Interim Report Q1 2019 - Falck
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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 Comprehensive self-cleaning programme applying a zero-tolerance approach to ensure
from 2018 as underlying profitability and free An important first step in the cultural that quality and ethics always take priority at
cash flow improved on slightly lower revenue. turnaround is our comprehensive self-cleaning Falck.
This is confirmation of the financial and programme, Clear, that we announce with
strategic turnarounds that we announced in the release of this interim report. Falck The ruling was an embarrassment to Falck.
November 2017. has initiated this self-cleaning programme We live from helping and being trusted by
following the ruling by the Danish Competition people in urgent need and from meeting
The improved profitability is a result of the Council on 30 January 2019 that Falck had the expectations of public customers and
efficiency programme that was implemented violated Danish competition law in 2014-15. insurance companies. This is what our
in 2018 and continues into this year. In the employees take pride in and this is what our
quarter, we signed agreements for the Falck has made significant changes since customers and society expect from us.
divestment of clinics in Poland and Chile and then. In 2017, Falck established a global
continued to invest in implementing global compliance function, and in 2018, reintroduced Through our initiatives and by operating in an
operating models that improve quality and our Code of Conduct and conducted training ethical and transparent manner, we believe
efficiencies in our key processes. We won and in the Code of Conduct and in competition we can rebuild this trust, move forward
started preparing for an important contract law. Finally, Falck reintroduced its Falck Alert from our current situation and successfully
for patient transport services in London, whistleblower system to ensure that more complete our triple turnaround. Financially
initiated an extended contract for ambulance employees and partners raise their concerns and strategically we have made good
services in Stockholm and started preparing about potential irregularities or improper progress. Our Clear self-cleaning programme
for the large ambulance contract in Alameda, actions, aiming to create a culture of full will reinforce and accelerate our cultural
California, which we will take over in July 2019. transparency. turnaround.
Progressing well on our financial and strategic The Clear self-cleaning programme reinforces
turnarounds, we will now accelerate our these initiatives by compensating parties who
cultural turnaround. The cultural turnaround have suffered foreseeable and documented
aims at building the emergency response and loss resulting from the conduct of Falck Jakob Riis
healthcare category by being a great place to that led to the ruling by the Competition President and CEO
work, by exploring new ways of working with Council, by carrying out an internal review
our customers and by always giving priority to that identifies and deals with past or present
quality and ethics. violations of our Code of Conduct, and by
Falck Interim Report Q1 2019 3Management’s review
Quarterly highlights
Revenue EBITA
DKK million DKK million
Key events in Q1 2019
4,000 400
3,532 3,588 3,532 3,587 Revenue down by 1.5% in local currencies
327
3,000 300 • Revenue declined to DKK 3,532 million (DKK 3,588 million) due to divestments,
250
contract pruning and a lower subscription volume.
187 187
2,000 200
Underlying profitability up by 1.9 percentage points
1,000 100
• Underlying EBITA increased to DKK 250 million (DKK 187 million), yielding an
0 0 underlying EBITA margin of 7.1% (5.2%), when adjusted for positive impact
Q1 2019 Q1 2018 Q1 2019 Q1 2018 Q1 2019 Q1 2018 Q1 2019 Q1 2018 from the sale of office buildings in Denmark and the implementation of IFRS 16.
Reported Local currencies Reported Underlying 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 Economic profit • Free cash flow improved to DKK 683 million (DKK 307 million) due to a stronger
DKK million DKK million 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)
800 0
Numbers in brackets refer to Q1 2018
683 due to an increased underlying EBITA.
600 -200 • 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
-400 (355)
400
307 IFRS 16), through solid cash generation and conversion of shareholder loans into
-600
equity.
200
0
-800 (761) Outlook for 2019 maintained
Q1 2019 Q1 2018
• For the full-year 2019, Falck expects to improve its operating profit (EBITA)
Q1 2019 Q1 2018
Reported compared to 2018, on flat revenue.
Reported
• 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.
Falck Interim Report Q1 2019 4Management’s review
Key figures
DKK million Q1 2019 Q1 20181) 20181)
Income Statement
Revenue 3,532 3,588 14,043
Operating profit before other items (EBITA) 327 187 275
Operating profit (EBIT) 274 118 28
Net financial items (128) (106) (439)
Profit for the year from continuing operations 87 2 (517)
Profit for the year from discontinued operations - 6 (398)
Balance sheet
Total assets 14,516 14,052 12,337
Net operating assets 9,063 7,772 7,233
Total equity 4,596 3,087 2,207
Subordinated shareholder loans - 2,059 2,220
Net interest-bearing debt 4,369 5,260 4,961
Cash flows and investments
Cash flows from operating activities 532 339 764
Free cash flow 683 307 790
Investments in intangible assets and property, plants and equipment (322) (124) (365)
Key figures
Economic profit (355) (761) (278)
EBITA margin (%) 9.3 5.2 2.0
Cash conversion rate (%) 208.6 164.0 287.5 1) Excluding impact from the IFRS 16 reporting standards, cf. section 1.
2) Equity ratio includes subordinated shareholder loans.
2)
Equity ratio (%) 31.7 36.4 35.9
In 2018, Falck Safety Services and Danish medical clinics were presented as
Net interest-bearing debt to EBITDA (factor)1) 1.90 3.27 2.62 discontinued operations and assets classified as held for sale. See section 3 and 4.
FTEs 25,324 27,124 25,583 In general, the financial and non-financial data are stated excluding discontinued
operations.
Falck Interim Report Q1 2019 5Management’s review
Quarterly results
In the first quarter of 2019, profitability increased on lower business as a part of the Healthcare business At Falck’s general meeting in March 2019,
revenue. Free cash flow improved and net interest-bearing debt unit, and this business is no longer presented equity was increased by DKK 2,270 million from
as discontinued operations. conversion of shareholder loans of DKK 2,269
was reduced following the conversion of shareholder loans to
million and capital injection of DKK 1 million.
equity. Net financial items increased by DKK 22 After the capital increase major shareholders
million primarily due to implementation of the of Falck are: Lundbeckfonden (59.15%), KIRKBI
IFRS 16 reporting standards. (28.59%), TryghedsGruppen (11.94%).
Financial results However, reported EBITA was positively
impacted by a one-off gain of DKK 65 million Free cash flow Up until the conversion, interest amounted
Revenue from the sale of office buildings in Denmark Free cash flow was DKK 683 million (DKK to DKK 50 million, and due to the conversion,
Reported revenue amounted to DKK 3,532 and by DKK 12 million due to changes in 307 million), driven by a stronger underlying interest expenses in the remaining three
million (DKK 3,588 million), resulting in a recognition of lease assets under the new performance and reduced investment in fixed quarters of the year will be lower. After the
revenue decline of 1.5% in local currencies IFRS 16 reporting standards. Adjusted assets in both Ambulance and Assistance. conversion of shareholder loans to equity, net
compared to Q1 2018. for the one-off gain and IFRS standards Part of the improvement related to the sale of interest-bearing debt was reduced from DKK
implemented, underlying EBITA amounted to office buildings in Denmark (DKK 89 million). 5,260 million to DKK 4,369 million (including
The decline in revenue was primarily caused DKK 250 million (DKK 187 million), yielding an Interest and amortisations on finance lease lease liabilities of DKK 2,109 million related to
by contract pruning and divestments in underlying EBITA margin of 7.1% (5.2%). liabilities had a positive impact of DKK 144 the implementation of IFRS 16). Equity ratio
Ambulance and by a decline in the Assistance million. Adjusted for this, free cash flow was was 31.7% (36.4%).
subscription portfolio. The EBITA increase was driven by efficiency DKK 539 million.
gains across all business units and effective For covenant purposes, net interest-bearing
Cost of services price management in the Ambulance business, Economic profit debt to EBITDA factor is calculated excluding
Cost of services decreased by DKK 124 million though partly offset by costs related to the Economic profit improved compared to impact on finance leases related to the
Numbers in brackets refer to Q1 2018
compared to Q1 2018 excluding non-recurring establishment of a global operating model Q1 2018 but was still negative at DKK 355 implementation of the IFRS 16 reporting
costs, resulting in a gross profit improvement in IT. million (negative at DKK 761 million). The standards.
of DKK 3.5% compared to Q1 2018. Sales improvement was due to an increase in
and administrative costs decreased by DKK Profit for the period underlying EBITA. Implementation of the Operational results
18 million, however still negatively impacted Profit for the period was DKK 87 million (DKK IFRS 16 reporting standards impacted net
by the implementation of global operating 8 million), mainly due an improved underlying operating assets by DKK 2,225 million. Throughout the quarter, Falck continued to
models in Finance and IT. EBITA, partly offset by increased net financial win and renew contracts, including patient
items. Equity and subordinated loans transport services for Imperial College
Operating profit In January 2019, TryghedsGruppen acquired Healthcare, London, ambulance services
Reported operating profit before other items In Q1 2019, Falck divested its clinics in Chile the Falck shares owned by Liberatio (6.7%). in Anaheim, California, and fire services
(EBITA) increased to DKK 327 million (DKK 187 and recognised a loss of DKK 10 million. Falck contracts in Denmark, the UK and the
million). decided to keep the Healthcare staffing Netherlands.
Falck Interim Report Q1 2019 6Management’s review
Effective from the end of Q1, Falck’s DKK 500 million compared to 2018 and with EBITA effect of efficiency programme Global Compact is in line with Falck’s overall
ambulance contract in Poland expired and will full effect in 2020. focus to increase transparency, strengthen
not be prolonged, as the Polish government DKK governance processes and accelerate focus on
million
has decided to insource all ambulance 2019 initiatives are in the detailing phase and compliance.
business. In the quarter, Falck also signed an significant effects are expected to derive 600 In March, Lars Vester Pedersen stepped down
agreement for the divestment of its Polish from operational optimisation, reduction in as EVP of Assistance and member of the
400
medical clinics, which are a non-core business overhead costs and procurement initiatives. Executive Management team and will retire
area for Falck. Similarly, Falck divested its Efficiency initiatives are being planned from Falck at the end of 2019. CEO Jakob Riis
200
clinics in Chile. across business units as well as for the global has taken over as interim Head of Assistance
functions. Falck expects to see effects from 0 until a new EVP has been appointed.
Global operating models the 2019 initiatives materialising in the Q1 Q2 Q3 Q4 Q1
Falck is making progress to operate as one beginning of Q3 2019. The efficiency initiatives 2018 2019 Exiting the quarter, the number of full-time
company with the same values, mindset carried out in 2018 continue to contribute employees (FTEs) was 25,324 (27,124). The
and business model. The roll-out of global significantly to improving profitability as they reduction was caused partly by redundancies
operating models continued in the quarter. are materialising. Ambulance, supported by operational following cost optimisation, partly by
systems in fleet management, dispatch and divestments and partly by the exiting of
In Ambulance, the first efficiency benefits In Q1 2019, the efficiency programme had a planning. contracts.
were reaped from the global roll-out of the positive impact on EBITA of DKK 130 million
fleet management system and the partial and in total, the programme had increased 2) Reduction of overhead costs, primarily
roll-out of the global dispatch system. EBITA by DKK 442 million exiting Q1 2019. The through roll-out of global operating models
effects were partly a result of optimisation in Finance, IT and HR and outsourcing of
In IT, the transformation process is more initiatives where 1,200 full-time employees transactional finance processes and IT
Numbers in brackets refer to Q1 2018
comprehensive than anticipated due to the (FTEs) were made redundant throughout infrastructure.
complexity of Falck’s business and IT setup. 2018. The FTE reduction was carried out
In Q1, focus was on finalising the transition across business units with approximately 3) Procurement initiatives including
of Falck’s infrastructure and IT services 45% in Ambulance, 30% in Assistance, 10% in renegotiation of contracts and
to the external provider, HCL, as well as Healthcare and 15% in global functions. consolidation of vendors and products.
implementing a global IT operating model.
Falck’s efficiency programme builds on three People and organisation
Efficiency programme pillars: In January 2019, Falck became a signatory to
Entering Q1 2019, Falck announced that the the UN Global Compact, thereby formalising
efficiency and cost optimisation programme 1) Operational optimisation across business its commitment to contribute to a socially,
will continue through 2019 with the ambition units, notably the implementation of environmentally and economically sustainable
of reducing Falck’s cost base by an additional standardised global core processes in development. The commitment to the UN
Falck Interim Report Q1 2019 7Management’s review
Outlook 2019
For the full year 2019, Falck expects to
improve its operating profit (EBITA) compared Ruling from the Danish Competition Self-cleaning programme The Clear self-cleaning programme builds
to 2018, on flat revenue. The company will Authorities on the initiatives taken from 2016 up until
continue to prune its portfolio of unprofitable Following the ruling by the Danish now.
contracts and services and to ensure effective On 30 January 2019, Falck received a Competition Council, Falck has initiated a
price management across its business. ruling from the Danish Competition comprehensive self-cleaning programme, Falck has established a new executive
Council for having violated the Danish Clear, to ensure transparency and a zero- management team, and 80% of all top 30
Falck expects its efficiency and cost competition rules in connection with the tolerance and speak-up culture on ethics. leaders have onboarded in 2017 or later.
optimisation programme to contribute award and transfer of the ambulance
significantly to improving profitability in 2019, operation contract in the Region of The Clear self-cleaning programme In 2017, Falck established a global
with significant impact from operational Southern Denmark to a new provider aims at: compliance function, and in 2018,
optimisation, reduction of overhead costs as (BIOS) in 2014-15. reintroduced its Code of Conduct and
well as procurement initiatives. •C
ompensating parties who have conducted training in the Code of
Costs related to Falck’s continuing Falck decided to refrain from appealing suffered foreseeable and documented Conduct and in competition law.
restructuring activities are expected to the ruling, and the case was then referred loss resulting from the conduct of Falck
continue into 2019. These include costs related to SØIK (the State Prosecutor for Serious that led to the ruling of the Competition Finally, Falck reintroduced its Falck Alert
to divestments, transformation costs and Economic and International Crime) Council. whistleblower system to ensure that
costs related to building global operating for determination of a potential fine. more employees and partners raise their
models. SØIK has not yet informed Falck of the •C
arrying out an internal review that concerns about potential irregularities
expected timing for a decision in the case. identifies and deals with past or present or improper actions, aiming to create a
2019 results are expected to be negatively violations of the Code of Conduct. culture of full transparency.
impacted by payment of a potential fine BIOS and the Region of Southern
and compensation claims for documented Denmark have expressed their intention • Applying a zero-tolerance approach to
losses following the ruling by the Danish or possibility to raise compensation claims ensure that quality and ethics always
Competition Council. In the Q1 2019 reporting, against Falck. However, Falck has not take priority at Falck.
however, Falck has not recognised a provision received any such claims yet.
for neither a fine nor compensation claims due
to uncertainty about the amount and timing.
Falck Interim Report Q1 2019 8Management’s review
Performance by business unit
Ambulance
Financial performance price contracts in Denmark and Sweden. Business update Revenue
Profitability improved driven by efficiency The number of services in the US, which Two important contracts were initiated in DKK million
gains and effective price management. accounted for 70% of pay-on-use revenue in the quarter: patient transport services for
1,922 1,920 1,922 1,936
Revenue declined moderately due to the quarter, declined by 20% mainly due to the Capital Region of Denmark and extended 2,000
100 100
divestments and contract pruning. the exiting of non-profitable contracts and ambulance services in Stockholm. In addition, 1,500
seasonal variations in trip patterns. In the Falck signed a large contract on patient 1,000
500
Revenue private subscription business, the number of transport services with Imperial College
0
Reported revenue was DKK 1,922 million subscribers was at level with Q1 2018, with Healthcare in West London following an open Q1 2019 Q1 2018 Q1 2019 Q1 2018
(DKK 1,920 million), resulting in a decline at stable churn rate compensated by the public tender, and preparations started for Reported Adjusted
in revenue of 0.7% in local currencies. The acquisition of new subscribers. an extensive ambulance contract in Alameda,
decline in revenue was primarily caused by California, which Falck will take over in July
the divestment of Falck’s Finnish ambulance Operating profit 2019.
business and contract pruning in the pay-on- Operating profit before other items (EBITA) EBITA
use business. increased to DKK 143 million (DKK 100 Efficiency gains were reaped from the global DKK million
million), yielding an EBITA margin of 7.4% roll-out of the fleet management system,
143 143
The exit from the ambulance business in (5.2%). The increase in EBITA across markets covering the entire fleet of 4,300 operating 150
Finland in Q3 2018 impacted fixed contract was driven by efficiency gains across the vehicles, and the partial roll-out of the global 100 100
100
revenue negatively by 3.3%. The decline business and effective price management. dispatch system, which by year-end 2018 had
50
in revenue was partly offset by new fixed reached 53% of front-end employees and will
0
Efficiencies caused a margin increase of 3.5% continue through 2019, when implementation
Q1 2019 Q1 2018 Q1 2019 Q1 2018
on fixed contracts. In the US pay-on-use of the resource planning system will also Reported Underlying
Revenue by contract type business, margin increased by 1.9% as a result commence.
of the exiting of non-profitable contracts
Numbers in brackets refer to Q1 2018
Other and effective price management. Margins The number of full-time employees (FTEs)
Private 3%
subscriptions*** for private subscriptions increased by 2%, was reduced by 1,243, primarily as a result of
8%
primarily due to effective price management operational optimisation and divestments. Key figures
with stable frequency of usage.
In Q1, Falck launched an electric ambulance DKK million Q1 2019 Q1 2018 2018
Pay-on-use Fixed Free cash flow prototype, built on a Tesla car with fuel cells
contracts** contracts*
35% 54% Free cash flow increased to DKK 211 million added to provide additional power to reliably Revenue 1,922 1,920 7,659
EBITA 143 100 192
(DKK 111 million). The development was run medical equipment and sirens.
EBITA margin (%) 7.4 5.2 2.5
primarily driven by improvement in underlying
Free cash flow 211 111 546
performance and lower investment in fixed
* primarily in Denmark, Sweden, Spain, Slovakia and Poland Economic profit (44) (504) (91)
assets but offset by lower cash collection in
** primarily in the US, the UK and Germany
FTEs 18,389 19,632 18,511
*** in Colombia-based Group EMI the US.
Falck Interim Report Q1 2019 9Management’s review
Performance by business unit
Assistance
Financial performance The number of trips in the pay-on-use Free cash flow Revenue
Profitability improved driven by efficiency business declined by 17%, reaching normalised Free cash flow was DKK 361 million (DKK DKK million
initiatives and effective price management. levels compared to an extraordinarily high 263 million), driven by stronger underlying
Revenue declined due to a decline in the Q1 2018. The decline was partly offset by an performance and lower investment in fixed 900 744 799 744 795
number of private subscriptions. increased revenue per trip. assets but offset by fewer prepaid public 600
firefighting contracts. 300
Revenue In the fixed contract business for public
0
Reported revenue was DKK 744 million (DKK firefighting, revenue was slightly lower than in Business update Q1 2019 Q1 2018 Q1 2019 Q1 2018
799 million), resulting in a revenue decline Q1 2018 due to contract losses. In the quarter, Falck extended its contract Reported Adjusted
of 6.4% in local currencies. The decline was with the largest insurance company in Finland,
primarily due to a decline in the number Operating profit OP, where Falck now handles car damage
of private subscriptions and loss of public Operating profit before other items (EBITA) teleclaims on top of roadside assistance
firefighting contracts, partly offset by increased to DKK 144 million (DKK 111 million), services. Within public firefighting, Falck EBITA
effective price management. yielding an EBITA margin of 19.4% (13.9%). The entered into a new eight-year agreement DKK million
increase was driven by efficiency initiatives providing fire services to six Danish
The number of private subscriptions declined and low frequency of use. municipalities in eastern Zealand. 144 144
150
111 111
by 8%, as churn rate was not sufficiently
100
compensated by the number of new Efficiency initiatives carried out in 2018 In order to increase customer satisfaction and
50
subscribers. However, revenue per subscription continued to contribute significantly to reduce churn, Assistance implemented a new
0
increased slightly. improving profitability as they materialised, customer experience strategy, which entails
Q1 2019 Q1 2018 Q1 2019 Q1 2018
most importantly the changed operating designing consistent end-to-end customer Reported Underlying
Revenue by contract type model with increased use of franchisers and journeys, clarifying responsibilities and
sub-contractors, better utilisation of call establishing consistent monitoring routines. In
Numbers in brackets refer to Q1 2018
centres and optimisation of the network of addition, new business intelligence solutions
Fixed contracts***
14% Falck stations in Denmark. were built, which will provide better insights
and easier follow-up on KPIs. An important Key figures
In the subscription business, costs went down optimisation initiative was the merging of the
Pay-on-use Private due to a decline in frequency by 16% caused by Norwegian and Swedish assistance centres, DKK million Q1 2019 Q1 2018 2018
contracts** subscriptions* benign weather conditions in Denmark. In the allowing more efficient coordination of
26% 60%
pay-on-use business, EBITA was at the same workload across the joint group of operators. Revenue 744 799 2,993
EBITA 144 111 415
level as in Q1 2018.
EBITA margin (%) 19.4 13.9 13.9
The number of full-time employees (FTEs)
Free cash flow 361 263 305
* primarily in Denmark and Sweden was reduced by 328, primarily as a result of
** with insurfance and automotive companies in the Nordics Economic profit 66 (53) 37
operational optimisation.
and Baltics
FTEs 1,594 1,922 1,728
*** long-term public firefighting contracts in Denmark
Falck Interim Report Q1 2019 10Management’s review
Performance by business unit
Healthcare Portfolio Businesses
Financial performance Business update Portfolio Businesses consist of the two service Free cash flow improved to DKK 17 million
Reported revenue was DKK 638 million (DKK During the quarter, a healthcare service areas Industrial Fire Services and Global (negative at DKK 32 million), mainly driven by
642 million), resulting in an increase in revenue agreement with the Volvo Group was initiated Assistance. lower investment in fixed assets and improved
of 1.6% in local currencies. with Falck taking over Volvo’s internal cash collection in Global Assistance.
occupational healthcare service. Financial performance
The increase in revenue was primarily due to Reported revenue was DKK 291 million (DKK Business update
increased activity in Denmark and Norway, After a challenging 2018 with negative 290 million), resulting in a flat revenue growth Industrial Fire Services won and renewed a
partly offset by a decrease in physical earnings, Q1 2019 showed early signs that in local currencies. number of contracts in the quarter. These
treatments on pay-on-use contracts in Sweden. the turnaround in Healthcare is progressing, include two contracts for security services
though there is also a positive impact from Revenue was positively impacted by new in the UK, a new 10-year contract for the
Operating profit before other items (EBITA) seasonality in the first quarter of the year. contracts in Industrial Fire Services and emmtec Industry & Businesspark in the
increased to DKK 42 million (DKK 25 million), increased activity in Global Assistance, and Netherlands and rescue operations for the
yielding an underlying EBITA margin of 6.6% Efficiency and cost optimisation initiatives are negatively by the divestment of Falck Fire Red Bull Air Race events.
(3.9%). being implemented throughout the business. Academy in the Netherlands in Q3 2018.
These include improved utilisation in the Global Assistance went live with a
The increase in EBITA was driven by efficiency external Healthcare network, digitisation Operating profit before other items (EBITA) comprehensive duty-of-care membership
gains in Denmark and Sweden but offset by of processes, optimisation of back-office was DKK 18 million (DKK 16 million), yielding with a new corporate customer and entered
increased costs in Norway. functions as well as standardised contracts an EBITA margin of 6.3% (5.5%). into a new agreement with a large Northern
and improved contract management. European company on worldwide medical
Free cash flow was DKK 18 million (DKK 7 Increase in EBITA was driven by new business assistance to 14,000 employees.
million). Cash flow was positively impacted In Q1, Falck decided to keep the Healthcare and efficiency initiatives in both service areas
by stronger underlying performance, partly staffing business as a part of the Healthcare but partly offset by divestment of Falck Fire
offset by lower prepayments, predominantly business unit, and this business is no longer Academy in the Netherlands in Q3 2018.
Numbers in brackets refer to Q1 2018
in Denmark. presented as discontinued operations.
Key figures Key figures
DKK million Q1 2019 Q1 2018 2018 DKK million Q1 2019 Q1 2018 2018
Revenue 638 642 2,466 Revenue 291 290 1,162
EBITA 42 25 (115) EBITA 18 16 43
EBITA margin (%) 6.6 3.9 (4.6) EBITA margin (%) 6.3 5.5 3.7
Free cash flow 18 7 9 Free cash flow 17 (32) 92
Economic profit (82) (82) (102) Economic profit (10) (36) (15)
FTEs 2,347 2,656 2,452 FTEs 2,703 2,766 2,726
Falck Interim Report Q1 2019 11Management’s review
Management’s statement
The Board of Directors and the Executive The interim report has been prepared in liabilities and financial position as at 31 March Group, the financial results for the period and
Committee have today considered and accordance with IAS 34 ”Interim Financial 2019 and of the results of the Group’s the Group’s financial position.
approved the interim report of Falck A/S for Reporting” as adopted by the EU and operations and cash flows for the financial
the period 1 January 2019 – 31 March 2019. additional requirements under the Danish period 1 January – 31 March 2019. Besides what has been disclosed in the interim
The interim report has not been audited or Financial Statements Act. report, no changes in the Group’s most
reviewed by the company’s independent Furthermore, in our opinion, the Management’s significant risks and uncertainties have
auditors. In our opinion, the interim financial statements review includes a fair review of developments occurred relative to the disclosures made in the
give a true and fair view of the Group’s assets, in the operations and financial position of the 2018 Annual Report.
Copenhagen, 6 May 2019
Executive Committee:
Jakob Riis Tor Magne Lønnum Jakob Bomholt
President and CEO CFO EVP, Ambulance
Board of Directors:
Peter Schütze Lene Skole Lars Frederiksen
Chairman Deputy Chairman
Niels Smedegaard Dorthe Mikkelsen Søren Thorup Sørensen
Vagn Flink Møller Pedersen Henrik Villsen Andersen Allan Rensgaard
Falck Interim Report Q1 2019 12Financial statements Income statement DKK million Section Q1 2019 Q1 2018 2018 Revenue 2 3,532 3,588 14,043 Cost of services (2,721) (2,845) (11,380) Gross profit 811 743 2,663 Sales and administrative expenses (563) (581) (2,473) Other operating income and expenses, net 79 25 85 Operating profit before other items (EBITA) 327 187 275 Restructuring costs - (11) (14) Amortisation of customer contracts (53) (58) (233) Operating profit (EBIT) 274 118 28 Gains/losses from divestments of enterprises (10) (2) (56) Income after tax from associates and joint arrangements - - 1 Financial income 2 7 34 Financial expenses (130) (113) (473) Profit before tax 136 10 (466) Income taxes (49) (8) (51) Profit for the period from continuing operations 87 2 (517) Profit for the period from discontinued operations 3 - 6 (398) Profit for the period 87 8 (915) Profit for the period attributable to: Shareholders in Falck A/S 73 5 (888) Non-controlling interests 14 3 (27) Total 87 8 (915) Falck Interim Report Q1 2019 13
Financial statements Statement of comprehensive income DKK million Section Q1 2019 Q1 2018 2018 Profit for the period 87 8 (915) Actuarial adjustment of pension provisions - 1 1 Items that will not be reclassified to the income statement - 1 1 Exchange rate adjustment 51 (21) (24) Value adjustment of currency hedging instruments (9) 3 (3) Value adjustment of interest hedging instruments 4 5 25 Tax on other comprehensive income (7) 19 (17) Items that may be reclassified to the income statement 39 6 (19) Other comprehensive income 39 7 (18) Total comprehensive income 126 15 (933) Total comprehensive income attributable to: Shareholders in Falck A/S 112 18 (906) Non-controlling interests 14 (3) (27) Total 126 15 (933) Falck Interim Report Q1 2019 14
Financial statements Statement of cash flows DKK million Section Q1 2019 Q1 2018 2018 Operating profit (EBIT) 274 118 28 Depreciation, amortisation and impairment 179 115 662 Amortisation of customer contracts 53 58 233 Profit before depreciation, amortisation and impairment (EBITDA) 506 291 923 Change in net working capital 223 133 117 Transactions with associates (14) 3 23 Reversal of profit from divestment of non-current assets, net (78) (5) (34) Net interest paid (55) (55) (120) Income tax paid (50) (28) (145) Cash flows from operating activities 532 339 764 Purchase of property, plant and equipment (312) (58) (257) Sale of property, plant and equipment 368 9 126 Purchase of intangible assets (10) (66) (108) Acquisition of subsidiaries, non-controlling interests and operations - (9) (55) Divestment of subsidiaries, non-controlling interests and operations 5 (2) - Investments in associates - - (8) Cash flows from hedging of net investments 9 15 33 Cash flows from investing activities 60 (111) (269) Transactions with shareholders 1 - - Transactions with non-controlling interests - (4) (15) Interest-bearing debt raised 24 - - Repayment of interest-bearing debt (534) (448) (756) Cash flows from financing activities (509) (452) (771) Cash flows from continuing operations 83 (224) (276) Cash flows from discontinued operations 3 - 3 213 Change in cash and cash equivalents 83 (221) (63) Cash and cash equivalents at 1 January 1,138 1,077 1,077 Exchange rate adjustment 3 (6) (9) Change in cash and cash equivalents 83 (221) (63) Cash and cash equivalents related to assets classified as held for sale - (6) 133 Cash and cash equivalents at the end of the period 1,224 844 1,138 Falck Interim Report Q1 2019 15
Financial statements
Balance sheet
31 March 31 March 31 December 31 March 31 March 31 December
DKK million Section 2019 2018 2018 DKK million Section 2019 2018 2018
Assets Equity and liabilities
Goodwill 6,436 6,460 6,424 Share capital 133 81 81
Other intangible assets 952 1,346 1,008 Other reserves (348) (464) (387)
Property, plant and equipment 3,190 1,389 1,098 Retained earnings 4,463 3,047 2,182
Investments in associates and joint ventures 51 55 64 Equity attributable to Falck A/S 4,248 2,664 1,876
Deferred tax assets 151 170 170
Non-controlling interests 348 423 331
Other receivables 49 41 50
Total equity 4,596 3,087 2,207
Total non-current assets 10,829 9,461 8,814
Subordinated shareholder loans - 2,059 2,220
Inventories 28 76 24 Loans 4,973 3,916 3,756
Contract assets 520 574 479 Deferred tax 228 238 230
Trade receivables 1,539 1,596 1,489 Provisions 94 116 99
Income tax receivable 44 18 29 Other payables 4 9 10
Other receivables 332 341 364
Total non-current liabilities 5,299 6,338 6,315
Cash and cash equivalents 1,224 844 1,138
Loans 620 240 123
Total current assets 3,687 3,449 3,523
Trade payables 845 796 820
Assets classified as held for sale 4 - 1,142 -
Income taxes 106 117 97
Total assets 14,516 14,052 12,337 Provisions 250 263 244
Contract liabilities 1,440 1,575 1,204
Other payables 1,360 1,306 1,327
Total current liabilities 4,621 4,297 3,815
Total liabilities 9,920 10,635 10,130
Liabilities relating to assets classified as held for sale 4 - 330 -
Total equity and liabilities 14,516 14,052 12,337
Falck Interim Report Q1 2019 16Financial statements
Statement of changes in equity
Currency Non-
Share Hedging translation Retained controlling
2019 DKK million capital reserve reserve earnings Total interests Equity
Equity at 1 January 2019 81 (10) (377) 2,182 1,876 331 2,207
Change in accounting policies - - - - - - -
Adjusted equity at 1 January 2019 81 (10) (377) 2,182 1,876 331 2,207
Exchange rate adjustment - - 51 - 51 - 51
Value adjustment of currency hedging instruments - (9) - - (9) - (9)
Value adjustment of interest hedging instruments - 4 - - 4 - 4
Tax on other comprehensive income - 1 (8) - (7) - (7)
Other comprehensive income - (4) 43 - 39 - 39
Profit for the period - - - 73 73 14 87
Total comprehensive income - (4) 43 73 112 14 126
Capital increase 52 - - 2,218 2,270 - 2,270
Change in non-controlling interests’ ownership share - - - (1) (1) 3 2
Adjustment of provision for acquisition of non-controlling
interests relating to acquisitions after 1 January 2010 - - - (9) (9) - (9)
Total transactions with owners 52 - - 2,208 2,260 3 2,263
Total equity movements in 2019 52 (4) 43 2,281 2,372 17 2,389
Total equity at 31 March 2019 133 (14) (334) 4,463 4,248 348 4,596
Falck Interim Report Q1 2019 17Financial statements
Statement of changes in equity (Continued)
Currency Non-
Share Hedging translation Retained controlling
2018 DKK million capital reserve reserve earnings Total interests Equity
Equity at 1 January 2018 81 (27) (443) 3,091 2,702 428 3,130
Change in accounting policies - - - (41) (41) - (41)
Adjusted equity at 1 January 2018 - 81 (27) 3,050 2,661 428 3,089
Exchange rate adjustment - - (21) - (21) - (21)
Value adjustment of currency hedging instruments - 3 - - 3 - 3
Value adjustment of interest hedging instruments - 5 - - 5 - 5
Acturial adjustment of pension provisions - - - 1 1 - 1
Tax on other comprehensive income - (2) 21 - 19 - 19
Other comprehensive income - 6 - 1 7 - 7
Profit for the period - - - 5 5 3 8
Total comprehensive income - 6 - 6 12 3 15
Dividend - - - - - (3) (3)
Change in non-controlling interests’ ownership share - - - 5 5 (5) -
Adjustment of provision for acquisition of non-controlling
interests relating to acquisitions after 1 January 2010 - - - (14) (14) - (14)
Total transactions with owners - - - (9) (9) (8) (17)
Total equity movements in 2018 - 6 - (3) 3 (5) (2)
Total equity at 31 March 2018 81 (21) (443) 3,047 2,664 423 3,087
Falck Interim Report Q1 2019 18Financial statements
Section 1
Accounting policies
Falck A/S is a public limited liability company and support the way Falck is managed. is determined based on the non-cancellable The table below summaries the impact of IFRS
domiciled in Denmark. The interim report Comparative figures are changed accordingly. period of the lease and management 16.
includes the consolidated financial statements judgement.
of Falck A/S and its subsidiaries (Falck). Implementation of new accounting standards,
amendments and interpretations Falck has applied the modified retrospective
The interim report has been presented in The following accounting standards, amend- approach, meaning that comparative figures
accordance with IAS 34 “Interim Financial ments (IAS and IFRS) and interpretations have for 2018 have not been restated.
Reporting” as adopted by the EU and been implemented from 1 January 2019:
additional requirements in accordance with the • IFRS 16 “Leases” The impact of IFRS 16
Danish Financial Statements Act. • IFRIC 23 “Uncertainty over income tax At 1 January 2019, Falck recognised lease
treatments” assets under Property, plant and equipment
The interim report does not contain all the • Amendment to IFRS 9 “Financial instruments” of DKK 2,383 million of which DKK 158 million
information required for the annual report and • Amendment to IAS 28 “Investments in was reclassified from Finance leased assets
should therefore be read in conjunction with Associates and Joint Ventures” under IAS 17. DKK 29 million was reclassified
the 2018 Annual Report. No interim report has from prepayments to leased assets as part of
been prepared for the parent company. Apart from the impact from IFRS 16, the the transition to IFRS 16. A corresponding lease
adoption of new standards, amendments and liability of DKK 2,313 million was recognised
Apart from the adoption of IFRS 16 “Leases”, interpretations has not affected the interim under loans of which DKK 117 million was
the accounting policies are consistent with report for 2019. reclassified from Finance leased liabilities
those applied in the 2018 Annual Report, to under IAS 17.
which reference is made. IFRS 16 Leases
As of 1 January 2019, Falck has adopted IFRS In Q1 2019, EBITA was impacted positively by
Definitions of financial highlights and key ratios 16 “Leases” which replaces IAS 17 “Leases”. DKK 12 million due to a reduction in Cost of
can be found in Section 1.4 of the 2018 Annual sales and Sales and administrative expenses of
Report. The adoption of IFRS 16 has resulted in all DKK 111 million partly off-set by depreciations
leased buildings and vehicles being recognised of DKK 99 million. The full-year effect on EBITA
Change in presentation of the Income in the balance sheet as lease assets with a is estimated to be a positive impact of DKK 65
statement corresponding lease liability except for low- million based on the current leasing portfolio.
The classification in the Income statement value assets and short-term leases. In Q1 2019, the impact from IFRS 16 on Profit
is changed as of 1 January 2019 from a before tax was negative of DKK 15 million.
presentation by the “nature of expense” to a The lease assets are depreciated over the Deferred tax assets increased by DKK 3 million
presentation by the “function of expense”. Falck term of the lease and payments are allocated in Q1 2019 related to IFRS 16.
has changed the classification to better reflect between amortisations on the lease liabilities
and interest expenses. The term of the lease
Falck Interim Report Q1 2019 19Financial statements
Section 1
Accounting policies (continued)
1 January 2019 31 March 2019
Previous New Previous New
accounting IFRS 16 accounting accounting IFRS 16 accounting
DKK million policies adjustment policies policies adjustment policies
Income statement
Cost of services - - - (2,731) 10 (2,721)
Gross profit - - - 801 10 811
Sales and administrative expenses - - - (565) 2 (563)
Operating profit before other items (EBITA) - - - 315 12 327
Net financial items - - - (101) (27) (128)
Profit before tax - - - 151 (15) 136
Income taxes - - - (52) 3 (49)
Profit for the period from continuing operations - - - 99 (12) 87
Assets
Property, plant and equipment 6,425 2,225 8,650 1,064 2,126 3,190
Deferred tax assets 170 - 170 148 3 151
Other receivables, current 50 (29) 21 364 (32) 332
Total assets 12,337 2,196 14,533 12,418 2,097 14,516
Equity and liabilities
Equity 2,207 - 2,207 4,608 (12) 4,596
Loans, non-current 3,756 1,707 5,463 3,340 1,633 4,973
Loans, current 123 489 612 144 476 620
Total equity and liabilities 12,337 2,196 14,533 12,418 2,097 14,516
Falck Interim Report Q1 2019 20Financial statements
Section 2
Segment and revenue information
Group and other
Q1 2019 Business units Ambulance Assistance Healthcare Portfolio Businesses activities/eliminations Total Comments
Management has defined Falck’s business
Income statement segments based on the reporting presented
Revenue 1,922 744 638 291 (63) 3,532 to the Group Executive Management, and
Depreciation, amortisation and impairment (52) (20) (3) (3) (101) (179) which forms the basis for the Management’s
Operating profit before other items (EBITA) 143 144 42 18 (20) 327 strategic decisions.
Balance sheet The performance of the business segments
Total assets 4,780 3,929 2,071 1,135 2,601 14,516 is evaluated on the basis of operating profit
Investments in intangible assets before other items (EBITA).
and property, plant and equipment 46 6 1 3 266 322
Group and other activities include Group
Key ratios staff functions not directly attributable to the
EBITA margin (%) 7.4% 19.4% 6.6% 6.3% - 9.3% business units, eliminations and adjustment for
lease accounting (IFRS 16 Leases). The business
units report according to the old leasing
Group and other standard (IAS 17) and not according to IFRS 16.
Q1 2018 Business units Ambulance Assistance Healthcare Portfolio Businesses activities/eliminations Total
Income statement
Revenue 1,920 799 642 290 (63) 3,588
Depreciation, amortisation and impairment (65) (36) (9) (5) - (115)
Operating profit before other items (EBITA) 100 111 25 16 (65) 187
Balance sheet
Total assets 5,183 4,156 2,069 1,256 1,388 14,052
Investments in intangible assets
and property, plant and equipment 79 9 11 25 - 124
Key ratios
EBITA margin (%) 5.2% 13.9% 3.9% 5.5% - 5.2%
Falck Interim Report Q1 2019 21Financial statements
Section 3
Discontinued operations
Profit for the period from discontinued operations Gains/losses from divestments of discontinued operations
DKK million Q1 2019 Q1 2018 2018 DKK million Q1 2019 Q1 2018 2018
Revenue - 223 653 Consideration received - - 537
Cost of services - (149) (434) Deferred payment - - 50
Gross Profit - 74 219 Sales price for discontinued operations - - 587
Sales and administrative expenses - (54) (163) Net assets divested - - (902)
Other operating income and expenses, net - 1 2 Reclassification of exchange rate adjustment from
divestment of discontinued operations - - (102)
Operating profit before other items (EBITA) - 21 58
Transaction costs - - (15)
Net financial items - (15) (3)
Loss on divestments of discontinued operations - - (432)
Profit before tax - 6 55
Net assets divested
Income taxes - - (21)
Assets
Profit for the period - 6 34
Goodwill - - 415
Loss on divestment of discontinued operations - - (432) Other intangible assets - - 30
Profit for the period from discontinued operations - 6 (398) Property, plant and equipment - - 335
Deferred tax assets - - 41
Current assets - - 246
Cash flows from discontinued operations
DKK million Q1 2019 Q1 2018 2018 Cash and cash equivalents - - 118
Liabilities
Cash flows from operating activities - (10) 21
Non-controlling interests - - (49)
Cash flows from investing activities - (20) (144)
Deferred tax - - (8)
Cash flows from financing activities - 33 (68)
Provisions - - (28)
Cash consideration from divestment of discontinued operations - - 404
Current liabilities - - (198)
Cash flows from discontinued operations - 3 213
Net assets divested - - 902
Loss on divestment of discontinued operations - - (330)
Sales price receivable - - (50)
Adjustment for cash and cash equivalents divested - - (118)
Cash consideration from divestment of discontinued operations - - 404
Falck Interim Report Q1 2019 22Financial statements
Section 3 Section 4
Discontinued operations (continued) Assets classified as held for sale
Comments Assets classified as held for sale
In Q1 2019, Falck decided to keep the In Q3 2018, Falck divested Falck Safety 31 March 31 March 31 December
DKK million 2019 2018 2018
Healthcare staffing business as a part of Services and its Danish medical clinics. A
the Healthcare business unit. As a result, the loss on the divestments of DKK 432 million Intangible assets - 434 -
staffing business is no longer presented as was recognised in profit from discontinued Property, plant and equipment - 307 -
discontinued operations. operations. Deferred tax assets - 58 -
Inventories - 2 -
The comparative figures for 2018 for the Contract assets - - -
income statement, statement of cash flows Trade receivables - 154 -
and balance sheet have been restated. Income tax receivable - 12 -
Other receivables - 39 -
In 2018, discontinued operations included Falck Cash and cash equivalents - 136 -
Safety Services and Danish medical clinics
Assets classified as held for sale - 1,142 -
and associated businesses (Falck Lægehuse,
Sirculus and Vikteam). Deferred tax - 33 -
Loans - 25 -
Trade payables - 71 -
Income taxes - 4 -
Provisions - 122 -
Contract liabilities - - -
Other payables - 75 -
Liabilities relating to assets classified as held for sale - 330 -
Net assets classified as held for sale - 812 -
Comments
Assets and liabilities classified as held for sale In Q3 2018, Falck divested Falck Safety
relate to Falck Safety Services and Danish Services and its Danish medical clinics and
medical clinics and associated businesses associated businesses (Falck Lægehuse,
(Falck Lægehuse, Sirculus and Vikteam), which Sirculus and Vikteam). See section 3.
are disclosed as discontinued operations.
Falck Interim Report Q1 2019 23Financial statements Section 5 Contingent liabilities On 30 January 2019, Falck received a ruling the case. BIOS and the Region of Southern from the Danish Competition Council for Denmark have expressed their intention having violated the Danish competition rules in or possibility to raise compensation claims connection with the award and transfer of the against Falck. However, Falck has not received ambulance operation contract in the Region of any such claims yet. Falck has not recognised Southern Denmark to a new provider (BIOS) in a provision for neither a fine nor compensation 2015. Falck decided to refrain from appealing claims in the Q1 2019 reporting due to the ruling, and the case was then referred to uncertainty about the amount and timing. SØIK for an investigation and determination of a potential fine. SØIK has not yet informed Falck of the expected timing for a decision in Section 6 Events after the reporting date No events have occurred after the balance sheet date affecting Falck’s financial position at 31 March 2019. Falck Interim Report Q1 2019 24
Financial statements
Falck A/S
Sydhavnsgade 18
2450 Copenhagen SV
Denmark
Tel.: +45 70 33 33 11
www.falck.com
www.falck.dk
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