Attendo’s first quarter report 2023: PROGRESS IN FINLAND IMPROVE THE RESULT
Attendo reports a clear improvement in operating result and continued strong organic growth in the first quarter of 2023. Growth increased by 16 percent, driven primarily by price adjustments in Finland, acquisitions and higher occupancy in Scandinavia. The general cost level has increased, however, and the sick-leave rates remain elevated. All-in-all, operating result amounted to SEK 116m, an increase of SEK 85m from last year.
Comments from Martin Tivéus, Attendo president and CEO
“The first quarter of the year was characterised by preparations for the new staffing standard in Finland, related to access to competence, quality improvement and renegotiations of contracts in care for older people. The new contracts provide the conditions going forward to provide good care at lower cost than publicly operated alternatives while once again turning to surplus after several years in the red. The outcome of the new contracts from April are in line with expectations and previous communications. We see a clear improvement in earnings already in the first quarter as an effect of positive price effects already from the turn of the year in combination with well-executed preparations ahead of the new staffing standard.
Financial performance in the Scandinavian business was flat, where improvements generated by higher occupancy were offset by annual price adjustments that did not fully compensate for cost increases.
With price and cost conditions clarified, we can assess our capacity to achieve the financial targets we set in early 2021 with greater certainty. Overall, we see good potential to achieve SEK 4 per share in 2024, thus a quarter or two later than originally planned.
Group: High growth and improved performance
We are reporting growth of 16 percent in the first quarter, driven primarily by price adjustments in Finland, acquisitions and higher occupancy in Scandinavia. Costs have increased in both business areas, however, and sick-leave rates remain elevated. Lease-adjusted EBITA for the first quarter of 2023 increased by SEK 85 million compared to the preceding year to SEK 116 million, corresponding to an operating margin of 2.9 percent.
Finland: Clear turn-around already in Q1
Sales in Attendo Finland increased by around 17 per cent in the quarter in local currency, mainly due to higher prices and acquisitions, but also good growth in other segments. Price increases of about 12 percent of sales starting at the beginning of the year combined with operational improvements have clearly improved adjusted EBITA, which amounted to SEK 73m for Q1, an increase of SEK 91m compared to Q1 2022. Operating result is still being held back by high personnel costs related primarily to preparing for higher staffing requirements, overtime costs and high sick leave, although these costs were somewhat lower than expected. Rents increased by about 10 percent during the quarter.
Staffing requirements and other regulatory requirements have successively increased in Finland since 2019. As of 1 April 2023, the staffing requirement will increase from 0.60 to 0.65 care workers per resident. The costs of providing Finnish care for older people have thus increased dramatically, exceeding 50 percent across a period of five years.
The renegotiations of contracts for our nursing homes in Finland completed in Q1 were thus aimed at securing reasonable compensation for previous and upcoming cost increases due to higher regulatory requirements and the high rate of inflation in the past year.
The contract negotiations resulted in an average price adjustment of about 12 percent of total sales in Attendo Finland in Q1. Additional price effects in Q2 are estimated at 6-7 percent of total sales. Cost increases are estimated to be 1-2 percentage points lower.
On the whole, the new contractual situation provides a basis for recovery after several years of unsustainable conditions in the Finnish nursing home business.
Scandinavia: Improvements in occupancy offset by costs inflation
Sales in Attendo Scandinavia increased by about 5 percent compared to the corresponding quarter last year, primarily as a consequence of higher occupancy in nursing homes in own operations and price adjustments. Lease-adjusted EBITA was slightly lower at SEK 61m (66).
Operating result in nursing homes in own operations increased as a result of higher occupancy compared to the same period in 2022. Staffing costs remain high and no compensation has been paid for higher sick-leave, compared to the preceding year. Inflation has also had significant impact, primarily in terms of higher costs for rent, food and consumable supplies that had not been fully compensated for by Swedish local authorities ahead of 2023.
Consequently, the company and the industry as a whole need to work actively among contracting local authorities to create better understanding for sustainable terms and conditions.
Favourable conditions for reaching SEK 4 per share in 2024
Ahead of 2021, Attendo set a target to achieve adjusted EPS of at least SEK 4 for the full year 2023. The turnaround programme was based mainly on renegotiation of contracts in Finland to secure compensation for increased requirements, combined with post-pandemic recovery of occupancy levels. As we have noted previously, the challenging situation in the labour market for care workers in Finland, as well as high inflation, have affected our estimate of when the profit target will be reached.
Now that the renegotiations of contracts in care for older people in Finland are by and large complete, we see good potential to achieve SEK 4 per share in 2024, one or a few quarters later than originally planned. Financial performance improved in Q1 and we expect further improvements in Q2.
Quarterly sustainability reporting from 2023
According to the UN's Agenda 2030, a sustainable society is based on people with needs having good and equal access to high-quality health and care services. As a large care company, our focus areas for sustainability lie primarily within the social dimension, with a focus on our customers, quality and care solutions and employees. In the past, we have reported sustainability data annually, but starting in 2023, we will gradually increase reporting quarterly as well.
This quarter we can see that customer satisfaction increased in both Sweden and Finland. We are also starting to report the measurements we make in the area of quality of life starting in Finland, where the RAI methodology gives us the opportunity to measure perceived quality of life. Continuously measuring quality of life is key to meeting the individual's needs in order to provide person-centred care. It also supports the ambition our company has had since the beginning in 1985 and which we have been expressing for over 20 years as "empowering the individual".
Commitment is the key to good care
We know that empowered and committed employees are the single-most important factor in realising our ambition to achieve high-quality care and the highest customer satisfaction in every location of operation. We also know that structural demand for care workers is increasing in pace with an ageing population and higher staffing requirements. There has been imbalance in the Finnish labour market for several years.
We are working intensively to address this situation and to attract and retain the best employees. We have made major strides in the past year in Finland, where the situation has been the most critical. Among other actions, we have implemented and improved our induction programme for all employees, expanded our internal training academy and implemented an updated leadership programme for all managers. We have also expanded leadership training for all new managers in Sweden and launched several initiatives to create clearer career paths for our employees and position Attendo as a preferred employer. We strongly believe that satisfied employees are the key to delivering good care and ensuring that more people choose Attendo in the future. “
Summary of the first quarter 2023
- Net sales amounted to SEK 4,044m (3,482). Organic growth was 8.9 percent.
- Lease adjusted EBITA (EBITA according to the previous accounting standard) was SEK 116m (31), corresponding to a lease adjusted operating margin of 2.9 percent (0.9).
- Operating profit (EBITA) amounted to SEK 241m (142), corresponding to an operating margin of 6.0 percent (4.1).
- The profit for the period amounted to SEK 28m (-32). Diluted earnings per share were SEK 0.17 (-0.20). Adjusted earnings per share after dilution were SEK 0.43 (0.09).
- Free cash flow amounted to SEK 8m (57).
- There were 20,923 (21,155) beds in Attendo’s homes at the end of the period. Occupancy in the homes was 86 percent (84).
Invitation to presentation
In connection with the release of the report, a webcast presentation will be held at 11.00 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-q1-2023
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 26 April 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.