Consti Plc Interim Report for January – March 2020

CONSTI PLC INTERIM REPORT 29 APRIL 2020, at 8.30 a.m.

Consti Plc Interim Report for January – March 2020

PROFITABILITY AND CASH FLOW IMPROVED

1–3/2020 highlights (comparison figures in parenthesis 1–3/2019):

·Net sales EUR 59.0 (73.5) million; change -19.7%

·EBITDA EUR 1.3 (0.5) million and EBITDA margin 2.2% (0.7%)

·Operating profit/loss (EBIT) EUR 0.5 (-0.4) million and EBIT margin 0.8% (-0.5%)

·Order backlog EUR 202.2 (237.8) million; change -14.9%

·Free cash flow EUR 2.0 (-3.5) million

·Earnings per share EUR 0.01 (-0.08)

                                                         

Guidance on the Group outlook for 2020:

The Company estimates that its operating result for 2020 will improve compared to 2019.

CEO Esa Korkeela’s comment

“Our net sales for the first quarter of 2020 decreased 19.7 percent from the comparison year and amounted to 59.0 million euro. As expected, our net sales for January-March decreased from the strong comparison period.

Our operating result for the reporting period was profitable and improved compared to the previous year. Our operating result for January-March was 0.5 (-0.4) million euro, which is 0.8 (-0.5) percent of the net sales. Our profitability developed mainly positively during the first quarter. 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.

The outbreak of the coronavirus pandemic (COVID-19) and actions taken to control it have not affected our market environment significantly during the first quarter. During the reporting period, our order intake amounted to 62.1 (73.5) million euro. Our order backlog at the end of the reporting period was 202.2 million euro. Thus, our order backlog at the end of the first quarter was 14.9 percent smaller than in the comparison period but grew 8.8 percent compared to the end of the previous year.

Uncertainty has grown in our business environment as a result of the coronavirus pandemic, but so far, the impact on our company has been limited. We have been able to keep our worksites open in all of our operational areas. During the reporting period, we have taken many actions to protect the health of our personnel, customers and partners, and to ensure that work progresses at our worksites and that our customer’s projects are executed without unnecessary interruptions. After the reporting period we have had active negotiations and reached agreements of new renovation projects that will be completed during this year. On the other hand, some projects, which were in the negotiation stage, have been cancelled, and the start of some projects that were at the contractual stage has been moved forward.

The most significant short-term uncertainties during the coronavirus pandemic have to do with our ability to carry out work at current worksites and short-term demand outlook. Uncertainty related to our ability to carry out work at worksites has to do with personnel availability, possible cases of illness, availability of materials, and regulatory provisions. Uncertainty related to short-term 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 of renovation is affected by the length of the corona pandemic and actions taken to control it, as well as the speed of recovery of the general economic situation.

Our guidance for the ongoing year remains unchanged. In 2020, our performance is supported by the organisational renewal we carried out during the previous year, the scalability of operating costs in relation to changes in volume, and the improved quality of our order backlog. Achieving our guidance requires, however, that our worksites remain operating in future as well, and that we are able to advance the projects in our order backlog as planned during the rest of the year.”

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 more serious impact of the crisis is expected to show later on. The Confederation of Finnish Construction Industries RT conducted a survey in April which reveals that work has continued at construction sites fairly normally despite the coronavirus pandemic and related restrictions. The survey shows, however, that the slowing down of production and postponing of planned projects is estimated to be at least fairly probable.

The short-term demand outlook has deteriorated fastest in residential renovations. The growth drivers of housing companies’ renovations remain unchanged, but in some cases decision-making has been postponed, in addition to which the Finnish government’s restrictions to control the coronavirus pandemic have an impact especially on the carrying out of some residential renovations. The Finnish Real Estate Federation’s spring 2020 renovation barometer estimates that the corona crisis will decrease housing company renovations. 33% of the barometer’s respondents estimate that their housing company will decrease renovations during the ongoing year, while 27% estimate that renovations will increase in their housing company compared to the previous year. However, as many as 76% of the respondents still estimate that planned renovations will be carried out despite the current economic situation in 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 48 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 slightly over 13 billion euro in 2019. Residential buildings made up 8 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. Pipeline renovations are the most rapidly growing area of renovation. In the past years building technology renovations have made up nearly half of all housing company renovations and approximately three quarters of these building technology renovations have been pipeline renovations. Structures and facades are the second largest object of renovation activity, making up nearly 40 percent of all 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 renovation markets, but the more serious impact of the crisis is expected to show later on. The short-term demand outlook has deteriorated fastest in residential renovations. The growth drivers of housing companies’ renovations remain unchanged, but in some cases decision-making has been postponed, in addition to which the Finnish government’s restrictions to control the coronavirus pandemic have an impact especially on the carrying out of some residential renovations.

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. The most significant short-term uncertainties during the coronavirus pandemic have to do with Consti’s ability to carry out work at current worksites and short-term demand outlook. Uncertainty related to Consti’s ability to carry out work at worksites has to do with personnel availability, possible cases of illness, availability of materials, and regulatory provisions. Uncertainty related to short-term 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 of renovation is affected by the length of the corona pandemic and actions taken to control it, as well as the speed of recovery of the general economic situation.

Consti’s guidance for 2020 remains unchanged. In 2020 Consti’s performance is supported by the organisational renewal carried out the previous year, the scalability of operating costs in relation to changes in volume, and the improved quality of the order backlog. Achieving the guidance requires, however, that Consti’s worksites remain operating in future as well and the projects in the order backlog can be advanced as planned during the rest of the year.

Press conference

Microsoft Teams meeting for analysts, portfolio managers and media representatives, will take place 29 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 Tuesday 28 April 2020 at 12.00 p.m. by sending an email to . A link to the meeting will be sent to registered participants during the afternoon of Tuesday 28 April 2020.

Financial communication in 2020

Half-year report 1-6/2020 will be published 24 July 2020

Interim report 1-9/2020 will be published 28 October 2020

CONSTI PLC

Further information:

Esa Korkeela, CEO, Consti Plc, Tel. 8

Joni Sorsanen, CFO, Consti Plc, Tel. +358 50 443 3045

Distribution:

Nasdaq Helsinki Ltd.

Major media

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.

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