CONSTI GROUP PLC HALF-YEAR FINANCIAL REPORT 26 JULY 2019, at 8.30 a.m.
Consti Group Plc Half-Year Financial Report for January – June 2019
NET SALES GREW, EBIT TURNED POSITIVE
4–6/2019 highlights (comparison figures in parenthesis 4–6/2018):
·Net sales EUR 81.2 (77.8) million; growth 4.4%
·EBITDA EUR 1.0 (2.1) million and EBITDA margin 1.3% (2.7%)
·Operating profit (EBIT) EUR 0.1 (1.7) million and operating profit margin 0.1% (2.1%)
·Order backlog EUR 226.8 (286.2) million; change -20.8 %
·Free cash flow EUR 2.7 (2.2) million
·Earnings per share EUR -0.04 (0.16)
1–6/2019 highlights (comparison figures in parenthesis 1–6/2018):
·Net sales EUR 154.7 (140.0) million; growth 10.5%
·EBITDA EUR 1.5 (2.3) million and EBITDA margin 1.0% (1.7%)
·Operating profit/loss (EBIT) EUR -0.3 (1.5) million and operating profit/loss margin -0.2% (1.0%)
·Free cash flow EUR -0.7 (-5.6) million
·Earnings per share EUR -0.11 (0.12)
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) | 4-6/ 2019 | 4-6/ 2018 | Change % | 1-6/ 2019 | 1-6/ 2018 | Change % | 1-12/ 2018 |
| Net sales | 81,225 | 77,773 | 4.4 % | 154,705 | 140,041 | 10.5 % | 315,762 |
| EBITDA | 1,030 | 2,084 | -50.6 % | 1,515 | 2,315 | -34.5 % | -464 |
| EBITDA margin, % | 1.3 % | 2.7 % | 1.0 % | 1.7 % | -0.1 % | ||
| Operating profit/loss (EBIT) | 120 | 1,664 | -92.8 % | -278 | 1,464 | -2,126 | |
| Operating profit/loss (EBIT) margin, % | 0.1 % | 2.1 % | -0.2 % | 1.0 % | -0.7 % | ||
| Profit/loss for the period | -205 | 1,194 | -691 | 907 | -2,330 | ||
| Order backlog | 226,765 | 286,201 | -20.8 % | 225,082 | |||
| Free cash flow | 2,748 | 2,229 | 23.3 % | -728 | -5,572 | 86.9 % | -7,140 |
| Cash conversion, % | 266.9 % | 107.0 % | n/a | n/a | n/a | ||
| Net interest-bearing debt | 22,007 | 18,455 | 19.2 % | 19,582 | |||
| Gearing, % | 85.2 % | 69.7 % | 83.6 % | ||||
| Return on investment, ROI % | -7.5 % | -3.8 % | -4.5 % | ||||
| Number of personnel at period end | 1,097 | 1,153 | -4.9 % | 1,046 | |||
| Earnings per share, undiluted (EUR) | -0.04 | 0.16 | -0.11 | 0.12 | -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 half-year financial report. | |||||||
CEO Esa Korkeela’s comment
”Our net sales for the second quarter of 2019 grew 4.4 percent from the comparison year and amounted to 81.2 million euro. Net sales grew especially due to the increase in volume of large comprehensive renovation projects during the fiscal period. For example, we handed over the entirely renovated hotel Scandic Marski to the building project owner in June.
Our operating result for April-June improved compared to the previous quarter and turned positive. Our profitability development was mainly positive during the second quarter but executing the remaining performance obligations in an individual building purpose modification project continued to have a material negative impact on our result. Without this project’s negative impact on our result, our operating result for April-June would have improved considerably from the previous year. The project in question commenced in 2017 and at the end of the fiscal period the project was essentially completed.
Our order backlog at the end of June was 226.8 million euro. Our order backlog grew 0.7 percent in comparison to the order backlog at the end of the previous fiscal year, but it was 20.8 percent smaller than that of the comparison period. During April-June we received new orders amounting to 57.4 million euro, which is a 35.2 percent decrease to the strong comparison period. Our order intake development reflects the new, more disciplined bidding procedures that we took into use in our entire Group last year, and ongoing large comprehensive renovation projects, which tie up resources. In general, the quality of our order backlog has continuously improved during the first half of the year, as the share of loss-making projects has decreased significantly from the beginning of the year.
During the fiscal period, we continued implementing our turnaround programme to improve Consti’s profitability and competitiveness. Our new organisational structure’s four business areas have developed their operations as expected. Business leadership has moved closer to production at our worksites, in addition to which we have improved our organisation’s risk management and agility. We are determinedly advancing toward achieving our cost saving goals. Due to the actions aimed at improving profitability and performance, our fixed costs for the fiscal period are lower than that of the comparison period. We will continue our turnaround programme in the second half of the year as well, for instance by enhancing the efficiency of internal services supporting our business.
The market environment remained good for renovations and technical building services during the second quarter. The predicted deceleration of new construction has not yet reflected on renovation markets. 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. I expect our performance to continue improving during the second half of 2019.”
Operating environment and outlook for the 2019
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 13.0 billion euro in building construction during 2018.
In its June report, European construction market forecasting company Euroconstruct estimates that in 2019, building construction will decrease approximately 0.9 percent from the previous year. This change is due to developments in new construction. Euroconstruct estimates that new construction will decline 3.2 percent and predicts that renovations will grow 1.7 percent from the previous year.
The Confederation of Finnish Construction Industries RT also predicts in its April 2019 report that renovations will continue growing at a pace of approximately 1.8 percent during 2019. According to RT, renovation growth will focus on residential buildings and concentrate to growth areas. RT also estimates that office space renovations will increase despite the slowing economy, because aging business premises will be renovated for new use when it is economically justifiable. RT also expects growth in school renovations but notes that due to the delay in the Finnish healthcare and social welfare reform there may be uncertainty concerning hospital renovation projects.
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.
Over half of renovations are conducted on residential buildings. Renovations concentrate on residential buildings mainly due to the age of the building stock. At present, renovations are being conducted mainly on buildings from the 1960s and 1970s. Next, renovations will start on the considerably larger building stock of buildings from the late 1970s and the 1980s. Nearly half of the residential buildings built in the 1970s and 1980s were apartment buildings. According to statistics published in June 2019 by Statistics Finland, in 2018 more than one third of all apartment building renovations were building technology renovations, while slightly less than one third were facade renovations, and the rest were renovations of other structures.
In addition to the aging building stock, renovation construction, building technology and maintenance needs are maintained by heightened energy efficiency requirement, urbanisation, the need to modify the use of buildings for new purposes, the development of building technology and the aging population’s need for accessible buildings. Climate change also adds to the need of facade renovations and servicing, in particular.
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 July 2018 at 10.00 Hotel Haven’s Haven 1-conference room, at Unioninkatu 17, Helsinki. The conference is hosted by CEO Esa Korkeela and CFO Joni Sorsanen.
Financial communication in 2019
Consti Group Plc shall publish one more interim report during 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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