Good morning all and welcome to this Q4 Webcast with Lumi Gruppen. With us today is CEO Erik Brandt and CFO Martin Prytz. Please use the written Q&A function if you have any questions, and these will be answered after the presentation. Erik and Martin, please go ahead when you're ready.
Thank you, Kirsty. Good morning, everybody. Hope you're all feeling great this morning. Obviously, we look forward to presenting the results of the poor Q4 for you guys. We will also be available to answer any questions you might have by the end of the presentation. I think just a quick summary of Lumi first. We are a leading education provider in Norway. We have currently, but we are waiting 1/3, two operating segments, Sonans and Oslo Nye Høyskole, ONH. We look forward to add the third segment, NTech, to the group this year. Both schools have strong market positions and have strengthened the online position over the last couple of years. Combined, we have now more than 9,000 students. 57% of the students are attending digital programs.
The share of online students is expected to further increase, securing Lumi as one of the leading provider of online education in Norway. First, a summary of the quarter before Martin will go through the financials in more details. With a lower cost base now and a more flexible and scalable operational model in combination with our market position, we are well positioned to benefit from a likely market recovery in 2023 and also different growth opportunities. Back to the quarter. In the quarter, we saw a solid development in ONH with continued growth. The cost cut plan in ONH has been successfully implemented, contributing to improved financial performance in the quarter. Sonans has achieved NOK 7 million in savings in the quarter, a significant result which positively affects the P&L in the quarter.
I'm also pleased to inform you that NTech, Norwegian School of Technology, received its first accreditation and is preparing a launch in 2023. NTech will be a new growth area in Lumi Gruppen, addressing the increased demand for tech competence in the society. On the slide to the right, you will see the financial headlines for the quarter and for 2022. We are pleased that we maintained the Adjusted EBIT for the quarter in line with Q4 2021 at NOK 23.1 million. Think Martin will go through the financial results in more details now before I continue with the operational and more strategic part of the presentation. Martin.
Thank you, Erik. For the financials, first of all, looking at the revenue. The revenue was NOK 126 million in Q4, representing a decline of 5.7%. Like previous quarters, this is driven by the post-COVID market setback for Sonans. At the same time, as Erik mentioned, we see strong growth and a record high revenue in the Q4 for ONH with 18% growth versus last year. Sonans reported higher online revenues like in Q3. This is the result of what we had announced previously, the change in commercial terms leading to a different accrual of revenue. It's important to say that this is revenue from recurring educational services and active students and not changes in the accounting principles. The Adjusted EBIT ended at NOK 23.1 million in Q4, and the margin was actually slightly higher compared to last year, Q4 .
The margin is held up by the cost programs successfully implemented, strong ONH revenue growth, and higher online revenue in Sonans. However, the EBIT was negatively impacted by an additional bad debt accrual of NOK 6 million for Sonans and ONH. Measures were implemented to deal with the situation in Q4. I'm now confident that we have a process in place to deal with this situation. We have received updated credit scores for our portfolio from our service partner, Intrum, that shows that the portfolio is improving with respect to bad debt. However, it will take some time before this yields full impact in the P&L. Looking more closely, especially at Sonans, we are very happy to see that the cost program is developing as expected. In previous quarters, we announced NOK 60 million in savings for Sonans for the school year 22/23.
Together with closing additional three campuses, consolidating the greater Oslo region, we will exceed savings above NOK 70 million annually. Together with the cost program in ONH, the group is now set for a strong performance given a likely market recovery. It's also positive. We are also pleased to see that the cash flow is now also starting to improve now as this restructuring cost is more or less out of the P&L. The liquid reserve of NOK 29 million is satisfactory at the year-end with the knowledge that we have a strong cash flow in Q1 with prepayments on the tuition fees for the semester, spring semester. The leverage using NGAAP EBITDA as measure, ended at 3.4 with 25% adjustment compared to allowed level of 30%, so slightly below.
We believe that there is still sufficient headroom for the Q1 and Q2 covenant in line with the updated agreement with Nordea. To conclude the financial part of this presentation, we would like to highlight the six areas of importance going forward. We will for the coming periods continue to work with value per student, unified pricing as one of our priorities. We will maintain strong cost control and continue optimizing the cost base. We will have focus on credit quality still and cash conversion from student contracts. Leveraging from structural OpEx reductions. Starting now the process with securing a new long-term financing for the group as the facilities mature in February 2024.
Also when it comes to earnings quality, as we have put up as one of the items here as well, is that now as the restructuring cost is complete, more or less, there should be more limited need for adjusting the numbers to present the underlying performance of the group from 2023 and onwards. I think that was the financial part of the presentation, and happy to receive questions after the presentation in the Q&A.
Thank you, Martin. I will proceed. Let me just find the right button here. Okay, I think this section will contain the following highlights with focus on the three segments. Three, I said two earlier, but now it's going to be three segments in Lumi Gruppen. First, Sonans, and the highlights from Sonans is that we have completed the turnaround strategy and reduced the cost base, as also Martin said. I also want to say that underlying market fundamentals with increased importance of education is still strong. We know the drivers that led to the market decline last year in the private candidate market, and the same drivers should positively affect the market when they revert back to normal. We will also cover some more information regarding the Admission Committee.
The reason for that is that, hearing product consultation process is now in place with the deadline 9th of March. It's important for you also to know that Lumi has taken a leading role in the sector, in the education sector, in the consultation process. For ONH, strong track record of growth and performed a very strong spring intake, with 17% growth in students for this spring. I think the college is well-positioned for the autumn intake and also awaits the final approval of a new bachelor degree, which will add to already strong portfolio of programs. I think it's fair to say that ONH might be a medium player in the higher education market, but has a solid online position, attracting students that wants a more flexible and convenient offering customized to different life situation.
For NTech, we are obviously excited to launch NTech in the market. We had a pre-sounding in the market, this week actually at the student fair in Oslo, where all the young students go and see what they're going to do next year, and I think it was a success. The website and marketing campaign will be launched in Q1, and priority now is to secure a successful launch, recruit students obviously, and then deliver a high-quality offering from the autumn. However, it is important now also to say that new programs and courses will be developed, that's our priority, to expand offering and growing student volume in the coming years.
It's fair to say that this is not a sprint, it's a marathon, and it's, yes, it's several years from now, we are going to have a huge vocational school in the group. A little bit more of Sonans first. The first phase of the turnaround is completed, as I say, and the next phase is closing of three small campuses around Oslo region and consolidate the total student volume in the region in the Oslo campus from next school year. This will create a more effective and profitable operation and contribute to rebuilding the student volume in the Oslo campus. Live has been a success the first year of the launch and will be an important tool for reaching more students across geographies with fewer campuses. It's also not important to notice that the price level is similar to campus courses.
As Martin showed, the inflation has affected the campus cost base, and prices will be adjusted to compensate for this. The spring intake is a supplementary intake for school year 2022, 2023. The market conditions, as said, as expected, remained the same throughout the school year. The total sales ended down by 31% in line with the autumn intake. As a result, as Martin said, as a result of increased number of bad payers, we started to credit check online students this fall. Obviously, this resulted in a decline in online sales since a portion of students were denied admission. The credit quality now of the sale will be improved going forward.
A key question for Sonans is how the market will develop going forward, and we believe a market recovery is likely already from the school year 2023/2024. The main reason for this is that the underlying market fundamentals are still strong, and the market drivers that led to decline should also lead to increased demand when the high school exams are reintroduced, and probably the labor market also softens. Over to the Admission Committee. The Admission Committee published their recommendation December 1st, 2022, as you probably are all aware of, and they suggested several changes to the admission system. The most controversial suggestion is the removal of the opportunity to improve grades from high schools.
I think it's fair to say that the Norwegian system of intake to higher education has always been based on the principle that everybody should have a chance to enter, regardless of whether they were successful in high schools or not. One of the key tools to secure a second chance is the private candidate arrangement, which allows students to gain study competence, take new subjects, or improve grades to qualify for higher education. Around 60,000 students use this opportunity every year. In the school year 2021/2022, more than 120,000 exams were conducted. According to Statistics Norway, 75% of the private candidates are first-time candidates, which means they have not taken the subject previously, while 25% improve their grades. The Opptakskomiteen suggestion is related to improvement of grades, not the first time candidates.
In worst case, the suggestion could affect 25% of the private candidates market. First, it is also important to underscore that any potential changes will not affect ONH or NTech, and only a part of the Sonans' business. Secondly, the suggestion does not change anything of the underlying problems, that the supply of attractive study program is limited, and many students will still have poor grades and will need assistance. Services to help students qualify will still be in high demand, and Lumi is well positioned to prepare students for a potential entrance test and assist students in high school to be successful on their exams, since it will become more important to be successful at first try. Third, we are now in a consultation process which will be finalized March 9th.
Our target in our communication plan is obviously to maintain the possibility to improve grades. We have been active meeting politicians and other organizations and provide them with analysis and data points supporting our view. Fourth, it will take several years before this comes into effect, and opinion so far is not consistent, which suggests that the outcome will or could be somewhat different than the suggestion is. Either way, Lumi will have time to adjust the business and develop new services helping students to qualify. We also included something on the right slide here, figures from a survey showing that more than 60% of respondents are positive to the private candidate scheme, 25% are neutral, and only 11% are negative. The Admission Committee recommendation is not in line with the public opinion.
Secondly, one of the key premises for the recommendation was that Norwegian students are too old when they start studying. Figures from OECD shows that Norwegian students, on average, start when they are 22, in line with the OECD average. In the Nordics, however, the average age is 24 to 25, as you can see on the top there. I think it is rather inconsistent that they look to Sweden for inspiration for the new model they recommend when the age is way higher than in Norway. Yes, I think that conclude the Opptaksutvalget. Over to ONH. Continue to outperform market for higher education, 17% growth in the spring intake, as said. ONH, they have a separate spring intake for online programs only. No campus programs start in spring, and 17% growth compared to last year.
Last year, we had 16% growth. We continue to grow in the spring. Based on the current market drivers, especially increased demand for online programs in higher education, the college is well-positioned for the autumn intake. When you look forward, the first important milestone for this intake is 15th of April, which is the deadline for public universities. ONH will obviously continue its intake through the summer with an important sales period in July as well. ONH has developed a solid portfolio of programs, master, bachelor, annual units, half-year programs, single subjects, both online and on campus. This platform is a solid foundation for additional growth and development. As I said previously, a new bachelor program is in process and will be launched pending NOKUT accreditation.
In addition, new programs will be developed, and we're also currently exploring new opportunities for the B2B market and new international opportunities through collaboration with partners. I think ONH is on the right track, and we expect another strong year for the college. Several growth opportunities do we have in pipeline to continue the growth rate that we have seen over the last couple of years. 504 new students this spring, compared to 432 students last year. A little bit about NTech. A long process has been completed, and Lumi Gruppen is finally ready to launch the new school and take in the market. As I said, we have been at the student fair. The website will be launched early March, ntech.no.
The key now is obviously to recruit students and launch a high quality offering for the first students. NTech will be located at the campus Oslo, but we also have a footprint in the Rebel House in downtown Oslo Center. Close collaboration with the tech industry is key to successfully make the student ready for a job after two years. I also think this is a part of what gives NTech a competent, competitive advantage compared to other schools. The two-year program is offered full-time, but shorter courses for upskilling and reskilling will also be offered in addition to developing new programs going forward. Yes, I think that concludes the NTech bit. You want to go through the [ask] Martin ?
Yes, I think to try to summarize this presentation, I think that we are of the opinion that the market recovery is possible as early as next school year, starting from the autumn.
Yes.
It's obvious that a more favorable situation for market situation for Sonans will quickly improve the financial performance given the completed restructuring process and the significant leverage of the business. We see continued growth for all nations spring intake. We are now ready for a further volume expansion for the current program portfolio, but also adding an additional bachelor program. We are, as Erik said, we are very happy to launch NTech, a new growth opportunity for the group. As Erik also presented, we are now closely following the process of, on the recommendations published by the Admission Committee and also delivering our answers in that hearing round as well.
I think for the guiding part for this coming H1 of 2023, yeah, based on the spring intake for ONH and for Sonans, we estimate revenues to end around NOK 205 million to NOK 210 million for H1 2023. I think that concludes our presentation, Erik.
Yes.
We are happy to answer questions through the Q&A.
The first question was about we have provided a revenue guidance for the H1 , and we obviously have a good overview of the cost development as well. I think that as the numbers for the H2 of 2022 and the first part of the school year is on adjusted basis, I think that shows just the level of operating expenses in Sonans and what should be expected for the spring. There are some uncertainty related to the optics for the spring due to this bad debt situation, but we believe that the bad debt expenses will decrease during the spring from the measures taken.
We don't expect additional savings above the levels we are presenting now for Sonans during the H1 of 2023. There will be additional savings from the campuses that we will close from by end of this school year that annually will lead to additional cost reduction in structural OpEx by approximately NOK 10 million. Approximately NOK 5 million to come into the P&L of the H2 of 2023. I think that's what we could share on the, on the cost base. Q3, Q4 on adjusted basis representing the current level of Sonans, potentially some few additional savings during the H1 of 2023. More significant savings from closing the three campuses in the H2 of 2023.
Next question is, can you say anything about the size of student capacity in the NTech launch? Maybe, Eric, you could say.
Yeah, absolutely. I think, I think it's a little bit difficult to say, but I think somewhere between 50 and 100 students, it's something that we should be able to process the first year. I think it's extremely important for us to be successful the first year, since this is the first launch, and it's the first time we actually do it with new students. It's very important for us to maintain the quality and deliver, you know, as best as we can, so we get happy students, and then we can increase the student numbers the year after when we have the second intake.
Yes. Next one is with the larger geographical reach for Sonans. Are we doing any specific marketing action in remote places? I think the answer to that is yes, basically. We are now serving students in outside larger cities throughout the Live concept and the online platform. It's obvious that we will target those students in different ways than we have done traditionally through the campus sales.
Focusing obviously in the markets, we have campus with specific marketing for those students as well. We will obviously adapt our marketing approach towards the new structure of Sonans. The next question is about FTEs in Sonans going forward. I think we have written something about that in the report, stating that we were around 106 FTEs at the end of the year, and we expect to be around 95 FTEs at midyear 2023 with the closing of the three campuses in the Oslo region. Then there's the question of how confident we are of an improvement in Adjusted EBIT of FTEs in the coming year or this year compared to last year. I think it's a bit early to say.
I think that's. Based on the cost measures we have taken, that will be persistent over time given that a lot of the cost measures are of structural nature, means that we are able to improve the performance of the group given a market, likely market recovery. It's, again, the student volumes that decides how the result will be for this year. We are positive currently on the market development, but still too early to conclude whether that will improve the EBIT for 2023. Additional question on the OpEx developing into H1 of this year, given the cost cut programs. I think, as I said, we have reported on adjusted basis for OpEx, showing the underlying performance given the measures taken.
As we presented, we have reduced cost in Sonans by NOK 34.8 million in the first, or the H2 of 2022, and we are now at the level we announced, around NOK 60 million for the year. Additionally, NOK 10 million will come on top of that from the closing down three campuses, additional three campuses. We don't expect additional savings on top of that, but we will have a positive impact of closing down the three campuses at the H2 of 2023. A question on the working capital effect in Q4 and what drives this.
I think, in general, I think that as we have the bad debt situation, it means that we have a weaker development for accounts receivables as well, meaning that the balance of accounts receivable is much higher relatively to sales than it should be compared to previous periods, meaning that the bad debts percentage is much higher, resulting in lower cash inflow as well from students.
No more questions?
It seems no more questions at this point.
No. Okay. Thanks for joining the presentation.
Yes, thank you all.
You are welcome to send an email to us if there are any more questions. Yes, absolutely. We're happy to answer, of course.
Thank you.
Thanks.
Thank you.
Okay.
Have a nice day. Bye.
Thank you.