AcadeMedia’s Year-end Report 2016/17

Fourth quarter (April 2017 – June 2017)

Full year (July 2016 – June 2017)

Significant events after the end of the reporting period
On July 8 the allocations for Vocational and Preparatory modules (“yrkes- och studieförberedande moduler, YSM”) which will replace Basic Modules was published. The allocation is preliminary during an appeal period, during which other parties can appeal the outcome. On an annual basis, once YSM replace the Basic Modules, the EBIT margin of the entire Adult Education segment is expected to decrease by one to three percentage points.

The complete report will be made available at https://corporate.old.academedia.duvadev.se/en/financials/reports-presentations/

Comments from CEO Marcus Strömberg
AcadeMedia has ended the financial year 2016/17 in a stable way, reaching an adjusted operating profit of SEK 638 million. Growth continues to be robust in all AcadeMedia segments. The year has been characterized by very strong earnings growth in adult education, though the last quarter of the financial year fell short of the previous year’s high level. Within school operations, increases in teacher salaries that have not yet been compensated by school vouchers have had a negative impact on the margin. An important event during the year was the acquisition of the German preschool company Stepke, which more than doubled AcadeMedias’s operation in Germany, from seven to 17 preschools.

Growth and seven new upper secondary schools
AcadeMedia demonstrated solid revenue growth of 10.6 percent during the year as a result of the increase in students and participants in both Sweden and Norway. AcadeMedia’s growth in Sweden is mainly driven by increasing number of students in existing operations, while the growth in Norway, where AcadeMedia runs preschools under the Espira brand, comes from acquisitions and new establishments carried out during the year.

During the 2016/17 financial year, AcadeMedia acquired a total of 19 units and opened 5 new preschools, to be compared with 20 acquisitions and 14 new establishments last year. During the last quarter a decision was taken to make seven new establishments in the Upper Secondary School segment in August 2017. Over the past few years the total number of students in each yeargroup of upper secondary school has declined in Sweden, but the demographic curve is now turning upwards and we also see a clear increase in interest in many of our schools.

The new upper secondary schools are located in both large and small cities, as well as under several brands. One example of a new establishment is Rytmus, which is opening in Borlänge. The ProCivitas schools, previously only present in the south of Sweden, are now being established in Stockholm which has generated significant interest.

In all, 300-350 students are expected to begin in the first year at AcadeMedia’s seven newly opened upper secondary schools this fall. These units are estimated to have approximately 1,400 students once they are fully operational. AcadeMedia also plans to open several new upper secondary schools over the next few years. Newly established upper secondary schools always have a negative impact on the margin during their first year of operation.

Strong growth in adult education
AcadeMedia’s adult education has shown strong growth in 2016/17 and achieved record earnings of SEK 200 million. However, the earnings performance for the last quarter of the financial year was somewhat weaker and it was difficult to match the strong performance of the fourth quarter of last year. The performance for adult education throughout the year contributed strongly to the Group's positive performance for the full year, although the same segment is also entirely responsible for the Group's lower earnings in the fourth quarter.

AcadeMedia’s Adult Education segment has strengthened its position as leader in all significant parts of its market. In January 2018 a major contract with the National employment agency will expire. The contract referred to “Basic Modules,” is being replaced by Vocational and Preparatory modules (“yrkes- och studieförberedande moduler, YSM”). The new agreement is for two years with the option to renew for two more years. AcadeMedia was preliminarily awarded 45 of a total of 70 contract areas, which is in line with previous sales in the contract area. However, this allocation could be appealed. One change compared to previously is that the National employment agency is moving more toward price-based tenders, where the lowest price wins the contract. As a result, the price per student will be lower and the margin in the new contract will be lower than in the current contract. On an annual basis, once the YSM replaces the Basic Modules contract, the EBIT margin of the entire Adult Education segment is expected to decrease by one to three percentage points.

The National employment agency has received considerable criticism for the change in the tender process, since most stakeholders prefer a stronger emphasis on quality. AcadeMedia agrees with this criticism. It is very important to ensure that society’s investment in adult education gives results, especially since so many people with a foreign background need an education that leads to employment, or to complement their previous education to meet Swedish requirements. As the leading player within integration, we are looking forward to working with these issues for many years to come.

Quality performance during the year
One of AcadeMedia’s most important objectives is for all students to achieve the goals of their education. The preliminary grades in AcadeMedias’s compulsory and upper secondary schools show a slight decline. The national statistics are not yet available. The results of the adult segments’s annual satisfaction survey performed at the end of the term showed a sustained high quality level.

An important part of our quality management is also the annual employee satisfaction survey. In Sweden we are pleased that AcadeMedia’s employee satisfaction index has had a rising trend since 2013. An employee survey was also carried out in Norway and shows the same positive trend with an increased employee satisfaction index.

Inspections at almost all schools
In 2016 and 2017 the Schools Inspectorate inspected 179 of AcadeMedia’ compulsory and upper secondary schools. The Inspectorate found no cause for criticism at 133 of these schools. The results of the Inspectorates assessments are clearly better than the national average.

Acquisitions in Germany
The German preschool market is undergoing strong growth. One important reason is the need for more women to return to work. However this requires efficient and adequate child care. According to estimates from Instituts der deutschen Wirtschaft, there is a shortage of about 300,000 preschool places in Germany.

During the fourth quarter AcadeMedia acquired Stepke, a German preschool operator that has seven preschools, as well as three mobile preschools in Brandenburg and Nordrhein-Westfalen with 640 children and 200 employees. Stepke is growing rapidly and has an additional nine preschools that will be ready to start before the end of 2018. Sales in 2016 amounted to EUR 6.6 million, though the many new establishments had a negative impact on earnings, which were somewhat positive. AcadeMedia also owns Joki, with seven preschools in Munich. Currently almost 1,100 children attend AcadeMedia’s 17 preschools in Germany.

Concluding remarks
AcadeMedia is the leading education provider in Northern Europe, and thus an important player in society. An area that will be increasingly important for both society and AcadeMedia is integration. We provide families and individuals with the opportunity to educate themselves, and/or to ensure that their previous education can be supplemented to meet the requirements of their new country as well as give them access to the labor market. Preschools are also important in this context since newly arrived immigrant children need the same opportunities as children born in Sweden. A good preschool serves as the basis for successful school years, which in turn lays the foundation for a good occupation. Our societal mission can and should be combined with stable growth and a good financial performance. 

Marcus Strömberg
President and CEO
AcadeMedia AB (publ) 

Presentation of the report

A web-cast telephone conference will be held at 09:30 CET today, where CEO Marcus Strömberg and CFO Eola Änggård Runsten will present the report.
You can follow the presentation and the conference on the following page:

https://tv.streamfabriken.com/academedia-q4-2017

Or call one of the following numbers at least ten minutes before the start of the call:

The presentation material will be available before the conference begins on AcadeMedia web via https://corporate.old.academedia.duvadev.se/en/financials/reports-presentations/

For more information, please contact:
Marcus Strömberg, CEO
Telephone: +46 8 794 4200
E-mail: marcus.stromberg@old.academedia.duvadev.se

Eola Änggård Runsten, CFO
Telephone: +46 8 794 4240
E-mail: eola.runsten@old.academedia.duvadev.se

Christian Hall, Investor Relations
Telephone: +46 763-111 242
E-mail: christian.hall@old.academedia.duvadev.se

About AcadeMedia
AcadeMedia creates opportunities for people to develop. The 12,500 employees at our 550 preschools, compulsory schools, upper secondary schools and adult education centres share a common focus on quality and development. Our 140,000 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.old.academedia.duvadev.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 CET on August 30, 2017.