Internationella Engelska Skolan Interim report 1 july-31 march 2018/2019

Third quarter (January-March)

• Operating income increased by 17.5% to MSEK 743.1 (632.3), of which organic growth amounted to 10.5%
• The number of students in the Swedish operation at the end of the quarter was 25,555 (23,971)
• The number of registrations in the queue in Sweden at the end of the quarter was about 199,700 (178,800)
• Operating profit (EBIT) rose 21.8% to MSEK 64.2 (52.7)
• The operating margin was 8.6% (8.3)
• Adjusted for items affecting comparability of MSEK 6.2 (0), the operating margin was 9.5% (8.3)
• Profit for the quarter totalled MSEK 47.9 (42.8)
• Earnings per share were SEK 1.19 (1.07)
• Cash flow for the period was MSEK 3.1 (70.5)
• Cecilia Marlow was appointed Interim CEO in January, when the previous CEO left her position

First nine months (July-March)

• Operating income increased by 16.6% to MSEK 2,024.7 (1,736.5), of which organic growth amounted to 10.0%
• Operating profit (EBIT) increased by 10.3% to MSEK 137.6 (124.7)
• The operating margin (EBIT) was 6.8% (7.3)
• Adjusted for items affecting comparability of MSEK 6.4 (2.7), the operating margin was 7.1% (7.3)
• Profit for the period totalled MSEK 100.3 (97.0) and earnings per share were SEK 2.50 (2.42)
• Cash flow for the period was MSEK 54.5 (46.8)

After the end of the period

• On 1 April 2019, through its wholly owned Spanish subsidiary International Education Partnership, S.L. (IEP), IES acquired 99.4% of the shares in Colegio Internacional de Valladolid, a school fee-funded private school in Valladolid, Spain, with 294 students 
   

CEO’s comment

IMPROVED PROFITABILITY
The third quarter showed continued strong growth, up 17.5% year-on-year, due to acquisitions in Spain and more students in Sweden. The margin also improved due to a better balance between the increase in school voucher funding and teacher salaries, respectively. At the same time, we can see that our efforts to appeal incorrect school voucher decisions are yielding results. We are continuing to grow in Spain through acquisitions and as planned, the operations developed favourably.

Strong third quarter
Our third quarter was characterised by strong growth and improved profitability. In addition, the final school voucher decisions for 2019 were slightly better than the preliminary decisions we received and rose by just over 3% compared with 2018.

Operating income for the July to March period increased by 16.6% to MSEK 2,024.7, of which organic growth amounted to 10.0%. The operating margin (EBIT) adjusted for costs affecting comparability related to the CEO change in January was 7.1% (7.3).

For the second consecutive quarter, we can see that teacher salary increases have levelled out while school voucher increases better reflect the costs. We have been working with municipalities for several years to ensure that the school vouchers we receive are correct, which has also led to retroactive payments from some municipalities. In Sweden, revenues per student rose 3.0% in the first nine months, while personnel costs per student, adjusted for items affecting comparability, rose 4.3%.

Research supports bilingual education
IES has provided bilingual education since 1993 based on the belief that English is the key that gives our students access to the whole world. In today’s globalised world, it is more relevant than ever to have full command of English, while Swedish is vital for participation in the Swedish labour market and culture.

However, the benefits of bilingual education are far greater. More and more studies are showing that bilingualism improves cognitive abilities, such as working memory and the ability to focus and reason. A research study on bilingualism by Naja Ferjan Ramirez and Patricia Kuhl published in 2017 shows that children who are bilingual perform as well and even better than monolingual children. The study also shows that exposure to a second language at an early age through social interactions is more effective than learning a language from TV and other media. Bilingualism also develops proficiency in Swedish. In his research, Per Holmberg shows that students with both English and Swedish as their languages of instruction, improve the most in Swedish.

Continued growth
In Sweden, we now have nearly 200,000 registrations in the queue for our schools. More and more parents are seeing the benefits of how we manage and operate our schools. In Spain, where we have a total of 2,800 students in our schools following our recent acquisition in early April, the demand for education in Spanish and English is high from Spanish families. Combined with the positive trend for our existing schools, this means that we are constantly evaluating new acquisition opportunities in Spain. In Sweden, more and more municipalities want us to establish in their areas. However, because school voucher funding does not always reflect the real cost of, for example premises, we are forced to decline on a regular basis. As the number of school-age children increases, so does the need for new – and costly – school buildings, which is pushing rent levels up. However, our plan to open two to three new schools in Sweden per year remains firm.

Taking care of nearly 29,000 schoolchildren between 5-19 years is a huge responsibility and requires totally dedicated, committed and enthusiastic employees. Our fantastic principals, teachers and other employees go the extra mile every day to ensure that every child can reach their potential. The more schools I visit, the clearer it becomes that this is the foundation of integration and sustainable social development.
     
Cecilia Marlow
Interim CEO
  

FOR MORE INFORMATION, PLEASE CONTACT:
Emma Rheborg, Head of Communication & IR, tel. +46 (0)768-511 540
Cecilia Marlow, Interim CEO, tel. +46 (0)73-414 61 28
Fredrik Åkerman, CFO, tel. +46 (0)70-415 23 65

TELECONFERENCE IN CONNECTION WITH PUBLICATION OF THE QUARTERLY REPORT:
Interim CEO Cecilia Marlow and CFO Fredrik Åkerman will be holding a teleconference today, Friday 17 May, at 10:00 a.m. CEST in connection with publication of the quarterly report. The conference will be held in English. To participate in the teleconference, please call the following number:
+46 (0)8-566 426 51 and then press 95869380#. The presentation material is available on IES’s website: http://corporate.engelska.se

  
This is a translation of the Swedish original. In case of any inconsistency between the Swedish and English version, the Swedish version shall prevail.

This information is such information that Internationella Engelska Skolan i Sverige Holdings II AB (publ) is obligated to publish in accordance with the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact people set out above, on 17 May 2019 at 8:00 a.m. CEST.

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