Review by the President and CEO
Interim Report for January 1 – March 31, 2018 (published April 24, 2018)
“The market situation in building technology services has remained good and the year 2018 has started according to our expectations. The implementation of our strategy in the “Fit” phase is starting to show results. For the first quarter of 2018, our adjusted EBITDA improved to EUR 10.9 (7.8) million and EBITDA to EUR 9.9 (-2.0) million. Our financial position strengthened. Operating cash flow before financial and tax items turned strongly positive and improved to EUR 19.8 (-12.1) million. Furthermore, our cash conversion rate came in at 148.2 percent, and our net debt/EBITDA improved to 1.8x, as calculated following the calculation principles confirmed with our lending parties.
We continued our selective approach in our Projects business and strengthening our Services business. Revenue was down as expected. It is noteworthy that revenue was also impacted by adverse fluctuations in currency exchange rates, the timing of Easter and the sale of our Krantz business in the last quarter of 2017. New orders were on a good level. Revenue of the Services business declined by 1.4 percent and revenue of the Projects business declined by 15.7 percent. Measured in local currency terms, revenue however increased by 1.4 percent in the Services business unit. Both the Projects and the Services business unit improved their performance. There were no material project business write-downs impacting our first quarter results. Although there still are certain project risks remaining, I expect the Projects business to materially improve its result in 2018.
By division, there was overall good progress. All divisions that experienced significant problems in 2017 (Sweden, Germany and Industrial Solutions) improved their profitability and cash flow in the first quarter. In Germany, however, the performance still remained far from satisfactory. There was positive development in most other divisions. Finland, Norway and Austria continued to deliver good results, with Denmark clearly improving.
The implementation of our “Top performance at every level” Must-Win was at the core of our operational development. We continued to roll out the performance management programme and its four streams related to Services, Projects, procurement and material logistics as well as fixed costs. The target of this programme is to materially improve our operational efficiency, customer focus, agility and management systematics with focus on the operative units.
At the same time, we continued to further develop our “Best solutions” Must-Win, with increased resourcing to strengthen our service offering and new digital services. This programme is taken forward with several different focus areas during the first half of 2018. In addition, we continued the implementation of our “Excellent customer experience” and “Winning team” Must-Wins.
Looking forward into 2018, the market environment remains favourable. Our customer satisfaction has improved and our personnel is getting good feedback on their competences and service mindset. This in turn has translated into better quality new orders. Furthermore, our renewed leadership has team shown significant commitment to Caverion by making considerable investments in the company’s shares. All this creates a good foundation based on which to further improve our performance.”