HELSINKI, Aug. 4, 2022 /PRNewswire/ —
Caverion Corporation Half-year Financial Report 4 August 2022 at 8.00 a.m. EEST
Organic revenue growth and margin improvement continued
1 April – 30 June 2022
- Revenue: EUR 577.0 (545.1) million, up by 5.9 (5.1) percent, 6.5 (2.6) percent in local currencies. Organic growth was 4.7 (3.3) percent. Services business revenue increased by 7.7 (10.1) percent, 8.3 (7.1) percent in local currencies. Projects business revenue increased by 2.5 (-2.9) percent, 3.1 (-4.6) percent in local currencies.
- Adjusted EBITA: EUR 22.9 (19.7) million, or 4.0 (3.6) percent of revenue, up by 16.0 percent.
- EBITA: EUR 21.4 (18.0) million, or 3.7 (3.3) percent of revenue.
- Operating profit: EUR 17.5 (13.9) million, or 3.0 (2.5) percent of revenue.
- Operating cash flow before financial and tax items: EUR -9.3 (-3.4) million.
- Earnings per share, undiluted: EUR 0.09 (0.06) per share.
- Acquisitions: Caverion closed four acquisitions in April–June 2022.
1 January – 30 June 2022
- Order backlog: EUR 1,907.9 (1,789.0) million, up by 6.6 (2.8) percent. Services backlog increased by 4.3 (10.7) percent. Projects backlog increased by 9.8 (-6.1) percent.
- Revenue: EUR 1,105.1 (1,060.4) million, up by 4.2 (0.0) percent, 4.6 (-1.8) percent in local currencies. Organic growth was 3.6 (-1.1) percent, driven by 5.2 (2.7) percent organic growth in Services. Services business revenue increased by 6.1 (3.9) percent, 6.4 (1.8) percent in local currencies. Projects business revenue increased by 0.8
(-6.5) percent, 1.3 (-7.9) percent in local currencies.
- Adjusted EBITA: EUR 40.3 (36.1) million, or 3.6 (3.4) percent of revenue, up by 11.6 percent.
- EBITA: EUR 36.4 (33.1) million, or 3.3 (3.1) percent of revenue.
- Operating profit: EUR 28.9 (24.9) million, or 2.6 (2.3) percent of revenue.
- Operating cash flow before financial and tax items: EUR 29.7 (37.2) million.
- Cash conversion (LTM): 81.3 (80.3) percent.
- Earnings per share, undiluted: EUR 0.13 (0.11) per share.
- Net debt/Adjusted EBITDA: 1.5x (1.1x).
- Acquisitions: Caverion closed five acquisitions in January–June 2022.
Unless otherwise noted, the figures in brackets refer to the corresponding period in the previous year.
Guidance for 2022: In 2022, Caverion Group’s revenue (2021: EUR 2,139.5 million) and adjusted EBITA (2021: EUR 87.7 million) will grow compared to 2021.
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Jacob Götzsche, President and CEO:
“I am pleased that we continued improving our underlying business and increased revenue and adjusted EBITA during the second quarter of 2022 compared to the previous year. I am satisfied that despite the challenging business environment we have a continued strong order backlog and a positive organic growth. This supports our sustainable profitable growth strategy going forward.
The recent changes in the geopolitical environment are expected to impact also Caverion. We divested our Russian subsidiary in the end of 2021 and have no operations in Ukraine or Belarus. Therefore, the impact of the conflict on Caverion is currently indirect. Despite these challenges in the operating environment and resulting cost inflation and rising interest rates, our performance during the second quarter of 2022 was solid. The effects of the corona pandemic gradually started to ease off during the second quarter, however the number infections started to increase again towards the end of the quarter. We remain somewhat cautious with the pandemic as unpredictable virus variants and new waves of the pandemic may continue to emerge.
Our order backlog at the end of June increased by 6.6 percent to EUR 1,907.9 (1,789.0) million compared to the previous year. The order backlog increased in Services by 4.3 percent and in Projects by 9.8 percent. In addition to the fixed contracts in Projects and Services, we also see strong demand in Services ad-hoc orders. We expect our increased order backlog to continue to support our revenue growth in 2022. Our second quarter revenue was EUR 577.0 (545.1) million, up by 5.9 percent or 6.5 percent in local currencies. Measured in local currencies, the Services business revenue increased by 8.3 percent, while the Projects business revenue increased by 3.1 percent in the second quarter. The business mix change seen in recent years continued; the Services business accounted for 66.0 (64.8) percent of Group revenue in the second quarter of 2022. As a result of the high share of our Services business, more than half of our revenue is recurring service and maintenance work.
Our profitability improved in the second quarter. The adjusted EBITA improved to EUR 22.9 (19.7) million, or 4.0 (3.6) percent of revenue. EBITA was EUR 21.4 (18.0) million, or 3.7 (3.3) percent of revenue. Particularly divisions Austria, Finland, Germany and Norway progressed well. Division Denmark continued the positive performance improvement. Both business units, Services and Projects, improved their performance during the second quarter of 2022.
Our operating cash flow before financial and tax items was EUR 29.7 (37.2) million in the first half of the year 2022 and cash conversion (LTM) was 81.3 (80.3) percent. In the first half of 2022, the cash flow was negatively impacted by the payment of EUR 8.8 million for civil claims relating to the German anti-trust matter. The respective cost was recognised in 2021 and reported in items affecting comparability in 2021. At the end of the first half of the year, our interest-bearing net debt amounted to EUR 215.4 (147.3) million, or EUR 77.5 (23.7) million excluding lease liabilities. The net debt was impacted by investments in acquisitions with a negative cash flow effect of EUR 28.4 million in January–June 2022 and dividend payment of EUR 23.2 million. We have a solid financial position, and our leverage is at a low level. The net debt/Adjusted EBITDA ratio was 1.5x (1.1x).
We have embarked on our journey towards targeted acquisitions in line with our strategy. As part of our ongoing development of our capabilities to serve our customers, we closed the acquisitions of the Danish company DI-Teknik A/S in April 2022, the Finnish service company Wind Controller and the Finnish industrial service specialist WT-Service Oy in May 2022 as well as one bolt-on acquisition in Norway in May 2022. DI-Teknik is one of Denmark’s largest industrial automation companies bringing us completely new expertise in this area. Wind Controller is the leading technical consultant and service provider for the Finnish wind power industry.
In May we launched our updated strategy and financial targets guiding us up until the year 2025. We are targeting sustainable profitable growth going forward. Our strategic priorities and actions are progressing according to the plan. We have already taken our first steps in executing on our new strategy by identifying a handful of customer solution areas in which we will set up centres of expertise, sharing knowledge by leveraging our presence across our geographies. In addition, we continue our simplification efforts in our IT landscape. We move forward in our Sustainability strategic theme by aiming to have more than 2,000 electric service vans in use by 2025. We also improved our EcoVadis sustainability rating from the silver to the gold standard and are now in the top 5% in our industry. We strongly believe in our purpose to enable building performance and people’s wellbeing in smart and sustainable built environments.”
Impacts of the Ukraine crisis on Caverion’s business during the first half of 2022
Russia’s invasion of Ukraine at the end of February 2022 increased geopolitical tensions especially in Europe overnight. Unprecedented sanctions have been imposed on Russia and Belarus and on certain individuals of these countries, and Russia has imposed extensive counter-sanctions. The war has created uncertainties weakening the growth prospects in several countries where Caverion operates. Any further escalation or prolongation of the conflict or regional unrest in neighbouring areas could adversely affect growth estimates for all of Europe, and potentially lead to a recession.
Caverion has divested its Russian subsidiary at the end of 2021 and has no operations in Ukraine or Belarus. Therefore, the impact of the conflict on Caverion is currently indirect. The crisis may affect Caverion directly short or longer term if the conflict escalates further or if de-escalation is not achieved. The possibility that other countries may become actively involved in the conflict would be likely to materially and adversely affect also Caverion’s operations in such countries.
The duration of the Ukrainian conflict and its future effects on the industry, and Caverion in particular, remain uncertain, and the overall situation remains highly volatile. Caverion has already experienced increases in material prices and delays in the supply chain and in decision-making, however Caverion continued to manage them on a daily basis without having a significant impact on the performance during the first half of 2022. These will potentially accelerate further with a longer duration of the war in Ukraine. Due to the uncertainty, it is however difficult to evaluate the potential long-term effects of the crisis on Caverion.
Market outlook for Caverion’s services and solutions in 2022 and megatrends impacting the industry
Caverion expects the underlying demand to be overall positive in Services and Projects during 2022. This scenario assumes a sufficient control of the corona pandemic impacts with no significant unforeseen setbacks in 2022 and no further escalation of the conflict in Ukraine. The conflict has resulted in geopolitical tensions, mounting inflation, rising interest rates and lowered economic growth prospects.
According to Euroconstruct forecasts published on 10 June 2022, the total construction growth is estimated to slow down from the level of 5.7 percent in 2021 to 2.3 percent in the Western Europe (EC-15) countries in 2022, and a similar rate is forecasted for 2023. After the sharp decline in 2020, the total non-residential construction is forecast to recover in 2022−2024. However, it will not return to pre-pandemic levels in several EC-15 countries, including Germany and Finland. Stagnant forecasts are predicted for the largest European construction market Germany, while the expectations for the Nordic countries are diverse. Forecasts for Finland and Sweden are more negative with expectations on decreasing production levels over the next three years, whereas Norway and Denmark expect an increase by 3−4 percent over 2022−2024. Both new construction and renovation in the non-residential sector are expected to have stable growth in 2022.
The market instability resulting from the war in Ukraine and the high inflation are expected to dampen the willingness to invest in new construction. Uncertainty is caused by the availability of building materials and the significant cost increases. Increased material prices, including fuel costs, and longer delivery times may continue to affect also Caverion’s business going forward. Potential risks may still emerge from the supply side, not only from cost inflation but also from labour shortage, potentially further fuelled by increased sick leave levels or quarantines caused by the corona pandemic. Any further delays in the supply chain and potential cost increases may have a negative impact on business execution and order intake going forward.
The business volume and the amount of new order intake are important determinants of Caverion’s performance in 2022. A negative scenario whereby the corona pandemic or the ongoing geopolitical conflict start to negatively impact market demand cannot be ruled out. However, a large part of Caverion’s services is vital in keeping also critical services and infrastructure up-and-running at all times. Furthermore, the continued focus on energy efficiency and CO2 reduction activities and projects continue to support the activity and business volume.
The monetary and fiscal policies currently in place are still supporting an economic recovery. As an example, the economic stimulus packages provided by national governments and the EU are expected to increase infrastructure, health care and different types of sustainable investments in Caverion’s operating area over the next few years. The main themes in the EU stimulus packages are green growth and digitalisation. Caverion expects the national and EU programmes to increase demand also in Caverion’s areas of operation in 2022.
In order to control the mounting inflation, the European Central Bank (ECB) concluded in June 2022 that it will end its asset purchases program as of 1 July 2022 and raise the key ECB interest rates at its July monetary policy meeting, whereby the rates were raised by 50 basis points. Furthermore, the ECB expects to further normalise the key interest rates in its upcoming meetings depending on the updated medium-term inflation outlook.
The digitalisation and sustainability megatrends are in many ways favourable to Caverion and believed to increase demand for Caverion’s offerings going forward. The increased energy efficiency requirements, increasing digitalisation, automation and technology in built environment as well as urbanisation remain strong and are expected to promote demand for Caverion’s services and solutions over the coming years. Especially the sustainability trend is expected to continue strong. The EU also aims to accelerate the green transition due to the current geopolitical situation that has led into energy crisis in many countries that have been largely dependent on imported gas from Russia.
Increasing awareness of sustainability is supported by both EU-driven regulations and national legislation setting higher targets and actions for energy efficiency and carbon-neutrality. This is furthermore supported by the society’s end-users’ general request for an environmentally friendly built environment. Examples of current initiatives include e.g. the proposed revision of EU’s Energy Performance of Buildings Directive (EPBD) and Minimum Energy Performance Standards (MEPS) it aims to establish as well as the “Fit for 55” climate package and the Renovation Wave Strategy. The “Fit for 55” climate package proposes to make EU’s climate, energy, transport and taxation policies fit for reducing net greenhouse gas emissions by at least 55% by 2030, compared to 1990 levels. The objective of the European Commission’s Renovation Wave Strategy is to at least double the annual energy renovation rate of residential and non-residential buildings by 2030. Mobilising forces at all levels towards these goals is expected to result in 35 million building units renovated by 2030.
Caverion expects the underlying demand to be overall positive during 2022. Caverion’s Services business is overall by nature stable and resilient through business cycles. Stimulus packages are also expected to positively impact general demand in the Services business.
There is an increased interest for services supporting sustainability, such as energy management. Caverion has had a special focus for several years both in so-called Smart Technologies as well as in digital solutions development. These are believed to grow faster than more basic services on average and enable data-driven operations with recurring maintenance. The sustainability trend is also increasing the demand for building automation upgrades.
As technology in buildings increases, the need for new services and digital solutions is expected to increase. Customer focus on core operations also continues to open opportunities for Caverion through outsourcing of industrial operation and maintenance, property maintenance as well as facility management.
Both new construction and renovation in the non-residential sector are expected to have stable growth in 2022. Due to the late-cyclical nature of the Projects business, even after the economic environment recovers, it typically takes some time before the Projects business turns back to growth. Economic sentiment is on a lower level in the EU as a result of the Ukraine crisis. The market instability resulting from the war in Ukraine and the high inflation are expected to dampen the willingness to invest in new construction. However, the stimulus packages are expected to positively impact the general demand also in the Projects business. Caverion expects the underlying demand to be overall positive also in Projects during 2022.
From the trends perspective, the digitalisation and sustainability megatrends are supporting demand also in Projects, as Caverion’s target is to offer long-term solutions binding both Projects and Services together. The requirements for increased energy efficiency, better indoor climate and tightening environmental legislation continue to drive demand over the coming years.
NEWS CONFERENCE, WEBCAST AND CONFERENCE CALL
Caverion will hold a news conference on its Half-year Financial Report on Thursday, 4 August 2022, at 10.00 a.m. Finnish time (EEST) at Flik Studio Eliel, Töölönlahdenkatu 2C (Sanoma House), Helsinki, Finland. The news conference can 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 +44 333 3000804 at 9:55 a.m. (Finnish time, EEST) at the latest. The participant code for the conference call is 76171729#. More practical information on the news conference can be found on Caverion’s website, www.caverion.com/investors.
Financial information to be published for 2022
Q3 Interim Report will be published on 3 November 2022 and Financial Statement Release for 2022 on 9 February 2023. Financial reports and other investor information are available on Caverion’s website www.caverion.com/investors. The materials may also be ordered by sending an e-mail to IR@caverion.com.
Distribution: Nasdaq Helsinki, principal media, www.caverion.com
For further information, please contact:
Riitta Palomäki, Interim CFO, Caverion Corporation, tel. +358 40 833 2100, firstname.lastname@example.org
Milena Hæggström, Head of Investor Relations and External Communications, Caverion Corporation,
tel. +358 40 5581 328, email@example.com
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Caverion Corporation Q2 2022 Half-year financial report
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