AcadeMedia’s interim report July – September 2019

First quarter (July – September 2019)

• Net sales increased by 6.8 percent and amounted to SEK 2,502 million (2,343). Organic growth, including bolt-on acquisitions, was 6.8 percent.
• Operating profit (EBIT) amounted to SEK 129 million (58). Excluding the effects of IFRS 16, EBIT was SEK 75 million (58), which was an increase of 29.3 percent. Operating profit, adjusted for items affecting comparability and effects of IFRS 16, amounted to SEK 75 million (52).
• Net profit for the period amounted to SEK 16 million (31). Excluding the effects of IFRS 16, it was SEK 46 million (31).
• Cash flow from operating activities amounted to SEK 326 million (-219). Excluding the effects of IFRS 16, it was SEK- 29 million (-219).
• The average number of children and students in preschool, compulsory school and upper secondary school during the first quarter was 81,468 (78,770), representing an increase of 3.4 percent. Growth was completely organic.
• Earnings per share was SEK 0.15 (0.30) before dilution and SEK 0.15 (0.30) after dilution. Adjusted for IFRS 16 effects, earnings per share was SEK 0.43 (0.30) before dilution and 0.43 (0.30) after dilution.

Implementation of IFRS 16 has a significant effect on AcadeMedia’s financial statements. To simplify the comparison, AcadeMedia will also present the 2019/20 financial year adjusted for IFRS 16 as a complement. This is described as “Excluding the effects of IFRS 16”. Important key performance indicators and key performance indicators based on rolling 12 months are presented excluding the effect of IFRS 16. The segments within AcadeMedia have unchanged accounting principles compared to last year and will continue to report all leases as operating leases.

The complete report will be made available at https://corporate.academedia.se/en/financials/reports-presentations/

Comments from CEO Marcus Strömberg

Our financial year had a stable start with a 3.4 increase in the number of children and students at our schools. This contributed to good revenue growth and a solid start to the financial year. We opened six new preschools in Germany during the quarter and are accelerating growth according to plan. In Adult Education, cost-cutting measures have been effective and the situation has stabilised. Several contracts have been extended pending new tender processes.

Organic growth of 3.4 percent

Autumn is a fun period for us as we welcome all the children and students to their new class or school after the summer. This year we opened twelve new units, which is one reason why the number of children and students in AcadeMedia’s preschools and schools increased by 3.4 percent during the first quarter compared with the previous year.

In Sweden, the compulsory schools have 3.8 percent more students on a like-for-like basis. In the Upper Secondary Schools segment, four new schools opened in the autumn of 2019 and new students were also admitted to new establishments from previous years. Student enrolment in the Upper Secondary Schools segment increased by a total of 4.8 percent.

In the new Preschool segment, which includes preschools in Sweden, Norway and Germany, the number of children increased by 1.4 percent. Adjusted for divested Swedish preschools, the number of children increased by 5.6 percent on a like-for-like basis. All in all, this volume growth provides a solid basis for AcadeMedia’s development in the coming years.

In addition to the growth in existing units, AcadeMedia continues to make selective bolt-on acquisitions. In Sweden, Helix Gymnasiet was acquired in the fourth quarter of 2018/19 and two small preschools were acquired after the reporting period. Bolt-on acquisitions are a source of value creation since they are usually high quality, well attended schools that can be quickly integrated into AcadeMedia’s management and support structure.

Accelerating growth in Germany

In the Preschool segment, Germany in particular has undergone strong growth during the quarter. Six new preschools with room for about 500 children opened in August and September 2019. This represents an increase of 16 percent over the number of places at the end of June 2019. In the current financial year (2019/20), six to nine additional new establishments are planned with room for more than 600 children. Moreover, new establishments with room for an additional 1,800 children are already under contract, which means that in a few years AcadeMedia locations in Germany will have over 6,000 preschool places. In addition, negotiations are underway for a pipeline of new establishments. It is extremely rewarding to see growth in Germany take off.

Adult Education stabilised

In the Adult Education segment, several positive events have occurred during the quarter. In Higher Vocational Education, the number of participants increased by over 30 percent. Higher Vocational Education, which accounted for 18 percent of the Adult Education segment in the 2018/19 financial year, is at 24 percent and is growing faster than other parts of the segment.

In Municipal Adult Education, there are two important tenders currently pending with the City of Gothenburg and the City of Stockholm. The Gothenburg tender will be redone following a legitimate appeal. The Stockholm tender has also been appealed, which means that there will be a delay until new contracts are signed. The good news is that both municipalities have chosen to extend their current contracts with AcadeMedia until next summer so that the participants can continue their training until these tenders are completed.

Regarding the Swedish Public Employment Agency, our cost measures have been effective. This business area has also diminished and represented 12 percent (18) of sales in the Adult Education segment for the first quarter of 2019/20, compared with 17 percent for the 2018/19 financial year.

New pension scheme in Norway

In Norway, employers and employees have agreed on a new pension plan that will take effect on 1 January 2020. It is extremely encouraging that about 80 percent of employees will switch to a defined contribution plan, which provides greater predictability in pension costs. The full financial impact of this transition is not yet clear, but preliminary indications suggest there will be a one-off positive impact on earnings of around SEK 60 million.

New accounting rules have a major impact

As a company, AcadeMedia has chosen to invest its resources in delivering quality education and therefore leases the majority of all its premises. School operations are a long-term, stable business with municipalities as a stable customer. This justifies longer leases for school operations and shorter leases for adult education. Adjusting the lease duration is an easy way to mitigate the operational risk in the underlying operations. With the introduction of IFRS 16, which takes place this quarter for AcadeMedia, these right-of-use assets are capitalized and SEK 7.3 billion is added to the balance sheet. This is a major change in accounting, but no change has taken place in our operations or business relationships. In this report, we have tried to make it as easy as possible for external assessors to have continuity in the figures and to understand the underlying developments.

Improved quality performance in Upper Secondary Schools segment

Last week, AcadeMedia's quality report was published with the Group's aggregate results for 2018/19. As we sum up the past academic year, we see both good results and continuing challenges. We are pleased with the continued good quality results in our Swedish and Norwegian preschools, and also with the creation of an organisation-wide method for tracking and developing quality in our Scandinavian preschools. In Norway, preschools have now started "Espira Blikk", which is the Norwegian equivalent of Pysslingen's established model for driving development of learning and care at all preschools. At the same time, like all schools in Sweden, we work with challenges to increase the equivalence of education. More information on AcadeMedia’s quality results can be found in our quality report for 2018/19 and further back in this report.

AcadeMedia is becoming more equal

I am pleased to report that AcadeMedia is the fourth in terms of gender equality among listed companies in Sweden according to the Allbright Foundation’s annual report on gender equality, a massive improvement from 34th place the previous year.  This accomplishment shows that AcadeMedia has made great progress in terms of increasing gender equality and diversity in the company. We have not yet reached our goal, but we will continue efforts to achieve equal representation in executive positions. It is important that our children, students and adult participants have role models in the classrooms that reflect what society really looks like – which of course we believe creates added value for our business.

Marcus Strömberg
President and CEO 
AcadeMedia AB (publ) 

Presentation of the report

A web-cast telephone conference will be held at 09:30 CEST 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 2693
UK: +44 33 3300 9266
US: +1 833 5268 347

You can follow the presentation and the conference on the following page::
https://tv.streamfabriken.com/academedia-q1-2019

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
E-mail: marcus.stromberg@academedia.se

Eola Änggård Runsten, CFO
Telephone: +46 8 794 4240
E-mail: eola.runsten@academedia.se

About AcadeMedia
AcadeMedia creates opportunities for people to develop. The 16,900 employees at our 660 preschools, compulsory schools, upper secondary schools and adult education centres share a common focus on quality and development. Our 180,000 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 08:00 CEST 23 October 2019.