AcadeMedia’s Year-end Report July 2019 – June 2020
Fourth quarter (April – June 2020)
- Net sales increased by 2.1 percent and amounted to SEK 3,227 million (3,162). Organic growth, including bolt-on acquisitions, was 3.9 percent.
- Operating profit (EBIT) amounted to SEK 334 million (218). Excluding the effects of IFRS 16, EBIT was SEK 279 million (218), which was an increase of 28 percent. Operating profit, adjusted for items affecting comparability and effects of IFRS 16, amounted to SEK 279 million (232).
- Items affecting comparability amounted to SEK 0 million (-14).
- Net profit for the period amounted to SEK 179 million (148). Excluding IFRS 16, it was SEK 206 million (148).
- Cash flow from operating activities amounted to SEK 963 million (425). Excluding IFRS 16, it was SEK 634 million (425).
- The average number of children and students in preschool, compulsory school, and upper secondary school during the fourth quarter was 82,999 (79,994), representing an increase of 3.8 percent. Growth was completely organic.
- Earnings per share was SEK 1.70 (1.41) before and after dilution. Adjusted for IFRS 16, earnings per share was SEK 1.96 (1.41) before and SEK 1.95 (1.41) after dilution.
- The coronavirus outbreak had a sizable impact on operations but limited financial impact in the period.
Full year (July 2019 – June 2020)
- Net sales increased by 4.7 percent to SEK 12,271 million (11,715). Organic growth including bolt-on acquisitions amounted to 5.4 percent.
- Operating profit (EBIT) amounted to SEK 973 million (635). Excluding the effects of IFRS 16, EBIT was SEK 763 million (635), which was an increase of 14.8 percent. Operating profit, adjusted for items affecting comparability and effects of IFRS 16, amounted to SEK 728 million (634).
- Items affecting comparability amounted to SEK 36 (1) million.
- Net profit for the period amounted to SEK 431 million (431). Excluding IFRS 16, it was SEK 549 million (431).
- Cash flow from operating activities amounted to SEK 2,521 million (684). Excluding IFRS 16, it was SEK 1,069 million (684).
- The average number of children and students in preschool, compulsory school, and upper secondary school during the year was 82,433 (79,493), representing an increase of 3.7 percent. Growth was completely organic.
- Earnings per share was SEK 4.09 (4.09) before and after dilution. Adjusted for IFRS 16, earnings per share was SEK 5.21 (4.09) before and after dilution.
- The Board of Directors proposes a dividend of SEK 1.50 per share (1.25) for the 2019/20 financial year.
Implementation of IFRS 16 has a significant effect on AcadeMedia’s financial statements. To simplify the comparison, the 2019/20 financial year is presented adjusted for IFRS 16. This is described as “Excluding IFRS 16”. Important key performance indicators and additional key performance indicators based on rolling 12 months are presented excluding IFRS 16. For example, adjusted operating profit (EBIT) is reported excluding IFRS 16. The segments within AcadeMedia have unchanged accounting principles and will continue to report rent as Other external expenses.
The complete report will be made available at https://corporate.academedia.se/en/financials/reports-presentations/
Comments from CEO Marcus Strömberg
The fourth quarter of 2019/20 was marked by the ongoing Covid-19 pandemic. Teaching conditions have been very different from normal, requiring tremendous effort from our staff and students. We have worked hard to provide all students and participants with the necessary conditions to be able to achieve their educational goals and for the operations to function as well as possible. These experiences will be valuable to us as we move into the future.
Although the Covid-19 pandemic has had a substantial impact on operations, the economic impact has been limited. Operating profit showed growth both in the fourth quarter and for the full year 2019/20, which is largely attributable to the recovery in adult education. The organic growth for the year was over 5 percent.
The Adult Education Segment has turned the corner, and we see strong demand moving forward
The fourth quarter result is a testament to the Adult Education Segment leaving its restructuring phase. The loss-making contracts with the Swedish Public Employment Service will be terminated in the autumn of 2020. Operations in Municipal Adult Education and Higher Vocational Education continue to grow, gaining market share. AcadeMedia is a clear leader in distance education and our extensive experience in this field has mitigated much of the impact of the pandemic on teaching during the quarter. Overall, sales in the quarter increased by 6.0 percent and adjusted operating profit rose by SEK 33 million compared with the previous year.
Unemployment in Sweden has increased, and adult education is becoming even more important for society by helping people to find new jobs and to avoid long-term unemployment. The government is therefore investing in adult education through significant increased funding. The Swedish National Agency for Higher Vocational Education has responded rapidly to new directives by increasing the number of student places in higher vocational education. The Swedish Public Employment Service has also received increased funds but has not yet announced how those funds will be used.
AcadeMedia is the market leader in adult education in Sweden with a broad contract portfolio, well equipped to contribute in many of the initiatives that are initiated. For example, our Higher Vocational Education business has received a good allocation in the extra allocation rounds from The Swedish National Agency for Higher Vocational Education and we expect about 20 percent more participants this autumn compared with the same period last year. In addition, the City of Stockholm’s drawn-out procurement process has now concluded. The agreements signed show a renewed trust providing good stability for up to four years. It is obviously gratifying that many pieces are starting to fall into place at the same time as the number of applicants for this autumn’s starts are higher than ever both in the higher vocational education and in our municipal adult education. The financial impact will not be achieved until students have been recruited to the programmes and, in some cases, completed their education.
Covid-19 – time for evaluation and reflection
AcadeMedia’s Norwegian and German preschools closed in March and reopened later in the spring. Unlike most other European countries, the Swedish authorities decided to keep preschools and compulsory schools open, while upper secondary school and adult education transitioned to distance education. Despite the difficulties and rapid changes we have experienced, we can be proud of the way that the spring semester was managed in all segments.
While the pandemic is still ongoing, we have begun to evaluate our work from the spring. We have seen strong engagement with many perspectives. For example, Ifous conducted a survey in which more than 2,300 upper secondary school students across the country answered questions about how they experienced distance education compared to regular education. The survey demonstrated the tremendous importance of the social interactions between teacher and student, and among students. Many said they miss being physically in school. The results also showed that both students and teachers want to be able to supplement in-school teaching with digital aids to enhance learning and participation.
We need to continue to evaluate whether, and if so how, the quality of teaching and student learning have been affected by distance learning. This is partly to adapt teaching to each student’s level of knowledge and partly to be able to continue to develop digital technology as a complementary tool for increased teaching quality and improved learning. Digital teaching is not appropriate for everyone or all the time, but where it is appropriate it should be made available. Rules must be changed, and such changes would benefit Swedish schools.
This autumn, all our units are expected to resume in-classroom teaching and planning for this took place at the end of the quarter. There are challenges, mainly in upper secondary school, with respect to preventing the spread of infection since students generally travel further to school and the premises are not always suitable for physical distancing. There was concern last spring that infection would spread in the open preschools and compulsory schools, but we have not seen any widespread increase of infection in our units. AcadeMedia has collaborated with several stakeholders and authorities to develop guidelines that will help us to run normal operations while minimising the risk of further spread of infection.
The Covid-19 outbreak has had a limited financial impact on the financial year. The Preschool Segment was adversely affected in Germany, where parental fees could not be fully charged. This had a negative impact on sales in the Preschool Segment of SEK 15 million for the full year. Lower expenses and some employees on furlough in Germany in the fourth quarter reduced the negative impact on earnings to SEK 8 million for the full year. In Sweden, distance education in the Upper Secondary School Segment resulted in lower direct costs, which were partially offset by investments in digital services.
Municipal finances are impacted by the pandemic
Even before the coronavirus Covid-19 pandemic, the number of municipalities in Sweden running at a deficit was increasing. During the spring, the Swedish government provided substantial financial aid packages to the municipalities. Despite these, even more municipalities warn of a worsening economy. It is likely that a number of them will need to both raise taxes and review costs. We know that some are discussing smaller school voucher increases than would have been implemented otherwise.
AcadeMedia is carefully monitoring the situation and as an important player in the community, we are continually reviewing how we work and how we allocate our resources.
Our assessment is that in practice, the municipalities will find it difficult to cut costs for schools. The equal terms principle ensures that, regardless of choice of provider, students have access to the same conditions and resources.
We are continuously working to modify and adapt our costs and to find new ways of working. The Swedish Association of Local Authorities and Regions has noted that digitalisation is an important component of the solution; we agree with this and we are on the leading edge of this effort.
Eight new units start in the first quarter of 2020/21
With another financial year behind us, we look forward to welcoming all the new students to the autumn semester. We are particularly excited to welcome the four new upper secondary schools and four new preschools that will open in the first quarter of 2020/21. A total of 10-15 new units are being planned in Germany for 2020/21, though developments related to the Covid-19 pandemic may change these plans. The strong demand in Germany and the rapidly increasing number of new students in upper secondary school are important driving forces in our growth.
We are also pleased that we completed the planning of our new upper secondary school campus in Uppsala during the spring. The advantages of forming a campus are many. We gain flexibility and several economies of scale and in addition, we can rent larger properties without increasing risk when several schools share the premises. For the students, the sense of belonging and community that can be found at a campus is often great. In Uppsala the existing NTI Upper Secondary School and the newly opened ProCivitas will move into a 5,500 square metre building on the university campus.
As a result of the financial development during the year and the group’s strong financial position and stable outlook, the board of AcadeMedia has decided to propose a dividend of SEK 1.50 (1.25) per share for the financial year 2019/20. The group’s strong financial position and good level of quality also leave room to capture future business opportunities and to manage an increased uncertainty related to the pandemic.
President and CEO
AcadeMedia AB (publ)
Presentation of the report
A web-cast telephone conference will be held at 09:30 CEST today, where CEO Marcus Strömberg and CFO Katarina Wilson will present the report
To participate in the conference call, and thereby be able to ask questions, call one of the following numbers ten minutes before the start of the call:
SE: +46 8 5664 27 05
UK: +44 33 3300 9032
US: + 1 833 5268 381
You can follow the presentation and the conference on the following page:
The presentation material will be available before the conference begins on AcadeMedia web via https://corporate.academedia.se/en/financials/reports-presentations/
For more information, please contact:
Marcus Strömberg, CEO
Telephone: +46 8 794 4200
Katarina Wilson, CFO
Telephone: +46-8 794 42 91
AcadeMedia creates opportunities for people to develop. The 17,600 employees at our 661 preschools, compulsory schools, upper secondary schools and adult education centres share a common focus on quality and development. Our 182,000 children and students are provided with a high quality education, giving them the best conditions to attain both learning objectives and their full potential as individuals. AcadeMedia is Northern Europe ́s largest education company, with locations/facilities/presence in Sweden, Norway and Germany. Our size gives us the capacity to be a robust, long term partner to the communities we serve. More information about AcadeMedia is available on www.academedia.se.
This information is information that AcadeMedia AB 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 CEST 28 August 2020.