Attendo AB (publ) (ATT) Q4 FY2025 Earnings Call Transcript & Summary

Welcome to Attendo Q4 report 2025. [Operator Instructions] Now I will hand the conference over to CEO, Martin Tiveus; and CFO, Mikael Malmgren. Please go ahead.

Thank you, and good morning, everyone. Today we present Attendo's results for the fourth quarter and for full year 2025. In short, I'm happy with how we ended the year in both our key markets with a continued positive trajectory in Finland and the expected margin uplift in Scandinavia. The result is mainly driven by increased occupancy, more accurate staffing planning and a continued clear focus on quality and stability in operations. Overall, I believe we're well positioned to continue investing in both our people, quality, and capacity to meet the growing need for care in society. I will start by giving a general update of the development in the quarter, then our CFO, Mikael Malmgren, will take you through the financials in more detail. Next slide, please. So let me start with the key highlights from the quarter. We delivered a strong quarter with continued improvements across both financial performance and quality. Satisfaction was maintained or increased in all stakeholder groups and reached an all-time high in relative satisfaction. This confirms that our operational improvements are translating into both higher quality and stronger financial outcomes. Net sales amounted to SEK 4.8 billion, down 2% year-on-year. However, underlying performance remained solid. Adjusted for ended contracts, divestments and currency effects, net sales grew by a healthy 5%, reflecting improved volumes and operational momentum. Occupancy continue to improve and remains a key value driver. It increased by 1 percentage point sequentially and 3 percentage points year-on-year, supporting both revenue growth and margin expansion. Lease adjusted EBITA increased by 53% to SEK 343 million compared to SEK 225 million last year. The improvement was driven by continued progress in both business areas. In Finland, we sustained our positive trajectory, supported by higher occupancy, solid operational efficiency, and a gradually improving geographical footprint. In Scandinavia, we delivered the expected margin uplift in the fourth quarter, primarily driven by increased occupancy in our own operated nursing homes, combined with efficiency improvements in support and central functions. Overall, we delivered an adjusted EPS of SEK 6 per share for the period and ended the year with a strong cash flow exceeding SEK 1 billion. This provides financial flexibility and supports continued investments in new capacity. Currently, we have around 800 new care places under construction. Finally, during the fourth quarter, we surpassed next year's EPS target. And as a result, we will today present an updated financial target, which I will return to later in the presentation. Next slide, please. So we'll start by looking at the development of some of our nonfinancial KPIs. I cannot stress enough the importance of pairing strong financial performance with high, consistent, and stable satisfaction across all our stakeholder groups. I am particularly happy to see relative satisfaction reaching its highest level ever this quarter, 51 compared to 44 in Q4 last year as a result of an increased focus on relatives in 2025. In Finland, open meetings for relatives have been arranged all over the country. And in Sweden, more and more people are using a relative app, Nara. In the relative app, family members can follow the everyday life of loved one in a nursing home, connect with staff, and stay in tune with activities and health plans. Next slide, please. Occupancy increased in both business areas during the quarter, main drivers being more sold beds in combination with closed capacity. In Finland, the work to strengthen relations with the welfare regions lead the results in terms of higher occupancy. Furthermore, we opened 1 new nursing home in Finland during the quarter and started construction of another 7 new homes. In Scandinavia, we started construction of 2 new homes during the quarter, bringing the total number of beds under construction to above 800. Next slide, please. So let's turn to the development of our rolling 12-month lease adjusted EBITA margin. During the quarter, we managed to improve margins in both business areas, delivering a rolling 12-month lease adjusted EBITA margin of 6.7% by the end of the year, a clear improvement from 5.4% last year. While we have seen a steadily improving margin trajectory in Finland for many consecutive quarters, I am pleased to show that we delivered the expected margin uplift in Scandinavia in Q4. In Scandinavia, we have exited several outsourcing and home care contracts with poor terms over the past year, and we can now look forward to a stronger focus on own operations in our key segments. From this point onwards, we expect Scandinavia to continue to improve, driven by increasing occupancy and improving operational efficiency. With that, I hand over to our CFO, Mikael Malmgren. Please go ahead, Mikael.

Thank you, Martin, and good morning, everyone. In the quarter, we saw underlying growth in both business areas, approximately plus 3% in Finland and plus 8% in Sweden. However, growth was offset by ended and ending contracts in Sweden and FX headwinds, which resulted in reported net sales decreasing 2% to SEK 4.8 million. In Scandinavia, the growth was down 1% reported or minus SEK 53 million, while underlying growth, excluding ended and ending contracts was 8.3% when also including the recent Framja acquisition. Ending and ended contracts will continue to weigh on sales throughout 2026. In Finland, growth was plus 2.5% or SEK 65 million in local currency and plus 3.6% excluding divestments. Improvement largely driven by an increase in net new customers compared to same quarter last year with a good development in own nursing homes. Acquisitions and divestments done during the year in both Sweden and Finland added a net SEK 44 million in growth. Currency had, as expected, a larger negative net sales effect of close to 3%. And based on our current euro-SEK trading, we expect to see a similar effect in the coming quarter. Next slide, please. The reported result improved to SEK 494 million. Correspondingly, the lease adjusted EBITA increased from SEK 225 million to SEK 343 million, up 53% versus same period last year and our strongest Q4 result to date. Lease adjusted EBITA in Scandinavia was SEK 40 million higher than last year. Last year, Scandinavia's result was impacted by SEK 13 million integration costs. At the same time this year, ending home care contracts had a nonrecurring negative impact on results of approximately SEK 5 million, which equals to SEK 10 million lower result compared to same period last year. Finland lease adjusted EBITA improved SEK 97 million, excluding FX effects. Currency had a SEK 17 million reported and a SEK 12 million negative effect on lease adjusted EBITA. Next slide, please. Growth to Attendo Finland was plus 3.6% excluding divestments and FX effects and minus 2% reported due to a weaker euro. Lease adjusted EBITA was SEK 270 million, an improvement of SEK 85 million or plus SEK 97 million, excluding currency effect compared to last year. The quarter improved by more sold beds in primarily owned nursing homes, but also continued improved manning on the back of continued investments in staff development, working conditions, and support systems. The result was further improved by a better geographical footprint. The quarter also had approximately SEK 50 million positive seasonality effect due to the timing of Liberation Day versus last year. At the end of the quarter, we opened 1 new nursing home unit with 89 beds. And during 2026, we plan to exit a few more low or no occupancy units, which will lead to further improved occupancy and productivity. At the same time, we're now scaling up our investments with confirmed plans to add 580 in additional capacity during 2026. Next slide, please. In Scandinavia, underlying net sales growth was plus 8.3%, driven by growth in own nursing homes as well as our recent acquisition. However, total net sales growth was offset by ended and ending contracts. Lease adjusted EBITA was SEK 96 million, an improvement of SEK 40 million versus last year, driven by own operations and improved central costs. Ended and ending outsourcing contracts had no material impact on the result. However, the result was slightly negatively affected by home care exits, where these contracts generated approximately SEK 5 million in losses. At the same time, previous period was impacted negatively by integration costs of SEK 13 million. Going forward, we still foresee some minor negative effects in Q1 next year from the home care contract exits. As stated in the last Q3 report, we were not fully satisfied with the results and that Scandinavia has more to give. As such, we are pleased to see that the improvements of set actions show in the results in the quarter. Finally, in Scandinavia, which has had a higher rate of openings in the last 18 months, has a further 220 places under construction and more planned, which I will come back to later in the presentation. Next slide, please. This is a new slide, which breaks out the ended and ending contracts within outsourcing as well as home care exits. At the bottom, we have the reported numbers in terms of net sales and EBITA, while at the top, we have the Attendo business, which we call our core operations, where the ended and ending contracts have been excluded. The ambition with this is to show you both the impact of the exits as well as better showcase how the underlying and remaining core operations is doing. As we mentioned before, Attendo Scandinavia margin uplift showed promise in Q4, where the team is working to further improve our ways of working, faster responding to changes in manning and sales, while simultaneously exiting nonstrategic outsourcing contracts and exiting non-sustainable home care contracts. As you can see on the slide, Attendo operations, our core, which excludes ended and ending contracts, show a net sales growth of 8.3% and a margin of 5.1% in the quarter. At the same time, the contracts which have ended or will end has significant impact on overall net sales, down SEK 163 million, but limited impact on our EBITA and a testament to our chosen strategy. Next slide, please. On the back of an expected gradual demographic shift towards more people in need of care, we are starting to scale up our investments. This is on the back, as I mentioned, of an expected gradual and sequential demographic shift with more elderly in need of care over the next 10 to 15 years. Our pipeline of projects, as shown on the slides, consists of both sites under construction, i.e., what we call shovel in the ground as well as signed lease agreements for projects to be built and where we expect to commence construction during the next 12 months. In total, we now have 1,250 added capacity in pipeline with more than 85% to 90% expected to open during the next 2 years, but we are also now starting to add projects for 2028. Important to note is that the pipeline follow our strategy to open in locations where we forecast a strong need for our services, a good payer relationship, and a buying mechanism in place. Also importantly, that it provides good commute options for both staff and relatives as well as an overall growing population. A growing population, we believe, is important to ensure availability of staff. Next slide, please. Today, I'm happy to introduce an updated table on our cash flow generation. With this, we aim to both better show our actual rent payments that flow out, which sometimes are somewhat difficult to capture under the IFRS 16 standard and also show the cash flow we have available to us as a firm, i.e., free cash flow to firm. As you will note, the rent payments under IFRS 16 have been moved up to show that they in reality impact the operating cash flow. While under the IFRS standard, the lease agreements are treated as debt where you have to pay an interest on the lease liability as well as a principal, i.e., amortization of the lease liability, which lowers the debt on the balance sheet, while in reality, when you add these together, they equal the actual rent paid. With that, let's dive into the numbers. Overall, our free cash flow to firm showed strong resilience and improved to SEK 1,179 million on a rolling 12-month basis and SEK 560 million in Q4 compared to SEK 462 million same period last year. During the quarter, we repurchased SEK 150 million worth of shares. And today, we can report that we reached our target mandate from last report of buying back SEK 200 million worth of shares by the time of this Q4 report. As a result of the last 2 years, since the initiation of our continued share buyback program back in February 2024, we have repurchased approximately 10% of outstanding shares. And in line with our financial plan of continued buybacks, we're happy to announce our next repurchase program. Program aims to repurchase an additional SEK 200 million worth of shares until next quarterly report in May, ahead of the AGM. Next slide, please. Over the last 12 months, we have continued to deliver on our set 2024 to 2026 financial plan and a more active capital allocation. As a result, we have utilized close to 60% of our free cash flow for dividend and more importantly, continued share buybacks. In addition, we have continued to add high-quality value-accretive bolt-ons, firstly, in Finland in Q1 this year and in Sweden during Q3. And at the same time, we divested our nonstrategic child welfare business in Finland. And finally, we continue to improve our net debt. Looking ahead, we aim to continue with our strategy of adding further value-accretive bolt-ons of at least 2% to 3% of additional EBITA growth on average per year and subject to AGM and Board approval to continue our quarterly buyback programs. Next slide, please. Let's have a look at our key financial metrics. If we start at the top left, the adjusted earnings per share improved by SEK 0.68 per share, up 69% versus last year. Improvement primarily due to higher lease adjusted EBITA and further supported by both reduced financing costs and continued share buybacks. If we turn to the top right figure and our lease adjusted margin in percent, adjusted for nonrecurring items in 2024, we continue to improve our lease adjusted EBITA margin. In Q4, the rolling 12-month margin was 6.7%, up 1.3 percentage points compared to Q4 last year. If we look at the bottom left figure, our lease adjusted net debt-to-EBITA ratio was 1.1x, and down 0.6x compared to same quarter last year. And finally, if we look at the figure on the bottom right, net interest expenses in the quarter was SEK 26 million, SEK 10 million better than same period last year and SEK 28 million lower on a rolling 12-month basis. With that, I hand over to you, Martin.

Thank you, Mikael. As we enter 2026, we do so from a position of strength. Strong financial performance is paired with high and stable quality across our operations. Customer satisfaction remains high in our care services and relative satisfaction is at all-time high. This confirms the resilience and sustainability of our operating model. During the year, we have exited and continue to exit several noncore care contracts. At the same time, we have further strengthened our geographical footprint by gradually leaving less attractive areas and opening new units in locations with stronger long-term demand and better economics. In Finland, we continue to see positive margin trajectory. And in Scandinavia, we initiated expected margin uplift in the fourth quarter, making an important step in the turnaround of the region. For 2025, we delivered an adjusted EPS of SEK 6 per share, well above next year's adjusted EPS target and represents an increase of approximately 50% compared to the previous year. Our strong financial results enables increased investments in new capacity to meet the growing demands for care in society. Currently, we have around 800 new care beds under construction. Based on this strong performance and financial position, the Board intends to propose a dividend of SEK 1.80 per share alongside continued share buybacks. Next slide, please. With that, we conclude Q4 in 2025 and move forward into new financial targets for 2026 and beyond. Since the end of 2022, we have improved our adjusted earnings per share significantly. After having concluded the first phase of our turnaround plan in 2023, we announced a new financial plan in the beginning of 2024 with a target to deliver more than 80% earnings per share growth by 2026. As you can see in the graph, we exceeded the target during the fourth quarter, delivering 100% EPS growth over the past 2 years. Hence, we now enter the next phase for Attendo with updated financial targets for 2026 to 2028. Next slide, please. To begin with, we will continue to execute on our strategy with a clear focus on combining healthy financial performance and balanced growth with high-quality care operations and strong stakeholder satisfaction. Our priority remains balanced asset-light organic growth in our existing markets, complemented by selective and margin-accretive bolt-on acquisitions in both Scandinavia and Finland. Supported by demographic trends and broader societal developments, we see strong underlying demand growth for elderly care in the Nordic region, alongside a steadily increasing demand for specialized functional care over the next 15 to 20 years. Against this backdrop, we're introducing a new financial target for the period 2026 to 2028 to reach a lease adjusted EPS of at least SEK 9 per share. Next slide, please. To further illustrate our balanced growth strategy, let me walk you through the EBITA growth opportunities embedded in our growth model. We start with adding new capacity through greenfield developments. Here, we see ample opportunities across both geographies and care segments. And on average, we expect to add around 2% to 3% net new capacity per year with a corresponding contribution to EBITA growth. Bolt-on acquisitions are expected to provide an additional contribution of approximately 2% to annual EBITA growth. Next lever is occupancy, which is a key driver of profitability improvement. Our assumption is that we can increase occupancy by, on average, at least 1 percentage point per year. This improvement is expected to contribute at least the same amount to EBITA growth. And while average occupancy has improved significantly over the past year to around 88%, we see clear potential to reach at least 92%, in line with historical levels. On unit level, higher occupancy also improves productivity. Combined with new digital tools and more standardized ways of working across the group, this will further support margin expansion and earnings growth. Growth also enables scale benefits in overhead and support functions, which is expected to be EBITA accretive over time. Finally, we assume annual inflation compensation through price increases, which should also have a positive drop-through to EBITA. Taken together, these levers supports an EBITA growth of at least 10% per year. Next slide, please. From our current earnings level, we see several clear building blocks that support our ambition to reach at least SEK 9 per share in lease adjusted EPS by 2028. The first building block is Scandinavia. Here, we expect continued margin restoration driven by improved staffing efficiency, exit of unprofitable contracts and adjustment to overhead in support and central functions. The middle bar represents the annual EBITA improvement generated by our growth model, as outlined earlier, combining organic capacity growth, bolt-on acquisitions, higher occupancy, operational efficiency, and scale benefits. The third building block is active capital allocation. Supported by strong free cash flow and our asset-light growth model, we see continued opportunities to enhance shareholder value through share buybacks. Over the past 2 years, we have on average repurchased close to 5% of outstanding shares per year, further supporting EPS growth. We intend to continue the share buybacks in the coming years. Next slide, please. So to summarize, these are our updated financial targets for the period 2026 to 2028. We are updating the EPS target while leaving our other financial targets largely unchanged. Our leverage target measured at adjusted net debt to adjusted EBITA remains at between 1.5x and 2.5x. We may temporarily exceed 2.5x, for example, in connection with a larger acquisition while maintaining a disciplined approach to capital allocation. We also maintained our dividend policy of distributing or aiming to distribute 30% of adjusted net profit. Our intention is to combine the dividend with a recurring share buyback program supported by strong free cash flow generation. Overall, we believe that our solid financial position, strong customer focus and ability to provide local authorities with cost-effective care, while at the same time addressing increasingly complex care needs, position Attendo well for the future. Finally, earlier today, we sent out an invitation to our Digital Capital Markets Day, which will take place on March 17. With that, we open up for Q&A. So operator, please go ahead.

[Operator Instructions] The next question comes from Julia Angeli Strand from Handelsbanken.

And firstly, congratulations to a strong report. I'll stick to 3 questions. So firstly, can you quantify what you said on rightsizing central functions in Scandinavia? And are your efforts there done? Or will they continue throughout 2026?

Yes. Thank you, Julia. We did not quantify the exact amount, and we don't have an aim to do that either. However, we do see these effects having a positive effect also in the first 3 quarters of 2026.

Okay. Understood. And then I can see that you have ended or divested beds in both Scandinavia and Finland. Do you have more assets that you want to divest?

Not currently. We only, as we mentioned, have some plans to close down some lower no occupancy units, but no divestments as such.

Okay. And building on that one, how should we look at the pace of occupancy improvements? It feels like occupancy improvements of 1 percentage point quarter-over-quarter seems a lot given that Q4 has a lot of holidays. Is that durable pace? Or is that just an effect that you closed beds during this quarter?

I think occupancy development, I mean, it has, I think, few things to bear in mind. I mean, in Finland, the lower staffing ratio that was introduced in 2025 should also mean a reduced pressure on public finances, which we anticipated could lead to better occupancy situation, and it also -- has also materialized during 2025. But we also, in Scandinavia have been opening new units in attractive location. And of course, also that helps out also to build up occupancy. As I said, I mean, with the growth model, we have simulated sort of the importance of 1% occupancy growth per annum and the effect that will have on EBITA growth and also productivity. And we still believe that we should be able to long term go up to at least 92% on average. So it's another 4 percentage points to go. Then how fast this will go, we'll have to see.

The next question comes from Kristofer Liljeberg from Carnegie.

Starting on your comments, it seems you wanted to open a bit more beds. And just to clarify what you said, you have total now beds in project of 1,250 or so. Did you say that you expect to open 85% to 90% of these within 2 years? And if you could comment on expected number of openings in 2026?

Yes, that's correct, what you said, we expect 85% to 90% in next 2 years, and they are fairly evenly split between the years.

Okay. Great. And if we look a little bit further ahead, what do you think is a good number of openings? Would you like to expand that even further? Or is that a good level for the years after 2026 as well?

I mean we have a sort of rolling 3-year planning horizon in terms of our building up openings. But then we have a very long-term plan, of course, as well. But if we look at the demographic growth and the expected demand growth and capacity needs in both Finland and Sweden, you can see that we have somewhat raised our openings target. If you look at our growth model, we used to have 2% organic growth. Now we have 2% to 3% net openings after closures, meaning that likely sort of closer to 3% over the next 2 to 3 years, which is also reflecting a higher demand growth in the market. And that higher demand growth will go on for the next 15 years, if you look at demographics. So it's in plan to increase building pace and capacity growth a bit more than we have done over the past 5 to 10 years.

But still there's --it's early phase, Kristofer, so we don't -- so we follow our model.

Yes. That's good. Then on the margin improvement in Scandinavia, pretty sharp improvement end of the year. Is it possible to quantify in any way what this should mean as a run rate when we start 2026 and then the potential to further improve this in 2026?

Yes. We don't comment on margins, as you know, Kristofer. However, the effects that we have seen in Q4, we expect to continue into 2026 with the improvements from ending contracts, the support staff improvement of cost base as well as some operational efficiency and acquisitions.

And finally on the margin when it comes to Finland, you didn't mention margin improvement in Finland as a driver for EPS. So you have done a great job, of course, in the last couple of years there. But do you expect Finnish margin to be more flattish now going forward? Or do you see further potential there?

If you look at the largest segment in Finland, which is the nursing home segment, which is more than 70% of business, we believe that we are a bit more sort of -- we are through the turnaround phase and reach a more stable phase in terms of margin development in Finland. Then of course, I mean, continued occupancy improvement from this level will, of course, also have an effect. We also have a drop-through on margins, of course.

The next question comes from Bjorn Olsson from SEB.

Just a follow-up on the expansion question then. So let's assume that you open roughly 1,200 new beds in the next 2 years. That equals roughly 3% of new capacity each year. How much of a margin pressure will that add, do you expect in the short run?

Yes. Again, thank you, Bjorn. It could have a slight margin pressure in 2027, of course. But overall, we see a slightly higher opening in Finland, where the fill up is generally a bit faster as we open slightly smaller homes. This is also a level, if you look at it, around 600 per annum in terms of net new beds that we believe that we can fill in a quite quick pace and then have a very limited effect on margin. So that's the idea with our -- what we call the balanced growth strategy is to grow in a balanced way, meaning overall with sustained margins.

Okay. Clear. And then just on your debt side, I mean, you clearly have a debt that's way below your targeted level. And you mentioned potential for larger acquisitions. Could you give any flavor on sort of if it's in any particular area you're looking at or sort of what would be accretive in your mind?

We are continuously doing accretive acquisitions. I think we made around 70 acquisitions since I started in the company 7 years ago. In Finland, the market is still somewhat fragmented in all segments. So we do acquisitions in Finland across the board, across all our 3 major segments. In Sweden, there are no nursing homes to buy because it's largely only us and [ Ambea ] building nursing homes in Sweden. But there are still a very vivid M&A market on both disabled care and individual and family care in Sweden.

The next question comes from Philip Ekengren from ABGSC.

I just have a couple of follow-ups, and you might have answered this, and I apologize if that's the case. But just on Finland, obviously, strong margins here, and you highlighted some more accurate staffing procedures. Do you see further room for improvement on that part of the margin improvement?

I think we've managed to reach a very high efficiency in terms of staffing and planning. We have done a lot of improvements, both in digital tools and procedures in Finland, adapting to the -- we've been practicing a lot with changing staffing requirements basically every year over the past 4, 5 years in Finland. So I think we're getting better and better on it. And I think that now we reach an efficiency level that is on a good level in Finland. I don't expect any more drastic improvements from this level on in terms of efficiency.

Make sense. Good answer. And then on occupancy, there were some questions earlier on this. But I mean, obviously, clear improvements here. What is a good occupancy level? Do you have a sort of occupancy target in mature units? Can you say anything on that, give any flavor on it?

Yes. The occupancy focus, if you look inside, we will open the lid, you'll see that this is a very regional and local business. In capital areas, both in Finland and Stockholm, occupancy levels are typically 98%, 99% because of -- you have high density of elderly people. You have higher demand growth in larger cities and it's more difficult to find land plots to build capacity. So it's typically more common with undercapacity or over demand in larger cities in capital regions, whereas on smaller cities and country side, it's a bit of the opposite. So when we -- what we're seeing is when we're gradually optimizing a geographical footprint, it also means that we are -- have been over the past 5, 6 years, gradually every year as leasing contract goes out, exiting selected units in rural areas and then rebuilding new units in larger cities or regional hubs. That also helps improve long term the average occupancy level. So when we say that we're at 88%, and we should target at least 92%, it's because we've been at 92% historically, we know that that's at least where we should come back to. It doesn't mean that that's a roof, but that's our sort of our first occupancy target is to reach 92%.

[Operator Instructions]

Yes. So thank you. We also have a question from the chat to elaborate on the calendar effect referenced in the report, profit was also affected by a positive way by calendar effect. That relates to the timing of Liberation Day in Finland, where if it occurs on a weekday, the staff is also getting 1 day off. However, if it occurs on a weekend, there is no additional vacation day. This year, it on a Saturday. And next year, it will happen on a Sunday. Yes. there's also a question on elaborating on improved planning, which has benefited margins in Finland and Scandinavia during the quarter. Improved planning, what that means is ability to as quickly as possible, adapt to changes in occupancy on a single unit and how we can use a mix of full-time, part-time and hourly staff and also work more efficiently with staffing post to manage sick leave and so forth. So there, of course, we have a lot of help with our digitalization initiatives that is constantly ongoing to help improve both competence and training of our planning functions, but also the digital tools to help planning. That seems to be...

There are no more questions at this time. So I hand the conference back to the speakers for closing comments.

Well, with that, I think we conclude the call. Thank you all for listening in and for good questions. And looking forward to see you soon again. Thank you.

Thank you.