Interim Report Q1 - Q3 2019 · Financial results Q1-Q3 2019 Year-to-date revenue was DKK 10,376 million (DKK 10,606 million), resulting in a 2.3% revenue decline in fixed currencies

Interim Report Q1 - Q3 2019

Contents

FINANCIAL STATEMENTS

Primary statements 16Sections 22

MANAGEMENT’S REVIEW

Letter from the CEO 3Quarterly highlights 4Key figures 5Quarterly results 6Performance by business unit 9Management’s statement 15

Numbers in brackets

refer to same period 2018

Falck Interim Report Q1 - Q3 2019 2

With improved performance for six consecutive quarters, we complete the two-year financial turnaround at Falck. We move from a state of critical need for turning around our business financially to a phase where stabilising our business and winning new customers will take centre stage.

In the third quarter, our efficiency and cost optimisation programme continued to contribute to the improved financial performance. Profitability was, however, partly offset by funding investments in new business, discontinuation of contracts and continued investments in new technology and processes enhancing our global operating models.

Underlying EBITA margin ended at 4.9% (5.5%) for the quarter, while reported EBITA margin improved from 3.5% to 4.9%.

Starting up new contracts puts short-term pressure on our underlying profitability but increases in importance as we focus on the mid to long term.

In the third quarter, we entered into several new healthcare contracts, among others

with the Stockholm County Council, and were awarded contracts with Glasgow and Aberdeen Airports to provide firefighting services from December 2019. In July 2019, we went live with our largest US contract so far, providing 911 emergency services to the 1.6 million citizens of the County of Alameda, California. These new contracts are a vote of confidence in Falck and our offerings.

Over the past two years, we have improved our reported EBITA margin from 0% in 2017 to 6.5% year-to-date in 2019. Free cash flow for the nine-month period is positive by DKK 488 million, and the debt level including lease liabilities has improved from DKK 5,421 million in 2017 to DKK 4,224 million.

Although we are leaving the turnaround phase, we continue to push for ongoing efficiency and cost optimisation as we see significant potential to further increase our competitiveness.

Our ambition is to lead our industry, as we aim to be our customers’ preferred emergency response and healthcare provider. We can only succeed in this if we are a great place to work for our current and future employees.

We have completed our financial turnaround

Jakob RiisPresident and CEO

Meeting this ambition will be our guiding star in the years to come.

Letter from the CEO


Management’s review

Quarterly highlights

RevenueDKK million

EBITADKK million

Free cash flowDKK million

Economic profitDKK million

Revenue at DKK 3,403 million • Revenue was DKK 3,403 million (DKK 3,488 million). In fixed currencies, revenue

declined by 2.5% compared to Q3 2018.• New ambulance contracts in the US, Sweden and the UK contributed positively

to revenue whereas divestments and contract pruning in Ambulance and lower activity in Healthcare had a negative impact.

Profitability at DKK 166 million • Reported EBITA was DKK 166 million (DKK 123 million) with an underlying EBITA

margin of 4.9% (5.5%).• Cost optimisation and efficiency initiatives contributed positively to EBITA but

were partly offset by investments in technology and processes enhancing Falck’s global operating models as well as by costs related to start-up and discontinuation of contracts.

Positive profit for the period and free cash flow, improved economic profit and net debt level• Profit for the period from continuing operations was positive at DKK 46 million

(negative at DKK 53 million), primarily driven by improved EBITA and lower net financial items.

• Free cash flow was DKK 116 million (DKK 88 million), impacted positively by IFRS 16 reclassifications, partly offset by start-up costs and working capital build-up related to new contracts in Ambulance.

• Economic profit improved to negative DKK 259 million (negative at DKK 382 million) due to improved EBITA.

• Net interest-bearing debt including lease liabilities was reduced from DKK 4,292 million end of Q2 2019 to DKK 4,224 million end of Q3 2019.

Key events in Q3 20194,000

3,000

2,000

1,000

0

Reported

3,403 3,4033,488

Fixed currencies

3,491

Q3 2019 Q3 2018 Q3 2019 Q3 2018

200

150

100

50

0

166

123

191166

Reported Underlying

Q3 2019 Q3 2018 Q3 2019 Q3 2018

0

50

100

150

Reported

Q3 2019 Q3 2018

116

88

(382)

(259)

Q3 2019 Q3 2018

-450

-300

-150

0

Reported

Falck Interim Report Q1 - Q3 2019


4

Key figures

1) Excluding impact from the IFRS 16 reporting standards, cf. section 1.

2) Equity ratio includes subordinated shareholder loans, converted to equity in Q1 2019.

In 2018, Falck Safety Services and Danish medical clinics were presented as discontinued operations and assets classified as held for sale. See section 3.

In general, the financial and non-financial data are stated excluding discontinued operations.

DKK million Q3 2019 Q3 20181) Q1-Q3 2019 Q1-Q3 20181) 20181)

Income Statement

Revenue 3,403 3,488 10,376 10,606 14,043

Operating profit before other items (EBITA) 166 123 675 291 275

Operating profit (EBIT) 124 70 339 113 28

Net financial items 7 (106) (134) (324) (439)

Profit for the period from continuing operations 46 (53) 43 (206) (517)

Profit for the period from discontinued operations - (428) - (398) (398)

Balance sheet

Total assets 13,268 12,378 13,268 12,378 12,337

Net operating assets 8,712 7,695 8,712 7,695 7,103

Total equity 4,532 2,510 4,532 2,510 2,207

Subordinated shareholder loans - 2,164 - 2,164 2,220

Net interest-bearing debt 4,224 5,239 4,224 5,239 4,961

Cash flows and investments

Cash flows from operating activities 120 68 446 380 764

Free cash flow 116 88 488 257 645

Investments in intangible assets and property, plant and equipment (31) (44) (424) (259) (365)

Key figures

Economic profit n/a n/a (259) (382) (252)

EBITA margin (%) 4.9 3.5 6.5 2.7 2.0

Cash conversion rate (%) 69.7 70.7 72.2 88.3 234.7

Equity ratio (%)2) 34.1 37.8 34.1 37.8 35.9

Net interest-bearing debt to EBITDA (factor)1) n/a n/a 1.95 3.12 2.62

EBITDA 331 260 1,151 725 937

FTEs 23,919 25,977 23,919 25,977 25,583



Quarterly results

Financial results Q3 2019

RevenueReported revenue amounted to DKK 3,403 million (DKK 3,488 million), resulting in a revenue decline of 2.5% in fixed currencies compared to Q3 2018.

New contracts in Ambulance and effective price management in both Ambulance and Assistance contributed positively to revenue. Key drivers of the decline were divestments and contract pruning in Ambulance. In addition, lower activity in Healthcare impacted revenue negatively.

Cost of servicesCost of services decreased to DKK 2,701 million (DKK 2,763 million) excluding non-recurring costs.

Sales and administrative expensesSales and administrative expenses decreased to DKK 551 million (DKK 611 million), driven by Falck’s efficiency and cost optimisation programme.

In the third quarter of 2019, revenue was 2.5% lower than in Q3 2018, whereas reported EBITA ended at DKK 166 million. Profit for the period and free cash flow were positive, and economic profit and net debt level improved.

Operating profit Reported operating profit before other items (EBITA) was DKK 166 million (DKK 123 million).

Underlying EBITA was DKK 166 million (DKK 191 million), yielding an underlying EBITA margin of 4.9% (5.5%). In Q3 2018, underlying EBITA was adjusted for non-recurring costs mainly related to changes in accounting estimates.

The improvement in EBITA was driven by efficiency measures and effective price management across business units but was partly offset by investments in technology and processes enhancing Falck’s global operating models as well as by costs related to start-up and discontinuation of contracts.

Profit for the periodProfit for the period from continuing operations was positive at DKK 46 million (negative at DKK 53 million), primarily driven by improved EBITA and lower net financial items due to reduced net interest-bearing debt and conversion of shareholder loans.

Profit for the period from discontinued operations was DKK 0. In Q3 2018, profit

from discontinued operations was negative at DKK 428 million, mainly related to loss from divestment of Falck Safety Services and Danish medical clinics.

Free cash flowFree cash flow was DKK 116 million (DKK 88 million). Reclassifications from the IFRS 16 reporting standards had a positive effect of DKK 82 million as lease payments are now classified as financing activities. This was offset by primarily start-up costs and working capital build-up related to new contracts in Ambulance.

Economic profitEconomic profit was negative at DKK 259 million (negative at DKK 382 million) including IFRS 16 implementation. The improvement was driven by improved EBITA. Implementation of the IFRS 16 reporting standards impacted economic profit negatively by DKK 161 million.

Net operating assets increased to DKK 8,712 million (DKK 7,695 million), mainly driven by the implementation of IFRS 16 (DKK 1,683 million), which was partly offset by divestments and regular depreciations and amortisations.

Equity and loansNet interest-bearing debt including lease liabilities was DKK 4,224 million end of Q3 2019 compared to DKK 4,292 million end of Q2 2019. Equity ratio was 34.1% in Q3 2019 compared to 33.7% in Q2 2019.

Financial results Q1-Q3 2019

Year-to-date revenue was DKK 10,376 million (DKK 10,606 million), resulting in a 2.3% revenue decline in fixed currencies compared to Q1-Q3 2018. New contracts in Ambulance and effective price management in Ambulance and Assistance contributed positively to revenue and are expected to improve revenue further in Q4 2019.

The decline in revenue was primarily driven by divestments and discontinuation of contracts in Ambulance. In addition, a lower subscription volume in Assistance had a negative impact on revenue.

Reported operating profit before other items (EBITA) was DKK 675 million (DKK 291 million). Reported EBITA was positively impacted by a one-off gain of DKK 65 million from the sale of



office buildings in Denmark in Q1 2019 and by DKK 12 million due to changes in recognition of lease assets under the IFRS 16 reporting standards. Adjusted for the one-off gain and IFRS 16 standards implemented, underlying EBITA was DKK 598 million (DKK 494 million), yielding an underlying EBITA margin of 5.8% (4.7%).

Improvements to the underlying profitability were primarily driven by efficiency measures and effective price management across business units, but partly offset by investments in technology and processes enhancing Falck’s global operating models as well as by costs related to start-up and discontinuation of contracts.

Profit for the period from continuing operations was positive at DKK 43 million (negative at DKK 206 million), primarily driven by improved EBITA and lower net financial items due to reduced net interest-bearing debt and conversion of shareholder loans. This was partly offset by the negative impact from special items of DKK 193 million in Q2 2019, covering settlement costs, estimated fine and legal fees following a ruling by the Danish Competition Council and Falck’s self-cleaning programme. Income taxes for the period were impacted by non-deductible costs related to special items.

Profit for the period from discontinued operations was DKK 0. In Q1-Q3 2018, profit

from discontinued operations was negative at DKK 398 million, mainly related to loss from divestment of Falck Safety Services and Danish medical clinics.

Free cash flow amounted to DKK 488 million (DKK 257 million). The improvement was mainly driven by improved earnings in all business units and a lower level of investment in fixed assets. Sale of properties (DKK 89 millioin) and interest and amortisations on finance lease liabilities (DKK 269 million) had a positive impact, offset by settlement costs and legal fees following the ruling by the Danish Competition Council as well as by start-up costs related to new contracts.

Operational results

New contractsIn the quarter, Falck entered into a number of new contracts across business units. In Healthcare, these included a contract with the Stockholm County Council for psychological crisis support. In Industrial Fire Services, Falck was awarded a contract covering the outsourcing of the fire brigades of Glasgow and Aberdeen Airports.

People and trustIn September, Falck launched its second global engagement survey. The survey and feedback will enable Falck to take action and create a great place to work for everyone. The results

the entire organisation. In the quarter, IT focused on mapping the complex IT application landscape with a view to decommissioning applications, renegotiating contracts, simplifying and saving costs. The outsourcing of infrastructure and IT services progressed and is expected to be finalised within Q4 2019.

In Ambulance, implementation continued of the global dispatch system and roll-out commenced of the global planning system. The global fleet management system, which also covers Assistance vehicles, is fully operational. Global models also continued to be implemented in Quality Management, in HR and in Finance, where the outsourcing of transactional finance processes progressed further in the US and Europe.

of the survey will be communicated to the employees and acted upon during Q4 2019.

Falck works diligently to build trust with customers, employees and society at large. In the quarter, the roll-out continued of the global Code of Conduct e-learning, which has now been launched in the US, Latin America, Germany and the Nordic and Baltic countries.

Falck appointed two new members of the Executive Management team in the quarter. In August, Elisabeth Milton started as new SVP, Head of Global HR. Elisabeth has executive experience from the service industry, including 20 years with SAS, and has led major transformations. In September, Michala Fischer-Hansen joined as new EVP of Assistance. Michala has close to 20 years of commercial experience from Novo Nordisk.

Global operating modelsIn the quarter, Falck continued to roll-out global operating models, which will allow Falck to operate under one brand with shared values, processes and systems. However, the roll-out has proven more complex than originally estimated and is expected to run for a considerable period of time. The roll-out of global operating models encompasses both installing new processes and investing in technology and IT systems.

The magnitude of Falck’s IT transformation influences the roll-out of global systems in

Q1 Q2 Q3 Q4 Q1 Q2 Q3

DKK million

0

200

400

600

2018 2019

Annualised EBITA effect of efficiencyprogramme



Efficiency programmeFalck’s efficiency and cost optimisation programme was launched in 2017 with total targeted savings of yearly DKK 1 billion with full effect in 2020. The efficiency programme builds on three pillars: operational optimisation across business units, reduction of overhead costs and procurement initiatives.

In Q3 2019, focus was on restructuring the global organisations of HR, IT and Finance as well as increasing operational efficiencies primarily in Ambulance and Assistance. Within the procurement programme, emphasis was on installing strategic suppliers for Falck’s fleet, including financing, and on projects within marketing, legal and medical consumables.

In the quarter, the efficiency programme had a positive impact on EBITA of DKK 60 million (Q1-Q3 2019: DKK 250 million), additional to the effects realised in 2018. Since its beginning in 2018, the programme has realised annual run-rate EBITA effects of DKK 560 million by the end of Q3 2019 .

Exiting the quarter, the number of full-time employees (FTEs) was 23,919 (25,977). The reduction was caused by redundancies following cost optimisation, by divestments and by discontinuation of contracts.

Outlook for 2019

Falck has adjusted its outlook and now expects a revenue decline of approximately 1% for the full year 2019, due to divestments, contract pruning and a lower subscription volume, partly offset by new contracts primarily in Ambulance.

Falck expects to improve its operating profit (EBITA) compared to 2018 (DKK 275 million). The continuing efficiency programme is expected to contribute significantly to improving profitability in 2019, with impact from operational optimisation, reduction of overhead costs as well as procurement initiatives.

Costs related to Falck’s restructuring activities are expected to continue into Q4 2019. These include costs related to divestments, transformation costs and costs related to building global operating models.

Profit for the year will be negatively impacted by settlement costs following a ruling by the Danish Competition Council as well as by an estimated fine from SØIK and legal fees in relation to the ruling and Falck’s self-cleaning programme, as announced in Q2 2019.



Ambulance

Key figures

DKK million Q3 2019 Q3 2018 Q1-Q3 2019 Q1-Q3 2018 2018

Revenue 1,974 1,985 5,789 5,812 7,659

EBITA 103 33 355 174 192

EBITA margin (%) 5.2 1.7 6.1 3.0 2.5

Free cash flow 125 136 302 222 492

Economic profit n/a n/a 44 (162) (66)

FTEs 17,077 18,810 17,077 18,810 18,511

Financial performance Q3 2019

RevenueReported revenue was DKK 1,974 million (DKK 1,985 million), resulting in a revenue decline of 1.1% in fixed currencies.

New fixed-price and pay-on-use contracts mainly in the US, Stockholm and the UK contributed positively to revenue, whereas there was a negative impact from divestment of ambulance businesses in Finland and Switzerland and from discontinuation of Falck’s ambulance contract in Poland. Revenue is expected to increase in Q4 2019 through the new contracts.

In the US pay-on-use business, the number of services decreased by 9% mainly due to contract pruning, but revenue was positively impacted by the start-up of the Alameda contract on 1 July. The decrease in number of services was offset by effective price management and the introduction of a quality assurance fee programme in California.

Revenue in the private subscription business in Latin America was on par with Q3 2018.

Operating profitReported operating profit before other items (EBITA) increased to DKK 103 million (DKK 33 million) with an underlying EBITA margin

Performance by business unit

Profitability improved driven by efficiency and cost optimisation initiatives but was impacted by one-off costs related to start-off and close-down of contracts. Revenue declined due to divestments and discontinuation of contracts, partly offset by new contracts.



in non-core markets and partly offset by new contracts in core markets, which are expected to improve revenue further in Q4 2019.

Reported operating profit before other items (EBITA) increased to DKK 355 million (DKK 174 million) with an underlying EBITA margin of 6.1% (4.6%). In Q1-Q3 2018, underlying EBITA was adjusted for non-recurring costs mainly related to changes in accounting estimates.

The increase in EBITA was driven by efficiency and cost optimisation initiatives across the business, effective price management and contract pruning. EBITA was positively

In Slovakia, Falck started negotiations concerning transfer agreements with the ambulance providers taking over Falck’s contracts when they expire during 2020.

Financial performance Q1-Q3 2019

Year-to-date reported revenue was DKK 5,789 million (DKK 5,812 million), resulting in a revenue decline of 1.1% in fixed currencies.

The decline in revenue was driven by divestments and discontinuation of contracts

of 5.2% (4.7%). In Q3 2018, underlying EBITA was adjusted for non-recurring costs mainly related to changes in accounting estimates.

The increase in EBITA was driven by efficiency and cost optimisation initiatives, effective price management and contract pruning, mainly in Denmark and the US. There was a positive impact from the quality assurance fee in California, whereas start-up costs for the new contract with Alameda County, California, had a negative impact on EBITA. Additionally, there was a negative impact from a provision related to the close-down of contracts in Slovakia at year end.

Free cash flowFree cash flow was DKK 125 million (DKK 136 million). Free cash flow was positively impacted by improved performance and improved net working capital in Denmark, but negatively impacted by start-up costs and working capital build-up related to the Alameda contract.

Business update

In the quarter, the US market constituted approximately 30% of revenue in Ambulance, and the development is positive. In July 2019, Falck went live with its largest US contract so far, providing 911 emergency services to the 1.6 million citizens of the County of Alameda, California.

Fixed contracts* 55%

* primarily in Denmark, Sweden, Spain and Slovakia** primarily in the US, the UK and Germany*** in Colombia-based Group EMI

Pay-on-use contracts** 37%

Private subscriptions***8%

Revenue by contract typeQ1-Q3 2019

EBITADKK million

RevenueDKK million

impacted by new contracts but negatively impacted by divestments and discontinuation of contracts as well as by start-up costs related to new contracts.

Free cash flow increased to DKK 302 million (DKK 222 million), mainly driven by improved earnings, improved cash collection in Denmark and lower investments, but negatively impacted by working capital build-up and start-up costs related to new contracts, mainly in the US and the UK.

2,000

1,500

1,000

500

0

1,974

100

Reported Fixed currencies

Q3 2019 Q3 2018 Q3 2019 Q3 2018

1,974100

1,9961,985 150

100

50

0

103 103

94

33

Reported Underlying

Q3 2019 Q3 2018 Q3 2019 Q3 2018



Assistance

Key figures


RevenueReported revenue was DKK 690 million (DKK 715 million), resulting in a revenue decline of 3.1% in fixed currencies.

Effective price management offset the decline in revenue, which was driven by fewer subscriptions in Denmark and Sweden.

The number of trips in the pay-on-use business declined by 13% but revenue per trip increased.

Operating profitReported operating profit before other items (EBITA) increased to DKK 122 million (DKK 114 million), yielding an EBITA margin of 17.6% (16.0%). The increase in EBITA was driven by efficiency and cost optimisation initiatives and effective price management, partly offset by decrease in subscriptions and pay-on-use activity.

Efficiency initiatives carried out in 2018 continued to contribute to improving profitability as they materialised, including


Revenue 690 715 2,144 2,270 2,993

EBITA 122 114 392 318 415

EBITA margin (%) 17.6 16.0 18.3 14.0 13.9

Free cash flow 49 (6) 396 200 282

Economic profit n/a n/a 112 30 37

FTEs 1,531 1,872 1,531 1,872 1,728


Profitability improved driven by efficiency and cost optimisation initiatives. Revenue declined due to fewer subscriptions.




Year-to-date reported revenue was DKK 2,144 million (DKK 2,270 million), resulting in a decline of 5.2% in fixed currencies. Revenue was positively impacted by effective price management, but negatively impacted by fewer subscriptions in Denmark and Sweden and lower activity levels in the pay-on-use business due to mild weather conditions.

Reported operating profit before other items (EBITA) increased to DKK 392 million (DKK 318 million), yielding an EBITA margin of 18.3% (14.0%).

The increase in EBITA was driven by efficiency and cost optimisation initiatives, effective price management and lower frequency in the subscription business due to continuing mild weather, which was partly offset by lower frequency of use in the pay-on-use business.

Pay-on-use contracts**24%

* primarily in Denmark and Sweden** with insurance and automotive companies in the Nordics and Baltics*** long-term public firefighting contracts in Denmark

Private subscriptions* 61%

Fixed contracts***15%

Revenue by contract typeQ1-Q3 2019

EBITADKK million

RevenueDKK million

increased use of franchisers and sub-contractors, better utilisation of call centres and optimisation of the network of Falck stations in Denmark.

Free cash flow Free cash flow was DKK 49 million (negative at DKK 6 million). The improvement was driven by improved performance and a higher level of prepayments.

Business update

In August, Falck Teknik (Falck Technical Services) signed a contract with the Danish Defence. Falck Teknik, which delivers fire equipment to public and private institutions, will provide fire extinguishers to the Danish Defence for the next four years.

The tender process was completed for roadside assistance services for the insurance company Gjensidige in Norway, and Falck’s contract with Gjensidige will expire in Q1 2020.

The roadside assistance centre in Denmark relocated to modern facilities in Vejle in order to create a new digitalised and centralised assistance centre to the benefit of both customers and employees. During August and September, Assistance launched a new pipeline of commercial initiatives to advance its marketing and customer-focused activities.

Free cash flow increased to DKK 396 million (DKK 200 million), mainly due to improved performance, a higher level of prepayments and lower investment in fixed assets.

900

600

300

0

690

Reported Fixed currencies

Q3 2019 Q3 2018 Q3 2019 Q3 2018

690712715

150

100

50

0

122

Reported Underlying

Q3 2019 Q3 2018 Q3 2019 Q3 2018

122

114114



Healthcare

Key figures


RevenueReported revenue was DKK 507 million (DKK 547 million), resulting in a revenue decline of 6.3% in fixed currencies.

Revenue was negatively impacted by the termination of contracts with insurance companies in Denmark as well as by lower activity levels in the staffing business in Denmark.

Operating profitReported operating profit before other items (EBITA) decreased to negative DKK 9 million

(DKK 0 million), yielding an EBITA margin of negative 1.8% (0.0%).

The decrease in EBITA was caused by a higher impact of seasonality, where activity levels significantly decrease over the summer period, especially impacting Sweden.

Free cash flowFree cash flow was negative at DKK 74 million (negative at DKK 45 million) in line with business seasonality. Free cash flow was negatively impacted by repayment of deposit following the termination of an insurance company contract.


Revenue 507 547 1,764 1,814 2,466

EBITA (9) - 56 (78) (115)

EBITA margin (%) (1.8) (0.0) 3.1 (4.3) (4.6)

Free cash flow (74) (45) (27) (106) 17

Economic profit n/a n/a (52) (79) (101)

FTEs 2,304 2,491 2,304 2,491 2,452


Business update

In Q3, Falck entered into several new contracts with new customers. In Sweden, this included a contract with the Stockholm County Council, delivering psychological crisis support to 45,000 employees, as well as a contract for physical treatments to 65,000 policy holders for a major insurance company.

In Denmark, Falck entered into contracts with the municipalities of Greve and Sønderborg, providing back-in-job services to citizens together with the job centres. In addition, Healthcare entered into two new contracts with Danish insurance and pension companies, providing interdisciplinary interventions with the aim of preventing long-term-absence.

Throughout the quarter, Healthcare continued to optimise and commercialise the organisation in order to improve overall profitability. In Sweden, more customers began using Falck’s digital services, specifically within the stress treatment area.


Year-to-date reported revenue was DKK 1,764 million (DKK 1,814 million), resulting in a revenue decline of 1.3% in fixed currencies.

Revenue was negatively impacted by decrease in pay-on-use volumes in Sweden and lower activity in the staffing business in Denmark but positively impacted by increased activity in Norway.

Reported operating profit before other items (EBITA) increased to DKK 56 million (negative at DKK 78 million) with an underlying EBITA margin of 3.1% (0.6%). In Q1-Q3 2018, underlying EBITA was adjusted for non-recurring costs mainly related to changes in accounting estimates.

The increase in EBITA was caused by efficiency and cost optimisation initiatives across the business.

Free cash flow was negative at DKK 27 million (negative at DKK 106 million). Free cash flow was positively impacted by improved performance.

A decrease in profitability was driven by seasonality, while revenue declined due to termination of contracts and lower activity levels in the staffing business.



Portfolio Businesses

Key figures

Portfolio Businesses consist of the two service areas Industrial Fire Services and Global Assistance.


RevenueReported revenue was DKK 297 million (DKK 295 million), resulting in a flat revenue development of 0.3% in fixed currencies.

Revenue was positively impacted by new contracts in Industrial Fire Services and increased activity in Global Assistance, and negatively by the divestment of Falck Fire Academy in the Netherlands in Q3 2018.

Operating profitReported operating profit before other items (EBITA) was DKK 36 million (DKK 19 million) with an underlying EBITA margin of 11.9% (8.8%). In Q3 2018, underlying EBITA was adjusted for non-recurring costs mainly related to changes in accounting estimates.

The increase in EBITA was driven by new business and efficiency and cost optimisation initiatives in both service areas, but partly offset by the divestment of Falck Fire Academy in the Netherlands in Q3 2018.

Free cash flowFree cash flow improved to DKK 43 million (DKK 22 million), mainly driven by improved


Revenue 297 295 880 884 1,162

EBITA 36 19 75 46 43

EBITA margin (%) 11.9 6.7 8.5 5.2 3.7

Free cash flow 43 22 81 (41) 86

Economic profit n/a n/a 15 (40) (12)

FTEs 2,668 2,654 2,668 2,654 2,726


Profitability improved driven by new business and efficiency and cost optimisation initiatives in both service areas, while revenue increased despite a major divestment.

performance and improved invoicing and cash collection in Global Assistance.

Business update

In the UK, Industrial Fire Services was awarded a major contract covering the outsourcing of the fire brigades of Glasgow and Aberdeen Airports. This contract is the first in the UK within the aviation segment, where Falck is already providing fire services in Brazil, Spain, France, Portugal and Norway.

In the quarter, Global Assistance went live with a comprehensive duty-of-care membership with a new corporate customer providing medical, security and travel tracking services to their global workforce of 4,400 employees.


Year-to-date reported revenue was DKK 880 million (DKK 884 million), resulting in a revenue decrease of 1.0% in fixed currencies.

Revenue was positively impacted by new contracts in Industrial Fire Services and increased activity in Global Assistance, and negatively by the divestment of Falck Fire Academy in the Netherlands in Q3 2018.

Reported operating profit before other items (EBITA) was DKK 75 million (DKK 46 million) with an underlying EBITA margin of 8.5% (5.9%). In Q1-Q3 2018, underlying EBITA was adjusted for non-recurring costs mainly related to changes in accounting estimates.

The increase in EBITA was driven by new business and efficiency and cost optimisation initiatives in both service areas, but partly offset by the divestment of Falck Fire Academy in the Netherlands in Q3 2018.

Free cash flow improved to DKK 81 million (negative at DKK 41 million), mainly driven by improved performance, lower investment in fixed assets and improved cash collection in both service areas.



Management’s statement

Copenhagen, 28 October 2019

Executive Committee:

Jakob Riis Tor Magne Lønnum Jakob BomholtPresident 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

The Board of Directors and the Executive Committee have today considered and approved the interim report of Falck A/S for the period 1 January 2019 – 30 September 2019.

The interim report has not been audited or reviewed by the company’s independent auditors.

The interim report has been prepared in accordance with IAS 34 ”Interim Financial Reporting” as adopted by the EU and additional requirements under the Danish Financial Statements Act.

In our opinion, the interim financial statements give a true and fair view of the Group’s assets,

liabilities and financial position as at 30 September 2019 and of the results of the Group’s operations and cash flows for the fi-nancial period 1 January – 30 September 2019.

Furthermore, in our opinion, the Management’s review includes a fair review of developments in the operations and financial position of the

Group, the financial results for the period and the Group’s financial position.

Besides what has been disclosed in the interim report, no changes in the Group’s most significant risks and uncertainties have occurred relative to the disclosures made in the 2018 Annual Report.



Income statement

DKK million Section Q3 2019 Q3 2018 Q1-Q3 2019 Q1-Q3 2018 2018

Revenue 2 3,403 3,488 10,376 10,606 14,043

Cost of services (2,701) (2,763) (8,179) (8,530) (11,380)

Gross profit 702 725 2,197 2,076 2,663

Sales and administrative expenses (551) (611) (1,631) (1,836) (2,473)

Other operating income and expenses, net 15 9 109 51 85

Operating profit before other items (EBITA) 166 123 675 291 275

Special items - - (193) (11) (14)

Amortisation of customer contracts (42) (53) (143) (167) (233)


Gains/losses from divestments of enterprises (22) (43) 2 (51) (56)

Income after tax from associates and joint arrangements - (1) 3 (2) 1

Financial income 22 10 27 29 34

Financial expenses (15) (116) (161) (353) (473)

Profit before tax 109 (80) 210 (264) (466)

Income taxes (63) 27 (167) 58 (51)

Profit for the period from continuing operations 46 (53) 43 (206) (517)

Profit for the period from discontinued operations 3 - (428) - (398) (398)

Profit for the period 46 (481) 43 (604) (915)

Profit for the period attributable to:

Shareholders in Falck A/S 55 (474) 24 (594) (888)

Non-controlling interests (9) (7) 19 (10) (27)

Total 46 (481) 43 (604) (915)


Financial statements

Statement of comprehensive income


Profit for the period 46 (481) 43 (604) (915)

Actuarial adjustment of pension provisions - - - 1 1

Items that will not be reclassified to the income statement - - - 1 1

Exchange rate adjustment (18) (7) (12) 14 (24)

Value adjustment of currency hedging instruments - (5) 4 (3) (3)

Value adjustment of interest hedging instruments - 12 9 21 25

Tax on other comprehensive income (13) (9) (13) (10) (17)

Items that may be reclassified to the income statement (31) (9) (12) 22 (19)

Other comprehensive income (31) (9) (12) 23 (18)

Total comprehensive income 15 (490) 31 (581) (933)

Total comprehensive income attributable to:

Shareholders in Falck A/S 24 (483) 12 (571) (906)

Non-controlling interests (9) (7) 19 (10) (27)

Total 15 (490) 31 (581) (933)



Statement of cash flows



Depreciation, amortisation and impairment 165 137 476 434 662

Amortisation of customer contracts 42 53 143 167 233

Change in net working capital (137) (104) (185) (129) 117

Transactions with associates - (15) (22) 3 23

Reversal of profit from divestment of non-current assets, net (8) (4) (96) (14) (34)

Net interest paid (27) (51) (90) (105) (120)

Income tax paid (39) (18) (119) (89) (145)

Cash flows from operating activities 120 68 446 380 764

Purchase of property, plant and equipment (24) (29) (390) (155) (257)

Sale of property, plant and equipment - 12 376 30 126

Purchase of intangible assets (7) (15) (34) (104) (108)

Acquisition of subsidiaries and operations - (5) - (24) (38)

Divestment of subsidiaries and operations (7) 4 115 - -

Investments in associates - - - - (8)

Cash flows from hedging of net investments - 22 8 43 33

Cash flows from investing activities (38) (11) 75 (210) (252)

Transactions with shareholders - - 1 - -

Transactions with non-controlling interests (22) (1) (55) (24) (31)

Interest-bearing debt raised 43 - 163 10 39

Repayment of interest-bearing debt (102) (234) (905) (898) (965)

Cash flows from financing activities (81) (235) (796) (912) (957)

Cash flows from continuing operations 1 (178) (275) (742) (445)

Cash flows from discontinued operations 3 - (376) - 382 382

Change in cash and cash equivalents 1 198 (275) (360) (63)

Cash and cash equivalents at beginning of the period 855 499 1,138 1,077 1,077

Exchange rate adjustment (6) 2 (13) (4) (9)

Change in cash and cash equivalents 1 198 (275) (360) (63)

Cash and cash equivalents related to assets classified as held for sale - 146 - 132 133

Cash and cash equivalents at the end of the period 850 845 850 845 1,138



Balance sheet

DKK million Section30 September

201930 September

201831 December

2018

Assets

Goodwill 6,364 6,427 6,424

Other intangible assets 850 1,137 1,008

Property, plant and equipment 844 1,012 900

Right-of-use assets 1,903 222 198

Investments in associates and joint ventures 44 54 64

Deferred tax assets 134 220 170

Other receivables 42 81 50

Total non-current assets 10,181 9,153 8,814

Inventories 27 35 24

Contract assets 453 611 479

Trade receivables 1,419 1,393 1,489

Income tax receivable 29 29 29

Other receivables 309 312 364

Cash and cash equivalents 850 845 1,138

Total current assets 3,087 3,225 3,523

Total assets 13,268 12,378 12,337

DKK million Section30 September

201930 September

201831 December

2018

Equity and liabilities

Share capital 133 81 81

Other reserves (399) (322) (387)

Retained earnings 4,408 2,414 2,182

Equity attributable to Falck A/S 4,142 2,173 1,876

Non-controlling interests 390 337 331

Total equity 4,532 2,510 2,207

Subordinated shareholder loans - 2,164 2,220

Loans 3,185 3,682 3,662

Lease liabilities 1,448 109 94

Deferred tax 226 225 230

Provisions 87 46 99

Other payables 2 10 10

Total non-current liabilities 4,948 6,236 6,315

Loans 59 71 65

Lease liabilities 382 58 57

Trade payables 605 757 820

Income taxes 133 94 97

Provisions 204 266 244

Contract liabilities 1,092 1,158 1,204

Other payables 1,313 1,228 1,328

Total current liabilities 3,788 3,632 3,815

Total liabilities 8,736 9,868 10,130

Total equity and liabilities 13,268 12,378 12,337



Statement of changes in equity

2019 DKK millionShare

capitalHedging

reserve

Currency translation

reserveRetained earnings Total

Non- controlling

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 - - (12) - (12) - (12)

Value adjustment of currency hedging instruments - 4 - - 4 - 4

Value adjustment of interest hedging instruments - 9 - - 9 - 9

Tax on other comprehensive income - (3) (10) - (13) - (13)

Other comprehensive income - 10 (22) - (12) - (12)

Profit for the period - - - 24 24 19 43

Total comprehensive income - 10 (22) 24 12 19 31

Capital increase 52 - - 2,218 2,270 - 2,270

Dividend - - - - - (6) (6)

Change in non-controlling interests’ ownership share - - - (7) (7) 46 39

Adjustment of provision for acquisition of non-controlling interests relating to acquisitions after 1 January 2010 - - - (9) (9) - (9)

Total transactions with owners 52 - - 2,202 2,254 40 2,294

Total equity movements in 2019 52 10 (22) 2,226 2,266 59 2,325

Total equity at 30 September 2019 133 - (399) 4,408 4,142 390 4,532



2018 DKK millionShare

capitalHedging

reserve

Currency translation

reserveRetained earnings Total

Non- controlling

interests Equity

Equity at 1 January 2018 81 (27) (443) 3,091 2,702 428 3,130

Change in accounting policies - - - (53) (53) - (53)

Adjusted equity at 1 January 2018 81 (27) (443) 3,038 2,649 428 3,077

Exchange rate adjustment - - 14 - 14 - 14

Value adjustment of currency hedging instruments - (3) - - (3) - (3)

Value adjustment of interest hedging instruments - 21 - - 21 - 21

Actuarial adjustment of pension provisions - - - 1 1 - 1

Tax on other comprehensive income - (4) (6) - (10) - (10)

Other comprehensive income - 14 8 1 23 - 23

Profit for the period - - - (594) (594 (10) (604)

Total comprehensive income - 14 32 (593) (571) (10) (581)

Dividend - - - - - (12) (12)

Change in non-controlling interests’ ownership share - - - 20 20 (69) (49)

Purchase and sale of treasury shares, warrants, etc. - - - (2) (2) - (2)

Reclassification of exchange rate adjustment from divest-ment of discontinued operations - - 102 - 102 - 102

Adjustment of provision for acquisition of non-controlling interests relating to acquisitions after 1 January 2010 - - - (25) (25) - (25)

Total transactions with owners - - 102 (7) 95 (81) 14

Total equity movements in 2018 - 14 134 (600) (476) (91) (567)

Total equity at 30 September 2018 81 (13) (309) 2,438 2,173 337 2,510

(Continued)Statement of changes in equity



Falck A/S is a limited liability company domiciled in Denmark. The interim report includes the consolidated financial statements of Falck A/S and its subsidiaries (Falck).

The interim report has been presented in accordance with IAS 34 “Interim Financial Reporting” as adopted by the EU and additional requirements in accordance with the Danish Financial Statements Act.

The interim report does not contain all the information required for the annual report and should therefore be read in conjunction with the 2018 Annual Report. No interim report has been prepared for the parent company.

Apart from the adoption of IFRS 16 “Leases”, the accounting policies are consistent with those applied in the 2018 Annual Report, to which reference is made.

Key figures and ratiosIn 2019, the definitions of free cash flow, net operating assets and calculation of economic profit are revised.

Other key figures and ratios are unchanged and definitions can be found in Section 1.4 of the 2018 Annual Report.

Free cash flowFree cash flow has been revised to include income tax paid.

Section 1Accounting policies

Free cash flow = cash flow from operating activities + net interest paid - purchase of property, plant and equipment - sale of property, plant and equipment - purchase of intangible assets.

Net operating assets (NOA) In 2019, net operating assets has been revised to include all assets and liabilities except for investments in associates and joint ventures and net interest-bearing debt.

Economic profitIn 2019, economic profit is calculated applying average NOPAT and NOA on the Last Four Quarters basis (LFQ). Previously, the applied average NOPAT and NOA were based on the Last Twelve Months basis (LTM).

Economic profit = NOPAT - (NOAxWACC)

The required return to investors (WACC) is set at a simplified rate of 8% (2018: 8%).

Change in presentation of the Income statementThe classification in the Income statement is changed as of 1 January 2019 from a presentation by the “nature of expense” to a presentation by the “function of expense”. Falck has changed the classification to better reflect and support the way Falck is managed.Comparative figures are changed accordingly.

Implementation of new accounting standards, amendments and interpretationsThe following accounting standards, amend-ments (IAS and IFRS) and interpretations have been implemented from 1 January 2019:• IFRS 16 “Leases”• IFRIC 23 “Uncertainty over income tax

treatments”• Amendment to IFRS 9 “Financial instruments”• Amendment to IAS 28 “Investments in

Associates and Joint Ventures”.

Apart from the impact from IFRS 16, the adoption of new standards, amendments and interpretations has not affected the interim report for 2019.

IFRS 16 Leases As of 1 January 2019, Falck has adopted IFRS 16 “Leases” which replaces IAS 17 “Leases”.

The adoption of IFRS 16 has resulted in leased buildings and vehicles being recognised in the balance sheet as right-of-use assets with corresponding lease liabilities.

Right-of-use assets are depreciated over the term of the lease and payments are allocated between amortisations on the lease liabilities and interest expenses. The term of the lease is determined based on the non-cancellable period of the lease and management judgement.

Falck has applied the modified retrospective approach and comparative figures for 2018 have not been restated. At the date of initial application, lease liabilities have been measured at the present value of the remaining lease payments using the incremental borrowing rate. Right-of-use assets have been measured at an amount equal to the lease liabilities adjusted for prepayments. The selected implementation approach has no impact on retained earnings as of 1 January 2019.

In implementing IFRS 16, Falck has applied the following reliefs and expedients:

• Relied on the definition under IAS 17 and IFRIC 4 to determine whether contracts at the date of initial application contain a lease.

• Not recognised right-of-use assets and lease liabilities related to low value and short-term leases and related to leases with a remaining contract period of 12 months or less at the date of initial application.

• Applied a single discount rate to a portfolio of leases with reasonably similar characteristics.

• Excluded initial direct costs from the recognition of right-of-use assets at the date of initial application.

• Relied on the assessment of whether a contract is onerous under IAS 37 at the date of initial application instead of performing an impairment review under IAS 36.



Section 1Accounting policies (continued)

1 January 2019 30 September 2019

DKK million

Previousaccounting

policiesIFRS 16

adjustment

Newaccounting

policies

Previousaccounting

policiesIFRS 16

adjustment

Newaccounting

policies

Income statement

Cost of services - - - (8,190) 11 (8,179)

Gross profit - - - 2,186 11 2,197

Sales and administrative expenses - - - (1,632) 1 (1,631)

Operating profit before other items (EBITA) - - - 663 12 675

Net financial items - - - (108) (26) (134)

Profit before tax - - - 224 (14) 210

Income taxes - - - (170) 3 (167)

Profit for the period from continuing operations - - - 54 (11) 43

Assets

Right-of-use assets 198 2,225 2,423 192 1,711 1,903

Deferred tax assets 170 - 170 131 3 134

Other receivables, current 50 (29) 21 340 (31) 309

Total assets 12,337 2,196 14,533 11,585 1,683 13,268

Equity and liabilities

Equity 2,207 - 2,207 4,543 (11) 4,532

Lease liabilities, non-current 94 1,707 1,801 79 1,369 1,448

Lease liabilities, current 57 489 546 57 325 382

Total equity and liabilities 12,337 2,196 14,533 11,585 1,683 13,268

The impact of IFRS 16At 1 January 2019, Falck recognised lease assets under Property, plant and equipment of DKK 2,423 million of which DKK 198 million was reclassified from Finance leased assets under IAS 17. DKK 29 million was reclassified from prepayments to leased assets as part of the transition to IFRS 16. A corresponding lease liability of DKK 2,347 million was recognised under loans of which DKK 151 million was reclassified from Finance leased liabilities under IAS 17.

The impact on EBITA Q1-Q3 2019 was positive by DKK 12 million due to a reduction in operating cost of DKK 238 million off-set by depreciations of DKK 226 million. The impact from IFRS 16 on Profit before tax was negative by DKK 14 million Q1-Q3 2019.

Deferred tax assets increased by DKK 3 million in Q1-Q3 2019 related to IFRS 16.



Section 2Segment and revenue information

Q1-Q3 2019 Business units Ambulance Assistance Healthcare Portfolio BusinessesGroup and other

activities/eliminations Total

Income statement

Revenue 5,789 2,144 1,764 880 (201) 10,376

Depreciation, amortisation and impairment (165) (48) (9) (14) (240) (476)

Operating profit before other items (EBITA) 355 392 56 75 (203) 675

Balance sheet

Total assets 4,848 3,323 1,822 1,101 2,174 13,268

Investments in intangible assets and property, plant and equipment 128 11 4 4 277 424

Key ratios

EBITA margin (%) 6.1% 18.3% 3.1% 8.5% 6.5%

Q1-Q3 2018 Business units Ambulance Assistance Healthcare Portfolio BusinessesGroup and other

activities/eliminations Total

Income statement

Revenue 5,812 2,270 1,814 884 (174) 10,606

Depreciation, amortisation and impairment (231) (86) (98) (19) - (434)

Operating profit before other items (EBITA) 174 318 (78) 46 (169) 291

Balance sheet

Total assets 5,002 4,034 1,930 1,176 236 12,378

Investments in intangible assets and property, plant and equipment 154 13 32 60 - 259

Key ratios

EBITA margin (%) 3.0% 14.0% (4.3)% 5.2% 2.7%

CommentsManagement has defined Falck’s business segments based on the reporting presented to the Group Executive Management, and which forms the basis for the Management’s strategic decisions.

The performance of the business segments is evaluated on the basis of operating profit before other items (EBITA).

Group and other activities include Group staff functions not directly attributable to the business units, eliminations and adjustment for lease accounting (IFRS 16 Leases). The business units report according to the old leasing standard (IAS 17) and not according to IFRS 16.



Section 3Discontinued operations

Profit for the period from discontinued operations


Revenue - 189 - 646 646

Cost of services - (126) - (427) (427)

Gross Profit - 63 - 219 219

Sales and administrative expenses - (54) - (163) (163)

Other operating income and expenses, net - 1 - 2 2

Operating profit before other items (EBITA) - 10 - 58 58

Net financial items - (2) - (3) (3)

Profit before tax - 8 - 55 55

Income taxes - (4) - (21) (21)

Profit for the period - 4 - 34 34

Loss on divestment of discontinued operations - (432) - (432) (432)

Profit for the period from discontinued operations - (428) - (398) (398)

Cash flows from discontinued operationsDKK million Q3 2019 Q3 2018 Q1-Q3 2019 Q1-Q3 2018 2018

Cash flows from operating activities - 37 - 20 20

Cash flows from investing activities - (9) - (47) (47)

Cash flows from financing activities - (56) - 5 5

Cash consideration from divestment of discontinued operations - 404 - 404 404

Cash flows from discontinued operations - 376 - 382 382

CommentsIn Q1 2019, Falck decided to keep the Healthcare staffing business as a part of the Healthcare business unit. As a result, the staffing business is no longer presented as discontinued operations and assets classified as held for sale.

The comparative figures for 2018 for the income statement, statement of cash flows and balance sheet have been restated.

In 2018, discontinued operations included Falck Safety Services and Danish medical clinics and associated businesses (Falck Lægehuse, Sirculus and Vikteam).

In Q3 2018, Falck divested Falck Safety Services and its Danish medical clinics. A loss on the divestments of DKK 432 million was recognised in profit from discontinued operations. See section 4.3 of the 2018 Annual report.

Section 4Events after the reporting date

No events have occurred after the balance sheet date affecting Falck’s financialposition at 30 September 2019.



Falck A/S

Sydhavnsgade 18

2450 Copenhagen SV

Denmark

Tel.: +45 70 33 33 11

www.falck.com

www.falck.dk

CVR no. 33 59 70 45


Documents

Interim Report Q1 - Q3 2019 · Financial results Q1-Q3 2019 Year-to-date revenue was DKK 10,376 million (DKK 10,606 million), resulting in a 2.3% revenue decline in fixed currencies