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Breakeven and declining operating margin in 2016. Expected progress in 2017
For the past decade, Falck has grown significantly year after year, but in recent years the operating profit has decreased. This trend continued in 2016, but is expected to reverse in 2017.Falck’s revenue for 2016 amounted to DKK 15,964 million, which is a 4.8% year-on-year increase on 2015. The growth was attributable to the Emergency, Assistance and Healthcare businesses, whereas Safety Services continued to experience declining revenue due to the global downturn in the oil and gas industry.The growth in 2016 was negatively impacted by the significant slowdown in Safety Services and by Danish emergency contracts, which were not renewed. Despite these negative effects, organic growth was 4.3% compared with 2.2% in 2015. Operating profit (EBITA before special items) was DKK 792 million, which was a decrease of DKK 179 million compared to 2015.The decline in operating profit was primarily attributable to Emergency services and derived especially from operational challenges in the UK, change in contract portfolio, commencement of new contracts in Denmark and lack of rescue officers in a number of markets - Denmark, Germany and the UK among others. The Assistance business also reduced its earnings due to an increase in marketing costs as well as increased costs related to assistance provided to customers and to the introduction of additional services for subscribers in Denmark.The Emergency business renewed its largest contract in the United States, the provision of 911 ambulance services to Los Angeles County, California, and in addition, Falck was awarded another two areas, which doubled Falck’s ambulance operations in the county. In Spain, Emergency successfully commenced the operation of new significant ambulance contracts for areas around Barcelona won in 2015; Falck now provides ambulance services to more than 2 million citizens in areas around Barcelona. The strategic focus that Falck has placed on rolling out industrial fire services in Europe and Latin America continued to develop favourably as several new fire contracts were won.
In Assistance, Falck added several new services to its roadside assistance subscriptions and consequently saw an increase in the number of cars covered by a Falck membership. Falck also saw significant progress within Global Assistance signing contracts with a number of corporate clients, who are focusing on the expanded responsibility they have towards employees traveling and working outside their home country.
Healthcare saw strong growth within employee health services, but also achieved a breakthrough in winning a contract to coordinate the treatment and health claims for a major Danish insurance company.
Significant cost reduction programmes implemented in Safety Services have had a positive effect, and earnings in the business area are improving despite continued weak activity in the oil and gas sector, which has caused revenue to decline further.
As announced on 20 December 2016, Allan Søgaard Larsen stepped down as President and CEO of Falck in 2016. On the 1 May Jakob Riis will take up his new position as president and CEO of Falck.
In 2017, the Falck Group expects to achieve revenue growth in the region of 5% as well as an increase in the EBITA margin.
“In recent years we have, despite strong growth rates, seen declining margins. Our key focus in the coming years will be on reaping the benefits of the growth by improving margins while also capturing the strong growth potential inherent in the markets Falck operate in. To achieve this, we must consistently commit to always delivering on our promises and providing high-quality services in all areas of operation. This will continue to require the strong efforts of our highly qualified and dedicated
Falck employees that are the crucial foundation of everything we do”, says Chairman Peter Schütze.
For additional information, please contact Falck's press telephone: +45 7022 0307
You can read the report here:Falck annual report 2016
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