Ladies and gentlemen, welcome to the Humana Quarter One Report 2020. Today, I'm pleased to present CEO Rasmus Nerman. For the first part of this call, all participants will be in listen only mode. Afterwards, there will be a question and answer session. Speakers, please begin.
Thank you. Dear ladies and gentlemen, good morning and welcome to this presentation of Humana's first quarter in 2020. A quarter that for Humana, like the rest of society, was unlike anything that we have previously experienced due to the COVID-19 pandemic, of course. For this reason, I do not only have our CFO, Ulf Bonnevier here next to me, but also Eva Nilsson Bågenholm, Medical Doctor and Quality Director of Humana. I will start by giving you some of the financial and operational highlights of the quarter before I hand over to Ulf Bonnevier, who will take us through the details of the quarter. Towards the end, Eva, Ulf, and I will address any questions that you might have. Next slide, please. The first quarter was characterized by an unprecedented mobilization and unity in Humana.
It was also a quarter where heroic efforts from our staff made a difference for thousands of clients across the Nordics. Already in February, we formed a crisis management organization with the aim to support all Nordic operations in ensuring a safe work environment and preventing the spread of the virus, and thus protecting both staff as well as clients. Needless to say, the second half of the quarter was challenging, especially for our elderly care operations in Sweden and Finland, where the virus poses an even greater threat. I am pleased to say that our chosen strategy has proven successful so far as Humana has very limited spread of the disease in our operation.
Financially, the pandemic has contributed somewhat negatively during the quarter, with an impact on revenues in the form of fewer hours in personal assistance in Sweden and Norway, and also fewer visits in our open care in Finland. We have also seen higher costs for increased sick leaves and procurement of protective equipment across the group. We do expect higher costs and continued impact on revenues associated with COVID-19 also in the second quarter. Considering the support packages from the Nordic government, our assessment, though, is that the net effect is manageable. Moving on to the next slide, please, and some other operational highlights. In first quarter, the Humana Quality Index remained at the very high 94% in spite of the challenging times. We do expect this to fall somewhat, though, over the second quarter as sick leaves have increased.
We are equally pleased with the results from our annual employee satisfaction survey, where we see an increase to already strong numbers. This is a key success factor for us going forward. Moving on to the next slide, please, and a financial summary of the quarter. In the first quarter, our operating revenue amounted to SEK 1.94 billion. This is an increase with 13%. The organic growth in the quarter was 3.8%. Our operating profit in the quarter was SEK 98 million, an increase of 28% compared to last year, and the resulting operating margin was 5.1%, up from 4.5% last year. In the quarter, our operating cash flow was SEK 95 million, an improvement versus the corresponding quarter of 2019. Finally, our leverage at the end of the quarter was 5.2, down from 5.7 times prior year. Moving on to the next slide, please. I&F.
In our Individual & Family care segment, we saw a healthy improvement in operating profit versus last year, and we also saw positive organic growth for the first time in a few years. Although now fairly stable, we still encounter weaker demand in our children and youth segment, primarily in the southern and western parts of Sweden. The weaker demand is partly offset, though, by good operational efficiency in the quarter. On the other hand, our adult segments are performing well with solid growth, driven mainly with field openings. Although COVID-19 being a clear focus also in I&F, the business area is less impacted by the situation compared to our other segments. Next slide, please. Personal assistance. In personal assistance, we see yet another stable performance.
We've also received very strong results in our employee satisfaction survey for personal assistance. This is also crucial for our future ability to recruit competence in this labor-intensive segment. As a result of the pandemic, we do see decreased customer mobility and a slight increase in the number of canceled hours per client. We are, however, able to compensate for that by positive net customer intake in the quarter. Moving on to the next slide, please. In our elderly care segment, we continue to see good organic growth with a revenue increase, which is in line with our plans. The focus, however, has of course been on handling COVID-19 situation, where safety for our clients and staff is the top priority. Another challenge has been to solve for staffing during periods of very high sick leave due to the implemented security protocol.
Far, our strategy has been successful, and we see very limited spread in our units. We are also in a very good place when it comes to the staffing situation as well as the availability of protective equipment. Finally, our projects with new own managed housing units proceed according to plans. Next slide, please. In Finland, we saw good development in the quarter and continued strong organic growth. The COVID-19 situation has impacted Finland, with fewer open care visits and high sick leave. Similar to the rest of the group, it has been handled well with no spread of the virus in our units. In the quarter, our Individual & Family care segment in Finland performed well, whereas there are still challenges with profitability in our newly acquired operations.
Our turnaround program is moving in the right direction, we do expect a delay in progress as well as a negative impact from the COVID-19 situation in Finland going forward. Finally, our new Finnish management is now complete as Anu Kallio has taken over as the head of Humana Finland starting 1st of March. Next slide, please. Moving over to Norway, where we do see continued good development and performance. The main drivers for growth are still disabled care housing services and personal assistance. The impact from the COVID-19 situation has been managed well, the increase in sick leaves was resolved well thanks to timely and successful recruitment campaigns. We continue to be pleased with the performance in our Norwegian operations. With this said, I will now hand over to you, Ulf.
Thank you, Rasmus. I will now give 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 first quarter, our operating revenue grew to SEK 1,938 million. That's up 13% from SEK 178 million previous year. Acquired growth contributed SEK 164 million to revenue, of which SEK 148 relates to our acquisition of Coronaria Hoiva in Finland. The organic growth was 3.8% compared to 1.5% previous year. Next page, please. Organic growth. On page 11, you can see Humana's development with regards to organic growth. Although the leap year impacted overall with around 1%, the quarter was still a step forward as you can see in the graph. All business areas contributed to this, which is a good development.
More specifically, we see more stable occupancy, impact of new unit openings, as well as more hours of care performed as the reason for this. Next page, please. Profitability quarter one. Now moving to page 12 for more information on our results. Operating profit came in at SEK 98 million versus SEK 77 million prior year, the margin increased to 5.1% compared to 4.5% prior year, the increase is explained by occupancy and better efficiency. All business areas contributed to the improvement, except elderly care, where we saw a decline. The impact of COVID-19 has been financially quite limited. The total net negative financial effects of the pandemic are actually compensated by the net positive effects of the leap year. The specific items relating to COVID-19 effects are volume effects, of course, higher sick leave, increased need and costs for PPE or personal protective equipment.
Among the positive effects, we saw reduced travel as one of them. Next page, please. Now moving to page 13 and the segment performance, starting with Individual and Family. Revenues for the quarter reached SEK 519 million from prior year's SEK 512 million, an organic increase of 1.4% compared to a negative organic growth of minus 7% in the prior year. When taking into consideration the leap year, which has a positive impact of around 1%, the revenues have stayed stable year on year. Underlying, there is a decrease in occupancy in the children adolescent segment, which is compensated by an increase in occupancy in the adult segment. Operating profit came in at SEK 33 million versus SEK 28 million prior year, the margin increased to 6.4% compared to 5.5% prior year. The increase is explained by more stable occupancy overall and improved efficiency.
We are moving clearly in the right direction under the new management, the pandemic situation has increased pressure on the care units, a well-managed first quarter performance overall. Please also remember, prior year comparable set of numbers were quite weak. Next slide, please. We now move to page 14 and another stable quarter from personal assistance. Revenues are up 5% to SEK 790 million compared to prior year of SEK 684 million, with organic growth of 2.9% versus 1.5% prior year. Despite a negative effect on the number of hours from COVID-19, the total number of hours increased anyway, together with the higher assistance allowance and the impact of earlier acquisitions. Operating profit for the quarter increased somewhat to SEK 40 million, up from SEK 39 million last year, and the margin decreased somewhat to 5.6% from 5.8% prior year.
The decrease in margin, although quite small, is due to costs for higher sick leave. Next page, please. Elderly care on page 15. Revenues grew in the quarter with 9% organically and reached SEK 146 million versus SEK 134 million prior year. This comes from the recent openings and good occupancy overall. Operating profit was 0 versus SEK 4 million prior year, and the operating margin was -0.3% versus 2.8% prior year. Startup cost of SEK 3 million has impacted the quarter, and it relates to our opening of Kungsängen last year. COVID-19 has also, of course, had an impact on the business area financially, where we see higher costs for sick leave and protective equipment. The impact for our staff and unit managers handling the situation well and minimizing the risk for our clients are, however, far greater. Overall, an okay development in the elderly care business area, given the tough situation.
Next slide, please. Finland on page 16. Revenues for the first quarter in Finland came in at SEK 350 million compared to SEK 179 million prior year, an increase of 96%, and organically at constant currencies the growth was 10.2% versus 7.7% prior year. Again, a good growth driven mostly by a new acquisition, also by unit openings in the I&F area together with more customers. Operating profit increased to SEK 17 million versus SEK 15 million prior year, with a margin of 4.7% compared to 8.6% prior year. The performance is moving in a positive direction under the new management team, which is well received. Of course, COVID-19 effects have and will going forward dampen the positive effects of our improvement efforts. Also, the market continues to be very tough. Next slide, please. Norway on page 17.
Revenues were flat in reporting currency at SEK 194 million, and the organic growth was positive 4.6% versus 9.2% prior year. The growth development this quarter is due to openings of units and more customers. Operating profit increased to SEK 13 million versus SEK 9 million last year, and the margin was up to 6.7% from 4.5% prior year. The better operating profit was mainly due to a decrease in losses from now closed unprofitable units. Overall, a strong development in Norway in the quarter. Next slide, please. Now moving on to page 18 and 19 and our financial position and cash flow. In the graph on page 18, we see our leverage. Although higher than our newly revised financial targets, we are moving in the right direction and taking the leverage down gradually to now 5.2 times.
Cash flow in the quarter improved from prior year, as you can see on page 19, and there were three reasons for the improvements contributing: improved profits, better working capital, and reduced CapEx investments. Although the COVID-19 pandemic has had quite some operational impact on our business for our managers and staff in our care units to minimize the impact for our clients, from a pure financial point of view, we've done quite well. In summary, our profits have recovered from quarter four now in quarter one, but also the cash flow and leverage improved. The pandemic will continue to impact our business going forward, and certainly there will be more uncertainty for us to handle than ever before. With that comment, back to you, Rasmus.
Thank you, Ulf. To try and summarize the quarter, the pandemic put Humana, like the whole of society, to a difficult test, and will continue to take a lot of our focus and efforts during the foreseeable future. In the end, the most important thing is how we take care of our customers and clients, as well as the working environment for our 15,000 employees. I am proud of what we have accomplished so far. I'm also pleased to see us in the first quarter, taking a clear step in the direction of improving our performance whilst increasing the stability. Much work remains, I'm satisfied with this start to the year. With this said, we can now open up for questions. Thank you very much.
Okay. Thank you. Ladies and gentlemen, if you have a question for the speaker, please press 01 on your telephone keypad. Please note that you are limited to one question per round. Our first question is from Victor Forssell of ABG. Please go ahead.
Hello, guys. Thanks for taking my question. Can you hear me well?
Absolutely.
Perfect. I actually have three, if I may. Firstly, if you could start by giving some or any quantitative comments regarding to what degree COVID-19 actually impacted your operations in Q1 or by the end of March? Perhaps if you could share with us any early data from April, that would be appreciated.
As I discussed earlier, it is a rather small impact, and it's fully or nearly fully compensated by the impact of the leap year. The net financial costs or net financial negative impact from the COVID-19 is around SEK 10 million.
Okay. Just in terms of that progressing into the first month here in Q2, how would you describe the situation?
Well, obviously, with only parts of or sort of towards the end of the quarter, we have the impact. Obviously, that will be a full quarter. The truth is we have a lot of factors into play. We have volume, we have costs, we have some government subsidies.
Obviously it will be a larger impact in the second quarter than the first quarter, we think it's manageable.
Okay, great. Thanks. I can stick with two questions. In terms of Individual and Family and the situation with the contractors in the regions where you have been struggling last year, have you noticed any change in behavior from their side regarding placements by the end of the quarter or in April that will impact occupancy even further from these levels?
Victor, I would characterize the market for children and youth and all itself as stable. We would like the demand to be higher, we do not see any major change in demand compared to the end of last year. It has stabilized now. Yes, we do see a certain impact on the social services in Sweden. We see that placement requests are slightly fewer, and the lead times are also longer, probably due to the fact that also the social services are, of course, under very heavy burden from the COVID-19 pandemic. Looking at the actual numbers, we haven't seen any quantitative impact on the occupancy in I&F. It remains stable, but we'd like it to be higher.
Yeah, of course. Okay, thank you. I'll get back in queue.
Okay, thank you. Our next question is from Kristofer Liljeberg from Carnegie. Please go ahead.
Yeah, hi. Good morning. Also on the Individual & Family business, the improved profitability you see here, I understand volumes is a bit better than first quarter last year, if you compare it with the Q4, is that just the seasonal effect with the leap year, or are you starting to see anything from efficiency work that I know that's ongoing?
Kristofer, we're obviously helped by the leap year, we're also helped by two other factors. I would say we start to see some effects from our efficiency improvements. We are continuously adapting the organization to the demand that we meet in the market. That means that getting out of some contracts is also transforming some of the units, adapting, of course, staff levels to the demand that we currently need. Overall, yes, there is an effect from the leap year, there is also an effect from increased operational efficiency that will help. It's of course permanent. We do also have some units that we opened during last year, primarily within the LSS segment as well as adult segment that were under ramp-up last year, but are now reaching breakeven or even profit making. That also helps as well.
All in all, we feel it's a fairly good and stable quarter. Obviously, compared to quarter, as Ulf said, in Q1 of last year was fairly weak.
This business historically has been, in my view, maybe too volatile. With the changes you're doing now, could we expect it to be less volatile?
That is absolutely our expectations and our hope, Kristofer. At the end of the day, this business is very different from other operations, which are very stable. I mean, looking at personal assistance as well as the parts of the elderly care portfolio, which is up and running. At the end of the day, these are 130 units in Sweden. They're all very small, and average length of stay can vary significantly. I mean, it's by nature also a business which is a little bit more volatile. That said, our ambition is definitely to make it more stable going forward.
I think the comment we can make is we're taking out as much volatility as we can, wherever we can. There's still the nature of the business is going to be volatile, but it's going to be less volatile going forward.
Similar question related to Finland and the improvements there, because if I remember correctly, it looked a little bit better early autumn and then Q4, it disappointed again and now better. Is this just quarterly variations or are you really starting to see cost savings and restructuring helping that now?
I think there's a lot going on in Finland, Kristofer. Obviously, we have a new management in place, not only for Humana Finland as a whole, but also within the elderly care operations in Finland. The way we look at it, we are certainly making progress in Finland. We see it in the numbers, but more importantly, we see it in the activities being done. Of course, we, as any other provider in Finland, is impacted by the overall market in Finland with increased staffing requirements. We, like anyone else, are also negotiating about prices with the municipalities. We are making quite some progress there. At the same time, we are also getting out of some of the non-performing contracts during this year, and also there we are in line with our plans.
Of course, the COVID-19 situation, given that our presence in elderly care in Finland is fairly large, dampens this development a little bit. Our unit managers as well as the country management must ensure the safety of our clients and staff, and that is the priority. We do foresee that the development that we are seeing in the first quarter hopefully will continue, but it will take us a while longer. Obviously, there are also additional costs in Finland, higher sick leave, procurement of protective equipment. The Finnish government, their stimulus package is very different, as you probably know, from the packages that we have in Norway and Sweden. We as a company do not get the same support as we do in the other Scandinavian countries. We'll take the costs ourselves to a larger extent.
Okay. Thank you very much.
Okay. Thank you. The next question is from Karl-Johan Bonnevier from DNB Markets. Please go ahead.
Yes, good morning. First, good to see that you're back firmer footing again and balancing the COVID-19 challenge so well. Basically, I have two more detailed questions. Looking at the cash flow statements, I see that paid tax still continues to run higher than reported tax. Is that just a timing difference that we should see paid tax coming down to reported tax, or is there something else hiding there?
Just timing.
Just timing. Looking at, say, the market you described maybe being placed into a little more cautious from social security side and so on, has that impacted your thinking about what kind of CapEx you would like to deploy, say, in the current year?
Well, obviously, in uncertain times, we need to be careful with our investments and our cash, and that will govern our thinking throughout the year.
If you try to turn that into an expectation of, say, CapEx during this year or something like that?
We have firmly said that we're looking at SEK 100 million CapEx spend throughout the year with the plus or minus the variations when we do real estate investments and then selling these back. Where we stand right now, we'll try and be a little bit lower than that, obviously.
Excellent.
It's on a project-by-project basis.
Thank you. Ulf, good luck with your new challenges out there.
Thank you.
Thank you.
Okay, thank you. As a reminder, if you wish to ask questions, please press 01 on your telephone keypad. We have a following follow-up question from Victor Forssell from ABG. Please go ahead.
Yes, thank you for the next question. Just one last year on Finland. What impact did Coronaria Hoiva have on the EBIT line? Any of your comments or thoughts about the situation regarding the salary inflation would be appreciated. Thank you.
Victor Forssell, Coronaria Hoiva had a small positive impact on the decline in the quarter. When you're talking about the salary inflation, are you referring to Finland or the-
Yeah, Finland.
Finland.
Yeah.
No, not really. To a larger extent, similar to our operations in Sweden, except for personal assistance, we have a certain hedge in the contract that we have in the municipality, of course. We do foresee also in Finland that salaries will increase higher probably than the rest of the countries, and we're obviously engaged heavily in these negotiations as a company, but also through the private association of caregivers in Finland. It's not something that gets us up, keeps us up at night right now. I think it's more important for us to focus on the upcoming salary negotiations here in Sweden, where we have much more volume, and there's a higher uncertainty as well.
Okay. Thank you very much.
Okay, thank you. As a reminder, if you wish to ask a question, please press 01 on your telephone keypad. I remind you again, if you wish to ask a question, please press 01 on your telephone keypad. There are no further questions at this time. Please go ahead, speaker.
Thank you all for attending this conference of the Humana first quarter. Take care, be safe, and don't forget to wash your hands.
Thank you. That concludes our conference call today. You may now disconnect.