CONSTI GROUP PLC INTERIM REPORT 26 APRIL 2019, at 8.30 a.m.
Consti Group Plc Interim Report for January – March 2019
NET SALES GREW, EBIT DECLINED SLIGHTLY FROM PREVIOUS YEAR
1–3/2019 highlights (comparison figures in parenthesis 1–3/2018):
·Net sales EUR 73.5 (62.3) million; growth 18.0%
·EBITDA EUR 0.5 (0.2) million and EBITDA margin 0.7% (0.4%)
·Operating profit/loss (EBIT) EUR -0.4 (-0.2) million and EBIT margin -0.5% (-0.3%)
·Order backlog EUR 237.8 (250.2) million; change -5.0%
·Free cash flow EUR -3.5 (-7.8) million
·Earnings per share EUR -0.08 (-0.04)
Guidance on the Group outlook for 2019:
The Company estimates that its operating result for 2019 will improve compared to 2018.
| KEY FIGURES (EUR 1,000) | 1-3/ 2019 | 1-3/ 2018 | Change % | 1-12/ 2018 |
| Net sales | 73,480 | 62,267 | 18.0 % | 315,762 |
| EBITDA | 486 | 231 | 110.2 % | -464 |
| EBITDA margin, % | 0.7 % | 0.4 % | -0.1 % | |
| Operating profit/loss (EBIT) | -398 | -201 | -98.4 % | -2,126 |
| Operating profit/loss (EBIT) margin, % | -0.5 % | -0.3 % | -0.7 % | |
| Profit/loss for the period | -486 | -286 | -69.8 % | -2,330 |
| Order backlog | 237,763 | 250,177 | -5.0 % | 225,082 |
| Free cash flow | -3,476 | -7,801 | 55.4 % | -7,140 |
| Cash conversion, % | n/a | n/a | n/a | |
| Net interest-bearing debt | 24,001 | 20,295 | 18.3 % | 19,582 |
| Gearing, % | 92.0 % | 80.5 % | 83.6 % | |
| Return on investment, ROI % | -4.5 % | -1.7 % | -4.5 % | |
| Number of personnel at period end | 1,016 | 1,053 | -3.5 % | 1,046 |
| Earnings per share, undiluted (EUR) | -0.08 | -0.04 | -100.0 % | -0.30 |
| The impacts of IFRS 16 –standard on the reported figures are described in the accounting principles included in the financial tables of the interim report. | ||||
CEO Esa Korkeela’s comment
“Our net sales for the first quarter grew 18.0 percent from the comparison period and amounted to 73.5 million euro. Our net sales grew in all operating segments except Building Technology. Despite the growth in net sales, our result for the fiscal period did not reach a satisfactory level, albeit it grew clearly compared to the previous quarter. Our profitability development was mainly positive during the fiscal period, but executing the remaining performance obligations in an individual building purpose modification project had a negative impact on our result. The project in question commenced in 2017 and it will be finished during the first half of 2019.
Our order backlog at the end of March was 237.8 million euro. Our order backlog grew 5.6 percent in comparison to the order backlog at the end of the previous fiscal period, but it was 5.0 percent smaller than that of the comparison period. During January-March we received new orders amounting to 73.5 million euro, which is a 1.1 percent growth to the comparison period. On the whole the quality of our order backlog has continuously improved during the beginning of the year, and a larger share of the order backlog will be realised during the ongoing year than in the comparison period.
In early February we launched a turnaround programme to improve Consti’s profitability and competitiveness. Work in implementing the turnaround programme has advanced as planned. Our new organisational structure has been in place since 18 February 2019, and it has received positive feedback from both our personnel and stakeholders. We are also determinedly advancing toward achieving our cost saving goals. Due to the actions started during the last quarter of 2018, our fixed costs for the fiscal period are lower than that of the comparison period. We will continue our turnaround programme to accelerate Consti’s performance improvement and the realisation of our strategy. Our goal is to continue to move business leadership closer to production at our worksites, enhance the efficiency of internal services supporting our business, and improve our organisation’s risk management and reactivity.
The market environment remained good for renovations and technical building services during the first quarter. Based on our current market and business outlook, we believe that demand for renovations and technical building services will remain at a good level for the rest of the year as well. In our current position, however, it is more important to focus on the successful implementation of our internal actions, than the general market situation. I expect our turnaround programme to improve our performance in 2019.”
Operating environment
Professional renovation construction has grown in Finland steadily for nearly 20 years, and at its best its value has surpassed that of new construction. Due to the age of our building stock, growth in renovation construction has been rapid in comparison to the rest of Europe. The value of renovation construction was approximately 12.9 billion euro in building construction during 2018. Both the Confederation of Finnish Construction Industries RT and Euroconstruct have estimated that building construction grew approximately four percent in Finland in 2018. Renovation construction grew 1.0 percent according to the Confederation of Finnish Construction Industries RT, while Euroconstruct estimated its growth at 0.8 percent. As a consequence of vigorous housing construction, both institutes estimated that new construction grew about six percent.
The latest statistics on new construction permissions and commenced projects indicate that construction will slow down after a long period of growth, as economic growth calms down. Despite the development in the number of permissions and commenced projects, the volume of construction still remains high, which in turn has led to challenges in acquiring a certain type of professional subcontracting. If new construction volumes do decline, it is expected to have a two-fold impact on renovation construction markets. As pressure eases in the construction value chain, the availability of resources will improve and quality is projected to increase, but on the other hand competition for large-scale renovation projects in particular is estimated to increase.
The Confederation of Finnish Construction Industries RT estimates that renovation construction will continue to grow approximately 1.8 percent in 2019. Euroconstruct’s forecast for renovation construction growth is 1.8 percent. Over half of renovation constructions are housing repairs. A significant portion of renovation construction growth comes from repairing apartment buildings in growth centres. The general economic climate does not impact renovations nearly as much as it does new construction. The demand for technical repairs such as pipeline, electric and facade renovations have a greater impact, as does the profitability of renovations. The Finnish Real Estate Federation published a renovation barometer in autumn 2018 that indicated moderate growth expectations for renovation construction in housing companies in 2019. According to the barometer, growth expectations were strongest in the Greater Helsinki area. The majority of the renovation barometer’s respondents said that the current general economic climate does not have an impact on the realisation of renovation projects.
The Finnish Association of HPAC Technical Contractors’ April review conveys that the turn in construction is visible in the expectations of HPAC contractors and that interest is now shifting from new construction to renovations. At the time of the survey about 80% of HPAC contractors felt that the economic climate in new construction was at least satisfactory. 86% of the respondents felt that the economic climate was at least satisfactory in renovation construction and maintenance.
Demand for renovations, technical building services and building technology maintenance services is sustained by the ageing building stock, stricter energy efficiency requirements, urbanisation, the need to adapt buildings to new uses, the development of building automation, and the ageing population’s need for accessible buildings. Climate change is also increasing the demand for facade renovations and facade maintenance in particular.
Outlook for 2019
Growth is expected to continue in renovation construction in 2019. The Confederation of Finnish Construction Industries RT estimated in its April 2019 review of market conditions that renovation construction in Finland will grow 1.8 percent from the previous year. Construction market forecasting network Euroconstruct published a growth estimate in November 2018, in which it estimated growth at 1.8 percent.
The latest statistics on new construction permissions and commenced projects indicate that construction will slow down after a long period of growth, as economic growth calms down. Despite the development in the number of permissions and commenced projects, the volume of construction still remains high, which in turn has led to challenges in acquiring a certain type of professional subcontracting. If new construction volumes do decline, it is expected to have a two-fold impact on renovation construction markets. As pressure eases in the construction value chain, the availability of resources will improve and quality is projected to increase, but on the other hand competition for large-scale renovation projects in particular is estimated to increase.
The Company estimates that its operating result for 2019 will improve compared to 2018.
Press conference
A press conference for analysts, portfolio managers and media will be arranged on Friday 26 April 2019 at 10:00 a.m. (EET) at Hotel Lilla Roberts, address Pieni Roobertinkatu 1-3, Helsinki. The conference is hosted by CEO Esa Korkeela and CFO Joni Sorsanen.
Financial communication in 2019
Half-year report 1-6/2019 will be published 26 July 2019
Interim report 1-9/2019 will be published 25 October 2019
CONSTI GROUP PLC
Further information:
Esa Korkeela, CEO, Consti Group Plc, Tel. +358 40 730 8568
Joni Sorsanen, CFO, Consti Group 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 2018, Consti Group’s net sales amounted to 316 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
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