The report we released this morning still shows a mixed picture. Financially, we delivered strong top-line growth and continued positive development in Scandinavia, while the development in Finland has been more challenging, both in terms of the staffing situation and due to the prolonged pandemic impact. Underlying profit was, however, up slightly, and we should see a clear improvement from second half this year. The turbulence in the labor market for care staff in Finland is affecting both occupancy development and personnel cost. Having said this, we are committed to addressing the situation. We are reviewing our footprint in Finland. We're in the process of raising prices through renegotiating all our elderly care contracts going into 2023, and we are working hard to improve the staffing situation.
In spite of the macro headwind in Finland, the underlying trends are favourable, and our organization is focused on key actions in the turnaround program. I'll start by giving you an update of the overall development and direction of Attendo, and then Fredrik will take you through the numbers in more detail. Next slide, please. Adjusted for currency, we reported 12% top line growth year- over- year, of which organic growth accounted for 8%. Strong organic growth is an effect of more sold beds and higher prices. I'm pleased to see that sales and performance in Scandinavia has been stable throughout the quarter despite Omicron impact. We are on the track to get back to pre-pandemic occupancy levels. Reported profits in Scandinavia are lower year- over- year, but adjusted for items of one-time character, we are in line with 2021.
In Finland, the pandemic has kept its grip, resulting in exceptionally high sick leave numbers and difficulties in finding replacement staff. Due to regulations, we can only welcome new customers as long as there's no active infections in the unit, and we have enough staff already in place, something that has hampered occupancy development in Q1. The main negative impact on the P&L is cost for sick leave, salaries, and replacements. Unlike Sweden, there is no public compensation for pandemic-related sick leave in Finland. Nevertheless, underlying profit is up SEK 25 million in Finland year- over- year due to higher prices and more occupied beds. Another factor in the quarter is a stronger-than-anticipated cost pressure on consumable food and energy on the back of the Russian invasion of Ukraine.
For the group, we expect higher costs of around SEK 50 million during the remaining part of 2022. Our ambition is to pass on these extra costs to our payers in 2023 as part of the cost price inflation mechanism in our contract with municipalities, and we don't believe that this will have a long-term impact. In Finland, access to care personnel is one of our most important focus areas. The labor market for qualified care personnel has been challenging since the introduction of the new Elderly Care Law in 2020, but in recent months, the turbulence has increased. Negotiations between public providers and the unions to replace the current collective agreement that ended on April 30 are ongoing and have so far not yet resulted in a new agreement. As a consequence, we have seen strikes and union manifestations in many areas in recent weeks.
We are addressing the situation with tight supply of care personnel, and we have taken several measures to ensure that Attendo is seen as an attractive employer. To improve the access to qualified personnel, we acquired international recruitment company Silkkitie, something that will support our ambition to increase number of recruited nurses from abroad already in 2022. Our financial target for 2023 is to achieve an adjusted earnings per share of at least SEK 4. In our assessment, it's still possible to achieve the profit target in 2023, but given the current development in Finland, there is a risk that the timing might, may be delayed somewhat. Next slide, please. This slide shows the dramatic increase in COVID-19 transmission in Finland the past month. Finland has had a very low number of infected compared to Sweden during the entire pandemic.
Now we see the opposite situation. Transmission of Omicron in Finland continued on high level in April, resulting in continued high sick leave numbers, which has had a large impact on both personal costs and occupancy development. We expect extraordinary costs related to sick leave in Finland to around SEK 10 million per month in April and May. Next slide, please. As I mentioned, we have achieved organic growth of 8% in the quarter, mainly due to price in Finland and more sold beds in both Finland and Scandinavia. Lease-adjusted EBITA amounted to SEK 31 million, corresponding to a margin less than 1%. However, adjusted for non-recurring items, our underlying profit is up year-over-year with approximately SEK 25 million. Overall occupancy remained at 84% versus last quarter, an increase in Scandinavia, while a slight drop in Finland.
We opened 60 beds in the quarter, bringing total capacity up to more than 21,000 beds. Quality remained on a high level, and overall quality index in Scandinavia improved from 89% to 92%. Good and dignified care at the end of life, so-called palliative care, is one of the most important tasks in care for older people. Attendo works systematically to improve palliative care, and during the quarter, we got industry-wide data about palliative care, which shows that Attendo has improved in six out of seven areas since last year. Next slide, please. This chart shows the opening by quarter and rolling 12-month opening pace. Prior to 2020, we had a strong pipeline of new projects to meet expected demand for new nursing homes in Scandinavia. Since the start of the pandemic in Q2 2020, we have opened more than 1,000 new beds.
We do expect this to be successful over time, even though the hampered demand for elderly care during the pandemic has had a clear impact on the fill-up pace. In the initial phase of the pandemic, we adjusted and lowered our expansion plans with effect from 2022. During the remaining part of this year, we plan to open another 300 new beds, equally split between Scandinavia and Finland. In terms of new projects, we had around 400 own beds under construction by end of Q1. In line with our strategy, our current focus up till until 2023 is to improve occupancy and margins in current footprint rather than seeking new expansion. Beyond 2023, we expect to return to a phase of higher number of openings on the back of the upcoming elderly boom. Slide six, please.
The top chart presents sales on a trailing 12-month basis on a group level, as well as for the business areas. The trend is positive, and the last data point is turning upwards as we had particularly high organic growth in Q1, coupled with M&A in 2021. We have the ambition to continue to occupy empty beds, and we will continue to explore M&A opportunities the coming period. The lower chart displays a trailing 12-month lease-adjusted EBITA margin. The past two years, the reported development is heavily impacted by the corona pandemic. The underlying group margin is, however, improving this quarter, and from second half of this year, we should see reported margins lifting upwards. Next slide, please. Now turning to occupancy development. This chart displays clearly the mixed picture I talked about initially. We have a positive development in Scandinavia in spite of new openings.
While we see a flat development in Finland despite the lower opening pace. In Scandinavia, we have lost around 10 percentage points in total occupancy since the start of the pandemic. The past three quarters, we have seen demand and sales for nursing home placements increasing again, and we expect the positive sales and occupancy trend to continue. In Finland, demand for nursing home beds remains on a healthy level, but we haven't been able to translate this into higher occupancy during the quarter, as we have had challenges to find substitutes for staff on sick leave, and are restricted to accept new clients if we have any active infections of COVID-19 in the unit. We've also given notice of termination of the agreement for renegotiation in a number of municipalities where we are not satisfied with the terms.
While this is necessary to achieve healthy long term, it also hampers occupancy development short term, as these local authorities restrict new customers to attend the nursing homes until we have reached a new agreement. Let's take a closer look into the financials for the quarter. Please go ahead, Fredrik.
Thank you, Martin. Let's turn to page eight. Net sales increased to SEK 3.5 billion, up 14% compared to the corresponding quarter last year. The organic growth for the quarter was 8.2%, the highest organic growth for at least five years. In Finland, we continue to see growth across all service offerings in elderly care, to a large extent driven by price increases. Also, Scandinavia shows organic growth, primarily driven by improved moving rates in our elderly care homes following the pandemic and good development for our newer care homes. Lease-adjusted EBITA amounted to SEK 31 million, down from SEK 75 million last year. The comparison is impacted by exceptionally high sick leave costs in Finland this year. Last year's retroactive cost compensation and other items of non-recurring character. Underlying operating profit increased by roughly SEK 25 million.
The IFRS 16 effect on reported EBITDA increased somewhat, driven by new openings. Financial net was - SEK 169 million, compared to - SEK 164 million in the first quarter of 2021. IFRS 16-related interest expenses increased by SEK 10 million, while interest expenses for our borrowing from banks decreased by SEK 2 million. Income tax for the quarter was + SEK 10 million, corresponding to a tax rate of 23%. The adjusted earnings per share for the quarter was SEK 0.09, down from SEK 0.26 last year. Next slide, please. The Scandinavia business area continues to attract more and more customers, although average occupancy is still below historic levels due to the many openings over the last two years. Net sales for the business area increased by 11%.
The strong growth is to a large extent driven by more customers in nursing homes for elderly care. Our new units opened over the last two years have successfully attracted customers. They have also seen an overall increase in market demand. Further, during the last quarter of 2021, we did take over responsibility for four new outsourcing contracts. In the quarter, occupancy increased by 1 percentage point to 81%, and acquisitions has also contributed to growth. Lease-adjusted EBITDA decreased from SEK 91 million to SEK 66 million. Adjusted for differences between the years in COVID-19 support and other non-recurring items, profits are in line with last year. The adjustment items last year were SEK 36 million in retroactive COVID-19 cost reimbursement and a SEK 20 million cost related to property court case.
This year, we have made a provision for closure costs related to Uppsala Home Care of SEK 10 million. The underlying development is driven by occupancy improvements for units started 2020 and earlier, offset by startup costs for recently opened units and indirect costs related to high sick leave in the quarter. Looking ahead, units started during the last two years will continue to have a negative impact on the result, while we expect a continued positive customer inflow. The balance between startup costs and positive fill-up effects will gradually improve as the year progresses. General cost inflation has also increased during the last months. This is estimated to impact Attendo Scandinavia with about SEK 10 million per quarter. Next slide, please. Growth continues to be high for Attendo Finland and amounts to 16% reported and 12% in local currency.
The growth primarily comes from price increases, acquisitions, and more occupied beds. In many contracts, prices are adjusted in January, and the average price increase for Attendo is about 5% this year. Lease-adjusted EBITA decreased from +SEK 2 million to -SEK 18 million. Very high sick leave impacted operating profit in the quarter negatively with an estimated of 40 million kroner. In comparison, the net effect in the first quarter of 2021 from COVID-19 was positive by SEK 5 million due to public support. Hence, underlying lease-adjusted EBITA increased by about SEK 25 million. Price increases and improved occupancy compared to last year was partially offset by high cost and operations from high staffing costs. Looking ahead, we can conclude that all the sick leave levels has come down somewhat. They remain on an abnormally high levels in April.
At current levels, the extra cost for sick leave is about SEK 10 million per month. General cost inflation has also increased during the last month, and this is estimated to impact Attendo Finland with at least SEK 10 million per quarter. The constrained labor market will continue to impact our ability to welcome new customers. Next slide, please. This slide shows our cash flow development. Free cash flow was positive by SEK 57 million in the quarter and SEK 168 million for the last 12 months. Investments were temporarily somewhat higher this quarter due to some IT system changes. Adjusted net debt amounted to SEK 1.5 billion, which equals an adjusted net debt to adjusted EBITDA ratio of 2.7, well in line with our financial target. With that, I hand back over to Martin.
Thank you, Fredrik. A few closing words before the Q&A session. Financially, we delivered high growth at very low profit. We've been hard hit by the Omicron situation in Finland, something that spills over into Q2. Underlying profit was, however, up slightly, and we should see a clear improvement from the second half of this year. The turbulence in the labor market for care staff in Finland is affecting both occupancy development and personnel cost, factors which may affect the timing slightly of the fulfillment of our EPS target. Having said that, we are committed to addressing the situation. We are reviewing our footprint in Finland. We are in the process of renegotiating all our elderly care contracts, and we are working hard to improve the personnel situation.
Investing more in employee retention, training, starting up our own rental nurse company, and scaling up international recruitment of nurses through the acquisition of Silkkitie, to mention a few. In spite of the macro headwind in Finland, the underlying trends are long-term favourable, and the organization is focused on the key actions in the turnaround program. Thank you for listening, and over to you, Andreas.
Thank you, Martin. We'll enter the Q&A session. Please state one question at a time. Operator, please go ahead.
Thank you, Andreas. If you do wish to ask a question, please press zero one on your telephone keypad. If you wish to withdraw your question, press zero two to cancel. Our first question comes from the line of Kristofer Liljeberg from Carnegie. Your line is open.
Thank you. With Finland, how would you describe the understanding among payers for the need to increase prices? Also, if I could ask you about the Scandinavian business. When you expect the net effect from new openings versus the improved move-in to start having a positive effect instead of a negative effect on earnings, the timing for that? Thank you.
The first question, I mean, we have been preparing all municipalities for the renegotiations that will occur during the course of this year, entering 2023. It's early in the process. We've just started the renegotiations with some of the larger new regions in Finland. What we can say so far, there is an understanding that the cost base to operate has moved considerably. We can say that the public production cost has increased at least as much as it has for us, likely higher. There is the preparation for this. On the second note, we believe that we will see increase in margins during the second half of the year.
We should see that balance start shifting now because we have been opening a lot of new houses over the course of the past two years. We just have, in Sweden, one opening left this year. We should see that balance shift now to a more positive development.
Thank you.
Our next question comes from the line of Victor Forssell, Nordea. Please go ahead.
Thank you so much. I hope you can hear me well. I'll keep on the same topic regarding the new regions and the elections that have recently concluded in Finland, if you could just spend a minute there on the risks and opportunities you foresee with the elections and the results from there. Also, I guess that there is an imminent risk here on the labor side for you to have a better customer inflow in Finland. Do you see from this regional reform and situation that will there be enough time for the regions to follow through with the preparations that you talk about for you to be satisfied by 2023?
As you noted, I mean, the new regions are forming now as we speak. Up until those are formed, our view is that in some cases, we have negotiations with the already formed regions. Because also they turn to some SOTE regions. Some of them has already been voluntarily formed prior to going into this year, and they're already working. We have eight SOTE regions that has already been implemented. There, we have a functioning relationship. And those are the larger regions. I think it will differ a bit region by region, depending on how new they are, so to speak. This is something that they have to do.
This is also very important for the new SOTE regions to get this contract in place, of course, until next year. Could you repeat the other question, please?
Understood. No, I think that was good. It was just if they would have time enough to follow through with all the preparations here and forming of the new boards, et cetera, if you saw that as a risk of hindering you from reaching the sufficient price increases for next year.
Yeah. We believe that this will happen. As I said, we already started some of the negotiations, and these are expected to continue during the remaining course of the year.
Just a final one on Finland as well. Given the constraints of filling up in your current premises due to staffing shortages, just interesting to hear, you know, at what levels you are at in terms of this new implementations, the new rules that have been coming up here step by step and also for April next year that's another step up in care need from staffing. Just if you could elaborate a little bit on where you're what type of figures you're seeing in your own premises and also, you know, what it implies for next year to reach that 0.7 level throughout your premises. Thanks.
Permit-wise, we are currently at 0.6. That's the staff counts the all care staff. Then, on top of that, we have non-care staff doing non-care work. The care staff regulation currently is 0.6, which is where we are at. We're a bit above that in our unit. Of course, it becomes a constraint of access to care staff on the market, especially with the COVID-19 pandemic developing the way it has in Finland, with such high sick leave numbers. It means that there is a constraint of those staff on the entire market. That, of course, affects staff turnover, it affects overall personnel costs, and so forth.
We believe that this will continue to be a tough labor market in Finland. It'll be even tougher next year with 0.7%. That's why we're also looking to implement a broad set of different initiatives to support us in terms of getting the staff that we need. We just after the quarter we acquired Silkkitie, which is the leading international recruitment company in Finland for international nurses. We expect this year to get around 500 licensed nurses from that channel. That is, of course, something that we want to scale up over the next couple of years. We need to scale up.
Okay. Thanks a lot.
Our next question comes from the line of Jakob Lembke, ABG Sundal Collier. Your line is open.
Thank you and good morning. My first question is on the Finnish staffing company that you acquired, just the financial implications of that, if you can say anything.
Yeah. This is Fredrik. It's no major financial implication. It's rather 'cause we used them as a customer before and had contacts. I think the difference is that we have, of course, owning them, we get a bit, you know, you could say better prices in a way. It's also that we are in better control and strategically can make sure that we, since the access to labor is such an important topic for us in Finland, to make sure that we have the best possible ways of recruiting abroad. It makes our ambition because we have increased ambition of how many nurses we need to recruit from other countries, and it makes that ambition less costly.
Okay, I understand. Another question on Finland. With the pandemic and the sort of lingering effects we're seeing in Finland now, has that at all impacted the customer inflow or occupancy in the country?
In Finland, yes.
Definitely.
For sure. One thing is that you need to have more staff available already to accept new clients, which is difficult to get more staff now during the pandemic, with this amount of sick leave and the constraints in the labor market. The other thing is that if there's any active infection in the unit, either staff or residents, then regulations prohibits new people to move in. Of course, there is a clear effect on occupancy development in Finland. On top of that, we also terminated a number of agreements in Finland for renegotiation, which also hampers occupancy development.
That's also what we see on the occupancy development part of it, that we have now sort of flattish, this quarter, even slightly negative development on occupancy in Finland due to these factors.
What you saw in Scandinavia last year, I guess, sort of lowered inclination for elderly people to move into homes because they are maybe scared or.
No, we don't see that. I mean, if you look at Finland, even though Omicron has been spreading widely and seems to be very hard to stop, the level of vaccination is very high in Finland, and 100% in our nursing homes. We have very, you know, few causes of severe sickness. People in Finland were not generally afraid of Omicron, but it hinders us from developing occupancy in the units. We still have a good demand, say in Finland. We have a queue in many homes, so we can't accept them due to a lack of staff or existing active infection.
Okay. I was wondering, just short, if you could just explain sort of the timing between a unit going from a startup phase to ramp-up phase to more mature phase.
You can say that in a normal case, it takes about one year for a unit to get to break even. Then it costs money. It takes another year to get to good occupancy where we are in our target margin, so to say. It always, you know, differs on a case- by- case. It depends on what the municipality contract looks like and so forth. That's the typical development.
Okay. My last question is in general on the sort of negative headlines we've seen in the quarter. This might be anecdotal, but I feel like you might be more subject to headlines than your peers. I was wondering sort of what's your view on this and what can you do to improve the perception of the company?
Yeah, I mean, of course, that's a good question. It's a bit of a frustrating situation to be in, of course. It's also election year, and we did foresee that this could happen. Of course, the most important for us is to try to make sure that there is little to write about, and to make sure that we have our operations, a good quality system and have everything in operation in place. That's the most important part. Of course.
Okay
It is a very special media environment and political environment, this closer to election as well.
Okay. That was all my questions today. Thank you very much.
Thank you.
The next question comes from the line of Hans Boström, Trinity Delta. Please go ahead.
Good morning. A couple of questions, please. Going back to the labor topic first. Could you give us a sense of how many staff you actually were missing on a monthly basis or at any given point in time because of the Omicron situation in Finland that you had to replace and incur extra costs for? Then, I would also like to understand how many extra care workers would you expect to be able to hire because of the higher requirements in April next year, just to get a sense of what the numbers are in terms of numbers of care workers.
Second question relates to Sweden. I've been seeing reports that some municipalities are paying their care workers up to SEK 10,000 more per week in order to make up the very tight sort of labor situation over the holiday season. Is that something you expect to have to do as well? Thank you very much.
I think the first question is, we have the staff that we need in Finland to support the requirement of 0.6 and the current number of residents. We are working hard now to fight the sick leave situation to find enough substitutes and staff to keep that level of occupancy. Thing is that we, it's difficult to find staff enough to continue to develop occupancy and accept new clients with the Omicron sick and sick leave situation. That's, you know, that's challenging. We have the staff that we need right now for current occupancy and current requirements. Problem is, we are struggling to find enough staff to keep developing occupancy.
With regard to next year's increase from 0.6 to 0.7, you might say that with current footprint and current customer base and occupancy levels, we would need around 1,000 more FTEs to maintain current occupancy. We expect to solve more than half of that through international recruiting.
Who can incur the cost? Is that you purely in terms of, you know, language learning, et cetera, for these international?
Yeah, of course.
Would you be able to give us a sense of how much extra cost that would result in for you?
No, we haven't gone out to that figure, but it's a higher cost, of course, than recruiting domestic. On the other hand, this is staff that tends to stay a lot longer and be very loyal to the company, so and they're very highly appreciated. We believe that it over time works really well. We have been working with them for 10 years, so it's not a new relationship even though we acquired a company and we will increase our ambition quite dramatically.
As for the holiday cover in Sweden, I mean, I listened to the radio the other day, and we talked about this being a more challenging situation than any previous year. I mean, do you agree with that? Do you also expect to pay some thousand kroner more per extra?
No, I can't really comment on it. We haven't done this before, and it's anecdotal information. It also might differ a lot municipality by municipality. Of course, we're active in around 50 municipalities in Sweden out of 300. We haven't been forced to use these measures before, and I don't expect us to have to do it this year either.
Very good. If I may, just a final question. Do you get any compensation for your refugee reception from the Ukraine?
Yes, through Migrationsverket.
Would you expect this to be a significant business line for you for the rest of this year?
No, we don't.
Okay.
We expect it more so to cover the cost, to be quite honest, not to make any money from it.
Okay, thank you very much.
Thank you.
We have a follow-up question from Kristofer Liljeberg, Carnegie. Please go ahead.
Yeah, thank you. The recruitment company you acquired is the idea to use it entirely exclusively for Attendo? Also, on the staffing situation, how much would the tight staffing market improve, would you say, if sick leave just normalize in Finland?
Well, if sick leave normalized, it will certainly improve the situation this year. Then, of course, for next year when staffing requirements goes up further, there is purely mathematically a lack of nurses in Finland. That needs to be covered by international recruiting. When it comes to the Silkkitie acquisition and our plans forward, no, we don't plan to use it only for Attendo. We let them continue operate with external clients as well.
Would you say if you require so you need 1,000 more people next year, just based on the existing number of customers? Recruiting 500 from abroad, the other 500, would that be covered, so to say, by just the normal sick leave situation?
Not entirely, no. Not entirely.
Okay. A good part of it, but not entirely.
Okay. You would need additional employees if you're planning to bring on more customers, of course?
Yes.
Okay. Thank you.
Thank you.
There seems to be no more questions at this time, so I hand the word back to the speakers.
Okay, thank you. Well, we'll now conclude this conference call, and please contact us directly if you have any further questions. Thank you for your participation.