CONSTI PLC INTERIM REPORT 28 OCTOBER 2020, at 8.30 a.m.
Consti Plc Interim Report for January – September 2020
PROFITABILITY AND CASH FLOW IMPROVED
7–9/2020 highlights (comparison figures in parenthesis 7–9/2019):
·Net sales EUR 68.2 (81.8) million; change -16.7%
·EBITDA EUR 3.2 (3.0) million and EBITDA margin 4.8% (3.6%)
·Operating profit (EBIT) EUR 2.5 (2.1) million and EBIT margin 3.6% (2.6%)
·Order backlog EUR 189.4 (206.4) million; change -8.2 %
·Free cash flow EUR 4.6 (-0.4) million
·Earnings per share EUR 0.21 (0.17)
1–9/2020 highlights (comparison figures in parenthesis 1–9/2019):
·Net sales EUR 196.5 (236.5) million; change -16.9%
·EBITDA EUR 7.7 (4.5) million and EBITDA margin 3.9% (1.9%)
·Operating profit (EBIT) EUR 5.3 (1.8) million and EBIT margin 2.7% (0.8%)
·Free cash flow EUR 14.7 (-1.1) million
·Earnings per share EUR 0.43 (0.06)
Guidance on the Group outlook for 2020:
The Company estimates that its operating result for 2020 will improve compared to 2019.
| KEY FIGURES (EUR 1,000) | 7-9/ 2020 | 7-9/ 2019 | Change % | 1-9/ 2020 | 1-9/ 2019 | Change % | 1-12/ 2019 |
| Net sales | 68,202 | 81,837 | -16.7 % | 196,548 | 236,542 | -16.9 % | 314,801 |
| EBITDA | 3,249 | 2,979 | 9.1 % | 7,711 | 4,494 | 71.6 % | 8,137 |
| EBITDA margin, % | 4.8 % | 3.6 % | 3.9 % | 1.9 % | 2.6 % | ||
| Operating profit (EBIT) | 2,454 | 2,089 | 17.5 % | 5,283 | 1,810 | 191.8 % | 4,632 |
| Operating profit (EBIT) margin, % | 3.6 % | 2.6 % | 2.7 % | 0,8 % | 1.5 % | ||
| Profit for the period | 1,694 | 1,412 | 20.0 % | 3,533 | 720 | 390.6 % | 2,676 |
| Order backlog | 189,402 | 206,406 | -8.2 % | 185,820 | |||
| Free cash flow | 4,599 | -406 | 14,692 | -1,134 | 3,977 | ||
| Cash conversion, % | 141.5 % | n/a | 190.5 % | n/a | 48.9 % | ||
| Net interest-bearing debt | 7,383 | 22,727 | -67.5 % | 18,880 | |||
| Gearing, % | 23.6 % | 83.3 % | 64.4 % | ||||
| Return on investment, ROI % | 14.1 % | -0.7 % | 8.9 % | ||||
| Number of personnel at period end | 959 | 1,024 | -6.3 % | 990 | |||
| Earnings per share, undiluted (EUR) | 0.21 | 0.17 | 23.5 % | 0.43 | 0.06 | 616.7 % | 0.30 |
CEO Esa Korkeela’s comment
“Consti’s solid performance continued during the third quarter. Our net sales for July-September amounted to 68.2 (81.8) million euro. Net sales decreased 16.7 percent from the comparison period. Our operating result for the third quarter was 2.5 (2.1) million euro, which is 3.6 (2.6) percent of the net sales. Both our absolute and relative profitability continued improving. Our profitability developed mainly as we expected, and all of our business areas were profitable during the reporting period.
Due to our improved profitability and released working capital, our cash flow for the reporting period also improved significantly compared to the previous year. Our free cash flow for July-September was 4.6 (-0.4) million euro. As a result of our positive profitability and cash flow development, our balance sheet and liquidity position also continued to strengthen.
Rising uncertainty owing to the coronavirus pandemic (COVID-19) reflected on the development of both our net sales and order intake. In July-September our order intake amounted to 31.0 (37.0) million euro. Our order backlog at the end of the reporting period decreased to 189.4 (206.4) million euro. Thus, our order backlog at the end of the third quarter was 8.2 percent lower than in the comparison period.
As we estimated in our half-year report, as a result of the corona crisis some planned renovation projects have been postponed. In the housing company market postponed decision making has caused projects to be moved into the future. In business premises renovation and alteration projects, the demand has decreased especially in those industries that have suffered most from corona. The corona situation has unfortunately escalated after the reporting period, creating further uncertainty to the short-term demand outlook of renovations. In the longer term, both the development of the corona crisis and the general economic situation will influence the demand outlook for renovations.
During the reporting period we were able to ensure that, work progressed at our work sites and that our customer’s projects were executed without unnecessary interruptions. Protecting the health of our personnel, customers, and partners was also an important priority. We also started to renew our strategy during the reporting period. We believe that the implementation of the new organisation structure and our change programme that we carried out last year have created a good foundation, on which we can build an even stronger Consti. We will communicate more about our new strategy in the beginning of next year.
Our guidance for the Group’s outlook for 2020 remains unchanged. Although the coronavirus pandemic is negatively impacting our net sales, I expect that our performance will remain solid also during the last quarter of the year.”
Operating environment
Construction market 2020-21
A Ministry of Finance led construction trends group estimated current construction industry trends in its Construction 2020-2021 Report, which was published in September. According to the report, the corona epidemic’s effect on construction has been smaller than expected. The corona restrictions in force have, however, decreased renovation more than new building. According to the report, renovation declined during the beginning of the year. Nonetheless, construction output as a whole was estimated to have grown during the first half of the year.
The construction trends group estimates that construction outlook for the upcoming autumn and winter 2020 is, however, weak. The outlook for new building has slumped due to a fall in demand, and there has been a considerable reduction in the number of building permits issued. Construction output for the full year 2020 is estimated to be close to the 2019 level as, despite the poor outlook, output was still growing in the first six months of the year. The construction trends group estimates that output will be down by between three and five per cent in 2021.
According to the construction trends group, renovation outlooks for 2020 and 2021 are more positive than that of new building. Growth is expected to continue at a rate of 0.4 percent in 2020 and 1.3 percent in 2021. Renovations continue, because renovation needs remain high due to the age of the building stock. As supplementary and complimentary building become more common, the number of renovations also increase. The decrease in new construction also adds to the interest that companies show towards professional renovations.
The construction trends group estimates that the corona crisis has both positive and negative impacts on renovation demand, but the total effect is negative. Demand drivers for housing company renovations remain unchanged, but the corona crisis has caused both decision-making and the planning of renovation projects to be delayed in some housing companies. The Finnish Real Estate Federation conducted a separate survey in August, which showed that owing to the corona pandemic approximately 20 percent of large housing companies have postponed decision making, while about 15 percent have postponed renovation project planning. The growth of business premises renovations is slowing down because the corona crisis has lowered demand and created an over-supply of office spaces, and also decreased real estate business.
The renovation market in general
The renovation market is need-driven, and its steady growth is sustained by the age of the building stock and global megatrends. The general economic situation has a smaller impact on renovations and building technology services than it has on new construction.
Professional renovation has grown nearly continuously in Finland for the last 20 years and at its best, its value has surpassed that of new construction. In 2019, renovation’s share of all construction is estimated to have been approximately 47 percent. Both renovation and new construction have concentrated to large cities in past years. As economic growth declines new construction is estimated to concentrate even more to growth centres.
The value of professional renovation was approximately 13.8 billion euro in 2019. Residential buildings made up 8.3 billion euro of this amount. The majority of renovations were conducted in apartment buildings and rowhouses. The demand for renovation is increased by the age of the building stock in Finland. Residential construction was at its heights in the 1970s and the building technology, facades and structures from that time now require major renovations.
The demand for renovation is due to the large building stock of residential buildings from the 1970s and also renovation needs in commercial and office buildings. In the 1980s commercial and office building construction was especially large-scale, and in the 1990s and early 2000s more commercial and office buildings were built than residential buildings. Thus, commercial and service facilities do not necessarily meet present-day needs.
Megatrends such as aging population, urbanisation and climate change also add to the need of renovation. Energy efficiency requirements for buildings, for example, aim to decrease carbon emissions by improving energy efficiency through comprehensive renovations and smart building technology. EU’s directive requires that member states make long-term comprehensive renovation strategies to convert the building stock to be extremely energy efficient and low-carbon by 2050. Some of the requirements are already for 2020. Building technology such as ventilation, as well as various security systems are also growing more important as factors contributing to living comfort.
Hand in hand with urbanisation, both new construction and renovation are concentrated more and more to cities, because renovating buildings in areas that are losing population is not always economically viable. Urbanisation also adds to supplementary building in both centres of growth areas and suburbs. Modifications of building use are also conducted to renovate office buildings into apartments.
Outlook for the 2020
Growing uncertainty due to the coronavirus pandemic (COVID-19) has reflected on the development of both Consti’s net sales and order intake. As a result of the corona crisis, some planned renovation projects have been postponed. In the housing company market, postponed decision-making has caused projects to be delayed. In business premises renovation and alteration projects demand has decreased especially in those industries that have suffered most from corona. After the reporting period, the corona situation has unfortunately escalated, creating further uncertainty to the short-term demand outlook of renovations.
Consti’s guidance for 2020 remains unchanged. The coronavirus pandemic will have a negative impact on net sales for 2020, but Consti’s performance is expected to remain solid also during the last quarter of the year.
The Company estimates that its operating result for 2020 will improve compared to 2019.
Press conference
Microsoft Teams meeting for analysts, portfolio managers and media representatives, will take place 28 October 2020, at 10:00 a.m. (EET). The meeting will be hosted by CEO Esa Korkeela and CFO Joni Sorsanen.
Financial communication in 2021
Consti Plc’s Financial Statements for 2020 will be published 5 February 2021.
The electronic version of the annual report, which includes the full financial statements for 2020, will be published in week 11/2021.
Consti Plc’s Annual General Meeting for 2021 is scheduled to take place on Wednesday, 7 April 2021 in Helsinki.
Consti Plc shall publish three interim reports during 2021:
- Interim report 1-3/2021 published 30 April 2021
- Half-year financial report 1-6/2021 published 23 July 2021
- Interim report 1-9/2020 published 27 October 2021
CONSTI PLC
Further information:
Esa Korkeela, CEO, Consti Plc, Tel. +358 40 730 8568
Joni Sorsanen, CFO, Consti Plc, Tel. +358 50 443 3045
Distribution:
Nasdaq Helsinki Ltd.
Major media
www.consti.fi
Consti is a leading Finnish company concentrating on renovation and technical services. Consti offers comprehensive renovation and building technology services to housing companies, corporations, investors and the public sector in Finland’s growth centres. Company has four business areas: Housing Companies, Corporations, Public Sector and Building Technology. In 2019, Consti Group’s net sales amounted to 315 million euro. It employs approximately 1000 professionals in renovation construction and building technology.
Consti Plc is listed on Nasdaq Helsinki. The trading code is CONSTI. www.consti.fi
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