Ambea AB (publ) (AMBEA) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the Ambea's Interim Report Second Quarter 2024 Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Mark Jensen. Please go ahead.

Good morning, everyone, and welcome to Ambea's Second Quarter 2024 Report Presentation. Speaking is Mark Jensen, CEO of Ambea, and presenting with me today is Benno Eliasson, CFO. I will give you an introduction to the quarter, then I will talk about some of our efforts within quality and sustainability before Benno will describe the development of the financials for the group and for the different business areas. After that, I will summarize the quarter and compare to our financial targets before we open for questions. I would like to begin with a brief overview of Ambea. Ambea is the leading Scandinavian care provider. We have over 30,000 employees across Sweden, Norway and Denmark and revenues of SEK 13.7 billion. We offer a full range of services within elderly care, social care, staffing and competency solutions. We have more than 450 municipalities as our clients, and we are an important partner in solving challenges in the welfare system. Let's have a brief look at some of the reasons to invest in Ambea. Ambea delivered value to society, and we aspire to be the most attractive investment in the care sector. From a distance, care providers can look somewhat similar. But at a closer look, there are distinct differences as you see on this slide. Today, I would like to highlight our growth potential in own managed elderly care. Due to an increased an aging population in all Scandinavian countries, we'll see a steep rise in care needs towards 2030. The rise will materialize gradually over the coming years, and therefore, society has an urgent need to expand the number of modern care facilities. In Scandinavia, the municipalities are solely responsible for providing elderly care to their citizens. New municipal construction is far from meeting the total need and political reforms are needed to boost public investments as well as inviting the private sector to further contribute. Alternatively, we will face a steadily increasing undersupply of care homes. The risk of not having access to high-quality care when citizens are in need will be a major problem for society and will challenge citizens' trust in the welfare state. So this is an important topic, but there are signs of hope. In Denmark, we have seen political will to open the market as politicians on national level have realized all good forces, including private operators, are needed to catch up with the undersupply of nursing homes. New legislation is expected next year, and assuming our Danish business is in good shape, where we plan it to be, this provides a good growth opportunity. In Sweden, there are 290 municipalities who can decide if they want to include private operators to supply elderly care besides the municipal's own care services. The most common way is through adapting the freedom of choice legislation in Swedish LOV. Regarding private nursing homes, 25 municipalities have applied LOV, and here, supply and demand is imbalanced, as an open market will normally cater for that. Many of the remaining municipalities have supply issues of varying degree and where the tough economic situation makes it difficult to invest sufficiently in new nursing homes. Here, Ambea and our industry organizations argue for reforms on national level to ensure municipalities secure sufficient supply of nursing homes, and we believe the Danish example is worth following. A Swedish national reform could secure the elderly and would be able to get the care service they expect and have tax for. Together with construction companies and property owners, Ambea stands ready to rapidly expand investments in new and modern nursing homes would the opportunity arise. With our expertise in designing sustainable nursing homes to both quality and cost, we would also provide a cost-effective alternative to public construction. I will come back to organic growth and new care homes later in the presentation. But for now, let's turn to care quality. Quality ultimately arises in the interaction between care receivers and our employees. We always want to make it easy for employees to do the right thing in any given situation so that they can spend their time on things that create quality and value. We have a systematic approach to quality and sustainability, where we carefully follow up all our units every month. In the quarterly report, we highlight some of the activities that we carried out during the last quarter and relevant KPIs. Employees satisfaction is incredibly important to us, and we measure whether our employees would recommend us as a workplace to people who trust them. We, therefore, measure ENPS, Employee Net Promoter Score twice per year in May and December, where we ask the question, how likely are you to recommend us as an employer to a friend or acquaintance. The results for May shows that the proportion of employees who recommend Ambea is increasing every year. In this survey, the Ambea Group's ENPS was plus 26, which is an increase of plus 4 compared to the previous survey. The long-term target for 2024 is above plus 19, and the scale range from minus 100 to plus 100. The high ENPS is generally important in the care sector. As a sector, we need to attract thousands of new skilled employees over the coming years, while recommendable good workplaces on a broad base are extremely important. At the beginning of the year, we introduced an AI solution that helps our managers to see patterns and trends in employee views. AI now allows us to listen to employees' feedback and suggestions in a more efficient and structured way. Twice per year, each care unit completes a self-assessment comprising around 200 questions. The questions are mainly related to compliance with care regulations as well as Ambea's concepts and proceeds. The self-assessment helps employees and managers identify any areas that need to be improved. Action plans are drawn up and monitored each month. As well as being able to address issues at care unit level, we are all able to aggregate the data at regional and business unit level to understand what wider issues and trends exist, allowing us to take measures at the right place in the business. And now over to sustainability. Our focus on sustainability has been further reinforced during quarter 2. In May, we placed extra focus on diversity and inclusion during the European diversity month. And both Nytida and Vardaga became official supporters of Stockholm Pride, the largest Pride festival in the Nordic region. In our operations, everyone should feel welcome and included. It is a fundamental human right and important part of our mission and values. During the month of May, we do extra attention to diversity and inclusion in various ways. In August, we encourage our businesses around the country to celebrate Pride and put extra focus on how we can raise awareness and talk about norms, sexuality and sexual identity. We believe that joy of movement and fiscal activity are important for all people based on individual circumstances. And we, therefore, strive to inspire movement in our activities with several collaborations focusing on exercise and health. We also continue to support Ukraine and Ukrainian refuges. 30 out of our 130 Ukrainian employees in Nytida and Vardaga are now undergoing education to care systems. The education is initiative conducted and financed by Ambea together with the organizations, Beredskapslyftet and SWEA International with the aim of strengthening the position of Ukrainians in the Swedish job market. Ambea and Beredskapslyftet will also finance training for those who want to continue their studies to become assistant nurses. The education, which includes Swedish language studies are conducted besides practical work within Vardaga and Nytida, and we are impressed by the participants' progress. Turning to organic growth. In quarter 2, the old management pipeline was growing. We have 1,272 beds or care places in pipeline, most of them in Sweden. In Norway, we continue to build our pipeline in segments with good potential in line with our strategy. The pipeline increased compared to the previous quarter due to new signed contracts in Nytida, Vardaga and Stendi. In all 3 markets, we could open new beds and care places this quarter. Vardaga opened 2 new nursing homes with 80 beds each in Uppsala and in Stockholm. Vardaga also signed 2 new nursing homes during the quarter with a total of 240 beds that is planned to open in 2027. Nytida increased the pipeline with 3 new assisted living facilities with a total of 52 beds and expanding an existing daily activity unit by 30 additional care places. Stendi opened 2 new assisting living facilities with a total of 9 beds and signed 4 new contracts with a total of 25 beds. And Altiden opened a new assisted living facility with a total of 5 beds. Now let's have a look at acquisitions. In 2022 and in the years before, Ambea had a very active M&A agenda, and significant experience has been gained from the large number of acquisitions that Ambea concluded over the past decade. We have a structured acquisition process, which is supported by internal and external expertise. And in addition, Ambea has a detailed process to follow up and learn from previous acquisitions. In 2022, 5 bolt-on acquisitions with annual net sales of SEK 263 million were closed. Nytida closed 2 acquisitions and Vardaga, Altiden and Klara closed 1 acquisition each. However, no acquisitions were closed in 2023 due to lower levels of M&A activity in the market. And these activities started to increase again in 2024. In the second quarter of 2024, Nytida acquired 2 companies with total annual net sales of SEK 65 million. Alpklyftan, a company that runs homes for care or residents for children and young people in center Gothenburg. The operations include 24 care places and 19 employees. Annual net sales in 2023 amounted to SEK 25 million, and the acquisition was closed on May 2. And the second company was Evus Omsorg. This company consists of 3 assisted living facilities and 2 daily activity units, which are in 5 different municipalities outside of Stockholm. The operations include 51 care places and 31 employees. Annual net sales in 2023 amounted to SEK 40 million. And this acquisition was closed on June 3. The third bolt-on acquisition was signed after the quarter ended. Nytida acquired Sorbus Vårdboende, operating and assisted living facility specializing in care for individuals with Huntington's disease and younger people with dementia. Annual net sales in 2023 amounted to SEK 22 million, and the acquisition was closed on July 1. We remain active in seeking for quality bolt-on acquisitions that will contribute to total growth and see more opportunities for M&A ahead. Let's look at total revenue growth. The organic growth shown in the purple bars follows the positive trend we have seen since quarter 1, 2022. The total organic growth in this quarter was 5.9%. We remain positive about our overall growth potential in the coming quarters where volume, price mix and acquisitions are expected to contribute. And now to the highlights of the second quarter. In the second quarter, Ambea continued to improve EBITA and profitability. Moreover, Ambea has a strong financial position with high free cash flow generation. EBITA increased by 42% versus last year. Our group EBITA margin improved significantly to 7.7% compared to 5.8% in quarter 2 last year. Our free cash flow increased by 24% this quarter due to the strong earnings. The high cash flow generation enabled for continued active capital allocation through dividend payout, acquisitions and share buybacks. Ambea completed the previous share buyback program under which 3 million shares for SEK 187 million were repurchased during the first half of the year. Shortly thereafter, we initiated a new share buyback program of another 3 million shares with repurchased shares for additional SEK 98 million by the end of the second quarter. And you can always follow the progress of our share buyback programs via the Investor Relations page at our website, and Benno will also provide more detailed information on cash flow generation and utilization late in the presentation. Nytida acquired 2 companies in quarter 2 and closed the third bolt-on acquisition after the quarter ended. The 3 companies complement Nytida well and are in line with our strategy to acquire quality companies contributing to our service offering and profitability target. And now over to you, Benno, for a presentation of the financial summary.

Thank you, Mark. The good organic growth we have seen in the last quarters continues. Vardaga, Stendi and Nytida contributed to the growth, whereas Altiden and Klara had a negative growth. This quarter, net sales grew by 6% in total. Vardaga accounted for most of the growth and increased net sales by 12%. Like in the previous quarters, there is an increased occupancy trend. Higher prices also have contributed to the revenue growth. Vardaga started several new contract management units in the last quarters. Nytida has opened new own management units and started several contract management units last quarter, together with higher prices. The net sales growth was offset by a lower demand in parts of the segment, individual and family care. Net sales growth was 3%. Stendi increased revenue by 10% in SEK and 9% in local currency due to a stable and high demand and a better price mix. Altiden decreased revenue by 5% in SEK which was mainly driven by 1 large elderly care contract that expired. Klara decreased revenue by 10% due to continued lower demand for staffing solutions. And now turning to the EBITA development. This slide shows how the different business areas have affected the EBITA of the group. EBITA in total grew by 42% compared to the same quarter last year. EBITA was positively impacted by lower staffing costs as most of the Eastern bank holidays were in Q1 this year. Last year's EBITA was also impacted by 2 nonrecurring items of minus SEK 16 million. Two of our Ambea business area were particularly strong also this quarter. Vardaga's EBITA was up SEK 37 million, thanks to improved occupancy and operational efficiency, higher prices and positive effects on earlier measures related to handed-back rental contracts and the EBITA margin was up 2.3 percentage points. The second one is Stendi. Stendi's EBITA margin was up 4.8 percentage points due to higher occupancy and prices as well as operational improvements. The strong improvement resulted in SEK 42 million higher EBITA compared to last year. EBITA, Altiden showed an improvement of SEK 5 million compared to last year despite a high sick leave rate and lower occupancy. Nytida's EBITA decreased by SEK 10 million or 1.3 percentage points. Nytida had an exceptionally strong Q2 last year, which we could not fully match this quarter, but the underlying profitability is still very strong. Klara's EBITA was down SEK 8 million or minus 6.4 percentage points due to lower net sales, which could not be fully offset by lower costs. All in all, and excluding the 2 nonrecurring items of total minus SEK 16 million from last year, the group EBITA was up SEK 64 million. EBITA margin was strengthened by 1.9 percentage points to 7.7%. And turning to the cash flow development. Operating cash flow increased substantially compared to the same quarter last year. Cash conversion continues to be above 100%. The continued good cash flow development reflects the strong EBITDA and also a positive working capital effect in this quarter. Also, the better color from the Easter holiday of last quarter was not affecting the Q2 cash flow in any material way, which confirms that we continue to show strong underlying cash flow development. And this slide shows the way from the rolling 12 reported EBITA of SEK 1.219 billion to the SEK 1.101 billion in EBITDA, excluding IFRS 16 and down the way to the free cash flow post tax of SEK 840 million. This is SEK 228 million or 37% higher than the full year 2023 number we reported just 2 quarters ago. We can see that we have -- the last 12 months, have invested SEK 77 million in fixed assets. We have paid SEK 135 million in interest and SEK 109 million in taxes. We also had a small positive effect from working capital of SEK 33 million. Utilization. On this slide, we see how we have used the generated SEK 840 million in free cash flow. SEK 130 million was distributed to our shareholders as dividend, SEK 72 million was spent on the 2 acquisitions and SEK 285 million was spent on the 2 share buyback programs. Based on our strong cash flow, we continue to reduce our debt, rolling 12 by SEK 375 million. And now to the overview of the business areas. We can start with Nytida. Sales increased by 3%, which is driven by new operations in both contract management and own management as well as higher prices. As an offsetting effect, we had lower occupancy in some parts of the segment, individual and family care, which can be seen as natural fluctuations in demand. Nytida increased their own management pipeline with 52 beds and expanded 1 existing unit by 30 additional care places during the quarter. EBITA was lower than last year and decreased by 7% to SEK 124 million. The decrease is due to lower occupancy, as said, in part of the individual and family care, where we were not fully able to offset starting cost. EBITA has also been negatively impacted by acquisition costs and by some startup costs and termination costs of several management contracts. EBITA margin in the quarter landed at 11.9% and rolling 12, with the EBITA now trend at 13.3%. Vardaga. In Vardaga, net sales increased by 12% year-on-year, driven by higher occupancy, new contract management units and higher prices. Vardaga opened 2 new nursing homes with 160 beds during the quarter. Own management portfolio increased net sales by 9% and contract management portfolio increased by 17%, which is a result of commenced operations of previously won centers. EBITA amounted to SEK 105 million, which was significantly higher than last year, up 54%. Vardaga continues to show higher occupancy and prices as well as operational improvements, and the EBITA increase is also driven by earlier measures related to handed-back rental contracts. The earnings increase was somehow offset by start-up costs for the 2 newly opened nursing homes. Mature units showed a margin of 9.8%, that is 1.5 percentage points higher than the average volume for Vardaga's health care portfolio. Vardaga has, at the end of Q2, balanced contracts net of SEK 63 million in upcoming annual net revenue which will further contribute to future revenue and EBITA growth. Two new nursing homes with a total of 240 beds were signed in the quarter with a planned opening in 2027. And during this year 2024, 2 rental contracts with no operations have been handed back. On the next slide, we turn to our business area in Norway, Stendi. In Stendi, net sales increased by 10% in SEK and by 9% in local currency due to stable and high occupancy and better price mix. All segments continue to show growth like in previous quarters. The increased demand for care services for children and youth with complex needs remains. As Stendi has exited the elderly care segment, the underlying increase in net sales were in fact, 14% in local currency. In the quarter, Stendi opened 2 new assisting leading facilities with a total of 9 beds and signed 4 new contracts with a total of 25 beds. EBITA increased by SEK 42 million to SEK 61 million due to the positive occupancy and price growth as well as operational agreements. Earnings were also positively impacted by fewer public holidays compared to the same quarter last year. The EBITA margin in the quarter increased by 4.8 percentage points to 7.3%. Rolling 12 margin increased to 8.4%, thanks to the good earnings development over the last quarter. Altiden. Net sales in Altiden fell by 5%. During the quarter, Altiden opened 1 new assisted living facility with a total of 5 beds. The decrease in contract management sales by 19% was mainly due to 1 large elderly care contract that expired, which also explained the rise in our management share to 71% of total -- Altiden's total sales. In Q2, the EBITA was minus SEK 13 million, that is SEK 5 million better than last year, thanks to the continued structural profitability improvement measures regarding capacity and organization. Our improvement measures are gradually gaining effect, improving their financial performance despite a high sick leave rate and lower occupancy in the quarter. The turnaround takes time, but we expect further profitability improvements during the year. And now over to Klara, our smallest segment. In Klara, net sales decreased by 10% and because of continued weak demand due to the public health care regions limitations on the use of temporary care workers and the subsequent effect on other staffing services as well. EBITA decreased by SEK 8 million to SEK 5 million due to the lower net sales, which could not fully -- be fully offset by lower costs. Rolling 12 margin is now at 9.7%. And with that, back to you, Mark.

Thank you so much, Benno. To sum up our financial development versus our targets, our growth target is 8% to 10% through a combination of organic and acquired growth. We expect continued good organic growth and maintain an active M&A agenda. Over time, the growth target can be reached through a combination of organic and acquired growth. Looking at the profitability target, we have a mid-term adjusted EBITA target of 9.5%. We are on our way to reach the target with an increased EBITA margin amounting to 8.9% rolling 12. Most of the gap we have seen in the previous years is now closed thanks to 3 very strong quarters, and we expect further improvements going forward. The leverage level is again at 2.1x EBITDA, which is well below our financial target primarily thanks to the strong EBITDA. We expect our solid cash conversion to continue, which gives us potential to grow and provides financial flexibility. Free cash flow will be used for bolt-on acquisitions, future dividends according to our policy for the share buyback program and eventually for debt reduction. Before we open for questions, I would like to provide an outlook post quarter 2, 2024. Ambea's growth is expected to continue through a higher demand driving increased occupancy. We will also see effects from price adjustments versus last year. Nytida and Stendi plan to open several new units and care places in the coming quarters. New openings together with acquisitions will contribute to Nytida's growth going forward and more bolt-on acquisitions are expected this year. We expect the profitability to improve, and we will continue to close the gap versus our profitability target. We have bought back more than half of the 3 million shares of the current share buyback program, which we will continue. As of today, the company owns 5.03% of Ambea's total shares. The Board has a mandate from the Annual General Meeting to buy back shares up to a maximum of 10% ownership before the next AGM. To which degree the mandate will be utilized is up to the Board to decide. Finally, I would like to highlight the contribution of our employees. We provide care to 15,000 care receivers, many of them with complex needs and where the efforts that goes in to provide quality care for better and more independent lives are truly impressive. The job done ensures a society where we look after and provide care and support to those in need. It is an integrated part of the Nordic welfare model and close to our hearts and minds when we strive to make the world a better place one person at a time. For that, I express my gratitude to every employee at Ambea. And this concludes our presentation, and we will now have for questions.

[Operator Instructions] And the first question comes from the line of David Johansson from Nordea Markets.

I wanted to start off on Altiden, and we have kind of touched on this for a number of quarters now. How confident are you in your guidance now around breakeven for the full year, given the labor challenges and also occupancy? I think that would be the first one.

So our aim and our target is still that Altiden should breakeven this year. But of course, we would need some tailwind in the 2 areas you mentioned. So lowering the sick leaves and also getting occupancy levels up in the second half of the year will be paramount in order to reach that target. But it's still our ambition.

Okay. Great. And then if I could follow up on Nytida. Could you elaborate on the top line, which to me, looks -- that slowed down a bit, at least organically. So perhaps you can expand on the demand trend, especially in individual and family care and what your expectations are in terms of growth as we look towards H2.

Yes. As said, there is a natural fluctuation in the demand in individual and family care, especially for children and youth. We have seen a little bit lower than the same quarter last year, which was really good. We don't see that as a trend that will continue. And we also have some more openings and also contract management portfolio will increase during the rest of the year. So we will hopefully see a little bit better net sales growth during the coming quarters in Nytida.

Okay. Thank you for the clarity there. And then looking at Stendi, this favorable demand, I think, especially for complex youth care. What is your visibility now for Q3 and then perhaps also Q4? I think previously, you have believed this trend to be maybe more temporary, but now obviously, it has lasted a bit longer than expected. So I think any sort of clarity here, I think what you see in terms of demand would be great.

Yes. So the Norwegian society continues to face a quite high need for children and youth care and especially with more complex issues. So the visibility we have for quarter 3 and quarter 4 is that we expect the current demand, so to say, will not decrease. As far as we can see, that situation will continue for the next couple of quarters. As these placements are naturally shorter than other placements, it is difficult to provide any view beyond that. But with the visibility we have now, we still expect a high demand in the coming quarters.

Okay. Great. Then if I could end with a question on Vardaga. And again, another very strong result here, an 8.6% margin now on a rolling basis. I mean, what do you think is achievable here? I think you have reached a level where you have wanted to be at least looking historically. So what does the outlook from here look like from your perspective?

As said, we have been -- made a lot of progress in operational and management in Vardaga the last year. But we think that there is still some occupancy to gain and there is also some operational improvements still to be made. And so I think that we have not reached the top margin, if you say so. We think there is a possibility to gain another percentage point or so in Vardaga, absolutely.

And the next question comes from the line of Jakob Lembke from SEB.

My first question is a follow-on on Stendi. Just looking at the sort of sequential increase here from Q1 on the top line, how much of that is driven by this sort of short-term placement? And how much is more longer-term placements?

It's difficult to say exactly how much it belongs to each of the segments here. And also, I mean, you do not always know the length of the placement when you get it because it also depends on the progress with the care receiver. So I would say that most of the growth in revenue comes from the children and youth segment, but there are also growth in the other segments, and where we also see a good demand and also a very good performance by the Norwegian team. So it's not -- it doesn't belong to 1 segment only. It is a quite good basket with a mix from different segments, but the strongest contributor is children and youth care.

Okay. And another one on that. It seems like we are at a sort of supply-demand imbalance here in that segment. Do you see increased supply coming to the market instead of a more balanced picture here, perhaps a year ahead of time?

It takes time. Because first of all, I mean, you need to find proper locations, which is not that easy or you need to construct them, which takes time. We have projects in our pipeline for more placements going forward in the children and youth segment. And we will continue to see where the authorities are looking for demand and where they need our support in order to fulfill that demand to new established care homes, either new construction or existing facilities that can be turned into such homes. But I mean, in the short term, it's difficult to increase demand, both because you have the property issues, but you also have also the staffing, which you need to put in place and where there are quite high demands in Norwegian market for the level -- educational level of the staff that can work in children and youth care. So these 2 elements has to go hand-in-hand, and that also means that it takes time. So we are contributing as good as we can, and we are in very close dialogue with the authorities and trying to do whatever we can in order to fulfill the demand, but it takes time.

Okay. And then I have a question on Vardaga. I mean you mentioned in the report that there is this sort of shorter-developed care units here in Sweden. And you also said that this new unit in Vardaga have gotten off to a good start. I guess my question is, would you say that it is easier to fill capacity now compared to earlier? Is it a more favorable environment for you?

It depends very much on the local demand and supply situation in that specific municipality. Now we have opened up in Stockholm and Uppsala, and there seems to be a good demand. And there is also freedom of choice. So the care receivers can choose our homes if they want to, and that is a very important factor. So in these cases, yes, but in some cases, that could be the other way.

Okay. And then I'm wondering if you could give an update on how many elderly care units you have with no active operations and the sort of outlook for those.

We have 5 units at the moment with no active operations, and we are working with all of them to see when and how we can open them or how they can be used for other purposes. We have, during the last quarter, solved 2 of them, 2 contracts that are handed back. So it's now 5 units that are not owned.

And the next question comes from the line of Kristofer Liljeberg from Carnegie.

Three questions. First, I don't know if you have a comment on the occupancy levels for Vardaga, I missed the first part of the call. Second question, Nytida margin a bit lower here. How much of that would you say come from various items or more one-off nature versus the lower occupancy in social care you commented about? And in Norway, maybe difficult to say, but how much do you think margin benefits right now from the tight supply situation? And do you think it's reasonable to assume the current margins will be sustainable longer term with the more normalization of demand or -- demand/supply?

I can start with the last question and then I will hand over to Benno for the 2 first ones you have. So in terms of Norway, the margin now, we have said that we believe that sustainable margin in Norway is 7.5% to 8%. Now we are slightly above that, and that is because of our favorable demand situation. As we also said, we -- with the visibility we have now, foresee that this will continue. So there might be a little more in the short term for the margins in Stendi. But over strategy cycle, we believe that the current level is more sustainable. So that's the kind of perspective we have on the Norwegian margins, both short term and over strategy cycle. And then to your 2 questions on Nytida margins and occupancy level, I will hand over to Benno.

Yes, Vardaga occupancy level. What we said is that the occupancy is higher sequentially than the first quarter and higher than last year. We don't report any specific numbers in percent or something like that. But there is still room for improvements in the occupancy levels in Vardaga, even if it's on a higher level right now. The Nytida margin, we said that this quarter was 11.9% and rolling 12, 13.3%. We think that maybe the 13.3% is a sustainable margin level in Nytida. There will be some ups and downs in the quarter. It's natural fluctuations in some of the business subsegments in Nytida. We don't see a trend of lowering margins or something like that, that we have seen in the last 2 quarters. And we are rather confident that we will keep the margins going forward in Nytida.

But do you mean that -- the reason for not being at 13% is the more one-off items you had in the quarter? Or is lower occupancy having a negative?

If we have 13.3% as rolling 12, we have always higher margins in the third quarter. And being at 11.9% in the second quarter represent around 13% in a nonseasonal quarter, you can say.

And the next question comes from the line of Karl-Johan Bonnevier from DNB Markets.

Yes. First of all congratulations to a very solid Q2 development. Coming back to maybe some more granularity to a couple of the questions already posed. Looking at the new units that you are now setting in, in Vardaga, you indicate that it's a good start. But if you are looking at these municipalities where you have the free choice and these kind of things, would you say we are now back to what you would call the more historical kind of ramping model and how things evolves for you?

Yes. I mean, absolutely, when we have freedom of choice, we see that we have a normal ramping model, so to speak. The 2 units or the 2 nursing homes we opened this quarter are both with the AD apartments. So they are slightly bigger than the ones that we normally open at around 60, i.e., will probably take a little longer time to ramp them up fully. But as we have said, we are very satisfied with the early progress that we had in the first couple of months, and we look forward to welcome more care receivers moving in.

Excellent. And the second part of that is obviously finding the qualified staff. Is that...

It's always tough to find the right staff. And we continue to work very hard in our employee branding efforts, but also in securing that we have a very good work environment, that we have good managers and leaders that can lead the people at our care homes, that we have good competency developments for everyone, everyone that works with us. And we are very happy to see also that the ENPS, as we described, is now at an all-time high at plus 26, which means that many are willing to recommend their workplace to a friend or acquaintance. So these things are important to us. And we have seen a slightly less tight situation on nurses in the Swedish market over the last 6 to 8 months. But other than that, I mean, the challenges remain, and this is a high priority for us to continue to work on.

That was logical. Looking at contract management and obviously, now left it in Norway. Was that a loss burden for you towards the end? Or was that average margins for Norway or just breakeven or something?

It was margins well below our current margins. So that has, of course, been a contributor also to the margin development. But I would say the margin development in Norway comes from extremely hard and dedicated work by our Norwegian teams in many areas of the business. It's not only the strong demand in the sector, it's also a number of operational improvements. And we have seen and we continue to see Norwegian business. So we are very satisfied and proud of our team in Norway and what they have achieved.

Easily understood. And looking similar on Altiden and also left a couple of contract management. Is that something that improves the outlook that has been a burden for you?

Not really. That was -- the contract we exited in Denmark expired. And that wasn't a drag on profits. So that is not something that will help us going forward. But there are many other things that will help us going forward that we're working on in Denmark. So we expect profitability to continue to improve in the Danish market also.

Excellent. And Mark, you started off talking about the supply needs in the market, particularly in the elderly care space. Do you have any updated views on what the needs would be in say, in a 3- to 5-year perspective or something like that for the different Nordic countries?

Yes. So we turn to the Swedish market. I mean, there have been made quite a few forecast on this, and it is not so difficult to calculate actually how many care nursing homes that are needed. It is towards 2031, a little more than 400 new nursing homes that are required, and we are not anywhere near building at that pace at the moment. So the public sector is not putting up construction to meet the demand. And they simply need to invite private operators into more municipalities for us to support. We are working actively to find good locations in municipalities where we are welcome, and we are still expanding our pipeline. But if the welfare model in Sweden should last and taxpayers should expect to get the quality care that they are taxed for when they are in need, simply the pace has to increase, and that has to happen relatively fast. Otherwise, we will end up in a situation where queues will be long and where people will potentially die waiting for a placement. And that's not the way we want it to be in Sweden or Scandinavia, so this is something that we work hard on with ourselves and with our industry organizations and are discussing with both municipalities and on national level. In Denmark, the need is somewhat similar. The population is around half the size. So here, the need is a little more than 200 new nursing homes. But here, there is, as I described, political will, and we expect new legislation coming in next year that will open all municipalities to private operators in a model that we believe would be a good example for the Swedish politicians to look at. And as you said yourself, we are not in elderly care in Norway. The market is a little different there, where it's predominantly public, managed care homes or nursing homes in the elderly care sector. So here with a similar demographic pattern in Norway, also public construction has to increase. But at the moment, we cannot really support that. So it is very evident that these things will change. And we are very happy and stand ready to support.

Excellent. And in Norway, you would say at least the demographic need would be similar to maybe Denmark in size, but then you don't have the political will to use the private alternative to cater for that?

Correct.

Excellent. I hope you can help bridge that gap.

Thank you. We'll do our best.

Thank you. As there are no further questions, I would now like to hand back to Mark Jensen for any closing remarks.

So no more questions. Thank you all for calling in. The quarter 3 report for 2024 will be published on November 6. Have a nice day and stay safe and healthy, everyone. Thank you.

This concludes today's conference call. Thank you for participating. You may now disconnect.