The financial impact of the COVID-19 outbreak put pressure on revenue and operating profit. After seven consecutive quarters of improved profitability, both items declined in the first quarter of 2020.
COVID-19 and lower business performance impacted operating profit negatively by estimated DKK 151 million of which DKK 60 million related to the COVID-19 pandemic. For the full-year 2020 Falck has suspended its financial outlook due to the uncertainty caused by the COVID-19 outbreak.
President & CEO Jakob Riis said:
“The first quarter of 2020 was defining for Falck. The outbreak of the coronavirus disease was a test of our operational and financial resilience. Operationally, we have managed the situation very well. Financially, the impact from lower activity levels has put pressure on our profitability. Our frontline employees work diligently to respond to a challenging situation. Honouring their work, we want to ensure that Falck emerges stronger from the current critical situation, both financially and operationally, while also retaining the trust of customers and communities in which we operate.”
Financial highlights in Q1 2020 (compared to Q1 2019) were:
|DKK million||Q1 2020||Q1 2019||2019|
|EBITA margin (%)||3.3||9.2||5.3|
- Reported operating profit (EBITA) was DKK 109 million (DKK 325 million) with an EBITA margin of 3.3% (9.2%). Efficiency measures and price management did not fully offset lower activity levels in the pay-on-use business. COVID-19 impacted EBITA negatively by estimated DKK 60 million. The comparison quarter last year was positively impacted by gains of DKK 65 million from the sale of real estate in Denmark.Revenue was DKK 3,327 million (DKK 3,532 million). In fixed currencies, revenue decreased by 5.8% compared to Q1 2019. New contracts in Ambulance and Fire Services did not fully offset the lower activity levels in the pay-on-use business and impact from COVID-19 estimated to DKK 70 million.
- Profit for the period from continuing operations was DKK 29 million (DKK 100 million). The negative impact of the lower EBITA for the first quarter was offset by reduced net financial expenses and amortisations.
- Free cash flow was DKK 527 million (DKK 844 million). Cash flow was strong with a cash conversion of 483.3% due to improved cash collection particularly in the US and improvements in working capital.
- Falck has suspended its financial outlook for 2020 pending further clarification of the market impact from COVID-19 and the actual financial impact on the business.
COVID-19 has challenged Falck – first priority has been to maintain operations in support of healthcare systems
The COVID-19 outbreak has challenged the business in several ways. Falck is a market-leading provider to and an integral part of the emergency response and healthcare systems to millions of people in the Nordics, the UK, Germany, Spain, the US and Colombia. In Ambulance and Community Healthcare, the businesses saw increasing activity levels, coupled with a global shortage of personal protective equipment and an increased level of sick leave.
In other parts of the business, Falck was faced with a sudden decline in demand for its services. Government orders to shut down societal activity have impacted the healthcare business significantly and lowered demand for patient transport and roadside assistance.
Jakob Riis said:
“Our first priority has been to maintain operations in support of the response of healthcare systems to COVID-19. We have been put to the test in markets such as Barcelona, Stockholm and the US where healthcare systems have been under severe pressure. In each of our markets, we have lived up to our obligations and honoured the trust people place in us when municipalities choose Falck as their provider of services that constitute vital parts of the healthcare system.
Commercially, we have worked diligently to adapt to new market dynamics. In our healthcare business, we have shifted from physical to virtual delivery of services and extended our offering to services that meet new needs from employees working from home instead of from an office. In Colombia, the number of subscribers to our doctors on call services increased.”
However, the adjustments made to Falck’s business were not enough to offset the effects of the sudden shift in demand. 1,600 employees have been sent home temporarily.
“We have done our utmost to avoid permanent layoffs in this first phase of uncertainty, as we need our skilled employees back to work as soon as activity levels return to a new normal. We continue to assess the impact on our business and expect our activities to rebound soon after societies re-open albeit at lower activity levels than before the COVID-19 outbreak,” said Jakob Riis.
Falck’s Q1 interim report is available at www.falck.com.