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 |    19.5|        |      |    26.1|        |      |      - |
|restructuring    |        |        |      |        |        |      |        |
|costs            |        |        |      |        |        |      |        |
+-----------------+--------+--------+------+--------+--------+------+--------+
|EBITDA margin    |     3.3|        |      |     1.5|        |      |      - |
|excluding        |        |        |      |        |        |      |        |
|restructuring    |        |        |      |        |        |      |        |
|costs, %         |        |        |      |        |        |      |        |
+-----------------+--------+--------+------+--------+--------+------+--------+
|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 |     0.9|     2.6|      |    -0.7|     2.1|      |     2.7|
|margin, %        |        |        |      |        |        |      |        |
+-----------------+--------+--------+------+--------+--------+------+--------+
|Net profit for   |     2.9|     9.9|  -70%|    -9.9|    25.7|      |    46.6|
|the period       |        |        |      |        |        |      |        |
+-----------------+--------+--------+------+--------+--------+------+--------+
|Earnings per     |    0.02|    0.08|  -70%|   -0.08|    0.21|      |    0.37|
|share, basic,    |        |        |      |        |        |      |        |
|EUR              |        |        |      |        |        |      |        |
+-----------------+--------+--------+------+--------+--------+------+--------+
|                 |        |        |      |        |        |      |        |
+-----------------+--------+--------+------+--------+--------+------+--------+
|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 |   169.7|   101.9|   67%|   169.7|   101.9|   67%|    29.8|
|net debt         |        |        |      |        |        |      |        |
+-----------------+--------+--------+------+--------+--------+------+--------+
|Gearing, %       |    80.4|    43.4|      |    80.4|    43.4|      |    11.6|
+-----------------+--------+--------+------+--------+--------+------+--------+
|                 |        |        |      |        |        |      |        |
+-----------------+--------+--------+------+--------+--------+------+--------+
|Personnel,       |  17,375|  17,369|    0%|  17,486|  17,286|    1%|  17,321|
|average for the  |        |        |      |        |        |      |        |
|period           |        |        |      |        |        |      |        |
+-----------------+--------+--------+------+--------+--------+------+--------+

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

Attachments

Caverion Interim Report 1-9 2016.pdf