Review by the President and CEO
Interim Report for 1 January 1 – 31 March 2020 (published 30 April 2020)
“In the first quarter of 2020, the general business environment radically changed with the outbreak of the coronavirus pandemic. In this situation, the wellbeing of our employees, customers and other stakeholders has been, and continues to be, our first priority. Governments in our operating countries reacted to the situation by enforcing strict restrictions on social interactions, group gatherings and travel, many also by locking down their national borders. At the same time the corporate sector has tried to keep the business up and running to the extent possible. This meant wholly new challenges also for Caverion, both in the areas of health and safety and the optimisation of our operations.
Our performance in the first quarter shows that Caverion was not at the frontline taking the immediate hits from the corona crisis. A large part of Caverion’s services is vital in keeping critical services and infrastructure up-and-running. This includes ensuring the continued functioning of real estate premises, energy and transportation infrastructure, health facilities, pharmaceutical and food industries, food retail and logistics as well as facilities and services used by public authorities. An important share of these services needs to be performed even under lockdown measures imposed to help fight the coronavirus pandemic. While we also took contingency plans into use throughout the organisation in March, at the same time we benefited from a strong order backlog and a large amount of service contracts. We furthermore benefited from having rooted performance management throughout the organisation during the Fit phase of our strategy. We steer our business and contingency actions with a weekly performance management cycle, while in divisions and units the steering takes place on a daily basis.
In the first quarter of 2020, our revenue increased to EUR 541.6 (514.4) million, up by 5.3 percent. Excluding the impact of currencies, revenue grew by 7.0 percent in the quarter. Our adjusted EBITA amounted to EUR 12.1 (13.8) million, or 2.2 (2.7) percent of revenue. Our like-for-like profitability improved, taking into account that the result for the first quarter of 2019 was impacted by a positive arbitration decision relating to an old large risk project totalling EUR 8.9 million plus interest. I am especially satisfied with our cash flow generation which was a highlight of the quarter. Our operating cash flow before financial and tax items improved to EUR 56.1 (30.1) million. Our order backlog increased by 11.9 percent to EUR 1,768.3 (1,579.7) million. The integration of our most recent acquisitions (Maintpartner and Huurre) is progressing according to plan.
Measured in local currencies, the Services business revenue grew by 14.9 percent, while the Projects business revenue declined by 4.3 percent in the first quarter. Organic growth in the Services business was 3.8 percent. The Services business accounted for 63.3 (59.2) percent of Group revenue.
Our liquidity position is strong. At the end of the first quarter, our net debt amounted to EUR 142.8 (162.7) million, or EUR 11.8 (27.1) million excluding lease liabilities. The net debt/EBITDA ratio was 1.1x (0.7x). Our cash and cash equivalents increased to EUR 113.2 (101.3) million. In addition, Caverion had undrawn revolving credit facilities amounting to EUR 100.0 million and undrawn overdraft facilities amounting to EUR 19.0 million. Possible pension loans provide additional head room.
We estimate that the impacts of the corona crisis will be more visible to our business in the second quarter. It is expected that there will be somewhat more of our work force absent as well as more work site delays and closures. Although there recently have been positive signs that the governmental restrictions are clearly minimising the spread of the virus, many of our operating countries are currently still locked down. Due to the poor visibility and the extraordinary circumstances, Caverion informed on 14 April 2020 that it is withdrawing its guidance for 2020. Caverion may provide an updated guidance for 2020 once the visibility improves and more reliable estimates can be made.
I would like to express my sympathy to all our stakeholders heavily affected by the corona crisis. We continue supporting our customers with a specific focus on the ones being critical to the proper functioning of society in the current crisis. In this manner we help with building performance back to society.
There are many risks associated with the crisis, especially if it gets prolonged. Having said this, I am confident in our ability to manage the impacts of the crisis in the best possible manner. Our units, divisions and the Group have adopted a rigorous performance management process with a daily or weekly schedule to respond to the increased uncertainty and to implement required actions, including cost savings. We are extremely focused on cash flow and its drivers at all levels of the organisation. At the same time, we are continuing our most important development efforts in the areas of digitalisation, sustainability and energy efficiency. This will help us to keep executing our growth strategy with full force when the crisis is over. Our target is to come out of this crisis as a stronger company than entering it.”