Caverion Corporation’s Interim Report for January 1 – September 30, 2016
Caverion Corporation Interim Report October 27, 2016 at 9.00 a.m. EEST
Caverion Corporation’s Interim Report for January 1 – September 30, 2016
July 1 – September 30, 2016
- Order backlog: EUR 1,450.9 (1,477.2) million.
- Revenue: EUR 582.0 (573.7) million.
- EBITDA excluding restructuring costs: EUR 19.5 million, or 3.3 percent of revenue.
- EBITDA: EUR 13.8 (21.3) million, or 2.4 (3.7) percent of revenue.
- Working capital: EUR 57.9 (36.1) million.
- Free cash flow: EUR -38.8 (-14.2) million.
- Earnings per share, basic: EUR 0.02 (0.08) per share.
January 1 – September 30, 2016
- Revenue: EUR 1,758.1 (1,775.3) million.
- EBITDA excluding restructuring costs: EUR 26.1 million, or 1.5 percent of revenue.
- EBITDA: EUR 10.9 (57.5) million, or 0.6 (3.2) percent of revenue.
- Free cash flow: EUR -100.1 (-19.8) million.
Unless otherwise noted, the figures in brackets refer to the corresponding period in the previous year.
KEY FIGURES
| EUR million | 7–9/16 | 7–9/15 | Change | 1–9/16 | 1–9/15 | Change | 1–12/15 |
| Order backlog | 1,450.9 | 1,477.2 | -2% | 1,450.9 | 1,477.2 | -2% | 1,461.4 |
| Revenue | 582.0 | 573.7 | 1% | 1,758.1 | 1,775.3 | -1% | 2,443.0 |
| EBITDA excluding restructuring costs |
19.5 | 26.1 | - | ||||
| EBITDA margin excluding restructuring costs, % |
3.3 | 1.5 | - | ||||
| EBITDA | 13.8 | 21.3 | -35% | 10.9 | 57.5 | -81% | 91.5 |
| EBITDA margin, % |
2.4 | 3.7 | 0.6 | 3.2 | 3.7 | ||
| Operating profit | 5.0 | 14.7 | -66% | -11.6 | 38.1 | 65.0 | |
| Operating profit margin, % |
0.9 | 2.6 | -0.7 | 2.1 | 2.7 | ||
| Net profit for the period |
2.9 | 9.9 | -70% | -9.9 | 25.7 | 46.6 | |
| Earnings per share, basic, EUR |
0.02 | 0.08 | -70% | -0.08 | 0.21 | 0.37 | |
| Working capital | 57.9 | 36.1 | 60% | 57.9 | 36.1 | 60% | -13.6 |
| Free cash flow | -38.8 | -14.2 | -100.1 | -19.8 | 53.9 | ||
| Interest-bearing net debt |
169.7 | 101.9 | 67% | 169.7 | 101.9 | 67% | 29.8 |
| Gearing, % | 80.4 | 43.4 | 80.4 | 43.4 | 11.6 | ||
| Personnel, average for the period |
17,375 | 17,369 | 0% | 17,486 | 17,286 | 1% | 17,321 |
Word from the Interim President and CEO Sakari Toikkanen
“In the third quarter of 2016, Caverion Corporation continued the restructuring of its operations and the review of its project portfolio. As a result of the review, several projects were still identified with challenges in project management and execution. The identified challenges mainly relate to divisions Sweden, Denmark-Norway, Germany and Industrial Solutions. Based on the review, Caverion has completed and will complete more conservative cost estimate adjustments and provisions related to its project portfolio. The adjustments have an impact in the Group’s third and fourth quarter results in 2016.
Our focus at the end of the year is on the successful completion of the restructuring programme. We now estimate that the total personnel reductions will affect approximately 1,000 employees, i.e. more than initially estimated (700 employees). The total cost estimate of the restructuring actions is currently EUR 20-24 million (previously approximately EUR 22-26 million) in 2016. In addition, we continued to cut back on discretionary fixed costs relating to development, consultants and travelling.
Caverion has also implemented a stricter project tendering process in the Group since the second quarter. Completion of the restructuring and focus on higher project margins has affected the order backlog in the third quarter. As a result Caverion’s order backlog has slightly decreased in the third quarter compared to the previous year. A newly established Projects Group function is now also supporting the project management offices (PMOs) in the divisions.
Despite the increased focus on restructuring, we managed to deliver an EBITDA excluding restructuring costs of EUR 19.5 million (7-9/2015: 21.3) in the third quarter. Our cash flow was still unsatisfactory in the third quarter. In order to address this, we started an intensified focus on invoicing and receivables management with the aim to improve our working capital management and cash flow throughout the Group.
Our market environment remains favourable. Particularly in Finland, Sweden and Germany there are a lot of tenders ongoing. Caverion has an advanced service offering covering the whole life cycle of buildings and industries.
The Board of Directors appointed on September 27, 2016 Ari Lehtoranta as the new President and CEO of Caverion Corporation. Ari is thoroughly familiar with the company, its strategy and operations. Ari will start in his position on January 1, 2017.”
OUTLOOK FOR 2016
Market outlook for Caverion’s services and solutions
The megatrends in the industry, such as the increase of technology in buildings, energy efficiency requirements, increasing digitalisation and automation as well as urbanisation continue to promote demand for Caverion’s services and solutions over the coming years.
The Technical Installation and Maintenance market is expected to remain stable, however price competition is expected to remain tight in Technical Installations projects. Requirements for increased energy efficiency, better indoor conditions and tightening environmental legislation will be significant factors supporting the positive market development. In Norway, the general economy has been impacted by the slowdown in the oil industry and despite the recent stabilisation, this may continue to have a negative effect on the Technical Installation and Maintenance business.
In the Large Projects market, the new tenders for buildings and industry are expected to increase during the year. Low interest rates and availability of financing are expected to support investments. The demand for Design & Build of Total Technical Solutions is expected to develop favourably in the large and technically demanding projects. However uncertainty in economical situation has affected new projects resulting in price pressure and further project postponements or cancellations.
Underlying demand for Managed Services is expected to remain strong. As technology in buildings is increasing the need for new services and the demand for Life Cycle Solutions are expected to increase. Clients’ tendency towards focusing on their core operations continues to open opportunities for Caverion in terms of outsourced operation and maintenance especially for public authorities, industries and utilities.
Guidance for 2016
Caverion revised its guidance on October 19, 2016, according to which Caverion estimates that the Group’s revenue for 2016 will remain at the previous year's level (2015: EUR 2,443 million) and the Group’s EBITDA excluding restructuring costs for 2016 will be in the range EUR 40-50 million (2015: EUR 91.5 million).
INFORMATION SESSION, WEBCAST AND CONFERENCE CALL
Caverion will hold a news conference and webcast on the interim report on Thursday, October 27, 2016, at 11:00 a.m. (Finnish Time, EEST) at the Glo Hotel Kluuvi (Videowall meeting room), Kluuvikatu 4, 2nd floor, Helsinki, Finland. The news conference can also be viewed live on Caverion’s website at www.caverion.com/investors. It is also possible to participate in the event through a conference call by calling the assigned number +44 (0)203 043 2002 at 10:55 a.m. (Finnish time, EEST) at the latest. Participant code for the conference call is “7101031/ Caverion”. More practical information on the news conference can be found on Caverion's website, www.caverion.com/investors.
Financial information for 2016
Financial Statements Bulletin for January - December 2016 will be published on February 7, 2017 at 9:00 a.m. (Finnish Time, EET). Financial reports and other investor information are available on Caverion's website, www.caverion.com/investors, and IR App. The materials may also be ordered by sending an e-mail to IR@caverion.com.
CAVERION CORPORATION
Distribution: Nasdaq Helsinki, principal media, www.caverion.com
For further information, please contact:
Martti Ala-Härkönen, Chief Financial Officer, Caverion Corporation, tel. +358 40 737 6633, martti.ala-harkonen@caverion.com
Milena Hæggström, Head of Investor Relations, Caverion Corporation, tel. +358 40 5581 328, milena.haeggstrom@caverion.com