Thank you very much, and good morning everyone. Welcome to Careium's interim report for the fourth quarter of 2021, and our first quarterly report as Careium. Joining me today as well is our CFO, Mathias Carlsson. Next slide, please.
As I said, this is our first quarter as a separately listed company. On December 10th last year, we completed the journey of becoming a listed company on Nasdaq First North. After building and creating one of the leading businesses in Northern Europe in technology-enabled care, the listing was the highlight after many great achievements by the organization throughout the years, and with a separate listing. Next slide, please.
A few highlights from the fourth quarter of 2021. The positive sales development continued in the fourth quarter, achieving the highest quarterly sales in a single quarter for Careium.
We implement our first larger installation in assisted living, expanding our market segments in line with our strategy. The cost margin in the quarter improved, although we have had continued negative effects from higher cost of goods sold due to high component and freight costs, as well as additional costs to maintain our high quality in service delivery during the pandemic. The operating profit in the quarter have been challenged predominantly as a consequence of increased costs being a standalone listed company, the mentioned increases in supply chain costs and service delivery costs during the pandemic also to a large extent as a result of a accelerated transformation in the U.K., creating a stronger foundation for us and making sure that we quicker integrate and capture the synergies that we see in the United Kingdom. Next slide, please.
Sales and gross margin in Q4. Net sales in the quarter equaled SEK 162.3 million, which is an increase of 12.2% compared to the same period last year, and an increase of 15.2% compared to the third quarter in 2021. As I said, SEK 162.3 million is the highest quarterly sales for Careium in the history of the company. The organic growth in the quarter equaled 3.5% and was mainly driven by good development in the Nordics, and especially implementation of a number of new contracts that we won earlier in the year in Sweden.
Sales of services increased by close to 16% to SEK 126.8 million, with a number of new contracts implemented in Nordics and the acquisition of Innocom in the third quarter. Share of services in the quarter equaled 78% of total sales. Gross margin in the quarter was 40.5%, which is an increase compared to the same quarter last year, and also an increase compared to the third quarter of 2021. This is despite the higher costs of goods sold and service delivery during the pandemic. The number of connections increased with close to 5% in the quarter compared to the same period previous year, and equaled 390,000 connections in the quarter, which is the same number of connections as the third quarter of 2021. Next slide, please.
A few market highlights for our different regions, starting with Nordic and the United Kingdom. In Nordic, the fourth quarter was in many aspects a good quarter for us in Careium. Sales increased with 20.4% following implementation of new contracts in Sweden, and also increased sales of Eliza in Norway. Sales also increased strongly compared to the third quarter in the region. In Sweden, we also continued to win a number of new contracts in the quarter, strengthening our already market-leading position within independent living. We also in Sweden implemented our first major customer in assisted living, expanding our offering and presence in a new segment in line with our strategy.
Costly service delivery, both in the Nordics and then predominant, of course, in Sweden and Norway, have been impacted by the pandemic with increased short-term sickness over time, etc. We have managed to maintain our high quality in our service delivery throughout the quarter despite some challenges or consequences from the last wave of the COVID-19 pandemic. Number of connections in the quarter equaled 124,500, which was an increase from the third quarter of 2021. In the U.K., we have suffered from challenges in integrating the acquired businesses, and sales decreased by 9% to SEK 56.1 million in the quarter, which is also negatively impacted by write-downs of expected sales. To address the challenges in the region, we have accelerated our transformation of the business to increase both profitability and strengthen our foundation for growth.
This includes just to mention a few creating one legal unit in the region, making sure we consolidate the number of active sites we have. We have already, in January, closed one of our sites in the region, increasing efficiency in the service delivery and also appointing new management in the region. Connections in the region or in the United Kingdom equaled 238,100, which was a decrease of 3.6% compared to the same quarter previous year. Next slide, please. Some highlights then for Central Europe and other markets. Sales in Central Europe increased with close to 64%, equaling SEK 23.4 million. It was a strong quarter also compared to the third quarter of 2021.
The strong sales increase in Central Europe is mainly a result of the acquisition of Innocom in the Netherlands that we concluded in the third quarter, as well as good demand for our products in the region and then especially Germany, where we have a strong position with a number of key customers in the country. We have also started the migration and implementation of our first major customer for our software as a service platform, which will be completed within the next two months in the region. In other markets, sales increased with 47% compared to the same quarter previous year, equaling SEK 2.5 million, which is driven by an increased demand for our mobile social alarms in especially France. Next slide, please.
A little bit about profitability in the fourth quarter. EBITA adjusted for restructuring costs equaled SEK 18.3 million, a slight decrease compared to the same period last year. EBIT adjusted for restructuring cost was SEK 0.9 million, which is a slight improvement compared to the third quarter 2021. Our profitability have been burdened by the increasing costs for components, freight, high costs for high-quality service delivery during waves of the pandemic, as well as extra costs which are mainly relating to the accelerated transformation in region U.K. The operating profit is in the quarter positively affected by a revaluation of estimated additional purchase price for acquisition of SEK 9.7 million. Next slide, please.
Cash flow in the quarter. The cash flow from current activities in the quarter was SEK 34.1 million, which is a clear improvement from the same period last year as well as previous quarters during 2021, where the improved cash flow is mainly a result of improvement in working capital during the quarter. Free cash flow was close to SEK 60 million in the fourth quarter, which is also a significant improvement from previous quarters. This resulted in a net debt decrease to SEK 149.7 million in the quarter compared to SEK 191 million at the end of the third quarter. Next slide, please. Some concluding remarks. This was, in many ways, a special quarter in which we took many steps in the right direction. We completed our listing on Nasdaq First North and are now trading and operating as a standalone listed company.
The positive sales development continued, reaching all-time high net sales in the quarter. Gross margin also improved compared both to the third quarter and the same period last year. We implemented our first larger customer in assisted living in line with our strategy to expand our market and offering, which we'll continue with going forward. We have also started to migrate and implement our first larger customer with our software as a service offering in region Central Europe. Despite many positive aspects in the quarter, it was not without a number of challenges where we will focus on improving, especially our profitability going forward. The profitability in the quarter had been challenged by high cost in components and freight, as well as necessary measures to maintain high service delivery during the latest wave of the pandemic.
As the business in the United Kingdom has not developed as it should, as we expect, we have accelerated our transformation of the region to ensure we extract the synergies and build a solid platform to further capitalize on the market opportunities we are confident will accelerate as the digital shift will increase its pace. We continue to strongly believe in our strategy and see that we are taking clear steps in moving towards becoming the European market leader in technology-enabled care. Thank you very much for attending and listening to this short update on the fourth quarter. We now move on to a Q&A session. I can ask you to go to next slide, please. We can move into Q&A, and let me know if there's any questions from anyone on the line.
Thank you. Ladies and gentlemen, if you would like to ask a question, please press zero one on your telephone keypad now. Once again, it is zero one on your telephone keypad to ask a question. There will be a brief pause while any questions are being registered. Our first question comes from the line of Rebecca Jaderup from ABG. Please go ahead. Your line is open.
Good morning, everyone, and thanks for taking my questions. The number of subscribers were flat quarter-over-quarter, meaning that you could implement some of the contracts that have been pending. Do you still have pending contracts? Could we expect an organic growth of subscribers in the next few quarters?
Good morning, Rebecca, and thank you for the question. Yes, we still have, and especially then in the Nordics and in Sweden, a number of pending contracts to implement, and especially contracts that we won in the fourth quarter. I think as discussed in previous webcasts, there's been some delay in implementing one contract during 2021, which we sort of caught up on the contract from Q2 to Q3 in the fourth quarter. We are still to implement the majority of the contracts that we won in Q4 during sort of first half, first few months of 2022.
All right. Thank you. The growth margin were one percentage point better than the previous year. Can we conclude on the back of this that the price increases for components are heading in the right direction? You still mentioned that as a reason for cost increases.
I would say probably unfortunately not, because we start to see that the component costs are not the same pace of increased component costs, but I wouldn't say it's over yet. I think as we all see, now inflation is increasing. I would expect that component costs will continue to be high in the coming quarters as well. We of course do what we can, even though we have sort of long customer contracts, given so the opportunity to adjust prices short term are sometimes limited. We of course do what we can to make sure we adjust the prices we take, when we deliver our services and our products to as large an extent as possible to mitigate for the increased component costs.
Thank you. Also one more question about the difficulty with finding synergies in the U.K. What are the challenges there? Should we expect this to take a few quarters of this kind of one-offs, or is this just in this Q4? Should we expect this to come also in Q1 or Q2?
As I said, so we have accelerated our sort of transformation in the U.K. to make sure that we build a strong foundation in the U.K., making sure that we capture the synergies that we are confident do exist in our business in the U.K. Of course, most importantly, create a really strong foundation to drive strong organic growth, especially on the back of the digitalization that it's sort of bound to happen in the United Kingdom, where we want to take a leading position in doing that. In order to achieve a stronger business in the U.K. with improved efficiency, improved profitability, and a stronger foundation for growth, that will take some efforts during 2022 as well.
There are sort of likely to be some costs associated with driving the transformation or achieving the transformation in the U.K. also during 2022.
Thank you. One last question. The Innocom in the Netherlands, how is that integration going? Is it easier to find synergies in that region?
I think so far Innocom has been a very good addition to Careium. We have sort of continued to grow the business in the Netherlands during the fourth quarter, strengthening our market position. I think the integration of Innocom or what we're doing with Innocom is making sure that sort of we take the good things from Innocom, see what we can transfer to other parts of Careium and transferring the good things of Careium, the products and the services we have in Careium to Innocom. To some extent, it's a lighter integration than what we need to do in the U.K., where we have a number of acquired entities that we want to integrate, making sure that we drive sort of becoming one entity and capturing the synergies from several entities in the United Kingdom.
Thank you very much. Thank you.
Thank you, Rebecca.
Thank you. Our next question comes from the line of Niklas Sävås from Redeye. Please go ahead, your line is open.
Hello, Carl-Johan.
Morning.
I wonder if you could bring some more color to the restructuring in the U.K., which came somewhat as a surprise. Was there a certain catalyst that led you to do it now? I mean, you mentioned that you lost quite a few connections, and maybe you can bring us some color on that as well.
Yeah. Thank you, Niklas. I think we have not had the performance that we want in the U.K., from several different aspects. I think we have not seen sort of the growth that we want in the United Kingdom. We can't say we haven't seen sort of market growth taking off yet. The digitalization is still sort of very early on, so we haven't really seen market taking off from that perspective. But still, we have not performed as we want and as we should when it comes to growing our business in the U.K. We've seen sort of struggles in making sure that we become one strong business and one strong entity in the U.K., which have, I would say, been amplified by the pandemic.
It hasn't been easier in sort of a situation where almost 50% of the time in the last two years, the region has been in lockdown, people working from home, which of course has made it more difficult to sort of drive our consolidation agenda in the United Kingdom. Having that said, even though of course, yes, there's been a number of factors making it more difficult, we have not been as successful as we wanted to be and as we should be. That's why we now, because we still are confident there are very good opportunities for us in the United Kingdom going forward, why we now sort of have accelerated and putting extra efforts in making sure we create a very strong and profitable United Kingdom region for us.
Fair enough. On the cost inflation you see, you mentioned the cost inflation in the components, but I guess the largest cost item for you is staff cost. I just wanna ask, how what kind do you see any pressure there on possible inflation, and how can you protect yourself against that in terms of your contract, your long-term contracts you have? So do you have any inflation adjustments incorporated in those contracts? Yeah, maybe bring some more color on that as well.
Yeah. I think as we said before, of course, it differs slightly from region to region. As we mentioned before, especially in Norway, we've seen quite high increases in staff cost of personnel, especially nurses, since everyone we have working in service delivery in Norway are sort of qualified nurses. In Norway, just as in many other markets, there's been a big shortage of nurses, and as a consequence, quite high inflation in the salary costs for nurses. We have suffered to some extent in Norway from that perspective, a little bit less in other markets. I think just as if we look forward, the trend is it will probably follow sort of the general inflation that we see in other sectors as well.
From a contract perspective, we typically have possibility to increase prices based on, I should say, some general inflation rates or sort of KPI adjustments on a yearly basis. We are to some extent protected from inflation increases, per se, in salary costs. That's where, as I mentioned earlier from Rebecca's question, where it's not always easy to maybe transfer the full additional cost when it comes to components, grades, other elements that might not sort of directly show in increased inflation in the local country.
Okay, great. On the Nordics, which surprised on the upside with quite high growth. You mentioned the Eliza in Norway, for example. Was that connected to a specific contract or has it been like that you have sold it in retail or yeah, maybe you can explain that.
Yeah. It's been connected to sort of certain municipalities and contracts that we sort of won during the year. I say in Norway and in certain markets, depending a little bit on who the customer are, there are customer acceptance tests sometimes that needs to be done with a specific maybe alarm receiving center software that they are using. That's something that we carried out during 2021, which was finalized sort of late third quarter, early fourth quarter, why we could start the deliveries of Eliza to some of the won contracts in Norway.
That's great. Last question I have is with regards to the service delivery in Sweden. I think we have all seen the reports in the media with some struggles there. Maybe can you explain what has happened and what measures you are taking there?
I think what the recent challenge from a service delivery perspective was here in the first quarter and a few weeks ago, which was a result of network related challenges from one of the larger operators in the Nordics, where a few thousand of our units were impacted by this network incident, which in certain cases led to longer response times. Typically there was sort of the alarms connected to the ARC as they should and within time. In certain municipalities, in certain instances, the response time was a bit longer.
From our perspective and what we do in order to mitigate these events as much as we can, of course, firstly, we have wherever possible, sort of fully redundant solutions to make sure that our service delivery would be up and running, all the time. You could say essentially backups in all aspects of the chain. Secondly, in order to successfully we have all digital alarms, we can quickly identify which units are not online and not working as they should, and then proactively together with both the customers and the end users, notify them if there is a problem and making sure that we take any, if necessary, mitigating actions to make sure that the end users are protected.
Great. Thank you so much, Carl-Johan .
Thank you.
Thanks.
Likewise.
Thank you. Once again, if there are any questions, it's zero one on your telephone keypad to register. As there are no more telephone questions registered, I hand back to our speaker.
Okay. Thank you very much for listening in to the webcast. As I said in the concluding remarks, there are many positive aspects from the quarter. The highest sales in a single quarter for Careium. Despite some of the challenges that we discussed here in the Q&A, we've managed to increase our gross profits. We have implemented our first larger solution in assisted living, and we are sort of on the verge of implementing our first larger customer for our software as a service platform. But of course, there are challenges in the quarter that we need to address and that we are addressing, especially in the United Kingdom, where we now have a very strong focus on accelerating the transformation in the U.K. to improve our profitability and our foundation for future growth. Thank you very much for listening in.
Have a great day, and I guess I'll speak to you soon again. Thank you very much.