Interim / Quarterly Report • Jul 25, 2018
Interim / Quarterly Report
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Caverion Corporation's Half-year Financial Report for January 1 – June 30, 2018
Operational improvement continues and Q2 revenue slightly higher than last year – Risk level lower going forward
Unless otherwise noted, the figures in brackets refer to the corresponding period in the previous year. The figures for 2017 have been restated according to IFRS 15.
* Based on calculation principles confirmed with the lending parties.
| KEY FIGURES | |
|---|---|
| EUR million | 4–6/18 | 4–6/17 | Change | 1–6/18 | 1–6/17 | Change | 1–12/17 |
|---|---|---|---|---|---|---|---|
| Order backlog | 1,596.8 | 1,512.7 | 5.6% | 1,596.8 | 1,512.7 | 5.6% | 1,491.0 |
| Revenue | 564.8 | 563.3 | 0.3% | 1,091.6 | 1,138.0 | -4.1% | 2,275.8 |
| Adjusted EBITDA | 12.9 | 4.5 | 185.9% | 23.9 | 12.3 | 94.3% | 25.8 |
| Adjusted EBITDA margin, % | 2.3 | 0.8 | 2.2 | 1.1 | 1.1 | ||
| EBITDA | -31.7 | -14.1 | -21.8 | -16.1 | 3.8 | ||
| EBITDA margin, % | -5.6 | -2.5 | -2.0 | -1.4 | 0.2 | ||
| Operating profit | -38.7 | -21.6 | -35.3 | -31.3 | -26.6 | ||
| Operating profit margin, % | -6.9 | -3.8 | -3.2 | -2.7 | -1.2 | ||
| Result for the period | -39.7 | -16.8 | -37.6 | -26.3 | -27.0 | ||
| Earnings per share, undiluted, EUR | -0.32 | -0.14 | -0.31 | -0.22 | -0.24 | ||
| Operating cash flow before financial and tax items |
-15.0 | -25.9 | 4.9 | -38.1 | -8.7 | ||
| Working capital | -57.2 | -8.6 | -30.8 | ||||
| Interest-bearing net debt | 10.2 | 98.6 | -89.6% | 64.0 | |||
| Net debt/EBITDA* | 0.2 | 3.4 | 2.9 | ||||
| Gearing, % | 3.9 | 41.7 | 27.2 | ||||
| Equity ratio, % | 28.2 | 25.8 | 25.8 | ||||
| Personnel, end of period | 15,751 | 16,750 | -6.0% | 16,216 |
* Based on calculation principles confirmed with the lending parties.
"The implementation of the "Fit" phase of our strategy continued to show results in the second quarter of 2018. Our adjusted EBITDA continued to clearly improve, although being periodically impacted by certain project writedowns from older projects as well as one-off legal and strategy-related costs. For the second quarter of 2018, our adjusted EBITDA improved to EUR 12.9 (4.5) million. Both business units improved their margins and our Projects business made a break-even result. For the first half of 2018, our adjusted EBITDA improved to EUR 23.9 (12.3) million. I am pleased that we managed to settle some of our largest old project claims during the quarter, one of them relating to a large Industrial Solutions project. As a consequence, our risk position related to old project risks was reduced.
Operating cash flow before financial and tax items was EUR -15.0 (-25.9) million in the second quarter, impacted by seasonality. Our net debt/EBITDA ratio improved to 0.2, following the calculation principles confirmed with our lending parties.
We continued the strengthening of our Services business and the selective approach in our Projects business. Revenue for the second quarter was EUR 564.8 (563.3) million, up by 0.3 percent or 2.1 percent in local currencies. Revenue for the Services business increased by 4.2 percent or 6.4 percent in local currencies. Revenue for the Projects business declined by 4.0 percent or 2.5 percent in local currencies. I am happy that while maintaining selectivity in our Projects business we were able to stop our revenue decline thanks to the good performance of our Services business.
There was positive development in profitability and cash flow in most divisions in the second quarter. Sweden and Industrial Solutions materially improved their result compared to last year. Finland, Norway and Austria continued to deliver good results.
An important event for the quarter was that Caverion managed to settle for its part with the Bundeskartellamt (German Federal Cartel Office) the cartel case investigated by the authority since 2014. Caverion Deutschland GmbH was imposed an anti-trust fine of EUR 40.8 million. The fine was booked as an expense in the second quarter and will be paid in the third quarter. I am satisfied that this particular matter is now behind us and we can move forward. In the quarter we also successfully strengthened our financial position through a directed share issue totalling EUR 60 million. The proceeds of the issue strengthen our strategic flexibility and enable us to smoothly continue the execution of our strategy going forward. This includes investments in digitalisation and possible bolt-on acquisitions in key areas in Services.
The foundation of our strategy is in providing superior customer value through an excellent customer experience. At the same time, we rigorously continue the further implementation of our "Top performance at every level" Must-Win, which is at the core of our operational development. We are planning to continue the streamlining of our operations in certain divisions during the second half of 2018, which is part of our "Fit" program and strategic transformation. Our strengthened balance sheet enables a gradual shift towards the Growth phase. With a reduced risk exposure, we are on a more stable path towards improving our profitability going forward."
There are no major changes in the market outlook for Caverion's services and solutions since the previous quarterly report.
The megatrends in the industry, such as the increase of technology in built environments, energy efficiency requirements, increasing digitalisation and automation as well as urbanisation continue to promote demand for Caverion's services and solutions over the coming years.
The underlying demand for Services is expected to remain strong. As technology in buildings increases, the need for new services and digital solutions and the demand for Life Cycle Solutions are expected to increase. Clients' tendency towards focusing on their core operations continues to open opportunities for Caverion in terms of outsourced operations and maintenance especially for public authorities, industries and utilities.
The Projects market is expected to remain on a good level. Good demand is expected to continue from both private and public sectors. However, price competition is expected to remain tight. Low interest rates and availability of financing are expected to support investments. The demand for Design & Build of Total Technical Solutions is expected to develop favourably in large and technically demanding projects. Requirements for increased energy efficiency, better indoor conditions and tightening environmental legislation will be significant factors supporting the positive market development.
Caverion's guidance for 2018 is unchanged: "Caverion estimates that the Group's revenue for 2018 will decrease compared to the previous year (2017: EUR 2,275.8 million). Caverion estimates that the Group's adjusted EBITDA will more than double in 2018 (2017: EUR 25.8 million)."
Adjusted EBITDA = EBITDA before items affecting comparability (IAC).
Items affecting comparability (IAC) are material items or transactions, which are relevant for understanding the financial performance of Caverion when comparing profit of the current period with previous periods. These items can include (1) capital gains and losses from divestments; (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 2018, major risk projects include three completed Large Projects from Industrial Solutions. The financial impacts of these will be reported separately by Caverion under "Items affecting comparability (IAC)". The adjusted EBITDA figures for 2017 have been calculated accordingly. The German anti-trust fine and there-related legal and other costs fall under "Items affecting comparability (IAC)" in category (4) i.e. "other items that according to Caverion management's assessment are not related to normal business operations".
Adjusted EBITDA ‒ Items affecting comparability
| EUR million | 4–6/18 | 4–6/17 | 1–6/18 | 1–6/17 | 1–12/17 |
|---|---|---|---|---|---|
| EBITDA | -31.7 | -14.1 | -21.8 | -16.1 | 3.8 |
| EBITDA margin, % | -5.6 | -2.5 | -2.0 | -1.4 | 0.2 |
| Items affecting EBITDA | |||||
| - Write-downs, expenses and income from major risk projects | 2.2 | 11.6 | 3.1 | 21.4 | 27.1 |
| - Restructuring costs | 1.1 | 7.0 | 1.2 | 7.0 | 7.3 |
| - Capital gains and losses from divestments | -12.3 | ||||
| - Other items* | 41.3 | 41.3 | |||
| Adjusted EBITDA | 12.9 | 4.5 | 23.9 | 12.3 | 25.8 |
| Adjusted EBITDA margin, % | 2.3 | 0.8 | 2.2 | 1.1 | 1.1 |
* Including the German anti-trust fine and there-related legal and other costs.
Caverion published IFRS 15 restated figures and quarterly Adjusted EBITDA for 2017 as well as its guidance for 2018 according to IFRS 15 in a stock exchange release on 21 March 2018.
In its revenue guidance Caverion applies the following guidance terminology.
| Positive change | Lower limit | Upper limit |
|---|---|---|
| % | % | |
| Increases | 0% | |
| Negative change | Lower limit | Upper limit |
| % | % | |
| Decreases | 0% |
In its adjusted EBITDA guidance Caverion applies the following guidance terminology, with a +/- 2pp (percentage point) threshold to the said limits.
| Positive change | Lower limit | Upper limit |
|---|---|---|
| % | % | |
| At last year's level | -5% | 5% |
| Grows | 5% | 30% |
| Grows significantly | 30% | 100% |
| Doubles | 100% | |
| Negative change | Lower limit | Upper limit |
| % | % | |
| Decreases | -30% | -5% |
| Decreases significantly | -30% |
Caverion will hold a news conference and webcast on the Half-year Financial Report on Wednesday, 25 July 2018, at 10:00 a.m. (Finnish Time, EEST) at the Glo Hotel Kluuvi (VideoWall meeting room), Kluuvikatu 4, 2nd floor, Helsinki, Finland. The news conference can also be viewed live on Caverion's website at www.caverion.com/investors. It is also possible to participate in the event through a conference call by calling the assigned number +44 (0)330 336 9105 at 9:55 a.m. (Finnish time, EEST) at the latest. Participant code for the conference call is "7508671 / Caverion". More practical information on the news conference can be found on Caverion's website, www.caverion.com/investors.
Q3 interim report will be published on 25 October 2018. Financial reports and other investor information are available on Caverion's website, www.caverion.com/investors, and IR App. The materials may also be ordered by sending an e-mail to [email protected].
Martti Ala-Härkönen, Chief Financial Officer, Caverion Corporation, tel. +358 40 737 6633, [email protected]
Milena Hæggström, Head of Investor Relations, Caverion Corporation, tel. +358 40 5581 328, [email protected]
Distribution: Nasdaq Helsinki, principal media, www.caverion.com
The overall market situation was relatively positive and stable throughout the period. Demand developed favourably in Finnish, Swedish and German markets. In Danish and Norwegian markets, the general economy and demand situation recovered from the previous year, supported by public demand. In Industrial Solutions division the market was stable in industrial maintenance. The markets for the divisions Eastern Europe and Austria also remained stable.
Demand for Services remained strong. Opportunities for Caverion in terms of outsourced operations and maintenance increased. Interest in public private partnerships and other Life Cycle Solutions was good in the Nordic countries, while these kind of commercial models still represent only a marginal, but a growing part in other markets.
The market for Projects was positive throughout the period. However, price competition remained tight. In large projects, tendering activity remained on a good level, while Caverion continued its selective approach. Low interest rates and availability of financing supported investments. Requirements for increased energy efficiency, better indoor climate and tightening environmental legislation supported demand. In certain technical disciplines there were signs of resource shortage.
Caverion managed to settle some of its largest old project claims during the quarter, one of them relating to a large Industrial Solutions project. As a consequence, the company's risk position related to old project risks was reduced. The company will separately report the impacts of the remaining two completed Large Projects in Industrial Solutions under "Items affecting comparability".
The Projects business is expected to materially improve its result in 2018 although there are still certain project performance risks remaining in 2018 from older projects. At present there are approximately one fifth of projects in Caverion's project order backlog that have been started in 2016 or earlier.
Order backlog amounted to EUR 1,596.8 million at the end of June, up by 5.6 percent from the end of June in the previous year (EUR 1,512.7 million). At comparable exchange rates the order backlog increased by 7.0 percent. The order backlog reporting was changed during the period due to reporting harmonisation of long-term Services contracts in Sweden, which increased the order backlog for the period by EUR 62.5 million. In the harmonisation, the fixed portion of the longer contracts has now been included in the order backlog for the whole contract period.
The Services order backlog increased compared to last year. The Projects order backlog declined, which was largely due to the Group's more selective approach towards Projects business. Caverion has implemented a stricter project tendering process since the second quarter of 2016 as well as closed down several poorperforming project units. Caverion continued to focus on the tendering process with a target to uplift the project margin particularly in new Projects business orders.
Revenue for April–June was EUR 564.8 (563.3) million. Revenue increased by 0.3 percent compared to the same period previous year. Revenue was impacted by fluctuations in currency exchange rates and the sale of the Krantz business in the last quarter of 2017. There was also a negative impact from the Group's more selective approach towards Projects business. At previous year's exchange rates revenue was EUR 575.3 million and increased by 2.1 percent compared to the previous year. Changes in the Swedish krona accounted for EUR 7.5 million, the Norwegian krone for EUR 1.9 million and the Russian rouble for EUR 1.1 million.
Revenue increased from the previous year in all divisions except Sweden, Denmark and Eastern Europe. The revenue in Germany in 2018 is not fully comparable with the previous year as Caverion sold its product business under the Krantz brand in Germany in 2017. The revenue growth in Germany in the second quarter was driven by the Services business.
Revenue of the Services business unit was EUR 303.1 (290.8) million in April–June, an increase of 4.2 percent from the corresponding period last year or 6.4 percent in local currencies. Revenue of the Projects business unit was EUR 261.6 (272.5) million in April–June, a decrease of 4.0 percent or 2.5 percent in local currencies due to more selective tendering.
The Services business unit accounted for 53.7 (51.6) percent of Group revenue and the Projects business unit for 46.3 (48.4) percent of Group revenue in April–June.
Revenue for January–June was EUR 1,091.6 (1,138.0) million. Revenue decreased by 4.1 percent compared to the same period previous year. Revenue was impacted by fluctuations in currency exchange rates and the sale of the Krantz business in the last quarter of 2017. There was also a negative impact from the Group's more selective approach towards Projects business. At previous year's exchange rates revenue was EUR 1,114.7 million and decreased by 2.0 percent compared to the previous year. Changes in the Swedish krona accounted for EUR 13.1 million, the Norwegian krone for EUR 8.3 million and the Russian rouble for EUR 1.8 million.
Revenue increased from the previous year in Austria, Denmark and Finland, while it decreased in other divisions. The revenue in Germany in 2018 is not fully comparable with the previous year as Caverion sold its product business under the Krantz brand in Germany in 2017.
Revenue of the Services business unit was EUR 596.1 (587.9) million in January–June, an increase of 1.4 percent from the corresponding period last year or 3.9 percent in local currencies. Revenue of the Projects business unit was EUR 495.5 (550.1) million in January–June, a decrease of 9.9 percent or 8.4 percent in local currencies due to more selective tendering.
The Services business unit accounted for 54.6 (51.7) percent of Group revenue and the Projects business unit for 45.4 (48.3) percent of Group revenue in January–June.
The Group adopted new revenue recognition principles according to IFRS 15 as of January 1, 2018. The IFRS 15 standard requires that revenue is recognised from any variable consideration at its estimated amount, if it is highly probable that no significant reversal of revenue will occur. Under the previous revenue recognition standards, revenue was recognised from variable consideration when it was assessed probable to occur. Revenue from variable considerations is thus to be recognised more prudently under IFRS 15 than under previous revenue recognition standards. Caverion issued a separate stock exchange release on March 21, 2018 on its IFRS 15 restated figures.
Caverion adopted a new way of reporting its business unit revenue as of 2018. Previously Caverion reported revenue according to the classification of its contracts as follows: Project business consisting of the Large Projects and Technical Installation business areas and the Services business consisting of the Technical Maintenance and Managed Services business areas. As of 2018 Caverion adopted business unit monitoring based on a profit center structure, whereby each profit center belongs to either the Projects or Services business unit. The new profit center structure enables improved financial steering in Caverion. Caverion provides comparative figures for the new Business Unit structure for each quarter of the financial year 2017. Based on the new classification, the Services business unit accounted for 53.1 per cent and the Projects business unit for 46.9 per cent of Group revenue in 2017, while based on the previous classification the Services business accounted for 52.5 per cent and the Projects business for 47.5 per cent of Group revenue in 2017.
| Revenue, | 4–6/ | % | 4–6/ | % | Change | 1–6/ | % | 1–6/ | % | Change | 1–12/ | % |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| EUR million |
2018 | 2017* | 2018 | 2017* | 2017* | |||||||
| Norway | 94.3 | 17% | 91.1 | 16% | 4% | 184.5 | 17% | 191.2 | 17% | -4% | 367.0 | 16% |
| Denmark | 34.6 | 6% | 35.0 | 6% | -1% | 70.0 | 6% | 67.2 | 6% | 4% | 142.7 | 6% |
| Sweden | 111.8 | 20% | 126.1 | 22% | -11% | 224.8 | 21% | 256.8 | 23% | -12% | 492.2 | 22% |
| Germany | 117.3 | 21% | 115.2 | 20% | 2% | 223.8 | 21% | 225.8 | 20% | -1% | 468.6 | 21% |
| Industrial Solutions |
65.2 | 12% | 62.8 | 11% | 4% | 116.1 | 11% | 129.4 | 11% | -10% | 248.3 | 11% |
| Finland | 81.3 | 14% | 75.7 | 13% | 7% | 159.1 | 15% | 158.3 | 14% | 1% | 317.3 | 14% |
| Austria | 42.7 | 8% | 38.4 | 7% | 11% | 79.5 | 7% | 72.7 | 6% | 9% | 161.9 | 7% |
| Eastern Europe |
17.6 | 3% | 19.2 | 3% | -8% | 33.7 | 3% | 37.0 | 3% | -9% | 77.8 | 3% |
| Group, total |
564.8 | 100% | 563.3 | 100% | 0% | 1,091.6 | 100% | 1,138.0 | 100% | -4% | 2,275.8 | 100% |
| Services business unit |
303.1 | 54% | 290.8 | 52% | 4% | 596.1 | 55% | 587.9 | 52% | 1% | 1,209.0 | 53% |
| Projects business |
||||||||||||
| unit | 261.6 | 46% | 272.5 | 48% | -4% | 495.5 | 45% | 550.1 | 48% | -10% | 1,066.8 | 47% |
*2017 figures IFRS 15 restated
Adjusted EBITDA was EUR 12.9 (4.5) million, or 2.3 (0.8) percent of revenue in April–June. EBITDA for April– June was EUR -31.7 (-14.1) million, or -5.6 (-2.5) percent of revenue, impacted by the German anti-trust fine of EUR 40.8 million and other items affecting comparability. EBITDA was also impacted by certain project writedowns from older projects as well as one-off legal and strategy-related costs.
Both business units improved their margins. By division, there was positive development in profitability in most divisions. Sweden and Industrial Solutions materially improved their result compared to last year. Finland, Norway and Austria continued to deliver good results.
Caverion announced on 12 June 2018 that it had managed to settle for its part with the Bundeskartellamt (German Federal Cartel Office) the cartel case investigated by the authority since 2014. According to the final decision of the Bundeskartellamt announced on 3 July 2018 Caverion Deutschland GmbH was imposed an antitrust fine of EUR 40.8 million. The fine was booked as an expense in the second quarter and will be paid in the third quarter.
Costs related to materials and supplies decreased to EUR 148.8 (157.4) million and external services to EUR 105.2 (108.4) million in April–June. Personnel expenses decreased by 5.0 percent and other operating expenses increased by 63.7 percent from the previous year due to the anti-trust fine. Personnel expenses for April–June amounted to a total of EUR 231.7 (244.0) million. Other operating expenses increased to EUR 110.8 (67.7) million. Group's external legal costs relating to the German anti-trust case and the three Industrial Solutions projects reported separately amounted in total to EUR 2.3 million. The Group's restructuring costs amounted to EUR 1.1 million, which related to Germany and Denmark. Other operating income was EUR 0.1 (0.1) million.
Adjusted EBITDA was EUR 23.9 (12.3) million, or 2.2 (1.1) percent of revenue in January–June. EBITDA for January–June was EUR -21.8 (-16.1) million, or -2.0 (-1.4) percent of revenue, impacted by the German anti-trust fine of EUR 40.8 million and other items affecting comparability. EBITDA was also impacted by certain project write-downs from older projects as well as one-off legal and strategy-related costs.
Both business units improved their margins. By division, there was positive development in most divisions. Finland, Norway and Austria continued to deliver good results, with Denmark, Sweden and Industrial Solutions clearly improving. The result in Germany in 2018 is not fully comparable with the previous year as Caverion sold its product business under the Krantz brand in Germany to STEAG Energy Services GmbH in the end of 2017.
Caverion announced on 12 June 2018 that it had managed to settle for its part with the Bundeskartellamt (German Federal Cartel Office) the cartel case investigated by the authority since 2014. According to the final decision of the Bundeskartellamt announced on 3 July 2018 Caverion Deutschland GmbH was imposed an antitrust fine of EUR 40.8 million. The fine was booked as an expense in the second quarter and will be paid in the third quarter.
Costs related to materials and supplies decreased to EUR 278.2 (321.8) million and external services to EUR 200.5 (209.6) million in January–June. Personnel expenses decreased by 6.0 percent and other operating expenses increased by 31.7 percent from the previous year due to the anti-trust fine. Personnel expenses for January–June amounted to a total of EUR 459.8 (489.3) million. Other operating expenses increased to EUR 176.1 (133.7) million. Group's external legal costs relating to the German anti-trust case and the three Industrial Solutions projects reported separately amounted in total to EUR 3.4 million. The Group's restructuring costs amounted to EUR 1.2 million, which related to Germany and Denmark. Other operating income was EUR 1.2 (0.4) million.
EBITDA is defined as Operating profit + Depreciation, amortisation and impairment. Adjusted EBITDA = EBITDA before items affecting comparability (IAC). Items affecting comparability (IAC) are material items or transactions, which are relevant for understanding the financial performance of Caverion when comparing profit of the current period with previous periods. These items can include (1) capital gains and losses from divestments; (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 2018, major risk projects include three completed Large Projects from Industrial Solutions. The German antitrust fine and there-related legal and other costs fall under "Items affecting comparability (IAC)" in category (4) i.e. "other items that according to Caverion management's assessment are not related to normal business operations".
The operating profit for April–June was EUR -38.7 (-21.6) million, or -6.9 (-3.8) percent of revenue, impacted by the German anti-trust fine of EUR 40.8 million and other items affecting comparability.
Depreciation, amortisation and impairment amounted to EUR 7.0 (7.5) million in April–June, of which EUR 0.5 (0.3) million were allocated intangibles related to acquisitions and EUR 6.5 (7.2) million were other depreciations, amortisation and impairments, the majority of which related to IT.
Operating profit for January–June was EUR -35.3 (-31.3) million, or -3.2 (-2.7) percent of revenue, impacted by the German anti-trust fine of EUR 40.8 million and other items affecting comparability.
Depreciation, amortisation and impairment amounted to EUR 13.5 (15.2) million in January–June, of which EUR 1.0 (1.1) million were allocated intangibles related to acquisitions and EUR 12.5 (14.1) million were other depreciations, amortisation and impairments, the majority of which related to IT.
The other factors affecting operating profit have been described in more detail under EBITDA.
Result before taxes amounted to EUR -36.8 (-34.1) million, result for the period to EUR -37.6 (-26.3) million and earnings per share to EUR -0.31 (-0.22) in January–June, impacted by the German anti-trust fine of EUR 40.8 million and other items affecting comparability. Net financing expenses in January–June were EUR -1.5 (-2.8) million.
The Group's effective tax rate was -2.2 (22.8) percent in January–June, impacted by the German anti-trust fine. The anti-trust fine has been treated as a non tax-deductible expense.
Gross capital expenditure on non-current assets totalled EUR 7.4 (7.9) million during January–June, representing 0.7 (0.7) percent of revenue. Investments in information technology totalled EUR 5.7 (5.8) million during January– June. IT investments were focused on building a harmonised IT infra and common platforms, datacenter consolidation as well as implementing a common ERP template. IT systems and mobile tools were also developed to improve the Group's internal processes and efficiency going forward. Other investments amounted to EUR 1.7 (2.1) million.
The Group's operating cash flow before financial and tax items amounted to EUR 4.9 (-38.1) million in the first half of the year. Operating cash flow improved in all divisions except Denmark due to better profitability and improved working capital management. The Group's free cash flow improved to EUR -5.1 (-46.7) million.
The Group's working capital improved to EUR -57.2 (-8.6) million at the end of June. Working capital also improved from the level of EUR -41.4 million at the end of March 2018. The amount of POC receivables decreased to EUR 249.4 (273.1) million and trade receivables to EUR 280.1 (300.6) million at the end of June. There was good development also in old overdue trade receivables. By the end of the period, working capital tied to risk projects in Industrial Solutions started to decline, while working capital in Germany was impacted by an anti-trust fine related current liability of EUR 40.8 million. The anti-trust fine will be paid in the third quarter.
Caverion's cash and cash equivalents amounted to EUR 62.2 (19.8) million at the end of June. In addition, Caverion has undrawn revolving credit facilities amounting to EUR 100.0 million and undrawn overdraft facilities amounting to EUR 19.0 million.
On 14 June 2018 Caverion announced the launch of a directed share issue of new shares in order to maintain a strong balance sheet and to retain strategic flexibility after the payment of the anti-trust fine. Strategic flexibility for Caverion means, inter alia: continuation of the shift towards the Services business, support for strategic projects and operational development, investments in digitalisation and a solid cash position to finance bolt-on acquisitions in selected areas in services especially in well-performing divisions. On 15 June 2018 the Company announced that it had directed a share issue of 9,524,000 new shares in the Company to institutional investors corresponding to approximately 7.36 percent of all the shares and votes in the Company immediately prior to the share issue. Approximately 17 percent of the shares were allocated to international investors. The share issue was priced at EUR 6.30 per share raising gross proceeds of EUR 60 million. The subscription price represented a discount of 6.5 percent to the closing price on 14 June 2018. The total number of issued shares in the Company following the share issue is 138,920,092 and the number of shares outstanding is 135,655,641.
The Group's interest-bearing loans and borrowings amounted to EUR 72.4 (118.4) million at the end of June and the average interest rate after hedges was 2.65 percent. Approximately 83 percent of the loans have been raised from banks and other financial institutions and approximately 15 percent from insurance companies. A total of EUR 28.3 million of the interest-bearing loans and borrowings will fall due during the next 12 months. The Group's net debt amounted to EUR 10.2 (98.6) million at the end of June. At the end of June, the Group's gearing was 3.9 (41.7) percent and equity ratio 28.2 (25.8) percent. On June 9, 2017 Caverion Corporation issued a EUR 100 million hybrid bond, an instrument subordinated to the company's other debt obligations and treated as equity in the IFRS financial statements. In June 2018, Caverion paid EUR 4.6 million (no interests paid in 2017) in hybrid bond annual interest.
Caverion's external loans are subject to a financial covenant based on the ratio of the Group's net debt to EBITDA. Financial covenant shall not exceed 3.5:1. At the end of June, the Group's Net debt to EBITDA was 0.2x according to the confirmed calculation principles. Caverion agreed with its lending parties in June that the German anti-trust fine and there-related legal and advisory fees are excluded from the calculation of EBITDA related to Group's financial covenant Net Debt to EBITDA.
Caverion adopted a new way of reporting its business unit revenue as of 2018. Previously Caverion reported business unit revenue according to the classification of its contracts as follows: Project Business consisting of the Large Projects and Technical Installation business areas and the Services Business consisting of the Technical Maintenance and Managed Services business areas. As of 2018 Caverion adopted Business Unit monitoring based on a profit center structure, whereby each profit center belongs to either the Projects or Services business unit. The new profit center structure enables improved financial steering in Caverion. Caverion provides comparative figures for the new Business Unit structure for each quarter of the financial year 2017. Based on the new classification, the Services business unit accounted for 53.1 per cent and the Projects business unit for 46.9 per cent of Group revenue in 2017, while based on the previous classification the Services business accounted for 52.5 per cent and the Projects business for 47.5 per cent of Group revenue in 2017. The comparative figures for 2017 are presented in the table below.
| 1–3/ | 4-6/ | 7-9/ | 10-12/ | 1–12/ | ||
|---|---|---|---|---|---|---|
| Revenue, EUR million | 2017 | 2017 | 2017 | 2017 | 2017 | % |
| Services business unit | 297.0 | 290.8 | 284.0 | 337.2 | 1,209.0 | 53% |
| Projects business unit | 277.6 | 272.5 | 261.6 | 255.1 | 1,066.8 | 47% |
| 1–3/ 2017 |
4-6/ 2017 |
7-9/ 2017 |
10-12/ 2017 |
1–12/ 2017 |
||
|---|---|---|---|---|---|---|
| Revenue, EUR million | Restated | Restated | Restated | Restated | Restated | % |
| Services business | 292.7 | 289.3 | 279.8 | 333.4 | 1,195.2 | 53% |
| - Technical Maintenance | 208.7 | 208.3 | 197.0 | 236.5 | 850.5 | 37% |
| - Managed Services | 84.1 | 80.9 | 82.8 | 96.9 | 344.6 | 15% |
| Projects business | 281.9 | 274.1 | 265.8 | 258.9 | 1,080.6 | 47% |
| - Technical Installation | 177.3 | 184.3 | 177.3 | 177.3 | 716.2 | 31% |
| - Large Projects | 104.6 | 89.7 | 88.5 | 81.6 | 364.5 | 16% |
Caverion announced in a stock exchange release on 6 November 2017 that it is renewing its division structure by separating its Denmark-Norway division operations into two divisions Denmark and Norway. The changes took place as of 1 January 2018.
The revenue and result in Germany in 2018 are not fully comparable with the previous year as Caverion sold its product business under the Krantz brand in Germany to STEAG Energy Services GmbH in the end of 2017. The sale became effective on December 31, 2017. As a part of Caverion Germany, Krantz employed approximately 230 people and its revenue was approximately EUR 45 million in 2017. The capital gain from the divestment was reported under other operating income for the period and it amounted to EUR 12.3 million.
The Group adopted new revenue recognition principles according to IFRS 15 as of January 1, 2018. The IFRS 15 standard requires that revenue is recognised from any variable consideration at its estimated amount, if it is highly probable that no significant reversal of revenue will occur. Under the previous revenue recognition standards, revenue was recognised from variable consideration when it was assessed probable to occur. Revenue from variable considerations is thus to be recognised more prudently under IFRS 15 than under previous revenue recognition standards. Caverion issued a separate stock exchange release on March 21, 2018 on its IFRS 15 restated figures, quarterly Adjusted EBITDA for 2017 as well as its guidance for 2018 according to IFRS 15.
The adoption of the new IFRS 15 accounting principles had a negative impact on revenue of EUR -7.0 million and on EBITDA and operating profit of EUR -7.3 million for the financial year 2017. The Group's equity ratio decreased from 27.9 percent to 25.8 percent and gearing increased from 24.4 percent to 27.2 percent as at 31 December 2017. The negative impact on the Group's retained earnings amounted to EUR 27.2 million as at 31 December 2017. Additional information has been presented in the financial tables under "IFRS 15 restated figures".
| Personnel by division, end of period | 6/18 | 3/18 | Change | 6/18 | 6/17 | Change | 12/17 |
|---|---|---|---|---|---|---|---|
| Sweden | 3,007 | 3,052 | -1% | 3,007 | 3,383 | -11% | 3,150 |
| Norway | 2,431 | 2,452 | -1% | 2,431 | 2,489 | -2% | 2,486 |
| Finland | 2,537 | 2,415 | 5% | 2,537 | 2,568 | -1% | 2,444 |
| Germany | 2,235 | 2,239 | 0% | 2,235 | 2,443 | -9% | 2,453 |
| Industrial Solutions | 2,053 | 1,985 | 3% | 2,053 | 2,125 | -3% | 2,023 |
| Eastern Europe | 1,600 | 1,642 | -3% | 1,600 | 1,817 | -12% | 1,754 |
| Denmark | 952 | 964 | -1% | 952 | 1,010 | -6% | 952 |
| Austria | 829 | 830 | 0% | 829 | 803 | 3% | 840 |
| Group Services | 107 | 108 | -1% | 107 | 112 | -4% | 114 |
| Group, total | 15,751 | 15,687 | 0% | 15,751 | 16,750 | -6% | 16,216 |
Caverion Group employed 15,835 (16,740) people on average in January–June 2018. At the end of June, the Group employed 15,751 (16,750) people. Personnel expenses for January–June 2018 amounted to EUR 459.8 (489.3) million.
Caverion continued to develop the competences needed by the businesses. In the first half of 2018, also some new resources were needed to fulfil critical competence gaps. Caverion continued to hire trainees and apprentices to grow as experts. Special attention was continued to be paid to project management and the strengthening of managerial capabilities. Development activities were continued in divisions to better match business demand with the supply of resources.
Several Group-wide projects were continued such as the implementation of project management capabilities. Further performance and utilisation improvement actions were continued in many divisions. Talent and succession planning as well as the implementation of harmonised people processes continued. The safety of employees continues to be a focus area. Accident frequency rate in the end of June decreased by 7 percent from the previous year to 5.4 (5.8).
Caverion announced the following changes in Caverion's Group Management Board and organisation structure on 4 May 2018.
Juha Mennander (born 1965) was appointed as the Head of division Sweden as of 1 June 2018 and he will still continue as a member of the Group Management Board. Juha Mennander will also act as the Head of Group Market Operations until further notice. Michael Kaiser (born 1962) was appointed as the Head of Caverion Projects Business Unit and a member of the Group Management Board as of 1 June 2018.
In order to focus and simplify Caverion's management structure, Caverion decided to reorganise its Eastern European operations. Niclas Sacklén, the former Head of division Eastern Europe, left the Group Management Board as of 1 July 2018 and is responsible for Caverion's Russian and Polish operations until 10 August 2018, after which he will leave the company. Caverion's Baltic operations were decided to be integrated into division Finland and they report to Ville Tamminen, Head of division Finland. Going forward, division Finland will be called Finland and Baltics. The financial reporting of Russia, Poland and Baltics will continue under "Eastern Europe" until the end of 2018.
Caverion is exposed to different types of strategic, operational, political, market, customer, financial and other risks. The market environment is currently positive in markets relevant for Caverion, but there may always occur sudden unexpected changes affecting also Caverion.
Caverion's typical operational risks relate to its Services and Projects business. These include risks related to tendering (e.g. calculation and pricing), contractual terms and conditions, partnering, subcontracting, procurement and price of materials, availability of qualified personnel and project management. To manage these risks, risk assessment and review processes for both the sales and execution phase are in place, and appropriate risk reservations are being made. Given the specific risks related to project business, the Group Project Business Unit was established in the beginning of 2017 and is dedicated to the overall improvement of project risk management, to steering the project portfolio and to improve project management capabilities. Despite all actions taken there is a risk that some project risks materialise, which could have a negative impact on Caverion's financial performance and position. Project risk assessment is part of the standard project management processes in the company, and it is possible that risks may be identified in currently running and new projects.
Although improved project controls have been implemented, it is possible that some risks may materialise, which could lead to project write-downs, provisions, disputes or litigations. Caverion has made a large amount of project write-downs during 2016-2017 but it is still possible that risks may emerge in these or new projects.
According to Group policy, write-offs or provisions are booked on receivables when it is probable that no payment can be expected. Caverion Group follows a policy in valuing trade receivables and the bookings include estimates and critical judgements. The estimates are based on experience on realised write-offs in previous years, empirical knowledge of debt collection, customer-specific collaterals and analyses as well as the general economic situation of the review period. Caverion carries out risk assessments related to POC and trade receivables in its project portfolio on an ongoing basis. There are certain individual larger receivables where the company continues its actions to negotiate and collect the receivables. There is remaining risk in the identified receivables, and it cannot be excluded that there is also risk associated with other receivables.
Given the nature of Caverion's business, Group companies are involved in disputes and legal proceedings in several projects. These disputes and legal proceedings typically concern claims made against Caverion for allegedly defective or delayed delivery. In some cases, the collection of receivables by Caverion may result in disputes and legal proceedings. There is a risk that the client presents counter claims in these proceedings. The outcome of claims, disputes and legal proceedings is difficult to predict. Write-downs and provisions are booked following the applicable accounting rules.
In June 2018, Caverion reached a settlement for its part with the German Federal Office (FCO) in a cartel case investigated by the authority since 2014. The investigation concerns several companies providing technical building services in Germany. Caverion Deutschland GmbH (and its predecessors) was found to have participated in anti-competitive practices between 2005 and 2013. According to the FCO's final decision issued on 3 July 2018, Caverion Deutschland GmbH was imposed a fine of EUR 40.8 million. There is a risk that civil claims may be presented against Caverion Deutschland GmbH in relation to this matter. It is not possible to evaluate the magnitude of the risk at this time. Caverion will disclose any relevant information on the potential civil law claims as required under the applicable regulations.
As part of Caverion's co-operation with the authorities in the cartel matter, the company identified activities during 2009-2011 that were likely to fulfil the criteria of corruption or other criminal commitment in one of its client projects executed in that time. Caverion has brought its findings to the attention of the authorities and supports them to further investigate the case. It is possible that these infringements will cause considerable damage to Caverion in terms of fines, civil claims as well as legal expenses. However, the magnitude of the potential damage cannot be assessed at the moment. Caverion is monitoring the situation and will disclose any relevant information as required under the applicable regulations.
Caverion has made significant efforts to promote compliance in order to avoid any infringements in the future. Caverion has a strong focus in further enhancing its compliance programme. As part of the programme all employees must complete an e-learning module and further training is given across the organisation. All employees are required to comply with Caverion's Code of Conduct, which sets zero tolerance on anti-competitive practices, corruption, bribery or any unlawful action.
Goodwill recognised on Caverion's balance sheet is not amortised, but it is tested annually for any impairment. The amount by which the carrying amount of goodwill exceeds the recoverable amount is recognised as an impairment loss through profit and loss. If negative changes take place in Caverion's result and growth development, this may lead to an impairment of goodwill, which may have an unfavourable effect on Caverion's result of operations and shareholders' equity.
Caverion's external loans are subject to a financial covenant based on the ratio of the Group's net debt to EBITDA. Breaching this covenant would give the lending parties the right to declare the loans to be immediately due and payable. Caverion concluded amendments with its lending parties related to the maximum level of the financial covenant and confirmed the EBITDA calculation principles related to the Group's financial covenant in 2017. The project write-downs made in 2016 and 2017 burdened the company's EBITDA and the financial covenant level in 2017. Caverion agreed with its lending parties in June that the German anti-trust fine and thererelated legal and advisory fees are excluded from the calculation of EBITDA related to Group's financial covenant Net Debt to EBITDA. It is possible that Caverion may need amendments related to its financial covenant also in the future. The level of the financial covenant ratio is continuously monitored and evaluated against actual and forecasted EBITDA and net debt figures.
Caverion's business typically involves granting of guarantees in favour of customers or other stakeholders, especially in large projects, e.g. for advance payments received, for performance of contractual obligations, and for defects during the warranty period. Such guarantees are typically granted by financial intermediaries on behalf of Caverion. There is no assurance that the company would have continuous access to sufficient guarantees from financial intermediaries at competitive terms or at all, and the absence of such guarantees could have an adverse effect on Caverion's business and financial condition. To manage this risk, Caverion's target is to maintain several guarantee facilities in the different countries where it operates.
There are risks related to the functionality, security and availability of the company's IT systems. Caverion has made significant investments in IT and system development. There is a risk that the expected functionalities and pay-back are not fully materialised.
Financial risks have been described in more detail in the 2017 Financial Statements note 5.5 and in the financial tables to this Half-year Financial Report under note 6.
The Annual General Meeting of Caverion, held on 26 March 2018, adopted the Financial Statements for the year 2017 and discharged the members of the Board of Directors and the President and CEO 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 composition of members of the Board of Directors and their remuneration, the election of a new auditor and its remuneration as well as authorised the Board of Directors to decide on the repurchase and/or on the acceptance as pledge of the company's own shares and share issues.
The Annual General Meeting elected a Chairman, Vice Chairman and six ordinary members to the Board of Directors. Michael Rosenlew was elected as the Chairman of the Board of Directors, Markus Ehrnrooth as the Vice Chairman and Jussi Aho, Joachim Hallengren, Thomas Hinnerskov, Antti Herlin, Anna Hyvönen and Mats Paulsson as members of the Board of Directors for a term continuing until the end of the next Annual General Meeting. The stock exchange release on the resolutions passed at the Annual General Meeting is available on Caverion's website at http://www.caverion.com/about-us/media/releases.
The Board of Directors held its organisational meeting on 26 March 2018. 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 Annual General Meeting, held on 26 March 2018, decided according to the proposal of the Board of Directors that no dividend will be paid for the financial year 2017.
Caverion's dividend policy is to distribute as dividends at least 50 percent of the result for the year after taxes, however, taking profitability and leverage level into account. Even though there are no plans to amend this
Caverion Corporation is a public limited company organised under the laws of the Republic of Finland, incorporated on June 30, 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.
The number of shares was 125,596,092 and the share capital was EUR 1,000,000 on 1 January 2018. Caverion held 512,328 treasury shares on 1 January 2018. At the end of the reporting period, the total number of shares in Caverion was 138,920,092. Caverion held 3,264,451 treasury shares on 30 June 2018, representing 2.35% of the total number of shares and voting rights. The number of shares outstanding was thus 135,655,641 at the end of June 2018.
On 14 June 2018 Caverion announced the launch of a directed share issue of new shares to maintain strong balance sheet and to retain strategic flexibility after the payment of the anti-trust fine. Strategic flexibility for Caverion means, inter alia: continuation of the shift towards the service business, support in operational development in projects, investments in digitalisation and a solid cash position to finance bolt-on acquisitions in selected areas in services especially in well-performing divisions. On 15 June 2018 the Company announced that it had directed a share issue of 9,524,000 new shares in the Company to institutional investors corresponding to approximately 7.36 percent of all the shares and votes in the Company immediately prior to the share issue. Approximately 17 percent of the shares were allocated to international investors. The share issue was priced at EUR 6.30 per share raising gross proceeds of EUR 60 million. The subscription price represented a discount of 6.5 percent to the closing price on 14 June 2018. The total number of issued shares in the Company following the share issue is 138,920,092 and the number of shares outstanding is 135,655,641.
Caverion's Board of Directors announced on 7 February 2018 in a stock exchange release the establishment of a new share-based incentive plan directed for the key employees of the Group ("Matching Share Plan 2018-2022"). The aim of the plan is to align the objectives of the shareholders and the key employees in order to increase the value of the company in the long-term, to encourage the key employees to personally invest in the company shares, to retain them at the company, and to offer them a competitive reward plan that is based on acquiring, receiving and holding the company's shares. The prerequisite for participating in the Plan is that a key employee acquires company shares up to the number and in the manner determined by the Board of Directors. The plan participant may not participate in the Performance Share Plan 2018-2020 simultaneously with participating in the Matching Share Plan. The rewards from the plan will be paid in four instalments, each instalment in 2019, 2020, 2021 and 2022. However, the reward payment will be deferred, if a yield of the share has not reached the pre-set minimum yield level by the end of the matching period in question. In connection with the technical execution of the plan a total of 3,800,000 new shares were subscribed for in Caverion Corporation's share issue directed to the company itself without payment and entered into the Trade Register on 19 February 2018. A maximum total of 1,280,000 shares held by the company were, in deviation from the shareholders' pre-emptive right, offered in the share issue for subscription to the key employees participating in the Matching Share Plan. The share subscription period ended on 23 February 2018. A total of 1,047,877 Caverion Corporation shares were subscribed for in the share issue pursuant to the primary and secondary subscription right and the total capital raised amounted to EUR 6.67 million. The subscription price was 6.37 euros per share. The company has granted the plan participants interest-bearing loans in the total amount of approximately EUR 4.72 million to finance the acquisition of the company's shares by the end of June 2018. More detailed information about the Matching Share Plan 2018-2022 and the related share issues and transfers was published in stock exchange releases on 7 February 2018, 19 February 2018, 1 March 2018 and 8 March 2018.
Caverion's Board of Directors approved a rolling long-term share-based incentive plan for the Group's senior management in December 2015. The share based incentive plan consists of a Performance Share Plan (PSP) as the main structure supported by a Restricted Share Plan as a complementary structure for specific situations. Both plans consist of annually commencing individual plans, each with a three-year period. The commencement of each new plan is subject to a separate decision of the Board. The Board of Directors decided to continue the said incentive structure in December 2016 and in December 2017. The first plans commenced thus at the beginning of 2016, followed by the second and third plans in the beginning of 2017 and 2018, respectively. The targets set for the first and second Performance Share Plan 2016–2018 and 2017-2019 were not met and no rewards will therefore be paid thereof. If all targets will be met, the share rewards based on Performance Share Plan 2018-2020 will comprise a maximum of approximately 850,000 Caverion shares (gross before the deduction of applicable payroll tax), to be delivered in the spring of 2021. Furthermore, the potential share rewards based on the Restricted Share Plans for 2016-2018; 2017-2019 as well as 2018-2020 total a maximum of approximately 236,000 shares (gross before the deduction of applicable payroll tax). Of these plans, a maximum of approximately 66,000 shares will be delivered in the spring of 2019 and a maximum of approximately 85,000 shares both in the spring of 2020 and 2021. More information on the incentive plans was released in stock exchange releases on December 18, 2015; December 21, 2016 and December 21, 2017.
Caverion has not made any decision regarding the issue of option rights or other special rights entitling to shares.
The Annual General Meeting of Caverion Corporation, held on 26 March 2018, authorised the Board of Directors to decide on the repurchase and/or on the acceptance as pledge of the company's own shares. The authorisation covers the repurchase and/or acceptance as pledge of a maximum of 12,000,000 company´s own shares using the company's unrestricted equity, at fair value at the date of repurchase, which shall be the prevailing market price in the trading at the regulated market organised by Nasdaq Helsinki Ltd. The shares may be repurchased other than pro rata to the shareholders' existing holdings. The share purchase will decrease the company's distributable unrestricted equity. The authorisation is valid for eighteen months from the date of the resolution of the Annual General Meeting. The Board of Directors has not used the authorisation on the repurchase of own shares during 2018. As part of the implementation of the Matching Share Plan, the company accepted as a pledge the shares acquired by those key employees who took a loan from the company. As a result, Caverion had 743,661 Caverion Corporation shares as a pledge at the end of the reporting period on 30 June 2018.
The Annual General Meeting authorised the Board of Directors to decide on share issues. The authorisation may be used in full or in part by issuing a maximum of 12,000,000 Caverion shares in one or more issues. The Board of Directors may decide on a directed share issue in deviation from the shareholders' pre-emptive rights. The Board of Directors would be authorised to decide to whom and in which order the shares will be issued. The authorisation can be used e.g. in order to strengthen the Company's capital structure, to broaden the Company's ownership, 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 programmes. In the share issues shares may be issued for subscription against payment or without charge. The Board of Directors is also authorised to decide on a share issue without payment directed to the company itself, within the limitations laid down in the Companies Act. The authorisation empowers the Board of Directors to decide on the terms and conditions of and measures related to the share issues in accordance with the Companies Act, including the right to decide whether the subscription price will be recognized in full or in part in the invested unrestricted equity reserve or as an increase to the share capital.
The share issue authorisation also includes the authorisation to transfer own shares that are in the possession of company or may be acquired. This authorisation applies to a maximum of 12,500,000 company's own shares. The Board of Directors was authorised to decide on the purpose and the terms and conditions for such transfer. The authorisation is valid until March 31, 2019. The Board of Directors has used the authorisation during 2018. On 15 June 2018 the Company announced that it had directed a share issue of 9,524,000 new shares in the Company to institutional investors.
The opening price of Caverion's share was EUR 5.93 at the beginning of the year 2018. The closing rate on the last trading day of the review period on 29 June was EUR 6.09. The share price increased by 3 percent during January–June. The highest price of the share during the review period January–June was EUR 7.53, the lowest was EUR 5.76 and the average price was EUR 6.45. Share turnover on Nasdaq Helsinki in January–June amounted to 22.3 million shares. The value of share turnover was EUR 143.9 million (source: Nasdaq Helsinki).
Caverion's shares are also traded in other market places, such as Cboe, Turquoise, Aquis and Frankfurt Stock Exchange (Open Market). During January–June, 4.8 million Caverion Corporation shares changed hands in alternative public market places, corresponding to approximately 15.5 percent of the total share trade. Of the alternative market places, Caverion shares changed hands particularly through Cboe. Furthermore, during January–June, 3.8 million Caverion Corporation shares changed hands in OTC trading outside Nasdaq Helsinki, corresponding to approximately 12.2 percent of the total share trade (source: Fidessa Fragmentation Index).
Caverion Corporation's market capitalisation at the end of the review period was EUR 826.1 million. Market capitalisation has been calculated excluding the 3,264,451 shares held by the company as per 30 June 2018.
At the end of June 2018, the number of registered shareholders in Caverion was 27,475 (3/2018: 27,829). At the end of June 2018, a total of 30.6 percent of the shares were owned by nominee-registered and non-Finnish investors (3/2018: 31.7%).
Caverion Corporation has on 15 June 2018 received an announcement under Chapter 9, Section 5 of the Finnish Securities Markets Act, according to which the holding of Varma Mutual Pension Insurance Company ("Varma") in Caverion Corporation has increased above the threshold of 5 per cent. The holding increased above the threshold on 15 June 2018 due to Varma's participation in the Share Issue of Caverion. According to the announcement, the holding of Varma in Caverion is 9,721,407 shares on 15 June 2018, corresponding to 7.00 per cent of Caverion's shares and voting rights.
Caverion Corporation has on 15 June 2018 received an announcement of managers' transactions, according to which Antti Herlin, a member of the Board of Directors in Caverion Corporation through Security Trading Oy ("Security Trading", a company owned by Antti Herlin) has purchased shares in Caverion Corporation on 15 June 2018. The aggregated transactions represented a volume of 1,400,000 shares with a volume weighted average price of EUR 6.3 per share. The holding of Security Trading Oy after the share subscriptions equals thus 14.74 per cent of Caverion's shares and voting rights after the directed share issue announced on 14 June 2018, which corresponded to the pro-rata holding prior to the share issue.
Caverion Corporation received on 19 February 2018 an announcement under Chapter 9, Section 5 of the Finnish Securities Markets Act, according to which the holding of Antti Herlin, a member of the Board of Directors in Caverion Corporation through Security Trading Oy ("Security Trading", a company owned by Antti Herlin) has decreased below the threshold of 15 per cent. According to the announcement, the holding decreased below the threshold on 19 February 2018 due to dilution related to Caverion Corporation's share issue to the Company itself. According to the announcement, the combined holding of Antti Herlin and Security Trading in Caverion is 19,050,180 shares on 19 February 2018, corresponding to 14.72 per cent of Caverion's shares and voting rights. According to the announcement, the direct holding of Security Trading in Caverion was 19,020,000 shares on 19 February 2018, corresponding to 14.699 per cent of Caverion's shares and voting rights at the time.
Updated lists of Caverion's largest shareholders and ownership structure by sector as per 30 June 2018, are available on Caverion's website at www.caverion.com/investors.
| EUR million | 4-6/2018 | 4-6/2017 | 1-6/2018 | 1-6/2017 | 1-12/2017 |
|---|---|---|---|---|---|
| Restated | Restated | Restated | |||
| Revenue | 564.8 | 563.3 | 1,091.6 | 1,138.0 | 2,275.8 |
| Other operating income | 0.1 | 0.1 | 1.2 | 0.4 | 15.9 |
| Materials and supplies | -148.8 | -157.4 | -278.2 | -321.8 | -638.4 |
| External services | -105.2 | -108.4 | -200.5 | -209.6 | -433.0 |
| Employee benefit expenses | -231.7 | -244.0 | -459.8 | -489.3 | -940.4 |
| Other operating expenses | -110.8 | -67.7 | -176.1 | -133.7 | -276.1 |
| Share of results of associated companies |
0.0 | 0.0 | 0.0 | 0.0 | |
| Depreciation, amortisation and impairment |
-7.0 | -7.5 | -13.5 | -15.2 | -30.4 |
| Operating profit | -38.7 | -21.6 | -35.3 | -31.3 | -26.6 |
| % of revenue | -6.9 | -3.8 | -3.2 | -2.7 | -1.2 |
| Financial income and expense, net | -0.7 | -1.6 | -1.5 | -2.8 | -5.7 |
| Result before taxes | -39.5 | -23.2 | -36.8 | -34.1 | -32.3 |
| % of revenue | -7.0 | -4.1 | -3.4 | -3.0 | -1.4 |
| Income taxes | -0.3 | 6.4 | -0.8 | 7.7 | 5.3 |
| Result for the period | -39.7 | -16.8 | -37.6 | -26.3 | -27.0 |
| % of revenue | -7.0 | -3.0 | -3.4 | -2.3 | -1.2 |
| Attributable to | |||||
| Equity holders of the parent company | -39.7 | -16.9 | -37.6 | -26.3 | -27.0 |
| Non-controlling interests | 0.0 | 0.0 | 0.0 | 0.0 | |
| Earnings per share attributable to the equity holders of the parent company |
|||||
| Earnings per share, basic, EUR | -0.32 | -0.14 | -0.31 | -0.22 | -0.24 |
| Diluted earnings per share, EUR | -0.32 | -0.14 | -0.31 | -0.22 | -0.24 |
| EUR million | 4-6/2018 | 4-6/2017 | 1-6/2018 | 1-6/2017 | 1-12/2017 |
|---|---|---|---|---|---|
| Restated | Restated | Restated | |||
| Result for the review period | -39.7 | -16.8 | -37.6 | -26.3 | -27.0 |
| Other comprehensive income | |||||
| Items that will not be reclassified to profit/loss |
|||||
| - Change in fair value of defined benefit | |||||
| pension | -0.4 | 1.1 | -0.8 | 1.3 | 1.6 |
| -- Deferred tax | 0.0 | ||||
| Items that may be reclassified subsequently to profit/loss |
|||||
| - Cash flow hedges | 0.0 | 0.0 | 0.1 | ||
| - Change in fair value of for available for | |||||
| sale investments | 0.0 | 0.0 | 0.0 | 0.0 | 0.1 |
| -- Deferred tax | -0.1 | -0.2 | |||
| - Translation differences | 0.4 | -2.2 | -0.1 | -2.0 | -2.5 |
| Other comprehensive income, total | -0.1 | -1.1 | -1.0 | -0.7 | -0.6 |
| Total comprehensive result | -39.9 | -18.0 | -38.6 | -27.0 | -27.6 |
| Attributable to | |||||
| Equity holders of the parent company | -39.9 | -18.0 | -38.7 | -27.1 | -27.6 |
| Non-controlling interests | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| EUR million | Jun 30, 2018 | Jun 30, 2017 | Dec 31, 2017 | |
|---|---|---|---|---|
| Restated | Restated | |||
| Assets | ||||
| Non-current assets | ||||
| Property, plant and equipment | 20.0 | 25.0 | 21.9 | |
| Goodwill | 331.6 | 339.8 | 331.6 | |
| Other intangible assets | 41.9 | 47.5 | 46.7 | |
| Shares in associated companies | 0.1 | 0.1 | 0.1 | |
| Other investments | 1.1 | 1.2 | 1.2 | |
| Other receivables | 6.7 | 3.2 | 2.1 | |
| Deferred tax assets | 32.3 | 28.3 | 27.4 | |
| Current assets | ||||
| Inventories | 18.4 | 20.5 | 17.6 | |
| Trade receivables | 280.1 | 300.6 | 333.9 | |
| POC receivables | 249.4 | 273.1 | 226.5 | |
| Other receivables | 44.9 | 37.3 | 47.5 | |
| Income tax receivables | 3.6 | 8.1 | 7.5 | |
| Cash and cash equivalents | 62.2 | 19.8 | 29.2 | |
| Total assets | 1,092.3 | 1,104.5 | 1,093.2 | |
| Equity and liabilities | ||||
| Equity attributable to equity holders of the parent | ||||
| company Share capital |
1.0 | 1.0 | 1.0 | |
| Hybrid capital | 100.0 | 100.0 | 100.0 | |
| Other equity | 158.2 | 134.9 | 134.3 | |
| Non-controlling interest | 0.4 | 0.4 | 0.4 | |
| Equity | 259.6 | 236.3 | 235.6 | |
| Non-current liabilities | ||||
| Deferred tax liabilities | 55.5 | 50.2 | 51.6 | |
| Pension liabilities | 45.4 | 45.7 | 44.2 | |
| Provisions | 7.6 | 6.9 | 7.0 | |
| Interest-bearing debts | 44.2 | 73.4 | 57.7 | |
| Other liabilities | 0.3 | 0.4 | 0.4 | |
| Current liabilities | ||||
| Advances received | 170.8 | 188.4 | 179.9 | |
| Trade payables | 188.6 | 197.1 | 215.5 | |
| Other payables | 272.1 | 225.0 | 237.3 | |
| Income tax liabilities | 1.7 | 7.0 | 5.8 | |
| Provisions | 18.2 | 29.2 | 22.7 | |
| Interest-bearing debts | 28.3 | 45.0 | 35.5 | |
| Total equity and liabilities | 1,092.3 | 1,104.5 | 1,093.2 |
| EUR million | Jun 30, 2018 | Jun 30, 2017 | Dec 31, 2017 |
|---|---|---|---|
| Restated | Restated | ||
| Inventories | 18.4 | 20.5 | 17.6 |
| Trade and POC receivables | 529.5 | 573.8 | 560.4 |
| Other current receivables | 44.0 | 36.2 | 46.0 |
| Trade and POC payables | -207.4 | -213.9 | -236.1 |
| Other current liabilities | -270.9 | -236.8 | -239.0 |
| Advances received | -170.8 | -188.4 | -179.9 |
| Working capital | -57.2 | -8.6 | -30.8 |
Consolidated statement of changes in equity
| Equity attributable to owners of the parent | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Unrest | |||||||||||
| Share | Retained | Cumulative translation |
Fair value |
Treasury | ricted equity |
Hybrid | Non controlling |
Total | |||
| EUR million | capital | earnings | differences | reserve | shares | reserve | capital | Total | interest | equity | |
| Equity on December 31, | |||||||||||
| 2017 | 1.0 | 146.0 | -8.0 | -0.5 | -3.2 | 100.0 | 235.3 | 0.4 | 235.6 | ||
| Change in accounting principle, IFRS 9 |
-0.8 | 0.0 | -0.8 | -0.8 | |||||||
| Equity on January 1, | |||||||||||
| 2018 | 1.0 | 145.2 | -8.0 | -0.5 | -3.2 | 100.0 | 234.4 | 0.4 | 234.8 | ||
| Comprehensive income | |||||||||||
| Result for the period | -37.6 | -37.6 | 0.0 | -37.6 | |||||||
| Other comprehensive | |||||||||||
| income: | |||||||||||
| Change in fair value of | |||||||||||
| defined benefit pension | -0.8 | -0.8 | -0.8 | ||||||||
| Cash flow hedges | 0.0 | 0.0 | 0.0 | ||||||||
| Change in fair value of | |||||||||||
| available-for-sale | |||||||||||
| assets | -0.4 | 0.4 | 0.0 | 0.0 | |||||||
| -Deferred tax | -0.2 | -0.1 | -0.1 | ||||||||
| Translation differences | -0.2 | 0.1 | -0.2 | -0.2 | |||||||
| Comprehensive income, total |
-38.8 | -0.2 | 0.3 | -38.7 | 0.0 | -38.6 | |||||
| Dividend distribution | 0.0 | 0.0 | |||||||||
| Share issue | 60.0 | 60.0 | 60.0 | ||||||||
| Share issue costs after | |||||||||||
| taxes | -0.7 | -0.7 | -0.7 | ||||||||
| Share-based payments | 1.1 | 1.1 | 1.1 | ||||||||
| Share subscriptions | 6.7 | 6.7 | 6.7 | ||||||||
| Hybrid capital interests | |||||||||||
| after taxes | -3.7 | -3.7 | -3.7 | ||||||||
| Equity on June 30, 2018 | 1.0 | 103.8 | -8.2 | -0.2 | -3.2 | 66.0 | 100.0 | 259.2 | 0.4 | 259.6 |
| Equity attributable to owners of the parent | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| EUR million | Share capital |
Retained earnings |
Cumulative translation differences |
Fair value reserve |
Treasury shares |
Hybrid capital |
Total | Non controlling interest |
Total equity |
| Equity on January 1, 2017 (restated) |
1.0 | 172.1 | -5.6 | -0.7 | -3.2 | 163.6 | 0.4 | 163.9 | |
| Comprehensive income | |||||||||
| Result for the period | -26.3 | -26.3 | 0.0 | -26.3 | |||||
| Other comprehensive income: |
|||||||||
| Change in fair value of defined benefit pension |
1.3 | 1.3 | 1.3 | ||||||
| -Deferred tax | |||||||||
| Cash flow hedges | |||||||||
| Change in fair value of available for sale assets |
0.0 | 0.0 | 0.0 | ||||||
| Translation differences | -2.0 | -2.0 | -2.0 | ||||||
| Comprehensive income, total |
-25.0 | -2.0 | 0.0 | -27.1 | 0.0 | -27.0 | |||
| Dividend distribution | |||||||||
| Share-based payments | |||||||||
| Hybrid capital | 100.0 | 100.0 | 100.0 | ||||||
| Hybrid capital transaction costs after taxes |
-0.8 | -0.8 | -0.8 | ||||||
| Equity on June 30, 2017 | 1.0 | 146.5 | -7.6 | -0.7 | -3.2 | 100.0 | 235.9 | 0.4 | 236.3 |
| Equity attributable to owners of the parent | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| EUR million | Share capital |
Retained earnings |
Cumulative translation differences |
Fair value reserve |
Treasury shares |
Hybrid capital |
Total | Non controlling interest |
Total equity |
| Equity on January 1, 2017 (restated) |
1.0 | 172.1 | -5.6 | -0.7 | -3.2 | 163.6 | 0.4 | 163.9 | |
| Comprehensive income | |||||||||
| Result for the period | -27.0 | -27.0 | 0.0 | -27.0 | |||||
| Other comprehensive income: |
|||||||||
| Change in fair value of defined benefit pension |
1.6 | 1.6 | 1.6 | ||||||
| -Deferred tax | 0.0 | 0.0 | 0.0 | ||||||
| Cash flow hedges | 0.1 | 0.1 | 0.1 | ||||||
| Change in fair value of available for sale assets |
0.1 | 0.1 | 0.1 | ||||||
| Translation differences | -2.5 | -2.5 | -2.5 | ||||||
| Comprehensive income, total |
-25.3 | -2.5 | 0.2 | -27.6 | 0.0 | -27.6 | |||
| Dividend distribution | 0.0 | 0.0 | |||||||
| Share-based payments | 0.1 | 0.1 | 0.1 | ||||||
| Hybrid capital | 100.0 | 100.0 | 100.0 | ||||||
| Hybrid capital transaction costs after taxes |
-0.8 | -0.8 | -0.8 | ||||||
| Equity on December 31, 2017 |
1.0 | 146.0 | -8.0 | -0.5 | -3.2 | 100.0 | 235.3 | 0.4 | 235.6 |
| EUR million | 4-6/2018 | 4-6/2017 | 1-6/2018 | 1-6/2017 | 1-12/2017 |
|---|---|---|---|---|---|
| Restated | Restated | Restated | |||
| Cash flows from operating activities | |||||
| Result for the period | -39.7 | -16.8 | -37.6 | -26.3 | -27.0 |
| Adjustments to result | 7.8 | 5.0 | 13.9 | 9.9 | 13.7 |
| Change in working capital | 17.0 | -14.1 | 28.5 | -21.7 | 4.6 |
| Operating cash flow before financial and | |||||
| tax items | -15.0 | -25.9 | 4.9 | -38.1 | -8.7 |
| Financial items, net | -1.8 | -2.6 | -0.6 | -3.0 | -4.6 |
| Taxes paid | 2.2 | 0.1 | -1.8 | -2.4 | -3.4 |
| Net cash from operating activities | -14.6 | -28.4 | 2.4 | -43.5 | -16.7 |
| Cash flows from investing activities | |||||
| Acquisition of subsidiaries and businesses, | |||||
| net of cash | -0.4 | -2.4 | |||
| Disposal of businesses | -1.2 | -1.2 | 23.1 | ||
| Capital expenditure and other investments, | |||||
| net | -3.2 | -2.4 | -6.5 | -6.2 | -17.1 |
| Net cash used in investing activities | -4.4 | -2.4 | -8.1 | -6.2 | 3.6 |
| Cash flow from financing activities | |||||
| Change in loan receivables, net | -0.3 | 1.0 | -4.2 | 1.0 | 1.2 |
| Change in current liabilities, net | -20.3 | -5.0 | -20.3 | -30.0 | |
| Repayments of borrowings | -11.0 | -51.0 | -14.3 | -54.3 | -68.7 |
| Proceeds from financial leasing debts | |||||
| Payments of financial leasing debts | -1.1 | -0.6 | -1.7 | -1.2 | -2.2 |
| Share issue and subscriptions | 60.0 | 66.7 | |||
| Hybrid capital | 100.0 | 100.0 | 100.0 | ||
| Hybrid capital costs and interests | -4.6 | -1.0 | -4.6 | -1.0 | -1.0 |
| Dividends paid and other distribution of | |||||
| assets | 0.0 | 0.0 | 0.0 | 0.0 | |
| Net cash used in financing activities | 42.9 | 28.2 | 36.8 | 24.3 | -0.7 |
| Change in cash and cash equivalents | 23.9 | -2.6 | 31.2 | -25.5 | -13.9 |
| Cash and cash equivalents at the beginning | |||||
| of the period | 37.2 | 24.7 | 29.2 | 47.7 | 47.7 |
| Change in the foreign exchange rates Cash and cash equivalents at the end of |
1.1 | -2.2 | 1.8 | -2.4 | -4.6 |
| the period | 62.2 | 19.8 | 62.2 | 19.8 | 29.2 |
| EUR million | 4-6/2018 | 4-6/2017 | 1-6/2018 | 1-6/2017 | 1-12/2017 |
|---|---|---|---|---|---|
| Operating cash flow before financial and tax | |||||
| items | -15.0 | -25.9 | 4.9 | -38.1 | -8.7 |
| Taxes paid | 2.2 | 0.1 | -1.8 | -2.4 | -3.4 |
| Net cash used in investing activities | -4.4 | -2.4 | -8.1 | -6.2 | 3.6 |
| Free cash flow | -17.2 | -28.2 | -5.1 | -46.7 | -8.5 |
Caverion Corporation's Half-year Financial Report for January 1 – June 30, 2018 has been prepared in accordance with IAS 34, 'Interim Financial Reporting'. Caverion has applied the same accounting principles in the preparation of the Half-year Financial Report as in its Financial Statements for 2017 except for the adoption of new standards effective as of 1 January 2018.
The information presented in this Half-year Financial Report has not been audited.
In the Half-year Financial Report the figures are presented in million euros subject to rounding, which may cause some rounding inaccuracies in column and total sums.
Caverion adopts IFRS 15 (Revenue from contracts with customers), effective on January 1, 2018, using the full retrospective method of adoption. The IFRS 15 standard requires that revenue is recognised from any variable consideration at its estimated amount, if it is highly probable that no significant reversal of revenue will occur. Under the previous revenue recognition standards, revenue was recognised from variable consideration when it was assessed probable to occur. Revenue from variable considerations is thus to be recognised more prudently under IFRS 15 than under previous revenue recognition standards.
Restated comparative key figures for financial year 2017 have been published in a stock exchange release on 21 March 2018. The effect of adopting IFRS 15 on condensed consolidated income statement and on condensed consolidated statement of financial position for second quarter, half year and financial year 2017 is presented on pages 25-26.
New IFRS 9, 'Financial instruments' –standard has been applied as of 1 January 2018. The new standard includes guidance on the classification and measurement of financial instruments, new hedge accounting requirements and a new expected credit loss model for calculating impairment on financial assets.
The main impact of the IFRS 9 application for Caverion is coming from the new expected credit loss model applied to assess impairment loss for the doubtful trade receivables. The new impairment model requires recognition of impairment provisions based on expected credit losses (ECL), resulting in an increase in allowance for doubtful trade receivables. The credit loss allowance is measured at an amount equal to the lifetime expected credit losses. The expected credit loss model is forward-looking, and expected default rates are based on historical realised credit losses. The lifetime expected credit loss allowance is calculated using the gross carrying amount of outstanding trade receivables and an expected default rate. The lifetime expected credit loss allowance total was recognised as an adjustment of EUR 0.8 million to the opening balance of retained earnings in the year 2018, and thereafter the changes in expected credit losses will be recognised in profit and loss.
IFRS 9 retains but simplifies the mixed measurement model and establishes three primary measurement categories for financial assets: amortised cost, fair value through other comprehensive income (FVTOCI) and fair value through profit and loss (FVTPL). The basis of classification depends on the entity's business model and the contractual cash flow characteristics of the financial asset. Investments in equity instruments are required to be measured at fair value through profit and loss with the irrevocable option at inception to present changes in fair value in other comprehensive income. Changes in the classification of financial assets based on the new business-model driven classification of financial assets according to IFRS 9:
| Classification under IAS 39 |
Classification under IFRS 9 |
|
|---|---|---|
| Investments | Available for sale | FVTPL or FVTOCI |
| Trade receivables and other receivables | Loans and receivables | Amortised cost |
| Derivatives (hedge accounting not applied) | Held for trading | FVTPL |
| Cash and cash equivalents | Loans and receivables | Amortised cost |
For Caverion, the new classification and measurement guidance changes the terminology used for financial instruments but the impact on financial reporting is limited. There is no substantial transition adjustment recognised in the opening balance of retained earnings for 2018.
Hedge accounting is not applied in current hedging relationships.
Group management has performed an initial assessment of the impacts of IFRS 16 standard. Based on the current analysis most of the operating leases will be recognised in the balance sheet. The new standard will have a significant impact on the Group's balance sheet and related key ratios, such as the equity ratio and gearing. The leasing standard will also have an impact on the Group's income statement. Operating lease cost will be divided into the depreciation of the right-of-use asset and interest cost associated with the lease liability resulting to improved EBITDA.
Caverion plans to adopt the standard as of the effective date of January 1, 2019. The Group intends to apply the modified retrospective approach and will not restate comparative amounts for the year prior to first adoption.
ESMA (European Securities and Markets Authority) issued guidelines regarding Alternative Performance Measures ("APM") to be implemented at the latest during the second quarter of 2016. 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. Calculation of key figures is presented on page 27.
| 4-6/2017 | IFRS 15 | 4-6/2017 | 1-6/2017 | IFRS 15 | 1-6/2017 | 1-12/2017 | IFRS 15 | 1-12/2017 | |
|---|---|---|---|---|---|---|---|---|---|
| EUR million | Reported | Resta tement |
Restated | Reported | Resta tement |
Restated | Reported | Resta tement |
Restated |
| Revenue | 565.1 | -1.7 | 563.3 | 1,147.4 | -9.4 | 1,138.0 | 2,282.8 | -7.0 | 2,275.8 |
| Other operating income | 0.1 | 0.1 | 0.4 | 0.4 | 15.9 | 15.9 | |||
| Materials and supplies | -157.4 | -157.4 | -321.8 | -321.8 | -638.4 | -638.4 | |||
| External services | -108.4 | -108.4 | -209.6 | -209.6 | -433.0 | -433.0 | |||
| Employee benefit expenses | -244.0 | -244.0 | -489.3 | -489.3 | -940.4 | -940.4 | |||
| Other operating expenses | -68.3 | 0.6 | -67.7 | -133.2 | -0.5 | -133.7 | -275.8 | -0.3 | -276.1 |
| Share of results of associated companies Depreciation, amortisation |
0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | |||
| and impairment | -7.5 | -7.5 | -15.2 | -15.2 | -30.4 | -30.4 | |||
| Operating profit | -20.5 | -1.1 | -21.6 | -21.3 | -9.9 | -31.3 | -19.3 | -7.3 | -26.6 |
| % of revenue | -3.6 | -3.8 | -1.9 | -2.7 | -0.8 | -1.2 | |||
| Financial income and expense, net |
-1.6 | -1.6 | -2.8 | -2.8 | -5.7 | -5.7 | |||
| Result before taxes | -22.1 | -1.1 | -23.2 | -24.1 | -9.9 | -34.1 | -25.1 | -7.3 | -32.3 |
| % of revenue | -3.9 | -4.1 | -2.1 | -3.0 | -1.1 | -1.4 | |||
| Income taxes | 6.2 | 0.2 | 6.4 | 5.8 | 2.0 | 7.7 | 4.2 | 1.1 | 5.3 |
| Result for the review period |
-15.9 | -0.9 | -16.8 | -18.4 | -7.9 | -26.3 | -20.9 | -6.1 | -27.0 |
| % of revenue | -2.8 | -3.0 | -1.6 | -2.3 | -0.9 | -1.2 | |||
| Attributable to | |||||||||
| Equity holders of the parent company |
-15.9 | -0.9 | -16.9 | -18.4 | -7.9 | -26.3 | -20.9 | -6.1 | -27.0 |
| Non-controlling interests | 0.0 | 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, basic, EUR |
-0.13 | -0.14 | -0.15 | -0.22 | -0.19 | -0.24 | |||
| Diluted earnings per share, EUR |
-0.13 | -0.14 | -0.15 | -0.22 | -0.19 | -0.24 |
| Jun 30, | Jun 30, | Dec 31, | Dec 31, | |||
|---|---|---|---|---|---|---|
| 2017 | IFRS 15 Resta |
2017 | 2017 | IFRS 15 Resta |
2017 | |
| EUR million | Reported | tement | Restated | Reported | tement | Restated |
| Assets | ||||||
| Non-current assets | ||||||
| Property, plant and equipment | 25.0 | 25.0 | 21.9 | 21.9 | ||
| Goodwill | 339.8 | 339.8 | 331.6 | 331.6 | ||
| Other intangible assets | 47.5 | 47.5 | 46.7 | 46.7 | ||
| Shares in associated companies | 0.1 | 0.1 | 0.1 | 0.1 | ||
| Other investments | 1.2 | 1.2 | 1.2 | 1.2 | ||
| Other receivables | 3.2 | 3.2 | 2.1 | 2.1 | ||
| Deferred tax assets | 17.6 | 10.7 | 28.3 | 17.6 | 9.8 | 27.4 |
| Current assets | ||||||
| Inventories | 20.5 | 20.5 | 17.6 | 17.6 | ||
| Trade receivables | 315.6 | -14.9 | 300.6 | 347.3 | -13.4 | 333.9 |
| POC receivables | 297.3 | -24.2 | 273.1 | 249.7 | -23.2 | 226.5 |
| Other receivables | 37.3 | 37.3 | 47.5 | 47.5 | ||
| Income tax receivables | 8.1 | 8.1 | 7.5 | 7.5 | ||
| Cash and cash equivalents | 19.8 | 19.8 | 29.2 | 29.2 | ||
| Total assets | 1,133.0 | -28.4 | 1,104.5 | 1,120.0 | -26.8 | 1,093.2 |
| Equity and liabilities | ||||||
| Equity attributable to equity holders of the parent company |
||||||
| Share capital | 1.0 | 1.0 | 1.0 | 1.0 | ||
| Hybrid capital | 100.0 | 100.0 | 100.0 | 100.0 | ||
| Other equity | 163.8 | -28.9 | 134.9 | 161.4 | -27.1 | 134.3 |
| Non-controlling interest | 0.4 | 0.4 | 0.4 | 0.4 | ||
| Equity | 265.2 | -28.9 | 236.3 | 262.7 | -27.1 | 235.6 |
| Non-current liabilities | ||||||
| Deferred tax liabilities | 50.2 | 50.2 | 51.6 | 51.6 | ||
| Pension liabilities | 45.7 | 45.7 | 44.2 | 44.2 | ||
| Provisions | 6.9 | 6.9 | 7.0 | 7.0 | ||
| Interest-bearing debts | 73.4 | 73.4 | 57.7 | 57.7 | ||
| Other liabilities | 0.4 | 0.4 | 0.4 | 0.4 | ||
| Current liabilities | ||||||
| Advances received | 188.4 | 188.4 | 179.9 | 179.9 | ||
| Trade payables | 197.1 | 197.1 | 215.5 | 215.5 | ||
| Other payables | 225.0 | 225.0 | 237.3 | 237.3 | ||
| Income tax liabilities | 7.0 | 7.0 | 5.8 | 5.8 | ||
| Provisions | 28.6 | 0.5 | 29.2 | 22.4 | 0.3 | 22.7 |
| Interest-bearing debts | 45.0 | 45.0 | 35.5 | 35.5 | ||
| Total equity and liabilities | 1,133.0 | -28.4 | 1,104.5 | 1,120.0 | -26.8 | 1,093.2 |
| 6/2018 | 6/2017 | 12/2017 | |
|---|---|---|---|
| Restated | Restated | ||
| Revenue, EUR million | 1,091.6 | 1,138.0 | 2,275.8 |
| EBITDA, EUR million | -21.8 | -16.1 | 3.8 |
| EBITDA margin, % | -2.0 | -1.4 | 0.2 |
| Adjusted EBITDA, EUR million | 23.9 | 12.3 | 25.8 |
| Adjusted EBITDA margin, % | 2.2 | 1.1 | 1.1 |
| Operating profit, EUR million | -35.3 | -31.3 | -26.6 |
| Operating profit margin, % | -3.2 | -2.7 | -1.2 |
| Result before taxes, EUR million | -36.8 | -34.1 | -32.3 |
| % of revenue | -3.4 | -3.0 | -1.4 |
| Result for the review period, EUR million | -37.6 | -26.3 | -27.0 |
| % of revenue | -3.4 | -2.3 | -1.2 |
| Earnings per share, basic, EUR | -0.31 | -0.22 | -0.24 |
| Earnings per share, diluted, EUR | -0.31 | -0.22 | -0.24 |
| Equity per share, EUR | 1.9 | 1.9 | 1.9 |
| Equity ratio, % | 28.2 | 25.8 | 25.8 |
| Interest-bearing net debt, EUR million | 10.2 | 98.6 | 64.0 |
| Gearing ratio, % | 3.9 | 41.7 | 27.2 |
| Total assets, EUR million | 1,092.3 | 1,104.5 | 1,093.2 |
| Operating cash flow before financial and tax items, EUR million | 4.9 | -38.1 | -8.7 |
| Cash conversion (LTM), % | n.a | n.a | n.a |
| Working capital, EUR million | -57.2 | -8.6 | -30.8 |
| Gross capital expenditures, EUR million | 7.4 | 7.9 | 20.4 |
| % of revenue | 0.7 | 0.7 | 0.9 |
| Order backlog, EUR million | 1,596.8 | 1,512.7 | 1,491.0 |
| Personnel, average for the period | 15,835 | 16,740 | 16,607 |
| Number of outstanding shares at the end of the period (thousands) | 135,656 | 125,084 | 125,084 |
| Average number of shares (thousands) | 126,469 | 125,084 | 125,084 |
| EUR million | 4-6/2018 | 1-3/2018 | 10-12/2017 | 7-9/2017 | 4-6/2017 | 1-3/2017 |
|---|---|---|---|---|---|---|
| Restated | Restated | Restated | Restated | |||
| Revenue | 564.8 | 526.8 | 592.3 | 545.6 | 563.3 | 574.6 |
| EBITDA | -31.7 | 9.9 | 10.3 | 9.6 | -14.1 | -2.0 |
| EBITDA margin, % | -5.6 | 1.9 | 1.7 | 1.8 | -2.5 | -0.3 |
| Adjusted EBITDA | 12.9 | 10.9 | -5.2 | 18.8 | 4.5 | 7.8 |
| Adjusted EBITDA margin, % | 2.3 | 2.1 | -0.9 | 3.4 | 0.8 | 1.4 |
| Operating profit | -38.7 | 3.4 | 2.5 | 2.2 | -21.6 | -9.6 |
| Operating profit margin, % | -6.9 | 0.7 | 0.4 | 0.4 | -3.8 | -1.7 |
| 4-6/2018 | 1-3/2018 | 10-12/2017 | 7-9/2017 | 4-6/2017 | 1-3/2017 | |
|---|---|---|---|---|---|---|
| Restated | Restated | Restated | Restated | |||
| Earnings per share, basic, EUR | -0.32 | 0.01 | -0.02 | 0.00 | -0.14 | -0.08 |
| Earnings per share, diluted, EUR |
-0.32 | 0.01 | -0.02 | 0.00 | -0.14 | -0.08 |
| Equity per share, EUR | 1.9 | 1.9 | 1.9 | 1.9 | 1.9 | 1.2 |
| Equity ratio, % | 28.2 | 27.7 | 25.8 | 24.8 | 25.8 | 16.7 |
| Interest-bearing net debt, EUR million |
10.2 | 47.2 | 64.0 | 141.3 | 98.6 | 164.9 |
| Gearing ratio, % | 3.9 | 19.4 | 27.2 | 59.5 | 41.7 | 106.4 |
| Total assets, EUR million | 1,092.3 | 1,048.5 | 1,093.2 | 1,148.5 | 1,104.5 | 1,110.4 |
| Operating cash flow before financial and tax items, EUR |
||||||
| million | -15.0 | 19.8 | 66.9 | -37.5 | -25.9 | -12.1 |
| Cash conversion (LTM), % | n.a | 148.2 | n.a | n.a | n.a | n.a |
| Working capital, EUR million | -57.2 | -41.4 | -30.8 | 37.0 | -8.6 | -21.3 |
| Gross capital expenditures, EUR million |
3.2 | 4.2 | 7.3 | 5.2 | 2.9 | 5.0 |
| % of revenue | 0.6 | 0.8 | 1.2 | 1.0 | 0.5 | 0.9 |
| Order backlog, EUR million | 1,596.8 | 1,540.0 | 1,491.0 | 1,460.4 | 1,512.7 | 1,543.5 |
| Personnel at the end of the period |
15,751 | 15,687 | 16,216 | 16,483 | 16,750 | 16,679 |
| Number of outstanding shares at end of period (thousands) |
135,656 | 126,132 | 125,084 | 125,084 | 125,084 | 125,084 |
| Average number of shares (thousands) |
127,477 | 125,438 | 125,084 | 125,084 | 125,084 | 125,084 |
| Equity ratio (%) = | Equity + non-controlling interest x 100 Total assets - advances received |
|---|---|
| Gearing ratio (%) = | Interest-bearing liabilities - cash and cash equivalents x 100 Shareholder's equity + non-controlling interest |
| 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 |
| Free cash flow = | Operating cash flow before financial and tax items – taxes paid – net cash used in investing activities |
| Cash conversion (%) = | Operating cash flow before financial and tax items (LTM) x 100 EBITDA (LTM) |
| Share-related key figures | |
| Earnings / share, basic = | 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 |
| Equity / share = | Shareholders' equity Number of outstanding shares at the end of period |
| Alternative performance measures (APMs) reported by Caverion |
|
| EBITDA = | Operating profit (EBIT) + depreciation, amortisation and impairment |
| Adjusted EBITDA = | EBITDA before items affecting comparability (IAC) |
Items affecting comparability (IAC) are material items or transactions, which are relevant for understanding the financial performance of Caverion when comparing profit of the current period with previous periods. These items can include (1) capital gains and losses from divestments; (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 2018, major risk projects include three completed Large Projects from Industrial Solutions. The German anti-trust fine and there-related legal and other costs fall under "Items affecting comparability (IAC)" in category (4) i.e. "other items that according to Caverion management's assessment are not related to normal business operations".
Caverion announced on 7 February 2018 in a stock exchange release the establishment of a new share-based incentive plan directed for the key employees of the Group ("Matching Share Plan 2018-2022"). As part of the implementation of the Matching Share Plan, the company has granted the key employees participating in the plan interest-bearing loans in the total amount of EUR 4.7 million to finance the acquisition of the company's shares. The loans will be repaid in full on 31 December 2023, at the latest. Company shares have been pledged as a security for the loans.
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.
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.
Caverion's external loans are subject to a financial covenant based on the ratio of the Group's net debt to EBITDA. The covenant ratio is continuously monitored and evaluated against actual and forecasted EBITDA and net debt figures.
The table below presents the maturity structure of interest-bearing liabilities. The amounts are undiscounted. Cash flows of foreign-denominated liabilities are translated into the euro at the reporting date.
| EUR million | 2018 | 2019 | 2020 | Total |
|---|---|---|---|---|
| Interest-bearing liabilities | 14.9 | 27.0 | 30.5 | 72.4 |
Those financial assets and liabilities whose carrying amounts do not correspond to their fair values are presented in the table below.
| Jun 30, 2018 |
Jun 30, 2018 |
Jun 30, 2017 |
Jun 30, 2017 |
Dec 31, 2017 |
Dec 31, 2017 |
|
|---|---|---|---|---|---|---|
| EUR million | Carrying amount |
Fair value | Carrying amount |
Fair value | Carrying amount |
Fair value |
| Non-current liabilities | ||||||
| Loans from financial | ||||||
| institutions | 39.9 | 40.6 | 59.9 | 60.5 | 49.9 | 50.6 |
| Pension loans | 3.3 | 3.3 | 11.0 | 10.8 | 6.7 | 6.6 |
| Other financial loans | 0.5 | 0.5 | 0.5 | 0.5 | 0.5 | 0.5 |
| Finance lease | ||||||
| liabilities | 0.4 | 0.5 | 2.1 | 2.1 | 0.6 | 0.6 |
Fair values for non-current loans are based on discounted cash flows. The discount rate used is the rate at which the Group could draw a similar external loan at the balance sheet date and it consists of a risk-free market rate and a company-specific risk premium in accordance with the maturity of the loan.
The carrying amounts of all other financial assets and liabilities are reasonably close to their fair values.
| Nominal amounts | |||
|---|---|---|---|
| EUR million | Jun 30, 2018 | Jun 30, 2017 | Dec 31, 2017 |
| Interest rate derivatives | 40.0 | 60.0 | 50.0 |
| Foreign exchange forwards | 76.0 | 51.4 | 77.0 |
| Fair values | |||
|---|---|---|---|
| EUR million | Jun 30, 2018 | Jun 30, 2017 | Dec 31, 2017 |
| Interest rate derivatives | |||
| positive fair value | |||
| negative fair value | -0.2 | -0.3 | -0.3 |
| Foreign exchange forwards | |||
| positive fair value | 0.2 | 0.4 | 0.3 |
| negative fair value | -0.3 | -0.4 | -0.2 |
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. The fair values of interest rate swaps are based on discounted cash flows.
Hedge accounting for interest rate swaps ceased to meet the hedge effectiveness criteria and hedge accounting was discontinued during the financial year 2016.
| EUR million | Jun 30, 2018 | Jun 30, 2017 | Dec 31, 2017 |
|---|---|---|---|
| Guarantees given on behalf of associated | |||
| companies | 0.2 | 0.2 | 0.2 |
| Parent company's guarantees on behalf of its | |||
| subsidiaries | 444.4 | 519.6 | 473.9 |
| Other commitments | |||
| - Operating leases | 152.7 | 168.4 | 143.8 |
| - Other contingent liabilities | 0.2 | 0.2 | 0.2 |
| Accrued unrecognised interest on hybrid bond | 0.2 | 0.2 | 2.5 |
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 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. Creditors of YIT Corporation's major financial liabilities have waived their right to claim for settlement from Caverion Corporation on the basis of the secondary liability. 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 58.4 million at the end of June 2018.
The short-term risks and uncertainties relating to the operations have been described above under "Short-term risks and uncertainties". It is possible that especially the infringements in compliance may cause considerable damage to Caverion in terms of fines, civil claims as well as legal expenses. However, the magnitude of the potential damage cannot be assessed at the moment.
Caverion announced on 12 June 2018 that it had managed to settle for its part with the Bundeskartellamt (German Federal Cartel Office) the cartel case investigated by the authority since 2014. According to the final decision of the Bundeskartellamt announced on 3 July 2018 Caverion Deutschland GmbH was imposed an antitrust fine of EUR 40.8 million. The fine was booked as an expense in the second quarter and will be paid in the third quarter.
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