Attendo's report for the first quarter of 2020 – Clear focus on moderating the effects of the Corona-virus
Attendo reports continued good organic growth and progress in the actions taken to regain profitability in existing operations. However, the first quarter of 2020 was overshadowed by the acute spread of the Corona-virus, which affects both Attendo’s customers and operations short-term. Since early March, Attendo has been taking powerful measures to moderate the effects of the virus.
President and CEO Martin Tivéus comments on the report
“The second half of the first quarter was clearly characterised by the ongoing coronavirus pandemic in all of our markets. A large percentage of our customer group are in the risk groups for Covid-19. Accordingly, the entire organisation has been focused since early March on preventing the effects of the pandemic among customers and employees.
Efforts to combat Covid-19 primarily involve preventing the infection from reaching care home residents and home care customers and providing isolation care to customers with confirmed or suspected infections. As part of the preventive efforts, we were the first private care provider in the Nordic countries to suspend all visiting at care homes and to introduce health screening, including taking temperatures, of staff before each shift.
In mid-March, we decided to purchase a large quantity of personal protective equipment (PPE), aimed at providing PPE to employees providing care in all close physical contact with customers during the acute phase of the pandemic, in severely affected geographies. This ambition exceeds the recommendations of relevant government authorities, but something we are convinced is necessary to increase the level of protection for our frail customers. We have successively brought in more PPE and are now applying this method for customers in risk groups in selected geographies. However, we have always managed to secure sufficient volumes of PPE to apply this in the care of customers with suspected or documented infection in accordance with the recommendations of the authorities.
The staffing situation has at times been strained but under control. During the crisis we have received a large number of spontaneous applications and it is with pleasure that we see tendencies towards an increased interest in the care profession.
The corona situation had a certain financial impact on Attendo during the first quarter but is expected to have a more significant impact during the year and specifically in the second quarter. The costs increase when we buy large quantities of protective equipment to be able to increase the level of protection for the elderly and, in addition, our cost of sick leave increases as a result of our rigorous control of symptoms of illness among employees. Currently, our best estimate is that this means additional costs of approximately SEK 100 million during the rest of the year, of which the majority is expected to hit the second quarter. In addition to higher costs, we saw signs in April for a short-term negative demand effect due to concerns about the corona situation. At this stage, it is difficult to quantify any potential revenue impact for 2020. In the long term, however, we do not see that the corona situation should have any significant impact on either demand or occupancy.
Financial performance in the first quarter
Organic growth increased during the first quarter, driven by higher occupancy and the high rate of openings in Sweden and Finland. Net sales increased by 8 percent during the first quarter to SEK 3,128m adjusted for currency effects. Organic growth rose to 5.9 percent due to more sold beds in Finland and Scandinavia, price effects resulting from renegotiated contracts and index adjustments, as well as the leap day in 2020.
EBITA amounted to SEK 182m, a decrease of 29 percent compared with the preceding year. The decrease in profit is explained by higher costs in the Finnish operations and more empty beds due to the continued high rate of openings, while Scandinavia reported a small increase in profit.
Attendo opened 648 new beds in own operations during the quarter and the total number of beds in own operations at the end of the year was 17,260. We have sharply decelerated the rate of expansion in Finland, but the rate of openings will remain high during the second quarter of 2020 due to long lead-times for already ongoing projects.
Stable profits in Attendo Scandinavia
Our Scandinavian operations demonstrated persistently stable development in the first quarter. Net sales in the first quarter increased by about 4 percent, driven by more sold beds in own operations, contractually agreed price increases and acquired operations in home care. Net sales in outsourcing increased slightly, while net sales in individual and family care were stable. Overall, profits for Attendo Scandinavia were on par with profits for the first quarter of 2019.
We opened 255 new beds in Sweden during the first quarter, primarily in care for older people, which reduced profits for the first quarter. We will be increasing the rate of openings in Scandinavia in 2020 compared to 2019. This is creating the conditions for long-term growth and value creation, but is expected to have short-term negative impact on profitability during the start-up phase.
Turnaround programme in Finland showing early effects
Net sales in Attendo Finland increased by about 14 percent in the first quarter compared to the comparison quarter in 2019. The sales increase was driven primarily by more sold beds and positive price effects. Profit was, however, considerably lower than in the first quarter of 2019.
Increased personnel costs due to sharper staffing requirements imposed in 2019, a large number of units in the start-up phase and a persistently high rate of openings are the primary explanations for the decrease in profit compared to the same period in the preceding year. At the same time, renegotiated contracts and index-adjusted contracts going into 2020 had positive effect on profits. For the full year 2020, positive price effects are expected to about 3 percent of net sales and a large share of the price adjustments occurred in the first quarter.
Compassionate care has never been more important
Attendo is well-equipped to provide care to people who need it, under exceedingly difficult circumstances. We have clear procedures for reducing the risk of infection in our units and we are using proven methods to care for infected customers. Our committed employees in care operations are doing their outmost every single day to prevent infection while providing warm and personal care. Although we are seeing signs that the pandemic may be receding, we expect a period in which our customers will need to be isolated, and our job to enable communication with families, create bright spots in day-to-day life and increase the quality of life in its later phase will become even more important. Compassionate care has perhaps never been more important than now and we must all – within Attendo, society in general and each of us as individuals – support the most vulnerable among us.“
Summary of the first quarter 2020
- Net sales increased by 9 percent to SEK 3,128m (2,878). Adjusted for currency effects, net sales increased by 8 percent.
- Operating profit (EBITA) amounted to SEK 182m (258), corresponding to an operating margin of 5.8 percent (9.0).
- Adjusted EBITA, i.e. EBITA according to the previous IAS 17 accounting standard, was SEK 84m (160), corresponding to an adjusted operating margin of 2.7 percent (5.6).
- Profit for the period amounted to SEK 3m (66), corresponding to a profit margin of 0.1 percent (2.3).
- Diluted earnings per share were SEK 0.02 (0.41).
- Free cash flow amounted to SEK 226m (-32).
- The total number of beds in operation in Attendo’s own care homes was 17,260 (15,923), an increase by 8 percent. Occupancy in own care homes was 80 percent (81).
- The coronavirus pandemic has a serious impact on Attendo’s operations and the company makes great efforts to protect customers and employees. The financial effects of the coronavirus situation amounted to approximately SEK 20m for the first quarter and additional costs for the rest of the year are currently estimated to SEK 100m. In addition, impact on sales are expected.
Invitation to teleconference
Investors, analysts and journalists are invited to participate in a teleconference at 10:00 am (CET) hosted by Attendo’s CEO Martin Tivéus and CFO Fredrik
Lagercrantz. To participate in the conference, please dial in on any number below:
SE: +46 8 50 55 83 65
FI: +358 981 710 523
UK: +44 333 300 90 31
You can follow the presentation and the conference on the following page:
https://tv.streamfabriken.com/attendo-q1-2020
The report and related information material is available 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
E-mail: andreas.koch@attendo.com
Stefan Svanström, Head of Community Communications Attendo
Phone: +46 708 67 38 07
E-mail: 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 6 May 2020.
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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 approximately 25,000 employees and is locally anchored with more than 700 operations in around 300 municipalities in Sweden, Finland, Norway and Denmark. www.attendo.com