Lumi Gruppen
Presentation Q2 2023, 16 August 2023
CEO Erik Brandt and CFO Martin Prytz
Q2
Introduction
About Lumi Gruppen
Executive Summary
Financials
Lumi Gruppen — a leading private education provider in Norway
The group consists of three main operating segments from Q3-23:
Strategy & Operations
Sonans
Oslo Nye Høyskole
NTech
Outlook
Disclaimer
Oslo Nye Høyskole (ONH): Private university college, with a campus in central Oslo, and a strong online offering.
Sonans: Norway’s market leader within high school private candidate exam preparation courses.
Norwegian School of Technology (NTech): New vocational trade school launched 1H of 2023, offering IT study programmes at campus and online from the school year 2022/2023
LUMI GRUPPEN presentation Q2 23 3
Introduction
About Lumi Gruppen
Executive Summary
Financials
Lumi Gruppen Q2 — cost base reduced, mixed market developments
Oslo Nye Høyskole: Growing and gaining market share, cost development stabilized with improved EBIT margin
Strategy & Operations
Sonans
Oslo Nye Høyskole
NTech
Outlook
Disclaimer
Sonans: Continued revenue decline due to the post-Covid market set-back. Savings from the cost programme totalling close to NOK
17 million in Q2 and NOK 36 million for 1H 2023. A further 10 million in savings from the autumn
NTech: Marketing campaign for programmes and courses launched, enrolment from the coming school year 2023/2024
Based on the Sonans intake, more cost measures are being prepared for implementation from the third quarter
* Impairment of NOK 270 million related to goodwill allocated to the operating segment Sonans
LUMI GRUPPEN presentation Q2 23 5 Quarterly Revenue (NOKm) Quarterly EBIT (NOKm) 134 105 Q2-22 Q2-23 -22% 31 16 Q2-23 Q2-22 Q2-23 Excl. Impairment -254 -48% 22,8% Q2-22 15,4% Q2-23 Excl. Impairment -7 pp Quarterly EBIT Margin (%)
Introduction
About Lumi Gruppen
Executive Summary
Financials
Strategy & Operations
Sonans
Oslo Nye Høyskole
NTech
Outlook
Disclaimer
Financials
LUMI GRUPPEN presentation Q2 23 7
Introduction
About Lumi Gruppen
Executive Summary
Financials
Strategy & Operations
Sonans
Oslo Nye Høyskole
NTech
Outlook
Disclaimer
Operating revenue NOK 104.7 million (-22.0%)
Sonans revenue NOK 54.6 million (-38%) due to the post-Covid market setback
― No effect of new commercial terms for online in the second quarter, year-over-year online revenue numbers are comparable
― NOK 4.5 million not recognized in the second quarter as a result of students with full-year contracts demonstrating low payment ability. Total of NOK 9 million not recognized for 1H 2023
ONH revenue NOK 50.0 million (+8%) driven by new study programmes online
― Online grew 31.7%, campus down by 17.8%
Revenue in Q2 as expected, online revenue share remains above 50% in the second quarter
LUMI GRUPPEN presentation Q2 23 9
1H22 -65.0 9.8 Sonans ONH Group 0.6 1H23 267.0 212.4 Q2-22 Q2-23 134.4 104.7 1H22 1H23 267.0 212.4 -22% -20.4% ONH -33.4 Q2-22 Sonans 3.7 Group Q2-23 134.4 104.7
Revenue (NOKm) Development in Revenue quarterly and 1H (NOKm)
Introduction
About Lumi Gruppen
Executive Summary
Financials
EBIT margin decline driven by lower student volumes, partly compensated by cost programmes
EBIT excl. impairment NOK 16.1 million (30.7)
Strategy & Operations
Sonans
Oslo Nye Høyskole
NTech
Outlook
Disclaimer
EBIT margin excl. impairment 15.4% (-7.4 pp)
Margin negatively affected by the revenue adjustment of NOK 4.5 million in the quarter, a total of NOK 9 million for the 1H of 2023
Net savings in operating expenses of NOK 20 million for the Group in Q2 when excluding transaction costs related to the Hanover voluntarily cash offer
Bad debt expenses slightly below last year and significantly improved from Q4-22 and back to normal levels
Credit control measures implemented, positive impact on credit quality. Will reduce online sales, but expect net positive or at least neutral effect on profit
LUMI GRUPPEN presentation Q2 23 11
Q2-22 Q2-23 Excl. Impairment 22.8% 15.4% 1H22 1H23 excl. Impairment 16.9% 10.4% -7.4 pp -6.5 pp 45 22 10 36 -65 EBIT 1H-22 Sonans Revenue Sonans OpEx ONH Revenue 3 ONH OpEx Group/D&A EBIT 1H23 -6 4 4 Group/D&A EBIT Q2-22 -33 EBIT Q2-23 ONH OpEx ONH Revenue Sonans OpEx Sonans Revenue 31 16 16 -6
EBIT Margin (%) Development in EBIT excl. impairment quarterly and 1H (NOKm)
Introduction
About Lumi Gruppen
Executive Summary
Financials
Significant reduction in costs for Sonans and cost development stabilised for ONH
Strategy & Operations
Sonans
Oslo Nye Høyskole
NTech
Outlook
Disclaimer
Net savings of NOK 16 million for Sonans in Q2 and NOK 36 million for the 1H of 2023
Further reduction of NOK 10 million in operating expenses from 2H 2023 from consolidating the Greater Oslo region and closing 3 campuses
More cost measures being prepared for Sonans based on the expected result of the 2023/2024 intake
Cost level at ONH stabilising and reduced compared to Q2 (and 1H) last year, leading to a margin expansion back to levels prior to the ramp-up in OpEx and expansion of study programmes at ONH
Sonans quarterly OpEx development for the school year 2022/2023 compared to last year and estimated cost base for 2023/2024 before new cost measures
LUMI GRUPPEN presentation Q2 23 13 Sonans Revenue 56 61 65 56 238 40 49 46 39 164 Implemented Cost Savings Q3-22 Adj. Q2-23 Q4-22 Adj. -10 Q1-23 0 2023/2024 (Indicative level) -27,9% -19,0% -29,4% -29,4% -31,0% 2021/2022 2022/2023 348.7 255.4 2023/2024E 170.0 -27%
Introduction
About Lumi Gruppen
Executive Summary
Financials
Cash flow from operations improved with limited cash impact from restructuring costs
Net cash flow from operations minus NOK 80.5 million ( -71.9)
Strategy & Operations
Sonans
Oslo Nye Høyskole
NTech
Outlook
Disclaimer
Cash position of NOK 62 million at end of Q2-23
New leverage covenants was agreed for Q1-23 and Q2-23
― Covenant was 5.0 for Q2-23, reported covenant was 2.9
― Covenant Q3 2023 and onwards 3.5
New financing agreement with Nordea was signed in Q2-23
― Three-year agreement and debt reduced from NOK 430 million to NOK 300 million
Change of Control (CoC)
― Hanover passed 50 per cent ownership on 11 August 2023
― CoC waiver fee of NOK 5.2 million to be paid
― The Group is obliged to agree on new financing terms before 31 August 2023
LUMI GRUPPEN presentation 02 23 15 NIBD, ex. lease (NOKm) 70 70 32 62 Q2-22 102 Q2-23 132 398 238 Q2-22 Q2-23 Cash Revolving credit facility -72 -81 Q2-22 Q2-23
reserve (NOKm)
from Operations (NOKm)
Liquidity
CF
Introduction
About Lumi Gruppen
Executive Summary
Financials
Strategy & Operations
Sonans
Oslo Nye Høyskole
NTech
Outlook
Disclaimer
Strategy & Operations
LUMI GRUPPEN presentation Q2 23 17
Introduction
About Lumi Gruppen
Executive Summary
Financials
Sonans has continued to execute on its turnaround strategy to adapt cost base and operations to current market conditions
Strategy & Operations
Sonans
Oslo Nye Høyskole
NTech
Outlook
Disclaimer
― No firm evidence that a normalisation will occur in the 2023/2024 school year, as the post covid effects are still affecting the private candidate market in Norway.
Underlying demand for education still strong and would expect that the private candidate market will recover over time
― Expect that the proposal from the Admission Committee will be modified based on the result of the consultation process
Demonstrates position as a leading online player in the higher education market
Solid education platform with strong growth for online programmes
― Successful launch of new programmes last years, investments are now paying off Strong intake for the school year 23/24 so far with close to 10 per cent growth in signed contracts vs. flat sales last year
― Attractive growth opportunities ahead, ONH well positioned
First two-year higher vocational education programme approved Marketing campaign launched in 1H to recruit first cohort autumn 2023
― New programmes will be developed, both shorter and longer
Plans to offer both digital courses and campus
Attractive market with strong growth over the last years, but will take some time to establish the new brand/school
LUMI GRUPPEN presentation Q2 23 19
Introduction
About Lumi Gruppen
Executive Summary
Financials
Sonans — autumn intake likely to end around 30
per cent below last year
Strategy & Operations
Sonans
Oslo Nye Høyskole
NTech
Outlook
Disclaimer
Continued decline in the number of registered private candidate exams, sales development for Sonans is in line with this decline
Market position still strong and Sonans has maintained its position as the market leader with lower decline compared to the market decline
A market recovery is likely but will take time, volume growth driven by re-introduction of exams and a softer labour market
Market fundamentals and need for higher education still strong, positive outlook for the private candidate business in the mid- to long term
Sales for Sonans per week 37 (autumn intake in NOKm)
Number
*Forecast for the autumn student intake per week 32
** Estimate NOK 20 million in spring sales and total revenue is then expected to end at NOK 170 million (range NOK 165-180 million)
*Source: Utdanningsdirektoratet and 2022/2023 is estimated based on information from the county's examination offices in Norway
LUMI GRUPPEN presentation Q2 23
21 323 292 209 150 20/21 22/23 21/22 23/24* -35,2% -28,2%
of (in k) registered private candidate exams*
106 83 58 20/21 21/22 22/23 -45,5%
Introduction
About Lumi Gruppen
Executive Summary
Financials
Sonans — all time high student satisfaction in a challenging market
Strategy & Operations
Sonans
Oslo Nye Høyskole
NTech
Outlook
Disclaimer
Strong results for Sonan’s in the alumni survey, demonstrates that quality of service have been maintained despite a challenging market situation
Of the students, 86 per cent will recommend Sonans to others and a significant share of students are satisfied with their exams results
Sonans students in average, achieve 1.3 in grade improvement
LUMI GRUPPEN presentation Q2 23 Sonans recommendation* 23 22/23 83% 21/22 86% +3 pp 22/23 21/22 1.3 1.0 +30% Grade improvement in
61% 21/22 59% 22/23 +2 pp Satisfied
average*
with grades*
*Source: Sonans alumni survey
Introduction
About Lumi Gruppen
Executive Summary
Financials
ONH — continues to perform better than the market for the school year
2023/2024
Strategy & Operations
Sonans
Oslo Nye Høyskole
12 per cent growth in new students (signed contracts) per week
32
Strong programme portfolio both on campus and online, securing flexibility in the delivery model and efficient operations
NTech
Outlook
Disclaimer
Additional growth opportunities are being explored, including:
― New Bachelor programmes and annual units
― Vocational courses
― B2B opportunities
Growth in total of applicants to higher education in Norway vs. ONH
22.0%
Solid growth in signed contracts per week
32
12%
1.0%
NUCAS* ONH
* Norwegian Universities and Colleges Administration Services (Samordnet Opptak)
Signed Contracts
LUMI GRUPPEN presentation Q2 23 25
2022 2023
Introduction
About Lumi Gruppen
Executive Summary
Financials
NTech — launch of marketing campaign, preparing for the first intake
Launch of NTech in 1H 2023 with new website and marketing campaign
Strategy & Operations
Sonans
Oslo Nye Høyskole
First year of operations will partly be used to test and develop the concept and fully establish the school. The two-year programme
WebAppdevelopmentanddesign will start in 24/25
NTech
Outlook
Disclaimer
Three new courses for upskill and reskill in Frontend, AI and Product design planned to be started the coming school year
The offer will consist of programmes for full-time students and more flexible courses both online and physical
Will rapidly expand the portfolio to increase student volume
LUMI GRUPPEN presentation Q2 23 27
Introduction
About Lumi Gruppen
Executive Summary
Financials
Outlook
Strategy & Operations
Sonans
Oslo Nye Høyskole
NTech
Outlook
Disclaimer
Lumi’s business model has been transformed during the last year, with a more flexible and scalable business model with a relatively lower share of fixed costs
For ONH, the trend is positive, with applicants trending clearly higher than last year, in line with indications given when the first quarter was presented
For Sonans, the sales for the autumn intake per week 32 are expected to end around 30 per cent below the autumn intake last school year
Profitability for Sonans is expected to be weak in the 2023-2024 school year, ONH profitability will continue to improve
Launch of NTech, a new growth opportunity for the Group. Limited financial impact in the school year 2023/2024
Revenue estimates for the school year 2023/2024
Sonans: 165-180 million
ONH: 225-235 million
Based on the student intake for Sonans, more cost measures are being prepared for implementation from the third quarter
LUMI GRUPPEN presentation Q2 23 29
Introduction
About Lumi Gruppen
Executive Summary
Financials
Strategy & Operations
Sonans
Oslo Nye Høyskole
NTech
Outlook
Disclaimer
Disclaimer
This presentation includes forward-looking statements which are based on our current expectations and projections about future events. Statements herein, other than statements of historical facts, regarding future events or prospects, are forward-looking statements. All such statements are subject to inherent risks and uncertainties, and many factors can lead to actual profits and developments deviating substantially from what has been expressed or implied in such statements. As a result, you should not place undue reliance on these forward-looking statements.
The Group reports its financial results in accordance with accounting principles IFRS. However, management believes that certain alternative performance measures (APMs) provide management and other users with additional meaningful financial information that should be considered when assessing the Group’s ongoing performance. These APMs are non-IFRS financial measures, and should not be viewed as a substitute for any IFRS financial measure. Management, the board of directors and the long term lenders regularly uses supplemental APMs to understand, manage and evaluate the business and its operations. These APMs are among the factors used in planning for and forecasting future periods, including assessment of financial covenants compliance.
LUMI GRUPPEN presentation Q2 23 31
LUMI GRUPPEN presentation Q2 23 32