Good morning everybody, and thank you for your time. Marcus Strömberg here, and together with me I have our CFO, Katarina Wilson. I will start to give a short introduction to this start of the new year. We must say that we have had a fantastic start of this year, and we will try to give you as good presentation as possible. I go to page two, the CEO introduction. Of course, the focus for us is to overview and see how our student numbers develop. We can see that we are now 5% up when it comes to our school segment, and the organic revenue growth is more than 7%. That is really good numbers, and that is key for us, that focus on the student number and the organic growth. We have also made a lot of new starts.
This August, we started nine new units. A lot of them was at the upper secondary schools, but also preschools. You can also see that operating profit has increased a lot. The main reason for that is the great development of the adult education. We have a huge demand of students coming into our programs in all of different parts of the adult education. Of course, we have times now when we see a lot of unemployment, and a lot of people try to find new programs and new futures and new education programs. We see also that we have a development to online training, and that is what we have developed for many years in AcadeMedia. We think that that will be part of the new normal, that more of the adult education will be online.
We also have a high demand of new places in Germany. The pandemic situation has affected us more in Germany, but the demand is very high, and the demand of new places is higher than when we started our development in Germany. Germany will be an important market for us many years ahead. We have now the situation with the pandemic, and we follow the development very closely. Most of our different schools have started in a normal way, but we are alert and follow the development if we have to go online in some of our schools. So far, we think it has been a good start of the new year. Something that we have worked a lot with is to develop also our compulsory schools.
AcadeMedia, we have a lot of different brands. The idea behind this is to be focused even if we have a broad portfolio. Now we have started the development also in our compulsory school segment. We have launched new educational profiles. We think that this will be something that will bring AcadeMedia stronger into the future. With this introduction, I hand over to Katarina to go through the different numbers. Please go ahead, Katarina.
Thank you, Marcus. I'm Katarina Wilson, CFO of AcadeMedia. Moving on to page number three, highlights quarter one, our first quarter this new financial year. Student numbers grew by 5.1%, including, as Marcus said, nine new starts, four preschools, two in Sweden, one in Norway, and one in Germany, one integrated preschool included in the compulsory school segment, and four upper secondary schools. Net sales increased by 5.6% with organic growth in all segments. We had in this quarter a negative currency translation effect of SEK 43 million. If we adjust for that, sales grew by 7.4%. Adjusted EBIT increased significantly to SEK 151 million compared to SEK 75 million last year. The adjusted margin increased to 5.7%. This is driven mainly by the adult education segment, but all segments contributed to the growth in the quarter.
Moving on to page four, as this graph is showing, adjusted EBIT has doubled compared to last year. Quarter one is usually our smallest quarter. It is the beginning of the school year. What really matters is early on in the year is the number of students and participants in our classrooms. We have had a very good start to the year with strong student growth in the school segment, a significant volume growth in the adult education segment. We have also had a positive effect from more vacation days in total impacting SEK 20 million positive, SEK 10 million in the upper secondary school, SEK 5 million in the compulsory school segment, some smaller effects in the rest of the organization. This is a normal effect of growth when we have more employees. We saw this also to some extent last year in Quarter one.
However, we can expect this positive effect to even out over the course of the year. Items affecting comparability of SEK 10 million in the quarter is relating to retroactive income, giving an adjusted EBIT, adjusted for IFRS 16 of SEK 162 million compared to SEK 75 last year. IFRS 16 impacted EBIT with a further SEK 59 million positive. Moving on to page five, net sales rolling 12 months now amounts to SEK 12.4 billion, adjusted EBIT to just over SEK 800 million, and the adjusted EBIT margin to 6.5%. Which means that we are moving closer towards meeting our profitability target of 7%-8%. Moving on to page number eight, development in the quarter by segment, starting with the preschool segment. This segment includes preschools in Sweden, Norway, and Germany.
This first quarter, four new units opened in total, one in Germany, one in Norway, and two in Sweden, which gives us a total of 266 units. The preschools in all three countries are now again opened. In Germany, some preschools still have somewhat reduced opening hours to try to minimize the spread of the virus. The number of children increased by 3.2%, and the pandemic has delayed our new start in Germany, and the plan now for the full year is to open an additional 10 units, giving 11 in total this financial year. This should be compared to quarter one the two previous years, where we opened six units in the first quarter. Net sales remained flat, but adjusted for the negative currency translation effect, sales grew by 6%.
Adjusted EBIT and margin increased partly as an effect of higher compensation for the staff density regulation in Norway. However, this is somewhat offset by higher pension costs due to the new pension plan implemented in January as of this year. We've said before that the pension costs will increase annually about SEK 10 million. In Sweden, we can see that our efforts to increase capacity utilization and to work with staff planning is also contributing towards improved operating profits. Moving on to the next page, compulsory school, page nine. We continue to see good growth in this segment. The number of students increased by 6%, and if we adjust for the two acquisitions at the end of last year, the growth was 2.6%. Sales increased by 8.4%, and the sales increase is related to an increased number of students and the annual school voucher adjustment.
We have also had some positive one-offs in the quarter. We had an insurance compensation of SEK 7 million, where costs related to this was reported last year when they occurred. We have also had a positive effect of more vacation days impacting SEK 5 million positive. Good volume growth and some one-offs contributed to the increased adjusted EBIT and margin in the quarter. Adjusted EBIT amounted to SEK 33 million, and the margin was 5.1%. Moving on to the next page, Upper Secondary School, page 10. All our Upper Secondary Schools have returned to normal classroom teaching this quarter. However, some distance education is still taking place to try to limit the spread of the virus and to follow the recommendations of the local health authorities. Some schools have, for limited periods, also fully moved to distance education to stop the spread of the virus at that specific school.
Student numbers grew by 5.6% and net sales by 5.2% as a result of the now 18 new schools that in total have opened over the last four years, of which four opened in this quarter. Adjusted EBIT was higher than last year, SEK 73 million compared to SEK 60 million last year, and this was due to good volume growth as well as positive effect of vacation, SEK 10 million. We also had items affecting comparability of SEK 8 million related to retroactive revenue for previous years. Moving on to the next page, adult education, page 11. Also in this segment, all teaching has gradually returned to normal compared to the distance education we saw during spring. Rising unemployment has created a high demand for adult education and a rapid volume increase, giving a net sales growth of nearly 14%, 13.6% exactly. All business areas are growing.
In the higher vocational education, we have had a record number of applicants this autumn, and the number of students increased by 16%. In the municipal adult education, we've had fewer dropouts during the summer because of the pandemic, contributing to growth both in sales and earnings. The labor market services business is also growing as a consequence of the higher unemployment. The volume-sensitive contract for vocational and preparatory modules will be terminated in the next quarter, but we are now seeing a shift from this contract to other contracts with the Swedish Public Employment Service. EBIT increased from SEK 22 million to SEK 57 million, and the margin increased to 14.8%. This improvement is mainly an effect of the sharp volume increase, but also an effect of expenses lagging during this rapid growth phase, which is enhancing the margin temporarily.
We still believe that over a longer period, this segment should have a margin around 9% to 11%. We have also said in the past that this first quarter normally is a smaller quarter for the adult education segment, but because of the rapid volume increase, fewer dropouts, and the cost lagging, this has not so much been the case this year. Looking ahead, we see that the demand for more flexible and digital teaching is increasing. We have a long experience from this, and we are well prepared to scale up the digital business when needed. Moving on to page 13, free cash flow and investments. Free cash flow is defined as cash flow before investing in expansion, and AcadeMedia has a strong free cash flow.
Cash flow is normally negative at the beginning of the school year related to working capital, and the free cash flow in this quarter was -SEK 42 million compared to -SEK 122 million last year. The strong operating profit in the quarter reduced the negative impact somewhat. Cash flow was also positively impacted at the sale last quarter of a property in Oslo. Moving on to page 14, the financial position improves even further. Net debt is significantly lower than last year, and the cash position has improved. The leverage ratio is lower than last year at 1.6, which is well below the financial target of below three. Finally, moving on to the last page 15, the financial performance versus targets. We are meeting the growth targets while profitability is still below target, even if it is increasing now for the sixth quarter running.
Leverage, as I said, at 1.6, is well meeting the target of below three. With that, I would like to open up for questions.
Okay.
Thank you. If you have a question for the speakers. Please press zero one on your telephone keypad. Our first question comes from the line of Stefan Knutsson of ABG. Please go ahead.
Hi, Marcus and Katarina. Thank you for the presentation. Even if we exclude the vacation effects that you mention in the report, we see the EBIT margin strengthening in all the school segments. Is that what you expect full year, or was there some other explanation towards the year-over-year improvement in Q1 that is not relevant for the full year?
Well, thank you for your question. We did mention that we have some one-offs, especially in the compulsory school segment. I would also like to state that this first quarter is a small quarter, and the effect can be somewhat skewed. What really is important is the number of students that we have, and that's very good. We're very happy with that development.
Okay, perfect. Also on the Adult Education, obviously a very high margin here, but you say that costs are lagging. You maintain your range of 9%-11% long term, but when do you expect costs to start ramping up?
Well, digitally, we are somewhat understaffed, I would say. When we have this rapid volume increase, we are ramping up the cost as well. It's very hard for us to say exactly when we will reach the 9%-11%, but you need to see this really on a rolling basis and the longer term.
Okay, thank you.
Our next question comes from the line of Johan Sundén of Carnegie. Please go ahead.
Hi. One question from my side. I was a bit late into the call. Just a clarification regarding the insurance compensation. Can you give a clarification of that once again? I had a hard time catching up on that during the presentation.
Yes, we've had a compensation in the quarter of SEK 7 million, that's related to two insurance cases we've had over the last few years. We've taken the cost related to this when they occurred. It's a net zero effect, but because we had the revenue or the compensation this quarter, it stands out in the quarter.
Yeah. Okay. Well, that's perfectly clear. That was all for me. Thank you.
Our next question comes from the line of Karl-Johan Bonnevier of DNB Markets. Please go ahead.
Yes, good morning. A couple of questions. On the upper secondary school side, you had a good student growth. Could you elaborate a little how you saw the growth in year 1 students within that?
Yes. We don't report that question, but I would like to say it's positive because otherwise we wouldn't have that sort of total growth. The growth in year one is positive. We don't give the exact numbers, but we wouldn't have the total number of 5% if the growth in year one wasn't positive.
You would agree to that it's fair to assume that you are taking your part of the demographic growth, which I think was 2% for the student year or something like that. Is that?
We are taking market share for the moment. The big city, the development is quite positive for our upper secondary schools. We've been working with it to give them strong pedagogical profile. We have a very good communication and marketing and also good quality results. I think we have a very strong position now the coming years when it comes to upper secondary education.
Turning to adult education, could you give us some sort of feeling for the average length of these programs that you are now in the startup of? Is this something that will keep with you for the next six months, or is it yearly programs, or how does it work in the different segments?
I'd like to say it's yearly programs. We have changed the mix from labor market programs into municipality programs and vocational training, and also a lot of online training. For the moment we win a lot of tenders. I would like to say the contracts portfolio is quite positive for the moment, and I think we have a portfolio for the coming years. The question is, will the students be there? I think they will be there because we have a lot of unemployment and lot of people want to invest in education. If you look at the vocational training, we have 45,000 applications to our vocational programs. I think we started 7,000 places or something like that. We have never seen that sort of numbers.
For the moment, I would like to say the portfolio contracts when it comes to Adult Education, it's the best we have had for many years.
Can we, just for purpose of guidance going forward and so on, how relevant is a Q1 performance in Adult Education as guidance for coming quarters? Is there some sort of guideline for that?
As Katarina mentioned, it's difficult to look too much on the margin. As we mentioned, we have very strong growth. We have never seen such demand before. Now maybe you should look at our historical numbers when it comes to margin in the adult education. You can't look at this quarter because it's a small quarter. I would like to say that we are back on track when it comes to our adult education.
Sounds promising.
On top of that, we have this very high demand from the market. The key question here is to win the contracts, and that is what we have done, the recent contracts and tender process that we have seen. We mentioned in the report about the Stockholm contract, for instance, and we have a lot of other contracts also. One also key driver is the development when it comes to online training also. A lot of classroom education has moved into online, and that's positive for the margin, and we think it's also positive for the quality and the result and the convenience for the student.
Is there any overall rule of thumb how much of the adult education lines or curriculums that can be done online at this stage? How many of your students that can be handled online rather than in classrooms?
I don't think we have any numbers for that. Still the overall picture is that we have a lot of people going to classrooms. I think they will keep on going to classroom. We also have this blended learning, that you have some of your lessons in the classroom and some online. We have also started, as you maybe know, AcadeMedia EdTech, and we have invested a lot in different sort of platforms. Now we have moved and left some of the external platform that we have had in our different programs to use our own learning platforms. Of course, that will also improve the profitability. We have a lot of different areas in the adult education that is developing positive at the moment.
You should also keep in mind that labor market program, they are just around 10% of our revenue for the moment. But if you look the coming year, we will see a big market coming when it comes to the labor markets. The agency of unemployment will be deregulated and open for private operators. That is a SEK 1 billion market coming, and we are ready to take a part of that market also.
I guess the other side of this strong development in Adult Education is that, and that part benefited you is the ramping of employees, so to say, the staffing and teacher. Do you have good access to qualified teacher or is that a limiting factor for the moment that is putting you under constraints?
No, not when it comes to the adult education. It's more difficult in Germany or in other parts, but not when it comes to adult education in Sweden.
Excellent. What are your expectations for the upcoming wage negotiations in Sweden? What kind of guidance would you give?
When you take the voucher?
No, the wage negotiations.
Yes, sorry. It is very difficult. They are negotiating now for the moment, and you see that everybody wants to take the numbers down, but the union wants to bring it a little bit up. I do not mention the number, but I think it will be a little lower than it has been the recent years. That is what I get. What you should keep in mind is that we in fact see now that the municipalities have had a very good development of their finance during this year. That may be quite strange, but they have got a lot of money from the state. I think we have money in the system, but where the wages will land finally, it is difficult to answer that.
Excellent. Thank you very much, and congratulations to good start to the year.
Just to remind everyone, if you would like to ask a question, please press zero one on your telephone keypads. There are no further questions at this time. Please go ahead, speakers.
Thank you very much for your time, and we wish you all a good day. We are here to answer any questions if you want to contact us. Thank you very much.
Thank you very much. Bye-bye.