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CONSTI PLC INTERIM REPORT 29 APRIL 2022, at 8.30 a.m.
Consti Plc Interim Report for January – March 2022
SOLID PERFORMANCE CONTINUED
1–3/2022 highlights (comparison figures in parenthesis 1–3/2021):
Net sales EUR 59.8 (59.3) million; growth 0.9%
EBITDA EUR 1.4 (0.9) million and EBITDA margin 2.3% (1.5%)
Adjusted operating result (EBIT) EUR 0.4 (0.5) million and Adjusted EBIT margin 0.6% (0.8%)
Operating result (EBIT) EUR 0.4 (0.1) million and EBIT margin 0.6% (0.2%)
Order backlog EUR 205.1 (196.5) million; growth 4.4%
Order intake EUR 37.6 (69.8) million; change -46.2%
Free cash flow EUR -0.8 (-2.9) million
Earnings per share EUR 0.01 (-0.02)
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)
EBITDA margin, %
Adjusted operating result (EBIT)
Adjusted EBIT margin, %
Operating result (EBIT)
Operating result (EBIT) margin, %
Profit/loss for the period
Free cash flow
Cash conversion, %
Net interest-bearing debt
Return on investment, ROI %
Number of personnel at period end
Earnings per share, undiluted (EUR)
CEO Esa Korkeela’s comment
“Our net sales for the first quarter of 2022 were 59.8 (59.3) million euro, ending up slightly above the previous year’s level. In January-March, our seasonally low net sales grew by 0.9 percent compared to the comparison period.
Taking into account that our business volumes are usually lowest in the first quarter of the year, our profitability for the reporting period was in line with our expectations. Our adjusted operating result for January-March before items affecting comparability was 0.4 (0.5) million euro, which is 0.6 (0.8) percent of our net sales. Our balance sheet and liquidity positions at the end of the reporting period remained at a good level.
During January-March, our order intake was 37.6 (69.8) million euro. Despite the decreased order intake in the first quarter, our order backlog, 205.1 (196.5) million at the end of March, was 4.4 percent higher than in the comparison period.
The uncertainty in our 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 implications, the war has a negative impact on the availability of building materials and products, which can complicate our ability to advance ongoing projects according to plans. The crisis in Ukraine, with its ramifications, also creates uncertainty regarding 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.
The increase in construction costs had a somewhat greater impact on our projects than in the comparison period in such ongoing projects where a rapid increase in material costs was not sufficiently considered at the tendering phase. Due to the rapid rise in the prices of building materials and products and possible availability problems, we have adapted our tendering operations to reflect the changed operating environment. The coronavirus pandemic, on the other hand, continued to affect our business primarily through increased sick leaves.
During the reporting period, we continued to implement our strategy and launched additional measures to ensure the performance of our business in an uncertain operating environment. Our actions focus especially on procurement, tendering, and customer work. Our goal is to ensure a healthy margin level for our order intake and the smooth advancing of our customers’ projects. As part of our sustainability work, we announced CO2 emission reduction targets for our own operations (Scope 1–2). Our target is to reduce our own CO2 emissions by 40% by 2025, by 70% by 2030 and by 100% by 2035. We provide more information on the progress of our sustainability work in our sustainability report published today.
Despite the increased 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.”
Construction market 2022
Thus far, there are no public economic forecasts for construction which would take into account the crisis in Ukraine. According to the latest available forecasts renovations are expected to increase in 2022 by about 1.3–2.0 percent. The Confederation of Finnish Construction Industries RT and the construction trends group led by the Ministry of Finance estimate that the growth will be about 2.0 percent and Euroconstruct forecasts a growth of 1.3 percent. Renovations are expected to increase in both residential buildings and office premises. The growth forecasts for the entire construction industry for 2022 vary between 2.0 and 2.5 percent.
The Confederation of Finnish Construction Industries RT estimates that the strong work base in construction will keep the industry’s activity at a good level throughout early 2022, but cumulative cost development may slow down the start of planned new projects.
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.
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. The crisis in Ukraine, 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 taken additional measures to ensure its business performance in an uncertain operating environment. The measures focus especially on procurement, tendering, and customer work. The aim of the measures is to ensure a healthy margin level for order intake and the smooth advancing of customers’ projects.
Despite the increased uncertainty in the operating environment, the guidance for the current year remains unchanged. The company’s 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.
Microsoft Teams meeting for analysts, portfolio managers and media representatives, will take place 29 April 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 28 April 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 28 April 2022.
Financial communication in 2022
Half-year report 1-6/2022 will be published 22 July 2022
Interim report 1-9/2022 will be published 27 October 2022
Esa Korkeela, CEO, Consti Plc, Tel. +358 40 730 8568
Joni Sorsanen, CFO, Consti Plc, Tel. +358 50 443 3045
Nasdaq Helsinki Ltd.
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