Welcome to the AcadeMedia Q4 report 2022 to 2023. 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, CEO Marcus Strömberg and Deputy CEO Katarina Wilson. Please go ahead.
Good morning, everybody, and welcome to this presentation of our full year result. I will just give a short introduction, and then I will hand over to Katarina that will go through the numbers. First of all, we are very happy to start a new school year, and in fact, we are starting this school year with all-time high record when it comes to number of students. The number of students is up 5%, and we think that is a good start of the new year, and that is a result of the investment that we have done in vocational training and also in our campuses, and also, of course, the growth in the international markets. If you look at the revenue now in AcadeMedia, 25% of the revenue is outside of Sweden, 33% is outside the Swedish school voucher system.
To have a balance in our revenue is very important for us because that we think that is more safe for the students, and that is also something that will bring us into the future. If you look at the last quarter, we have a good growth when it comes to the revenue of 9%, and also the students number is up 6.4%. So we ended the school year and our full year in a very good and positive way. We have seen an improved development in Norway. That is something that we have struggled a bit with, but it's also very positive to see that the quality effort that we have done in Norway is also showing results because the children number is up, and the capacity rate is also improving.
And then if you look at the adult segment, it is, of course, good for Sweden that we have low numbers when it comes to unemployment rate, but that has affected the municipality training programs. But if we look at the vocational part of the adult education, it's really fantastic to see what we have achieved. We have made a total turnover of the adult education and the profitability and the growth and the things that we are doing to help companies to secure workforce is very positive from our side. So the total overview of the year is good in the tough environment, and we are starting the new school year in a very good way. So please continue, Katarina, and go through the numbers.
Thank you. Yes, I'm Katarina Wilson. I will start presenting the Q4, and then I will move on to summarize the financial year 2022 to 2023. The results that we are presenting today are in line with the preliminary numbers that we communicated on July 19. Let's move on to page 3 with highlights, quarter four. Good growth in number of students, 6.1%, with growth in all segments and in all geographies. Net sales increased by 9%, with growth in all segments, except in the adult education segment, where volumes in the municipal business area was still below last year. Organic growth, including smaller bolt-on acquisitions as well as growth in the Netherlands, was 7.2%.
The acquisition of Sandviks in Norway in quarter four last year, as well as the acquisition of FAWZ in Germany this year, contributed 2% to the growth. Changes in currency had a limited negative effect of 0.2% in the quarter. Adjusted EBIT was higher than last year, SEK 333 million, and adjusted margin increased to 7.9%. As of last quarter, we now seeing the full effect of inflation, including increased rental cost. Rent in Sweden increased from January 1 by 10.9% due to indexation, and we're estimating that cost for electricity, school meals, and rent altogether increased by about SEK 50 million in the quarter compared to last year.
The annual school voucher revision from January the first are partially offsetting this cost increase, and profitability in Norway increased due to the voucher revision, which is a compensation for previous years' cost increases. Good cost control in the compulsory and upper secondary school segments, in particular, also contributed. Items affecting comparability, SEK -23 million, is related to restructuring in the upper secondary school segment. Free cash flow in the quarter was higher than last year at SEK 406 million. So, let's jump on to page seven, development quarter four by segment and starting with the preschool segment. The number of children increased by 12.7%, with growth in all countries. The growth was mainly driven by acquisitions and new starts in Germany and in the Netherlands.
In total, we opened nine new units in Germany during the full year, and this was lower than what we initially communicated, 15. But as we also communicated during the race, that this was a temporary revised plan to mitigate increased inflation. No further units opened in the Q4. The acquisition in quarter two, FAWZ in Germany, contributed with 1,800 children. Net sales increased by 17.3% compared to last year, and the organic growth was 11.5%, adjusted for the acquisitions, FAWZ and Sandviks. Currency had a small negative impact of 0.8%. Adjusted EBIT and margin were higher than last year.
Higher costs in all countries due to inflation, about SEK 15 million in total, were offset somewhat by the annual school voucher revision, as well as increased capacity utilization in Sweden and in Norway. The acquisition of FAWZ in Germany also contributed. For the next financial year, 2023 to 2024, we will return to our plan to open 15 new units in Germany, of which six actually already in the Q1. In Sweden, three units will close with about 200 children, and also the acquisition, Winford College, with about 600 students, will be included in the preschool segment, as well as a Media Design Academy from August. Moving on to compulsory school, page 8. The number of students increased by 3.1%, which is 859 students, and sales grew by 7.9%.
One new school with 130 students started last autumn, and one school with 230 children was acquired in the Q3. Several units have also increased capacity, invested in increased capacity. The annual school voucher revision from January was 5.3%. Net sales were also positively impacted by retroactive school vouchers and subsidies of SEK 5 million in the quarter. And last year, we had a similar effect of about SEK 10 million in the Q4. Adjusted EBIT was higher than last year at SEK 88 million, and the margin increased to 8.6%. Inflation continued to impact operating costs, energy, school meals, and rent increased by about SEK 15 million in total compared to last year, somewhat offset by good cost control. Continued initiatives to strengthen student health also impacted profit.
We had no significant effect from vacation in this quarter compared to last year. Moving on to upper secondary school, page 9. Student numbers increased by 4.3%, which is over 1,800 students, and net sales increased by 7.7%. Growth is coming from the 24 units that have opened since 2017, as well as from capacity expansion, including 2 new campuses that opened in Stockholm last autumn. Revenue increase is also coming from the annual school voucher revision, that was 3.9%, and about SEK 10 million in retroactive school voucher adjustments in Q4 . Capacity expansion continues to temporarily lower capacity utilization, which decreased by about 2.9 percentage points to 82.9%. I've said this before, but this effect will remain until the campuses and the new starts have reached full capacity utilization.
Inflation continued to impact operating costs, energy, school meals, and rent increased by about SEK 20 million in total compared to last year, and this was somewhat offset by good cost control. Adjusted EBIT was higher than last year, SEK 160 million, and the margin increased to 11.6%. As I mentioned, we had items affecting comparability, SEK 23 million, related to restructuring. 4 schools will gradually close, and 3 schools will merge with sister schools in the same location. We actually also opened 1 school this autumn, 2023. Moving on to adult education, page 10. Sales decreased by 7.5%, and this is entirely due to continued lower volumes in the municipal adult education, where sales decreased by 22%, but volumes were stable compared to last quarter. Capacity adjustments in this business area and cost-cutting measures are now fully implemented.
Sales in the labor market services business increased by 25%, but from a very low level, which is a conscious decision to reduce exposure to this business area. The volume in the matching contract are still well below the Swedish Public Employment Service's own forecast. Demand for higher vocational education remains high and revenue increased by 7%. Capacity utilization is slightly lower than the last year, affecting EBIT and margin somewhat. Also, inflation had a negative impact on the adult education business. In total, adjusted EBIT in this segment decreased to SEK 20 million, and the margin was 5%.... And if we're looking ahead, the expectation for the next quarter is that the volumes in the municipal business area will continue to stay low, but volumes in the vocational business will increase.
As always, the development of the economy can lead to higher unemployment and increased demand for adult education. Free cash flow, moving on to page 12. AcadeMedia has a very strong free cash flow, and in the quarter, it was somewhat higher than last year at SEK 406 million. Maintenance CapEx to the right of this page, as a percentage of sales, was 1.8%, which is back to the level two years ago. If you recall, last year, we saw higher maintenance CapEx related to our 2 new campuses in Stockholm. Moving on to page 13, we still have a very strong financial position.
Net debt, excluding IFRS 16, was lower than last year at SEK 825 million, and leverage ratio, excluding IFRS 16, 0.6, 3.6, was lower than last year and well below the financial target of less than 3. Net debt, including property-related lease liabilities, was higher than last year due to expansion in capacity and growth. Lease liabilities also increased in the Q3, with just over SEK 400 million due to indexation of rental contracts. Leverage, including lease liabilities, was 3.1, which is in line with last year. Then to summarize the financial year 2022 to 2023, with some highlights, page 14. The number of children and students grew by 5.8%. 27 new units were added, mostly outside of Sweden, and the international business grew and accounted for 23% of total net sales.
Net sales increased 8.4% and exceeded SEK 15.5 billion. Adjusted EBIT was SEK 964 million, and adjusted EBIT margin, 6.2%, despite high inflation and declining volumes in the adult education business. Free cash flow was SEK 792 million. AcadeMedia also took the first step to expand compulsory and upper secondary schools internationally with the acquisition of FAWZ in the Q2. We also further strengthened our position in game education through the acquisition of Future games in Sweden. Our two new campuses that opened last autumn have proven to be very attractive to students. With that, I would like to conclude page 16, Financial Performance versus Target. Organic growth was 6%, which is, within our target.
Adjusted EBIT margin, 6.2%, which is below target, but the trend turned in the last quarter, and the target on capital structure is met. The board is proposing a dividend of SEK 1.75 per share, which is unchanged from last year. And so with that, I would like to open up for questions.
If you wish to ask a question, please dial star five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial star five again on your telephone keypad. As a reminder, if you wish to ask a question, please dial star five on your telephone keypad. The next question comes from Karl-Johan Bonnevier from DNB Markets. Please go ahead.
Yes, good morning, Marcus and Katarina. Sorry for the background noise there, but I'm in quite an exceptional place for the moment. But looking at your Q4, congratulations to a solid result and continued good development. And you obviously end this year now with an exceptional strong balance sheet. So what are your considerations about that going forward, and also looking at the opportunity to maybe redeploy a bigger part of that internationally?
So that is a very positive position that we have now with a very strong balance sheet, and we also have the balance in different international and local segments and a good cash flow. This gives us the opportunity to continue this strategy that for the moment, 33% of the revenue is outside the school voucher system in Sweden, and our target is that it should be 50%. I think this gives us possibility to continue to grow through acquisitions. We started now with acquisition in the Netherlands, and that is that now we are running the full education ladder, both in Germany and in the Netherlands. Hopefully, we can continue this development.
... And when you now also add what I would call more private finance markets and voucher finance markets, is there any additional considerations looking at the profitability perspective of these market opportunities or something else we should have at the back of our minds?
They are more profitable, but of course, they are also more expensive. So, so you have to pay a little bit more for them, but I think it's, it's also positive for us to learn new markets, new segments, and new school structure. For instance, we have a lot of discussion around the grades in Sweden, and now when we have looked into the Netherlands system, with, where the grades is everything, when it comes, the test is everything when it comes to grades. So we can also learn between different school systems. But the, the overall picture is, of course, that private paid education is more profitable and also more expensive. But that is how it looks like in, in the Netherlands and France and UK, and some parts of the Spain, Spain also.
What is positive, if you look in the Netherlands, they also have a very good independent school system with a lot of free schools, so to say. So we are learning more about these schools and taking steps all the time.
Willing to go outside voucher-based systems, would that add...? You have highlighted a number of markets where you have investigated opportunities historically. Would that add any new markets to that list?
Yes, absolutely. You have it in more countries, but we are a little bit careful. You know, we have to understand, and when you look at the semi-private paid system or private paid system, it's another base of parents that go to these schools. So we have to learn the system, work together with local management teams. And to be honest, we love the Swedish system, where everybody could choose schools. And if we look, for instance, in Germany, it started preschool with private paid schools, but now they have the same system as in Sweden. So who knows what will happen? But this is a first step for us, and we are learning.
And finally, from me, when you look at the new legislation that the educational authorities are suggesting, so to say, how will that impact you? And there's a big part of your operations that will be non-compliant if you are looking at it, or how would it play out?
The overall picture when you look at AcadeMedia in Sweden is that we are compliant. I follow this all the time, and if you look at the school inspections result when they look at our different schools, it's quite positive, to be honest. So that is that I'm not so concerned around. But when you look at this investigation, we will see what the result of this will be. It is a lot of different sort of regulations, so, and maybe one regulation on top of another regulation. So it will be a little bit hard to work out the legal part, but we think that it's very important that the politicians in Sweden now develop the system and the long-term regulation of this sector. That is the most important thing. If it will affect us, I think it's more positive that the regulation is long-term.
Excellent. Thank you very much for all that extra color, and all the best out there.
The next question comes from Beltrán Palazuelo from DLTV. Please go ahead.
Hello, good morning, Marcus, Katarina. Good to say hello. I have a couple of questions, if I may. First of all, regarding margins for next year, I know they will be, let's say, very questionable due to the vouchers coming, but seeing how inflation is developing, where would you expect, let's say, margins going forward in the next 12 months? And then I have two other questions. I don't know if... Should I ask them now or after you answer the first one?
Yeah, you know, you're right when you're saying that the school voucher, of course, is important, and we don't know what that will be for the next year. So it's very hard to answer that question, but we're very happy that we are finishing last year on a really strong, in a strong position. So, you know, I'm not too worried, but also when it comes to the adult education, it really, really now depends on the unemployment rates in Sweden and how that will, you know, turn out. So, it's hard to be exact on that question.
Okay. Thank you very much. And let me, maybe my second question, in M&A, exactly what is in your extremely, let's say, strong balance sheet? If you take this out, what would, let's say, the M&A budget, if the good opportunities arise, how can you stretch your balance sheet in order to, let's say, execute the good opportunities? So when you see the opportunities that are in front, how much would AcadeMedia be able to invest in good opportunities for the long term?
If we have good opportunities, as you see when you look at our balance sheet, we have a lot of potential in the balance sheet, but the environment is also a little bit different now with quite high interest rates. So maybe we don't have the potential that we have in our target with three times EBITDA. But if we have the right opportunity, I think that we could use our balance sheet to make the company stronger, and we are looking mainly at the added dedication investments and also in the different international markets.
Okay. Thank you very much. So maybe my two last questions is maybe you could, let's say, clarify or more about your dividend policy. It seems that it has been a good year, and your dividend is, let's say, the same and no buyback. So if you could, let's say, clarify your dividend policy. And then maybe another question from my side is regarding free cash flow. If you could define exactly what do you define by free cash flow? And then if I get, let's say, your net debt from last year, ex leases, and from this year, and if I add everything that's there, it's quite confusing. So maybe for next time, you could put out, let's say, a statement of cash flow ex IFRS, because it's very, very complex to add it.
Maybe Katarina could call you and explain that. So that is her real expertise. But if we take the other questions around dividend, you know, we, it's very important to understand that the overall environment is still quite tough when it comes to inflation. So we really have to keep our feet on solid ground. And as I said before, our key priority is to deliver good quality to all our students and to continue to invest in vocational training and campuses and so on. But we also want to invest more in acquisition in an international strategy that I mentioned. So that's why the dividend is in that way. And so we want to keep a strong position and to continue the strategy that the board has decided. Hopefully, you will see some news around this the coming year.
Just to touch on the free cash flow definition, you have a table on page 6 in the report. But the easy definition of free cash flow is cash flow after we have after investing in our existing business, so after maintenance CapEx. So what is left to pay dividend, to amortize, and also financing cost. But, John, I'm very happy to talk you through this in detail.
Okay, in this free cash flow, then we would need to pay the leases because it seems... Well, it seems so quite high. When I see your, let's say, CapEx and when I see your depreciation ex-IFRS, it's, or-
Free cash flow is-
We can talk on... Yeah.
Yeah. Free cash flow is not impacted by leases. So free cash flow in our definition is the same with or without IFRS 16. So it is the real free cash flow after we've paid rent.
Okay. Well, thank you very much, and all the support from our side, and congratulations for the strong results.
Thank you.
As a reminder, if you wish to ask a question, please dial star 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.
Thank you very much for your question. We wish you all a good day. Thank you and goodbye.
Thank you. Bye-bye.