Interim Report January September 2017

Transcription

1 Interim Report January September 2017 Ari Lehtoranta, President and CEO Martti Ala-Härkönen, CFO October 27, 2017

2 Contents Group development Cash flow and financing Market outlook and guidance for 2017

3 Operating environment 1-9/2017 Share of Service business revenue increased to 51% (46%) Services (Technical Maintenance and Managed 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. However, these kinds of commercial models represent so far only a marginal part in other markets. Revenue breakdown 1 9/2017 (1 9/2016) Projects (Technical Installation and Large 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. Technical Installation 32% (33%) Large Projects 17% (21%) Technical Maintenance 36% (33%) Managed Services 15% (13%) 3

4 Summary of Q3/2017: First signs of improved performance Order backlog Order backlog EUR 1,460.4 (1,450.9) million, up by 0.7% from the previous year Focus in Services working out well. Services order backlog up by 5.5% from the previous year Revenue Revenue EUR (582.0) million, down by 6.3% from last year Revenue up by 4.7% in Services, down by 15.7% in Projects (Large Projects down by 23.2%) Selective approach toward Projects business EBITDA EBITDA excluding restructuring costs EUR 13.8 (19.5) million EBITDA EUR 8.7 (13.8) million Affected by project write-downs of EUR 7.1m, trade receivable writedowns of EUR 0.9m and restructuring costs of EUR 5.2m Working capital and free cash flow Working capital EUR 75.7m (56.1), capital still tied in risk projects Free cash flow EUR -43.8m (-38.8) Two small acquisitions in Austria Earnings per share Earnings per share amounted to (0.02) EUR per share. 4

5 Order backlog development Clear growth in Services order backlog Order backlog amounted to EUR 1,460.4 (1,450.9) million at the end of September 2017, up by 0.7% from last year or by 1.2% at comparable exchange rates. Order backlog EUR million Q1 Q2 Q3 Q4 1,513 1,451 1,460 Focus in Services working out well. Services order backlog up by 5.5% from the previous year In Projects the order backlog declined by 2.7%. Caverion continued to implement its selective approach towards the Projects business Comparative figures are carve-out figures for the periods before the effective date of the partial demerger (June 30, 2013). 5

6 Examples of our recent contracts (7-9/2017) Large Project Customer: City of Helsinki Contract: Technical systems and a telematic system for managing traffic in the new Teollisuuskatu tunnel in Central Pasila Location: Helsinki, Finland Value: ~EUR 5.4 million Large Project + Managed Life Cycle Customer: General contractor A. Enggaard Contract: Managed Life Cycle project for a new office building, including a 15-year Managed Services contract Location: Aarhus, Denmark Value: EUR 31 million Managed Services Customer: Building owners (several) Contract: A renewed five-year Managed Services contract for Munich Uptown building a skyscraper and an office complex Location: Munich, Germany Value: Not disclosed 6

7 Revenue development Group revenue EUR million Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Revenue breakdown by division EUR million % 2015: 2, : 2, /2017: 1,692-8% -11% Denmark-Norway Sweden Germany Industrial Solutions -7% 0% / / % -1% Finland Austria Eastern Europe January-September 2017 Revenue EUR 1,692.5 (1,758.1) million, down by 3.7% Services business revenue grew by 6.4%, while Projects business revenue declined by 12.4%. Project write-downs also affecting Revenue growth largest in Denmark- Norway and Austria compared to the previous year July September 2017 Revenue EUR (582.0) million, down by 6.3% Services business revenue grew by 4.7%, while Projects business revenue declined by 15.7%. 7

8 Profitability affected by project write-downs and restructuring costs EBITDA: EUR 8.7 (13.8) million in Q3/2017 EBITDA excl. restructuring costs: EBITDA, EUR million EBITDA margin, % EUR 13.8 (19.5) million for Q3/2017 EUR 14.6 (26.1) million for 1-9/ /15: 91.5 (3.7%) /16: (-0.5%) 1-9/2017: 2.5 (0.1 %) Restructuring costs were: EUR 5.2 (5.7) million for Q3/2017 EUR 12.1 (15.2) million for 1-9/2017 Not included in restructuring costs but burdening EBITDA : Project write-downs with a negative impact on EBITDA of EUR 7.1 (4.1) million for Q3/2017 and EUR 25.4 (19.1) million for 1-9/2017 Trade receivable write-downs of EUR 0.9 million Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Other turnaround related one-off costs 8

9 Risk projects bridge (December 2016 September 2017) Majority of increased project risks in Jan Sep 2017 attributable to new bioproduct plant projects in Finland, project write-downs increased especially in Germany in Q3/2017 EUR EUR million million Majority attributable to new bioproduct Majority attributable plant projects to new bioproduct delivered by plant Industrial projects Solutions delivered by Industrial Solutions 13.4 ~19 ~ ~20 ~18 ~20 Major project risks (Dec 2016) Additional risks identified in year-end 2016 risk projects Write-downs related to new bioproduct plant projects in Finland in Jan-Sep/2017 Other project writedowns in Jan-Sep/2017 Not materialised project risks removed from the list Major project risks (Sep 2017) 9

10 Actions continued to improve Projects business Actions completed in 1-9/2017 New project categorisation and decision-making model approved Strengthened bidding and steering Higher selectivity resulted in lower albeit healthier order intake New monthly steering model running on all organisation levels Project management competence mapping done in the Nordic countries Further actions in Q4/2017 Release of updated PM guidelines Project performance management programme started first in Sweden and Germany Tender calculation tools harmonisation in divisions Implementation of updated forecasting principles SAP deployment of improved forecasting process 10

11 Cost savings in 1-9/2017 Personnel expenses, EUR million Other operating expenses, EUR million % % / / / /2017 Personnel cost savings realised as planned EUR 28.5m (-3.9%) Discretionary cost savings realised as planned EUR 11.5m (-5.5%) 11

12 Headcount development by division Total reduction of 1,181 employees from the end of June ,664 16,483 6/2016 Sweden -302 HC Denmark- Norway -193 HC Industrial Solutions -637 HC Finland -65 HC Group Services -40 HC Eastern Europe -48 HC Austria 41 HC Germany 63 HC 9/

13 Status update on estimated key risk areas for 2017 Remaining project performance risks of the risk list about EUR 18 million It is possible that the settlement of some technically completed projects in 2017 may move into In 1-9/2017, project write-downs of EUR 25.4 million related to risk project portfolio in divisions Industrial Solutions and Germany Write-down risk on overdue trade receivables The estimated full-year write-down risk on overdue trade receivables in 2017 is below the earlier anticipated maximum level of EUR 10m. Utilisation risk After the completed restructurings, the impacts of the utilisation risk estimated earlier (up to EUR 10m) have by and large already materialised in the results. 13

14 Cash flow and financing

15 Working capital still tied in risk projects Working capital was EUR 75.7 (56.1) million at the end of September 2017 Working capital still tied in risk projects POC receivables amounted to EUR (331.0) million at the end of September. Trade receivables amounted to EUR (323.6) million at the end of September. 100 Working capital, EUR million Working capital to sales, % (LTM) % 5% % 2% 2% 2% % -1% 0% 34 1% -15-1% % 1% 56 2% 3% % 1% 1% Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 15

16 Working capital development in divisions Positive development in Finland, Sweden and Denmark-Norway: WC negative and improving Risk projects continue to tie up working capital in Industrial Solutions and Germany Working capital breakdown by division EUR million Q3/2016 Q3/ Finland Sweden Denmark-Norway Austria Eastern Europe Germany Industrial Solutions Group 16

17 Cash flow and investments Free cash flow was negative in 1-9/2017 although improving by EUR 9.6 million from last year. Free cash flow (-100.1) in 1-9/2017 and EUR -43.8m (-38.8) in Q3/2017 Cash flow still tied in risk projects Free cash flow was improved by the lower level of investments compared to last year. Capital expenditure (incl. acquisitions) totalled EUR 13.1m (32.0) in 1-9/2017. IT investments: EUR 8.2 m (20.0) Other investments, incl. acquisitions: EUR 5.0m (12.0) Two small acquisitions in Austria Operating cash flow before financial and tax items, EUR million Free cash flow, EUR million Capex, EUR million Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Q3/ Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Q3/17 Free cash flow = Operating cash flow before financial and tax items Taxes paid Net cash used in investing activities (net, including acquisitions and disposals) 17

18 Debt Structure on September 30, 2017 Debt maturity EUR million 71* * Of which EUR 60 million commercial papers. Sources of funds in the loan portfolio Banks 50% Commercial papers 38% Insurance companies 10% Others 2% Interest rate type (after hedges) Fixed interest rate 12% Floating interest rate 88% Loan portfolio total EUR million and net interest-bearing debt EUR (169.7) million at the end of September Average interest rate after hedges 1.8% (0.9%) at the end of September. Net financing expenses for 1-9/2017 EUR -4.2 (-1.7) million. EUR 100m hybrid bond issued on June 9, 2017, an instrument treated as equity in the IFRS financial statements. 18

19 Liquidity and leverage on September 30, 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 calculated excluding restructuring costs ** The Net Debt/EBITDA for Q4/16 Q3/17 has been calculated according to confirmed calculation principles with lending parties x x Financial covenant (Net Debt/EBITDA): 4.0x Net debt/ebitda in Q3/2017: 4.1x according to confirmed calculation principles 3.0x 2.0x In connection with the hybrid transaction, the covenant maximum level was agreed at 5.0x for Q2/2017 and Q3/ x 0.0x EBITDA calculation principles related to the covenant were amended in September Covenant shall remain below 3.5x from Q4/2017 onwards. Gross debt to net debt (EURm) 70 Long-term borrowings Short-term borrowings Cash and cash equivalents Net debt Liquidity reserve EUR 137 million at the end of September 2017, EUR million Unused credit facilities Cash and cash equivalents 19

20 Key credit ratios on September 30, 2017 EUR 100m hybrid bond issued in June 2017 strengthened the capital structure and financial position of Caverion Equity ratio, % Gearing, % Equity ratio improved to 27.0% (Q3/2016: 20.5%) Gearing improved to 53.2% (Q3/2016: 81.5%) 23.5 % 21.1 % 20.5 % 18.7 % 19.2 % 28.1 % 27.0 % 26.7 % 63.6 % 81.5 % 78.7 % 90.1 % 37.2 % 53.2 % 20

21 Market outlook and guidance for 2017

22 Lead indicators for main Caverion countries: slight improvement in economic sentiment, construction confidence remains high ECONOMIC SENTIMENT INDICATOR (1/2007 9/2017) CONSTRUCTION CONFIDENCE INDICATOR (1/2007 9/2017) Economic Sentiment Indicator (Jan Sep 2017) Longterm average Finland Germany Austria Sweden Denmark Construction Confidence Indic. (Jan Sep 2017) Finland Germany Austria Sweden Denmark Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Longterm average Note: Mean-adjusted figures Source: European Commission, October

23 Construction and GDP growth estimates for main Caverion countries New building constr. expected to grow strongly particularly in Scandinavia in , building renovation to continue its stable ~1.5% growth in Caverion s main markets going forward NEW NON-RESIDENTIAL CONSTRUCTION NON-RESIDENTIAL RENOVATION NEW RESIDENTIAL CONSTRUCTION RESIDENTIAL RENOVATION GROSS DOMESTIC PRODUCT CAGR CAGR CAGR CAGR CAGR % 10.3% 6.3% 6.1% 5.1% Weighted average* 3.1% 5.5% 3.3% 1.8% 0.7% 0.4% 2.5% 2.0% 1.8% 1.5% 1.5% 3.2% 1.6% 1.8% 2.6% 1.4% 2.3% 2.0% 1.6% 1.7% 1.9% 1.7% 1.7% 1.4% 1.6% 1.4% 1.5% 0.9% 0.5% -0.5% Sweden Norway Denmark Austria Germany Finland Sweden Denmark Austria Norway Finland Germany Denmark Sweden Germany Norway Austria Finland Norway Denmark Finland Sweden Austria Germany Sweden Austria Denmark Norway Finland Germany Source: Euroconstruct, June 2017 * Weighted average CAGR calculated based on Caverion s current geographical mix 23

24 New non-residential construction growth estimates for Particularly new buildings for health as well as new office and commercial buildings projected to have the highest growth potential in in the main Caverion countries NEW NON-RESIDENTIAL CONSTRUCTION GROWTH BY BUILDING TYPE (CAGR 17-18) 30% 25% 46.5% BUILDINGS FOR HEALTH CAGR OFFICE BUILDINGS CAGR OTHER NON-RESIDENTIAL SECTORS CAGR % 15% 10% 6.1% 5% 0% TOT. 6.3% 3.3% 1.8% 0.7% 0.4% -5% -10% -15% Health Office Commercial Education Storage Agricultural Misc Industrial Health Office Commercial Education Misc Industrial Agricultural Storage Industrial Commercial Office Storage Health Agricultural Education Misc Industrial Commercial Education Storage Agricultural Health Office Misc Health Education Office Agricultural Misc Storage Industrial Commercial Office Commercial Storage Misc Health Agricultural Industrial Education Sweden. Norway. Denmark. Austria. Germany. Finland Source: Euroconstruct, June

25 Reiterated guidance for 2017 Revenue Caverion estimates that the Group s revenue will remain at the previous year's level in 2017 (2016: EUR 2,364 million). EBITDA excluding restructuring costs Caverion estimates that the Group s EBITDA excluding restructuring costs will more than double in 2017 (2016: EUR 15.6 million). 25

26 Welcome to Caverion s CMD in Helsinki on Nov. 7, 2017! address: IR@caverion.com

27 Additional slides

28 Key figures EUR million Q3/17 Q3/16 Change 1-9/17 1-9/16 Change 2016 Order backlog 1, , % 1, , % 1,408.1 Revenue % 1, , % 2,364.1 EBITDA excluding restructuring costs % % 15.6 EBITDA margin excluding restructuring costs, % EBITDA % % EBITDA margin, % Operating profit % % Operating profit margin, % Earnings per share, basic, EUR % Working capital % % -2.6 Free cash flow % % Interest-bearing net debt % % Gearing, % Personnel, end of period 16,483 17, % 16,483 17, % 16,913 28

29 Shareholders on September 30, 2017 Largest shareholders Shares, % of share pcs Capital Change after Jun. 2017, pcs Change after Jun. 2017, % 1 Herlin Antti 17,800, , Structor S.A. (Ehrnrooth family) 17,565, Ilmarinen Mutual Pension Insurance Company 5,488, Varma Mutual Pension Insurance Company 5,005, , Fondita funds 3,465, Mandatum companies 3,099, , The State Pension Fund 1,850, Nordea funds 1,782, , Elo Pension Company 1,611, Aktia funds 1,518, Brotherus Ilkka 1,048, Säästöpankki funds 1,014, , Odin funds 891, Evli funds 734, , Funds held by Ari Lehtoranta* 553, Caverion Oyj 512, Alandia companies 427, , Foundation of Brita Maria Renlunds minne 412, Kaleva Mutual Insurance Company 356, OP funds 326, , largest, total 65,463, All shares 125,596, Sector distribution (9/2017) 28,660 owners Nominee reg. and non- Finnish 34.9% (Jun. 30: 35.6%)* Households 19.0% (19.5%) General government 11.9% (11.3%) Financial and insurance corporations 9.5% (9.3%) Non-profit institutions 4.6% (4.6%) Non-financial corporations and housing corporations 20.1% (19.7%) *) Solero Luxco S.A.R.L (Triton) holding nominee registered since April Their latest directly registered holding as of March 31, 2017 was 9,716,223 shares (7.74%). *) incl. Voluntas Investment Oy, directly held shares and shares held by closely associated persons. 29