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Caverion Oyj
Interim / Quarterly Report • Nov 3, 2023
3260_10-q_2023-11-03_7048b82b-63f2-41f8-8938-00834768a5e7.pdf
Interim / Quarterly Report
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Q3/2023 | 0
Q3/2023 Interim Report 1-9/2023
Caverion Corporation's Interim Report for 1 January – 30 September 2023
Solid profitability in an uncertain operating environment
1 July – 30 September 2023
- ﴿ Revenue: EUR 578.0 (564.1) million, up by 2.5 percent. Organic growth was 2.5 (11.8) percent. Services business revenue increased by 0.1 percent. Projects business revenue increased by 7.0 percent.
- ﴿ Adjusted EBITA: EUR 29.7 (26.9) million, or 5.1 (4.8) percent of revenue, up by 10.6 percent.
- ﴿ EBITA: EUR 28.9 (25.1) million, or 5.0 (4.5) percent of revenue, up by 15.1 percent.
- ﴿ Operating profit: EUR 25.0 (21.1) million, or 4.3 (3.7) percent of revenue, up by 18.9 percent.
- ﴿ Operating cash flow before financial and tax items: EUR -5.9 (7.7) million, impacted by the cost reimbursement of EUR 10.0 million to Bain Consortium.
- ﴿ Earnings per share, undiluted: EUR 0.12 (0.10) per share.
1 January – 30 September 2023
- ﴿ Order backlog: EUR 1,943.1 (1,971.0) million, down by 1.4 percent. Services backlog decreased by 2.8 percent. Projects backlog increased by 0.4 percent.
- ﴿ Revenue: EUR 1,821.0 (1,669.2) million, up by 9.1 percent. Organic growth was 8.1 (6.2) percent. Services business revenue increased by 6.7 percent. Projects business revenue increased by 13.9 percent.
- ﴿ Adjusted EBITA: EUR 79.7 (67.2) million, or 4.4 (4.0) percent of revenue, up by 18.6 percent.
- ﴿ During the period, key figures related to profit, cash flow and earnings per share were impacted by the tender offer related cost reimbursement of EUR 10.0 million to Bain Consortium.
- ﴿ EBITA: EUR 64.5 (61.5) million, or 3.5 (3.7) percent of revenue, up by 4.9 percent.
- ﴿ Operating profit: EUR 52.2 (49.9) million, or 2.9 (3.0) percent of revenue, up by 4.6 percent.
- ﴿ Operating cash flow before financial and tax items: EUR 33.5 (37.4) million, down by 10.3 percent.
- ﴿ Cash conversion (LTM): 94.1 (90.1) percent.
- ﴿ Earnings per share, undiluted: EUR 0.23 (0.23) per share.
- ﴿ Net debt/Adjusted EBITDA: 1.9x (1.8x).
- ﴿ Acquisitions: Caverion closed five acquisitions in January–September 2023, total annual revenue EUR 60.4 million.
Unless otherwise noted, the figures in brackets refer to the corresponding period in the previous year.
Guidance for 2023: In 2023, Caverion Group's revenue (2022: EUR 2,352.1 million) and adjusted EBITA (2022: EUR 105.8 million) will grow compared to 2022.
KEY FIGURES
| EUR million | 7-9/23 | 7-9/22 | Change | 1-9/23 | 1-9/22 Change | 1-12/22 | |
|---|---|---|---|---|---|---|---|
| Revenue | 578.0 | 564.1 | 2.5% | 1,821.0 | 1,669.2 | 9.1% | 2,352.1 |
| Organic growth, % | 2.5 | 11.8 | 8.1 | 6.2 | 8.6 | ||
| Adjusted EBITDA | 45.3 | 41.1 | 10.4% | 124.6 | 109.1 | 14.2% | 163.0 |
| Adjusted EBITDA margin, % | 7.8 | 7.3 | 6.8 | 6.5 | 6.9 | ||
| EBITDA | 44.5 | 39.3 | 13.2% | 109.5 | 103.6 | 5.7% | 143.4 |
| EBITDA margin, % | 7.7 | 7.0 | 6.0 | 6.2 | 6.1 | ||
| Adjusted EBITA | 29.7 | 26.9 | 10.6% | 79.7 | 67.2 | 18.6% | 105.8 |
| Adjusted EBITA margin, % | 5.1 | 4.8 | 4.4 | 4.0 | 4.5 | ||
| EBITA | 28.9 | 25.1 | 15.1% | 64.5 | 61.5 | 4.9% | 86.1 |
| EBITA margin, % | 5.0 | 4.5 | 3.5 | 3.7 | 3.7 | ||
| Operating profit | 25.0 | 21.1 | 18.9% | 52.2 | 49.9 | 4.6% | 69.9 |
| Operating profit margin, % | 4.3 | 3.7 | 2.9 | 3.0 | 3.0 | ||
| Result for the period | 16.0 | 14.6 | 9.7% | 32.7 | 33.1 | -1.3% | 46.2 |
| Earnings per share, undiluted, EUR | 0.12 | 0.10 | 12.9% | 0.23 | 0.23 | 1.2% | 0.32 |
| Operating cash flow before | |||||||
| financial and tax items | -5.9 | 7.7 | 33.5 | 37.4 | -10.3% | 144.3 | |
| Order backlog | 1,943.1 | 1,971.0 | -1.4% | 1,943.3 | |||
| Cash conversion (LTM), % | 94.1 | 90.1 | 100.6 | ||||
| Working capital | -76.9 | -75.8 | -1.4% | -141.4 | |||
| Interest-bearing net debt | 332.8 | 274.0 | 21.4% | 200.9 | |||
| Net debt/Adjusted EBITDA | 1.9 | 1.8 | 1.2 | ||||
| Gearing, % | 190.9 | 131.8 | 89.1 | ||||
| Equity ratio, % | 15.5 | 19.0 | 19.8 | ||||
| Personnel, end of period | 14,853 | 15,037 | -1.2% | 14,490 |
JACOB GÖTZSCHE, PRESIDENT AND CEO:
"In the third quarter of 2023, we continued to deliver solid profitability as well as revenue growth. Even in a challenging operating environment, our underlying business has proven resilient. Global trends driving market demand, such as energy efficiency and the green transition in the built environment, continue to support our growth. I am pleased that thus far, the challenges of the building construction market and the high interest rate environment have not been reflected in our overall performance. So far, we have been successful at mitigating the negative effects, but the market situation continues to be challenging.
Group revenue in the third quarter continued to increase compared to the previous year and amounted to EUR 578.0 (564.1) million, which is a decent result considering the current operating environment. Excluding currency rate effects, revenue in the third quarter remained at a good level across both the Services and Projects businesses. Organic growth continued at a satisfactory 2.5 percent level, whereas acquisitions contributed by 3.8 percent. The currency devaluation in Sweden and Norway continued to be significant, impacting our third quarter revenue negatively by EUR 22 million. Inflation and higher sales prices due to increased material costs contributed in part to revenue growth. The impact was, however, clearly lower than in the same period last year and in the first half of 2023. In comparable exchange rates, revenue increased in divisions Sweden, Norway, Austria, Denmark and Industry and was at last year's level in Finland and Germany. Current customer highlights include infrastructure initiatives improving power transmission capacity in Finland, renewable energy projects in Sweden, planning and building of a cleanroom in Germany, and facility management agreements, to name a few. These examples demonstrate well the breadth of Caverion's capabilities.
In the third quarter, we achieved a strong adjusted EBITA, despite the negative impact of currency devaluation of the Swedish Krona and Norwegian Krone (at about EUR 1 million). Compared to the previous year, our adjusted EBITA improved by 10.6 percent to EUR 29.7 (26.9) million and was 5.1 (4.8) percent of revenue during the quarter. The increase in adjusted EBITA was driven by business unit Projects, where revenue remained strong with a healthy project mix. Our operating cash flow during the quarter was EUR -5.9 (7.7) million, negatively impacted by the tender offer related cost reimbursement of EUR 10.0 million paid to Bain Consortium.
Order backlog at the end of the third quarter was slightly behind last year at EUR 1,943.1 (1,971.0) million. In comparable currencies, order backlog was at the same level as last year. Despite the continued challenging market conditions, the order backlog provides us with confidence that our business will remain stable towards the year end. Whereas material price inflation is easing, the impact of currency rate fluctuation is difficult to predict. While we are not immune to the challenges of the current operating environment, global trends drive long-term demand in our business, which overweighs limitations in the short-term.
The execution of our Sustainable Growth strategy has progressed well during the year in all of our business focus areas. During the quarter, we completed two acquisitions, VVS Teknikk in Norway and Kiwa Inspecta's building services business unit in Finland, and welcomed around 85 skilled colleagues to the Caverion Group. Both of the acquisitions strengthen our service capacity and expertise in these markets. As outlined by our strategy, high quality companies that complement our existing capabilities and/or geographical footprint will continue to be in our radar also going forward.
On a different note, the tender offer for the Caverion shares, which is recommended by the Board of Directors, has recently taken a major step forward as all the acceptance conditions have been met. The ownership of Crayfish BidCo Oy, a Finnish company controlled by Triton Fund V, has exceeded 2/3 of all outstanding Caverion shares and all merger control clearances have been received. According to the preliminary result after the tender offer period, which ended on 1 November 2023, Triton's ownership will increase to 94.3% when the tender offer is completed. The ownership change in itself has no impact in our daily business. We at Caverion continue to focus on serving our customers and working together across the company as before.
Looking ahead, Caverion is well set to deliver on its long-term business targets and accelerated sustainable growth. We continue to focus on being the trusted expert partner for our customers and to support them in being smart and sustainable throughout the entire lifecycle of buildings, infrastructure and industrial sites. Our biggest asset in delivering on this ambition is our knowledgeable employees, who deserve a special thank you for ensuring Caverion is the preferred choice for our customers."
MARKET OUTLOOK FOR 2023
Caverion expects the underlying demand to be overall positive in Services during 2023.
In Projects, the high inflation and increasing interest rates are impacting the demand environment for new construction negatively. In addition, the conflicts in Ukraine and recently also in the Middle East are creating economic uncertainty. With its balanced Projects business portfolio, Caverion still expects the underlying business activity to remain stable in 2023.
The digitalisation and sustainability megatrends are in many ways favourable to Caverion and they are believed to increase demand for Caverion's offering going forward. The increased energy efficiency requirements, and the increasing digitalisation, automation and technology requirements in the built environment remain strong, together with the urbanisation megatrend. 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. The continued focus on energy efficiency and CO2 reduction activities and projects continues to support activity and business volume in Caverion's operating environment.
FINANCIAL AND SUSTAINABILITY TARGETS
Caverion updated its financial targets in connection with publishing its updated strategy on 9 May 2022. Sustainability targets remained unchanged.
| Mid-term financial targets until the end of 2025 | |||||
|---|---|---|---|---|---|
| Cash conversion (LTM) | Operating cash flow before financial and tax items / EBITDA > 100% |
94.1% | |||
| Profitability | Adjusted EBITA > 5.5% of revenue | 4.4% | |||
| Organic revenue growth | 3−4% p.a. over the strategy period | 8.1% | |||
| M&A revenue growth | 2−3% p.a. over the strategy period | 5.0% | |||
| Debt leverage | Net debt/LTM Adjusted EBITDA < 2.5x | 1.9x | |||
| Dividend policy | Distribute at least 50% of the result for the year after taxes, however, taking leverage level into account |
62%* |
* Calculated as Dividend per earnings (%). The Annual General Meeting approved the proposal of the Board of Directors according to which a dividend of EUR 0.20 per share was paid from the distributable funds of the company for the financial year 2022. The dividend was paid on 5 April 2023.
| Sustainability targets until 2025 | 2025 target | 2022 | 2021 |
|---|---|---|---|
| Decreasing our footprint | |||
| Total carbon footprint defined and measured | 100% | 90% | 80% |
| Increasing our handprint | |||
| Our offering has a defined carbon handprint | 100% | 25% | 20% |
| Carbon handprint over footprint (Scope 1−2) | 5x | >3x | >2x |
| Caring for our people | |||
| Lost Time Injury Frequency Rate (LTIFR) | <2 | 4.0 | 4.0 |
| Share of female employees | 15% | 11% | 11% |
| Our employees trained in sustainability | 100% | 30%* | N/A** |
| Ensuring sustainable value chain | |||
| Supplier Code of Conduct sign-off rate | >90% | 74% | 66% |
| Our tender requests include sustainability criteria | 100% | - | - |
* Sustainability eLearning available since Q4/2022. During the year two other ESG related eLearnings conducted with performance rates of 97% (InfoSec eLearning) and 97% (Code of Conduct eLearning).
** Sustainability eLearning not yet available. Two other ESG related eLearnings conducted with performance rates of 86% (Safety eLearning) and 92% (Code of Conduct eLearning).
NEWS CONFERENCE, WEBCAST AND CONFERENCE CALL
Caverion will hold a news conference on its Interim Report on Friday, 3 November 2023, at 10.00 a.m. Finnish time (EET) at the Company's premises, Torpantie 2, 01650 Vantaa, Finland. The news conference can be viewed live on Caverion's website at www.caverion.com/investors or at https://caverion.videosync.fi/2023-q3. It is also possible to participate in the event through a conference call by registering beforehand on the following link: https://palvelu.flik.fi/teleconference/?id=1009622. Phone numbers and the conference ID to access the conference will be provided after the registration. To ask a question, press *5 on your telephone keypad to enter the queue. More practical information on the news conference can be found on Caverion's website, www.caverion.com/investors.
FINANCIAL INFORMATION TO BE PUBLISHED IN 2024
The Financial Statements Release for 2023 will be published on 8 February 2024. The Annual Review 2023 including the financial statements will be published during week 9/2024, at the latest. The Interim and Half-yearly Reports for 2024 will be published on 25 April, 31 July and 31 October 2024.
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 [email protected].
CAVERION CORPORATION
For further information, please contact:
Mikko Kettunen, CFO, tel. +358 50 347 7462, [email protected] Noora Koikkalainen, Head of Investor Relations, tel. +358 50 562 6552, [email protected]
Distribution: Nasdaq Helsinki, principal media, www.caverion.com
OPERATING ENVIRONMENT
The economic uncertainty due to the conflicts in the Ukraine and recently in the Middle East, followed by the subsequent energy crisis, mounting inflation, rising interest rates and lowered economic growth prospects continued. Caverion has no operations in the Middle East, Russia, Ukraine or Belarus. Therefore, the impact of the conflicts on Caverion is currently indirect.
Core inflation, despite signs of easing, remained high during January–September 2023. The cost inflation related to material prices continued to impact also the building technology market. Caverion continues to manage any increases in material prices and delays in the supply chain on a daily basis without them having a significant impact on the financial performance during January–September 2023. On the other hand, wage inflation has gradually increased.
The economic sentiment indicators have continued to be volatile in the EU during January–September 2023, and the operating environment is still impacted by lower economic growth prospects and the recent interest rate hikes.
Services
In Services, the market demand and general investment activity remained positive. Caverion has continued to see an increasing interest towards longterm and large-scale service agreements, driven by the demand for technical competencies and selfdelivery capability. There has also been increasing demand for services supporting sustainability, such as energy management, digital solutions and advisory services, driven by regulation and increased awareness. Growth has been limited by the availability of competent workforce.
Projects
The increasing interest rates have as much as stalled certain segments of the building construction market. Caverion is not immune to this development. The residential construction market, however, does not have a significant role in Caverion's Projects business portfolio. On the other hand, the demand in certain other businesses, such as renewable energy related projects, has been strong. As such, for Caverion's Projects business as a whole, the market demand has remained mostly stable, however, with regional differences.
The Projects market was also impacted by increases in material prices, delays in decision-making and supply chain as well as uncertainty in the business environment, especially related to new construction.
Order backlog (EUR million)
ORDER BACKLOG
- ﴿ Order backlog at the end of September decreased by 1.4 percent to EUR 1,943.1 million from the end of September in the previous year (EUR 1,971.0 million).
- ﴿ At comparable exchange rates, order backlog was at last year's level at EUR 1,970.2 million.
- ﴿ Order backlog decreased by 2.8 percent in Services and increased by 0.4 percent in Projects from the end of September in the previous year.
REVENUE
July–September
- ﴿ Revenue for July–September was EUR 578.0 (564.1) million. Revenue increased by 2.5 percent compared to the previous year. At the previous year's exchange rates, revenue would have been EUR 599.9 million, an increase of 6.3 percent compared to the previous year. Organic growth was 2.5 percent.
- ﴿ Revenue increased by 3.8 (2.9) percent as a result of acquisitions and divestments.
- ﴿ Revenue was negatively impacted by fluctuations in currency exchange rates of EUR 21.9 million, equalling a decrease of 3.9 percent. Changes in Swedish krona had a negative effect of EUR 11.5 million and changes in Norwegian krone had a negative effect of EUR 10.5 million.
- ﴿ Excluding the effects of exchange rates, revenue increased in divisions Sweden, Norway, Austria, Denmark and Industry and was at last year's level in Finland and Germany.
- ﴿ Organic growth was strong especially in divisions Denmark, Sweden and Austria.
(EUR million)
| Change in | Acquisitions and | ||||||
|---|---|---|---|---|---|---|---|
| Currency comparable | Organic | divestments | |||||
| EUR million | 7-9/23 | 7-9/22 | Change | impact | rates * | growth ** | impact |
| Sweden | 101.6 | 101.8 | -0.2% | -11.2% | 11.0% | 10.3% | 0.7% |
| Finland | 101.5 | 102.8 | -1.3% | -1.3% | -3.1% | 1.8% | |
| Germany | 107.9 | 107.5 | 0.4% | 0.4% | 0.4% | ||
| Norway | 79.0 | 83.1 | -4.9% | -12.7% | 7.8% | 4.7% | 3.1% |
| Industry | 72.4 | 69.1 | 4.7% | 0.3% | 4.4% | -10.9% | 15.4% |
| Austria | 66.0 | 59.2 | 11.5% | 11.5% | 7.9% | 3.5% | |
| Denmark | 37.2 | 29.9 | 24.5% | -0.2% | 24.7% | 16.1% | 8.7% |
| Baltic countries | 12.4 | 10.7 | 16.1% | 16.1% | 16.1% | ||
| Group, total | 578.0 | 564.1 | 2.5% | -3.9% | 6.3% | 2.5% | 3.8% |
| Services | 372.4 | 371.9 | 0.1% | -4.2% | 4.4% | 2.2% | 2.2% |
| Projects | 205.6 | 192.1 | 7.0% | -3.2% | 10.2% | 3.2% | 7.0% |
* Revenue change in local currencies
** Revenue change in local currencies, excluding the impact of acquisitions and divestments but including the change in the revenue of the acquired businesses post-acquisition
In July–September, the revenue of the Services business unit was at the same level as last year in the corresponding period with EUR 372.4 (371.9) million. In local currencies, the increase was 4.4 percent.
The revenue of the Projects business unit was EUR 205.6 (192.1) million in July–September, an increase of 7.0 percent, or 10.2 percent in local currencies.
January–September
- ﴿ Revenue for January–September was EUR 1,821.0 (1,669.2) million. Revenue increased by 9.1 percent compared to the previous year. At the previous year's exchange rates, revenue would have been EUR 1,888.6 million, an increase of 13.1 percent compared to the previous year. Organic growth was 8.1 percent.
- ﴿ Revenue increased by 5.0 (1.6) percent as a result of acquisitions and divestments.
- ﴿ Revenue was negatively impacted by fluctuations in currency exchange rates of EUR 67.6 million, equalling a decrease of 4.1 percent. Changes in Swedish krona had a negative effect of EUR 32.4 million and Norwegian krone had a negative effect of EUR 35.2 million.
- ﴿ Excluding the effects of exchange rates, revenue increased in Sweden, Finland, Germany, Norway, Austria and Denmark and was at the previous year's level in Industry. Organic growth was strong especially in divisions Denmark and Sweden.
Revenue by business unit % of revenue 1-9/2023 Revenue by division
| Change in | Acquisitions and | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Currency comparable | Organic | divestments | |||||||
| EUR million | 1-9/23 | 1-9/22 | Change | impact | rates * | growth ** | impact | ||
| Sweden | 357.7 | 322.6 | 10.9% | -10.1% | 20.9% | 20.2% | 0.7% | ||
| Finland | 325.4 | 311.2 | 4.5% | 4.5% | 2.1% | 2.5% | |||
| Germany | 322.3 | 293.5 | 9.8% | 9.8% | 9.8% | ||||
| Norway | 261.8 | 263.6 | -0.7% | -13.4% | 12.7% | 11.3% | 1.4% | ||
| Industry | 200.2 | 205.0 | -2.4% | 0.1% | -2.4% | -16.4% | 13.9% | ||
| Austria | 194.8 | 161.9 | 20.3% | 20.3% | 11.0% | 9.3% | |||
| Denmark | 123.6 | 77.9 | 58.6% | -0.2% | 58.8% | 30.8% | 28.0% | ||
| Baltic countries | 35.2 | 33.4 | 5.6% | 5.6% | 5.6% | ||||
| Group, total | 1,821.0 | 1,669.2 | 9.1% | -4.1% | 13.1% | 8.1% | 5.0% | ||
| Services | 1,177.5 | 1,103.9 | 6.7% | -4.5% | 11.2% | 6.9% | 4.3% | ||
| Projects | 643.6 | 565.2 | 13.9% | -3.2% | 17.0% | 10.6% | 6.4% |
* Revenue change in local currencies
** Revenue change in local currencies, excluding the impact of acquisitions and divestments but including the change in the revenue of the acquired businesses post-acquisition
The revenue of the Services business unit increased and was EUR 1,177.5 (1,103.9) million in January– September, an increase of 6.7 percent, or 11.2 percent in local currencies. The revenue of the Projects business unit was EUR 643.6 (565.2) million in January–September, an increase of 13.9 percent, or 17.0 percent in local currencies.
The Services business unit accounted for 64.7 (66.1) percent of Group revenue, and the Projects business unit for 35.3 (33.9) percent of Group revenue in January–September.
| Revenue, EUR million | 7-9/23 | % | 7-9/22 | % | Change | 1-9/23 | % | 1-9/22 | % | Change 1-12/22 | % | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Sweden | 101.6 17.6 | 101.8 18.0 | -0.2% | 357.7 19.6 | 322.6 19.3 | 10.9% | 455.0 19.3 | |||||
| Finland | 101.5 17.6 | 102.8 18.2 | -1.3% | 325.4 17.9 | 311.2 18.6 | 4.5% | 431.9 18.4 | |||||
| Germany | 107.9 18.7 | 107.5 19.1 | 0.4% | 322.3 17.7 | 293.5 17.6 | 9.8% | 406.0 17.3 | |||||
| Norway | 79.0 13.7 | 83.1 14.7 | -4.9% | 261.8 14.4 | 263.6 15.8 | -0.7% | 368.5 15.7 | |||||
| Industry | 72.4 12.5 | 69.1 12.3 | 4.7% | 200.2 11.0 | 205.0 12.3 | -2.4% | 285.5 12.1 | |||||
| Austria | 66.0 11.4 | 59.2 10.5 | 11.5% | 194.8 10.7 | 161.9 | 9.7 | 20.3% | 237.0 10.1 | ||||
| Denmark | 37.2 | 6.4 | 29.9 | 5.3 | 24.5% | 123.6 | 6.8 | 77.9 | 4.7 | 58.6% | 122.1 | 5.2 |
| Baltic countries | 12.4 | 2.1 | 10.7 | 1.9 | 16.1% | 35.2 | 1.9 | 33.4 | 2.0 | 5.6% | 46.0 | 2.0 |
| Group, total | 578.0 | 100 | 564.1 | 100 | 2.5% 1,821.0 | 100 1,669.2 | 100 | 9.1% | 2,352.1 | 100 | ||
| Services | 372.4 64.4 | 371.9 65.9 | 0.1% 1,177.5 64.7 1,103.9 66.1 | 6.7% | 1,570.1 66.8 | |||||||
| Projects | 205.6 35.6 | 192.1 34.1 | 7.0% | 643.6 35.3 | 565.2 33.9 | 13.9% | 782.0 33.2 |
PROFITABILITY
Adjusted EBITA, EBITA and operating profit
July–September
- ﴿ Adjusted EBITA for July–September increased to EUR 29.7 (26.9) million, or 5.1 (4.8) percent of revenue and EBITA increased to EUR 28.9 (25.1) million, or 5.0 (4.5) percent of revenue.
- ﴿ Adjusted EBITA improved especially in divisions Germany, Austria and Industry. When it comes to Services, adjusted EBITA declined slightly and improved in Projects.
- ﴿ The devaluation of the Swedish krona and the Norwegian krone had a negative impact on adjusted EBITA of approximately EUR 1 million.
The operating profit (EBIT) for July–September was EUR 25.0 (21.1) million, or 4.3 (3.7) percent of revenue.
Costs related to materials and supplies decreased to EUR 149.1 (153.8) million and external services increased to EUR 115.2 (107.8) million in July– September. Personnel expenses increased to a total of EUR 219.0 (210.1) million for July–September. Other operating expenses amounted to EUR 51.2 (53.9) million. Other operating income amounted to EUR 1.1 (0.8) million.
Adjusted EBITA and margin
(EUR million)
Depreciation, amortisation and impairment amounted to EUR 19.5 (18.3) million in July–September. Of these EUR 15.6 (14.2) million were depreciations on tangible assets and EUR 3.9 (4.1) million amortisations on intangible assets. Of the depreciations, the majority related to right-of-use assets in accordance with IFRS 16 amounting to EUR 13.8 (12.7) million and EUR 1.8 (1.5) million related to machinery and equipment and other tangible assets. The amortisations were related to allocated intangibles on acquisitions amounting to EUR 2.4 (1.6) million as well as IT and developed solutions amounting to EUR 1.5 (2.5) million.
January–September
- ﴿ Adjusted EBITA for January–September increased to EUR 79.7 (67.2) million, or 4.4 (4.0) percent of revenue and EBITA increased to EUR 64.5 (61.5) million, or 3.5 (3.7) percent of revenue.
- ﴿ Adjusted EBITA improved during the period despite the devaluation of Swedish krona and the Norwegian krone, which had a negative impact of approximately EUR 3 million. Increased costs of materials and external services were successfully covered in pricing.
- ﴿ Adjusted EBITA improved both in Services and Projects. Especially divisions Denmark, Germany, Sweden and Austria progressed well.
- ﴿ EBITA was negatively impacted by the cost reimbursement of EUR 10.0 million to the Bain Consortium booked in Q2/2023.
The operating profit (EBIT) for January–September was EUR 52.2 (49.9) million, or 2.9 (3.0) percent of revenue.
Costs related to materials and supplies increased to EUR 475.3 (431.9) million and external services increased to EUR 345.7 (309.1) million in January– September. Personnel expenses increased to a total of EUR 706.2 (674.6) million for January–September. Other operating expenses increased to EUR 186.0 (151.8) million. Other operating income amounted to EUR 1.7 (1.9) million.
Adjusted EBITA and margin
(EUR million)
Depreciation, amortisation and impairment amounted to EUR 57.2 (53.7) million in January–September. Of these EUR 45.0 (42.1) million were depreciations on tangible assets and EUR 12.3 (11.6) million amortisations on intangible assets. Of the depreciations, the majority related to right-of-use assets in accordance with IFRS 16 amounting to EUR 39.8 (37.7) million and EUR 5.1 (4.4) million related to machinery and equipment and other tangible assets. The amortisations were related to allocated intangibles on acquisitions amounting to EUR 7.1 (4.1) million as well as IT and developed solutions amounting to EUR 5.2 (7.4) million.
EUR million 7-9/2023 7-9/2022 1-9/2023 1-9/2022 1-12/2022 EBITA 28.9 25.1 64.5 61.5 86.1 EBITA margin, % 5.0 4.5 3.5 3.7 3.7 Items affecting comparability (IAC) - Capital gains and/or losses and transaction costs related to divestments and acquisitions 0.2 1.7 1.3 4.1 5.4 - Write-downs, expenses and income from major risk projects* 4.0 - Restructuring costs 0.3 0.0 1.3 1.1 1.1 - Other items 0.3 0.0 12.5 0.4 9.2 - Costs related to public tender offers** 0.3 12.5 2.5 - Costs related to other items*** 0.0 0.0 0.4 6.7 Adjusted EBITA 29.7 26.9 79.7 67.2 105.8
Adjusted EBITA and items affecting comparability (IAC)
* Major risk projects included only one old risk project in Germany during 2022.
** In 2022 and 2023, other items included advisory and personnel costs related to the submitted public tender offers. A EUR 10.0 million cost was recognised for the reimbursement of expenses to the Bain Consortium in relation to the termination of the Combination Agreement.
Adjusted EBITA margin, % 5.1 4.8 4.4 4.0 4.5
*** In 2022 and 2023, other items also included provisions and legal and other costs for civil claims related to the German anti-trust matter.
Q3/2023 | 11
July–September
Transaction costs related to acquisitions totalled EUR 0.2 (1.7) million in July–September. Restructuring costs amounted to EUR 0.3 (0.0) million.
Other items totalled EUR 0.3 (0.0) million and included advisory and personnel costs related to the submitted public tender offers.
January–September
Transaction costs related to acquisitions totalled EUR 1.3 (4.1) million in January–September and restructuring costs amounted to EUR 1.3 (1.1) million. Other items totalled EUR 12.5 (0.4) million and included advisory and personnel costs related to the submitted public tender offers in the amount of EUR 2.5 million. In the second quarter of 2023, a EUR 10.0 million cost was also recognised in relation to the termination of the Combination Agreement with the Bain Consortium. The cost reimbursement was paid during the third quarter.
EBITA is defined as Operating profit + amortisation and impairment on intangible assets. Adjusted EBITA = EBITA before items affecting comparability (IAC). Items affecting comparability (IAC) in 2023 are material items or transactions, which are relevant for understanding the financial performance of Caverion when comparing the profit of the current period with that of the previous periods. These items can include (1) capital gains and/or losses and transaction costs related to divestments and acquisitions; (2) writedowns, expenses and/or income from separately identified major risk projects; (3) restructuring expenses and (4) other items that according to Caverion management's assessment are not related to normal business operations. In 2022, major risk projects included only one old risk project in Germany reported under category (2). In 2022 and 2023, provisions and legal and other costs for civil claims related to the German anti-trust matter were reported under category (4). Category (4) included also costs related to the submitted public tender offers in 2022 and 2023.
Adjusted EBITDA is affected by the same adjustments as adjusted EBITA, except for restructuring costs, which do not include depreciation and impairment relating to restructurings.
Result before taxes, result for the period and earnings per share
Result before taxes amounted to EUR 42.7 (43.1) million, result for the period to EUR 32.7 (33.1) million, and earnings per share to EUR 0.23 (0.23) in January–September. Net financing expenses in January–September were EUR 9.6 (6.9) million. This includes an interest cost on lease liabilities amounting to EUR 4.0 (2.9) million. In January-September 2022, net finance expenses included one-off exchange settlement cost related to bond refinancing amounting to EUR 1.2 million.
The Group's effective tax rate was 23.5 (23.1) percent in January–September 2023. Income taxes in the income statement amounted to EUR 10.0 (10.0) million.
CAPITAL EXPENDITURE, ACQUISITIONS AND DISPOSALS
Gross capital expenditure on non-current assets (excluding capital expenditure on leased assets), including acquisitions, totalled EUR 39.9 (92.8) million in January–September, representing 2.2 (5.6) percent of revenue. Investments in information technology totalled EUR 3.6 (6.3) million representing 0.2 (0.4) percent of revenue. IT investments continued to be focused on building a harmonised IT infrastructure and common platforms, with migration to the cloud. Caverion SmartView and mobile tools were also further developed. Investments in acquisitions amounted to EUR 31.6 (82.6) million and other investments to EUR 4.6 (3.9) million.
On 1 February 2023, Caverion closed an agreement to acquire TM Voima Group's substation and power transmission line business in Finland and Estonia by acquiring the shares of TMV Service Oy, TMV Line Oy and TMV Power OÜ. The acquisition strengthened Caverion's presence in the energy sector and enables
growth especially in the substation business. In 2022, the revenue of TM Voima Group's substation and transmission line business amounted to EUR 47.7 million and the number of employees at the time of the acquisition was 74. The purchase price was not disclosed.
In March 2023, Caverion signed a small asset purchase agreement to acquire St1 Lähienergia's geothermal heating installation and project management unit in Finland. The acquisition was closed on 3 April 2023 and transferred the unit's nine employees, their working tools and material stock to Caverion. The acquisition is a part of a cooperation agreement between Caverion and St1 in the area of geothermal projects for large-scale buildings. The purchase price was not disclosed.
On 1 June 2023, Caverion closed an agreement to acquire the shares of the Swedish CRC Clean Room Control AB. CRC provides specialised measurement services for clean rooms. The acquisition strengthened Caverion's measurement and validation expertise especially for advanced clean rooms within the pharmaceutical industry. The company had 5 employees at the time of the acquisition and its revenue amounted to EUR 1.1 million in 2022. The purchase price was not disclosed.
On 1 July 2023, Caverion closed an agreement to acquire the shares of the Norwegian VVS Teknikk Møre AS. VVS Teknikk specialises in ventilation, piping and building automation related services and projects and the company had approx. 35 employees at the time of the acquisition. The company's revenue for the year 2022 amounted to EUR 7.8 million. The acquisition strengthened Caverion's service capacity and expertise in Norway's Sunnmøre region. The purchase price was not disclosed.
On 29 June 2023, Caverion signed an agreement to acquire Kiwa Inspecta's building services and consultancy unit in Finland. The transaction was closed on 1 September 2023. Kiwa's building services and consultancy provides services related to building condition surveys, consisting of field services and assessments to buildings, structures, and HVAC systems. The acquisition supports Caverion's sustainable growth strategy and expands Caverion's expertise in advisory services in Finland. The acquired unit employs 50 experts and its revenue for the year 2022 amounted to EUR 3.8 million. The purchase price was not disclosed.
More information on Caverion's acquisitions in the review period can be found in Note 5 on page 30 to this Interim Report.
CASH FLOW, WORKING CAPITAL AND FINANCING
- ﴿ The Group's operating cash flow before financial and tax items decreased to EUR 33.5 (37.4) million in January–September and cash conversion (LTM) was 94.1 (90.1) percent. The period's cash flow was negatively impacted by the tender offer related cost reimbursement of EUR 10.0 million to Bain Consortium as well as by a payment of EUR 5.5 million for civil claims relating to the German anti-trust matter. The respective cost was recognised in 2022 and reported in items affecting comparability in the same year. A similar payment of EUR 8.8 million negatively affected the cash flow in January-September 2022.
- ﴿ The Group's free cash flow improved to EUR -12.2 (-55.2) million. Cash flow after investments was EUR -22.0 (-62.9) million.
- ﴿ The Group's working capital improved to EUR -76.9 (-75.8) million at the end of September.
In July–September, the Group's operating cash flow before financial and tax items decreased to EUR -5.9 (7.7) million. The Group's free cash flow improved to EUR -11.6 (-42.2) million. Cash flow after investments was EUR -14.6 (-42.6) million.
At the end of September, the Group's working capital was affected by the following items: The amount of trade and POC receivables increased to EUR 628.3 (588.6) million, other current receivables increased to EUR 31.3 (29.9) million and inventories decreased to EUR 20.7 (22.8) million. On the liabilities side, advances received increased to EUR 270.3 (264.0) million, other current liabilities increased to EUR 271.5 (251.5) million and trade and POC payables increased to EUR 215.5 (201.7) million.
Caverion's cash and cash equivalents amounted to EUR 12.5 (46.8) million at the end of September. In addition, Caverion had undrawn revolving credit facilities amounting to EUR 100.0 million and undrawn overdraft facilities amounting to EUR 15.9 million.
The Group's gross interest-bearing loans and borrowings excluding lease liabilities amounted to EUR 206.8 (181.9) million at the end of September, and the average effective interest rate was 4.1 (2.4) percent. Approximately 27 percent of the loans have been raised from banks and other financial institutions and approximately 73 percent from capital markets. Caverion has issued commercial papers to support sufficient liquidity. At the end of September, the outstanding commercial papers amounted to EUR 76.9 million. Lease liabilities amounted to EUR 138.4 (138.9) million at the end of
- ﴿ The Group's interest-bearing net debt excluding lease liabilities amounted to EUR 194.3 (135.1) million at the end of September and including lease liabilities to EUR 332.8 (274.0) million. Net debt was impacted by investments in acquisitions with a negative cash flow effect of EUR 29.8 million in January–September 2023 and EUR 11.7 million in October-December 2022 as well as the EUR 35 million redemption of the Hybrid bond in May 2023.
- ﴿ At the end of September, the Group's gearing was 190.9 (131.8) percent and the equity ratio 15.5 (19.0) percent. Equity ratio was also negatively impacted by the full repayment of the EUR 35 million hybrid bond.
In March, Caverion repaid the remaining part of the EUR 75 million senior unsecured bond according to its terms and conditions which totalled EUR 3.5 million following the tender offer in February 2022.
On 15 May 2020 Caverion issued a EUR 35 million hybrid bond, an instrument subordinated to the company's other debt obligations and treated as equity in the IFRS financial statements. The hybrid bond does not confer to its holders the rights of a shareholder and does not dilute the holdings of the current shareholders. The coupon of the hybrid bond was 6.75 percent per annum until 15 May 2023.
PERSONNEL
- ﴿ Caverion Group employed 14,712 (14,486) people on average in January–September 2023. At the end of September, the Group employed 14,853 (15,037) people. Personnel expenses for January–September increased to EUR 706.2 (674.6) million. The increase was mainly due to acquisitions and salary inflation.
- ﴿ The Group's accident frequency rate at the end of September was 4.4 (4.0). Caverion cares for the safety, health and wellbeing of its employees and will continue to a have high ambition and strong focus on improving them.
September 2023, resulting to total gross interestbearing liabilities of EUR 345.2 (320.8) million.
Caverion announced on 14 April 2023 that it will exercise its right to redeem its EUR 35 million hybrid bond. The hybrid bond was redeemed in full on 15 May 2023 in accordance with its terms and conditions.
Caverion's external loans are subject to a financial covenant based on the ratio of the Group's net debt to EBITDA according to the calculation principles confirmed with the lending parties. The ratio shall not exceed 3.5. Caverion is in compliance with the quarterly monitored financial covenant.
| Personnel by division, end of period | 9/2023 | 6/2023 | Change | 9/2023 | 9/2022 | Change 12/2022 | |
|---|---|---|---|---|---|---|---|
| Finland | 3,036 | 3,082 | -1% | 3,036 | 2,836 | 7% | 2,894 |
| Sweden | 2,647 | 2,648 | 0% | 2,647 | 2,521 | 5% | 2,559 |
| Norway | 2,383 | 2,312 | 3% | 2,383 | 2,325 | 2% | 2,344 |
| Germany | 2,278 | 2,225 | 2% | 2,278 | 2,218 | 3% | 2,225 |
| Industry | 1,825 | 1,987 | -8% | 1,825 | 2,299 | -21% | 1,850 |
| Austria | 1,053 | 1,046 | 1% | 1,053 | 1,245 | -15% | 1,023 |
| Denmark | 778 | 784 | -1% | 778 | 773 | 1% | 759 |
| Baltic countries | 701 | 701 | 0% | 701 | 654 | 7% | 666 |
| Group Services | 152 | 153 | -1% | 152 | 166 | -8% | 170 |
| Group, total | 14,853 | 14,938 | -1% | 14,853 | 15,037 | -1% | 14,490 |
Information on the effect of acquisitions on Group personnel can be found in Note 5 to this Interim Report.
CHANGES IN CAVERION'S GROUP MANAGEMENT BOARD AND ORGANISATION STRUCTURE
Caverion appointed Liisa Vasben as Interim Head of Group Human Resources and Safety as of 24 May 2023 after the resignation of Minna Schrey-Hyppänen, Executive Vice President, Human Resources and Safety. Ms Vasben will also continue to hold the position of Group Head of People Management and Rewards. She reports to Jacob Götzsche but will not be a Group Management Board member.
Jaakko Wacklin was appointed as Executive Vice President, Operational Performance and Excellence and a member of the Group Management Board of Caverion Corporation as of 24 May 2023. He reports to Jacob Götzsche, President and CEO. Mr Wacklin has worked at Caverion and its predecessor companies for over 15 years, having most recently held the position of Group Head of Services Business.
Mr Wacklin will continue to lead the Services business and also lead Caverion's operational performance improvement activities. Caverion agreed mutually with Kari Sundbäck, Executive Vice President, Services, Solutions, Digital and Sustainability, that he left his position at the company as of 24 May 2023.
Elina Kaura was appointed as Group Head of Legal & Compliance, Group General Counsel and a member of the Group Management Board of Caverion Corporation as of 9 February 2023. Ms Kaura joined Caverion on 1 August 2022 as the Deputy to Group General Counsel Anne Viitala, who stepped down from this position and from the Group Management Board. Ms Viitala continues as a Senior Advisor reporting to President & CEO Jacob Götzsche until her expected retirement later this year.
SIGNIFICANT SHORT-TERM RISKS AND UNCERTAINTIES
There have been no material changes in Caverion's significant short-term risks and uncertainties reported in the Board of Director's Report presented in the Annual Review of 2022. Those risks and uncertainties are still valid. The most significant factor creating uncertainty are the conflicts in Ukraine and recently also in the Middle East as well as their potential implications on the operating environment of Caverion. The impacts of the war on Caverion's business have been described earlier in this report under "Operating environment" on page 6. Further escalation or prolongation of the conflicts or regional unrest in neighbouring areas could negatively affect Caverion's operating environment.
The short-term risks related to the lack of availability of materials and supply as well as the increase in material prices are still valid. The same applies to the risk of rising energy and fuel prices. Possible problems with the availability and cost of materials, labour, energy and fuel may impact the operating environment in the near future. These risks have already partly materialised. Also wage inflation has gradually increased. The key measures how Caverion is managing the situation include price increase clauses in tenders and agreements covering these costs.
The elevated inflation in the EU countries poses several risks and may lead to a recession within the EU and also wider. The situation may have an impact on the market demand going forward due to a weakening economic sentiment. The potential risk is balanced by the growing need for energy efficiency in the built environment where Caverion is able to support its customers.
Cyber risks have increased, among others, due to the Ukraine crisis. There have been concrete cases of cyber-attacks on business enterprises and government authorities. Government authorities have warned of an increasing number of cyber-attacks. Caverion has improved the company's cyber security operations and technologies continuously and is well prepared against cyber security threats. However, it cannot be excluded that also Caverion could face cyber-attacks with potential impact on operations.
Financial risks have been described in more detail in the financial tables of this report under Note 7 "Financial risk management" on page 31.
The comprehensive description of Caverion's key risks is available on the company's website www.caverion.com/investors/.
RESOLUTIONS PASSED AT THE ANNUAL GENERAL MEETING
Caverion Corporation's Annual General Meeting, which was held on 27 March 2023 in Helsinki, adopted the Financial Statements and the consolidated Financial Statements for the year 2022 and discharged the members of the Board of Directors and the President and CEOs from liability. In addition, the Annual General Meeting resolved on the use of the profit shown on the balance sheet and the payment of dividend, the approval of the presented Remuneration Report for Governing Bodies, on the composition of members of the Board of Directors and their remuneration, also including a one-off retroactive additional fee to be paid to the Chairman and the members of the ad hoc Tender Offer Committee, the election of the auditor and its remuneration as well as authorised the Board of Directors to decide on the repurchase of the company's own shares and/or acceptance as pledge of own shares as well as share issues. The Annual General Meeting also decided to amend the Company's Articles of Association to enable holding a General Meeting in Espoo or Vantaa in addition to the Company's registered domicile or completely without a meeting venue as a so-called remote meeting.
The Annual General Meeting elected a Chairman, a Vice Chairman and five (5) ordinary members to the Board of Directors. Mats Paulsson was elected as the Chairman of the Board of Directors, Markus Ehrnrooth as the Vice Chairman and Jussi Aho, Joachim Hallengren, Thomas Hinnerskov, Kristina
DIVIDENDS AND DIVIDEND POLICY
The Annual General Meeting, held on 27 March 2023, approved the proposal of the Board of Directors according to which a dividend of EUR 0.20 per share was paid from the distributable funds of the company for the financial year 2022. The dividend was paid to shareholders who on the record date of the dividend payment 29 March 2023 were recorded in the shareholders' register held by Euroclear Finland Oy. The dividend was paid on 5 April 2023.
Jahn and Jasmin Soravia as members of the Board of Directors for a term of office expiring at the end of the Annual General Meeting 2024. The stock exchange release on the resolutions passed at the Annual General Meeting is available on Caverion's website at www.caverion.com/newsroom.
The Board of Directors held its organisational meeting on 27 March 2023. At the meeting the Board decided on the composition of the Human Resources Committee and the Audit Committee. A description of the committees' tasks and charters are available on Caverion's website at www.caverion.com/investors - Corporate Governance.
The Vice Chairman of the Board and Chairman of the Audit Committee, Markus Ehrnrooth is closely associated with two of the members of the Bain Consortium which made the initial Tender Offer for Caverion announced on 3 November 2022. To avoid any actual or perceived conflicts of interests, Markus Ehrnrooth has continued not to participate in and has refrained from all the work of the Board and its committees after the Assembly meeting of the newly elected Board held on 27 March 2023 until the end of May 2023 after the expiry of the Bain Consortium's offer on 17 May 2023. At this date Markus Ehrnrooth continues not to participate in and refrains from all the work of the Board and its committees in regard to the Triton offer (made by Crayfish BidCo Oy).
Caverion's dividend policy is to distribute as dividends at least 50 percent of the result for the year after taxes, however, taking leverage level into account. Even though there are no plans to amend this dividend policy, there is no guarantee that a dividend or capital redemption will actually be paid in the future, and also there is no guarantee of the amount of the dividend or return of capital to be paid for any given year.
SHARES AND SHAREHOLDERS
Caverion Corporation is a public limited company organised under the laws of the Republic of Finland, incorporated on 30 June 2013. The company has a single series of shares, and each share entitles its holder to one vote at the General Meeting of the company and to an equal dividend. The company's shares have no nominal value.
Share capital and number of shares
The number of shares was 138,920,092 and the share capital was EUR 1,000,000 on 1 January 2023. Caverion held 2,447,447 treasury shares on 1 January 2023. At the end of the reporting period, the total number of shares in Caverion was 138,920,092. Caverion held 1,873,825 treasury shares on 30 September 2023, representing 1.35 percent of the total number of shares and voting rights. The number of shares outstanding was 137,046,267 at the end of September 2023.
The Board of Directors of Caverion Corporation decided on a directed share issue without payment for the fourth and final instalment of the company's Matching Share Plan 2018–2022 reward payments, as described in stock exchange release published on 27 April 2023. The decision on the directed share issue without payment was based on the authorisation granted to the Board of Directors by the Annual General Meeting of Shareholders held on 27 March 2023. In the directed share issue without payment, 164,658 Company shares held by the company were on 27 April 2023 conveyed to 13 key employees in accordance with the terms and conditions of the plan. No new shares were issued in connection with the plan. Prior to the directed share issue, the Company held a total of 2,038,483 treasury shares, of which 1,873,825 treasury shares remained with the company after the conveyance.
The Board of Directors of Caverion Corporation decided on a directed share issue without payment for Caverion's Performance Share Plan 2020-2022 and Restricted Share Plan 2020-2022 reward payment, as described in stock exchange release published on 17 March 2023. In the directed share issue without payment, 408,964 Caverion Corporation shares held by the company were on 28 March 2023 conveyed to 92 key employees according to the terms and conditions of the plans. No new shares were issued in connection with the plans and therefore the plans had no diluting effect. The decision on the directed share issue without payment was based on the authorisation granted to the Board of Directors by the Annual General Meeting of Shareholders held on 28 March 2022. Prior to the directed share issue, Caverion held a total of 2,447,447 treasury shares, of which 2,038,483
treasury shares remained with the company after the conveyance.
Caverion's long-term share-based incentive schemes for the Group's senior management and key employees were approved by the Board of Directors in December 2015 and in December 2018. If all targets will be achieved, the share rewards subject to Board approval will comprise in total a maximum of approximately 3.2 million Caverion shares (gross before the deduction of applicable taxes) for PSP 2021−2023 and PSP 2022−2024.
The Restricted Share Plan (RSP) is based on a rolling plan structure originally announced on 18 December 2015. The commencement of each new plan within the structure is conditional on a separate Board approval. Share allocations within the Restricted Share Plan will be made for individually selected key employees in specific situations. Each RSP plan consists of a three-year vesting period after which the allocated share rewards will be delivered to the participants provided that their employment with Caverion continues at the time of the delivery of the share reward. The potential share rewards based on the Restricted Share Plans for 2021−2023 and 2022−2024 total a maximum of approximately 250,000 shares (gross before the deduction of applicable payroll tax). Of these plans, a maximum of 165,000 shares will be delivered in the spring of 2024, and a maximum of 85,000 shares in the spring of 2025.
Based on the management's judgement, Caverion has estimated the effect of the public tender offer and other available information on the share-based incentive plans and their classification at the reporting date.
Following the completion of the public tender offer, Caverion's equity-settled share-based incentive plans will be settled in cash based on the agreement between Caverion and Crayfish BidCo Oy. As a result, the accounting treatment of Caverion's outstanding equity-settled share-based incentives was changed in the third quarter of 2023 and a modification from equity-settled to cash-settled classification in accounting under IFRS 2 Share-based Payment has been made for all remaining share-based incentive plans. Following the change, Caverion Group's deferred tax assets increased by approximately EUR 2 million, equity decreased by approximately EUR 12 million and current liabilities increased by approximately EUR 14 million. The change in classification had no impact on income statement.
Additional information can be found in Crayfish BidCo Oy's tender offer document published on 7 March 2023 as well as later supplements.
Authorisations of the Board of Directors
Authorising Caverion's Board of Directors to decide on the repurchase and/or on the acceptance as pledge of own shares of the company
The Annual General Meeting of Caverion Corporation, held on 27 March 2023, authorised the Board of Directors to decide on the repurchase and/or on the acceptance as pledge of the Company's own shares in accordance with the proposal by the Board of Directors. The number of own shares to be repurchased and/or accepted as pledge shall not exceed 13,500,000 shares, which corresponds to approximately 9.7% of all the shares in the Company. The Company may use only unrestricted equity to repurchase own shares on the basis of the authorisation.
Purchase of own shares may be made at a price formed in public trading on the date of the repurchase or otherwise at a price formed on the market. The Board of Directors resolves the manner in which own shares will be repurchased and/or accepted as pledge. Repurchase of own shares may be made using, inter alia, derivatives. The repurchase and/or acceptance as pledge of own shares may be made otherwise than in proportion to the share ownership of the shareholders (directed repurchase or acceptance as pledge).
The authorisation cancelled the authorisation given by the Annual General Meeting on 28 March 2022 to decide on the repurchase and/or acceptance as pledge of the Company's own shares. The authorisation is valid until 27 September 2024. The Board of Directors has not used the authorisation to decide on the repurchase of the company's own shares during the period.
As part of the implementation of the Matching Share Plan announced on 7 February 2018, the company has accepted as a pledge the shares acquired by those key employees who took a loan from the company. As a result, Caverion had 148,652 Caverion Corporation shares as a pledge at the end of the reporting period on 30 September 2023.
More information on the share-based incentive plans has been published in stock exchange releases.
Caverion has not made any decision regarding the issue of option rights or other special rights entitling to shares.
Authorising Caverion's Board of Directors to decide on share issues
The Annual General Meeting of Caverion Corporation, held on 27 March 2023, authorised the Board of Directors to decide on share issues in accordance with the proposal by the Board of Directors. The number of shares to be issued under the authorisation may not exceed 13,500,000 shares, which corresponds to approximately 9.7% of all the shares in the Company.
The Board of Directors decides on all the conditions of the issuance of shares. The authorisation concerns both the issuance of new shares as well as the transfer of treasury shares. The issuance of shares may be carried out in deviation from the shareholders' pre-emptive rights (directed issue). The authorisation can be used, e.g. in order to develop the Company's capital structure, to broaden the Company's ownership base, to be used as payment in corporate acquisitions or when the Company acquires assets relating to its business and as part of the Company's incentive programs.
The authorisation cancelled the authorisation given by the Annual General Meeting on 28 March 2022 to decide on the issuance of shares. The authorisation is valid until the end of the next Annual General Meeting, however no later than 30 June 2024.
The Board of Directors has used the current authorisation to decide on share issues during the period. The decision on the directed share issue without payment published on 27 April 2023 described under "Share capital and number of shares" was based on the current authorisation, while the decision on the directed share issue without payment published on 17 March 2023 was based on the previous authorisation.
Trading in shares
The closing price of Caverion's share was EUR 6.93 at the end of the year 2022. The closing rate on the last trading day of the review period on 30 September 2023 was EUR 8.61. The share price increased by 24 percent during January–September. The highest price of the share during the review period January– September was EUR 9.07, the lowest was EUR 6.93 and the average price was EUR 8.45. Share turnover on Nasdaq Helsinki in January–September amounted to 72.6 million shares. The value of share turnover
Public tender offers for the shares in Caverion Corporation
A consortium of investors led by Bain Capital announced in the name of North Holdings 3 Oy on 3 November 2022 a public tender offer to the shareholders of Caverion. The Board of Directors of Caverion, represented by a quorum comprising the non-conflicted members of the Board of Directors, then unanimously decided to recommend that the shareholders of Caverion accept the tender offer. More information can be found in the stock exchange releases published by Caverion as well as in the tender offer document published on 24 November 2022 with supplements.
Crayfish BidCo Oy, a Finnish company controlled by Triton Fund V, announced on 10 January 2023 a competing public cash tender offer for all the shares in Caverion Corporation. More information can be found in the stock exchange releases published by Caverion as well as in the tender offer document published on 7 March 2023 with supplements.
The Board of Directors of Caverion Corporation announced on 5 April 2023 that the Bain Consortium's right to match period expired on 4 April 2023 without any improvements announced in the terms of the Bain Consortium Offer. Consequently, the Board decided to withdraw its recommendation for the Bain Consortium Offer and instead unanimously recommend the Triton Offer. Caverion entered on 5 April 2023 into a co-operation agreement with Triton, in which Caverion and Triton undertake to, among other things, assist and cooperate with each other in relation to consummation of the Triton Offer. Furthermore, Caverion also terminated the combination agreement signed on 3 November 2022 with the Bain Consortium (as amended on 24 January 2023, the "Combination Agreement"). According to the Combination Agreement, if the Combination Agreement is terminated by either party as a result of the Board withdrawing, modifying, cancelling or amending its recommendation for the Bain Consortium Offer, Caverion shall reimburse to the Bain Consortium any and all of its documented outwas EUR 613.6 million (source: Nasdaq Helsinki). Caverion's shares are also traded in other marketplaces, such as Cboe and Turquoise.
The market capitalisation of the Caverion Corporation at the end of the review period was EUR 1,180.0 million. Market capitalisation has been calculated excluding the 1,873,825 shares held by the company as per 30 September 2023.
of-pocket expenses and costs incurred in connection with the Combination Agreement and the Bain Consortium Offer, up to the maximum amount of EUR 10,000,000 in the aggregate. The cost coverage does not have an impact on the Triton Offer. Additional information has been presented in Caverion's stock exchange releases on 5 April 2023. As a result, EUR 10.0 million cost for the reimbursement of expenses related to the termination was booked in the second quarter of 2023 and paid during the third quarter of 2023.
North Holdings 3 Oy confirmed on 24 May 2023 that it will not complete its tender offer. North Holdings 3 Oy further stated that have been taken to either make or refrain from making a new tender offer at a later point in time. Additional information has been presented in Caverion's stock exchange release on 24 May 2023.
On 24 July 2023, Crayfish BidCo Oy provided updated information on the merger control clearance processes and also extended the offer period under the tender offer for all shares in Caverion Corporation until 2 October 2023.
On 31 August 2023, Crayfish BidCo Oy announced that it had on that day received unconditional merger control clearance for the Tender Offer from the European Commission.
On 29 September 2023, Crayfish BidCo Oy announced that it extends offer period under its tender offer for Caverion Corporation until 1 November 2023. The completion of the Tender Offer was conditional on, among others, the receipt of all necessary regulatory approvals, including merger control clearance. Crayfish BidCo Oy estimated that it will obtain merger control clearance in Finland during October 2023.
More information related to this has been presented in Note 10 "Events after the review period" on page 33.
Number of shareholders and flagging notifications
At the end of September 2023, the number of registered shareholders in Caverion was 18,929 (6/2023: 19,552). At the end of September 2023, a total of 18.4 percent (6/2023: 17.7 percent) of the shares were owned by nominee-registered and 14.1 percent by non-Finnish investors (6/2023: 13.6 percent).
Caverion Corporation received on 14 June 2023 an announcement under Chapter 9, Section 5 of the Finnish Securities Markets Act, according to which the holding of Crayfish BidCo Oy ("Crayfish BidCo", a company ultimately owned by Triton V LuxCo 87 SARL based in Luxembourg) had exceeded the threshold of 25 per cent. According to the announcement, the holding exceeded the threshold on 13 June 2023. According to the announcement, the direct holding of Crayfish BidCo Oy in Caverion had increased to 40,941,792 shares, corresponding to 29.47 per cent of Caverion's shares and voting rights. The indirect holding of Triton V LuxCo 87 SARL in Caverion had increased to 40,941,792 shares, corresponding to 29.47 per cent of Caverion's shares and voting rights.
Caverion Corporation received on 12 April 2023 an announcement under Chapter 9, Section 5 of the Finnish Securities Markets Act, according to which the holding of Crayfish BidCo Oy ("Crayfish BidCo", a company ultimately owned by Triton V LuxCo 87 SARL based in Luxembourg) had exceeded the threshold of 20 per cent. According to the announcement, the holding exceeded the threshold on 11 April 2023. According to the announcement, the direct holding of Crayfish BidCo Oy in Caverion had increased to 33,304,907 shares, corresponding to 23.97 per cent of Caverion's shares and voting rights. The indirect holding of Triton V LuxCo 87 SARL in Caverion had increased to 33,304,907 shares, corresponding to 23.97 per cent of Caverion's shares and voting rights.
Caverion Corporation received on 12 January 2023 an announcement under Chapter 9, Section 5 of the Finnish Securities Markets Act, according to which the holding of Crayfish BidCo Oy ("Crayfish BidCo", a company ultimately owned by Triton V LuxCo 87 SARL based in Luxembourg) had exceeded the threshold of 5 per cent. According to the announcement, the direct holding of Crayfish BidCo Oy in Caverion increased on 12 January 2023 to 13,647,263 shares, corresponding to 9.82 per cent of Caverion's shares and voting rights. The indirect holding of Triton V LuxCo 87 SARL in Caverion increased to 13,647,263 shares, corresponding to 9.82 per cent of Caverion's shares and voting rights.
Updated lists of Caverion's largest shareholders and ownership structure by sector as per 30 September 2023, are available on Caverion's website at www.caverion.com/investors.
INTERIM REPORT 1 JANUARY – 30 SEPTEMBER 2023: FINANCIAL TABLES
Condensed consolidated income statement
| EUR million | 7-9/2023 | 7-9/2022 | 1-9/2023 | 1-9/2022 | 1-12/2022 |
|---|---|---|---|---|---|
| Revenue | 578.0 | 564.1 | 1,821.0 | 1,669.2 | 2,352.1 |
| Other operating income | 1.1 | 0.8 | 1.7 | 1.9 | 2.3 |
| Materials and supplies | -149.1 | -153.8 | -475.3 | -431.9 | -615.4 |
| External services | -115.2 | -107.8 | -345.7 | -309.1 | -446.0 |
| Employee benefit expenses | -219.0 | -210.1 | -706.2 | -674.6 | -923.6 |
| Other operating expenses | -51.2 | -53.9 | -186.0 | -151.8 | -226.1 |
| Share of results of associated companies | 0.0 | 0.0 | 0.0 | 0.0 | |
| Depreciation, amortisation and impairment | -19.5 | -18.3 | -57.2 | -53.7 | -73.5 |
| Operating result | 25.0 | 21.1 | 52.2 | 49.9 | 69.9 |
| % of revenue | 4.3 | 3.7 | 2.9 | 3.0 | 3.0 |
| Financial income and expense, net | -4.0 | -2.2 | -9.6 | -6.9 | -9.0 |
| Result before taxes | 21.1 | 18.9 | 42.7 | 43.1 | 60.9 |
| % of revenue | 3.6 | 3.3 | 2.3 | 2.6 | 2.6 |
| Income taxes | -5.0 | -4.3 | -10.0 | -10.0 | -14.7 |
| Result for the period | 16.0 | 14.6 | 32.7 | 33.1 | 46.2 |
| % of revenue | 2.8 | 2.6 | 1.8 | 2.0 | 2.0 |
| Attributable to | |||||
| Equity holders of the parent company | 16.0 | 14.6 | 32.7 | 33.1 | 46.2 |
| Non-controlling interests | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Earnings per share attributable to the equity | |||||
| holders of the parent company | |||||
| Earnings per share, undiluted, EUR | 0.12 | 0.10 | 0.23 | 0.23 | 0.32 |
| Diluted earnings per share, EUR | 0.12 | 0.10 | 0.23 | 0.23 | 0.32 |
Consolidated statement of comprehensive income
| EUR million | 7-9/2023 | 7-9/2022 | 1-9/2023 | 1-9/2022 | 1-12/2022 |
|---|---|---|---|---|---|
| Result for the review period | 16.0 | 14.6 | 32.7 | 33.1 | 46.2 |
| Other comprehensive income | |||||
| Items that will not be reclassified to profit/loss: | |||||
| - Change in fair value of defined benefit pension plans | 0.6 | 1.5 | 6.6 | ||
| -- Deferred tax | -2.1 | ||||
| - Change in fair value of other investments | -0.1 | -0.1 | |||
| -- Deferred tax | |||||
| Items that may be reclassified subsequently | |||||
| to profit/loss: | |||||
| - Translation differences | 1.9 | -1.7 | -4.0 | -4.6 | -3.7 |
| Other comprehensive income, total | 1.9 | -1.2 | -4.0 | -3.2 | 0.7 |
| Total comprehensive result | 17.9 | 13.4 | 28.7 | 29.9 | 46.9 |
| Attributable to | |||||
| Equity holders of the parent company | 17.9 | 13.4 | 28.7 | 29.8 | 46.9 |
| Non-controlling interests | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
Condensed consolidated statement of financial position
| EUR million | Sep 30, 2023 | Sep 30, 2022 | Dec 31, 2022 |
|---|---|---|---|
| Assets | |||
| Non-current assets | |||
| Property, plant and equipment | 19.8 | 19.5 | 19.1 |
| Right-of-use assets | 133.1 | 134.2 | 132.6 |
| Goodwill | 464.1 | 429.9 | 442.5 |
| Other intangible assets | 52.4 | 57.2 | 56.4 |
| Shares in associated companies and joint ventures | 0.1 | 1.5 | 0.1 |
| Other investments | 1.1 | 1.3 | 1.1 |
| Other receivables | 4.7 | 9.0 | 8.4 |
| Deferred tax assets | 20.2 | 18.4 | 15.0 |
| Total non-current assets | 695.6 | 671.0 | 675.3 |
| Current assets | |||
| Inventories | 20.7 | 22.8 | 22.3 |
| Trade receivables | 325.0 | 302.5 | 379.6 |
| POC receivables | 303.1 | 285.8 | 231.3 |
| Other receivables | 33.6 | 30.4 | 32.1 |
| Income tax receivables | 3.2 | 1.1 | 2.9 |
| Cash and cash equivalents | 12.5 | 46.8 | 81.2 |
| Total current assets | 698.1 | 689.5 | 749.4 |
| Total assets | 1,393.7 | 1,360.5 | 1,424.7 |
| Equity and liabilities | |||
| Equity attributable to equity holders of the parent company | |||
| Share capital | 1.0 | 1.0 | 1.0 |
| Hybrid capital | 35.0 | 35.0 | |
| Other equity | 173.1 | 171.7 | 189.2 |
| Non-controlling interest Equity |
0.2 174.3 |
0.3 208.0 |
0.2 225.4 |
| Non-current liabilities | |||
| Deferred tax liabilities | 38.8 | 40.3 | 38.5 |
| Pension liabilities | 40.9 | 49.3 | 41.9 |
| Provisions | 8.0 | 7.6 | 8.7 |
| Lease liabilities | 92.6 | 95.7 | 93.5 |
| Other interest-bearing debts | 126.5 | 133.3 | 127.8 |
| Other liabilities | 15.2 | 9.8 | 12.7 |
| Total non-current liabilities | 321.9 | 336.0 | 323.1 |
| Current liabilities | |||
| Advances received | 270.3 | 264.0 | 286.2 |
| Trade payables | 188.4 | 172.7 | 198.5 |
| Other payables | 272.4 | 252.1 | 294.7 |
| Income tax liabilities | 11.9 | 5.1 | 6.8 |
| Provisions | 28.5 | 30.7 | 29.4 |
| Lease liabilities | 45.9 | 43.2 | 43.9 |
| Other interest-bearing debts | 80.3 | 48.7 | 16.8 |
| Total current liabilities | 897.5 | 816.5 | 876.2 |
| Total equity and liabilities | 1,393.7 | 1,360.5 | 1,424.7 |
Working capital
| EUR million | Sep 30, 2023 | Sep 30, 2022 | Dec 31, 2022 |
|---|---|---|---|
| Inventories | 20.7 | 22.8 | 22.3 |
| Trade and POC receivables | 628.3 | 588.6 | 611.2 |
| Other current receivables | 31.3 | 29.9 | 31.6 |
| Trade and POC payables | -215.5 | -201.7 | -227.1 |
| Other current liabilities | -271.5 | -251.5 | -293.3 |
| Advances received | -270.3 | -264.0 | -286.2 |
| Working capital | -76.9 | -75.8 | -141.4 |
Certain line items in the current assets and liabilities in the balance sheet include also financing related items, which explains the small differences between the working capital -table and the balance sheet.
Consolidated statement of changes in equity
| Equity attributable to owners of the parent | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| EUR million | Share capital | Retained earnings |
Cumulative differences translation |
Fair value reserve |
Treasury shares | equity reserve Unrestricted |
capital Hybrid |
Total | Non-controlling interest |
Total equity |
| Equity on January 1, 2023 | 1.0 | 135.1 | -9.6 | -0.3 | -2.0 | 66.0 | 35.0 | 225.2 | 0.2 | 225.4 |
| Comprehensive income | ||||||||||
| Result for the period | 32.7 | 32.7 | 0.0 | 32.7 | ||||||
| Other comprehensive | ||||||||||
| income: | ||||||||||
| Translation differences | -4.0 | -4.0 | -4.0 | |||||||
| Comprehensive income, total | 32.7 | -4.0 | 28.7 | 0.0 | 28.7 | |||||
| Dividend distribution | -27.4 | -27.4 | -27.4 | |||||||
| Share-based payments * | -15.7 | -15.7 | -15.7 | |||||||
| Hybrid capital repayment | -35.0 | -35.0 | -35.0 | |||||||
| Hybrid capital interests and costs after taxes |
-1.7 | -1.7 | -1.7 | |||||||
| Equity on September 30, 2023 | 1.0 | 122.9 | -13.6 | -0.3 | -2.0 | 66.0 | 174.1 | 0.2 | 174.3 |
* The change in classification under IFRS 2 Share-based payment from equity-settled to cash-settled approach decreased retained earnings by approximately EUR 12 million. Additional information is presented on page 16.
| Equity attributable to owners of the parent | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| EUR million | Share capital | Retained earnings |
Cumulative differences translation |
Fair value reserve |
Treasury shares | equity reserve Unrestricted |
Hybrid capital | Total | Non-controlling interest |
Total equity |
| Equity on January 1, 2022 | 1.0 | 107.6 | -6.0 | -0.2 | -2.4 | 66.0 | 35.0 | 201.1 | 0.3 | 201.4 |
| Comprehensive income Result for the period Other comprehensive income: |
33.1 | 33.1 | 0.0 | 33.1 | ||||||
| Change in fair value of defined benefit pension plans |
1.5 | 1.5 | 1.5 | |||||||
| -Deferred tax Change in fair value of other investments |
-0.1 | -0.1 | -0.1 | |||||||
| -Deferred tax | ||||||||||
| Translation differences | -4.6 | -4.6 | -4.6 | |||||||
| Comprehensive income, total | 34.5 | -4.6 | -0.1 | 29.8 | 0.0 | 29.9 | ||||
| Dividend distribution | -23.2 | -23.2 | 0.0 | -23.2 | ||||||
| Share-based payments | 1.8 | 1.8 | 1.8 | |||||||
| Transfer of own shares | -0.4 | 0.4 | ||||||||
| Hybrid capital interests and costs after taxes |
-1.9 | -1.9 | -1.9 | |||||||
| Equity on September 30, 2022 | 1.0 | 118.5 | -10.6 | -0.2 | -2.0 | 66.0 | 35.0 | 207.7 | 0.3 | 208.0 |
| Equity attributable to owners of the parent | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| EUR million | Share capital | Retained earnings |
Cumulative differences translation |
Fair value reserve |
Treasury shares | equity reserve Unrestricted |
Hybrid capital | Total | Non-controlling interest |
Total equity |
| Equity on January 1, 2022 | 1.0 | 107.6 | -6.0 | -0.2 | -2.4 | 66.0 | 35.0 | 201.1 | 0.3 | 201.4 |
| Comprehensive income Result for the period Other comprehensive |
46.2 | 46.2 | 0.0 | 46.2 | ||||||
| income: Change in fair value of defined benefit pension plans |
6.6 | 6.6 | 6.6 | |||||||
| -2.1 | -2.1 | -2.1 | ||||||||
| -Deferred tax Change in fair value of other investments |
-0.1 | -0.1 | -0.1 | |||||||
| -Deferred tax Translation differences |
-3.7 | -3.7 | -3.7 | |||||||
| Comprehensive income, total | 50.7 | -3.7 | -0.1 | 46.9 | 0.0 | 46.9 | ||||
| Dividend distribution | -23.2 | -23.2 | 0.0 | -23.2 | ||||||
| Share-based payments | 2.2 | 2.2 | 2.2 | |||||||
| Transfer of own shares | -0.4 | 0.4 | ||||||||
| Hybrid capital interests and costs after taxes |
-1.9 | -1.9 | -1.9 | |||||||
| Equity on December 31, 2022 | 1.0 | 135.1 | -9.6 | -0.3 | -2.0 | 66.0 | 35.0 | 225.2 | 0.2 | 225.4 |
Condensed consolidated statement of cash flows
| EUR million | 7-9/2023 | 7-9/2022 | 1-9/2023 | 1-9/2022 | 1-12/2022 |
|---|---|---|---|---|---|
| Cash flows from operating activities | |||||
| Result for the period | 16.0 | 14.6 | 32.7 | 33.1 | 46.2 |
| Adjustments to result | 26.3 | 23.7 | 76.5 | 62.9 | 88.7 |
| Change in working capital | -48.2 | -30.6 | -75.6 | -58.6 | 9.4 |
| Operating cash flow before financial and tax items | -5.9 | 7.7 | 33.5 | 37.4 | 144.3 |
| Financial items, net | -3.0 | -0.4 | -9.8 | -7.6 | -9.5 |
| Taxes paid | -1.1 | -2.0 | -7.7 | -8.5 | -14.3 |
| Net cash from operating activities | -9.9 | 5.3 | 16.0 | 21.3 | 120.5 |
| Cash flows from investing activities | |||||
| Acquisition of subsidiaries and businesses, | |||||
| net of cash | -2.2 | -45.2 | -29.8 | -73.6 | -85.3 |
| Disposal of subsidiaries and businesses, | |||||
| net of cash | 0.1 | -0.1 | 0.4 | ||
| Dividends from equity accounted | |||||
| investments | 1.3 | ||||
| Capital expenditure and other investments, net | -2.5 | -2.7 | -8.2 | -10.5 | -13.5 |
| Net cash used in investing activities | -4.7 | -47.9 | -38.0 | -84.2 | -97.1 |
| Cash flow after investing activities | -14.6 | -42.6 | -22.0 | -62.9 | 23.4 |
| Cash flow from financing activities | |||||
| Change in loan receivables, net | 0.2 | 2.6 | 0.8 | 0.8 | |
| Change in current liabilities, net | 0.0 | 45.3 | 66.8 | 45.3 | 9.9 |
| Proceeds from borrowings | 0.1 | 74.7 | 74.7 | ||
| Repayments of borrowings | 0.0 | 0.0 | -5.2 | -73.0 | -75.4 |
| Repayments of lease liabilities | -13.5 | -12.5 | -38.8 | -36.7 | -49.8 |
| Hybrid capital repayment | -35.0 | ||||
| Hybrid capital costs and interests | -2.2 | -2.4 | -2.4 | ||
| Dividends paid and other distribution of assets | -27.4 | -23.2 | -23.2 | ||
| Net cash used in financing activities | -13.4 | 32.9 | -39.1 | -14.5 | -65.4 |
| Change in cash and cash equivalents | -28.0 | -9.6 | -61.0 | -77.4 | -42.0 |
| Cash and cash equivalents at the beginning of the period | 36.1 | 58.7 | 81.2 | 130.9 | 130.9 |
| Change in the foreign exchange rates | 4.4 | -2.2 | -7.6 | -6.7 | -7.7 |
| Cash and cash equivalents at the end of the period | 12.5 | 46.8 | 12.5 | 46.8 | 81.2 |
Free cash flow
| EUR million | 7-9/2023 | 7-9/2022 | 1-9/2023 | 1-9/2022 | 1-12/2022 |
|---|---|---|---|---|---|
| Operating cash flow before financial and tax items | -5.9 | 7.7 | 33.5 | 37.4 | 144.3 |
| Taxes paid | -1.1 | -2.0 | -7.7 | -8.5 | -14.3 |
| Net cash used in investing activities | -4.7 | -47.9 | -38.0 | -84.2 | -97.1 |
| Free cash flow | -11.6 | -42.2 | -12.2 | -55.2 | 32.9 |
NOTES TO THE INTERIM REPORT
1. Accounting principles
Caverion Corporation's Interim Report for 1 January – 30 September, 2023 has been prepared in accordance with IAS 34, 'Interim Financial Reporting'. Caverion has applied the same accounting principles in the preparation of the Interim Report as in its Financial Statements for 2022.
Based on the management's judgement, Caverion has estimated the effect of the public tender offer and other available information on the share-based incentive plans and their classification at the reporting date. Following the completion of the public tender offer, Caverion's equity-settled share-based incentive plans will be settled in cash based on the agreement between Caverion and Crayfish BidCo Oy. As a result, the accounting treatment of Caverion's outstanding equity-settled share-based incentives was changed in the third quarter of 2023 and a modification from equity-settled to cash-settled classification in accounting under IFRS 2 Share-based Payment has been made for all remaining sharebased incentive plans.
Following the change, Caverion Group's deferred tax assets increased by approximately EUR 2 million, equity decreased by approximately EUR 12 million and current liabilities increased by approximately EUR 14 million. The change in classification had no impact on income statement.
The information presented in this Interim Report has not been audited.
In the Interim Report the figures are presented in million euros subject to rounding, which may cause some rounding inaccuracies in column and total sums.
2. Key figures
| 9/2023 | 9/2022 | 12/2022 | |
|---|---|---|---|
| Revenue, EUR million | 1,821.0 | 1,669.2 | 2,352.1 |
| Organic growth, % | 8.1 | 6.2 | 8.6 |
| EBITDA, EUR million | 109.5 | 103.6 | 143.4 |
| EBITDA margin, % | 6.0 | 6.2 | 6.1 |
| Adjusted EBITDA, EUR million | 124.6 | 109.1 | 163.0 |
| Adjusted EBITDA margin, % | 6.8 | 6.5 | 6.9 |
| EBITA, EUR million | 64.5 | 61.5 | 86.1 |
| EBITA margin, % | 3.5 | 3.7 | 3.7 |
| Adjusted EBITA, EUR million | 79.7 | 67.2 | 105.8 |
| Adjusted EBITA margin, % | 4.4 | 4.0 | 4.5 |
| Operating profit, EUR million | 52.2 | 49.9 | 69.9 |
| Operating profit margin, % | 2.9 | 3.0 | 3.0 |
| Result before taxes, EUR million | 42.7 | 43.1 | 60.9 |
| % of revenue | 2.3 | 2.6 | 2.6 |
| Result for the review period, EUR million | 32.7 | 33.1 | 46.2 |
| % of revenue | 1.8 | 2.0 | 2.0 |
| Earnings per share, undiluted, EUR | 0.23 | 0.23 | 0.32 |
| Earnings per share, diluted, EUR | 0.23 | 0.23 | 0.32 |
| Equity per share, EUR | 1.3 | 1.5 | 1.6 |
| Equity ratio, % | 15.5 | 19.0 | 19.8 |
| Interest-bearing net debt, EUR million | 332.8 | 274.0 | 200.9 |
| Gearing ratio, % | 190.9 | 131.8 | 89.1 |
| Total assets, EUR million | 1,393.7 | 1,360.5 | 1,424.7 |
| Operating cash flow before financial and tax items, EUR million | 33.5 | 37.4 | 144.3 |
| Cash conversion (LTM), % | 94.1 | 90.1 | 100.6 |
| Working capital, EUR million | -76.9 | -75.8 | -141.4 |
| Gross capital expenditures, EUR million | 39.9 | 92.8 | 112.8 |
| % of revenue | 2.2 | 5.6 | 4.8 |
| Order backlog, EUR million | 1,943.1 | 1,971.0 | 1,943.3 |
| Personnel, average for the period | 14,712 | 14,486 | 14,570 |
| Number of outstanding shares at the end of the period (thousands) | 137,046 | 136,473 | 136,473 |
| Average number of shares (thousands) | 136,847 | 136,462 | 136,465 |
3. Financial development by quarter
| EUR million | 7-9/2023 | 4-6/2023 | 1-3/2023 | 10-12/2022 | 7-9/2022 | 4-6/2022 | 1-3/2022 |
|---|---|---|---|---|---|---|---|
| Revenue | 578.0 | 628.2 | 614.8 | 682.9 | 564.1 | 577.0 | 528.1 |
| Organic growth, % | 2.5 | 8.6 | 13.5 | 14.9 | 11.8 | 4.7 | 2.4 |
| EBITDA | 44.5 | 28.0 | 37.0 | 39.8 | 39.3 | 35.8 | 28.5 |
| EBITDA margin, % | 7.7 | 4.5 | 6.0 | 5.8 | 7.0 | 6.2 | 5.4 |
| Adjusted EBITDA | 45.3 | 40.2 | 39.1 | 53.8 | 41.1 | 37.3 | 30.8 |
| Adjusted EBITDA margin, % | 7.8 | 6.4 | 6.4 | 7.9 | 7.3 | 6.5 | 5.8 |
| EBITA | 28.9 | 13.2 | 22.4 | 24.6 | 25.1 | 21.4 | 15.0 |
| EBITA margin, % | 5.0 | 2.1 | 3.6 | 3.6 | 4.5 | 3.7 | 2.8 |
| Adjusted EBITA | 29.7 | 25.5 | 24.5 | 38.7 | 26.9 | 22.9 | 17.4 |
| Adjusted EBITA margin, % | 5.1 | 4.1 | 4.0 | 5.7 | 4.8 | 4.0 | 3.3 |
| Operating profit | 25.0 | 8.9 | 18.3 | 20.0 | 21.1 | 17.5 | 11.4 |
| Operating profit margin, % | 4.3 | 1.4 | 3.0 | 2.9 | 3.7 | 3.0 | 2.2 |
| 7-9/2023 | 4-6/2023 | 1-3/2023 | 10-12/2022 | 7-9/2022 | 4-6/2022 | 1-3/2022 | |
|---|---|---|---|---|---|---|---|
| Earnings per share, undiluted, EUR | 0.12 | 0.03 | 0.09 | 0.09 | 0.10 | 0.09 | 0.04 |
| Earnings per share, diluted, EUR | 0.12 | 0.03 | 0.09 | 0.09 | 0.10 | 0.09 | 0.04 |
| Equity per share, EUR | 1.3 | 1.2 | 1.5 | 1.6 | 1.5 | 1.4 | 1.4 |
| Equity ratio, % | 15.5 | 14.7 | 18.1 | 19.8 | 19.0 | 18.6 | 17.3 |
| Interest-bearing net debt, EUR million | 332.8 | 303.4 | 204.6 | 200.9 | 274.0 | 215.4 | 125.6 |
| Gearing ratio, % | 190.9 | 180.5 | 100.2 | 89.1 | 131.8 | 111.3 | 67.7 |
| Total assets, EUR million | 1,393.7 | 1,409.0 | 1,416.2 | 1,424.7 | 1,360.5 | 1,289.5 | 1,313.9 |
| Operating cash flow before | |||||||
| financial and tax items, EUR million | -5.9 | -12.7 | 52.1 | 106.9 | 7.7 | -9.3 | 39.1 |
| Cash conversion (LTM), % | 94.1 | 106.9 | 103.6 | 100.6 | 90.1 | 81.3 | 89.6 |
| Working capital, EUR million | -76.9 | -111.5 | -151.5 | -141.4 | -75.8 | -106.5 | -158.2 |
| Gross capital expenditures, EUR million | 4.5 | 4.6 | 30.8 | 20.0 | 54.8 | 33.3 | 4.7 |
| % of revenue | 0.8 | 0.7 | 5.0 | 2.9 | 9.7 | 5.8 | 0.9 |
| Order backlog, EUR million | 1,943.1 | 2,004.8 | 2,034.3 | 1,943.3 | 1,971.0 | 1,907.9 | 1,951.6 |
| Personnel at the end of the period | 14,853 | 14,937 | 14,641 | 14,490 | 15,037 | 14,612 | 14,272 |
| Number of outstanding shares at | |||||||
| end of period (thousands) | 137,046 | 137,046 | 136,882 | 136,473 | 136,473 | 136,473 | 136,473 |
| Average number of shares | |||||||
| (thousands) | 137,046 | 136,999 | 136,491 | 136,473 | 136,473 | 136,473 | 136,440 |
4. Calculation of key figures
IFRS key figures
| Earnings / share, undiluted = | Result for the period (attributable for equity holders) - hybrid capital expenses and accrued unrecognised interests after tax |
|---|---|
| Weighted average number of shares outstanding during the period | |
| Earnings /share, diluted = | Result for the period (attributable for equity holders) - hybrid capital expenses and accrued unrecognised interests after tax |
| Weighted average dilution adjusted number of shares outstanding during the period |
Alternative performance measures
ESMA (European Securities and Markets Authority) has issued guidelines regarding Alternative Performance Measures ("APM"). Caverion presents APMs to improve the analysis of business and financial performance and to enhance the comparability between reporting periods. APMs presented in this report should not be considered as a substitute for measures of performance in accordance with the IFRS.
| EBITDA = | Operating profit (EBIT) + depreciation, amortisation and impairment | |||
|---|---|---|---|---|
| Adjusted EBITDA = | EBITDA before items affecting comparability (IAC) * | |||
| EBITA = | Operating profit (EBIT) + amortisation and impairment | |||
| Adjusted EBITA = | EBITA before items affecting comparability (IAC) * | |||
| Equity ratio (%) = | (Equity + non-controlling interest) × 100 Total assets - advances received |
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| Gearing ratio (%) = | (Interest bearing liabilities - cash and cash equivalents) × 100 Shareholders' equity + non-controlling interest |
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| Interest-bearing net debt = | Interest-bearing liabilities - cash and cash equivalents | |||
| Working capital = | Inventories + trade and POC receivables + other current receivables - trade and POC payables - other current payables - advances received - current provisions |
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| Free cash flow = | Operating cash flow before financial and tax items – taxes paid – net cash used in investing activities |
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| Cash conversion (%) = | Operating cash flow before financial and tax items (LTM) ×100 EBITDA (LTM) |
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| Equity / share = | Shareholders' equity Number of outstanding shares at the end of the period |
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| Dividend / earnings (%) = | Dividend per share x 100 Earnings per share |
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| Net debt / Adjusted EBITDA = | Interest-bearing net debt Adjusted EBITDA (LTM) |
Organic growth = Defined as the change in revenue in local currencies excluding the impacts of (i) currencies; and (ii) acquisitions and divestments. The currency impact shows the impact of changes in exchange rates of subsidiaries with a currency other than the euro (Group's reporting currency). The acquisitions and divestments impact shows how acquisitions and divestments completed during the current or previous year affect the revenue reported. However, the change in the revenue of the acquired businesses post-acquisition is included in organic growth.
*Items affecting comparability (IAC) in 2023 are material items or transactions, which are relevant for understanding the financial performance of Caverion when comparing the profit of the current period with that of the previous periods. These items can include (1) capital gains and/or losses and transaction costs related to divestments and acquisitions; (2) write-downs, expenses and/or income from separately identified major risk projects; (3) restructuring expenses and (4) other items that according to Caverion management's assessment are not related to normal business operations. In 2022, major risk projects only included one old risk project in Germany reported under category (2). In 2022 and 2023, provisions and legal and other costs for civil claims related to the German anti-trust matter were reported under category (4). Category (4) included also costs related to the submitted public tender offers in 2022 and 2023.
Adjusted EBITDA is affected by the same adjustments as adjusted EBITA, except for restructuring costs, which do not include depreciation and impairment relating to restructurings.
5. Acquisitions 2023
| Acquired unit | Division | Business unit |
Technical area | Acquisition type |
Acquisition period |
Employees | Prior financial year annual revenue, EUR million |
|---|---|---|---|---|---|---|---|
| TM Voima Group | Industry | Projects | Industrial project installations |
Shares | Feb | 74 | 47.7 |
| St1 Lähienergia's geothermal heating installation and project management unit |
Finland | Services | Heating | Business | Apr | 9 | - * |
| CRC Clean Room Control AB |
Sweden | Services | Ventilation and air conditioning |
Shares | Jun | 5 | 1.1 |
| VVS Teknikk Møre AS | Norway | Services and Projects |
Ventilation, piping and automation |
Shares | Jul | 35 | 7.8 |
| Kiwa Inspecta's building services and consultancy unit |
Finland | Services | Advisory services |
Business | Sep | 50 | 3.8 |
* The acquisition of St1 Lähienergia's geothermal heating installation and project management unit only comprised the unit's personnel, working tools and material stock.
6. Related party transactions
Caverion announced on 7 February 2018 in a stock exchange release the establishment of a new sharebased incentive plan directed for the key employees of the Group ("Matching Share Plan 2018−2022"). The company provided the participants a possibility to finance the acquisition of the company's shares through an interest-bearing loan from the company, which some of the participants utilised. In the end of
7. Financial risk management
Caverion's main financial risks are the liquidity risk, credit risk as well as market risks including the foreign exchange and interest rate risk. The objectives and principles of financial risk management are defined in the Treasury Policy approved by the Board of Directors. Financial risk management is carried out by Group Treasury in co-operation with the Group's subsidiaries.
At the end of September 2023, despite the slight signs of easing, the core inflation is still high with uncertainty around its future direction. With limited central bank guidance, the amount and size of the next interest hikes are hard to predict. Caverion remains in the outlook of higher interest rates increasing the interest cost of funding also in the fourth quarter of 2023. Also continuing high volatility on foreign exchange rates is expected. Caverion monitors the risks closely and, at the moment, does not see any need for changes in the risk management principles. The risks related to the availability of financing, the availability of guarantee facilities as well as foreign exchange and interest rate related risks are in control. The sharpened focus on cash flow and working capital management continues.
The objective of capital management in Caverion Group is to maintain an optimal capital structure, maximise the return on the respective capital employed and to minimise the cost of capital within the limits and principles stated in the Treasury Policy. The capital structure is modified primarily by directing investments and working capital employed. September 2023, the total outstanding amount of these loans amounted approximately to EUR 0.9 (3.7) million. The loans will be repaid in full on 29 December 2023, at the latest. Company shares have been pledged as a security for the loans.
No significant changes have been made to the Group's financial risk management principles in the reporting period. Further information is presented in Group's 2022 financial statement in note 5.5 Financial risk management.
Caverion's external loans are subject to a financial covenant based on the ratio of the Group's net debt to EBITDA according to the calculation principles confirmed with the lending parties. The covenant ratio is continuously monitored and evaluated against actual and forecasted EBITDA and net debt figures.
The next table presents the maturity structure of interest-bearing liabilities. Interest-bearing borrowings are based on contractual maturities of liabilities excluding interest payments. Lease liabilities are presented based on the discounted present value of remaining lease payments. Cash flows of foreigndenominated liabilities are translated into the euro at the reporting date.
| EUR million | 2023 | 2024 | 2025 | 2026 | 2027 | 2028-> | Total |
|---|---|---|---|---|---|---|---|
| Interest-bearing borrowings | 79.6 | 3.0 | 51.5 | 75.0 | 209.1 | ||
| Lease liabilities | 12.8 | 42.8 | 29.7 | 19.8 | 12.1 | 21.3 | 138.4 |
| Total | 92.4 | 45.8 | 81.2 | 19.8 | 87.1 | 21.3 | 347.5 |
8. Financial liabilities and interest-bearing net debt
| Sep 30, 2023 | Sep 30, 2022 | Dec 31, 2022 | |
|---|---|---|---|
| EUR million | Carrying amount | Carrying amount | Carrying amount |
| Non-current liabilities | |||
| Senior bonds | 73.6 | 76.7 | 73.3 |
| Loans from financial institutions | 49.9 | 50.0 | 50.0 |
| Other financial loans | 0.0 | 0.5 | 0.0 |
| Pension loans | 3.0 | 6.0 | 4.5 |
| Lease liabilities | 92.6 | 95.7 | 93.5 |
| Total non-current interest-bearing liabilities | 219.1 | 228.9 | 221.3 |
| Current liabilities | |||
| Senior bonds | 3.5 | ||
| Loans from financial institutions | 0.1 | 0.1 | 0.1 |
| Pension loans | 3.0 | 3.0 | 3.0 |
| Other financial loans | 0.2 | 0.6 | 0.1 |
| Commercial papers | 76.9 | 44.9 | 10.0 |
| Lease liabilities | 45.9 | 43.2 | 43.9 |
| Total current interest-bearing liabilities | 126.1 | 91.9 | 60.7 |
| Total interest-bearing liabilities | 345.2 | 320.8 | 282.0 |
| Total interest-bearing liabilities (excluding | |||
| IFRS 16 lease liabilities) | 206.8 | 181.9 | 144.6 |
| Cash and cash equivalents | 12.5 | 46.8 | 81.2 |
| Interest-bearing net debt | 332.8 | 274.0 | 200.9 |
| Interest-bearing net debt excluding IFRS 16 | |||
| lease liabilities | 194.3 | 135.1 | 63.4 |
The fair value of senior bonds amounted to EUR 68.6 million at the end of September 2023. The carrying amounts of all other financial assets and liabilities are reasonably close to their fair values.
Derivative instruments
| Nominal amounts | |||
|---|---|---|---|
| EUR million | Sep 30, 2023 | Sep 30, 2022 | Dec 31, 2022 |
| Foreign exchange forwards | 104.2 | 113.9 | 121.1 |
| Fair values | |||
| EUR million | Sep 30, 2023 | Sep 30, 2022 | Dec 31, 2022 |
| Foreign exchange forwards | |||
| positive fair value | 1.0 | 1.0 | 0.0 |
| negative fair value | 0.0 | -1.0 | -0.1 |
The fair values of the derivative instruments have been defined as follows: The fair values of foreign exchange forward agreements have been defined by using market prices on the closing day.
9. Commitments and contingent liabilities
| EUR million | Sep 30, 2023 | Sep 30, 2022 | Dec 31, 2022 |
|---|---|---|---|
| Parent company's guarantees on behalf of its subsidiaries | 459.2 | 447.2 | 493.1 |
| Other commitments | |||
| - Other contingent liabilities | 0.2 | ||
| Accrued unrecognised interest on hybrid bond | 0.9 | 1.5 |
The nominal amount of leasing commitments of lowvalue and short-term leases amounted to EUR 8.3 (5.6) million at the end of September. The present value of lease liability of leases not yet commenced to which Caverion is committed amounted to EUR 0.2 (0.7) million at the end of September.
Entities participating in the demerger are jointly and severally responsible for the liabilities of the demerging entity which have been generated before the registration of the demerger. As a consequence, a secondary liability up to the allocated net asset value was generated to Caverion Corporation, incorporated
10. Events after the reporting period
On 18 October 2023, Crayfish BidCo Oy announced that it had agreed conditional purchases of further Caverion shares which will, after FCCA approval, increase its shareholding to approximately 67.77 percent in Caverion and consequently fulfill the acceptance condition under tender offer. Crayfish BidCo Oy furthermore announced that the Finnish Competition and Consumer Authority ("FCCA") had issued a conditional merger control clearance decision concerning the Tender Offer. The Clearance Decision is conditional on the Offeror procuring the divestment of a certain geographically limited building automation business unit in Finland to a purchaser fulfilling certain criteria set out in the Clearance Decision and approved by the FCCA.
With a stock exchange release published on 24 October 2023, Crayfish BidCo Oy declared its public cash tender offer for Caverion unconditional as it had received all necessary regulatory approvals and secured the fulfilment of the minimum acceptance condition of more than two-thirds (2/3) of all shares under the tender offer. Crayfish BidCo Oy will complete the tender offer during November 2023. The Offeror's intention is to acquire all the Shares in Caverion.
On 24 October 2023, Caverion received an announcement under Chapter 9, Section 5 of the Finnish Securities Markets Act, according to which the holding of Crayfish BidCo Oy (a company ultimately owned by Triton V LuxCo 87 SARL based in Luxembourg) in Caverion's shares had exceeded the threshold of two thirds. According to the announcement, the holding exceeded the threshold
due to the partial demerger of YIT Corporation, for those liabilities that were generated before the registration of the demerger and remain with YIT Corporation after the demerger. Caverion Corporation has a secondary liability relating to the Group guarantees which remain with YIT Corporation after the demerger. These Group guarantees amounted to EUR 20.4 million at the end of September 2023.
The short-term risks and uncertainties relating to the operations have been described in section "Significant short-term risks and uncertainties".
on 24 October 2023 and the direct holding of Crayfish BidCo Oy in Caverion increased to 92,946,868 shares, corresponding to 66.91 percent of Caverion's shares and voting rights. The indirect holding of Triton V LuxCo 87 SARL in Caverion increased to 92,946,868 shares, corresponding to 66.91 percent of Caverion's shares and voting rights. The announced increase in shareholding was based on share acquisitions, which upon completion resulted in the direct holding of Crayfish BidCo Oy and the indirect holding of Triton V LuxCo 87 SARL exceeding the two thirds threshold in the manner provided for in Chapter 9, Section 5 of the Finnish Securities Markets Act. Such share acquisitions were completed on 31 October 2023.
On 25 October 2023, Caverion received announcements under Chapter 9, Section 5 of the Finnish Securities Markets Act, according to which the holding of Antti Herlin, Security Trading Oy, Hisra Consulting and Finance Oy, Fennogens Investments S.A. and Varma Mutual Pension Insurance Company decreased below the threshold of 5 percent on 24 October 2023. According to the announcements, the direct holding of these shareholders decreased to 0 shares, corresponding to 0.00 percent of Caverion's shares and voting rights. The announced decrease in shareholding was based on share disposals, which were completed on 31 October 2023.
On 25 October 2023, Caverion Corporation published a notice convening the Extraordinary General Meeting to be held on 15 November 2023 in Vantaa. Registration for the Extraordinary General Meeting ends on 10 November 2023 at 16.00 Finnish time.
As a result of Crayfish BidCo Oy completing the conditional share purchases on 31 October 2023 resulting, together with Crayfish BidCo Oy's prior shareholding, Crayfish BidCo Oy's holding of the shares and voting rights in Caverion has increased to approximately 67.82 percent of all outstanding shares (excluding treasury shares) in Caverion, constituting a change of control event under Caverion's financing agreements which include a change of control clause. Occurrence of the change of control event requires notifications, negotiations and potential waivers with the counterparties to the financing agreements. Consequently, the banks and other financial institutions have the opportunity to cancel their available commitments towards Caverion after a negotiation period. As for the EUR 75 million senior unsecured bond due 25 February 2027 ("Notes"), a notice of change of control event has been issued on 31 October 2023 as a stock exchange release. As a result of the change of control event, each holder of the Notes has the right to request that all of its Notes be repurchased as a price per Note equal to 100 per cent of their nominal amount together with accrued but unpaid interest. Consequently, Caverion will on the repurchase date of 29 January 2024 repurchase the Notes, together with
accrued but unpaid interest, held by Noteholders who have requested the repurchase of the Notes held by them. Caverion has on 31 October 2023 become an additional borrower in Senior Facilities Agreement executed between Crayfish Bidco Oy and a group of banks. The refunding of current facilities and repurchase of senior bond Notes is financed through these new lending facilities.
On 2 November 2023, Crayfish BidCo Oy announced preliminary results of the public tender offer, the acceptance period of which expired on 1 November 2023. Based on the preliminary result, the shares validly tendered represent approximately 94.30 percent in aggregate of all the issued and outstanding shares and votes in Caverion. The final result will be confirmed and announced on or about 6 November 2023. The offer price will be paid to each Caverion shareholder who has validly accepted the tender offer in accordance with the terms and conditions of the tender offer, on or about 27 November 2023.
For more information, please refer to published stock exchange releases available on Caverion's website at www.caverion.com/investors.
Caverion's Financial Information in 2024
Financial Statement Release for 2023: 8 February 2024 Annual Review 2023: during week 9/2024, at the latest Interim report for January−March 2024: 25 April 2024 Half-year financial report for January−June 2024: 31 July 2024 Interim report for January−September 2024: 31 October 2024
Caverion Corporation • P.O.Box 71, FI-01601 Vantaa • Tel. +358 10 4071 • [email protected] • www.caverion.com @CaverionGroup facebook.com/CaverionGroup www.linkedin.com/company/caverion