Thank you, good morning, and welcome to this presentation of Humana's fourth quarter of 2019. As always, I will start by giving you some financial and operational highlights, and then hand over to our CFO, Ulf Bonnevier, who will take us through the details of the quarter and the year. Moving on to the next slide, please. Financial highlights. In the fourth quarter, we continued to see a healthy organic growth, with operating revenues increasing 12% to just over SEK 1.9 billion. The organic growth in the quarter was 0.7%, down from last year, primarily driven by a lower organic growth rate in the areas of Elderly Care and Norway. Our operating profit in the quarter was SEK 71 million, a clear disappointment, and a decrease of 13% compared to last year. In the quarter, we incurred one-off costs affecting comparability of approximately SEK 10 million.
The effects of IFRS 16 increased EBIT with SEK 16 million in the quarter, and the resulting operating margin was 3.7%, a decrease compared to the corresponding quarter of last year. The quarter was strong in terms of cash flow, with an operating cash flow of SEK 220 million, and our leverage was at 5.4 times or 4.0 times excluding effects of IFRS 16. This is above last year and above our financial targets, but clearly moving in the right direction compared to Q2 and Q3. Next slide, please. As a result of our strategy work during the autumn, and also considering the new IFRS 16 standard, the board of directors have revised our financial targets from 2020 onwards. We will come back to these targets later in the presentation.
During the fourth quarter, we also finalized the technical integration of Coronaria Hoiva, and the acquired operations have now been fully separated from the previous owners and integrated into Humana. Moreover, the Humana brand is being fully implemented, and from March onwards, Humana will be the common brand used for all of our operations in Finland. Finally, the Humana quality index remains on a very high 93% in the fourth quarter. Looking at the full year, we come in at a very strong 94%, which is an improvement versus the 92% we saw in 2018. Low sick leave numbers, educational efforts, and increased customer satisfaction are the main drivers behind the improvement. Moving on to the next slide, please. In our individual and family care segment, the performance was weak in the fourth quarter, primarily driven by too low demand and occupancy in parts of the youth segment.
Humana is affected by the strained financial in many Swedish municipalities, which has resulted in lower demand in the quarter and year for services within the youth segments particularly. Important to note though, however, is that the main challenges are still centered around two regions within the youth division of INF. The performance in other parts of INF is either stable or good, which makes this a critical but also fairly isolated challenge. Importantly, our internal efforts are moving clearly in the right direction, with the new management systematically addressing our capacity, the services that we offer, as well as utilization and flexibility in our cost base. We can now move to page number five in personal assistance. In personal assistance, our steady performance continues, and during the quarter we see very high customer satisfaction and increased market share in a market that declined with 2.4% in 2019.
Our revenue remains stable, but margins were, as expected, somewhat lower in the quarter. On a full year basis, we are rather pleased with the performance. We enter 2020 on a very good level. In January, a public inquiry on the professionals personal assistance was presented. This report contains a number of positive proposals. We also do note that the government clearly expresses its intention to strengthen the right to personal assistance. Next slide, please. In our Elderly Care segment, we continue to see healthy organic growth, although quite somewhat lower than previous quarters. The capacity utilization remains high in our units. Profitability in the quarter was impacted by the opening of Kungsängen, which is ramping up faster than expected, thus incurring higher costs in the short term. It does, however, also imply that we anticipate reaching break-even and profitability faster than planned for this unit.
As commented upon earlier, we are of course very pleased to see that we improve our already very high grades in the 2019 National Board of Health and Welfare's annual quality survey. Moving on to the next slide, please. In Finland, the performance in the quarter was of course disappointing. We continue to see a very strong structural and organic growth, but the profitability in the quarter was impacted by a weak performance in the newly acquired Coronaria Hoiva. One-off costs for integration, costs associated with opening of new units within the INF segment in Finland. We also had some calendar effects due to the placement of public holidays in the fourth quarter. During the quarter, we finalized the integration, which is vital in our efforts to improve profitability going forward. Our management can focus entirely on the turnaround supported by better access to relevant data.
This is hugely important. Needless to say, also our operations have been impacted by increased staffing requirements and regulatory pressure, not yet fully reflected in our compensation levels. We do also know that we have a number of internal work streams that will lead to improvements in profitability throughout 2020. As mentioned earlier, we have made several changes to the Finnish management to drive the development for the coming years, and Anu Kallio, the new head of our Finnish operation, now joins us in a couple of weeks. Next slide, please. Moving on to Norway, where the performance was stable. All the revenues decreased slightly organically during the quarter compared to last year. This is mainly attributable to planned ramp-down of some non-performing units.
Profitability-wise, the year was strong, but the quarter was impacted by one-off costs for leaving a number of rented premises early, which however, will lower rental costs for us going forward. Overall, the strong momentum in Norway continues. We enter 2020 in good shape with personal assistance and disabled care housing services being the main drivers for growth going forward. Next slide, please. As touched upon earlier, the board of directors have agreed on new financial targets for the group from 2020 onwards, reflecting both the new financial reporting standard, IFRS 16, but also the outcome of an extensive strategy work done during the autumn. The new targets distinguish more clearly between value creation through organic versus acquired growth. The new medium-term financial targets have been defined as an operating margin of 7% over the medium term, annual organic revenue growth of 5% over the medium term.
Both on acquisitions may generate additional annual growth of 2% to 3%. Interest-bearing net debt not exceeding 4.5 times EBITDA, and the dividend policy remains unchanged. I think with this said, I will now hand over to you, Ulf.
Thank you, Rasmus. I will now give a brief summary of some more details about the performance overall and per business area, as well as cash flow and financial position. First of all, we turn to page 10 of the presentation where we see the operating revenue for the group. In the fourth quarter 2019, our operating revenue grew to SEK 1,912 million, up 12% from SEK 1,700 million previous year. Acquired growth contributed SEK 165 million to revenue, of which SEK 143 million relates to Coronaria Hoiva in Finland. The organic growth was 0.7% compared to 4.8% previous year. The lower organic growth in the quarter is due to the weaker organic growth rate in Elderly Care in Norway versus earlier. Next page, please. Operating revenue full year on page 11. For the full year, operating revenue grew to SEK 7,467 million, up 11% from SEK 6,725 million previous year.
Acquired growth contributed SEK 613 million to revenue and SEK 443 million of that relates to Coronaria Hoiva in Finland. The organic growth was 2% compared to 3.4% for the full year 2018. On page 12, you can see Humana's development with regards to organic growth. After reasonable development earlier quarters in 2019, the level in quarter four was lower than expected. This is mainly due to lower growth rate in Norway and Elderly Care. In Norway, we've closed a couple of unprofitable units, therefore the organic growth is lower compared to the comparable quarter. In Elderly Care, we still have a good growth level of around 10%, but last year was really strong with both new unit openings and contract wins combined. Moving to page 13 for more information on our results in the fourth quarter.
Our operating profit decreased 13% in the quarter to SEK 71 million, down from SEK 82 million in quarter four last year. Excluding the effects of IFRS 16 integration and acquisition related items, the operating profit decreased 36% to SEK 61 million for the quarter, down from SEK 95 million prior year. The effect on operating profit from our IFRS 16 is +SEK 16 million, this you will find as a reduction of the central costs. The components of the SEK 16 million are decreased rental costs of SEK 83 million and an increase in depreciation of SEK 67 million. Integration costs for Coronaria Hoiva was SEK 6 million. The margin was 3.7% versus 4.8% last year in the quarter, excluding IFRS 16, the margin ended up at 2.9% compared to 4.8% previous year.
The decrease in the profit for the quarter is mainly attributable to a disappointing quarter in Finland, mainly the Coronaria Hoiva performance, low occupancy in Children & Adolescents in INF, and start-up losses in Elderly Care. Apart from operational issues, we also had one-off items totaling approximately SEK 10 million, both integrations costs as well as costs for terminating leases in Norway. Next page, please. We look at the profitability for the full year on page 14 and exclude IFRS 16 of plus SEK 46 million and acquisition related costs of minus SEK 42 million, so they largely balance out. The operating profit is down 11% at SEK 365 million versus prior year's SEK 409 million. We look at the operational performance, we see a weak year from the INF business area, mainly due to weak demand in the youth segments.
Performance below expectations for the first nine months of consolidating Coronaria Hoiva, but also the market in Finland has impacted negatively. Stronger or more stable performance in Personal Assistance, Elderly Care in Norway. This is not nearly enough to compensate for the development in INF in Finland. Next slide, please. Moving to page 15 and the segment performance starting with Individual and Family. Revenues for the quarter reached SEK 518 million, a decrease of 3.8% versus prior year's SEK 540 million, with negative organic growth of -3.8% versus -2.6% prior year. The decrease is due to low occupancy, especially for housing solutions for Children & Adolescents. Operating profit came in at SEK 27 million versus SEK 37 million prior year, and the margin decreased to 5.1% compared to 6.8% prior year. The decrease is due to low occupancy.
The financial performance is less than satisfactory, but internal efforts are moving in the right direction. The new management is addressing the main issues with capacity utilization and flexibility in the cost base. Next slide, please. We've now moved to page 16 and another stable quarter from Personal Assistance. The revenues for the fourth quarter were up 3% to SEK 707 million compared to prior year of SEK 689 million, with organic growth of 0.3% versus 2.2% last year. The number of assistance hours naturally vary per quarter, and the market also declined last year with 2.4%. Most of the revenue increase comes from acquisitions. Operating profit for the quarter decreased as expected, somewhat to SEK 37 million, down from SEK 41 million last year, and this comes mainly from the increase in staff cost versus the state reimbursement level. The margin ended in the quarter at 5.2% versus 5.9% prior year.
Next page, please. Elderly Care on page 17. Revenues grew in the quarter with 11% organically and reached SEK 143 million versus SEK 129 million prior year. This comes from the recent openings and reasonable occupancy overall. Operating profit was SEK 0 million versus SEK 4 million last year, and the operating margin was 0.3% versus 2.9% prior year. Start-up costs of SEK 4 million has impacted the quarter, and it relates to our opening of Kungsängen, which is progressing well, with occupancy developing better than expected. Overall, a reasonable development in the Elderly Care business area. Next slide, please. Moving to Finland. Revenues for the fourth quarter in Finland came in at SEK 348 million compared to SEK 159 million prior year, an increase of 119%. Organically at constant currencies, the growth was 10.7% versus 6.9% prior year.
Again, a strong growth driven mostly, of course, by our new acquisition, but also by new unit openings in the INF area, together with more customers. The operating profit decreased to SEK 9 million versus SEK 17 million prior year, with a margin of 2.7% versus 10.9%. Of course, this is a dissatisfactory performance. When breaking it down into its three components, we have the following. One, the newly acquired Elderly Care operations need to improve occupancy and efficiency. Both occupancy and efficiency could have been somewhat better in the quarter, and we are addressing these issues together with the new local management. Two, we are now finished with the technical integration of the support functions, and this consumed SEK 6 million in the quarter in terms of cost. We are now fully separated from the previous owner's technical structure. We are, however, still working hard on refining our processes further.
Three, the INF part of Finland is doing well in general. This is the part where we have good organic growth, but suffered a smallish negative impact on the margin due to the opening of new units. Next slide, please. We're moving to Norway on page 19. Revenues increased in reporting currency to SEK 196 million versus SEK 177 million prior year. The organic growth was -0.7% versus 4.8% prior year. This development is explained by a lower number of customers in the comparable period as a result of the closure of a couple of unprofitable units. Operating profit declined to SEK 13 million versus SEK 20 million prior year. The margin was 6.8% versus 11.1% prior year. The decline in operating profit was impacted by one-off costs of SEK 3 million for leaving rented property early.
Adjusted for that, the development was in line with our expectations since the comparable period last year was exceptionally strong. Overall, a stable development in Norway in the quarter, and also good for the year as a whole. Next slide, please. Moving on to page 20 and 21 and our financial position and cash flow. Cash flow from operating activities for the quarter was SEK 206 million versus SEK 191 million last year, excluding the impact of IFRS 16. The quarter was positive when it comes to working capital driven by good collections. Our CapEx investments continued to be fairly high, but compensated by a further batch of real estate sale and lease back of approximately the same level. In the graph, we also see our leverage, although on the high side, but moving clearly in the right direction versus second and third quarter.
Excluding IFRS 16, our leverage is down to four times, and including IFRS 16, we're at 5.4 times. Although our Q4 results are not great, we've managed to improve our financial position to a better level. With that comment, I hand the word back over to you, Rasmus.
Thank you, Ulf. To summarize the quarter and the year, it has certainly been full activity both during the quarter as well as over the full year. We have continued to build a sustainable Nordic care group with strong quality positions in all of our segments. We have experienced strong growth, but we've also struggled with profitability. The weak finish to this year is far from satisfactory, but we are convinced that our hard work in the quarter will pay off. Come 2020, there is ample room for improvements, and we do enter the year with a sharp focus on profitability. We have good confidence and also very good momentum in personal assistance in Norway. The performance in our Elderly Care segment was reasonable, but we do expect improvements from increased capacity utilization in our newly opened units over 2020.
In INF, we need to see further stabilization, but we do also see that our internal efforts are moving in the right direction, where we're addressing challenges systematically with an ambition to improve permanently. In Finland, we have experienced a challenging year with acquisition of Coronaria Hoiva, the changing and challenging market environment, many new openings, and also focus on integration. As we now enter 2020, we do that in better shape. With integration finalized, the new management in place, and activities already ongoing, we do expect gradual improvements throughout 2020. In parallel to improving our performance, we will also continue the important work on increasing stability and predictability. Much work remains, but we're well-equipped to face 2020. I think with that said, we can now open up for questions. Thank you.
Thank you. Ladies and gentlemen, if you have a question for the speakers, please press 01 on your telephone keypad. Please note you are limited to one question per round. The first question comes from the line of Christopher Liljeblad from Carnegie. Please go ahead.
Thank you. Hope you can hear me. First one, question regarding the restructuring costs. Are they on the overhead cost line, or do we find them in the different business lines?
You will find them in the different business lines.
It's SEK 6 million in Finland, and what more than that?
SEK 3 million in Norway, SEK 3.5 for leaving rented property early.
Okay. The SEK 3.5, is that in the overhead line?
No. It's in Norway.
Okay. Sorry. Is it possible regarding the Individual and Family business, you mentioned there were two underperforming units in Sweden. Is it possible to quantify the impact there if it's really so that the problems are as related as you said? Looking into 2020 here and the work you're doing to trying to stabilize operations, that should result in less quarterly variations. How soon you think that will start to help you? Thank you.
I can comment on that, Christopher. Just to clarify, it's not two units, it's two regions, of course. It's the southern western region. I think we have been discussing these two regions for well above a year now. I think trying to quantify it's obviously a simplification of reality. We have some units that are underperforming in other segments as well, but trying to isolate the 90% of our issues, they are kind of isolated to these two regions. Trying to quantify them, basically they alone would represent the deviation from last year. That's the way to quantify it, both on a top line as well as bottom line perspective. The work on stabilizing, that's work ongoing. It obviously contains many elements. We do need to look at our portfolio in these two regions. We're not alone here. There is a market component.
These municipalities, Malmö, et cetera, they're obviously with pretty strained financial situation as well. We must look at what kind of offering do we have. Do we perhaps need to pause or close some units? Do we need to transform some of these units, et cetera? Once we've done that journey, we will see an increased stabilization as well. I also like to highlight, which I did, the bulk of business in INF is fairly stable. Both in terms of utilization and also in terms of profit, in a sense. These regions have a majority of units that typically have shorter-term placements. They're slightly larger, and they're not as specialized as the rest of units that we have in the northern part of Sweden.
How confident are you on improving individual and family earnings in 2020?
I think it's a little bit early to say. That is, of course, our ambition to improve earnings in individual and family. It's in our own plans as well. The question is, equally important for us is also to counterweight the negative organic decline to start growing as well organically. Ambition is certainly to improve INF in 2020, no doubt about that. I would be hesitant to give exact number.
Yeah, understand that. Finally, Finland, the earnings in Q4 versus third quarter, is that just reflecting seasonality, or has that business seeing further deterioration underlying if we strip out the restructuring cost?
If you strip out the restructuring cost and wanting to enter 2020 in good shape as well, the underlying business performance is about the same. Coronaria Hoiva, which is the acquired business, is slightly loss-making in the fourth quarter. We do, however, expect that to improve gradually now in 2020. It also has some other effects, which I mentioned. One, of course, is that we put a lot of work into the integration. Now that has been finalized, so business as usual. In our operations, it's of course exceptionally important that our managers can focus on their ordinary business, and that will in itself drive improvements that we expect to see now already in the first quarter.
Okay. Thank you.
Thank you.
The next question comes from the line of Karl-Johan Bonnevier from DNB Markets. Please go ahead.
Yes, good morning. Just on the new financial targets, do you see them just as an adjustment to IFRS 16, or could you lead a little how you have thought about coming up with a straight organic growth target instead of the previous one where you bundle this on? Also on the net debt to EBITDA target, that now gives you more flexibility, or how should we see it?
I think, Karl-Johan, it all started. IFRS 16 is just a layer that we put on the targets. The targets themselves originate from the strategic planning that we did this autumn. We looked at a three-year plan, where we should be as a company in three years, what we think that we can accomplish given the projects that we have in the pipeline. Then we simply apply IFRS 16 to that. If you look at the operating margin, it's basically the same to what we have today, maybe a slight increase. If you look at the leverage, it's about the same, just applying IFRS 16. It's also, as you can see, a more emphasis on value curation through organic growth. That is, of course, because we have a number of exciting organic growth projects in our pipeline the coming three years.
I think with that also comes a more internal stricter focus on capital intensity, return on capital, return on investments, et cetera, in the new IFRS 16 world.
Excellent. Thank you for the granularity.
Thank you.
We have a follow-up question from the line of Christopher Liljeblad from Carnegie. Please go ahead.
Can you hear me?
Yep. Yes.
Okay, very nice. On Elderly Care, you had the startup cost in Kungsängen. How would that play out in the next few quarters? You said also that if anything is ramping up, that's faster than expected.
Well, it all depends on occupancy developments. Right now we're ahead of our plan. We have an internal ambition to get to where we want within 12 months, we have managed in our opening so far to beat that. We have the same internal focus here again to try and come to break even as quickly as possible. We'll still see some losses in quarter one, hopefully they will die down during quarter two.
Okay, thank you.
The next question comes from the line of Victor Forssell from ABG. Please go ahead.
Thank you very much for taking the question. It's regarding Coronaria Hoiva. I think in previous communications, you've stated that you expect this ramp-up to reach sort of the levels where when you communicated the acquisition, those levels of 8% on EBITDA margins, if I remember it correctly. Is that something you think you revised in today's report, or are you still expecting that for the full year to end the year at those levels?
I don't think we will achieve 8% EBITDA margin on the isolated Coronaria Hoiva business in 2020, Victor. I do see the company generating significant profit as compared to what it did the first nine months of 2019.
Okay. Just to clarify, what do you see has changed in I think that was the plan last quarter already.
What we do see is, I guess, what everyone else sees in the Finnish market right now, and you cannot compare the regulatory environment nor the staffing requirements compared to last year. AVI and Valvira, which is the regulatory bodies in Finland, are much stricter.
The speaker line has disconnected. Please bear with us as we try to redial.
Yes, sorry, Victor Forssell. Apologies for that. Where were we? Yes. There is certainly different regulatory as well as market environment in Finland that we simply need to adapt to. The other thing is that you of course know that there is a proposal on the table in Finnish parliament to look at increased staffing requirements going from a minimum to 0.5 to 0.7. There are a couple of things here that are uncertain still. A, where to find all of these 8,000-10,000 new nurses. B, how to actually finance this. Will it be covered by the municipalities? That partly depends on the contracts that are existing. There are a number of uncertainties.
I think we, as a company, must rather focus on the internal improvement levers that we do have, and there certainly are many for us to improve the profitability of Coronaria Hoiva, regardless of these external market factors. As an example, we, for instance, will exit this year, seven or eight contracts that are not performing at the moment. We need to work on our staffing efficiency. We need to draw out the value now from having integrated them into our system portfolio as well as our ways of working. We need to train our managers, and we also need to work more intensively than what they have in the past with reutilizations of sales efforts. I think all of those factors combined will drive significant improvement.
There are some external factors that have, of course, not only hit us, but all the other major providers in the market, and there is some uncertainty still.
Okay, great. Thank you very much.
Thank you.
Just as a reminder, if you do wish to ask a question, please press 01 on your telephone keypad now. We have one more question from the line of Carl Mellby from SEB. Please go ahead.
Yes. Good morning. Thank you for taking my question. First of all, in regards to Elderly Care, are you still planning on opening five new units in 2021? If so, is it possible to quantify the potential impact on start-up costs from that during 2021? Secondly, coming back to Christopher's question on non-recurring items. You mentioned SEK 3 million Norway, SEK 6 million Finland, but if I read the notes on page four, you also have a positive impact of SEK 7 million in the quarter. The net of that is rather SEK 3 rather than SEK 10. Is that correct? Thank you.
Let's take the question one by one. Let's do the five openings we have starting 2021 and following through into 2022. Obviously, these are major commitments in terms of building, in terms of timing, in terms of hiring staff, et cetera. We think that we're in the right location. Obviously, this will be depending on when they open, will be a major impact both in terms of positive, in terms of revenue drive, but also temporarily we'll see the start of losses coming through the P&L. Certainly. It is absolutely too early to model that until we have more information on when this will actually happen. We will come back with more information maybe during the year as this becomes more clearer than we see right now. You had another question on Was it on Finland?
No, it was regarding non-recurring items. You mentioned SEK 3 million.
Yeah. SEK 3 million Norway.
SEK 3 million Norway. SEK 6 million Finland, you have a positive one of SEK 7 million.
Yeah, we obviously have also some items relating to earn-outs that come through the P&L.
Okay. The net of those are rather three?
Well, that is a positive, yes.
Okay. Thank you.
As there are no further questions, I'll hand it back to the speakers.
I guess nothing more from our side. Thank you all for the attention as well as good questions. Thank you for today.