CONSTI GROUP PLC INTERIM REPORT 10 NOVEMBER 2016, at 8.30 a.m.
Consti Group Plc Interim Report for January - September 2016
Net sales on par with last year, profitability improved
7-9/2016 highlights (comparison figures in parenthesis 7-9/2015):
· Net sales 70.6 (70.4) million euro; growth 0.3 %
· EBITDA 4.5 (3.6) million euro and EBITDA margin 6.4% (5.1%)
· Adjusted EBITDA 4.5 (3.8) million euro and adjusted EBITDA margin 6.4% (5.4%)
· Operating profit (EBIT) 3.7 (3.0) million and operating profit (EBIT) margin 5.3% 4.2%)
· Adjusted EBIT 3.7 (3.2) million euro and adjusted EBIT margin 5.3% (4.5%)
· Order backlog 185.6 (172.3) million euro
· Free cash flow 6.6 (0.1) million euro
· Earnings per share 0.37 (0.25) euro
1-9/2016 highlights (comparison figures in parenthesis 1-9/2015):
· Net sales 186.7 (181.2) million euro; growth 3.0 %
· EBITDA 8.2 (7.0) million euro and EBITDA margin 4.4 % (3.9 %)
· Adjusted EBITDA 8.3 (7.5) million euro and adjusted EBITDA margin 4.4% (4.2%)
· Operating profit (EBIT) 6.5 (5.4) million and operating profit (EBIT) margin 3.5% (3.0%)
· Adjusted EBIT 6.6 (5.9) million euro and adjusted EBIT margin 3.5% (3.2%)
· Free cash flow 10.4 (7.2) million euro
· Earnings per share 0.60 (0.23) euro
Guidance on the Group outlook for 2016:
Consti adjusted its net sales guidance with a stock exchange release on October 26th 2016, in which it stated that the company estimates its net sales to grow compared to 2015. The company previously estimated that "its total annual net sales for 2016 will grow approximately 5-10 percent compared to 2015."
| KEY FIGURES (EUR 1,000) | 7-9/ 2016 | 7-9/ 2015 | Change % | 1-9/ 2016 | 1-9/ 2015 | Change % | 1-12/ 2015 | |
| Net sales | 70,554 | 70,361 | 0.3 % | 186,735 | 181,212 | 3.0 % | 256,151 | |
| Adjusted EBITDA* | 4,521 | 3,788 | 19.4 % | 8,250 | 7,539 | 9.4 % | 12,613 | |
| Adjusted EBITDA margin, % | 6.4 % | 5.4 % | 4.4 % | 4.2 % | 4.9 % | |||
| EBITDA | 4,521 | 3,598 | 25.7 % | 8,227 | 7,014 | 17.3 % | 10,507 | |
| EBITDA margin, % | 6.4 % | 5.1 % | 4.4 % | 3.9 % | 4.1 % | |||
| Adjusted EBIT* | 3,729 | 3,156 | 18.2 % | 6,558 | 5,887 | 11.4 % | 10,520 | |
| Adjusted EBIT margin, % | 5.3 % | 4.5 % | 3.5 % | 3.2 % | 4.1 % | |||
| Operating profit (EBIT) | 3,729 | 2,966 | 25.7 % | 6,535 | 5,362 | 21.9 % | 8,414 | |
| Operating profit (EBIT) margin, % | 5.3 % | 4.2 % | 3.5 % | 3.0 % | 3.3 % | |||
| Profit for the period | 2,791 | 1,245 | 124.2 % | 4,593 | 1,057 | 334.5 % | 3,260 | |
| Order backlog | 185,614 | 172,299 | 7.7 % | 181,301 | ||||
| Free cash flow | 6,610 | 90 | 7244.8 % | 10,357 | 7,160 | 44.7 % | 8,910 | |
| Cash conversion, % | 146.2 % | 2.5 % | 125.9 % | 102.1 % | 84.8 % | |||
| Net interest-bearing debt | 11,667 | 19,441 | -40.0 % | 17,407 | ||||
| Gearing, % | 44.6 % | 88.6 % | 70.9 % | |||||
| Number of personnel at period end | 931 | 928 | 0.3 % | 890 | ||||
| Earnings per share, undil. (EUR) | 0.37 | 0.25 | 48.2 % | 0.60 | 0.23 | 161.0 % | 0.61 | |
| * New ESMA (European Securities and Markets Authority) guidelines on Alternative Performance Measures (APMs) are effective for the financial year 2016. Consti presents APMs to reflect the underlying business performance and to enhance comparability between financial periods. APMs should not be considered as a substitute for measures of performance in accordance with the IFRS. As of Q1 2016, Consti relabels the previously referenced "before non-recurring items" with "before items affecting comparability" (IAC). For a more detailed description of items affecting comparability, see section "Sales, result and order backlog". | ||||||||
CEO Marko Holopainen's comment
Net sales on par with last year
"Demand for renovation construction and technical building services continued on a fairly good level during the third quarter of the year. Order intake in July-September was 6.3 percent higher than in the corresponding period last year. Thus our order backlog also developed positively. Our order backlog in euros at the end of the reporting period was 185.6 (172.3) million euro. Our net sales for the third quarter of the year grew 0.3 percent and was 70.6 million euro. Net sales grew in Technical Building Services and Renovation Contracting, but decreased in Building Facades. Net sales in July-September was affected by greater than anticipated challenges in obtaining personnel resources, which in turn reflected on the progress and start of projects and also somewhat on attaining new projects. Thus our order backlog - which had strengthened during the beginning of the year - was not realised as net sales at the anticipated pace. Nevertheless, our profitability improved during the quarter. Our adjusted EBIT was 3.7 million euro, which is 5.3 percent of the net sales, while corresponding figures from the third quarter of 2015 were 3.2 million euro and 4.5 percent of the net sales.
Market situation remained at a fairly good level
In general, the market situation in renovation construction and technical building services continued to be fairly good. The increase in new construction has, however, in our opinion decreased the amount of large-scale office premise renovation projects. Pipeline renovations and façade renovations of residential buildings came to the fore in orders we obtained during the quarter, as did service-work in general. All in all, the order intake during July-September grew compared to last year, but the orders will by the large be carried out in 2017.
Internally, personnel issues were emphasised
We need more competent personnel to support growth and thus we have increased our investments into for example personnel recruitment, training, and career paths. In addition, we are aiming at strengthening Consti's employer image, as the fight for competent personnel is fierce in our industry.
Outlook for the rest of the year
Based on our current market and business outlook, we believe that the demand for renovation construction and technical building services will remain at a fairly good level during the rest of the year as well. The fourth quarter's net sales will be affected by greater than anticipated challenges in obtaining personnel resources, and also in part by project schedules moving forward. Consequently, we adjusted our guidance on the Group net sales outlook slightly downwards. We estimate that net sales for 2016 will grow compared to 2015."
Operating environment
The Confederation of Finnish Construction Industries RT (CFCI) estimates in its October review of business conditions that housing construction will grow in 2016 by approximately 8 percent compared to the previous year. Renovation construction is estimated to grow 1.5 percent and new construction is estimated to grow 14 percent from last year.
CFCI expects renovation construction growth to be more moderate than in previous years as the increase in new construction is decreasing activity in renovation construction. Although renovation construction growth is slowing down somewhat, the renovation needs of existing building stock are believed to sustain steady growth in to the next decade.
The Finnish Association of HPAC Technical Contractors estimated in their October review that business conditions for technical building services have improved, especially in new construction. Approximately 75 percent of HPAC-contractors felt that the economic conditions were at least satisfactory. In renovation construction about 86 percent of respondents said that conditions were at least satisfactory, as did 91 percent of respondents from maintenance services.
The relative portion of renovations in the Finnish building market has grown during the past decade, and it is now already larger than the new construction market. The Confederation of Finnish Construction Industries RT (CFCI) estimates that renovation amounted to approximately 54 percent of the building market's total value in 2015. The general economic situation has a significantly smaller impact on renovation construction and technical building services than it does on the new construction market.
The ageing building stock particularly increases the demand for renovation construction. As buildings age, they require more technical renovations such as pipeline and façade renovations. At the moment mainly buildings from the 1960s and an increasing number of buildings from the considerably larger building stock of the 1970s are being renovated in Finland. In renovation construction the largest growth during the next decade is expected to come from residential buildings in large cities. In housing association renovations approximately one third of the renovations are pipelines, one third façades and the rest other structures.
In addition to ageing, buildings require more renovation, technical building services and building technology maintenance services due to heightened energy efficiency requirements, urbanization, modification of the use of buildings, the development of housing automatisation and the ageing populations' need for barrier-free buildings.
There are currently a great number of buildings in Finland which would benefit from renovations modifying their use to match current needs. Such renovations would improve both the buildings' usability and profitability. Typical modifications of buildings include the altering of old office buildings and industrial buildings in growth centres into hotels, apartments and assisted living facilities. Modifications of the use of buildings are a central part of Consti's services.
Renovation construction markets are concentrating on growth areas, akin to new construction. Necessary technical repairs in declining suburbs and less populated areas are often economically unviable.
The renovation market is very fragmented in Finland. Large construction companies focus on new building and the field of renovation has typically consisted of several small companies that usually focus on only one segment of renovation.
Measured in net sales, Consti is one of Finland's leading companies in renovation and technical building services.
Outlook for 2016
Renovation construction is expected to continue growing in 2016. The Confederation of Finnish Construction Industries RT (CFCI) estimates in its October review of business conditions that housing construction will grow in 2016 by approximately 8 percent compared to the previous year. Renovation construction is estimated to grow 1.5 percent and new construction 14 percent from last year.
CFCI expects renovation construction growth to be more moderate than in previous years as the increase in new construction is decreasing activity in renovation construction. Although renovation construction growth is slowing down somewhat, the renovation needs of existing building stock are believed to sustain steady growth in to the next decade.
The Finnish Association of HPAC Technical Contractors estimated in their October review that business conditions for technical building services have improved especially in new construction. Approximately 75 percent of HPAC-contractors felt that the economic conditions were at least satisfactory. In renovation construction about 86 percent of respondents said that conditions were at least satisfactory, as did 91 percent of respondents from maintenance services.
The general economic conditions have a considerably smaller impact on renovation construction and technical building services than on new building.
Consti adjusted its net sales guidance with a stock exchange release on October 26th 2016, in which it stated that the company estimates its net sales to grow compared to 2015. The company previously estimated that "its total annual net sales for 2016 will grow approximately 5-10 percent compared to 2015."
Press conference
A press conference for analysts, portfolio managers, and media will be arranged on Thursday November 10th 2016 at 10:00 at Hotel Glo Kluuvi at Kluuvinkatu 4, 2nd floor, Helsinki. The conference is hosted by CEO Marko Holopainen and CFO Esa Korkeela.
Financial reporting in 2017
Consti Group Plc's Financial Statements for 2016 will be published on Thursday February 16th 2017.
The electronic version of the annual report, which includes the full financial statements for 2016 will be published in week 11/2017.
Consti Group Plc's Annual General Meeting for 2017 is scheduled to take place on Tuesday, April 4th 2017 in Helsinki.
Consti Group Plc shall publish three interim reports during 2017:
- Interim report 1-3/2017 published May 4th 2017
- Half-year financial report 1-6/2017 published August 10th 2017
- Interim report 1-9/2017 published November 9th 2017
CONSTI GROUP PLC
Further information:
Marko Holopainen, CEO, Consti Group Plc, Tel. +358 400 458 158
Esa Korkeela, CFO, Consti Group Plc, Tel. +358 40 730 8568
Distribution:
Nasdaq Helsinki Ltd.
Major media
www.consti.fi
Consti is a leading Finnish company concentrating on renovation and technical services. Consti offers comprehensive building technology, pipeline renovation, renovation contracting, façade renovation and other demanding construction and maintenance services for residential and commercial buildings. In 2015, Consti Group's net sales amounted to 256 million euro. It employs about 900 professionals in renovation construction and building technology.
Consti Group Plc is listed on Nasdaq Helsinki. The trading code is CONSTI. www.consti.fi
