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During the reporting period, we continued our activities to improve project performance, maintaining a focus on implementing operating models to improve project steering and monitoring. These actions have been steps in the right direction, and we have seen them have a positive impact on new project deliveries that are underway. However, during the reporting period we had to note that our corrective actions have not yet been fully put into practice in all Consti Group business areas. In order to ensure performance improvement in projects, the whole organisation needs to take a step closer to worksite execution.

During the reporting period, we immediately began targeted actions to restore the performance of low-profitability units. In addition to personnel changes and clarifying responsibilities in the line organisation, we further tightened our tendering criteria. For example, in the future we will no longer take on building purpose modification projects in which the project delivery method is not balanced with the risks and profit potential of the project. Our operating result for January-September 2018 was significantly weakened by two demanding building purpose modification projects, which had a negative impact of EUR 4.0 million on the result. I believe that successfully implementing the ongoing corrective actions will make Consti a stronger and better performing company, in both the short and long term.

The market environment continued to be predominantly good during the third quarter. Between July and September, we received new orders amounting to 39.3 million euro, which is a 28.0 per cent increase on the comparison period. The increase in new orders was particularly strong in facade renovations in the Greater Helsinki area. Thanks to the growth in new order intake, our order backlog in September, 270.1 million euro, was 35.9 per cent larger than in the comparison period. The positive development of our order backlog puts us in a good position to return to a path of profitable growth. At the same time, however, we note that our unresolved risks include a significant disagreement concerning the Hotel St. George construction project. More detailed information on the progress of this dispute has been disclosed during the reporting period. Our estimation is still that this issue will not affect Consti`s guidance for 2018.

Our current market and business outlook leads us to believe that demand for renovations and technical building services will remain at a good level towards the end of the year. I expect our strong order backlog and our profitability-improving actions to enhance our performance in the last quarter of the year."

Operating environment and outlook for the 2018

In Finland, nearly six per cent of GDP is spent on renovations, which is significantly more than the European average. Professional renovation construction amounted to approximately 13.1 million euro in 2017, and its share of the total construction market has increased steadily in recent years. Due to the age of the building stock, growth in Finland has been faster than in the rest of Europe. The ageing building stock will uphold the demand for renovation construction in years to come. As buildings get older, they will need more technical repairs, increasing the demand for, inter alia, pipeline and facade renovations.

The Confederation of Finnish Construction Industries RT (CFCI) estimated in its October review of market conditions that construction will continue to grow this year at almost the same rate as last year. Total building construction in 2018 is forecast to increase by approximately 4 per cent on the previous year. Renovation construction is estimated to increase by 1.5 per cent and new building by 6 per cent compared to 2017.

Residential building renovations in expanding cities are expected to drive most renovation construction growth. Renovation prospects are also improved by the more systematic renovations of public buildings and the conversion of outdated office buildings for new uses when financially justified.

A shortage of skilled labour, however, remains a challenge hindering renovation construction growth. According to CFCI, small apartment buildings have comprised a large proportion of new construction, which has led to more competition between new construction and renovation construction for the same workforce.

Despite the growth challenges, CFCI notes that barometers forecasting the development of housing renovations anticipate a positive trend for next year. In its September review of the current economic situation, the Finnish Association of HPAC Technical Contractors maintained its assessment of the market conditions for construction as good, and set to remain positive until next spring, despite a minor slowdown on the market. The review also mentioned that even if no new projects are started, ongoing projects and order backlogs will provide work well into next year.

The general economic climate has a significantly smaller impact on renovations and technical building services than it does on new construction. The majority of respondents to the Finnish Real Estate Federation`s renovation barometer said that the general economic climate does not affect decisions on undertaking renovation projects.

The coming years will see 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. When these trends are combined with the ageing building stock, we can predict sustained demand for renovations, technical building services and building technology maintenance services.

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 26 October 2018 at 10.00 at Hotel Scandic Simonkenttä`s Bulsa -conference room, at Simonkatu 9, Helsinki. The conference is hosted by CEO Esa Korkeela and CFO Joni Sorsanen.

Financial communication in 2019

Consti Group Plc`s Financial Statements for 2018 will be published 7 February 2019.

The electronic version of the annual report, which includes the full financial statements for 2018, will be published in week 11/2019.

Consti Group Plc`s Annual General Meeting for 2019 is scheduled to take place on Tuesday, 2 April 2019 in Helsinki.

Consti Group Plc shall publish three interim reports during 2019:

• Interim report 1-3/2019 published 26 April 2019

• Half-year financial report 1-6/2019 published 26 July 2019

• Interim report 1-9/2019 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 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

Consti Interim Report 1-9/2018

This announcement is distributed by West Corporation on behalf of West Corporation clients.

The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: Consti Yhtiöt Oyj via GlobeNewswire
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