Internationella Engelska Skolan - Interim Report (1 July - 31 March 2016/2017)
Progress of operations in quarter 3 (January-March)
- Total operating income was up by 12.5% on the corresponding quarter of the previous year, mainly due to increased student numbers, and central government subsidies for “Lärarlönelyftet”, and amounted to MSEK 541.4 (481.5)
- The number of students in the Swedish operation at the end of the quarter was 21 420 (19 795)
- There were around 144,000 registrations on waiting lists at the end of the quarter, an increase of some 17,000 registrations, (13%) compared to the corresponding period in the previous year
- Operating profit (EBIT) for the period increased by 6.1% on the corresponding quarter of the previous year, amounting to MSEK 53.8 (50.7). Accordingly, the operating margin was 9.9% (10.5)
- Profit for the quarter was MSEK 44.1 (38.0)
- Earnings per share were SEK 1.10 (0.95)
- Cash flow from operating activities amounted to MSEK -22.9 (-80.2)
Financial performance in the period (July - March)
- Total operating income increased by 13.3 % on the corresponding period of the previous year, amounting to MSEK 1,500.2 (1,324.3)
- Operating profit (EBIT) for the period increased by 9.2% year-on-year, amounting to MSEK 138.9 (127.2).
Operating margin was 9.3% (9.6)
- Operating profit (EBIT) adjusted for items affecting comparability for the period increased by 13.0% on the corresponding period of the previous year, to MSEK 145.0 (128.3). The adjusted operating margin was 9.7% (9.7)
- Profit for the period was MSEK 109.7 (95.3)
- Earnings per share were SEK 2.74 (2.38)
- Cash flow from operating activities amounted to MSEK 179.4 (40.9)
IES returned strong growth in the quarter. Total operating income increased by 12.5% year-on-year to MSEK 541.4 and operating profit (EBIT) increased by 6.1% to MSEK 53.8, corresponding to an EBIT margin of 9.9%.
The growth is the result of opening a new school in Älvsjö, Stockholm in 2016, and opening a large number of new classes in other schools. In addition a central government subsidy “Lärarlönelyftet” made a positive contribution of MSEK 7.5 on total operating income, while impact on earnings remain negative as the subsidy only covers some 90% of IES’s costs associated with the initiative. Total revenues per student increased by 4.0% including “Lärarlönelyftet” and by 2.5% excluding the government subsidy.
Personnel costs per student are increasing gradually, and were up 7.2% on the previous year including “Lärarlönelyftet”. The increase is mainly due to the supply of qualified teachers in Sweden being below demand, contributing to increasing wage creepage.
As far as possible, we are offsetting the effects of rising personnel costs and a limited increase in school vouchers by capitalising on economies of scale. Our successful recruitment program for qualified teachers from English-speaking countries outside Sweden means that we are affected less by Swedish wage creepage, at the same time as being able to attract highly qualified teachers in subjects where there are shortages in Sweden. We can also conclude that we retain our ability to attract highly qualified Swedish teachers to all our schools, which I see as evidence of our good reputation. We are also continuing to keep our overheads down as far as possible, while also strengthening our organisation at management level in order to ensure the quality of our delivery as we continue to expand.
There is considerable interest for our four new schools in Årsta, Landskrona, Södertälje and Helsingborg which are scheduled to open in autumn 2017. This means that we are confident in our expectation that growth in the number of classes and students will be significantly higher in 2017/2018 compared to the current year. All principals have been appointed for these schools, and recruitment of teachers is proceeding according to plan.
The three schools acquired in Spain in 2016 are also progressing well, with rising student numbers. These jointly-owned schools are increasingly being operated in accordance with our model for quality systems and financial control. We have recruited a highly qualified local management team and are allocating resources from IES to support our efforts on the Spanish market. The strategy is to gradually complete platform acquisitions of bilingual schools with Spanish students located in major cities.
For the academic year 2017/18, IES has been allocated a subsidy for ”Karriärtjänster” (Advanced Skilled Teachers) of a maximum of MSEK 19.7, up to 232 teachers. A decision has also been made to allocate IES a subsidy of a maximum of MSEK 40.2 relating to “Lärarlönelyfte”. Both subsidies have a negative effect on IES’ earnings as we do not receive subsidies for our international teachers who teach the English language. We consider this to be unjustified for reasons of principle. This means that we normally receive some 90% of the subsidies we apply and incur costs for. Furthermore, the subsidy does not fully cover the social security and pension expenses incurred in connection with the increase in remuneration for these employees.
The Swedish Schools Inspectorate’s regular inspection of IES is currently underway and is expected to be completed in June. All our school units will be inspected. To date, 24 of our 30 schools have been visited by the Swedish Schools Inspectorate. For 13 of these schools, we have been able to review the Swedish Schools Inspectorate’s observations, which are communicated in the form of decisions. 12 of the decisions are entirely free of criticism. The most recent inspection was completed in 2013, encompassing 13 schools, with 2 of the decisions entirely free of criticism.
Unfortunately, the education of our children and their future continues to be politicised—most recently in the form of a proposal for arbitrarily allocating students to schools. Although it is challenging to operate in this environment, we must not allow ourselves to be distracted by the multitude of proposals. We contribute to building a positive future for young people and continue to focus fully on offering quality and a great education. Our ambition of providing a stable learning environment where children in Sweden, regardless of background, are able to realise their full potential stands.
For more information, please contact:
Johan Hähnel, Investor Relations, tel. +46 (0)70 605 6334, Ralph Riber, CEO, tel. +46 (0)70 875 6689, or Fredrik Åkerman, CFO, tel. +46 (0)70 415 2365.
Teleconference in connection with publication of the quarterly report:
On Thursday 18 May at 10:00 a.m. CET, Ralph Riber, CEO and Fredrik Åkerman, CFO will hold a conference call for the publication of the quarterly report. The call will be held in English. To participate, please call the following number: +46 (0)8 5059 6306 and enter the code: 32913658#. The presentation will be uploaded to IES’s website before the conference call, at: http://corporate.engelska.se/financial-information/reports-and-presentations.
Financial Statement 2016/17 – 23 August 2017
Interim Report Q1 2017/18 – 17 November 2017
Annual General Meeting 2016/17 – 17 November 2017
Internationella Engelska Skolan i Sverige Holdings II AB discloses the information provided herein pursuant to the EU’s Market Abuse Regulation and the Securities Markets Act. The information was submitted for publication, through the agency of the above contacts, on 18 May 2017 at 08:00 a.m. CET.