Attendo first quarter report 2022: HIGH ORGANIC GROWTH BUT PROFITABILITY UNDER PRESSURE DUE TO THE PANDEMIC
Attendo shows high organic growth during the first quarter of 2022, driven by higher prices in Finland and a normalized demand for nursing homes in Scandinavia. At the same time, the quarter is burdened by high sick leave costs in Finland as a result of the sharp spread of infection, which is expected to gradually decrease but will continue to have a negative impact on earnings during the second quarter. The margin for the Attendo Group is expected to increase during the second half of 2022.
Comments from Martin Tivéus, Attendo president and CEO
“Attendo has had strong organic growth since the autumn of 2021, driven mainly by higher prices in Finland combined with normalisation of demand for nursing home beds in Scandinavia. With organic growth of 8 percent and an underlying profit improvement, the first quarter of 2022 was no exception. At the same time, the quarter is impacted by costs related to high sick leave in Finland as a result of the strong transmission of infection in society. This is expected to gradually decrease but will continue to have a negative impact on earnings during the second quarter. The margin for the Attendo Group is expected to increase during the second half of 2022.
Our Scandinavian operation is expected to continue to develop steadily, while developments in the labor market for healthcare professionals in Finland make the outlook for the Finnish market more difficult to assess. We are taking several measures to improve the conditions for staffing in Finland. At the beginning of the second quarter, we acquired a company focused on international recruitment of care staff.
Group: High organic growth and underlying earnings improvement
We are reporting organic growth of around 8 percent during the first quarter, driven mainly by higher customer inflow and price adjustments. This was accompanied, however, by unusually high personnel costs in Finland and lower public support, which had clear impact on performance. Lease adjusted EBITA for the first quarter of 2022 decreased by SEK 44 million compared to 2021, but the underlying profit increased by approximately SEK 25 million adjusted for the impact of the pandemic and other non-recurring items.
The profit impact of the pandemic in Finland will lessen as sick leave normalises, but as virus transmission in Finland is still higher than elsewhere in the Nordic countries, we expect the costs of sick leave will remain elevated also during part of the second quarter. Late in the quarter, we also saw a markedly higher rate of inflation as a consequence of Russia’s invasion of Ukraine. Going forward, we estimate that costs will increase due to rising prices for energy, fuel, food and consumable supplies to about SEK 20 million per quarter at current price levels. We do expect a large part of this to be compensated for starting in 2023, however, through adjustments for inflation in existing contracts.
Scandinavia: Stable underlying performance and continued high inflow
We opened 60 new nursing home beds in Sweden during the quarter, bringing the total to 450 new beds in the last year. A high rate of new establishment lays the foundation for good organic growth, but constrains profit in the short term when we have more units in the start-up phase in relation to units in a ramp-up phase. The inflow rate has been clearly lower than normal during the pandemic years. Combined with the high number of openings, this has held back occupancy and profitability in Scandinavia. The high inflow rate to nursing homes remained high in the first quarter and with only about 150 new beds planned for 2022, we believe conditions are favourable for continuing to increase occupancy and profitability in our nursing homes.
By virtue of a good occupancy trend combined with acquisitions, we increased sales in Attendo Scandinavia by about 11 percent compared to the same quarter in the preceding year. Lease adjusted EBITA amounted to SEK 66 million, down by around SEK 25 million in relation to the preceding year. The decrease is explained by lower public support, whilst underlying performance in Scandinavia is in line with the first quarter of 2021, in spite of the high rate of openings during the year.
In the first quarter, Uppsala municipality cancelled Attendo’s home care contract in the municipality. The background is that a few former employees in one of Attendo’s home care unit in Uppsala have acted in bad faith against both Attendo and the municipality. These people have been reported to the police by Attendo. The loss of the contract will reduce annual revenues by about SEK 90 million.
Finland: Continued high virus transmission and greater turbulence in the Finnish labour market are impacting occupancy and profits
Although I am pleased with the strong growth of 12 percent, the overall performance is a disappointment. High sick leave increased personnel costs, public support was lower and inflation led to higher costs for consumables. These factors combined reduced profit by SEK 20 million compared to last year. Adjusted for the exceptionally high sick leave rate in Finland, however, we demonstrated profit growth in the first quarter.
We expect that sick leave will gradually be normalized, but we expect a negative impact on earnings of approximately SEK 10 million per month in our Finnish operations at least during the two initial months of the second quarter of 2022.
The occupancy trend during the first quarter was weak even though there was good underlying demand for care beds in Finland. Average occupancy fell slightly from 86 percent to 85 percent. The high sick leave due to Omicron made it difficult to find substitute employees. As a result, we could not accept customers at the rate we would have preferred, in recognition of the risk of not being able to meet the staffing requirements and because regulations prevent us from accepting new customers into homes where there is active Covid infection among either customers or staff. In addition, we have cancelled several major contracts for renegotiation ahead of 2023. Although we consider it necessary over the long term in order to ensure sustainable terms, this does mean that we will receive considerably fewer new customers in these regions in the short term.
Our key focus areas in Finland in 2022 include renegotiating all contracts ahead of 2023 to set sustainable terms and addressing staff provision in pace with rising staffing requirements.
Increased uncertainty in Finland may delay the timing of the profit target
In recent months, the challenges in the labour market for healthcare professionals in Finland have increased. Increased difficulties in finding qualified staff in combination with higher staff turnover in the market contribute to rising personnel costs. In addition, occupancy development is slowed down as we are not allowed to accept new customers if we cannot increase staffing at the same time.
Our financial target for 2023 of an adjusted earnings per share of at least SEK 4 is mainly based on improved occupancy in all markets and higher prices in Finland. In addition, there is potential from M&A. While development in Scandinavia is picking up according to plan, we believe that the challenging staffing conditions in Finland are contributing to increased uncertainty regarding both occupancy development and personnel costs in Finland. In our assessment, it is still possible to achieve the profit target in 2023, but given the current development in Finland, there is a risk that the timing may be delayed somewhat.
We have extensive work in progress in Finland to ensure the needs of employees before the summer and before the next step in the staffing reform in April 2023. We work with communication, advocacy work, new introduction programs, clearer career paths, training and compensation models. After the end of the quarter, we also acquired the international recruitment company Silkkitie. Through the acquisition, Attendo will have better opportunities to recruit nurses internationally and the goal is for us to be able to recruit 1,000 additional nurses via Silkkitie by 2024.
Support for Ukraine
We are all profoundly shaken by Russian invasion of Ukraine, where the human suffering is beyond comprehension. Immediately after the war broke out in February, teams were appointed in Finland and Sweden to determine what we at Attendo can do to help. One of the first actions was to make vacant apartments and homes available to municipalities and government authorities in the Nordic countries. We welcomed the first families from Ukraine after only a week. Attendo has no operations in Ukraine and we believe the most effective way to support the situation in the country is to donate funds to established aid organisations. Attendo chose to donate SEK 500,000 to the Red Cross, which is delivering humanitarian aid in Ukraine. Employees of our local units have also made outstanding efforts on a voluntary basis. It is gratifying to see the heartfelt engagement, capacity to take action and compassion of our employees and their commitment to supporting the numerous people who are fleeing the war. “
Summary of the first quarter 2022
- Net sales amounted to SEK 3,482m (3,062). Organic growth was 8.2 percent.
- Lease adjusted EBITA, i.e., EBITA according to the previous accounting standard, was SEK 31m (75), corresponding to a lease adjusted operating margin of 0.9 percent (2.4). Underlying profit, adjusted for the effects of the pandemic and other non-recurring items, is estimated to have increased by approximately SEK 25 million.
- Operating profit (EBITA) amounted to SEK 142m (183), corresponding to an operating margin of 4.1 percent (6.0).
- The loss for the period amounted to SEK -32m (-9). Earnings per share after dilution were SEK -0.20 (-0.06). Adjusted earnings per share after dilution were SEK 0.09 (0.26).
- Free cash flow amounted to SEK 57m (138).
- There were 21,155 (20,852) beds in Attendo’s homes at the end of the period. Occupancy in homes was 84 percent (81).
Invitation to presentation
In connection with the release of the report, a webcast presentation will be held at 10.00 am (CET) hosted by Attendo CEO Martin Tivéus and CFO Fredrik Lagercrantz.
You can follow the presentation on the following page:
https://tv.streamfabriken.com/attendo-q1-2022
Analysts and investors will have the opportunity to ask questions during the presentation by calling in. To obtain call-in details, please send your request to: kommunikation@attendo.se.
The quarterly report and other information material will be made public on:
https://www.attendo.com/
Attendo AB (publ)
For further information, please contact:
Andreas Koch, Communications and IR-Director Attendo
Phone: +46 705 09 77 61 I email: andreas.koch@attendo.com
Stefan Svanström, Head of Community Communications Attendo
Phone: +46 708 67 38 07 I email: stefan.svanstrom@attendo.com
This is information that Attendo AB (publ) 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 on 6 May 2022 at 08.00 CET.
Attendo - the leading care company in the Nordics I For over 35 years, supporting and strengthening people with care needs has been the starting point of everything Attendo does. In addition to care for older people, Attendo provides care for people with disabilities and social care for individuals and families. Attendo has approximately 27,000 employees and is locally anchored with more than 700 facilities in around 300 municipalities in Sweden, Finland and Denmark. Every day Attendo has tens of thousands of encounters with its customers. These encounters manifest Attendo’s shared values of care, commitment and competence.