Review by the President and CEO

Interim Report for January 1 – September 30, 2018 (published October 25, 2018)

“After the first year of implementation, the results from the “Fit” phase of our 2020 strategy are becoming visible. Our adjusted EBITDA was up by 36.5 percent and amounted to EUR 42.4 (31.1) million in January–September. Both business units improved their margins from last year. The adjusted EBITDA for the third quarter was EUR 18.5 (18.8) million, or 3.5 (3.4) percent of revenue.

Even though our adjusted EBITDA margin has improved quarter by quarter this year as well as against last year, our profitability is still burdened by non-performing projects that were initiated in 2016 or earlier. We started the third quarter by having approximately 20 percent of our order backlog in such projects, and we believe that the level will be reduced to slightly above 10 percent by the end of the year. I am satisfied that we are observing better and more stable profitability in our new projects at the same time. The number of disputes and overdue receivables has also drastically reduced. We furthermore managed to settle another large Industrial Solutions project from our risk list during the quarter. As a consequence, two out of three Large Projects from our risk list have now been settled. Their effects are taken into account as items affecting comparability in the adjusted EBITDA calculation.

During the third quarter, we continued the strengthening of our Services business and the selective approach in our Projects business. Revenue for the third quarter was EUR 524.9 (545.6) million, a decrease of 3.8 percent compared last year. Measured in local currencies, the decrease amounted to 1.7 percent. Revenue for the Services business increased by 0.9 percent in local currencies, while in the Projects business revenue decreased by 4.6 percent in local currencies.

By division, Finland, Norway and Austria continued to deliver strong results in the third quarter. Germany, Sweden and Industrial Solutions are developing favourably. Each delivered a positive EBITDA result compared to a negative one a year earlier. In Denmark and Eastern Europe, our restructuring actions were continued which weakened their quarterly profitability compared to the previous year.

Excluding one-offs, the strong improvement in our cash flow continued. Operating cash flow before financial and tax items was EUR -37.0 (-37.5) million during the third quarter, but it was impacted by the German cartel fine payment of EUR 40.8 million in August. Excluding the fine, our operating cash flow improved materially by EUR 41.3 million compared to the previous year. In January-September, the corresponding y-o-y improvement was EUR 84.3 million.

Our financial position has strengthened, which enables investments in digitalisation and possible bolt-on acquisitions in key areas in Services. Our net debt amounted to EUR 50.2 million at the end of September and the net debt/EBITDA ratio was 1.1x.

We continue with the implementation of the “Fit” phase of our “Top performance at every level” programme. We are experiencing strong improvements in several fronts both in Services and Projects while becoming more harmonised in our ways of working. At the same time, we continue to further streamline our operations in certain divisions. I expect the Fit phase of our strategy to be finalised by the end of the first half of 2019, after which we will focus on profitable growth.”

Ari Lehtoranta