Strong cash flow the highlight of the corona year – enabling an increased dividend
1 October – 31 December 2020
1 January – 31 December 2020
Unless otherwise noted, the figures in brackets refer to the corresponding period in the previous year.
|Adjusted EBITDA margin, %||6.4||8.0||5.4||5.7|
|EBITDA margin, %||3.8||6.1||4.6||4.8|
|Adjusted EBITA margin, %||3.9||5.7||2.8||3.2|
|EBITA margin, %||1.1||3.8||2.0||2.3|
|Operating profit margin, %||0.3||3.2||1.3||1.7|
|Result for the period||-3.6||15.1||8.6||22.6||-61.9%|
|Earnings per share, undiluted, EUR||-0.03||0.11||0.05||0.14||-67.6%|
|Operating cash flow before financial and tax items||81.3||80.6||0.8%||157.6||143.7||9.7%|
|Cash conversion (LTM), %||158.5||139.5|
|Interest-bearing net debt||118.6||168.4||-29.5%|
|Equity ratio, %||18.9||21.5|
|Personnel, end of period||15,163||16,273||-6.8%|
* Based on calculation principles confirmed with the lending parties.
“Caverion’s adjusted EBITA improved in the fourth quarter compared to the previous quarters of the year. While our results have been impacted by the second wave of the corona pandemic, I am pleased with our ability to manage the crisis. We have continued developing our digital, smart technology and sustainability offerings across our divisions. At the same time, we have continued to root our performance management practices across the Group, increasing our competitiveness further. When the growth starts after the crisis, we are fit and well positioned to meet new customer demand. In the fourth quarter, our focus was on executing our restructuring and productivity improvements announced in the beginning of November. The resulting savings will be at least EUR 25 million for 2021.
Our order backlog decreased by 3.7 percent to EUR 1,609.1 (1,670.5) million in the fourth quarter. Order backlog increased in Services, whereas in Projects there was a negative impact from the downturn. The share of old projects started in 2016 or earlier was only 1.4 percent of the order backlog in Projects at the end of the year. The economic environment had an impact on both revenue and profitability. Project business revenue was also affected by our continuous selectivity approach in projects and the closure of our large projects business in Denmark. Our fourth quarter revenue was EUR 579.3 (589.0) million, down by 1.7 percent or 1.0 percent in local currencies. Measured in local currencies, the Services business revenue grew by 5.3 percent, while the Projects business revenue declined by 11.1 percent in the fourth quarter. The Services business accounted for 65.3 (61.5) percent of Group revenue.
Our fourth quarter adjusted EBITA was EUR 22.5 (33.7) million, or 3.9 (5.7) percent of revenue. In Services, although the demand environment remained rather stable, our ad-hoc works were impacted by corona. In the Industry division, the quarter saw a positive impact from earlier postponed shutdown services. In Projects, the pandemic continued to impact our productivity to a certain extent. The restructurings completed in the quarter also impacted productivity. EBITA was EUR 6.3 (22.5) million, or 1.1 (3.8) percent of revenue. EBITA was impacted by one-off restructuring costs amounting to EUR 7.7 million and write-downs on the last remaining major risk project in Germany totalling EUR 7.7 million. Compared to our earlier estimate being the end of 2020, the project is now expected to be completed by the end of the first half of 2021. The execution has been delayed due to corona and other reasons beyond Caverion’s control. Due to the potential negative effects of the downturn on project forecasts, we also made an overall critical assessment of our Projects business risks when closing the year. Measured by the start year of the project, our margin slippages in the Projects business have clearly decreased each year in recent years. Our risk exposure related to projects is smaller going forward due to various efforts we have made in project management, execution and financial steering.
Our cash flow was again strong and continues to be the highlight of the year. Our operating cash flow before financial and tax items improved to EUR 81.3 (80.6) million in the fourth quarter, despite being negatively impacted by previously postponed authority payments due to corona totalling EUR 6.8 million. Our liquidity position has remained strong and our leverage is at a record low level. All this enables an increased dividend proposal for 2020 compared to previous years. At the end of the fourth quarter, our interest-bearing net debt amounted to EUR 118.6 (168.4) million, or EUR -10.6 (31.5) million excluding lease liabilities. The net debt/EBITDA ratio was -0.2x (1.4x). Our cash and cash equivalents were EUR 149.3 (93.6) million. We made one small acquisition in Austria in the beginning of 2021 and are actively looking for further acquisitions.
Caverion published its sustainability targets during the quarter. The purpose of Caverion is to enable performance and people’s well-being in smart and sustainably built environments. Our target is to create sustainable impact through our solutions, with a positive carbon handprint 10 times greater than our own carbon footprint by 2030. Going forward, we are actively striving to make the sustainability impacts we enable visible and measurable to our customers throughout our offering.
The year 2020 was very demanding for our employees. We have focused on employee safety throughout the year and our teams have vigorously fought the virus and taken all necessary actions in their daily work. Fortunately, all of our infected employees have so far recovered from Covid-19. Our people have shown very strong performance and I want to sincerely thank all our employees for their hard efforts during this exceptional year.
Looking forward into 2021, our target remains to come out of the crisis as a stronger company than entering it. We expect the economic environment particularly in the first quarter still to be challenging. The second half of the year looks more promising. We expect that a significant amount of the governmental and EU-level stimulus packages will be directed towards sustainable investments enabling smart buildings and cities. Even if our general outlook for this year is positive and we expect to improve our performance, Caverion will only provide a guidance for 2021 once the level of uncertainty caused by the pandemic on Caverion’s operating environment and operations has diminished. Our mid-term adjusted EBITA margin target of over 5.5 percent (launched in November 2019) is valid and we see good opportunities to improve even beyond that in the future.”
Caverion expects the economic environment particularly in the first quarter of 2021 still to be challenging and to negatively impact general demand and pricing, while market demand is expected to gradually pick up as of the second half of the year. This base case scenario assumes a successful implementation of the ongoing corona vaccination programmes and no material unforeseen negative surprises in 2021.
Various economic scenarios exist on how deep and long the economic downturn will be and what the speed of the economic recovery will be. The business volume and the amount of new order intake are important determinants of Caverion’s performance in 2021. A negative scenario whereby the corona pandemic continues longer than currently anticipated cannot be ruled out. Nevertheless, 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 energy and transportation infrastructure, health facilities, pharmaceutical and food industries, retail and logistics as well as facilities and services used by public authorities. An important share of these services needs to be performed even during a downturn.
The monetary and fiscal policies currently in place are clearly supporting an economic recovery in 2021. As an example, the economic stimulus packages provided by national governments and the EU are expected to increase infrastructure, health care and different types of sustainable investments in Caverion’s operating area. The main themes in the EU stimulus packages are green growth and digitalisation. The EU member states must prepare and present their own national plans during spring 2021. Caverion expects these national and EU programmes to increase demand also in Caverion’s areas of operation as of the second half of 2021.
The digitalisation and sustainability megatrends are in many ways favourable to Caverion and believed to increase demand for Caverion’s offerings going forward. The increase of technology in built environments, increased energy efficiency requirements, increasing digitalisation and automation as well as urbanisation remain strong and are expected to promote demand for Caverion’s services and solutions over the coming years. Especially the sustainability trend is expected to continue strong. Increasing awareness of sustainability is supported by both EU-driven regulations and national legislation setting higher targets and actions for energy efficiency and carbon-neutrality. Caverion has put a large effort to develop its offering and solutions to meet this demand.
The Energy Performance of Buildings Directive (EPBD) passed by the EU requires all buildings from 2021 to be nearly zero-energy buildings (NZEB). Furthermore, EU Member States shall lay down requirements to ensure that, where technically and economically feasible, non-residential buildings with an effective rated output for heating systems or systems for combined space heating and ventilation of over 290 kW are equipped with building automation and control systems by 2025. The building automation and control systems shall be capable of (a) continuously monitoring, logging, analysing and allowing for adjusting energy use; (b) benchmarking the building’s energy efficiency, detecting losses in efficiency of technical building systems, and informing the person responsible for the facilities or technical building management about opportunities for energy efficiency improvement; and (c) allowing communication with connected technical building systems and other appliances inside the building.
The nearly zero or very low amount of energy required should be covered to a very significant extent from renewable sources. As concrete numeric thresholds or ranges are not defined in the EPBD, these requirements leave room for interpretation and thus allow EU Member States to define their nearly zero-energy buildings in a flexible way, taking into account their country-specific climate conditions, primary energy factors, ambition levels, calculation methodologies and building traditions. Several Caverion countries have already passed the national legislation based on the EPBD framework, for example Finland and Germany in the fourth quarter of 2020.
While the corona crisis and the economic downturn have negatively impacted the demand environment in Services, especially in ad-hoc works and small service projects, an economic recovery is expected to turn the Services business back to growth. Caverion’s Services business is overall by nature more stable and resilient through business cycles than the Projects business. Stimulus packages are also expected to positively impact general demand in the Services business.
There is an increased interest for services supporting sustainability, such as energy management. Caverion has had a special focus for several years both in so-called Smart Technologies within building technologies as well as in digital solutions development, both of which are believed to grow faster than more basic services on average and enable data-driven operations with recurring maintenance. In Cooling, as an example, there is a technical change ongoing from environmentally harmful F-gases into CO2-based refrigeration, providing increased need for upgrades and modernisations. The sustainability trend is also increasing the demand for building automation upgrades.
As technology in buildings increases, the need for new services and digital solutions is expected to increase. Customer focus on core operations also continues to open outsourcing and maintenance as well as various facility management opportunities for Caverion.
The corona crisis and the economic downturn are in general impacting the demand environment negatively in Projects. In the short term, new builds are still expected to decrease while modernisations are expected to grow more modestly in larger cities. Commercial and office construction will still suffer from uncertainty. Due to the late-cyclical nature of the Projects business, even after the economic environment recovers, it typically takes some time before the Projects business turns back to growth. However, the stimulus packages are expected to positively impact the general demand also in the Projects business.
From the trends perspective, the digitalisation and sustainability megatrends are supporting demand also in Projects, as Caverion’s target is to offer long-term solutions binding both Projects and Services together. The requirements for increased energy efficiency, better indoor climate and tightening environmental legislation continue to drive demand over the coming years.
Caverion will provide a guidance for 2021 as soon as the level of uncertainty caused by the pandemic on Caverion’s operating environment and operations has diminished.
Caverion will hold an online news conference on its Financial Statement Release on Thursday, 11 February 2021, at 10.00 a.m. Finnish time (EET). The online news conference can be viewed live on Caverion’s website at www.caverion.com/investors. It is also possible to participate in the event through a conference call by calling the assigned number +44 (0)330 336 9105 at 9:55 a.m. (Finnish time, EET) at the latest. The participant code for the conference call is “1772267 / Caverion”. More practical information on the online news conference can be found on Caverion's website, www.caverion.com/investors.
The Annual Review, including the financial statements for 2020, will be published on Caverion's website in English and Finnish by 3 March 2021 at the latest. Interim/Half-yearly Reports will be published on 29 April, 5 August and 4 November 2021.
Financial reports and other investor information are available on Caverion's website www.caverion.com/investors. The materials may also be ordered by sending an e-mail to IR@caverion.com.
Distribution: Nasdaq Helsinki, principal media, www.caverion.com