CONSTI PLC INTERIM REPORT 27 APRIL 2023, at 8.30 a.m.
Consti Plc Interim Report for January – March 2023
NET SALES GREW, ORDER BACKLOG INCREASING
1–3/2023 highlights (comparison figures in parenthesis 1–3/2022):
- Net sales EUR 68.9 (59.8) million; growth 15.2%
- EBITDA EUR 1.5 (1.4) million and EBITDA margin 2.1% (2.3%)
- Operating result (EBIT) EUR 0.7 (0.4) million and EBIT margin 1.0% (0.6%)
- Order backlog EUR 253.8 (205.1) million; growth 23.7%
- Order intake EUR 58.6 (37.6) million; growth 56.1%
- Free cash flow EUR -1.0 (-0.8) million
- Earnings per share EUR 0.04 (0.01)
Guidance on the Group outlook for 2023:
The Company estimates that its operating result for 2023 will be in the range of EUR 9,5-13,5 million.
KEY FIGURES (EUR 1,000) | 1-3/ | 1-3/ | Change % | 1-12/ |
Net sales | 68,928 | 59,830 | 15.2 % | 305,217 |
EBITDA | 1,473 | 1,357 | 8.5 % | 14,927 |
EBITDA margin, % | 2.1 % | 2.3 % |
| 4.9 % |
Operating result (EBIT) | 657 | 359 | 82.8 % | 11,428 |
Operating result (EBIT) margin, % | 1.0 % | 0,6 % |
| 3.7 % |
Profit/loss for the period | 304 | 111 | 174.5 % | 8,491 |
Order backlog | 253,756 | 205,094 | 23.7 % | 246,650 |
Free cash flow | -970 | -830 | -16.9 % | 18,000 |
Cash conversion, % | n/a | n/a |
| 120.6 % |
Net interest-bearing debt | 5,661 | 16,255 | -65.2 % | 3,871 |
Gearing, % | 15.8 % | 52.1 % |
| 10.7 % |
Return on investment, ROI % | 19.3 % | 10.1 % |
| 18.3 % |
Number of personnel at period end | 1,020 | 933 | 9.3 % | 975 |
Earnings per share, undiluted (EUR) | 0.04 | 0.01 | 300.0 % | 1.10 |
CEO Esa Korkeela’s comment
”Consti's solid development continued during the first quarter of the year. Our net sales continued to grow as we expected. Our net sales for January-March increased 15.2 percent and amounted to 68.9 (59.8) million euro. Our net sales grew in all our geographic operating areas.
Our operating profit for January-March was 0.7 (0.4) million euro, or 1.0 (0.6) percent of our net sales. Our profitability improved, although cost inflation negatively affected our results through both increased construction costs and increased indirect costs. At the end of the reporting period, our balance sheet and liquidity position remained at a good level.
Our order intake in January-March amounted to 58.6 (37.6) million euro, which is a 56.1 percent increase compared to the same period last year. Our most significant order in the first quarter was the comprehensive renovation of a housing company in Myllypuro, which is owned by the City of Helsinki. The value of the contract is approximately 26 million euro. The project will be carried out jointly by three of our business areas. The rest of our order intake for January-March consists of several smaller projects that are evenly distributed across our business areas. Due to our strong order intake, our order backlog at the end of the reporting period increased by 23.7 percent compared to the comparison period and was 253.8 (205.1) million euro.
During the reporting period, we continued to implement our strategy and take measures to ensure the performance of our business in the prevailing operating environment. These measures were particularly focused on customer work and tender activities. In our corporate social responsibility work, we continued efforts in accordance with our chosen responsibility themes for the strategy period. In our corporate responsibility report, which was published today, we provide more detailed information about the development of the sustainability issues that are most important to our stakeholders and our business, and about the measures we took during 2022.
Based on our current market view, we believe that the demand for renovation and building technology services will remain at a reasonable level in 2023. According to forecasts, the renovation market is expected to grow by around 1.5 percent in 2023. The forecasts reflect the needs-oriented nature of renovation. Poor demand prospects for new construction may increase competition for renovation projects. Additionally, rising financing costs and strong inflation may postpone construction projects in the short term. In the longer term, the growth of renovation is supported by the age of Finland's building stock and global megatrends, as well as sustainability goals such as the EU Energy Efficiency Directive.
Our strong order backlog, progress in our strategic projects, and steadily improved performance provide a good foundation for us to continue our solid development in 2023.”
Operating environment
Construction market 2023–2024
According to the economic outlook report published in March by the Confederation of Finnish Construction Industries (CFCI), the entire construction market is expected to decline by about 3.5 percent in 2023. CFCI estimates that the renovation market will grow by approximately 1.5 percent in 2023, while the new residential construction will decline by as much as 20 percent.
In its March report CFCI notes that a slowdown in cost increases and the estimated decrease in new construction will accelerate the need for renovations, especially next year. CFCI estimates that the renovation market will grow about 2 percent in 2024. CFCI states that considering the aging of the building stock and the goals of the green transition, the growth of renovation is still too slow.
The renovation market in general
In recent years, the Finnish house building market has been divided almost equally between new construction and renovation. Renovation has grown relatively steadily for the last 20 years. Growth is projected to remain steady for years to come, as renovation is more need-based and less sensitive to economic cycles than new construction.
Nearly two-thirds of renovation is conducted in residential buildings, and more than half of this volume is estimated to be professional renovation. Just over one third of all renovation is conducted in non-residential buildings.
In the renovation of residential buildings, the emphasis is still on building technology, which accounts for approximately 40 percent of the value of renovation. It has been estimated that building technology renovation will increase more strongly than other renovation also in the next few years. The growth of building technology renovation is maintained by the large number of residential buildings that have reached the age where they require pipeline renovation.
The higher prices of heating and the green transition will also bring growth to the building technology market. Until now, energy efficiency has been improved largely in connection with other renovation, but rapidly rising energy prices have made energy renovation profitable as independent projects as well. Energy efficiency and a building’s ability to withstand increasing extreme weather conditions are improved with building technology and construction solutions such as facade renovation. Renovation plays a central role in reducing the carbon footprint of the built environment, as the number of new buildings is growing by only about one per cent per year.
In addition to building technology renovation, many housing companies have a growing need for facade renovation, which they have postponed due to financial reasons, to make way for pipeline renovation. Approximately one fifth of all renovation projects are maintenance and repair projects. In the building technology market, Consti also operates in all other areas of new construction apart from housing construction.
The age of Finland’s building stock is a primary driver of the need for renovation. Housing construction was at its peak in the 1970s, and the building technology and structures of that time now require thorough renovation. Along with the need for building technology renovation, expectations for living comfort have risen. In addition, the need for renovation in business premises is also driven by changes in space needs.
However, strong inflation and the rapid rise of both energy costs and the price of financing may postpone renovations in the short term, especially renovations commissioned by housing companies. General meetings held in housing companies during the spring will, to a large extent, determine their readiness for renovation investments. Uncertainty in the outlook for construction is also brought about by the rise in the prices and availability of building materials and products, intensified by the war in Ukraine.
In addition to the age of the building stock, renovation needs are increased by many phenomena named as megatrends, such as urbanisation, the aging of the population, changes in working methods, the growth of e-commerce and climate change. Both new construction and renovation remain heavily concentrated in growth centres.
Outlook for 2023
In 2023, the amount of house construction in Finland is estimated to decrease by approximately 5.9 percent from the previous year. New construction is predicted to decline by approximately 9.6 percent, but it is expected that renovation will continue on a growth path of approximately 1.5 percent in 2023. The current market outlook suggests that the demand for renovation and building technology services will remain at a reasonable level in 2023. The forecasts reflect the need-oriented nature of renovation. Poor demand prospects for new construction may increase competition for renovation projects. Additionally, rising financing costs and strong inflation may postpone construction projects in the short term.
Consti's strong order backlog, progress in strategic projects, and its steadily improved performance provide a good foundation for the company to continue its solid development in 2023.
The Company estimates that its operating result for 2023 will be in the range of EUR 9,5-13,5 million.
Press conference
Microsoft Teams meeting for analysts, portfolio managers and media representatives, will take place 27 April 2023, at 10:00 a.m. (EET). The meeting will be hosted by CEO Esa Korkeela and CFO Joni Sorsanen.
Analysts, portfolio managers and media representatives are kindly requested to register for the meeting no later than Wednesday 26 April 2023 at 12.00 p.m. by sending an email to IR@consti.fi. A link to the meeting will be sent to registered participants during the afternoon of Wednesday 26 April 2023.
Financial communication in 2023
Half-year report 1-6/2023 will be published 21 July 2023
Interim report 1-9/2023 will be published 27 October 2023
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
Consti is a leading Finnish company concentrating on renovation and technical services. Consti offers comprehensive renovation and building technology services and selected new construction 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 2022, Consti Group’s net sales amounted to 305 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