Welcome to the AcadeMedia Q3 report. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answer session, participants are able to ask questions by dialing star five on their telephone keypad. Now, I will hand the conference over to the speakers, Marcus Strömberg, CEO, Katarina Wilson, Deputy CEO, and Petter Sylvan, CFO. Please go ahead.
So good morning, everybody, to a fantastic day in Stockholm. We have a great spring day, and finally, we see the sun. Welcome to this presentation of the third quarter and the new year of AcadeMedia. Together with me, I'm very happy also to introduce our new CFO, Petter Sylvan, and I will hand over to him in just a few minutes. But first, if we change page, we have a short update, and I must say that we have started the new year in a very good way. The number of students has grown in a stable way, and if we look at the revenue, it's more than 10% up, and it's mainly driven by organic growth and the international expansion. We also have continued to increase our international growth with an acquisition in Finland.
So we run now 113 preschools in Finland, and it has a revenue of around SEK 1 billion. So AcadeMedia now have all different sort of education in five countries, and we also have small, small businesses in Poland and in U.K. And we have also invested a lot in quality. We have increased the number of teachers that had academic results. We have also invested a lot in our school buildings, and also the grade has also been a debate in Sweden, and I must say that no organization has done so much as AcadeMedia when it comes to quality. And we continue also our campus strategy with a new campus in Malmö. And in August 2025, we will have 1,000 students entering a really fantastic building.
So if we look at the campuses in Stockholm, we have two campuses, and also in Gothenburg, in Örebro, and in Uppsala, and now also in Malmö. That will be really, really great. We also have some exams result when it comes to the PISA, and we're also very proud that the independent schools perform very well when it comes to the results of PISA, and it also been announced a report around that. So the overall picture, good growth, good development, and we also have invested in quality, and that is also a stable platform to continue to develop AcadeMedia into the future. Then if I hand over to Petter, and he will go through the numbers.
Thank you, Marcus. And good morning, everyone. As a new CFO to the company, I'm so honored to present my first quarterly report, and I'm delighted to kick off with such a strong quarter. As Marcus outlined earlier, we achieved a good growth of 10%, with contributions from the acquisitions of Touhula in Finland and Winford College in Netherlands, amounting to 3.6%. Additionally, our adjusted profit margin increased to 7.1% compared to last year's 6.6%, which means that we were reaching SEK 327 million in absolute terms, up SEK 50 million from last year. This increase in adjusted EBIT reflects the growth across all our segments. Most segments experience also improved profitability, except for Upper Secondary, where the revision of school vouchers still isn't sufficient to compensate for higher costs.
Moreover, this increased profit has translated into a correspondingly higher free cash flow. Now, turn to page four, please. The improved adjusted EBIT are, as I mentioned, evident across all segments, as you see in the picture. Apart from the better compensation through annual increases in school vouchers, which now adequately account for inflation, the positive change is most notable in the Preschool and International segments, where in addition to better school voucher compensation, the acquisitions also contributed an additional SEK 8 million. As we have mentioned in previous quarters, the increase in group overhead costs is a natural outcome of our growth. So some of our staff functions are adding extra resources to accommodate our expanding operations. Move to page five, please. Our rolling twelve-month net sales have now reached SEK 16.7 billion.
Adjusted EBIT has climbed to SEK 975 million, while we maintain a stable margin. Once again, we observe a very positive trend in free cash flow development. Now, let's look at the quarters development within each segment, and we start with Preschool and international segment on page eight. The number of children increased by an impressive 13.2%. With growth witnessed across all countries except Sweden, where five preschools were closed in the past twelve months, affecting the year-over-year numbers. Our growth was primarily driven by the acquisitions of Winford in the Netherlands and Touhula in Finland, along with new preschool openings in Germany. The international operations account now for 27% of the group's total sales this quarter, and 30% pro forma.
Net sales increased by 15.8% compared to last year, with organic growth at 6% and acquisitions contributing 10.9%. Adjusted EBIT and margin improved compared to the previous year. This year's margin reached 6.7%, up from last year's 5.5%, and the operating profit was SEK 108 million compared to last year's SEK 76 million. These improvements are attributed to better compensation for inflation costs through annual school voucher increases, reduced energy costs, and contributions from acquisitions. The item affecting comparability in this year is the cost of acquisition of Touhula. Moving on to compulsory school on page nine, we noted 2.2% increase in student numbers.
Net sales rose by 8.3%, driven by increased number of students, the positive impact of the annual school voucher revision in January of 5.5%, and higher government grants. The school voucher revision was in line with our previous estimate in Q2. Adjusted EBIT and margin improved compared to the previous year. This year's margin reached 7.1%, up from last year's 6.8%, and the operating profit was SEK 78 million compared to last year's SEK 69 million. These improvements attributed to better compensation through the school voucher revision, increased capacity utilization, and decreased energy cost. Now, turning to upper secondary school on page ten. We there observed 2.8% increase, percent increase in student numbers. The sales growth of 6.5% is driven by more students, as well as the annual school voucher revision of 3.8%.
Although it's worth noting that this revision hasn't been sufficient to offset inflation cost increases. Consequently, the adjusted margin was somewhat below last year's 8.4%, despite improved EBIT in absolute numbers due to higher capacity utilization and lower energy costs. Moving to adult education on page 11, we see a 6.7% increase in sales, driven by a higher number of students in higher vocational education and the acquisitions of Berghs. In the municipality business, our implemented capacity adjustments and cost-cutting measures from last year continued to yield a positive effect. Adjusted EBIT increased to SEK 43 million from previous year's SEK 33 million, with a margin of 9.7% compared to 8% last year. We anticipate the full year EBIT margin within the lower range of 9%-11%, given the seasonally weaker fourth quarter.
Continue to page 13, free cash flow and investments. Free cash flow for the quarter was SEK 200 million higher than last year, attributed to higher profits and a more favorable working capital development. Maintaining CapEx as a percentage of sales has slightly declined to 1.6%. The significant increase in other expansion CapEx is associated with the acquisitions of Winford and Touhula. Proceeding to page 14, the financial position. Net debt, excluding IFRS 16, increased by SEK 1.5 billion compared to last year, with a leverage ratio, including IFRS 16, at 1x, well below the financial target of less than 3x. Including property-related lease liabilities, net debt was higher due to growth, the acquisition of Touhula, and the share redemption program. Finally, on page 15, our financial performance against targets.
Our organic growth, including small bolt-on acquisitions, stands at 7.4%, exceeding our financial target of 5%-7% growth. Our adjusted EBIT margin of 6.1% falls below the target range of 7%-8%, but in the quarter, we delivered 7.1% worth noting. Our leverage ratio of 1x remains comfortably below the required threshold of 3x. With these words, we end this presentation 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. The next question comes from Karl- Johan Bonnevier from DNB Markets. Please go ahead.
Yes, good morning, Marcus and Petter. First of all, Marcus, good to have you back in good shape again, so.
Thank you. I'm a little bit dangerous for the moment. I tell the rest of the staff to know when I'm fixed.
Excellent, excellent. So, no, good to see that things also the business momentum seems to be good out there for you. Two questions really for me. Looking at the Finnish acquisition of Touhula, I know that's an acquisition target you have been looking at a number of times historically and walked away from. What makes you convinced that it was the right time to go for it now, and what kind of opportunities do you see there?
You know, we looked at this 2016, and, and in effect, we gave a bid on the company at the right level, but the price then for the one who acquired the company was very, very high. Now this has been a development in Finland, where they have to, they grew too much, and they had to restructure the company, and we think that this is just the right time. It's a good management, it's the right price, it's the right profitability, and it also got a lot of opportunities coming when it comes to, to Finland. The right price, the right management, and the right development, and they have also fixed some of the growth issues that they had.
When you look at the opportunity as it stands today, what are the main opportunities there?
In Finland? It's to—
Yes.
O f course, to increase the profitability of the company through the management's efforts and action plans, and also to make bolt-on acquisitions.
Excellent. And when you look at the market position of Touhula today, I understand they are the second largest operator in Finland. And what is the rest of the structure of the market? How much is public, how much is private, and so on, just to give the ballpark for those kind of bolt-on opportunities.
It's not so much as it is in Sweden. The market is a little bit different because a lot of families have their children at home, and they also have what we call in Sweden, "dagmamma." That is also a big part. So the drivers for growth is that people who have the children at home and at "dagmamma," also want to go to professional daycare centers, so that is the key drivers for the growth possibility and the quality of the sector. I would like to say that it's around 10% now. I don't have the really correct number, but it's smaller part than it is in Sweden. And we have some bigger groups. Some of the Finnish some of them are owned by Finnish companies.
But as you mentioned, this is the second biggest, and we really believe in the brand. We believe in the quality that they, they have. We also believe in the management that we have got to know in a very good way. And as I mentioned, we have got to know Touhula for many, many years. And I think that is a very good idea from AcadeMedia side, just not running around buying companies. Get to know the people, get to know the market, get to know the business. And it was the same in Germany and also in, in Netherlands. So we are very hopeful when it comes to, to the, to the Finnish development.
Excellent. Sounds encouraging. Looking at the campus strategy, could you—h ow do you see, say, the Malmö opening? Is that a question of moving a lot of other operations in there? Is it a start up from scratch, or how is that gonna be pursued?
Yes, we are moving three different businesses into that. It's the Designgymnasiet , the creative high school, and also our music school, Rytmus, will move there. So it's three existing schools. But if you look at Designgymnasiet , it's really hard for them to find places now. It's totally overbooked. So I think it's very good that we could give them this opportunity. So it's three existing businesses that we are moving into that campus. And we really believe in this campus strategy, and we are now so big that nobody else could do this sort of investment because it's really big steps. And then we see that the municipality, they don't and do this sort of investment either.
So we really believe in it, and we think it's good for the society, we think it's good for the students and for the teachers also. So this will be good for Malmö. And it, it's maybe we should mention that, that 50% of all the children in higher upper secondary go to go to upper secondary in independent schools in Malmö. I saw the numbers now in Gothenburg. The private part is increasing. It's stable in Stockholm. So the upper secondary market, where we are really the market leader, is stable and good and developing in a good way.
Excellent. When you look at how the campus strategy has evolved in Stockholm, Uppsala, Gothenburg, that you mentioned, are you now up to basically full capacity load on those campuses, or is there still a big gap to bridge, say, coming the coming school year?
If we have one campus in Stockholm called Campus Vasastan, it's totally fully booked now. Campus Södermalm still will need one year, but has a very good development. I think in Uppsala, we will need two more years. In Gothenburg, we are really working out to find school places because the demand is very high. If we look at one of our brands, that is Drottning Blanka, we now run three Drottning Blanka schools in Gothenburg. So in Gothenburg, we are really positive to keep on helping the municipality with vocational programs and training.
Sounds excellent. And when you look at, say, the how you're closing up to your—w hat you are doing to, say, get the right kind of student to sign up, number of students sign up for the coming year, how is that that work going this year, and how you're pursuing it compared to last year?
We think it's developing quite okay. We don't announce the – we haven't announced some part of the numbers. It's stable, and we see that vocational numbers is really increasing, increasing. What we struggle with a little bit is the technical program, and that is not the biggest part, but we see a decline when it comes to technical programs in all Sweden. I think we take some market shares, but that is not, that is very negative for Sweden, so we're working a lot on that. But that will also affect the number of students in August. But we are increasing in the vocational program, what we call as Praktiska, and the semi-vocational programs that we call Drottning Blanka. And that is really positive and fantastic to see how these schools has developed the recent years.
AcadeMedia, we have this portfolio of brands, and that when we see a decline in one brand, it's increasing in other segments, and that give us the possibility to keep on growing. I have an interview with TT just this morning, and they said. Before I started to talk, they said, "You always report stable numbers." So that is maybe why we have this portfolio group of different brands.
Yeah. Now, thank you very much, and good to have you back, and all the best out there.
Thank you very much.
There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.
Thank you very much for listening, and we wish you all a good day and a good weekend. Thank you very much.