Interim Report 1 January – 31 March 2024: A challenging start to 2024
2024-04-25 Regulatory informationFirst quarter 2024
• Net sales SEK 430.2 million (503.2)
• EBITA SEK 17.4 million (41.6)
• EBITA margin 4.0 percent (8.3)
• EBIT SEK 15.1 million (38.0)
• EBIT margin 3.5 percent (7.6)
• Profit after financial items SEK 13.5 million (31.3)
• Profit for the period SEK 10.5 million (24.5)
• Basic earnings per share SEK 1.09 (2.57)
• Diluted earnings per share SEK 1.08 (2.55)
Performance measures
Chief Executive Officer’s statement
It was a challenging start on all Nordic markets in 2024, and the first quarter of the year was weak in revenue and profitability terms, exacerbated by an exceptionally strong comparative quarter. The Swedish market was still subject to the regions’ contracting limits. On the Norwegian market, profitability was limited by price pressure and increased salaries due to intensified competition. Denmark also experienced a tough quarter, impacted by contracting limits. On the other hand, the UK progressed well, and took more major steps forward. We’re taking a number of actions to address current challenges. Dedicare was named the Best Workplace in Norway for the second year in a row.
The Dedicare group’s net sales in the first quarter were SEK 430.2 million, down by 14.5 percent on the corresponding quarter of the previous year, which in turn, was exceptionally strong with a 27.5 percent increase. Profitability was poor with an EBITA of SEK 17.4 million (41.6), corresponding to an EBITA margin of 4.0 percent (8.3). This challenging start to the year has several causes and is fundamentally about limits on contracted staff and an altered competitive situation with more market participants, the related margin pressure, and us no longer having pandemic-related demand.
For the Norway Segment, net sales for the quarter were SEK 267 million, a 6.2 percent decrease year on year. Adjusted for currency effects, net sales were down by 3.0 percent. At the same time, EBITA reduced to 6.1 percent (10.4). We encountered significantly harsher competition in the quarter from new Nordic—Norwegian, Swedish and Danish—market players, who contributed to price pressure and increased payroll expenses, mainly in doctor staffing. This impacted net sales and profitability negatively. We saw progress towards a general increase in cost levels and higher payroll expenses as early as in the fourth quarter of 2023, but the impact was greater and the trend clearer in the first quarter of the year. Nevertheless, the demand for nurses remained healthy in the quarter, not least due to the new deal of last fall enabling us to provide nurses to all Norway’s hospitals. In the most recent market statistics (fourth quarter 2023), we achieved a record-high market share of 41 percent of nurse staffing in hospitals. At the time of writing, there is a correspondingly large-scale tender ongoing for hospital doctor staffing in Norway, scheduled to complete in the second quarter of this year. Our preschool operation Acapedia continued its brisk progress in the quarter. In the more intense competitive situation we’re now encountering in Norway, being an attractive employer is critical, which is why I’m so pleased that we in April, for the second year in a row, wins the title Norway’s Best Workplace by Great Place to Work.
In Sweden, the market was still very negatively impacted by the regions’ limits on contracting in healthcare staff. Net sales for the quarter were SEK 94.1 million, a 32.2 percent decrease on the corresponding quarter of the previous year. Profitability was also weak, with EBITA margin limited to 1.2 percent (7.2). The changed market resulted in lower demand, but also more people entering permanent employment, which in turn reduces the supply of staff. We are also seeing altered purchasing patterns by the regions,
with orders being placed at short notice and assignments being shorter term. Overall, we’re experiencing a market that is more difficult to navigate than we’ve seen in the past 2 to 3 years. But with over 25 years in the sector, we possess extensive experience of dealing with, and adapting to, major changes on our market. We’re continuing to review our costs, while our work on streamlining our core processes is ongoing. It’s also important to note that our transition to the new nationwide deal for Sweden’s regions was a contributor to the market’s exceptional hesitancy early in the year. This deal came into effect in January, and the regions join it as their current deals expire; most of the regions will join during the second quarter. An industry council has been created to monitor this nationwide deal, where Dedicare is one of the representatives. In Life Science, consisting of our recruitment and consulting operation in pharmaceuticals, biotechnology and medical devices, we’re continuing our work on creating a pan-Nordic organization and appointed a new Managing Director, Anna-Lena Mann, after the end of the quarter. In the first quarter, Life Science experienced increased demand for consultants.
For the first quarter, Denmark reported net sales of SEK 58.2 million (70.3), with the EBITA margin reducing to 5.5 percent (7.3). The segment was negatively impacted by limits on nurses on long-term contract. On the positive side, we entered a new agreement on doctor staffing with the North Jutland regional health authority. This deal has already come into effect and is off to a positive start.
The UK segment (previously New Markets) had another eventful quarter with great progress, not least in recruitment for permanent positions. We also made a successful contribution to doctor staffing for hospitals in the Western Isles, where Dedicare has a unique deal providing GPs, surgeons and paediatricians. In the UK, we relocated to new, larger premises as the next natural step in our growth journey and created a new Business Developer role. Net sales in the UK in the quarter were SEK 12.4 million (9.9), with a healthy EBITA margin of 7.3 percent (6.1).
For 2024, Dedicare’s Board of Directors has decided to amend our profitability target from an EBIT margin exceeding 7 percent over time to an EBITA margin exceeding 7 percent over time. Using EBITA as our base, the focus on profitability performance excluding the impact of acquisition-related assets is clearer. This change is consistent with how Europe’s other major staffing and consulting providers monitor profitability, which improves comparability. I’d also like to point out to readers that we’ve altered our segment reporting in this Report, which is also part of the group’s growth strategy, and reviewed in more detail on page 16.
Although we’re currently experiencing increased demand ahead of the summer half-year, it’s clear the market is more hesitant than previously, and the challenges we saw at the beginning of the year are also following us into the second. We’re streamlining our organisation, while also putting energy into improving customer loyalty and our attractions as an employer, while our work on expanding and internationalising our business continues.
Dedicare is in a group-wide collaborative agreement with Doctors without Borders, involving us offering meetings with the organization for our consultants; doctors, nurses and others. We’ll also be funding the salary of the consultants that take on assignments with Doctors without Borders. This is a unique partnership, opening an exciting skills development opportunity for our consultants, while as a company, we support Doctors without Borders’ fantastic work around the world.
In closing, I’d like to thank our customers for the trust you’ve shown in us in the quarter, and not least, our consultants and staff for their committed efforts in meeting customer needs.
Krister Widström, Managing Director and CEO
This information is mandatory for Dedicare AB (publ) to publish pursuant to the EU Market Abuse Regulation (MAR) and the Swedish Securities Markets Act. This information was submitted for publication through the agency of the above contact at 3 p.m. CET on 25 April 2024