Ambea — Earnings Release 2018

Nov 13, 2018

Continued positive growth and profitability trend. Strategic acquisition of Aleris Care

Third quarter July-September

• Net sales rose 4 per cent to SEK 1,541 million (1,488)
• Operating profit (EBIT) rose 9 per cent to SEK 184 million (169)
• EBITA increased 11 per cent to SEK 205 million (184), corresponding to a margin of 13.3 per cent (12.4)
• Adjusted EBITA, excluding items affecting comparability, increased 12 per cent to SEK 205 million (183). The adjusted EBITA margin was 13.3 per cent (12.3)
• During the quarter, items affecting comparability amounted to SEK 0 million (-1).
• Net profit for the period totalled SEK 128 million (119)
• Earnings per share were SEK 1.89 (1.75) before and after dilution
• Operating cash flow was SEK 78 million (57)
• Free cash flow totalled SEK 54 million (49)

First nine months January-September

• Net sales rose 4 per cent to SEK 4,526 million (4,352)
• Operating profit (EBIT) rose 10 per cent to SEK 365 million (331)

• EBITA increased 13 per cent to SEK 423 million (374), corresponding to a margin of 9.3 per cent (8.6)

• In the preceding year, EBITA and adjusted EBITA were positively impacted by SEK 18 million attributable to a refund of previously paid pension premiums

• Adjusted EBITA, excluding items affecting comparability, amounted to SEK 427 million (406). The adjusted EBITA margin was 9.4 per cent (9.3)
• Items affecting comparability amounted to SEK -4 million (-32), related to previously divested personal assistance operations
• Net profit for the period totalled SEK 263 million (172)
• Earnings per share were SEK 3.88 (2.58) before and after dilution
• Operating cash flow was SEK 434 million (254)
• Free cash flow totalled SEK 357 million (153)

Significant events

• There were no significant events during the quarter
• After the end of the quarter, agreements were entered into to acquire all of Aleris' care operations in Sweden, Norway and Denmark

SEK million	2018 Jul–Sep	2017 Jul–Sep	Change %	2018 Jan–Sep	2017 Jan–Sep	Change %	2017/2018 Rolling 12 months	2017 Jan–Dec	Change %
Net sales	1,541	1,488	4	4,526	4,352	4	5,990	5,816	3
EBITA	205	184	11	423	374	13	510	461	11
Operating margin, EBITA (%)	13.3	12.4		9.3	8.6		8.5	7.9
Adjusted EBITA	205	183	12	427	406	5	520	498	4
Operating margin, adjusted EBITA (%)	13.3	12.3		9.4	9.3		8.7	8.6
EBIT	184	169	9	365	331	10	436	402	8
Operating margin, EBIT (%)	11.9	11.4		8.1	7.6		7.3	6.9
Profit after tax	128	119	8	263	172	53	316	226	40
Earnings per share before dilution, SEK	1.89	1.75	8	3.88	2.58	51	4.69	3.37	39
Earnings per share after dilution, SEK	1.89	1.75	8	3.88	2.58	51	4.68	3.37	39
Operating cash flow	78	57	37	434	254	71	639	459	39
Free cash flow	54	49	10	357	153	133	536	332	61

Consolidated key figures

For definitions of key figures, see Note 9

Comments from Fredrik Gren, President and CEO

Continued positive growth and profitability trend. Strategic acquisition of Aleris Care

Like the preceding quarter, the third quarter showed strong profitability and growth. The adjusted EBITA margin improved one percentage point year-on-year, and Ambea continued to deliver positive growth in own management. The acquisition of Aleris' care operations will broaden our growth platform, and make us the largest care provider in Sweden, Norway and Denmark with a strong pipeline of own management beds.

In the third quarter, net sales amounted to SEK 1,541 million (1,488). Own Management accounted for 69 per cent (65). Adjusted EBITA rose 12 per cent year-on-year to SEK 205 million (183).

Net sales rose 4 per cent during the quarter, positively impacted by acquisitions and start-ups under own management. Adjusted for the divestment of personal assistance operations in 2017, total net sales rose 5 per cent. Own Management grew 10 per cent, while volumes in Contract Management were lower year-on-year as expected. The high level of growth for Heimta continued, linked to previous acquisitions and start-ups. Klara's sales declined year-on-year, largely the result of lower demand for temporary doctors and nurses.

Adjusted EBITA increased year-on-year. We saw a continued positive trend in elderly care, driven by high occupancy rates and low start-up costs. In Nytida, the high rates of occupancy in LSS units and HVB units for adults continued, while lower rates of occupancy for children and youth had a negative impact on earnings. Heimta showed stable profitability due to growing occupancy rates in already established units.

During the quarter, Nytida opened 48 new placements and 10 new beds. Heimta opened one new operation with two beds. At the end of the quarter, the total number of beds and placements under construction or for which leases had been signed was 1,025, representing 18 per cent of the number of beds under own management.

The previously announced adjustment of central costs that began in the second quarter of 2018 proceeded as planned. No restructuring costs were charged to earnings in the third quarter. The assessment that the cost-reduction programme will achieve full effect of 30 MSEK in 2019 remains firm.

The acquisition of Aleris' care operations will make us the largest care company in the Nordic region pending approval by the relevant competition authorities. A strong pipeline of new beds is increasing our capacity for organic growth under own management. The acquisition offers major opportunities for increased profitability in Aleris' care units across Sweden, Norway and Denmark through operational improvements and direct cost synergies according to our operational model.

In the third quarter, Ambea's efforts to promote gender equality were rewarded with a nomination for the 2018 AllBright Award, while Vardaga received the White Guide Senior Meal Award for the second consecutive year.

Following the elections in Sweden, 225 of Sweden's 290 municipalities now have a political majority with a positive view of privately-provided welfare services, compared to before the election when the equivalent number amounted to approximately 140 municipalities. We are therefore expecting stronger support for freedom of choice in care services, and that municipalities increasingly choose private alternatives to meet the growing need for care.

During the year, we have laid the foundation for increased growth by establishing a large own management pipeline and by undertaking several minor acquisitions. Following the acquisition of Aleris' care operations, we are now looking forward to using our operational model and growth strategy in more geographies and segments.

Fredrik Gren

Group

Third quarter

Net sales

Net sales rose 4 per cent to SEK 1,541 million (1,488).

Net sales in Own Management amounted to SEK 1,065 million (969), up 10 per cent compared with the year-earlier period, due to acquisitions and start-up units. The personal assistance operations, which were divested in November 2017, contributed SEK 18 million in the year-on-year period. Adjusted for the subsequent decline, net sales growth in Own Management was 12 per cent.

Net sales in Contract Management amounted to SEK 399 million (438). The year-on-year decline in sales was attributable to contracts terminated in 2017 and 2018.

Net sales in Staffing declined 5 per cent to SEK 77 million (81).

Earnings

EBIT rose 9 per cent to SEK 184 million (169), corresponding to a margin of 11.9 per cent (11.4).

EBITA rose 11 per cent to SEK 205 million (184). The EBITA margin was 13.3 per cent (12.4). EBITA for the quarter was not impacted by any items affecting comparability, while the third quarter of 2017 was charged with SEK -1 million. In the third quarter, an earn-out provision of SEK 4 million related to the acquisition of Varphaugen in Norway was reversed and recognised in other operating income, which improved EBITA by the corresponding amount. During the quarter, capital gains on property sales amounted to SEK 1 million, which also had a positive impact on earnings.

The adjustment of central costs that began in the second quarter and is estimated to generate SEK 30 million in cost savings with full effect from 2019 is progressing as planned. No restructuring costs were charged to the third quarter. For full-year 2018, the impact of these measures on earnings is expected to be marginal.

Adjusted EBITA for the quarter rose 12 per cent to SEK 205 million (183). The earnings improvement is attributable to a higher share of operations under own management, favourable occupancy rates and cost control in established units.

The adjusted EBITA margin was 13.3 per cent (12.3).

Net financial items

During the quarter, net financial items amounted to SEK -16 million (-12). The change was mainly due to accrual effects.

Income tax

Tax expense for the period was SEK 40 million (38), corresponding to a tax rate of 24 per cent (24).

Net profit for the period

Profit for the period totalled SEK 128 million (119), representing earnings per share of SEK 1.89 (1.75) before and after dilution.

Distribution of net sales

Jul–Sep		Vardaga			Nytida			Heimta			Klara			Group
SEK million	2018	2017	Change %	2018	2017	Change %	2018	2017	Change %	2018	2017	Change %	2018	2017	Change %
Own Management	282	257	10	641	615	4	142	97	46	–	–	–	1,065	969	10
Contract Management	275	317	-13	124	121	2	–	–	–	–	–	–	399	438	-9
Staffing	–	–	–	–	–	–	–	–	–	77	81	-5	77	81	-5

Own Management – total in operation, including acquisitions

		OB		Quarterly change	CB
	Units	Beds/Placements	Units	Beds/Placements	Units	Beds/Placements
Vardaga	27	1,343	–	–	27	1,343
Nytida – beds	1981	1,9081	1	6	199	1,914
Nytida – placements	761	2,2271	–	51	76	2,278
Heimta	59	189	-1	-3	58	186
Total	360	5,667	–	54	360	5,721

Own Management – pipeline

	OB	Opened during the quarter	New during the quarter2	CB
Vardaga	880	–	–	880
Nytida – beds	953	10	36	121
Nytida – placements	483	48	21	21
Heimta	5	2	–	3
Total	1,028	60	57	1,025

Contract Management – pipeline

		Allocation decisions during the quarter4
	Units	Beds	Annual revenue	Started-up/terminated during the quarter Annual revenue5
Won	4	21	28	9
Renewed confidence	1	10	4	–
Lost	–	–	–	78
Contracts retaken to be run under municipal auspices	–	–	–	–

1 Opening balance has been adjusted due to the reclassification of acquired Stöd och Resurs placements and an increase in the number of beds and placements before the beginning of the quarter.

2 New refers to the total sum of signed contracts and units under construction. For more information about expected openings, refer to Own Management – Pipeline under ambea.com/investor-relations/

3 Opening balance was adjusted by 7 beds and 17 placements.

4 Allocation decisions during the quarter refer to decisions received by Ambea during the quarter regarding contracts that are to be handed back or started up. The period of time between allocation and handback/start-up ranges from a couple of months to one year. About 9-12 months for Vardaga, and 6-9 months for Nytida.

5 Shows the contracts started up or handed back during the quarter and their annual revenue.

Group

January – September

Net sales

Net sales rose 4 per cent to SEK 4,526 million (4,352).

Net sales in Own Management amounted to SEK 3,085 million (2,778), up 11 per cent compared with the year-earlier period, due to acquisitions and start-up units. The personal assistance operations, which were divested in November 2017, contributed net sales of SEK 55 million in the year-on-year period. Adjusted for the subsequent decline, net sales growth was 13 per cent.

Net sales in Contract Management amounted to SEK 1,203 million (1,331). The yearon-year decline in sales was attributable to contracts terminated in 2017 and 2018.

Net sales in Staffing amounted to SEK 238 million (243), down 2 per cent.

Earnings

EBIT rose 10 per cent to SEK 365 million (331), corresponding to a margin of 8.1 per cent (7.6).

EBITA rose 13 per cent to SEK 423 million (374). The EBITA margin was 9.3 per cent (8.6). EBITA for the period was impacted by items affecting comparability of SEK -4 million (-32), attributable to the divestment of personal assistance operations in the fourth quarter of 2017. The reversal of an earn-out provision had a positive impact of SEK 4 million on earnings for the period. In May 2017, an amount of SEK 18 million was refunded for previously paid pension premiums, which had a positive effect on the comparative period.

Adjusted EBITA for the period was SEK 427 million (406). Acquisitions, start-up units and higher productivity had a positive impact on earnings. The trend in Contract Management and Children & Youth operations remained negative, while increased overheads, combined with restructuring costs of SEK 8 million, were charged to earnings.

The adjusted EBITA margin was 9.4 per cent (9.3).

Net financial items

Net financial items amounted to SEK -28 million (-103) for the period. The change was due to more attractive financing terms obtained in the second quarter of 2017 and the new commercial paper programme issued in December 2017. When the new financing arrangement was introduced in 2017, SEK 49 million was expensed as financing fees in relation to previous financing arrangements.

Income tax

Tax expense for the period was SEK 74 million (56), corresponding to a tax rate of 22 per cent (25). Following the Riksdag's decision to cut corporate tax rates, deferred tax assets and liabilities were adjusted and generated a positive impact of SEK 4 million. The adjustment comprises SEK -1 million related to lower tax receivable for loss carryforwards, and SEK 5 million related to lower tax due for capitalised customer relationships.

Net profit for the period

Profit for the period totalled SEK 263 million (172), representing earnings per share of SEK 3.88 (2.58) before and after dilution.

Net sales by segment January – September 2018

Net sales by contract model January – September 2018

Distribution of net sales

Net sales by segment	2018 Jan–Sep	2017 Jan–Sep	Net sales by contract model	2018 Jan–Sep	2017 Jan–Sep
Vardaga	37%	39%	Own Management	68%	64%
Nytida	49%	49%	Contract Management	27%	30%
Heimta	9%	6%	Staffing	5%	6%
Klara	5%	6%	Total	100%	100%
Total	100%	100%

Distribution of net sales

Jan–Sep		Vardaga			Nytida			Heimta			Klara			Group
SEK million	2018	2017	Change %	2018	2017	Change %	2018	2017	Change %	2018	2017	Change %	2018	2017	Change %
Own Management	832	756	10	1,858	1,747	6	395	275	44	–	–	–	3,085	2,778	11
Contract Management	832	951	-13	371	380	-2	–	–	–	–	–	–	1,203	1,331	-10
Staffing	–	–	–	–	–	–	–	–	–	238	243	-2	238	243	-2
Total	1,664	1,707	-3	2,229	2,127	5	395	275	44	238	243	-2	4,526	4,352	4

Cash flow

SEK million	2018 Jul–Sep	2017 Jul–Sep	2018 Jan–Sep	2017 Jan–Sep	2017/2018 Rolling 12 months	2017 Jan–Dec
Cash flow from operating activities before changes in working capital	191	182	388	289	483	383
Cash flow from changes in working capital	-137	-116	-15	-106	48	-42
From operating activities	54	66	373	183	531	342
Cash flow from investing activities (excluding acquisitions and investments and divestments in financial assets)	0	-17	-16	-30	5	-10
Free cash flow	54	49	357	153	536	332

Free cash flow for the quarter amounted to SEK 54 million (49). The increase in free cash flow compared with the year-earlier period was mainly due to improved cash flow from investing activities. Increased operating receivables contributed SEK -14 million (-35), and change in operating liabilities contributed SEK -123 million (-80).

Free cash flow amounted to SEK 357 million (153) for the interim period. The increase in free cash flow was mainly attributable to higher operating profit and improved working capital tied-up. Changes in operating receivables contributed SEK 31 million (-37), and changes in operating liabilities contributed SEK -46 million (-69).

Financial position

SEK million	30 Sep 2018	30 Sep 2017	31 Dec 2017
Net interest-bearing liabilities	2,153	2,027	2,015
Equity/assets ratio (%)	45.8	41.6	44.5
Net debt/Rolling 12 months adjusted EBITDA	3.7	3.6	3.7

For definitions of key figures, see Note 9

At 30 September 2018, net debt amounted to SEK 2,153 million (2,027), or 3.7 times 12 months' adjusted EBITDA. The increase in net debt was due to the financing of acquisitions.

At the balance-sheet date, equity amounted to SEK 2,684 million, compared with SEK 2,480 million on 31 December 2017.

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 with approximately 70 nursing homes across the country, where 6,500 employees are focused on quality of life and security for every individual.

Quarter

Vardaga's net sales declined 3 per cent year-on-year to SEK 557 million (574).

Net sales in Own Management amounted to SEK 282 million (257), an increase of 10 per cent, mainly due to start-up units and a higher rate of occupancy in both established and start-up units.

Net sales in Contract Management amounted to SEK 275 million (317). The decline was attributable to contracts terminated in 2017 and 2018. In the third quarter, no new decisions were announced in regard to submitted tenders. One contract with annual sales of SEK 15 million was concluded during the quarter.

EBITA rose 14 per cent to SEK 57 million (50). The earnings improvement was mainly attributable to high rates of occupancy in established units and low start-up costs for new Own Management units. The impact on Contract Management was negative compared with the year-earlier period.

The EBITA margin was 10.2 per cent (8.7).

January-September period

Vardaga's net sales declined 3 per cent to SEK 1,664 million (1,707).

Net sales in Own Management amounted to SEK 832 million (756), an increase of 10 per cent, mainly the result of higher occupancy rates in start-up units. Net sales in Contract Management amounted to SEK 832 million (951). The 13-per cent decline was due to contracts won not fully offsetting contracts terminated.

At SEK 125 million (124), EBITA was in line with the preceding year. In 2017, earnings were positively impacted by a refund of approximately SEK 18 million for pension premiums paid. Start-up units and changes in Contract Management's contract mix had a positive impact on earnings compared with the year-earlier period.

The EBITA margin was 7.5 per cent (7.3).

Vardaga's operating margin (EBITA), RTM %

SEK million	2018 Jul–Sep	2017 Jul–Sep	Change %	2018 Jan–Sep	2017 Jan–Sep	Change %	2017/2018 Rolling 12 months	2017 Full-year	Change %
Net sales	557	574	-3	1,664	1,707	-3	2,217	2,260	-2
EBITA	57	50	14	125	124	1	155	154	1
Operating margin, EBITA (%)	10.2	8.7		7.5	7.3		7.0	6.8

Own Management – total in operation

	OB		Quarterly change		CB
	Units	Beds	Units	Beds	Units	Beds
Beds	27	1,343	–	–	27	1,343

Own Management – pipeline

			Quarterly change
	OB	Opened during the quarter	New during the quarter6	CB
Beds	880	–	–	880

Contract Management – pipeline

		Allocation decisions during the quarter7	Started-up/terminated during the quarter
	Units	Beds	Annual revenue	Annual revenue 8
Won	–	–	–	–
Renewed confidence	–	–	–	–
Lost	–	–	–	15
Contracts retaken to be run under municipal auspices	–	–	–	–

6 New refers to the total sum of signed contracts and units under construction. For more information about expected openings, refer to Own Management – Pipeline under ambea.com/investor-relations/

7 Allocation decisions during the quarter refer to decisions received by Ambea during the quarter regarding contracts that are to be handed back or started up. The period of time between allocation and handback/start-up varies. About 9–12 months for Vardaga, and 6–9 months for Nytida.

8 Shows the contracts started up or handed back during the quarter and their annual revenue.

Nytida

Nytida provides support and care for children, young people and adults with lifelong disabilities and psychosocial problems. Nytida offers residential facilities, day services and support for individuals, families and schools at approximately 375 units throughout Sweden. Based on proven models and in-depth knowledge, our 7,000 employees work to strengthen the individual's ability to live an independent life.

Quarter

Net sales rose 4 per cent to SEK 765 million (736).

Net sales in Own Management amounted to SEK 641 million (615), up 4 per cent. Growth was attributable to acquisitions and high rates of occupancy in LSS and HVB Adult units, while a weaker trend for Children & Youth operations had a negative impact. The personal assistance operations divested in the preceding year contributed net sales of SEK 18 million in the second quarter of 2017. Adjusted for the divestment, net sales in Own Management rose 7 per cent.

Net sales in Contract Management amounted to SEK 124 million (121). During the quarter, Nytida secured new contracts corresponding to an annual volume of SEK 28 million, and retained contracts corresponding to an annual volume of SEK 4 million.

EBITA rose 2 per cent to SEK 128 million (126). Acquisitions, combined with LSS and HVB Adult operations, made a positive contribution during the quarter, while Children & Youth operations showed a weaker trend year-on-year.

The EBITA margin was 16.7 per cent (17.1).

Kung Saga, a special needs upper secondary school with an aesthetic focus, was acquired at the end of the year. For more information, see Note 5.

January-September period

Net sales rose 5 per cent to SEK 2,229 million (2,127).

Net sales in Own Management amounted to SEK 1,858 million (1,747), an increase of 6 per cent, mainly due to acquisitions. The personal assistance operations, which were divested in November 2017, contributed net sales of SEK 53 million in the yearon-year period. Adjusted for the subsequent decline, net sales growth was 10 per cent. Net sales in Contract Management amounted to SEK 371 million (380). The 2-per cent decline was due to contracts won not fully offsetting contracts terminated.

EBITA rose 5 per cent to SEK 284 million (270).

The EBITA margin was 12.7 per cent (12.7).

Stöd & Resurs was acquired in May 2018, comprising residential facilities, day services and short-term accommodation for children and adults with neuropsychiatric disabilities. For more information, see Note 5.

SEK million	2018 Jul–Sep	2017 Jul–Sep	Change %	2018 Jan–Sep	2017 Jan–Sep	Change %	2017/2018 Rolling 12 months	2017 Full-year	Change %
Net sales	765	736	4	2,229	2,127	5	2,966	2,864	4
EBITA	128	126	2	284	270	5	364	350	4
Operating margin, EBITA (%)	16.7	17.1		12.7	12.7		12.3	12.2

Nytida's operating margin (EBITA), RTM %

Nytida

Own Management – total in operation

	Units9	OB Beds/ Placements9	Units	Quarterly change Beds/ Placements	CB Units	Beds/ Placements
Beds	198	1,908	1	6	199	1,914
Placements	76	2,227	–	51	76	2,278

Own Management – pipeline

	Quarterly change
	OB10	Opened during the quarter	New during the quarter11	CB
Beds	95	10	36	121
Placements	48	48	21	21

Contract Management – pipeline

	Allocation decisions during the quarter12	Started-up/terminated during the quarter
	Units	Beds	Annual revenue	Annual revenue 13
Won	4	21	28	9
Renewed confidence	1	10	4	–
Lost	–	–	–	63
Contracts retaken to be run under municipal auspices	–	–	–	–

9 Opening balance has been adjusted due to the reclassification of acquired Stöd och Resurs placements and an increase in the number of beds and placements before the beginning of the quarter.

10 Opening balance was adjusted by 7 beds and 17 placements.

11 New refers to the total sum of signed contracts and units under construction. For more information about expected openings, refer to Own Management – Pipeline under ambea.com/investor-relations/

12 Allocation decisions during the quarter refer to decisions received by Ambea during the quarter regarding contracts that are to be handed back or started up. The period of time between allocation and handback/start-up varies. About 9–12 months for Vardaga, and 6–9 months for Nytida.

13 Shows the contracts started up or handed back during the quarter and their annual revenue.

Heimta

Heimta provides support and residential facilities for disability and psychiatric care in Norway. The operations have about 750 employees and offer residential facilities, user-controlled personal assistance (BPA), rehabilitation services, temporary relief for relatives and testing in large parts of Norway.

Quarter

Net sales rose 46 per cent to SEK 142 million (97), attributable to acquisitions and higher rates of occupancy in start-up units. Adjusted for currency effects (SEK 8 million), the year-on-year increase was 38 per cent. At the end of the second quarter of 2017, a number of contracts in Vitale were terminated, generating a negative year-on-year impact of SEK 5 million for the quarter.

EBITA was SEK 21 million (8), representing a margin of 14.8 per cent (8.2). The increase of SEK 13 million corresponds to 163 per cent which, adjusted for currency effects (SEK 1 million), amounts to 133 per cent year-on-year. During the quarter, an earn-out provision of SEK 4 million related to the acquisition of Varphaugen was reversed, and improved EBITA in the corresponding amount. Start-up costs attributable to new Own Management units were charged to earnings for the quarter, while acquisitions made a positive contribution.

January-September period

Net sales rose 44 per cent to SEK 395 million (275), which was the result of acquisitions. Adjusted for currency effects (SEK 11 million), the year-on-year increase was 40 per cent. At the end of the second quarter of 2017, a number of contracts in Vitale were terminated, generating a negative year-on-year impact of SEK 30 million for the period.

EBITA was SEK 29 million (19), representing a margin of 7.3 per cent (6.9). Adjusted for currency effects (SEK 0 million), EBITA was SEK 29 million. Start-up costs attributable to new Own Management units were charged to earnings at the beginning of 2018, while acquisitions made a positive contribution.

As of March 2018, all operations are conducted under the Heimta brand.

SEK million	2018 Jul–Sep	2017 Jul–Sep	Change %	2018 Jan–Sep	2017 Jan–Sep	Change %	2017/2018 Rolling 12 months	2017 Full-year	Change %
Net sales	142	97	46	395	275	44	489	369	33
EBITA	21	8	163	29	19	53	29	19	53
Operating margin, EBITA (%)	14.8	8.2		7.3	6.9		5.9	5.1

Own Management – total in operation

	OB		Quarterly change		CB
	Units	Beds	Units	Beds	Units	Beds
Total in operation	59	189	-1	-3	58	186

Own Management – pipeline

	Quarterly change
	OB		Opened during the quarter	New during the quarter14	CB
Beds		5	2	–		3

14 New refers to the total sum of signed contracts and units under construction. For more information

about expected openings, refer to Own Management – Pipeline under ambea.com/investor-relations/

Klara

Klara is one of Sweden's leading providers of staffing for health and social care. Klara is an authorised staffing company and is ISO certified. Based on personalised service and long-standing experience of the industry, Klara provides the best staffing solutions for both public and private clients. Klara mediates thousands of assignments every year and conducts operations throughout Sweden.

Quarter

Net sales declined 5 per cent to SEK 77 million (81). This trend was largely due to lower year-on-year demand for temporary doctors and nurses.

EBITA was SEK 5 million (6), representing a margin of 6.5 per cent (7.4). The lower demand for temporary doctors had a negative impact, while Klara Team, which offers qualified oncall services on a subscription basis, had a positive impact and partly offset the negative trend during the quarter.

January-September period

Net sales declined 2 per cent to SEK 238 million (243). The weaker trend for temporary doctors and nurses was partly offset by acquisitions, which contributed net sales of SEK 15 million during the nine-month period.

EBITA was SEK 12 million (10), representing a margin of 5.0 per cent (4.1). Acquisitions and a positive trend for Klara Team made a positive contribution. Temporary doctors had a negative impact.

On 4 January 2018, Ambea acquired Elevhälsan, which is specialised in staffing solutions for student healthcare services in comprehensive and secondary schools.

In June, the Supreme Administrative Court issued a decision regarding VAT liability for staffing agencies supplying temporary care staff. For Klara, these new guidelines from the Swedish Tax Agency entail that the supply of temporary care staff to municipalities, counties and private social care companies will be subject to VAT from 1 July 2019. Ambea assesses that this regulatory change will lead to new business models, probably lower sales, and also have a slightly negative effect on Klara's earnings. Parts of the previously announced administrative cost-reduction programme addresses specifically the need to adapt cost structure within the staffing operations.

As of March 2018, all operations have been conducted under the Klara brand.

SEK million	2018 Jul–Sep	2017 Jul–Sep	Change %	2018 Jan–Sep	2017 Jan–Sep	Change %	2017/2018 Rolling 12 months	2017 Full-year	Change %
Net sales	77	81	-5	238	243	-2	317	322	-2
EBITA	5	6	-17	12	10	20	14	12	17
Operating margin, EBITA (%)	6.5	7.4		5.0	4.1		4.4	3.7

Other events

Incentive programmes

The Annual General Meeting on 23 May 2018 resolved to introduce two new long-term incentive programmes: (i) a warrant programme for Group management and (ii) a matching share plan for certain employees in the Ambea Group.

For more information about the programmes, refer to the Interim Report for the second quarter or information from the 2018 AGM at ambea.com/investor-relations/corporate-governance/ shareholders-meeting/

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 and volume of transactions remained unchanged during the period compared with the preceding year.

Events after the end of the quarter

Acquisition of Aleris' care operations

On 15 October, Ambea entered into an agreement to acquire all of Aleris' care operations in Norway, Sweden and Denmark for a purchase price of SEK 2.6 billion on a debt-free cash-free basis (enterprise valuation). The acquisition will make Ambea the largest care company in the Nordic region, with operations in Sweden, Norway and Denmark¹⁵.

The transaction is subject to approval by the relevant competition authorities and is expected to be completed by the first quarter of 2019, but no later than the second quarter of 2019.

Ambea intends to finance the transaction with existing credit facilities and new secured bank loans. The transaction is not therefore subject to a financing contingency. To repay some of this financing and reduce Ambea's debt in line with the company's long-term financial targets, Ambea intends to propose that a general meeting resolve on a new issue of shares to existing shareholders, to raise approximately SEK 1.2 billion. Ambea's major shareholders – ACTR Holding AB and ACTOR SCA, which are jointly controlled by KKR and Triton, and in combination represent approximately 50.1 per cent of the shares and voting rights in Ambea – have announced their intention to vote in favour of a rights issue at a general meeting and to subscribe for their respective pro rata shares. The rights issue is expected to be approved and will be implemented in the first half of 2019.

The acquisition is expected to generate both direct cost synergies and opportunities for operational improvements. The total amount of direct cost synergies is an estimated SEK 90 million per year, of which half is expected to be achieved in 2019, and the remaining portion in 2020. Identified operational improvements amount to SEK 30 million, and are expected to be achieved in 2020. The transaction is expected to generate total transaction costs of SEK 35 million, with expected recognition in the fourth quarter of 2018, and total integration costs of SEK 100 million, of which the majority are expected to be recognised during 2019.

For the 12-month period of 1 July 2017-30 June 2018, the new Group's sales amounted to approximately SEK 10,602 million16, of which Ambea accounted for SEK 5,937 million and Aleris' care operations for approximately SEK 4,665 million17. In the corresponding period, adjusted EBITA for the new Group was approximately SEK 644 million¹⁸, of which adjusted EBITA amounted to SEK 498 million for Ambea and approximately SEK 146 million for Aleris' care operations17 (reported SEK 96 million).

Tax audit

After the end of the quarter, Ambea received a reassessment notice from the Swedish Tax Agency regarding VAT for prior years in Ambea AB (publ) amounting to SEK 12 million, including tax surcharges. These were mainly related to VAT expenses in connection with IPO fees in 2017. The company is now analysing the Swedish Tax Agency's proposed decision with the intention of lodging an appeal.

VAT for the supply of temporary care staff

On 25 October, the Swedish Tax Agency announced its position on VAT treatment for the supply of temporary care staff. Under the new rule, the supply of temporary care staff to municipalities, counties and private social care companies will be subject to VAT. This rule is based on a decision handed down by the Supreme Administrative Court in June 2018. The Swedish Tax Agency will apply the new rule from 1 July 2019. For Klara, this means that the supply of temporary care staff to external private social care companies, municipalities and counties will be subject to VAT. This regulatory change is expected to result in lower sales from staffing operations but have limited negative earnings impact on Group level.

units, units being phased out and items affecting comparability.

¹⁵ Based on financial statements for 2017, adjusted for significant acquisitions and divestments. Attendo adjusted for the divestment of the Finnish healthcare operations and the acquisition of

Mikeva. Estimated market in Denmark, excluding personal assistance. 16 Proforma based on summation of Ambea's net sales and Aleris' net sales, adjusted for discontinued

¹⁷ Adjusted for discontinued units, units being phased out and items affecting comparability

¹⁸ Proforma based on summation of Ambea's adjusted EBITA and Aleris' EBITA, adjusted for discontinued units, units being phased out and items affecting comparability.

Seasonal variations

Ambea's operating profit is affected by seasonal variations, weekends and public holidays.

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

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

Employees

The average number of full-time employees (FTE) during the interim period was 7,456 (7,245). This interim report uses an improved methodology to calculate the average number of employees during the interim period and for the comparative year, see Note 1.

Parent Company

The Parent Company's earnings pertain to Group-wide costs. During the quarter, Parent Company net sales amounted to SEK 8 million (6). The quarterly results totalled SEK -6 million (-10).

The improved performance was mainly the result of transferring the Group account to the Parent Company, which generated SEK 10 million (0) in increased internal interest income.

Risks and uncertainties

Ambea's operations and performance are impacted by demographic, economic and political factors, as well as the general trend for the care services market. Changes in these factors may lead to lower demand for Ambea's care services, which could have a negative impact on the company. Ambea works continuously to monitor, assess and take action to mitigate risk. Risk management is based on sophisticated systems, delegation of responsibilities and procedures that are firmly secured in the organisation.

Demand for Ambea's care services is largely impacted by legislation and policy decisions, since municipalities are both customers and purchasers. Ambea's development therefore depends on the focus of each municipality on social care. Risks associated with freedom of choice may mean that Ambea is unable to perform the specific service at the set price, or that not enough care recipients choose the company's residential facilities or placements. There is also a risk that in public procurements, the company will not win new contracts or have its existing contracts renewed.

Limitations on the ability to conduct private care services for profit, and stricter licensing and supervision rules could lead to restrictions of Ambea's business model. Ambea is thus affected by, and must observe, changes and interpretations of new and current legislation, ordinances, regulations and practices. Violations or failure to comply with these could result in the company being subject to fees, fines, penalties or other sanctions. Such factors could also lead to restructuring measures and costs.

The quality of our operations is Ambea's principal priority. In addition to rigorous and systematic internal quality control, comprehensive monitoring and quality checks are carried out by the authorities, and permits are required for conducting operations. Should the company be unable to meet contractual and quality requirements, it could become liable to pay fines, damages, contractual penalties, or ultimately lose the customer contracts and/or permits required to conduct its business. Since Ambea's operations are also dependent on permits, the loss of, or delays in receiving, permits could have a material adverse effect on 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 provision of care services are managed by the management of each company at different levels, taking into account the procedures and governance principles applied by the Group. The operations are monitored in co-operation with clients and customers, and by conducting 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.

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, 12 November 2018

	Lena Hofsberger Chair of the Board
Anders Borg	Lars Gatenbeck	Thomas Hofvenstam
Ingrid Jonasson Blank	Gunilla Rudebjer	Mikael Stöhr
Patricia Briceño Employee representative	Charalampos Kalpakas Employee representative	Magnus Sällström Employee representative

Fredrik Gren President and CEO

Presentation of the third quarter of 2018

Ambea will hold a presentation for the financial market, with the possibility to participate by teleconference, at 10:00 a.m. CET on Tuesday, 13 November 2018. The presentation will be held in English, and be available as a webcast at www.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.

Phone numbers:

Sweden:	+46 (0)8 5033 6574
UK:	+44 (0)330 336 9105
US:	+1 323-794-2094

Contact

Jacob Persson, Head of Investor Relations, telephone +46 (0)708 64 07 52

Forthcoming report occasions

Q4 interim report and year-end report for 2018	13 February 2019
Annual Report	10 April 2019
Annual General Meeting	16 May 2019
Q1 interim report	10 May 2019
Q2 interim report	20 August 2019
Q3 interim report	8 November 2019

Ambea is active in social care and has approximately 15,000 employees. We offer disability services, individual and family care, and care of the elderly with a focus on residential facilities 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. Total revenue and adjusted EBITA for the 2017 financial year amounted to SEK 5,816 million and SEK 498 million, respectively. The company was founded in 1996, is headquartered in Solna and listed on Nasdaq Stockholm.

Auditor's review

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

Introduction

We have conducted a limited review of the interim financial information (interim report) for Ambea AB (publ) at 30 September 2018 and for the nine-month period that ended on this date. The Board of Directors and Chief Executive Officer 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, 12 November 2018

Ernst & Young AB

Mikael Sjölander Authorised Public Accountant

Consolidated income statement in summary

SEK million	2018 Jul–Sep	2017 Jul–Sep	2018 Jan–Sep	2017 Jan–Sep	2017/2018 Rolling 12 months	2017 Jan–Dec
OPERATING INCOME
Net sales	1,541	1,488	4,526	4,352	5,990	5,816
Other operating income	18	15	45	43	85	83
Total operating income	1,559	1,503	4,571	4,395	6,075	5,899
OPERATING EXPENSES
Consumables	-46	-45	-135	-135	-181	-182
Other external costs	-291	-273	-898	-843	-1,195	-1,139
Personnel costs	-1,002	-988	-3,067	-3,005	-4,095	-4,033
Depreciation, amortisation and impairment of tangible and intangible assets	-36	-27	-102	-79	-133	-110
Profit/loss from participations in Group companies	–	–	-4	0	-27	-23
Other operating expenses	–	-1	0	-2	-8	-10
Operating expenses	-1,375	-1,334	-4,206	-4,064	-5,639	-5,497
OPERATING PROFIT	184	169	365	331	436	402
Financial income	3	2	5	5	7	7
Financial expenses	-19	-14	-33	-108	-47	-121
Net financial items	-16	-12	-28	-103	-40	-114
PROFIT AFTER NET FINANCIAL ITEMS	168	157	337	228	396	288
PROFIT BEFORE TAX	168	157	337	228	396	288
Tax on net profit for the period	-40	-38	-74	-56	-80	-62
NET PROFIT FOR THE PERIOD	128	119	263	172	316	226
Net profit for the period attributable to shareholders of the Parent Company	128	119	263	172	316	226
Earnings per share before dilution (SEK)	1.89	1.75	3.88	2.58	4.69	3.37
Earnings per share after dilution (SEK)	1.89	1.75	3.88	2.58	4.68	3.37

Consolidated statement of comprehensive income in summary

SEK million	2018 Jul–Sep	2017 Jul–Sep	2018 Jan–Sep	2017 Jan–Sep	2017/2018 Rolling 12 months	2017 Jan–Dec
NET PROFIT FOR THE PERIOD AFTER TAX	128	119	263	172	316	226
OTHER COMPREHENSIVE INCOME, ITEMS NOT TRANSFER ABLE 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 not transferable to profit or loss	–	–	–	–	-2	-2
OTHER COMPREHENSIVE INCOME, ITEMS TRANSFERABLE TO PROFIT OR LOSS
Translation differences	-3	-2	20	-6	14	-12
Hedging of net investments in foreign operations	3	3	-18	6	-12	12
Tax related to net investments in foreign operations	-1	-1	4	-1	2	-3
Other	–	-1	–	0	–	–
Total items transferable to profit or loss	-1	-1	6	-1	4	-3
Total other comprehensive income	-1	-1	6	-1	2	-5
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD	127	118	269	171	318	221
Comprehensive income for the period attributable to shareholders of the Parent Company	127	118	269	171	318	221

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 Note K12 in the company's 2017 Annual Report.

SEK million	2018 Jul–Sep	2017 Jul–Sep	2018 Jan–Sep	2017 Jan–Sep	2017/2018 Rolling 12 months	2017 Jan–Dec
Profit for the period attributable to shareholders of the Parent Company, SEK million	128	119	263	172	316	226
Earnings per share before dilution
Average number of shares, thousands	67,617	67,617	67,617	66,708	67,617	66,937
Earnings per share before dilution, SEK	1.89	1.75	3.88	2.58	4.69	3.37
Earnings per share after dilution
Average number of shares, thousands	67,659	67,634	67,650	66,720	67,648	66,950
Earnings per share after dilution, SEK	1.89	1.75	3.88	2.58	4.68	3.37

Consolidated balance sheet in summary

SEK million	30 Sep 2018	30 Sep 2017	31 Dec 2017
ASSETS
Fixed assets
Goodwill	4,086	3,670	3,774
Customer contracts and customer relations	468	438	466
Other intangible assets	19	19	19
Tangible assets	205	189	201
Non-current receivables from Group companies	–	0	0
Derivative instruments	0	0	0
Deferred tax assets	42	75	76
Non-current receivables	27	21	26
Total fixed assets	4,847	4,412	4,562
Current assets
Inventories	0	0	0
Accounts receivable	647	618	624
Other receivables	58	54	94
Prepaid expenses and accrued income	164	160	157
Cash and cash equivalents	80	471	87
	949	1,303	962
Assets held for sale	69	137	43
Total current assets	1,018	1,441	1,005
TOTAL ASSETS	5,865	5,851	5,567

Consolidated balance sheet in summary – continuation

	30 Sep	30 Sep	31 Dec
SEK million	2018	2017	2017
EQUITY AND LIABILITIES
Equity
Share capital	2	2	2
Other capital contributions	4,965	4,963	4,965
Reserves	6	2	0
Retained earnings, including profit for the year	-2,289	-2,532	-2,487
Total equity attributable to shareholders of the Parent Company	2,684	2,435	2,480
Non-controlling interests	–	–	–
Total equity	2,684	2,435	2,480
Non-current liabilities
Non-current interest-bearing liabilities	465	2,202	710
Other non-interest-bearing liabilities	0	11	4
Pension provisions	7	6	6
Other provisions	0	5	0
Deferred tax liabilities	118	116	124
Total non-current liabilities	590	2,340	844
Current liabilities
Current interest-bearing liabilities	35	296	43
Commercial papers	1,733	–	1,349
Accounts payable	137	161	194
Tax liabilities	84	56	73
Other non-interest-bearing liabilities	78	103	96
Accrued expenses and deferred income	524	460	488
Total current liabilities	2,591	1,076	2,243
TOTAL EQUITY AND LIABILITIES	5,865	5,851	5,567

Consolidated statement of changes in equity in summary

SEK million	2018 Jan–Sep	2017 Jan–Sep	2017 Jan–Dec
Opening balance	2,480	2,067	2,067
Total comprehensive income	269	171	221
Transactions with shareholders
New share issue	–	200	200
Issue expenses	–	-6	-7
Warrants issued	2	2	2
Share buybacks	–	–	-5
Dividend	-68	–	–
Closing balance	2,684	2,435	2,480

Consolidated cash flow statement in summary

SEK million	2018 Jul–Sep	2017 Jul–Sep	2018 Jan–Sep	2017 Jan–Sep	2017/2018 Rolling 12 months	2017 Jan–Dec
OPERATING ACTIVITIES
Profit before tax	168	157	337	228	396	288
Adjustment for non-cash items	32	26	102	100	148	145
	200	183	439	328	544	433
Tax paid	-8	-1	-51	-39	-62	-50
Cash flow from operating activities before changes in working capital	191	182	388	289	483	383
CASH FLOW FROM CHANGES IN WORKING CAPITAL
Change in operating receivables	-14	-35	31	-37	35	-33
Change in operating liabilities	-123	-80	-46	-69	14	-8
Cash flow from operating activities	54	66	373	183	531	342
INVESTING ACTIVITIES
Investment in intangible assets	0	-1	-2	-3	-4	-4
Investment in tangible assets	-2	-27	-20	-55	-31	-66
Divestment of tangible assets	3	10	7	27	40	60
Free cash flow	54	49	357	153	536	332
Acquisition and disposal of shares and participations	-18	-98	-368	-293	-513	-438
Other financial assets	0	0	0	1	0	1
Cash flow from investing activities	-18	-115	-383	-322	-507	-447
Cash flow after investing activities	36	-49	-10	-139	24	-105
FINANCING ACTIVITIES
New loans/Loans raised	118	43	380	2,325	1,691	3,636
Repayment of loan liabilities	-9	-20	-37	-2,229	-1,765	-3,957
Change in revolving credit facility	-147	–	-265	–	-265	–
New share issue	–	–	–	194	–	194
External funds provided	–	–	2	2	2	2
Share buybacks	–	–	–	–	-5	-5
Dividends paid	–	–	-68	–	-68	–
Cash flow from financing activities	-38	23	12	292	-410	-130
CASH FLOW DURING THE PERIOD	-2	-27	2	153	-386	-235
Cash and cash equivalents on the opening date	80	496	87	318	471	318
Exchange rate differences in cash and cash equivalents	3	1	-9	0	-5	3
Cash and cash equivalents on the closing date	80	471	80	471	80	87

Parent Company income statement in summary

SEK million	2018 Jul–Sep	2017 Jul–Sep	2018 Jan–Sep	2017 Jan–Sep	2017/2018 Rolling 12 months	2017 Full-year
INCOME
Net sales	8	6	19	19	25	25
	8	6	19	19	25	25
OPERATING EXPENSES
Other external costs	-2	-2	-13	-38	-15	-40
Personnel costs	-8	-3	-19	-7	-24	-12
Amortisation of intangible assets	0	–	0	–	0	–
Operating expenses	-10	-5	-32	-44	-39	-52
OPERATING PROFIT/LOSS	-2	1	-13	-26	-14	-27
Financial items	-4	-11	2	-21	-8	-31
LOSS AFTER FINANCIAL ITEMS	-6	-10	-11	-47	-22	-58
Appropriations	–	–	–	–	57	57
LOSS BEFORE TAX	-6	-10	-11	-47	35	-1
Tax on net profit for the period		–		–	–	–
NET PROFIT/LOSS FOR THE PERIOD	-6	-10	-11	-47	35	-1

Parent Company balance sheet in summary

SEK million	30 Sep 2018	30 Sep 2017	31 Dec 2017
ASSETS
Intangible assets
Software	2	–	0
Financial assets
Participations in Group companies	4,128	4,127	4,127
Total fixed assets	4,130	4,127	4,127
Current assets
Receivables from Group companies	23	89	9
Other receivables	0	2	2
Tax assets	2	6	2
Prepaid expenses and accrued income	4	–	3
Cash and bank balances	10	50	9
Total current assets	39	147	25
TOTAL ASSETS	4,169	4,274	4,152
EQUITY AND LIABILITIES
Share capital	2	2	2
Statutory reserve	0	0	0
Total restricted equity	2	2	2
Share premium reserve	200	198	199
Retained earnings	1,856	1,929	1,925
Loss for the period	-11	-47	-1
Total non-restricted equity	2,045	2,081	2,123
TOTAL EQUITY	2,047	2,083	2,125
Non-current liabilities
Liabilities to credit institutions	369	2,181	659
Current liabilities
Commercial papers	1,733	–	1,349
Accounts payable	2	6	9
Other liabilities	1	0	2
Accrued expenses	17	3	8
Total current liabilities	1,753	10	1,368
TOTAL EQUITY AND LIABILITIES	4,169	4,274	4,152

Key financial figures

SEK million	2018 Jul–Sep	2017 Jul–Sep	Change %	2018 Jan–Sep	2017 Jan–Sep	Change %	2017/2018 Rolling 12 months	2017 Jan–Dec	Change %
Net sales	1,541	1,488	4	4,526	4,352	4	5,990	5,816	3
Growth in net sales (%)	4	8		4	11		3	9
EBITDA	220	196	12	467	410	14	569	512	11
Operating margin, EBITDA (%)	14.3	13.2		10.3	9.4		9.5	8.8
Adjusted EBITDA	220	195	13	471	442	7	579	550	5
Operating margin, adjusted EBITDA (%)	14.3	13.1		10.4	10.2		9.7	9.5
EBITA	205	184	11	423	374	13	510	461	11
Operating margin, EBITA (%)	13.3	12.4		9.3	8.6		8.5	7.9
Adjusted EBITA	205	183	12	427	406	5	520	498	4
Operating margin, adjusted EBITA (%)	13.3	12.3		9.4	9.3		8.7	8.6
EBIT	184	169	9	365	331	10	436	402	8
Operating margin, EBIT (%)	11.9	11.4		8.1	7.6		7.3	6.9
Profit before tax	168	157	7	337	228	48	396	288	38
Profit after tax	128	119	8	263	172	53	316	226	40
Earnings per share before dilution, SEK	1.89	1.75	8	3.88	2.58	51	4.69	3.37	39
Earnings per share after dilution, SEK	1.89	1.75	8	3.88	2.58	51	4.68	3.37	39
Return on equity (%)	4.9	5.0		10.2	7.6		12.3	9.9
Operating cash flow	78	57	37	434	254	71	639	459	39
Free cash flow	54	49	10	357	153	133	536	332	61
Cash conversion (%)	35.9	29.1		94.9	63.2		114.1	90.8

	30 Sep	30 Sep	31 Dec
	2018	2017	2017
Net debt/Rolling adjusted EBITDA (ratio)	3.7	3.6	3.7

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, and the Swedish Financial Reporting Board's recommendations RFR 1, Supplementary Accounting Rules for Groups, and RFR 2 Accounting for Legal Entities. The accounting policies applied are consistent with those applied in the preparation of the most recent annual report.

IFRS 9 Financial Instruments, which entered into force on 1 January 2018, has no impact on Ambea's accounting.

IFRS 15 Revenue from Contracts with Customers entered into force on 1 January 2018 and replaces the previous IFRS related to revenue recognition. IFRS 15 is based on revenue being recognised when control of the good or service is transferred to the customer and entails new methods of determining how revenue is recognised.

The new standard will not result in a material difference in relation to the former standard. An accrual effect was identified in relation to school vouchers, and these will not be recognised during school summer holidays as of 2018. IFRS 15 contains expanded disclosure requirements for revenue, see Note 4, page 29.

New and amended IFRS standards not yet applied

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 cash flow). Efforts with detailed estimates of the effect of IFRS 16 are ongoing and a modified retroactive model for the transition has been chosen. The information provided for operating leases in the 2017 Annual Report gives an indication of the nature and scope of the leases that currently exist. The company estimates that the new standard will increase the net debt/rolling adjusted EBITDA ratio by approximately 1.7 to 2.0.

Changes in segment reporting

In the interim report for January-September 2017, the reversal of fees and depreciation on car leasing was recognised under unallocated items, but these will be recognised under each segment in 2018. To improve comparability between years, the comparative year has been restated and costs have been allocated to each segment based on the segment's share of costs in 2018. This adjustment affects Other external costs and Depreciation and impairment of tangible assets.

Change in calculation of average number of full-time employees (FTE)

From the interim report for the second quarter, an improved methodology is now used for calculating the average number of employees. To facilitate comparability with prior periods, these figures have sometimes been restated using the same methodology.

Note 2 Key judgements and estimates

For information about key judgements and estimates in this interim report, please refer to Note K33 in the company's 2017 Annual Report.

Note 3 Segment information

During the period, the name of the Norwegian operations was changed to Heimta and the name of the staffing operations was changed to Klara.

In 2017, Heimta and Klara were reported together in the segment Other: Norway and Staffing Solutions. As of 2018, they are reported separately.

Vardaga Comprises elderly care

• Nytida Comprises care for people with functional disabilities
• Heimta Mainly comprises psychiatric support in residential facilities and outpatient care, and residential facilities for people with life-long disabilities in Norway.
• Klara Comprises staffing solutions and the supply of temporary doctors, nurses and other care workers.

Segments

July – September		Vardaga		Nytida		Heimta		Klara		Unallocated items17		Group adjustments	Group
SEK million	2018	2017	2018	2017	2018	2017	2018	2017	2018	2017	2018	2017	2018	2017
OPERATING INCOME
Net sales	557	574	765	736	142	97	77	81	–	0	–	–	1,541	1,488
Other operating income	5	8	3	5	6	0	9	9	4	1	-9	-9	18	15
Internal transactions	–	–	–	–	–	–	-9	-9	–	–	9	9	–	–
Total income from external customers	562	582	768	741	148	98	77	81	4	2	–	–	1,559	1,503
OPERATING EXPENSES
Consumables	-22	-22	-19	-19	-2	-2	0	0	-3	-2	–	–	-46	-45
Other external costs*	-111	-109	-150	-133	-45	-37	-23	-26	37	33	–	–	-291	-273
Personnel costs	-368	-397	-463	-459	-80	-49	-49	-49	-42	-33	–	–	-1002	-988
Profit/loss from participations in Group companies	–	–	–	–	–	–	–	–	–	–	–	–	–	–
Other operating expenses	–	0	–	0	–	0	–	–	–	-1	–	0	–	-1
Depreciation, amortisation and impairment of tangible assets*	-4	-4	-8	-4	-1	-1	–	–	-2	-4	–	–	-15	-12
EBITA	57	50	128	126	21	8	5	6	-6	-5	–	–	205	184
EBITA margin, %	10.2	8.7	16.7	17.1	14.8	8.2	6.5	7.4	–	–	–	–	13.3	12.4
Items affecting comparability	–	–	–	–	–	–	–	–	–	-1	–	–	–	-1
Adjusted EBITA	57	50	128	126	21	8	5	6	-6	-6	–	–	205	183
Adjusted EBITA margin, %	10.2	8.7	16.7	17.1	14.8	8.2	6.5	7.4	–	–	–	–	13.3	12.3
Amortisation of intangible assets and customer contracts											–	0	-21	-15
Operating profit (EBIT)											–	–	184	169
Financial income											–	–	3	2
Financial expenses											–	–	-19	-14
Net financial items											–	–	-16	-12
Profit after net financial items											–	–	168	157
Profit before tax											–	–	168	157
Tax on net profit for the period											–	–	-40	-38
NET PROFIT FOR THE PERIOD											–	–	128	119
ASSETS	1,376	1,369	3,646	3,371	538	341	180	179	125	590	–	–	5,865	5,851

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

• *Reversal of costs and depreciation on car leasing have been adjusted for the comparative year and are
• recognised in this report under each segment instead of under unallocated items. See "Changes in segment

reporting" under accounting policies for more information.

Segments

January – September		Vardaga		Nytida		Heimta		Klara		Unallocated items18	Group adjustments		Group
SEK million	2018	2017	2018	2017	2018	2017	2018	2017	2018	2017	2018	2017	2018	2017
OPERATING INCOME
Net sales	1,664	1,707	2,229	2,127	395	275	238	243	1	0	–	–	4,526	4,352
Other operating income	16	21	10	13	9	1	26	25	9	8	-26	-25	45	43
Internal transactions	–	–	–	–	–	–	-26	-25	–	–	26	25	–	–
Total income from external customers	1,680	1,728	2,239	2,140	403	276	238	243	10	8	–	–	4,571	4,395
OPERATING EXPENSES
Consumables	-65	-69	-60	-59	-6	-3	–	0	-3	-4	–	–	-135	-135
Other external costs*	-338	-323	-453	-388	-138	-123	-75	-81	105	72	–	–	-898	-843
Personnel costs	-1,140	-1,201		-1,418 -1,409	-227	-128	-150	-153	-132	-114	–		– -3,067	-3005
Profit/loss from participations in Group companies	–	–	–	–	–	–	–	–	-4	–	–	–	-4	–
Other operating expenses	–	0	–	0	–	0	–	–	–	-1	–	–	–	-2
Depreciation, amortisation and impairment of tangible assets*	-12	-11	-24	-13	-3	-2	-1	0	-4	-11	–	1	-44	-36
EBITA	125	124	284	270	29	19	12	10	-28	-49	–	1	423	374
EBITA margin, %	7.5	7.3	12.7	12.7	7.3	6.9	5.0	4.1	–	–	–	–	9.3	8.6
Items affecting comparability	–	–	–	–	–	–	–	–	4	32	–	–	4	32
Adjusted EBITA	125	124	284	270	29	19	12	10	-24	-17	–	1	427	406
Adjusted EBITA margin, %	7.5	7.3	12.7	12.7	7.3	6.9	5.0	4.1	–	–	–	–	9.4	9.3
Amortisation of intangible assets and customer contracts											–	0	-58	-43
Operating profit (EBIT)											–	–	365	331
Financial income											–	–	5	5
Financial expenses											–	–	-33	-108
Net financial items											–	–	-28	-103
Profit after net financial items											–	–	337	228
Profit before tax											–	–	337	228
Tax on net profit for the period											–	–	-74	-56
NET PROFIT FOR THE PERIOD											–	–	263	172
ASSETS	1,376	1,369	3,646	3,371	538	341	180	179	125	590	–	–	5,865	5,851

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

*Reversal of costs and depreciation on car leasing have been adjusted for the comparative year and are

recognised in this report under each segment instead of under unallocated items. See "Changes in segment

reporting" under accounting policies for more information.

Note 4 Income

Jan–Sep	Vardaga		Nytida		Heimta			Klara	Group
SEK million	2018	2017	2018	2017	2018	2017	2018	2017	2018	2017
Own Management	832	756	1,858	1,747	395	275	-	-	3,085	2,778
Contract Management	832	951	371	380	-	-	-	-	1,203	1,331
Staffing	-	-	-	-	-	-	238	243	238	243
Total	1,664	1,707	2,229	2,127	395	275	238	243	4,526	4,352

Note 5 Acquisitions

During the interim period, Ambea completed the following acquisitions:

• Curation Holding AB
• PR Vård AB
• Arona Omsorger
• Strukturrutan AB
• TillVäxthemmen AB
• Kung Saga AB

Curation Holding AB

On 7 May, Ambea's Nytida business area acquired Curation Holding AB (Stöd & Resurs). The acquisition complements and strengthens Nytida's current operations in residential care, day services and short-term accommodation for children and adults with neuropsychiatric disabilities. Stöd & Resurs's operations comprise a total of 16 units under own management with 89 beds and 40 placements in Stockholm and Västra Götaland.

At the acquisition date, the purchase price amounted to SEK 302 million and was financed in cash. The acquisition gave rise to goodwill of SEK 242 million. The goodwill relates mainly to synergies from reduced central costs. The goodwill is not expected to be tax deductible.

The acquisition was consolidated in Ambea's accounts as of 7 May 2018, and has contributed SEK 54 million in net sales and SEK 18 million in EBITA during the year. If the acquisition had taken place on 1 January 2018, management estimates that Stöd & Resurs's net sales would have amounted to approximately SEK 99 million and EBITA to about SEK 32 million.

The acquisition analysis is preliminary since intangible assets are undergoing valuation. The acquisition analysis is expected to be finalised in the fourth quarter of 2018.

Other acquisitions

The transferred consideration for the acquisitions comprised cash in the amount of SEK 71 million. The acquisitions gave rise to goodwill of SEK 46 million in the form of a difference between the consideration transferred and the fair value of the acquired net assets. The goodwill mainly relates to synergies in the form of coordination gains within administration. The goodwill is not expected to be tax deductible. In the period up to 30 September 2018, the acquired companies contributed SEK 30 million to consolidated net sales and SEK 5 million to consolidated EBITA. If the acquisitions had taken place on 1 January 2018, Ambea estimates that the companies' net sales would have amounted to SEK 37 million and EBITA to SEK 5 million.

Brief information about the acquisitions is presented here:

PR Vård AB

On 2 January, Ambea's Klara business area acquired PR Vård AB (Elevhälsan). The business area is specialised in staffing solutions for student healthcare services in comprehensive and secondary schools. The company conducts operations throughout Sweden, with a strong position in Stockholm, Uppsala and Östergötland. In 2017, sales were approximately SEK 25 million. The acquisition was consolidated in Ambea's accounts as of 2 January 2018.

The acquisition analysis is preliminary since intangible assets are undergoing valuation. The acquisition analysis is expected to be finalised in the fourth quarter of 2018.

Arona Omsorger

On 28 February, Ambea's Nytida business area acquired Arona Omsorger, comprising two legal entities, Trollglim och Vittergull AB and R.A.L. Fastighetsförvaltning AB. Arona Omsorger consists of one group home with a total of seven beds and day services for 12 people with a focus on caring for animals, and the operations are located close to Trosa and Vagnhärad in Sweden. In 2017, sales amounted to approximately SEK 12 million. The acquisition was consolidated in Ambea's accounts as of 28 February 2018.

The acquisition analysis is preliminary since intangible assets are undergoing valuation. The acquisition analysis is expected to be finalised in the fourth quarter of 2018.

Strukturrutan AB

On 4 April, Ambea's Vardaga business area acquired Strukturrutan AB. The company runs the Myran nursing home in Östersund on behalf of the municipality. In 2017, sales amounted to approximately SEK 10 million. The acquisition was consolidated in Ambea's accounts as of 4 April 2018.

TillVäxthemmen AB

On 1 June, Ambea's Nytida business area acquired Tillväxthemmen AB. Tillväxthemmen's operations focus on socially vulnerable children and young adults, have 13 beds and are based in Gävleborg County. In 2016/2017, sales amounted to approximately SEK 12 million. The acquisition was consolidated in Ambea's accounts as of 1 June 2018.

The acquisition analysis is preliminary since intangible assets are undergoing valuation. The acquisition analysis is expected to be finalised in the fourth quarter of 2018.

Continued on the next page.

Kung Saga AB

On 28 September, Ambea's Nytida business area acquired Kung Saga AB. Kung Saga operates a special needs upper secondary school with an aesthetic focus and related after-school activities in Stockholm. The company has 45 school placements and 30 after-school placements. In 2017, sales amounted to approximately SEK 20 million. The acquisition was consolidated in Ambea's accounts as of 28 February 2018.

The acquisition analysis is preliminary since intangible assets are undergoing valuation. The acquisition analysis is expected to be finalised in the first quarter of 2019.

Net assets of acquired companies on the date of acquisition

SEK million	Xx Curation Holding AB	Other acquisitions	Fair value recognised in the Group
Tangible assets	13	12	32
Intangible assets	1	–	54
Accounts receivable and other receivables	21	8	29
Cash and cash equivalents	14	17	31
Non-current interest-bearing liabilities	-5	-4	-9
Deferred tax liability	0	0	-14
Accounts payable and other liabilities	-22	-16	-38
Net identifiable assets and liabilities	22	17	85
Group goodwill	242	46	288
Total consideration			373
Cash (acquired)			-31
Net cash outflow			342
Earn-out paid in respect of previous years' acquisitions			26
Total acquisitions			368

Note 6 Fair value of financial instruments in the fair value hierarchy

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

Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities. This level includes Eligible treasury bills, Bonds and Other interest-bearing securities. Re-measurement is recognised in Net financial items.

Level 2 – 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 recognised under Other net current assets or Other current liabilities.

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

Derivative instruments are classified within Level 2 of the fair value hierarchy. Ambea has hedged 62 per cent of its interestrate exposure in financing by purchasing interest-rate caps. The interest-rate caps are measured 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 of the interest-rate cap is recognised in profit or loss and SEK 0 million was charged against net financial items for the quarter. At 30 June 2018, the value of the derivatives was SEK 0 million. Ambea uses the standard report of issuing banks for the market valuation of purchased interest-rate caps. The measurement is based on the bank's standard pricing model and method. The measurement is based on the bank's average price.

Contingent considerations are classified within Level 3 of the fair value hierarchy. Material unobservable inputs mainly comprise predicted sales.

Consolidated assets and liabilities measured at fair value

SEK million	30 Sep 2018	30 Sep 2017	31 Dec 2017
Interest rate derivatives	0	0	0
Contingent consideration	-	-36	-29

The change of SEK 29 million in contingent consideration compared with 31 December 2017 consists of settlement related to TBO (SEK 25 million) and adjustment of Varphaugen (SEK 4 million), both of which were acquired in 2017.

Note 7 Pledged assets and contingent liabilities

SEK million	30 Sep 2018	30 Sep 2017	31 Dec 2017
Leased assets	79	66	74
Chattel mortgages	14	13	13
Real estate mortgages	25	24	23
Factoring	2	2	2
Total pledged assets	120	104	112

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 effects on the Group's financial results.

Note 8 Reconciliation with IFRS financial statements

SEK million	2018 Jul–Sep	2017 Jul–Sep	2018 Jan–Sep	2017 Jan–Sep	2017/2018 Rolling 12 months	2017 Jan–Dec
Growth/Acquired growth
Growth in net sales (%)	4	8	4	11	3	9
Of which, acquired growth (%)	6	8	7	10	7	10
Of which, organic growth (%)	-2	0	-3	1	-4	0
Operating margin (EBIT)
Net sales	1,541	1,488	4,526	4,352	5,990	5,816
Operating profit (EBIT)	184	169	365	331	436	402
Operating margin, EBIT (%)	11.9	11.4	8.1	7.6	7.3	6.9
EBITA and adjusted EBITA
Operating profit (EBIT)	184	169	365	331	436	402
Amortisation and impairment of intangible assets	21	15	58	43	74	59
EBITA	205	184	423	374	510	461
Items affecting comparability	0	-1	4	32	10	38
Adjusted EBITA	205	183	427	406	520	498
Net sales	1,541	1,488	4,526	4,352	5,990	5,816
EBITA margin (%)	13.3	12.4	9.3	8.6	8.5	7.9
Adjusted EBITA margin (%)	13.3	12.3	9.4	9.3	8.7	8.6
EBITDA and adjusted EBITDA
Operating profit (EBIT)	184	169	365	331	436	402
Depreciation, amortisation and impairment of tangible and intangible assets	36	27	102	79	133	110
EBITDA	220	196	467	410	569	512
Items affecting comparability	0	-1	4	32	10	38
Adjusted EBITDA	220	195	471	442	579	550
Net sales	1,541 14.3	1,488 13.2	4,526 10.3	4,352 9.4	5,990 9.5	5,816 8.8
EBITDA margin (%) Adjusted EBITDA margin (%)	14.3	13.1	10.4	10.2	9.7	9.5

Note 8 Reconciliation with IFRS financial statements – continuation

SEK million	2018 Jul–Sep	2017 Jul–Sep	2018 Jan–Sep	2017 Jan–Sep	2017/2018 Rolling 12 months	2017 Jan–Dec
Items affecting comparability
Reversal of received damages Heimta	–	–	–	–	-17	-17
– of which, compensation included in other operating income	–	–	–	–	-17	-17
Reversal of restructuring and acquisition-related costs	–	0	–	1	0	1
– of which, costs included in the profit/loss row other external costs	–	0	–	1	0	1
– of which, costs included in profit/loss row personnel costs	–	–	–	0	–	0
Reversal of income and costs for discontinuation of entire segments	–	0	4	-1	27	22
EKB
– of which, income	–	–	–	0	–	0
– of which, costs included in the profit/loss row other external costs	–	0	–	-3	0	-3
– of which, costs included in profit/loss row personnel costs	–	0	–	0	0	0
– of which, costs included in the profit/loss row depreciation, amortisation and impairment of tangible and intangible assets	–	0	–	0	0	0
– of which, costs included in the profit/loss row other operating expenses	–	–	–	0	–	0
	–	0	–	-3	0	-3
Personal assistance
– of which, income	–	-18	–	-55	-11	-66
– of which, costs included in the profit/loss row other external costs	–	1	–	3	2	5
– of which, costs included in profit/loss row personnel costs	–	18	–	54	9	63
– of which, profit or loss from participations in Group companies	–	–	4	0	27	23
	–	–	4	2	27	25
Reversal of costs attributable to the IPO	–	0	–	32	–	32
– of which, costs included in the profit/loss row other external costs	–	0	–	32	–	32
– of which, costs included in profit/loss row personnel costs	–	–	–	0	0	0
– of which, costs included in the profit/loss row depreciation, amortisation and impairment of tangible and intangible assets	–	0	–	0	0	–
Items affecting comparability	–	-1	4	32	10	38
Operating cash flow
EBITDA	220	196	467	410	569	512
Adjustment for non-cash items	-5	-7	-2	-20	16	-2
Cash flow from investing activities excl. acquisitions and sales of subsidiaries	0	-17	-16	-30	5	-10
Operating cash flow before changes in working capital	215	172	449	360	590	500
Changes in working capital	-137	-115	-15	-106	50	-41
Operating cash flow after changes in working capital	78	57	434	254	639	459

Note 8 Reconciliation with IFRS financial statements – continuation

SEK million	2018 Jul–Sep	2017 Jul–Sep	2018 Jan–Sep	2017 Jan–Sep	2017/2018 Rolling 12 months	2017 Jan–Dec
Cash conversion (%)
Operating cash flow after changes in working capital	78	57	434	254	639	459
Adjustment for cash flow from investing activities related to increased capacity/growth	1	0	9	5	11	7
Operating cash flow excluding cash flow from investments in increased capacity/growth	79	57	443	259	649	465
EBITDA	220	196	467	410	569	512
Cash conversion (%)	35.9	29.1	94.9	63.2	114.1	90.8

SEK million	30 Sep 2018	30 Sep 2017	31 Dec 2017
Net debt, Net debt/Adjusted EBITDA, RTM
Non-current interest-bearing liabilities	465	2,202	710
Current interest-bearing liabilities	1,768	296	1,392
Less cash and cash equivalents	-80	-471	-87
Net debt	2,153	2,027	2,015
Rolling adjusted EBITDA	579	564	550
Net debt/Rolling adjusted EBITDA (ratio)	3.7	3.6	3.7
Debt/equity ratio
Non-current interest-bearing liabilities	465	2,202	710
Current interest-bearing liabilities	1,768	296	1,392
Total interest-bearing liabilities	2,233	2,498	2,102
Total equity	2,684	2,435	2,480
Debt/equity ratio	0.8	1.0	0.8
Equity/assets ratio
Total equity	2,684	2,435	2,480
Total assets	5,865	5,851	5,567
Equity/assets ratio (%)	45.8	41.6	44.5

Return on equity	2018	2017	2018	2017	2017/2018	2017
SEK million	Jul–Sep	Jul–Sep	Jan–Sep	Jan–Sep	Rolling 12 months	Jan–Dec
Opening equity attributable to shareholders of the Parent Company	2,556	2,316	2,480	2,067	2,435	2,067
Closing equity attributable to shareholders of the Parent Company	2,684	2,435	2,684	2,435	2,684	2,480
Average equity attributable to shareholders of the Parent Company	2,620	2,376	2,582	2,251	2,560	2,274
Profit after tax	128	119	263	172	316	226
Return on equity (%)	4.9	5.0	10.2	7.6	12.3	9.9

Note 9 Definitions and purpose

Key financial figures	Definition and calculation	Purpose
Growth (%)	Growth consists of the increase in sales in relation to the comparative period.	This key figure is used to follow up the com pany's sales increase
	The period's increase in net sales/Net sales in the period of comparison
Acquired growth (%)	The period's net sales growth from acquisi tions/the comparative period's net sales	This key figure is used to follow up the pro portion 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 comparative period	This key figure is used when analysing un derlying sales growth driven by comparable units between different periods
Operating profit (EBIT)	Profit for the period before financial items and taxes	The key figure used to monitor the company's profit generated by operating activities. This key figure enables comparisons of profit
	Total operating income – Operating expenses.	ability between companies/industries
EBITA	Operating profit before amortisation and impairment of intangible assets	This key figure is used to follow up the company's profit generated by operating
	Operating profit (EBIT) + Amortisation and impairment of intangible assets	activities. The figure enables comparisons of profitability between companies/industries
Adjustments	Items related to events in the company's operations that impact comparability with profit during other periods. Include: - Transaction costs attributable to major	The key figure Adjustments of items affect ing comparability is used to achieve a fair comparison of the underlying development of business operations
	acquisitions
	- Major re-organisations
	-Costs for preparing the company for a fu ture stock-exchange listing
Adjusted EBITA	Operating profit before amortisation and impairment of intangible assets adjusted for items from events in the company's oper ations that affect comparisons with profit during other periods	The key figure is used to follow up the company's profit generated by operating activities in order to obtain a fair comparison of the underlying development of business operations. The figure enables comparisons
	EBITA + Adjustments	of profitability between companies/indus tries
EBITDA	Operating profit before depreciation, amor tisation and impairment of intangible and tangible assets	The key figure used to follow up the compa ny's profit generated by operating activities. The figure enables comparisons of profitabili
	Operating profit (EBIT) + Depreciation, am ortisation and impairment of intangible and tangible assets	ty between companies/industries
Adjusted EBITDA	Operating profit before depreciation/am ortisation 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	This key figure used to follow up the compa ny's profit generated by operating activities with a fair comparison of the underlying development of the business operations. The figure enables comparisons of profitability between companies/industries
	EBITDA + Adjustments

Key financial figures	Definition and calculation	Purpose
Operating margin (%)	Operating profit as a percentage of net sales.	This key figure is used to follow up the per
	Operating profit (EBIT)/Net sales	centage 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
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 Adjusted EBITDA + Changes in working capi	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 able to generate a sufficiently positive cash flow to maintain and expand its operations
	tal + Cash flow from investing activities excl. acquisitions and divestments of subsidiaries
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 op erating activities including cash flow from investing activities excluding acquisitions
	Cash flow from operating activities + Cash flow from investing activities excluding ac quisitions 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 divided by EBITDA	This key figure is used as a performance indi cator of the proportion of a company's profit
	Operating cash flow/EBITDA	that is converted to cash
Net debt	The Group's interest-bearing liabilities ex cluding pension provisions adjusted for cash and cash equivalents	This key figure is a measure of the company's debt/equity ratio and is used by the company to assess its capacity to meet its financial commitments
	Interest-bearing liabilities – cash and cash equivalents
Net debt/Rolling adjusted EBITDA	Net debt/Adjusted EBITDA is a measure of the debt/equity ratio defined as the closing balance for net debt in relation to rolling adjusted EBITDA.	This key figure used to monitor the level of the company's indebtedness to ensure that financial covenants are met
	Net debt/Rolling adjusted EBITDA
Debt/equity ratio	The debt/equity ratio shows a company's financial capacity Interest-bearing liabilities/Equity	This key figure is used to monitor the proportion of equity and debt that is used to 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 percentage of total assets financed with equity and enables an analysis of the company's long-term finan
	Equity/Total assets	cial strength and ability to withstand losses
Return on equity (%)	The return on equity shows the company's re turn on the capital provided by its owners	This key figure is used to show the returns generated on the capital that shareholders
	Profit for the period/Equity (average equity at the beginning and end of the period)	have invested in the company

Quality management in the third quarter of 2018

Summary

• Ambea's monitoring tool for assuring the quality of its operations, the Quality and HR Flash, is sent out to all operations in Nytida and Vardaga every month. Compared with the second quarter, the index has increased slightly. Vardaga remained at 7.2, while Nytida rose slightly from 6.3 to 6.4, over a rolling six-month period.
• Ambea's successful efforts to integrate newly arrived residents have continued. In the 100 Club, where companies pledge to take on at least 100 newly arrived language and care trainees over a three-year period, only ICA has taken on more trainees than Ambea, Nytida and Vardaga. A total of 500 people have now received traineeships in our operations. In the special employment programme, Ambea's group of companies accounts for one quarter of all special employment offers in the Swedish private sector.
• Efforts to harmonise all operations with the General Data Protection Regulation (GDPR) continued during the quarter. The operations have received check lists to help them ensure that their documentation and data complies with the directive.
• Ambea is testing a new type of employee satisfaction survey (Teambarometern). The survey comprises quick questions and takes place every fifth week, instead for annually with a

Melat came to Sweden from Eritrea three years ago. She is now employed as a care assistant at Vardaga.

more comprehensive battery of questions. The aim is to make Ambea a better employer by monitoring how employees feel about their work situation at more regular intervals.

Awards and distinctions

• This year, Ambea was placed on the AllBright Green List and is therefore a candidate for the 2018 All-Bright Award. On 22 November, the award will be presented to a company that can show it has taken responsibility for leading the company toward a more meritocratic and gender-neutral position in the preceding year.
• For the second consecutive year, Vardaga Silverpark in Täby has received the White Guide's Senior Mealtime of the Year Award. This is the fourth consecutive year for chef Karoline Nordefors. She received the Senior Mealtime of the Year Award in 2015 and 2017, and Senior Chef of the Year Award in 2016. Silverpark's former care manager, Ximena Samuelsson, was named Residential Care Manager of the Year for her work at Silverpark.

Silverpark and Karoline Nordefors received the White Guide Award for the second consecutive year.

The quarter in figures

• Equal share of serious non-compliances in Q3, degree 4, compared with the previous quarter (+1.4%).
• One Lex Sarah notification for Vardaga, which is one less than in the preceding quarter. The Swedish Health and Social Care Inspectorate (IVO) has issued its decision and the case is now closed.
• Six individual complaints reported for Nytida and three for Vardaga.
• IVO conducted 11 supervisory inspections of Nytida's operations, of which eight decisions have now been received, all without criticism. For Vardaga, two supervisory inspections have been carried out but no decisions have yet been received.