Good day, and thank you for standing by. Welcome to the Ambea conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Mark Jensen, President and CEO. Please go ahead.
Thank you so much, and good morning, everyone. Today, I speak to you from Helsinki, Finland, as Ambea has entered into an agreement to acquire the Finnish social care services company, Validia, from Invalidiliitto, the Finnish Association of People with Physical Disabilities. Validia is a strategic acquisition for Ambea and a rather unique right-sized opportunity for entering the growing Finnish social care services market. Validia is the market leader in severely disabled residential care, with a growing position in mentally disabled residential care. It has a nationwide network of approximately 50 units, serving circa 1,300 care receivers with over 2,600 employees. It is known for high care quality and led by a strong and trusted management team that we will continue to build on.
Validia is a platform for continued growth opportunities in the attractive Finnish market in current and adjacent care service segments and adds approximately 20 well-being services counties to Ambea's customer portfolio of approximately 450 municipalities in our existing Scandinavian markets. The enterprise value paid for Validia is EUR 126 million, representing approximately 9.7 times equity value over EBITDA, and the transaction is expected to close April 1 and will be financed with existing and new debt facilities and 2 million Ambea treasury shares. With the acquisition of Validia, we are creating the only Pan-Nordic care services group with a meaningful presence in all four large Nordic countries. Ambea and Validia share the same values with strong emphasis on care quality, and the companies have a good cultural fit.
Validia will provide Ambea with a platform in Finland for future growth, organic, and through actions, while balancing Ambea's customers with the more diverse customer base and spread. Validia will become a new business area, and Validia's Managing Director will join Ambea's executive management team. Validia's competence and employees are important for the future growth and for the development of the company, and both companies will benefit from best practice processes and care competence sharing between all four countries, providing operational improvement potential and being aligned with Ambea's vision to make the world a better place, one person at a time. Validia's growth and profitability margins will support Ambea's financial targets going forward. If we look at the Finnish social care services market, it is very attractive. Validia's part of the market has grown historically 6% per year and in a market that is worth approximately EUR 1 billion.
Adjacent segments that can be part of the services portfolio in the future, like mental and substance abuse and child welfare residential care, add another EUR 1 billion market to the potential. The share of private provision is high in Finland across most segments, and especially in those that Validia is addressing today, and that is, in a Nordic context, quite significant positively. Looking at Validia as a company, Validia offers care services in four different segments: severely and mentally disabled ERC, personal assistance, and neurological rehabilitation. Validia is a market leader in severely disabled enhanced residential care, all segments that we at Ambea are familiar with in our other Nordic countries. The majority of net sales and profits are generated from severely disabled care and mentally disabled care, with the remainder from personal assistance and rehabilitation of approximately 5% each. The total capacity is around 1,400 beds.
The growth of the company has been very strong in recent years, driven by both organic and acquired growth, and earnings have also improved thanks to, among other things, service mix, improved occupancy rates, and price increases. Now, over to you, Benno.
Thank you, Mark. Validia, which will form a new business area in Ambea, will represent about 9% of Ambea's net sales, adding SEK 1.4 billion to a total of SEK 15.6 billion for the Ambea Group, based on the 2024 numbers. Validia will be the fourth largest business area per net sales. Validia's EBITDA, estimated per IFRS 16 accounting, is approximately SEK 160 million, corresponding to an EBITDA margin of 11.5%. The 2024 margin is above the average of Ambea's EBITDA margin and is also above Ambea's financial target of 9.5%. As this is a platform acquisition in a new country, we are only expecting minor cost synergies, primarily within procurement and IT. As Mark said in the beginning, we are acquiring Validia as a platform for further growth in Finland. Our plan is therefore to strengthen Validia's organization to maintain, improve quality and operations, while gearing towards continued strong growth.
In the due diligence process and interactions with Validia, we have seen that there are many operational excellence and cross-country learning opportunities. Validia will benefit from Ambea's operational excellence, digitalization, quality initiatives, and processes. Also, our education arm, Lära, will be deployed for usage in Finland. Likewise, we are impressed by Validia and can benefit from the quality and care assessment and planning system right , that they successfully use in Validia. Validia's unique MONA concept, aimed for challenging disabled care receivers, is another example of what Ambea can learn from Validia and share with other countries. To the financials, the transaction will be financed through a new EUR 90 million term loan facility from the existing bank consortium and by 2 million Ambea treasury shares. The shares will be subject to a 12-month lockout period.
The acquisition is expected to have a positive impact on Ambea's earnings per share from 2026. As I said, direct cost synergies are limited. We expect them to be around SEK 10 million. Transaction costs are expected to be around SEK 30 million and impact 2025. Integration and other one-offs related to the acquisition are expected to be approximately SEK 40 million, impacting 2025 and 2026 more or less evenly. Post-transaction net debt to EBITDA will be below the financial target at around 2.8 times, and we expect it to decrease the leverage to 2-2.5 times in the later part of the year, thanks to our strong cash flow. We also reiterate that we intend to complete the current share buyback program, which we are conducting right now, of 2 million shares, and it is planned to be completed before the AGM in May.
There are no regulatory approvals required for us in this transaction, and we are planning for closing of the transaction on the 1st of April. Validia will therefore be included in Ambea's reporting from the second quarter this year. Integration will start immediately after closing and is expected to be completed during 2026. Ambea's financial target and dividend policy will remain intact. Now, back to you, Mark, for concluding remarks.
Thank you so much, Benno. We are very excited about this acquisition and the addition of a new geographical market in Ambea's portfolio. The acquisition is in line with Ambea's strategy and strengthens our investment case for shareholders. With Validia, we now have a strong platform with a substantial presence in all four large Nordic countries. The acquisition will substantially improve our addressable markets and open up for further organic and acquired growth opportunities in Finland. We also further balance the care portfolio mix with adding a new country and 20 well-being services counties to the existing portfolio of 450 municipal clients in our existing Scandinavian markets. Ambea has a long history of strong cash flow and dividend payment in line with our policy, and we believe that this acquisition will, over time, strengthen our future cash flows and dividends.
Having the well-being of our care receivers top of mind, we look forward to welcoming Validia on the 1st of April. Thank you for listening, and we will now open for questions.
Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. We will now take the first question from the line of David Johansson from Nordea Markets. Please go ahead.
Hello, good morning. Thank you for taking my questions. I have two. First one, just on the business mix, from what I can find, Validia looks like to be somewhat similar, perhaps, to Nytida and majority social care and also rehabilitation. Maybe you can comment on the different areas here and perhaps also the sales split. That is the first one. Going into my second question, which is a little bit on the outlook, how do you think about the growth and margins now going forward? I think you talked about the 6% growth in this market historically. Is that a reasonable figure to expect also going forward? Also looking at profitability, with the strengthened organization and initiatives you talked about, Benno, is there an upside potential to expect here, looking at the margin head also? Thank you.
Okay, maybe I can start, and then Benno can follow. If we look at the business that is today, I mean, 75% approximately of the business comes from the severely disabled care, which is the largest area in Validia and also where Validia is a market, Finnish market. That was where they started in that segment, and that is where it has grown very strong with a nationwide presence. Mentally disabled, which is around 13% of the business, has been growing in recent years, and here we see a potential to continue the growth and to take a larger part of the market, of course, in dialogue with the customers and based on the needs in society. The two smaller segments, personal assistance and neurological rehabilitation, with around 5% each, of course, also interesting.
Where in personal assistance, we have good experience from Norway, so we will have a good look at that, of course, to see whether there are good opportunities here going forward. Neurological rehabilitation, which fits the kind of main segment on severely disabled, as a good adjacent service line to that. That is a strong platform and quite unique to get hands on such a platform. It is, as you say, social care services in line with social care services that we also offer within Nytida, Stendi, and Altiden. Of course, there are country differences and differences in legislation and so on, but it is a well-managed and profitable also social care business, and we think that is a very good entry platform for us to a growing and attractive market here in Finland.
Other than that, of course, there are segments today that are known to Ambea and where we are strong and have a good presence in our other Scandinavian markets and where Validia are not present in Finland. That is, of course, something we will have a good look at to see whether there are future growth opportunities outside Validia's current service offering, but in line with Ambea's service offering in the Scandinavian markets. It provides a very good platform for future growth. To your questions on margin, maybe, Benno, you can take that.
Yeah. It was also a question regarding growth opportunities. We see that we aim for higher growth than the market, of course, both organic and through add-on M&As. We think that we can complement this company with smaller bolt-on acquisitions with lower multiples that could add more value to the company. Regarding margins, we see that there are things that we can share from Sweden that could improve margins, but we will not set a forecast of saying that the margin will go up with a certain percentage point going forward. We see that there are potentials, and we are also in this business for long term and want to grow the business in this new segment. We are not promising to increase the margin going forward, but we see there are potentials.
Thank you.
Thank you. We will now take the next question from the line of Jakob Lembke from SEB. Please go ahead.
Yeah. Hi, good morning. Starting on the profitability for the company you're acquiring, it seems that they have had a quite positive development here in the last few years. What expectations do you have for margins for 2025?
Yeah, a little bit to repeat my answer from the last question, that we see that the margins we have right now, we think, is on a decent level, and we think that there could be possibilities going forward. For 2025, I do not think that they will come into play yet, so to speak.
Okay, the trend in the acquired business seems to be very positive. What has driven that, can you say?
Yeah, they come from a history where with the nonprofit owner, maybe there hasn't been really full focus on profitability. The new management team that joined the company a couple of years ago have made tremendous good work here, and we think that most of that margin lift is done, but there will be probably there are more possibilities we can see.
Okay. I noticed that on the slide where you showed EBITDA by business area, you showed SEK 160 million EBITDA for Validia. Just what is different in that one compared to the one in the press release?
The one in the press release is their reported numbers with the Finnish GAAP that is not IFRS 16. We made a comment that if we would add what we think should have been the number, if they were reported to IFRS standard, that would add another around 1.4-1.5 percentage points to the margin.
Okay, so the least adjusted EBITDA, you think, is around SEK 142 million?
Yeah, that's exactly. Because they don't report according to IFRS 16, for example, or IFRS at all. It's Finnish GAAP.
Okay. Also a question on the integration you will do. It seems like you will do quite limited integration, which means, or I guess my question is also that the integration cost seems to be a bit high. Just what will you do, really?
Of course, we will do a thorough integration of the company into the Ambea Group, and we will spend resources, of course, to get to know the company, to transfer knowledge, as we said, both to Finland and from Finland in the areas where the knowledge and competence within Validia can add to Ambea's competence. We also want to make sure that we invest properly in a good integration where our well-proven processes and systems will enter Validia in a good and thorough way, and where we make sure that we will manage a swift and also thorough integration. We see this as an investment to make sure that Validia will become a very strong leg in the Ambea Group and to make sure that we will transfer knowledge, processes, and systems in both directions in a good and ordered manner.
Okay. Also on the financing side, what sort of, yeah, financing costs or interest would you expect on this?
We have entered a so-called bridge facility with our existing bank consortium, and the interest rates we pay there are around the same that we pay on our present facility. That is somewhere depending, of course, lending the money in euros, so the numbers are not really the same, but there is a margin between 100-200 basis points depending on different things.
Okay. Just the final question, given the acquisition here and the increased leverage, do you still see potential to do further share repurchases later in the year?
Absolutely so. As said, we are continuing with the ongoing program, and we will finalize that. As also said, we see, depending on what happened on the other acquisitions that we are in process with, that we could come down to two, two- and- a- half later this year. At that level, it is, of course, possible to make further buybacks going forward.
Okay, that's all from me. Thank you.
Thank you.
Thank you. As a reminder, if you wish to ask a question, please press star 11 on your telephone. We will now take the next question from the line of Karl- Johan Bonnevier from DNB Markets. Please go ahead.
Yes, good morning, Mark and Benno. Interesting deal and good to see you entering the Finnish market. Maybe you could describe a little, this is quite a different kind of seller to this transaction, the federation, so to say, or the association. How has that relation affected, say, the development of this company historically, and how do you now transfer it into this structure?
The organization and the current owner up until this transaction has been a long-term owner of Validia. They have been developing the company in a very good way. As Benno said, with the new management team entering a few years ago, they kind of professionalized the business, started to grow faster and kind of, how to express it, maybe took a more commercial mindset to the operation while maintaining very high and good quality levels in the care services provided. At a point of time, of course, an organization has to come to a discussion on whether it is the core task of the organization to continue to develop such a company or whether their time and efforts are spent better on their core tasks, so to speak.
The sellers decided on that last year and started then this process, which has been an open and competitive process, professionally run, where we and other interested companies have been engaged in the process. We see also it's a very good sign that they will take as a part of the transaction 2 million Ambea shares, treasury shares, and become a significant stake shareholder in Ambea with a little more than 2% ownership. Also a strong sign that they are still committed to the business and they want to make sure that they can also follow the business going forward and become part of the ownership of Ambea. They have also press released today why they have come to this conclusion, and that can be found, of course, also online. They also press released when they started the process the reasons why they did so.
It has been a very good owner of the company with strong and good values that we share, and we're happy to have them on board as shareholders going forward.
Excellent. I think you already indirectly answered my next question, Benno, with talking about the difference in the EBITDAs that you have in the presentation and the press release with the IFRS 16 effect. This is basically leased properties. Are there any owned properties in this portfolio?
No, I think they own one property or something. Otherwise, they are renting them like we are doing, but since they haven't reported them IFRS 16, this is an estimate that we have put into the presentation here to what would have been the fact if they had reported according to IFRS 16.
Yes, that's fine. Just one final, Mark. If you compare this to the transaction you did a couple of years back with Echo Foundation in Denmark, which was, I guess, an asset carve-out, but maybe a similar kind of seller to some extent, this looks to be much more of a straightforward transaction and much easier one. Is that the way you would look at it as well?
Absolutely. I'd say also the size and also the quality of Validia is on a very high level. I mean, it's a significant size, much larger than the Echo business was in Denmark, and also with a proven trust and very strong management team that we will continue to build on. We see this, as we have said, as a very good platform for future growth in Finland and with a very competent and proven team.
Thank you very much and all the best out there.
Thank you.
Thank you.
Thank you. There are no further questions at this time. I would now like to turn the conference back to Mark Jensen for closing remarks.
Thank you very much for listening in. I wish you all a very nice day. Stay safe and healthy.
This concludes today's conference call. Thank you for participating. You may now disconnect.