AcadeMedia’s interim report July – December 2017
Second quarter (October – December 2017)
- Net sales increased by 12.2 percent to SEK 2,813 million (2,508) of which Vindora represented 6.3 percent. Organic growth including bolt-on acquisitions amounted to 5.4%.
- Operating profit (EBIT) increased by 16.9 percent to SEK 166 million (142), of which Vindora represented SEK 21 million. Adjusted for items affecting comparability, operating profit was SEK 167 million (142).
- Net profit was SEK 116 million (89) in the period.
- Cash flow from operating activities amounted to SEK 257 million (260).
- The average number of children and students in pre-, compulsory, and upper secondary schools during the second quarter was 72,945 (65,633), representing an increase of 11.1 percent.
- Earnings per share was SEK 1.22 (0.95) before dilution and 1.21 (0.95) after dilution.
- On November 1, the acquisition of Vindora, with operations in both upper secondary school and adult segment, was completed. A rights issue of SEK 410 million (excluding issue expenses) contributed to financing the acquisition.
First six months (July – December 2017)
- Net sales increased by 11.0 percent to SEK 4,850 million (4,370) of which Vindora represented 3.6 percent. Organic growth including bolt-on acquisitions amounted to 6.5 percent.
- Operating profit (EBIT) increased by 17.1 percent to SEK 246 million (210), of which Vindora represented SEK 21 million. Adjusted for items affecting comparability, operating profit was SEK 249 million (211).
- Net profit for the period amounted to SEK 168 million (130).
- Cash flow from operating activities amounted to SEK 399 million (391).
- The average number of children and students in pre-, compulsory and upper secondary school amounted to 70,522 (65,388), which was an increase of 7.9 percent.
- Earnings per share was SEK 1.76 (1.38) before dilution and SEK 1.76 (1.38) after dilution.
Significant events after the end of the reporting period
Preliminary voucher increases in Sweden for 2018 amount to 2.5 percent. On January 11, the government announced a regulation change regarding guidelines for calculation of premises cost in the school voucher. The effect of this is still uncertain. The change will become effective from March 1st. Voucher increases in Norway will amount to 2.9 percent. The voucher increases are based on municipality announcements to date and are calculated as a weighted average based on AcadeMedia’s student mix in each country
The complete report will be made available at https://corporate.academedia.se/en/financials/reports-presentations/
Comments from CEO Marcus Strömberg
The second quarter of AcadeMedia’s financial year has been full of activity. We have closed four acquisitions including the strategic acquisition of Vindora, as well as three bolt-on acquisitions. In addition, a rights issue was launched and successfully completed, securing financial stability which is important for further growth. Operations have developed well overall, with good results in the Adult education segment but with continued margin pressure in the Pre- and compulsory school segment.
Financial development in the second quarter
Financial development for the second quarter of the financial year continued roughly as planned. Increased student numbers provided good organic growth of 5.4 percent. Several acquisitions were completed. In addition to Vindora, a compulsory school south of Stockholm was acquired (Kringlaskolan) as well as a small pre-school business with three units in Norway and two units in Sweden. These units will be integrated into the Pre- and compulsory schools segment in Sweden, and into the International preschool segment.
In the second quarter, education activity was high in all segments; thus, revenues and operating profits were higher than in the first quarter. Three out of four segments are on par with last year’s EBIT whereas the Pre- and compulsory schools segment is lagging. This is mainly due to margin pressure from salary inflation, for which school vouchers have not yet compensated. We now have a preliminary view of the voucher levels for 2018 and we can see that this is not sufficient to balance the increased salary levels for teachers. The most important way to improve economic efficiency is to ensure that AcadeMedia’s schools deliver high-quality education and thus are attractive to students and parents. This is our main focus.
Contract transition in Adult Education delayed
During the second quarter, the Adult education segment has been preparing for a major transition in its contract portfolio. The high-margin contract “Basic Modules” will come to an end on January 31, 2018, meaning no further student admissions will take place after that date. In the tender for the replacement contract Vocational and Preparatory Modules (yrkes- och studievägledande moduler “YSM”) AcadeMedia was awarded 45 out of 70 contract areas, which was very satisfactory. However, the allocation is pending the outcome of an appeals process, which has delayed the transition by roughly one quarter. In the short term, this has been financially positive for the Adult education segment, as volumes have remained strong within the existing high margin contract. If the appeal is rejected and the new contract is awarded to AcadeMedia as announced, the negative impact on the entire Adult education segment’s EBIT margin is estimated at one to three percent on an annual basis, when YSM has fully replaced Basic Modules.
Vindora acquisition completed
On November 1, the acquisition of Vindora was completed, meaning the financial results have been included for two months of the quarter. With this acquisition, AcadeMedia aims to be a leading player in apprenticeships, vocational training and introductory programs in upper-secondary schools. This is an area which is increasingly important for society and for individuals who otherwise risk life-long exclusion from the labor market. Vindora comprises a total of 33 schools under the Praktiska brand and three schools under the Hagströmska brand. In addition, Vindora offers adult education under the Movant brand.
In the coming six to twelve months, efforts will be made to integrate the business in the Upper secondary school segment (Praktiska and Hagströmska) and the Adult education segment (Movant) as well as the support functions with AcadeMedia. As stated earlier, we believe that the Vindora business, combined with our structure and our quality-assurance system, provide a great opportunity for Sweden and for AcadeMedia as a company.
Rights Issue oversubscribed and completed
In order to partially fund the acquisition of Vindora, a rights issue of SEK 410 million was launched and completed. The issue was substantially oversubscribed and thus the guarantee from Mellby Gård was not used. The new issue has strengthened AcadeMedia’s balance sheet and will also provide flexibility for future growth.
For the remainder of the financial year, we look forward to incorporating Vindora and learning more about the apprenticeship education model. In addition, we are excited about the expansion process in Germany. In Sweden, we need to focus on stabilizing certain areas of the Pre- and compulsory schools segment.
Regarding the political situation, in January the government presented two proposals for consideration to the Council on Legislation, the proposal on ownership assessment and the proposal on limitation of profits for welfare companies. Both proposals largely follow what was previously known. Ownership assessment is not controversial for a company like AcadeMedia and the proposal to limit profits is not expected to gain support by a majority in the Swedish parliament.
We wish, and hope, that the debate ahead can focus more on how we together can address the real issues in Swedish schools.
President and CEO
AcadeMedia AB (publ)
Presentation of the report
A web-cast telephone conference will be held at 09:30 CET today, where CEO Marcus Strömberg and CFO Eola Änggård Runsten will present the report.
To participate in the conference call, and thereby be able to ask questions, call one of the following numbers ten minutes before the start of the call:
SE: +46 8 5664 2662
UK: +44 20 3008 9808
US: +1 8557 532 235
You can follow the presentation and the conference on the following page: https://tv.streamfabriken.com/academedia-q2-2017-2018
The presentation material will be available before the conference begins on AcadeMedia web via https://corporate.academedia.se/en/financials/reports-presentations/
For more information, please contact:
Marcus Strömberg, CEO
Telephone: +46 8 794 4200
Eola Änggård Runsten, CFO
Telephone: +46 8 794 4240
Christian Hall, Investor Relations
Telephone: +46 763 111 242
AcadeMedia creates opportunities for people to develop. The 15,600 employees at our 640 preschools, compulsory schools, upper secondary schools and adult education centres share a common focus on quality and development. Our 173,000 children and students are provided with a high quality education, giving them the best conditions to attain both learning objectives and their full potential as individuals. AcadeMedia is Northern Europe ́s largest education company, with locations/facilities/presence in Sweden, Norway and Germany. Our size gives us the capacity to be a robust, long term partner to the communities we serve. More information about AcadeMedia is available on www.academedia.se.
This information is information that AcadeMedia AB is obliged to make public pursuant to the EU Market Abuse Regulation and the Securities Markets Act. The information was submitted for publication, through the agency of the contact persons set out above, at 08:00 CET February 1, 2018.