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AcadeMedia’s adult education segment takes restructuring expenses of SEK 38 million in the fourth quarter

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AcadeMedia’s adult education segment takes restructuring expenses of SEK 38 million in the fourth quarter

As previously communicated, the adult education segment is facing a transition period and lower margins. The ongoing transition in combination with a weaker market development and a delayed start of new agreements means that the fourth quarter earnings will be weaker than expected for the adult education segment.

Adult education is facing several challenges and we have lowered our expectations for the coming quarter regarding net sales and earnings. The factors affecting the fourth quarter negatively are the settlement compensation to Malmö regarding the SFI-contract (already communicated[1]), the ongoing contract transitions which commenced in the beginning of this quarter, delayed start of new contracts and a more challenging market outlook.

Delayed start of new contracts
The extended appeal process of the latest large tender has caused delays in the start of the new contracts for Vocational and Prepatory modules (yrkes- och studieförberedande moduler, “YSM”). Most training programs are therefore expected to start after the summer, which will give rise to unoccupied staff and vacant facilities during the summer. Cost adjustments are in progress but the delayed start of YSM will negatively impact operating earnings in the current quarter and the beginning of the next fiscal year.

Weaker market development requires capacity adjustment
The Swedish labor market is currently strong and the number of immigrants has declined. Consequently, the Swedish Public Employment Agency has clearly reduced their resource allocation to training and integration of immigrants (“etableringsuppdraget”), which means that the demand and market volumes are expected to decline. This is clearly noticeable in the start of the new agreements for Vocational Swedish training (yrkessvenska,”YS”), where volumes have not yet reached target levels.

The lower demand in the adult education segment requires adjustment of capacity and cost levels. AcadeMedia’s adult education estimates that the total expenses for capacity adjustment as well as expenses for excess capacity required in current agreements are expected to amount to approximately SEK 38 million in the fourth quarter 2017/18. The weaker demand and delayed contracts are also estimated to render lower earnings during the first half of 2018/19.

The underlying earnings for the adult education segment before items affecting comparability (adjusted EBIT) in the fourth quarter is estimated to SEK -10 to 0 million. The operating earnings (EBIT) for the adult education segment, including items affecting comparability, is estimated to SEK -60 to -70 million.

Following the ongoing contract transitions and capacity adjustments, AcadeMedia believes that the long-term EBIT-margin will be 9-11 percent in the adult education segment. The lower margin level is a consequence of both new contracts with lower margins and lower capacity utilization following reduced volumes in the market.

Outlook fourth quarter for the adult education segment
In total, the fourth quarter will have expenses of SEK 60 million under items affecting comparability. The expenses are:

  • The settlement with the City of Malmö due to deficiencies identified in the SFI education SEK 22 million. The amount is lower than previously communicated[1] as premises have been sublet.
  • Capacity adjustment in adult education and expenses for excess capacity required in current agreements following lower market volumes, amount to approximately SEK 38 million.

For more information, please contact: 
Marcus Strömberg, CEO
Telephone: +46 8 794 4200
E-mail: marcus.stromberg@academedia.se 

Eola Änggård Runsten, CFO
Telephone: +46 8 794 4240

About AcadeMedia
AcadeMedia creates opportunities for people to develop. The 15,800 employees at our 650 preschools, compulsory schools, upper secondary schools and adult education centres share a common focus on quality and development. Our 176,000 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. The information was submitted for publication, through the agency of the contact persons set out above, at 20:00 CET June 28, 2018 

[1] Press announcement June 1st relating to settlement with City of Malmö