Humana AB (publ)

Good morning and welcome to the Humana Q2 2025 report presentation. For the first part of the presentation, participants will be in listen-only mode. During the questions and answers session, participants are able to ask questions by dialing pound key 5 on their telephone keypad. If you are listening to the presentation via webcast, you can ask written questions using the form below. Now I will hand the conference over to speakers. Please go ahead.

Thank you. Good morning and welcome to Humana's Q2 presentation. My name is Evelina Pettersson. I'm the head of IR at Humana. With me today I have our CEO Natalie Bolat-Nilsson and our CFO Christopher Heroux. Please go ahead, Natalie.

Thank you, Evelina. Starting off with a few highlights. from the quarter we have an underlying profitability improvement in both sweden and norway performing well in those areas we have an ongoing transition in finland during the quarter we have performed a phase two of our transition program that we have talked about previously in a previous quarter report, and that will start taking effect from the second half of this year. We have good performance in all of our targeted growth areas, and this is a very good sign for the future. We're performing very nicely within the LSS segment in Sweden. We're performing nicely in our disability segment in Finland, and we're also performing well in our elderly care in Sweden. We have also amassed a good amount of projects in our pipeline in these target areas. And already now we signed several contracts amounting to about 100 million in annual revenue that will start up later this year and beginning of and during next year. And we are, of course, continuing to grow that pipeline. We have a new financing agreement in place that will reduce our financial costs with 35 million compared to the previous 12 months. That's starting to take effect already this week, actually. And together with our previously announced efficiency and consolidation programs that we are running, We actually now have 100 million in dedicated efforts that will reduce our costs with 100 million once in full effect. So we are very positive about the outlook moving forward. We have a strong cash flow during the quarter, a net debt decrease, and we have repurchased our own shares. Christoffer will get back to more about this shortly. We often talk about that we have a specialization strategy. For us, that means that we want to be the very best in the areas where we operate. and that we want to be able to drive the development in those areas in a positive way. I'd like to give you a few examples from our Almedalen agenda that we had recently. One is that we released a report. We actually spent a bit of time figuring out the legal costs associated with the insurance board reclaim processes within personal assistance. and what we could see is that we actually spend more money on the market on the legal processes than what the insurance board actually manages to take back in reclaims it's a big waste of taxpayer money we'd like to spend our efforts focusing on giving care to the personal assistance customers but we know that one of the best ways to do that is to have a very very sharp legal team and it's a bit unfortunate but it's the way it is on the market currently we hope there will be positive changes moving forward But for us, we actually win about 97% of our cases, and that's one of the best ways we can help our clients currently. Showing a couple of more examples of how we try to drive the development and monitor the development. It's the area of comorbidity. These are often clients with both mental health issues and often drug abuse issues. It's a group that has been very marginalized for many years on the market and the responsibility for the clients have been tossed between municipalities and regions and back to municipalities. And it's a big waste of money and it's causing a lot of issues for the clients. We operate within this segment. We have several units within this segment. And there has been an ongoing investigation since mid 2020 in this area that is now with the government being on referral there. And we hope that the suggestions will be implemented during 2026. In that case, we will see a much better setup for this area moving forward, which we are happy to say. And it also puts a lot of pressure on the municipalities and regions incorporating in, for example, tendering for this area. So it will be more cost effective and it will be better for the clients. So happy to have taken part in that effort. We also have talked a lot previously about our outcome measures and we continue to work heavily in this area, especially as regards our children and young people. It's really hard to believe that it's up to each social worker to make a decision on what is an effective treatment measure. when there's no evidence or treatment options, standardized treatment options available for them to make that decision. We would like to see a development in this area where we have national registers where we can collect data from municipalities and from private operators to see what is actually the best outcome of the different type of treatment methods. so that we can develop standardized care chains for these children and young people and have better effects, more cost-effective treatments, and so on. So we should learn from the healthcare. This is nothing new. It's been done within healthcare for many, many years. You collect the data, you have the codes, you collect the evidence of the treatment methods, and then you develop standardized care flows. for everything from hip replacement to cancer treatment so it's not impossible and we should absolutely make sure we drive that development further in sweden as well where we are working heavily on this going over to the financials the last 12 months revenues are growing with seven percent compared to the status one year ago

The growth mainly consists of the acquisition of Team Olivia Norway and at the same time there is a decrease coming from the divestment of elderly care in Finland. In our adjusted EBIT last 12 months of 496 million SEK, individual and family is by far the biggest contributor. Norway is developing well and some positive signs regarding personal assistance are to be seen also in this quarter. Even though a decrease in the LTM adjusted EBIT compared to the previous quarter, we have developed in a positive way compared to one year ago. In Q2, we had a significant negative effect from that the Easter occurred in the current quarter compared to the first quarter last year of 27 million SEK. If you disregard the Easter effect, There are underlying positive developments in both Sweden and Norway. On the other hand, Finland has developed negatively, which we will give further comments on later in this presentation.

Looking at Sweden, we see an underlying profitability improvement of 10 million SEK compared to last year. And the improved profitability is primarily driven by continued really nice development within our elderly care segment that we're very happy about. It's also driven by the efficiency programs that we've been running within personal assistance that are showing effect. So improvements in those two segments. We also see that our elderly care unit that we opened in May, Strängnäs, the large new very nice unit is performing according to plan. So we're happy about that. We have done some, we see that APB segment, we've talked about that before, the residential care homes. It's a little bit weak and it continues to be a little bit weak. As you know, there's been a lot of debate in this area, media attention and so on. But we do see that we are getting requests. The requests have changed in profile quite a lot during the past two years. Two years ago, we would get a lot of requests on young girls with self-harm behavior, and now we get a lot of requests on young boys with criminal connections. So we are making a few adjustments in our portfolio to better be able to meet the requests that are actually coming in. So we feel optimistic moving forward and we have free capacity in this area, which is also optimistic for when it takes off again. We have been able to build a strong pipeline within LSS, as I mentioned before, and we continue to do that. So we are growing in this segment that is performing very well for us currently. So happy about that. Moving over to Norway. Norway is performing according to plan. We see a profitability improvement compared to last year, which is nice. We have a fairly large Easter effect in Norway during this quarter. that of course impacts a bit since Easter came in Q1 last year. And we have a nice continued organic growth during the quarter in Norway. And the highlight from this period was that we won the tender within HOT services, which is Group Homes for Adults in the Oslo region. And it will start to take effect from 1st of November this year. And for us, it means that we will be able to increase our current capacity with 20% in this area. And at the same time, we will have more complex cases and higher prices and higher margins. So we're very happy about this development and it shows promise moving forward. Moving over to Finland, which was very weak. quarter for us and we knew that it would be a weak quarter and we've been talking about this as a transition year. It's of course partly due to the fact that we divested the elderly care in Finland impacting quite a lot on the revenue side as you can see. But we have also had a weak purchasing behavior from the software regions within open care, as we've talked about before. We've been able to adjust continuously, but there is always a lag when you do that. Pretty much the same as we have discussed previously in personal assistance in Sweden. It's the same type of logic. We do, however, also see that there's been a small decline in some of the areas within child and welfare services. We are big in this area. We still have a good occupancy on the total portfolio. So we're not overly worried about this, but it gives quite an impact on the bottom line from the fact that in these permits, you cannot reduce the staff when occupancy drops. It's tied to the number of beds you have on the permit. But we have decided and negotiated during Q2 that we will make a few adjustments and close down a few departments to improve the profitability in this area. We have also had a few ramp-ups during the period that impact profitability, and we have continued to convert child welfare units to the category demanding intensive. We have a few more conversions planned for this year, and after that we will be at targeted level. During the conversion, of course, there is a small impact on the profitability in the unit. But at the same time, we are converting to a segment where we have 100% occupancy today and where we have good margins. So we feel confident that this is going to give us good impact moving forward. We have also, during the period, been able to welcome our new country manager, Leila Rutanen. Very happy to have her on board on the team. And we feel confident that the measures that we have taken during Q2 will start to pay off during Q3 and moving forward. So even if it's a week quarter, we feel quite optimistic about the Finnish market and our business in Finland. This coupled with the fact that we are signing agreements within disability care, the segment where we have very good performance, small segment for us still, but where we're growing. gives us a lot of confidence moving forward.

Yes, and coming back to the new financing agreement that Natalie mentioned, since the divestment of elderly care in Finland Humana has had a rather high cash balance at quarter ends. Last Monday Humana signed a new long-term loan agreement The agreement is over three years with two extension options of one year each. The total facility amounts to approximately 2.3 billion SEK divided into 1.4 billion in term loans which means we are repaying 500 million of the current term loans and an RCF facility of 900 million SEK. This updated capital structure will enable us to work more efficiently and also look forward to lower our annual net interest with some 35 million SEK going forward compared to the last 12 months. Emana has a free cash flow of 317 million SEK over the last year. During this period, free cash flow is still burdened by the property construction of the elderly care home in Stängnäs, which was finalized in the end of the last quarter. Hence this effect will fade out during the coming periods which will have a positive effect on our free cash flow generation. Also the new loan agreement will have a positive effect on the free cash flow going forward. The free cash flow we have generated and the investment of the elderly care business in Finland have made it possible for us to complete share buybacks of 88 million during the last two quarters. as well as paying dividend to our shareholders during the current quarter of 50 million and still have a positive development in our net debt of some 400 million SEK, coming down to a net debt of 1.3 billion at quarter end. Moving over to our financial targets, we have a negative development in our organic growth and as previously mentioned, the EBIT margin decreased in the quarter But we see good potential to improve this during the coming periods, given all the actions we have taken. When it comes to our capital structure, we are more or less at the same level as the previous quarter. And with that, back to you, Natalie, for some concluding remarks.

Thank you. Yes, a little bit on the focus moving forward. We will continue with the transition program that we have running in Finland. We had a phase one during last fall. We had a phase two that we executed on now during the second quarter that will start giving impact for next quarter. And we have a few more measures in mind for a phase three that we will get back to in coming quarterly reporting. But we feel confident. Finland is a good market for us and has a lot of dynamics in the market that's attractive. So we feel confident that it will give impact and we will see nice developments there. We will continue on our efficiency and consolidation programs. These earlier announced measures together with the refinancing will allow us to improve our costs with 100 million once in full effect. this will of course be a substantial impact for us moving forward so very happy about all the efforts that's been taken during the previous year and these are not including the operational efficiency program so not impacting the actual operations We will continue to execute on our specialization strategy. We feel very confident about the target areas where we're growing. It will help us balance our portfolio moving forward and we're also growing in the areas where we have nice margins and good profitability. In addition to that, we have started putting a lot of focus on organic growth again, both in filling up the units where we have free capacity, making sure we have the right type of permits for the requests and the demand that we have, and also in building pipelines together with our property. partners in these target areas. So we've seen some nice developments in the beginning of the year here and look forward to more nice developments in this area moving forward. As mentioned previously, we have a little bit of a weak demand in the APB segment, but we have initiated now some changes in the portfolio that we think will help us develop this area moving forward. And then we have during the first half of the year, as I've mentioned earlier, we have a lot of investments that's being run currently in digitalizing several of our areas. In addition to that, we are now also venturing onto the AI potential we have made during the quarter an AI assistant to available to all of our employees and we already now have it in use in for example within the quality area in personal assistance where our employees can use the AI system to easily access our routines and procedures to get better support in that and and we also have several other initiatives running such as scheduling and trials in different areas so we're very happy to follow and work with this area and we think that moving forward maybe not already next year but in the coming few years this will give us a big competitive advantage and by being early in this area and working with it so quite excited about that development and we also see that there's quite a positive interest now in the forums we have around our ai initiatives that are running in the different countries And with that, we feel confident moving forward. We have a lot of things that we have put in place that will start giving effect. So we have a positive outlook on the future. And with that, we'd like to wish you all a nice holiday and 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. As a reminder, if you wish to ask a question, please dial pound key 5 on your telephone keypad. The next question comes from Julia Angelistran from Handelsbanken. Please go ahead.

Hi, good morning and thank you for taking my question. My first question is on Finland. I'm wondering how should we look at the performance in Finland going forward? I know the transition might take time and you have more plans, but considering we have weak market conditions and so on. So could you maybe elaborate a little bit on that?

Absolutely, Julia. We feel confident that we will have significant improvements in Q3 compared to Q2. We will most likely not quite be on the same level as previous year for several reasons, but significant improvement moving forward compared to Q2.

Okay. So could this market's conditions improve? Maybe not. likely super near term but could this also speed up the transition or is this completely separate?

The transition is that we are changing the business segments we're operating in since we left the elderly care and we're focusing a lot on growing within disability currently. The growth in disability will of course take a little bit of time but we have signed contracts and we have a couple of more units opening up in the end of this year. But before you see the full effect of course there will be a little bit lag in that. at the same time the conversions that we are doing within our current portfolio within child welfare services that is starting to pay off directly after the conversion and the conversion projects are not that long so that we will see much quicker that improvement in child welfare services okay understood and just a last one for me then um

Could you maybe give us an indication on how the occupancy in Sweden is compared to a year ago and also how the occupancy in HVB home is today compared to a year ago?

Occupancy in Sweden, if you look at the adult segment that we have, it's performing pretty much as expected. If you look at the elderly care, we're in very, very good shape. When we looked at the end of the quarter, I think we had 11 open beds. if we disregard the new unit in Strängnäs. So we're doing really, really well on the occupancy there. The A3B segment, we have lower occupancy than the same period last year, and it is impacting. And we've seen a small decline in this area over the year that's been. So it's been a little bit weak, and part of that, we believe, is due to the big media. discussions around the HVBs. There's been a lot of negative debates. I think many municipalities are still a little bit hesitant to place within the HVB segment. They're afraid of of getting criticism. And it's a little bit of a misconception because the HPV segment is helping the young children getting out of criminal gangs, for example. But with the media attention that's been in place, it's easy to think that it's the other way around. So we do believe that it will start picking up again. We feel fairly confident. There's also the new HPV investigation that will most likely segment the HPV homes once put in place. we are in really good shape to capture that need when it comes so we feel confident that there are no no alternatives today to be homes today so we and the need is there so we feel confident that it will start picking up again exactly when it's always hard to say of course and in the meantime we're making a few adjustments in our portfolio to better meet the request that we do actually get we have in in the segment for young men with the criminal behavior or sexual deviations and young men in general, our units are fully occupied. They're 100% fully. So it's more a matter of adjusting a little bit, which takes some time since Evo needs to allow for that in the new permits. So adjusting a little bit in the portfolio, we think will help us capture some of the need that's actually there. And then we do believe it will start picking up again. It will eventually.

Okay, that's great. That's all my questions. Thank you.

All right.

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.

So with that, then we say thank you and have a really nice holiday.