Humana AB (publ)

Good morning and welcome to the MANAS Q4 and full year 2024 presentation. My name is Evelina Pettersson and I'm the head of IR at the MANAS. With me today I have our CEO Natalie Bolas-Nilsson and our CFO Christopher Heroult. They will walk you through the presentation. Please go ahead Natalie.

Thank you and we will start off with some of the highlights from the period. There are three specific areas that I'd like to highlight. First of all we are continuing to improve on our financials and we have also reached our target on net debt ratio which we are quite happy about. We ended the year with a strong cash position which also allowed the board to propose a dividend of one SEC. And this morning they also made a resolution to repurchase our own share. So happy about the improvement on the financials. The second area is our ability to execute on the strategic agenda. We have during the quarter made the divestment of the elderly care units. The last parts came together and as you saw earlier this week we pressed release that we have now completed the divestment. We will continue to focus in our targeted area, child welfare services and disability services in Finland. We have also completed the integration of team Olivia in Norway. This has been done in a very good way and has exceeded our expectations both on the business case and on synergies. So a job very well done by the Norwegian team. On the theme of making a real difference which we also like to talk about within Humana. We are happy to see that we have continued to improve our customer satisfaction by 4 percentage points Q4 this year compared to Q4 last year. And we have also made a decision and a commitment to introduce the science based targets. Both on short term and long term net zero targets. Which I believe we are the first ones within the Nordic care market to set and we are happy to lead the way in this area. As mentioned the satisfied customers have increased both on a quarterly level and on a year compared to previous year. We have a continued high degree of satisfied employees and we are delivering a very safe service continually. On the social impact which we would like to measure we have increased the number of placements in our care homes that lead to a lower level of care by 6 percentage points. And this is of course a great achievement for the individuals who can return to a more normal way of life. Returning to schools etc. And it's also a great impact to the society when we achieve this and when we continue to increase our social impact. We have also increased the number of clients in our residential care homes who achieve the targets on their implementation plans from 62 to 66 percent. Which makes a big difference for the individual per se. During the Q3 presentation we talked about the areas that we will put special attention to in the short term agenda. And we have been executing on these areas. On the cost control area one of the highlights is that we have now set the Swedish organisation. We have gathered the support functions within the different companies and the different business areas in Sweden into common functions. This itself allows us to start introducing common processes, routines and systems. And it also allows us to ensure that we have specialised services for all of our business areas. And at the same time we are achieving a high degree of savings of approximately 55 million SEK. Which will be fully implemented by the end of 2026. The main part of these savings will be effectuated during this year. We are also continuing to work with the internal governance and control. And ensuring that we become one Humana. That we work according to common processes. That we set targets on a group level. Break them down and follow up to ensure that we reach our goals in a good way. And we have also put a lot of focus on consolidation of the Humana group. As we talked about in the Q3 presentation, the Humana has a long history of growing through acquisition. And this has led us to have a fairly complex company structure. We have around 180 companies when we started off this journey. And we have now set targets of reducing the company group to around 50 companies. And we have started the execution of this project. It's a fairly complex project. It impacts of course moving staff, securing contracts, reapplying for permits, considering tax and financial impact. But I am convinced that this will help us become much more efficient in all types of activities. And we are expecting savings of around 10 million SEK by implementing this. And it will be fully implemented by the end of 2026. We also said that we are very happy with the specialisation strategy that we have in place. But that we would deep dive into a few areas to see if we can optimise them further. And the areas that we have reviewed during Q4 is INS. And we have made two main conclusions from that work. One is that we are in the residential care home business and we are market leaders there, especially in Sweden but also in Finland. And within this area we will continue to strengthen the surrounding services such as family home and supported housing. And the point of doing this is that we can keep the placements for a longer time in different levels of care. And it will give us also more business in the surrounding areas with slightly higher margins. It is also beneficial for the children and the young people during their upbringing that they get a better continuity and the same contact through a longer period of time. So we are very happy about that direction. We will also for the adult segments continue to strengthen our position within LSS in Sweden. We see that it will give the mix, our portfolio within INF, slightly better stability moving forward. In Finland we have dived into two areas. And one is the open care area where we have now seen for quite a period of time. And we expect also moving forward to see a slightly decreased purchasing behaviour from the southern region. And this is due to the savings programmes that have been implemented there. The type of open care services that we have today are not legally mandatory services, which makes it easier to save on those types of services. And at the same time it is not a long term viable solution to save on those because it means that you will start increasing the need for institutional care. But we have with the new Disability Care Act in Finland we see opportunities in developing a concept for disability open care services. Which we believe will give us advantages in two different ways. One is it's a legally mandatory service, so it's not a service that's easy to save on for the southern region. And it's also a service that we can easily add to our already existing network for open care services. So it will not give us a large amount of additional overhead. We also see the opportunity that it will feed into a nice care chain into our disability care homes, which is a focus area for us. The other area we looked into in Finland is the mental health area. And we see that there are some interesting movements that regard the housing options. So we will for now maintain our mental health position on the market and we will closely follow and monitor the tendering over the upcoming year. And the third area that we talked about for phase two is the elderly care area. And we have just initiated the work on that to form a strategy for the elderly care within Nordic. So I'm looking forward to getting back on future presentations and telling you more about that. Now over to you, Kistofor, for some financial highlights.

Yes, thank you. To start with, I would like to recognize the milestone that Humana reached over 10 billion SEK in yearly revenues in 2024. 10.3 billion to be accurate. This is an increase with seven percent from 2023 and an increase of 12 percent for the quarter compared to the same quarter last year. The organic growth is not yet where we want it to be, but improvements are accomplished during 2024. We are on a positive track when it comes to development in adjusted EBIT. At the same time, as mentioned, we have increased our revenues with seven percent during 2024. The adjusted EBIT has increased 18 percent, which makes us proud, but not satisfied. Now diving into the different segments. Within Sweden, both individual and family and elderly care performed well in the quarter with an organic growth of five and 11 percent respectively. The EBIT was improved for individual and family in the quarter, and elderly care is summarizing the year with an EBIT improvement of 37 million SEK compared to last year. As you know, personal assistance is facing a challenging situation in its market. The revenue decreased also during this quarter compared to last year. The EBIT in Q4 last year was positively impacted by 10 million SEK effect from an adjustment in pension costs. If that effect is excluded, personal assistance shows a slightly improved EBIT in this quarter compared to last year. Looking at the full year of 2024, the EBIT in Sweden improved by 15 million SEK, corresponding to six percent. Finland has had a tough quarter. The decrease in demand within open care services, as we also mentioned in Q3, has continued also in this quarter. To face this, we have been very active and reshaped parts of our organization, which has led to some one-time costs of approximately four million SEK, which we have recognized in this quarter. The other sub-segments in Finland show an improved EBIT compared to previous periods, both for the quarter as well as for the full year. And in Finland, we are actively working with finding organic growth opportunities, and we have started to build a pipeline with new business opportunities. And as you know, we have now divested the elderly care business in Finland, and as CFO, I was pleased to see the purchase price of 25 million euros coming into our bank account last Monday. Norway continues to perform also in this quarter. In addition to integrate the new business of Team Olivia Norway, the segment has also performed an organic growth in the quarter of more than eight percent and for the full year of more of almost 12 percent. Many of the synergies from the acquisition have been realized, but some synergies are still to be taken out during 2025. During this year, one of our primary focuses in Norway is to improve the profitability within the sub-segment healthcare services, or as we say, hälse- och omsorgskänslor. We had a strong operating cash flow in the quarter. In this quarter, we managed to be accurate in our cash collection at year end, resulting in a cash position of almost 600 million SEK. And with our cash position and the development of the business in general and our current financial position in mind, the Board is now proposing to the AGM a dividend for the year of one SEK per share. And in combination with this, the Board has also taken a decision to utilize their existing mandate from the last AGM to repurchase up to one million shares. To summarize, let's catch up with our financial targets. We are not yet where we want to be when it comes to our organic growth. During the last two quarters, we have improved compared to last year, but clearly still a way to go. However, excluding personal assistance, we are at .1% in the quarter and .5% for the full year. Our adjusted EBIT has improved in the quarter compared to last year and also on a full year basis. For the full year, the adjusted EBIT is 5% compared to .6% in 2023. And last but definitely not least, our capital structure gradually improves. From the debt ratio of 3.8 in Q2 just after the acquisition of Team Olivia Norway, we have now managed to come down to our targeted level of 3.0. And with that, back to you, Natalie.

Thank you. So why should you invest in the Nordic Care Market and Humana specifically? Well, it is a growing non-cyclical market with a growing need for highly complex services. We are very well positioned at Humana with our specialization strategy to meet these needs. We have a diversified portfolio, many segments and several countries, and a clear strategy for growth, both M&A and Organic, which we have been able to execute on historically. And we have increased net revenues with 12% just recently. We are focusing on sustainable value creation at all levels, on customer satisfaction, on the social impact, and now also on commitment to scientifically based climate targets. And we have improved our financials and we have an attractive cash flow, which has allowed the board to propose reintroduced dividends. So summing up and a focus going forward, we will continue with all the cost control initiatives already introduced. And we will continue the consolidation journey of the Humana Group, both in ensuring that we work with common processes and that we reduce the complexity and increase efficiency. We will continue to execute on our specialization strategy, both on the already identified areas and also by reviewing the elderly care strategy and assessing that in the coming year. We will continue to work on strengthening our ability for organic growth. We have during the last quarter grown a healthy pipeline of projects in our targeted areas, and we will continue to secure good partnerships that will allow us to grow as desired in these areas. We will also continue to focus on securing a customer inflow within the personal assistance in Sweden. It is an extremely stagnant market and there is a big need for some movement on the market. So we are active in this area and looking at different options. And of course, we will continue to ensure that we make a real difference at all levels, customer satisfaction, social impact, as well as now with testing the climate space sustainability targets. Very happy about that. And with that, we open up for questions.

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 Christopher Lilleberg from Carnegie. Please go ahead.

Hi, good morning. I wonder if you could maybe comment a little bit more how we should think about earnings in Finland and how soon the cost savings could have an effect, especially now when you are divesting the elderly care business there as well. So if you could comment on what the mix will look like after that. My second question relates to personal assistance and whether you see any signs of more stable client net flows here and the potential to regain some profitability in that business here in 2025. Thank you.

So starting up with the question in Finland, it is a smaller part of our business that we are divesting. So we and it has approximately the same profitability as our other areas. So we don't foresee a big change in the margins in Finland moving forward. What we do see that our targeted areas, both within intensive care for child welfare services and the intensive care for disability, is that it is higher margin business. And we have opened units and we have new units in the pipeline that will be announced. So from that perspective, we feel fairly confident that we will continue on a good development there. Over the next year, we do have some changes in Finland though, partly with the open care services. We're looking into, we know that there will be a continued reduced purchasing behaviour. We have adjusted our organisation for that, but it may need to be adjusted continually. We will see a little bit how that develops. We are looking this spring at developing a new concept to introduce into the open care services, which we are quite excited about. And we do have a new management also coming in June. So there will be a few changes during the year and we are focusing also on the divestment and making sure that lands as according to plan. But fairly confident that we will be able to counteract the impact of the sale of course of the end early care.

But if you look at Finland, you generated like 17 million Swedish in profit here in Q4. I think there was some cost, 4 million if I just put that for the cost for the restructuring programme. So that's around 20 million. That's like 10 million below the earnings level you had in the first and second quarter. Is there some seasonality in here or does this just reflect a continued or a worsening trend for some of the segments in Finland?

Yeah, we are following Finland closely and as Natalie said, it is a period of many changes now with the divestment of the elderly care. That's some 20% of the revenue. So of course we need to follow the organisation and to follow Finland very closely now. And also making sure that these adjustments that we have made that it also shows in the numbers of course. Q4 is a week quarter also with a lot of holidays and so on. But as you say, we have a gap from the performance in Q4 last year also with that one time effect as you also mentioned included. But we are working with this and following Finland very closely.

And it is primarily with the open care services area. So we feel we have that under our watch.

And as mentioned also the other subsegment except for open care services, they are actually performing a better EBIT both in Q4 compared to last year Q4 and also for the whole of 2020. So that is also comforting I think.

And that is the area that we are

focusing on.

Did you mention how large the savings are in Finland?

No. The savings on the staff for the restructuring of open care services. It

is

around 4 million SEC during the quarter.

And personal assistance?

Personal assistance, let me put it this way. It is an extremely stagnant market. There are fewer customers and the number of customers are continuing to decrease on the market. We see a slight increase in the number of hours which means that the customers are getting older and with more needs in general. So from that perspective it is hard to say when the turn will actually come. But what is preventing the movement on the market is primarily that a lot of companies have issues with reclaims from the insurance board and with permits problems with the Evo in Sweden, the permit agency. So we do have some embryos and thoughts on how we can get that moving that we will start looking at more actively now during the first half of the year. So it is a little bit hard to say what that will lead to. We do believe that it will be a continued challenging market when it comes to increasing the number of customers on the market. But there is a big need for it. The municipalities are making fewer decisions, the insurance board is making fewer decisions, that the need within the group are not decreasing. So there is a growing need and we are quite active in that debate as well as some of you may have already noticed. So we are hoping that we will see some movement during this year. But as we said also in the previous quarter, we are not too worried because even when the customer base is slightly decreasing, we are still the largest on the market. And it is fairly easy to adjust the cost on the personal assistance level.

I thought you have said previously that as long as the number of clients is going down, you will always be lagging with the cost savings. So I guess for this business to start to generate some profit again, you need to see at least stable net flow in clients.

Yes, that is correct. And we have seen a gradual decrease of the customer net outflow. So it is slowly improving but we are not yet at zero. And like Kistofa mentioned during his financial presentation as well, if you compare Q4 this year compared to Q4 last year, we had a one-time impact on pension repayments last year of 10 million SEK. So the underlying profitability has actually improved this year in Q4.

Yes, yes.

So we do see some improvement. Yes.

The next question comes from Jakob Lemke from SEB. Please go ahead.

Hi, my first question is on Norway. I am wondering if the margin level you are doing here in Q4 is sort of representative of where you are now and if we can expect that to continue going forward.

Thanks for the question. In Q4 in Norway we mentioned on the Q3 call that there was this strike situation within one of the staff areas in Norway. Yes, that agreement was settled during Q4 and we actually had a little bit of a positive upside there when we released our provisions being made. So we had a slight positive one-time effect there in the result. So I think it is a little bit perhaps stronger for a typical Q4 in this Q4. And we see in Norway the year to date we have a slightly lower EBIT percentage, but that also comes from the beginning of the year. So I think it will be exciting for us during 2025 to continue to work hard and also to realize the last synergies that we have also and that we mentioned previously. So we

believe in a good continued development in Norway.

Okay, then I have a question, more of a technical one. The IFRS 16 impact and EBIT increased quite substantially here in the quarter. Is this something we should expect going forward to continue at this level? Yes,

so this was a bit of a special effect now in Q4 as we wrote primarily in our Q4 report that during the quarter we had the Finnish elderly care company. They were accounted for as assets and liabilities held for sale. And that also with the accounting standard implies that we should stop account for depreciation on the lease contracts when those circumstances occur. So that is the reason why we had the approximately 10 million SEK in less depreciations during this quarter. Now we have sold and divested it in the beginning of this week so that the decrease will not remain going forward.

Okay, and this final question on repurchases. You write that it's to create flexibility for future acquisitions. Do we then read this as more of a one-off or is this something you will do more regularly going forward?

That's of course up to the board to decide but we now have as said a good cash position at year end and on top of that we also had the cash coming in from the divestment of the elderly care. So we are of course working with the capital allocation continuously and at this stage the board this morning took this decision. The liquidity in our share is not very high so I think with this initial mandate and decision of up to 1 million shares that will also take a while. Okay, so let's see after that what the board thinks going forward.

We see it as a very positive development.

Okay, that's all from me. Thank you very much.

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

Hi, you mentioned this release of the provision in Norway. How large was that in the quarter?

That was minor effect, not substantial but it was an effect but not that big.

Okay, but I think you had minus 2 million EU or extraordinary items for the group. Does that include both the cost you had in Finland and this positive provision or release of the provision in Norway?

No, it actually does not include any of those items. So there are other items for that. So we have that. Yeah, I can read them out. It's three different ones. We have them in the Q4 report of course but it is related to the... Okay,

but never mind. Would you say that the positive effect in Norway is netting out the negative effect in Finland?

Yeah, that could be a reasonable assumption.

Okay, great. Thank you.

Thanks.

As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. There are no more phone questions at this time. So I hand the conference back to the speakers for any written questions or closing comments.

Thank you. We have a couple of written questions. I will read them out. So the first one is, please elaborate on your medium term strategy to generate volume growth within individual and family in Sweden.

Well, it's primarily within the areas that we have already mentioned. So we will focus on growth a little bit of course on the occupancy, but it's not a huge focus for us, but a little bit on occupancy. But then growing within LSS is a targeted area that we have started looking into more, both organic and M&A of course. And then also the surrounding areas to our residential care homes within the child and young. So supported living and family homes. Those are our primary target for the area. Then of course we have a few other types of projects as well in the pipeline that we will continue to execute on.

All right. Second question. Please elaborate briefly on your M&A strategy given the large cash balance, including Finland exit. And do you foresee closing additional add-on in 2020?

I wouldn't exclude it. We are monitoring and looking into and we are continuously evaluating possible acquisitions. We have reviewed several during the past few months. And we have also started looking more actively into some of our targeted areas that we may be able to pursue. So I won't exclude it, but we will do it at the right multiples and when it makes sense and aligns with our strategic agenda.

Last question. What drives the case expand of approximately 70 million in the quarter? How many new unit homes have started and within which business areas? Do you foresee any divestment of real estate assets during 2020?

Okay, so many questions in one question.

So

we have the topics investments that you mentioned and that I would say that half of that is investment in our project that we are having a joint venture and building elderly care home house property in Stregnäs as you know. And then the rest of it is more running complex investments that we do in our business on a recurring basis. And the other questions were.

Do you foresee any divestment of real estate assets during 2020?

Not any major effects from that.

No. Okay, thank you very much. That was the last question. We want to thank everyone for listening and have a good day. Thank you.