AcadeMedia’s interim report July – December 2020

Second quarter (October – December 2020)

• Net sales increased by 5.5 percent and amounted to SEK 3,436 million (3,258). Organic growth, including bolt-on acquisitions and adjusted for currency effects, was 7.3 percent.
• Operating profit (EBIT) amounted to SEK 273 million (201).
• Adjusted operating profit, adjusted for items affecting comparability and effects of IFRS 16, amounted to SEK 224 million (150). Items affecting comparability amounted to SEK -9 million (-).
• Net profit for the period amounted to SEK 133 million (75).
• Free cash flow amounted to SEK 572 million (260).
• The average number of children and students in preschool, compulsory school, and upper secondary school during the second quarter was 85,927 (82,325), representing an increase of 4.4 percent. Growth was organic.
• Diluted earnings per share was SEK 1.26 (0.71). Adjusted for IFRS 16, diluted earnings per share was SEK 1.49 (0.99).
• The pandemic impacted all segments and distance education was resumed at the upper secondary schools. Activities have been postponed or delayed.
• In December, Swedish Education Group was acquired. It will be included in the Compulsory school, Upper secondary school, and the Adult education segments from quarter 3.

First six months (July – December 2020)

• Net sales increased by 5.5 percent to SEK 6,077 million (5,760). Organic growth, including bolt-on acquisitions and adjusted for currency effects, amounted to 7.3 percent.
• Operating profit (EBIT) amounted to SEK 495 million (330).
• Operating profit, adjusted for items affecting comparability and effects of IFRS 16, amounted to SEK 375 million (225). Items affecting comparability amounted to SEK 1 million (-).
• Net profit for the period amounted to SEK 224 million (91).
• Free cash flow amounted to SEK 529 million (138).
• The average number of children and students in preschool, compulsory school, and upper secondary school during the first six months was 85 785 (81,897), representing an increase of 4.7 percent. Growth was completely organic.
• Diluted earnings per share was SEK 2.12 (0.87). Adjusted for IFRS 16, diluted earnings per share was SEK 2.61 (1.42).

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 the financial year showed continued high demand for AcadeMedia’s education programmes. Higher number of applicants to our adult education programmes and in the school segments the student numbers increased by 4.4 percent. In total, the Group’s net sales rose by 5.5 percent. Margins increased in all segments, except for the Preschool Segment, which was affected in Germany by the ongoing pandemic.

The margin increase for the Compulsory School and Upper Secondary School segments was the result of more children and students, but also of cost control and lower costs as activities had to be cancelled or postponed because of the pandemic. The Covid-19 pandemic has a significant impact on day-to-day operations, however our solid business model and strong digital skills have eased the challenges posed by the pandemic. So, alongside our day-to-day work we have been able to continue our long-term strategic efforts, enabling us to welcome Swedish Education Group (SEG) to AcadeMedia.

Continued high demand for adult education

Many components of our Adult Education Segment were starting to fall into place before the beginning of this financial year. Protracted tendering processes were completed and new agreements were signed, unprofitable contracts with the Swedish Public Employment Agency were ended, and allocation to our vocational schools was good. We also saw higher numbers of applicants to our autumn programmes. Consequently, the Adult Education Segment experience good conditions and continues to generate strong earnings and margins. Adjusted operating profit rose to SEK 75 million for the quarter. High demand allows us to run our education programmes at high utilisation, strengthening the segment’s profitability. In addition, the Swedish Public Employment Agency is directing more job seekers to various labour market services, which also has a positive effect. It remains our judgement that the EBIT margin in the Adult Education Segment should over time be 9–11 percent.

Looking ahead, it is gratifying that the Swedish National Agency for Higher Vocational Education continues to show confidence in us through its allocation of 7,660 programme places starting in autumn 2021, which equates to approximately 19.3 (14.5) percent of the total granted programme places. This allocation means that we gain market share. The programmes run for 1–3 years. The financial effects will only be realised after participants have started their programmes.

Behind these figures are thousands of people who, for a variety of reasons, have chosen to attend one of our programmes. We have a broad education portfolio, extensive experience of distance education, and committed colleagues who every day ensure that students receive knowledge and insights that lead to jobs. This is an important social responsibility that we are proud of.

Acquisitions strengthen our position

At the end of the quarter, the Swedish Competition Authority approved our acquisition of Swedish Education Group (SEG). With six schools in a number of Swedish cities and a total of 2,600 students, 1,300 adult education participants, and 320 employees, the acquisition primarily strengthens AcadeMedia’s position in upper secondary and higher vocational education. Shortly after the second quarter, we acquired a compulsory school and associated preschool, Stockholms Internationella Montessoriskola (Stims), with approximately 800 children and students.

We have for some time been working to clarify the educational profiles of our compulsory schools. The key objective is to make it easier for families to choose the right school, and we believe this will have a positive impact going forward. Stims, one of Sweden’s leading Montessori schools, will be an integral part of this work.

It will be both stimulating and exciting to work with these schools as part of the AcadeMedia family. We are a solid, long-term owner and view acquisitions as a way for both parties to develop and learn.

Development of the Swedish school system is welcomed

Schools and education are a cornerstone of the Swedish welfare system. The development of the Swedish school, in which independent providers have an integral role, is vital. Admittedly, Swedish students’ knowledge gap in relation to other countries has stabilised, however within Sweden challenges remain when it comes to raising knowledge levels and giving all students equal opportunities. Almost 400,000 students in Sweden attend independent preschools, compulsory and upper secondary schools, which is around 19 percent of all students. It is important that independent and municipal providers work together with authorities and the Swedish Ministry of Education to develop the system and create greater equality.

The consultation period for two government inquiries expired in November 2020. These inquiries made proposals for developing the Swedish school system. Some of the proposals are progressive, while others are not as well considered. The Swedish Government Offices are now compiling the consultation comments and the government will discuss the matter with other parties. It remains to be seen whether these proposals are presented in full, in part, or not at all to a vote by the Swedish Parliament. We expect the debate how schools should be funded, organised, and developed to continue until the election.

Sterling work by our employees

During the quarter, our operations were significantly affected by the second wave of the pandemic, and larger parts of the Swedish operation than before switched to distance learning. Our colleagues across all segments are doing their utmost to create as normal an environment as possible, with continuity and a focus on learning. I cannot speak highly enough of the resilience and commitment they are showing. The Christmas holidays were a welcome break for many, providing the opportunity to recharge their batteries. I would like to conclude by expressing my heartfelt thanks to our colleagues who are handling the current situation brilliantly. And a request to everyone who is in contact with schools, either through their children or someone else, to please give the staff you meet a little extra encouragement as a thank you for their sterling efforts.

Marcus Strömberg
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 Katarina Wilson 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 8 505 583 53
UK: +44 33 3300 9034
US: 1 833 5268 382

You can follow the presentation and the conference on the following page:

https://tv.streamfabriken.com/academedia-q2-2021

The presentation material will be available before the conference begins on AcadeMedia web via https://corporate.academedia.se/en/financials/reports-presentations/  
It will also be possible to access the recorded version of the webcast after it is finished on this page.

For more information, please contact:

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

Katarina Wilson, CFO
Telephone: +46-8 794 42 91
E-mail: katarina.wilson@academedia.se

About AcadeMedia
AcadeMedia creates opportunities for people to develop. The 17,600 employees at our 661 preschools, compulsory schools, upper secondary schools and adult education centres share a common focus on quality and development. Our 182,000 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.