Humana AB (publ)

Good morning and welcome to Humana's Q1 2025 presentation. With us today we have our CEO Nathalie Bolas-Milsom and our CFO Kristoffer Herus. Please go ahead, Nathalie.

Thank you. Let's start off with some highlights from quarter one. For the fourth quarter in a row, we saw a profitability improvement within our businesses with an adjusted EBIT improvement of 8% compared to last year. We also saw an adjusted EBIT improvement in Sweden of 11%, which was nice for us. We are continuing to have a good profitable organic growth in Norway. During Q1, we had a growth of 7.6% in Norway. We have finalized the investment of the elderly care units in Finland within the quarter. And we are leaving the elderly care by doing that in Finland. And we are supporting during a three-month period. the buyer and after that we will continue to adjust the overhead and we are also investing in child welfare services and disability and have done that during the quarter and open new units. We have seen a strong cash flow during the period with also with a net debt decrease to 2.6 and we have repurchased our own shares with an amount of 55 million SEK during the quarter. The initiatives launched during the second half of 2024, aiming at increasing the cost efficiency, synergies, and the consolidation of our legal structure is well underway, moving as they should, and they have begun to give effect during Q1. The effects have partly been offset though by the system investments that we're making in order to further increase our efficiencies moving forward. And despite of what you may have seen the last few days in the media around personal assistance being overtaken by criminal gangs, we don't see that in our business and there are several positive signs But just to make a small comment on the media that has been underway, stating, for example, that we have had around 22 staff employed with criminal connections in our operations. It's nothing that we know anything about. No one has been informing us about this. And if it is true, we are not sure what criminal connections mean. And also it would mean that it's about 0.2% of the staff that we have employed within personal assistance. And I believe that you will see that in any business that you actually look at the staff. So we are not too worried about that in our area. The positive signs that we have seen within the personal assistance markets, however, during the quarter is that for the first time in a long time, we can see a small increase of new customers entering the market. We can also see a small increase in the number of hours on the market. And there's also been an indication that the index clause will be included in the budget proposition for next year, which for us will be very beneficial. So maybe we should end the positive science within personal assistance by noting that for the first time, even if the quarter as a whole had a net outflow of customers, the last month of the quarter, we actually had our first month for a very long time with a net zero customer outflow, which is a positive indication in that area. As we've talked a lot about also in previous presentations, we do operate within areas requiring specialized competence. And we know that this works for us because we have very high client satisfaction in these areas. And we have a well-filled toolbox in order to be able to do this. We invest in research and development. We have evidence-based methods, both our own that we have developed and that external partners have developed. that we use. We have an active internal competence transfer. We have our Humana Academy where our employees can continuously develop their competences. And we have a very strong value based culture to build from. To give you one example of how we use these methods, I'd like to point out, as you can see in this picture, the unit is called Tonvillan. It's one of the units where we work with young boys 15 to 20 years of age that have criminal behavior. And the whole point of the operations is to get the young boys and men out of the criminal behavior and into being productive citizens again. We have good success in this area, and we're using a method called B12 in this area, which we have developed ourselves, and there has been research done on this method as well. And we know that it's working. So when you see in the debate sometimes in the media that the HVB homes or the residential care units, that they are also called, is a growing ground for criminal gangs, it is quite the contrary. The HVB homes in Sweden are a part of the solution in breaking these negative trends. And how do we know that then? Well, we know that by keeping measuring the social impact of our services. And we can see that we have had a slight decline in Q1 of the number of completed placements that led to a lower level of intervention. And this is partly due to the fact that we have fewer people actually leaving us during Q1 this year compared to last year. But it's also a sign of that we're getting more complex placements and that we are receiving placements that are waiting for assist placements. So they are actually meant to move into a higher level of care after us. But we do, however, see that more than half of the clients in the residential care homes actually achieve the target in their implementation plans. And the target, for example, can be going back to school or being able to reunite with families. So we are definitely making a positive impact in society by working within this area.

OK, I will go through the financial slide. In the quarter we see a growth rate in the revenues of 5% compared to last year. The decrease from the previous quarter comes primarily from the divestment of the Finnish elderly care business as per end of January, as well as that the current quarter contains two days less compared to the previous quarter. I would like to highlight the adjusted EBIT contribution between our business areas. Only two years ago, Personal Assistance contributed with 40% of Humana's EBIT. The contribution in today's portfolio has changed a lot and we have been able to compensate for the decrease in Personal Assistance profitability. This shows strength in Humana's diversified portfolio. Also during Q1, there was a continued profit improvement compared to previous quarters, both in absolute and relative numbers, with an adjusted EBIT margin reaching 5.1%. The EBIT development compared to last year shows a mix between the segments with improvement in Sweden and Norway. while Finland had a weaker quarter, where a major part of the decreased EBIT comes from that elderly care in Finland constantly rebuked with 7 million SEK in Q1 last year. We see a slight decrease in revenues for Sweden, both compared to last year as well as previous quarter. Main reason for this is the continued decrease in revenues within business area personal assistance during the quarter, even though Natalie, as she mentioned, that March showed a promising sign. Even though the decrease in revenues we were able to compensate for this and reached an increase in adjusted EBIT of 11%. The main driver for the increased EBIT was the business area elderly care with very good occupancy. Norway continues to perform in most aspects. The revenue increase of 95% is of course primarily driven by the Team Olivia acquisition but also supported by an organic growth of 7.6%. The decrease in revenues from the previous quarter is mainly related to less number of days in Q1 and also a weakening of the Norwegian pound. On the operational side, we have so far been able to meet increased personnel costs with price increases and organic growth. Finland is in transition. This quarter the divestment of elderly care business was completed and is the main driver behind the drop in revenues. But we also see a decrease in revenues as well as the profitability coming from low demand. within some areas of child welfare services as well as open care services. We have an increased focus on finding growth opportunities and to work actively with our current portfolio. On the coming two slides, I want to highlight some of the major items within our cash flow for the last 12-month period. From the starting point of the reported EBIT of 523 million SEK, we do adjustments to come to the EBITDA excluding IFRS 16. We have a positive effect from the change in working capital of 113 million SEK. We have PropEx-related investments of almost 100 million SEK in our units. And on top of this, we have invested in the construction of an elderly care home amounting to 120 million SEK. This property is now finalized. Paid interest as well as paid income tax takes us down to a free cash flow for the period of 219 million SEK. During the last 12 months we have divested the elderly care business in Finland and at the same time acquired Team Olivia Norway. On top of this, we have conducted repurchase of shares amounting to a paid amount of 55 million SEK per quarter end. Finally, we have an FX rate effect leading to our change in net debt of 222 million SEK for the last 12 month period. As you probably know, our board has suggested to the AGM in early May a dividend of 1 SEK per share amounting to approximately 50 million SEK. When it comes to our financial targets, we are not where we want to be when it comes to our organic growth. We reach a total growth rate of 8%, but the organic growth rate suffers from the development within personal assistance and also the last quarter's development in some areas in Finland. Our adjusted EBIT has continuously improved the last quarters and for the current quarter we reached an adjusted EBIT of 5.1% for the last 12 months, to be compared with 4.6% one year ago. Our capital structure continues to improve, and we are now at a leverage ratio of 2.6. The reason for the positive development during the quarter is both an improved ABTA, as well as the decrease in net debt, mainly due to the divestment of the elderly care in Finland. And now back to you, Natalie.

Thank you. So looking a little bit at the focus going forward, we will continue to deliver on the efficiency synergies and consolidation programs that we have initiated during last year they will run until the end of next year so it's a two-year effort here before we see full impact we will continue to execute on our specialization strategy where we will invest in child welfare services and disability services in finland We will invest within LSS and the HVB care chain in Sweden. And we have also, as of yesterday, decided that we will continue to invest within the elderly care segment in Sweden at a moderate pace. We will continue to ensure the transition in Finland, leaving elderly care and investing in the targeted area. And we will continue to secure the customer inflow and the profitability in personal assistance in Sweden, where we have many initiatives running. And of course, last but not least, since we have had quite a long period investing now in programs to increase our efficiency and consolidation, we are now turning our eyes again to the growth. And we will target, of course, organic growth and growing healthy pipelines and partnerships in our different countries and in the targeted areas, as well as reviewing the M&A options in our targeted areas. And with that, we thank you from us.

If you wish to ask a question, please dial pound key 5 on your telephone keypad. To enter the queue, if you wish to withdraw your question, please dial pound key 6 on your telephone keypad. If you are listening to the presentation via webcast, you can ask written questions using the form below. The next question comes from Christopher Liljeberg from Carnegie. Please go ahead.

Thank you. Given what you said about the personal assistance volumes, do you expect a stable development now from the second quarter, or do you expect it could even start to increase a little bit later in the year? That's my first question. And then I wonder about the Norway and the sequential earnings, if there's anything special explaining that besides seasonality. Thank you.

If we start with the personal assistance for Q2, we know we will have an impact looking at the profitability of the Easter coming in Q2 this year compared to previous year. But we do have a more positive view on the customer So yeah, from that perspective, we do believe that it will improve and flatten out hopefully during the year, which has been the target and the goal for that.

And then your question, your second question regarding the, if I understood you correctly, you were asking about the margin in Norway in this quarter compared to the previous quarter in Q4. Right?

Yes.

Yeah. So we have a margin this quarter in Norway of 5.2% and in q4 it was 7.1 so yeah this with the we have some calendar effects with the one day less in this quarter in in february and then also one other day less due to yeah the composition of the month so that hurts impacts our profitability in norway Otherwise than that, we say that we are a little bit under pressure on the cost side in Norway, but we have been able to compensate for that so far and we will also continue to compensate for that going forward.

Yeah, we believe in delivery according to our plan during the year.

Yeah and when we compared to the Q1 last year it we go up with almost one percent and we see an improvement in actually in all sub-segments in Norway in the EBIT percentage this quarter compared to Q1 last year. So we see a good development in Norway.

The impact from the F16 Lisa counting is smaller sequentially. Is that the only factor of divesting in Finland?

Yes, exactly, as we write in the report on a pretty detailed level, but that we have a write down of the right of use assets of 11 million SEK connected to the divestment of elderly care in Finland. So that is what you pick up on. That difference is a bit smaller than normal, so to speak.

Is that adjusted for in the earnings report, the 90 million you report in IFRS adjusted EBIT?

No, so that effect is in the other segment.

Okay. Maybe I could come back to that afterwards. Thank you.

Okay, thank you.

The next question comes from Carl Johan Bonnevir from DNB Markets. Please go ahead.

Yes, good morning, Nathalie and Kristoffer. Just to start off, just to get a feeling for how do you see the willingness from the local municipalities to send, say, customers to you, given the heat they're getting for what's going on in the HVB segment and so for the moment?

Yeah, the HVB, we do see that it's a slow inflow on the HVB segment in Sweden. And our belief is that there's still a big need. We don't see a change in the need, but that the municipalities are more careful in placing their clients due to the political debate. The municipalities are a little bit afraid of placing and getting criticism and so on. So I think it's so important to actually highlight the fact that we are not part of the problem in welfare crime or the other way around. We are part of the solution to the organized crime and the criminal gangs. This is where the children come to become more productive parts of the society again. So it's been a slow quarter, Q1, as partly also previous quarter was a little bit slow. But we don't see a change in the need. And we also get increasing amounts of requests for clients waiting for these placements. And we are adjusting our permits in order to be able to take a higher degree of those. And then there's a slow process with Evo in approving permits. It takes a little bit of time to do that.

And I think you mentioned during last year sometime that with all the focus being towards the youth criminality and so on, a lot of the other segments also saw less of of the new customers coming in because the municipalities were then basically focusing on the criminality segment. Is that neutralized again so you're back to more of a normal kind of situation in the other segment?

Well within personal assistance as you just saw in Sweden there was a lot of media over the past few days saying that the personal assistance has been taken over by criminal gangs, which is of course not true. So that is a sad development. But we don't see on the market that it's making a difference, at least not yet. And I don't expect that it will either. I believe that this is more of a political debate. It's a very large part of the market that is taken care of by the private operators. So even if there is a debate there about criminality, I don't believe it will make an impact on us. um and we are a large secure provider in this area and in the elderly care we are there's not been any impact at all we are of course doing really well in that segment and have a very high occupancy and see continuous improvements in that area within lss and other areas i do believe that the lss has gone down a little bit on the market as a total but we haven't seen it in our

units units specifically and we will watch and see the reports from our competitors but that's the signals we've been picking up on from others good to hear good to hear and just if you could elaborate a little on maybe now when you're also talking about keeping the the swedish elderly care segment which sounds logical to me at least Looking at your financial targets and closing the gap up between the 5% to 7% on profitability, how do you see the building blocks? What are the different operations supposed to contribute to be able to close that gap?

yes so that the target is on medium medium turn so to speak so we see promising signs as natalie mentioned in the personal assistance business area and which has a very pressured profitability for the last period as you know so there we see a potential to contribute from that and then we also have the ongoing as Natalie also mentioned savings program that we are executing on that will also contribute quite substantially and then of course we are looking very actively on our portfolio all of the time and see also potential for further operational efficiencies in our different business areas and we will also focus a lot on our organic growth which has been a bit behind as mentioned in the presentation. We will put a lot of focus there as well and to make good and sound investment decisions and we will get some profitability contribution also from these activities going forward.

When we think about organic growth we should think about coming out of the higher margin mix in your portfolio so to say.

In Finland, it will be very much focused on higher margin growth, organic growth, since we are investing in disability and child welfare services and conversion of child welfare services into higher intensive care units. So for sure, higher margins. Around the HVB care chain, that also will contribute to higher margins. The LSS, the same there. It's in general slightly higher margins than HVB. So, yeah, we are investing in more profitable areas.

Excellent. Thank you very much for the extra color and all the best out there.

Thank you. As a reminder, if you wish to ask a question, please dial pound key 5 on your telephone keypad. There are no more questions from the phone lines at this time, so I hand the conference back to the speakers for any written questions and closing comments. Please go ahead.

Well, in that case, we will thank you for the attention today during the presentation and look forward to seeing you next quarter again.