Review by the President and CEO
Interim Report for January-March 2019 (published 26 April 2019)
“Caverion’s year 2019 has started as planned and we took important steps towards the Growth phase. While we are still finalising our “Fit” actions in a few divisions in accordance with our strategy, our adjusted EBITDA increased to EUR 27.1 (10.9) million in the first quarter of the year. The comparative figures for the prior financial periods have not been restated to comply with the IFRS 16 Leases standard adopted from the beginning of the year. Our revenue for the first quarter was EUR 514.4 (526.8) million, with the Services business continuing to grow and the Projects business revenue declining, as anticipated. Measured in local currencies, revenue decreased by 1.2 percent; the Services business was up by 5.4 percent while the Projects business revenue was down by 9.3 percent. It is of specific note that all our Fit divisions experienced healthy growth in the first quarter.
Both business units improved their profitability in the first quarter. In the Services business, most of our divisions continued to improve their margins in accordance with targets. The Projects business profitability was supported by a positive arbitration decision related to the third and last major Industrial Solutions risk project for 2018. This decision further lowered our risk position going forward. The result was still negatively impacted by old projects. We are continuing our efforts to close or settle the remaining non-performing projects from our project portfolio.
In the first quarter, our operating cash flow before financial and tax items was EUR 30.1 (19.8) million. Our working capital improved to the level of EUR -60.4 (-41.4) million.
There were several important events during the quarter. In March we signed an agreement with Maintpartner Holding Oy to acquire all of the shares in Maintpartner Group Oy including its subsidiaries in Finland, Poland and Estonia. Maintpartner is an industrial maintenance and service provider operating in sectors such as energy, chemicals, metal, food and manufacturing industries. The revenue of the business to be acquired was approximately EUR 137 million in 2018 and it employed approximately 1,500 people. The acquisition complements our knowledge in industrial maintenance and services as well as in the development of digital solutions. It also supplements our geographical coverage and customer base in various industrial segments. The transaction is subject to approval by the competition authorities.
At the end of the quarter, we issued a new EUR 75 million senior unsecured four-year bond. The senior bond issue opened up a new instrument for Caverion in the capital markets and diversified our funding base further. We partially redeemed our hybrid bond notes with the proceeds from the new issue and proactively managed our debt portfolio. Earlier in the quarter, we also refinanced our bank loans and undrawn revolving credit facilities. Both these events have improved our financial position and support us in moving from the Fit phase of our strategy towards the Growth phase. Our net debt excluding lease liabilities amounted to EUR 27.1 (47.2) million at the end of March and the net debt/EBITDA ratio was 0.7x (1.8x).
We continued our strategic planning process with several streams in preparation for the Growth phase of our strategy. We will come back to this in more detail at our Capital Markets Day to be held in Helsinki on 5 November 2019. In the meanwhile, the implementation of the “Fit” phase of our strategy will continue during the first half of 2019. The remaining Fit actions are specifically concentrated on Germany and Denmark.”