Lumi Gruppen is a leading education provider in Norway, offering high-quality educational services. The group consists of two main operating segments: Sonans and Oslo Nye Høyskole (ONH).
Sonans is Norway’s market leader within high school private candidate exam preparation courses, primarily to help former high school students achieve better exam results and/or complete their high school diploma to enter higher
education. ONH is a private university college established in 2007, acquired by Lumi Gruppen in 2019. ONH has one campus located in central Oslo, in addition to a strong online offering.
Sonans — market leader within private candidate exams
Oslo Nye Høyskole
— National Student Survey: overall student satisfaction (2021)
Revenue 2021
Oslo Nye Høyskole
— National Student Survey: Online educational offer (2021)
Adj. EBIT 2021
Adj. EBIT% 2021
Challenging market conditions post-Covid. Significant cost reduction programmes implemented resulting in a more scalable and flexible business model.
REVENUE ENDED AT NOK 121.5 MILLION FOR THE THIRD QUARTER (NOK 130.9 MILLION)
— Sonans with 54.8 per cent growth in online revenue while campus revenue declined by 40.7 per cent
— Oslo Nye Høyskole (ONH) with 8.5 per cent growth in revenues, of which online grew by 13.6 per cent
ADJUSTED EBIT AT NOK 30.9 MILLION FOR THE THIRD QUARTER (NOK 32.4 MILLION)
— Cost reduction programme implemented for Sonans; effect of the sales decline significantly reduced
— Full-year effect of ramp-up in costs related to new programmes at Oslo Nye Høyskole
SONANS – COST REDUCTION PROGRAMME TOTALLING NOK 61 MILLION IMPLEMENTED, EQUIVALENT TO 26 PER CENT OF 2021 OPERATING EXPENSES
— New, more scalable operating model implemented, full-time employees reduced by 22 per cent
— Introduction of “Live” successful, already a mid-sized campus with profitable operations
— A strong market position maintained in a challenging market
OSLO NYE HØYSKOLE – COST REDUCTION PRO GRAMME TOTALLING NOK 15 MILLION DECIDED ON AND TO BE IMPLEME NTED IN Q4 2022, EQUIVA LENT TO 13 PER CENT OF 2021 OPERATING EXPENSES
— Focus on improving margins due to a softer than expected student intake
— Continued to gain market share despite a challenging market, new programmes well received
— Additional bachelor programme in pipeline, option to launch in 2H 2023
IMPROVED FINANCIAL FLEXIBILITY
— Waiver and new financial covenants established for the school year 2022/2023
NOKm per quarter/year to date NOKm per quarter/year to date
Revenue 121.5 130.9 388.5 398.3 -7.2% -2.5%
Payroll expenses 59.4 64.6 174.5 175.0 -8.1% -0.3%
Payroll expenses in % of revenue 48.9% 49.3% 44.9% 43.9% -0.5 pp 1 pp
Total other operating expenses 16.8 20.2 81.2 74.1 -16.7% 9.5%
Operating expenses in % of revenue 13.9% 15.4% 20.9% 18.6% -1.6 pp 2.3 pp
Adjusted EBITDA 45.3 45.8 132.8 148.9 -1.3% -10.8%
Adjusted EBITDA margin 37.3% 35.0% 34.2% 37.4% 2.3 pp -3.2 pp
Adjusted EBIT 30.9 32.4 90.0 109.6 -4.6% -17.8%
Adjusted EBIT margin 25.4% 24.7% 23.2% 27.5% 0.7 pp -4.3 pp
Non-recurring Items 10.8 4.5 24.9 16.9 140.7% 47.6% Net financial items 9.0 6.2 21.7 30.3 44.0% -28.5%
Profit/(loss) before income tax 11.1 21.7 43.5 62.4 -48.7% -30.3% Tax 2.9 4.2 9.2 12.6 -30.3% -27.2%
Profit/(loss) for the year 8.2 17.5 34.3 49.8 -53.0% -31.1%
Earnings per share (excl. treasury shares) (NOK) 0.23 0.49 0.95 1.38 -53.0% -31.1%
Capex (fixed assets and development cost) 4.2 8.6 13.1 11.0 -51.4% 18.7%
Adjusted operating cash flow 45.8 81.3 -44.0% 83.6 106.2 21.0%
Adj. cash conversion (relative to adjusted PTP) 190% 279% -89 pp 103% 120% -17 pp
Total assets 1 265 1 356 1 265 1 356 -6.7% -6.7%
Equity 545 535 545 535 1.8% 1.8%
Equity % 43.0% 39.5% 43.0% 39.5% 3.6 pp 3.6 pp
Cash position 67 108 67 108 -37.4% -37.4% Net (interest bearing) debt 363 342 363 342 5.9% 5.9%
Number of Employees (FTEs) 247 297 247 297 -16.6% -16.6% Sick-leave 4.9% 4.3% 4.8% 3.4% 0.6 pp 1.4 pp
Number of Campuses Sonans 12.0 15.0 12.0 15.0 -20.0% -20.0% Number of Campuses ONH 1.0 1.0 1.0 1.0 0.0% 0.0%
Number of Students Sonans
119 3 526 3 119 3 526 -11.5% -11.5%
216 8 437 6 216 8 437 -26.3% -26.3% — of which online
Number of Students ONH
031
860 2 031 1 860 9.2% 9.2%
868 2 798 2 868 2 798 2.5% 2.5% — of which online
significant decline in applicants to higher education, fewer students without a place of admission, cancelled high school exams three years in a row and a record strong labour market negatively impacted the autumn student intake for Lumi Gruppen.
The
Oslo Nye Høyskole
the operational focus has been to
the scalability of the
position for both Sonans
during this chal
Total sales in the autumn student intake declined by 28 per cent compared to last year. The decline in sales at Sonans was driven by a weak campus sale, which ended down 42 per cent. The introduction of the new digital campus offering “Live” was well received in the market and together with online, sales increased by 13 per cent.
The current market development for Sonans is mainly a consequence of fewer students without a place of admission in higher education. The total number of applicants to higher education in Norway fell by 12.6 1 per cent for the student intake autumn 2022, resulting in applicants not receiving a study programme offer declining almost 43 per cent versus 2021. In addition, the labour market has been exceptionally strong, reversing the increase in the number of unemployed people between 20-24 years after the outbreak of the Covid19 pandemic. Currently, the unemployment rate for this age group is 19 2 per cent lower than pre-Covid levels. All together, these elements contributed to a lower number of applicants to Sonans.
In a 10-year period before the outbreak of the Covid-19 pandemic, campus sales increased on average by 11 per cent per year, and Sonans still believes that the market fundamentals and need for higher education remain strong. This view is also supported by an extensive report published by Statistics Norway. The Bureau concludes that the private candidate scheme has grown to become an important part of the education system in Norway. Among the first-time private candidates, as many as 62 per cent did not have any diploma before entering a private candidate school. In addition, 45 per cent of the private candidates were 25 years or older, which means private candidate schools represent a significant opportunity for people wanting a change in their lives. Private candidate schools are also successful in realising new opportunities for people; 80 per cent of the private candidates have succeeded in either being accepted to higher education or are employed after completing private candidate schools.
As a result of the challenging markets, Lumi Gruppen has implemented several revenue and cost measures in Sonans to improve profitability. The new digital campus “Live” had a successful first student intake. “Live” is already a mid-size campus in Sonans with profitable operations and high student satisfaction. The introduction of “Live” has also been an important enabler to optimise class schedules for the physical campuses. By harmonising local class schedules with the schedules for “Live” classes, it has been possible to get physical campus students to participate in “Live” classes with a positive effect on classroom efficiency. Sonans has identified and implemented an extensive cost reduction programme totalling NOK 61 million in response to the changes in market conditions including rightsizing of the organisation, improved classroom efficiency, reduced administrative costs and improved marketing efficiency. New measures are also under consideration.
To improve operational efficiency, Sonans has introduced a new operating model enabling a reduction in full-time employees by 22 per cent from 143 to 112. Classroom efficiency has been improved by optimising classes based on total sales and not on suboptimal gains for individual campuses. The key focus in this process has been to change the structure of subjects and class offerings, based on market demand.
Efficiency has also been significantly improved through a reorganisation of the Sonans administration including a centralized sales unit and using more lean processes. Student satisfaction at Sonans is very high and it is crucial to maintain an attractive learning environment when implementing the efficiency measures. Consequently, the student-critical functions remain at local campuses including the teachers’ follow-up of their students. Despite a cut in overall marketing expenses, visibility and ad recognition have been maintained. Budget cuts have mainly impacted low quality site traffic from social media and digital banners. Further cost measures totalling NOK 10 million are currently being considered, including closing additional campuses and lowering overhead costs.
Since 2014, Sonans has maintained its dominant position for private candidate schools with a market share of approximately 60 per cent, which is four times higher than the number two school. Through the extensive initiatives implemented during the pandemic, Sonans has maintained its competitive position and is well prepared for the future. By introducing “Live”, Sonans has significantly expanded student reach and improved scalability in the business model. In addition, in a brand awareness survey 3 for online providers, Sonans was almost four times more recognised than the second-ranked private candidate school.
Oslo Nye Høyskole ended its student intake in line with last year with 1 336 signed contracts 4 vs. 1 338 contracts a year earlier. New programmes showed robust growth, while existing programmes were affected by the challenging market conditions due to post-Covid effects. Bachelor programmes ended up 9 per cent compared to last year and the master’s programme grew by 65 per cent. Annual programmes fell by 11 per cent as more students signed up for the multi-year programmes which is positive with a higher value per student and a higher share of recurring revenues.
Operating Revenue 121.5 130.9 388.5 398.3 -7.2% -2.5%
— Campus 57.7 83.2 217.1 269.0 -30.7% -19.3%
— Online 63.7 47.8 171.2 129.2 33.3% 32.5%
Total operating revenue 121.5 130.9 388.5 398.3 -7.2% -2.5%
Payroll Expenses 59.4 64.6 174.5 175.0 -8.1% -0.3%
Payroll Expenses in % of operating revenue 48.9% 49.3% 44.9% 43.9% -0.5 pp 1 pp
Other Expenses 16.8 20.2 81.2 74.1 -16.7% 9.5 %
Other expenses in % of operating revenue 13.9% 15.4% 20.9% 18.6% -1.6 pp 2.3 pp
Total operating expenses 76.2 84.8 255.6 249.2 -10.1% 2.6%
Adjusted EBITDA 45.3 45.8 132.7 148.9 -1.3% -10.8%
Adjusted EBITDA % 37.3% 35.0% 34.2% 37.4% 2.3 pp -3.2 pp
Depreciation and amortization 14.4 13.8 42.7 39.4 4.5% 8.4%
Adjusted EBIT 30.9 32.4 90.0 109.6 -4.6% -17.8%
Adjusted EBIT % 25.4% 24.7% 23.2% 27.5% 0.7 pp -4.3 pp
Non-recurring items 10.8 4.5 24.9 16.9 140.7% 47.6%
Number of FTEs 247.2 296.5 247.2 296.5 -16.6% -16.6%
Sick-leave 4.9% 4.3% 4.8% 3.4% 0.6 pp 1.4 pp
In a market with a 12.6 per cent drop in the number of applicants for higher education in Norway 5, ONH continued to gain market share. The primary reason behind this development has been the launch of new programmes well adapted to students’ interests and needs.
Considering the significant investments made over the last two years, the student intake this year was below expectations even though this is market driven. To compensate for flat volumes, it was decided in Q4 2022 to implement a cost reduction programme targeting a reduction in operating expenses of NOK 15 million per year. This will yield full effect from January 2023, but with some positive P&L impact already from Q4 2022. The cost reduction is mainly related to a reduction in personnel at ONH.
By continuing to increase multi-year bachelor programmes’ share of revenue, revenue visibility will increase, and operational risk will decline. The key priority is still to increase the number of students for the new programmes already introduced, but new programmes
will also be launched. In Q3, ONH has applied for a new bachelor programme: “Bachelor in HR, management and organisational psychology”. In addition, ONH plans to launch new annual programmes which will be derived from multi-year bachelor programmes.
ONH is currently evaluating and updating its existing strategy as most areas of the growth strategy implemented in 2019 have been delivered. ONH will therefore continue to develop its growth strategy that will include requirements for the systematic quality work at ONH. A comprehensive upgrade of ONHs quality system is close to completion to meet expectations also set by the Norwegian Agency for Quality Assurance in Education (NOKUT) and will significantly simplify reporting routines. In addition, a new strategy will include initiatives to identify synergies and better coordinate operations at ONH and Norwegian School of Technology when operational.
The financial statement presented as part of the operational and financial review, has been adjusted for non-recurring Items. A non-recurring item is, by definition, an entry that appears in the financial statements that is unlikely to happen again and is infrequent or unusual. Non-recurring items are commented on separately as part of the financial review.
The condensed interim financial statement and notes for Q3 and the first three quarters of 2022 are unaudited.
Revenues decreased by 7.2 per cent to NOK 121.5 million in Q3 2022, compared to NOK 130.9 million in Q3 2021. Revenue was negatively impacted by a significant decrease in the number of students at Sonans, with NOK 13.4 million in reduced sales for the quarter, corresponding to a 15.5 per cent decrease. The reduced revenue in Sonans was partly offset by a growth in revenue of NOK 3.8 million, corresponding to 8.5 per cent, for Oslo Nye Høyskole (ONH). The reduction in revenue was seen in campus sales, which declined 30.7 per cent for the Group. Online sales had a positive development and increased 33.3 per cent compared to same quarter last year. The online revenue share was 52.5 per cent for Q3 2022, compared to 36.5 per cent for Q3 2021. The increase was in part driven by the new commercial terms for online starting from 1 January 2022.
Adjusted total operating expenses decreased by 10.1 per cent to NOK 76.2 million in Q3 2022, compared to NOK 84.8 million in Q3 2021. The decrease is a result of the cost reduction programme implemented in Sonans. To a large extent this relates to lower personnel expenses together with reduced expenses for campus operations, overhead and marketing.
In the Q2 2022 report, Lumi Gruppen announced the implementation of a cost reduction programme totalling NOK 61 million for Sonans as response to the market setback and the roughly 28 per cent early decline in sales for the school year 2022/2023. The reported cost reduction for Q3 2022 was NOK 7.7 million and, including adjustments, the cost reduction amounted to NOK 13.7 million. Adjustments are made to reflect the effect of the cost reduction at the point of time the decision was made, which mainly relates to wage expenses for personnel dismissed during the quarter. In Q4 2022 there will be lower accruals for redundant personnel and thus lower adjustments to the reported figures.
For ONH, the revenue growth of NOK 3.8 million was offset by an increase in total operating expenses by NOK 5.4 million in the quarter. This relates to the final ramp-up costs of new programmes. Going forward, the operating expenses will not continue to grow from new programmes. In addition, a cost reduction programme totalling NOK 15 million has been decided that will have some impact in Q4 2022 and full effect from Q1 2023. The decision to implement this programme is a result of lowerthan-expected student volumes with a negative impact on margins. Most of the cost reductions will be for personnel expenses.
Adjusted depreciation and amortisation expenses were NOK 14.4 million in Q3 2022 compared to NOK 13.8 million in Q3 2021. The increase is a result of a termination of a lease agreement.
Adjusted EBIT ended at NOK 30.9 million, a decrease of 4.6 per cent compared to the same period last year.
Reported EBIT ended at NOK 20.1 million, a decrease of 27.7 per cent compared to the same period last year. The deviation between adjusted EBIT and reported EBIT is explained by the non-recurring items.
The net financial expense in Q3 2022 was NOK 9.0 million compared to NOK 6.2 million in Q3 2021. The increase is mainly a result of increased interest expenses and a waiver fee of NOK 1.3 million.
Income tax expense in Q3 2022 was NOK 2.9 million compared to NOK 4.2 million in Q3 2021.
Profit was NOK 8.2 million in Q3 2022 compared to NOK 17.4 million in Q3 2021.
For the third quarter, the Group reported NOK 10.8 million in non-recurring items.
Of this, NOK 1.8 million in ONH was related to the Qybele LMS license fee that will expire 31 December 2022.
Sonans reported NOK 6.0 million in non-recurring expenses for the quarter mainly related to termination of employees including certain severance pay agreements. In, addition, the amount also included NOK 0.7 million related to exit costs for closing three campuses.
The Group reported NOK 2.9 million in non-recurring costs that includes finance interim resources supporting the ongoing outsourcing process of the payroll and finance function in Lumi Gruppen, legal fees for advice in connection with the financing and restructuring process, and accruals for terminated employees.
The Group’s assets totalled NOK 1 265 million in Q3 2022, a decrease of NOK 90.3 million from Q3 2021. The Group’s equity amounted to NOK 544.6 million, an increase of NOK 9.7 million since Q3 2021. The equity ratio was 43.0 per cent in Q3 2022, compared to 39.5 per cent in Q3 2021. Current and non-current liabilities to financial institutions were NOK 428.3 million in Q3 2022 compared to NOK 447.0 million in Q3 2021.
Net cash flow from the Group’s operations during Q3 2022 was NOK 52.7 million. The difference between net cash flow from operations and profit before tax of NOK 11.1 million is mainly due to depreciation and changes in working capital. For both Sonans and Oslo Nye Høyskole, most students pay tuition fees early in the semester (resulting in a very positive cash flow in Q1 and Q3), and the latter part of the semester the cash is used for ongoing operations.
The net cash outflow from investing activities amounted to NOK 4.2 million during Q3 2022. Of that, NOK 2.6 million relates to capitalised development costs for new programmes at Oslo Nye Høyskole and NTech and NOK 1.6 million relates to investments in fixed assets such as IT equipment. The net cash outflow from financing was NOK 13.4 million during Q3 2022. This consists of the principal portion of lease liabilities in accordance with IFRS 16.
During Q3 2022, the Group had a net increase in cash and cash equivalents of NOK 32.3 million. As at the balance sheet date, the Group had cash and cash equivalents of NOK 67.4 million, compared to NOK 107.6 million in the same period last year. In addition, the Group has an unused revolving credit facility of NOK 70 million.
There has been a significant shift in demand for private candidate courses following the outbreak of the Covid-19 pandemic which has impacted operational and financial performance negatively. Based on recent developments, it is difficult to make precise projections for the coming years, but the fundamentals for the education market seem to be unchanged and hence it is likely that the market will recover next year.
As a result of the challenging markets, Lumi Gruppen has accelerated the efficiency programmes and has so far implemented a cost reduction programme for Sonans for the school year 2022/2023 that will reduce the annual cost base by NOK 61 million equivalent to 26 per cent of the total 2021 cost base. In addition, Lumi Gruppen also decided early Q4 2022 to implement a cost reduction programme in ONH totalling NOK 15 million on an annual basis. This will yield effect already from Q4 2022 and full effect from Q1 2023. Sonans has now implemented a new more scalable business model, which can more rapidly adapt to changes in market conditions. This represents an opportunity for Sonans longer term, as the online model is significantly more flexible and efficient than the campus model. Further, it also opens for additional opportunities for new business and innovation. The new digital campus initiative “Live” has also been well received and will expand geographical reach and improve margins for Sonans. “Live” has very attractive financial metrics with limited investments and fixed costs, combined with pricing on par with campus.
Oslo Nye Høyskole will continue to expand the study programme and applied for a new bachelor programme in Q3 2022. Operational focus will also be on attracting more students to the already established study programmes to improve economies of scale.
The competitive position for Lumi Gruppen has also been strengthened during the pandemic with ONH continuing to gain market share and Sonans maintaining a strong position with a stable market share of approximately 60 per cent.
As announced at the end of the third quarter, Lumi Gruppen entered into an agreement with Nordea where the financial covenant for the second half of 2022 is waived and a new covenant is set for Q1 2023 and Q2 2023. Given the current financial projections, Lumi Gruppen believes that the new agreement allows for sufficient headroom.
Longer term, Lumi Gruppen believes that the underlying fundamentals for the education sector are strong. The need for higher education in Norway is still high and Lumi Gruppen is well positioned as a market leading provider of private education. Through a combination of high student satisfaction and a unique learning concept, the Company has established a competitive edge and is well positioned to exploit the market opportunities in the new normal post-Covid.
Oslo, 1 November, 2022
Approved by the Board of Directors and Management
We are an important part of the Norwegian educational system and provide opportunities for people who want to take higher education and participate in the workforce.
Operating revenue 73.1 86.4 248.7 276.6 -15.5% -10.1%
— Campus 37.7 63.6 155.4 212.7 -40.7% -26.9%
— Online 35.3 22.8 93.3 64.0 54.8% 45.9%
Total operating revenue 73.1 86.4 248.7 276.6 -15.5% -10.1%
Payroll expenses 22.5 34.8 74.6 94.2 -35.3% -20.8%
Payroll expenses in % of operating revenue 30.8% 40.2% 30.0% 34.0% -9.4 pp -4 pp
Other expenses 17.8 21.2 80.7 77.7 -15.9% 3.9%
Other expenses in % of operating revenue 24.4% 24.5% 32.4% 28.1% -0.1 pp 4.4 pp
Total operating expenses 40.3 55.9 155.3 171.9 -28.0% -9.6%
Adjusted EBITDA 32.8 30.5 93.4 104.7 7.4% -10.8%
Adjusted EBITDA % 44.8% 35.3% 37.6% 37.9% 9.6 pp -0.3 pp
Depreciation and amortization 11.9 10.0 35.2 29.9 19.1% 17.6%
Adjusted EBIT 20.9 20.5 58.2 74.8 1.7% -22.2%
Adjusted EBIT % 28.5% 23.7% 23.4% 27.0% 4.8 pp -3.6 pp
Non-recurring items 6.0 - 11.4
Number of FTEs 111.7 143.0 111.7 143.0 -21.9% -21.9%
Sick-leave 5.6% 5.0% 6.2% 4.4% 0.6 pp 1.8 pp
Total revenues ended at NOK 73.1 million in the third quarter, a 15.5 per cent decrease from the same period last year. Online revenues grew by 54.8 per cent in the third quarter while campus revenues decreased by 40.7 per cent. The growth for online is driven by an online shift in the market and the effect of changes in commercial terms implemented from 1 January 2022. Due to the Covid-19 pandemic, Sonans experienced an extraordinary shift from students attending classes on campus to online studies. This led to pressure on margins and lower sales as result of 25-30 per cent lower prices for online compared to campus. Because of this, several measures have been implemented including, among others, a price increase averaging 10 per cent for online courses from the school year 2022/2023. In addition, prices for campus courses have been adjusted up by on average 3.5 per cent.
Total operating expenses decreased by NOK 15.6 million in the third quarter compared to the same period last year and ended at NOK 40.3 million. Personnel expenses decreased by NOK 12.3 million due to the announced implementation of a cost reduction programme totalling NOK 61 million for the school year 2022/2023. Other expenses decreased by 3.4 million and are related to lower marketing expenses, reduced campus operation expenses and overhead from Group functions.
Adjusted EBIT ended at NOK 20.9 million, compared to NOK 20.5 million last year, with a corresponding EBIT margin of 28.5 per cent third quarter compared to 23.7 per cent in the same period last year. Reported EBIT for the period ended at 14.8 million and the deviation from adjusted EBIT is explained by the non-recurring items which are related to the cost programme implemented for Sonans.
We strive to ensure that our education programmes are of the very best quality, and that our students reach the goals they have set for themselves.
Operating revenue 48.4 44.6 139.6 121.5 8.5% 14.9%
— Campus 20.0 19.6 61.7 56.3 1.9% 9.6%
— Online 28.4 25.0 77.9 65.2 13.6% 19.5%
Total operating revenue 48.4 44.6 139.6 121.5 8.5% 14.9%
Payroll expenses 29.5 23.1 75.7 60.6 27.8% 24.9%
Payroll expenses in% of operating revenue 61.0% 51.8% 54.2% 49.9% 9.2 pp 4.4 pp
Other expenses 5.4 6.5 21.9 20.3 -16.8% 7.7% Other expenses in% of operating revenue 11.2% 14.7% 15.7% 16.7% -3.4 pp -1 pp
Total operating expenses 35.0 29.6 97.6 80.9 18.0% 20.6%
Adjusted EBITDA 13.4 15.0 42.0 40.6 -10.2% 3.5%
Adjusted EBITDA% 27.8% 33.5% 30.1% 33.4% -5.8 pp -3.3 pp Depreciation and amortization 2.4 2.4 7.3 6.5 1.0% 12.6%
Adjusted EBIT 11.0 12.6 34.7 34.1 -12.3% 1.8%
Adjusted EBIT% 22.7% 28.2% 24.8% 28.0% -5.4 pp -3.2 pp
Non-recurring items 1.8 1.9 7.3 5.7 -2.2% 27.5%
Number of FTEs 121.1 124.4 121.1 124.4 -2.7% -2.7% Sick-Leave 3.4% 4.1% 3.0% 2.5% -0.7 pp 0,5 pp
Total revenues were NOK 48.4 million in the third quarter, an increase of 8.5 per cent compared to the corresponding quarter last year. The growth is mainly driven by new programmes and a higher share of recurring revenues from students in multi year programmes. The continued growth will enable the school to achieve scale, which will positively impact the profitability.
Operating expenses at ONH increased by NOK 5.3 million in the third quarter compared to the same period last year, predominantly caused by higher personnel expenses of NOK 6.4 million. Until now, the growth in headcount and personnel expenses is a result of the ramp-up and the investment in new programmes. Other expenses decreased by NOK 1.1 million this quarter as result of various savings in other operating expenses.
Adjusted EBIT ended at NOK 11.0 million, compared to NOK 12.6 million in the same period last year, with a corresponding EBIT margin of 22.7 per cent compared to 28.2 per cent last year. With the cost reduction programme
decided on and under implementation, it is expected that the margin for ONH will improve during the following quarters.
Oslo Nye Høyskole ended its student intake in line with last year with 1 336 signed contracts 6 vs. 1 338 contracts last year. New programmes show strong growth, while existing programmes are affected by the challenging market conditions due to post-Covid effects. Bachelor programmes ended up 9 per cent compared to last year and the master’s programme grew by 65 per cent. Annual programmes fell by 11 per cent as more students are signing up for the multiyear programmes which is positive with a higher value per student and a higher share of recurring revenues.
The key priority will be to increase the number of students in existing programmes, but new single subject programmes will also be launched. These programmes will be derived from multi-year bachelor programmes. In addition, there is an option to launch an additional bachelor programme in 2023.
NOK
Revenue 2,3 121 061 130 874 387 354 398 333 530 102
Government Grants 417 - 1 111 - 1 049
Other operating income - - 44 - 922
Total revenue 121 477 130 874 388 509 398 333 532 073
Payroll expenses 65 624 65 833 185 806 176 261 248 697
Depreciation and amortisation expenses 4,5,6 13 163 13 973 42 293 41 206 55 435
Other operating expenses 22 593 23 265 95 298 88 274 116 277
Total operating expenses 3 101 380 103 071 323 397 305 740 420 409
Operating profit/loss (EBIT) 20 097 27 803 65 112 92 593 111 664
Interest income 1 142 5 510 1 136 Financial income 121 - 391 - 93 Interest expense -6 921 -3 910 -19 028 -13 434 -36 206 Financial expense -2 179 -2 467 -3 022 -17 360 -1 443
Net financial items -8 978 -6 235 -21 652 -30 284 -36 420 Profit/(loss) before income tax 11 119 21 568 43 460 62 309 75 244
Income tax 2 900 4 162 9 195 12 632 16 174 Profit/(loss) for the period 8 219 17 407 34 265 49 677 59 070
Basic/diluted earnings per share (NOK) 0.23 0.48 0.95 1.38 1.54
Items not reclassified to profit or loss: Remeasurement of defined benefit pension liabilities - decrease/(increase) 15
Related tax effects -3
Other comprehensive income for the year 12
TOTAL COMPREHENSIVE INCOME IS ATTRIBUTABLE TO Owners of Lumi Gruppen AS 8 219 17 407 34 265 49 677 59 082
ASSETS
Deferred tax asset 2 418 388 2 657 Goodwill 4 957 032 957 032 957 032 Other intangible assets 4 24 301 15 147 18 248
Total intangible assets 983 751 972 567 977 937
Leasehold improvements - - 1 098
Right-of-use assets 6 114 789 148 555 136 160 Office machinery and equipment 5 11 971 14 247 11 965
Total tangible assets 126 760 162 802 149 223
Investments in shares 1 619 1 559 1 559
Other non-current receivables - -Total non-current financial assets 1 619 1 559 1 559 Total non-current assets 1 112 130 1 136 928 1 128 718
Trade receivables 7 63 451 62 119 22 345 Earned, not invoiced - 24 500 40 541
Other current receivables 8 22 207 24 337 20 655
Cash and bank deposits 67 415 107 609 63 505
Total current assets 153 073 218 566 147 046
Total assets 1 265 203 1 355 494 1 275 765
EQUITY
Share capital 9 15 201 15 201 15 201
Share premium 434 218 479 465 470 218 Treasury stock -81 -81 -81
Other reserves - -1 236 -1 224 Retained earnings 95 235 41 480 60 697
Total equity 544 573 534 828 544 811
Pension liabilities - 2 201 2 319
Liabilities to financial institutions 10 428 267 426 967 437 292
Non-current lease liabilities 6 82 378 110 830 99 426
Total non-current liabilities 510 645 539 998 539 037
Liabilities to financial institutions 10 - 20 000Current lease liabilities 6 42 357 46 639 46 200 Trade creditors 6 948 2 936 2 052
Tax payable 9 378 13 356 15 815
Public duties payable 9 637 10 476 18 189 Unearned revenue 113 180 163 546 76 462
Other current debt 28 485 23 715 33 199
Total current liabilities 209 985 280 668 191 917
Total liabilities 720 630 820 666 730 954
Total equity and liabilities 1 265 203 1 355 494 1 275 765
Profit before income taxes 11 119 21 568 43 460 62 309 75 244
Adjustments for
Taxes paid in the period - - -16 500 -22 792 -22 792
Gain/loss from sale of fixed assets - - - 137 137
Interest expense 8 821 6 063 21 253 30 200 36 206
Interest paid -4 505 -3 910 -16 180 -12 033 -15 841
Interest paid — leasing - -7 365 -7 365
Depreciation 13 163 13 973 42 293 41 214 55 436
Change in trade receivable -40 574 -38 812 -41 106 -3 158 3 846
Change in trade creditors -3 907 -2 884 4 896 -2 511 -3 506
Differences in expensed pensions and payments in/out of the pension scheme - - -749 103 103 Items classified as investments or financing - - - -496 -496
Change in other current assets and liabilities 68 627 93 302 60 905 45 048 -8 835
Net cash flow from operations 52 745 89 300 98 272 130 655 112 137
Proceeds from sale of fixed assets - - - 392 392
Purchase of fixed assets -1 578 -2 007 -3 750 -2 464 -3 464
Purchase of intangible assets -2 612 -6 609 -9 332 -8 556 -12 787
Payment to buy shares in other companies - - -60 -60 -60 Payment to buy subsidiaries (Bjørknes Education and Bjørknes Høyskole) - - - -30 000 -30 000
Net cash derecognised upon sale of subsidiary - - - -Net cash flow from investments -4 190 -8 616 -13 142 -40 688 -45 919
Proceeds from issuance of new liabilities to financial institutions - - - 446 100 446 100 Payment of principal portion of lease liabilities -13 399 -10 329 -35 219 -30 854 -41 209 Repayment of liabilities to financial institutions - - -10 000 -606 204 -616 204 Repayment of other loans - - - -Costs directly booked in equity - - - -9 246 -9 246 New equity received - - - 200 000 200 000
Payment of dividend - - -36 000 -Net cash flow from financing -13 399 -10 329 -81 219 -204 -20 559
Exchange gains / (losses) on cash and cash equivalents - - - -Net change in cash and cash equivalents 35 155 70 355 3 911 89 763 45 659 Cash and cash equivalents at the beginning of the period 32 260 37 254 63 505 17 846 17 846 Cash and cash equivalents at the end of the period 67 415 107 609 67 415 107 609 63 505
Unused operational credit facilities in addition 70 000 70 000 70 000 70 000 70 000
2022
Balance at 1 January 2022 15 201 470 218 -81 -1 224 60 697 544 811
Issued share capital - - - - -IFRS Adjustments - - - 1 224 - 1 224 Profit/(loss) for the year - - - - 34 265 34 265
Other equity changes - -36 000 - - 272 -35 728
Equity at 30 September 2022 15 201 434 218 -81 - 95 235 544 573
2021
Balance at 1 January 2021 2 995 291 632 -42 -1 236 1 586 294 935
Issued share capital - - - - -Transfer from distributable equity 15.02.2021 10 526 -10 487 -39Capital increase 16.02.2021 1 680 198 320 - - - 200 000
Costs directly booked in equity - -9 246 -9 246 OCI - - 12 - 12 Profit/(loss) for the year - - - - 59 071 59 071
Other equity changes - - - - 41 41 Equity at 31 December 2021 15 201 470 218 -81 -1 224 60 697 544 811
Lumi Gruppen AS (the Company or Lumi Gruppen), is the parent company of the Lumi Gruppen (Lumi or the Group) and is a limited liability company incorporated and domiciled in Norway, with its head office in Nydalen, Oslo. The Company is listed on Euronext Growth stock exchange in Oslo, Norway and has the ticker “LUMI”.
Lumi Gruppen is a leading player in the education market in Norway. The Group consists of the parent company Lumi Gruppen AS and its subsidiaries Lumi Bidco AS, Lumi Services AS, Sonans Privatgymnas AS, Oslo Nye Høyskole AS, ONH Education AS, and Norwegian School of Technology AS. The operating companies in the Group are Sonans Privatgymnas AS, Oslo Nye Høyskole AS and ONH Education AS. Lumi Services AS is a company that organizes shared services like IT, marketing and finance on behalf of the operating companies.
The accounting policies applied by the Group in these consolidated interim financial statements are the same as those applied by the Group in its consolidated financial statements for the year ended 31 December 2021.
Discontinued operations are defined as a component of the Lumi Group or Group entity that has been disposed of and represents a separate major line of business.
Lumi Gruppen earns revenue from educational services including one university college and private candidate schools across Norway. Services are delivered both on campus and online, and delivered over time to the students. Educational service revenue is distributed according to the individual course sold. Courses for a single semester is distributed over 4 to 6 months while courses running over two semesters are distributed over 10 to 12 months.
The preparation of interim condensed financial statements involves the use of accounting estimates. Actual results may differ from these estimates. Management is required to exercise judgment in applying the group’s accounting policies.
Management has used estimates and assumptions that have affected assets, liabilities, revenues, expenses, and information on potential liabilities. Future events may lead to these estimates being changed. Estimates and their underlying assumptions are reviewed on a regular basis and are based on best estimates and historical experience. Changes in accounting estimates are recognized during the period when the changes take place. If the changes also apply to future periods, the effect is divided among the present and future periods. Management has, when preparing the interim financial statements; made certain significant assessments based on critical estimates and significant judgment when it comes to application of the accounting principles.
An assessment of impairment indicators has been made on 30 September 2022, refer to note 4 for details.
Invoicing for the educational services is done at the beginning of each school semester, in August/September and January. Invoices sent in August/September are for both the semester and for the entire school year fees. This creates the posting of the deferred revenue in the balance sheet (a contract liability). This contract liability is always current, as the revenue will be earned within a maximum of 9 months after the date of the invoice.
Q3 2022
Total revenue 73 069 48 408 - 10 519 -10 519 121 477
— of which management fee - - - 10 519 -10 519Total expenses 47 590 36 793 176 14 177 -10 519 88 217
— of which management fee 8 964 1 125 375 55 -10 519Depreciation and amortisation 10 663 2 424 2 74 - 13 163
EBIT 14 816 9 191 -178 -3 732 - 20 097
Q3 2021
Total revenue 86 348 44 526 - 10 842 -10 842 130 874
— of which management fee - - - 10 842 -10 842Total expenses 55 946 31 499 433 12 062 -10 842 89 098 — of which management fee 9 287 1 125 375 55 -10 842Depreciation and amortisation 10 004 2 400 - 1 769 -200 13 973 EBIT 20 398 10 627 -433 -2 989 200 27 803
YTD 2022
Total revenue 248 729 139 615 - 31 852 -31 687 388 509
— of which management fee - - - 31 719 -31 719Total expenses 167 979 104 883 1 842 38 087 -31 687 281 104 — of which management fee 26 889 3 413 1 125 292 -31 719Depreciation and amortisation 33 929 7 318 2 244 800 42 293 EBIT 46 821 27 414 -1 844 -6 479 -800 65 112
YTD 2021
Total revenue 276 511 121 445 - 32 904 -32 527 398 333
— of which management fee - - - 32 904 -32 904Total expenses 171 871 86 633 1 191 39 374 -34 534 264 535 — of which management fee 27 885 3 375 1 138 130 -32 527Depreciation and amortisation 29 926 6 500 - 3 051 1 729 41 206 EBIT 74 714 28 312 -1 191 -9 521 278 92 592
COST
Cost at 31 December 2021 211 688 745 344 957 032
Additions
Additions through acquisitions Disposals Cost at 30 September 2022 211 688 745 344 957 032
Accumulated at 31 December 2021 Impairment for the year Accumulated amortization
Accumulated at 30 September 2022 Carrying amount at 30 September 2022 211 688 745 344 957 032
Amortization method n/a n/a n/a
Estimated useful life
As described in the annual report for 2021, goodwill is tested for impairment at annual basis, and, as per IAS 36, more frequently if indicators of possible impairment are identified.
As announced 21 September 2022, the student intake for the school year 2022/2023 came in 28% below last year’s intake for Sonans. The decrease in market value that occurred in the third quarter and the reduction in revenue following the decrease in student intake are by management, and according to IAS 36, treated as an impairment indicator. Based on this goodwill are tested for impairment at 30 September 2022. The CGUs tested are in line with the CGUs described in the annual report. The key assumptions are updated to reflect the current situation, and the DCF to reflect updated forecast. With respect to the impairment testing made for the goodwill allocated to the CGU Sonans, the DCF is based upon the assumption that the private candidate market over the next years will normalize and eventually return back towards historical
Impairment tests Impairment tests Impairment tests
levels in terms of student volumes. Further, it is expected that a share of the cost reduction programme implemented in 2022 will continue to yield effect the coming years since this programme includes changes in operation that is not temporary in nature. At last, Sonans will continue to develop its educational offering and this will also include commercial aspects that will reduce impact of migration cross distribution channels.
Impairment testing has indicated no existing impair ment requirements for goodwill. As stated above, the Group will also perform an impairment test annually and next time this be will at year end of 2022.
COST
Cost at 31 December 2021 33 000 19 437 52 437 Additions - 9 332 9 332 Additions through acquisitions - -Disposals - -Cost at 30 September 2022 33 000 28 769 61 769
AMORTIZATION AND IMPAIRMENT
Accumulated at 31 December 2021 32 200 2 286 34 486 Impairment for the year Amortisation 800 2 182 2 982 Accumulated at 30 September 2022 33 000 4 468 37 468 Carrying amount at 30 September 2022 - 24 301 24 301 Amortization method Degressive Linear Estimated useful life 2-4 years 5 years
COST
OFFICE
Cost at 31 December 2021 12 948 376 42 800 56 124 Additions 323 - 3 427 3 750 Additions through acquisitions - - -Disposals - - -Cost at 30 September 2022 13 271 376 46 227 59 874
DEPRECIATIONS AND IMPAIRMENT
Accumulated at 31 December 2021 11 850 - 31 212 43 062 Depreciation 448 - 4 394 4 842 Impairment - - -Disposals - - -Accumulated at 30 September 2022 12 298 - 35 606 47 904 Carrying amount at 30 September 2022 974 376 10 621 11 971 Depreciation method Linear n/a Linear Estimated useful life In line with 5-3 years lease contract
Amounts recognised in the balance sheet
Right-of-use assets
Premises 111 220 143 853 131 872 Equipment 3 568 4 702 4 289
Total 114 789 148 555 136 160
Depreciation method Linear Linear Linear Estimated useful life In line with In line with In line with lease contract lease contract lease contract
Lease liabilities
Current 42 357 46 639 46 200
Non-current 82 378 110 830 99 426
Total 124 736 157 469 145 626
Amounts recognised in the statement of profit or loss
Depreciation of right-of-use assets 10 787 10 886 34 470 32 455 43 363 Settlement with termination - - - -Interest expense 1 580 1 827 5 051 5 493 7 365
Cost at 31 December 2021 259 213 259 213
Additions 18 653 18 653
Additions through acquisitions -Disposals 5 554 5 554 Cost at 30 September 2022 272 312 272 312
DEPRECIATIONS AND IMPAIRMENT
Accumulated at 31 December 2021 123 053 123 053 Depreciation 34 470 34 470 Impairment Disposals Accumulated at 30 September 2022 157 523 157 523 Carrying amount at 30 September 2022 114 789 114 789
Depreciation method Linear Linear Estimated useful life In line with In line with lease contract lease contract
NOK 1000 30.09. 22 30.09. 21 31.12. 21
Trade receivable 66 748 63 088 33 584 — of which Sonans 43 433 38 004 27 978
Loss allowance -3 298 -968 -11 239 — of which Sonans -2 932 -353 -13 276
Total trade receivable, net 63 451 62 119 22 345
NOK 1000 30.09. 22 30.09. 21 31.12. 21
Prepaid expenses 21 154 23 634 20 589
Other debtors 1 054 703 67
Total other receivables 22 207 24 337 20 655
Parent company (Lumi Gruppen AS)
Ordinary shares 36 193 814 0.42 15 201 402
Cost at 30 September 2022 36 193 814 15 201 402
At 30 September 2022 ACCOUNT SHARES OWNERSHIP
Pareto Aksje Norge Verdipapirfond
Ordinary 3 548 253 9.8
J.P. Morgan SE Nominee 1 759 293 4.9
The Northern Trust Comp. London Br Ordinary 1 695 038 4.7
Verdipapirfondet Holberg Norge Nominee 1 551 253 4.3
Forsvarets Personellservice Ordinary 1 250 436 3.5
Vevlen Gård AS Ordinary 1 010 000 2.8
Centra Invest AS Ordinary 1 000 000 2.8
Nye Commodore AS Ordinary 1 000 000 2.8
Brandt Ordinary 969 978 2.7
Skandinaviska Enskilda Banken AB Nominee 805 853 2.2
Goldman Sachs International Ordinary 750 411 2.1
Valorem AS Nominee 750 000 2.1
Verdipapirfondet DNB SMB Ordinary 659 180 1.8
Aars AS Ordinary 633 977 1.8
Melesio Invest AS Ordinary 575 709 1.6
J.P. Morgan SE Nominee 571 003 1.6
Clearstream Banking S.A. Nominee 488 100 1.3
VJ Invest AS Ordinary 465 170 1.3
Visento AS Ordinary 453 270 1.3
Nordnet Livsforsikring AS Ordinary 438 432 1.2
Top 20 shareholder / nominee 20 375 356 56.3
Other 15 818 458 43.7
Current and non-current liabilities to financial institutions are financial liabilities, primarily bank loans, and are recognised initially at fair value and subsequently at amortised cost using the effective interest rate method to measure interest expense on the loans.
As announced 26 September 2022, Lumi Gruppen AS reached an agreement with the bank (Nordea), and the new financing terms are as follows:
— Waiver for the leverage covenant in Q3 and Q4 2022
— New leverage (NIBD/EBITDA) covenant for Q1 2023 of 4.0 and for Q2 2023 of 5.0
— Allowable adjustment of EBITDA of up to 30%
— No amortisation the next 12 months
AS PRESENTED IN THE STATEMENT OF FINANCIAL POSITION
Non-current liabilities to financial institutions 428 267 426 967 437 292 Current liabilities to financial institutions 20 000Total liabilities to financial institutions 428 267 446 967 437 292
Total amount borrowed 430 000 450 000 440 000 Capitalized bank fees -1 733 -3 033 -2 708
Total liabilities to financial institutions 428 267 446 967 437 292
Nominal value of debt with collateral security Liabilities to financial institutions 430 000 450 000 440 000 Total 430 000 450 000 440 000
Book value of collateral pledged Accounts receivable 63 451 62 119 22 345 Office machinery and equipment 11 971 14 247 13 063 Total 75 422 76 366 35 409
Balances and transactions between the Company and its subsidiaries, which are related parties to the Company, have been eliminated on consolidation basis. There are no
significant related party transactions for Lumi Gruppen as of 30 September 2022.
Lumi Bidco AS Oslo 100
Lumi Services AS Trondheim 100
Sonans Privatgymnas AS Trondheim 100
ONH Education AS Oslo 100
Oslo Nye Høyskole AS Oslo 100
Norwegian School of Technology AS Trondheim 100
There are no contingent liabilities as of 30 September 2022.
The Group reports its financial results in accordance with IFRS accounting principles as issued by the IASB and as endorsed by the EU. 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 use 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 assessing compliance with financial covenants. Alternative Performance Measures reflect adjustments based on the following items:
Pro Forma revenues are revenues for the Group adjusted for sold or acquired entities. Sonans Karriere AS was disposed from the Group in early June 2020, and the financials of Sonans Karriere AS are included in the reported consolidated reported revenues for the Group until and including May 2020.
Adjusted EBITDA before impact of IFRS 16
Adjusted EBITDA before impact of IFRS 16 is a measure of EBITDA adjusted for (i) lease expenses applying IAS 17 Leases, (ii) revenue and cost from sold or acquired business, and (iii) certain extraordinary items affecting comparability, referred to as Non-Recurring items in this report. The Group has presented this APM because it considers it to be an important supplemental measure to understand the leverage ratio of the Group.
Adjusted EBITDA divided by total revenue.
EBIT is a measure of earnings before deducting net financial items and taxes. The Group has presented this APM because it considers it to be an important supplemental measure to understand the overall picture of profit generation in the Group’s operating activities.
Adjusted EBIT is a measure of EBIT adjusted for (i) revenue and cost from sold or acquired business, and (ii) certain extraordinary items affecting comparability referred to as Non-Recurring items in this report, and (iii) for the subsidiar
ies of Lumi Gruppen AS, also including IFRS adjustments as these companies report on NGAAP. The Group has presented these APMs because it considers them to be important supplemental measures to understand the under lying profit generation in the Group’s operating activities.
Adjusted EBIT divided by total revenue.
Current and non-current borrowings for the period (excluding property lease liabilities recognised under IFRS 16) less cash and cash equivalents for the period. Net debt is a non-IFRS financial measure, which the Group considers to be an APM, and this measure should not be viewed as a substitute for any IFRS financial measure. The Group has presented this APM as it is a useful indicator of the Group’s indebtedness, financial flexibility and capital structure because it indicates the level of borrowings after taking into account cash and cash equivalents within the Group’s business that could be utilised to pay down the outstanding borrowings. Net Debt is also used as part of the assessment for financial covenant compliance.
Net debt divided by last twelve months Adjusted EBITDA before impact of IFRS 16.
Capital expenditure (capex) is a measure of total investment in the period both in the operations and in development of new business. Capital expenditures consist of both maintenance capex and development capex and the source of capex is the Statement of cash flows.
Adjusted operating cash flow is based on Net Cash Flow from Operations excluding non-recurring items, interest cost and interest paid and including capex. The group has presented this APM because it considers it to be an important supplemental to understand the normalized cash flow of the Group when excluding non-recurring items.
Adjusted operating cash flow divided byprofit before income taxes (pre tax profits)
