Caverion Oyj - Financial Statement Release

Caverion Corporation’s Financial Statement Release for January 1 – December 31, 2016

Caverion Corporation Financial Statement Release February 7, 2017 at 9.00 a.m.
EET
Caverion Corporation’s Financial Statement Release for January 1 – December 31,
2016

A year of restructuring

October 1 – December 31, 2016

  · Revenue: EUR 606.0 (667.8) million.
  · EBITDA excluding restructuring costs: EUR -10.5 million, or -1.7 percent of
revenue.
  · EBITDA: EUR -22.2 (34.0) million, or -3.7 (5.1) percent of revenue.
  · Free cash flow: EUR 28.0 (73.6) million.
  · Earnings per share, undiluted: EUR -0.17 (0.17) per share.

January 1 – December 31, 2016

  · Order backlog: EUR 1,408.1 (1,461.4) million.
  · Revenue: EUR 2,364.1 (2,443.0) million.
  · EBITDA excluding restructuring costs: EUR 15.6 million, or 0.7 percent of
revenue.
  · EBITDA: EUR -11.4 (91.5) million, or -0.5 (3.7) percent of revenue.
  · Working capital: EUR -2.6 (-15.4) million.
  · Free cash flow: EUR -72.1 (53.9) million.
  · Earnings per share, undiluted: EUR -0.25 (0.37) per share.

Unless otherwise noted, the figures in brackets refer to the corresponding
period in the previous year.

KEY FIGURES

+-----------------------+---------+---------+------+--------+--------+------+
|EUR million            |10–12/16 |10–12/15 |Change|1–12/16 |1–12/15 |Change|
+-----------------------+---------+---------+------+--------+--------+------+
|Order backlog          |         |         |      | 1,408.1| 1,461.4| -3.6%|
+-----------------------+---------+---------+------+--------+--------+------+
|Revenue                |   606.0 |   667.8 | -9.2%| 2,364.1| 2,443.0| -3.2%|
+-----------------------+---------+---------+------+--------+--------+------+
|EBITDA excluding       |    -10.5|       - |      |    15.6|      - |      |
|restructuring costs    |         |         |      |        |        |      |
+-----------------------+---------+---------+------+--------+--------+------+
|EBITDA margin excluding|     -1.7|       - |      |     0.7|      - |      |
|restructuring costs, % |         |         |      |        |        |      |
+-----------------------+---------+---------+------+--------+--------+------+
|EBITDA                 |    -22.2|     34.0|      |   -11.4|    91.5|      |
+-----------------------+---------+---------+------+--------+--------+------+
|EBITDA margin, %       |     -3.7|      5.1|      |    -0.5|     3.7|      |
+-----------------------+---------+---------+------+--------+--------+------+
|Operating profit       |    -29.2|     26.9|      |   -40.8|    65.0|      |
+-----------------------+---------+---------+------+--------+--------+------+
|Operating profit       |     -4.8|      4.0|      |    -1.7|     2.7|      |
|margin, %              |         |         |      |        |        |      |
+-----------------------+---------+---------+------+--------+--------+------+
|Net profit for the     |    -21.7|     20.9|      |   -31.7|    46.6|      |
|period                 |         |         |      |        |        |      |
+-----------------------+---------+---------+------+--------+--------+------+
|Earnings per share,    |    -0.17|     0.17|      |   -0.25|    0.37|      |
|undiluted, EUR         |         |         |      |        |        |      |
+-----------------------+---------+---------+------+--------+--------+------+
|                       |         |         |      |        |        |      |
+-----------------------+---------+---------+------+--------+--------+------+
|Working capital        |         |         |      |    -2.6|   -15.4|-83.4%|
+-----------------------+---------+---------+------+--------+--------+------+
|Free cash flow         |     28.0|    73.6 |-62.0%|   -72.1|    53.9|      |
+-----------------------+---------+---------+------+--------+--------+------+
|                       |         |         |      |        |        |      |
+-----------------------+---------+---------+------+--------+--------+------+
|Interest-bearing net   |         |         |      |   145.5|    29.8|      |
|debt                   |         |         |      |        |        |      |
+-----------------------+---------+---------+------+--------+--------+------+
|Gearing, %             |         |         |      |    78.7|    11.7|      |
+-----------------------+---------+---------+------+--------+--------+------+
|                       |         |         |      |        |        |      |
+-----------------------+---------+---------+------+--------+--------+------+
|Personnel, end of      |         |         |      | 16,913 |  17,399| -2.8%|
|period                 |         |         |      |        |        |      |
+-----------------------+---------+---------+------+--------+--------+------+

DIVIDEND PROPOSAL

The Board of Directors proposes to the Annual General Meeting that no dividend
be paid for 2016.

Word from the President and CEO Ari Lehtoranta

“For Caverion, year 2016 was a very special and unfortunately a disappointing
one. We found out during the year that our performance was clearly lower than
estimated and further studies brought up issues which were dramatic and
fundamental. This led to the change of the CEO, CFO and several other key
members of the Group and divisional leadership teams especially in divisions
having larger problems i.e. Sweden, Germany and Denmark-Norway.

The year was overall a year of restructuring. The total amount of jobs impacted
by the restructuring actions in 2016 was 1,060. These actions were unfortunate
but necessary to improve our utilisation rate going forward. The total
restructuring costs amounted to about EUR 27 million in 2016. We estimate that
the restructuring actions improved our performance in 2016 by about EUR 18
million. The estimated total savings impact of the restructuring actions is
approximately EUR 40 million in 2017, the additional savings for 2017 vs. 2016
being thus approximately EUR 22 million. In addition, we also cut back on
discretionary fixed costs, related for example to development projects,
consultancy and travelling.

Caverion completed some 3,000 projects in its Projects business in 2016. We have
now reviewed all completed and ongoing projects where we have work in progress,
overdue receivables or disputes with customers. As a result of the reviews, we
made the necessary cost estimate adjustments, write-downs and provision
increases in our project portfolio, totalling EUR 59 million for 2016. We have
had too optimistic revenue estimates for add-on sales in projects, too
optimistic cost and receivable forecasts and different kinds of project
execution challenges. We lost several percentage points in our project margin in
2016 not only in Large Projects, but also in Technical Installation in smaller
projects. Our project performance has been poor in Sweden, Germany and
Industrial Solutions. Earlier in the year, we also faced problems in division
Denmark-Norway.

We believe that our risk level is lower going forward, despite certain risks in
some of our ongoing projects especially in divisions mentioned above. We
estimate our remaining identified performance risks in projects to amount to
approximately EUR 20 million for 2017. We have implemented several actions that
will help us improve our project business performance to the right level. For
example, we have reorganised our project business and centralised all Large
Project activities to dedicated, professional project management teams, we have
increased our tender margin requirements and set up proper tender go/no go
analyses and steering processes for Large Projects. We also continue to
strengthen the steering of our project business and to improve our mandatory
project manager trainings.

The completion of the restructuring, implementation of a stricter project
tendering process and focus on higher project margins affected our order backlog
also in the fourth quarter. This creates us a potential further risk of up to
EUR 10 million related to our utilisation rate during 2017. In addition, we
estimate that there are risks related to old overdue trade receivables of up to
EUR 10 million in 2017.

Our Technical Maintenance and Managed Services business areas, which represent
our Services business, continued to perform well in 2016. We clearly see now
that our division Denmark-Norway is making a turnaround. Finland and Austria
performed well throughout 2016. Clear improvements were also seen in our cash
flow and working capital towards the year-end.

We have started the creation of a stronger Caverion for the future. With the
completed and ongoing actions, together with the organisational and management
changes announced earlier, we are laying a better foundation going forward. Year
2017 will be a year of stabilisation and a way forward for us – not yet
reflecting the company’s full profit potential. Our focus is to further
implement all our corrective actions and to improve our performance management
in our divisions and business units. We have also started to prepare our
strategy towards 2020. The market environment remains favourable. Caverion’s
service portfolio and industry knowledge are great assets to create a winning
company.”

OUTLOOK FOR 2017

Market outlook for Caverion’s services and solutions

The megatrends in the industry, such as the increase of technology in buildings,
energy efficiency requirements, increasing digitalisation and automation as well
as urbanisation continue to promote demand for Caverion’s services and solutions
over the coming years.

Projects

The Technical Installation and Large Projects markets are expected to remain on
a good and stable level, however price competition is expected to remain tight
in Technical Installation projects. In the Large Projects market, new tenders
for buildings and industry are expected to remain on a good level and even to
somewhat increase. Low interest rates and availability of financing are expected
to support investments. The demand for Design & Build of Total Technical
Solutions is expected to develop favourably in large and technically demanding
projects. Good demand from both the public and private sector is expected to
continue. Requirements for increased energy efficiency, better indoor conditions
and tightening environmental legislation will be significant factors supporting
the positive market development.

Services

The underlying demand for Technical Maintenance and Managed Services is expected
to remain strong. As technology in buildings increases, the need for new
services and the demand for Life Cycle Solutions are expected to increase.
Clients’ tendency towards focusing on their core operations continues to open
opportunities for Caverion in terms of outsourced operations and maintenance
especially for public authorities, industries and utilities.

Guidance for 2017

Caverion estimates that the Group’s revenue will remain at the previous year's
level in 2017 (2016: EUR 2,364 million). Caverion estimates that the Group’s
EBITDA excluding restructuring costs will more than double in 2017 (2016: EUR
15.6 million).

In its guidance Caverion applies the following guidance terminology, with a +/-
2pp (percentage point) threshold to the said limits.

+------------------------+-----------+-----------+
|Positive change         |Lower limit|Upper limit|
+------------------------+-----------+-----------+
|%                       |          %|
+------------------------+-----------+-----------+
|At last year’s level    |        -5%|         5%|
+------------------------+-----------+-----------+
|Grows                   |         5%|        15%|
+------------------------+-----------+-----------+
|Grows clearly           |        15%|        30%|
+------------------------+-----------+-----------+
|Grows significantly     |        30%|       100%|
+------------------------+-----------+-----------+
|Doubles                 |       100%|           |
+------------------------+-----------+-----------+
|                        |           |           |
+------------------------+-----------+-----------+
|Negative change         |Lower limit|Upper limit|
+------------------------+-----------+-----------+
|%                       |          %|
+------------------------+-----------+-----------+
|Decreases               |       -15%|        -5%|
+------------------------+-----------+-----------+
|Decreases clearly       |       -30%|       -15%|
+------------------------+-----------+-----------+
|Decreases significantly |           |       -30%|
+------------------------+-----------+-----------+

INFORMATION SESSION, WEBCAST AND CONFERENCE CALL

Caverion will hold a news conference and webcast on the interim report on
Tuesday, February 7, 2017, at 11:00 a.m. (Finnish Time, EET) at the Glo Hotel
Kluuvi (Videowall meeting room), Kluuvikatu 4, 2nd floor, Helsinki, Finland. The
news conference can also 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 9411 at
10:55 a.m. (Finnish time, EET) at the latest. Participant code for the
conference call is “9672615/ Caverion”. More practical information on the news
conference can be found on Caverion's website, www.caverion.com/investors.

Annual General Meeting 2017

Caverion Corporation's Annual General Meeting will be held on Friday, March 17,
2017, starting at 10:00 a.m. (Finnish time, EET) in Messukeskus in Helsinki,
Finland. Full notice of the meeting, including the Board of Directors’ proposals
to the Annual General Meeting, will be published as a separate stock exchange
release.

Financial information for 2017

The Annual Report, including the financial statements for 2016, will be
published on Caverion's website and IR App in English and Finnish at the latest
during week 8 in February 2016. Interim Reports will be published on April 28,
July 20 and October 27, 2017.

Financial reports and other investor information are available on Caverion's
website, www.caverion.com/investors, and IR App. The materials may also be
ordered by sending an e-mail to IR@caverion.com.

CAVERION CORPORATION


Distribution: Nasdaq Helsinki, principal media, www.caverion.com
For further information, please contact:

Martti Ala-Härkönen, Chief Financial Officer, Caverion Corporation, tel.
+358 40 737 6633, martti.ala-harkonen@caverion.com
Milena Hæggström, Head of Investor Relations, Caverion Corporation, tel.
+358 40 5581 328, milena.haeggstrom@caverion.com

Attachments:

02063861.pdf