AcadeMedia’s interim report July 2018 – March 2019
Third quarter (January – March 2019)
- Net sales increased by 5.7 percent and amounted to SEK 3,135 million (2,967). Organic growth, including bolt-on acquisitions, was 4.5 percent.
- Operating profit (EBIT) increased by 10.5 percent to SEK 231 million (209). Retroactive revenues from prior years amounted to SEK 20 million and is included in items affecting comparability. Adjusted for items affecting comparability, operating profit was SEK 210 million (214).
- Net profit for the period was SEK 172 million (152).
- Cash flow from operating activities amounted to SEK 129 million (153).
- The average number of children and students, excluding the Adult Education segment, increased by 4.8 percent to 79,873 (76,188).
- Earnings per share amounted to SEK 1.63 (1.45) before dilution and SEK 1.63 (1.44) after dilution.
First nine months (July 2018 – March 2019)
- Net sales increased by 9.4 percent to SEK 8,554 million (7,818). Organic growth including bolt-on acquisitions amounted to 4.0 percent.
- Operating profit (EBIT) decreased by 8.6 percent to SEK 416 million (455). Retroactive revenues from prior years amounted to SEK 36 million and is included in items affecting comparability. Adjusted for items affecting comparability, operating profit was SEK 402 million (463).
- Net profit for the period amounted to SEK 282 million (320).
- Cash flow from operating activities amounted to SEK 258 million (552).
- The average number of children and students, excluding the Adult Education segment amounted to 79,326 (72,410), representing an increase of 9.6 percent.
- Earnings per share was SEK 2.69 (3.25) before dilution and SEK 2.68 (3.24) after dilution.
The complete report will be made available at https://corporate.academedia.se/en/financials/reports-presentations/
Comments from CEO Marcus Strömberg
The third quarter shows healthy growth in number of students in all segments. EBIT increased 10 percent in the quarter and margins are stabilizing in the school segments. Adult Education continues to be challenged by the changes at the Swedish Public Employment Service. The quarter also includes substantial retroactive revenues from municipalities following positive outcome of legal cases regarding adherence to the Equal terms law.
Earnings improved in the school segments
The third quarter continues to show strong earnings in the school segments, and we see margins stabilizing. The Pre- and Compulsory School Segment had earnings and margins in line with last year while the Upper Secondary School Segment continues to show strong margins. This is both due to strong underlying growth and due to large retroactive payments.
The adult education has a record number of participants in its training programs but continues to have a mixed financial performance. As described earlier, the higher vocational education and municipal training are doing well while the business for employment related training continues to be weak. During the quarter the Swedish Public Employment Service has launched substantial cut-backs in its own organization which obviously will have an impact on the volume of students allocated to various programs. The Adult Education Segment continues to work hard at reducing resources and costs in this market area.
Development of preschool portfolio
AcadeMedia has made a strategic review of its preschool units in Sweden in order to improve quality and operations and to meet a strong demand of good pre-school education. We have identified a number of potential new establishments and bolt-on acquisitions as well as some divestments to be undertaken. The goal is to focus our locations to municipalities who share our view on quality and resource requirements in pre-schools. By leaving some municipalities where voucher levels do not provide for a sustainable quality level, we aim to enhance both the quality and margin of our Swedish preschool portfolio.
Fair voucher levels – Equal terms law
Fair voucher levels for privately run schools is critical to AcadeMedia’s ability to run qualitative and stable operations. The Equal Terms law was enacted in 2010 and states that the voucher should reflect the municipality’s own resource allocation so that students who choose an independently run school are not disadvantaged. The intention is good, but in reality, transparency in municipal financial reporting is lacking and it is difficult to ensure equal terms. For this reason, AcadeMedia has stepped up its activities on all fronts in the last year to ensure that the law is followed. So far, our efforts have paid off with a number of retroactive payments recently from municipalities relating to budget deficits in prior years. Year to date, a total of SEK 36 million (-) has been paid out and accounted for as items affecting comparability.
The voucher (price) revisions for 2019 are now clear and we can conclude that the average revision for our Swedish schools is around 2.5 percent and for Norwegian preschools is 3.4 percent. This is roughly the same level of increase as for 2018. However, the revision levels vary among municipalities and school forms. Although this year’s revisions are decent the voucher levels have fallen behind the actual cost increases for a number of years and thereby challenged our margins.
AcadeMedia will continue to appeal voucher levels, review municipal budget deficits, and also discuss with various organizations and policy makers on a regional and national level in order to defend our student’s rights.
The Norwegian staffing regulation
As previously communicated, the Norwegian parliament (Stortinget) last year decided to impose new staffing regulations for all preschools. As of August 2018, there are requirements regarding the ratio of trained preschool teachers to children and as of August 2019, a regulation regarding the adult to child ratio will be enforced. So far, the transition to a higher proportion of qualified staff has been well managed and we now move into the next phase of this adjustment. Due to the time lag in voucher cost base (as explained later in the report) we envisage a short-term downturn in earnings in the Norwegian operation following these changes. However, after a two-year adjustment period there should be full cost flow-through.
Client and employee survey show improvements
The annual client satisfaction survey was performed during the first months of the quarter and the results are encouraging. Especially in the upper secondary schools there is a substantial improvement in the student’s promotor score. In the other school segments the recommendation level is stable.
In addition, the annual Swedish employee survey continues to show high satisfaction levels. This is now the fifth consecutive year with high and increasing satisfaction among our employees. 85 percent (84) of all Swedish staff are proud of their workplace and 84 percent (85) have a high confidence in their manager. This is very encouraging as the quality of our education is entirely dependent on the people and leaders in our organization. We also note that our staff turnover has improved considerable albeit from a high level. All in all, this provides for a good outlook going forward.
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 8 566 427 04
UK: +44 33 3300 9266
US: +1 833 8230 590
You can follow the presentation and the conference on the following page: https://tv.streamfabriken.com/academedia-q3-2019
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
Eola Änggård Runsten, CFO
Telephone: +46 8 794 4240
AcadeMedia creates opportunities for people to develop. The 17,500 employees at our 660 preschools, compulsory schools, upper secondary schools and adult education centres share a common focus on quality and development. Our 179,900 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 CET May 7, 2019.