31.10.2014
Stock exchange release
Caverion Corporation's Interim Report for January 1–September 30, 2014: Profitability and cash flow increased, operational improvement...
Profitability and cash flow increased, operational improvement according to the plan
July 1 – September 30, 2014
· Order backlog: EUR 1,379.5 (1,296.0) million at the end of September, an increase of 6% from the end of September 2013.
· Revenue: EUR 566.7 (594.8) million.
- Revenue decreased by 3 percent at previous year’s exchange rates for corresponding period.
· EBITDA: excluding non-recurring items EBITDA was EUR 25.3 (26.8) million, or 4.5 (4.5) percent of revenue.
- Profitability improved from the previous quarter and the EBITDA margin excl. non-recurring items was at the same level as last year for corresponding period.
- EBITDA including non-recurring items was EUR 21.5 (23.3) million, or 3.8 (3.9) percent of revenue.
· Operating cash flow before financial and tax items: EUR 20.5 (11.1) million.
· Working capital: EUR 49.4 (119.9) million at the end of September. The target to reach negative working capital by the end of 2016 is progressing according to plan.
January 1 – September 30, 2014
· Revenue: EUR 1,746.4 (1,855.5) million.
- Revenue decreased by 3 percent at previous year’s exchange rates for corresponding period.
· EBITDA: excluding non-recurring items EBITDA was EUR 41.3 (55.0) million, or 2.4 (3.0) percent of revenue.
- EBITDA including non-recurring items was EUR 33.2 (45.6) million, or 1.9 (2.5) percent of revenue.
- The non-recurring items totalled EUR -8.2 million. The non-recurring costs of EUR 21.4 million consisted of expenses relating to a terminated M&A project, reorganisation costs and provisions for old, completed projects. These were offset by a non-recurring release of pension liability to pension costs of EUR 13.2 million following a transfer into a new pension scheme in Norway.
- Projects in Norway and Denmark diluted the profitability in January−September 2014. The turnaround of the Norwegian project operations has progressed well during the third quarter, according to plan.
· Operating cash flow before financial and tax items: Improved from the previous year to EUR 13.4 (7.1) million as a result of focus on working capital management. Cash flow was burdened by IT license prepayments of EUR 4.3 million and a non-recurring payment of EUR 3.5 million related to a final settlement in Denmark.
Unless otherwise noted, the figures in brackets refer to the corresponding period in the previous year. Comparative figures for 2013 are carve-out figures for the periods before the effective date of the partial demerger (June 30, 2013).
KEY FIGURES
| EUR million | 7-9/14 | 7-9/13 | Change | 1-9/14 | 1-9/13 | Change | 1-12/13 |
| Revenue | 566.7 | 594.8 | -5% | 1,746.4 | 1,855.5 | -6% | 2,543.6 |
| EBITDA | 21.5 | 23.3 | -8% | 33.2 | 45.6 | -27% | 70.9 |
| EBITDA margin, % | 3.8 | 3.9 | 1.9 | 2.5 | 2.8 | ||
| EBITDA excl. non-recurring items | 25.3 | 26.8 | -5% | 41.3 | 55.0 | -25% | 81.7 |
| EBITDA margin excl. non-recurring items, % | 4.5 | 4.5 | 2.4 | 3.0 | 3.2 | ||
| Operating profit | 15.7 | 17.8 | -12% | 16.0 | 29.9 | -46% | 49.4 |
| Operating profit margin, % | 2.8 | 3.0 | 0.9 | 1.6 | 1.9 | ||
| Net profit for the period | 9.9 | 11.4 | -13% | 7.6 | 18.4 | -59% | 35.5 |
| Earnings per share, basic, EUR | 0.08 | 0.09 | -13% | 0.06 | 0.15 | -59% | 0.28 |
| Working capital | 49.4 | 119.9 | -59% | 49.4 | 119.9 | -59% | 46.0 |
| Operating cash flow before financial and tax items | 20.5 | 11.1 | 84% | 13.4 | 7.1 | 89% | 108.5 |
| Interest-bearing net debt, end of period | 131.6 | 190.1 | -31% | 131.6 | 190.1 | -31% | 86.5 |
| Gearing, end of period, % | 57.8 | 79.7 | 57.8 | 79.7 | 34.6 | ||
| Personnel, average for the period | 17,329 | 18,016 | -4% | 17,346 | 18,174 | -5% | 18,071 |
Word from the President and CEO Fredrik Strand
“At our Capital Markets Day held in Stockholm in September, we emphasised our clear plan for improving our profitability. In line with this, we reiterated our key focus to address the great potential of our life cycle solutions. The megatrends in our business field, such as tightening requirements for energy efficiency, digitalisation and fragmented markets, work in our favour.
The key to our ongoing profitability improvement lies in our own internal efficiency, which we are enhancing by making needed changes to our operational model and processes. We are transforming from a financial holding model into one coherent service and project company. Therefore, our operating principles and processes will be essentially the same in all countries. The project management related to project controls has already been improved, project business are being centralised into project office units and the ability to run projects according to set targets has improved. As a result, the turnaround of the Norwegian project operations has progressed well during the third quarter, according to plan. In addition, we have invested in systems, tools and further harmonisation to shorten the invoicing process. Our improved working capital management can be seen in our improved operating cash flow also for July–September.
We also had a positive development in our order backlog, up 6 percent from the end of September 2013, amounting to EUR 1,379.5 million at the end of September. We have announced several multi-million orders, such as the Henninger Tower project in Germany worth EUR 33 million, a project delivery of DZNE research centre in Bonn (close to EUR 9 million) and a deal to Aquis Plaza shopping centre in Aachen (around EUR 5 million). In Finland, some of our customers have had to postpone their projects, but we have also been able to secure relatively large new deals, such as the delivery of electricity systems to the Valkea shopping centre in Oulu, worth EUR 3.5 million. In Norway, we are providing a total technical solution for Arendal police station, also worth more than EUR 3 million.”
OUTLOOK FOR 2014
Market outlook for Caverion’s services and solutions
The increase of technology in buildings, energy efficiency requirements, increasing digitalisation and automation all promote demand for Caverion’s services and solutions over the coming years. The opportunities to grow in service and maintenance business are still favourable in all of Caverion’s divisions in 2014. As technology in buildings is increasing the need for new services and the demand for life cycle solutions are expected to increase. New investments in building systems are expected to increase slightly and positive signs can be seen in tendering activity. The growing public investments and the need for renovation and proactive maintenance are expected to be the key factors behind the growth. The tightening of environmental legislation will improve the growth potential of energy efficiency services. Environmental certifications and energy efficiency will be significant factors that will allow the property owners to upgrade their property value. An increasing number of properties will be connected to remote monitoring through command centres.
Overall changes in the operating environment due to growing uncertainty over the general marcoeconomic development and mounting geopolitical tensions have led to some expected cautiousness in project start-ups and service demand during the rest of the year.
Guidance for 2014 (unchanged)
Caverion estimates that the Group’s revenue with comparable exchange rates and EBITDA excluding non-recurring items for 2014 will remain at the previous year's level.
In 2014 the targeted EBITDA level will be reached by improving the operational efficiency, growing the service and maintenance business as well as increasing the project business in Germany. The potential changes in general macroeconomic environment nonetheless may have an effect on Caverion’s business and customers.
One single operative segment
The Board of Directors of Caverion Corporation decided on 27 January, 2014 that Caverion’s external reporting structure will be changed as of January 1, 2014 to better match the company’s new management structure and business areas. The segments based on geographical areas (Building Services Northern Europe and Building Services Central Europe) are replaced by one single operative segment, that will also include the Group services and other items. Since Caverion’s establishment, both service and maintenance and project businesses have been developed strongly across all countries. This interim report is the third one based on the new reporting structure. The change in reporting structure has no effect on the Group’s strategic targets.
INFORMATION SESSION, WEBCAST AND CONFERENCE CALL
Caverion will hold a news conference and webcast on the Interim Report on Friday, October 31, 2014, at 11:00 a.m. (Finnish Time, EET) at Restaurant Bank, Unioninkatu 20, 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 20 31940550 (no conference ID or pin code required) at 10:55 a.m. (Finnish time, EET) at the latest. More practical information on the news conference can be found on Caverion's website, www.caverion.com/investors.
Financial information in 2014
Financial Statements Bulletin for January - December 2014 will be published on January 29, 2015 at 9:00 a.m. (Finnish Time, EET).
Financial reports and other investor information are available at 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
For further information, please contact:
Antti Heinola, Chief Financial Officer, Caverion Corporation, tel. +358 40 352 1033, antti.heinola@caverion.fi
Milena Hæggström, Head of Investor Relations, Caverion Corporation, tel. +358 40 5581 328, milena.haeggstrom@caverion.fi
Distribution: NASDAQ Helsinki, principal media, www.caverion.com
