Earnings Call: Q2 2021

Aug 20, 2021

Yes. Thank you, and good morning, and welcome to this presentation of the Mana's Q2 of 2021. As always, I will start by giving you some of the financial and operational highlights and then hand over to our CFO, Nora Jaiasekara, who will take us through the details and the financials of the quarter. Next slide, please. During the second quarter, we continue It is a good overall progress. Needless to say, we have had a lot of focus on our Under the Care segment, where we during the quarter are ramping up for new home managed units. Handling the pandemic is, of course, too a major focus for the group, And we are pleased to see that the situation is well under control, helped by vaccinations of both staff and customers. Whereas the transmission of the virus in our operations is basically 0, we still see a dampened although slightly improving demand in our Nordic Air Medicare. Financially, the quarter was solid with organic growth and improvements in operating profit. During the quarter, we also signed acquisition of Balan's Berhandling. The acquisition will now ever be closed in the Q4 of this year. Next slide please. In the Q2, our operating revenues increased with 4% and Humana reached the milestone of quarter revenues exceeding SEK 2,000,000,000. The organic growth in the quarter was 3.4%, in line with last year. Our operating profit in the quarter was NOK 107,000,000, an improvement of 7% to NOK 100,000,000 in the corresponding quarter of last year. The adjusted operating profit improved 28% compared to last year's SEK 83,000,000 as we exclude the capital gains from sale of properties. The operating margin was 5.2%, an improvement versus last year's 5.1%. And in the quarter, we had a strong operating cash flow of €1,000,000 and our net debt is at €3,900,000,000 The leverage was at 4.5 times, which is in line with our financial target and down slightly compared to last year. Next slide please. As mentioned in the beginning, we continue to handle the pandemic well with very low transmission of the virus, none in the Nordic Air Telecare. We are also pleased to see the positive impact from vaccinations, but we do keep our strict procedures and protocols in all operations. In the Q2, the Humana quality index remained on a high 94%. The number of serious deviations reported to authorities was in line with last year, one of the deviations referred to the tragic accident in Platea in June. Next slide please and over to our segments starting with Personal Assistance. In personal assistance, the performance again was solid. We continued to grow in the quarter with 3% of which 1% was organic. During the quarter, a public investigations on the right personal assistance was presented. If proposals here are realized, it would strengthen and the right personal systems for many individuals and their families and thus be very positive. Needless to say, Humana contributes active lead to this work. During the year and the quarter, we have also seen some increased regulatory focus. Although we welcome strict regulations, there is an industry concern around the unpredictability that we currently see though. At Humana, we continue to be positive to the future outlook for personal and systems. And moving on to the next slide, please, in individual and family. In our individual and family care segment too, the performance was fairly strong, although the quarter was turbulent. We continued to see a fairly good and stable demand in our roughly 180 units. Towards the end of the quarter, our focus was, of course, on the tragic incident at 1 of our units in Platea. The entire organization was affected by this incident, and we take it very seriously. Following our Leksara investigation, we decided to immediately close the concerned unit. We're also taking a number of other actions, including steps to further develop our systematic quality control. And as mentioned previously, we also signed acquisition of Balan Berhandling. With revenues of approximately SEK 60,000,000, Balans Berhandling is one of the leading providers of psychosocial care in Northern Sweden, The acquisition will be closed in Q4 this year. Next slide please. Moving on to Endelikare, where we have had a busy quarter with 4 new home managed units under ramp up, a total of 2 60 apartments in 4 locations. So far, the openings are progressing according to plan, both in terms of demand as well as recruitment. On top of ramp ups, our focus, of course, remains also on handling the pandemic where we continue to see a stable situation, thanks to the vaccinations. We have no transmission of virus in our elderly care. We're pleased to see certain improvements also in utilization over the quarter, although there is some seasonality here as well. Although demand is picking up, we do still expect a dampened demand in the coming quarters as well. Next slide please. Moving on to Finland where things are moving in the right direction with operational improvements resulting also in better performance. We are also pleased to see positive organic growth in the quarter. Whereas the pandemic still has a negative impact on operations in Finland, we are pleased to note an overall improvement in occupancy in all divisions in Finland over the quarter. Going forward, we will put additional focus on organic growth and new openings, especially in the Finnish I and F segments. Next slide please. And over to Norway. In Norway, we continue to see operations developing well. Pleasing to see in the quarter was the strong organic growth a warmer 16%, driven by both high demand in our Disabled Care segment as well as a strong customer inflow in Personal Systems. We also saw stable occupancy in our other EINF segment, Varna Van, which has been slightly more volatile in the past. Towards the end of the quarter, Humana also won a number of smaller tenders within the disabled care segment, HOT. Another solid quarter also in Norway. With this said, I will now hand over to you, Novella. Thank you, Rasmus. I will now give some details to our performance in the Q2 of 2021. Turning to Slide 10. From a financial perspective, it has been another stable quarter with leverage in line with targets and strong operating cash flow. After the quarter end, we have signed a new 3 year financing agreement. The agreement ensures Humana's long term financing needs and has improved terms compared to previously. Next slide, please. On Slide 11 in the presentation, you can see the operating revenue for the group. In the Q2 2021, our operating revenue increased with 4% from last year's SEK 1,980,000,000 to just over SEK 2,000,000,000 this year. Individual and family, personal assistance and Norway are contributing. Revenues negatively impacted by the COVID-nineteen pandemic, largely due to lower occupancy in elderly care in Sweden and Finland. Organic growth in the quarter was flat at 3.4%. Lower organic growth in Personal Systems and elderly Care is compensated by improvement in both individual and family as well as moverings. Next slide please. Now moving to Slide 12 for more information on our results in the Q2. Operating profit for the quarter came in at NOK 107,000,000 versus SEK 100,000,000 last year, an increase of 7%. Adjusted operating profit increased by 28%. The margin increased slightly from 5.1% last year to 5.2% in the 2nd quarter. All business areas contribute to the increase except for elderly care, a stable second quarter. The pandemic has had a very marginal financial effect on the profitability for the group in the quarter. Our continued assessment is also but the effect is manageable going forward. Next slide please. On Slide 13 and the segment performance starting with Personal Assistance. Revenues for the Q2 are up 3% to SEK756,000,000 compared to last year of SEK733,000,000 with an organic growth of 1.1% versus 5.4% last year. Higher reimbursement, partly offset by fewer assistance of Power and acquired operations drive the development. Operating profit for the quarter increased to SEK 35,000,000, up from SEK 29,000,000 last year. Also the margin increased to 4.7% versus 4% last year. The increase in margin is mainly due to increased efficiency, higher reimbursement and lower social security contributions per Jan. Acquired operations contributed as well, another well managed quarter from Personal Assistance. Next slide please. Now moving to Slide 14 with individual and family. Revenues for the quarter reached NOK578,000,000 compared to SEK 532,000,000 last year. Organic growth in the quarter was 4.2%, up from last year's minus 0.7%. The stable occupancy in several segments as well as new units and acquisitions drive the improvement. Operating profit came in at SEK 50,000,000 versus SEK 49,000,000 last year and the margin decreased 8.7% compared to 9.3% last year. The operating profit in the quarter is, however, affected by costs for terminated operations of SEK 8,900,000. Excluding these costs, the operating margin increased to 10.2%. Stable occupancy and contributions from acquisitions are behind the increase. Individual and Family delivered a good Q2. Next slide please. Elderly Care on Slide 15. Revenues were flat in the quarter. 4 new owned managed units were opened, but dampening the growth COVID-nineteen is still impacting occupancy negatively. Operating profit was minus SEK 4,000,000 versus SEK 1,000,000 last year and the operating margin was minus 2.4% versus 0.7% last year. The start up costs for the new elderly care homes under own management are affecting the quarter. The pandemic affected the result to lower occupancy and higher costs for sick leave and protective equipment, partially offset by government trends. Opening the new units has been main focus in elderly Care. Next slide please. Finland on Slide 16. Revenues for the Q2 in Finland came in at SEK 325,000,000 compared to SEK 338000000 last year, a decrease of 4%. Organic growth was 1% versus 0% last year. The improvement is due to improved utilization and new units. Operating profit increased to SEK 16,000,000 versus SEK 11,000,000 last year with a margin of 4.8% versus 3.2% last year. The increase is explained by improved utilization and better operational efficiency. The Q2 shows continued improvement in Finland. Next slide please. Norway on Slide 17. Revenues increased with 20 percent to 240,000,000 versus SEK201,000,000 last year and the organic growth was 15.7% versus 9.5% last year. The growth development in this quarter is due to new units and more customers in personal assistance and the disabled care segment. Operating profit increased to SEK 22,000,000 from SEK 16,000,000 last year, and the margin improved to 9.3% from 7.9% last year. High operational efficiency and more customers drive the improvement. The strong momentum in Norway continued. Next slide please. Moving on to Slide 18 and central costs. Underlying central costs are slightly lower than last year. Sale of real estate affected the comparative period positively. Next slide please. On Slide 19, you can see our financial position. Interest bearing debt increased with SEK 318,000,000 to SEK 3,900,000,000 compared to Q2 2020. And leverage decreased slightly to 4.5 times from 4.6 times. Interest bearing debt is up slightly compared to Q4 2020, partly due to higher IFRS 16 that's related to the new elderly care unit. Next slide please. Operating cash flow for the quarter on Slide 20 amounted to SEK 251,000,000 versus SEK 221,000,000 last year. The increase is due to higher profit and decreased working capital. Next slide please. From a financial perspective, yes, another stable and predictable quarter for Gimana. With that, back to you, Wasson. Thank you, Norwe. And we can move to the last slide in the presentation. We are pleased to see yet another stable quarter with good overall progress for the group. We continue to grow organically, and we have opened 4 new elderly care homes in home management during also now in the spring. Our focus on the pandemic remains, but the situation is well under control and partly or mainly thanks to vaccinations. We continue to see improvements both in terms of profitability as well as financial situation with our strong operating cash flow. We have also secured a new financing agreement that ensures flexibility in the future. Following my decision to leave Lumana after 10 fantastic years, the board has started the process to recruit my successor. But my as well as our priorities going forward remain the same. We want to continue our focus on value creation, continued to drive organic growth and continued to build the pipeline of the Christie acquisitions. We can now open up for questions. Thank you very much. Thank you. And our first question comes from Christopher Didier from Carnegie. Please go ahead. Your line is now open. Yes. Thank you. Jupin, first on the individual and family business. I'm Price about the small margin if we strip out the cost for closing a few units. So if you could explain how that's possible considering, I think last year was positive. You had a positive impact from a lot of various development support programs. 2nd quarter is if you could comment second question, if you could comment a little bit about the ramp up in the 4 new elderly care units. Maybe it's possible to quantify the start up cost and when you think that business will return to profitability. And just finally, Norway, After the strong growth we have seen here recently, is it possible to continue to drive inflow on new Personal Systems customers from current levels? Or is that effect Uenovel, so to say? Thank you. Good morning, Christoph. Maybe I can start and Nora, you can fill in. The Q2 of I and F was a very strong quarter. I think we've seen not only this year, but also towards the end of last year that we have been seeing an increased stability and also more stable and actually fairly high utilization in our units. I would say maybe that the underlying performance 9F in the second quarter was very strong, and that was driven by both high efficiency, but also Very high, I would say, utilization overall in our 108 units. And I would not maybe bet on that very high utilization being a new normal. We're obviously looking into the reasons why, but we've seen a higher demand over a couple of quarters now in individual and family. So the Q2 in the INS this year was strong for us as well. In terms of the elderly care, we see our 4 new managed elderly care units basically following the plan that we have. I think the average utilization in these 4 new units is around just north of 50%, which I would consider Really good, given the fact that we opened some of these just recently. 1 of the units has almost 100% utilization. 1 has been very much a ramp after the utilization just below 20%. We've seen also over the Q2 that Utilization or demand overall in elderly care has gone up a little bit. It's not the magnitude movement, but 1% or 2% up over the Q2. There's always a bit of seasonality in the summer where utilization in elderly care Actually, it often goes up a little bit, but obviously, we do interpret that as a signal of demand slowly coming back in Swedish elderly care. We also see this in in Finland. Norway, we do feel that we have a very strong momentum. Of course, we cannot anticipate Norway coming that 16% organic growth quarter after quarter. But we have a strong inflow of customers in Personal Systems, which will which should be reflected in In our quarter reports, at least for a number of reports going forward, we do also have a strong momentum in Hoth, which is another area in Norway. But again, there, 16% is of course something we're very pleased not but not something that we anticipate for the future. Maybe Okay, please. When it comes to the ramp up costs in Edvard Care, obviously, we have opened 4 new units in 1 quarter and have a cost in this quarter around or just below SEK 10,000,000 when it comes to Those units and when it comes to reaching positive results in Endemic Air, our ambition is still to reach or slightly beat last year. Of course, it is hard today say whether or not we are going to reach it Depends on the development of the ramp ups and of course, on the development of the pandemic. Okay. Thank you. Thank you. Our next question comes from Karl Johan Bonhoeffer from DNB Markets. Please go ahead. Your line is now open. Yes. Good morning, Rasmus and Nora. The tragic test you had in the Palatia unit and the closure of that, have you seen that having any Impact of, say, placings and the reluctance for you getting placings after that? I guess the short answer, Karon, is no. I mean, obviously, besides that we closed the 2 units. And when you look at I guess SEK 8,700,000 is the Costs for the closure of that unit, would you expect any additional, say, negative impacts coming from that kind of extras? I mean, of course, we have we immediately closed the units. So we do not count on any contributions from those 2 units. So there will be an which is not material on I and F. If you look at the contribution for the first half year for this unit, this was around SEK 7,000,000, 8,000,000. However, going forward, obviously, We do open new units all the time. So we hope to compensate that from 2022 and onwards. And when you look at the replacing of the other caretakers you have in this unit, you were able to do that successfully within your own operations? Some of the clients were replaced within other units of Germana, the majority were replaced with the social services. However, quite a few of the municipalities and social services have reached out to us during the summer and asked for help again. But a minority was replaced in within Humana units at that point in time in June. Good. And just one more from me. Looking at working capital So, Lars, that seems to have had a very good release of that in the first half of the year. So is there any extras in there? So we should expect it to normalize in the second half? Or is It's continuing to be this good? I would say we will continue. There are no Except our exceptional items there. So we should be seeing this continue. Excellent. And Rasmus, good all the best in your new role, so to say, when that starts. Thank you very much. Hopefully, we'll meet each other here at least for 1 more quarter. Our focus remains the same. But thank you very much. Stay safe. Take care. Thanks. Thank you. The next question comes from Victor Voshel from Nordea. Please go ahead. Your line is now open. Yes, thank you and good morning. Just a quick follow-up question on the elderly Care segment. Perhaps you alluded to it. So I'm sorry for that if that has already been answered to. But in terms of just the looking at it On a like for like basis, I mean, the or just to strip out the organic growth here in the quarter from your Previously owned units, if you could just elaborate a bit on that given That utilization for your newly opened seems progressing well. So just a bit of the underlying trend from Q2 last year would be interesting. Absolutely. So I mean, within the elderly care, We the ramp ups are going fairly well. As I said, we are roughly at 50% utilization on 2 cases. So there has been a net inflow of customers. We have, however, during this year also left a number of outsourcing contracts. We've also won a couple, but they are entering into mode later this year. So it evens out basically. If you strip out the own sorry, if you strip out the ramp ups, our utilization has gone up 1.5% roughly in the second quarter, which is A small improvement, but it's at least an improvement, which is a sign of demand coming back now after the pandemic. So also we are moving in the right direction the way we see it. From an organic growth perspective, I guess we should start to expect the organic growth coming in later this year now as this ramp up stood up in Eveline Care. Sure. Yes, absolutely. Thanks. And just a final one on the cost side as well. I appreciate your commentary earlier. When we look at it in sort of Dividing the costs right now into, let's call it, fixed costs and then Other sort of non fixed costs that are more tied to you improving the utilization, would you say that this is a trough in terms of those fixed costs rather than you taking on some more when utilization starts to improve? I mean, the if you're still on the elderly care segment, Victor, yes, of course, the majority of fixed Cost of those are already in there. The investments are made. The rent is being paid. Obviously, we are a bit more cautious when opening These units given the fact that we are in a pandemic and demand is down all over the country, which means that Over time, as we open new floors in these different units, we will obviously recruit more staff and then we can debate whether staff cost is fixed or variable. But The typically fixed costs are already in the P and L. And the sort of any sort of timing there because that's Perhaps what I wanted to understand more whether that's going to be a bit more in Q3 just due to timing When you took on these costs in Q2? It's a difficult question. I guess there shouldn't be any major differences between Q2 and Q3 looking at it from that perspective. It's obviously depending on how the ramp ups proceed and the better they go. Typically, these ramp ups, I mean, It can be costlier in the shorter term if we take in a lot of clients because then we need to recruit and open up, etcetera. But always in our calculations for elderly care, we always count on a year in our calculus before we reach kind of maturity and sort of profitability of these units. And we've done it much faster in the past. Now we have a pandemic, so we are a bit prudent. So our view is the year from opening and then we should be mature in these units. Sure, sure. All right. Thanks a lot. Thank you. Okay. There appears to be no further questions. I return the conference to the speakers for any closing remarks. No more closing remarks for us. Thank you all very much for the intention. I hope you have a fantastic Friday. Enjoy the sun, and there's a weekend coming soon. Thank you.