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AcadeMedia AB
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Ladies and gentlemen, welcome to the AcadeMedia Q3 2019 report. Today, I am pleased to present CEO, Marcus Strömberg; and CFO, Eola Änggård Runsten. [Operator Instructions] Speakers, please begin.
So good morning. I'm Marcus Strömberg, and together with me, Eola, sitting next to me. And good morning to this presentation about the quarter 3 of AcadeMedia.So this time of the year is really fantastic in AcadeMedia because we are preparing for the exams of all our students, but we are also reporting this result. And we think that this result is quite good. It's a stable result. And also, we have seen improvement in our school segments. And I will go to Page #3, and let me give you a short CEO introduction, and then I will leave over to Eola to go through the numbers.And in the report, you can see that we have been struggling with decline in the margin when it comes to compulsory schools, but we now see improvement and stabilization in the school segments. And to be honest with you, the Upper Secondary School has really performed well this quarter, a strong organic growth, and we also improved the margin. And we have told you before about the Adult Education. And we struggle with problems when it comes to the employment services, but the overall number of students in Adult Education hasn't been higher. So the problem is isolated to the employment services. And we are taking down the costs, and we will continue to take down costs in that part.And we have also started to optimize our portfolio when it comes to preschools in Sweden. AcadeMedia is one of the leading service provider of preschools in Europe, but in some municipalities in Sweden, we think that the school voucher is very low, so we will leave some municipalities and focus on other regions with good possibilities to create sustainable profit and development.And when it comes to preschools in Norway, we have prepared for a transition to a new staffing regulation. We have known about this for quite a time, so we are prepared for it, and we have a special report on that in this presentation. So we will tell you more about that.And one other thing that we have been working a lot with is the question of equal terms in Sweden. We have a specific team in our company that's working with this, looking through the counts of the municipalities and also taking discussion when we think that the school voucher is not correct. And in this quarter, we see some result of that, and that is very positive, and that will also cause the municipality to improve the school voucher. And we have also announced the prices, how the voucher has developed. And as you can see, it's more stable. It's 2.5% in the school segments and 3.4% in the Norwegian preschools. And we think that the development has improved. It could be a little bit more, but it's quite okay.So that is, so to say, the introduction, and then I continue to the overall numbers on Page 5.And if you look at the quarter, this is the first quarter where we compare our figures, not including the Vindora acquisition. So it's total organic growth. We have some minor acquisitions that we have done, but we are quite pleased with development when it comes to the organic growth. So the organic growth of number of students is good, and the total sales growth is also good. And in the quarter, this equal term process has affected the results. And if you compare the adjusted EBIT with the EBIT, you can see that this improvement is shown. But the underlying development in the school segment, as I told you, has improved in Upper Secondary. And when it comes to Compulsory, it is stable.And the cash flow is a little bit lower, and I think Eola will comment on the cash flow development when it comes to a little bit further on, but that is the overall quarter. And on Page 6, we also continue to give you a little overview how the result is affected but by different parts. And as you can see, we have a strong development when it comes to Upper Secondary School. And the demographic for classes is also very good. We have a very strong position in Sweden, improved margin. We see good effects of our efficiency program. Pre- and Compulsory School also more stable. We have been working a lot with the development there. And when it comes to Adult Education, this decline in profit is caused by the labor market programs, and you can see that very clear in this picture. So this is a good picture to see how the development and the result has been affected by the different segments.And you can also see the result of items affecting comparability, and that is the equal terms that has affected the result with SEK 20 million in that quarter.So let me continue to 12-month rolling figures, and maybe I could give you the word and you can continue, Eola, with that.
Yes, thank you, Marcus. So on a 12-month rolling basis, we are actually still at all-time high on the sales level, and this is despite the fact that we've had a decline in the Adult Education segment. The Upper Secondary School segment is the main growth contributor. So we're, at the moment, at SEK 11.5 million of sales on a rolling 12 month basis. However, as you know, the earnings and margins have been affected by the decline in the Adult Education segment and are down compared to the prior full year.And with that, I'm -- turning to Page 8, and I'm going to start running through the different business segments and what has occurred in each of them.So in the Pre- and Compulsory schools of Sweden, we have solid organic growth of a little less than 2% in volume, and net sales grew with 5.5%, which includes then the voucher increases.Earnings and margins are largely in line with last year. We're quite encouraged to see that our staff turnover has gone down quite substantially, as has wage inflation there, quite interconnected. However, we do still have a handful of units which are still requiring substantial resources in order to turn around.As Marcus mentioned, we've taken a strategic review of the preschool portfolio in Sweden. And as a result of this, we are now making some changes. The overall goal is, of course, to enhance both the quality of the operations we can run, but also margins. And as Marcus mentioned, some municipalities we feel have a voucher level which isn't consistent with the type of quality we want to be running in our units.So as a result, we are divesting some 9 preschool units. We've also decided to close a couple of them, and we will be opening one new one. We have opened one new one in the quarter. The closures and divestments will be taking effect as of July 1, i.e., as of the beginning of the next business year. Overall a stable result in the Pre- and Compulsory School segment, and various strategic initiatives are ongoing.Turning then to Page 9 and the Upper Secondary School segment. Obviously, as you've noted, the Upper Secondary School segment has a very strong quarter here, volume growth of 6.2%. And this is fully organic, and that gives us a net sales increase of 8.6%. And it is mainly the new establishment and also increased capacity utilization in other units that is driving growth.EBIT margin increased quite substantially when including the nonrecurring items of SEK 20 million, but also adjusted EBIT margin improved by 0.5%.So very strong quarter on sort of both growth and margins. And we do want to give some cautionary advice looking forward. We do have ongoing regulatory reviews of the units that we acquired 1.5 years ago from FSN, the Vindora and Praktiska schools. They are requiring quite a lot of effort to improve quality and so on, and this will continue to require resources during the coming year. We also experienced quite intense sort of competition and some difficulties in finding attractive and sort of cost-efficient premises in the kind of locations we want in order to realize the expansion plans we have for Upper Secondary Schools. So overall, we expect to see perhaps somewhat higher premises costs than we have had in the past. But overall, a very strong performance from the Upper Secondary School, which is largely offsetting the downturn in the Adult Education segment.And with that, I will turn to Page 10 and the Adult Education segment. And as we explained last quarter in our in-depth review of the Adult Education, we continue to see a mixed development in this segment. The labor market education part, which is largely done for the Swedish Public Employment Service as the main client, continues to face headwinds and difficulties. And those of you who are based in Sweden can also read in the papers about the internal issues that this authority is currently facing. And this continues to affect the volumes that are actually -- because the participants need to be allocated through our programs in order to -- for us to gain revenues. So we have an ongoing dialogue with the Swedish Public Employment Agency, but this is the part of the Adult Education segment which is troublesome at the moment. While the other 2 parts, the municipal Adult Education and higher vocational training education continue to show strong and improved development compared to last year.A small note also on those of you who saw that we actually -- we won a tender for the city of Gothenburg. However, this was appealed, and a ruling in the administrative court has concluded that the tender must be redone, which, of course, is unfortunate. However, the City of Gothenburg has, in the meantime, extended our contracts with AcadeMedia.So still a sort of mixed development in Adult Education and challenges from the Swedish Public Employment Service, Arbetsförmedlingen.And with that, we turn to the Preschool International segment on Page 11. Here, we have overall good volume growth, especially Germany is growing very quickly. And here, we also see an improvement of margin following the fact that we are sort of increasing the revenue generation in relation to our overhead organization. So we see scale benefits here impacting the margin. On the other hand, in Norway, we have higher pension expenses this year as compared to last year.So -- but overall, a fairly stable development in the International Preschool segment. As you know, the Norwegian operation is facing quite a substantial transition into new staffing regulations. And so far, the small adjustments have been offset by other savings, but I thought that we would look a little more in depth at how this works on Page 12.So as of August last year -- or in May last year, the Norwegian Parliament resolved on new regulations for staff and teacher density. And this applies to all preschools in Norway, both the municipal preschools as well as the independently run preschools. And the first part of the regulation require -- regards the number of pedagogical trained staff in the schools. And there's a requirement to have a certain sort of teacher density or pedagogical leader density, and this is as of August last year. So this has already been managed and, as I've said, with very limited financial impacts. The staff density norm is a big point, and this will be enforced as of August this year. And this requires a higher adult-to-child ratio dependent on the age group of the children. So here we will be making quite substantial adjustments to the staffing levels as well the municipality.In Norway, the voucher system works somewhat differently to in Sweden. In Norway, the voucher is calculated, as shown on the graph to the bottom right-hand corner. The actual costs from 2 years prior, plus an index for the 2 following years, creates the voucher level. So there's a good point that it is actual cost. In a situation like this, however, where we have a major transition in the cost structure for all preschools, we have a delay in the compensation level. And while there's been a talk in the political documents about independently preschools being compensated, we have seen very little of that so far. And we don't expect this to be -- to compensate us fully for this transition. So there will be a transition period for the independent preschool providers until the vouchers reflect the increased cost level that also the municipalities have. And this is something that the Norwegian management team has been extremely focused on since a year when we first learned about these new regulations, and there is a solid plan to cater for this. However, we do expect it not to be fully offset, and there will be a dip in earnings the coming year.Moving forward then to Page 13. And summarizing then the status of our financial position, we have -- we're at -- now at 2.8x leverage ratio, which is in line with our financial targets of being below 3. Overall, we had good cash flow from operations in the third quarter. In working -- when it comes to working capital, we had some calendar effects in Norway relating to Easter, which meant that the municipal payments were delayed to April instead of prior year in March.Overall, we see that we have a stable financial position, improved equity asset ratio, and long-term debt is also improving.And this then starts to bring us to a close. And I'd usually end with the slide on Page 14 summarizing our financial targets and how we're performing in relation to them. And as you know, growth is something we usually are -- manage to achieve. We are slightly below our target here due to the Adult Education segment margins, also hampered by Adult Education segment, but we see good trends in the schooling segments, capital structure in line. So -- and with that, I think we conclude the presentation.
Yes, please, and open up for question also. So please.
[Operator Instructions] Our first question is from Carolina Elvind from Danske Bank.
Just a few questions on my side. So first, the units that you are servicing within the pre- and compulsory schools, I guess, they are lossmaking, but could you quantify how much?
We've not quantified, but I would say there's a marginal effect on EBIT.
Okay. So it's not the -- because last year, you were talking about underperforming units impacting EBIT some SEK 26 million?
These are mainly compulsory schools, not preschools. I mean, yes, these are -- these preschools that we are divesting are a drag, but it's not sort of a huge EBIT impact that we are divesting them.
Okay. And then regarding the staff density in Norway, so the impacts that we saw from non-staff density this year, which is your density norm, that's the effects we have already seen. So what you're talking about this being earnings next year, that's from the staff density one from 1st of August of 2019? Just to make it clear.
Exactly.
Okay. And then also, you're commenting the margin in International Preschool as impacted by different cost patterns last year. So does that mean that you had higher costs in Q4 last year? Or -- just to get some color.
I'd say it's more a matter of sort of timing, the cost timing pattern over the quarter. So no drama really. It's just sort of the timing of costs quarter-by-quarter. There's a slight mismatch this year compared to last year.
But if you do..
Yes. Compared to coming quarter or the last quarter?
This quarter as compared to last.
Just to remind you that this segment is Norway and Germany. And Germany, that's really a growth case. And we have quite high overhead costs in Germany. And when we grow, of course, the overhead will be a lower percent of the total revenue. So it -- you have to have focus that this is -- the main growth will be in Germany, and it's a growth case. And it's -- we will be seeing scalable effects in Germany, but it will take some time.
Okay. And then also for Upper Secondary School, so, I guess, we're talking about -- are we talking about starting from Q1, the extra costs you would know to adjust according to regulatory or...
If it talks about Vindora.
Oh, I think this is a continuous step-up of efforts we need to make in order to -- it's taken us some time to sort of get our arms around this business to understand where really the issues there are and where we need to add resources. So I would say it's sort of continuous increased effort in these units. It's not sort of a certain timing.
Yes, okay. And is it possible to quantify approximately how much costs we're talking about?
No, we haven't given any such estimates.
[Operator Instructions] Our next question is from Karl-Johan Bonnevier from DNB Markets.
Yes, quite a few things are discussed. Quite a lot of ground to cover for me as well. If you start with the preschool portfolio change that you highlighted, you indicated that there's basically no earnings impact from these disposals and closures. Do you see any one-offs for getting out of this and then adjusting portfolio?
So it's very small.
It's very small. I mean, we're talking about sort of a slight effect on -- slight EBIT effect when we divest and on a continuous basis also very small. I mean, we're talking about less than SEK 2 million.
Yes. And so you can say this is a portfolio that is good quality. We have run them for many years, but they have affected our margin because we will never make it, the profitability sustainable, and we have discussed this with the municipalities. And we don't think that they will improve the school voucher, and we can't run preschool sets at lossmaking or at a very low -- very, very low margin or negative margin.
0 margin.
So that's why we have been working that. So you can say that we have found a new service provider that has taken over the contract. So it has no costs. It will affect our margin in a positive way, and it's also a clear signal to the preschool market in Sweden because they need to build 50,000, 60,000 new places, and they have to invest. And in this municipality, we don't think that they invest a lot enough.
And when you look at the remaining portfolio in the preschool segment suite, and after this adjustment to it, do you feel that everything is now in good working order?
I think this is also on a portfolio consisting of more than 100 units. This is an ongoing process, but I think, yes, now we've taken sort of a strategic sort of weeding of -- so I think that this is a substantial change we made, and now we're also looking more forward into, where can we start, and which municipalities we want to operate, can we expand certain units, et cetera.
For instance, you live in Halmstad, Karl-Johan, and there's a great need of new preschools. And in fact, the municipality in Halmstad, they have a correct school voucher, and they want us to build new preschools. So we will open one new in, yes, I think, 6 or 8 months. And we will continue to bid and build new preschools in municipalities with a great need and with the correct school voucher.
Sounds very logical to me. When you look at the compulsory portfolio, the compulsory school portfolio in the Swedish operation, do you feel that you have right-sized it to the same degree that you also looked to do, say, a year ago?
We closed one school that was really lossmaking. And now this year, we have closed one new school and moved the students -- children to other schools that we operate. And we still have a few lossmaking -- really lossmaking schools. But we think that we can turn them around. And so maybe we have focused on 1 or 2 more. But so far, so good. And this year, we are focusing on organic growth. In August, we don't start any new preschools, so we really have to focus on to increase the capacity utilization on our existing school. And as you know, the demographic needs in compulsory school is very, very high. So we are hopeful. And maybe if we see some positive development when it comes to the school voucher, we will start to open new schools even in compulsory -- in a compulsory segment.
Excellent. Turning to Upper Secondary, you highlighted that your expansion plans has run into, let's say, a property problem, if you put it like that. Has it affected your plan for opening already during, say, the coming fiscal year? Or it's more a question for the comings after that?
No, I think that was a bit harshly put, I think. We -- yes, I mean, it's an ongoing challenge. Let me put it this way. And we -- in due course, we will find the premises, but it takes time because we -- it needs the sort of town planning authorities to be in line and all kinds of things, rebuilding of premises, so on. But it's more a matter of saying that the sort of extremely strong margins that we had in this quarter perhaps are not sustainable. So that's sort of the overall message. We do have needs to invest in operational expenditure going forward in order to realize the expansion plans we have, and also to have a sustainable and qualitative operations in the Praktiska schools.
So -- but if put it -- you can look at the quarter, but if you take the overview of these segments, the demographic situation is very positive in the bigger cities. And we have some really interesting expansions plan that we are working very hard with for the moment, and we will tell you more about that in the future. But we -- of course, we have the strongest brand. We have the best position. We will try to continue to take margins...
Market share.
Or market shares and develop our position in this segment.
How does the expansion plan look for this autumn? Is there a lot of new schools opening up?
We have seen a few. We have -- we will open some schools, but we also have capacity in existing schools and also when it comes to Praktiska.
Yes. We're marketing, at the moment, 4 new schools for the fall term of 2019.
Excellent. Turning into Adult Education. Just to get a better feel for Arbetsförmedlingen contract, what can you do short term whilst you're in the contract to mitigate the impact of the fields that you are doing a good job on that already, but is there more to come? And you indicated earlier that maybe you could get into a breakeven situation on the Arbetsförmedlingen contract going into next fiscal year. Is that still feasible?
That is our plan. And so if we take the more long-term perspective, we think that the market will come back. Because the employment services, they invest in private operators, but we can't wait 1.5 years, so they are not sending in the students to our existing contracts. So we are trying to take down the costs. We are closing some contracts in minor cities. So that is the plan for the moment, and then continue to develop the good performance that we are doing in the other parts of Adult Education. So to minimize the loss in employment services and taking down overhead costs and to keep up the good work in the other segments. And we have an all-time high when it comes to students in municipality program and also in vocational training programs. So the problem is the employment services. And the revenue for the movement is very low, but it cost us a lot of money because we have to run the different sites because we have contracts. So for the moment, we have a discussion with employment services about closing down some of these sites.
And are they forthcoming in these kind of discussions? Or are they saying, "Okay, you are sitting in this contract. Then you sign the contract and you need to supply it even though we are not yet hitting the volumes?" Or how does it work?
We have positive discussion. I think we will close some of our sites. I don't think that we can close all of them. So --- but we have a positive discussion. They really -- they need to have suppliers. So we have a positive discussion with them. But when we have the result, we will report about it.
And looking at the city strings you have in the other part of the other portfolio, is it possible to reuse, say, people not use on the education side in the Arbetsförmedlingen portfolio in the other segment? So is the -- are those volumes in totally different areas so you can't really do that?
You can say that they are a little bit in different areas, but we also have -- there's a lot of people -- immigrants coming to Sweden. They are now entering the vocational programs that we run, so I think that is the main driver to the development in these segments. But we also have gone -- it's positive if you look at it on a Swedish perspective because we have a positive development on the labor market. And that affects also maybe the vocational training program ahead because students can go to work instead of going to school. So that is our main competitor when it comes to run the vocational training for the moment. But who knows what will happen? Maybe we see some trends that the number of people leaving their works is increasing. So this is a countercyclical business. But then, for the moment, it is developing quite good in the vocational program and the municipality program.
Then finally, looking at the Preschool International just to -- is it possible for us to get a feel -- you're talking about the -- say, the Norwegian extra cost being a dip in earnings. Is it possible to quantify how much more staffing you need to comply with this? And what -- say, like-for-like, what kind of additional costs that would mean? Is it SEK 10 million, SEK 15 million? Is it SEK 50 million, SEK 60 million? Just to get the feel for what kind of practice we are talking about.
We've chosen not to quantify this number. There is a lot of measures ongoing in order to counteract this as much as possible. But as we are trying to explain here, we don't think that we will see that in full. So we do expect a dip in earnings the coming year.
But it's not to the scale that your Norwegian operation suddenly will be a breakeven operation or something like that?
That sounds a bit too drastic.
We have known about this for a long time, and we have planned for it. So -- and the system, as Eola has explained, is that the municipalities, they will have increased costs, but it will be a delay because of the system that it is the actual cost that affects the school voucher in Norway. And that's why we are taking costs, also some costs that are temporary. So that is the plan, and I think the plan has performed quite well so far.
Okay. And then a final for me. When I look at your CapEx, it's obviously run at very high level so far this year particularly compared to last year. Could you quantify how much of that is related to property investment and how as much what I would call normal CapEx into the operation?
If I remember correctly, some SEK 150 million, SEK 140 million is property-related, and the rest is regular investments. And I think what we're seeing now is also the expansion in the Upper Secondary School is requiring more investments. They are more IT-intense, so we need more computers and devices. And we are also sort of expanding into properties, which require refurbishing and rebuilding. So -- and we do more of this in our own books now than earlier. So...
But around SEK 140 million, SEK 150 million related to property, is it?
Yes. Off the top of my head, that's about that number.
[Operator Instructions] And our next question is from Victor Forssell from ABG.
Just staying a bit within the Preschool International. So we have this effect from Norway. How do you see that play out? When you look at the full segment, including Germany, is that something you believe that the German expansion and improvements there will offset to a certain degree, I mean, looking at the whole segment in terms of profitability for the coming years or this period than in 2 years ahead?
Well, I mean, obviously, we hope that Germany will offset the effect somewhat, but the reason that we are explaining this in our report now is that we do feel that it will have an impact on the Preschool International segment as a whole. So you need to expect sort of a dip, a temporary, I would say, dip in the financial performance of the Preschool International segment as a whole relating to this staffing change in Norway. But again, this is a change that is affecting the whole Norwegian market. It's a temporary effect, and we are doing our utmost to counteract this -- the short-term financial effects. But nevertheless, we do see a dip.
So it's important to keep in mind this is a temporary effect in Norway, and the overall preschool market is really a growth case when it comes to Europe and Germany. So you have to have the long-term perspective. And we have also taken, because maybe one of the best concepts in Europe when it comes to preschool market is the Norwegian Espira concept. And we have started now a lot of Espira preschools also in Germany. So when it comes to that, of course, you focus on what is happening in the next quarter and next year, but you also have to keep in mind to have the long-term perspective when it comes to this market. And we also see some major transition in France and also in U.K. So the preschool market is an international market with a great potential. And we have the best concept, and we are, in fact, one of the leading player in Europe for the moment.
All right. And just on the Adult Education as well. I think we talked about it last quarter where you saw some lowering of their losses within the Arbetsförmedlingen contracts. And just to get to that conversation again, so it looks like you had a similar improvement from Q2 to Q3. And is that something that you would see also going into the next quarter? So sequentially from quarter 3 to quarter 4 that you are actually reducing these losses?
As you can see, it's an underlying improvement when it comes to this area even if it's small. But the main question is now, how should it be developed into the next year? How will this contract portfolio continue the next year? So our focus is, in fact, to take down this part of the Adult Education to make it as small as possible and to lose the least money as is possible. So I don't think that you should focus on improvement when it comes to labor markets. The -- your conclusion is correct, but that is not our main focus when it comes to Q4 and Q1. So that -- our focus is to take down the lossmaking parts as much as possible.
And the next question is from Karl-Johan Bonnevier from DNB Markets.
Yes, Eola, just another small thing. Looking at working capital, you had huge swings in that intra-quarter, between the quarters during this compared to previous years. Could you just allude a little on what is structurally in that? And what is your timing differences?
I think there is a lot of -- one structural change that we've commented on previously is the fact that about this time last year, our largest client, the municipality of Stockholm, went from quarterly prepayment to monthly prepayment. And I believe this has an impact about SEK 90 million. So this is sort of a negative change in the net working capital position compared to last year that we have with us. In addition to that, we see large timing and calendar effects affecting it. And especially all measurements compared to the beginning of this year, i.e. 1st of July, we had an exceptionally favorable net working capital position, which means that the networking capital year-to-date looks more negative than it actually is because we were in a very favorable position, and some large payments were pushed from the end of June until the beginning of July. So that's one thing you need to keep in mind when you look at the year-to-date figures. We are also a business with very large sort of lumpy payments when it comes to our business. So we have rather large inflows from municipalities. And this is what happened in Norway in this quarter due to the timing of Easter payments from the municipalities were pushed from end of March as per last year to beginning of April this year, which is affecting the comparison in relation to last year. And also, when we have our lease contracts, rental contracts for premises, they are usually at the end of each quarter rather large payments when we have our monthly salary payments, very large. So this -- the working capital is extremely sensitive to exactly what day and date you put down the measuring pole.
Underlying except for stock comp-based, nothing that really has changed from your very favorable working capital situation?
No. I mean, the overall situation of working capital is very favorable in our business. All the schooling segments have a positive -- I mean, negative net working capital, i.e., very favorable. Adult Education is basically sort of neutral when it comes to net working capital. Certain parts of business require working capital, and others don't. So overall, the working capital profile of our business is still very favorable. What has happened in the cash flow terms compared to last year is, of course, that the downturn in Adult Education segment has, of course, negatively impacted cash flow. The -- some of the reserves we have taken have an impact on net working capital when they flow back into the result or into the earnings, P&L, yes.
And on the lease note, have you done any early calculation what kind of impact we should see on the change to IFRS 16 lease accounting for you?
Obviously, we're working on that at the moment, but we have not communicated anything more than what you can see in our reports. And I mean, as I usually say, you look at Note 3 in the annual report and you will see roughly the size and expense of the impact. It is obviously sort of going to be a large impact for us. And we plan to communicate more about this in connection with our year-end reports.
Excellent. And finally from me. I saw some news clip from a property magazine that you've hired a new property manager to, say, take a more active role also in the property segment. Is that a change to your strategy? Or is it just, say, a temporary thing as you're building your portfolio to do it in a more structural way and then looking to sell it off? Or how should we see that?
I think this is just stepping up our capacity and strategic thinking in terms of property because we realize this is -- after staff, our premises and property is the second most strategically important resource for us. It's both strategically important in terms of attractiveness, growth opportunities, but also it's #2 in terms of other costs. So this is a very important resource. So we need sort of a strategic capacity here, and we need to sort of boost our property team overall. Whether this will result in some new strategic approaches with regards to premises is too early to say.
So we should not -- so you're not signaling that we should expect you to, say, direct more of the CapEx in the future towards property investment than you have done historically?
Well, as I said earlier, we have increased somewhat, but I think that's -- it's too early to say. I mean, we do experience, when we negotiate long-term property contracts with property owners, we realize that we create a lot of value for these property owners when we sign 10-year contracts, for instance, for a school. And sometimes, we think, should we be able to somehow benefit from that value we're creating to the other party? How is a different question. But we need to step up our strategic ambitions here. And what I've said to [ Peter ], who's our Property Director, is we should really aim -- AcadeMedia should aim to be the most attractive tenant in sort of welfare property.
And our next question is from Carina Elmgren from Handelsbanken.
I have a couple of questions regarding the Adult Education. How much of top line is it currently? And how much do you expect it to decrease further as a part of the segment mix, the fiscal year?
You mean the proportion of?
Yes, sorry. The -- I mean, the National Employment Agency, how much of Adult Education top line? I'm sorry for that.
We haven't ...
We don't report that. But if we should give you some overall information, this is, for the moment, a quite small part. And as we have told you in our last report, the markets for vocational education and also municipality will increase. So maybe we have the possibility to take this part out of each other. So that is -- we have not reported the exact numbers, but if we look at the market, the market outside employment services will grow a lot in this August. And we have also announced that we have a lot of new contracts when it comes to vocational training.
Okay, great. And the loss in volumes that you have seen with the employment agency, is that reflecting and actually decreasing in demand? Or is it due to restructuring? And would you see some more demand popping up somewhere else? Or is this really, really reflecting the lost demand? Or how should we look at this?
I think demand is really quite a tricky question here because demand in this part of the Public Employment Agency is basically set by the Public Employment Agency and the amount of funds they have. But I mean, we feel that, overall, the society has a continued demand for this. But at the moment, we're sort of in a somewhat just sort of restructuring phase of this part of the market.
We have the contracts, but the labor markets, the authorities, they don't send any students because they have internal problems and they also have budget problems. So the need of this sort of education is still there. And that is very, very strange for us to understand, but that is the situation.
And our next question is from Victor Forssell from ABG.
Just a short follow-up for me. I mean, just in terms of giving a bit more color again, I'm not sure if I understood it correctly, but what you see in Preschool International is that you, over the next 2 years, won't have any earnings growth at all. Or how should I look at it?
As we have said, we -- earnings growth, no. What we have said is a dip in earnings. So that's what we expect. The earnings in the Preschool International segment will be lower next year than this year. That's -- put it in a different way, that's how I -- what we mean.
Yes, okay. But that's basically a negative earnings growth into next year then?
Yes.
And as there are no further questions, I will hand over back to the speakers for any final comments.
So thank you very much for your question, and we wish you all a very good day.
Thank you.
Bye-bye.
Bye.