...Welcome to the AcadeMedia Q1 report 2024/2025. 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 #key five on their telephone keypad. Now, I will hand the conference over to the speakers, CEO Marcus Strömberg and CFO Peter Sylvan. Please go ahead.
Good morning, everybody, and thank you very much for your time. We will present our quarter one interim report for 2024. I will do this together with Peter Sylvan, that is the CFO, and I will give you a short update about the business development in the first quarter, and also some comments on the quality development in the company. The first quarter in AcadeMedia is a small quarter when it comes to the revenue and the profit, but it is an important quarter for AcadeMedia as a company. We think that we have started this year very stable, with a growth of 12%, where 6% is organic, and the international development is still strong in the company. We are now reaching for 100 units in Germany.
We are at 98 for the moment, and we see a strong development when it comes to our international business. The government in Sweden, they really invest now in vocational training. I think it will be more than 100,000 students. The budget for this year is very important that to go ahead with the supply of skills. AcadeMedia, we are really the leading vocational trainer in Sweden. We are the leading actor when it comes to skill supply, and that's why we also see this very positive development when it comes to the adult education. We also have reported our thirteenth quality report, and we focus a lot on reading, and we see now a positive result, and we have seen this over many years, but this year is really, really positive.
The next step for us is my favorite subject, that is, mathematics. That is really a challenge for the Nordic countries and also in Sweden, but we really focus on that for the moment. I will just give you some short information from our quality report. As I mentioned, this is the thirteenth year that we report. You can continue to the next page, where we report the quality result. Our model, that we call the AcadeMedia Quality Model, is really top of the line. It's a role model for a lot of other companies. One very important subject in Sweden is that we should have the best conformity when we compare our grades with the national average.
And we are very proud to announce these numbers now that we are really a role model when it comes to grading, both in compulsory schools and, as this picture show, the upper secondary schools. And if you go to the next page, same as the finance sector, we are really watched out when it comes to the school inspection. They do a lot of inspections. I would like to say that they do more inspection when it comes to the private schools than the public schools. And if you look at these numbers, we are also really outperforming the rest of the schools in Sweden. We have really good results when it comes to leadership, when it comes to quality development, and also the order in schools.
So if you look at the most objective quality result, that is the school inspections result, we also perform very well. And then when it comes to the absolute number, I just put this slide, which shows the result in the compulsory schools, and we are very sorry to say that some of the schools in Sweden is now performing a little bit weaker, but the positive development when it comes to AcadeMedia is still good. We have a higher result than the national average, and we are at a stable level. And you should keep in mind that this is also if you look at the comparability with the national test. So the quality development in AcadeMedia is strong, and that is something that we continue to invest a lot in. And now I hand over to Peter, that could comment on the financial result.
Thank you, Marcus, and good morning, everyone. It's I'm glad to have the ability to present the financial outcome that is great, while we, at the same time, have such a quality improvement. If we start at this page, as Marcus mentioned earlier, we achieved a good growth of 12%, with contributions from the acquisitions of Touhula in Finland and Winford in the Netherlands, amounting to 7.1%. Our adjusted profit increased from 151- 157 million SEK in absolute terms. And as Marcus mentioned briefly, the first quarter is a seasonally small quarter as part of the business are closed, and this impacts the net sales, profit, and thereby margin development. Our newly Finnish preschool business that we acquired, Touhula, follow this seasonal pattern.
And in addition, last year's net sales and profitability was positively affected by energy grants of 15 million SEK. So, furthermore, the free cash flow development of -225 million SEK was more negative than last year's 127 million SEK. And this was because of unfavorable net working capital development. Now turn to my page, please. Adjusted EBIT increased in upper secondary school and adult education segment, whereas it decreased on preschool and international and compulsory school segment. The positive change is most notable in the adult education of +20 million SEK, and this is driven by increased demand in higher vocational education, which is countered by the 11 million SEK negative effect in preschool and international business. And this seasonality is foremost driven by the seasonality effect of the acquired Touhula.
As we mentioned in the previous quarters, the increase in group overhead costs is a natural outcome of our growth, and the increase in this quarter of SEK 1 million was marginal, but more vacancies are to be filled in the coming quarters. So let's continue to a couple of page, I think page 11. So if we look at the quarters development and within each segment, and then we start with the preschool and international segment. The number of children increased by an impressive 29.6%, with growth witnessed across all countries except Sweden, and there we had six units that were closed last year. Our growth was primarily driven by the acquisitions of Winford in the Netherlands and Touhula in Finland, along with new preschool openings in Germany.
This quarter, the total sales in the quarter of the group constituted 31% of international business. Net sales increased by 24.6% compared to last year, with organic growth of 7.1%. Adjusted EBIT margin and EBIT decreased compared to the previous year. This year's margin was -0.8%, down from last year's zero result, and the operating profit was -11 million SEK compared to last year's zero. And as mentioned, it was this acquisition of Touhula that amplified the seasonal pattern of the first small quarter of the preschools are closed. Higher school vouchers in Germany compensated to a larger extent for the higher cost levels. Please move on to the next slide. At compulsory school, we note a 2.3% increase in student numbers.
Net sales rose by 7.6%, driven by increased number of students and the positive impact of the annual school voucher revision. Adjusted EBIT and margin decreased compared to the previous year, and this year's margin reached 5.1%, down from last year's 6.4%, and the operating profit was SEK 44 million compared to last year's SEK 51 million. The somewhat lower result was a consequence of higher personnel and maintenance cost, and part of that cost of high personnel was related to efforts in quality improvements. Last year, net sales and EBIT was positively affected by an energy grant by SEK 5 million. Please move on to upper secondary school on next page. And then we observe a 0.54% increase in student numbers.
The sales growth of 3.4% was driven by more students, as well as the annual school voucher revision. Although it's worth noting that this revision hasn't been sufficient to offset on inflation cost increases. Even so, the adjusted margin increased this year to 6.0% compared to last year's 5.7%, due to higher capacity, capacity utilization and temporary lower costs. Move on to adult education. We see a 7.1% increase in sales, driven by a higher number of students in higher vocational education. Adjusted EBIT increased to 67 million from previous year's 48, with a margin of 17.1% compared to last year's 13.2%. The first quarter is last year, a strong quarter, affected by lower personnel costs due to vacation.
Unemployment is forecasted to increase during 2024 before it decreases in 2025. And even though this quarter in Q1 used to be strong for the adult education, margin-wise, it's worth to notice that for the last twelve months, the profitability has been 10.4%. So over time, a slightly lower margin. Let's continue to next page, where I think it's page 16, and we talk about the free cash flow and investment. Free cash flow for the last twelve months was 98 million SEK, which was lower than last year, attributed to more unfavorable net working capital development. Maintaining CapEx as a percentage of sales has slightly declined to 1.6%, and the significant increase in other expansion CapEx is associated with the acquisitions of Winford and Touhula.
Proceed to page seventeen, the financial position. Net debt, excluding IFRS 16, increased by SEK 146 million compared to last year, with a leverage ratio, including IFRS, at 0.9%, well below the financial target of less than 3%. Including property-related lease liabilities, net debt was SEK 1.5 billion higher due to growth, the acquisitions of Touhula, and indexation of rents. Continue to finally, page eighteen and our financial performance against target. Our organic growth, including small bolt-on and acquisitions, stands at 7.0%, and this is exceeding our financial target of 5%-7% growth. Our adjusted EBIT margin of 6.2% fall below the target range of 7%-8%, and the leverage rate of zero point six, zero point nine remains comfortably below the required threshold of three.
With these words, I end the presentation, and we 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 Stefan Knutsson from ABG. Please go ahead.
Hello, and good morning. A couple of questions from me. First, on the preschool profitability, I know that you commented last time around that you saw that you were in a higher level, in terms of profitability in H2, and that you expected that level sort of to be the new level. Just to comment there, because now you came in lower in Q1, it might be an effect of the acquisition in Finland, but just if you still see the same full year effect that you alluded to on the previous call.
Yeah, that's correct. I actually said at that call that my view was also to be adjusted with the normal seasonal effect, and we have this normal seasonal effect that which we verify in Q1, that it is for the preschools, particularly, a weak quarter since they are closed to a high degree. So this is in line with our expectations, and it's in line with the view I communicated in Q4 for the full year.
Okay.
Touhula wasn't in the number last year.
Touhula wasn't in the number, so that's the major change.
Yeah, that is the big change.
Yeah.
Yep. Perfect. Then on compulsory profitability, as well, just to get an understanding what should be the expectation here, because here we shouldn't have any difference, seasonality effects. But yeah, just to comment, because you are 1.3 percentage points lower this quarter compared to last year in terms of profitability here.
The significant part of the cost we see are related to more temporary costs in terms of maintenance and other spending. And some of it is related to later periods in the year, and some of it are related to efficiency measures that we expect to be lower. So we see the major part of this cost to be temporary, and we withhold our expectations for the full year.
Yes. It is important to keep in mind that this is really a small quarter, and if you buy a little more books or if you compare it with last year, it affects the margin. So.
Exactly
... you have to keep in mind that this is really, really small quarter.
In addition to that, you have the SEK 5 million grant in the compulsory school. You also had it in the upper secondary school, but in the compulsory school, where you look closer. In this small quarter, it also have a significant comparison effect.
Yes.
We have the grant, but we didn't have the cost last year.
Perfect. And then lastly, just on the student intake in the upper secondary school segment, and if you're happy with the development. I mean, you increased the capacity utilization somewhat, but there is still some way to go, I suspect, given that you have opened a couple of new schools here in the last couple of years.
Yeah. We are happy with that we have a growth of students in all our segments. Although, I mean, this is a mature business, the significant growth we have in our niche international markets, but we do have growth of children in all our segments, and we are happy with that development. The only part of segment where we see a decline of children is in the Swedish preschool business, and that is mostly an effect of the demographic development.
Yeah. If we think a bit more long term, is it comparable to see what you have in terms of capacity utilization in the compulsory schools versus upper secondary, or can you comment anything on that?
You mean long term, if they are comparable in terms of-
I mean, what's the target level, because I think you are at 93%-94% somewhere in the compulsory schools.
Maybe we can't reach that level when it comes to upper secondary. What we see now when it comes to upper secondary is that the vocational program is really developing very well. And we have really made a lot of effort in that area. We have also developed our campus. They are also performing quite well. What is a little bit more challenging now when it comes to upper secondary is the technical program. That is a specific program in Sweden, and we see a decline in that in both compulsory schools and in our schools. So there we have a little weaker capacity utilization, so it's a potential for the future. But we also know that the students, they could change between different years.
This year, the economic program is very popular, and the technical program is a little bit less popular. We have worked a little with the unit management when it comes to compulsory schools. The overall picture is stable and good, and we have a very good portfolio when it comes to the upper secondary schools.
Okay, thank you very much for your answers. That was all for me.
The next question comes from Karl-Johan Bonnevier from DNB Markets. Please go ahead.
Yes, good morning, Marcus and Peter. Just a couple of questions from me. Looking at Touhula, you have now owned it for a while, and obviously, the seasonality you pointed to is similar to a lot of the other operations. When you look at it now, does it seem to have the potential you were looking for when you acquired it? And how would you compare it maybe to the Swedish operation or the Norwegian operation in their margin potential?
It absolutely have the potential that we see in Sweden. But as we have commented on, they are coming from a tough situation. I think we made a good acquisition, and we are taking step by step. So but the potential is still there.
Mm-hmm. And as we have communicated earlier, our expectations that they will leave a margin this year in the range of 3-4% is still what we expect and have no other view on. And then from there, we want to take it higher, but it will take longer time than a year.
But mid long term, it should be up to, towards maybe the group average for the preschool or something like that?
Yes. Clearly, that's our-
Yes
-expectation.
Excellent. In the upper secondary, you single out that it was favored temporary cost there. Is there anything you could quantify, as you didn't single it out in the compulsory school segment, so to say, in a similar way, where it was negative?
In the upper secondary, I don't think we mentioned. Yeah, okay. Yeah, so I thought you said higher, and you mentioned it. Okay. Yep. No, we are, I mean, what we don't single out any specific cost. It's what Marcus said also that since they have had a low revision of voucher revision, they have been very keen on keeping cost control. And typically, when you have started the quarter, which is typically where you have earnings for the season, they have been very cautious in their spending in books and literature and related things. So we expect that this little improved margin is not nothing that over the year is a trend.
Excellent, and I understand the wording. And looking at the-
That is what we-
Yeah.
We think that they have done a very good job. But you, because you know about the school voucher, and so we are really a professional organization, really good managers.
That must be perfect if you can balance it already down on the unit level rather than having some sort of central kind of effort on it. So, looking at adult education, obviously amazing margins in the first quarter, do we still looking at something more similar to the LTM trend? You still confident within the 10%-11% range this year, given the temporary effects you also highlight in adult education?
Yeah, we don't expect. We think the LTM trend is, I mean, generally speaking, we have our expectation targets on 9-11%. I think that it will be in the upper range. I don't think it will be higher than the 10.4%. We are probably something around 10%, is our expectation.
Perfect. You mentioned the weak working capital and the impact of that on the free cash flow in the first quarter. Is there anything that is recurring in that, or is that gonna neutralize over the next couple of quarters, or how do you see it?
It's a quite typical pattern that we have a weak or an unfavorable development of net working capital in Q1. But the development has been more unfavorable this quarter than the last year. And this is mainly related to that we have had invoices, suppliers paid earlier than the other year, and that we have had more revenues that we haven't been able to, that we have recognized, but we haven't been able to invoice yet. So all of that will normally be compensated, and will be shift to Q2. That is our view.
We have seen this many quarters, and so because it depends when we pay the rent-
Yeah
... when we pay the invoice, and how is the date scheduled between the different quarters? So over time, it will be. We see nothing has changed.
No.
... Good to know if there's nothing structurally behind it.
Just, would be interesting to hear your reasoning. I saw the release on the board suggesting of a redemption program of a maximum of SEK 300 million. Clearly, obviously, a slight uptick there compared to last year, but how did you come to that kind of number and that kind of ambition, given your super strong financials?
It was a good round number.
You know what, what is very important for us, that is to, first of all, continue to invest in quality. We see really positive improvement, so we will continue to invest in early reading, early math, and also in the adult education as well. And we also want to make acquisition on the international market, and we want to have a good financial structure. And we saw that the last year, it was good numbers. We think it's impacted the overall capital structure in a good way, and we think we have the same potential this year. We made the big acquisition in Finland, and now we have a pipeline when it comes to international acquisitions, but nothing maybe will happen the coming months.
But we will continue with that, and we think that this is good number, and we think it's also important to continue with the same model, because now I think a lot of people understand how this model works, and I think personally, that it's a quite good model. It's possible to stay with your shares, it's possible to sell your shares if you want to. So I think it's voluntary, and it's a good model, and we have got quite good comments on it from investors.
We should see, as this is the second year now in a row, that you come with this, Redemption Program. Should we see it as a recurring event going forward, if the financial situation looks in a similar way coming up to the end of this fiscal year?
This is absolute possibility. Now, we learned it, we know how it works, but the key question is: Will we make big acquisitions? So if we make big acquisitions, this could change, but if we don't do it, I think this is something that is a possibility for the board to continue with. But no decision is taken.
Good answer, good answer. This should be not a strategic, it should be a tactical thing if you use it, I guess. I'm looking forward to see on your acquisition moves, and all the best out there.
The next question comes from Johan Lönnqvist Sundén from Carnegie. Please go ahead.
Hi, Marcus and Petter. My question was actually on the adult, the margin expectation of the adult business going forward. I think we covered it well, so I'm happy with the answer I received. Thanks a lot, and congratulations. Good development. To get back in line.
Maybe we just could comment on that, so I. You have this really right, because the government in Sweden, they are really investing now in adult education. So if you look at the budget, they are now reaching a target of more than one hundred thousand person going into to vocational program. And I'm gonna say that our adult education business has really the right focus. We have the right position, we have the right brands and so on. So I think we have a good opportunity when it comes to what will happen, and help Sweden with unemployment situation.
The next question comes from Johan Lönnqvist Sundén from Carnegie. Please go ahead. As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.
So then we would like to say thank you for your time and wish you all a good day. Thank you very much.
Thank you.