Investor Presentation. November 2017

Transcription

1 Investor Presentation November 2017

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 Finland 14% Industrial Solutions 13% Eastern Europe 3% Austria 7% Revenue by division (1-9/2017) Germany 20% Sweden 22% We design, build, operate and maintain user-friendly and energy-efficient solutions for buildings, infrastructure and industrial plants Projects 49 % Revenue by business unit (1-9/2017) Services 51% Denmark-Norway 21% ~16,500 employees (9/2017) 30,000 spaces in service 12 countries 6.3 Work safety, LTIFR DISCIPLINES EUR 2.4 billion revenue EUR x million EBITDA 1 Net debt/ebitda 2 93 % ISO ) excl. restructuring costs 2) In connection with the financing arrangement agreed on December 22, 2016, Caverion and its lending parties confirmed the EBITDA calculation principles related to the Group s financial covenant (Net Debt/EBITDA). The Net Debt/EBITDA for 2016 has been calculated accordingly figures, unless otherwise stated 5

6 Clear competitive advantage This is why our customers choose us Expertise in Services Trusted partner and advisor in facility management 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 Expertise in Projects Integrated life cycle deliveries of all building systems 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 6

7 Diversified client base provides hedge from economic cycles Thousands of clients representing all sizes of businesses and organisations Client concentration in 2016 (% of revenue) Revenue breakdown by client segments in % 14% Top 10 largest clients Others Low customer concentration supporting business stability Caverion is not dependent on individual clients In 2016, the three largest clients represented <7% of our revenue and the ten largest <14% 27% 16% Public 13% Industry 33% 13% 13% 33% Real estate investors and developers 13% Real estate users 27% Five main client segments Dependency on economic cycles is reduced through various client groups in the private and public sectors Geographically extensive presence in 12 countries General contractors 16% 7

8 Four megatrends support the demand and underpin our strategy Increasing technology The share of technology in built environments investment cost is increasing (40-60%); requires expertise in integration of multiple technologies. Energy efficiency Both legal and financial needs increase the demand for energy efficient solutions and renewable energy sources. Digitalisation The growing digitalisation of built environments creates possibility to manage data and conditions across the whole life cycle. Urbanisation Creating safe and reliable built environments for citizens and communities in a profitable manner. 8

9 What went wrong in the past? Project performance Aggressive growth in Projects Errors in tendering and execution cost-estimate adjustments, writedowns and provisions and restructurings Cash flow Capital tied up in risk projects Weak profitability and one-offs Sizeable IT investments Growth combined with too much internal development Execution failed ERP roll-out consumed significant resources - now finalised Revenue (OLD TARGET ) Annual revenue growth more than 10% on average Profitability (OLD TARGET ) EBITDA over 6 % of revenue Working capital (OLD TARGET ) Negative 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 Profitable Growth in Services boosted by digitalisation Improving our performance Building on our strengths Accelerating profitable services growth 14

15 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 15

16 2 Building on our existing strengths in Services Technological capabilities Customer relationships Digital services 16

17 3 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 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 1 Select projects based on profitability, cash flow and ability to support growth in services 2 Implement Projects Performance Management 3 Improve project management competences and develop resource planning 4 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 First implications of our selective approach STARTING POINT: A FEW MAJOR LOSS-MAKING PROJECTS AND TOO MANY PROJECTS WITH MINOR CONTRIBUTION MARGIN OVER VOLUME APPROACH EVIDENT IN CAVERION PROJECTS REVENUE DEVELOPMENT Project margin by project from best to worst (illustration) Large Projects revenue ( m, LTM) Technical Installation revenue ( m, LTM) REDUCE 1,234 1,116 Project margin ( m) Too many projects with minor or no contribution on project margin level Problem most evident in Sweden Dozen of large loss-making projects Problem most evident in Industrial Solutions and Germany STOP Volume reduction as a result of tighten tender approval process Improvement in margins of new order intake with higher risk buffers Result still affected by a few old challenging large projects Number of projects (from best to worst) 2016 Q3/

23 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% 23

24 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 à à à à 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 à Constant follow-up and focus on actions Weekly à Early-warning indicators Technicians / site 24

25 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 & cycle X XPPP X Own resources Capital area PM competence (Level 4-5) A A+ S- disc M- disc TTS Subcontracting EPC Life D&B & cycle X XPPP X Growth center Own resources Subcontracting 25 S- disc M- disc TTS D&B EPC & PPP Life cycle

26 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 è 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 è Local organisation and competences 6m 12m 18m Project length 26

27 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 27

28 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 28 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

29 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 29

30 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 30

31 A clear plan to improve profitability with the new strategy Projection of potential of the new strategy on EBITDA margin STATUS QUO (adjusted for items affecting comparability) FIT FORGROWTH EBITDAmargin target >6% Overdue rec. risks 0-10m >6 % >7 % 65.3m 2.9 % Rem. proj. risks 18m -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

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, while price competition remains tight 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 Strong market position in Central and Northern Europe Caverion well-positioned in growing markets Total revenue of Caverion s main competitors EUR million, 2016 SPIE 5,145 #3 #1 Apleona* 2,909 #2 Caverion 2,364 #5 Bravida 1,564 #5 Strabag Property and Facility Services* 1,116 #2 Coor 798 Assemblin* 750 *) 2015 figure 34 Source: Company information, Caverion

35 Competitive environment in Countries Finland Sweden Germany Norway Company Revenue meur Company Revenue meur Company Revenue meur Company Revenue meur 1. Caverion 1. Bravida 1. Apleona 1. Bravida+Oras 2. Are 2. Caverion 2. Strabag PFS 2. GK 3. Consti 3. Assemblin 3. Wisag 3. Caverion 4. Bravida 4. Midroc Electro AB 4. SPIE 4. Coor 5. Quatro Mikenti 5. Eitech 5. Caverion 5. OneCo Austria Denmark Baltics/EE Company 1. Ortner 2. Caverion 3. Engie 4. EQOS Energie 5. G. Klampfer Revenue meur Company 1. Kemp & Lauritzen 2. Bravida 3. Kirkebjerk 4. Lindpro 5. Caverion Revenue meur Company 1. ISS 2. Apleona 3. City Service 4. Caverion 5. Revenue meur Revenue Less than 50mEUR meur mEUR More than 500mEUR 35

36 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%) 36

37 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

38 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% 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% 0.7% 0.4% 0.5% 0.9% -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 38

39 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

40 Financials

41 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 Q3/17 LTM EBITDA (EURm) EBITDA margin (%) Q3/17 LTM Net debt (EURm) Net debt/ebitda** 4.1x Revenue (EURm) 2,407 2,443 2,364 2, Q3/17 LTM *Operating cash flow before financial and tax items / EBITDA ** According to agreed calculation principles 41

42 Capital allocation principles #1 Financial target: > 100% cash conversion Ü Ü Ü Ü 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 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). 43

44 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. 44

45 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). 45

46 Revenue development Group revenue EUR million 2015: 2, : 2, /2017: 1, Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Revenue breakdown by division EUR million -8% -11% +7% % 0% % -1% Denmark-Norway Sweden Germany Industrial Finland Austria Eastern Europe Solutions 1-9/ /2017 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%. 46

47 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 47

48 Divisional performance overshadowed by challenges in legacy projects Sweden, Germany and Industrial Solutions: Restructuring actions nearing completion Illustrative performance by division in 2017* OP. CASH FLOW 1) Conv. >100% Conv. 80%-100% Conv. < 80% FINLAND SWEDEN NORWAY DENMARK GERMANY AUSTRIA INDUSTRIAL SOLUTIONS EASTERN EUROPE EBITDA MARGIN > 4.0% 2.0% 4.0% < 2.0% 1) Operative cash flow before financial and tax items Overall strong performance in both Projects and Services Performance improving y-o-y, but still unsatisfactory particularly in Projects Successful turnaround clearly visible strong outlook Profitability gradually improving; good cash flow generation Profitability and cash flow burdened by challenges in old projects Continued stable profit generation, projects slightly impacting cash flow Profitable service operations overshadowed by major write-downs in a few large projects Stable and satisfactory profit-making, cash flow impacted by a few projects 48 * Management estimate on divisions current annualised performance

49 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 projectssolutions 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) 49

50 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 à 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 50

51 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%) 51

52 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/

53 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. 53

54 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% % 2% % 1% 1% 1% 1% Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 54

55 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 55

56 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) 56

57 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. 57

58 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 3.0xconfirmed calculation principles 2.0x In connection with the hybrid transaction, the 1.0xcovenant maximum level was agreed at 5.0x for 0.0xQ2/2017 and Q3/2017 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 58

59 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 % 59

60 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, % 100% 75% 78% % Dividends AGM held on March 17, 2017 decided that no dividend be paid for

61 Key investment highlights Megatrends support the future demand of our business Positive market sentiment in all of our key markets Technology forerunner that will, after getting fit, grow faster than the market Diversified client base in Central and Northern Europe Well-performing Services, actions ongoing to improve profitability in Projects Operating in asset-light, cash generative business Our 16,500 employees are our most important asset Cash conversion* > 100% Leverage (Net debt/ebitda) < 2.5x Profitability (EBITDA-%) > 6% 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 61

62 Appendix

63 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 63 Caverion

64 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 64

65 Shareholders on October 31, 2017 Largest shareholders Shares, % of share pcs Capital Change after Sep. 2017, pcs Change after Sep. 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, Nordea funds 2,324, , The State Pension Fund 1,850, Elo Pension Company 1,611, Aktia funds 1,518, Brotherus Ilkka 1,048, Säästöpankki funds 964, , 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, Jenny and Antti Wihuri s Foundation 283, largest, total 65,911, All shares 125,596, Sector distribution (10/2017) 28,497 owners Nominee reg. and non- Finnish 34.6% (Sep. 30: 34.9%)* Households 19.0% (19.0%) General government 11.9% (11.9%) Financial and insurance corporations 9.9% (9.5%) Non-profit institutions 4.6% (4.6%) Non-financial corporations and housing corporations 20.1% (20.1%) *) 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. 65

66 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, , Calor AB ABB Building Systems MCE AG caverion GmbH Esco Arneg Kühlmöbel, Norway Sähkötaso Esitystekniikka Acquisition period Integration and development 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. 66

67 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 67

68 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 68

69 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 69

70 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 70

71 Customer information portal with 24/7 real-time data 71

72 Board of Directors as of March 17, 2017 Michael Rosenlew, Chairman Born 1959, M.Sc. (Econ.). Professional board member. Finnish citizen. Joachim Hallengren Born 1964, M.Sc. (Civil Engineering). CEO of Bonava AB. Swedish citizen. Anna Hyvönen Born 1968, Lic.Tech. Managing Director, Vianor Holding Oy. Member of the Nokian Tyres Management team. Finnish citizen. Jussi Aho Born 1968, M.Sc. (Civil Engineering). CEO of Fira Group Oy and Fira Oy. Finnish citizen. Antti Herlin Born 1956, D.Sc. (Econ.) h.c., D.Arts h.c., D.Sc. (Tech) h.c. Chairman of the Board, KONE Corporation. Finnish citizen. Eva Lindqvist Born 1958, M.Sc. (Eng.), MBA. Professional board member. Swedish citizen. Markus Ehrnrooth, Deputy Chairman Born 1985, M.Sc. (Tech.), B.Sc. Pol. Sc. (Econ.). Co- Founder of Knomi Oy. Finnish and Swedish citizen. Thomas Hinnerskov Born 1971, M.Sc. (Fin. and Accounting). Executive VP, KONE Central and North Europe and member of the Executive Board, KONE Corporation. Danish citizen. 72

73 Great empowered leadership team in place Austria Manfred Simmet Norway Knut Gaaserud Eastern Europe Niclas Sacklén Finland Ville Tamminen Germany Werner Kühn Industrial Solutions Sakari Toikkanen /int Sweden Klas Tocklin Denmark Michael Højgaard Caverion Group Ari Lehtoranta Services Thomas Hietto Projects Jarno Hacklin Finance, Strategy and M&A Martti Ala-Härkönen Legal & Governance Anne Viitala HR & People Minna Schrey- Hyppänen IT, Communications and Sales Development Sakari Toikkanen 73

74 Caverion s guidance terminology Positive change Lower limit Upper limit % % At last year s level -5% 5% Grows 5% 15% Grows clearly 15% 30% Grows significantly 30% 100% Doubles 100% Negative change Lower limit Upper limit % % Decreases -15% -5% Decreases clearly -30% -15% Decreases significantly -30% 74