Consti Group Plc Interim Report for January - March 2018

CONSTI GROUP PLC FINANCIAL STATEMENTS BULLETIN 27 APRIL 2018, at 8.30 a.m.

Consti Group Plc Interim Report for January - March 2018

Net sales and order backlog grew

1-3/2018 highlights (comparison figures in parenthesis 1-3/2017):

• Net sales EUR 62.3 (57.3) million; growth 8.7%
• EBITDA EUR 0.2 (0.8) million and EBITDA margin 0.4% (1.3%)
• Operating profit/loss (EBIT) EUR -0.2 (0.3) million and EBIT margin -0.3% (0.5%)
• Order backlog EUR 250.2 (212.9) million; growth 17.5%
• Free cash flow EUR -7.8 (-0.5) million
• Earnings per share EUR -0.04 (0.00)

                               
Guidance on the Group outlook for 2018:
The Company estimates that its operating result for 2018 will grow compared to 2017.

CEO Esa Korkeela's comment

"Our net sales for the first quarter grew 8.7 percent and amounted to MEUR 62.3. Net sales growth continued especially good in Building Facades. Yet despite net sales growth, our result did not yet rise to a satisfactory level, though it improved significantly compared to the previous quarter. During the reporting period we continued activities to improve productivity and profitability. We completed the reorganising of our Technical Building Services business area, and took several operating models into practise to improve project steering and follow-up. Nevertheless, our result was still weakened by the execution of the remaining performance obligations from certain already identified projects that generate low gross margin on sales.

The share of low-margin projects in our order backlog has steadily decreased during the beginning of the year. In addition, we received new orders amounting to MEUR 72.7 during January-March, which is a 22.2 percent increase to the comparative period. Consequently, our order backlog at the end of March, MEUR 250.2, was 17.5 percent larger than in the comparative period, which puts us in a good position to return to a profitable growth path. Simultaneously, however, we note that a project in our Renovation Contracting business area still has open risks, which we have taken into account in the result for the first quarter to the best of our ability.

We are continuing implementation of our updated strategy, placing emphasis on activities aimed at improving profitability. In our profitability improving activities we will continue highlighting the implementation of practises relating to project steering and reporting, and clarifying profit and reporting responsibilities.

The market environment for renovation and technical building services remained good during the first quarter. I believe that our strong order backlog and the positive demand for renovations and building technology form a solid foundation for us to achieve profitability turnaround assuming that potentially expanding labour dispute doesn't significantly affect the execution of our projects."

Operating environment

In Finland, nearly six percent of the GDP is spent on renovations, which is significantly more than the European average. The Confederation of Finnish Construction Industries RT estimated in its March review of market conditions that the construction boom will continue, but growth will halt in 2019, mainly due to the decrease in the amount of predicted new residential construction. RT estimates positive growth prospects for renovation construction and expects its steady growth to continue.

The Finnish Association of HPAC Technical Contractors' March survey of the current economic situation also implies that new construction is levelling off. The survey also showed that while the current market conditions remain favourable, the pace is expected to slow down toward the end of the year. At the time of the survey 82% of HVAC contractors felt the current market situation in new construction was at least satisfactory. Approximately 89% of the respondents said the current market situation was at least satisfactory in renovations and 85% felt it was at least satisfactory in maintenance.

The Confederation of Finnish Construction Industries RT's review of market conditions estimated renovations to amount to approximately 13.1 billion euro in 2017, and predicts a two-percent growth for both this and the following year. Availability of skilled workforce, however, remains a challenge hindering renovation construction growth. Small apartment buildings have comprised a large portion of new construction and thus RT mentions that there has been more competition between new construction and renovation construction for the same workforce.

The general economic climate has a significantly smaller impact on renovations and technical building services than it does on new construction. Prerequisites for office building renovations also improve with economic growth. In upcoming years as well, renovation construction activity will be maintained by the aging building stock, renovation debt built up throughout the years, changes in building use purpose and energy efficiency requirements.

Outlook for 2018

Growth is expected to continue in renovation construction in 2018. The Confederation of Finnish Construction Industries RT estimated in its March review of market conditions that renovation construction in Finland will grow 2.0 percent from the previous year. Construction market forecasting network Euroconstruct published a growth estimate in November 2017, in which it estimated growth at 1.5 percent. The Finnish Association of HPAC Technical Contractors' March survey of the current economic situation estimated that the market conditions for building technology remain good, but predicted that the market will slow down especially in new construction toward the end of the year. This survey also mentioned that already ongoing and soon to be started projects will, however, create work for building technology contractors well into next year.

The Company estimates that its operating result for 2018 will grow compared to 2017.

Press conference

A press conference for analysts, portfolio managers and media will be arranged on Friday 27 April 2018 at 10:00 a.m. (EET) at conference room Play of Hotel Scandic Park Helsinki, address Mannerheimintie 46, Helsinki. The conference is hosted by CEO Esa Korkeela and CFO Joni Sorsanen.

Financial communication in 2018

Half-year report 1-6/2018 will be published 26 July 2018
Interim report 1-9/2018 will be published 26 October 2018

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 building technology, pipeline renovation, renovation contracting, façade renovation and other demanding construction and maintenance services for residential and commercial buildings. In 2017, Consti Group's net sales amounted to 300 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