CONSTI PLC HALF-YEAR FINANCIAL REPORT 22 JULY 2022, at 8.30 a.m.
Consti Plc Half-Year Financial Report for January – June 2022
SOLID PERFORMANCE CONTINUED, ORDER BACKLOG AT A GOOD LEVEL
4–6/2022 highlights (comparison figures in parenthesis 4–6/2021):
Net sales EUR 73.1 (70.9) million; growth 3.1%
EBITDA EUR 3.7 (0.3) million and EBITDA margin 5.1% (0.4%)
Adjusted operating result (EBIT) EUR 2.9 (2.9) million and Adjusted EBIT margin 4.0% (4.1%)
Operating result (EBIT) EUR 2.9 (-0.5) million and EBIT margin 4.0% (-0.7%)
Order backlog EUR 240.8 (236.2) million; growth 1.9 %
Order intake EUR 98.7 (98.5) million; growth 0.3%
Free cash flow EUR 2.6 (-1.4) million
Earnings per share EUR 0.28 (-0.09)
1–6/2022 highlights (comparison figures in parenthesis 1–6/2021):
Net sales EUR 132.9 (130.2) million; growth 2.1%
EBITDA EUR 5.1 (1.2) million and EBITDA margin 3.8% (0.9%)
Adjusted operating result (EBIT) EUR 3.3 (3.4) million and Adjusted EBIT margin 2.5% (2.6%)
Operating result (EBIT) EUR 3.3 (-0.4) million and EBIT margin 2.5% (-0.3%)
Order intake EUR 136.3 (168.3) million; change -19.0%
Free cash flow EUR 1.7 (-4.3) million
Earnings per share EUR 0.29 (-0.11)
Guidance on the Group outlook for 2022: The Company estimates that its operating result for 2022 will be in the range of EUR 9-13 million.
KEY FIGURES (EUR 1,000)
4-6/ 2022
4-6/ 2021
Change %
1-6/ 2022
1-6/ 2021
Change %
1-12/ 2021
Net sales
73,118
70,902
3.1 %
132,947
130,185
2.1 %
288,773
EBITDA
3,729
276
1251.4 %
5,086
1,154
340.7 %
9,202
EBITDA margin, %
5.1 %
0.4 %
3.8 %
0.9 %
3.2 %
Adjusted operating result (EBIT)
2,912
2,918
-0.2 %
3,271
3,400
-3.8 %
9,535
Adjusted EBIT margin, %
4.0 %
4.1 %
2.5 %
2.6 %
3.3 %
Operating result (EBIT)
2,912
-531
3,271
-429
5,705
Operating result (EBIT) margin, %
4.0 %
-0.7 %
2.5 %
-0.3 %
2.0 %
Profit/loss for the period
2,154
-721
2,265
-806
3,717
Order backlog
240,756
236,191
1.9 %
218,578
Free cash flow
2,577
-1,356
1,747
-4,285
5,458
Cash conversion, %
69.1 %
n/a
34.4 %
n/a
59.3 %
Net interest-bearing debt
17,880
20,404
-12.4 %
14,262
Gearing, %
60.0 %
76.3 %
44.7 %
Return on investment, ROI %
15.6 %
8.5 %
9.2 %
Number of personnel at period end
997
1,003
-0.6 %
961
Earnings per share, undiluted (EUR)
0.28
-0.09
0.29
-0.11
0.47
CEO Esa Korkeela’s comment
“Our net sales for the second quarter of 2022 were 73.1 (70.9) million euro. Our net sales increased 3.1 percent compared to the comparison period.
Our adjusted operating result for April-June was 2.9 (2.9) million euro, which is 4.0 (4.1) percent of our net sales. The second quarter advanced according to our expectations and our projects predominantly proceeded as planned. Our balance sheet and liquidity positions at the end of the reporting period remained at a good level.
During April-June, our order intake was 98.7 (98.5) million euro. Order intake was particularly good in our Housing Companies business area, in which demand is maintained by the needs-oriented nature of renovations. Due to the good order intake, our order backlog at the end of the reporting period was 240.8 (236.2) million euro, which is 1.9 percent higher than the order backlog for the comparison period. Compared to the comparison period, we estimate that a larger share of our order backlog at the end of the reporting period will contribute to our net sales during the rest of the year, both in absolute and relative terms.
Increased construction costs had a greater impact on our profitability than in the comparison period in certain ongoing projects where the steepness and duration of cost increases has not been sufficiently considered. Inflation also weakened our profitability somewhat during the reporting period through increased indirect costs. The coronavirus pandemic, on the other hand, continued to affect our business mainly through increased sick leave.
During the reporting period, we continued to implement our strategy and measures to ensure the performance of our business in an uncertain operating environment. Our actions focus especially on procurement, tendering, customer work and fixed cost management.
Russia's military aggression, with its ramifications, creates uncertainty about the short-term demand outlook for renovation and building technology. This uncertainty may lead to the rescheduling of some projects in the negotiation phase as well as the postponement of investment decisions. However, demand is maintained by the needs-oriented nature of renovations. Due to the geopolitical situation, the EU is seeking to accelerate the Green Transition, which is expected to create demand for Consti's services and solutions.
Despite the uncertainty in the operating environment, we are keeping our guidance for the current year unchanged. Our strong order backlog, the progress of our strategic projects, and our steadily improved performance put us in a good position to continue our positive and solid development in 2022.”
Operating environment
Construction market 2022
In its May economic outlook, the Confederation of Finnish Construction Industries CFCI estimates that the economic outlook for construction has declined significantly due to Russia’s military aggression in Ukraine. According to CFCI, the main hazards are caused by the sharp increase in costs and the growing uncertainty towards the end of the year. However, in its economic outlook, CFCI estimates that due to the large number of housing projects that started before the war in Ukraine began, and the pick-up in business premises construction, the entire construction market will grow by around 2.0% in 2022. According to CFCI's forecast, the renovation market is estimated to grow by 1.5 percent in 2022.
Construction market research institute Euroconstruct estimated in its June 2022 report that the entire market for housebuilding will grow by 3.9% in 2022. According to Euroconstruct's forecast, the renovation market is estimated to grow by 1.4 percent and the new construction market by around 6.0 percent in 2022.
The renovation market in general
Professional renovations have increased almost continuously in Finland for the past 20 years. Growth has been relatively steady, as renovations are more need-driven and less cyclical than new construction. In addition to the age of the building stock, the need for renovations is increased especially by climate change and energy efficiency requirements, as well as urbanisation and changes in working methods.
The value of professional renovations was approximately 14 billion euro in 2021, of which residential buildings accounted for about 8.1 billion euro. The majority of renovations are conducted in apartment buildings and terraced houses. The renovation market in Finland is very fragmented and there are numerous small companies working in the sector.
Renovations have made up approximately half of all housing construction projects in recent years. In 2021 the share was about 45 percent. Forecon’s market analysis estimates that the number of renovations tripled in Finland between 1980-2020. Although the growth rate of renovations is expected to slow down somewhat, it is estimated that renovations have better growth prospects than new construction, when looking at the 2020s as a whole. New construction growth has been driven by residential building, and also numerous public service construction projects, especially schools and hospitals. Despite the growth in new school construction, public construction is expected to slow down in the next few years, and this will have a significant impact on the volume of construction.
In Finland renovations are driven primarily by the age of the building stock. Housing construction peaked in the 1970s and building technology, facades and structures from that era now require substantial renovations. Thus far, the greatest number of renovations have been conducted on housing companies built in the 1960s and renovations have focused on building technology. Building technology has been the fastest growing renovation type. Forecon estimates that building technology renovations increased about 4–5 percent annually in the 2020s, while the number of renovations as a whole has grown approximately 1–2 percent per year. Building technology has accounted for about half of all housing company renovations in recent years, and about 40 percent of all the renovations of the building stock. Exterior surfaces and structures have been the second largest renovation type, making up nearly 40 percent of all renovations. Facade renovations have had to be postponed in many housing companies for financial reasons, to make way for pipeline renovations. Consequently, housing company renovations will focus more strongly on facade renovations in upcoming years. In addition, strong weather fluctuations and wind driven rain brought forth by climate change put facades under greater duress than before and add to maintenance needs. Approximately one fifth of all renovation projects are maintenance and repair projects.
The demand for renovations in Finland is also driven by the growing need for commercial and office building renovations. Commercial and office building construction was especially rapid in Finland in the 1980s and also in the early 1990s and 2000s. Buildings from this time period do not often meet current needs. For example, the increase in remote work and e-commerce have set new challenges for the efficient use of these premises.
Renovation needs are also increased by many phenomena classified as megatrends such as population aging, urbanisation, and climate change. Climate change mitigation necessitates better energy efficiency in buildings, which increases the need to renovate both residential buildings and commercial and office premises.
Repair measures related to emission reduction and improved energy efficiency hold more importance than before. Finland, as part of the EU, is committed to strongly reducing emissions. The EU is preparing a large-scale ‘Renovation Wave’ initiative which aims to double the renovation rate to cut emissions and improve energy efficiency.
General risks to growth include increased construction costs and the availability of both personnel and materials. The shortage of skilled personnel particularly affects growth centres, where both new construction and renovations are increasingly concentrating.
Outlook for 2022
The uncertainty in Consti’s operating environment increased significantly after Russia launched an attack on Ukraine in February. Due to geopolitical instability, the prices of building materials and products important to the company have continued to rise. In addition to the cost impact, the war has a negative impact on the availability of building materials and products, which may complicate Consti’s ability to advance ongoing projects according to plans. Russia's military aggression, with its ramifications, also creates uncertainty about the short-term demand outlook for renovation and building technology. This uncertainty may lead to the rescheduling of some projects in the negotiation phase, as well as the postponement of investment decisions. However, demand is maintained by the needs-oriented nature of renovation.
Consti has continued the additional measures initiated during Q1 to ensure its business performance in an uncertain operating environment. The measures will continue to focus especially on procurement, tendering, customer work and fixed cost management.
Despite the uncertainty in the operating environment, the guidance for the current year remains unchanged. The strong order backlog, progress of strategic projects, and steadily improved performance put Consti in a good position to continue its positive and solid development in 2022.
The Company estimates that its operating result for 2022 will be in the range of EUR 9-13 million.
Press conference
Microsoft Teams meeting for analysts, portfolio managers and media representatives, will take place 22 July 2022, 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 Thursday 21 July 2022 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 Thursday 21 July 2022.
Financial communication in 2022
Consti Plc shall publish one more interim report during 2022:
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 2021, Consti Group’s net sales amounted to 289 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
