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Consti Plc Half-Year Financial Report for January – June 2020
CONSTI PLC HALF-YEAR FINANCIAL REPORT 24 JULY 2020, at 8.30 a.m.
Consti Plc Half-Year Financial Report for January – June 2020
PROFITABILITY AND CASH FLOW IMPROVED
4–6/2020 highlights (comparison figures in parenthesis 4–6/2019):
- Net sales EUR 69.3 (81.2) million; change -14.7%
- EBITDA EUR 3.2 (1.0) million and EBITDA margin 4.6% (1.3%)
- Operating profit (EBIT) EUR 2.4 (0.1) million and operating profit margin 3.4% (0.1%)
- Order backlog EUR 211.8 (226.8) million; change -6.6 %
- Free cash flow EUR 8.1 (2.7) million
- Earnings per share EUR 0.21 (-0.04)
1–6/2020 highlights (comparison figures in parenthesis 1–6/2019):
- Net sales EUR 128.3 (154.7) million; change -17.0%
- EBITDA EUR 4.5 (1.5) million and EBITDA margin 3.5% (1.0%)
- Operating profit/loss (EBIT) EUR 2.8 (-0.3) million and operating profit/loss margin 2.2% (-0.2%)
- Free cash flow EUR 10.1 (-0.7) million
- Earnings per share EUR 0.22 (-0.11)
Guidance on the Group outlook for 2020:
The Company estimates that its operating result for 2020 will improve compared to 2019.
KEY FIGURES (EUR 1,000) | 4-6/ | 4-6/ | Change % | 1-6/ | 1-6/ | Change % | 1-12/ |
Net sales | 69,306 | 81,225 | -14.7 % | 128,346 | 154,705 | -17.0 % | 314,801 |
EBITDA | 3,181 | 1,030 | 208.9 % | 4,462 | 1,515 | 194.4 % | 8,137 |
EBITDA margin, % | 4.6 % | 1.3 % | 3.5 % | 1.0 % | 2.6 % | ||
Operating profit/loss (EBIT) | 2,368 | 120 | 1877.1 % | 2,830 | -278 | 4,632 | |
Operating profit/loss (EBIT) margin, % | 3.4 % | 0.1 % | 2.2 % | -0.2 % | 1.5 % | ||
Profit/loss for the period | 1,711 | -205 | 1,839 | -691 | 2,676 | ||
Order backlog | 211,838 | 226,765 | -6.6 % | 185,820 | |||
Free cash flow | 8,107 | 2,748 | 195.0 % | 10,093 | -728 | 3,977 | |
Cash conversion, % | 254.8 % | 266.9 % | 226.2 % | n/a | 48.9 % | ||
Net interest-bearing debt | 11,272 | 22,007 | -48.8 % | 18,880 | |||
Gearing, % | 37.9 % | 85.2 % | 64.4 % | ||||
Return on investment, ROI % | 13.7 % | -7.5 % | 8.9 % | ||||
Number of personnel at period end | 999 | 1,097 | -8.9 % | 990 | |||
Earnings per share, undiluted (EUR) | 0.21 | -0.04 | 0.22 | -0.11 | 0.30 | ||
CEO Esa Korkeela’s comment
”Our net sales for the second quarter of 2020 amounted to 69.3 (81.2) million euro. As expected, our net sales for April-June decreased 14.7 percent from the comparison period.
Our operating result for the second quarter was 2.4 (0.1) million euro, which is 3.4 (0.1) percent of the net sales. Our profitability developed mainly as we expected during April-June. Our relative profitability continued to improve. All of our business areas were profitable in the reporting period. Due to our improved profitability and released working capital, our cash flow for the reporting period also improved significantly compared to the previous year.
During the second quarter of the year, we invested into active bidding and negotiation activity for new renovation projects. During April-June, our order intake amounted to 66.8 (57.4) million euro, which is a 16.3 percent increase to the comparison period. Our order backlog at the end of the reporting period was 211.8 million euro. Thus, our order backlog at the end of the second quarter was 6.6 percent smaller than in the comparison period but grew 14.0 percent compared to the end of the previous year.
The outbreak of the coronavirus pandemic (COVID-19) and actions taken to control it increased uncertainty during the second quarter, but all in all the corona crisis had a limited impact on our operations and financial development during the reporting period. We succeeded in keeping our worksites open in all of our business areas. During the reporting period, we concentrated on protecting the health of our personnel, customers and partners, and ensuring that work progresses at our worksites and that our customer’s projects are executed without unnecessary interruptions.
In Finland, the coronavirus epidemic situation has been calm since the latter part of the reporting period, and emergency conditions were terminated in mid-June. Uncertainty related to short-term renovation demand outlook is caused especially by the possible moving forward of some projects that are in the negotiation stage, and possible postponement of decision-making. In the longer term, the demand outlook for renovation is impacted by development of the corona crisis and the speed of recovery of the general economic situation.
Our guidance for the Group’s outlook for 2020 remains unchanged. Our performance is supported by the implementation of the new organisation structure and change program that we carried out during the previous year, the flexibility of operating costs in relation to changes in volume, and the improved quality of our order backlog.”
Operating environment
Coronavirus pandemic (COVID-19)
The outbreak of the coronavirus pandemic (COVID-19) and actions taken to control it have an impact on Finnish renovation markets, but the effects of the crisis are expected to show after a delay. The European construction market research institution Euroconstruct estimates in its June 2020 report that the corona crisis will have a negative impact especially on new construction. The impact on renovation is expected to be considerably smaller. In its forecast, Euroconstruct estimates that new construction will decrease approximately 5.6 percent in 2020, while renovation will grow 0.4 percent from the previous year.
The Confederation of Finnish Construction Industries RT estimates in its May 2020 forecast that the corona crisis will double the pace at which construction is slowing down. According to RT, the impact of the corona crisis will show only after some time and the impacts on the construction sector will not be apparent until after summer. In its May 2020 forecast RT estimates that construction will decrease 5 percent in 2020. RT’s assessment of the development of construction is divided: it estimates that new construction of residential buildings will decrease 20.0 percent and new construction of office buildings will decrease 5.0 percent, while building renovation will grow 0.5 percent and civil engineering works will grow 3.0 percent from the previous year.
The short-term demand outlook is uncertain especially in housing company renovation market. The growth drivers of housing companies’ renovations remain unchanged, but decision-making has been postponed in some housing companies due to the corona crisis. According to temporary legislation that came into force in May 2020, housing companies can hold annual shareholder’s meetings for fiscal periods that ended between 30 September 2019 and 31 March 2020 by the end of September 2020.
The renovation market in general
The renovation market is need-driven, and its steady growth is sustained by the age of the building stock and global megatrends. The general economic situation has a smaller impact on renovations and building technology services than it has on new construction.
Professional renovation has grown nearly continuously in Finland for the last 20 years and at its best, its value has surpassed that of new construction. In 2019, renovation’s share of all construction is estimated to have been approximately 47 percent. Both renovation and new construction have concentrated to large cities in past years. As economic growth declines new construction is estimated to concentrate even more to growth centres.
The value of professional renovation was approximately 13.8 billion euro in 2019. Residential buildings made up 8.3 billion euro of this amount. The majority of renovations were conducted in apartment buildings and rowhouses. The demand for renovation is increased by the age of the building stock in Finland. Residential construction was at its heights in the 1970s and the building technology, facades and structures from that time now require major renovations.
The demand for renovation is due to the large building stock of residential buildings from the 1970s and also renovation needs in commercial and office buildings. In the 1980s commercial and office building construction was especially large-scale, and in the 1990s and early 2000s more commercial and office buildings were built than residential buildings. Thus, commercial and service facilities do not necessarily meet present-day needs.
Megatrends such as aging population, urbanisation and climate change also add to the need of renovation. Energy efficiency requirements for buildings, for example, aim to decrease carbon emissions by improving energy efficiency through comprehensive renovations and smart building technology. EU’s directive requires that member states make long-term comprehensive renovation strategies to convert the building stock to be extremely energy efficient and low-carbon by 2050. Some of the requirements are already for 2020. Building technology such as ventilation, as well as various security systems are also growing more important as factors contributing to living comfort.
Hand in hand with urbanisation, both new construction and renovation are concentrated more and more to cities, because renovating buildings in areas that are losing population is not always economically viable. Urbanisation also adds to supplementary building in both centres of growth areas and suburbs. Modifications of building use are also conducted to renovate office buildings into apartments.
Outlook for 2020
The outbreak of the coronavirus pandemic (COVID-19) and actions taken to control it have an impact on Finnish construction markets, but the more serious impact of the crisis is expected to show later on. The European construction market research institution Euroconstruct estimates in its June 2020 report that the corona crisis will have a negative impact especially on new construction. The impact on renovation is expected to be considerably smaller. In its forecast, Euroconstruct estimates that new construction will decrease approximately 5.6 percent in 2020, while renovation will grow 0.4 percent from the previous year.
Uncertainty has grown in Consti’s business environment as a result of the coronavirus pandemic, but so far, the impact on the company has been limited. Uncertainty related to short-term demand outlook is still caused by the possible moving forward of some projects that are in the negotiation stage, and possible postponement of decision-making. The short-term demand outlook is uncertain especially in housing company renovation market. The growth drivers of housing companies’ renovations remain unchanged, but decision-making has been postponed in some housing companies due to the corona crisis. According to temporary legislation that came into force in May 2020, housing companies can hold annual shareholder’s meetings for fiscal periods that ended between 30 September 2019 and 31 March 2020 by the end of September 2020.
Consti’s guidance for 2020 remains unchanged. In 2020 Consti’s performance is supported by the implementation of the new organisation structure and change program that was carried out the previous year, the flexibility of operating costs in relation to changes in volume, and the improved quality of the order backlog.
The Company estimates that its operating result for 2020 will improve compared to 2019.
Press conference
Microsoft Teams meeting for analysts, portfolio managers and media representatives, will take place 24 April 2020, 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 23 July 2020 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 23 July 2020.
Financial communication in 2020
Consti Plc shall publish one more interim report during 2020:
- Interim report 1-9/2020 published 28 October 2020
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
www.consti.fi
Consti is a leading Finnish company concentrating on renovation and technical services. Consti offers comprehensive renovation and building technology 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 2019, Consti Group’s net sales amounted to 315 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
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