Investor Presentation. September 2018

Transcription

1 Investor Presentation September 2018

2 Company representatives Martti Ala-Härkönen CFO Milena Hæggström Head of IR 2

3 Contents 1. Business and strategy 2. Market overview 3. Financials 4. Appendix 3

4 Business and strategy

5 Caverion a leading European service company o o o Caverion designs, builds, operates and maintains user-friendly and energy-efficient technical solutions for buildings, industries and infrastructures in Northern, Central and Eastern Europe. Caverion s services and solutions are used in commercial, industrial, public and residential buildings and processes ensuring business continuity, safe, healthy and comfortable conditions, optimised performance and cost control. The company s head office is located in Helsinki, Finland. The Caverion share (CAV1V) is listed on Nasdaq Helsinki. EUR 2.2 billion revenue, LTM Q2/ ,000 spaces in service EUR 37.4 million adjusted EBITDA, LTM Q2/ countries 0.2x Net debt/ebitda 1 ~15,750 employees (6/2018) Caverion is a technical forerunner and its disciplines cover the entire life cycle of buildings and industries, projects, and services Heating and Sanitation Ventilation and Air Conditioning Cooling Electricity Information and Communication Services Security and Safety Automation Industrial Installations Process Piping Note: Revenue and adjusted EBITDA LTM Q2/2018 figures. IFRS 15 restated figures as applicable, unless otherwise. stated. 1) According to agreed calculation principles with the lending parties. As of Q2/

6 Caverion is a leading European service provider for buildings and industries Caverion has a strong market position: In 2017, ranked among the five largest players in all of its largest operating countries (Finland, Sweden, Norway, Denmark, Germany and Austria). Caverion is also the leading industrial solutions company in Finland. Finland Sweden Austria Norway #3 #2 #1 1. Caverion 2. Are 1. Bravida 2. Caverion 1. Ortner 2. Caverion 1. Bravida+Oras 2. GK #5 #4 3. Consti 3. Assemblin 3. Engie 3. Caverion 4. Bravida 4. Midroc Electro 4. EQOS Energie 4. Coor #5 5. Quatro Mikenti 5. Eitech 5. G. Klampfer 5. OneCo Germany 1. Apleona 2. Strabag PFS 3. Wisag 4. SPIE 5. Caverion Denmark 1. Kemp & Lauritzen 2. Bravida 3. Kirkebjerk 4. Lindpro 5. Caverion Baltics/EE 1. ISS 2. Apleona 3. City Service 4. Caverion Denmark 6% Austria 7% Industrial Solutions 11% Finland 14% Eastern Europe 3% Revenue by division (2017) Norway 16% Sweden 22% Germany 21% #2 Revenue meur mEUR More than 500mEUR 6

7 Key investment highlights A leading European service company offering intelligent and integrated solutions Clear strategic path forward with focus on strong profitability improvement and service growth Financial targets Cash conversion* > 100% Profitability (EBITDA-%) > 6% 3. Forerunner in digital solutions for built environments Asset-light, cash generative business model with a diversified customer base Healthy order backlog with an increasing share of services and high-quality projects Market outlook remains attractive Leverage (Net debt/ebitda) < 2.5x Growth Services growth > market Services generate > 2/3 of Group revenue (longterm target beyond 2020) Group revenue growth target specified by the end of 2019 *) Operating cash flow before financial and tax items / EBITDA 7

8 Forerunner in digital solutions for built environments Megatrends Increasing technology Energy efficiency Digitalisation Urbanisation The share of technology in built environments investment cost is increasing (40-60%) requires expertise in integration of multiple technologies Both legal and financial needs increase the demand for energy efficient solutions and renewable energy sources The growing digitalisation of built environments creates possibility to manage data and conditions across the whole life cycle Creating safe and reliable built environments for citizens and communities in a profitable manner Caverion s technical expertise New solutions Cost efficiency Energy efficiency Customer satisfaction Megatrends and Caverion s well-invested technological platform and new solutions provide cost and energy efficiency for Caverion s customers 8

9 Clear competitive advantage This is why our customers choose us Expertise in Services Expertise in Projects Trusted partner and advisor in Facility Management Services 55% Integrated life cycle deliveries of all building systems Remote management capabilities Real-time client reporting Nationwide local presence ensuring short response times Efficiency in reducing costs, extending service life and minimising breakdowns Unified concepts: ServiFlex, ServiFlex+ and IoT Flex Revenue by business unit (H1/2018) Projects 45 % A forerunner in digitalising project planning and execution (BIM) Expertise in clean room, tunnel, telematics, traffic control Productivity and quality through prefabrication and own smart solutions Local presence, centralised competences in PMOs Technical expertise as an integrator of all technical systems for building and industry Skilled personnel Strong partner Technological innovator Life-cycle and sustainability focus 9

10 Fit for Growth Increasing technology Energy efficiency Digitalisation Urbanisation Caverion is turning into a leading service company and a selective master of projects. We cover the whole life cycle of buildings, industries and infrastructure. We are a technology forerunner providing excellent customer experience. We will, after getting fit, grow faster than the market. MISSION VISION Smart solutions and happy customers First choice in digitalising environments MUST-WINS Excellent customer experience Best solutions Top performance at every level Winning team VALUES Step ahead Cooperation Responsibility High performance MUST-HAVES Safety Quality Sustainability 10

11 Fit for Growth Meeting the milestones for FIT GROWTH Excellent customer experience Best solutions Top performance at every level Winning team 11

12 Fit for Growth Key changes and ways to guarantee success Shift in business mix over time Organic growth faster than the market in Services Selectivity in Projects, focus on those leading to Services Must-Wins are key in strategy execution Strategy starting from customer demand - Transformation towards a service culture where customer experience is key Best solutions: embracing digitalisation Driving Top Performance at every level Winning team: capable leaders and engaged professionals First focus on efficiency and getting fit, second grow faster than the market on a sustainable basis Executable division-specific plans Renewed and experienced team to execute strategy 12

13 Four clear Must-Wins to implement our strategy Excellent customer experience Professional sales Service culture program Increased customer loyalty Best solutions Boost Profitable Growth with Comprehensive Services Boost profitable growth with Digital Services Boost profitable growth through Technology Becoming Master of Projects Top performance at every level Project performance management Service performance management Procurement & logistics performance management Fixed cost performance management Winning team Inspirational leadership Right people in right places Professional growth 13

14 1 Improving our performance in Services Business unit focus Performance management Management structure Consistent way to develop service business, end-to-end Ensuring strong execution Granular financial reporting Focus on invoicing, completion, mobile reporting quality, sales management and productivity KPI s down to individual level Management practices 14

15 Accelerating profitable Services growth Building on existing strengths TECHNICAL MAINTENANCE (78% of revenue in Services) Performance management People development Growth with existing customers Expand and upgrade services scope Pricing optimisation SERVICES TAILORED FOR LARGE CUSTOMERS (22% of revenue in Services) Comprehensive offering with technical and digitalised core Differentiating factor Develop partnerships High quality service delivery Growth with existing and new customers NEW DIGITAL SERVICES SERVICE CULTURE 15

16 Growing service business performing well Services revenue (IFRS 15 adjusted) EUR million 2017: 1, H1/2018: (587.9) Q1 Q2 Q3 Q4 Q1 Q2 The underlying demand for Services is expected to remain strong. As technology in buildings increases, the need for new services and digital solutions and the demand for Life Cycle Solutions are expected to increase Services business revenue grew by 4.2% in Q2/2018, while in Projects revenue declined by 4.0% (y-o-y) Share of service business of 54% of total revenue in Q2/2018 Services business continues to perform well 10,000 Employees in Services EUR 1.2 billion revenue in ,000 spaces in service 1,000,000 Service orders annually 5,500 Service cars 5,000 Mobile tools in use 29% Managed Services of total Services 250 Service locations 16

17 New Digital Services add value to our customers Ready to roll-out: IoTFlex for industrial customers ServiFlex+ for buildings Customer information portal Remote center services Analytics Sensors Customer information portal Development: Caverion smart solutions Digitalised service delivery process Analytics New business models Remote center Building Automation System Field mobility 17

18 Why are projects important to Caverion? Healthy project Supports service Increasing Service customers Sets Caverion business drives growth with smart interest towards require project apart from soft cash flow and concepts and Life Cycle capabilities service negative working digital solutions contracting competitors as capital (BIM) a technological forerunner 18

19 Poor historical performance but clear strategy going forward MAIN REASONS BEHIND POOR PROJECT PERFORMANCE: Wrong incentives to take on projects Fragmented project unit structure Undesirable project mix Errors in tender calculation Mistakes in project execution ambitious growth targets and employment purposes multiple small project units with wrong locations too high share of single discipline tender based contracting unprofitable margins from the very beginning of projects inadequate competences to deliver certain complex projects ACTIONS TO DELIVER STRATEGY : Select projects through categorisation model and selective tendering Implement project performance management Develop project competences and implement strategic resource planning Develop active project portfolio and business mix management TARGET 2020: PROFITABLE PROJECT BUSINESS GENERATING STRONG CASH FLOW AND SUPPORTING SERVICE GROWTH 19

20 Delivering our selective and disciplined strategy in Projects Select projects based on profitability, cash flow and ability to support growth in services Implement Projects Performance Management Improve project management competences and develop resource planning Manage project portfolio and business mix, climb up in the value chain 20

21 Strategic choices in bid / no-bid phase CONTRACT MODEL / TERMS DISCIPLINES CUSTOMER SEGMENT VALUE CHAIN GEOGRAPHICAL FOOTPRINT Decrease lump-sum terms, increase partnership models Banned and restricted clauses Only payment plans enabling strong project cash flow Focus on multi-discipline and total technical solution projects Focus on disciplines with higher strategic value Ensure high service hit rate Clear no-go customers Focus on the most profitable and attractive customer segments Ensure high service hit rate Move up in the value chain with focus on Design & Build and Smart concepts Move gradually away from tender-based singlediscipline contracting Ensure high service hit rate Focus on projects located in growth centers Reduction in number of project units through increased selectivity 21

22 Project categorisation identifies risk level for tendering and sets requirements for execution competences and steering model PROJECT RISK ASSESSMENT IN TENDERING PHASE CATEGORIES BY NO. AND VALUE OF PROJECTS TECHNICAL PROJECT CHARACTERISTICS Number of projects Value of Projects A++ FINANCIAL CRITERIA 30% A++ A+ A+ A CONTRACTUAL TERMS AND CONDITIONS B+ B A 90% EXECUTION RELATED ISSUES CUSTOMER RELATED ISSUES 70% C B+ B C TRACK RECORD AND COMPETENCE D D 10% 22

23 2 Projects Performance Management Action-based steering and follow-up through harmonised management and KPIs BUSINESS UNIT S ORGANISATIONAL LEVELS MEETING FREQ. HARMONISED MANAGEMENT PRACTICES AND KPIs PROJECT CATEGORIES GROUP Monthly / Quarterly A A+ Division Region Manager Project Unit Manager Monthly Monthly Monthly Harmonised meeting practices on all organisational levels Harmonised weekly and monthly performance indicators Harmonised reporting tools and action templates Means to manage (training and handbooks) B+ C D B Project manager Constant follow-up and focus on actions Weekly Early-warning indicators Technicians / site 23

24 3 Strategic resource planning in practice (illustration Sweden) 1. Project unit structure consolidated to gain lean cost structure and wider offering 2. Units resources and project management competences matching with project categories and market potential 3. Own resources scaled to support flexibility 4. PMO built to support large and complex project deliveries GROWTH CENTER PM competence (Level 2-3) B B+ Mid-size city S- disc PM competence (Level 1) M- disc MID-SIZE CITY TTS X PMO / LARGE PROJECTS C D Own resources Subcontracting EPC Life D&B & PPP cycle X X X Own resources Capital area PM competence (Level 4-5) A A+ S- disc M- disc TTS Subcontracting EPC Life D&B & PPP cycle X X X Growth center Own resources Subcontracting 24 S- disc M- disc TTS D&B EPC & PPP Life cycle

25 4 Building a portfolio with an optimal mix of projects Balancing duration with risk & reward Value and service hit rate increase, less competition Design & Build Life cycle EPC & PPP, Alliance Design & Build PMO Centralised organisation and competences Total technical solution Total technical solution Multiple disciplines, tender-based Multiple disciplines, tender-based Single discipline, tender-based Single discipline, tender-based Single discipline, tender-based Regions Local organisation and competences 6m 12m 18m Project length 25

26 Must-Wins will enable Caverion to deliver its financial targets CAVERION Must-Wins FINANCIAL IMPACT Excellent Customer Experience Best Solutions Top Performance at Every Level Winning Team OPERATIVE CASH FLOW EBITDA Net working capital Sales margin Fixed cost Operative working capital Other working capital Revenue Direct costs Fixed personnel Other fixed cost POC-items and invent. Trade rec. & payables Other curr. receivables Other curr. liabilities All relevant income statement and balance sheet items are addressed through Must-Wins in order to achieve the Group financial targets 26

27 Performance Management of Business Unit initiatives Top Performance at Every Level FINANCIAL IMPACT 1) Service Performance Management 2) Project Performance Management 3) Procurement and Material Logistics Performance Management 4) Fixed Cost Performance Management WORK STREAM 27 OPERATIVE CASH FLOW EBITDA Net working capital Sales margin Fixed cost Operative working capital Other working capital Revenue Direct costs Fixed personnel Other fixed cost POC-items and invent. Trade rec. & payables Other curr. receivables Other curr. liabilities 1 2 Service Performance Management Project Performance Management Roll out a harmonised, action-based Service business performance management model Roll out common KPIs, steering model, meeting protocols & prodecures as well as incentives Target: Strong impact on all P/L items and OWC Roll out Project performance management model Project selectiveness through clear categorisation Roll out common KPIs and project review metrics Target: Strong impact on all P/L items and OWC, improve project portfolio and resource management

28 Performance Management of procurement/fixed cost initiatives Top Performance at Every Level FINANCIAL IMPACT 1) Service Performance Management 2) Project Performance Management 3) Procurement and Material Logistics Performance Management 4) Fixed Cost Performance Management WORK STREAM OPERATIVE CASH FLOW EBITDA Net working capital Sales margin Fixed cost Operative working capital Other working capital Revenue Direct costs Fixed personnel Other fixed cost POC-items and invent. Trade rec. & payables Other curr. receivables Other curr. liabilities 3 4 Procurement and Material Logistics Performance Management Fixed Cost Performance Management Drive cost savings and WC efficiency in both direct and indirect procurement Roll out common KPIs and harmonised action-based steering Drive category management to leverage purchasing power Improve material logistics efficiency Flatten and harmonise organisational structures with focus on fixed personnel and premises costs Drive savings on all discretionary & other fixed cost categories optimise processes and cut fixed costs 28

29 Other Must-Wins will deliver particularly in the Growth phase Other Must-Wins 1) Excellent Customer Experience 2) Best Solutions 3) Winning Team FINANCIAL IMPACT WORK STREAM OPERATIVE CASH FLOW EBITDA Net working capital Sales margin Fixed cost Operative working capital Other working capital Revenue Direct costs Fixed personnel Other fixed cost POC-items and invent. Trade rec. & payables Other curr. receivables Other curr. liabilities Excellent Customer Experience Best Solutions Winning Team Drive professional sales with harmonised operating model Implement long-term service culture program Continuously increase customer loyalty Growth in high value-added services and solutions Growth through digital services Growth through new technologies and new business models Strengthen leadership and increase engagement Improve occupational competences and capabilities Enhance resource and competence planning Incentives aligned with the targets 29

30 A clear plan to improve profitability with the new strategy Projection of potential of the new strategy on EBITDA margin presented at the CMD in November 2017 STATUS QUO (adjusted for items affecting comparability) FIT FOR GROWTH EBITDAmargin target >6% >6% >7% 65.3m 2.9% -0.9 % 23.8m EBITDA-% Q3/2017 (LTM) Restructuring costs (LTM) Project writedowns (LTM) EBITDA-% Adj. starting point (LTM) Services Performance Management Projects Performance Management Procurement and Material Logistics Performance Management Fixed Cost Performance Management EBITDA-% "Fit" phase potential Other Must- Wins EBITDA-% Strategy 2020 potential Services margin improvement excluding direct materials and fixed costs Projects margin improvement excluding direct materials and fixed costs Targeted cost savings in direct material purchases 4 5 Achievement of targeted fixed cost rate (on top of adjusted cost base) Targeted sales increase with operating leverage of Fit phase potential

31 Summary: Actions to reach our financial targets through Must-Wins Focus on Top performance at every level Top performance at every level Roll out performance management models with common KPIs in these areas: Project performance management Be selective in projects through categorisation Roll out common project review metrics Service performance management Roll out meeting protocols & procedures and incentives Procurement/logistics perf. management Drive cost savings and WC efficiency Drive category management to leverage purchasing power Improve material logistics efficiency Fixed cost performance management Optimise processes and cut fixed costs Harmonise organisational structures Other Must-Wins Excellent customer experience Drive professional sales with harmonised operating model Implement long-term service culture program and increase customer loyalty continuously Best solutions Grow in high value-added services and solutions Grow through digital services, new technologies and new business models Winning team Strengthen leadership and increase engagement Improve competences and capabilities Enhance resource/competence planning Align incentives with targets 31

32 Market overview

33 Favourable market demand and outlook Market remains fragmented Services Underlying demand expected to remain strong Demand for Life Cycle Solutions expected to increase Opportunities in outsourced operations and maintenance Key competitors Gunnar Karlsen, Apleona, Assemblin, Are Group, Spie, Bilfinger Projects Markets expected to remain on a good level Demand for Design & Build expected to develop favourably Energy efficiency, better indoor conditions and tightening legislation positive drivers Key competitors Bravida, Gunnar Karlsen, Apleona, Assemblin, Are Group, Ortner Group, ROM-Technik, Engie 33

34 Favourable Services market demand and outlook % Facility Management Services Market Growth Outlook Europe Germany Services Underlying demand expected to remain strong IFM/bundled offerings gaining share Opportunities in outsourced operations and maintenance; currently ~half of the total market is outsourced (varies between geographies and segments) Demand for Life Cycle Solutions expected to increase Source: Lünendonk -Studie

35 Operating environment 1-6/2018 Services Demand remained strong. Opportunities in outsourced operations and maintenance increased. Interest in PPP s and other Life Cycle Solutions was good in the Nordic countries, while these kind of commercial models still represent only a marginal, but a growing part in other markets. Revenue breakdown* 1-6/2018 (1-6/2017) Projects The market was positive, but price competition remained tight. In the market for large projects, tendering activity remained on a good level, while Caverion continued its selective approach. Requirements for increased energy efficiency, better indoor climate and tightening environmental legislation supported demand. In certain technical disciplines there were signs of resource shortage. Services business unit 55% (52%) Projects business unit 45% (48%) * Change in reporting of business unit revenue 35

36 Economic sentiment and construction confidence All main Caverion countries above long-term averages ECONOMIC SENTIMENT INDICATOR (1/2008 6/2018) CONSTRUCTION CONFIDENCE INDICATOR (1/2008 6/2018) Long-term average Long-term avergae Average adjusted figures Source: European comission, July

37 Construction and GDP growth estimates in key markets Good outlook on new non-residential construction for 2018, renovation to continue its stable growth. Variations between countries especially in new construction. NEW NON-RESIDENTIAL CONSTRUCTION NON-RESIDENTIAL RENOVATION NEW RESIDENTIAL CONSTRUCTION RESIDENTIAL RENOVATION GROSS DOMESTIC PRODUCT GROWTH '18 GROWTH '18 GROWTH '18 GROWTH '18 GROWTH '18 8.8% 6.6% 5.1% 3.9% 2.6% Weighted average* 3.7% 1.7% 1.5% 2.8% 2.0% 1.7% 1.5% 1.4% 1.6% 7.0% 4.5% 2.0% 3.5% 2.0% 1.8% 1.5% 1.2% 0.9% 2.4% 3.2% 2.8% 2.5% 2.1% 2.0% 2.0% 0.5% 0.4% -0.2% -0.5% -1.8% Norway Finland Denmark Sweden Austria Germany Sweden Denmark Austria Finland Norway Germany Finland Denmark Germany Austria Sweden Norway Denmark Norway Finland Austria Sweden Germany Austria Sweden Finland Germany Denmark Norway Source: Euroconstruct, June 2018 * Weighted average growth calculated based on Caverion s 1-6/ 2018 geographical volume mix 37

38 New non-residential construction growth estimates for 2018 Growth estimates particularly high for health and office buildings in Caverion s main markets NEW NON-RESIDENTIAL CONSTRUCTION BY BUILDING TYPE (GROWTH 2018) SUMMARY % New non-residential construction volume 2017 in main Caverion countries* ( b, left axis) Weighted average growth 2018** (%, right axis) 20.3% Total weighted average** 3.7% 25% 20% 15% 10% Substantial growth expected in the health sector especially in Norway and Sweden, thanks to improving public finances, reorganisation of public health-care, the growing share of private sector health-care and the ageing of population. The growth is expected to continue also in Office construction outlook good for 2018 particularly in Finland and Norway % % % 0.3% 0.2% % 5% 0% 0 Buildings for health Office buildings Storage buildings Misc buildings Industrial buildings Buildings for education Commercial buildings Agricultural buildings -5% Source: Euroconstruct, June 2018 * Finland, Sweden, Norway, Denmark, Germany and Austria ** Weighted average growth calculated based on Caverion s 1-6/ 2018 geographical volume mix 38

39 Financials

40 Caverion s updated financial targets until the end of 2020 During the Fit phase focus on Cash Conversion and EBITDA Cash conversion* Profitability (EBITDA-%) Leverage (Net debt/ebitda) Growth Services growth > market > 100% > 6% < 2.5x Services generate > 2/3 of Group revenue (long-term target beyond 2020) Group revenue growth target specified by the end of 2019 Operating cash flow (EURm) Cash conversion*, % n/m n/m n/m H1/18 EBITDA (EURm) EBITDA margin (%) H1/18 Net debt (EURm) Net debt/ebitda** 0.2x Q1/18 Revenue (EURm) 2,407 2,443 2,364 2, *Operating cash flow before financial and tax items / EBITDA (LTM) ** According to agreed calculation principles with the lending parties 40

41 Guidance for 2018 unchanged Revenue Adjusted EBITDA Caverion estimates that the Group s revenue for 2018 will decrease compared to the previous year (2017: EUR 2,275.8 million). Caverion estimates that the Group s adjusted EBITDA will more than double in 2018 (2017: EUR 25.8 million). Dividend Dividend policy: Dividend pay-out at least 50% of the result for the year after taxes, however, taking profitability and leverage level into account. The AGM held on 26 March 2018 decided that no dividend be paid for Adjusted EBITDA = EBITDA before items affecting comparability (IAC) 41

42 Capital allocation principles #1 Financial target: > 100% cash conversion Investments in organic growth including digitalisation Reduction in leverage Dividend policy: payout at least 50% of the net profit for the period, taking into account profitability and leverage level M&A: Areas where adding complementing capabilities / assets to existing footprint especially in Services Allowed for Divisions performing well 42

43 Summary of Q2/2018: Operational improvement continues and Q2 revenue slightly higher than last year Risk level lower going forward Order backlog Order backlog amounted to EUR 1,596.8 (1,512.7) million at the end of June, up by 5.6 percent from the end of June in the previous year. Reporting change of long-term Services contracts in Sweden (up by EUR 62.5 million) Revenue Revenue EUR (563.3) million, up by 0.3% or by 2.1% in local currencies. Revenue up by 4.2% in Services and down by 4.0% in Projects Impacted negatively by currency fluctuations and the sale of Krantz EBITDA Adjusted EBITDA improved to EUR 12.9 (4.5) million Both business units improved their margins. EBITDA amounted to EUR (-14.1) million, affected by anti-trust fine of EUR 40.8 million. Cash flow and leverage Operating cash flow before financial and tax items was EUR (-25.9) million, impacted by seasonality. Net debt/ebitda improved to 0.2x, based on the confirmed calculation principles with lending parties. Earnings per share Earnings per share amounted to EUR (-0.14) per share. Earnings per share was impacted by the German anti-trust fine of EUR 40.8 million and other items affecting comparability. 43

44 Order backlog development Order backlog was EUR 1,596.8 (1,512.7) million at the end of June, up by 5.6 percent from the previous year. The order backlog reporting was changed during the period due to reporting harmonisation of longterm Services contracts in Sweden, which increased the order backlog by EUR 62.5 million. At comparable exchange rates the order backlog increased by 7.0 percent. Order backlog increased in Services and declined in Projects from the end of June Order backlog EUR million Q1 Q2 Q3 Q4 1,540 1,597 1, Comparative figures are carve-out figures for the periods before the effective date of the partial demerger (June 30, 2013). 44

45 Revenue development Group revenue, EUR million Q1 Q2 Q3 Q4 Q1 Q : 2,275.8 Revenue breakdown by division, EUR million Norway Denmark Sweden Germany Industrial Solutions / /2018-4% +4% -12% -1% -10% +1% +9% -9% Comparative figures are restated IFRS 15 figures for H1/2018: 1,091.6 (1,138.0) Finland Austria Eastern Europe Q2/2018: Revenue was EUR (563.3) million, up by 0.3% from the previous year (+2.1% in local currencies). +4.2% in Services (+6.4% in local currencies) and -4.0% in Projects (-2.5% in local currencies) Revenue increased from the previous year in all divisions except Sweden, Denmark and Eastern Europe. H1/2018: Revenue was EUR 1,091.6 (1,138.0) million, down by 4.1% from the previous year (-2.0% in local currencies). +1.4% in Services (+3.9% in local currencies) and -9.9% in Projects (-8.4% in local currencies) Impacted negatively by currency fluctuations and the sale of Krantz 45

46 Adjusted EBITDA improved from the previous year Adjusted EBITDA improved from the previous year to: EUR 12.9 (4.5) million for Q2/2018 EUR 23.9 (12.3) million for H1/2018 EBITDA was EUR (-14.1) million for Q2/2018 and EUR (-16.1) million for H1/2018, impacted by the German anti-trust fine of EUR 40.8 million and other items affecting comparability. EBITDA also impacted by certain project writedowns from older projects as well as one-off legal and strategy-related costs. Both business units improved their margins. By division, there was positive development in most divisions. Adjusted EBITDA, EUR million Adjusted EBITDA margin, % 2017: 25.8 (1.1%) H1/2018: 23.9 (2.2%) EBITDA, EUR million EBITDA margin, % 2017: 3.8 (0.2%) H1/2018: (-2.0%) Q1 Q2 Q3 Q4 Q1 Q Comparative figures are restated IFRS 15 figures for Q1 Q2 Q3 Q4 Q1 Q2 46

47 Strategy execution through must-wins continues Focus on Top performance at every level in 2018 Preparing for growth with new solutions and services Services Overall improvement in performance KPI s Good opportunities identified in pricing Specific actions carried out for lowperforming service units Utilisation improved Quick identification of performance gaps Actions to get back on track Projects Consolidation of project units, comprehensive project management trainings rolled out Improvement in performance KPI s Meeting and review practices and project management dashboards with KPIs implemented Procurement and fixed costs Procurement and fixed costs performance management programmes ongoing Supplier category management under implementation 47

48 Estimated Projects business risks for 2018 Caverion managed to settle some of its largest old project claims during the quarter, one of them relating to a large Industrial Solutions project. The company s risk position related to old project risks was reduced. The company will separately report the impacts of the remaining two completed Large Projects in Industrial Solutions under Items affecting comparability. The Projects business is expected to materially improve its result in 2018 although there are still certain project performance risks from older projects. At present there are approximately one fifth of projects in Caverion s project order backlog that have been started in 2016 or earlier. There was good development also in old overdue trade receivables. 48

49 15,751 employees at the end of June 2018 Employees by division 6/2018 Number of employees (end of period) 17,664 16,750 Work safety Accident frequency rate in the end of June decreased by 7% from the previous year to 5.4 (5.8). Sweden 19% Norway 15% Finland 16% Germany 14% Industrial Solutions 13% Eastern Europe 10% Denmark 6% Austria 5% Group Services 1% 15,751 Q2/16 Q2/17 Q2/18 49

50 Sustainability at Caverion in 2017 Key measures in ESG (Environment, Social and Governance) Work safety Accident frequency rate 5.7 (2016: 6.3) Fatal accidents 0 (2016: 0) Environment ISO certified operations 92% (2016: 93%) Fleet fuel emissions 22,999 tco2 (2016: 23,584) Kuva vaihdetaan Code of conduct o Caverion issued its fully renewed Code of Conduct in September o CoC e-learning rate by end of 2017 was 93% (previous rate 84%) Employee engagement o Employee Engagement Index 70% (2015: 70%) 50

51 Q2 cash flow impacted by seasonality Operating cash flow before financial and tax items amounted to EUR 4.9 (-38.1) million during H1/2018. Operating cash flow improved in all divisions except Denmark due to better profitability and improved working capital management. Free cash flow improved to EUR -5.1 (-46.7) million in H1/2018. Capex was EUR 7.4m (7.9). IT investments: EUR 5.7m (5.8) Other investments: EUR 1.7m (2.1) Operating cash flow before financial and tax items, EUR million 2017: -8.7 H1/2018: 4.9 (-38.1) Free cash flow, EUR million Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Q2/18 Capex, EUR million Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Q2/18 Free cash flow = Operating cash flow before financial and tax items Taxes paid Net cash used in investing activities (net, including acquisitions and disposals) 51

52 Working capital development The Group s working capital improved to EUR (-8.6) million at the end of June. Working capital, EUR million % of sales, (LTM) Working capital was impacted by the anti-trust fine related current liability of EUR 40.8 million in Germany. The amount of POC receivables decreased to EUR (273.1) million and trade receivables to EUR (300.6) million at the end of June. There was good development also in old overdue trade receivables % % % 0.0% -0.5% -1.0% -1.5% -2.0% -2.5% Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Q2/18-3.0% Comparative figures are restated IFRS 15 figures for

53 Working capital development in divisions Positive trend compared to last year almost in all divisions. Working capital tied to risk projects in Industrial Solutions started to decline, Germany impacted by anti-trust related current liability Working capital breakdown by Division EUR million 40 Q2/2017 Q2/ Norway Finland Austria Sweden Denmark Eastern Europe Industrial Solutions Germany Group 53

54 Balanced debt maturity structure Debt maturity structure on 30 June 2018, EUR million Sources of funds in the loan portfolio 54 Banks 83% Insurance companies 15% Others 2% Interest rate type (after hedges) Fixed interest rate 17% Floating interest rate 83% Gross loans EUR 72.4m (118.4m) at the end of June 2018 Net interest-bearing debt EUR 10.2m (98.6m) Net financing expenses for H1/2018 EUR -1.5m (-2.8m) Average interest rate after hedges 2.7% (2.3%) EUR 100m hybrid bond issued on June 9, 2017, treated as equity in the IFRS financial statements.

55 Financial position after EUR 60 million share issue in Q2/ x Net debt (EURm) Net debt/ebitda (12m) x 2.3x x 0.7x x x x x x x 2.8x x 3.4x * The Net Debt/EBITDA for Q1-Q3/16 has been calculated excluding restructuring costs. ** The Net Debt/EBITDA for Q4/16 Q2/18 has been calculated according to confirmed calculation principles with lending parties x x x x Net debt reduced by EUR 37 million in Q2, Net debt EUR 10.2 million at the end of Q2. o o On 15 June 2018, Caverion announced a directed share issue. Proceeds raised were EUR 60.0 million. German anti-trust fine will be paid in Q3/2018. Financial covenant (Net Debt/EBITDA): Net debt/ebitda in Q2/2018: 0.2x according to the confirmed calculation principles with lending parties. In June it was agreed with the lending parties that the German anti-trust fine and there-related legal and advisory fees are excluded from the calculation of EBITDA. Gross debt to net debt (EURm) Long-term borrowings Short-term borrowings Cash and cash equivalents Net debt Liquidity reserve EUR 181 million at the end of June 2018, EUR million 119 Unused credit facilities 62 Cash and cash equivalents 55

56 Strengthened balance sheet to retain strategic flexibility Equity ratio 28.2% (Q2/2017: 25.8%) Equity ratio, % Gearing, % Gearing 3.9% (Q2/2017: 41.7%) Caverion concluded a directed share issue of EUR 60.0 million in June. The rationale was to maintain a strong balance sheet and to retain strategic flexibility after the payment of the anti-trust fine, including: Continuation of shift towards the Services business; Support strategic projects and operational development; Investments in digitalisation; A solid cash position to finance bolt-on acquisitions in selected areas in services especially in well-performing divisions. 16.9% 16.7% 25.8% 24.8% 25.8% 27.7% 28.2% 88.8% 106.4% 41.7% 59.5% 27.2% 19.4% 3.9% Comparative figures are restated IFRS 15 figures for Q4/

57 Dividends Dividend policy Payout at least 50% of the net profit for the period, taking into account profitability and leverage level Dividends paid Dividend per share, EUR Dividend pay-out ratio, % 75% 100% 78% % 0% Dividends The AGM held on 26 March 2018 decided that no dividend be paid for

58 Appendix

59 Summary - Caverion Equity story Key investment proposals A leading European service company offering integrated and sustainable technical solutions Among top 5 in key operating countries Intelligent and integrated solutions covering all technical disciplines throughout the life cycle of properties and plants Strong technical competence Presence in 12 countries Extensive client base Own R&D Client benefits: Optimal conditions Usability Cost-efficiency Sustainability We are a company for the future Energy efficiency incorporated in all solutions Our unified market offering helps clients to focus on their core business Provider of Life Cycle Solutions Business units: Services Projects Life Cycle Solutions for buildings and industries Business model built on market mega trends Getting fit for growth Client need for integrated solutions and outsourcing partners supporting demand Fragmented market offering growth opportunities also through M&A Well-performing Services, actions ongoing to improve profitability in Projects through Performance Management actions Operating in asset-light, cash generative business Megatrends: Increasing technology Energy efficiency Digitalisation Urbanisation Technology forerunner that will, after getting fit, grow faster than the market Financial targets: Cash conversion > 100% EBITDA margin >6% Net debt/ebitda < 2.5x Services growth > market Dividend policy: at least 50% of net profit, taking into account profitability and leverage level 59 Caverion

60 Key figures EUR million Q2/18 Q2/17 Change H1/18 H1/17 Change 1-12/17 Order backlog 1, , % 1, , % 1,491.0 Revenue % 1, , % 2,275.8 Adjusted EBITDA % % 25.8 Adjusted EBITDA margin, % EBITDA EBITDA margin, % Operating profit Operating profit margin, % Earnings per share, undiluted, EUR Operating cash flow before financial and tax items Working capital Interest-bearing net debt % 64.0 Net debt/ebitda Gearing, % Equity ratio, % Personnel, end of period 15,751 16, % 16,216 60

61 Acquisitions have contributed to revenue growth Group revenue EUR million 1,680 1,797 1,892 2,140 2,396 2,125 2,353 2,876 2,803 2,544 2,407 2,443 2,364 2, , Calor AB ABB Building Systems Acquisition period Integration and development MCE AG caverion GmbH Acquisition period Integration and development figures based on official segment reporting, i.e. sum of building systems and industrial services related revenue figures of YIT, including also internal sales figures are external revenue figures based on Caverion s carve-out segment reporting figures: 1-6/2013 carve-out /2013 actual. 2017: IFRS 15 restated figures Esco Norway Arneg Enegia, AE Ausserwöger Kühlmöbel, Elektrotechnik GmbH, Sähkötaso Weiss Anlagen Technik Esitystekniikka GmbH 61

62 Some examples of our clients Broad and diversified client base Managed Services Technical maintenance Industrial Installations Managed Life Cycle Karolinska University Hospital Solna, Sweden Metsä Fibre, Pulp Mills Finland TOTAL Refinery Leuna, Germany "Marine Façade, passenger port of St. Petersburg Russia Outokumpu Tornio, Finland National courthouse Viborg, Denmark Managed Operations Project Execution Energy Performance contracting Design & Engineering, Project Management & Execution AstraZeneca, Sweden Valio, Vantaa, Finland Palais Quartier Frankfurt a. M., Germany DC Tower Vienna, Austria Söderhamn municipality, Sweden Knowledge Centre, St. Olav s Hospital Trondheim, Norway 62

63 ServiFlex+ Smart service concept for buildings Renewed, digitalised service for preventive maintenance Experience on building technology from over 30,000 facilities in 12 European countries Applications for all kind of facilities; schools, office buildings, retails shops, malls and warehouses With ServiFlex+ customers can: Optimise and predict maintenance costs Choose single or multiple technical systems See 24/7 how their building is performing Sustainability: reduced energy consumption up to 20% Have one customer information portal for reports and real-time information 63

64 IoTFlex Smart service concept for industry Modern analytics based on sensor technology allows the detection of disturbances in critical parts of the production line at an early stage Tested and developed together with a few industrial customers Fits for various industrial segments Major cost-savings when uncontrolled interruptions of production can be eliminated 64

65 Customer information portal with 24/7 real-time data 65

66 Board of Directors as of March 26, 2018 Michael Rosenlew, Chairman Born 1959, Finnish citizen M.Sc. (Econ.) Professional board member Chairman of the Board of Directors of Caverion Corporation as of 2017, Vice Chairman of the Board of Directors , Member of the Board of Directors as of 2013 Markus Ehrnrooth, Vice Chairman Born 1985, Finnish ja Swedish citizen M.Sc. (Tech), BSc Political Science (Econ) Perustaja, Knomi Oy Vice Chairman of the Board of Directors of Caverion Corporation as of 2017, Member of the Board of Directors as of 2015 Jussi Aho Born 1968, Finnish citizen M.Sc. (Civil Engineering) CEO of Fira Group Member of the Board of Directors of Caverion Corporation as of 2017 Joachim Hallengren Born 1964, Swedish citizen M.Sc. (Civil Engineering) CEO, Bonava AB Member of the Board of Directors of Caverion Corporation as of 2017 Antti Herlin Born 1956, Finnish citizen D.Sc. (Econ.) h.c., D.Arts h.c., D.Sc. (Tech) h.c. Chairman of the Board of Directors, KONE Corporation Member of the Board of Directors of Caverion Corporation as of 2017 Thomas Hinnerskov Born 1971, Danish citizen M.Sc. (Finance and Accounting) Executive Vice President, KONE Central and North Europe Member of the Board of Directors of Caverion Corporation as of 2017 Anna Hyvönen Born 1968, Finnish citizen Lic.Tech. Managing Director, Vianor Holding Oy Member of the Board of Directors of Caverion Corporation as of 2013 Mats Paulsson Born 1958, Swedish citizen M.Sc. (Civil Engineering) Industrial adviser Member of the Board of Directors of Caverion Corporation as of

67 Group Management Board as of July 1, 2018 Ari Lehtoranta President and CEO Divisions Manfred Simmet Austria Werner Kühn Germany Martti Ala-Härkönen Finance, Strategy and IT Juha Mennander Market Operations Knut Gaaserud Norway Michael Højgaard Denmark Minna Schrey- Hyppänen HR and Safety Anne Viitala Legal and Governance Ville Tamminen Finland and Baltics Juha Mennander Sweden Michael Kaiser Projects Thomas Hietto Services Sakari Toikkanen Industrial Solutions (Interim) 67

68 Directly registered shareholders on August 31, 2018 Largest shareholders Shares, % of share pcs Capital Change after July 2018, pcs Change after July 2018, % 1 Herlin Antti 20,500, Structor S.A. (Ehrnrooth family) 17,565, Solero Luxco Sarl (Triton) 11,172, Varma Mutual Pension Insurance Company 9,721, Ilmarinen Mutual Pension Insurance Company 5,102, , Mandatum companies 3,927, Nordea funds 3,401, , Fondita funds 3,395, Caverion Oyj 3,264, Aktia funds 2,118, Säästöpankki funds 2,050, , The State Pension Fund 1,850, Evli funds 1,100, , Elo Pension Company 1,060, Brotherus Ilkka 1,048, Odin funds 848, Foundation of Brita Maria Renlunds minne 817, Funds held by Ari Lehtoranta* 768, OP funds 491, , Kaleva Mutual Insurance Company 483, largest, total 90,685, All shares 138,920, Sector distribution (8/2018) 26,891 owners Nominee reg. and non- Finnish 32.2% (Jul. 31: 31.1%)* Households 16.8% (16.9%) General government 13.3% (13.6%) Financial and insurance corporations 11.1% (11.6%) Non-profit institutions 4.1% (4.2%) Non-financial corporations and housing corporations 22.5% (22.5%) *) incl. Voluntas Investment Oy and directly held shares. 68