Consti Group Plc Financial Statements Bulletin for January – December 2019

CONSTI GROUP PLC FINANCIAL STATEMENTS BULLETIN 7 FEBRUARY 2020, at 8.30 a.m.

Consti Group Plc Financial Statements Bulletin for January – December 2019

PROFITABILITY AND CASH FLOW IMPROVED   

10–12/2019 highlights (comparison figures in parenthesis 10–12/2018):

·Net sales EUR 78.3 (96.8) million; change -19.1 %

·EBITDA EUR 3.6 (-1.7) million and EBITDA margin 4.7 % (-1.8 %)

·Operating profit/loss (EBIT) EUR 2.8 (-2.2) million and EBIT margin 3.6 % (-2.2 %)

·Order backlog EUR 185.8 (225.1) million; change -17.4 %

·Free cash flow EUR 5.1 (1.9) million

·Earnings per share EUR 0.25 (-0.25)

1–12/2019 highlights (comparison figures in parenthesis 1–12/2018):

·Net sales EUR 314.8 (315.8) million; change -0.3 %

·EBITDA EUR 8.1 (-0.5) million and EBITDA margin 2.6 % (-0.1 %)

·Operating profit/loss (EBIT) EUR 4.6 (-2.1) million and EBIT margin 1.5 % (-0.7 %)

·Free cash flow EUR 4.0 (-7.1) million

·Earnings per share EUR 0.30 (-0.30)

·The Board of Directors proposes a dividend of EUR 0.16 per share

                               

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 2019 amounted to 314.8 million euro, ending up at nearly last year’s level. As expected, our net sales for the last quarter fell short of the strong comparison period.

Our operating result for the financial period improved each quarter towards the end of the year and was clearly better than the comparison period. Our operating result for October-December was 2.8 (-2.2) million euro, which is 3.6 (-2.2) percent of net sales. Our operating result for the entire year 2019 was 4.6 (-2.1) million euro which is 1.5 (-0.7) percent of net sales. All our business areas had profitable operating results for fiscal year 2019. During the year Consti had approximately 800 projects ongoing. Except for a few old projects from the already discontinued housing repair unit, all of our projects predominantly advanced as planned. Due to our improved operating result, cash flow in January-December also improved considerably compared to the previous year.

In fiscal year 2019, we continued implementing our turnaround programme to improve Consti’s profitability and competitiveness. The programme advanced as planned during the year. The actions we carried out enabled us to improve our organisation’s customer orientation, risk management, and agility, in addition to which we were able to move business leadership closer to production at our worksites. We also achieved the cost savings goals established in our turnaround programme, and consequently, two-million-euro annual cost savings will begin to impact our result fully from the beginning of 2020 onwards. Due to the actions that we have carried out, our fixed costs for 2019 were also lower than they were in the comparison period.

Our market environment remained mainly good in fiscal year 2019. During the year we received new orders amounting to 214.8 million euro, which is a 6.0 percent decrease from the comparison period. Our order backlog at the end of the year was 185.8 million euro. Our order intake in the last quarter 46.8 million euro (27.9) was significantly higher than in the comparison period, but nevertheless our order backlog at the end of the year fell short 17.4 percent from the order backlog at the end of the previous fiscal year. The whole year’s order intake and order backlog development reflect the group-wide more disciplined bidding procedures and resources tied up by ongoing large comprehensive renovation projects. All in all, the quality of our order backlog improved steadily throughout the fiscal year.

Based on our present market and business outlook we believe that the demand for renovations and building technology services will remain at a moderate level in 2020 in Consti’s market areas. I expect that together, the improved quality of our order backlog and successful implementation of our turnaround programme will improve our performance in 2020.”

Operating environment

Professional renovation construction 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 construction’s share of all construction is estimated to have been approximately 48 percent.

The renovation construction market’s growth is estimated to have been about 1-2 percent in 2019. According to Euroconstruct, the house building market as a whole declined approximately 1.5 percent. The Confederation of Finnish Construction Industries (CFCI) estimates that renovation construction grew nearly two percent in 2019 and Euroconstruct estimates it grew 0.9 percent.

New construction decreased about 3.6 percent in 2019 according to Euroconstruct. In new construction the emphasis was on public buildings such as schools and hospitals, and commercial buildings. Residential new construction decreased after growing rapidly during past years. CFCI estimates that residential new construction decreased 5.0 percent, while Euroconstruct’s estimate is 7.6 percent. No significant changes occurred in the amount of other new construction.

Both renovation construction 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 construction 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. Renovation construction is need driven and thus economic fluctuation has a lesser impact on it than it does on new construction.

The demand for renovation construction 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 scale of construction in the 1970s is showcased by the fact that housing companies built in the 1970s have a total of about 60 million square meters of net floor area, while housing companies built in the 1960s only have about 35 million square meters of net floor area. 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.

Pipeline renovations are the most rapidly growing area of renovation construction. 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.

Measured by the value of renovations, building technology renovations in housing companies built in the 1960s are clearly the largest group. In proportion to net floor area, facades are also renovated most in housing companies from the 1960s, but the value of renovations is more evenly distributed across housing companies from different decades. Windows, external doors, foundations and structures are renovated most in older housing companies, while roof renovation value is largest in housing companies from the 1980s. Pipeline renovations are also increasing in housing companies from the 1980s.

Both renovation and new construction has increased for several years now in public buildings such as schools and hospitals. Especially new construction has increased considerably. Public building construction is, however, estimated to slow down in upcoming years, and this in turn is estimated to significantly impact the construction market as a whole.

The market for renovation construction is estimated to continue to grow relatively steadily, and faster than new construction. The demand for renovation construction 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. Commercial and service facilities do not necessarily meet present-day needs. New construction of commercial and office buildings is estimated to decrease in upcoming years.

Megatrends such as aging population, urbanisation and climate change also add to the need of renovation construction. Energy efficiency requirements for buildings, for example, aim to decrease carbon emissions by improving energy efficiency through basic 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 construction 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.

Euroconstruct estimates that building renovations will grow 1.2 percent in 2020 and that the annual growth will remain at approximately 1.6 percent during 2021 and 2022. Euroconstruct estimates that new construction will decrease 2.4 percent in 2020. The whole market for housebuilding is estimated to decrease about 0.7 percent.

The slowing down of new construction is expected to improve workforce availability, but it may simultaneously intensify competition especially for large renovation projects.

Outlook for 2020

Renovation growth is expected to continue in 2020. In its November outlook, Euroconstruct estimated that Finland’s renovation market will grow 1.2 percent from the previous year. Euroconstruct estimates that new construction will decrease 2.4 percent in 2020. The slowing down of new construction is expected to improve workforce availability, but it may simultaneously intensify competition especially for large renovation projects.

The general economic situation typically has a significant impact on new construction, but a much lesser impact on renovations.

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

Press conference

A press conference for analysts, portfolio managers, and media will be arranged 7 February 2020 at 10:00 at Hotel Haven at Unioninkatu 17, Helsinki. The conference is hosted by CEO Esa Korkeela and CFO Joni Sorsanen.

Financial reporting in 2020

Consti will publish its Financial Statements, Board of Directors’ Report, Auditors’ Report, and Corporate Governance Statement on the company website during week 11/2020.

Consti Group Plc’s Annual General Meeting shall be arranged on Monday 6 April 2020 in Helsinki. Invitation to the Annual General Meeting will be published later as a separate Stock Exchange release.

Consti Group Plc shall publish three interim reports during 2020:

• Interim report 1-3/2020 published 29 April 2020
• Half-year financial report 1-6/2020 published 24 July 2020
• Interim report 1-9/2020 published 28 October 2020

CONSTI GROUP PLC

Further information:

Esa Korkeela, CEO, Consti Group Plc, Tel. 8

Joni Sorsanen, CFO, Consti Group Plc, Tel. 5

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 Group Plc is listed on Nasdaq Helsinki. The trading code is CONSTI.

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