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2016-07-21

Caverion: Half Yearly Report for January 1 - June 30, 2016

Caverion Corporation Half Yearly Report July 21, 2016 at 9:00 a.m.
EEST

Half Yearly Report for January 1 - June 30, 2016

April 1 - June 30, 2016

· Order backlog: EUR 1,554.2 (1,393.1) million, an increase of 12%
from the corresponding period in the previous year.

· Revenue: EUR 615.5 (638.1) million.
· EBITDA excluding restructuring costs: EUR -6.8 million, or -1.1
percent of revenue.

· EBITDA: EUR -14.4 (22.0) million, or -2.3 (3.4) percent of
revenue.

· Working capital: EUR 17.1 (7.7) million.
· Free cash flow: EUR -32.6 (-6.3) million.
· Earnings per share, basic: EUR -0.13 (0.08) per share.
January 1 - June 30, 2016

· Revenue: EUR 1,176.1 (1,201.5) million.
· EBITDA excluding restructuring costs: EUR 6.6 million, or 0.6
percent of revenue.

· EBITDA: EUR -2.9 (36.2) million, or -0.2 (3.0) percent of revenue.
· Free cash flow: EUR -61.3 (-5.5) million.
Unless otherwise noted, the figures in brackets refer to the
corresponding period in the previous year.

KEY FIGURES

+-----------------+--------+--------+------+--------+--------+------+--------+
|EUR million | 4-6/16 | 4-6/15 |Change| 1-6/16 | 1-6/15 |Change|1-12/15 |
+-----------------+--------+--------+------+--------+--------+------+--------+
|Order backlog |1,554.2 |1,393.1 | 12%|1,554.2 |1,393.1 | 12%|1,461.4 |
+-----------------+--------+--------+------+--------+--------+------+--------+
|Revenue | 615.5 | 638.1 | -4%|1,176.1 |1,201.5 | -2%|2,443.0 |
+-----------------+--------+--------+------+--------+--------+------+--------+
|EBITDA excluding | -6.8| - | -| 6.6| - | -| - |
|restructuring | | | | | | | |
|costs | | | | | | | |
+-----------------+--------+--------+------+--------+--------+------+--------+
|EBITDA margin | -1.1| - | -| 0.6| - | -| - |
|excluding | | | | | | | |
|restructuring | | | | | | | |
|costs, % | | | | | | | |
+-----------------+--------+--------+------+--------+--------+------+--------+
|EBITDA | -14.4| 22.0| | -2.9| 36.2| | 91.5|
+-----------------+--------+--------+------+--------+--------+------+--------+
|EBITDA margin, | -2.3| 3.4| | -0.2| 3.0| | 3.7|
|% | | | | | | | |
+-----------------+--------+--------+------+--------+--------+------+--------+
|Operating profit | -21.5| 15.5| | -16.7| 23.4| | 65.0|
+-----------------+--------+--------+------+--------+--------+------+--------+
|Operating profit | -3.5| 2.4| | -1.4| 1.9| | 2.7|
|margin, % | | | | | | | |
+-----------------+--------+--------+------+--------+--------+------+--------+
|Net profit for | -16.1| 10.4| | -12.9| 15.8| | 46.6|
|the period | | | | | | | |
+-----------------+--------+--------+------+--------+--------+------+--------+
|Earnings per | -0.13| 0.08| | -0.10| 0.13| | 0.37|
|share, basic, | | | | | | | |
|EUR | | | | | | | |
+-----------------+--------+--------+------+--------+--------+------+--------+
| | | | | | | | |
+-----------------+--------+--------+------+--------+--------+------+--------+
|Working capital | 17.1| 7.7| 123%| 17.1| 7.7| 123%| -13.6|
+-----------------+--------+--------+------+--------+--------+------+--------+
|Free cash flow | -32.6| -6.3| | -61.3| -5.5| | 53.9|
+-----------------+--------+--------+------+--------+--------+------+--------+
| | | | | | | | |
+-----------------+--------+--------+------+--------+--------+------+--------+
|Interest-bearing | 130.6| 84.9| 54%| 130.6| 84.9| 54%| 29.8|
|net debt | | | | | | | |
+-----------------+--------+--------+------+--------+--------+------+--------+
|Gearing, % | 62.7| 37.3| | 62.7| 37.3| | 11.6|
+-----------------+--------+--------+------+--------+--------+------+--------+
| | | | | | | | |
+-----------------+--------+--------+------+--------+--------+------+--------+
|Personnel, | 17,577| 17,032| 3%| 17,541| 17,018| 3%| 17,321|
|average for the | | | | | | | |
|period | | | | | | | |
+-----------------+--------+--------+------+--------+--------+------+--------+

Word from the Interim President and CEO Sakari Toikkanen

"After the departure of the previous CEO, Caverion initiated a
thorough review of operations in all divisions where operative
challenges had been observed. Based on the results of this review
Caverion has identified profitability problems due to resource
overcapacity and challenges in executing and managing projects. The
identified issues mainly relate to divisions Sweden and
Denmark-Norway. The profitability of certain bigger projects in
Germany and Norway has also been weaker than forecasted. Furthermore,
Caverion has had too many development projects ongoing at the group
level, which has resulted in high fixed costs. Working capital and
cash flow have deteriorated in 2016 due to low profitability, high
level of investments and weak development in Germany and Sweden
driven by delayed final payments in projects and low invoicing.

Caverion has already started implementing the restructuring actions to
reduce the identified overcapacity. These actions will unfortunately
also imply personnel reductions, mainly focusing on the divisions
Sweden and Denmark-Norway as well as in the Group functions. The
personnel reductions are estimated to affect up to 700 employees and
the total restructuring costs for 2016 are estimated to be in the
region of EUR 22-26 million. By the end of June 292 employees have
been permanently laid off and restructuring costs were EUR 9.5
million during January-June. The impact of the actions will start to
materialise during the second half of 2016, with full effect visible
in 2017. At the end of June there were 62 people on temporary leave
in division Norway.

Due to the challenges in project management and execution, a more
detailed project review was conducted in Sweden covering more than a
hundred ongoing projects. In connection with this review, Caverion
has in division Sweden identified clear challenges in execution of
projects and has observed margin slippages in many of the reviewed
projects. Based on the the results of review, Caverion has made cost
estimate adjustments and provisions in the project portfolio in
division Sweden, which have a negative impact of EUR 15 million on
the reported EBITDA for April-June. Additionally in Germany and
Norway, Caverion has experienced challenges in executing certain
bigger projects.

In order to better support its operations, Caverion has decided to
reorganise its Group functions, establishing two new functions:
Projects and Services. These will respond to the challenges in
executing and managing projects and help to secure the targeted
utilisation rate in the service business. Additionally Caverion is
reviewing and reducing its fixed costs. Caverion will continue the
implementation of those development projects that support the
improvement of profitability and cash flow starting from the second
half of the year.

Finally I would like to emphasise that we are performing according to
our strategy in several divisions. Our order backlog has developed
very favourably during the beginning of the year, which is expected
to support our development in the second half of the year."

OUTLOOK FOR 2016

Market outlook for Caverion's services and solutions

The megatrends in the industry, such as the increase of technology in
buildings, energy efficiency requirements, increasing digitalisation
and automation as well as urbanisation continue to promote demand for
Caverion's services and solutions over the coming years.

The Technical Installation and Maintenance market is expected to
remain stable, however price competition is expected to remain tight
in Technical Installations projects. Requirements for increased
energy efficiency, better indoor conditions and tightening
environmental legislation will be significant factors supporting the
positive market development. In Norway, the general economy has been
impacted by the slowdown in the oil industry, which may continue to
have a negative effect on the Technical Installation and Maintenance
business.

In the Large Projects market, the new tenders for buildings and
industry are expected to increase during the year. Positive signs
have been seen both in received orders and in tendering activity,
especially in the public and industrial sectors and we expect the
positive trend to continue. Low interest rates and availability of
financing are expected to support investments. The demand for Design
& Build of Total Technical Solutions is expected to develop
favourably in the large and technically demanding projects. However
uncertainty in economical situation has affected new projects
resulting in price pressure and further project postponements or
cancellations.

Underlying demand for Managed Services is expected to remain strong.
As technology in buildings is increasing the need for new services
and the demand for Life Cycle Solutions are expected to increase.
Clients' tendency towards focusing on their core operations continues
to open opportunities for Caverion in terms of outsourced operation
and maintenance especially for public authorities, industries and
utilities.

Guidance for 2016

Caverion revised its guidance on June 20, 2016, according to which
Caverion estimates that the Group's revenue for 2016 will remain at
the previous year's level (2015: EUR 2,443 million) and the Group's
EBITDA excluding restructuring costs for 2016 will decrease clearly
from the previous year's EBITDA level (2015: EUR 91.5 million).

INFORMATION SESSION, WEBCAST AND CONFERENCE CALL

Caverion will hold a news conference and webcast on the half yearly
report on Thursday, July 21, 2016, at 11:00 a.m. (Finnish Time, EEST)
at the Kämp Hotel (Gallen-Kallela meeting ...

Författare WKR

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