External risks

Risks relating to school vouchers and the economy
Most of AcadeMedia’s income comes from public funding. Access to this funding is dependent on priorities in society and on the general economic situation in Sweden, Norway and the rest of the world. A deep and prolonged recession could lead to reduced tax revenue and thereby lower the ability to use public funds to finance current generous education systems. This, combined with other changes in the respective municipalities’ budgets and education grants, could lead to reduced reimbursement per education program, which would impact the entire market but also affect AcadeMedia.

A limited portion of the income from preschools in Sweden, Norway and Germany, and before-school and after-school care programs at compulsory schools comes from private financing in the form of fees paid by parents, which could be affected negatively by a general economic downturn.

Political risks
Publicly funded independent schools have been subject to significant scrutiny by the authorities, media etc.

Any future legislation that limits the ability of independent education providers to establish schools, cover costs and/or make a profit could have a significantly negative impact on the Group’s ability to operate its schools and thereby negatively impact the Group’s financial position and earnings.

Proposals that limit AcadeMedia’s ability to share profits with shareholders through dividends could have significant negative effects on AcadeMedia’s share and market value.

At this time there is no political majority wanting to impose restrictions on independent schools and profits, but the issue is a sensitive one and since March 5, 2015 a government commission has been studying the social welfare sector in Sweden. Among other things, the commission is tasked with studying proposals submitted on how the rules for public funding for running tax-financed social welfare programs, such as education, are to be designed so that the funds benefit the users, and the surplus as a principal rule is injected back into the provider’s organization.

Changes in laws and regulations
AcadeMedia operates in a highly regulated market. Breaches of laws and regulations may result in restrictions, increased operating expenses or other increased costs resulting from fines or other sanctions. They could also result in the Group’s contractual counterparties being given the right to cancel or change contracts entered into with the Group.

The political, economic and regulatory environment is changeable and political factors and/or political decisions could adversely impact the Group’s profitability.

AcadeMedia is dependent on national authorities in the education sector
The Group’s operations are dependent on a variety of remuneration systems which are determined by local, regional and national authorities. Under the law, the same conditions are to apply to schools operated by independent operators and those operated by municipalities. However, the municipalities’ pricing procedures vary considerably – both between different municipalities and over time. The prices are based on the relevant municipality’s budget and investments in education services, which is why prices may increase or decrease from one year to another in a specific municipality. Changes may be implemented at short notice.

There is also a risk that general cost increases, such as increased social security fees for young employees and increased teacher salaries, will not immediately be reflected in public reimbursement. This could result in significantly higher costs for AcadeMedia and Company may not always be able to expect to be compensated when the cost increase arises, but only later on through, for example, the school vouchers.