Welcome to the presentation of Attendo Q3 report. During the questions and answer session, participants are able to ask questions by dialing pound key five on their telephone keypad. Now I will hand the conference over to CEO Martin Tivéus and CFO Mikael Malmgren. Please go ahead.
Thank you, and good morning, everyone. Sorry for keep you waiting a few minutes. We had some issues with the Financial Hearings line. Today, we present the Attendo Q3 results, showing continued improvements, both financially and operationally. Before diving into the development in the quarter, let me just take a few moments to reflect on what company we are today and where we're going. Slide two, please. Today, we serve almost 30,000 people with different care needs daily, with more than 34,000 employees across almost 800 care units. Thanks to a strong focus on both the financial and operational turnaround over the past few years, we have grown net sales to well over 18 billion SEK on a rolling 12-month basis, and recovered our profitability significantly compared to where we were just a few years ago.
We've also become more diversified, dedicated to serving an increasing amount of people in not only elderly care, but also in disabled care, individual and family, and social psychiatry. Segments which needs a stronger specialization for those with more complex care needs. And maybe most important, I'm happy to see strong progress in terms of customer satisfaction in our nursing home operations. This was confirmed during the quarter in the national user surveys from both THL in Finland and Socialstyrelsen in Sweden, where Attendo scores higher than both industry average and public sector. At the same time, recent studies shows that we are providing care at a clearly lower cost to society than public sector, hence creating value to both customers, society, and shareholders. Next slide, please. Strategically, we believe that this makes us well-positioned for further long-term value creation.
Demographic trends will support long-term growth in elderly care segments for the foreseeable future, and in the disabled care and individual family care segments, we see a trend that public players need increasing support with taking care of more complex care needs. Hence, our recent acquisition of Team Olivia not only adds valuable competence and footprint in these segments, it also provides the necessary volume to enable increased investments in competence, quality, and methodology development. Investments that are needed to capture the future growth opportunities within more complex care needs in these segments. With a new financial and long-term plan for twenty twenty-four to twenty-six, a clear path for value creation, I'm happy to present our Q3 results. I'll start by giving you an overview of the development during the quarter, followed by a more detailed financial analysis from our CFO, Mikael Malmgren. Next slide, please.
Let's look at the Q3 highlights. In the quarter, we showed a rolling twelve-month growth in sales of 9%, mainly driven by the integration of Team Olivia in our Scandinavian business area. Underlying adjusted EBITDA improved by 21% or SEK 74 million to SEK 420 million, an effect of the Team Olivia acquisition in combination with underlying operational improvements. In Finland, we had a positive impact from lower cost of care staff during the summer months and higher price effects in disabled care and social psychiatry. These improvements were partly offset by the timing of price and wage increases in the fall of 2023. Scandinavia continues to show a steady progress in earnings growth, mainly attributed to the integration of Team Olivia and continued improvements in our own nursing home operations.
As in previous quarters, in twenty twenty-four, the result was hampered by one-off costs related mainly to integration, excess costs in Denmark, and ended outsourcing contracts. Cash flow was slightly lower than the comparison quarter, mainly due to higher vacation salary payout. Still, we see a positive trend in working capital, and we maintain a strong balance sheet after the acquisition of Team Olivia, with net debt to EBITDA improving slightly to 2.1. Consequently, we still have ample headroom to continue with active capital allocation, with share buybacks, investment in own operation, as well as selective bolt-on acquisitions. All in all, this quarter shows that we're heading firmly towards our operational and financial targets. Slide five, please. After Q3, I'm happy to announce that the effects of our long-term work to improve customer satisfaction is now also visible in external surveys.
In the national survey from Socialstyrelsen in Sweden, our customer satisfaction score for nursing homes this year was 81%, three points above publicly run nursing homes in the geographies where we operate. Six of our units were awarded 100%, one more unit than last year. The national THL survey for nursing homes in Finland shows a similar trend. This survey uses net promoter scores to find out to which degree customers would recommend the services provided. The NPS for 2024 came in as 40, nine points above last survey and a significant rise above the national average that remained unchanged at 36. Moreover, recent study shows that private providers run nursing homes more cost-effectively.
According to a new study from industry organization, Hali, private care costs 23% less than public care in Finland, and a study from Vårdföretagarna in Sweden shows that privately financed new nursing homes in Sweden costs 8% less than the average cost for the public sector or nursing homes. This proves that there is a strong case for increased cooperation between the public sector and private providers to meet future demand for care. Next slide, please. Let's turn to the development of occupancy, a key factor for our long-term profitability. Group occupancy at the end of the third quarter was 86%, stable compared to last year. Scandinavia shows a slightly lower occupancy, which is mainly a temporary effect related to the openings of three new homes with 112 beds in the quarter.
In Finland, underlying development is slightly stronger, since we have added around one hundred and seventy beds net since Q3 last year. As visible in the graph, occupancy in Finland has been flat the past years, while staffing density requirements has been steadily increasing. With the recent political shift and the return to lower staffing density requirements from twenty twenty-five, we believe that the supply-demand balance on the labor market for qualified care staff will improve. We also believe that this will lead to better opportunities to increase occupancy going forward. Next slide, please. This graph shows rolling twelve-month sales growth and lease-adjusted EBITDA margin. The most significant factor for sales development over the past twelve months has been the acquisition of Team Olivia in Sweden and improved terms in our Finnish operations.
Group margin improvement for the past eighteen months was mainly driven by the performance in the Finnish elderly care segment, and now we start to see clear improvements in Scandinavia as well. Let's take a closer look at the financials for the quarter. Please go ahead, Mikael.
Thank you, Martin, and good morning, everyone. Let's turn to page eight, please. Net sales in the quarter increased to SEK 4.8 billion, up 9% compared to quarter last year. The organic growth for the quarter was 2%. Organic growth was slightly negative in Attendo Scandinavia, where we saw continued organic growth in our own nursing homes. However, growth was as previously impacted by outsourcing contracts that ended end of last year. Including acquisitions, Scandinavia grew 18%. In Attendo Finland, the organic growth was 6% and primarily driven by improved terms. Currency had a negative effect in the quarter. Slide nine, please. Excluding one-offs of SEK 18 million, the reported result improved to SEK 554 million, and correspondingly, the lease-adjusted EBITDA increased from 346 to SEK 420 million.
As is visible in the graph, lease-adjusted EBITDA in Scandinavia, excluding one-offs, improved by SEK 48 million year over year, while Finland lease-adjusted EBITDA improved SEK 32 million year over year. Currency had a SEK 4 million negative effect on lease-adjusted EBITDA. Next slide, please. Growth for Attendo Finland amounts to 3% reported and 6% in local currency. Lease-adjusted EBITDA, including currency effect, improved by SEK 28 million versus last year to SEK 277 million. The quarter was impacted by higher personnel costs due to the annual salary increase, effective as of August versus September last year. However, the negative impact was more than offset by continued improved terms in social psychiatry and disabled care year over year, as well as better operational efficiency during the important vacation period. Occupancy rate was also slightly positive.
As mentioned earlier, the Finnish government announced in April that staffing requirements will be reduced from 0.65 to 0.6 for care staff per resident from January 2025. The negotiations with welfare regions are ongoing or about to start, and it's still early days as the law has only been presented but not yet passed in the parliament. However, we are well prepared for the expected change, and we believe that the reform will ease the balance on the Finnish labor market going forward. Slide 11, please. Organic growth in Scandinavia was slightly negative. We saw continued underlying growth in own nursing homes and welcomed more net new customers to home care. However, growth was offset by lower revenue due to the outsourcing contracts that ended end of last year. Acquisitions had a considerable effect on sales, and in total, Scandinavia grew 18%.
Lease-adjusted EBITDA, including one-off costs relating to the Danish exit and integration costs, increased from 48 million SEK to 164 million SEK. The improvement was primarily driven by Team Olivia acquisition and improved results from our own nursing homes. Improved result was partially offset by ended outsourcing contracts, which had a negative 20 million SEK impact versus Q3 last year. Ended outsourcing contracts will continue to impact the result, while gradually less in Q4, as the majority of contracts ended in December last year. Please note that we expect Q4 to be impacted by a minor non-recurring Team Olivia integration cost of up to 5 million SEK. Finally, I would like to highlight that we recently, and as part of the integration of Team Olivia, introduced two new brands to bring together our businesses in disabled care and IOF in Sweden, Unika and Vilja.
With two distinct brands, we believe we will have a better opportunity to build a leading player in these two important segments. When we look at the cash flow, the rolling twelve months, as previously communicated, has been affected by two one-off items in Q1 and Q2, but still, our free cash flow remains healthy at SEK 714 million. In the quarter, working capital, due to better vacation planning, and which now also includes Team Olivia, was impacted by higher vacation payoffs. CapEx was also slightly higher, and we will, as previously communicated, continue to normalize this at more historical levels compared to last year's low. During the quarter, we repurchased SEK 86 million worth of share, and in October, we have repurchased almost SEK 30 million more worth of shares, and today, we can announce that we will continue our repurchases in Q4 under a new program.
The new program aims to repurchase up to 150 million up until next report and will be executed under safe harbor regulation. Next slide, please. Over the course of the last twelve months, we have utilized our free cash flow to do a dividend according to policy, and in February, we also initiated continued share buybacks. These two elements make up more than 50% of our free cash flow utilization to date. In addition, we've made a transformative acquisition with Team Olivia, and which was financed by own cash and additional debt. Next slide, please. Let's look at the top left chart. The adjusted earnings per share improved by 0.41 SEK per share, or 0.46 SEK per share when excluding integration costs, which is equal to more than 30% uplift versus last year.
Improvement primarily due to higher lease-adjusted EBITDA and continued share buybacks, and what is expected, slightly offset by increased income tax. Now let's turn to the top right figure. Adjusted for non-recurring items, we continue to improve the lease-adjusted EBITDA margin. In Q3, the twelve-month margin up amounted to 4.9%, which is up from 4.6% last quarter and up from 4.3% end of last year. The figure at the bottom left shows the lease-adjusted net debt to EBITDA ratio, which decreased, a trend we continue and expect to gradually continue. As indicated in the figure to the bottom right, the net interest expense in the quarter was SEK 42 million. The increase in Q2 and Q3 is explained by higher financing costs due to the recent acquisitions.
Going forward, we expect our interest rates to gradually come down as our loans gradually roll over to the new and now lower stable Euribor market interest rates. Next slide, please. I would like to briefly recap on our adjusted EPS development. In 2022, our adjusted EPS was 0.68 SEK per share. In 2023, we made a significant turnaround based on the plan we set out in 2021, and we achieved an EPS of 3.02 SEK per share. Since then, our reported adjusted EPS has continued to improve and now amounts to 3.65 SEK on a rolling twelve-month basis when we include integration costs, and when we exclude the integration cost of Team Olivia of 20 million year to date, our EPS is actually at 3.76 SEK per share.
If we also adjust the EPS with our continued share buybacks to date, I divide with the outstanding shares at the end of the Q3 in the run rate, we are actually now at 3.84 SEK per share. With that, I hand over to you, Martin.
Thank you, Mikael. Before we move on to the questions and answers, let me just briefly summarize the quarterly development. We continue to see an overall stable growth in both sales and profits quarter on quarter. Improvement, it was driven by the acquisition of Team Olivia, in combination with underlying positive development in Scandinavia. In Finland, we managed to increase profits year over year, despite continued headwind constrained public finances. We have many opportunities in the years ahead, and we're both well-equipped and committed to solving society's complex care needs while empowering even more individuals. So now let's turn to the Q&A session. Operator, please go ahead.
If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from David Johansson with Nordea Markets.
Hi, good morning. Thank you for taking my questions. First one I had was on Scandinavia. Are you able to say anything on the underlying profit development in the quarter and also the contribution from Team Olivia? And then on that business, Team Olivia, then specifically, if you strip out the integration costs you talked about, do you see this business tracking better on profitability against the, I think it was at 9.6%, from when you acquired it? Thank you.
Yes, thank you. So, in regards to the underlying profitability in Scandinavia, as we mentioned, the outsourcing had a SEK 20 million negative. Team Olivia contributed around SEK 40 million, and then the rest is a mix of slightly positive from Denmark, as well as the elderly care providing the rest of the upside. In terms of tracking versus original estimates, we hold the same as we have said before. We see underlying performing in line with our expectations for Team Olivia.
Understood. Um, uh, then I was also curious on the development, uh, then for Denmark. What can you say about, uh, Q3 specifically, you know, on an under- underlying basis? And, and, uh, would you also say you track-- how do you say you track, uh, I guess, versus your profitability target, uh, from Q4, uh, on a run rate basis? I think you talked about profitability, uh, entering twenty twenty-five.
Yes, we talked about reaching break-even during Q4, and that is still our plan.
Okay, perfect. And then just the last one from me on Finland. Maybe, you know, the results in elderly care wasn't what you hoped for, but also you also say you have an elevated, you know, staffing situation against the current regulation there. So with the staffing change that could take place beginning in next year, would you say this, you know, changed the dynamic at all for elderly care in Finland and your ability to receive new customers? Thank you.
Yes, I mean, still early days, but we are overall positive towards the new low in staffing requirement. It's actually not just decided in parliament yet, but we expect it to be very shortly. You know, a few things around that. Well, one thing is the lower staffing requirements in the market, it will ease the pressure on the labor market for care staff, which is important. It will also make it less costly for welfare regions to give more people access to care services. So we are overall long-term positive to this change. For us, it's also more easy to adopt to a lower staffing ratio than to a higher one. So we think that this will be good for the market and also positive for long-term occupancy development.
Okay, maybe just a follow-up there. Would you say this is sort of the main lever for improving profitability in Finland? I think so, I think previously, I think you sounded more cautious on more compensation in previous calls. Thank you.
Yeah, I mean, it's still early days on compensation, because given that the parliament has not decided yet on the law change, it also means that very few welfare regions have actually come out to start tendering the zero point six. So, we still have limited visibility on the outcome of those negotiations, which we expect will be ready by the time of the Q4 report. But having said that, we think it will be positive for future possibilities of increasing occupancy in Finland, which is of course, the main long-term lever for profitability.
Perfect. Thank you. Those are my questions.
The next question comes from Kristofer Liljeberg from Carnegie Investment Bank. Please go ahead.
Yes, thank you. Given your comment here that you expect to be break even in Denmark in Q4, could you maybe tell us how large the losses has been in Denmark this quarter and in recent quarters? Then I just wonder about Finland, of course, you talked about lower cost for summer employees there, but given the year-over-year trend, it also seems that you are handling costs better in Finland versus recent quarters. Do you agree on that? And what's the reason behind that? And then you talked about the new staffing regulations in Finland being positive for occupancy rates going forward. What about Scandinavia? And what do you think will drive occupancy there into twenty twenty-five? Thank you.
Yes, thank you, Christopher. Let me start with the first question, and then I'll hand over to Martin for the second and third. So I think we mentioned earlier an estimate of around SEK 30 million for Denmark on a negative losses. We improved, as we mentioned in last quarter, by SEK 5, and we improved by another SEK 5 in this quarter, and we expect similar development then going forward as well. Then, coming to the,
Do you mean that you have improved earnings there sequentially by SEK 5 million per quarter?
Yeah, and, yes, exactly.
And you expect a similar trend in Q4?
Yeah.
We could assume a loss of around SEK 5 million in the third quarter, approximately.
Approximately, yeah.
Given that you said you expect to be break even in Q4.
Yeah. That's correct.
Okay.
Okay, moving into efficiency in Finland then. And you're correct. I mean, it has been improving. I mean, we have been. It's easy to forget, but we have been in a challenging period in Finland over three years' time, with increasing staff intensity requirements year over year for three consecutive years. That means that it's been a fight for staff. It also means that we haven't been to increase occupancy, to welcome new clients. We have to have the staffing beforehand. But so we have had, given the stress on the labor market, given this reform, we have had inflated staff turnover, and had a bit more staff than we have needed. So it's been difficult to work with staff efficiency, which has been getting better gradually.
For us, we have seen increasing staff EMPS numbers. We've seen also decreasing staff turnover. Now it's actually on a very modest level, which, of course, improves efficiency also in terms of staff general staff costs. What we're also up to do now is also right-sizing the organization because we have just both the slower occupancy development in some welfare regions than anticipated, but also the fact that regulation has turned from increasing staffing requirements to decreasing. So the anticipated final step of the increase will not happen. That means that we can also right-size staff, and this implies also better efficiency overall in Finland, and that is something that we believe will continue. Thirdly, you asked for occupancy in Scandinavia, and what will drive that?
Our occupancy in the main cities is good. If you look at for Stockholm, for example, you know, we have very little room for raising occupancy. We're quite close to 100%. We opened a new one about 100 beds during the quarter that we expect to fill up. But it is also good opportunities to continue to improve occupancy in other regions in Sweden next year. So we-
Just on the new unit in Stockholm, this large one, given the fact that other units have close to 100% occupancy, how soon do you expect this new home to be break even?
We expect it to be. I mean, we expect it to fill up. We have normally, you know, fill up times from 18-24 months. We think that, given what we've seen so far, that we likely go a bit faster. Breakeven, as you know, normally is reached at around 70% occupancy.
Thank you.
As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. The next question comes from Christopher Liljeberg from Carnegie Investment Bank. Please go ahead.
Yeah, one more, as there seems to be no one else in the queue. The improved customer satisfaction you highlighted, is that, would you say that's Attendo specific, or have you seen better for the overall private sector or the overall market there after the pandemic? And if it's Attendo specific, would you be able to highlight what you think are maybe the two, three most important factors for that?
Yeah. What we see is that the general private sector overall in this in all the geographies that we operate, I think was 80 overall, which is also stronger than the public sector. We were at 81, so a bit higher. Of course, I mean, we are also part of the the industry average of it. So and of course, a contributor to that. We have seen increasing numbers. We you know we do our own survey every quarter. So for the past two years, actually, we've seen gradual improvements, both in customer satisfaction and employee satisfaction, which has partly what we can see is that we have been investing more in leadership and leadership development.
We have better stability among the leadership and workforce. We have installed also group or team managers. So for all the larger units, we have now several team managers. So you have a smaller span of control and closer to your immediate manager as staff. And that has created a better stability in the workforce and also higher employee satisfaction, which also is a driver of customer satisfaction in the long run. So what we see now in the external survey for Socialstyrelsen is something that we have seen in our internal surveys gradually improving for the past two years.
Thank you.
There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.
With that, then, we're closing the call. Thank you for listening in, and if there's any more questions, then, please, please feel free to mail directly to me or Mikael.
Thank you very much.