Attendo’s report for the first quarter 2019: Strong growth with continued margin pressure
Attendo shows continued strong growth during an otherwise challenging first quarter of 2019. There are bright spots in home care operations, sales of new beds, and high and stable occupancy in mature units. Meanwhile, the result is negatively affected by stricter staffing requirements in Finland and the high rate of openings of new units.
President and CEO Martin Tivéus comments on the report
“The start of 2019 has been challenging for Attendo. There are however several bright spots – we continued to make progress in home care, sales of new beds increased, we demonstrated strong growth in own operations and we sustained high and stable occupancy in our mature units. As we announced in March, Attendo has been heavily impacted by the debate on the conditions of care for older people in Finland, which led to, among other things, stricter staffing requirements that entails higher costs for the company. In addition, we still see margin pressure due to historical decisions regarding the opening pace of new units. In order to guarantee a long-term sustainable business where we are still a leader in quality and innovation, we will better balance the pace in terms of establishment of new nursing homes going forward.
Net sales increased by 10 percent during the quarter to SEK 2,878 million, while the adjusted operating profit amounted to SEK 160 million, a decrease of 15 percent. Organic growth remains high in own homes while we see a decrease in outsourcing especially, as a consequence of several contracts ended at the end of 2018 and early 2019, including some large nursing homes that the City of Stockholm chose to insource.
Our strategy to grow organically in own operations complemented by selective, smaller acquisitions, remains unchanged. In total, we opened over 400 new beds in own operations during the quarter and the total number of beds in own operations amounted to nearly 16,000 at the end of the quarter, an increase of 20 percent compared with the same period last year. In 2019, we will open approximately 2,000 beds in own operations, slightly lower than the 2,400 beds that we opened in 2018. Due to already existing commitments, an adjustment of the opening pace will be visible from 2020. The average occupancy rate is currently about 80 percent, comparing to mature units that show an occupancy of about 90 percent.
Stability in Attendo Scandinavia
Our Scandinavian operations displayed a stable result for the quarter in line with profits in the previous year. The profit improved in home care, mainly as a consequence of improved planning and processes and also acquisitions. At the same time, the marks of last year's restructuring of individual and family care are clearly visible, where we closed down a number of unprofitable operations, as well as the loss of both sales and profits of ended outsourcing contracts. During the quarter, we completed further acquisitions within home care and started construction of three new nursing homes with a total of 68 beds. We will also put great energy into improving our market position in the outsourcing market during 2019.
Strong growth but squeezed profits in Attendo Finland
Our Finnish operations delivered growth of 30 percent during the quarter, driven primarily by new homes in own operations and acquisitions. We opened eleven nursing homes during the quarter with a total of 352 beds and started construction of a further nine units with a total of 356 beds.
Although we lower the investment pace forward from today's level to achieve a better balance between growth and profitability, we assess the Finnish market as a continued attractive and important growth market for Attendo. During the quarter, we launched an ambitious action program in Finland following the recent intensive debate on the conditions of care for older people and stricter requirements from the authorities. The program aims to meet the stricter requirements and further strengthen quality, employee commitment and customer satisfaction, and includes, among other things, more assistants on weekdays and weekends and extended teams within quality and competence development. As we previously announced, we estimate increased costs in Finland of approximately SEK 200 million in 2019, related to these measures. As our contracts in Finland expire, we intend to seek compensation for increased demands in negotiations with the municipalities. We expect a gradual price compensation, although the outlook for adjustments is limited in 2019.
Prioritised areas for 2019
As the leading private care provider in the Nordics, we work according to three fundamental objectives: to maintain high and stable technical quality of care so that our customers and local authorities have confidence in us; to achieve the highest customer satisfaction in every location; and to provide more care for money spent than municipalities’ own alternatives. By meeting these objectives, we are creating value for our customers and the society in which we operate. A high level of trust and preference among local authorities, residents and their relatives is creating the long-term conditions for growth as well as high and stable occupancy in our units, thus also creating value for our shareholders.
Our focus areas in 2019, linked to our main objectives, are to strengthen our position as the leading provider of care in terms of quality and customer satisfaction, ensure a better balance between growth and profitability going forward and restore trust in the Finnish market. As a step to further improve quality and monitoring of care services, we continued the roll-out of our mobile service planning and documentation system during the quarter at our homes in Scandinavia. We have also allocated additional resources to values initiatives at the units and have begun a review of our quality improvement system and skills development model, where the goals are to increase customer satisfaction and our attractiveness as an employer.
Finally, having concentrated the business, including the establishment of two separate business areas, we are introducing segment reporting where the two business areas, Attendo Scandinavia and Attendo Finland, are reported separately. We are also presenting occupancy rates and profitability in mature units. We hope the new reporting will make it easier to understand both short-term trends and Attendo’s long-term potential. “
Summary of the first quarter 2019
- Net sales increased by 10 percent to SEK 2,878m (2,624). Adjusted for currency effects, net sales increased by 7 percent.
- Operating profit (EBITA) amounted to SEK 258m (258), corresponding to an operating margin of 9.0 percent (9.8).
- Adjusted EBITA, i.e.EBITA according to the previous accounting standard IAS 17, was SEK 160m (188), corresponding to an adjusted operating margin of 5.6 percent (7.2).
- Profit for the period amounted to SEK 66m (78), corresponding to a profit margin of 2.3 percent (3.0).
- Diluted earnings per share for continuing operations were SEK 0.41 (0.49).
- Free cash flow amounted to SEK -32m (78).
- The total number of beds in operation in Attendo’s own homes was 15,923 (13,216), an increase by 20 percent. Occupancy in these homes was 81 percent (82).
- In the aftermath of a large number of inspections in private care homes in Finland, there has been an intensive public discussion on care for older people in the media, among politicians and other stakeholders. Attendo has launched an action programme in order to meet increased demands and ensure high quality and customer satisfaction. Overall, this entailed increased costs of about SEK 200m in 2019, as communicated on 27 March.
- As of 2019, Attendo reports operating segments based on our two business areas, Attendo Scandinavia and Attendo Finland.
Invitation to teleconference
Investors, analysts and journalists are hereby invited to participate in a teleconference at 10:00 am (CET), hosted by Attendo’s CEO Martin Tivéus and CFO Fredrik Lagercrantz. The presentation will be held in English.
To participate in the conference, please dial in on any number below at least ten minutes before the start of the call:
SE: +46 8 505 583 53
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UK: +44 3 333 009 273
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The quarterly report and other information material will be made public on:
Attendo AB (publ)
For further information, please contact:
Andreas Koch, Communications and IR-Director Attendo
Phone: +46 705 09 77 61
Stefan Svanström, Head of Community Communications Attendo
Phone: +46 708 67 38 07
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 person set out above, at 08.00 am CET on 3 May 2019.
Attendo - the leading care company in the Nordics
Attendo is the leading private provider of publicly financed care services in the Nordic region. The company was founded in 1985 and was first to provide outsourced care for older people in Sweden. In addition to care for older people, Attendo provides care for people with disabilities and social care for individuals and families. Attendo has around 24,000 employees and is locally anchored with close to 700 operations in more than 200 municipalities in Sweden, Finland, Norway and Denmark. www.attendo.com