Welcome to the AcadeMedia Q4 Report 2024-2025. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answers session, participants are able to ask questions by dialing #KEY-5 on their telephone keypad. Now, I will hand the conference over to the speakers, CEO Marcus Strömberg and CFO Petter Sylvan. Please go ahead.
Good morning everybody, and thank you very much for your time. We will spend now a few minutes to introduce you and present our Q4 report. It will be me, Marcus, and Petter that will make this presentation. This time of the year is really a great time for AcadeMedia. We meet a lot of new students, we start our schools, it's a very exciting and very good time. When we sum up this year, we can say that we have had a very good and very stable development in AcadeMedia during 2024-2025. At the end of the year, Q4 was in the same line as overall this year. We have kept on growing, we have made a lot of international expansion. All the segments are developing in a positive way, and that is very positive also when we look into the future.
We have also focused on quality, and we have made a lot of investment to also handle the demographic challenges in our mature markets. When we look at the preschool, where we have entered swimming lessons for free, we have traffic lessons for free, a lot of focus on reading, and all of these quality efforts have created this growth. When we look at the number of students, it has grown about 7% the year we have behind us. When we look at the start, we think that the start of this new school year has also been very stable with a growth of around 3%. When we look now at this year, the board also will propose an increased dividend to SEK 2.25 per share. The board also intends to propose a voluntary share redemption program or buyback program to the annual meeting that will be in November.
We also want to highlight some of our quality efforts, and we look at specifically on reading. In Sweden, we measure the results when they are at level three, but we have focused on year and level one. If we look at this number, our early efforts, our training programs on the teachers, our focus on new methods has really improved the way that the children learn how to read. When we look at the numbers now, of course, we have the target to achieve 100%, but we are now at 90% of the children in first grade that can read. That is a good step for us, and we attempt to continue this development. If you look at AcadeMedia, a lot of companies talk about the future. We could also show our history.
To have focus on stability, to grow profitability, to increase the profit, to make the company more stable, that has really been core for us. As we look at this number, we have increased 19% CAGR EBIT over these years. One important strategy for us is to continue to develop the international part of AcadeMedia. We have announced this target that it should be 50% of the revenue that should be outside Sweden, including the adult education. We made two acquisitions just before summer, both in Germany and in the Netherlands. We think that we have a good list of prospects, we have a strong balance sheet, that we could continue to grow and go toward this target. With this introduction, I also want to comment a little bit about politics.
We are very used to handle the politics situation in the different countries, both in Finland, Norway, Germany, and so on. This is a picture that just shows the situation in Sweden because we have had a lot of different proposals. I think it's around 10 proposals that are on the table for the government in Sweden now, and it's three proposals that are focused on the situation that we are in, in independent sectors. It is the profit inquiry, it is the school voucher inquiry, and it's also the principle of publicity to be more transparent as a sector. If we look at these three, we have made a picture that tries to explain where in the political phase are these different inquiries.
If we look at the first one, we are just after the phase that we have had information for what has been the comments from different sorts of organizations. Now it's about to be negotiated, and we think that the profit inquiry will have a proposal to the government around springtime 2026. That is our best guess for the moment. If we look at the school voucher, we are not still in this consolation phase, so it's nothing new information to talk about. It's very important also to say that even if the government will talk about the profit inquiry during the spring, it will be operating in 2028. The timetable in these inquiries is quite long. We can see the same. We have also commented on the principles of publicity, and here we also are in the same phase as the profit inquiry.
It's a long process, it takes a lot of time, and it will be, some of these we think will be proposed to the government and parliament in the spring. We could answer some questions if you have any questions around this after Petter's presentation.
Okay, thank you, Marcus. Good morning, everyone. I will talk about the financial development. As Marcus started to explain earlier, we achieved a good growth of 5.4%. This is with contributions from the acquisitions Yes in the Netherlands, amounting to 1.1%. Additionally, our adjusted profit margin increased to 9.1% compared to last year's 8.5%, reaching SEK 467 million in absolute terms, up from SEK 415 million. Finally, this increased profit has translated into higher free cash flow. Let's continue and turn to the next page. The improved adjusted EBIT are evident across all segments. In the preschool and international segment, the increase of SEK 19 million is driven by positive contribution from the mentioned acquisition of YES. In the compulsory and upper secondary segment, we have a stable situation.
In adult education, we continue to report strong results driven by high unemployment rate and, in particular, increased volumes in higher vocational educations. That's the total overview. Let's jump to page 11 and look at the quarter's development within each segment. We start with the preschool and international segment. The number here of children increased by 6.5%. Our growth was primarily driven by new preschool openings in Germany. The international operation accounts now for approximately 30% of the group's total sales. The net sales increased by 4.5% compared to last year, and we had an organic growth of 5.18%. The difference there is the currency effect. Adjusted EBIT and margin increased compared to the previous year. This year's margin is 8.6%, was up from last year's 8%. The adjusted operated profit increased to SEK 169 million compared to last year's SEK 151 million.
The improved result was mainly a positive effect from the acquisition of Yes in the Netherlands, as well as more children and higher compensation in Germany. Move on to the compulsory school on page 12. We now note a 4.8% increase in student numbers. Net sales rose by 9.7%, driven by an increased number of students and the positive impact of the annual school voucher revision. Adjusted EBIT and margin increased compared to the previous year. This year's margin reached 9.5%, up from last year's 9.1%. The operating profit was SEK 140 million compared to last year's SEK 99 million. The result and margin for the quarter were positively affected by acquisitions and expansion units. Now we turn to upper secondary school on the next page. We there observe a 0.6% increase in student numbers.
The sales grow by 2.7%, and this was driven by more students as well as the annual voucher revision. The adjusted margin was stable, and last year, 12.2% is maintained this year. Last segment, we want to the adult education, page 14. There is a 7.3% increase in sales, and this is attributed to a high number of students in higher vocational education in particular. Adjusted EBIT increased to SEK 34 million from the previous year that was SEK 23 million, with a margin of 7.5% compared to 5.4% last year. The improvement in result was mainly attributable to increased volumes in higher vocational education. Service conducted by SCB, the Swedish Statistics Bureau, indicates that the unemployment rate in Sweden was 9% in May, which is historically high and is expected to maintain high at the time being.
The growth here is highly correlated to a high unemployment rate in this segment. Okay, let's continue to page 16 and free cash flow and investments. Free cash flow for the last 12 months was close to last year in absolute terms. The free cash flow as a percentage of EBITDA is 62%. The lower ratio compared to last year is mainly an effect of the change in net working capital. The last four years, maintenance capital as a percentage of sales, as we see in the picture to the right, has declined. This is a consequence of fewer new openings and fewer expansion units. Proceed to page 17, the financial position. Net debt excluding IFRS 16 decreased by SEK 67 million compared to last year, with the leverage ratio excluding IFRS 16 as 0.5. Obviously, well below the financial target of less than 3.
Even including property-related lease liabilities, the net debt including is lower than last year. This is due to low indexation, low number of new entry contracts in the quarter, and FX effects. In the period, new loan agreements were signed with three banks securing financing until 2028, with the possibility to extend until 2030. Obtaining long-term financing is essential for AcadeMedia AB to successfully pursue its acquisition strategy that Marcus talked about. This approach aligns with our objective to secure 50% of revenues from other sources than the Swedish school voucher. Okay, let's continue to the next page. We now look at the overview of a full year. For the full year, we achieved a good growth of 9.7% with contributions from the acquisitions amounting to 4.7%. Additionally, our adjusted profit margin increased to 6.7% compared to last year's 6.3%, reaching SEK 1.281 billion in absolute terms.
This is up from SEK 1.097 billion. In all segments, it contributed to the improvement of operating margin and profit. Now turning to the next page and the full year's results visually. As I mentioned, the improved adjusted EBIT is evident across all segments. In the preschool and international segment, the increase of SEK 57 million is driven by new openings and acquisitions, along with better school voucher compensation in Germany. In the compulsory school, there has been a stable development with an increase of EBIT SEK 27 million, driven by contributions from the acquisition and expansion units. The upper secondary school has managed to increase its capital utilization and improve its cost control, leading to an improved EBIT of SEK 47 million. Adult education finally improved by SEK 54 million, and this was mostly driven by high volumes in vocational education.
Finally, on the next page, our financial performance against targets. Our organic growth, including small ballpark acquisitions, stands at 9.2%, exceeding our financial target of 5%-7% growth. Our adjusted EBIT margin of 6.7% falls below the target range of 7%-8%, but we are slowly improving, rolling 12, and are getting closer to our target. The leverage ratio of 0.5 remains well below the required threshold of 3 and leaves further room for acquisitions when opportunities occur, as long as share redemption and/or buyback programs. With these words, I end the presentation and we open up for questions.
If you wish to ask a question, please dial #KEY-5 on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial #KEY-6 on your telephone keypad. The next question comes from Johan Lönnqvist Sundén from DNB Carnegie. Please go ahead.
Hi, Marcus and Petter. Thank you for taking the questions.
Hello.
Hello. First one, it's on the adult business. You highlighted, Petter, in the presentation the projected unemployment rate in Sweden for the coming year. Can you give some kind of guidance or comment about your visibility on volumes and what that impact can have on margins during, say, the coming 6, 9, 12 months?
We don't give any forecast overall, but there is public data that you can also take part of that the unemployment rate is expected to be on similar levels for the coming year. That should be, yeah, everything equal should be equally positive compared to the year that we have had. We don't see any major factors that are negative to the segment for the coming business year. It's a general statement. From the margin perspective, we come from a year where we have significantly ramped up the volume, not the least, in the vocational education. We are at a historically very high margin on the close to 12% last year. It's a bit higher than the expected range of 9%-11%. Of course, if we would continue to have high volumes driven by high unemployment rate, I think that correlates to continuous high margins.
On the other hand, it's probably not sustainable to be at this high level, like 12%, over time, even though there are high unemployment rates because we often have needs to secure the quality, which always increases additional cost of investment when we ramp up relatively quickly.
I understand. If you go back to you had to start with the financial targets and you have pushed towards your margin target a bit during this year, what is needed to be achieved to reach the kind of corridor from where you stand today?
For the financial targets, all targets, or you meaning?
Margin specifically.
Margin specifically. Generally speaking, as many of you probably know, for the four segments we have, three of the segments are within the margin range, 7%-8% or higher. I mean, adult education is higher and compulsory school is at 7% or slightly higher. The upper secondary school is a little bit above 8%. All of these are at or higher at the range, and they need to sustain the margin. It's positive also if they slightly can improve the margin, but we don't necessarily expect them to contribute that much. The main change that is needed is continuous improved margin in the preschool and international segment. We have a slight improvement this year that has been behind us. It would have improved further if it wouldn't have been that we had added the acquisition of Touhula that came in with a lower margin.
We have a lower margin and we have a margin improvement in the segment in Touhula in this last year, but still they are lower than the rest of the segment. Continuous uplift in the year to come in the preschool and international, that is a necessity to reach our margin goal.
Specifically with the Finnish acquisition you referred to where you are working to improve margins, where are you in the progress of improving margins? Are you halfway done or if you just ballpark, how much is it done and how long time is it going to take?
We are kind of halfway.
The other half is that a quick fix or would take many years to achieve.
We happen to reach the full segment margin potential within perhaps two years or so.
Perfect. My final topic is the kind of buyback or redemption comment in the report. Is there any kind of ballpark range that has been discussed? Do you think the last year's levels are a good kind of level to look at, or will the kind of volume of the program be significantly different compared to what we've seen in the last few years?
We obviously don't give any specific guideline at the time being, but we can conclude that the cash flow at the time, we calculate it to the year that has been, I think, strong despite what that decision was made according to our strategic agenda and despite the dividend we made and the share buyback program the last year. We end up with the net leverage position that is even stronger than the year before. I mean, we have a good start in the year to come. We have a plan for continuous growth according to our financial targets, and there is nothing changed in our cash flow generation model.
With all that said, I mean, we have all the possibilities to either have a similar size or better in the share buyback or voluntary share redemption program combined with an acquisition agenda that we find decent or have a more aggressive acquisition agenda than we had the year before. It's either way.
What will dictate if you would go for a redemption or a buyback program?
That's a good question. We have had good use of the redemption program the last two years, and we have achieved many of the objectives we wanted with the redemption program. We have had the evaluation and discussion in the board the last half year or so of the pros and cons of continuing with the redemption program and the pros and cons with the alternative of a buyback program. We see positive advantages of both solutions. For us, the redemption program has been proven. On the other hand, we see a favorable mechanism in the share buyback program that we are evaluating. We need to come to a conclusion in the board and then put a proposal from the board to the annual general meeting for which one we find most favorable in our situation.
We take a number of factors into account, transparency to the market, the value that we have of providing a premium that we have in the redemption program. We don't typically do that in the share buyback program. We value that against the higher flexibility in terms of timing and frequency that we can do in a share buyback program.
Thanks for the color. I look forward to hear the conclusions. I'll get back in line.
Thanks.
As a reminder, if you wish to ask a question, please dial #KEY-5 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.
Thank you very much for your time.
We actually have one more question from Philip here from ABG. Is it okay to open up to Philip?
No problem.
The next question comes from Philip Söderqvist from ABG. Please go ahead.
Perfect. Thank you very much for taking my questions. I just have one or two here or potentially three, just to follow up on the Finnish business and the acquisition of Touhula. I appreciate that the margins are expected to improve gradually, but you're right that there was an accentuated seasonal effect in the quarter. Would you care to just explain that and what happened and what you see going forward, please?
You mean the seasonal effect specifically for Touhula or what is it?
Yeah, exactly. What was the accentuated seasonal effect? You write that in the report. Just why was that, and what happened?
Okay, so it's for comparison reasons that for last year they weren't. We acquired them in March, I think, in 2024, so they weren't part of the full year. That's what we mean.
Sorry, then I misinterpreted. Perfect. Just on geographies, do you see any kind of possibility of new countries adding new geographies in the coming years? What's your comments on that moving forward?
You could say that our focus now is to grow the German business to be the leading private operator in Germany, and we are quite at a good track for the moment. In the Netherlands, we will do more acquisitions when it comes to preschools, but we are also looking into adult education and also schools. If we talk about other countries, we have mentioned two, and that is the UK and that is also Poland. We are running adult education in Liverpool and in Warsaw for the moment, but we also want to run schools. If we talk about other countries, our main focus is Poland and the UK.
Perfect. That was everything for me. Thank you very much.
Thank you.
There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.
Perfect. Thank you very much for your questions and your time, and we wish you all a very good day. Thank you very much.