Review by the President and CEO

Financial Statements Bulletin 2014 (Jan 29, 2015):

“In 2014 we have focused on building Caverion into one, coherent company. The key to our profitability improvement lies in improving our own internal efficiency. We have now built the basis for our future by defining a common operating model. Our processes, organisational structures, skills, and offering are being designed so that they support us in providing services and solutions throughout the life cycle of our clients’ properties and processes. We have vast experience and expertise across the company, which we are turning into best practices by developing our commercial view for the whole group.

We have also improved our project risk management, by introducing transparent rules for delegation of authority as well as by implementing new steering committee and project review practices. In each division, we are also setting up shared project and managed operations offices, which encompass expertise in delivering demanding contracts to support our 250 local offices. The project management related to project controls has already been improved and the ability to run projects according to set targets has improved. As a result, the turnaround of the project operations has progressed well also during the fourth quarter.

Furthermore, we have invested in systems, tools and further harmonisation to shorten the invoicing process. Our improved working capital management can be seen in our improved operating cash flow for January–December. Implementation of our common ERP system in our main countries is progressing well. New mobile devices and systems have also been rolled out. These investments into building for our future have affected our short-term profitability.

During the second half of the year we have successfully managed to develop our business mix with several new contracts, for large projects including design and build of total technical solutions, as well as several new managed services agreements.

As we start the new year 2015 our strategic focus is gradually shifting more towards generating profitable growth. We aim to reach our targeted EBITDA margin of above 6 percent by the end of 2016 firstly by benefiting from our recent investments into operational efficiency, as described above. Secondly, we now have the foundation in place for bidding for more demanding contracts with higher margin potential. In line with this we continue to develop our business mix with initial focus on Technical Installation & Maintenance, Design & Build of Total Technical Solutions and Managed Services.”

Fredrik Strand