AcadeMedia’s interim report July – December 2019
Second quarter (October – December 2019)
- Net sales increased by 5.9 percent and amounted to SEK 3,258 million (3,076). Organic growth, including bolt-on acquisitions, was 6.0 percent.
- Operating profit (EBIT) amounted to SEK 201 million (128). Excluding the effects of IFRS 16, EBIT was SEK 150 million (128), which was an increase of 17.2 percent. Operating profit, adjusted for items affecting comparability and effects of IFRS 16, amounted to SEK 150 million (139).
- Net profit for the period amounted to SEK 75 million (79). Excluding IFRS 16, it was SEK 104 million (79).
- Cash flow from operating activities amounted to SEK 652 million (348). Excluding IFRS 16, it was SEK 325 million (348).
- The average number of children and students in preschool, compulsory school and upper secondary school during the second quarter was 82,325 (79,335), representing an increase of 3.8 percent. Growth was completely organic.
- Earnings per share was SEK 0.71 (0.75) before and after dilution. Adjusted for IFRS 16, earnings per share was SEK 0.99 (0.75) before and after dilution.
First six months (July – December 2019)
- Net sales increased by 6.3 percent to SEK 5,760 million (5,418). Organic growth including bolt-on acquisitions amounted to 6.4 percent.
- Operating profit (EBIT) amounted to SEK 330 million (186). Excluding the effects of IFRS 16, EBIT was SEK 225 million (186), which was an increase of 21.0 percent. Operating profit, adjusted for items affecting comparability and effects of IFRS 16, amounted to SEK 225 million (191).
- Net profit for the period amounted to SEK 91 million (111). Excluding IFRS 16, it was SEK 150 million (111).
- Cash flow from operating activities amounted to SEK 978 million (130). Excluding IFRS 16, it was SEK 296 million (130).
- The average number of children and students in preschool, compulsory school and upper secondary school during the first quarter was 81,897 (79,052), representing an increase of 3.6 percent. Growth was completely organic.
- Earnings per share was SEK 0.87 (1.05) before and after dilution. Adjusted for IFRS 16, earnings per share was SEK 1.42 (1.05) before and after dilution.
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 second quarter continued to show stable growth with a 3.8 percent increase in number of children and students and organic sales growth of 6 percent. Seven new units, of which four were acquired, were added during the period. The Adult Education Segment’s margin improved this quarter. The Higher Vocational Education and Municipal Adult Education areas showed profitable growth and Labour Market Services constituted a smaller proportion of the segment. The Upper Secondary School Segment’s strategic efforts of opening of new units to capture underlying market growth, increasing digitisation rate to improve efficiency and learning, and efforts to improve quality in our vocational training programs resulted in higher costs.
The need for new education places increases. According to the Ministry of Finance, 1,400 new preschools and schools are needed in the next six years in Sweden alone. Despite the increasing number of children and students, many municipalities are forced to cut back on the childcare voucher and school voucher due to strained economy. As a result, several municipalities now risk having to halt their expansion, which will create new opportunities for independent providers. We believe that many municipalities will find it difficult to meet their budgets. At the end of January, the Swedish Government decided to add SEK five billion to the welfare sector. This will enable municipalities to continue investing in education. However, the amount can increase as there is a parliamentary majority for SEK 7.5 billion in additional funding to the welfare sector. The City of Stockholm has decided to increase the preschool voucher by only 0.9 percent (1.9). We are prepared for this lower increase that will affect our Swedish preschool operation in 2020.
The combination of an increased demand for education places and limited public funds adds to my conviction that we will have new growth opportunities. We also have good opportunities for improved efficiency and to create economies of scale.
Strategic efforts on digital services
During the fiscal year, AcadeMedia has developed several digital education-related services and platforms. This increased overhead costs for the quarter. As part of our strategy, we are now even more driven to modernise and leverage digitalisation to enable access to education and related functions. Development is taking place both centrally and at segment level and affects infrastructure as well as pedagogy. The long-term goal is to enable a more efficient way of working for our teachers, students and participants both when choosing education as well as while studying – while enabling us to provide better education at a lower cost.
Efforts in the Compulsory School Segment show results
AcadeMedia has focused on increased capacity utilisation in our compulsory schools. Our efforts made an impact and we will now take the next step in developing our compulsory schools. In autumn 2020, Rudanskolan in Haninge will move to new premises and almost double in capacity to 900 students. Rudanskolan will then become one of our largest compulsory schools. During the quarter, we acquired Pops Academy in Stockholm, a compulsory school where academic quality and creative activities are combined. An exciting concept and brand that we want to continue to develop end expand.
Upper Secondary School Segment invest in the future
The Upper Secondary School Segment’s turnover increased by 6 percent in the quarter, but the overall result was substantially lower than last year. However, for the full year, we expect results in line with the previous fiscal year.
The decline in this quarter’s result was primarily due to marketing activities scheduled earlier than last year, investment in new units, and efforts to improve quality at Praktiska Gymnasiet.
Half of the decline was due to marketing activities that last year took place in the fourth quarter. The other half was a result of several strategic efforts, such as permanent increase of resources at Praktiska. We have also opened 14 new schools in the past three years and invested in increased digitalisation. These efforts strengthen our position and create an excellent foundation for profitable growth. We also face a strong growth in student numbers in the segment.
The efforts to improve quality at Praktiska Gymnasiet, acquired in 2017, has now produced results. In 2019, the School Inspectorate conducted a number of audits, many of which contained areas for improvement. In all the follow-ups except three, the School Inspectorate decided that the inadequacies have been rectified. Decisions in the three remaining cases are expected during the third quarter. The courses offered at Praktiska Gymnasiet are important for Sweden and my belief is that the demand for vocational training will continue to be high in the years to come.
Successful change in the Adult Education Segment
AcadeMedia has conducted a substantial overhaul of our Adult Education Segment. Labour Market Services now constitute less than ten percent of turnover. Growth in the more profitable Higher Vocational Education and Municipal Adult Education have led to a more positive mix within this segment.
The Swedish Public Employment Service’s reform, which for example involves outsourcing a large part of the business to private players, will open up further opportunities for us. At present, AcadeMedia’s exposure to the Employment Service is low, but we are well placed to scale up quickly to meet increasing demand once the authority’s reform is implemented.
The Swedish Public Employment Service recently published its forecast for the labour market, which shows that unemployment is expected to increase in 2020 due to the economic slowdown. They also point to four challenges: rising long-term unemployment, shortage of skilled labour, foreign-born’s ability to enter the labour market, and the Employment Service’s reduction and reform.
To meet these challenges, more people need to attend training courses demanded by employers. This implies that it is likely that resources to execute these training courses will be provided and demand for our services will increase.
A positive event after the end of the reporting period was that AcadeMedia’s Higher Vocational Education business has been awarded 4,285 educational places for autumn 2020, corresponding to approximately 14.5 percent (14.6) of the total number of places granted. Our initial expectation is that the number of participants will grow by seven percent in autumn 2020.
The upper secondary school teacher of the year works at AcadeMedia
Lärargalan, a gala to recognise teachers in Sweden was first held in 2016. This is an initiative where one of Sweden’s most important group of professionals is celebrated. Students can nominate teachers that have helped and inspired them. We are delighted that several AcadeMedia teachers have been recognised since the event began.
At the gala in December 2019, Björn Grönqvist, history and social studies teacher at Klara Teoretiska Gymnasium in Karlstad, was named upper secondary school teacher of the year. His nomination read, “You teach in a way that engages even those who are not so motivated. At the same time, you help those who find it easy to push themselves further. You see everyone as individuals and help us reach where we want to go.” The prize for maths teacher of the year went to AcadeMedia’s Anders Månsson, who teaches at ProCivitas in Helsingborg. Congratulations to both!
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 5199 93 83
UK: +44 33 3300 9268
US: +1 833 5268 396
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 16,900 employees at our 660 preschools, compulsory schools, upper secondary schools and adult education centres share a common focus on quality and development. Our 180,000 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 and the Securities Markets Act. The information was submitted for publication, through the agency of the contact persons set out above, at 08:00 CET 31 January 2020.