Review by the President and CEO
Interim Report for January-September 2019 (published 29 October 2019)
“The highlight of the quarter was a clear improvement in our profitability. This was supported by our lower-performing divisions improving their profitability. At the same time, there was no material negative impact from Projects. In the third quarter our adjusted EBITDA improved to EUR 36.2 (18.5) million, or 7.1 (3.5) percent of revenue. Our revenue for the third quarter was EUR 507.5 (524.9) million. Excluding the impact of currencies and divestments, revenue grew year-on-year. Our order backlog increased by 8.0 percent to EUR 1,676.9 (1,552.3) million, supporting our future organic growth.
Measured in local currencies, Group revenue decreased by 2.5 percent. However, the Services business revenue increased by 7.1 percent, while the Projects business revenue decreased by 13.4 percent. In the quarter, our Services business accounted for 58.5 (53.3) percent of Group revenue. In the Services business, most of our divisions continued to improve their margins in accordance with targets. In the Projects business, after being able to close several old projects, there was a clear profitability improvement in several divisions. The profitability of the Projects business is nevertheless yet far from the targeted level and performance management actions will be continued in all our divisions.
In the third quarter, which is typically a weak quarter in terms of cash flow, our operating cash flow before financial and tax items amounted to EUR 3.8 (-37.0) million. Our working capital improved to the level of EUR -46.8 (-3.2) million. Our net debt excluding lease liabilities amounted to EUR 41.7 (50.2) million at the end of September and the net debt/EBITDA ratio was 1.1x (1.1x). We were able to sign two important acquisitions in October. The first one, Pelsu Pelastussuunnitelma Oy underpins our focus on digital services, while the other one, the Refrigeration Solutions business of Huurre Group strengthens our focus on selected Smart Technologies. Regarding the Maintpartner acquisition signed in March, the Finnish Competition and Consumer Authority decided to initiate further proceedings concerning the transaction.
Caverion’s future profitable growth is strongly supported by the sustainability and digitalisation megatrends. Environmental regulations and legislation are further tightening, requiring increased actions in energy efficiency in buildings, and our enhanced offering is well suited to meet the new demands enabling smart cities and smart buildings. We launched the Growth phase of our Fit for Growth strategy in the third quarter. We will unfold our Growth strategy more in detail in the upcoming Capital Markets Day on 5 November 2019.”