CONSTI GROUP PLC INTERIM REPORT 9 NOVEMBER 2017, at 8.30 a.m.
Consti Group Plc Interim Report for January - September 2017
NET SALES GREW, RESULT WAS A DISAPPOINTMENT
7-9/2017 highlights (comparison figures in parenthesis 7-9/2016):
- Net sales EUR 77.8 (70.6) million; growth 10.3%
- EBITDA EUR -0.2 (4.5) million and EBITDA margin -0.3% (6.4%)
- Adjusted EBITDA EUR -0.2 (4.5) million and adjusted EBITDA margin -0.3% (6.4%)
- Operating profit/loss (EBIT) EUR -0.8 (3.7) million and operating profit/loss (EBIT) margin -1.0% (5.3%)
- Adjusted EBIT EUR -0.8 (3.7) million and adjusted EBIT margin -1.0% (5.3%)
- Order backlog EUR 198.8 (185.6) million; growth 7.1 %
- Free cash flow EUR 2.9 (6.6) million
- Earnings per share EUR -0.10 (0.37)
1-9/2017 highlights (comparison figures in parenthesis 1-9/2016):
- Net sales EUR 213.9 (186.7) million; growth 14.5%
- EBITDA EUR 3.8 (8.2) million and EBITDA margin 1.8% (4.4%)
- Adjusted EBITDA EUR 3.8 (8.3) million and adjusted EBITDA margin 1.8% (4.4%)
- Operating profit/loss (EBIT) EUR 2.2 (6.5) million and operating profit/loss (EBIT) margin 1.0% (3.5%)
- Adjusted EBIT EUR 2.2 (6.6) million and adjusted EBIT margin 1.0% (3.5%)
- Free cash flow EUR 6.4 (10.4) million
- Earnings per share EUR 0.16 (0.60)
Guidance on the Group outlook for 2017:
Consti specified the outlook for 2017 with a stock exchange release on September 15th 2017, in which it stated that the company estimates that its total annual net sales for 2017 will grow compared to 2016 but operating profit will be lower than in 2016. The company previously estimated that "its total annual net sales for 2017 will grow compared to 2016."
| KEY FIGURES (1 000€) | 7-9/ 2017 | 7-9/ 2016 | Change % | 1-9/ 2017 | 1-9/ 2016 | Change % | 1-12/ 2016 |
| Net sales | 77,824 | 70,554 | 10.3 % | 213,903 | 186,735 | 14.5 % | 261,558 |
| Adjusted EBITDA | -214 | 4,521 | 3,764 | 8,250 | -54.4 % | 13,142 | |
| Adjusted EBITDA margin, % | -0.3 % | 6.4 % | 1.8 % | 4.4 % | 5.0 % | ||
| EBITDA | -214 | 4,521 | 3,764 | 8,227 | -54.2 % | 13,120 | |
| EBITDA margin, % | -0.3 % | 6.4 % | 1.8 % | 4.4 % | 5.0 % | ||
| Adjusted EBIT | -760 | 3,729 | 2,215 | 6,558 | -66.2 % | 11,004 | |
| Adjusted EBIT margin, % | -1.0 % | 5.3 % | 1.0 % | 3.5 % | 4.2 % | ||
| Operating profit/loss (EBIT) | -760 | 3,729 | 2,215 | 6,535 | -66.1 % | 10,982 | |
| Operating profit/loss (EBIT) margin, % | -1.0 % | 5.3 % | 1.0 % | 3.5 % | 4.2 % | ||
| Profit/loss for the period | -793 | 2,791 | 1,220 | 4,593 | -73.4 % | 7,978 | |
| Order backlog | 198,759 | 185,614 | 7.1 % | 190,806 | |||
| Free cash flow | 2,852 | 6,610 | -56.9 % | 6,354 | 10,357 | -38.6 % | 10,865 |
| Cash conversion, % | n/a | 146.2 % | 168.8 % | 125.9 % | 82.8 % | ||
| Net interest-bearing debt | 13,402 | 11,667 | 14.9 % | 12,097 | |||
| Gearing, % | 48.6 % | 44.6 % | 40.8 % | ||||
| Return on investment, ROI % | 14.0 % | 21.2 % | 22.7 % | ||||
| Number of personnel at period end | 1,117 | 931 | 20.0 % | 935 | |||
| Earnings per share, undiluted (€) | -0.10 | 0.37 | 0.16 | 0.60 | -73.6 % | 1.05 |
Interim CEO Esa Korkeela's comment
"Our third quarter net sales increased 10.3 percent from the comparison period and were 77.8 million euro. Net sales grew in all our business areas and growth was particularly strong in our Building Facades business area.
Our performance during the third quarter was not satisfactory. Disappointing was that we needed to adjust project cost assessments in the Technical Building Services business area, which lessen the Group's operating result in the third quarter. The Company's operating result is weakened by profitability problems relating to project management and execution in the Technical Building Services business area. In part the profitability problems relating to projects were also due to the staff renewal rate in project personnel and price competition in the industry. Going forward, we will need to focus on improving our efficiency and project management capabilities.
We have started planning of reorganising the Technical Building Services business area. With the planned reorganisation, our aim is to improve the accountability of our businesses and ability to response to market needs as well as to clarify service offering and to improve project management. I am convinced that these actions will help us to get the most out of the current market situation and to achieve profitable growth.
Demand for renovation contracting and technical building services has largely continued good. Order intake remained on par with last year and end of September order backlog was 7.1 percent higher than in the comparison period. New significant work sites that have increased order backlog during the reporting period include for example repair and refurbishment work at HOAS's Arentikuja 1, the technical building services installations and wet area renovation carried out as a joint repair project at housing corporation Yliskyläntie 6 & 7, as well as facades repair and space modifications for Suomen Yliopistokiinteistöt Oy in Oulu.
We continue work according to our strategy that was updated during the spring, however focusing on actions that improve profitability in the short-term. All of our business areas include operational units which have strong order backlog and in which profitability has developed as planned."
Operating environment and outlook for the 2017
The Confederation of Finnish Construction Industries RT (CFCI) estimates in its October review of business conditions that housing construction will grow in 2017 by approximately 4 percent compared to the previous year. Renovation construction is estimated to grow 1.5 percent and new construction is estimated to grow 7 percent from last year.
CFCI estimates that this year, the renovation industry will grow somewhat slower than before. While the rekindled pace of the new construction market has decreased demand for renovations to a degree, the existing building stock should uphold steady growth, albeit at a slightly slower pace than previously. Furthermore, there is considerable need for renovations in the public sector, especially in municipality owned properties such as hospitals and schools. In its October review of business conditions, CFCI improved outlook for office building renovations, as economic growth is enabling more and more renovation projects. The review also brought attention to a positive turn in the willingness of households to finance complete renovations.
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 79 percent of HPAC-contractors felt that the economic conditions were at least satisfactory. In renovation construction about 91 percent of respondents said that conditions were at least satisfactory, as did 90 percent of respondents from maintenance services.
The relative portion of renovations in the Finnish building market has grown during the past decade. The Confederation of Finnish Construction Industries RT (CFCI) estimates that renovation amounted to approximately 50 percent of the building market's total value in 2016.
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 the early 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.
Renovation construction markets are focused on growth areas, akin to new construction. The Confederation of Finnish Construction Industries RT (CFCI) published in August a theme overview on renovation construction, which showed that Helsinki, Tampere, Turku, Oulu and Lahti areas comprise total of 68 percent of renovation needs of apartment buildings for years 2016-2025.
Consti specified the outlook for 2017 with a stock exchange release on September 15th 2017, in which it stated that the company estimates that its total annual net sales for 2017 will grow compared to 2016 but operating profit will be lower than in 2016. The company previously estimated that "its total annual net sales for 2017 will grow compared to 2016."
Press conference
A press conference for analysts, portfolio managers and media will be arranged on Thursday 9 November 2017 at 10.00 at Hotel Lilla Roberts Emmy conference room, at Pieni Roobertinkatu 1-3, Helsinki. The conference is hosted by Interim CEO Esa Korkeela.
Financial reporting in 2018
Consti Group Plc's Financial Statements for 2017 will be published February 15th 2018.
The electronic version of the annual report, which includes the full financial statements for 2017, will be published in week 11/2018.
Consti Group Plc's Annual General Meeting for 2018 is scheduled to take place on Wednesday, April 4th 2018 in Helsinki.
Consti Group Plc shall publish three interim reports during 2018:
- Interim report 1-3/2018 published April 27th 2018
- Half-year financial report 1-6/2018 published July 26th 2018
- Interim report 1-9/2018 published October 26th 2018
CONSTI GROUP PLC
Further information:
Esa Korkeela, Interim CEO, 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 2016, Consti Group's net sales amounted to 262 million euro. It employs over 1000 professionals in renovation construction and building technology.
Consti Group Plc is listed on Nasdaq Helsinki. The trading code is CONSTI. www.consti.fi
