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2021-11-04

Caverion Corporation's Interim Report for 1 January - 30 September 2021

Caverion Corporation Interim Report 4 November 2021 at 8.00 a.m. EET

Caverion Corporation's Interim Report for 1 January - 30 September 2021

Continued improvement in profitability and strong increase in order backlog

1 July - 30 September 2021

  • Revenue: EUR 493.7 (515.5) million, down by 4.2 percent, 4.9 percent in local currencies. Organic growth was

-4.6 percent. Services business revenue decreased by 0.1 percent, 0.8 percent in local currencies.

  • Adjusted EBITDA: EUR 35.0 (34.8) million, or 7.1 (6.8) percent of revenue.
  • Adjusted EBITA: EUR 21.5 (21.2) million, or 4.4 (4.1) percent of revenue.
  • EBITA: EUR 17.7 (17.7) million, or 3.6 (3.4) percent of revenue.
  • Operating profit: EUR 13.5 (13.9) million, or 2.7 (2.7) percent of revenue.
  • Operating cash flow before financial and tax items: EUR -10.1 (-28.0) million.
  • Earnings per share, undiluted: EUR 0.05 (0.06) per share.

1 January - 30 September 2021

  • Order backlog: EUR 1,889.7 (1,627.7) million, up by 16.1 percent. Services backlog increased by 15.2 percent.
  • Revenue: EUR 1,554.1 (1,575.6) million, down by 1.4 percent, 2.8 percent in local currencies. Organic growth was -2.3 percent. Services business revenue increased by 2.6 percent, 1.0 percent in local currencies.
  • Adjusted EBITDA: EUR 97.6 (79.6) million, or 6.3 (5.0) percent of revenue.
  • Adjusted EBITA: EUR 57.6 (38.1) million, or 3.7 (2.4) percent of revenue, up by 51.1 percent.
  • EBITA: EUR 50.8 (36.1) million, or 3.3 (2.3) percent of revenue.
  • Operating profit: EUR 38.4 (25.3) million, or 2.5 (1.6) percent of revenue.
  • Operating cash flow before financial and tax items: EUR 27.1 (76.3) million.
  • Cash conversion (LTM): 96.4 (138.2) percent.
  • Earnings per share, undiluted: EUR 0.16 (0.08) per share.
  • Net debt/EBITDA*: 0.9x (0.8x).

Unless otherwise noted, the figures in brackets refer to the corresponding period in the previous year.

* Based on calculation principles confirmed with the lending parties.

Guidance for 2021: In 2021, Caverion Group's adjusted EBITA (2020: EUR 60.6
million) will grow compared to 2020.

KEY FIGURES

EUR million 7-9/21 7-9/20 Change 1-9/21 1-9/20 Change 1-12/20
Order backlog 1,889.7 1,627.7 16.1% 1,889.7 1,627.7 16.1% 1,609.1
Revenue 493.7 515.5 -4.2% 1,554.1 1,575.6 -1.4% 2,154.9
Organic growth, % -4.6 -6.0 -2.3 -3.5 -4.1
Adjusted EBITDA 35.0 34.8 0.4% 97.6 79.6 22.6% 116.5
Adjusted EBITDA 7.1 6.8 6.3 5.0 5.4
margin, %
EBITDA 31.2 31.4 -0.8% 90.8 77.7 16.9% 99.4
EBITDA margin, % 6.3 6.1 5.8 4.9 4.6
Adjusted EBITA 21.5 21.2 1.5% 57.6 38.1 51.1% 60.6
Adjusted EBITA 4.4 4.1 3.7 2.4 2.8
margin, %
EBITA 17.7 17.7 -0.4% 50.8 36.1 40.6% 42.4
EBITA margin, % 3.6 3.4 3.3 2.3 2.0
Operating profit 13.5 13.9 -2.5% 38.4 25.3 51.6% 27.2
Operating profit 2.7 2.7 2.5 1.6 1.3
margin, %
Result for the 7.8 8.5 -7.8% 23.5 12.2 92.8% 8.6
period
Earnings per 0.05 0.06 -8.4% 0.16 0.08 112.3% 0.05
share, undiluted,
EUR
Operating cash
flow before
financial and tax -10.1 -28.0 64.0% 27.1 76.3 -64.5% 157.6
items
Cash conversion 96.4 138.2 158.5
(LTM), %
Working capital -101.7 -94.5 -7.6% -160.4
Interest-bearing 185.0 187.5 -1.3% 118.6
net debt
Net debt/EBITDA* 0.9 0.8 -0.2
Gearing, % 96.2 93.8 60.4
Equity ratio, % 19.0 19.8 18.9
Personnel, end of 14,773 15,649 -5.6% 15,163
period

* Based on
calculation
principles
confirmed with
the lending
parties.

 

Jacob Götzsche, President and CEO:

"I am satisfied with our profitability improvement continuing according to plan in the third quarter of 2021. A highlight of the quarter was that our order backlog grew strongly both in Services and Projects compared to the previous year. This provides a solid foundation for profitable growth in the future. However, our revenue decreased seasonally in the third quarter as the new orders booked in the order backlog did not yet materialise in revenue. Our cash flow was also lower in the first nine months of the year. Our working capital was impacted by higher receivables, lower advance payments from new projects and our existing older projects being in a cash-consuming phase. Due to the different impacts of the corona pandemic on the third quarter this and last year, a revenue comparison between those quarters is less informative than in normal years. It is positive to see that most economies are now finally returning more back to business as usual.

In the third quarter, our order backlog increased by 16.1 percent to EUR 1,889.7 (1,627.7) million compared to a year earlier and by 5.6 percent compared to the end of the second quarter (EUR 1,789.0 million). The order backlog continued to increase in Services, up by 15.2 per cent. Now also the Projects order backlog was up by 17.2 per cent. It typically takes a few quarters before the growth in order backlog realises in revenue growth. Our third quarter revenue was EUR 493.7 (515.5) million, down by 4.2 percent or 4.9 percent in local currencies. Measured in local currencies, the Services business revenue declined by 0.8 percent and the Projects business revenue by 11.6 percent in the third quarter. The business mix change seen in recent years follows our plans; the Services business accounted for 65.1 (62.6) percent of Group revenue in January-September 2021.

We continued to improve our profitability in the third quarter. Our third quarter adjusted EBITA improved to EUR 21.5 (21.2) million, or 4.4 (4.1) percent of revenue. EBITA was EUR 17.7 (17.7) million, or 3.6 (3.4) percent of revenue. I am particularly happy about the positive progress which has continued in our divisions Industry, Germany, Norway and Sweden. In Services, the performance continued overall on a strong level year-to-date. There was a minor negative impact from increased material prices in the third quarter. We continued to see an increased interest towards those parts of our lifecycle offerings that help customers make their operations more efficient and predictable as well as improving their sustainability. In Projects, market demand started to pick up following the stabilisation seen in the second quarter. The finalisation of the last remaining major risk project will take until the end of the year and we continued to improve our profitability in Projects. I trust that our professional employees together with our focus on sustainability and digitalisation will enable us to continue improving our performance going forward.

Our operating cash flow before financial and tax items was EUR 27.1 (76.3) million in January-September 2021 and the cash conversion (LTM) was 96.4 (138.2) percent. Following a lower cash flow in the third quarter, we expect a strong cash flow in the fourth quarter. Our liquidity position is strong and our leverage is at a low level. At the end of the third quarter, our interest-bearing net debt amounted to EUR 185.0 (187.5) million, or EUR 56.0 (55.3) million excluding lease liabilities. The net debt/EBITDA ratio was 0.9x (0.8x). Our cash and cash equivalents were EUR 81.5 (84.8) million. We completed three bolt-on acquisitions in the quarter and continue to actively search for suitable acquisitions going forward.

After starting as Caverion's CEO in early August, my first impression of the company is that our business has clear opportunities going forward. Our people have great skills and capabilities throughout our divisions. We are currently working on our future strategy up to 2025 and expect to finalise this work during the first half of 2022. We expect market demand to pick up in the next few years and we strongly believe in our purpose to enable building performance and people's wellbeing in smart and sustainable built environments."

Market outlook for Caverion's services and solutions in 2021

Caverion expects market demand to be overall positive in Services and to improve also in Projects during the end of 2021. This scenario assumes a successful outcome from the ongoing corona vaccination programmes and continued control of the corona pandemic with no significant unforeseen setbacks in 2021. Increased material prices and longer delivery times may still affect Caverion's business going forward.

The business volume and the amount of new order intake are important determinants of Caverion's performance in 2021. A negative scenario whereby the corona pandemic continues longer than currently anticipated, due to for example potential new corona variants, can still not be ruled out. Nevertheless, a large part of Caverion's services is vital in keeping also critical services and infrastructure up-and-running at all times.

The monetary and fiscal policies currently in place are clearly supporting an economic recovery. As an example, the economic stimulus packages provided by national governments and the EU are expected to increase infrastructure, health care and different types of sustainable investments in Caverion's operating area over the next few years. The main themes in the EU stimulus packages are green growth and digitalisation. Caverion expects the national and EU programmes to increase demand also in Caverion's areas of operation as of the end of 2021.

The digitalisation and sustainability megatrends are in many ways favourable to Caverion and believed to increase demand for Caverion's offerings going forward. The increase of technology in built environments, increased energy efficiency requirements, increasing digitalisation and automation as well as urbanisation remain strong and are expected to promote demand for Caverion's services and solutions over the coming years. Especially the sustainability trend is expected to continue strong.

Increasing awareness of sustainability is supported by both EU-driven regulations and national legislation setting higher targets and actions for energy efficiency and carbon-neutrality. This is furthermore supported by the society end-users' general request for environmentally friendly built environment. The Energy Performance of Buildings Directive (EPBD) passed by the EU requires all new buildings from 2021 to be nearly zero-energy buildings (NZEB). Other initiatives include the "Fit for 55" climate package and the Renovation Wave Strategy. The "Fit for 55" climate package proposes to make EU's climate, energy, transport and taxation policies fit for reducing net greenhouse gas emissions by at least 55% by 2030, compared to 1990 levels. The objective of the European Commission's Renovation Wave Strategy is to at least double the annual energy renovation rate of residential and non-residential buildings by 2030. Mobilising forces at all levels towards these goals is expected to result in 35 mil...

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