Caverion Oyj - Inside information

Caverion Corporation’s Interim Report for January 1 – September 30, 2017

Caverion Corporation Interim Report October 27, 2017 at 9.00 a.m. EEST
Caverion Corporation’s Interim Report for January 1 – September 30, 2017

First signs of improved performance

July 1 – September 30, 2017

  · Order backlog: EUR 1,460.4 (1,450.9) million
  · Revenue: EUR 545.1 (582.0) million
  · EBITDA excluding restructuring costs: EUR 13.8 (19.5) million, or 2.5 (3.3)
percent of revenue
  · EBITDA: EUR 8.7 (13.8) million, or 1.6 (2.4) percent of revenue
  · Working capital: EUR 75.7 (56.1) million
  · Free cash flow: EUR -43.8 (-38.8) million
  · Earnings per share, undiluted: EUR -0.01 (0.02) per share

January 1 – September 30, 2017

  · Revenue: EUR 1,692.5 (1,758.1) million
  · EBITDA excluding restructuring costs: EUR 14.6 (26.1) million, or 0.9 (1.5)
percent of revenue
  · EBITDA: EUR 2.5 (10.9) million, or 0.1 (0.6) percent of revenue
  · Free cash flow: EUR -90.5 (-100.1) million

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

KEY FIGURES

+-------------------+-------+-------+------+-------+-------+-------+-------+
|EUR million        | 7–9/17| 7–9/16|Change| 1–9/17| 1–9/16| Change|1–12/16|
+-------------------+-------+-------+------+-------+-------+-------+-------+
|Order backlog      |1,460.4|1,450.9|  0.7%|1,460.4|1,450.9|   0.7%|1,408.1|
+-------------------+-------+-------+------+-------+-------+-------+-------+
|Revenue            |  545.1|  582.0| -6.3%|1,692.5|1,758.1|  -3.7%|2,364.1|
+-------------------+-------+-------+------+-------+-------+-------+-------+
|EBITDA excluding   |   13.8|   19.5|-29.0%|   14.6|   26.1| -44.1%|   15.6|
|restructuring costs|       |       |      |       |       |       |       |
+-------------------+-------+-------+------+-------+-------+-------+-------+
|EBITDA margin      |    2.5|    3.3|      |    0.9|    1.5|       |    0.7|
|excluding          |       |       |      |       |       |       |       |
|restructuring      |       |       |      |       |       |       |       |
|costs, %           |       |       |      |       |       |       |       |
+-------------------+-------+-------+------+-------+-------+-------+-------+
|EBITDA             |    8.7|   13.8|-37.0%|    2.5|   10.9| -77.2%|  -11.4|
+-------------------+-------+-------+------+-------+-------+-------+-------+
|EBITDA margin,     |    1.6|    2.4|      |    0.1|    0.6|       |   -0.5|
|%                  |       |       |      |       |       |       |       |
+-------------------+-------+-------+------+-------+-------+-------+-------+
|Operating profit   |    1.2|    5.0|-75.5%|  -20.1|  -11.6| -73.1%|  -40.8|
+-------------------+-------+-------+------+-------+-------+-------+-------+
|Operating profit   |    0.2|    0.9|      |   -1.2|   -0.7|       |   -1.7|
|margin, %          |       |       |      |       |       |       |       |
+-------------------+-------+-------+------+-------+-------+-------+-------+
|Net profit for     |    0.1|    2.9|-97.1%|  -18.3|   -9.9| -84.2%|  -31.7|
|the period         |       |       |      |       |       |       |       |
+-------------------+-------+-------+------+-------+-------+-------+-------+
|Earnings per       |  -0.01|   0.02|      |  -0.16|  -0.08|-102.6%|  -0.25|
|share, undiluted,  |       |       |      |       |       |       |       |
|EUR                |       |       |      |       |       |       |       |
+-------------------+-------+-------+------+-------+-------+-------+-------+
|Working capital    |   75.7|   56.1| 35.0%|   75.7|   56.1|  35.0%|   -2.6|
+-------------------+-------+-------+------+-------+-------+-------+-------+
|Free cash flow     |  -43.8|  -38.8|-12.8%|  -90.5| -100.1|   9.6%|  -72.1|
+-------------------+-------+-------+------+-------+-------+-------+-------+
|Interest-bearing   |  141.3|  169.7|-16.8%|  141.3|  169.7| -16.8%|  145.5|
|net debt           |       |       |      |       |       |       |       |
+-------------------+-------+-------+------+-------+-------+-------+-------+
|Gearing, %         |   53.2|   81.5|      |   53.2|   81.5|       |   78.7|
+-------------------+-------+-------+------+-------+-------+-------+-------+
|Personnel,         | 16,483| 17,281| -4.6%| 16,483| 17,281|  -4.6%| 16,913|
|end of period      |       |       |      |       |       |       |       |
+-------------------+-------+-------+------+-------+-------+-------+-------+

Word from the President and CEO Ari Lehtoranta

“We started to see the first signs of improved performance related to our
turnaround programme in the third quarter. While we are still getting negative
impact from older poor-performing projects, our ongoing new business in Projects
and particularly Services is showing improving results. Our EBITDA excluding
restructuring costs improved clearly from the first half of the year. In the
third quarter, EBITDA excluding restructuring costs was EUR 13.8 (19.5) million.
The result was still burdened by project write-downs of EUR 7.1 (4.1) million,
trade receivable write-downs of EUR 0.9 million and restructuring costs of EUR
5.2 (5.7) million. Our risk project challenges also impacted negatively on our
working capital and cash flow. Overall, we continued implementing our corrective
actions to improve particularly our project business performance. Looking
forward into the fourth quarter, I expect improved cash flow and our risk for
write-downs is lower than last year.

Caverion’s revenue for the third quarter of 2017 was EUR 545.1 (582.0) million.
There was a negative impact for the period especially from our more selective
project business tendering. In accordance with our target, the Services business
grew by 4.7 percent in the third quarter. The revenue of the total Projects
business decreased by 15.7 percent, while the revenue of Large Projects by as
much as 23.2 percent. Our focus in Services boosted up Services order backlog by
5.5 percent from the previous year, while in Projects the order backlog declined
by 2.7 percent. Besides selectivity in tendering, we have closed down several
poor-performing project units. This is part of our strategic transformation.

Our market environment remains favourable. Divisions Finland and Austria
improved their solid performance in the third quarter. Division Denmark-Norway
delivered a good result. In Sweden our quarterly results were burdened by
further restructuring costs of EUR 4.9 million affecting about 190 employees and
productivity challenges. We started a rigorous performance management programme
in Sweden during the period, the target of which is to materially improve our
long-term performance. The result in Industrial Solutions and Germany remained
negative due to write-downs in previously identified risk projects. By business
unit, the Services business unit continued to improve its performance.
Performance in the Projects business unit was still poor, burdened by write
-downs.

We continued to realise savings from the completed restructuring actions and
discretionary fixed cost savings. Our personnel expenses decreased by about 3.9
percent and our other operating expenses by about 5.5 percent from the previous
year in January-September. This is satisfying, while taking into account that we
have also had turnaround related one-off costs at the same time, for example,
our external legal costs relating to project business amounted to EUR 2.2
million in division Industrial Solutions. In January–September, the total
performance and utilisation actions amounted to restructuring costs of
approximately EUR 12.1 million. Their estimated total savings impact is
approximately EUR 2.8 million in 2017 and EUR 8.6 million in 2018.

We have made write-downs totalling EUR 25.4 (19.1) million related to our risk
projects in divisions Industrial Solutions and Germany in January–September.
Following our latest assessment in October, the remaining project performance
risks of our risk list are estimated to be about EUR 18 million. It is possible
that the settlement of certain technically completed projects in 2017 may move
into 2018.

With respect to old overdue trade receivables, the estimated full-year write
-down risk in 2017 is below the earlier anticipated maximum level of EUR 10
million. After the completed restructurings, the impacts of the utilisation risk
estimated earlier (up to EUR 10 million) have by and large already materialised
in our results.

Caverion’s financial performance in 2017 is negatively impacted mainly by our
project business performance. At the same time we have started to build a new
stronger Caverion for the future. We will tell more about our new strategy at
our Capital Markets Day in Helsinki on November 7, 2017.”

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.

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.

Projects

The Technical Installation and Large Projects markets are expected to remain on
a good level. Good demand is expected to continue from both the private and
public sectors. However, price competition is expected to remain tight. 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.
Requirements for increased energy efficiency, better indoor conditions and
tightening environmental legislation will be significant factors supporting the
positive market development.

Turnaround programme ‒ Items affecting EBITDA and operating profit*

+------------------------+------+------+------+------+-------+
|EUR million             |7–9/17|7–9/16|1–9/17|1–9/16|1–12/16|
+------------------------+------+------+------+------+-------+
|EBITDA                  |   8.7|  13.8|   2.5|  10.9|  -11.4|
+------------------------+------+------+------+------+-------+
|EBITDA margin, %        |   1.6|   2.4|   0.1|   0.6|   -0.5|
+------------------------+------+------+------+------+-------+
|Items affecting EBITDA  |      |      |      |      |       |
|and operating profit    |      |      |      |      |       |
+------------------------+------+------+------+------+-------+
|-  Project write-downs**|   7.1|   4.1|25.4  |  19.1|   59.0|
+------------------------+------+------+------+------+-------+
|-  Restructuring costs  |   5.2|   5.7|  12.1|  15.2|   26.9|
+------------------------+------+------+------+------+-------+

* The effect of the risk from overdue trade receivables and the utilisation risk
excluded for 2017.

** Including cost estimate adjustments, cost overruns and provision increases
from the risk project list for 2017.

Guidance for 2017

Caverion’s guidance for 2017 is unchanged. Caverion’s guidance for 2017 is:
“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
Friday, October 27, 2017, at 11:00 a.m. (Finnish Time, EEST) 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, EEST) at the latest. Participant code for the
conference call is “7876164/ Caverion”. More practical information on the news
conference can be found on Caverion's website, www.caverion.com/investors.

Financial information and IR events

Caverion will arrange a Capital Markets Day in Helsinki, Finland on November 7,
2017 at 9:00 a.m. (EET). Further information on the programme is available on
Caverion's website, www.caverion.com/investors.

Financial Statements Bulletin for January - December 2017 will be published on
February 7, 2018 at 8:00 a.m. (Finnish Time, EET). 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:

10261118.pdf