Review by the President and CEO
Financial Statement Release for 1 January 1 – 31 December 2019 (published 7 February 2020)
“I am satisfied with the progress of Caverion’s performance in the fourth quarter. Firstly, Caverion turned back to growth. Our revenue for the fourth quarter increased to EUR 589.0 (587.6) million, which includes the Maintpartner and Huurre acquisitions as of December. These acquisitions together with the Pelsu acquisition are examples of our renewed focus on growth. Excluding the impact of currencies, revenue grew by 1.6 percent in the quarter. At the same time we achieved our result targets and the positive improvement trend seen in the third quarter continued. Adjusted EBITDA improved to EUR 47.0 (11.0) million, or 8.0 (1.9) percent of revenue in the fourth quarter. Operating cash flow before financial and tax items improved to EUR 80.6 (53.7) million. Order backlog increased by 11.8 percent to EUR 1,670.5 (1,494.3) million, supporting our future organic growth.
Measured in local currencies, the Services business revenue grew strongly by 9.1 percent, while the Projects business revenue declined by 8.5 percent in the fourth quarter. The Services business accounted for 61.5 (57.4) percent of Group revenue and had an excellent last quarter with most divisions improving their margins. In the Projects business, we made a material write-down for the one remaining risk project reported under adjusted EBITDA in the fourth quarter of 2019. This negative EBITDA impact was partially offset by a compensation from the previous owners of our German subsidiary related to the cartel case, also reported under adjusted EBITDA. For the full year of 2019, the Projects business profitability was still negatively impacted by old projects. Although the Projects business improved its performance in the second half of 2019, the profitability is still far from the targeted level. Performance management actions will continue.
For the full year of 2019, our adjusted EBITDA improved to EUR 120.4 (53.4) million, or 5.7 (2.4) per cent of revenue. Cash flow was a highlight of 2019. For the full year of 2019, our operating cash flow before financial and tax items improved to EUR 143.7 (21.6) million and cash conversion was 139.5 per cent. Cash flow after investments, including the payments for the acquisitions completed, was EUR 64.5 (1.4) million. Our continued efforts to improve working capital have paid off. In the fourth quarter, our working capital improved to the level of EUR -100.9 (-54.6) million. Net debt excluding lease liabilities amounted to EUR 31.5 (6.9) million at the end of December. The net debt/EBITDA ratio was 1.4x (0.2x).
We launched our updated financial targets and growth strategy at our Capital Markets Day in November. Our mid-term target is to grow organically over 4 percent per annum over the cycle and to further increase the share of our Services business. Organic growth will be complemented with acquisitions. Digitalisation and sustainability are the key themes supporting our future profitable growth. 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. Our future sources of growth include deepening customer partnerships, advisory services and outcome based projects and services, digital solutions as well as smart technologies in selected building technology growth areas.
Finally, I would like to give special thanks to our employees. We have made the best ever results in Finland, Industrial Solutions and Austria. Hard work in turning around Sweden, Germany and Denmark is paying off. Norway has made our best ever profitability in the Services business. Improved performance together with our increasingly important role in fighting climate change is boosting our motivation. The improvements seen in our operations in the second half of 2019 provide a good starting point going forward. In 2020, our target is to grow our revenue and further improve our results.”