Hello, and welcome to the Humana Audiocast for Teleconference Q1 2022. Today, I'm pleased to present CEO Johanna Rastad and CFO Noora. For the first part of this call, all participants will be in a listen-only mode, and afterwards, there will be a question and answer session. Johanna, please begin your meeting.
Good morning, and welcome to this presentation of Humana's first quarter 2022 results. My name is Johanna Rastad. I'm CEO of Humana, and I'm here with Noora, our CFO. Next page, please. In the quarter, our employees continue doing a fantastic job taking care of clients, although the new versions of the COVID virus hit us broadly. This caused record high sick leave and total absence rates across many business areas. Thankfully, sick leave recovered towards the end of the quarter as restrictions also lifted, meaning our ability to take on clients improved and the overall cost base was reduced. Obviously, this was a highly welcomed situation. We continue to achieve good growth of 8.1%, although mainly driven by acquisitions. In the quarter, we welcomed the new company, Kalliola, to our Finnish operations.
Organically, we grow and open several new units in the quarter. Operating profits decreased significantly versus last quarter due to Omicron and high energy costs, but also a negative effect from new units and previously closed. Next page, please. Nora will go deeper into the financials in the following section, but a few comments from my side. First, despite the challenging environment, we grow revenues compared to last year. Organic growth reached 1.8%. Positive contribution from new units in Elderly Care and Norway, which increased clients in Personal Assistance and the Home Care segment. I&F contributed negatively. We have a weak operating profit in the quarter, mainly explained by the pandemic and other external factors burdening results with approximately SEK 20 million.
Effect of closed units in I&F, not compensated by new units as well as the five elderly care homes that we opened last year, summing up to a negative effect of approximately SEK 12 million. To that, we see an indirect effect of the pandemic, partly explaining an overall lower utilization. Gladly, March balanced the two initial very tough months. That said, we still work to achieve performance improvements in Elderly Care and I&F. Next page, please. With the war for talent being highly present, it's very pleasing to see a recent employee survey showing continued high employee satisfaction and improvement in our leadership index, as well as several other important employee-related KPIs. Particularly since employees in our industry have been under high pressure during the pandemic. We continue striving to offer the best possible employee experience to retain and attract employees.
For the first quarter, we have figures for the new Humana Quality Index, not only an improved index, but also a better tool for internal quality follow-up. The new index reached 73, and customer satisfaction remained high. We use this data to improve in all our business areas. Next page, please. Now moving into our business areas. Personal Assistance managed the quarter well. We see an overall decrease in assistance hours that is partly offset by higher reimbursement. The business area is not immune to pandemic challenges, with strong efforts to secure staffing and recruitment taking place in the quarter. Digital sign-in to Försäkringskassan was launched in the quarter, a welcomed improvement for customers. We see continued industry tension from the authorities, even Försäkringskassan focusing on reclaim issues and company permits. Next page, please. Over to Individual and Family.
I&F is highly affected by external factors, both pandemic and high energy costs. 4 new units open in the quarter, aimed at gradually reducing the gap from previously closed units. Among them, a unit adding to our healthcare operations, expanding our offering to more complex clients. Occupancy levels and personnel costs have been challenging in the quarter, partly due to an indirect pandemic effect following an inability to take on clients. The complex clients we have require dedicated staffing and competence. The previously announced dedicated quality assurance work in Division Young is now completed and has entered into continuous development. We see improvements at several levels following that, including treatment content in our units, significantly higher employee satisfaction levels, and also improved occupancy in the division.
The business area, Individual and Family, is focusing on recovery, securing staffing and competence to match client needs, and of course, targeted on closing in on the performance gap. Next page, please. Over to Elderly Care. That is also highly impacted by extreme absence rates affecting staffing and occupancy as well as cost. The five new elderly care units opened last year continued to bear cost. Despite the pandemic, we continue our previously introduced change initiative, and we see initial positive results in March. Utilization is developing in a positive direction towards the end of the quarter, and we continue to monitor development closely and also push to secure further needed improvements. Next page, please.
Finland is clearly, as the other business areas, heavily affected by the pandemic, with also here record high sick leave affecting revenue and cost, in a negative way. March, also here shows signs of recovery in, mainly child welfare services and housing services, while the pandemic effect in open care services continues throughout the period, something we also see for the Swedish operations. We opened two child welfare units in the quarter, as well as completed the acquisition of Kalliola in January that strengthens our position in the Nyland region. The acquisition contributes to growth, but not EBIT contribution in the quarter. Continue focusing on recovery in Finland and organic growth initiatives. Next page, please. Norway. Operations in Norway continue to develop well with double-digit organic growth and improving operating profit. We see growth in assistance and improved efficiency in children and youth.
To secure continuous growth, staffing is essential, and the team is dedicated on ensuring employee attractiveness going forward. This team has also historically proven to be very good at adapting to a changing environment, so also with the higher educational requirements introduced in January with a good development within Division Young. Overall, continued good performance in Norway. Now over to Noora for financials.
Thank you, Johanna. I will now give you a summary of the detailed performance of Humana in the first quarter of 2022. Turning to slide 10. As Johanna described, the challenging environment has marked the financial performance in the quarter. Despite growth, group profit is below expectations. The direct effect of the pandemic is approximately SEK 15 million, and the total effect of external factors amounts to approximately SEK 20 million. Profit is also burdened by effects of closed and ramp-up units, summing up to approximately SEK 12 million, as well as generally lower utilization. Group financial stability has created space for further share buybacks. Humana currently holds 10% of outstanding shares. As such, the board has proposed canceling the shares to the annual general meeting. In addition, the board has proposed to the AGM that no dividend is to be paid for the financial year 2021. Next slide, please.
On slide 11 in the presentation, you can see the operating revenue for the group. In the first quarter of 2022, our operating revenue increased by 8.1% to SEK 2.1 billion. Norway and Elderly Care are the main drivers, as well as contribution from acquisitions. Revenue is negatively impacted by the spread of Omicron from late 2021 continuing in the first quarter, and this time affecting most of our operations, occupancy in Elderly Care and Outpatient Care in particular. Organic growth in the quarter was 1.8%. Strong organic growth in Norway and Elderly Care did not fully compensate for the lower growth due to fewer assistance hours in Personal Assistance, as well as low utilization in Finland and Individual & Family. Next slide, please. Now moving to slide 12 for more information on our results in the first quarter.
Operating profit for the quarter came in at SEK 77 million, a decrease of 31.9%. The operating margin decreased to 3.6% in the first quarter. Naturally, the spread of Omicron affected across all segments. As already mentioned, the direct effect amounting to approximately SEK 15 million for the group in the quarter. The total effect of external factors sums to approximately SEK 20 million. The decrease is also explained by a negative impact from closed units in Individual & Family and new units within Individual & Family and Elderly Care. The effect, approximately SEK 12 million in the quarter. Also, utilization has been lower in general. Towards the end of the quarter, the situation has improved gradually, although to a varying degree in different regions and operations.
We are closely following the development of the pandemic and the potential financial impact on Humana as a whole, and our current assessment is that the financial impact of the pandemic is decreasing going forward. Next slide, please. On slide 13 and the segment performance starting with Personal Assistance. Revenues for the first quarter are up 1.2% to SEK 761 million, with an organic growth of 0.1%. Higher reimbursement, partly offset by fewer assistance hours and acquired operations drive the improvement. Operating profit for the quarter is flat at SEK 50 million, as well as the margin at 6%. The maintained margin is mainly due to efficient cost management and positive contributions from acquisitions. A stable performance from Personal Assistance. Next slide, please. Now moving to slide 14, and for Individual & family. Revenue in the quarter reached SEK 577 million.
Organic growth in the quarter was negative at 7.1%. Acquisitions contribute to the increase of revenue. The negative effect of closed units and the pandemic is only partly compensated for by new units. Operating profit came in at SEK 23 million, and the margin was 4%. The low performance in the quarter is explained by effects related to the pandemic, closed units and ramp-up costs for new units and higher energy costs. Also, utilization and efficiency have been generally lower, partially offset by acquisitions. Individual & Family is clearly a disappointment financially. Next slide, please. Elderly Care on slide 15. Revenues grew organically in the quarter with 30.1% and reached SEK 196 million. Naturally, the five new own managed units from last year contribute. COVID-19 is still impacting occupancy negatively.
Operating profit came in at SEK 4 million, and the operating margin was -1.8%. The quarter is affected by the pandemic and startup costs for the new elderly care homes under own management, partly offset by improvements in the contracted units. While Elderly Care is still clearly affected by the pandemic, improvement initiative is showing some results. Next slide, please. Finland on slide 16. Revenues for the first quarter in Finland came in at SEK 361 million. Organic growth was positive at 1.7%. Organic growth is primarily driven by new opened units in the child and youth segment. The recent acquisition naturally contributes to the revenue increase. Operating profit decreased SEK 3 million with a margin of 0.7%. Reduced occupancy and a sharp increase in sick leave due to the pandemic are the main drivers.
Integration of the former nonprofit operations of Kalliola is ongoing. The performance in Finland has been severely affected by the pandemic in the first quarter. Next slide, please. Norway on slide 17. Revenues increased with 17.7% to SEK 247 million, and the organic growth was 10.8%. The growth development this quarter is due to more customers in personal assistance and the care home segment. Operating profit increased to SEK 18 million, and the margin was 7.3%. High operational efficiency and more customers drive the performance. We are again very pleased with the financial performance in Norway. Next slide, please. Moving on to slide 18 on central costs. Underlying central costs are slightly up from last year. The effect of IFRS 16 is up some due to new lease contracts. Next slide, please.
On slide 19, you can see our financial position. Interest-bearing debt increased by SEK 720 million to SEK 4.4 billion, and leverage increased slightly to 4.9 times. Interest-bearing debt is up, mainly driven by higher IFRS 16 debt related to the new elderly care units. Next slide, please. Operating cash flow for the quarter on slide 20 amounted to SEK 115 million. The decrease is due to lower profits and increased working capital related to delayed payments for assistance operations in Sweden. Next slide, please. From a financial perspective, the first quarter leaves room for improvement. The quarter was heavily affected by the pandemic, and much work remains to close the performance gap to reach our financial targets with continued stability and predictability. Now back to you, Johanna, for some final comments.
Thank you, Nora. To sum up, we've managed a quarter with maintained growth despite the highly challenging environment with the pandemic and global instability. The weak operating profit is explained by both external factors as well as internal factors, where we have actions in place to secure performance in both Individual and Family and Elderly Care. We concluded an acquisition in Finland and opened two units in the country as well as four in Individual and Family. Our employees remain satisfied, and our leadership index is improving from already good levels. At the same time, we launch our new Humana Quality Index, which is an important step for us being able to measure and follow quality development in the group. We enter the latter part of spring with absence rates recovering, which is very welcomed in our operations.
Regarding our priorities going forward, it continues to be creating sustainable value for customers, clients, owners, and also the society as a whole. After a period we've had to dedicate time and effort to handle external factors, we now intensify required internal activities, securing a few elements along the way. The positive and timely increase in occupancy in our new and old units, particularly in I&F and Elderly Care. We will also secure the change initiative in Elderly Care, the full recovery from the pandemic in Finland, as well as making sure we have a good infrastructure for both Norway and Personal Assistance to continue their delivery path. Finally, to ensure our central functions have the right focus, enabling our employees to deliver care at their very best. With that, we open up for questions.
Thank you. If you do wish to ask a question, please press zero one on your telephone keypad. If you wish to withdraw your question, you may do so by pressing zero two to cancel. Our first question comes from the line of Jakob Lembke from ABG. Please go ahead.
Good morning, Johanna and Noora. I have a few questions, and I'll start with individual and family, as I was a bit surprised of the negative, or how much negative the organic growth was in the quarter. I'm just wondering is, with the sort of adaptation of the model you're speaking about and the newly opened units, when we can expect these to offset the closures you have had and take you back to growth in this segment?
Well, good morning. Well, it's a tricky question to answer when we will get back to positive organic growth. We have the closures in the last in 2021 that we carry with us into this year. We do, however, open up both new units in the fourth quarter as well as this quarter with an attempt then to gradually balance that effect. I would say looking at this quarter as a whole, the initial two months were tougher than the final months. We're moving in a positive direction there.
Okay. I'm just wondering on the margin in Individual and Family, roughly how much of the temporary costs you highlight in this quarter relates to Individual and Family?
Well, in terms of the profit deviation, it's obviously substantial in Individual and Family. It's not isolated to the pandemic. I would say pandemic and higher energy costs is somewhere roughly around high single digits. You have the closed units and the contribution from startups sort of along similar lines. You have a remaining deviation that is related to the lower utilization as a whole. I would say that's partly relating to the pandemic, but it's not the full explanation. We are not performing as we should because we have a positive effect also from acquisition.
I think with that you have a fairly good guidance on the profit levels in Individual & Family.
Okay. Finally, a question on Finland. As you mentioned, it's quite a tough environment there in the quarter. If I recall correctly, they are a bit behind Sweden in their sort of phase in the pandemic. I'm wondering a bit on how Finland developed towards the end of the quarter and maybe also now in the beginning of Q2.
Yes. Well, as you say, the Finnish society as a whole is sort of slightly behind Sweden in recovery from the pandemic. We can see the same tendencies in our own operations not improving in the same manner as our Swedish and Norwegian operations. Although improvement can be seen in the early second quarter or late first quarter.
Okay. That was all the question I had. Thank you very much.
Thank you.
The next question comes from the line of Kristofer Liljeberg from Carnegie. Please go ahead.
Yeah. Thank you. Good morning. Just to make sure I understand it correctly, the SEK 15 million Omicron effect, is that a direct effect from higher costs?
Good morning, Kristofer Liljeberg. The SEK 15 million is a combination of higher costs, but also partly the effect of lower utilization due to the pandemic.
Okay. Is it possible to say anything about occupancy rates here in April? If that has improved further versus what you saw late in March, for example?
Our occupancy levels are gradually improving across all operations. The change between late March and today is not significant yet, although we see the trend towards the right direction in all operations. The pace of the improvement is not what we would like to see.
Okay. What do you think is the reason for this?
The reasons are different in the different operations and in the different countries as well. In Finland, the pandemic is still affecting to a much larger extent. In Elderly Care, also there is a difference between our different regions, I would say. In Individual and Family, we have sort of several factors affecting the utilization, not only the pandemic.
What factors are there? Because it seems that the pretty solid performance you had in Individual and Family for two years has completely stopped, and now you are underperforming the market. Do you have any sort of explanation for this happening?
I mean, there are two parts of it. One that is driven by the external factors. I would say the profit deviation is partly then related to the pandemic and the higher energy costs somewhere around the high single digit area. We are still burdened by the closed units. We have the new units not contributing to the bottom line to weigh up for those closures. You know, there is also an indirect effect we were speaking of. We have complex clients with.
with us not being able to have employees in place and the competence in place, it's been tricky for us to make placements and to increase the occupancy levels in the units that we have and that we wanted in particular in the first two months of the quarter. I think it's a balance of both external factors and internal.
Okay. Final question from me. The reason for the fewer assistance hours is that also Omicron related or?
Yes, partly. It's been tricky for us to find staffing. I mean, we have outperformed the market in personal assistance over several quarters, several years even. But it has been tricky for us to find the proper staffing, particularly in the rural area.
Okay, thank you.
Just as a final reminder, if you do wish to ask a question, please press zero one on your telephone keypad now. We have one more question from the line of Victor Forssell from Nordea. Please go ahead.
Yes, thanks a lot, and good morning, everyone. I'll start off with a question regarding Individual and Family. Just looking at the new units that you're opening and the needs for those units really, how do you see that occupancy over time? Would you say that it will still be as volatile as perhaps in children and youth, or how do you see sort of the long-term character of those types of needs?
No, I think from a demand perspective, there is demand for our services, and we have a good foundation to stand on in terms of both newly built units and capacity in existing units. We are able to fill up our units in a good way going forward. There is a challenging part that relates to employees and both the shortage of staff and the shortage of competence. I think that's also shared with the broader market. There is no reason to believe that we won't be able to increase our occupancy in Individual and Family in the long run.
Understood. Just in terms of the care needs, are these of a character that perhaps require longer term stay, i.e., meaning, you know, a more stable occupancy over time as you're filling up these placements or will sort of the character of these needs that you now open up or the specialization that you drive for have the same, you know, volatile character as other parts of Individual and Family?
You know, that's a very good question. I think, from a mix perspective, we have focused our organic initiatives on the LSS, sort of assisted living facilities. Those are of character that you move in and then you stay in general. That's a very stable division, so to say, and that's also where we dedicate our efforts. Division Young is more volatile of character. Parts of the adult division related to drug abuse can also to parts of the business be more volatile. I think also here over time, since the mix is changing, I think we should see stability.
It will take time because Division Young is still a large segment in our Individual and Family operation.
Yep. Thank you. That's clear. Just finally on Personal Assistance, just to understand that you perhaps saw some lost market share in this specific quarter due to the staffing issues and also what are your expectations for next calendar year with the proposed at least new regulations regarding Stärkt assistans here in Sweden. What do you foresee in terms of market development? Are you quite certain at this stage that market will be able to grow in general or what's your thoughts there?
Well, we've had a challenging environment also for personal assistance in the pandemic times. That's absolutely clear. We have the shortage of staff has affected our ability to take on new clients. We have managed the challenging market conditions over quite some time. Stärkt assistans is obviously warmly welcome because for us as a large provider of personal assistance, it's likely that we will be able to grasp part of that volume or to get part of that volume increase. Price-wise, I think we're looking at yeah, probably 1.5% even going forward, which we'll see if that will increase depending a bit on the inflation pressure.
Cost levels, also there, we have the collective agreements that again, I think, will pressure slightly, but our judgment is that we will manage it going forward.
Thanks a lot. That was all for me.
As there are no further questions, I'll hand it back to the speakers.
Thank you very much, and have a continuing good day.
This concludes our conference call. Thank you all for attending. You may now disconnect your lines.