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

Welcome to Attendo Q2 Report 2026. [Operator Instructions] Now I will hand the conference over to CEO, Martin Tivéus; and CFO, Mikael Malmgren. Please go ahead.

Thank you, and good morning, everyone. Today, we present Attendo's results for the second quarter of '26. As usual, we'll focus on the key drivers behind our performance, our operational progress and how we continue to execute our strategy. I will start by giving a general update on the development in the quarter, and 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. I'm pleased to present a strong quarter with improved results in both business areas, driven by higher occupancy, improved operational efficiency and a strong delivery on our quality indicators. Customer satisfaction reached the highest level we have measured so far and employee satisfaction continues to improve from already high levels. While reported net sales increased by 1%, underlying growth in continuing operations remained strong at around 5%. The delta is explained by ended or ending outsourcing and Home Care contract in Sweden as well as currency effects. Profitability improved significantly with lease adjusted EBITA increasing by 56% to SEK 321 million. On a rolling 12-month basis, lease adjusted EBITA margin improved by 2 percentage points to 7.8% for the group. Adjusted earnings per share increased by close to 80% in the quarter, and we delivered a strong free cash flow of SEK 269 million, supporting increased investments in new capacity. By continuing to develop quality of care and by adding new capacity to society, we are part of the solution to the care challenges of both today and tomorrow. Next slide, please. Before we go into the quarter in more details, just let me briefly recap the plan we presented in February. Since 2023, we have doubled our adjusted earnings per share from SEK 3 to SEK 6 for the full year of 2025. That was the delivery of our previous financial plan. In February this year, we announced a new financial target to reach an adjusted EPS of at least SEK 9 per share by 2028. In other words, another 50% increase from last year's level. We illustrated the EPS journey from SEK 6 to at least SEK 9 per share with three building blocks. The first building block is margin improvement in Scandinavia, where we communicated an expected margin uplift throughout 2026, driven by improved staffing accuracy, focusing on operations, exiting of unprofitable contracts and improvements in ways of working. As you can see in our Q2 numbers and also later in this presentation, the margin uplift in Scandinavia is already well underway. The second building block is our core growth model that we have followed over the past 5 years, what we call the balanced growth model. I will return to that in a moment. And the third building block is active capital allocation, primarily through continued share buybacks conducted within our mandate, where we target to buy back around 5% of outstanding shares per annum. After the second quarter of 2026, our rolling 12-month adjusted EPS reached SEK 7.14, well on our path towards our financial target of reaching at least SEK 9 per share by 2028. So let me now just spend a moment on the balanced growth model itself. Next slide, please. Our model for balanced growth contains several growth levers that over time can fluctuate a bit between quarters and years, but together, they build up to an EBITA growth of at least 10% per annum. New capacity through greenfield openings contributing to average around 2% to 3% of growth per year, margin-accretive bolt-on acquisitions contributing around 2%. Occupancy improvement, where we assume at least 1 percentage point of improvement per year in existing capacity. That 1 percentage point higher occupancy together with better ways of working, typically also translate into higher productivity contributing to around 2%. Further, we have economies of scale effects and finally, price compensating for annual cost inflation. On top of annual growth in EBITA, continued share buybacks supports an even higher growth rate in adjusted earnings per share. As I said in the beginning of this presentation, in this quarter, we were in line with or ahead of plan on all these growth levers. Let me show you 3 where we have the most to report today, which is new capacity, acquisitions and occupancy. Next slide, please. So starting with new capacity. This slide shows our project pipeline. As you can see, we now have around 900 places under construction, 600 in Finland, around 300 in Scandinavia, and we have signed agreements for a further close to 600 places where construction has not yet started. Over the next 12 months, we will open around 770 new places across Finland and Sweden. Already construction started projects, as you can see, now correspond to around 4% of our total capacity. After planned closures of units with low occupancy or weak economics, that well supports the 2% to 3% net capacity growth in our balanced growth model and gives us good visibility on openings into '27 and '28. Next slide, please. The second growth lever is M&A, where we, over time, expect around 2% EBITA growth per annum. Our approach is to acquire high-quality, margin-accretive bolt-ons in segments we know well, and we integrate them into our own quality systems and ways of working. Year-to-date, we made 4 transactions, 2 smaller bolt-ons in Finland completed earlier in the year and another 2 strategic acquisitions signed during the second quarter. One is Skåningegård in Southern Sweden with 9 units within Disability Care, Individual & Family Care and Elderly Care and the other one being A-klinikka in Finland with 17 units within substance abuse and addiction treatment. Combined, these businesses represent around SEK 450 million in net sales and around SEK 50 million in lease adjusted EBITA before synergies. That corresponds to roughly 4% EBITA growth relative to our 2025 results. Hence, we've already delivered more than the full year ambition of at least 2% from acquisitions. Further, A-klinikka in particular, strengthens our position in specialist care in Finland and broadens what we can offer develop regions. Next slide, please. The third growth lever is occupancy. And here, we continue to deliver above the 1 percentage points per year that we assume in the model. We ended the quarter at 88% for the group, up around 2.5 percentage points year-on-year. In Scandinavia, we see a clear improvement in occupancy from more sold beds and from active capacity management. During the quarter, we closed 1 old nursing home with 4 locations. In Finland, occupancy was 87% against 85% last year and stable sequentially. The second quarter is seasonally softer in Finland in combination with several openings during the quarter. Occupancy carries a very high drop-through to earnings, and we continue our path back to our target of reaching at least 92% average occupancy for the group, which is in line with historical levels. Next slide, please. So let's turn to the development of our rolling 12-month lease adjusted EBITA margin. So we see a continued margin uplift in both business areas, both sequentially and year-on-year. Rolling 12-month group margin is up to 2 percentage points from a year ago to 7.8%. Finland has now delivered a steadily improving margin trajectory for 14 consecutive quarters. In Scandinavia, we expect to continue to gradually improve margins during 2026. You can also note that rolling 12 months net sales has been broadly flat at around SEK 19 billion for a number of quarters as an effect of the transition in Scandinavia in combination with currency effects. We expect to gradually return to net sales growth from the second half of this year as the effect of the transition in Scandinavia wears off in combination with acquisitions. With that, I hand over to our CFO, Mikael Malmgren. Please go ahead, Mikael. Next slide, please.

Thank you, Martin, and good morning, everyone. So let's take a look at the sales development for the quarter. Reported net sales increased by 1.3% to north of SEK 4.7 billion. Our continuing operations grew by 4.9% with growth in both business areas, where Scandinavia grew 7%, driven by more sold beds in own homes and products. Finland grew close to 4%, excluding the divested Individual & Family Care business and currency, driven mainly by own nursing homes. However, reported growth was partially offset by first, ended and ending outsourcing and home care contracts in Scandinavia, which reduced reported net sales by SEK 113 million. Secondly, last year's divestment in Finland impacted sales by SEK 24 million. And finally, FX headwind had a SEK 22 million negative impact. Ending and exiting contracts net sales impact will gradually wear off during the remaining part of 2026 and first half year of 2027. In Scandinavia, only 2 decided outsourcing exits remain in the portfolio and both leave in the fourth quarter of this year. Next slide, please. Moving to EBITA development. Reported EBITA improved by SEK 121 million to SEK 470 million. Lease adjusted EBITA increased by SEK 160 million to SEK 321 million and up 56% versus same period last year. The improvement is broad-based with lease adjusted EBITA in Scandinavia improving SEK 62 million and substantially higher than last year. And Finland also performing very well, improving lease adjusted EBITA by SEK 53 million, excluding FX effects. Group and other items was broadly neutral in the quarter, and currency had a marginal effect on reported EBITA and lease adjusted EBITA. Next slide, please. Turning to Finland. Net sales was SEK 2.8 billion, up 1.9% reported and 2.7% adjusted for currency. Excluding the divested business and currency, growth in continuing operations was approximately 4%, driven mainly by more sold beds in primarily owned nursing homes. Going forward, we expect to see continued growth driven by new openings and further supported by recent acquisitions. Lease adjusted EBITA was SEK 235 million against SEK 183 million, an increase of 29% or plus SEK 52 million, with the margin improving to 8.4% from 6.7%. Earnings improved in all segments, but the largest contribution came from care for older people. Two things drive it. First, occupancy, up to 87% from 85% last year, supported by higher inflow of new residents and a well-managed start to the summer period. Second, staffing is now well matched to the needs of the operations, driven by investments in staff development, working conditions, support systems and improved sick leave. This has been our biggest focus on our agenda in Finland for the past 2 years. Occupancy development was further supported by our active work to improve our geographical footprint. On capacity, we opened 3 new homes with 103 places during the quarter. We also took over a home with 59 places in high occupancy from a welfare region. At the same time, we continue to improve our geographical footprint, closing down around 100 places in units with low or no occupancy. We also started construction of 2 new homes with 65 places. During the quarter, we had a positive net inflow of new customers. And as a result, occupancy was stable despite some summer seasonality. Looking ahead, we plan to sustain our investment in new capacity with currently 600-plus places under construction in Finland, of which 440 are planned to open during 2026. In addition, we have a strong pipeline of signed lease agreements equal to a further 270-plus places where construction has not yet started. Finally, as Martin covered earlier, we completed 1 bolt-on acquisition in Finland during the quarter and A-klinikka, an additional strategic acquisition closed on August 1. A-klinikka is expected to deliver incremental EBITA from January 1 onwards post integration is completed. Next slide, please. So turning to Scandinavia. As communicated already last year, we expect to improve margins in Scandinavia during the whole 2026. In Q2, growth in continuing operations was 7% and offset by ending outsourcing and home care contracts. In line with our financial plan and margin uplift in Scandinavia, lease adjusted EBITA increased more than SEK 60 million to SEK 106 million, with the margin improving to 5.4% from 2.2%. The improvement has 3 key drivers: higher occupancy in our own homes, better operational efficiency, primarily more accurate staffing planning and improved central support function ways of working. In addition, the second quarter of last year carried nonrecurring costs in home care contracts that were being exited. Also in Scandinavia, we continue to improve our geographical footprint, closing an own nursing home, which had zero occupancy already end of Q1 and which will have a positive impact on the results going forward. At the same time, we're starting to increase our investments in new capacity with new openings from Q4 onwards. And so we expect to see gradually positive net sales growth, further supported by the recent acquisition of Skåningegård. Next slide, please. As mentioned previously, net sales growth in continuing operations grew 7% in the quarter to SEK 1.9 billion and lease adjusted EBITA grew close to 8%. This marks the third consecutive quarter of improved margins, reaching 5.7%. At the same time, the ended and ending contracts decreased SEK 130 million. The revenue base is now small and the impact year-over-year will continuously diminish over the next couple of quarters. As a result of our actions, total lease adjusted EBITA increased 141% with the margin now up to 5.4%. Next slide, please. We continue to see strong free cash flow on a rolling 12-month basis. That said, free cash flow to firm was slightly lower in the quarter due to timing of working capital. The working capital effect was negative SEK 53 million in the quarter against positive SEK 178 million last year. The change is the main explanation for the year-on-year movement in free cash flow, where the comparison quarter had a more favorable working capital timing development. There's no change in the underlying payment behavior, and we expect this to be reversed ahead of next quarter update. CapEx investments was stable at SEK 44 million against SEK 49 million, again, a positive reminder of how capital-light our business model is. Free cash flow to firm was therefore SEK 269 million in the quarter and SEK 1.2 billion on a rolling 12-month basis. Worth noting is that we paid our first of 2 dividends, SEK 129 million, and we repurchased shares of SEK 241 million against SEK 36 million in the comparison quarter. Since start of share buybacks in February 2024, we have repurchased 5% of outstanding shares on average per year and the pace we aim to at least continue. As such, I'm happy to announce that the Board has approved a new repurchase program, targeting to repurchase an additional SEK 250 million worth of shares until the time of the Q3 report in November. Next slide, please. So a quick look at the key metrics, all of which continue to move in the right direction and ahead of plan. Starting with the earnings per share bridge on the right. Adjusted earnings per share improved by 79% from SEK 0.85 to SEK 1.52. By far, the largest contribution comes from the higher lease adjusted EBITA at around SEK 0.8 per share. Financial items contribute positively as financing costs come down. Tax takes some of it back as expected on higher profits and buyback adds further. On a rolling 12-month basis, adjusted earnings per share is now SEK 7.14. If we look at the top right, the rolling 12-month lease adjusted margin was 7.8%, up from 5.8% a year ago and improving every quarter throughout the period. At the bottom left, our leverage was 1.1x, down from 1.7x comparable period and in line with previous quarters. Going forward, we expect leverage to increase slightly due to increased investments in new capacity, the recent acquisitions in both Scandinavia and Finland and due to our active capital allocation. And bottom right, net interest expense was SEK 25 million in the quarter against SEK 31 million. During the quarter, we also refinanced the company 1.5 years ahead of time, improving our financial flexibility by an additional SEK 1 billion. With improved financial flexibility supported by our bank group, we are confident to be able to sustain our investments in acquisition, add new capacity and maintain an active capital allocation. At the same time, we expect a gradual improvement in the net interest expense as the effects of the refinancing comes through. With that, I hand over to you, Martin.

Thank you, Mikael. Next slide, please. So let me summarize. Most importantly, we continue to deliver appreciated care, creating value both for individuals and for society. Our latest surveys show record high and stable satisfaction across stakeholder groups, which confirms the resilience and sustainability of our operating model. For us, delivering high quality of care is not only our mandate for long-term growth, it's also part of our promise to society to deliver better and more appreciated care at a lower cost to society. The higher and stable quality across our operation is paired with strong financial performance, driven by continued improvement in occupancy and strong operational efficiency. We also continue to strengthen our geographical footprint by gradually leaving less attractive areas and opening new units in locations with stronger long-term demand and better economics. With the 2 strategic acquisitions made during the quarter, we're already ahead of our M&A ambition for the full year. For the second quarter, rolling 12 months lease adjusted earnings per share increased to SEK 7.14, well ahead of plan towards reaching at least SEK 9 per share in 2028. Our strong financial results and cash flow enable increased investments in new capacity to meet the growing demand for care in society. Currently, we have around 900 new care beds under construction and a total pipeline of close to 1,500 places, capacity that will be well needed given the demographic situation in the Nordics. Overall, Attendo is well positioned to meet increasing care needs in society while delivering sustainable and profitable growth for shareholders. With that, thank you for your attention, and let's open up for questions. Operator, please go ahead.

[Operator Instructions] The next question comes from Björn Olsson from SEB.

First, a question on Scandinavia. The margin uplift you described was, I guess, a mix of all fronts, but could you break down the different components in terms of how much was the occupancy improvement adding versus the efficiency effects? And I mean, given the high occupancy rate in Scandinavia at the moment, I would assume that the margin improvements to come are from efficiencies. And then would you say that sort of the potential margin level then if operating at peak efficiency, should that be sort of approach the Finland level? Or could you give us a bit of a flavor here?

As you know, we generally don't guide on the margins or margin breakdowns. But on the improvement in Scandinavia, I mean, we -- as I said, we communicated that already last year that we foresee a gradual margin uplift in Scandinavia throughout 2026 and a bit into 2027 due to the transition that we are working on in terms of moving away from outsourcing contracts and unprofitable contracts with a focus on own operations. That's in combination that the demand growth that we're seeing in society also make that the fill-up phase goes faster now than it did a couple of years ago. So the new units that we opened during 2025 are basically already -- so what you're seeing here is a combination of the transition towards a clear focus on operation in combination with occupancy improvements and ways of working. And that it will continue for another couple of quarters.

Okay. And as I know that you don't guide, but is it -- I guess we should then assume that the sort of the peak margin is still at a lower range than in Finland.

I mean we've said historically that the ways of running operations in Scandinavia is slightly different and more complex than running operations in Finland. In Finland, you have a national regulation with the same ways of working across all units, whilst in Sweden, that is more directed at the municipality level, which then leads to slightly more complex ways of working and increased cost.

So structurally, the slight difference between much higher margin levels in Finland and Scandinavia, yes.

Okay. Makes sense. And then just on Finland. I mean, your occupancy level has flattened out, you still improved margins by optimizing the staffing. Are you done with that work now? Or do you see additional efficiency gains like at the structural margin improving level from here as well?

I mean we operate now at a strong operational efficiency level that we're happy with. We're not still happy with the occupancy levels. That is something that we foresee should be going up until we reach target of at least 92% occupancy level. Q3 is seasonally a bit softer in terms of occupancy because you have a tradition also in Finland to take on people during summer breaks and so forth. Also, we are investing more in the capacity growth in Finland. So we're opening -- we're entering now as from this quarter and onwards, a period of stronger opening pace or higher opening pace. And of course, that will also short term might hold back occupancy growth before it continues to grow.

The next question comes from Anna Salamon from ABG Sundal Collier.

So you've now completed 2 acquisitions post quarter and are already ahead of the plan on the full year M&A target. Does that mean you're accelerating the pace further? Or are you more pausing or slowing down for now?

We have a very disciplined approach to acquisitions. So we acquire only margin-accretive, high-quality well-run companies. We have a strong M&A team both in Finland and Sweden. They're continuously working on the pipeline. So M&A, it's difficult to plan exactly when sellers are willing to sell. But the fact that we reached 4% this year doesn't mean that we will stop looking for good acquisitions. We are continuing that work in the same pace as forward as we have been. So if we can do more than the at least 2% that we have in the model, then we're just happy.

Okay. Perfect. And regarding occupancy, which is improving in both segments. In which of the 2 do you see more room to keep pushing higher from here? And do you see a potential ceiling in any or both of the segments?

We said that our -- the first target is to come back to at least to the 92% that was our historical average pre the pandemic. Having said that, we don't see that as a roof. We said that that's where we at least should come back to. Mind you that we are entering the next 15 years will be a long period of structurally growth in underlying demand, especially within elderly care. That also means that we foresee that we will fill up new facilities faster, and it also might lead to higher occupancy levels than we've seen historically. But the other thing we guided for is that we're going to at least 92%. On the other hand, because if you look at -- we've said that before that if you look at our -- typically in larger cities, we have higher occupancy earlier. And if you look at Stockholm, for example, we're operating at above 98% occupancy currently. So 92% is not a physical threshold.

The next question comes from Julia Angeli Strand from Handelsbanken.

I'll stick to 3 and take them one by one. And firstly, a follow-up on Scandinavia. And I believe you communicated in Q1 that Q1 was the peak of underabsorption of cost and that improvement in terms of margin should strengthen throughout the year. Is this the case in Scandinavia still? Or how should we look at H2?