CONSTI GROUP PLC HALF-YEAR FINANCIAL REPORT 26 JULY 2018, at 8.30 a.m.
Consti Group Plc Half-Year Financial Report for January - June 2018
ORDER BACKLOG GREW, RESULT TURNED POSITIVE
4-6/2018 highlights (comparison figures in parenthesis 4-6/2017):
- Net sales EUR 77.8 (78.8) million; change -1.3%
- EBITDA EUR 2.1 (3.2) million and EBITDA margin 2.7% (4.1%)
- Operating profit (EBIT) EUR 1.7 (2.7) million and operating profit (EBIT) margin 2.1% (3.4%)
- Order backlog EUR 286.2 (227.9) million; growth 25.6 %
- Free cash flow EUR 2.2 (4.0) million
- Earnings per share EUR 0.16 (0.26)
1-6/2018 highlights (comparison figures in parenthesis 1-6/2017):
- Net sales EUR 140.0 (136.1) million; growth 2.9%
- EBITDA EUR 2.3 (4.0) million and EBITDA margin 1.7% (2.9%)
- Operating profit (EBIT) EUR 1.5 (3.0) million and operating profit (EBIT) margin 1.0% (2.2%)
- Free cash flow EUR -5.6 (3.5) million
- Earnings per share EUR 0.12 (0.26)
Guidance on the Group outlook for 2018:
The Company estimates that its operating result for 2018 will grow compared to 2017.
| KEY FIGURES (EUR 1,000) | 4-6/ 2018 | 4-6/ 2017 | Change % | 1-6/ 2018 | 1-6/ 2017 | Change % | 1-12/ 2017 |
| Net sales | 77,773 | 78,811 | -1.3 % | 140,041 | 136,079 | 2.9 % | 300,203 |
| EBITDA | 2,084 | 3,206 | -35.0 % | 2,315 | 3,978 | -41.8 % | 1,714 |
| EBITDA margin, % | 2.7 % | 4.1 % | 1.7 % | 2.9 % | 0.6 % | ||
| Operating profit (EBIT) | 1,664 | 2,697 | -38.3 % | 1,464 | 2,975 | -50.8 % | -375 |
| Operating profit (EBIT) margin, % | 2.1 % | 3.4 % | 1.0 % | 2.2 % | -0.1 % | ||
| Profit for the period | 1,194 | 1,996 | -40.2 % | 907 | 2,013 | -54.9 % | -1,074 |
| Order backlog | 286,201 | 227,907 | 25.6 % | 225,721 | |||
| Free cash flow | 2,229 | 3,980 | -44.0 % | -5,572 | 3,502 | 8,936 | |
| Cash conversion, % | 107.0 % | 124.1 % | n/a | 88.0 % | 521.4 % | ||
| Net interest-bearing debt | 18,455 | 15,514 | 19.0 % | 12,070 | |||
| Gearing, % | 69.7 % | 55.0 % | 47.7 % | ||||
| Return on investment, ROI % | -3.8 % | 23.7 % | -0.7 % | ||||
| Number of personnel at period end | 1,153 | 1,165 | -1.0 % | 1,079 | |||
| Earnings per share, undiluted (EUR) | 0.16 | 0.26 | -38.6 % | 0.12 | 0.26 | -54.4 % | -0.14 |
CEO Esa Korkeela's comment
"Our net sales for the second quarter of the year were at nearly the same level as in the comparison period, amounting to 77.8 million euro. Net sales growth continued strong in our Building Facades business area, but second quarter volumes in Technical Building Services still reflected the business areas' reorganising which was started towards the end of 2017; as well as taking new operating models into use, and the more disciplined bidding activity applied to pipeline renovation services. Our operating profit improved clearly compared to the previous quarter. Although we could already see a positive impact on our result due to the corrective actions we have taken, our profitability was still weakened by certain already identified low-margin projects, as well as carrying out final performance obligations in one Renovation Contracting project during the reporting period.
The market environment continued mainly good during the second quarter. During April-June we received new orders amounting to 88.7 million euro, which is a 6.9 percent growth to the comparison period. New order intake grew particularly much in facade renovations in the Greater Helsinki area. Due to the good development in new order intake, our order backlog at the end of June, 286.2 million euro, was 25.6 percent larger than in the comparison period, which puts us in a good position to return to a path of profitable growth. At the same time, however, we note that a certain project in our Renovation Contracting business area still has open risks, which we have to the best of our ability taken into consideration in our result. The building in question has already been handed over to the customer and the project's final financial statement notes that there is a significant disagreement between the parties.
We continued carrying out our updated strategy during the second quarter of the year. In addition to actions improving profitability, we also advanced in for example launching new services. In April, we launched our new Consti Kodikas service concept. Consti Kodikas is a product family offered to housing corporations. It aims to provide comprehensively planned residential building renovations that increase the value and comfort of the property as cost effectively as possible. In our actions to improve profitability we are continuing the implementation of common practises relating to steering and reporting in our projects, as well as clarifying profit and reporting responsibilities.
Our current market and business outlook leads us to believe that the demand for renovations and technical building services will remain at a good level during the latter half of the year as well. I expect that our strong order backlog combined with our actions to improve performance will support us in achieving a turn in our profitability during the second part of the year, although restoring our Technical Building Services business areas' performance to the required level will take somewhat longer than expected."
Operating environment and outlook for the 2018
In Finland, nearly six percent of the GDP is spent on renovations, which is significantly more than the European average. During recent years, renovations have increased their share of the total construction market steadily. Due to our building stock's age, growth in Finland has been rapid compared to the rest of Europe.
European construction business research group Euroconstruct estimated in its June 2018 forecast that total building in 2018 will increase approximately 4.3 percent from the previous year, renovation construction will grow about 1.5 percent, and new building 6.9 percent from 2017. In renovation construction demand growth is estimated to continue progressing steadily during upcoming years and the growth is estimated to be faster than new building growth on average.
The Confederation of Finnish Construction Industries RT estimated in its March 2018 review of market conditions that renovations will continue growing at approximately 2.0 percent both during the current and upcoming year. Growth is expected especially from residential building renovations in growth centres. Business premises renovations are also expected to grow due to the improved economic environment. Renovation prospects are also improved by the more systematic renovations of public sector properties.
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, urbanisation, changes in building use purpose and energy efficiency requirements.
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 Thursday 26 July 2018 at 10.00 Glo Hotel Kluuvi's Board -conference room, at Kluuvikatu 4, Helsinki. The conference is hosted by CEO Esa Korkeela and CFO Joni Sorsanen.
Financial communication in 2018
Consti Group Plc shall publish one more interim report during 2018:
- Interim report 1-9/2018 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
