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.
KEY FIGURES
+-----------------+--------+--------+------+--------+--------+------+--------+
|EUR million | 4–6/16 | 4–6/15 |Change| 1–6/16 | 1–6/15 |Change|1–12/15 |
+-----------------+--------+--------+------+--------+--------+------+--------+
|Order backlog |1,554.2 |1,393.1 | 12%|1,554.2 |1,393.1 | 12%|1,461.4 |
+-----------------+--------+--------+------+--------+--------+------+--------+
|Revenue | 615.5 | 638.1 | -4%|1,176.1 |1,201.5 | -2%|2,443.0 |
+-----------------+--------+--------+------+--------+--------+------+--------+
|EBITDA excluding | -6.8| - | -| 6.6| - | -| - |
|restructuring | | | | | | | |
|costs | | | | | | | |
+-----------------+--------+--------+------+--------+--------+------+--------+
|EBITDA margin | -1.1| - | -| 0.6| - | -| - |
|excluding | | | | | | | |
|restructuring | | | | | | | |
|costs, % | | | | | | | |
+-----------------+--------+--------+------+--------+--------+------+--------+
|EBITDA | -14.4| 22.0| | -2.9| 36.2| | 91.5|
+-----------------+--------+--------+------+--------+--------+------+--------+
|EBITDA margin, | -2.3| 3.4| | -0.2| 3.0| | 3.7|
|% | | | | | | | |
+-----------------+--------+--------+------+--------+--------+------+--------+
|Operating profit | -21.5| 15.5| | -16.7| 23.4| | 65.0|
+-----------------+--------+--------+------+--------+--------+------+--------+
|Operating profit | -3.5| 2.4| | -1.4| 1.9| | 2.7|
|margin, % | | | | | | | |
+-----------------+--------+--------+------+--------+--------+------+--------+
|Net profit for | -16.1| 10.4| | -12.9| 15.8| | 46.6|
|the period | | | | | | | |
+-----------------+--------+--------+------+--------+--------+------+--------+
|Earnings per | -0.13| 0.08| | -0.10| 0.13| | 0.37|
|share, basic, | | | | | | | |
|EUR | | | | | | | |
+-----------------+--------+--------+------+--------+--------+------+--------+
| | | | | | | | |
+-----------------+--------+--------+------+--------+--------+------+--------+
|Working capital | 17.1| 7.7| 123%| 17.1| 7.7| 123%| -13.6|
+-----------------+--------+--------+------+--------+--------+------+--------+
|Free cash flow | -32.6| -6.3| | -61.3| -5.5| | 53.9|
+-----------------+--------+--------+------+--------+--------+------+--------+
| | | | | | | | |
+-----------------+--------+--------+------+--------+--------+------+--------+
|Interest-bearing | 130.6| 84.9| 54%| 130.6| 84.9| 54%| 29.8|
|net debt | | | | | | | |
+-----------------+--------+--------+------+--------+--------+------+--------+
|Gearing, % | 62.7| 37.3| | 62.7| 37.3| | 11.6|
+-----------------+--------+--------+------+--------+--------+------+--------+
| | | | | | | | |
+-----------------+--------+--------+------+--------+--------+------+--------+
|Personnel, | 17,577| 17,032| 3%| 17,541| 17,018| 3%| 17,321|
|average for the | | | | | | | |
|period | | | | | | | |
+-----------------+--------+--------+------+--------+--------+------+--------+
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.
CAVERION CORPORATION
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, antti.heinola@caverion.com
Milena Hæggström, Head of Investor Relations, Caverion Corporation, tel.
+358 40 5581 328, Milena.Haeggstrom@caverion.com
