Caverion Corporation's Half-year Financial Report for 1 January - 30 June 2020

HELSINKI, Aug. 6, 2020 /PRNewswire/ --

Corona crisis impacted revenue and EBITA, still improvement year-on-year, strong cash flow

1 April - 30 June 2020 

• Revenue: EUR 518.5 (512.3) million, up by 1.2 percent, 3.3 percent in local currencies. Organic growth was -4.8 percent. Services business revenue up by 3.1 percent, 5.8 percent in local currencies.
  
• Adjusted EBITDA: EUR 18.5 (10.0) million, or 3.6 (2.0) percent of revenue.
  
• Adjusted EBITA: EUR 4.8 (-3.2) million, or 0.9 (-0.6) percent of revenue.
  
• EBITA: EUR 8.4 (-4.1) million, or 1.6 (-0.8) percent of revenue.
  
• Operating cash flow before financial and tax items: EUR 48.2 (29.1) million.
  
• Earnings per share, undiluted: EUR 0.01 (-0.06) per share.
  
• New EUR 35.0 million hybrid bond in May, redemption of old EUR 66.1 million hybrid notes in June
  
• Strong liquidity position

1 January - 30 June 2020

• Order backlog: EUR 1,739.7 (1,704.7) million, up by 2.1 percent.
  
• Revenue: EUR 1,060.1 (1,026.7) million, up by 3.2 percent, 5.2 percent in local currencies. Organic growth was -2.3 percent. Services business revenue up by 7.8 percent, 10.3 percent in local currencies.
  
• Adjusted EBITDA: EUR 44.7 (37.1) million, or 4.2 (3.6) percent of revenue.
  
• Adjusted EBITA: EUR 17.0 (10.6) million, or 1.6 (1.0) percent of revenue.
  
• EBITA: EUR 18.4 (5.2) million, or 1.7 (0.5) percent of revenue.
  
• Operating cash flow before financial and tax items: EUR 104.3 (59.2) million.
  
• Earnings per share, undiluted: EUR 0.02 (-0.04) per share.
  
• Net debt/EBITDA*: 0.1x (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.

KEY FIGURES

Ari Lehtoranta, President and CEO:

"Like we estimated in our first quarter report, the impacts of the corona crisis were more visible to our business in the second quarter. The wellbeing of our employees, customers and other stakeholders continued to be our first priority. Fortunately, all of our infected employees have recovered from Covid-19. Most of our operating countries were locked down especially in April-May, at which time there were more of our workforce absent as well as more work site delays and closures. The government restrictions and the impacts to our business started to clearly ease up in June. In the latter part of the quarter, several governments announced also material stimulus packages to accelerate the return of the economies to more normal business conditions.

Our order backlog increased by 2.1 percent to EUR 1,739.7 (1,704.7) million. The coronavirus pandemic had an impact on both revenue and profitability in the second quarter, but there was still improvement year-on-year. Our second quarter revenue was EUR 518.5 (512.3) million, up by 1.2 percent or 3.3 percent in local currencies. Measured in local currencies, the Services business revenue grew by 5.8 percent, while the Projects business revenue declined by 0.6 percent in the second quarter. The Services business accounted for 61.9 (60.8) percent of Group revenue. Our adjusted EBITA improved to EUR 4.8 (-3.2) million, or 0.9 (-0.6) percent of revenue. Our EBITA improved to EUR 8.4 (-4.1) million, or 1.6 (-0.8) percent of revenue, being positively impacted by a one-off capital gain. In Services, our ad-hoc orders were lower in April-May, followed by a recovery in June. In Projects, the corona pandemic impacted our productivity. The Projects business profitability was also affected by completion of the last few old projects, ramping down the large projects business in Denmark and the inflexibility to adjust personnel costs with temporary lay-offs in Central Europe.

Our cash flow generation and liquidity position continued to be strong in the second quarter. Our operating cash flow before financial and tax items improved to EUR 48.2 (29.1) million. Cash flow was positively impacted by postponing authority payments to the value of EUR 29.6 million, which will be paid out in July-November. At the end of the second quarter, our interest-bearing net debt amounted to EUR 138.8 (158.9) million, or EUR 9.9 (24.7) million excluding lease liabilities. The net debt/EBITDA ratio was 0.1x (0.8x). Our cash and cash equivalents increased to EUR 130.2 (103.6) million. The integration of our most recent acquisitions and the divestment of certain parts of our industrial operations in Finland progressed according to plan.

At present the main issue is how quickly our European economies will recover and return back to the growth track. Naturally we hope that there will not be a second wave with the virus spread leading to new lockdown measures. I am so far pleased with our ability to manage the negative impacts of the crisis. We have executed contingency and cost-saving actions since March and furthermore benefited from having rooted performance management throughout the organisation during the Fit phase of our strategy.

Due to the poor visibility and the extraordinary circumstances, Caverion withdrew its guidance for 2020 in April. At present it is still difficult to forecast how deep and long the current downturn will be and what will be the speed of the economic recovery. For Caverion, the business volume and the amount of new order intake will be key determinants to our performance in the second half of this year. Nevertheless, we assume a pick-up in our Adjusted EBITA in the second half of 2020 compared to the first half of 2020.

We continued our most important development efforts in the areas of digitalisation, sustainability and energy efficiency in the first half of the year. We have been pleased to recognise that a significant amount of the economic stimulus packages is directed towards sustainable investments enabling smart buildings and cities. This is the area where we have our strategic focus. We are well positioned to support our customers' sustainability targets. Our own sustainability KPI targets will be published this year. We will come back to this in more detail at our Sustainability Morning to be held in connection with our Q3/2020 report in Helsinki on 5 November 2020. Our target is to come out of the crisis as a stronger company than entering it."

OUTLOOK FOR 2020

Market outlook for Caverion's services and solutions

A large part of Caverion's services is vital in keeping critical services and infrastructure up-and-running. This includes ensuring the continued functioning of energy and transportation infrastructure, health facilities, pharmaceutical and food industries, food retail and logistics as well as facilities and services used by public authorities. An important share of these services needs to be performed regardless of the coronavirus pandemic. The economic stimulus packages provided by governments and the EU are expected to increase infrastructure, health care and different types of sustainable investments in Caverion's operating area.

In Caverion's operating countries, the lockdown measures of the first wave of the corona pandemic impacted Caverion's business mainly between mid-March and the end of May, after which they have been gradually dismantled and their impact has reduced. At the end of the second quarter, the corona pandemic was well contained in most Caverion countries, while at the global level the pandemic continued spreading. A possible second wave of the coronavirus spread could lead to renewed lockdown measures also in Caverion countries and again increase the negative business impacts. Any further restrictions such as limiting industrial operations and shutdowns or temporary close-downs of premises or construction sites could have an impact on Caverion's business.

The corona crisis has led to a global downturn, but it is still unclear how deep and how long the downturn will be and what will be the speed of the economic recovery. The business volume and the amount of new order intake are important determinants to Caverion's performance in the second half of 2020, but both are still difficult to predict at present. While the digitalisation and sustainability megatrends are in many ways favourable to Caverion, a global downturn will most likely negatively impact the general level of demand and the pricing environment also for Caverion's offering. Most likely the demand for new construction projects will decrease, but there may also be an impact on smaller ad-hoc services and projects.

The corona crisis and the resulting downturn may also promote additional demand and new opportunities for some of Caverion's solutions going forward. Remotely controlled buildings are helping customers to save time and money, but also enable to operate the buildings more safely. Special requirements also apply to ventilation and air-conditioning systems, increasing the demand for ventilation related upgrades based on new guidelines and requirements.

Despite the coronavirus and its economic effects, the overall megatrends in the industry, such as the increase of technology in built environments, 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.

Services

The corona crisis and the resulting economic slowdown are in general expected to impact the demand environment negatively in Services, especially in ad-hoc services. However, Caverion's Services business is by nature more stable and resilient through business cycles than the Projects business. As technology in buildings increases, the need for new services and digital solutions is expected to increase. Customer focus on core operations continues to open up outsourcing and maintenance as well as technical building management opportunities for Caverion. In some cases, the demand for smaller ad-hoc work in empty buildings may also increase. There is a continued interest for services supporting sustainability, such as energy management. In Cooling, there is a technical change ongoing from F-gases into CO2-based refrigeration, providing increased need for upgrades and modernisations.

Projects

The corona crisis and the resulting economic slowdown are in general expected to impact the demand environment negatively in Projects. Most likely the demand for new construction projects will decrease, but on the other hand, renovation construction is expected to continue increasing. The current circumstances also allow doing repairs and many types of installation projects for unoccupied properties and sites. From the trends perspective, the requirements for increased energy efficiency, better indoor climate and tightening environmental legislation continue to drive demand over the coming years. Stimulus packages are also expected to positively impact general demand in the Projects business.

Guidance for 2020

Caverion announced on 14 April 2020 that it withdraws its guidance for 2020 due to the increased uncertainty around the market outlook as a result of the coronavirus pandemic.

Caverion may provide an updated guidance for 2020 once the visibility improves and more reliable estimates can be made.

INFORMATION SESSION, WEBCAST AND CONFERENCE CALL

Caverion will hold a news conference and webcast on the Half-year Financial Report on Thursday, 6 August 2020, at 10.00 a.m. Finnish time (EEST) at Hotel Kämp, Kluuvikatu 2, Helsinki, Finland. The news conference can also be viewed live on Caverion's website at www.caverion.com/investors.

It is also possible to participate in the event through a conference call by calling the assigned number +44 (0)330 336 9105 at 9:55 a.m. (Finnish time, EEST) at the latest. The participant code for the conference call is "5730948/ Caverion". More practical information on the news conference can be found on Caverion's website, www.caverion.com/investors.

Financial information to be published in 2020

Q3 Interim Report will be published on 5 November 2020. Financial reports and other investor information are available on Caverion's website www.caverion.com/investors. The materials may also be ordered by sending an e-mail to IR@caverion.com.

CAVERION CORPORATION

Distribution: Nasdaq Helsinki, principal media, www.caverion.com

For further information, please contact:

Martti Ala-Härkönen
Chief Financial Officer
Caverion Corporation
Tel. +358-40-737-6633
martti.ala-harkonen@caverion.com

Milena Hæggström
Head of Investor Relations and External Communications
Caverion Corporation
Tel. +358-40-5581-328
milena.haeggstrom@caverion.com

This information was brought to you by Cision http://news.cision.com

https://news.cision.com/caverion/r/caverion-corporation-s-half-year-financial-report-for-1-january---30-june-2020,c3164478

The following files are available for download: