Cedergrenska AB (publ)

Skolkoncernen C.D. Grenska released their report earlier this afternoon for the second quarter of the year. The deadline is October to December. And to put some color on the numbers, I have the founder and board member, Niklas Pohl, with me in the studio. Welcome, Niklas.

Thank you so much.

It's great to be here. Let's start with the main topic of the report. The revenue of the movement increased by 14.6% to SEK 257 million. And the movement result, EBITDA, has an increase of 47%. to 18.9 million kronor.

What is it that drives this strong growth? Basically, as it has been in the last quarter, everything is based on educational activities that are attractive, high quality, where there are children and students who want to go. We've had that basis for quite some time now. But then you look at it, it's the one that creates the opportunity to have these solid margins and surplus. But, as you mentioned, the improvement of the margin towards the same period last year is driven mainly by three things. One is, as you mentioned earlier, so you will recognize this, the efficiency program that we launched about one and a half years ago, with 20 million in full effect on a yearly basis in savings. That has now even more been incorporated into the whole organization in an even higher degree. We can come back to the details later, but it is a driving force. Then we have these acquisitions that we did and joined in the summer. The whole idea of co-operating on resources, it means that every new acquisition creates large distribution, scale distribution and contributes to increasing the margins in the company. We see this clearly from the last schools that arrived during the summer. The third point, which I think is very happy to see, is that our resource schools, especially under the brand Helleboråskolorna, have received a better compensation from the municipality than we had expected. This is fair, because they are very low, but when it finally happens, it also helps to strengthen the margins.

I didn't mention the marginals, but it increased from 5.7% last year to 7.4% now. Will you be able to continue to improve these marginals further?

I think it's a great question and it's very important that you as investors and we as a company think about where we are. The quarter is much better than last quarter, the same quarter last year. And if we look at the half-year, we are at approximately 2% in improvement. And if we draw out that trend, then you start to see profitability levels for CDG that are above the goal we have for marginals. And I just want to be very clear and honest with investors that we have a range between 6-8% for what the old CDG, the life for learners, because that's still what we live with in this quarter. 6-8%. We're not going to be outside of this. So what we're going to do when we see this strong development, is to reinvest in even higher quality in our educational services. Then it can take a while before it starts to show on the cost side. But now that we've done so well with our savings, so we're on this type of margin, then we should start focusing on quality, so that we keep ourselves within, if again for the old series, keep ourselves between these 6-8%. So that you just don't forget that when you see the very strong margins right now.

Responsible and sustainable margin goals.

Yes, I think we should remind ourselves of that. It's important to take that with us. We don't have the goal of maximizing the margins. We have the goal of having sustainable, long-term, predictable, credible margins.

Let's move on. You have a project about local health care and then we have the subsidiary CDG Enska Mat. How have these two parts developed during the quarter?

It's really fun. CDG Enska Mat and local health care are both part of the efficiency program that we implemented. CDG Enska Mat has has now reached its full capacity, and it was the case in Kuvertan as well, full capacity on how much you can take care of in the school group. So that about half of these 10,000 children, including those who are learning now, have Cedrienska food. So here we have finished the first step in the introduction of this concept. Now we need to continue, but we need to be patient as investors. We need to find the right conditions for the next step when we scale up Swedish food. It's about the right staff, the right kitchen, the right geographical location. We need to get back to that when we can expect more from the food side. At Lokalvård, right here and now, we have taken a decision that basically doubles the work done by the local health service in the local health group. So it's really fun to see and we dare to do that against the background that we see how the quality is actually a little better than what we had at the time when we bought externally and we save about 10% of the local health costs. When we got the conclusion after the first evaluation period, we decided to double this effort. But that means that there is still a small part of Sederenska that has its own local health care, so there is still a lot to roll out in this project.

It will be very interesting to follow. After the acquisition of Apprendere Skolor, you have identified a target of annual EBITDA contributions of at least SEK 20 million per year and annual net synergies of about SEK 4 million from the year 2006-2007. Is this in line with your expectations before you did the acquisition?

No, this is actually better. You are limited in the information you have, and that's how it should be when it's a public offer. So that's one factor, that first now you have hands-on, put yourself in all situations and can then understand what the long-term profitability should be based on, given the good quality in the businesses. But then you have the synergies, and you don't know until you actually sit and negotiate various agreements with reviewers, with office rents and company insurances, where you will end up somewhere. But pretty quickly afterwards we were able to start some of the processes and we see that it is at least one million better on the synergies than we had believed before. That's why we chose to go out with this separate press release when we summed up the 20 million, because we thought it was important to share with us the image we had gotten when we had gotten ourselves into the company a little better.

We also show an organic growth. How should investors look at that part in the future?

Yes, it is not a big driving force right now. Organic growth is around 3-4% so we would prefer it to be around 5%. And it is, I think we still highlight it, and you should also take it with you from the quarterly report, that even if there is strong growth, 23% in the high school segment, we are losing students in primary school and preschool, 4-5% approximately. So the picture is not unilaterally just growth everywhere, but there are lower years of children and students. I think a lot of people are affected by this, even if we think we have very competitive quality. This is something we have to work hard with to stabilize the trend. But the growth right now is mainly on the gymnasium side.

After the acquisition of Apprendere skolor, how ready are you for further acquisitions?

I understand your question, because this was our biggest acquisition ever. Now we are fully committed to taking care of this. But I would like to nuance the picture a bit. One reason to do Apprendere förvärvet was that got access to resources, especially in vocational school and resource school, in order to actually be able to do more acquisitions in those segments. We have Claudia, the CEO of Apprendere, who is still there and is the CEO of the old Apprendere now within CD Grenska. And she has the time to look at things more time than she had before. She also has the conditions now when you have an owner and management test that you can handle and are approved of. I would like to say that we have strengthened our conditions, and that is what you can expect from CDG, that in these new areas, resources and vocational schools, we can show that Apprendero has also been a way to broaden and ensure the underlying for sustainable growth.

What can investors keep in mind during the spring?

I think you should keep an eye out for two things. First, we need to show even more of the underlying value of Apprendere. One thing we have said now is that the surplus is there, the economic backbone is there. I am around and meet all directors and all Apprendere's operations together with people from the head office. And I get such a great impression from these schools. Speaking of things you couldn't know before you made the offer, but now that you get to meet the people and see the businesses, I think you will hear more about how nice and well taken care of it is to learn from the schools. Because I think that during During the old apprenticeship, it was like a wet filter with this owner and management test that they had not managed to do. Then the quality in Skimundan came in, so it will be able to be lifted up. That's one thing. Then I will, which Lotta also mentions in our CEO in the report, that we have promised during this fiscal year to return to the internal work related to our capital structure. As you can probably see in the report, we have twice as strong cash flows from the current business this quarter as we had last quarter. So it's a significant improvement. We have a cash position of 67 million. We run the company with a strong net cash flow. And that may not be where you should optimally be. And then we have promised to come back during the fiscal year. So then we have the spring on us to get back to the market how we plan to guarantee this.

With those positive words, we can end this interview now. Thank you very much, Niklas Paulsson, for your contribution. Thank you very much. And thank you very much to all of you who have watched. Don't miss the next report and interview in about three months on the same channel. Thank you.