Strong Ports offset by weaker Airports

Contemplating ~EUR 20m rights issue

No estimates changes until after any subscription period

Transformation drives margin improvement, lower deliveries
Cavotec saw order intake decline 5% y-o-y, of which 8% was organic, to EUR 37.2m (-6% vs. ABGSCe 39.4m). The strong order intake in Ports & Maritime (+42% y-o-y) was not enough to offset the delayed Airport orders from the US and Asia regions. As of Q3’18, the R12m book-to-bill stands at 1.03x. Sales arrived at EUR 49.2m, or -6% y-o-y, of which -5% was organic (-4% vs. ABGSCe 51.4m) due to pending Ports & Maritime deliveries in China and production challenges following the recently opened production facility in Italy. According to management, both the start-up issues and pending deliveries should be addressed by year-end.According to the company, 65% of the transformation projects has been completed, and management remains confident in that it will be able to achieve a significant portion of the targeted EUR 10m run-rate savings already in 2019. Until 2021, the company targets a headcount reduction of ~100 people, expected to account for the majority of run-rate savings.

Contemplated ~EUR 20m issue to support restructuring
On a rolling twelve-month basis, Cavotec’s current ND/EBITDA adj. stands at 0.9x, but 3.8x in relation to reported EBITDA. The company states that the main reason for the ~EUR 20m rights issue in conjunction with the report is to strengthen Cavotec’s finances during the restructuring period. Furthermore, management also expects the rights issue to provide financial flexibility if growth opportunities arise, both organically and through M&A.

Estimate changes pending finalisation of rights issue
Due to ABG Sundal Collier being the Sole Global Coordinator and Bookrunner in the contemplated rights issue, we will not revise our estimates before the end of the subscription period. Pre-Q3’18, we estimated an adj. EBIT CAGR of 37% for ’17-’20.