Caverion Corporation's Interim Report for January 1–June 30, 2014: Improved working capital management – Increasing profit remains in focus

Helsinki, 2014-07-22 08:00 CEST (GLOBE NEWSWIRE) --  

CAVERION CORPORATION                INTERIM REPORT 1-6/2014             July 22, 2014 at 9:00 a.m.

Improved working capital management –  Increasing profit remains in focus
 

April 1 – June 30, 2014

• Revenue: EUR 588.4 (652.8) million, decreased by 10 percent.
  • Revenue decreased by 7 percent at previous year’s exchange rates for corresponding period.
• EBITDA: excluding non-recurring items EBITDA was EUR 2.9 (16.0) million, or 0.5 (2.5) percent of revenue.
  • EBITDA including non-recurring items was EUR 2.1 (12.9) million, or 0.4 (2.0) percent of revenue.
  • Activities relating to the demerger and the restructuring of the business have taken a longer time than expected and are still partly ongoing. Projects in Norway and Denmark have continued to dilute the profitability in April−June 2014. Furthermore, Caverion has reviewed the project business more closely in all the divisions and revised the cost estimates and provisions relating to some low-performing projects in the overall project portfolio. The profitability of the Norwegian project business is expected to improve during the second half of 2014.
• Operating cash flow after investments: EUR -9.4 (-35.3) million. Improved cash flow as a result of focus on working capital management.
• Working capital: EUR 48.6 (99.8) million at the end of June. The target to reach negative working capital by the end of 2016 is progressing according to plan.
• Order backlog: EUR 1,350.3 (1,274.2) million at the end of June.

January 1 – June 30, 2014

• Revenue: EUR 1,179.7 (1,260.6) million, decreased by 6 percent.
  • Revenue decreased by 3 percent at previous year’s exchange rates for corresponding period.
• EBITDA: excluding non-recurring items EBITDA was EUR 16.0 (28.2) million, or 1.4 (2.2) percent of revenue.
  • EBITDA including non-recurring items was EUR 11.7 (22.3) million, or 1.0 (1.8) percent of revenue.
  • EBITDA is burdened by non-recurring items of EUR -4.3 million in total. The non-recurring costs of EUR 17.5 million consisted of expenses relating to a terminated M&A project, reorganisation costs and provisions for old, completed projects, including a final settlement of EUR 3.5 million from an old export project in Danish operations due to bankruptcy of a joint venture partner. 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.
• Operating cash flow after investments: EUR -26.3 (-37.5) million, 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. Investments of EUR 8.2 million in January–June related mainly to IT and development of common business processes. 

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

Word from the President and CEO Fredrik Strand

“The work to move from the old YIT financial holding model into a competitive coherent service and project corporation with common processes and tools is progressing well with full speed.

During April–June we have reviewed our overall project portfolio more closely in all the divisions and revised the cost estimates and provisions relating to some low-performing projects. The review has negatively impacted the reported EBITDA and the EBITDA full year guidance due to cost estimate adjustments to projects in the completion phase, provisions made for low-performing active projects and provisions made for old, completed projects. The latter has been considered as non-recurring items as defined in the financial tables under note 5. Caverion is conservative in defining non-recurring items, which are excluded from our EBITDA guidance.

Our Q2 results should be seen as an integrated part of our overall performance and part of completing the demerger and restructuring of the operations within Caverion and not an individual quarter as projects typically stretch over 12-24 months.

We are still in progress in increasing our profitability. This is the foundation we need in order to achieve growth in line with our vision: to become a leading European provider of advanced and sustainable life cycle solutions for buildings and industries.

We also strive to have more efficient and harmonised processes in all our countries. Having the best people is not enough, if the processes and tools supporting their work are not sufficient. We have therefore initiated process development and it is our firm goal to have all the redefined processes in place as by the end of the year.

In addition, we are investing in tools and templates to shorten the invoicing process. Our improved working capital management is already bearing fruit, which can be seen in our improved cash flow from operations for April–June.”

OUTLOOK FOR 2014

Market outlook for Caverion’s services

There are no changes to the previously communicated market outlook.

The increase of technology in buildings, energy efficiency requirements, increasing digitalisation and automation all promote demand for Caverion’s services 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 repair work 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.

Guidance for 2014

Caverion updated its guidance for 2014 on July 14, 2014. According to the updated guidance 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 second 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 Tuesday, July 22, 2014, 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 +44 207 660 2078 (no conference ID or pin code required) at 10:55 a.m. (Finnish time, EEST) at the latest. More practical information on the news conference can be found on Caverion's website, www.caverion.com/investors.

Other IR events in 2014

Caverion will arrange a Capital Markets Day in Stockholm on September 10, 2014 at 9:00 a.m. (Swedish Time, CEST). More information on the programme has been published as a stock exchange release on June 18, 2014.

Financial information in 2014

Interim Report for January - September will be published on October 31, 2014 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 OMX Helsinki, principal media, www.caverion.com