Attendo second quarter report 2022: STRONG GROWTH AND IMPROVED MARKET CONDITIONS, BUT WEAK RESULT
Attendo continues to show good organic growth during the second quarter of 2022, driven by strong sales in Scandinavia and higher prices in Finland. The result, however, is hampered by difficulties to recruit qualified staff and high staff turnover, which in combination with high general inflation has had a clear negative impact in Finland and for Attendo as a whole. The first renegotiations ahead of the next step in the staffing reform has resulted in price increases of about 30 percent, which is assessed as sufficient to reach sustainable conditions in care for older people in Finland from 2023.
Comments from Martin Tivéus, Attendo president and CEO
“We saw strong sales in care for older people in Scandinavia during the quarter. Occupancy in Scandinavia is continuing to rise and combined with higher prices in Finland, we are reporting continued solid organic growth. Profit was nevertheless weak, mainly due to developments in Finland. Greater difficulty finding qualified staff combined with a higher employee turnover rate in the market is further increasing personnel costs. Combined with high inflation, this is having significant impact on performance in Finland and for Attendo as a whole.
Long-term, considerably higher prices within Finnish care for older people will be required to compensate for costs linked to the new law on care and services for older people and the steep rise in labour costs in recent years. We will be renegotiating all agreements on care for older people in Finland in 2022 ahead of April 2023, when the final phase of the Finnish staffing reform will be implemented. We finalised negotiations during the quarter corresponding to about 20 percent of the contractual volume in care for older people in Finland ahead of 2023. We have obtained an average price adjustment on these contracts of about 30 percent, a level we assess is sufficient to achieve sustainable terms in Finland from 2023.
Group: High organic growth
We are reporting organic growth of 7 percent in the second quarter, driven mainly by higher customer inflow in Scandinavia and price adjustments in Finland for the current year. We have, however, had unusually high personnel costs and higher general costs driven by inflation, which has had significant adverse impact on profit. Lease adjusted EBITA for the second quarter of 2022 fell by SEK 64 million compared to 2021.
Scandinavia: Continued strong customer inflow, underlying profit in line with last year
We have opened numerous new and modern nursing homes in Sweden in the past 18 months. It is satisfying to see a higher customer inflow as people increasingly choose Attendo’s nursing homes. Occupancy increased by 1 percentage point to 82 percent and we expect the positive occupancy trend to continue in future quarters, as we are seeing good demand while opening fewer new homes. We still have some way to go before we are back at the target level of 90 percent we had before the pandemic.
Sales in Attendo Scandinavia increased by about 10 percent compared to the same quarter in 2021. Underlying EBITA was in line with the previous year, while reported lease adjusted EBITA increased by SEK 10 million to SEK 84 million. EBITA includes positive non-recurring items of about SEK 30 million (18). Personnel costs during the quarter were somewhat higher than expected, as a result of e.g. costs related to sick leave and increased costs for temporary staffing ahead of the summer holiday period.
Finland: Challenges in the Finnish labour market are impacting the occupancy trend and profit
We achieved growth of 8 percent in local currency during the quarter, but financial performance was clearly disappointing. Continued high personnel costs due to imbalances in the labour market and rigid regulatory requirements, high sick leave during the quarter and large increases in the costs for consumables have clearly pressured operating profit, which decreased by SEK 75 million compared to 2021. Corona effects have had a negative effect on earnings of approximately SEK 15 million, compared with the previous year Although we are working intensively to improve the trend in the second half of 2022, we believe the underlying challenges will persist in the short term.
We have, however, received positive long-term indications during the quarter. Our key focus areas in Finland in 2022 involve renegotiating all contracts ahead of 2023 and setting sustainable terms and addressing staff provision to meet rising staffing requirements.
We finalised negotiations during the quarter of about 20 percent of all contracts ahead of 2023 when the final phase of the nursing home staffing law will be implemented and the staff requirement will increase from the current 0.6 care workers per resident to 0.7. On average, the renegotiated contracts entail price increases of about 30 percent, a level we assess is sufficient to achieve sustainable terms in Finland, although the staffing situation remains strained. As these continued negotiations are of great importance for long-term profitability in Finland, we intend to report the results of completed negotiations in upcoming quarterly reports.
The care industry has worked intensively to get politicians and the public to understand the consequences of the new staffing law and the strained situation in the Finnish labour market for care workers. We are now seeing rising awareness, and government agencies and politicians at the national level are working to find solutions to ensure better conditions for care providers to perform their services. The supervisory authorities (AVI/Valvira) have updated their guidelines regarding the share of care staff in nursing homes permitted to be care assistants. This gives us greater flexibility when recruiting staff and it will make it easier to meet the staffing requirements. It also means that the step up to 0.7 in April 2023 will be less dramatic in an already strained labour market.
Timing for meeting the profit target of SEK 4 per share
In the beginning of 2021, Attendo set a goal to reach an adjusted earnings per share of 4 SEK for the full year 2023. As previously mentioned, the challenging situation in Finland affects the timing for meeting this target. Given the good progress regarding price negotiations in Finland, regulatory relief and a positive occupancy trend in Scandinavia, we still expect to reach a profit level of 4 SEK per share, while the timing is likely to be delayed somewhat.
Focus on well-being and quality of life
Our ambition within Attendo is to expand the perspective on quality to include well-being and quality of life, alongside the more traditional approach to quality of care. Accordingly, we are now designing models and systems in Finland and Sweden to improve quality of life for our customers. We are seeing positive outcomes in our pilot studies where sharper focus on follow-up and personal action plans in this area are leading to improvements in customers’ self-assessments of their life situations. I consider this a high priority for the next few years as we take the next steps in fulfilling our mission to “empower the individual”. Every human being, regardless of age or life situation, wants to be seen, heard and understood. If we at Attendo can help make the lives of people who need care a little better, we will also contribute to a better society in which more people feel they can live life on their own terms. “
Summary of the second quarter 2022
- Net sales amounted to SEK 3,546m (3,207). Organic growth was 6.7 percent.
- Lease adjusted EBITA (EBITA according to the previous accounting standard) was SEK -11m (53), corresponding to a lease adjusted operating margin of -0.3 percent (1.7).
- Operating profit (EBITA) amounted to SEK 106m (162), corresponding to an operating margin of 3.0 percent (5.1).
- The loss for the period amounted to SEK -63m (-19). Diluted earnings per share were SEK -0.39
(-0.12). Adjusted earnings per share after dilution were SEK -0.14 (0.19). - Free cash flow amounted to SEK 134m (72).
- There were 21,062 (20,858) beds in Attendo’s nursing homes at the end of the period. Occupancy in the homes was 84 percent (83).
Summary of the period January - June 2022
- Net sales amounted to SEK 7,028m (6,269). Organic growth was 7.4 percent.
- Lease adjusted EBITA (EBITA according to the previous accounting standard) was SEK 20m (128), corresponding to a lease adjusted operating margin of 0.3 percent (2.0).
- Operating profit (EBITA) amounted to SEK 248m (345), corresponding to an operating margin of 3.5 percent (5.5).
- The loss for the period amounted to SEK -95m (-28). Diluted earnings per share were SEK -0.59
(-0.18). Adjusted earnings per share after dilution were SEK -0.06 (0.45). - Free cash flow amounted to SEK 191m (210).
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-q2-2022
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 and the Securities Market Act. The information was submitted for publication, through the agency of the contact persons set out above at 08.00 CET on 21 July 2022.
Attendo - the leading care company in the Nordics I 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 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.