, you see that the fourth quarter was a little stronger, but it's still the same pattern. You increase the revenues with 3.4% to 907 million kronor and the turnover with 41% to 56 million kronor. Comment?

56 million kronor, then we are on an EBITDA margin of 6.2%. And we are very proud of that. It's strong, as I said. The companies have lifted the margins back to our financial goals, which is between 6-8% EBITDA margin. But again, growth is not at the level we want it to be. That is why we are so proud to be able to handle the things we needed internally. Now we are focusing on growth, and as our prognosis says, it is obvious that growth will accelerate in the future.

Thank you. Your CEO, Lotta Smit, writes in the CEO-word, just as you are talking about the efficiency program that you have initiated, that it is what contributes to improved margins. Could you tell us a little more in detail what this is for changes you have made?

Yes, it is a package that is roughly equivalent to 20 million kronor, or two percentages of our margin in improvements. which was initiated about a year ago. The focus, as you can see in the description, was to influence teachers and students as little as possible. And I think we have survived that. So you can find the majority of the measures in the head office, where we have made some adjustments and savings, which now have full effect. We have also taken important strategic decisions, such as managing all school lunches and school meals ourselves, instead of buying it from an external partner. We have also started to do this with local health care. And then I think it's useful with this kind of cost pressure that inflation brings, is that you start to look at a number of different engagements you have. In our case, it was about major agreements. It can be a rental agreement, it can be an agreement with advisors and lawyers, and you get a chance to negotiate them, and we have succeeded with that to better levels.

Let's take a look at the activities during the first quarter. As you mentioned, you acquired the school food company David Ebbesen AB, which became Cedegrenska Mat AB. What would you say are the factors behind this decision?

First and foremost, this is a unique opportunity to include one of Sweden's top school food manufacturers in our group. We have followed him for many years because he has delivered food to some of our schools. He is unique in school Sweden because he makes all food from scratch with good raw materials. So if you think about other actors that we have previously worked with, especially externally, they have thrown out frozen meatballs in the oven and warmed them up for the children, or frozen pancakes. David or CDN ska mat nu. Nu lagar vi all mat från grunden. Så att kunna ge det till alla våra skolbarn och elever, det känns jätteviktigt. Samtidigt som förstås, det har inte känts kul heller för den kvalitet vi har fått att du också behöver betala ett högt pris och bidra till vinster hos en extern part. Nu kan vi behålla de resurserna inne i skolan istället. Så jag tycker du får en dubbel, en bra win-win effekt där från båda hållen.

Yes, when you look at it with financial eyes, you see that it also means a certain diversification for you as a group.

Yes, it does, but I think that more than you as an external commentator can believe, school food is an important part of a school. It's not just food. School food is an integrated part of the school community. The students spend a lot of time there. Our food staff, which is now our own, meets them there. That interaction is actually very important for how good a school day will be for the children.

You have also joined and acquired a few more schools. Can you comment on that?

Yes, exactly. So now we're going back after this time with a focus on savings and order and order, we're going back to growth. I think it's so cool to see, because again, growth follows exactly what we've seen historically. As I said, CDGN is quite a paraply organization that collects strong school brands. The majority of those who have joined is done in the form of exclusive dialogues. You find each other in a desire to cooperate because you see that together we will do it better. We do not participate so often in public actions. Nyköpings Erskilna Gymnasium is a great example of this. It's a high-quality high school with a large search engine. It's the leader in its region. They had a common wish to work together under the CD-border. They want to collaborate with our strong brands here in Stockholm. They are an investment in their school, while we grow and become stronger together. In the psychology school, there's a great school that has great growth potential. It's two parallel schools. with an exciting niche towards philosophy and the social program. And in a municipality that is exciting, Solna. Here it will be very exciting to work with this school company in the future and see how much we can support them in their growth journey.

For the first time, you have given a guidance on turnover growth at 10%, 24% and 25% with EBITDA margin at at least 6%. Why is it important for you to communicate this now?

Back to what Cedrienska is as a company. We are a safe growth company. As a safe company, if you go in for a year and have the same stable conditions as we have now, then I think that a prognosis and guidance, when we feel comfortable with it, we should be able to share it with us. You shouldn't forget that we are... I don't know if there are any analysts who follow us or who make estimates for our developments. It must be very difficult for an external investor to create an understanding of how to evaluate CDGrenska. And we want to help. If we can, as we can now, then we want to help and call in what you can expect in revenue. profit per share. So I think there is both the signal value and the practical, that we want to be transparent, show how it works, and if it can help investors to create an understanding of us, then I think it's valuable.

Another marker for that is your share, and now you've decided to do the net profit. Could you put this in perspective? Is it a sustainable level? Why did you come up with this sum?

Partly, the sum follows exactly the policy we launched a while ago, where the maximum share can be the reported net profit. So that's where you should start. Then I think we signal in the policy that we also have as a goal that up to a third of the goodwill-adjusted net profit should be able to be shared. So with that, it is clear that we hope to be able to lift the reported net profit in the future so that you can move from today, it is around 15% of the goodwill-adjusted net profit that is shared, that we can move upwards towards towards this level around the third part. But it will take some time and it requires that we deliver good development in the net profit. I want to emphasize that when it comes to sharing, 85% of the net profit we make stays in the schools in the current situation. So I think it is, if you want to say something, an incredibly good distribution there as well. You can't forget that. It might be sad that we haven't come further in our journey towards a third of the net investment. But at the same time, you should see the advantages of having a lot of money going back to schools. And that will give even better conditions in the future.

Thank you. You also write in your book, Kommuniken, that you are active in sectors that are affected by external factors, such as social investments in education, regulatory markets and so on. This is for good and evil. Everyone needs education. But of course there are risks when it comes to regulatory changes. There are a lot of state investigations. A lot of people will report during the spring. What do you hope and think will come out of these investigations?

I can say this. We in the industry, and we in Cedrenska, we feel almost like this. Finally it's happening. We are talking about up to 20 different surveys where we will see the answers and conclusions during the spring of 2025. And as you mentioned, yes, there will be harsher demands. There will be a need for change. We're ready for that. We're not there to wait for this to happen and then adjust ourselves. We're at the forefront of the changes we see coming. I think there will be a much higher demand for hearing-impaired teachers. The average for other schools in Sweden is already quite clear. Maybe there will be demands for the first teachers to be put down in a higher degree, how they should work, how many you should have. That is the borderline in the country today. So it will happen a lot, but what can be considered to be difficult for an industry, we only see as positive and welcome. Because it needs to happen. There are a lot of things that need to be developed and improved in this free school system and in all of school Sweden. So it's great that it's happening now. And then we will see a lot of changes in the law, a lot of changes in the rules and things that make us need to keep improving. But I think it's good that we're forced to do that, and I think it's good for the public opinion to feel that changes are really happening. When this is done, we'll have a foundation for a better school Sweden than we had before. I think that's what's needed for us to finally have some peace and quiet in this industry. The fact that they do these surveys and they come to concrete changes, changes that show the general public that now we have a stronger, better system for Swedish schools in the future. Then this will be less of a hot potato for the next election, less risk that it will be used as a political blow, in the media and so on. And for the investors, I think it will be obvious after the spring that, okay, we had a large number of investigations, we got changes, the CDN must also adapt, but it seems to have done a lot in good time as well. And above all, free schools are still there. We now have a new platform that everyone can work from, municipal and private, but free schools are still there. And that feeling of the new foundation gives us a lot of confidence and positive energy.

I understand. And if we leave these regulatory things out of your control, what do you hope that the year 2024-2025 will mean for CD Gränska?

Back to focusing on school development and school quality. It has been tough to work under this hard inflation-driven cost pressure that has put the focus, and it had to be done for a while, on inflation and the cost costume. But there is nothing that lecturers love more than to have a safe economy, a strong economic backbone. Because then they can focus their shoulders down, calmly, focus on what they want to invest in school development. And that is where Sedergrenska's lecturers are right now. And that's where we want them to be. That's why it's so nice, you asked about the prognosis. I think the prognosis also has a strong and an internal signal that things are going well for us, that there are safe finances, that you can focus on school development.

Great. Niklas Pålsson, CEO of CD Granska, thank you for your contribution. Thank you, it was great to be here.