Q4 20/21

Aug 31, 2021

Ladies and gentlemen, welcome to the Academia 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, Markus Hornberg and CFO, Catherine Nevelson. Speakers, please begin. So thank you very much, and welcome to everybody to this presentation of our interim report on this quarter's form and also our full Jiel, yourself. And I will start with just an introduction to the quarter and the full year, and Katerina will ask me Go through the numbers and deep dive in some things. And it's a fantastic time for us now in August when we start all the schools. It has been a very strange year, but things are now going back to normal. And if we go to Page number 2, we must Say that this year, 2021, even if it was a strange year, it has been a very fantastic year for Academia. It has been a strong year. Yes. Very stable quality results. And organic revenue was a growth of 8%. And it's the best year ever in Academia, yes, history with an operating profit of SEK 934,000,000 and also a margin of 7%. The key driver was the adult education. And we have seen a combination of online training and also Increased demand of vocational training. That has been the key driver of the development of the added dedication. And a lot of people I try to retrain and go to new jobs and to try to use this time during the pandemic to get to new jobs. And academia has been very important in that development. And in the last quarter, we have seen an ease when it comes to the restrictions. And the capacitization in Germany has improved. And we are going back more to normal when it comes to the situation in Germany. I think the Q4, the growth was very strong. It was 10%, more than 10%, and we have that Number of 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 because we had postponed some activities in the quarter 3 and quarter 2, And that has affected the result of Q4. And we have also tried to prepare us for this cold start now in August. That is the best cold start that we have ever done. The growth will continue. We have a lot of possibilities, both with organic growth and continuing acquisition, as we have mentioned in the reports. And we plan to start 8 new units, and we're going back to normal in Germany with 15 new schools that we are planning to start. And 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 upper secondary school segment. So it's a very good start of the new school year. And then I will hand over to Katharina to go through the details. Thank you. Thank you, Markus. Moving on to Page number 3, highlights quarter 4 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, 2 new units opened in Germany and 1 acquisition in Norway also contributed to the growth. Net sales increased by 13.8% with organic growth in all segments. And Swedish Education Group contributed 3 percentage points to the growth. And Adjusted for the acquisition and the positive currency translation effect of EUR 8,000,000, the organic growth was 10.4%. Adjusted EBIT was in line with last year, EUR 280,000,000 and the adjusted margin decreased to 7.6%. And while the adult education segment continued to show strong growth, we saw some higher costs in the school segment. And 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 EUR 30,000,000. And this should be compared to quarter 23 where many activities had to be postponed or even canceled due to the pandemic and where we also, in those Q4 to reduced costs of a similar magnitude. And it should be noted also that in quarter 4 last year, All education, especially in the upper secondary school, was distance education, leading to somewhat lower cost in the comparable quarter. And 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 costs of EUR 25,000,000. And this was also offsetting the lower cost that we had in the Q1 of this year. So moving on to Page number 4, 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, scaling an adjusted EBIT in line with last year. Items affecting comparability of minus 14% related Moving on to Page number 5, 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 percent driven by acquisitions and organic growth. We added 26 new units During the year, 17 new staff were of 9 new preschools in Germany and 9 units were acquired with the Swedish Education Group and Teams. Net sales increased by 8.7% and now exceeds €13,000,000,000 at euros 13,300,000,000 and the organic revenue growth was 8.1%. Adjusted EBIT was EUR 934,000,000, which is an increase of 28% And the adjusted EBIT margin was 7%. We are meeting our financial performance targets for the 3rd quarter running. I can also mention free cash flow amounted to SEK 1,100,000,000 for the year. So to summarize, a very strong year. Moving on to Page number 9. And let's go back to development in quarter 4 By segment and starting with the preschool segment. So despite the pandemic, 2 preschools opened in Germany In the last quarter, which gives a total now of 58 preschools in Germany. And I would like to highlight That's 35 of those actually were started organically over the last few years. And 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 the adjusted for positive currency effects of 8%, Sales grew by 9.9%. And this increase is partly due to higher school vouchers in Norway. The increase was 4.4 percent but also due to recovery in volume growth in Germany. Adjusted EBIT was in line with last year's €79,000,000 and was affected by higher pension costs in Norway, about €6,000,000 And high maintenance costs in Sweden of EUR 7,000,000 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. And looking ahead, we are planning to start 15 new preschools in Germany during the next financial year And as many as 8 units in this Q1 of next year. So moving on To the compulsory pool, Page 10. We continue to see good growth in this segment. The number of students increased by 6.5 percent and sales grew by 9.8 percent, whereas the acquisition of Swedish Education Group and In Stockholm Internationale Montpetur Schoola added just over 1,000 children and students. Adjusted EBIT amounted to CHF 63,000,000 which was lower than last year, and the margin was 7.1% from CHF 29.2 Last year. And as expected, we saw higher personnel costs caused by fewer number of vacation days in the quarter, And this effect amounted to SEK 15,000,000. We also had high costs related to our new educational profiles as well as somewhat higher activity levels increasing costs by SEK 10,000,000. And also in this segment, some of the cost increase was related to improvement of Store environment. And 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 percent, 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 15.6%. The upper secondary schools in Sweden had really up until March this year conducted Education is almost a year. But on April 1, the national recommendations on distance education ended, which That meant that more classroom education could be introduced. Adjusted EBIT and margin was lower than last year at NOK 102,000,000 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 10,000,000 in the quarter. Overall, for the full year, the restrictions and cancel activities have reduced costs in this segment by about EUR 15,000,000 Also, the number of vacation days were less than last year, leading to higher personnel costs in the last So SEK 10,000,000. And for this new autumn start, we have opened 3 new upper secondary schools. So moving on to the adult education segment, Page 12. Writing unemployment has all through this year created very high demand for adult education with exceptional volume increase and high Asset utilization. Net sales increased by 21.5% in the quarter where the acquisition of Swedish Education Group under the brand name Koi Ho contributed 5.3 percentage points. EBIT increased to €59,000,000 and the margin was 12%. And all business areas contributed to the improvements. Demand, like Markus said, for high educational education remains high, and this business area now represents 26 Percent of the total segment from earlier 20%. And this increase is partly due to the acquisition of Cohihuahua, but also good allocation of new educational cases from January 2021. The labor market service business constitutes now 13% of the total segment. During the year, the loss making contracts, vocational and preparatory modules, was terminated, and we're now seeing a transition to new matching service. But this transition is Change service, but this transition is slower than we have anticipated. The municipal adult education is also growing but now makes up a smaller part of the total segment at 58%. We have in this area solid contract portfolio that covers many of the areas that the government has directed Resources too. So if we're looking ahead, we have a relatively young contract portfolio and no major changes are For this coming year, we are however expecting the margin to come down somewhat to more normal levels. Then moving on to Page number 14, free cash flow and investments. The free cash flow, defined as cash flow before investing in expansion, amounted to SEK 1,100,000,000 for the full year compared to NOK 805,000,000 last year. And free cash flow in the quarter amounted to NOK 341,000,000 which was lower than last year, explained by calendar effects that had a negative impact on the working capital, especially in Norway. And to the right on this page, total CapEx is increasing mainly due to the recent acquisition. Moving on to Page 15. The financial position improves even further. Net debt is significantly lower than last year. It's about SEK 1,200,000,000 and the leverage ratio is lower than last year at SEK 0.9, which is well below the financial target of below 3%. And property related lease liabilities increased mainly through the recent acquisition. So finally, moving on to the last page, Page 16, the financial performance versus target. And to conclude, we are for the 3rd quarter running meeting all of our financial targets, including our profitability targets. And with that in mind, the board is proposing a dividend of SEK 1.75 per share. And with that, I would like to open up for questions. Thank you. To cancel. Our first question comes from the line of Stefan Knutsen from ABG. Please go ahead. Hi, Markus and Catharina. 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 Goes through the different segments and what you expect now going into a more normal year next year. So a lot of students have tried this online. So we think that this the level of online training It will still be high. What we can see so far is that the interest to retrain is still high. But as Katrina 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 Job, so to say. So we think that we have a very strong position, but that it will be a little bit more normal than we have seen this year. And then we can talk a little bit about the labor market development of the labor market programs. And we have seen that this has also improved in quarter 4. And the labor market agency is Still working a lot to try to develop this new market for private operators. So that is a possibility for us, the coming Years, not becoming months of becoming years. So more normal levels, still a 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 have behind. Perfect. And then also on the OpEx levels in the School segment, obviously, were have lower OpEx in Q2 and Q3 and some of that you recouped here in Q4. If you just look at the full year 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 coal segment. We didn't catch up the full effect we saw in quarter 2 and 3. But in the compulsory I would say it's a normal level all in all. Okay, perfect. That was all for me. We have another question from the line of Kaijuan Bonavia from DNB Markets. Please go ahead. Yes, good morning. I wonder if you could start just helping us to see how these timing Saks 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 and also looking at the new setup 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. And that's just A normal mechanism from us growing. But saying that, This is hard to really forecast, but I think that's what I'm expecting at least. Pension costs 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 Of course, another increase next year. And then I think you had a Sad question, Karl Johan. What was that? Yes. Obviously, the Norwegian payment system is this kind of 2 year delay From when you really see the cost impact. And I guess it was 2 years ago now that you really saw the big cost impact in Norway. So 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 January now coming. And so we have Another 6 months where we're not fully compensated. That's what we're expecting. And Mark, it's very good that you started to reveal this at least preliminary student numbers. And it seems You have a good uptake in the indoor 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. And we have also Developed campus in the bigger cities. So we used to have every 10th Student, when it comes up to secondary that Posselen Akademieja School, this year when it comes to year 1, it will be much more 10%. So we have a high intake of students this year. And Academia will be very important It will be very important to deliver at the secondary school places becoming GS in Sweden. So we will be the absolute top player in all segments. And we have this So theoretical programs that develops very well. And we also have our vocational program that is also developing very well. We have one new store for instance in Nord Stream that is more than 100 students that has applied to that school and that must have seen some sort of record. And then we have 2022. We have our 2 big Stockholm campus that we also opened. So 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 last year. We have developed our profiles. We now And 5 different profiles when it comes to compulsory score. And we are also very positive that this will also help us to keep up the growth and also the quality. So that is what we can mention. And we also have a very positive demographic development when it comes up as secondary in Sweden. And when you look at those 16,000 that you now see starting with you in year 1, how does that number compare to last year? Higher. Yes. When I look at the average of 7% growth, At least what I had in my I'm not sure if that's a confirmed number for you, but I think I had a number that suggests that you have a, say, 10%, 11%, 12% growth in the year number year 1 students or something like that. I think it's at least 2,000 more, maybe 2,500 more than last year. Excellent. Yes, that's a nice carryover 4 year as well, I guess. So because I guess most of those are entering, say, 2 to 3 year programs at least or That's correct. That's correct. And of course, we have some help of our acquisitions that we have done also. And we also we are also doing some acquisition comes to compulsory school, as Cathina mentioned, we made an acquisition that we announced today. So we will continue to grow organically when it And so Aker's, I think, maybe do some acquisitions and continue the development when it comes to compulsory stores. Excellent. And Katerina, you mentioned that, well, you have never had such a strong balance sheet ever, at least during this incarnation of the listed company, so to say. And you are well below the 3 times 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? Well, we've mentioned this many times, there's a lot of opportunity to continue our growth. So we will let you know When we have something in the pipeline? Good. Just one final for me then I'll not So I'll follow that route anymore. If you look at the what you call describe the stable portfolio you now have in adult education for maybe the next 12 to 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. And then we also have this vocational program. And we hope also that the politician will invest even we hope and think So we'll invest more money also when it comes to vocational programs. But we don't see any big Municipality tenders, the coming years. There, it's always small, but not in the bigger cities. Excellent. Thank you very much. And we have one more question from Johan Sundin from Carnegie. Please go ahead. Hi, 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 costs refers to and how of what recurring nature those are to? Mike, go back to my second one after that. It's not Of a recurring nature, this is we have 2 new profiles and it's always cost related to that. So it's backpacks for children and all sorts of additional Heinz. And I mean, it's also some CapEx, of course, but it's really to highlight those profiles. Okay. Perfect. So that's good enough. And then 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, Kalandesk and Teleskruppen that Tries to consolidate the market as well. Do you think that the M and A market has become more crowded? Or what has is it just COVID-nineteen that has been holding you back given that your Cash flow has been so strong during the is so strong and has been strong over the last 2 years. It's nice to have a follow-up on that. We have also developed our capacity to grow also organically. So Maybe we have a focus when it comes up to secondary to really manage this organic growth. And then 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 I said in the earlier months maybe 10, 15 years ago But you just acquire a company, then you do nothing about it. So 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 Montial that is Montessori's Ghost. And of course, we would like to acquire Montessori's Ghost So put into that brand, and then we will have the leading chain of Montessori stores in Sweden. And we think that, that will Drive the profitability and that would also drive growth and attract investment quality. So that is more All right. And we are very positive that we see now more companies going into the public market. I think that, that will also affect The political situation, that is very positive. And what we also could mention that we think that the sector will have all time high this August. So we think that more than 400,000 children refer to independent trade schools and after secondary schools in Sweden, and that is all time high. And this is a very big part of the public school system in Sweden. So I think that, that is that will also decrease And then looking at your various segments, are you too big for making acquisitions in the upper and secondary segment market? Or so it's just in the compulsory side that you Should be able to do acquisition or how is Regulates look at that? Are you too big? No, no, not yet, Because it's still a fragmented market then. Of the oil shale, we have said this 10% or 10% plus, so to say. So That is not a problem. And we just made this investigation when we acquired Cyber. So 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. And I also want to remind you that we have this very fantastic possibilities in Germany that we will now restart. And we also have this possibility when it comes to digitalization that we really have a phenomenal effort being to develop our Online capacity, and I would like to say that Academia is the leading EdTech and online player when it comes to other dedication Today, and we will tell you more about that in the coming year, but it has been a very great development. And that will also affect, I think, both the track and also our profitability. Perfect. That was all for me. Thank you. And we have a follow-up question from Stefan Klutson from ABG. Please go ahead. Yes. Hello, Oergen. Just briefly, if you can update us a little bit on the political side. We have seen during the summer that Anne Axtram was out in an interview in the audience industry. And It was, let's say, why she took the job and it was not positive news for you. But on the other hand, we're also seeing Sante Partier taking their part in that story. But 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. So you can say that social democrats in Sweden, they have this problem, but they are losing voters to the left party. So they are using This question, yes, talk a lot about it, to try to stop that loan to school to the left party. And if you take the Situation now, I think that the social democrats, they will put maybe some public investigation to the parliament. But I don't think that they will take it through because all the right wing parties and absolutely Centre Patib will not vote for this Different sort of changes that they have that they will put on the table. And you have one key Of course, the school voucher, and there it's certainly very clear that they don't want to change it. When it comes to the school choice Yes. And the compulsory scores, I think that could be changes, but they don't work so good together for the moment. And they will have it will be a select election in just less than a year. So I'm not sure that they will put And there are changes on the table when it comes to school choice during the time before the election. And even if they do, it will not affect us negatively. So it's a lot of talking as it has always been, but I don't think that there will be any real Changes. And as I mentioned before, this sector is now in Sweden, in Sweden, very big and important. And most of the sector is run by limited private companies. Perfect. Very clear. Thank you. And as there are no further questions, I will hand it back to the speakers. So thank you very much. We wish you all a good week. We've now received the sun again in Stockholm. So we hope for the best. So thank you very much. Thank you. Bye bye. Bye.