Good morning everybody to this Presentation of AcadeMedia Reporting the Full Year from July 2021 to June 2022 and Q4 result. With me today is Katarina Wilson, the CFO. My name is Marcus Strömberg. I'm the CEO of AcadeMedia. This year is a year where we had invested a lot in Swedish education. I think we have never invested so much in Swedish education as in this year. We have started two new campuses with over 4,000 places in central Stockholm, which we believe will be a landmark in Stockholm for many, many years ahead. We have also invested a lot in vocational training, and also in some compulsory school with over 1,000 students each. The year we have behind has been a fantastic year with a lot of investment.
We also see the results, because we have never seen such a interest in our school as we have seen this year. The number of students is up 5%, and we are over 95,000 children and students in our different schools. This year, we have also continued to develop the international preschool segment with 16 new starts in Germany, even if we have had this pandemic situation, and we think that is a very good result. We have also entered a new country, the Netherlands, with a platform investment, and we plan to continue to develop our position when it comes to international preschools. We have also had seen the development in adult education going back to normal levels. We have a positive development in the economy, and therefore we have some more normal students level when it comes to adult education.
The overall picture is very positive. We have maybe the best year ever when it comes to the AcadeMedia financial position, and we have a strong position to continue to invest in education, and we also see the results when it comes to interest from our students. The board also proposed a dividend this year of the same level as last year, 1.725 SEK, and it's also very positive that we continue to pay back to the professional owners that we have, and that has also supported us to continue to invest in education in Sweden. Now I will hand over to Katarina, and she will go through the numbers, and then we will answer some questions in a few minutes.
Thank you, Marcus. I'm Katarina Wilson, CFO of AcadeMedia. Moving on to page three, highlights 4Q of our financial year 2021-2022. I would like to start by confirming that the results in this report are in line with the preliminary results for the fourth quarter that we published on July 20. To summarize the quarter, student numbers grew by 3.6% with solid growth in the compulsory and the upper secondary school segment. Growth in the preschool segment was as high as 6.2% due to new starts in Germany, as well as the acquisition of two preschools in the Netherlands. We're now running preschools in four countries.
Net sales increased by 4.9% with growth in all segments except in the adult education segment, where volumes are continuing to come down to more normal levels after the pandemic. Adjusted for a positive currency translation effect of SEK 27 million and the acquisition of Sandviks, the organic growth, including smaller bolt-on acquisitions, was 3.7%. Adjusted EBIT was in line with previous year at SEK 279 million, and the adjusted margin decreased to 7.2%. The main reasons for the lower margin is really the same reasons as in the last quarter, lower volumes in parts of the adult education segment and lower profitability in Norway.
Items Affecting Comparability -SEK 14 million includes further insurance compensation, SEK 6 million related to the fire in a compulsory school in July last year, and provision for loss making units in Norway -SEK 21 million. Free cash flow in the quarter increased to SEK 397 million due to strong cash flow from operating activities. Jumping to page number seven, development quarter four by segment and starting with the preschool segment. As I said, another country was added to the preschool segment with the acquisition of two preschools in the Netherlands with 233 children. In Germany, one further unit opened in the quarter, which gives a total of 16 openings this financial year and in total 73 units in Germany. In total in the preschool segment, we now have 292 units in four countries.
The number of children increased by as much as 6.2%, and net sales increased by 10.9% compared to last year. Organic growth was 6.7%, adjusted for a positive currency effect of SEK 27 million and the acquisition of Sandvik's diversification into educational services. EBIT and margin was lower than last year, mainly due to changes in Norway. Lower pension compensation and higher salary costs, as well as higher cost for temporary staff and electricity, all in all had a negative effect on EBIT in the quarter by about SEK 20 million.
The way the model works in Norway, any changes to the cost structure that is also incurred by the municipalities, as this is a pandemic effect mostly, will be compensated with a two-year delay. We have identified loss-making units in Norway, and we have made a provision of SEK 21 million, and this is reported as Items Affecting Comparability. In Germany, the capacity utilization was somewhat lower in the fourth quarter due to this year's new openings starting later in the year and therefore have not had the possibility to reach full capacity. This was offset by lower personnel expenses in Sweden. For the new financial year, 15 new units are planned to open in Germany, and one new unit will open in Sweden. Moving on to the next page, compulsory school, page eight.
Continued solid organic growth in the compulsory school segment. The number of students increased by 2.5%, and sales grew by 7.4%. Retroactive school voucher compensation and subsidies in total SEK 10 million in the quarter contributed to the increase. Adjusted EBIT increased to SEK 80 million, and the margin increased to 8.4%. Volume growth was the main reason for the increase, as well as the retroactive revenue, with cost taken in previous quarters, as well as somewhat lower personal expenses due to a higher degree of employee vacation compared to last year. We have received further insurance compensation related to the fire, six million, and we still expect to see further compensation in the coming months, and this is reported as items affecting comparability. For the August school start, one new Vittra school has just opened. Moving on to upper secondary school, page nine.
Student numbers increased organically by 3%, and the growth was mainly coming from the 21 new schools that have started over the last five years. Net sales increased by 5%, driven by volume growth and the annual voucher revision. EBIT was higher than last year at SEK 130 million, and the margin increased to 10.1%. Volume growth is the main driver, but also to some extent, lower personnel cost of about SEK 10 million related to volume growth and compared to last year. The fourth quarter also included cost of SEK 5 million related to the new campuses. Last year in the fourth quarter, cost increased when postponed activities earlier in the year could be resumed in the last quarter, and we do not see that same pattern of increased cost in the fourth quarter this year.
Our brand-new state-of-the-art campuses in Stockholm open in August, and this will have a slight negative impact on the margin during the next two years until they have reached full capacity utilization in these new larger premises. Three further new schools also opened this autumn. Moving on to adult education, page 10. Again, to remind you, last year, high unemployment created very high demand for adult education with exceptional volumes and high capacity utilization. We have for a few quarters now seeing an improved job market as well as lower immigration, and this is reflected in lower number of participants in our programs. Net sales decreased in the quarter by 12.8%. However, demand for higher vocational education remains high, and sales in this business area increased by 15% organically.
Continued high capacity utilization in this business area, but student dropout rates are rising, an effect of the stronger labor market. The number of participants in the municipal adult education continued to decrease to more normal levels, and net sales in this area decreased by 19%. Of course, this result in lower capacity utilization and profitability, especially in the SFI operation, where we're continuing to see, to adjust capacity to this lower demand. We expect that this adjustment will be completed now at the beginning of the financial year. Sales in the labor market services business declined by as much as 55% but from a low level. This is also a conscious decision to reduce exposure to this business area.
The transition to the new matching services has been completed, but volumes in the new contracts are still low. All in all, adjusted EBIT decreased to 37% and the margin was 8.6%. Looking ahead, increased inflation can lead to higher unemployment, which again would lead to high demand for adult education. After the reporting period, AcadeMedia has agreed to acquire Futuregames, ranked as one of the leading game education providers in the world. Moving on to page 12, free cash flow and investments. We defined free cash flow before investing in expansion. This was for the full year, slightly lower than last year, but still very strong and amounted to SEK 922 million.
The main reason for the slightly lower free cash flow was the less favorable working capital. I've said this many times, usually the working capital is affected by calendar effects, and this is also the case this time. We also had somewhat high maintenance CapEx investments in existing operations that amounted to just over SEK 300 million this year compared to SEK 241 million last year. This increase is mainly, as Marcus said, investments in our new campuses, which in the fourth quarter amounted to SEK 44 million. Moving on to page 13, continued strong financial position. Net debt excluding IFRS 16 was significantly lower than last year.
Now below SEK 1 billion, and the leverage ratio was lower than last year at 0.7, which is well below the financial target of below 3. Increased property-related lease liabilities is mainly due to recent acquisitions and to the new campuses that are adding about SEK 600 million to the lease liabilities. As earlier communicated, a new loan agreement has been signed until 2025 with the possibility to extend for another two years. With that, I would like to summarize the full year 2021, 2022. Moving on to page 14. Very strong student numbers grew by 5.4%. In total, 20 new units were added. Eighteen new starts, of which 16 in Germany. Sales increased by 7.5% and amounted to SEK 14.3 billion, with growth in all the segments except in the adult education segment.
Adjusted operating profit increased to SEK 1 billion and the margin remained at 7%. Strong free cash flow at SEK 922 million. Diversification into educational services through the acquisition of Sandvik's. A fourth preschool country was added with the platform acquisition in the Netherlands, and large investments in campuses strengthened the position up in upper secondary school. A new loan agreement was signed. I would like to say all of this was achieved despite another year of the pandemic with, at times, high levels of absence and sick leave. Finally, moving on to the last page, 16, the financial performance versus target. To conclude, all of our financial targets were met in the year 2021, 2022, and the board is proposing a dividend, same as last year at 1.75 SEK per share.
With that, I would like to open up for questions.
Hello. We will open up for questions. First question is from Karl-Johan Bonnevier, DNB Bank. Karl-Johan, please unmute yourself and go ahead, ask your question.
Good morning. Good luck with the technology. It's difficult to get things started today, so I'm sure if you've already discussed this earlier. If you look at the new student growth that you saw during this year, could you elaborate a little on that. Looking at, say, for the school year starting this year, how you see that 16,000 in the year one students, comparing to previous years, and then also how you see the momentum in the different countries and the different segments, please.
Yes. We communicated about 5% student increase all in all. We have not yet disclosed how that is spread amongst the different segments. We are very pleased to see more than 16,000 students coming into our upper secondary schools, and that is the most number of students we've ever seen in year one in the upper secondary school. It's very promising. We've also seen, you know, a really high demand coming into our campuses. Very promising. Of course, these numbers are preliminary. It's a big turn for the next few weeks when students move. I just would like to say it's still preliminary.
When you look at the political term, well, obviously it's an election coming up here in a couple of days' time. Have you seen that affecting your way of attracting new students in any way?
No. No, we have not seen that. I mean, as we said, this is all-time high. No.
Thank you. We used to say that the more the debate is, the more students we get. Because it's very important for families to have the best schools and to have an option for maybe the municipality schools. So that is what the history says, and that is also what we see this August.
We have the next question from Johan Sundén, Carnegie. Johan, please unmute yourself and go ahead, ask your question.
Thank you, moderator. Good morning, Marcus and Katarina. A few questions from me as well. First one is related to the new campuses that you refer to that give rise to about SEK 5 million extra cost in this quarter. Is this just a one-time effect, or can there pop up more kind of startup costs related to this? Or how should we view that item?
No, this is a one-time effect. You will not see this going forward. As I said in the call, you know, it will take us perhaps two years now to fully fill these new much larger premises. You will see somewhat effect on the margin because of lower capacity utilization, but not related to additional costs.
Clear. If we go to the preschool business and the business in Norway, we're seeing a margin weakness recently, and it is persisting. How worried should we be for the coming year with what's happening on energy markets where I guess the kind of bottleneck for recruiting preschool teacher isn't easing? How worried are you?
I think when it comes to Norway, we've seen, you know, higher electricity cost already this last year, so I don't expect that to rise further. I think we're expecting to see a slight improvement in Norway. The lower pension compensation, we only saw half-year effect of that last year, so that will impact us for the first two quarters in the new year. But as Marcus mentioned, we have programs now to try and see what we can do. Of course, higher inflation is on our agenda when it comes to Sweden as well. You know how the revenue works. We will get compensated. In Norway, unfortunately, there's a 2-year lag for when the compensation will come.
What you should have in mind when it comes to Norway is that 50% of the market is private, and the private operator is very important in Norway. Sometimes in the history, systems are changed, and then you have to adapt, and that is what happens now in Norway. We always aim to come out better on the other side when they do these sort of changes. We also have seen the same in the healthcare sector. Sometimes you have changes in regulation. Now we've seen that in Norway, and I think that we will come out very strong on the other side. In fact, we also have the number of children is up, so we are very popular.
I think we are the leading quality concept in Norway, and that will also bring us into the future.
Mm-hmm. Great. My last question, it's related to this vacation effect that has been a little bit lumpy over the last two, three years. If we summarize this year, how much of a boost do you see in full year numbers from lower vacation takeout? Have you any kind of feeling or insight for how it could play out next year?
Well, Johan, I can only agree with you. It's been lumpy and this is never easy to forecast. Obviously, I can't forecast how our employees will use their vacation. If I sum up the full year, we've had a somewhat positive effect. It's not that great, perhaps SEK 10-15 million. We saw last year in quarter one a positive effect. I think that was a negative effect in quarter two and three. We had, again, a positive effect of about SEK 15 million in the last quarter. I can't predict the future. I don't know how next year will look.
The kind of positive full year effect that we basically had in Q4 now. Was it more or less the same that was more negative last year than it?
Yes
Theoretically should be if that.
Yeah
Would be natural?
More or less.
Yeah.
More, yes.
Yeah. Excellent. I get back in line. Thanks. Thanks a lot.
Next question is from Stefan Knutsson, ABG. Stefan, please unmute yourself. Go ahead, ask your question.
Thank you. Hello, Katarina and Marcus. Two questions from me. First on the loss provision in Norway. Maybe I missed the part when you presented it, but can you just clarify? Because I think that isn't that part of running business that you see rising electricity costs and costs for the pension, and that it will affect the first two quarters of next year? Because as I see it, the IAC that you booked was exactly the same as the extra cost that you referred to in the quarter. Is that sort of the level that you expect going forward as well?
This is really related to, you know, lease obligations that we have. The reporting or the accounting says that you have to provide for that. We have lease obligations. This is our estimate of that obligation until we will have full compensation for cost.
The cost compensation will then start in 2023.
Yeah
with the higher voucher increase.
Correct.
Okay, perfect. Going on to the adult education segment, regarding the labor market services, which saw a huge drop in the quarter. I just want to hear what's your view on the labor market services long term. Is there a future or will you try to exit the market altogether now with this development?
We can say that the labor market services is a small part of the total revenue of that education, and for the moment, the demand is very low. I think it will continue in Q1 also, because the labor market is strong. The most important part for us is the vocational program called Yrkeshögskolan, and here we see that the demand is still high. Of course, some of the students can go to job instead of going to education, but we have a very good portfolio of new starts when it comes to Yrkeshögskolan. The labor market services, that is a small part of AcadeMedia for the moment. If we go ahead maybe one year, at least I think that the economy in Sweden and also in Europe will have problem, and we will have higher unemployment rate.
I think the government and authorities will invest more in labor market programs. Maybe that is a market that will grow when we move into tougher economic times.
Okay, perfect. Also on Futuregames, can you just shed some more light on the growth prospects there and what to expect in the midterm? You talk about geographical expansion. I just want to get a feeling for when in time that can happen.
First of all, now we have made these acquisitions, and now we have the two biggest players in Sweden, which also have some international potential. With Futuregames, they have started to investigate education in other countries. We have also started in U.K., very small part. But I don't think you will see big numbers when it comes to the coming quarters, but in the future, I think it has potential. This idea to develop verticals, to take one part where AcadeMedia has a strong position and try to make it more international, that is what we have shown when it comes to Hypocampus. We will also show this when it comes to game education, and we are also working with other sorts of verticals where we see this international potential.
Perfect. Then I can take a last one also on the political landscape, because I saw an article popping up here in Dagens Industri about your note that you see increased risk for, as the right-wing parties has opened up to investigate the system. Can you just give your word, Marcus, on how you view the political landscape here prior to the election and also the risk about potential decrease in school voucher for you?
You know, it's very difficult to comment on the papers. I saw it also now, but you know, we have the responsibility to give information when it comes to our reporting. That's why we have this note in the report. If we look at the reality, the investigations that the government has put on the parliament table, they have been taken down. To be honest, I see the political risk when it comes to school voucher is very, very low. What could happen after the election? You could have the blue side, the right side could win, and then of course, they will try to reform the system, and that is very positive, and we are a big supporter of that sort of reformation because the sector now is very, very big. It's more than 400,000 children.
It's 800,000 parents. You have to reform this sector. If the left side win, then they will rely on Centerpartiet, and they are in fact a right-wing party. Then will they have to negotiate. I think the risk for the sector is very low. The debate will now, in two weeks, of course, be very high. In reality, I see the risk as very low.
Okay. Thank you very much for your answers.
We have a follow-up question from Johan Sundén. Johan if you want, please unmute yourself and ask your question.
Yes, thank you. A follow-up from me on the German preschool business. You announced that you
Plan to open some 37 new units during coming three years.
Yes
That doesn't really reflect any big acceleration you have done over the last two years, actually. What is holding you back from not accelerating the expansion in Germany even more? Is it still tough to recruit teachers, or what is the big bottleneck here?
See, you can say that this is what we have the decision in the board and contracts to start. We could start more during these three years because we have a lot of pipeline that we haven't decided to open yet. When it comes to this pipeline and new start, it's very important for us to start with quality. Now, in fact, we have built up SEK 1 billion business area in Germany, and I think that is quite fantastic. You know, the return is very high because they are profitable in one year, one and a half year. The demand is very high. If we should start a lot of schools where we don't have quality, then we would have problem.
Our focus is to start, for the moment, 15 new units, to make it profitable, to do it with quality, and this should be a big part. For the moment, we don't want to accelerate it too much because we want to see that things develop as we planned.
On the expansion to the Netherlands, how is the strategy going forward there? Should we expect more bolt-on acquisitions in the beginning, or when can we expect the first kind of greenfield opening from your side?
We say that when it comes to the Netherlands, our focus is to do some more bolt-on acquisitions as a starting point, so we have a bigger platform to start from. We don't have the same capacity need as we see in Germany, so we won't have as many units in the Netherlands as we have in Germany, for instance. The private sector is very big in the Netherlands, and it's also possible as a next step to consolidate the market. To be honest, that is our strategy, to continue to do bolt-on and then be ready to make some consolidation when it comes to the sector in the Netherlands.
Of course, there are other countries that we also are looking into, but the main focus still is to continue the plan in Germany.
On the consolidation story in the Netherlands, how far have you come with kind of getting good idea of the market? Do you have more discussions ongoing, or how-
I would like to say that we have.
Active should we expect you to be?
We have the best market overview in the Netherlands. We know all the operators. The same in France, Luxembourg, Switzerland, Spain, and so on. The operators, we know them all, and we have contacts. But we want to do it at the right price and at the right time. The insight in the market, that is not the problem, and the relations with the operators, that is not the problem. We want to do it at the right price and at the right time.
Excellent. Thanks for taking my follow-up question.
We have one more follow-up question from Stefan Knutsson, ABG. Stefan, please unmute yourself and go ahead and ask your question.
That is a technical mistake. I'm afraid. I don't have any further questions.
We seem to have no more questions. Speakers, I hand over the word for you for closing remarks.
Sorry, we have a web question as well. Marcus and Katarina, from the web. The adult education segment, is it at sustainable margins now, and what would a sustainable margin be at, given normal volumes going forward?
Well, I think we've communicated this many times that a sustainable margin in the adult education segment is between 9% and 11% over a longer period. That means that you will have times like now when the margin is lower than the 9%, and you will have times like we saw a few quarters ago, a margin that is higher than 11%. That's still where we think the correct margin should be, somewhere between 9% and 11%.
We have a second question regarding energy costs. How big headwind do you expect the next year at current energy prices, especially Norway, which are not compensated for, next year during the two-year margin or two-year lag?
In both Sweden and Norway, we have secured prices, especially during the winter months. I don't think this effect will be massive, but obviously we will also have higher energy prices like the rest of the world. It's hard right now to say exactly, and we are really focusing on this, and we're talking about this a lot. We're trying to also look into how we can reduce electricity consumption and to be sustainable. It's very high on our agenda.
Final two questions also on energy. How will compensation work, for example, in Germany? Will you likely see higher voucher inflation in Sweden with higher energy costs?
Absolutely. Anything that is also affecting the municipalities, like it is right now in both Sweden and Norway and Germany, we will get compensation. You know, we might not get the compensation at the same time as we see higher costs, so there might be a time lag. For sure, we should see higher school vouchers.
No more questions.
Okay. Perfect. Thank you very much for your time, and we wish you all a good day. Thank you very much.
Thank you.