Lumi Gruppen Presentation Q3 2023, 08 November 2023 CEO Erik Brandt and CFO Martin Prytz
Q3
Introduction About Lumi Gruppen Executive Summary
Financials Strategy & Operations Sonans Oslo Nye Høyskole Outlook Disclaimer
Lumi Gruppen — a leading private education provider in Norway The group consists of two main operating segments: Oslo Nye Høyskole: 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.
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L U M I G R U P P E N presentation Q3 23
Introduction About Lumi Gruppen Executive Summary
Financials
Lumi Gruppen Q3 — ONH continues progress, market for Sonans still weak Operating revenue NOK 103.7 million (121.5) EBIT of NOK 10.7 million (20.1)
Strategy & Operations
Oslo Nye Høyskole
Sonans
― Strong growth and profitability, ONH to integrate NTech initiative, with 12 new
Oslo Nye Høyskole
programmes in pipeline
Outlook
― ONH receives recognition for its quality system, and it is approved by NOKUT
Disclaimer
Sonans ― Revenue decline for Sonans partly explained by stricter credit control measures and accounting effects, indicating underlying revenue reduction of about 10 % in Q3-23
― New cost programmes to counter effects of weak private candidate market
Group ― New board elected at the EGM 1 November 2023 ― Rights issue cancelled; discussions ongoing with the company's shareholders to secure repayment of NOK 50 million on the existing NOK 300 million loan facility
Quarterly Revenue
Quarterly EBIT
Quarterly EBIT Margin
(NOKm)
(NOKm)
(%)
-14.6%
-6.2 pp
121.5
20.1
16.5%
103.7
10.3% 10.7
Q3-22
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Q3-23
L U M I G R U P P E N presentation Q3 23
Q3-22
Q3-23
Q3-22
Q3-23
Introduction About Lumi Gruppen Executive Summary
Financials Strategy & Operations Sonans Oslo Nye Høyskole Outlook Disclaimer
Financials
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L U M I G R U P P E N presentation Q3 23
Introduction About Lumi Gruppen Executive Summary
Q3 revenue as expected, +23% growth for ONH driven by higher online student volumes
Financials
Operating revenue NOK 103.7 million (-14.6%)
Strategy & Operations Sonans
Sonans revenue NOK 44.4 million (-39.2%) due to the post-Covid market setback followed by a stronger job market for the younger age segment in particular
Oslo Nye Høyskole
― Stricter credit control measures have contributed to the decline in volumes
Outlook Disclaimer
and revenue
― No effect of new commercial terms for online in the third quarter, year-over-year online revenue numbers are not fully comparable (NOK 10 million in Q3-22)
ONH revenue NOK 59.3 million (+22.5%) driven by online study programmes ― Online grew by 42.3%, campus was down by 5.7%
Revenue
Development in Revenue quarterly and YTD
(NOKm)
(NOKm)
-18.6% 388.5
121.5
388.5
316.1
-28.7
Ytd 23
Q3-22 Sonans
10.7
0.2
103.7
-93.5
20.7
Ytd 22 Sonans
ONH
0.4
316.1
-14.6% 121.5
Q3-22
9
103.7
Q3-23
Ytd 22
L U M I G R U P P E N presentation Q3 23
ONH
Group
Q3-23
Group
Ytd 23
Introduction About Lumi Gruppen Executive Summary
Financials
Strong margin development in ONH and cost reductions offset by lower volumes in Sonans EBIT NOK 10.7 million (20.1) EBIT margin 10.3% (-6.2 pp)
Strategy & Operations Sonans Oslo Nye Høyskole Outlook Disclaimer
Net savings in operating expenses of NOK 9.0 million for the Group in Q3-23 ― Gross savings of around NOK 13.0 million when excluding the gain from sale of ONHs collection portfolio last year and expenses related to NTech included in the P&L from Q3 2023
Credit control measures implemented with positive impact on credit quality and profitability going forward ― Bad debt expenses were down by 23.9% year to date and 34.6% when excluding the sale of the collection portfolio in ONH last year
― Cash flow from student payments in Sonans was down by 10% in Q3-23 compared to last year while revenue declined by 39.2% in the same quarter compared to last year
EBIT Margin (%)
Development in EBIT excl. impairment quarterly and YTD (NOKm) 20.1
-6.2 pp
-6.4 pp 16.8%
16.5%
0.1
-1.9
10.7
ONH OpEx
Group/D&A
EBIT Q3-23
2.7
-7.8
32.9
ONH OpEx
Group/D&A*
EBIT Ytd 23
10.9
-28.7
10.2 10.4%
10.3%
EBIT Q3-22
Sonans Revenue
Sonans OpEx
ONH Revenue
65.1
20.7 -93.5 45.7 Q3-22
Q3-23
Ytd 22
Ytd 23 Excl. Impairment
EBIT Ytd 22
Sonans Revenue
Sonans OpEx
ONH Revenue
* Includes NOK 5.2 million in transaction costs related to Hanover Investors voluntarily cash offer. When excluding this item, EBIT was NOK 38.1 million with an EBIT margin of 12.1% year to date
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L U M I G R U P P E N presentation Q3 23
Introduction About Lumi Gruppen Executive Summary
Additional cost measures under implementation to improve profitability, limited impact on core business
Financials Strategy & Operations Sonans Oslo Nye Høyskole Outlook Disclaimer
Additional cost measures amounting to NOK 12-18 million with full effect from the school year 2024/2025 Cost measures mainly related to lower campus operation costs, renegotiation of lease contracts, sub-leasing, and changes in the organisational set-up for NTech and Group Functions Underlying financial development for Sonans is somewhat better when adjusting for last year's online revenue effect and stricter credit control measures that we expect to materialise in improved profitability going forward Cost level at ONH stabilised and reduced compared to Q3-22 and year to date last year, leading to a margin expansion back to levels prior to the ramp-up in OpEx and the expansion of study programmes
Sonans Revenue in Q3
Sonans EBIT in Q3
Sonans cash flow** in Q3
(NOKm)
(NOKm)
(NOKm)
14.8 -39.2%
-29.6%
-10.1%
73.1
73.2 65.8
7.8
63.1 10.0 44.4 -28.7 -2.2 11.7
Q3-22
Q3-22*
Q3-23 Adj.
* Q3-22 adjusted down by NOK 10 million to exclude the effect of the implementation of new commercial terms for online last year, not recurring in Q3-23
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L U M I G R U P P E N presentation Q3 23
EBIT Q3-22
Revenue Cost Decline Reduction
EBIT Q3-23
Online Adj. EBIT Revenue Q3-23 Effect*
Q3-22
Q3-23
** Received student payments in Q3-23 compared to the same period last year
Introduction About Lumi Gruppen Executive Summary
Financials
Strong cash flow from operations despite decline in revenues in the quarter Net cash flow from operations NOK 76.5 million (51.2) ― Excluding the repayment of corporate income taxes, net cash flow from
Strategy & Operations
operations was NOK 65.1 million
Sonans
Cash position of NOK 126.7 million (67.4) at end of Q3-23
Oslo Nye Høyskole
New leverage covenants agreed with new financing agreement
Outlook Disclaimer
― Leverage ratio was 2.7 in Q3-23 ― Covenant reset (NIBD / EBITDA) for quarters Q3 2023 – Q2 2024: 3.5x, 4.5x, 3.6x and 5.1x
― Thereafter, flat at 3.0x in Q1 and Q3, and 4.0x in Q2 and Q4 to account for seasonal WC fluctuations
Net CF from Operations
Liquidity reserve
NIBD, ex. lease
(NOKm)
(NOKm)
(NOKm)
197
77
137
51
362
127 173
67
Q3-22
Q3-23
70
70
Q3-22
Q3-23
Cash Revolving credit facility
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Q3-22
Q3-23
Introduction About Lumi Gruppen Executive Summary
Financials Strategy & Operations Sonans Oslo Nye Høyskole Outlook Disclaimer
Strategy & Operations
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L U M I G R U P P E N presentation Q3 23
Introduction About Lumi Gruppen Executive Summary
Financials Strategy & Operations Sonans Oslo Nye Høyskole Outlook Disclaimer
― Strong job market post-Covid with negative impact on student volumes
― Demonstrates position as a leading online player in the higher education market
― Sonans will continue to adapt cost base and operations to current market conditions
― Solid education platform with strong growth for online programmes
― Underlying demand for education still strong and thus could expect that the private candidate market will recover over time
― Strong intake for the school year 23/24 with an expected growth of +20% in 2H 2023
― Expect modification of the proposal from the Admission Committee, the government will present its overall proposal for new admission rules in 1H of 2024
― Attractive growth opportunities ahead, ONH well positioned ― ONH to integrate NTech initiative, with 12 new programmes in pipeline
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L U M I G R U P P E N presentation Q3 23
Introduction About Lumi Gruppen Executive Summary
Financials Strategy & Operations Sonans Oslo Nye Høyskole Outlook Disclaimer
Sonans — autumn intake ended around 30 per cent below last year Continued decline in the number of registered private candidate exams, sales development for Sonans is in line with this decline Revenue decline for Sonans partly explained by stricter credit control measures and accounting effects Market position still strong and Sonans has maintained its position as the market leader with a decline in line with 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 as of week 37
Number of registered private candidate exams*
(Autumn intake in NOKm)
(in 1000s)
-35.2%
-36.5%
323
106 292 83
-28.2% 209
67 150
20/21
21/22
22/23
23/24
20/21
21/22
22/23
*Source: Utdanningsdirektoratet
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L U M I G R U P P E N presentation Q2 Q3 23
Introduction About Lumi Gruppen Executive Summary
Financials Strategy & Operations Sonans Oslo Nye Høyskole Outlook Disclaimer
ONH — continues to perform better than the market for the school year 2023/2024 21.6 per cent growth in new students (signed contracts) at end of the student intake 22.5 per cent growth in revenue in Q3-23, online grew by 42.3 per cent Strong programme portfolio both on campus and online, securing flexibility in the delivery model and efficient operations Additional growth opportunities are being explored, including: ― Vocational courses and integration with NTech, 12 new programmes in pipeline ― New Bachelor programmes and annual units ― B2B opportunities
Growth in total of applicants to higher education in Norway vs. ONH
Solid growth in signed contracts at end of the autumn intake as of week 37 21.6%
24.0%
Signed Contracts
1.0% NUCAS*
ONH
* Norwegian Universities and Colleges Administration Services (Samordnet Opptak)
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L U M I G R U P P E N presentation Q3 23
2022
2023
Introduction About Lumi Gruppen
Outlook
Executive Summary
Financials Strategy & Operations Sonans Oslo Nye Høyskole 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 online student growth leading to improved return on investments made and profitability Profitability for Sonans is expected to be weak in the 2023-2024 school year, ONH profitability will continue to improve Cost measures in the size of NOK 12-18 million to be implemented
Revenue estimates for the school year 2023/2024* ― Sonans: 170-175 million ― ONH: 227-232 million
*Period from 1 July 2023 to 30 June 2024
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L U M I G R U P P E N presentation Q3 23
Introduction About Lumi Gruppen Executive Summary
Financials Strategy & Operations Sonans Oslo Nye Høyskole 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.
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