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Consti Plc Half-Year Financial Report for January – June 2021
CONSTI PLC HALF-YEAR FINANCIAL REPORT 23 JULY 2021, at 8.30 a.m.
Consti Plc Half-Year Financial Report for January – June 2021
ADJUSTED EBIT IMPROVED, ORDER BACKLOG STRENGTHENED
4–6/2021 highlights (comparison figures in parenthesis 4–6/2020):
Net sales EUR 70.9 (69.3) million; growth 2.3%
EBITDA EUR 0.3 (3.2) million and EBITDA margin 0.4% (4.6%)
Adjusted operating result (EBIT) EUR 2.9 (2.7) million and Adjusted EBIT margin 4.1% (3.9%)
Operating result (EBIT) EUR -0.5 (2.4) million and EBIT margin -0.7% (3.4%)
Order backlog EUR 236.2 (211.8) million; growth 11.5 %
Order intake EUR 98.5 (66.8) million; growth 47.4%
Free cash flow EUR -1.4 (8.1) million
Earnings per share EUR -0.09 (0.21)
1–6/2021 highlights (comparison figures in parenthesis 1–6/2020):
Net sales EUR 130.2 (128.3) million; growth 1.4%
EBITDA EUR 1.2 (4.5) million and EBITDA margin 0.9% (3.5%)
Adjusted operating result (EBIT) EUR 3.4 (3.3) million and Adjusted EBIT margin 2.6% (2.6%)
Operating result (EBIT) EUR -0.4 (2.8) million and EBIT margin -0.3% (2.2%)
Order intake EUR 168.3 (129.0) million; growth 30.5%
Free cash flow EUR -4.3 (10.1) million
Earnings per share EUR -0.11 (0.22)
Guidance on the Group outlook for 2021:
The Company estimates that its operating result for 2021 will be in the range of EUR 4-8 million.
KEY FIGURES (EUR 1,000) | 4-6/ | 4-6/ | Change % | 1-6/ | 1-6/ | Change % | 1-12/ |
Net sales | 70,902 | 69,306 | 2.3 % | 130,185 | 128,346 | 1,4 % | 274,646 |
EBITDA | 276 | 3,181 | -91.3 % | 1,154 | 4,462 | -74,1 % | 11,440 |
EBITDA margin, % | 0.4 % | 4.6 % | 0.9 % | 3.5 % | 4.2 % | ||
Adjusted operating result (EBIT) | 2,918 | 2,721 | 7.2 % | 3,400 | 3,324 | 2,3 % | 9,478 |
Adjusted EBIT margin, % | 4.1 % | 3.9 % | 2.6 % | 2.6 % | 3.5 % | ||
Operating result (EBIT) | -531 | 2,368 | -429 | 2,830 | 8,237 | ||
Operating result (EBIT) margin, % | -0.7 % | 3.4 % | -0.3 % | 2.2 % | 3.0 % | ||
Profit/loss for the period | -721 | 1,711 | -806 | 1,839 | 5,675 | ||
Order backlog | 236,191 | 211,838 | 11,5 % | 177,857 | |||
Free cash flow | -1,356 | 8,107 | -4,285 | 10,093 | 18,334 | ||
Cash conversion, % | n/a | 254.8 % | n/a | 226.2 % | 160.3 % | ||
Net interest-bearing debt | 20,404 | 11,272 | 81,0 % | 4,737 | |||
Gearing, % | 76.3 % | 37.9 % | 14.1 % | ||||
Return on investment, ROI % | 8.5 % | 13.7 % | 13.6 % | ||||
Number of personnel at period end | 1,003 | 999 | 0,4 % | 927 | |||
Earnings per share, undiluted (EUR) | -0.09 | 0.21 | -0.11 | 0.22 | 0.70 | ||
CEO Esa Korkeela’s comment
”During the second quarter of 2021, our net sales were 70.9 (69.3) million euro. Our net sales grew 2.3 percent to the comparison period.
Our Adjusted operating result (EBIT) for April-June before items affecting comparability was 2.9 (2.7) million euro, which is 4.1 (3.9) percent of our net sales. Operationally the second quarter advanced as expected and our projects largely progressed as planned. Our operating result (EBIT) for the second quarter was -0.5 (2.4) million euro, which is -0.7 (3.4) percent of our net sales. During the reporting period we received an arbitral award from the arbitral tribunal in the dispute relating to the construction project for Hotel St. George. As a result of the decision, we recognised a non-recurring loss of 3.4 million euro for the period, mainly due to the write-down of net receivable on our balance sheet. The arbitral award will have a positive cash flow impact of approximately 2 million euro in the third quarter of the year.
In April-June our order intake was 98.5 (66.8) million euro, which is a 47.4 percent increase to the comparison period. Due to the good order intake, our order backlog at the end of the reporting period grew to 236.2 (211.8) million euro, which is 11.5 percent higher than in the comparison period. During the reporting period we recorded ia. in line with our new strategy the first orders related to new construction services into our order backlog. In the first project we will build two new office buildings targeting a Gold level LEED classification in Ilmalanrinne, Helsinki, and in the second project we will build a new school and sports premises for Järvenpää City. The strong order intake during the second quarter is a good indication of how well our customers have received our new strategy focusing on customer orientation, sustainability, and the expansion into the new construction services.
The negative impact that the coronavirus pandemic (COVID-19) had on our ability to advance projects according to plans was smaller than in the first quarter and it lessened toward the end of the reporting period. Despite the pandemic, demand for renovations remained at an adequate level. The housing company market has now returned near to normal levels regionally as well. However, demand for renovation and modification work in commercial premises has remained lower than normal especially in those industries that have suffered most from the coronavirus pandemic. Construction material price increases and material availability did not have a significant impact on our business during the second quarter.
During the second half or the year we will concentrate on ensuring our business performance and implementing our strategy. Our strengthened order backlog puts us in a good position to continue positive solid development in the second half of the year as well.”
Operating environment
Construction market 2021
European construction market research institution Euroconstruct estimates in its June 2021 report that the entire house building market will grow 1.9 percent in 2021. According to Euroconstruct’s assessment, renovation markets will grow 1.1 percent and new construction markets will grow 2.6 percent in 2021.
Although renovation construction is expected to grow in 2021, the coronavirus pandemic continues to cause uncertainty to the short-term demand outlook of renovation. The pandemic is expected to return in some form during autumn, in which case restrictive actions may be unavoidable. So far, the impact of restrictive actions has, however, remained quite moderate, because construction sites have predominantly been able to continue work despite the pandemic.
In housing companies, the corona crisis delayed decision making and renovation project plans during 2020, but if the corona situation allows it, the pent-up renovation needs are expected to boost demand in apartment renovations. According to Euroconstruct, the corona crisis has had both positive and negative effects on the renovations of commercial and public properties, but the overall impact has remained negative. There have been delays in starting work at new renovation sites, but on the other hand activity levels have been even better than normal at work sites where customers or users of the buildings have not been present due to corona restrictions.
According to Statistics Finland’s most recent figures, construction material costs continued to rise rapidly in June. Building costs rose by 4.2 percent in June 2021 from the previous year. The prices of materials went up by 5.5 percent and labour costs by 3.5 percent. The prices of services remained unchanged from the previous summer. Prices rose for nearly all building materials, but the price development of steel products and timber has accelerated particularly for several months already. The Confederation of Finnish Construction Industries RT’s June housing construction survey indicates that housing construction may slow down during the latter part of the year, because raw material shortages and raw material prices both escalated in the beginning of the year, and labour shortages are also increasing.
The renovation market in general
The value of professional renovations in total was nearly 14 billion euro in 2020, with residential building renovations’ share amounting to 8.0 billion euro. Most renovations are conducted in apartment buildings and row houses.
Professional renovation has grown nearly continuously in Finland for the past 20 years. Renovations’ share of all construction was approximately 47 percent in 2020.
Public service construction, especially schools and hospitals, has grown rapidly in recent years. New construction of schools is estimated to continue active, but on the whole public construction is expected to decline in upcoming years. This will have a considerable impact on the volume development of construction.
The need for facade renovations is growing, mainly due to 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. However, housing companies from the 1960s have still been renovated most when looking at the value of the renovations in proportion to the net floor area. Housing companies from the 1960s are clearly the largest group especially in building technology renovations.
Building technology renovations are the fastest growing area of renovations, including for example pipeline renovations, heating, ventilation, cooling and electrical renovations. They have made up nearly half of all housing company renovations in recent years. About 70 percent of building technology renovations are pipeline renovations.
Structures and facades are the second largest group, making up nearly 40 percent of all renovations. For financial reasons, facade renovations have had to be postponed in many housing companies to make room for pipeline renovations. According to the Finnish Real Estate Federation’s renovation barometer, there is currently almost the same number of facade and pipeline renovations ongoing in housing companies. The barometer estimates that in upcoming years renovation needs will focus increasingly on facades.
Approximately one fifth of renovations are repair and maintenance renovations.
The demand for renovation is maintained by 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 in Finland, and in the 1990s and early 2000s more commercial and office buildings were built than residential buildings. Premises from that era do not necessarily meet present-day needs. In addition, the growing amount of remote work and online shopping due to the corona pandemic add new challenges to the efficient use of premises.
Megatrends such as aging population, urbanisation and climate change also add to renovation needs. Like new construction, renovation is also estimated to continue concentrating to growth centres.
Climate change mitigation requires for instance improved energy efficiency in buildings, as stipulated in the EU’s energy efficiency directive. This is fostered for example with building technology and facade renovations. Adaption to weather variations caused by climate change necessitates meticulous maintenance of facades in particular.
Outlook for 2021
The coronavirus pandemic continues to cause uncertainty to Consti’s operating environment. Although market research institutes expect the renovation market to grow in 2021, new waves of the pandemic and lockdowns remain possible. The operating environment for the rest of the year is also affected by the rapid increase in the cost of building materials and possible problems related to availability of the materials. The increase in the price level and availability of building materials did not have a significant impact on Consti's business in the first half of the year. In the second half of the year, the impact is estimated to be somewhat larger in those ongoing projects where a rapid increase in material costs has not been sufficiently considered at the tendering phase. In the second half of 2021, Consti will focus on ensuring business performance and implementing the strategy.
As a result of the arbitral award, Consti lowered its guidance for 2021 on 11 June 2021. According to the new guidance the Company estimates that its operating result for 2021 will be in the range of EUR 4-8 million
Press conference
Microsoft Teams meeting for analysts, portfolio managers and media representatives, will take place 23 July 2021, 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 22 July 2021 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 22 July 2021.
Financial communication in 2021
Consti Plc shall publish one more interim report during 2021:
Interim report 1-9/2021 published 27 October 2021
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 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 2020, Consti Group’s net sales amounted to 275 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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