Good day, and thank you for standing by. Welcome to the Ambea Interim Report First Quarter 2022 conference call. At this time, all participants are in listen only mode. After the speaker presentation, there will be the question and answer session. To ask a question during the session, you will need to press Star and One on your telephone keypad. Please be advised that today's conference is being recorded. I would now like to hand the conference over to our speaker today, Mark Jensen. Please go ahead.
Good morning, everyone, and welcome to Ambea's first quarter 2022 report presentation. This is Mark Jensen, CEO of Ambea, and together with me today is Benno Eliasson, CFO. Last quarter, we provided an overview of Nytida segments and the business. Today, I will give an introduction to Vardaga before presenting an overview of the first quarter. Then I will describe the development of the financials for the group and for the different segments in Ambea. After that, I will summarize the quarter and compare to our financial targets before we open more for questions. I would like to begin with a brief overview of Ambea. Ambea is the leading Scandinavian care provider. We have about 26,000 employees across Sweden, Norway, and Denmark, and revenues of almost SEK 12 billion. We offer a full range of services within elderly care, disability care, psychosocial support, and staffing solutions.
We have more than 350 municipalities as our clients, and we are an important partner in solving challenges in the welfare system. Nytida, Vardaga, and Klara all operates in Sweden, where Nytida offers social care, Vardaga provides elderly care, and Klara offers various staffing solutions. Stendi in Norway and Altiden in Denmark both primarily operates within social care. On the next slide, we will turn to the Swedish market for elderly care. Sweden is facing a major demographic change with an aging population. In 2030, the group of people aged 80+ is expected to increase with 250,000 according to Statistics Sweden. This means that more elderly will need home care and residential care.
Based on the Swedish Ministry of Finance report in 2019, the think tank, Timbro, estimated last year that there will be a shortage of 418 nursing homes by 2030. This is a huge challenge for society where Vardaga and Ambea can help. The pace in construction must increase quite rapidly as political decisions, planning processes, and construction takes time. Building new residential facilities is a complex process that requires knowledge and capital. Over the past five years, Ambea has created a dynamic startup process. Because we start many new facilities, we do also acquire extensive knowledge for common projects. That is a major difference and advantage compared to small and medium-sized municipalities that do not have the same opportunity to accumulate knowledge from scale.
Overall, this gives us ideal conditions to plan and establish sustainable, attractive, and purpose-built facilities, and thereby help municipalities meet requirements for effective and high-quality elderly care. The municipality decides if the individual is entitled to elderly care, either due to dementia or age-related weakness. The service for care is paid by the local municipality, whereas the care receiver pays monthly rent for the apartment at the nursing home. All care receivers live in their own apartment with a bathroom and a kitchenette, and all nursing homes have common facilities for the care receivers to use, where joint activities are taking place and where meals are prepared and served. A typical Vardaga-owned managed nursing home has 60 apartments or beds. Within a nursing home, the care receiver is provided round-the-clock care.
During the last twelve months, Vardaga opened 427 care placements in new residential facilities, andu in pipeline, Vardaga has more than 1,100 new elderly care placements. We continue to expand the pipeline with priority to municipalities with a stable freedom of choice model in place, which gives the residents the right to choose their preferred nursing home. Now we will turn more specifically to Vardaga's business segments. Vardaga is one of the two largest private elderly care providers in Sweden, operating approximately 100 residential facilities across Sweden with a certain concentration to the Stockholm region. Home care services are offered in selected locations concentrated to the cities of Stockholm and Linköping. In Sweden, the 290 municipalities are responsible for providing elderly care to its residents.
The Swedish market for elderly care has 80% of its total capacity in public care homes operated by the municipalities and 20% with private operators operating the care homes on terms set out by the individual municipality. There's basically no market for private pay solutions. The 20% private share can be split into two segments. The first segment is contract managed, where the municipality publicly tenders the operation of the nursing home and the municipality's premises on contracts with a typical duration of four to six years and where we take over existing staff. The other segment is own managed, where private operators build and operate nursing homes in municipalities where freedom of choice is prioritized under the Act on System of Choice in the Public Sector, also known as LOV, or Local Freedom of Choice Model.
Care placements under own management are offered in premises that Vardaga rents from private property companies on long-term contracts, usually 10-15 years. Due to the long duration, the premises can be customized to suit Vardaga's working methods and concepts, and we recruit the staff. On a national basis, the total number of contract managed homes is relatively stable. The number of private or not-for-profit operated own managed nursing homes is increasing. Vardaga is active in both contract managed and own managed. Vardaga also run facilities, including geriatric psychiatry and for people with young onset dementia. In addition to permanent residential placements, Vardaga offers short-term placements. Within home care, Vardaga has 12 home care units that offer home care for approximately 2,400 customers.
A home care team carries out individual services such as cleaning, washing, shopping, private nursing, cooking, walks, and above all, companionship. Home care can be either public operated by the municipalities, be contract managed through public tenders, or privately operated in a freedom of choice setting. Now let's look at a brief introduction to Vardaga's scalable model on the next slide. At Vardaga's nursing homes, every care receiver should be able to live a dignified and meaningful life based on their own preferences. To achieve this high quality of care, The Good Day concept is applied, comprising a range of promises related to various aspects of care and to ensure the quality. Let me explain some of the elements. Our goal is that every day will be filled with quality of life and meaningful activities for each individual.
All of Vardaga's residential facilities have at least one employee who's overall responsible for organizing activities. Young people visit many facilities on weekends and school holiday days, which is highly appreciated by our care receivers. In addition, some residents receive regular visits from therapy and pet dogs who spread joy and support exercise and medical treatment. About 50% of our care receivers suffers from dementia, and the overall number of people with dementia is forecasted to double by 2050. Vardaga has the Dementia Academy, which is a staff training program provided by Lära and is a center for competence development. The program involves both staff and relatives and takes about a year to conclude. The purpose of the program is to offer high-quality tailored dementia care. We also believe that the mealtime should be the highlight of the day.
Vardaga applied the Food Like Home concept, and food is prepared in the open kitchens on each floor. Our food generally receives high marks. We also know that a good night's sleep is a vital component of care. Together with each care receiver, we draw up a plan to help them sleep better at night. An important service of Vardaga, and also ethical issue, is end-of-life care. Vardaga has been focusing on training teams of representatives from various professions within the nursing home to palliative care officers. We want to provide the best possible tailored end-of-life care for our residents, including professional support for their relatives. To sum up, The Good Day is an important approach for employees to be able to provide good and high-quality care with focus on each individual in an efficient and scalable model. Now to our update on our general work within quality.
Our quality management aims at consistently meeting regulatory requirements as well as expectations of our customers, meaning the care receivers, their relatives, and the municipalities. High quality and continuous quality improvement is fundamental to Ambea. On this slide, I would like to give you examples on 4 of the elements we think are of importance to improving quality. Twice a year, all units perform self-assessments with about 200 questions to identify areas for improvement. The result of the assessment is reported in our quality system and used for action planning and further follow-up. Lately, we have updated the questionnaire to improve focus and ensure that the self-assessment questionnaire is better tailored to specifics and needs of each segment and type of care. Each month, we follow up all our units on eight selected quality and HR metrics.
This gives us an overview of the situation in the units and the ability to identify higher risks at an early stage. Monitoring of risk is based on existing data, for example, for employee engagement and sick leave, as well as our self-assessments. Together, this data generates a quality and HR index score. This is one of the cornerstones within our quality management, and the purpose is to identify units with a negative trend at an early stage and provide adequate support to achieve consistent quality across the organization. We flag and follow up units that need closer support, and this includes all new units. The start-up phase of a new care home implies high risk when it comes to ensuring quality. To reduce the risk, we put a lot of resource into the start-up process.
Over the last months, Vardaga made an extra investment in the start-up process and have selected and trained a number of project managers to be able to further focus and improve the process. In parallel, we transfer the gained knowledge to Altiden in Denmark to achieve further group synergies within quality. When it comes to whistleblowing, our employees should always feel safe to report suspected deviations of our code of conduct. Reports should initially be made to the line manager for quick response and action, but it's also possible to make anonymous reports through our whistleblowing function. Our whistleblowing function is in line with the new EU directive, and all deviations are investigated. As a further improvement in this area, we will, in June this year, implement an external whistleblowing channel for all our business areas.
A consistent high-quality care is always delivered through a lot of smaller and larger actions and activities. Through attention to both detail and the bigger picture, and through constant work and priority on organizational culture, we strive to foster an open and transparent environment where reporting of deviations are prioritized and welcomed. This will help us to learn and capture smaller issues before they become big and to avoid repetitions of similar deviations. We know on quality we can never rest, but need to work with compassion and determination every day across the entire organization. Feel free to ask questions regarding our quality work later in the session. Now let's turn to the growth in revenue over the last quarters. At the start of the pandemic, overall group revenue was impacted negatively as occupancy dropped, especially within Elderly care in Sweden.
Since Q2 2021, the trend is reversed, and we can see an increase in number of care receivers, high occupancy rates, and increased revenue year-on-year. Over the last four quarters, the growth has been increasing substantially and amounted to 13% in Q1 2022. With a higher commercial focus to fill vacancies in existing facilities, new facilities open in 2022 and a normal flow of roll-on acquisitions, we look positively at our overall growth potential, although comparables will be tougher from next quarter. On the next slide, we will have a look at organic growth. We see an ongoing occupancy improvement in most of our Vardaga units improving, and we opened three new units with 247 beds in the quarter, which is, by the way, a record for new beds in Vardaga in one quarter.
Vardaga opened 3 new units with a total of 18 beds and more openings are planned years ahead. As the demographic change requires construction of more nursing homes and care facilities, we continue to actively seek opportunities for organic growth within Elderly Care in Sweden and Denmark and within Social Care in all three markets. Since the beginning of 2020, we have added more than 1,000 new beds and placements, and as partners to the municipalities, we will continue the work to further develop good access to new care homes to meet the increasing demand. Let's look at acquisitions. In 2022, we have made four acquisitions so far. We have already presented two acquisitions in the first quarter. Nytida acquired Christinagården in Lindesberg and the subsidiary Yxe Herrgård. The acquisition was closed the first of February 2022.
Furthermore, Vardaga acquired Hemmahjälpen Assistans that operates in the home care segment. The acquisition was closed the first of March 2022. We are glad to present two more acquisitions made after the first quarter ended. Nytida acquired Alternatus Familia, which provides family care in Sweden. Revenue for the financial year 2020/2021 was SEK 24 million. The acquisition was closed on May second 2022. Further, Klara acquired SkolPool. SkolPool is market leader in the student health service with care provider responsibility. Through the acquisition, the two leading actors merge into one operation under Klara. The revenue of SkolPool during the financial year 2020/2021 amounted to SEK 68 million. The acquisition was closed on May 2nd. Strong cash generation gives us the opportunity to seek for bolt-on acquisitions, which we see as an essential part of our strategy.
We are active in all our markets evaluating potential opportunities for future value creation and continue to see M&A as a key driver of growth. Now to the summary of the quarter. In local currency, all segments apart from Stendi deliver net revenue growth in the quarter compared to last year. In total, sales grew by 13% compared to Q1 last year, primarily driven by organic growth, but also M&A activities. Adjusted EBITDA amounted to SEK 195 million, an increase of 28% versus last year. The increase was mainly driven by Vardaga's positive occupancy trend and strong operational performance. Altiden also had a positive effect on the result, including a one-off effect of SEK 7 million.
In Stendi, we continue the efforts to strengthen profitability in a program we started last quarter and where the positive effects will start to materialize gradually during the second half of 2022. We continue to see positive development in Altiden in Denmark. Our strategic focus on social care and nursing homes delivered solid net revenue growth in the quarter. The positive occupancy development within Vardaga has continued month-to-month throughout the quarter. We will continue our increased commercial investments behind relevant information and activities within Vardaga to reach future care receivers and their relatives. Now over to you, Benno, for a presentation of the financial summary.
Thank you, Mark. This quarter, we see increased growth numbers from last quarter's 8% year-on-year to this quarter's 13%. Growth versus last quarter was 3%, and if we consider the two fewer invoicing days in Q1, the growth was above 4-5%. If we look into how the different business areas have affected the group numbers, we can see that in this quarter, all business areas contribute to the group, to the growth. Vardaga increased 15% versus last year. We have opened 6 new nursing homes since the beginning of Q2 last year and have had increasing occupancy throughout this quarter. Nytida is up 5%, and Stendi as well shows growth in SEK but has negative growth in local currency by 2% as we are adjusting the capacity.
Altiden is up 87% as an effect of the acquisition of EKKO, as well as strong underlying growth in both social care and elderly care. Klara increased 19% with growth in all sub-segments, which is really strong. Going to EBITDA. This shows how the different business area have affected the EBITDA of the group. In Vardaga, we see that the improved occupancy and operational improvements have generated a higher profitability than previous years, despite the fact that last year was positive affected by retroactive government reimbursement, and this quarter start-up costs for three new units. In Nytida, we kept the strong margin from last year and increased EBITDA by SEK 5 million. In Stendi, we see we were affected by the high sick leave cost in the quarter and were not able to match last year's numbers, so we were down SEK 3 million.
In Altiden, we saw profit improvement in both elderly care and social care, where acquired EKKOfonden business contributed well. EBITDA was also positively affected by revaluation of additional purchase price for the EKKO acquisition. All in all, the adjusted EBITDA grew by 28%. Operating cash flow increased by 24% in line with the strong earnings growth. Q1 is normally one of the weakest quarters from a cash flow point of view. This puts the rolling twelve operating cash flow just below 100% of EBITDA, but seen in a longer perspective, still very strong. This slide shows you can say the cash flow statements including the new leasing standard IFRS 16 are sometimes a bit tricky to follow.
This slide is right to show the way from the rolling twelve reported EBITDA of SEK 754 million to the 670 million in EBITA excluding IFRS 16 and down to the free cash flow post-tax. We can see, for example, that we have paid SEK 141 million in taxes, SEK 70 million in interest, and invested SEK 86 million in fixed assets. We can also see that we have had a negative effect on working capital rolling twelve by SEK 165 million . We have generated SEK 337 million in free cash flow post-tax based on the old accounting standard. On this slide, we can see how we have used that money.
We have SEK 109 million distributed to our shareholders as dividends, and SEK 213 million was spent on the three acquisitions that we have made the last four quarters. Coming to the financial position, the strong EBITA in the quarter has affected the leverage ratio, and we are at 3.3 times now excluding IFRS 16. We can also see that our leasing debt is increasing as we have signed new nursing home contracts as well as prolonged some other contracts. As you can see in the graph, financing from our commercial paper program has come down a bit the last quarter as the credit spreads have increased the last month. Macroeconomics. In the fast-changing world, we have seen higher inflation rates in the Scandinavian countries lately. This will affect most companies and of course also Ambea.
Our largest cost is of course salaries and benefits for our staff. Short term, these are not directly affected by higher inflation. The same goes for our rental agreement for our premises. These are determined on a yearly basis and will be affected from 2023, adjusted with index according to our rental contracts. Other costs, which represent around 15% of our cost base, are in some areas more impacted short term. We have already, for example, seen high energy prices, and gradually we have seen higher price increases for food and different types of consumables, as well. In some cases, we can mitigate part of increase by changed behavior or renegotiation, but in most cases not. In other cost areas, for example, for different professional services, we see very low impact.
A vast majority of our client contracts are regulated on a yearly basis by different types of index. The most common ones includes expected salary increase and historical inflation rates in a basket model. This means that, for example, high inflation in 2022 will be reflected in prices invoiced to our customers from first of January 2023. To summarize, we will see some effects in the coming quarters, but we are working on mitigating actions. Long term, from 2023, we expect that we will be covered by revenue indexation. Turning to the different business areas. Nytida. Sales increased by 5%, as said. We started up several new contracts in Q1 and added on acquisition of Christinagården from 1st of February. Our management homes show slightly lower occupancy than last year.
We opened three new assisted living facilities with 18 beds in the quarter and have the last four quarters opened up 10 new units with a total of 66 beds. EBITDA increased with sales, and margins were stable in the quarter at 12.4%. On a rolling 12 basis, EBITDA is still at a high 14.2%. In Vardaga, net sales increased by 15% year-on-year, or 2% versus last quarter. If we take the two l ess invoicing days in consideration, the quarter-on-quarter growth was over 4%. We have opened up three new nursing homes in the quarter, and six since the beginning of Q2 last year.
Occupancy in mature units, which now also includes units started in 2019 and 2020, we were in the quarter at a higher than last year occupancy and shows a month-on-month good trend throughout this quarter. In the national elderly care statistic for December, we can see that the number of elderly living in nursing homes are still 3%-4% less than before the pandemic, which means that we think that there's still an expected strong demand ahead of us. EBITDA increased with 96% to SEK 59 million, driven by both high occupancy and strong operational performance. EBITDA was negatively affected by startup costs for the three new units in the quarter. We have at the moment around 10 nursing homes that we not yet have opened up for care receivers.
We evaluate the local markets very carefully and are ready to open most of them within a short period of time. We opened up two of these in this quarter in the city of Gothenburg, where a local political decision gave the care receivers freedom of choice from February 1st. To further improve occupancy, we continue to boost our communication and marketing activities based on the local needs and opportunities we see. To Stendi. Net sales increased by 5% in SEK, but decreased by 2% in local currency. We saw stable demand, but we have reduced our capacity in our own managed portfolio. EBITDA was down SEK 3 million- SEK 12 million. Q1 is normally not a good quarter, but this year we once again were hit by strict Norwegian COVID quarantine rules and high cost of sick leave.
In Norway, we are working on different profit improvement measures, both to adapt our capacity to the demand in the market and other programs such as staff reductions on an entity level, negotiation of contracts, and relocation of units. This work has been ongoing since Q4 and have been slightly delayed because of the mentioned high sick leave rates and focus on managing the pandemic. The effects of the improvement measures will be shown gradually from the second half of this year. Altiden. The repositioning of Altiden is progressing according to plan in the quarter. Net sales grew by 87% and was affected positively by the acquisition of EKKO by SEK 105 million, and on a negative side, on the planned exit of Hjørta contracts by SEK 23 million.
In the elderly care segment, we saw increased occupancy in our own managed home, and we started up one new contracted nursing home in the beginning of the quarter, which also contributed positively to the growth. EBITDA was up SEK 13 million-SEK 14 million, and this includes a one-off regulation of the additional purchase price by SEK 7 million. The acquired EKKO units are performing well, but our own managed nursing home is still loss-making. The new nursing home opened in 2021 in June, and normally takes eight to 12 months until a newly opened nursing home reaches breakeven. At last, Klara. Net sales increased by 19%, and we are growing our business towards both external public and private operators, as well as towards our own companies, Vardaga and Nytida.
Compared to last year, we have expanded our nursing patrols geographically to three new cities in Sweden, and expanded our business in several existing geographies as well. The business model of Klara delivering different nursing services on-site when needed in evenings and weekends has proven to be very attractive for different types of caregivers. EBITDA margin was improved to 7.5%, and in rolling twelve to 7.7%. With that, back to you, Mark.
Thank you, Benno. To sum up our financial development versus our targets. Our growth target is 8%-10% through a combination of acquired and organic growth. In 2022, we have announced four acquisitions already, and that together with strong organic growth, have improved our opportunities to fulfill our financial revenue growth target in 2022. Profitability-wise, we have a midterm adjusted EBITDA target of 9.5%. Since Q2 2021, we have seen improving occupancy, which in turn will support an increased margin going forward. Also, the efforts to improve profitability in Norway is expected to positively contribute to the margin development during second half of 2022. Finally, leverage is unchanged from the last quarter and still slightly above target. That said, our solid cash conversion will reduce leverage over time.
If we need to choose between reaching our growth target and our debt target, we will choose growth. Summarizing the first quarter of 2022, Ambea is showing good organic growth in the quarter and see an ongoing positive occupancy trend in our elderly care segment in Sweden. Stendi Norway continue to adjust capacity and focus on social care where we have scale, high competence, and growth opportunities. The strategic repositioning in Denmark follows plan. In 2022, we will see a different structure of the business with a higher proportion of own managed care homes and an exit of the last remaining home care contracts. In the quarter, Altiden added 18 new placements into the own management pipeline. Every new strategy co-created with 50 managers across all countries are finalized, now being rolled out internally and incorporated into the annual short and midterm planning processes.
The strategy builds on our strengths and will guide us to capture new opportunities. The new strategy will be communicated on a wider scale later in the year. I had the chance to visit our teams and several care facilities in all three markets during the quarter. It has been a tough winter in the care sector with a mutating coronavirus, renewed restrictions, and higher sick leaves. Our teams have managed to balance their focus once again and have prioritized our care receivers' health and well-being 24/7. Simultaneously, we have started to execute the development plans we agreed for the year and have accelerated the growth. This means we are now providing care to more care receivers than ever, and my colleagues have delivered excellent performance in a challenging environment. The war in Ukraine and the humanitarian suffering it creates has affected all of us deeply.
We have in various ways tried to support the Ukrainian people the little we can through rapid and concrete actions. Our actions have, as examples, included donations from our staff and from Ambea to organizations on ground, the Red Cross, Save the Children, and UNHCR. We have offered our support to the authorities in terms of housing for refugees, and we have shifted products and services away from approximately ten suppliers that have chosen to stay active in Russia. Through relevant actions, we will continue to support the Ukrainian people the best we can. In a constantly changing environment, adaptability and agility is important. At Ambea, we continue to look optimistic at the opportunities to support our clients, 350 municipalities across three countries. Together with them, we will follow our vision to make the world a better place one person at a time.
With that, I conclude our presentation and open up for questions.
Thank you. Dear participants, we will now begin the question and answer session. As a reminder, if you wish to ask a question, please press star and one on your telephone keypad and wait for your name to be announced. The first question comes from the line of Matthias Wådsten from SEB. Please ask your question.
Yes. Hi there, Matthias Wådsten from SEB. A few questions from me. If we start with Stendi, quite surprising on the upside in Q1 in my view, and given the highest sustained number of COVID cases we have seen through January and March. Given the sharp reduction of infections going into Q2, can you elaborate a little bit on the scope for sequential improvements? And also, you know, the efficiency program that is expected to gradually help you in H2, can you give some flavor about the magnitude of that and about the sort of practical improvements that you expect to be able to implement? That's my first question.
Okay. We can see in Stendi that we have had extra costs in the quarter for high sick leave rates and COVID-affected quarantine. We have seen some small effects of the restructuring program that we are doing, and we will see more of that gradually from Q2 and Q3, especially in Q3 and Q4. To see the sequential improvement is a little bit tricky in Norway because Q2 is where we have all the bank holidays, so it's a little bit harder to look for it sequentially. We will see more effects of course in Q2 than in Q1, but have that in mind that there is a calendar effect in Q2 that is different from Q1.
Thank you very much. On the macroeconomic impact that you're referring to here, I appreciate the flavor, but can you just try to clarify what kind of efficiency you're experiencing now and for the remainder of the year? Maybe at what rate does the overall group cost increase? Can you give some flavor here would be helpful.
As we stated in that slide, we have around 85% of our cost base is not affected at all short term. In the 15% of other costs, I will say maybe between 5%-10% of the cost base is affected. It's a relatively limited part of our cost bases are affected. Of course, as all other companies, we see higher energy costs, higher food costs, and higher costs for some kind of supplies. I cannot give a number what the total will be of that. We have a total cost base of almost SEK 1 billion, and it's only 10% of that that are between 5%-10% that are affected in different ways.
It is a bit hard for us to make predictions because we don't really see what the energy prices will go and how fast the food prices will increase. Because there is signals that saying that the food price will increase during the summer, but we haven't seen that in our books yet. It's a little hard to make a forecast on that front.
Understood. The last one from me here. Another quarter here with working capital tie up. I know this is a known effect, but we also note the negative effect on a rolling twelve-month basis here. I guess some reverse trend from what we saw early on in the pandemic, but how do you expect this to develop going forward? What should we think of? That would be helpful.
I think that we have, for example, now in the rolling twelve slide, we see a working capital effect that is negative, of SEK 165 million that affects the full year cash flow. I think that will over time be a little more neutral. We have seen that going up and down in different cutoffs between the quarters. Over time, we will see that be around neutral. That will of course then increase the cash flow with the same amount.
Thank you very much.
Thank you. The next question comes from the line of Kristofer Liljeberg from Carnegie. Please ask the question.
Yeah, thank you. Good morning. Three questions. First, coming back to your commentary about cost inflation. You mentioned energy costs, for example. I guess that's mainly for heating. Is it fair to assume that negative effect should have been larger in the first quarter than what we will see for second, third, and fourth quarter?
I mean, I think it's important that we do not over-exaggerate the impact of the cost inflation on Ambea. Actually, we have, as Benno explained, 85% of our costs not impacted short term, and I think this is impacting other companies much more than it's impacting us. We wanna be transparent with it, so I appreciate the question. When it comes to energy, I mean, there are different ways, of course, different sources that we are procuring. One is, of course, heating. Another one is electricity, and the third one is fuel for cars, where we have quite a few with 900 care homes spread across three markets.
We have seen, of course, increased heating costs during the winter and also increased prices for electricity. We have seen these costs coming down somewhat, but also we see high volatility in this market. We are of course working on various mitigating activities. Energy efficiency programs as an example. We are looking at converting our fleet to electric cars, which we will accelerate now from Q3 and onwards. It's not like we are just sitting and watching it. We are actually working on quite many areas in order to mitigate these effects. Short term, they are there. Then when we will have the indexation of our revenue contracts renewed first of January, of course, that will capture the inflation that we have seen this year.
It's not like we will not be compensated for it. We will just be compensated for it a little later, so there'll be delay in compensation, because we have index regulations in our revenue contracts. It's important to understand how this impacts various industries and we hope we have clarified the picture and not kind of painted it too negative because we just want to be transparent and open about it. Of course it's impacting us as it is impacting everyone else.
Yeah, that's very clear. Thank you. The other question I had about, is it possible to quantify the negative effects you had from higher sick leave in the quarter?
I don't think it is really because if we look at the three markets, we have had relatively good government support in Sweden. We have had also government support in Denmark, a little shorter, only until the end of February. Whereas Norway has had hardly any government support to compensate for the higher sick leave, and actually the highest sick leave we have seen in Norway of the three markets. Also because the spread of the Omicron was faced a little different between the three countries, and between different parts of the country. I mean, to a large extent, we have been able to work around it, and with the government programs, we have been compensated in two out of three markets.
There has been impact, but.
Yeah.
It's difficult to quantify.
If we take Norway then, for example, how much better would earnings have been with a normal type of sick leave in the quarter?
I don't know if we can put a number to that, Daniel.
No, I wouldn't do that. It's a little bit tricky to tell actually.
Mm-hmm.
Okay. If we then assume sick leave will be lower in the second quarter than in the first quarter, and you also have some positive effect from the restructuring, do you expect second quarter earnings should be better in Norway than in the first quarter despite the calendar effects?
We don't predict that. I think the underlying will be better because we don't expect that high sick leave cost, and we will see gradual effect from the cost-saving program. If that will compensate for calendar effects. Well, bank holidays, I cannot judge today.
Okay. What's the reason for it being so difficult to quantify the sick leave costs?
In some parts, we can go short in a few parts. In some parts we can replace the sick persons with ordinary staff. In some times we have to pay 100% overtime. In some parts we have to take in staffing companies. It's a little bit tricky to see all the direct and indirect effects of this, as a mix. There has been higher sick leave than usually, and there has been higher cost. Exactly what the net effects of all these are, it's not so easy to track actually.
Okay. Final question. The acquisition you have done in the Klara segment, could you say anything about-
Yeah
Profitability there?
We can say that this sector are a profitable sector. These are type of services that we are also providing in the Klara segment where we are nurse personnel. This is a service that we are selling to schools with more of a prescription service where we take care of the responsibility for health. That is not like an ordinary staffing service that you sell hour by hour. There is possibilities to have higher profitability in these kind of services than in general in the Klara portfolio, you can say.
Great. Thank you.
Mm-hmm.
Thank you. Dear participants, as a reminder, if you wish to ask a question, please press star and one on your telephone keypad. The next question comes from the line of Karl Norén from Danske Bank. Please ask your question.
Yes, good morning. So I have a couple of questions, but if we start with the cash flow. I'm just wondering a bit, as Matthias alluded to on the free cash flow in the quarter. As I look at it's a -SEK 24 million, compared to a - SEK 2 million in the first quarter last year, despite significantly higher earnings. I know you have some negative working capital effects, but I'm just wondering is there any other one-off effect that impacts this quarter, or relates this, mainly due to the higher leasing costs due to more new homes?
No, there is no specific one-offs that hits. Bear in mind that we have each month around SEK 1 billion invoiced and a due date the very last day of the month. How the cutoff is done and how our customers pay the very last day could differ SEK 50 million-SEK 100 million. That is. It is a little bit tricky to overanalyze the short term effect of on a specific quarter.
Okay. Maybe a question on the government support. Is it possible to quantify maybe how much government support you got in the quarter?
We can say that we have got in Sweden government support to cover all our extra sickness costs in Sweden. That rule is no longer there from 1st of April, so there is no government compensation in Sweden since 1st of April. You can say that we have had normal sickness costs in Sweden because of that compensation. The sickness rates in Sweden are coming down, so we are close to normal sickness right now in Sweden as well. It has gradually come down in March and April to a more normal level. We were at very high levels in January, February.
Okay. The net effect there shouldn't really. That should be closer to zero.
No, it shouldn't be in the Swedish business areas. There shouldn't be any net effect of the sickness.
Okay. Did you receive any compensation in Norway or Denmark?
In Norway, more or less none. In Denmark, less in January and February where we have the highest sickness rates. We have still higher sickness rates in Denmark than we usually have, so there will be some costs coming also into second quarter higher than normal.
Okay. You mentioned during the ending of the call new financial targets and the new strategy. I think you've been speaking about that for a while. Should we expect any new financial targets or not? Maybe if not, should we read it as you believe your current financial targets are within reach?
We have the financial targets that we have communicated here. We don't have, of course, any other financial targets than the one we communicate. The strategy is more to kind of lead us the way to those targets. That's how we see it now. As I said also, we are rolling it out internally and gradually implementing it into our short-term and mid-term planning processes. That work is ongoing. The financial targets we have presented today are the financial targets we have, and those are the financial targets we strive to meet.
Okay. Just the last question on getting back to Stendi again in Norway. Just on Kristofer's question there on the whether EBIT or profit should be better in Q2, but I mean, just looking at the historical figures, I mean, it seems like the margin has been quite okay, at least in 2018 and 2019 in Q2. I'm just wondering there, is there really any reason to believe that the margin should be lower in Q2 than in Q1? I mean, of course the seasonality is maybe worse, but I guess you have a lot of other positive contributors as well supporting earnings in Q2.
I won't then make any forecast for Q2 earnings in Norway. I can say we haven't had so many normal quarters in Norway lately. If you look at the calendar effect, there are, I think, seven or eight bank holidays in the second quarter, and there is one in the first. Norway is by far the country where we have the toughest Q2 to have the cost base in Q2. That's how it is. Sometimes that have been a little bit not seen so clearly because I think that happened in Q1 and Q2 over the last years.
Okay, thank you.
Thank you. The next question comes from line of Karl-Johan Bonnevier from DNB. Please ask your question.
Thank you, Benno. Just it would be interesting if you could elaborate on how your new opening ambitions in Vardaga need to see how that looks for the rest of the year and into 2023. If you see any of the units that you have, say, not disclosed any opening dates for in Vardaga now coming into, say, an opening framework, if you put it like that.
We have in the pipeline for Vardaga one more opening this year, for sure. Of course, as Benno explained, we still have a number of homes where we haven't opened yet. Maybe you know, some of them will come into play also, but that's a little too early to say. What we can see is that we can see there is an increased activity in the municipalities, in quite many municipalities, because they also see that the demand is coming back, and in some places quite rapidly. Maybe there will be some openings over the next quarters for some of the homes that we have received the keys to, but not yet opened.
In terms of Nytida, we also have a few openings to come this year of group homes. They are not that big. I mean, a normal group home would be six beds, so we need quite a few of them to impact the Nytida in a material way. But there are also a pipeline there. We also have a pipeline in Denmark on organic growth with eighteen placements coming in during the remaining part of the year. I think the organic pipeline is looking relatively good in those three segments, whereas we in Stendi will continue to work on optimizing the capacity to the demand in the market.
When you look at extending the pipeline, are you looking at adding new units also to say to it? Because I guess that's been pretty constant over the last couple of quarters. Is it time to start-
Yeah, we are.
Looking for new opportunities?
Yeah, absolutely. We are that, and we are looking for organic growth opportunities in all markets. We can also see that there are opportunities that are very interesting in both Nytida and Vardaga that we're working on currently. Our aim is absolutely to continue to fill the pipeline with more projects, for sure. We also want to do that in Denmark. When time comes and the time is right in Norway, we will also look to organic growth in Norwegian markets. That's not on the table for now in Norway.
When you look at.
There's good activity.
Excellent.
in terms of filling the pipeline.
When you look at filling the pipeline, do you think it's logical to see that I see you have had a good flow of acquisitions of late? Is it easier to fill the pipeline by taking on already existing units, so to say, than looking for new greenfields?
Depends on the business segment, I would say. I mean, if you look to Vardaga in Sweden, there's not that much to acquire, if anything at all. Here organic growth is basically the key to growth. If we look to Nytida and to Altiden, then there's still a good opportunity for acquired growth, and we will continue to focus on that, but also to do that in a good balance with organic growth. With acquisitions, it's always like sometimes, I mean, you kind of get a few of them in a very short time, and then it takes a bit longer before the next ones will come.
We will of course continue to look for high-quality companies that we believe can be a good fit to our business areas and where we can use a proven model to bring in quality and take our synergies when we do that. It's not always easier to acquire, and we believe that acquired growth and organic growth must go hand in hand, so it's not one or the other. I'll be very clear that for Vardaga in Sweden, acquisition is not really in focus.
Good. Just finally, also coming back to that internal rollout of the renewed strategy, could you just elaborate a little on where you see. Is it an evolution or revolution of the old strategy? What are the main points that you are now, say, trying to implement in the different units and so on?
Yeah, as we have said earlier, it's definitely an evolution, so no revolution at all. I mean, the care business is not for revolution. It's more like an evolutionary business. What we are trying to do is, of course, to build on the strength and also to take the opportunity now coming out of the pandemic to see, you know, what lies ahead and how can we help the municipalities actually to create care homes that will meet the demand because the demand is coming. We will see both within elderly care and social care that the demand will increase quite rapidly.
When we see the generations that are born in the later part of the 1940s that will get into elderly care home age, so to speak, in five to 10 years, there's definitely a need to get going on constructing new facilities because otherwise society will not be able to provide proper care for these people when we get, you know, towards 2027, 2028. Planning processes and these things take time.
We need to be able to work on improving and expanding capacity and do that hand in hand with our customers, the municipalities, and to make sure that we really build good quality care concepts, also making sure that we have motivated and trained staff to take care of our care receivers because more staff will be needed. Some of these challenges we are addressing in the strategy, and they are not new, but we are trying to do it in slightly new ways and with an evolution, not a revolution. We will elaborate more on this a little later in the year, but we focus on the internal efforts at this point in time.
You elaborated on it indirectly in your cost inflation discussion before about 85%. The majority of your cost obviously being employee-related. I guess this year we are still looking at quite modest kind of wage increases. I guess the risk is that we're gonna get into much more of an inflationary environment than that in 2023 as well. Is there ways through which you can balance this, or would that be covered by the indexation clauses to a large extent upfront?
That will be covered by the indexation clauses to a large extent. That's the way it works. In that perspective, we are well covered.
Excellent. Thank you very much. Good luck out there.
Thank you.
Thank you. Dear participants, as a reminder, if you wish to ask a question, please press star and one on your telephone keypad. The speakers are now open for the questions.
Thank you so much. Thank you for today. Thank you for calling in. The quarter two report will be published on August 18. Have a nice day. Stay safe and healthy. Thank you. Thank you.
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