Half Yearly Report for January 1 – June 30, 2016
Caverion Corporation Half Yearly Report July 21, 2016 at 9:00 a.m. EEST
Half Yearly Report for January 1 – June 30, 2016
April 1 – June 30, 2016
- Order backlog: EUR 1,554.2 (1,393.1) million, an increase of 12% from the corresponding period in the previous year.
- Revenue: EUR 615.5 (638.1) million.
- EBITDA excluding restructuring costs: EUR -6.8 million, or -1.1 percent of revenue.
- EBITDA: EUR -14.4 (22.0) million, or -2.3 (3.4) percent of revenue.
- Working capital: EUR 17.1 (7.7) million.
- Free cash flow: EUR -32.6 (-6.3) million.
- Earnings per share, basic: EUR -0.13 (0.08) per share.
January 1 – June 30, 2016
- Revenue: EUR 1,176.1 (1,201.5) million.
- EBITDA excluding restructuring costs: EUR 6.6 million, or 0.6 percent of revenue.
- EBITDA: EUR -2.9 (36.2) million, or -0.2 (3.0) percent of revenue.
- Free cash flow: EUR -61.3 (-5.5) million.
Unless otherwise noted, the figures in brackets refer to the corresponding period in the previous year.
|Net profit for
|Free cash flow||-32.6||-6.3||-61.3||-5.5||53.9|
average for the
Word from the Interim President and CEO Sakari Toikkanen
“After the departure of the previous CEO, Caverion initiated a thorough review of operations in all divisions where operative challenges had been observed. Based on the results of this review Caverion has identified profitability problems due to resource overcapacity and challenges in executing and managing projects. The identified issues mainly relate to divisions Sweden and Denmark-Norway. The profitability of certain bigger projects in Germany and Norway has also been weaker than forecasted. Furthermore, Caverion has had too many development projects ongoing at the group level, which has resulted in high fixed costs. Working capital and cash flow have deteriorated in 2016 due to low profitability, high level of investments and weak development in Germany and Sweden driven by delayed final payments in projects and low invoicing.
Caverion has already started implementing the restructuring actions to reduce the identified overcapacity. These actions will unfortunately also imply personnel reductions, mainly focusing on the divisions Sweden and Denmark-Norway as well as in the Group functions. The personnel reductions are estimated to affect up to 700 employees and the total restructuring costs for 2016 are estimated to be in the region of EUR 22-26 million. By the end of June 292 employees have been permanently laid off and restructuring costs were EUR 9.5 million during January–June. The impact of the actions will start to materialise during the second half of 2016, with full effect visible in 2017. At the end of June there were 62 people on temporary leave in division Norway.
Due to the challenges in project management and execution, a more detailed project review was conducted in Sweden covering more than a hundred ongoing projects. In connection with this review, Caverion has in division Sweden identified clear challenges in execution of projects and has observed margin slippages in many of the reviewed projects. Based on the the results of review, Caverion has made cost estimate adjustments and provisions in the project portfolio in division Sweden, which have a negative impact of EUR 15 million on the reported EBITDA for April–June. Additionally in Germany and Norway, Caverion has experienced challenges in executing certain bigger projects.
In order to better support its operations, Caverion has decided to reorganise its Group functions, establishing two new functions: Projects and Services. These will respond to the challenges in executing and managing projects and help to secure the targeted utilisation rate in the service business. Additionally Caverion is reviewing and reducing its fixed costs. Caverion will continue the implementation of those development projects that support the improvement of profitability and cash flow starting from the second half of the year.
Finally I would like to emphasise that we are performing according to our strategy in several divisions. Our order backlog has developed very favourably during the beginning of the year, which is expected to support our development in the second half of the year.”
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, which 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. Positive signs have been seen both in received orders and in tendering activity, especially in the public and industrial sectors and we expect the positive trend to continue. 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 June 20, 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 decrease clearly from the previous year's EBITDA level (2015: EUR 91.5 million).
INFORMATION SESSION, WEBCAST AND CONFERENCE CALL
Caverion will hold a news conference and webcast on the half yearly report on Thursday, July 21, 2016, at 11:00 a.m. (Finnish Time, EEST) at the Kämp Hotel (Gallen-Kallela meeting room), Kluuvikatu 2, 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)20 3427 1920 at 10:55 a.m. (Finnish time, EEST) at the latest. Participant code for the conference call is “745667 / Caverion”. More practical information on the news conference can be found on Caverion's website, www.caverion.com/investors.
Financial information in 2016
Caverion’s disclosure policy updated pursuant to the Market Abuse Regulation came into force on July 3, 2016. The document is available in full at http://www.caverion.com/investors/investor-relations/disclosure-policy.
Interim Reports for the first nine months of 2016 will be published on October 27, 2016. 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.
Distribution: Nasdaq Helsinki, principal media, www.caverion.com
For further information, please contact:
Antti Heinola, Chief Financial Officer, Caverion Corporation, tel. +358 40 352 1033, firstname.lastname@example.org
Milena Hæggström, Head of Investor Relations, Caverion Corporation, tel. +358 40 5581 328, Milena.Haeggstrom@caverion.com