Caverion Oyj : Q3 Presentation slides

Interim Report 1-9/2020 and Sustainability Morning

Ari Lehtoranta, President and CEO

Martti Ala-Härkönen, CFO

5 November 2020

2 Interim Report 1-9/2020

Agenda for today

10.00 a.m. Q3 Presentation with Q&A*, ** Ari Lehtoranta, President and CEO Martti Ala-Härkönen,CFO

~10.45 a.m. Sustainability Morning presentation* Ari Lehtoranta, President and CEO

~11.15 a.m. Sustainability related Q&A**

Feedback form: https://fal.cn/cavsust2020

*)	Q&A session after the presentation
**)	Open for all participants with opportunity to ask questions

3 Interim Report 1-9/2020

Agenda for the Q3 Presentation

1. Operating environment 1-9/2020 and market outlook for 2020
2. Group development
3. Cash flow and financing
4. Guidance and dividend

1. Operating environment 1-9/2020 and market outlook for 2020

5 Interim Report 1-9/2020

Operating environment 1-9/2020

Market was more stable in Q3 compared to Q2, second wave of corona visible at the end of Q3

Services

• Despite the continuing pandemic, corona-related restrictions were much more limited in Q3 compared to Q2, enabling Caverion to operate without bigger interruptions. However, the second wave of corona started to be more visible at the end of Q3.
• In division Industry, the corona situation postponed several annual shutdowns in Finland until late autumn and 2021.
• Pricing environment tightened in Services as of the second quarter.

Projects

• The demand for new construction projects was negatively impacted by the corona pandemic, however less for renovation construction.
• Pricing environment generally tightened in Projects as of the second quarter.
• Going forward, the economic stimulus packages provided by governments and the EU are expected to increase infrastructure, health care and different types of sustainable investments. However, there was not yet any visible impact in Q3.

Revenue breakdown 1-9/2020(1-9/2019)

37.4%

(40.5%)

62.6%

(59.5%)

Services business unit

Projects business unit

6 Interim Report 1-9/2020

Corona crisis has impacted the market sentiment

Indicators in main Caverion countries materially down in March-May, improvement since June 2020 Economic sentiment indicator below trend line, while construction confidence surprisingly positive

ECONOMIC SENTIMENT INDICATOR		CONSTRUCTION CONFIDENCE INDICATOR
	(2008 - 09/2020)				(2008 - 09/2020)
150					150
125					125
100					100
75					75
50					50
Finland	Sweden	Germany	Denmark	Austria	Finland	Sweden	Germany	Denmark	Austria

Sources: European Commission, September 2020

2. Group development

8 Interim Report 1-9/2020

Summary of Q3/2020

Revenue and EBITA impacted by corona-related downturn, still improvement in January-September

Order backlog

• Order backlog decreased by 2.9% to EUR 1,627.7 (1,676.9) million at the end of September (-1.8% at comparable exchange rates)
• Order backlog in Services increased by 7.3% compared to previous year.

Profitability

• Adjusted EBITA amounted to EUR 21.2 (23.0) million, or 4.1 (4.5) percent of revenue.
• EBITA was EUR 17.7 (22.1) million, or 3.4 (4.4) percent of revenue.
• EPS amounted to EUR 0.06 (0.08) per share.

Revenue

• Revenue increased to EUR 515.5 (507.5) million, up by 1.6% (2.3% in local currencies).
• Organic growth was -6.0%.
• Services +8.6% and Projects -8.3% (+9.6% and -8.1% in local currencies)

Cash flow and leverage

• Operating cash flow before financial and tax items amounted to EUR -28.0 (3.8) million.
• Cash and cash equivalents were EUR 84.8 (83.4) million
• Net debt/EBITDA* was 0.8x (1.1x).

Other events

• Integration of the latest acquisitions progressed according to plan.
• Divestment of certain parts of Finnish industrial operations closed.

* Based on calculation principles confirmed with the lending parties.

9 Interim Report 1-9/2020

Order backlog development

Order backlog decreased by 2.9% year-on-year, growth in Services, decline in Projects

• Order backlog decreased by 2.9% year- on-year to EUR 1,627.7 (1,676.9) million at the end of September.
• • At comparable exchange rates the order backlog decreased by 1.8% year-on-year.

Order backlog, EUR million

Q1		Q2	Q3	Q4
	1,740	1,677
			1,628

﴿ Order backlog increased by 7.3% in
Services compared to the previous year,
while it decreased by 13.0% in Projects.
﴿ Order backlog decreased by 6.4% from
the end of the previous quarter.	15 1617 18 1920	15 16 1718 1920	1516 1718 19 20	1516 17 1819

10 Interim Report 1-9/2020

Examples of our new agreements

July-September 2020

PROJECTS

• Customer: The Red Bull Arena Besitzergesellschaft mbH
• Agreement: Modernising building technology solutions, including Cooling, at the football stadium of the Bundesliga club RB Leipzig.
• Location: Leipzig, Germany

SERVICES/SMART TECH

• Customer: Norwegian Police Shared Services (PFT)
• Agreement: A framework agreement to provide, install and maintain security systems, including access control, video surveillance and security alarm systems.
• Location: Across Norway

SERVICES

• Customer: Kemijoki Oy
• Agreement: An extended contract on outsourcing the technical maintenance and operations of 18 hydropower plants, provision of sustainable hydropower-generated electricity.
• Location: Kemijoki and Lieksankoski watercourse area, Finland.

11 Interim Report 1-9/2020

Revenue development

Q3 revenue up by 1.6% (2.3% in local currencies), still impacted by corona

Group revenue, EUR million

	2019: 2,123.2			1-9/2020: 1,575.6
514.4	512.3		589.0	541.6	518.5
507.5		515.5

Q1 Q2 Q3 Q4 Q1 Q2 Q3

Revenue breakdown by division, EUR million			1-9/2019	1-9/2020
-3%	+11%	+5%	-14%	+40%	-3%	-15%	+10%
312 303	272	302	263 275	265	227	144 202
						148 143
							80	68	50	56
	Sweden	Finland	Germany	Norway	Industry	Austria	Denmark	Other countries

• Q3 revenue increased to EUR 515.5
  (507.5) million, up by 1.6% from the previous year, +2.3% in local currencies.
• Organic growth was -6.0%.
• Business units:

﴿ Services +8.6%, Projects -8.3%

(+9.6% and -8.1% in local currencies)

• • In Services, ad-hoc orders returned to almost normal levels in the quarter, while in the Industry division there was still an impact from delayed industrial shutdown services. In Projects, the corona pandemic continued to impact productivity to a certain extent.
• Revenue increased in Finland, Germany, Industry and other countries.

12 Interim Report 1-9/2020

Profitability development

Profitability improved in Q3 compared to the challenging Q2

• Q3/2020 Adjusted EBITA amounted to EUR 21.2 (23.0) million, or 4.1 (4.5) percent of revenue.
• • In Services, ad-hoc orders returned to almost normal levels in the quarter, while in the Industry division there was still an impact from delayed industrial shutdown services.
  • In Projects, the corona pandemic continued to impact productivity to a certain extent.
• Q3/2020 EBITA was EUR 17.7 (22.1) million, or 3.4 (4.4) percent of revenue.

			Adjusted EBITA, EUR million			Adjusted EBITA margin, %
					2019: 67.2 (3.2%)					1-9/2020: 38.1 (2.4%)
									23.0		33.7								21.2
		13.8						5.7
						4.5				12.1			4.8		4.1
	2.7		-3.2
										2.2
																					0.9
					-0.6
			Q1			Q2		Q3		Q4			Q1	Q2		Q3
					EBITA, EUR million				EBITA margin, %
					2019: 49.8 (2.3%)				1-9/2020: 36.1 (2.3%)
										22.1			22.5									17.7
			9.3						4.4				10.0
										3.8					8.4
																		3.4
			1.8														1.8			1.6
							-0.8
			Q1			-4.1			Q3		Q4			Q1	Q2		Q3
					Q2

Adjusted EBITA = EBITA before items affecting comparability (IAC)

13 Interim Report 1-9/2020

Caverion plans operative improvements including restructuring

• Due to the current downturn and its impacts on its revenue, Caverion plans to proactively further streamline and adjust its operations.
• Caverion estimates that the company's headcount would reduce by approximately 500 by the end of H1/2021, with a large part of the reductions planned to be carried out by the end of 2020. Headcount reductions are very unfortunate but still necessary to secure Caverion's competitiveness in the future.
• The planned actions include personnel reductions, reorganisation and operating model development.
  The actions would impact all Caverion countries with a minor impact on the best-performing countries Finland and Austria.
• The resulting savings including some other cost-cutting measures are estimated to be at least EUR 25 million for 2021. The initially estimated restructuring costs amount to approximately EUR 10 million in Q4/2020.
• A part of the savings will be invested in growing particularly the digital and smart technology businesses across divisions. At the same time, Caverion increases its customer-centricity and strengthens its foundation for profitable growth.

3. Cash flow and financing

15 Interim Report 1-9/2020

Cash flow development

Cash flow negatively impacted by postponed authority payments paid in Q3

﴿ Operating cash flow before	Operating cash flow before financial and tax items, EUR million
financial and tax items was		2019: 143.7		1-9/2020: 76.3 (63.0)
EUR -28.0 (3.8) million in Q3/2020.				80.6	56.1
﴿ Cash flow was negatively impacted	30.1	29.1		48.2
3.8
	by postponed authority payments of
	EUR 22.4 million paid in Q3.
﴿ Free cash flow was EUR							-28.0
-30.5(-2.5) million in Q3/2020.	Q1/19	Q2/19	Q3/19	Q4/19	Q1/20	Q2/20	Q3/20
﴿ Operating cash flow before
financial and tax items was EUR	Free cash flow, EUR million			Capex, EUR million
76.3 (63.0) million in 1-9/2020.
﴿	Up 21.1% year-on-year	27.0	25.2		59.5	46.0	45.0
﴿	Cash conversion (LTM) 138.2%		24.4
﴿ Capex was EUR 13.3 (13.9) million	4.4	3.8	5.7		8.3	4.0	1.1
in 1-9/2020.
		-2.5
﴿ IT investments: EUR 7.1m (6.3m)
﴿	Other investments incl. acquisitions:	Q1/19	Q2/19	Q3/19	Q4/19	Q1/20	Q2/20	-30.5
	EUR 6.2m (7.7m)	Q3/20

Free cash flow = Operating cash flow before financial and tax items - Taxes paid - Net cash used in investing activities (net, including acquisitions and disposals).

16 Interim Report 1-9/2020

Working capital development

Improvement in working capital year-on-year

• Working capital improvement continued year-on-year.
• • Working capital of EUR -94.5(-46.8) million at the end of September
• Actions completed in recent years:
• • Tight weekly follow up of invoicing and receivables
  • Negotiating improved payment terms in purchases and projects
  • Focus on resolving old risk projects
  • Invoicing related KPIs and competitions at various levels of the organisation, centralised management of invoicing

Working capital, EUR million % of sales, (LTM)

-3%	-4%	-2%	-5%	-6%	-7%	-4%
-60.4	-80.8	-46.8
				-94.5
		-100.9
			-127.3
				-161.3

Q1/19 Q2/19 Q3/19 Q4/19 Q1/20 Q2/20 Q3/20

17 Interim Report 1-9/2020

Continued efforts to improve working capital have paid off

Improvement in Finland, Austria, Sweden, Industry and Germany

Working capital by division									Q3/2019	Q3/2020
EUR million
40
									-8.8
20
0
-20					-15.4
								-5.3
-40
										-46.8
-60
		-14.7
-80
-100											-94.5
-120
	Norway	Finland	Austria	Sweden	Denmark	Other	Industry	Germany		Group
								Countries

18 Interim Report 1-9/2020

Debt maturity

Net debt (excl. lease liabilities) at a low level, debt maturity structure extended

Debt maturity structure 30 September 2020

EUR million

Lease liabilities		Existing debt		RCF (undrawn)

100

													128
						3
								3
																3				2
		2
				39.8		28.2		19.3				11	7				23.4
	9
2020	2021	2022	2023	2024		2025->

Net debt EURm 55.3 (41.7) excl. lease liabilities or EURm 187.5 (172.9) incl. lease liabilities on 30 September 2020

Maturity of bank loan facilities extended in June

﴿ Maturity of term loan (EUR 50m) and unutilised RCF (EUR 100m) extended to February 2023.

EUR 75m senior unsecured 4-year bond matures in March 2023.

New EUR 35.0m hybrid bond in May and redemption of old EUR 66.1m hybrid notes in June

﴿ EUR 35.0m hybrid has first call date in May 2023.

EUR 15m TyEL pension loan in April, maturity 5 years ﴿ EUR 1.5m loan repayments semi-annually

19 Interim Report 1-9/2020

Low leverage and strong liquidity

Net debt excl. lease liabilities (EURm) 141

3.4x 4.1x 2.9x

1.8x	50	7
	1.1x

0.2x 0.2x

Net debt (excl. lease liabilities) /EBITDA (12m)

						98	78
27			42					55
	25
		1.4x				10
		1.1x			1.1x
	0.7x
							0.8x
		0.8x
									0.1x

Financial covenant Net debt/EBITDA

﴿ Net debt/EBITDA in Q3/2020 was 0.8x (1.1x)
	according to confirmed calculation principles with
	lending parties.
﴿	The covenant level shall not exceed 3.5x.
﴿	The confirmed calculation principles exclude the

Q2/17 Q3/17 Q4/17 Q1/18 Q2/18 Q3/18 Q4/18 Q1/19 Q2/19 Q3/19 Q4/19 Q1/20 Q2/20 Q3/20

Net Debt and the Net Debt/EBITDA calculated according to confirmed calculation principles with lending parties.

Gross debt to net debt on 30 September 2020 (EURm) excluding lease liabilities

				3			85		55
	137
			Short-term	Cash and cash
Long-term	Net debt
borrowings	borrowings	equivalents

effects of the IFRS 16 standard.

Strong liquidity position and high amount of undrawn credit facilities on 30 September 2020

• Cash and cash equivalents of EURm 84.8 (83.4)
• In addition, undrawn revolving credit facilities of EUR 100.0m and undrawn overdraft facilities of EUR 19.0m

4. Guidance and dividend

21 Interim Report 1-9/2020

Guidance and dividends

Guidance for 2020

• Caverion announced on 14 April 2020 that it withdraws its guidance for 2020 due to the increased uncertainty around the market outlook as a result of the corona pandemic.
• Due to the continued corona pandemic and economic uncertainty experienced at the end of the third quarter, Caverion has decided not to give any guidance for the remainder of 2020. Caverion's target is to provide guidance for 2021 in conjunction with the publication of its financial statements release for 2020.

Dividend

• Caverion's AGM held on 25 May 2020 resolved that no dividends will be distributed based on the balance sheet for 2019 by a resolution of the AGM, but that the Board of Directors is authorised to decide at their discretion on the distribution of dividends of a maximum amount of EUR 0.08 per share from retained earnings.

22 Interim Report 1-9/2020

Fit for Growth strategy

DIGITALISATION

SUSTAINABILITY

PURPOSE

We enable performance and people's wellbeing in smart and

sustainable built environments

MUST-WINS

Excellent customer	Sustainable
experience	solutions
VALUES

VISION

First choice in digitalising environments

Top performance	Winning team
at every level

MUST-HAVES

Step ahead | Cooperation | Responsibility | High performance	Safety | Quality

24 Interim Report 1-9/2020

Key figures

EUR million	7-9/20	7-9/19	Change	1-9/20	1-9/19	Change	1-12/19
Order backlog		1,627.7	1,676.9		-2.9%		1,627.7	1,676.9		-2.9%		1,670.5
Revenue		515.5	507.5	1.6%		1,575.6	1 534.2		2.7%		2 123.2
Adjusted EBITDA		34.8	36.2	-3.8%		79.6	73.3		8.5%		120.4
Adjusted EBITDA margin, %		6.8	7.1				5.0	4.8			5.7
EBITDA		31.4	35.3	-11.1%		77.7	67.1		15.8%		103.0
EBITDA margin, %		6.1	7.0				4.9	4.4			4.8
Adjusted EBITA		21.2	23.0	-7.8%		38.1	33.5		13.7%		67.2
Adjusted EBITA margin, %		4.1	4.5				2.4	2.2			3.2
EBITA		17.7	22.1	-19.6%		36.1	27.3		32.4%		49.8
EBITA margin, %		3.4	4.4				2.3	1.8			2.3
Operating profit		13.9	18.9	-26.5%		25.3	16.4	54.3%		35.3
Operating profit margin, %		2.7	3.7				1.6	1.1			1.7
Earnings per share, undiluted, EUR		0.06	0.08	-27.1%		0.08	0.04		105.1%		0.14
Operating cash flow before financial and tax		-28.0	3.8				76.3	63.0		21.1%		143.7
items
Cash conversion (LTM), %							138.2	177.5				139.5
Working capital							-94.5	-46.8		-101.9%		-100.9
Interest-bearing net debt							187.5	172.9		8.4%		168.4
Net debt/EBITDA							0.8	1.1			1.4
Gearing, %							93.8	79.5				73.6
Equity ratio, %							19.8	22.6				21.5
Personnel, end of period							15,649	14,606		7.1%		16,273

25 Interim Report 1-9/2020

Directly registered shareholders on 30 September 2020

Largest shareholders	Shares, pcs	% of	Change after
1			shares	6/2020, pcs
Herlin Antti	20,504,392	14.8	639
2	Fennogens Investments SA (Ehrnrooth family)	14,169,850	10.2	0
3	Varma Mutual Pension Insurance Company	9,728,407	7.0	0
4	Mandatum companies	5,670,083	4.1	-3,500
5	Ilmarinen Mutual Pension Insurance Company	3,780,000	2.7	-77,142
6	Elo Mutual Pension Insurance Company	3,081,001	2.2	650,000
7	Säästöpankki funds	2,985,255	2.1	50,000
8	Caverion Oyj	2,807,991	2.0	0
9	The State Pension Fund	2,050,000	1.5	0
10	Fondita funds	1,529,910	1.1	-10,090
11	Brotherus Ilkka	1,403,765	1.0	0
12 Nordea funds	1,388,778	1.0	-248,384
13	Aktia funds	1,370,000	1.0	-88,099
14	Evli funds	1,245,000	0.9	-1,272,000
15 Kaleva Mutual Insurance Company	969,025	0.7	0
16	Ari Lehtoranta	917,051	0.7	0
17	Sinituote Oy	672,400	0.5	0
18	OP funds	519,574	0.4	-32,634
19	Wipunen Varainhallinta Oy	500,000	0.4	-25,000
20	Kirkon Eläkerahasto	357,000	0.3	0
	20 largest, total	75,649,482	54.5
	All shares138,920,092	100.0

Sector distribution (9/2020)

Nominee reg. and non-Finnish

30.4% (Jun 30: 29.8%)

Households

17.6% (17.7%)

General government

13.6% (13.2%)

26,710

owners Financial and insurance

corporations 10.4% (11.4%)

Non-profit institutions

3.3% (3.3%)

Non-financial corporations and housing corporations

24.6% (24.6%)