Ladies and gentlemen, welcome to the AcadeMedia Audiocast for Teleconference Q4 2020 to 2021. The first part of this call, all participants will be in a listen-only mode, and afterwards, there will be a question and answer session. Today, I'm pleased to present CEO, Marcus Strömberg, and CFO, Katarina Wilson. Speakers, please begin.
Thank you very much, welcome to everybody to this presentation of our interim report for the quarter four and also our full-year results. I will start with just an introduction to the quarter and the full year, Katarina will after me go through the numbers and deep dive in some things. It's a fantastic time for us now in August when we start all the schools. It has been a very strange year, things are now going back to normal. If we go to page two, we must say that this year, 2021, even if it was a strange year, it has been a very fantastic year for AcadeMedia. It has been a strong year. We have had very stable quality results, organic revenue was a growth of 8%.
It's the best year ever in AcadeMedia history with an operating profit of SEK 934 million and also a margin of 7%. The key driver was the adult education, and we have seen a combination of online training and also an increased demand of vocational training. That has been the key driver of the development of the adult education. A lot of people have tried to retrain and go to new jobs and to try to use this time during the pandemic to get to new jobs. AcadeMedia has been very important in that development. In the last quarter, we have seen an ease when it comes to the restrictions, and the capacity utilization in Germany has improved, and we are going back more to normal when it comes to the situation in Germany. In the fourth quarter, the growth was very strong.
It was more than 10%, and we have had the number of children has increased with 8.5%. The adjusted operating profit was in line with last year, but it has been affected by higher activity levels and personnel costs. We had postponed some activities quarter three and quarter two, and that has affected the result in quarter four. We have also tried to prepare us for the school start now in August. That is the best school start that we have ever done. The growth will continue. We have a lot of possibilities, both with organic growth and continued acquisition, as we have mentioned in the report. We plan to start eight new units, and we're going back to normal in Germany with 16 new schools that we have planned to start.
We have also announced the preliminary student numbers for the next school year, and it indicates a growth of 7%, and we have the largest ever intake when it comes to after secondary school segment. It's a very good start of the new school year. I will hand over to Katarina to go through the details. Thank you.
Thank you, Marcus. Moving on to page number three, highlights quarter four of our financial year ending in June. Continued good growth. Student numbers grew by 8.5%, including the acquisition of Swedish Education Group. That contributed with just over 2,500 students. In the quarter, two new units opened in Germany and one acquisition in Norway also contributed to the growth. Net sales increased by 13.8% with organic growth in all segments. Swedish Education Group contributed 3 percentage points to the growth. Adjusted for the acquisition and the positive currency translation effect of SEK 8 million, the organic growth was 10.4%. Adjusted EBIT was in line with last year, SEK 280 million, and the adjusted margin decreased to 7.6%. While the adult education segment continued to show strong growth, we saw some higher costs in the school segments.
The main reason for this was that some of the COVID-related restrictions were lifted in the quarter, which increased activity levels and also cost by about SEK 30 million. This should be compared to Q2 and Q3, where many activities had to be postponed or even canceled due to the pandemic, and where we also in those quarters saw reduced cost of a similar magnitude. It should be noted also that in Q4 last year, all education, especially in the after secondary school, was distance education, leading to somewhat lower cost in the comparable quarter. Also, as I was highlighting already in the beginning of this year, we were expecting a negative effect on vacation, fewer number of vacation days in the quarter, giving higher personnel cost of SEK 25 million.
This was also offsetting the lower cost that we had in the first quarter of this year. Moving on to page number four, showing an adjusted EBIT bridge that illustrates the continued strong performance in the adult education segment, which is offsetting the high cost and activity levels in the other segments, giving an adjusted EBIT in line with last year. Items affecting comparability of SEK -14 related to restructuring in the after secondary school and integration expenses of Swedish Education Group. Moving on to page number five, highlights for the full year. We have had a very strong year, mainly due to an exceptional year for the adult education segment, but also solid growth in the school segment. Student numbers grew by 6.5%, driven by acquisitions and organic growth.
We added 26 new units during the year, 17 new starts, whereof nine new preschools in Germany, and nine units were acquired with the Swedish Education Group and STIMS. Now exceeds SEK 13 billion at SEK 13.3 billion, and the organic revenue growth was 8.1%. Adjusted EBIT was SEK 934 million, which is an increase of 28%. The adjusted EBIT margin was 7%. We are meeting our financial performance targets for the third quarter running. I can also mention free cash flow amounted to SEK 1.1 billion for the year. To summarize, a very strong year. Moving on to page number nine. Let's go back to development in quarter four by segment. Starting with the preschool segment. Despite the pandemic, two preschools opened in Germany in the last quarter, which gives a total now of 58 preschools in Germany.
I would like to highlight that 35 of those actually were started organically over the last few years. We have 273 preschools in total in this segment. The number of children increased by 4%, driven mainly by Germany, where we have seen signs of recovery. Net sales increased by 10.8% compared to last year, and adjusted for positive currency effects of SEK 8, sales grew by 9.9%. This increase is partly due to higher school vouchers in Norway. The increase was 4.4%, but also due to recovery in volume growth in Germany.
Adjusted EBIT was in line with last year at SEK 79 million and was affected by higher pension costs in Norway, about SEK 6 million, and high maintenance costs in Sweden of SEK 7 million related to improvements of the outdoor environment. Something which is even more important now when children during the pandemic have been spending more time outdoors.
In all three countries, all preschools have remained open in the quarter, and we're very happy to see increased capacity utilization in Germany. Looking ahead, we are planning to start 15 new preschools in Germany during the next financial year and as many as eight units in this first quarter of next year. Moving on to the compulsory school, page number 10. We continue to see good growth in this segment. The number of students increased by 6.5%, and sales grew by 9.8%, where the acquisition of Swedish Education Group and STIMS, Stockholms Internationella Montessoriskola, added just over 1,000 children and students. Adjusted EBIT amounted to SEK 63 million, which was lower than last year, and the margin was 7.1% compared to 9.2% last year. As expected, we saw higher personnel costs caused by a fewer number of vacation days in the quarter, and this effect amounted to SEK 15 million.
We also had higher costs related to our new educational profile, as well as somewhat higher activity levels increasing costs by SEK 10 million. Also in this segment, some of the cost increase was related to improvement of outdoor environment. Very recently, yesterday in fact, we acquired a compulsory school in Sweden with 175 students. Moving on to the after-secondary school segment, page 11. Student numbers increased by 12.6%, where Swedish Education Group contributed with 2,300 students or 6.4 percentage points, and the organic growth was 6.2%. Net sales increased by 16.6%.
The after-secondary schools in Sweden had really up until March this year, conducted distance education for almost a year. On April 1st, the national recommendations on distance education ended, which meant that more classroom education could be introduced. Adjusted EBIT and margin was lower than last year at SEK 102 million, and the adjusted EBIT margin dropped to 9.2%.
Due to the easing of COVID restrictions, some of the earlier canceled and postponed activities could take place to a greater extent, and this increased costs by about SEK 10 million in the quarter. Overall, for the full year, the restrictions and canceled activities have reduced costs in this segment by about SEK 15 million. Also, the number of vacation days were less than last year, leading to higher personnel costs in the last quarter of SEK 10 million. For this new autumn start, we have opened three new after-secondary schools. Moving on to the adult education segment, page 12. Rising unemployment has all through this year created very high demand for adult education with exceptional volume increase and high capacity utilization. Net sales increased by 21.5% in the quarter, where the acquisition of Swedish Education Group under the brand name KYH contributed 5.3 percentage points.
EBIT increased to SEK 59 million, the margin was 12%, and all business areas contributed to the improvements. Demand, like Marcus said, for higher vocational education remains high. This business area now represents 26% of the total segment from earlier 20%. This increase is partly due to the acquisition of KYH, but also good allocation of new educational places from January 2021. The labor market service business constitutes now 13% of the total segment. During the year, the loss-making contract vocational and preparatory modules was terminated. We're now seeing a transition to new matching service. This transition is slower than we had anticipated. The municipal adult education is also growing, now makes up a smaller part of the total segment at 58%. We have in this area a solid contract portfolio that covers many of the areas that the government has directed resources to.
If we're looking ahead, we have a relatively young contract portfolio, and no major changes are expected for this coming year. We are, however, expecting the margin to come down somewhat to more normal levels. Moving on to page number 14, free cash flow and investment. The free cash flow, defined as cash flow before investing in expansion, amounted to SEK 1.1 billion for the full year compared to SEK 805 million last year. Free cash flow in the quarter amounted to SEK 341 million, which was lower than last year, explained by calendar effects that had a negative impact on the working capital, especially in Norway. To the right on this page, total CapEx is increasing mainly due to the recent acquisitions. Moving on to page 15, the financial position improves even further.
Net debt is significantly lower than last year at about SEK 1.2 billion. The leverage ratio is lower than last year at 0.9x, which is well below the financial target of below 3x. Property-related lease liabilities increased mainly through the recent acquisitions. Finally, moving on to the last page 16, the financial performance versus targets. To conclude, we are for the third quarter running, meeting all of our financial targets, including our profitability targets. With that in mind, the board is proposing a dividend of SEK 1.75 per share. With that, I would like to open up for questions.
Thank you. If you do wish to ask a question, please press zero one on your telephone keypad. If you wish to withdraw your question, you may do so by pressing zero two to cancel. Our first question comes from the line of Stefan Knutsson from ABG. Please go ahead.
Hi, Marcus and Katarina. My first question is regarding the outlook for the adult education segment. It was a special year this year with high unemployment. Can you just talk us through the different segments and what you expect now going into a more normal year next year?
A lot of students have tried this online. We think that the level of online training will still be high. What we can see so far is that the interest to retrain is still high. As Katarina mentioned, we think it will be more normal levels because the number of students in some of the vocational program has been really high, and now the labor market is starting to working more normal, and some of them will also go back to ordinary jobs so to say. We think that we have a very strong position, but that it will be a little bit more normal than seen this year. We can talk a little bit about the labor market development of the labor market programs.
We have seen that this has also improved in Q4, and the labor market agency is still working a lot to try to develop this new market for private operators. That is a possibility for us the coming years, not coming months, of the coming years. More normal levels, still high interest, still high levels when it comes to online training, but I don't think we will see the same situation that we saw some quarters the year that we had behind.
Perfect. Also on the OpEx levels in the school segments, obviously you had lower OpEx in Q2 and Q3, and some of that you recouped here in Q4. If you just look at the profitability in the Swedish schools, how would you say that you would summarize this year?
Well, as I mentioned, I think we've had all in all, somewhat lower cost in the upper secondary school segment. We didn't catch up the full effect we saw in quarter two and three. In the compulsory school segment, I would say it's a normal level all in all.
Okay, perfect. That was all for me.
Just as a final reminder, if you do wish to ask a question, please press zero one on your telephone keypad now. We have another question from the line of Karl-Johan Bonnevier from DNB Markets. Please go ahead.
Yes, good morning. I wonder if you could start just helping us to see how these timing effects will impact, say, the upcoming year. If you're looking at vacation costs, is that going to be the same pattern for this year? That maybe Q1 is going to be stronger and where you have a release of vacation pays? Also looking at the new setup of the pension cost and maybe also elaborate a little on how the timing effects in the delayed payment in Norway is going to catch up during this year compared to last year.
Thank you, Karl-Johan. I can start with the vacation pay. I think we will see a pattern going forward that we will have a positive effect in Q1 and a negative effect in Q4. That's just a normal mechanism from us growing. Saying that, this is hard to really forecast. I think that's what I'm expecting at least. Pension cost in Norway, I don't see that we will see a continued increase. We saw the increase this year, so I think that will not cause another increase next year. I think you had a third question, Karl-Johan. What was that?
Yeah, no, obviously the Norwegian payment system is this kind of two-year delay from when you really see the cost impact. I guess it was two years ago now that you really saw-
Yeah.
...the big cost impact in Norway. Would you expect to see the full catch-up for that in the coming year?
Yes, that's correct. We are expecting to see full compensation, if you can say that from 1st of January now coming. We have another six months where we're not fully compensated. That's what we're expecting.
Marcus, very good that you started to reveal these at least preliminary student numbers, and it seems like you have a good uptake in your schools for this year. How could you describe it compared to the previous years?
I'd like to say that if it comes to the upper secondary, as we mentioned, we have worked a lot to make our profiles more stronger. We have developed new services when it comes to support the students and the family when it comes to their school choice. We have also developed campus in the bigger cities. We used to have every 10 students, when it comes to upper secondary, that was in an AcadeMedia school. This year, when it comes to year one, it will be much more than 10%. We have a high intake of students this year, and AcadeMedia will be very important to deliver upper secondary school places the coming years in Sweden. We will be the absolute top player in all segments.
We have this theoretical programs that develops very well, and we also have our vocational program that is also developing very well. We have one new start, for instance, in Norrköping that is more than 100 students that has applied to that school, and that must have been some sort of record. We have 2022, we have our two big Stockholm campus that will also open. I hope that we will continue this positive development when it comes to upper secondary. When it comes to the compulsory schools, we have now done the same things that we have done in the upper secondary. We have developed our profiles. We now have five different profiles when it comes to compulsory school. We are also very positive that this will also help us to keep up the growth and also the quality.
That is what we can mention. We also have a very positive demographic development when it comes to upper secondary in Sweden.
When you look at those 16,000 that you now see starting with you in year one, how does that number compare to last year?
Higher.
Yeah, it's funny. When I look at the average of 7% growth, at least what I had. I'm not sure if that's a confirmed number for you, I think I had a number that suggests that you have, say, 10%, 11%, 12% growth in the year number year one students or something like that.
I think it's at least 2,000 more, maybe 2,500 more than last year.
Excellent. Yeah, that's a nice carryover number for you as well, I guess. I guess most of those are entering, say, two to three-year programs at least.
That's correct. Of course, we have some help of our acquisitions that we have done also. We are also doing some acquisition when it comes to compulsory school, as Katarina mentioned, we made an acquisition that we announced today. We will continue to grow organically when it comes to upper secondary, maybe do some acquisitions and continue the development when it comes to compulsory schools.
Excellent. Katarina, you mentioned that you have never had such a strong balance sheet ever, at least during this incarnation of the listed company, so to say, you're well below the 3x net debt to EBITDA target that the board has set for you. What is your preferred capital allocation at this time? What are you looking to do with that opportunity you have on the balance sheet?
We've mentioned this many times. There's a lot of opportunity to continue our growth. We will let you know when we have something in the pipeline.
Good. Just one final from me. I'll not follow that route anymore. If you look at what you describe the stable portfolio you now have in adult education for maybe the next 12, 24 months, are there any good tender opportunities for you out there to gain even better exposure to this market for the moment?
There are all the time tenders, but I think the biggest opportunity now is the development of the labor market agency, and that will be a process. Of course, it will depend on the political situation, but that is a really big market that will continue to open up. Then we also have the vocational program, and we hope and think that politicians will invest more money also when it comes to vocational programs. We don't see any big municipality tenders the coming years. There is always small, but not in the bigger cities.
Excellent. Thank you very much.
We have one more question from Johan Sundén from Carnegie. Please go ahead.
Hi, and thank you for taking my questions. Two questions from my side. First one is related to the compulsory segment and those costs that you highlighted that are related to the education profiles. Can you please just give some more color what those cost refers to and of what recurring nature those are too? I will come back with my second one after that.
It's not of a recurring nature. We have two new profiles and it's always cost related to that. It's backpacks for children and all sorts of additional signs and it's also some CapEx, of course, but it's really to highlight those profiles.
Okay, perfect. That's good enough. Also referring to the previous question on the acquisition side. There's been a few IPOs of private school companies in Stockholm over the last year. I can understand Tellusgruppen that tries to consolidate the market as well. Do you think that the M&A market has become more crowded? Is it just COVID-19 that has been holding you back, given that your cash flow is so strong and has been strong over the last two years? It would be nice to have some color on that.
We have also developed our capacity to grow also organically. Maybe we have a focus when it comes up with secondary to really manage this organic growth. Now when we have developed our profiles, we also want to make acquisitions that we could put into our different profiles. If you look at these companies, they can acquire anything. They are in the same position that AcadeMedia was maybe 10, 15 years ago, that you just acquire a company, then you do nothing about it. We want to develop our profiles. We think that that will be very important to keep up the quality and attractiveness over time. If you take, for instance, in compulsory schools, we have now developed one brand that we call Montessori Mondial, that is Montessori schools. Of course, we would like to acquire Montessori schools to put into that brand.
Then we will have the leading chain of Montessori schools in Sweden. We think that that will drive the profitability, and that will also drive growth and attractiveness and quality. That is more our idea. We're positive that we see now more companies going into the public market. I think that that will also affect the political situation, and that is very positive. What we also could mention that we think that the sector will have all-time high this August. We think that more than 400,000 children will go to independent preschools and upper secondary schools in Sweden. That is all-time high. This is a very big part of the public school system in Sweden. I think that will also decrease the political risk in Sweden.
Looking at your various segments, are you too big for making acquisition in the upper secondary state market? It's just in the compulsory side that you should be able to do acquisition? How is regulators look at that? Are you too big?
No. Not yet. It's still a fragmented market, and of all children we just have this 10% or 10%+, so to say. That is not a problem. We just made this investigation when we acquired the Cyber. We have checked this just recently, but our focus is, of course, to increase and develop our organic growth when it comes to upper secondary and to make acquisition when it comes to compulsory schools. I also want to remind you that we have these very fantastic possibilities in Germany that we will now restart. We also have this possibility when it comes to digitalization that we really have put a lot of effort in to develop our online capacity. I would like to say that AcadeMedia is the leading EdTech and online player when it comes to adult education today.
We will tell you more about that in the coming year. It has been a very great development. That will also affect, I think, both the attractiveness and also our profitability.
Perfect. That was all from me. Thank you.
We have a follow-up question from Stefan Knutsson from ABG. Please go ahead.
Yes. Hello again. Just briefly, if you can update us a little bit on the political side. We have seen during the summer that Anna Ekström was out in an interview in Dagens Industri, and it was, let's say, why she took the job, and it was not positive news for you. On the other hand, we're also seeing Centerpartiet taking their part in that story. If you just can brief us on the recent development and if you have seen any progress on the investigation that was published some months ago.
You can say the Social Democrats in Sweden, they have this problem, that they are losing voters to the Left Party. They are using this question, they have spoke a lot about it to try to stop that voters go to the Left Party. If you take the situation now, I think that the Social Democrats, they will put maybe some of this investigation to the parliament, but I don't think that they will take it through because all the right-wing parties, and absolutely Centerpartiet will not vote for this different sort of changes that they will put on the table. You have one key question is of course the school voucher. There, it's Centerpartiet very clear that they don't want to change it.
When it comes to the school choice and the compulsory schools, I think that could be changes, but they don't work so good together for the moment, it will be election in just less than a year. I'm not sure that they will put any changes on the table when it comes to school choice during the time before the election. Even if they do, it will not affect us negative. It's a lot of talking as it has always been, I don't think that there will be any real changes. As I mentioned before, this sector is now in Sweden very big and important. Most of the sector is run by limited private companies.
Perfect. Very clear. Thank you.
As there are no further questions, I will hand it back to the speakers.
Thank you very much. Wish you all a good week. We now see the sun again in Stockholm, so we hope for the best. Thank you very much.
Thank you. Bye bye.
Bye.
This concludes our conference call. Thank you all for attending. You may now disconnect your lines.