Good morning all. Welcome to this Q1 webcast with Lumi Gruppen. Presenting today is CEO, Erik Brandt, and CFO, Martin Prytz. If you have any questions, please use the written Q&A function. Questions will be answered after the presentation. Erik and Martin, please go ahead when you are ready.
Thank you, Kirsty. Good morning again to all of you, welcome to this Q1 presentation by Lumi Gruppen. I am Erik Brandt, as Kirsty kindly introduced us, and I'm joined by Martin Prytz, our CFO. As always, we look forward to presenting the results for the Q1, and also to give some market update as we see it now in regards to the autumn intake. We will also answer any questions you might have. Just a brief recap of Lumi Gruppen. You all know Lumi of course. I think there are just a couple of things here to emphasize. I think the most important thing is maybe that ONH continue to score high on the Studiebarometeret, which is annual student survey.
Despite the problems we have had in Sonans is still the clear market leader in the private candidate market. Still, we have more than 8,000 students in this quarter. 57% of them are online. I think it's very interesting to see the online share for the ONH students, where we have 74% online students attending ONH this year. Just a brief summary of the quarter. I think the headline summarizes quite well. Cost base reduced and financial position is improved. I think with a lower cost base and a more flexible and scalable operational model, we are well-positioned for the future. In addition, the financial position is improved, significantly improved following the placement, which give the company more headroom going forward.
I'm not going to go through the financial results, as you can see there, because Martin will go through them in more detail later. Some takeaways anyway. ONH is the growth driver in Lumi and continue the positive development. It's also good to see that we have stabilized the cost base, resulting in improved EBIT margin for our higher education business. As expected, the revenues in Sonans are declining because of the post-COVID setback, which affected the student intake this school year. However, we have successfully implemented the cost cut program. Also, by the end of the quarter, NTech was launched, targeting its first enrollment for the school year 2023/2024. Before I continue, Martin will go through the financial results in the quarter in more details.
Thank you, Erik. First of all, just, please note in the report that the numbers we refer to in is now reported and not adjusted.
Mm-hmm.
For a comparison, we have, however, included the non-recurring items and the segment key figures in the quarterly report. We included the non-recurring items identified for Q1 2023, all numbers are referred to as the reported numbers in this quarterly report. First of all, revenue in Q1, as expected. Online revenue share remains about 50%. Total operating revenue was NOK 108 million, compared to NOK 133 million last year, which represents a decline of 18.8%. The decline in revenue, as we have spoken about many times now, is driven by the post-COVID market setback for the private candidate business in Sonans. We have, however, no effect of any new commercial terms for online in the Q1, the numbers are comparable year-over-year.
It's worth to mention that the revenue for Sonans was adjusted by NOK 4.5 million in the quarter as a result of full year contracts for a selection of students that demonstrate a low payment ability, and hence low likelihood for receiving a consideration from them. The full year contract revenue will be recognized when the payment is received. The group expects, however, that the effect of this change will still be in line with what was communicated in the Q4 in a total then of NOK 8 million-NOK 10 million in the H1 of 2023. For Oslo Nye Høyskole, we had a strong performance in the Q1 with 13.5% growth, mainly driven then by new study programs offered online.
Earnings per, for interest and tax in the Q1 was NOK 6.1 million, compared to NOK 14.3 million last year. The EBIT margin ended at 5.7%, compared to 10.8% last year. The decrease is in EBIT, lower margin in the quarter was a result of the decline in revenues. Reduced student volumes and lower revenue for Sonans have, to large extent though, been offset by the cost program implemented. Together with the growth in volumes and revenue for Oslo Nye Høyskole, this has compensated for the significant deviation in revenues. With the cost programs implemented, we had a total deviation in revenues of NOK 25 million, but that was reduced to only a NOK 8 million impact on EBIT for the quarter with the full effect of the cost programs.
As we can see on the right side, Sonans OPEX declined by NOK 19.1 million in the quarter. Total operating, sorry. Total operating expenses, excluding depreciation and impairment losses, equaled NOK 45.5 million in the Q1 for Sonans, and this represents a decrease of 29.6% and NOK 19 million compared to last year. We expect further reduction in operating expenses from the second half of 2023 when we are consolidating the Greater Oslo Region by closing an additional three campuses. Growth in volumes for Sonans will, with the new cost base or the slimmer and flexible cost base, will improve profits going forward. On the right side, we see that the expected savings in Sonans will amount to approximately NOK 70 million, which will lead to cost base of NOK 164 million excluding depreciation and amortization.
This is potentially then also higher by fully utilizing, optimizing the channels in Sonans, which is live, online and campus. Given this cost base and potentially more than savings, the Sonans business will start to be more profitable already on low growth numbers as we can see on the right side of the presentation. Lumi Gruppen had a total liquidity reserve, including the revolving credit facility of NOK 206 million, and a net interest-bearing debt of NOK 164 million at the end of the Q1. We had successfully completed a private placement of NOK 170 million on 7th of March, is in the quarter. Of the NOK 175 million in proceeds, NOK 130 million was used to reduce the bank debt from NOK 430 million to NOK 300 million.
We also launched on twenty-four April a subsequent offering, which will add additional NOK 25 million in proceeds. Together, this will improve the financial position of the group and allow for some more strategic and operational headroom going forward. As previously announced, we agreed on new leverage covenants for the Q1 and Q2 this year, the covenants were 4 for Q1 and five for the Q2. Actual leverage for this quarter was actually then 1.6. In the new financing agreement with Nordea and with effect from the Q3 of 2023 and onward, the leverage covenant has been set to 3.5. I think that's conclude the financial part of the presentation.
Mm.
I pass on to you, Erik.
Thank you, Martin. Just go on. I think this section will contain some highlights from each of the segments in Lumi. Now we also have included NTech here. I think first of all, some highlights on for Sonans. The turnaround process has been completed, you know, the cost cut program has been successfully completed, as Martin also showed in the figures. We also include some figures from Samordna Opptak, the UCAS. What kind of effect that should have on Sonans. I think the underlying demand for education is still strong. We also see some potential for some more normalized market going forward this year.
We also included some information about the admission committee and the process there, and we also expect the results to be somewhat modified based on the current results from the consultation program. ONH is on a good steam and continue to strengthen its position and have a strong start of the 2023/2024 intake. We also have new programs in pipeline also awaiting approval from NOKUT, but also some programs that we are going to launch within our own portfolio this year. I think based on the current applicant numbers, online shows strong development in ONH, while campus is basically more or less flat in line with the overall market.
NTech we have got, we have received the approval, as you all know, and we also launched it in late Q4, Q1, sorry. I think we go to the private candidate segment first. As you all know, the market has been hit by post-COVID effects, as we have previously informed. Three years without high school exams, resulting in better grades, strong labor market, which led to a major decline in applicants to higher education. These are the key factor for the market decline. The question now is how will the market develop going forward? The market KPI so far, we will say, is more or less neutral because that's related to the number of applicants to higher education. We see that there's been a small growth in number of applicants to higher education in Norway.
In addition, we see that the labor market is still strong, even if there are some signals that the unemployment rate might start to increase. We also know that the exams in high schools will go as planned, which should indicate maybe a more normal market going forward. We say that the market recovery is likely, but it will take time and probably driven by the reintroduction of exam and a softer, more normal and softer labor market. Over to the update when it comes to the sale for the school year 2023/2024.
Just to give you an explanation first, the first sales cycle for the school year, the coming school year, is completed around week 37, which is the deadline for signing up for private candidate exams the autumn. Sonans continued to sell courses after that as well for the spring, and that sale will also add to the total revenues and total school year sales for that school year. This year we have signed up students with a total value of 36 million NOK. That's a 36% decline compared to last year. To say this earning cycle has historically varied a lot, as you can see there, and doesn't give too much visibility in the final result.
In 2020, which was the best year in period, the sale was NOK 52 million at this time, and in 2022, which was the worst year, the sale was NOK 56 million at this time. The level in 2023 is in line with the sale in 2017 and 2018. The sale, the remaining weeks, as we have said before, the summer is the most important period. We have seen huge variation from NOK 153 million last year to NOK 271 million in 2020. In 2017 and 2018, which is comparable with the sale we have now, the remaining period was 216 and NOK 241 million respectively. Last year we experienced a solid sales decline during the summer.
I think a more normalized market during the summer because of the reintroduction exam and other factors could indicate an improvement of the remaining sale in 2023 compared to 2022. It is important for us to underline that it's too early to predict the outcome, and we have so far limited visibility. I think the main uncertainty for Lumi and the key swing factor for the financial development in the group is the long sale. As Martin also showed, small growth would significantly improve profit because we have a much lower cost base. In the same way as a decline would reduce profit. Let's look at admissions committee just a little bit. Not going to repeat everything they have come up with. What we are informing about is some new information after the hearing process.
The hearing process was completed this quarter, March 9th. It has been very interesting to see the respondents and how they are reacting to the suggestions. Basically, I have personally been through all 134 respondents and considering their view on the case of removing the opportunity to retake subjects. We have put up this graph, as you can see on the right here, to see where the different respondents stand on the matter of retake subjects or not. We see that 34% of all respondents support Sonans and support the opinion of continued opportunity to retake subjects, which means that they disagree with the admission committee. 24% are negative to retake subjects, which means they support the admission committee.
The largest group, 42%, didn't mention the issue or they are mixed, which means that they suggest more analyzing the consequences before making any decision. I think based on this analysis, it's not an unambiguously support of the Opptaksutvalget proposal, and the government will probably take all considerations into account when they deliver a proposal to the parliament. I think the signal based so far on the public hearings indicate that the changes might be more moderate than originally proposed. It's also interesting to look at the timeline here. It will take time, and the department confirm that it will take time to process the proposal from the admission committee.
I think, as they said, it will take at least a year before something is sent to the parliament for approval and the process in the parliament to take, you know, at least long term. Then there should be a transition period of three years, as we have heard previously, before something come into effect. Based on our estimate, potential changes should not be implemented earlier than from the school year 28, 29. I think we are prepared for all changes, and we will also have sufficient time to adapt the business to any potential outcome. It's also important to say that the committee's proposal will regardless not have any direct effect on the private candidate business in the next three to four year at least. Let's go over to ONH.
Continue to outperform the market, as we also did last year. The application date for UCAS, 15th of April, is an important date for ONH, even if ONH doesn't operate with a deadline but have an ongoing enrollment until the semester starts. The enrollment start status of the 15th of April is an important milestone and give us an indication on how the enrollment will end. It is still early in this cycle, and historically, we have achieved around 50% of the total number of applicants at this stage. I also have a very good news for you, that we have hired a new rector. We had a rector previously, which has been there for more than 10 years. Obviously, we have a managing director as well in Morten, but we were able to hire Sander Sværi.
He was previously a vice chancellor at Kristiania, and has been central in building up the offering and the quality and the all academic offering in Kristiania. We're very pleased for Sander to start in ONH, and he will be crucial in developing the offering further for ONH and strengthening its position. When it comes to the number of applicants so far, we have 20% growth in number of applicants, which is strong. The UCAS number show growth of less than 1%. ONH continue to outperform the market with double-digit growth. It is the online programs that are driving the growth. We see 41% growth in online applicants, while the campus applicants for campus programs are in line with last year. It's a flat development.
But I think with a strong portfolio of online programs, ONH is taking a lion's share of the increased demand for flexible programs. You can look, right there, you can see the difference in the different. Hold on. In the different master, bachelor's. We see there's a strong growth both in master and bachelor with 36% for master, 22% for bachelor, 11% for annual units, 35% for single subject, and other courses from very low volume, 554. We see that we grow in every area that we are offering programs. Okay. Let's have a quick look at NTech.
A long process has been completed, as you all know, you also can see some clips there from the webpage and also from some advertising. We have finally launched it. It would launch the last week of the quarter, the last week in March, we have started building awareness in the market. I think the campaign will focus more on conversion in the next phase to generate more leads and applicants. It's still too early to give an estimate on how many students the school will achieve, I think this is a long-term investment aiming at building a substantial business unit within the group over time. This year we will offer one program in Oslo, the web app development and design.
In addition, we plan to offer shorter courses for up-skill and re-skill, and we are collaborating with the industry, including Rebel, a leading tech hub in Oslo. We will continue to develop the offering over time, new programs, both campus and online, but I think we will see that the volume over time will be online. Already from 2024, a broader portfolio will be offered. It is important for us to be able to start the school and deliver quality from day one, then we can increase our market reach and improve word of mouth going forward. It takes time to launch a brand-new school and to build up a reputation, but Lumi, we are in this market for the long haul. Yes, I think that concludes it, Martin. Should we look at the outlook?
Yes. Thanks, Erik. I think on the last two slides, I think we tried to summarize this kind of a bit state of the business.
Yeah
... and the outlook as well. I think first of all, that we have been presenting for several quarters now that we've done a lot of measures on the cost side and reducing cost in especially Sonans and transform kind of the business model, meaning that I think now, at least Sonans, is a more flexible and scalable business model with a relatively lower share of fixed costs.
Mm.
We see that the number of applicants to higher education is more a neutral signal for now at least. As Erik presented, we see strong growth still for ONH.
Yeah
... and their online programs. Also as Erik said, I think, you know, the Private Candidate business is obviously the most important swing factor, more short term for, Lumi. But as we see that the visibility into the volume trend for Lumi is, still limited as we are early in the sales cycles and for Sonans, for instance, there is still 20 weeks left of the sales before we can kind of conclude on the expected volumes for, the coming school year. We are happy, to see the continued growth for ONH, and we are also there, ready for further volume expansion, for the current program portfolio, and we will also launch new programs there as well.
Yeah.
Launch of NTech, as Erik said, the first year, we have kind of moderate expectance, expectations on the student volumes. However, I think it's important to launch NTech now and get started. We see strong opportunities within the vocational market.
Mm.
We see from student intake and Samordna opptak that there is strong growth.
Yeah
... the vocational market as well.
Yeah.
Still not the, a large, on the same size as the higher education market, but still vocational schools are becoming, a major part of the education system in Norway.
Yeah.
We are also following them closely, the admission committee. We were more uncertain, I think, when we presented the Q4 report, but as Erik said, and reviewing all the hearing during the consultation process that has been received, we see there is likely to be modified the proposal. We obviously expect some changes as the committee has several proposals.
Yeah.
It seems like they could be more modified, based on the opinions on, in particular the retake matter.
Mm.
When it comes to revenues, we are not making any changes to the estimates that we presented in the Q4 report. We are saying around NOK 205 million-NOK 210 million for the second half or, sorry, the first half of 2023.
Mm.
I think with that concludes our presentation, and we are open up now for questions in the Q&A.
Yeah.
Thank you.
It was all clear.
Yeah, no questions at the moment.
No
crystal clear.
I think we all give it one more minute, and then.
Yeah
we will close.
Yeah
webcast. Yes, we have actually one question, Eric.
We have not commented on that in the report yet. We have some interest, but it's limited numbers so far, so we need to, you know, because we have started to build awareness, and now we have gone more into conversion now. We haven't really communicated that yet, but we are planning to start this autumn.
We can also then add that there is no specific deadline.
No, no. No deadline.
And can sign up-
Yeah
... until the start of the program.
Yeah.
Okay. I think that was it. Thank you for joining our webcast.
Yeah. Yes, thank you.
Thank you very much.
Have a good day.
Have a good day.