Attendo full-year report 2022:CONTINUED SUBDUED RESULT, FAVOURABLE CONDITIONS FOR TURNAROUND IN 2023
Attendo shows continued good organic growth for the fourth quarter as well as the full year 2022. The result however is pressured by high personnel costs and high cost inflation. Meanwhile, the development in the quarter has shown that conditions for a turnaround in 2023 are favourable, with a continued strong customer inflow in Scandinavia and significant price adjustments in Finland. Overall, there are good opportunities to reach the financial goal of a profit of SEK 4 per share with some delay from the original goal.
Comments from Martin Tivéus, Attendo president and CEO
“We have been through a weak quarter where the result was pressured by high costs for sick leave and increasing costs related to inflation and also the challenging staffing situation in Finland. These factors have also characterized a large part of 2022. During both the fourth quarter and the full year, we have had good organic growth, mainly as a result of increasingly higher occupancy in Scandinavia and previous price adjustments in Finland. Despite the previous year's weak results, the conditions are good for a turnaround in 2023. We expect higher average occupancy in Scandinavia combined with significant price adjustments in Finland as compensation for increased staffing requirements. These positive effects are offset in part by higher inflation-related costs in both business areas, some under-compensation in Sweden from payors and increased personnel costs in Finland. Overall, we see good opportunities to reach our financial goal of a profit of SEK 4 per share with some delay from the original goal for the full year 2023.
Group: Sustained good growth
We are reporting good growth of 9 percent in the fourth quarter, driven mainly by higher customer inflow in Scandinavia, price adjustments in Finland and acquisitions. This was accompanied however by high employee-related costs including those related to temporary staffing, overtime and sick leave. Inflation has also had adverse impact on the costs of food and other consumables. Lease adjusted EBITA for the fourth quarter of 2022 decreased by SEK 57 million compared to the preceding year to SEK 8 million.
Finland: Weak results during the quarter, but turnaround expected in 2023
Sales in Attendo Finland increased by about 11 percent in local currency during the quarter, owing to higher prices and acquisitions. However, the strained staffing situation due to higher staff density requirements and high sick leave prevented us from welcoming new customers and increasing occupancy at the rate we would have liked. High personnel costs related primarily to preparing for higher staffing requirements, overtime costs, high sick leave and the generally strained staffing situation are still impacting profits. Higher costs for consumables have also had negative effect on profit. This is clearly apparent in profits; lease adjusted EBITA fell by SEK 31m compared to the fourth quarter of 2021 to SEK -55m.
Staffing requirements in the Finnish care system have been increasing in stages since 2019, which has dramatically increased costs. Private care providers have not been compensated in accordance with the sharper requirements. This has led to a situation in which compensation to private providers is significantly lower than compensation to local authorities. External studies show that local authorities were already around 30 percent more expensive back in 2021. The difference is even greater today.
Renegotiation of contracts for our nursing homes in Finland is ongoing, aimed at securing compensation for previous and future cost increases, mainly related to staffing requirements, as well as wage increases, high inflation and costs related to the strained staffing situation. The staffing requirement will increase from 0.60 to 0.65 care workers per resident. This increase was determined in late January and Attendo is now negotiating based on these conditions.
At this point, about a third of contracts have been finalised ahead of the change, which will take effect 1 April 2023. The contracts negotiated thus far based on the new staffing law entail an average price adjustment of close to 30 percent. The negotiations relate to 24-hour care in nursing homes in care for older people, which constitutes approximately 50 percent of the total turnover
Already from the first quarter, we have secured certain inflation-related price adjustments of close to 10 percent for all of Attendo Finland. Overall, the price increases are expected to provide a solid basis for a recovery after several years of unsustainable conditions in the Finnish care for older people operations.
Scandinavia: High intake rate continues, profits lower than in 2021
Sales in Attendo Scandinavia increased by about 7 percent compared to the same quarter in 2021, although lease adjusted EBITA fell by SEK 25m to SEK 80m. Profit in nursing homes in own operations increased as a result of higher occupancy, but other segments are showing lower profits. Home care has had the greatest negative impact. The main reason for reduced earnings is higher personnel costs, mainly related to sick leave. In addition, we have significant effects from increased inflation.
There has been persistent strong demand for nursing home beds. We are continuing to fill an increasing number of beds in own operations in existing and recently opened homes. With few new openings in upcoming quarters and persistent good demand, we expect the positive occupancy trend in nursing homes to continue in 2023. That notwithstanding, we are going into 2023 with a higher cost base because rents and costs for consumables have increased significantly due to inflation. Likewise, wages are expected to rise more than the historical trend when current wage agreements expire later this spring. Although we are working actively with advocacy aimed at creating understanding of the importance of sustainable terms and conditions, our local authorities have not indexed contracts for 2023 upwards in pace with increased costs.
Timing of meeting the profit target of SEK 4 per share
Ahead of 2021, Attendo set a target to achieve Adjusted EPS of at least SEK 4 kronor for the full year. As previously mentioned, the challenging staffing situation in Finland affects our estimated timing for when the profit target will be met. We are also moving into 2023 with high inflation-related costs and dealing with a situation in Scandinavia in which local authorities are not fully compensating private providers for the cost increases. We are, however, seeing good progress in price negotiations and some regulatory relief in Finland and a persistently favourable occupancy trend in Scandinavia.
All in all, we expect to be able to reach SEK 4 per share with a delay of a few quarters from our original plan, i.e. in 2024. A clear year-on-year improvement is expected to be seen in the result as early as the second quarter of 2023.
Positive outcomes of customer and relative satisfaction surveys
Attendo’s long-term goal is to have the most satisfied customers in every location where we operate. This ambition is meant to motivate every local unit to do their utmost to deliver good care that does not only maintain high quality of care in terms of procedures and processes, but also maintains keen focus on happiness and quality of life for our customers, day in and day out. Towards that end, we carry out regular measurements in which we ask residents and their relatives to tell us what they think about their care. These measurements augment the industry-wide surveys conducted by public authorities.
Surveys carried out in Finland during the quarter show that the recommendation ratio (Net Promoter Score) among customers and relatives is rising, which is consistent with the overall trend in recent years. We are seeing the same trend in the Swedish operations and are happy to see higher scores for local operations that have put particular focus on communication between residents and their relatives.
When we sum up customer and relative satisfaction in 2022 for all countries in which we operate, our satisfaction scores are on par with or slightly better than the industry as a whole. We are continuing to work systematically with local units that are not attaining our targets and transferring methods and lessons learnt from highly successful local units. Through our breadth and size, we have amassed a unique bank of knowledge based on experience for providing highly rated care and we intend to become even better at improving satisfaction with our services among residents and relatives, regardless of where they live in the Nordic region. “
Summary of the fourth quarter 2022
- Net sales amounted to SEK 3,789m (3,338). Organic growth was 5.7 percent.
- Lease adjusted EBITA (EBITA according to the previous accounting standard) was SEK 8m (65), corresponding to a lease adjusted operating margin of 0.2 percent (2.0).
- Operating profit (EBITA) amounted to SEK 131m (172), corresponding to an operating margin of 3.5 percent (5.2).
- The loss for the period amounted to SEK -44m (-8). Diluted earnings per share were SEK -0.27 (-0.06). Adjusted earnings per share after dilution were SEK -0.07 (0.21).
- Free cash flow amounted to SEK 106m (153).
- There were 20,932 (21,093) beds in Attendo’s homes at the end of the period. Occupancy in the homes was 85 percent (84).
Summary of the period January – December 2022
- Net sales amounted to SEK 14,496m (12,867). Organic growth was 6.8 percent.
- Lease adjusted EBITA (EBITA according to the previous accounting standard) was SEK 199m (400), corresponding to a lease adjusted operating margin of 1.4 percent (3.1).
- Operating profit (EBITA) amounted to SEK 674m (836), corresponding to an operating margin of 4.6 percent (6.5).
- The loss for the period amounted to SEK -44m (59). Diluted earnings per share were SEK -0.28 (0.35).
- Adjusted earnings per share after dilution were SEK 0.68 (1.48).
- Free cash flow amounted to SEK 24m (249).
- The Board of Directors is proposing no dividend for the 2022 financial year.
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://ir.financialhearings.com/attendo-q4-2022
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 at 08.00 CET on 10 February 2023.
Attendo – the leading care company in the Nordics | For over 35 years, seeing, 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 more than 30,000 employees and is locally anchored with over 700 facilities in close to 300 municipalities in Sweden, Finland and Denmark. Every day Attendo has tens of thousands of encounters with its customers. In all these encounters, our employees manifest Attendo’s shared values of care, commitment and competence.