Interim Report Q1 2019
Interim Report Q1 2019
Contents
MANAGEMENT'S REVIEW
FINANCIAL STATEMENTS
Letter from the CEO
3
Primary statements
13
Quarterly highlights
4
Sections
19
Key figures
5
Quarterly results
6
Performance by business unit
9
Management's statement
12
Falck Interim Report Q1 2019
2
Management's review
Letter from the CEO
Falck improves profitability and cash flow - accelerates cultural turnaround
First quarter of 2019 continued the trajectory from 2018 as underlying profitability and free cash flow improved on slightly lower revenue. This is confirmation of the financial and strategic turnarounds that we announced in November 2017.
The improved profitability is a result of the efficiency programme that was implemented in 2018 and continues into this year. In the quarter, we signed agreements for the divestment of clinics in Poland and Chile and continued to invest in implementing global operating models that improve quality and efficiencies in our key processes. We won and started preparing for an important contract for patient transport services in London, initiated an extended contract for ambulance services in Stockholm and started preparing for the large ambulance contract in Alameda, California, which we will take over in July 2019.
Comprehensive self-cleaning programme An important first step in the cultural turnaround is our comprehensive self-cleaning programme, Clear, that we announce with the release of this interim report. Falck has initiated this self-cleaning programme following the ruling by the Danish Competition Council on 30 January 2019 that Falck had violated Danish competition law in 2014-15.
Falck has made significant changes since then. In 2017, Falck established a global compliance function, and in 2018, reintroduced our Code of Conduct and conducted training in the Code of Conduct and in competition law. Finally, Falck reintroduced its Falck Alert whistleblower system to ensure that more employees and partners raise their concerns about potential irregularities or improper actions, aiming to create a culture of full transparency.
applying a zero-tolerance approach to ensure that quality and ethics always take priority at Falck.
The ruling was an embarrassment to Falck. We live from helping and being trusted by people in urgent need and from meeting the expectations of public customers and insurance companies. This is what our employees take pride in and this is what our customers and society expect from us.
Through our initiatives and by operating in an ethical and transparent manner, we believe we can rebuild this trust, move forward from our current situation and successfully complete our triple turnaround. Financially and strategically we have made good progress. Our Clear self-cleaning programme will reinforce and accelerate our cultural turnaround.
Progressing well on our financial and strategic turnarounds, we will now accelerate our cultural turnaround. The cultural turnaround aims at building the emergency response and healthcare category by being a great place to work, by exploring new ways of working with our customers and by always giving priority to quality and ethics.
The Clear self-cleaning programme reinforces these initiatives by compensating parties who have suffered foreseeable and documented loss resulting from the conduct of Falck that led to the ruling by the Competition Council, by carrying out an internal review that identifies and deals with past or present violations of our Code of Conduct, and by
Jakob Riis President and CEO
Falck Interim Report Q1 2019
3
Management's review
Quarterly highlights
Revenue
DKK million
4,000 3,532 3,588 3,000
3,532 3,587
2,000
1,000
0 Q1 2019 Q1 2018 Reported
Q1 2019 Q1 2018 Local currencies
EBITA
DKK million
400 327
300
187 200
250 187
100
0 Q1 2019 Q1 2018
Reported
Q1 2019 Q1 2018 Underlying
Free cash flow
DKK million
800 683
600
400
307
200
0
Q1 2019 Q1 2018 Reported
Falck Interim Report Q1 2019
Economic profit
DKK million
0
-200
-400 (355)
-600
-800
(761)
Q1 2019 Q1 2018 Reported
Key events in Q1 2019
Revenue down by 1.5% in local currencies ? Revenue declined to DKK 3,532 million (DKK 3,588 million) due to divestments,
contract pruning and a lower subscription volume.
Underlying profitability up by 1.9 percentage points ? Underlying EBITA increased to DKK 250 million (DKK 187 million), yielding an
underlying EBITA margin of 7.1% (5.2%), when adjusted for positive impact from the sale of office buildings in Denmark and the implementation of IFRS 16. Improved EBITA was driven by continuing efficiency measures. ? Underlying EBITA margins improved across all business units with Ambulance at 7.4% (5.2%), Assistance at 19.4% (13.9%), Healthcare at 6.6% (3.9%) and Portfolio Businesses at 6.3% (5.5%).
Free cash flow and economic profit improved, net debt reduced ? Free cash flow improved to DKK 683 million (DKK 307 million) due to a stronger
underlying performance and reduced investment in fixed assets. Interest and amortisations on finance lease liabilities had a positive impact of DKK 144 million. ? Economic profit improved to negative DKK 355 million (negative at DKK 761 million) due to an increased underlying EBITA. ? Net interest-bearing debt was reduced from DKK 5,260 million to DKK 4,369 million (including lease liabilities of DKK 2,109 million related to the implementation of IFRS 16), through solid cash generation and conversion of shareholder loans into equity.
Outlook for 2019 maintained ? For the full-year 2019, Falck expects to improve its operating profit (EBITA)
compared to 2018, on flat revenue. ? 2019 results are expected to be negatively impacted by payment of a potential fine
and compensation claims for documented losses following the ruling by the Danish Competition Council.
4
Numbers in brackets refer to Q1 2018
Management's review
Key figures
DKK million
Income Statement Revenue Operating profit before other items (EBITA) Operating profit (EBIT) Net financial items Profit for the year from continuing operations Profit for the year from discontinued operations
Balance sheet Total assets Net operating assets Total equity Subordinated shareholder loans Net interest-bearing debt
Cash flows and investments Cash flows from operating activities Free cash flow Investments in intangible assets and property, plants and equipment
Key figures Economic profit EBITA margin (%) Cash conversion rate (%) Equity ratio (%)2) Net interest-bearing debt to EBITDA (factor)1) FTEs
Falck Interim Report Q1 2019
Q1 2019
3,532 327 274 (128) 87 -
14,516 9,063 4,596 4,369
532 683 (322)
(355) 9.3
208.6 31.7 1.90
25,324
Q1 20181)
3,588 187 118 (106) 2 6
14,052 7,772 3,087 2,059 5,260
339 307 (124)
(761) 5.2
164.0 36.4 3.27
27,124
20181)
14,043 275 28 (439) (517) (398)
12,337 7,233 2,207 2,220 4,961
764 790 (365)
(278) 2.0
287.5 35.9 2.62
25,583
1) Excluding impact from the IFRS 16 reporting standards, cf. section 1. 2) Equity ratio includes subordinated shareholder loans.
In 2018, Falck Safety Services and Danish medical clinics were presented as discontinued operations and assets classified as held for sale. See section 3 and 4. In general, the financial and non-financial data are stated excluding discontinued operations.
5
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