Caverion will today hold its Capital Markets Day in Stockholm, Sweden. The event focuses on Caverion’s strategy and service offering. There are no changes to the previously communicated financial targets, market outlook or guidance for 2014.
The President and CEO Fredrik Strand will emphasise the significance of life cycle solutions for Caverion’s future success and explains how Caverion is aiming to reach its strategic targets of growth and profitability improvement. Caverion has in the recent months developed a more commercialised way of viewing its market offering, with a matrix of service areas, disciplines and client segments.
The presentations given by Karl-Walter Schuster (Project Excellence) and Matti Malmberg (Service Efficiency) describe in more detail each of Caverion’s seven service areas as well as actions taken to improve profitability in projects and services. Antti Heinola, CFO, will give an update on Caverion’s financial performance.
The day will end with a site visit to the medical technology company Bactiguard’s new production facility, for which Caverion has provided advanced clean room technology, illustrating Caverion’s expertise in technically demanding properties.
President and CEO Fredrik Strand: Life cycle solutions Caverion’s competitive edge
“Caverion’s competitive edge is built on life cycle solutions: they are at the core of our brand and included in everything we do. There is growing demand for life cycle solutions in the market as building technologies are increasingly advanced and integrated. This requires multi-discipline expertise, which we can offer our clients. We understand the complexity of building technologies and industrial processes, and can provide services for their entire life cycle,” says President and CEO Fredrik Strand.
Caverion aims to be a leading European provider of advanced and sustainable life cycle solutions.
“I have great faith in our ability to achieve this vision. The megatrends, such as tightening requirements for energy efficiency, digitalisation and fragmented markets, work in our favour. Energy efficiency is incorporated in all of our services, from energy inspections to total deliveries of energy-saving contracts,” Fredrik Strand continues.
Clear implementation plan to reach the 2016 profitability targets
Caverion’s long-term financial targets by the end of 2016 are intact: average annual growth in revenue of more than 10%, EBITDA over 6% of revenue and negative working capital. The company’s aim is to distribute at least 50% of the result for the year after taxes, excluding changes in fair value, as dividend and capital redemption to the company’s shareholders.
“We are now focusing especially on building future leadership and a coherent operating model. Caverion is transforming from an old financial holding model into one, coherent service and project corporation, and we need to have common processes and tools in place in all of our countries. While this work has progressed well, increasing profits is admittedly not yet a closed project, and the harmonisation of processes is also still on-going.”
Caverion’s target to reach negative working capital by the end of 2016 is pursued by measures such as increasing the number of mobile devices in the field and by introducing a common SAP template. Furthermore, efficient working capital management is ensured by monitoring, reporting and invoicing on a daily basis.
The procurement process and organisation will be harmonised with centrally negotiated agreements and common policies for approving suppliers, among others. The importance of strong cash flow and prompt invoicing has been highlighted throughout the group. As a result, Caverion has been able to improve its working capital during the first half of 2014.
Growth through balancing the business mix
“Once we have succeeded in improving the profits, we can move on to the actual growth phase. Our goal is to grow revenue both organically and through carefully selected acquisitions, which account for approximately half of the targeted growth. Organically, the growth is pursued through developing our business mix: growing service and maintenance and long-term service agreements and, at the same time, increasing Design & Build projects. The aim is to develop strong own concepts in both projects and services,” states Strand.
Caverion already has a strong market position in all of its key market areas. It is among the top five companies in its industry in all of of its six largest operating countries. “The extensive services and operations in 13 countries are competitive advantages in a market where most service providers focus on a few individual solutions locally. There is still growth potential, especially in German-speaking countries,” concludes Strand.
Striving for excellence in the project business
In the project business, Caverion’s competitive edge is its ability to deliver extensive, multi-discipline projects. Furthermore, the company differentiates itself from its competitors through special expertise in technologies for demanding properties such as hospitals, laboratories and clean rooms as well as its arrowhead competencies in cooling, building automation and remote monitoring, security and fire safety systems.
The company aims to increase the share of its own products and solutions. Caverion’s in-house R&D centre supports its product development. During the past 12 months, the company has registered more than 10 patent proposals.
Progress towards one coherent Caverion requires tighter control in the project process. Projects are more closely reviewed in all phases, and steering committees have been set up for larger projects. In addition, Caverion plans to establish centralised project offices in all divisions for large-scale projects as well as competence centres for Design & Engineering projects. Currently, the focus is on ensuring that common processes and decision gates are used in all projects.
Caverion is careful in choosing projects in terms of their risks and profitability as well as competence and resources required, and has a highly structured process for project selection. The company has introduced renewed and strict delegation of authority with clear approval limits for contracts: Contracts that are more than EUR 100 million in value are approved by the Board of Directors, contracts in the category of EUR 20−100 million are approved by the President and CEO, and when they fall into EUR 5−20 million rage, by the head of business area.
Moving up in the value chain in the service business
In the service business, Caverion’s aim is to move up in the value chain by stepping from technical maintenance, the foundation of service business, towards more comprehensive services, in which Caverion manages the entire life cycle of the client’s property.
Caverion offers a full range of technical and soft services for buildings and industrial processes. Ultimately, it can assume all the responsibility for designing, building, operating and maintaining the technical solutions throughout the life cycle, which is sometimes more than 20 years. The life cycle model decreases the costs related to the property, and ensures that the clients’ properties are safe, functional, sustainable and energy-efficient.
Caverion aims to increase the profitability of its service business through several actions, such as developing service concepts with higher margin potential, such as its ServiFlex concept for preventive technical maintenance. Growth is sought by generating new business potential through new service areas, client segments and disciplines. Boosting add-on sales and expanding existing contracts with additional services and disciplines receive enhanced focus.
Caverion has established a Centre for Service Excellence to support the services’ sales and to develop common processes and IT platforms related to services. For example, the aim is to roll out the ERP solution in all operating countries with mobile devices used in the field fully integrated to it.
The Capital Markets Day will start at 9:00 a.m. CEST (10:00 a.m. Finnish time, EEST). All presentations are available in English at www.caverion.com/investors. It is also possible to follow the presentations through a live webcast at approximately 9:00 a.m.-12:30 p.m. CEST. The teleconference will be open on the following numbers:
Finland: +358 (0)9 2313 9201
Germany: +49 (0)695 8999 0507
Sweden: +46 (0)8 5052 0110
UK: +44 (0)20 7162 0077
To connect to the meeting, please give the company name Caverion.
For additional information, please contact:
Milena Hæggström, Head of Investor Relations, tel. +358 40 5581 328, firstname.lastname@example.org
Distribution: NASDAQ OMX, principal media, www.caverion.com
Caverion designs, builds, operates and maintains user-friendly and energy-efficient technical solutions for buildings and industries. Our services are used in offices, retail properties, housing, public premises, industrial plants and infrastructure, among other places. We aim to be a leading European provider of advanced and sustainable life cycle solutions. Our strengths include technological competence and comprehensive services, covering all technical disciplines throughout the life cycle of the property and industrial plant. Caverion was established through the demerger of Building Services and Industrial Services businesses from YIT Group in June 2013. Our revenue for 2013 amounted to approximately EUR 2.5 billion. Caverion has nearly 18,000 employees in 13 countries in Northern and Central Europe. Caverion’s shares are listed on NASDAQ OMX Helsinki. www.caverion.com