Caverion Corporation’s Financial Statement Release for 1 January – 31 December 2021
Year 2021: Continued improvement in profitability and strong increase in order backlog
1 October – 31 December 2021
1 January – 31 December 2021
Unless otherwise noted, the figures in brackets refer to the corresponding period in the previous year.
* Based on calculation principles confirmed with the lending parties, containing certain agreed adjustments. The calculation principles take into account the impacts of the IFRS 16 standard as of Q4/2021, while prior to this period IFRS 16 standard impacts were not applicable.
Guidance for 2022: In 2022, Caverion Group’s revenue (2021: EUR 2,139.5 million) and adjusted EBITA (2021: EUR 87.7 million) will grow compared to 2021.
|Organic growth, %||-1.1||-5.6||-2.0||-4.1|
|Adjusted EBITDA margin, %||7.6||6.4||6.6||5.4|
|EBITDA margin, %||3.9||3.8||5.3||4.6|
|Adjusted EBITA margin, %||5.1||3.9||4.1||2.8|
|EBITA margin, %||1.5||1.1||2.8||2.0|
|Operating profit margin, %||0.9||0.3||2.0||1.3|
|Result for the period||1.6||-3.6||143.9%||25.1||8.6||190.8%|
|Earnings per share,
flow before financial
and tax items
|Cash conversion (LTM), %||91.2||158.5|
|Interest-bearing net debt||140.7||118.6||18.6%|
|Equity ratio, %||19.0||18.9|
|Personnel, end of period||14,298||15,163||-5.7%|
* Based on calculation principles confirmed with the lending parties, containing certain agreed adjustments. The calculation principles
take into account the impacts of the IFRS 16 standard as of Q4/2021, while prior to this period IFRS 16 standard impacts were not
“I am satisfied that our profitability improvement, which was visible throughout the year, continued in the fourth quarter of 2021. A highlight of the second half of the year was that our order backlog grew strongly both in Services and Projects compared to last year. This provides a solid foundation for profitable growth in 2022. In the fourth quarter, our revenue turned back to growth. Our cash flow also rebounded strongly.
The corona pandemic continued to impact our operations to a certain extent throughout the year. However, I am grateful to and proud of our 14,000 employees who have still been able to deliver high-quality solutions and services to our customers despite the challenging environment.
In the fourth quarter, our order backlog increased by 15.8 percent to EUR 1,863.8 (1,609.1) million compared to a year earlier. The order backlog increased in Services by 14.1 percent and in Projects by 18.0 percent. We expect our increased order backlog to realise in revenue growth in 2022. Our fourth quarter revenue was EUR 585.3 (579.3) million, up by 1.0 percent or -0.5 percent in local currencies. Measured in local currencies, the Services business revenue increased by 1.2 percent, while the Projects business revenue decreased by 3.7 percent in the fourth quarter. The business mix change seen in recent years continued; the Services business accounted for 65.5 (63.3) percent of Group revenue in 2021.
We continued to improve our profitability in the fourth quarter. Our adjusted EBITA improved to EUR 30.1 (22.5) million, or 5.1 (3.9) percent of revenue. EBITA was EUR 8.6 (6.3) million, or 1.5 (1.1) percent of revenue. There were also a few notable one-off items during the period. We divested our non-core Russian subsidiary at the end of the year, which resulted in a capital loss of EUR 10.0 million. The largest part of the loss is explained by translation differences, which is a non-cash item and does not have an impact on equity. The transaction only had a limited cash flow effect. In addition to this, we settled certain civil claims related to our old cartel case in Germany, totalling EUR 6.4 million in the fourth quarter. We also critically assessed our final remaining major risk project at the end of the year and made an additional provision of EUR 2.0 million in the fourth quarter. The project is now handed over to the customer, however final discussions between the parties are still ongoing.
I am particularly happy about the positive progress which continued in our divisions Sweden, Germany, Norway, Industry and Austria throughout the year. Division Finland continued its already strong performance. In Services, the performance continued overall on a strong level year-to-date. We continued to see an increased interest towards those parts of our lifecycle offerings that help customers make their operations more efficient and sustainable. In Projects, market demand picked up as of the third quarter and we continued to improve our profitability in Projects in the fourth quarter. Our project portfolio is now more balanced and better covered from a risk perspective, providing a good starting point for 2022. Overall, I trust that our professional employees together with our focus on sustainability and digitalisation will enable us to continue improving our performance in 2022.
Our operating cash flow before financial and tax items was EUR 76.7 (81.3) in the fourth quarter. For the full year, our operating cash flow was EUR 103.8 (157.6) million and cash conversion (LTM) was 91.2 (158.5) percent. Our liquidity position continues to be strong and our leverage is at a low level. At the end of the fourth quarter, our interest-bearing net debt amounted to EUR 140.7 (118.6) million, or EUR 5.0 (-10.6) million excluding lease liabilities. The net debt/EBITDA ratio was 1.1x (-0.2x). We completed three bolt-on acquisitions in the fourth quarter and continue to actively search for suitable acquisitions. After the reporting period, we closed one bolt-on acquisition in January.
We have continued the work on our new strategy that will guide us up until the year 2025 and expect to finalise this work during the first half of 2022. The core strategic themes for us going forward are people, customer experience, sustainability, and digitalisation. We will target sustainable profitable growth going forward. We strongly believe in our purpose to enable building performance and people’s wellbeing in smart and sustainable built environment. We aim to tell more about this work at our Capital Markets Day in Helsinki on 10 May 2022.“
As a provider of technical services and projects for buildings, infrastructure as well as industrial sites and processes, Caverion is part of the solution for a green, low carbon transition. In 2021, 33.0 percent of Caverion’s Group revenue was considered eligible with EU Taxonomy. Activities not considered eligible with EU Taxonomy accounted for 67.0 percent of Group revenue in 2021, consisting of technical building services not contributing to carbon emission reductions and industrial services outside the renewable energy sector. Caverion’s capital expenditures and operating expenses resulting from services or products associated with economic activities considered eligible with EU taxonomy amounted to 13.8 percent and 3.1 percent of its 2021 denominators of Capital Expenditure KPI and Operating Expenditure KPI, respectively. Caverion’s business model is asset-light and does not require large-scale investments to cope with the EU taxonomy. Most of Caverion’s investments are M&A or IT investments. With these eligibility levels, Caverion nevertheless demonstrates its strong position in environment and climate protection. More information on the calculation principles related to Caverion’s EU Taxonomy eligible figures can be found on Caverion’s website.
Caverion did not classify any activities under categories “Construction of new buildings” and “Renovation of existing buildings” as the company interprets these categories as belonging to building construction and renovation activities rather than technical building system related installations and services. However, had this approach been adopted, Caverion would have been able to report a material additional share of its building technology revenue as taxonomy eligible.
|EU Taxonomy KPI’s,
|Total||Eligible, %||Non-eligible, %|
related to day-to-day servicing of assets of
property, plant and equipment
*Total of EUR 80.7 million includes EUR 54.7 million capital expenditure on leased assets
Sustainability is at the core of Caverion Group’s growth strategy. Sustainability is also a mega trend that will support Caverion’s market demand over the coming years. Caverion’s solutions help its customers to improve their energy-efficiency and thereby reduce their carbon footprint. Caverion commits to making a difference in sustainability together with its customers in line with its strategy and purpose: enabling performance and people’s wellbeing in smart and sustainable built environments. Caverion has approved its own sustainability strategy. Caverion also reaffirms its sustainability target of having a positive carbon handprint five times greater than its carbon footprint by 2025. In the longer term, Caverion’s target by 2030 is to create a sustainable impact through its solutions, with a positive carbon handprint 10 times greater than its carbon footprint (Scope 1-2).
Caverion expects market demand to be overall positive in Services and to improve also in Projects during 2022. This scenario assumes a successful outcome from the ongoing corona vaccination programmes and a sufficient control of the corona pandemic impacts with no significant unforeseen setbacks in 2022. Increased material prices and longer delivery times may still affect Caverion’s business going forward, although the inflationary pressures are expected to be more moderate in 2022 compared to 2021. Potential risks may still emerge from the supply side, not only from raw material price inflation but also from labour shortage, furthermore potentially fuelled by increased sick leave levels or quarantines.
The business volume and the amount of new order intake are important determinants of Caverion’s performance in 2022. A negative scenario whereby the corona pandemic continues and starts to negatively impact market demand cannot be ruled out. However, a large part of Caverion’s services is vital in keeping also critical services and infrastructure up-and-running at all times.
The monetary and fiscal policies currently in place are clearly supporting an economic recovery. 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 over the next few years. The main themes in the EU stimulus packages are green growth and digitalisation. Caverion expects the national and EU programmes to increase demand also in Caverion’s areas of operation in 2022. The ECB decided in December 2021 to reduce its asset purchases step-by-step over the coming quarters with a goal to stabilise inflation at its target over the medium term, while still maintaining flexibility in the conduct of its monetary policy.
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 environment, 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. This is furthermore supported by the society end-users’ general request for an environmentally friendly built environment. The Energy Performance of Buildings Directive (EPBD) passed by the EU requires all new buildings from 2021 to be nearly zero-energy buildings (NZEB). Other initiatives include e.g. the “Fit for 55” climate package and the Renovation Wave Strategy. The “Fit for 55” climate package proposes to make EU's climate, energy, transport and taxation policies fit for reducing net greenhouse gas emissions by at least 55% by 2030, compared to 1990 levels. The objective of the European Commission’s Renovation Wave Strategy is to at least double the annual energy renovation rate of residential and non-residential buildings by 2030. Mobilising forces at all levels towards these goals is expected to result in 35 million building units renovated by 2030. The increased rate and depth of renovation will have to be maintained and increased also post-2030 to reach EU-wide climate neutrality by 2050. The proposed revision of the Energy Performance of Buildings Directive (EPBD) is an example of the coming EU directives that highlight the importance of sustainability and energy performance of the buildings. It, among other measures, aims to establish new EU-level Minimum Energy Performance Standards (MEPS), with enhanced requirements for both existing and new building stock. Caverion has been putting an effort to develop its offering and solutions to meet this demand and is well positioned with its more than 14,000 skilled employees.
Caverion expects market demand to be overall positive during 2022. 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 as well as in digital solutions development. These 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 up opportunities for Caverion through outsourcing of industrial operation and maintenance, property maintenance as well as facility management.
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. Caverion expects market demand to improve also in Projects during 2022.
According to Euroconstruct reports published in November 2021, the European construction industry has already fully recovered from the negative corona impacts, as the total construction volume in Western Europe was expected to grow by 5.6 percent in 2021, following a drop of 4.7 percent in 2020. Euroconstruct has a positive outlook for 2022, expecting a healthy growth (3.6%) in 2022 for Western European countries. The non-residential construction market is expected to perform relatively better than the housing market in the near future according to Euroconstruct.
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 hold a news conference on its Financial Statement Release on Thursday, 10 February 2022, at 10.00 a.m. Finnish time (EET). The 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 +44 333 3000804 at 9:55 a.m. (Finnish time, EET) at the latest. The participant code for the conference call is “21251507#”. More practical information on the news conference can be found on Caverion's website, www.caverion.com/investors.
The Annual Review, including the financial statements for 2021, will be published on Caverion's website in English and Finnish by 4 March 2022 at the latest. Interim/Half-yearly Reports for 2022 will be published on 28 April,
4 August and 3 November 2022.
Caverion will arrange a Capital Markets Day in Helsinki on 10 May 2022 at 12:00 noon (EEST). Further information on the programme will be published closer to the date.
Distribution: Nasdaq Helsinki, principal media, www.caverion.com