Ambea — Earnings Release 2017

Nov 17, 2017

Positive growth and profitability during the quarter

Third quarter, July – September

• Net sales rose 8 per cent to SEK 1,488 million (1,376)
• Operating profit (EBIT) increased to SEK 169 million (145)
• EBITA increased 12 per cent to SEK 184 million (164), corresponding to a margin of 12.4 per cent (11.9)
• Adjusted EBITA, excluding items affecting comparability of SEK 0 million (-13), increased 4 per cent to SEK 184 million (177). The adjusted EBITA margin was 12.4 per cent (12.9)
• Profit for the period was SEK 119 million (87)
• Earnings per share before and after dilution totalled SEK 1.75 (1.34)
• Operating cash flow amounted to SEK 57 million (102)
• Free cash flow totalled SEK 49 million (98)

First nine months January – September

• Net sales rose 11 per cent to SEK 4,352 million (3,924)
• Operating profit (EBIT) increased to SEK 331 million (252)

• EBITA increased 28 per cent to SEK 374 million (292), corresponding to a margin of 8.6 per cent (7.5)

• Adjusted EBITA, excluding items affecting comparability of SEK -30 million (-51), increased 17 per cent to SEK 404 million (344). The adjusted EBITA margin was 9.3 per cent (8.8)

• Profit for the period was SEK 172 million (122)
• Earnings per share before and after dilution totalled SEK 2.58 (1.87)
• Operating cash flow amounted to SEK 254 million (180)
• Free cash flow totalled SEK 153 million (139)

Significant events during the quarter

There were no significant events during the quarter

Consolidated key figures

SEK million	2017 jul–sep	2016 jul–sep	Change %	2017 jan–sep	2016 jan–sep	Change %	2016/2017 Rolling 12 mth	2016 jan–dec	Change %
Net sales	1,488	1,376	8	4,352	3,924	11	5,762	5,334	8
EBITA	184	164	12	374	292	28	442	359	23
Operating margin, EBITA (%)	12.4%	11.9%		8.6%	7.5%		7.7%	6.7%
Adjusted EBITA	184	177	4	404	344	17	517	456	13
Operating margin, adjusted EBITA (%)	12.4%	12.9%		9.3%	8.8%		9.0%	8.5%
Operating profit EBIT	169	145	17	331	252	31	381	301	27
Operating margin EBIT (%)	11.4%	10.5%		7.6%	6.4%		6.6%	5.6%
Profit after tax	119	87	37	172	122	41	178	128	39
Earnings per share before dilution, SEK1	1.75	1.34	31	2.58	1.87	38	2.69	1.97	37
Earnings per share after dilution, SEK1	1.75	1.34	31	2.58	1.87	38	2.68	1.97	36
Operating cash flow	57	102	-44	254	180	41	381	305	25
Free cash flow	49	98	-50	153	139	10	232	218	6

For definitions of key figures, see Note 8

Converted due to changes in equity in 2017; see the section "Earnings per share".

Comments from Fredrik Gren, President and CEO

Continued positive growth and profitability

In the third quarter, we continued to see positive results from our strategy, which is to grow the number of our Own Management units both by opening new residential care units and through acquisitions. During the quarter, we opened two new LSS residential care units in Sweden one new unit in Norway, and completed one acquisition in each market. Our organic growth in Norway is proceeding well, but the weak tender market in Sweden and the supported living units that were closed down – and for which we are still awaiting permits – are posing a challenge.

Net sales for the quarter amounted to SEK 1,488 million (1,376) and adjusted EBITA, excluding items affecting comparability, rose 4 per cent to SEK 184 million (177).

Sales growth of 8 per cent was driven by growth in Own Management which, in turn, was attributable to acquisitions and start-up units. In the third quarter, the Contract Management market continued to weaken due to few new tendering processes while interest in Own Management remained high. We saw a favourable trend in staffing operations during the quarter, with positive contributions to sales growth by Rent a Nurse and Careteam, in particular.

Acquisitions are key to our growth strategy. During the quarter, we completed another two acquisitions, Brostugegården AB in Sweden and Varphaugen in Norway, as well as an additional care acquisition in Sweden after the end of the quarter. With the acquisition of Norwegian Varphaugen, with operations in caring for children and young people with special needs, Ambea has now entered a new segment that is a natural complement to our existing operations and has a historically high rate of private providers.

In the third quarter, the share of total sales in Own Management was 65 per cent (60). Our pipeline with 932 placements/ beds under construction and signed leases is strong although the trend this quarter was marked by lower activity due to the summer, compared with the preceding quarter. After the end of the quarter, however, we signed yet another new Own Management contract in elderly care comprising 78 beds in the Stockholm region. In the third quarter, we opened one LSS group housing and one LSS service housing in Sweden with 6 and 12 beds, respectively. In Norway, where we signed a multi-year framework agreement for 21 placements this summer, we have now signed leases for two properties in central Oslo.

The Group's adjusted EBITA is moving in the right direction, with stable profitability in Vardaga and Nytida, and a sharply improved margin in the Other segment. The lower year-on-year margin for the Group was due to higher central costs during the quarter and a profit from property sales, which had a positive impact on the margin in the third quarter of 2016. While pri-

marily acquisitions and new units contributed positively to earnings, earnings were negatively impacted by lower contract management revenue. A number of contracts will soon be returned, which will continue to impact our profitability in the coming quarter. We are still awaiting permits for the supported living units that had to be closed down in the first quarter, which had a negative impact on earnings. Ambea is engaged in close dialogue with IVO and hopes to welcome new care recipients soon.

Quality is the cornerstone of our business and, accordingly, of our mission, our values and our vision. I am therefore pleased to announce that our quality processes have been recognised. Last quarter, we announced a number of White Guide nominations linked to our Vardaga concept, and the impressive results from our work with BPSD (behavioural and psychological symptoms in dementia), which was nominated for an award from the Swedish Association of Health Professionals. The results have now been announced, and we can proudly announce that all four nominations received a top ranking. In addition, Ambea received a gold trophy at the 2017 Swedish Design Awards Gala in recognition of its Nordic design concept, which is featured in all of our new nursing homes.

Growth was positive during the quarter, which is in line with our objectives. Although the tender market has slowed more than we expected, we are looking forward to expanding our strong Own Management pipeline and identifying new and attractive acquisition targets.

Fredrik Gren

Group

Third quarter

Net sales

Net sales rose 8 per cent to SEK 1,488 million (1,376).

Net sales in Own Management amounted to SEK 969 million (824), up 17 per cent compared with the year-earlier period, due to acquisitions and start-up units.

Net sales in Contract Management amounted to SEK 438 million (475). The decrease in sales compared with the year-earlier period was due to the fact that contracts won did not offset contracts terminated. Net sales in Staffing rose 7 per cent to SEK 81 million (76).

Earnings

EBIT rose 17 per cent to SEK 169 million (145), corresponding to a margin of 11.4 per cent (10.5).

EBITA rose 12 per cent to SEK 184 million (164). The EBITA margin was 12.4 per cent (11.9). In the third quarter of 2016, earnings were adversely impacted by the close-down of two Nytida units, and positively impacted by property sales. Accordingly, the current quarter was positively impacted by a net amount of approximately SEK 5 million, compared with the year-earlier period.

Adjusted EBITA for the quarter, including items affecting comparability of SEK 0 million (-13), rose 4 per cent to SEK 184 million (177). While acquired companies and start-up units had a positive impact on earnings, the Contract Management trend had a negative impact.

The adjusted EBITA margin was 12.4 per cent (12.9).

In terms of earnings, the third quarter of the year is strongest due the positive impact of holiday effects.

Net financial items

Net financial items for the quarter amounted to an expense of SEK -12 million (-31). The change was due to improved terms on the refinancing completed in the second quarter of this year.

Income tax

Tax expense for the period amounted to SEK 38 million (27), corresponding to a tax rate of 24 per cent (24).

Profit for the period

Profit for the period amounted to SEK 119 million (87), corresponding to earnings per share of SEK 1.75 (1.34) before and after dilution.

Distribution of net sales

		Vardaga			Nytida			Other: Norway and Staffing Solutions		items	Unallocated		Group
SEK million	2017 jul–sep	2016 jul–sep	Change %	2017 jul–sep	2016 jul–sep	Change %	2017 jul–sep	2016 jul–sep	Change %	2017 jul–sep	2016 jul–sep	2017 jul–sep	2016 jul–sep	Change %
Own Management	257	224	15	615	569	8	97	31	213	0	0	969	824	18
Contract Management	317	322	-2	121	153	-21	0	0	0	0	0	438	475	-8
Staffing	0	0	0	0	0	0	81	76	7	0	0	81	76	7
Total	574	546	5	736	722	2	178	107	66	0	0	1,488	1,376	8

Performance of Own Management pipeline2 in the third quarter

For the scheduled opening date of the units, visit ambea.se

Contract Management

			Change, third quarter Annual	Start-up/ Terminated during the
	Units	Beds	revenue4	quarter5
Won, not started	0	0	0	0
Renewed confidence	0	0	0	–
Lost, not terminated	1	6	4	0
Placements re-won from municipalities	0	0	0	0

2 Pipeline=total signed and under construction beds and placements

3 Pertains to contracts for which decisions are announced during the quarter

4 Pertains to contracts started or terminated during the quarter, with impact on the quarter and onwards

January – September

Net sales

Net sales rose 11 per cent to SEK 4,352 million (3,924). The Solhaga acquisition, which was consolidated in the middle of the first quarter of 2016, contributed an increase of SEK 148 million compared with the year-earlier period.

Net sales in Own Management amounted to SEK 2,778 million (2,259), growth of 23 per cent. This strong growth was attributable to the Solhaga acquisition, smaller acquired companies and start-up Own Management units.

Net sales in Contract Management amounted to SEK 1,331 million (1,436). The decrease in sales was due to contract terminations in both elderly care and LSS operations.

Net sales in Staffing amounted to SEK 243 million (229).

Earnings

EBIT rose 31 per cent to SEK 331 million (252), corresponding to a margin of 7.6 per cent (6.4).

EBITA rose 28 per cent to SEK 374 million (292). The EBITA margin was 8.6 per cent (7.5).

EBITA for the first nine months of the year was charged with items affecting comparability of SEK -30 million (-51), mainly related to the IPO. Adjusted EBITA rose 17 per cent to SEK 404 million (344). The increase was attributable to Solhaga and other acquisitions, Own Management unit start-ups and repaid pension premiums. Earnings were adversely impacted by a change in the contract portfolio between the periods, and by the leap-year effect.

The adjusted EBITA margin was 9.3 per cent (8.8).

Net financial items

Net financial items amounted to an expense of SEK -103 million (-91). The change was due to the recognition of capitalised financing fees of SEK 49 million attributable to previous financing, while improved terms on the new financing had a positive impact on net financial items. Income tax

Tax expense for the period amounted to SEK 56 million (39), corresponding to a tax rate of 25 per cent (24).

Profit for the period

Profit for the period amounted to SEK 172 million (122), corresponding to earnings per share of SEK 2.58 (1.87) before and after dilution.

Net sales per segment Jan – Sep 2017

Distribution of net sales

Net sales per segment	2017 jan–sep	2016 jan–sep	Net sales per contract model	2017 jan–sep	2016 jan–sep
Vardaga	39%	41%	Own Management	64%	57%
Nytida	49%	51%	Contract Management	30%	37%
Other: Norway and Staffing Solutions	12%	8%	Staffing	6%	6%
Total	100%	100%	Total	100%	100%

		Vardaga			Nytida			Other: Norway and Staffing Solutions		items	Unallocated		Group
SEK million	2017	2016 jan–sep jan–sep	Change %	2017 jan–sep jan–sep	2016	Change %	2017	2016 jan–sep jan–sep	Change %	2017	2016	2017 jan–sep jan–sep jan–sep jan–sep	2016	Change %
Own Management	756	641	18	1,747	1,551	13	275	67	310	0	0	2,778	2,259	23
Contract Management	951	970	-2	380	466	-18	0	0	0	0	0	1,331	1,436	-7
Staffing	0	0	0	0	0	0	243	229	6	0	0	243	229	6
Total	1,707	1,611	6	2,127	2,017	5	518	296	75	0	0	4,352	3,924	11

Cash flow

SEK million	2017 jul–sep	2016 jul–sep	2017 jan–sep	2016 jan–sep	2016/2017 Rolling 12 mth	2016 jan–dec
Cash flow from operating activities before changes in working capital	182	151	289	265	342	318
Cash flow from changes in working capital	-115	-96	-106	-163	-50	-108
From operating activities	66	55	183	102	292	210
Cash flow from investing activities (excluding acquisitions and divestments)	-17	43	-30	38	-60	8
Free cash flow	49	98	153	139	232	218

Free cash flow for the third quarter totalled SEK 49 million (98). The decrease in free cash flow compared with the year-earlier period was mainly attributable to cash flow from investing activities, where a cash payment of SEK 10 million (47) from property sales had a greater effect on the year-on-year quarter. Investments of intangible and tangible assets increased and amounted to SEK -27 million (-4). Cash flow from operating activities increased compared with the year-earlier period due to improved operating profit.

The third quarter is the year's weakest in terms of cash flow since the holiday pay liability generated in other quarters is paid out.

Free cash flow for the first nine months of the year totalled SEK 153 million (139). The increased free cash flow compared with the year-earlier period was mainly due to higher operating profit and lower tied-up working capital. Cash flow from investing activities, excluding acquisitions and divestments which amounted to SEK -30 million (38), was lower compared with the year-earlier period due to lower cash payments of SEK 27 million (69) from property sales.

Financial position

SEK million	30 sep 2017	30 sep 2016	31 dec 2016
Net interest-bearing debt	2,027	1,875	2,003
Equity/assets ratio	41.6%	40.3%	38.1%
Net debt/adjusted EBITDA	3.6	4.1	4.0
For definitions of key figures, see Note 8.

At 30 September 2017, net debt amounted to SEK 2,027 million (1,875), or 3.6 times rolling 12 months adjusted EBITDA.

Vardaga

Vardaga offers individual-focused healthcare and care services in special residential nursing homes for the elderly. Vardaga is one of Sweden's largest private providers of elderly care services with approximately 75 nursing homes throughout Sweden, where 7,000 employees work with a focus on safeguarding the quality of life and security of every individual.

Quarter

Vardaga's net sales rose 5 per cent to SEK 574 million (546).

Net sales in Own Management amounted to SEK 257 million (224), an increase of 15 per cent primarily attributable to higher occupancy in start-up units.

Net sales in Contract Management amounted to SEK 317 million (322). The decline of 2 per cent was due to the fact that contracts won during the year did not fully offset the previously terminated contracts.

EBITA rose 6 per cent to SEK 50 million (47). The increase was largely attributable to start-up Own Management units, while Contract Management operations had a negative impact. The lower occupancy in one region and a hand back prior to the Municipality's phase-out of the nursing home, Hemmet för Gamla, also had a negative impact on earnings. In addition, several more contracts, covering a total of 170 beds, will be terminated in the fourth quarter.

The EBITA margin was 8.7 per cent (8.6).

January – September

Vardaga's net sales rose 6 per cent to SEK 1,707 million (1,611)

Net sales in Own Management amounted to SEK 756 million (641), an increase of 18 per cent primarily attributable to higher occupancy in start-up units and annual indexation in established units.

Net sales in Contract Management amounted to SEK 951 million (970). The decline of 2 per cent was due to the fact that contracts won did not fully offset contracts terminated.

EBITA rose 35 per cent to SEK 124 million (92). Compared with the year-earlier period, earnings were positively impacted by repaid pension premiums of about SEK 18 million, Own Management units classified as start-up units in earlier periods, and from the contract mix in Contract Management operations.

The EBITA margin was 7.3 per cent (5.7).

Vardaga's operating margin (EBITA) RTM, %

SEK million	2017 jul–sep	2016 jul–sep	Change %	2017 jan–sep	2016 jan–sep	Change %	2016/2017 Rolling 12 mth	2016 jan–dec	Change %
Net sales	574	546	5	1,707	1,611	6	2,260	2,164	4
EBITA	50	47	6	124	92	35	151	120	26
Operating margin, EBITA (%)	8.7%	8.6%		7.3%	5.7%		6.7%	5.5%

Contract Management

			Change, third quarter	Start-up/
	Units	Beds	Annual revenue	Terminated during the quarter
Won, not started	0	0	0	0
Renewed confidence	0	0	0	0
Lost, not terminated	0	0	0	0
Placements re-won from municipalities	0	0	0	0

Nytida

Nytida provides support and care to children, youth and adults that satisfy disability care and psychosocial problems throughout their lives. We offer residential care, day-care activities, and individual, family and school support at approximately 350 units throughout Sweden. Using tried-and-proved models and in-depth knowledge, our 7,000 employees work with the aim of strengthening the individual's ability to live an independent life.

Quarter

Net sales rose 2 per cent to SEK 736 million (722).

Net sales in Own Management amounted to SEK 615 million (569), up 8 per cent, primarily due to acquired units. Start-up units made a positive contribution, while the supported living units that now require permits from the Swedish Health and Social Care Inspectorate (IVO) and have been closed down temporarily pending permits, had an adverse impact on sales.

Net sales in Contract Management amounted to SEK 121 million (153). This decrease in sales was due to the termination of several major contracts in 2016.

EBITA rose 24 per cent to SEK 126 million (102). While acquisitions had a positive impact on earnings, the Contract Management operations and supported living units pending permits from IVO had a negative impact. Profit for the quarter was SEK 20 million higher compared with the year-earlier period due to costs related to termination of the operations charged to the third quarter of 2016.

The EBITA margin was 17.1 per cent (14.1).

At the end of August, Brostugegården AB was acquired, a residential care facility in Uppsala with special services for people with psychosocial disabilities.

January – September

Net sales rose 5 per cent to SEK 2,127 million (2,017) The effect of the Solhaga acquisition being consolidated in the middle of the quarter was that sales increased by SEK 1275 million.

Net sales in Own Management rose 13 per cent to SEK 1,747 million (1,551). While acquisitions contributed to the positive trend, the supported living units that were closed down pending permits from IVO had a negative impact on sales during the quarter.

Net sales in Contract Management declined 18 per cent and amounted to SEK 380 million (466). This decrease in sales was due to the termination of several major contracts in 2016–17.

EBITA rose 19 per cent to SEK 270 million (226), mainly attributable to acquisitions. Profit for the period was SEK 20 million higher compared with the year-earlier period due to costs related to termination of the operations charged to the third quarter of 2016. Change in Contract Management operations and lower occupancy due to temporarily closed units had a negative impact on earnings.

The EBITA margin was 12.7 per cent (11.2).

Nytida's operating margin (EBITA), RTM %

5 Excluding Heimta, which is part of Other: Norway and Staffing Solutions.

Nytida

SEK million	2017 jul–sep	2016 jul–sep	Change %	2017 jan–sep	2016 jan–sep	Change %	2016/2017 Rolling 12 mth	2016 jan–dec	Change %
Net sales	736	722	2	2 127	2 017	5	2 840	2 730	4
EBITA	126	102	24	270	226	19	343	300	14
Operating margin, EBITA (%)	17.1%	14.1%		12.7%	11.2%		12.1%	11.0%

Contract Management

			Change, third quarter	Start-up/ Terminateduring the quarter
	Units	Beds	Annual revenue	Annual revenue
Won, not started	0	0	0	0
Renewed confidence	0	0	0	–
Lost, not terminated	1	6	4	0
Placements re-won from municipalities	0	0	0	0

Other: Norway and Staffing solutions

In the Other segment:

Ambea's staffing operations (Rent a Doctor/Rent a Nurse) are one of Sweden's leading providers of staffing services for healthcare and care services. We are an authorised staffing company and ISO certified. Based on personal service and long-standing experience of the industry, Ambea assists both public and private contracting authorities by providing superior staffing solutions. We mediate thousands of assignments every year and conduct operations throughout Sweden.

Ambea Norway consists of support and residential care services in the fields of disabled care and psychiatric care, provided through the companies Heimta, Vitale TBO Helse and Varphaugen. The operations have about 450 employees and offer residential care, user-guided personal assistance, rehabilitation services, temporary relief for relatives and investigatory services in large parts of Norway.

Quarter

Net sales rose 66 per cent to SEK 178 million (107), mainly attributable to acquisitions and higher occupancy in the Norwegian operations. Sales in the staffing operations rose 7 per cent year-on-year.

EBITA amounted to SEK 14 million (4) corresponding to a margin of 7.9 per cent (3.7) due to improved margins in the Norwegian operations and a positive marginal improvement in Staffing.

During the second half year, a total of 34 new beds will open in Norway which will have a short time impact on the margin..

Varphaugen was acquired on 10 July, with operations in care for children and young people with special needs.

January – September

Net sales rose 75 per cent to SEK 518 million (296), primarily due to acquisitions in Norway. Staffing operations showed positive growth of 6 per cent compared with the year-earlier period, attributable to a positive trend in its Rent a Nurse, social worker and Care Team services.

EBITA amounted to SEK 29 million (10), corresponding to a margin of 5.6 per cent (3.4).

SEK million	2017 jul–sep	2016 jul–sep	Change %	2017 jan–sep	2016 jan–sep	Change %	2016/2017 Rolling 12 mth	2016 jan–dec	Change %
Net sales	178	107	66	518	296	75	662	439	51
EBITA	14	4	250	29	10	190	34	15	127
Operating margin, EBITA (%)	7.9%	3.7%		5.6%	3.4%		5.1%	3.4%

Other events

Market listing

Ambea AB (publ) was listed on Nasdaq Stockholm on 31 March 2017. The offering comprised 26,565,495 shares, including 2,666,667 shares that were issued and offered by the company and 23,898,828 existing shares offered by ACTR Holding AB, which is controlled by Actor SCA, a partnership between funds advised by Triton and KKR, respectively (jointly designated the "Principal Owners"). The Ambea share is traded on the Nasdaq Mid Cap list under the ticker "AMBEA."

Incentive programme

The Extraordinary General Meeting held on 16 March 2017 resolved to introduce two long-term incentive programmes: (i) a warrant programme targeted at Group Management and members of extended management and (ii) a share savings programme targeted at certain other managers in the Ambea Group. The programmes are described in the interim report for the first quarter and more information is available on page 165 of the prospectus on ambea.se

Financing – new credit facility

The company's new credit facility amounts to SEK 2,500 million and is a multicurrency revolving credit facility. The new financing has been used to finance debt within the Group, consisting of loans, accrued interest and fees, and amounted to SEK 2,202 million on the balance-sheet date.

The credit facility has a three-year maturity profile, with an option to extend by one year at a time, plus a maximum of two additional years, upon approval. The credit facility is a revolving facility, which means that repaid amounts may be reborrowed so that the credit facility can be used for ongoing financing of the Group's operations during the term of the credit facility, within the scope of the credit framework.

The agreement contains customary guarantees and obligations. The agreement also contains terms and conditions relating to net debt in relation to adjusted EBITDA.

Shares and share capital

Following a resolution by the Extraordinary General Meeting on 16 March 2017, a new issue of 2,666,667 shares was implemented. The new issue contributed SEK 200 million before transaction expenses to Ambea. The new issue was registered on 4 April 2017 and increased the share capital by SEK 66,581.46, resulting in a dilution effect of 3.9 per cent. On the balance-sheet date, equity amounted to SEK 2,435 million, compared with SEK 2,067 million on 31 December 2016.

Related party transactions

No transactions took place during the quarter between Ambea and its related parties that had any material impact on the company's position and earnings. The nature of transactions and volume remained unchanged during the quarter compared with the year-earlier period.

Events after the end of the quarter

With the authorisation of the 2017 Annual General Meeting, the Board of Directors has decided repurchase up to 62,277 shares (approximately SEK 5.4 million) until the 2018 Annual General Meeting. The aim of the repurchase is to save the shares for delivery according to Ambea's share savings programme.

Seasonality

Ambea's results of operations are affected by seasonal variations, weekends and public holidays.

Weekends and public holidays reduce Ambea's profitability due to higher personnel costs based on inconvenient working hours. The first or second quarter is affected by Easter, depending on which quarter the Easter holiday occurs, while the first and fourth quarter are affected by the Christmas and New Year's holidays.

The company's personnel costs are affected in a similar manner, depending on when individual employees take their holiday. For example, the company is most profitable in the third quarter, as employees typically take holiday leave during the months of July and August and therefore receive holiday pay that is accrued continuously throughout the year. Costs during summer months are also generally lower due to a reduced schedule of central activities, such as mandatory training programmes and central initiatives, over this period.

Employees

The average number of full-time employees (FTE) during the interim period was 8,574 (7,429), the increase is mainly due to acquisitions.

Parent company

The Parent Company's earnings pertain to Group-wide costs. During the quarter, the Parent Company's net sales amounted to SEK 6 million (0). Quarterly earnings amounted to SEK -10 million (-2).

The weaker earnings were mainly attributable to financial expense of SEK -11 million (-) due to the Group's financing lying with Ambea AB (publ) as of April 2017, compared with the preceding year.

Risks and uncertainties

Ambea's operations and development are impacted by demographic, economic and political factors, as well as by the general development in the market for care services. Changes in these factors could result in reduced demand for Ambea's care services, which could adversely affect the company. Ambea works continuously on following up, analysing and taking actions to mitigate risks. Risk management is based on developed systems, division of responsibilities and procedures that are well secured in the organisation.

Demand for Ambea's care services is impacted to a great extent by legislation and political decisions, since municipalities are customers and the procuring party. Accordingly, Ambea's development depends on the orientation of the various municipalities in terms of the provision of healthcare and care services. Risks associated with freedom of choice can include Ambea being be unable to perform the specific service at the set price, or that not enough care recipients choose the company's residential care units or locations. There is also a risk that during public procurement, the company will not have its existing contracts extended or will not win new contracts.

Restrictions in the possibility to provide private care services for profit and stricter rules and regulations as regards permits and supervision can lead to restrictions of Ambea's business model. Ambea is thus affected by, and must comply with, changes and interpretations of new and current legislation, ordinances, regulations and practices. Infringements or shortcomings in the fulfilment of these could result in the company being subject to fees, fines, penalties or other sanctions. Such factors can also lead to adaptation actions and costs.

The quality of our operations is Ambea's principal priority. In addition to rigorous and systematic internal follow-ups of quality, comprehensive follow-ups and quality checks are performed by authorities, and permits are required for conducting operations. Should the company be unable to fulfil the contractual requirements and quality standards, the company could become subject to penalties, damages, contractual penalties,

or ultimately lose the customer contracts and/or permits which the company needs to conduct business. Since Ambea's operations are also dependent on permits, the loss of, or delays in receiving, permits could adversely affect Ambea's operations, earnings and financial position.

Ambea is also exposed to financial risks, whereby changes in the credit and capital market could affect Ambea's financial position.

Risks associated with the performance of care services are managed by the management of the various companies at different levels, taking into account the procedures and governance principles applied in the Group. Follow-up of the operations occurs in part in cooperation with contracting authorities and customers and in part in the form of internal quality checks. The design of contracts has a material impact on the risks associated with individual assignments. Financial risks are managed by the finance department.

Other information

The Nomination Committee for the 2018 AGM has been appointed and is as follows:

•Roger Hagborg, Actor SCA, Chairman of the Nomination Committee

• •Charlotta Faxén, Lannebo Fonder
• •Carl Gustafsson, Didner & Gerge Fonder AB
• •Tim Floderus, Investment AB Öresund
• •Lena Hofsberger, Chairman of the Board of Ambea AB.

Shareholders who wish to submit proposals to the Nomination Committee can e-mail them to valberedning@ambea.se, or send them to the following postal address:

Nomination committee

Ambea Att: Louise Tjeder Box 1565 SE-171 29 Solna

The Nomination Committee's proposal will be presented in the notice of the 2018 AGM as well as on the company's website.

Ambea's AGM will be held on 23 May 2018 at 9:00 a.m. in Näringslivets Hus, Wallenbergaren, Storgatan 19, in Stockholm, Sweden.

Shareholders who wish to have a matter addressed by the AGM must submit a written request to the Board of Directors at the following address:

Ambea AB Att: Louise Tjeder Box 1565 SE-171 29 Solna

In order to be included in the notice and agenda of the AGM, the proposal must be received by 4 April 2018.

This report is such information that Ambea AB (publ) is obliged to publish pursuant to the EU Market Abuse Regulation and the Swedish Securities Market Act. This information was submitted for publication, through the agency of the contact person set out below, on 17 November 2017.

The Board of Directors' assurance

The Board of Directors and President hereby provide their assurance that this interim report provides a true and fair overview of the operations, position and earnings of the Parent Company and the Group, and describes the material risks and uncertainties facing the Parent Company and the companies in the Group.

Stockholm, 17 November 2017

Lena Andersson Hofsberger Chairman of the Board
Daniel Björklund	Anders Borg	Thomas Hofvenstam
Ingrid Jonasson Blank	Hans Fredrik Årstad	Gunilla Rudebjer
Patricia Briceño Employee representative	Haralampos Kalpakas Employee representative	Magnus Sällström Employee representative

Fredrik Gren President and CEO

Auditor's review

Ambea AB (publ), Corp. Reg. No. 556468-4354

Introduction

We have conducted a review of the interim financial information in summary (the interim report) for Ambea AB (publ) at 30 September 2017 and for the nine-month period that ended on this date. The Board of Directors and President are responsible for preparing and presenting this interim report in accordance with IAS 34 and the Swedish Annual Accounts Act. Our responsibility is to express an opinion on this interim report based on our review.

Focus and scope of the review

We have conducted our review in accordance with International Standard on Review Engagements (ISRE) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity." A review consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review has another focus and considerably less scope than the focus and scope of an audit in accordance with International Standards on Auditing and generally accepted auditing standards.

The procedures performed in a review do not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. The opinion expressed based on a review does not therefore have the same level of assurance as an opinion expressed on the basis of an audit.

Opinion

Based on our review, no circumstances have arisen that give us any reason to believe that this interim report has not, in all material respects, been prepared for the Group in accordance with IAS 34 and the Swedish Annual Accounts Act, and for the Parent Company in accordance with the Swedish Annual Accounts Act.

Stockholm, 17 November 2017

Ernst & Young AB

Mikael Sjölander Authorised Public Accountant

Presentation of third quarter of 2017

Ambea will hold a presentation for the financial market, including the possibility to participate in a teleconference, at 10:00 a.m. CET, on Friday, 17 November 2017. The presentation will be held in English and also be available as a webcast on ambea.se

Call-up information

To make sure that the hook-up to the conference call works, please call a few minutes before the conference call starts to register by stating the code Ambea.

Phone numbers:

Sweden:	+46 (0) 8 5065 3938
UK:	+44 (0) 20 3427 1904
US:	+1646 254 3361

CONTACT

Louise Tjeder, IR and Strategy Manager, telephone +46 (0)73 143 17 68

FORTHCOMING REPORT OCCASIONS

• Q4 interim report and year-end report for 2017	21 February
• Annual Report	17 April
• Q1 interim report	17 May
• Q2 interim report	21 August
• Q3 interim report	13 November

Ambea, which is active in healthcare and care services, has approximately 14,000 employees. We offer services in disabled care, individual and family care, and care of the elderly with a focus on residential care and Own Management. We aim to be the quality leader in all that we do and our vision is to make the world a better place, one person at a time. At the end of the third quarter of 2017, Ambea had approximately 6,200 beds and 2,000 school and daily operation placements at around 500 units in Sweden and Norway. Total revenue and adjusted EBITA for the 2016 financial year amounted to SEK 5,409 million and SEK 456 million, respectively. The company was founded in 1996, is headquartered in Solna and listed on Nasdaq Stockholm.

Consolidated income statement in summary

SEK million	2017 jul–sep	2016 jul–sep	2017 jan–sep	2016 jan–sep	2016/2017 Rolling 12 mth	2016 jan–dec
OPERATING INCOME
Net sales	1,488	1,376	4,352	3,924	5,762	5,334
Other operating income	15	30	43	53	65	75
Total operating income	1,503	1,406	4,395	3,977	5,827	5,409
OPERATING EXPENSES
Consumables	-45	-45	-135	-132	-179	-176
Other external costs	-273	-256	-843	-703	-1,149	-1,008
Personnel costs	-988	-929	-3,005	-2,815	-4,006	-3,817
Depreciation, amortisation and impairment of tangible and intangible assets	-27	-30	-79	-73	-107	-102
Profit/loss from participations in Group companies	0	0	0	-1	0	-1
Other operating expenses	-1	0	-2	-1	-5	-4
Operating expenses	-1,334	-1,261	-4,064	-3,725	-5,446	-5,108
OPERATING PROFIT	169	145	331	252	381	301
Financial income	2	0	5	1	9	6
Financial expense	-14	-31	-108	-92	-151	-135
Net financial income and expenses	-12	-31	-103	-91	-142	-130
PROFIT AFTER NET FINANCIAL ITEMS	157	114	228	161	239	171
PROFIT BEFORE TAX	157	114	228	161	239	171
Tax on profit for the period	-38	-27	-56	-39	-61	-44
PROFIT FOR THE PERIOD	119	87	172	122	178	128
Profit for the period attributable to:
Shareholders of the Parent Company	119	87	172	122	178	128
Non-controlling interests	0	0	0	0	0	0
	119	87	172	122	178	128
Earnings per share before dilution (SEK)	1.75	1.34	2.58	1.87	2.69	1.97
Earnings per share after dilution (SEK)	1.75	1.34	2.58	1.87	2.68	1.97

Consolidated statement of comprehensive income in summary

SEK million	2017 jul–sep	2016 jul–sep	2017 jan–sep	2016 jan–sep	2016/2017 Rolling 12 mth	2016 jan–dec
PROFIT FOR THE PERIOD AFTER TAX	119	87	172	122	178	128
OTHER COMPREHENSIVE INCOME, ITEMS THAT CANNOT BE TRANSFERRED TO PROFIT OR LOSS
Remeasurement of defined benefit pension plans	–	–	–	–	-2	-2
Tax related to remeasurement of defined benefit pension plans	–	–	–	–	0	0
Total items that are not transferable to profit or loss	–	–	–	–	-2	-2
OTHER COMPREHENSIVE INCOME, ITEMS TRANSFERABLE TO PROFIT OR LOSS
Translation differences	-2	5	-6	6	-6	1
Hedging of net investments in foreign operations	3	–	6	–	6	3
Tax related to net investments in foreign operations	-1	–	-1	–	-2	-1
Other	-1	0	0	-2	–	1
Total items transferable to profit or loss	-1	5	-1	4	-2	4
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD	118	92	171	125	176	130
Comprehensive income for the period attributable to:
Shareholders of the Parent Company	118	92	171	125	176	130
Non-controlling interests	–	0	–	0	–	0
	118	92	171	125	176	130

Earnings per share

Recalculation of average number of shares

Earnings per share have been recalculated retroactively because the company implemented a four-for-one share split, a share conversion and a bonus issue in the first quarter of 2017. For more information, see the section Shares and share capital. The average number of shares in earlier periods has been recalculated to reflect the split, the conversion and the bonus issue. Due to the share conversion, all preference shares were converted to common shares and the debt to former holders of preference shares was paid off in connection with the bonus issue implemented on 31 March 2017.

SEK million	2017 jul–sep	2016 jul–sep	2017 jan–sep	2016 jan–sep	2016/2017 Rolling 12 mth	2016 jan–dec
Profit for the period attributable to the shareholders of the
Parent Company, SEK million	119	87	172	122	178	128
Earnings per share before dilution
Average number of shares, thousands	67,617	64,950	66,708	64,914
Earnings per share before dilution, SEK	1.75	1.34	2.58	1.87	2.69	1.97
Earnings per share after dilution
Average number of shares, thousands	67,634	64,950	66,720	64,914
Earnings per share after dilution, SEK	1.75	1.34	2.58	1.87	2.68	1.97

Consolidated balance sheet in summary

SEK million	30 sep 2017	30 sep 2016	31 dec 2016
ASSETS
Fixed assets
Goodwill	3,670	3,330	3,517
Customer contracts and customer relations	438	414	435
Other intangible assets	19	15	14
Tangible assets	189	161	168
Non-current receivables from Group companies	0	1	1
Derivative instruments	0	0	1
Deferred tax assets	75	74	94
Non-current receivables	21	21	21
Total fixed assets	4,412	4,016	4,252
Current assets
Accounts receivable	618	528	583
Current receivables from Group companies	-	6	7
Other receivables	54	85	32
Accrued income and prepaid expenses	160	117	145
Cash and cash equivalents	471	337	318
	1,303	1,073	1,085
Assets held for sale	137	28	82
Total current assets	1,441	1,101	1,167
TOTAL ASSETS	5,851	5,117	5,418

Consolidated balance sheet in summary – continuation

SEK million	30 sep 2017	30 sep 2016	31 dec 2016
EQUITY AND LIABILITIES
Equity
Share capital	2	1	1
Other capital contributions	4,963	4,772	4,772
Reserves	2	4	3
Retained earnings including profit/loss for the year	-2,532	-2,714	-2,709
Equity attributable to shareholders of the Parent Company	2,435	2,063	2,067
Non-controlling interests	–	1	–
Total equity	2,435	2,064	2,067
Non-current liabilities
Non-current interest-bearing liabilities	2,202	2,197	2,162
Other non-interest-bearing liabilities	11	18	72
Pension provisions	6	19	6
Other provisions	5	16	24
Deferred tax liabilities	116	102	109
Total non-current liabilities	2,340	2,352	2,373
Current liabilities
Current interest-bearing liabilities	296	15	159
Accounts payable	161	102	166
Tax liabilities	56	16	54
Other non-interest-bearing liabilities	103	99	80
Accrued expenses and deferred income	460	470	519
Total current liabilities	1,076	702	978
TOTAL EQUITY AND LIABILITIES	5,851	5,117	5,418

Consolidated statement of changes in equity in summary

SEK million	2017 jan–sep	2016 jan–sep	2016 jan–dec
Opening balance	2,067	1,933	1,933
Total comprehensive income	171	125	130
Transactions with shareholders
Acquisitions from non-controlling interests	–	–	-2
New share issue	200	6	6
Issue expenses	-6	–	–
Warrants issued	2	–	–
Closing balance	2,435	2,064	2,067

Consolidated cash flow statement in summary

SEK million	2017 jul–sep	2016 jul–sep	2017 jan–sep	2016 jan–sep	2016/2017 Rolling 12 mth	2016 jan–dec
OPERATING ACTIVITIES
Profit before tax	157	114	228	161	239	171
Adjustment for non-cash items	26	37	100	106	134	141
	183	151	328	267	373	312
Tax paid	-1	–	-39	-2	-31	6
Cash flow from operating activities before changes in working capital	182	151	289	265	342	318
CASH FLOW FROM CHANGES IN WORKING CAPITAL
Change in inventories	0	0	0	0	0	0
Change in operating receivables	-35	-14	-37	-113	-43	-120
Change in operating liabilities	-80	-82	-69	-50	-7	12
Cash flow from operating activities	66	55	183	102	292	210
INVESTING ACTIVITIES
Investment and disposal in intangible and tangible assets	-17	43	-30	38	-60	8
Free cash flow	49	98	153	139	232	218
Acquisition and disposal of shares and participations	-98	-19	-293	-886	-467	-1,061
Other financial assets	0	0	1	0	1	0
Cash flow from investing activities	-115	24	-322	-848	-527	-1,052
Cash flow after investing activities	-49	79	-139	-746	-235	-842
FINANCING ACTIVITIES
New loans/Loans raised	43	1	2,325	1,263	2,417	1,355
Repayment of loan liabilities	-20	-4	-2,229	-368	-2,247	-387
New share issue	–	–	196	1	196	1
Cash flow from financing activities	23	-3	292	895	366	969
CASH FLOW DURING THE PERIOD	-27	77	153	149	131	127
Cash and cash equivalents on the opening date	496	261	318	189	337	189
Exchange rate differences in cash and cash equivalents	1	-1	0	-1	3	2
Cash and cash equivalents on the closing date	471	337	471	337	471	318

Parent company income statement in summary

SEK million	2017 jul–sep	2016 jul–sep	2017 jan–sep	2016 jan–sep	2016/2017 Rolling 12 mth	2016 jan–dec
INCOME
Net sales		6 –	19	–	19	–
		6 –	19	–	19	–
OPERATING EXPENSES
Other external costs		-2 -2	-38	-5	-68	-36
Personnel costs		-3 0	-7	0	-7	0
Operating expenses		-5 -2	-44	-5	-75	-36
OPERATING PROFIT/LOSS		1 -2	-26	-5	-57	-36
Financial items		-11 –	-21	–	-21	–
LOSS AFTER FINANCIAL ITEMS	-10	-2	-47	-5	-78	-36
Appropriations		– –	–	–	36	36
PROFIT/LOSS BEFORE TAX	-10	-2	-47	-5	-42	0
Tax on profit for the period		– –	–	–	–	–
PROFIT/LOSS FOR THE PERIOD	-10	-2	-47	-5	-42	0

Parent company balance sheet in summary

SEK million	30 sep 2017	30 sep 2016	31 dec 2016
ASSETS
Financial non-current assets
Participations in Group companies	4,127	1,935	1,935
Total fixed assets	4,127	1,935	1,935
Current assets
Receivables from Group companies
Tax assets	89 2	– –	2 –
Other receivables	6	0	0
Cash and bank balances	50	2	0
Total current assets	147	2	2
TOTAL ASSETS	4,274	1,937	1,937
EQUITY AND LIABILITIES
Share capital	2	1	1
Statutory reserve	0	0	0
Total restricted equity	2	1	1
Share premium reserve	198	6	6
Retained earnings	1,929	1,929	1,929
Profit/loss for the period	-47	-5	0
Total non-restricted equity	2,081	1,930	1,935
TOTAL EQUITY	2,083	1,931	1,936
Non-current liabilities
Liabilities to credit institutions	2,181	–	–
Current liabilities
Accounts payable	6	–	–
Liabilities to Group companies	–	4	–
Other liabilities	0	–	0
Accrued expenses	3	2	1
Total current liabilities	10	6	1
TOTAL EQUITY AND LIABILITIES	4,274	1,937	1,937

Key financial figures

SEK million	2017 jul–sep	2016 jul–sep	Change %	2017 jan–sep	2016 jan–sep	Change %	2016/2017 Rolling 12 mth	2016 jan–dec	Change %
Net sales	1,488	1,376	8	4,352	3,924	11	5,762	5,334	8
Growth in net sales (%)	8%	22%		11%	20%		8%	23%
EBITDA	196	175	12	410	325	26	489	403	21
Operating margin EBITDA (%)	13.2%	12.8%		9.4%	8.3%		8.5%	7.6%
Adjusted EBITDA	196	188	4	440	376	17	564	500	13
Operating margin, Adjusted EBITDA (%)	13.1%	13.7%		10.1%	9.6%		9.8%	9.4%
EBITA	184	164	12	374	292	28	442	359	23
Operating margin, EBITA (%)	12.4%	11.9%		8.6%	7.5%		7.7%	6.7%
Adjusted EBITA	184	177	4	404	344	17	517	456	13
Operating margin, adjusted EBITA (%)	12.4%	12.9%		9.3%	8.8%		9.0%	8.5%
Operating profit EBIT	169	145	17	331	252	31	381	301	27
Operating margin EBIT (%)	11.4%	10.5%		7.6%	6.4%		6.6%	5.6%
Profit before tax	157	114	38	228	161	42	239	171	40
Profit after tax	119	87	37	172	122	41	178	128	39
Earnings per share before dilution, SEK	1.75	1.34	31	2.58	1.87	38	2.69	1.97	37
Earnings per share after dilution, SEK	1.75	1.34	31	2.58	1.87	38	2.68	1.97	36
Return on equity (%)	5.0%	4.3%		7.6%	6.1%		7.9%	6.4%
Operating cash flow	57	102	-44	254	180	41	381	305	24
Free cash flow	49	98	-50	153	139	10	232	218	6
Cash conversion	29.1%	59.4%		63.2%	60.0%		79.1%	79.7%

Notes

Note 1 Accounting policies

This interim report has been prepared in accordance with IAS 34 Interim Financial Reporting and the Swedish Annual Accounts Act, as well as the Swedish Financial Reporting Board's RFR 1, Supplementary Accounting Rules for Groups, and RFR 2 Accounting for Legal Entities. The applied accounting policies comply with the accounting policies used when preparing the latest annual accounts.

New and amended IFRS standards not yet applied

A number of new and amended IFRS standards are not yet effective and have not been applied in advance in the preparation of these financial statements. Listed below are the standards that may have an impact on the consolidated financial statements.

IFRS 9 Financial Instruments encompasses the classification and measurement of financial assets and liabilities. Ambea's accounts receivable generally relate to customers with good payment capacity, which is taken into account in the provision for expected credit losses. The option to apply hedge accounting is facilitated in general under IFRS 9, which may affect the accounting in the financial statements. The classification of financial instruments under IFRS 9 is not expected to affect the accounting. IFRS 9 will become effective on 1 January 2018.

IFRS 15 Revenue from Contracts with Customers introduces new ways of determining how revenue is recognized. Ambea is in the process of assessing the effects of this new standard, but has thus far concluded, based on an analysis of a sample of standard contracts from its different areas of operations, that the new standard will not have any material impact on the financial statements. Ambea is not planning on early adoption of IFRS 15.

IFRS 16 Leases will become effective on 1 January 2019. The new standard is expected to have a material effect on the income statement and balance sheet (but not the cash flow). Monetary estimations of the effect of IFRS 16 and the choice of transition methods have not yet been carried out. The information provided for operating leases in the 2016 Annual Report gives an indication of the nature and scope of the leases that currently exist. No decision has been made as to whether IFRS 16 will be adopted early as of 2018 or from 2019.

Note 2 Key estimates and judgments

For information on key estimates and judgments in the interim report, reference is made to Note K35 in the company's 2016 Annual Report.

Note 3 Segment information

The Norwegian operations and staffing operations together constitute a small proportion of the Group's operations that falls below the quantitative thresholds according to IFRS 8 p 13 requiring separate reporting. As of 2016, they have therefore been merged under a miscellaneous segment – Other: Norway and Staffing Solutions. In previous years, the staffing operations were reported as a separate segment.

Vardaga Consists of elderly care

Nytida Consists of care for people with functional disabilities

Other: Norway and Staffing solutions

Consists of staffing solutions and hiring of doctors, nurses and other care professionals, as well as the Norwegian operations. The Norwegian operations mainly comprise psychiatric support in residential care and outpatient care and residential care for people with life-long disabilities.

Segment

July – September	Vardaga		Nytida		solutions	Other: Norway and Staffing	items6	Unallocated	Consolidation adjustments		Group
SEK million	2017	2016	2017	2016	2017	2016	2017	2016	2017	2016	2017	2016
OPERATING INCOME
Net sales	574	546	736	722	178	107	0	0	–	0	1,488	1,376
Other operating income	8	7	5	4	10	7	1	18	-9	-6	15	30
Internal transactions	–	–	–	–	-9	-6	–	0	9	6	–	0
Total income from external customers	582	553	741	726	179	108	2	19	–	0	1,503	1,406
OPERATING EXPENSES
Consumables	-22	-22	-19	-22	-2	-1	-2	-1	–	–	-45	-45
Other external costs	-109	-102	-133	-146	-63	-34	33	26	–	–	-273	-256
Personnel costs	-397	-379	-459	-453	-99	-69	-33	-28	–	–	-988	-929
Other operating expenses	0	0	0	0	0	–	-1	0	0	0	-1	0
Depreciation and impairment of tangible assets	-4	-4	-4	-3	-1	0	-4	-4	–	–	-12	-11
EBITA	50	47	126	102	14	4	-5	11	–	–	184	164
EBITA margin, %	8.7%	8.6%	17.1%	14.1%	7.9%	3.7%	–	–	–	–	12.4%	11.9%
Items affecting comparability	–	–	-0	1	–	–	0	12	–	–	0	13
Adjusted EBITA	50	47	125	103	14	4	-6	24	–	–	184	177
Adjusted EBITA margin, %	8.7%	8.6%	16.9%	14.3%	7.9%	3.7%	–	–	–	–	12.4%	12.9%
Amortisation of intangible fixed assets and customer contracts									0	–	-15	-19
Operating profit (EBIT)									–	–	169	145
Financial income									–	0	2	0
Financial expense									–	–	-14	-31
Net financial items									–	–	-12	-31
Profit after net financial items									–	–	157	114
Profit before tax									–	–	157	114
Tax on profit for the year									–	–	-38	-27
PROFIT FOR THE PERIOD									–	–	119	87
ASSETS	1,369	1,379	3,371	3,065	520	250	590	424	–	–	5,851	5,117

6 The column Unallocated items consists of centrally approved costs for general central administration, restructuring measures, acquisitions and costs for the IPO.

AMBEA AB (PUBL) ORG.NR. 556468-4354 | INTERIM REPORT Q3 2017 2 8

January – September Vardaga Nytida Other: Norway and Staffing solutions Unallocated items Consolidation adjustments Group SEK million 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 OPERATING INCOME Net sales 1,707 1,611 2,127 2,017 518 296 0 0 – – 4,352 3,924 Other operating income 21 17 13 12 26 19 8 23 -25 -18 43 53 Internal transactions – – – – -25 -17 – – 25 18 – 1 Total income from external customers 1,728 1,628 2,140 2,029 519 298 8 23 – – 4,395 3,977 OPERATING EXPENSES Consumables -69 -67 -59 -63 -3 -1 -4 -1 – – -135 -132 Other external costs -323 -290 -388 -387 -204 -97 72 71 – – -843 -703 Personnel costs -1,201 -1,168 -1,409 -1,342 -281 -188 -114 -117 – – -3,005 -2,815 Profit/loss from participations in Group companies – – – -1 – 0 – – – – – -1 Other operating expenses 0 -1 0 0 0 – -1 0 – – -2 -1 Depreciation and impairment of tangible assets -11 -11 -13 -9 -2 -1 -11 -12 ^{1 0} -36 -33 EBITA 124 92 270 226 29 10 -49 -36 1 0 374 292 EBITA margin, % 7.3% 5.7% 12.7% 11.2% 5.6% 3.4% – – – – 8.6% 7.5% Items affecting comparability – – -3 11 – – 33 41 – – 30 51 Adjusted EBITA 124 92 267 236 29 10 -16 5 1 0 404 344 Adjusted EBITA margin, % 7.3% 5.7% 12.5% 11.7% 5.6% 3.4% – – – – 9.3% 8.8% Amortisation of intangible fixed assets and customer contracts ⁰ – -43 -40 Operating profit/loss (EBIT) – – 331 252 Financial income – – 5 1 Financial expense – – -108 -92 Net financial items – – -103 -91 Profit after net financial items – – 228 161 Group contributions received/paid – – – – Profit before tax – – 228 161 Tax on profit for the year – – -56 -39 PROFIT FOR THE PERIOD – – 172 122 ASSETS 1,369 1,379 3,371 3,065 520 250 590 424 – – 5,851 5,117

Note 4 Acquisitions

Ambea completed the following acquisitions during interim period:

• Resursteamet i Stockholm AB
• HVB Partner i Norr AB
• Varphaugen AS and Varphaugens Ungdomshjem AS
• Brostugegården

Resursteamet i Stockholm AB

On 31 May, Ambea's Nytida business area acquired Resursteamet i Stockholm AB, a Stockholm-based company primarily operating day-care activities for people with acquired or congenital cognitive disabilities. Together, Nytida and Resursteamet are now a clear market leader, with 36 units and 1,200 placements within day-care activities in Stockholm County. Following the acquisition, Nytida's leading position in residential care has been supplemented with Resursteamet's market-leading position in day-care activities, creating a stronger and broader LSS offering.

The purchase price on the acquisition date, which was financed in cash, amounted to SEK 194 million, including acquired net debt of SEK 6 million. The acquisition gave rise to goodwill of SEK 149 million. The goodwill relates mainly to synergy effects from reduced central costs. The goodwill is not expected to be tax deductible.

The acquisition was consolidated in Ambea's accounts as of 31 May 2017 and has contributed SEK 62 million in net sales and SEK 15 million in EBITA during the year. If the acquisition had taken place on 1 January 2017, management estimates that Resursteamet's net sales would have amounted to SEK 140 million and EBITA to SEK 23 million.

The acquisition analysis is preliminary, since final tax calculation is pending and intangible assets are currently being measured. The acquisition analysis is expected to be finalised in 2017.

HVB Partner i Norr AB

On 29 May, Ambea 100 per cent of the shares in HVB Partner i Norr AB. The company is based in Härnösand, Sweden, and offers full-time residential care for children and adolescents with social problems on its own premises in Norråsen in Gävleborg County. In 2015/2016, the company's net sales amounted to SEK 0.1 million.

The purchase price, which was financed in cash, was SEK 2 million. The acquisition gave rise to goodwill of SEK 1 million.

No operations are currently conducted by the company. During the year, the company has contributed SEK 0 million to the Group's net sales and SEK 0 million to the Group's EBITA. If the acquisition had taken place on 1 January 2017, Ambea estimates that the company's net sales would have amounted to SEK 0 million and EBITA to SEK 0 million.

Varphaugen

Varphaugen was acquired on 10 July, with operations in care for children and young people in Østlandet, Norway. The operations consist of two legal units, Varphaugen AS and Varphaugen Ungdomshjem AS, seven residential units for emergency placement, investigation and long-term accommodation as well as family homes for children and young people. In 2016, sales amounted to just over NOK 40 million.

The purchase price, which was financed in cash, was SEK 36 million. The acquisition gave rise to goodwill of SEK 22 million, mainly related to synergy effects from reduced central costs. The purchase price includes an estimated contingent consideration of SEK 11 million, conditional upon new price-escalation agreements related to two contracts. The amount of the contingent consideration is based on the new prices in the agreements and could range from SEK 0-11 million.

The acquisition was consolidated in Ambea's accounts as of 1 July 2017 and has contributed SEK 12 million in net sales and SEK 1 million in EBITA during the year. If the acquisition had taken place on 1 January 2017, management estimates that Varphaugen's net sales would have amounted to SEK 33 million and EBITA to SEK 3 million.

The acquisition analysis is preliminary, since final tax calculation is pending and intangible assets are currently being measured. The acquisition analysis is expected to be finalised in the first quarter of 2018.

Brostugegården AB

On 25 August, Ambea's Nytida business area acquired Brostugegården AB, a residential care facility with special services for people with psychosocial disabilities. Brostugegården has 30 placements and offers a comfortable home environment, as well as support and assistance for an independent and meaningful life based on the individual's conditions. In 2016, sales amounted to about SEK 22 million.

The purchase price, which was financed in cash, was SEK 80 million. The acquisition gave rise to goodwill of SEK 30 million, mainly related to synergy effects from reduced central costs.

The acquisition was consolidated in Ambea's accounts as of 1 September 2017 and has contributed SEK 2 million in net sales and SEK 1 million in EBITA during the year. If the acquisition had taken place on 1 January 2017, management estimates that Brostugegården's net sales would have amounted to SEK 17 million and EBITA to SEK 8 million.

The acquisition analysis is preliminary since intangible assets are currently being measured and is expected to be finalised in the first quarter of 2018.

Net assets of acquired companies on the date of acquisition

SEK million	Resursteamet i Stockholm AB	HVB Partner i Norr AB	Varphaugen AS	Varphaugen Ungdomshjem AS	Brostuge gården AB	Fair value recognised in the Group
Tangible assets	4	3	2	7	11	74
Intangible assets	8	0	0	0	0	48
Financial assets	0	0	0	0	0	0
Inventories	0	0	0	0	0	0
Accounts receivable and other receivables	22	0	1	6	2	31
Cash and cash equivalents	19	0	2	4	3	28
Non-current interest-bearing liabilities	-9	0	-2	-13	-7	-31
Deferred tax liability	-5	0	0	0	0	-14
Provisions	0	0	0	0	0	0
Accounts payable and other liabilities	-15	-2	0	-3	-3	-23
Net identifiable assets and liabilities	24	1	2	1	6	113
Group goodwill						201
Total consideration transferred						314
Cash (acquired)						-28
Estimated contingent consideration						-11
Net cash outflow						275
Paid contingent consideration in respect of previous years' acquisitions						18
Total acquisitions						293

Note 5 Fair value of financial instruments in the measurement hierarchy

Ambea applies the following hierarchy for measurement of financial instruments at fair value:

Level 1 – Listed prices (unadjusted) on active markets for identical assets or liabilities. This level includes eligible treasury bills, bonds and other interest-bearing securities. Remeasurement is recognised under Financial items.

Level 2 – Other observable data for assets or liabilities other than quoted prices included in Level 1, either directly (i.e. as price quotations) or indirectly (i.e. derived from price quotations). This level includes derivative instruments that are recognized under Other net current assets or Other current liabilities.

Level 3 – Data for assets or liabilities that are not based on observable market data.

Derivative instruments are measured in accordance with level 2 of the measurement hierarchy. Ambea has hedged 61 per cent of its interest-rate exposure in financing by purchasing interest-rate caps. The interest-rate caps are recognised at fair value and the impact on profit/loss is recognised in net financial items. The hedges were entered into in February 2016 and expire in January 2019. The change in fair value applying to the interest-rate caps is recognised in profit or loss and SEK -0 million was charged against net financial items for the quarter. The value of the derivatives amounted to SEK 0 million at 30 September 2017. Ambea uses the standard report of issuing banks for the market valuation of purchased interest-rate caps. The valuation is based on the bank's standard pricing model and method. The valuation is based on the bank's average price.

Contingent considerations are measured in accordance with level 3 of the measurement hierarchy. Material non-observable input data consists primarily of forecast sales.

Consolidated assets and liabilities measured at fair value

SEK million	30 sep 2017	30 sep 2016	31 dec 2016
Interest rate derivatives	0	–	1
Contingent consideration	-36	-15	-87

The change in contingent consideration of SEK 51 million against the annual accounts consists of regulation of SEK 15 million related to Ungstöd, adjustment of SEK 45 million in the acquisition analysis for Vitale due to a dispute with the previous owner and currency effects.

Note 6 Pledged assets and contingent liabilities

SEK million	30 sep 2017	30 sep 2016	31 dec 2016
Pledged shares	–	2,121	2,164
Leased assets	66	64	64
Chattel mortgages	13	35	37
Real estate mortgages	24	–	14
Factoring	2	–	2
Total pledged assets	104	2,219	2,281

The company secured new financing (refer to the section "Financing – new credit facility"), which took effect during the second quarter of 2017. The new agreement does not include a pledge of collateral in the form of shares, which accounts for the most significant change in pledged assets compared with the period of comparison.

Contingent liabilities

The Group is sometimes involved in lawsuits and legal proceedings that are related to day-to-day business activities. The claims relate to, but are not limited to, the Group's business practices, personnel matters and tax issues. With respect to matters that do not require any provisions, the Group, based on information that is currently available, is of the opinion that these will not result in any significantly negative effect on the Group's financial results.

Note 7 Reconciliation with IFRS financial statements

SEK million	2017 jul–sep	2016 jul–sep	2017 jan–sep	2016 jan–sep	2016/2017 Rolling 12 mth	2016 jan–dec
Growth/Acquired growth
Growth in net sales	8%	22%	11%	20%	8%	23%
Of which, acquired growth	8%	26%	10%	25%	13%	26%
Of which, organic growth	0%	-4%	1%	-5%	-5%	-3%
Operating margin (EBIT)
Net sales	1,488	1,376	4,352	3,924	5,762	5,334
Operating profit (EBIT)	169	145	331	252	381	301
Operating margin (EBIT)	11.4%	10.5%	7.6%	6.4%	6.6%	5.6%
EBITA and adjusted EBITA
Operating profit (EBIT)	169	145	331	252	381	301
Amortisation and impairment of intangible assets	15	19	43	40	61	58
EBITA	184	164	374	292	442	359
Items affecting comparability	0	13	30	51	75	97
Adjusted EBITA	184	177	404	344	517	456
Net sales	1,488	1,376	4,352	3,924	5,762	5,334
EBITA margin	12.4%	11.9%	8.6%	7.5%	7.7%	7 6.7%
Adjusted EBITA margin	12.4%	12.9%	9.3%	8.8%	9.0%	7 8.5%
EBITDA and adjusted EBITDA
Operating profit (EBIT)	169	145	331	252	381	301
Depreciation, amortisation and impairment of tangible and intangible assets	27	30	79	73	107	102
EBITDA	196	175	410	325	489	403
Items affecting comparability	0	13	30	51	75	97
Adjusted EBITDA	196	188	440	376	564	500
Net sales	1,488	1,376	4,352	3,924	5,762	5,334
EBITDA margin	13.2%	12.8%	9.4%	8.3%	7 8.5%	7 7.6% 8
Adjusted EBITDA margin	13.1%	13.7%	10.1%	9.6%	9.8%	9.4%

7 EBITDA margin recalculated from Annual report figures 2016 due to different definition of key measure.

SEK million	2017 jul–sep	2016 jul–sep	2017 jan–sep	2016 jan–sep	2016/2017 Rolling 12 mth	2016 jan–dec
Items affecting comparability
Reversal of restructuring and acquisition-related costs	0	2	1	36	13	49
- of which, costs included in the profit/loss row other external costs	0	2	1	22	14	35
- of which, costs included in the profit/loss row personnel costs	–	0	0	14	-1	13
Reversal of income and costs for discontinuation of operations	0	1	-3	5	10	17
- of which, income	–	-3	0	-6	-2	-7
- of which, costs included in the profit/loss row other external costs	0	1	-3	4	10	17
- of which, costs included in the profit/loss row personnel costs	0	2	0	6	1	7
- of which, costs included in the profit/loss row depreciation, amortisation and impairment of tangible and intangible assets	0	–	0	–	0	–
- of which, costs included in the profit/loss row other operating expenses	–	–	0	–	0	–
Reversal of costs attributable to IPO	0	10	32	10	52	31
- of which, costs included in the profit/loss row other external costs	0	10	32	10	51	29
- of which, costs included in the profit/loss row personnel costs	–	0	0	0	2	2
- of which, costs included in the profit/loss row depreciation, amortisation and impairment of tangible and intangible assets	0	–	0	–	0	–
Items affecting comparability	0	13	30	51	75	97
Operating cash flow
EBITDA	196	175	410	325	489	403
Adjustment for non-cash items	-7	-20	-20	-20	2	2
Cash flow from investing activities excluding acquisitions and sales of subsidiaries	-17	43	-30	38	-60	8
Operating cash flow before changes in working capital	172	198	360	343	431	413
Change in working capital	-115	-96	-106	-163	-50	-108
Operating cash flow after changes in working capital	57	102	254	180	381	305
Cash conversion
Operating cash flow after changes in working capital	57	102	254	180	381	305
Adjustment for cash flow from investing activities related to increased capacity/growth	0	2	5	15	6	16
Operating cash flow excluding cash flow from investments in increased capacity/growth	57	104	259	195	387	321
EBITDA	196	175	410	325	489	403
Cash conversion (%)	29%	59%	63%	60%	79%	80%

Interim report January – September 2017

SEK million	30 sep 2017	30 sep 2016	31 dec 2016
Net debt, Net debt/Adjusted EBITDA, RTM
Non-current interest-bearing liabilities	2,202	2,197	2,162
Current interest-bearing liabilities	296	15	159
Less cash and cash equivalents	-471	-337	-318
Net debt	2,027	1,875	2,003
Adjusted EBITDA, RTM	564	460	500
Net debt/Adjusted EBITDA, RTM (times)	3.6	4.1	4.0
Debt/equity ratio
Non-current interest-bearing liabilities	2,202	2,197	2,162
Current interest-bearing liabilities	296	15	159
Total interest-bearing liabilities	2,498	2,212	2,321
Total equity	2,435	2,064	2,067
Debt/equity ratio	1.0	1.1	1.1
Equity/assets ratio
Total equity	2,435	2,064	2,067
Total assets	5,851	5,117	5,418
Equity/assets ratio (%)	41.6%	40.3%	38.1%

SEK million	2017 jul–sep	2016 jul–sep	2017 jan–sep	2016 jan–sep	2016/2017 Rolling 12 mth	2016 jan–dec
Return on equity
Opening equity attributable to shareholders of the Parent Company	2,316	1,971	2,067	1,932	2,063	1,932
Closing equity attributable to shareholders of the Parent Company	2,435	2,063	2,435	2,063	2,435	2,067
Average equity attributable to shareholders of the Parent Company		2,017	2,251	1,998	2,249	2,000
Profit after tax	119	87	172	122	178	128
Return on equity (%)	5.0%	4.3%	7.6%	6.1%	7.9%	6.4%

Note 8 Definitions and purpose

Key financial figures	Definition and calculation	Purpose
Growth (%)	Growth consists of the increase in sales in relation to the period of comparison	This key figure is used to follow up the company's sales increase
	The period's increase in net sales/Net sales in the period of comparison
Acquired growth (%)	The period's increase in net sales from acquisitions/Net sales in the period of comparison	This key figure is used to follow up the proportion of the company's sales increase that was generated through acquisitions
Organic growth (%)	The period's increase in net sales excluding acquisitions/Net sales in the period of comparison	This key figure is used when analysing under lying sales growth driven by comparable units between different periods
Operating profit/loss (EBIT)	Profit for the period before financial items	This key figure is used to follow up the com
	and taxes Total operating income – Operating expenses	pany's profit generated by operating activi ties. The key figure enables comparisons of profitability between companies/industries
EBITA	Operating profit before amortisation and impairment of intangible assets	This key figure is used to follow up the com pany's profit generated by operating activi
	Operating profit (EBIT) + Amortisation and impairment of intangible assets	ties. The key figure enables comparisons of profitability between companies/industries
Items affecting comparability	Items related to events in the company's operations that impact comparability with profit during other periods. Includes:	The key figure Adjustments of items affecting comparability is used to achieve a fair com parison of the underlying development of
	-Transaction costs attributable to major acquisitions	business operations
	-Major re-organisations
	-Costs for preparing the company for a future stock-exchange listing
Adjusted EBITA	Operating profit before amortisation and impairment of intangible assets adjusted for items from events in the company's operations that affect comparisons with profit during other periods	The key figure is used to follow up the compa ny's profit generated by operating activities in order to obtain a fair comparison of the underlying development of business opera tions. The key figure enables comparisons of
	EBITA + Adjustment	profitability between companies/industries
EBITDA	Operating profit before depreciation/ amortisation and impairment of intangible and tangible assets	The key figure is used to follow up the com pany's profit generated by operating activi ties. The key figure enables comparisons of
	Operating profit (EBIT) + Depreciation/ amortisation and impairment of intangible and tangible assets	profitability between companies/industries
Adjusted EBITDA	Operating profit before depreciation/amor tisation and impairment of intangible and tangible assets adjusted for items from events in the company's operations that affect comparisons with profit during other periods	The key figure is used to follow up the com pany's profit generated by operating activi ties with a fair comparison of the underlying development of the business operations. The key figure enables comparisons of profita bility between companies/industries
	EBITDA + Adjustments
Operating margin (%)	Operating profit as a percentage of net sales Operating profit (EBIT)/Net sales	The key figure is used to follow up the percentage of net sales from operations that remains to cover interest payments and tax and to generate a profit after the company's costs have been paid

Key financial figures	Definition and calculation	Purpose
Operating cash flow	Total cash flow from operating activities excluding tax, net financial items and items affecting comparability, as well as cash flow from investing activities excluding acquisi tions and divestments of operations	This key figure shows cash flow from the company's operations, excluding company acquisitions, company divestments, funding, tax and items affecting comparability and is used to follow up whether the company is
	Adjusted EBITDA + Changes in working capi tal + Cash flow from investing activities excl. acquisitions and divestments of subsidiaries	able to generate a sufficiently positive cash flow to be able to maintain and expand its operations
Free cash flow	Total cash flow from operating activities and cash flow from investing activities excluding acquisitions and divestments of operations	This key figure shows cash flow from opera ting activities including cash flow from investing activities excluding acquisitions
	Cash flow from operating activities + Cash flow from investing activities excluding acquisition and sales of subsidiaries	and divestments of operations and is used because it is a relevant measure for investors to be able to understand the Group's cash flow from operating activities
Cash conversion (%)	Cash conversion as a percentage is defined as operating cash flow adjusted for cash flow from investing activities related to increased capacity/growth divided by EBITDA	This key figure is used as an efficiency measurement showing he proportion of a company's profit that is converted to cash
	Operating cash flow adjusted for cash flow from investing activities related to increased capacity/EBITDA
Net debt	The Group's interest-bearing liabilities exclu ding pension provisions adjusted for cash and cash equivalents	This key figure is a measurement of the company's debt/equity ratio and is used by the company to assess opportunities to meet
	Interest-bearing liabilities - cash and cash equivalents	its financial undertakings
Net debt/Adjusted EBITDA	Net debt/Adjusted EBITDA is a measurement of the debt/equity ratio that is defined as the closing balance for net debt in relation to adjusted EBITDA.	This key figure is used to monitor the level of the company's indebtedness to ensure that financial covenants are met.
	Net debt/adjusted EBITDA
Debt/equity ratio	The debt/equity ratio shows a company's financial capacity	The key figure is used to monitor the pro portion of equity and debt that is used to
	Interest-bearing liabilities/Shareholders'' equity	finance various parts of a company's operations
Equity/assets ratio (%)	The equity/assets ratio is used to show the proportion of assets that is financed by equity	This key figure shows the proportion of the balance sheet total that is financed by equity and it enables an analysis of the company's
	Shareholders'' equity/Balance sheet total	long-term financial strength and ability to withstand losses
Return on equity (%)	The return on equity shows the company's return on the capital provided by the owners	This key figure is used to show the return that is generated on the capital invested by the
	Profit for the period/Equity (average equity at the beginning and end of the period)	shareholders in the company

Summary report on quality in the third quarter of 2017

• Ambea's integration project 140 new languages- and caretaker trainees
• Vardaga employees awarded the White Guide prize for Senior Meal of the Year
• Vardaga awarded the Design Prize for our residential concept after the end of the quarter
• The number of deviations and serious deviations declined compared with the preceding quarter.
• Three and two Lex Sarah reports, respectively, for Vardaga and Nytida.
• Five separate complaints/reports of care deficiencies reported to the Health and Social Care Inspectorate (IVO), all concerning Vardaga.
• IVO conducted 17 supervisions/inspections: two at Vardaga and 13 at Nytida.

More information: ambea.com/quality-sustainability