Consti Plc Interim Report for January – September 2021
CONSTI PLC INTERIM REPORT 27 OCTOBER 2021, at 8.30 a.m.
Consti Plc Interim Report for January – September 2021
NET SALES GREW, PROFITABILITY IMPROVED
7–9/2021 highlights (comparison figures in parenthesis 7–9/2020):
- Net sales EUR 76.0 (68.2) million; growth 11.4%
- EBITDA EUR 4.0 (3.2) million and EBITDA margin 5.3% (4.8%)
- Adjusted operating result (EBIT) EUR 3.1 (2.6) million and Adjusted EBIT margin 4.1% (3.9%)
- Operating result (EBIT) EUR 3.1 (2.5) million and EBIT margin 4.1% (3.6%)
- Order backlog EUR 217.9 (189.4) million; growth 15.0 %
- Order intake EUR 40.0 (31.0) million; growth 28.9%
- Free cash flow EUR 3.6 (4.6) million
- Earnings per share EUR 0.29 (0.21)
1–9/2021 highlights (comparison figures in parenthesis 1–9/2020):
- Net sales EUR 206.2 (196.5) million; growth 4.9%
- EBITDA EUR 5.2 (7.7) million and EBITDA margin 2.5% (3.9%)
- Adjusted operating result (EBIT) EUR 6.5 (6.0) million and Adjusted EBIT margin 3.2% (3.0%)
- Operating result (EBIT) EUR 2.7 (5.3) million and EBIT margin 1.3% (2.7%)
- Order intake EUR 208.3 (160.0) million; growth 30.2%
- Free cash flow EUR -0.7 (14.7) million
- Earnings per share EUR 0.18 (0.43)
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) | 7-9/ 2021 | 7-9/ 2020 | Change % | 1-9/ 2021 | 1-9/ 2020 | Change % | 1-12/ 2020 |
| Net sales | 75,984 | 68,202 | 11.4 % | 206,168 | 196,548 | 4.9 % | 274,646 |
| EBITDA | 4,033 | 3,249 | 24.1 % | 5,188 | 7,711 | -32.7 % | 11,440 |
| EBITDA margin, % | 5.3 % | 4.8 % | 2.5 % | 3.9 % | 4.2 % | ||
| Adjusted operating result (EBIT) | 3,124 | 2,631 | 18.7 % | 6,524 | 5,955 | 9.5 % | 9,478 |
| Adjusted EBIT margin, % | 4.1 % | 3.9 % | 3.2 % | 3.0 % | 3.5 % | ||
| Operating result (EBIT) | 3,124 | 2,454 | 27.3 % | 2,694 | 5,283 | -49.0 % | 8,237 |
| Operating result (EBIT) margin, % | 4.1 % | 3.6 % | 1.3 % | 2.7 % | 3.0 % | ||
| Profit/loss for the period | 2,233 | 1,694 | 31.8 % | 1,427 | 3,533 | -59.6 % | 5,675 |
| Order backlog | 217,895 | 189,402 | 15.0 % | 177,857 | |||
| Free cash flow | 3,608 | 4,599 | -21.6 % | -678 | 14,692 | 18,334 | |
| Cash conversion, % | 89.4 % | 141.5 % | n/a | 190.5 % | 160.3% | ||
| Net interest-bearing debt | 18,635 | 7,383 | 152.4 % | 4,737 | |||
| Gearing, % | 62.6 % | 23.6 % | 14.1 % | ||||
| Return on investment, ROI % | 9.3 % | 14.1 % | 13.6 % | ||||
| Number of personnel at period end | 998 | 959 | 4.1 % | 927 | |||
| Earnings per share, undiluted (EUR) | 0.29 | 0.21 | 38.1 % | 0.18 | 0.43 | -58.1 % | 0.70 |
CEO Esa Korkeela’s comment
“During the third quarter of 2021, our net sales were 76.0 (68.2) million euro. Our net sales grew 11.4 percent to the comparison period.
Our adjusted operating result (EBIT) for July-September before items affecting comparability was 3.1 (2.6) million euro, which is 4.1 (3.9) percent of our net sales. Operationally the third quarter advanced as expected and our projects largely progressed as planned. Our operating result (EBIT) for the third quarter was 3.1 (2.5) million euro, which is 4.1 (3.6) percent of our net sales. All our business areas improved their profitability in July-September from the comparison period. Construction material price increases and material availability did not have a significant impact on our business during January-September. The impact was limited due to the labour-intensive nature of renovation, the timing of procurement in our ongoing projects, and the contract models in our project portfolio.
During July-September, our order intake was 40.0 (31.0) million euro, which means an increase of 28.9 percent from the comparison period. Our order intake in January-September increased by 30.2 percent from the comparison period and amounted to 208.3 (160.0) million euro. Our order backlog at the end of the reporting period increased by 15.0 percent from the comparison period and was 217.9 (189.4) million euro. The good order intake during the ongoing year, the strengthened order backlog, and the growth in net sales are good indications of how well our customers have received our new strategy focusing on customer orientation, sustainability, and the expansion into the new construction services.
During the reporting period, we completed our first acquisition in accordance with our new strategy by acquiring the share capital of RA-Urakointi Oy, which operates in Uusimaa. RA-Urakointi Oy is a company specialising in the repair of apartments and row houses. Its service offering includes facade repairs and seams as well as various microbial and bathroom repairs. Our strategic goal has been to meet the increased demand in the housing company market. The acquisition will strengthen our expertise, especially in special contracting and in meeting the renovation needs of row houses.
One of our strategic goals is controlled and profitable growth in attractive building technology segments. To accelerate the implementation of the strategy and increase our efforts, especially in the growth of our service business in building technology, we appointed Heikki Pesu as Business Area Director of Building Technology and as a member of Consti Oyj's Management Team during the reporting period.
The market environment for construction and building technology services remained at an adequate level during the third quarter. The coronavirus pandemic (COVID-19) did not have a significant impact on our ability to carry out our projects during the reporting period. The pandemic continues to have a negative effect on the demand for renovation and modification work in commercial premises, but the market is gradually recovering. On the other hand, the rapid rise in construction costs and problems with the availability of construction materials have increased uncertainty in the market environment. Although the rise in input prices is expected to slow down towards the end of the year, construction cost development and availability problems may have a negative impact on the ability to advance ongoing projects according to plans and on the demand situation.
Our strong order backlog puts us in a good position to continue positive solid development in the last quarter of the year as well.”
Operating environment
Construction market 2021-22
In its October report, the Confederation of Finnish Construction Industries RT estimates that the total volume of construction in 2021 will grow by about 1.5 percent from the previous year. According to RT's forecast, the renovation market is expected to grow by about one percent in 2021. RT predicts that in 2022, the total construction volume will grow to about 2.5% and the renovation market will grow to 2.0%.
A construction trends group led by the Ministry of Finance assessed the development of construction trends in its Construction 2021–2022 report, which was published in September. The group estimates that construction will grow by 0–2% this year. The report predicts that the busiest phase of construction will take place in the second half of 2021 and the first half of 2022. According to the construction trends group’s forecast, construction output will grow by 2–4 percent in 2022.
The group estimates that renovation will grow approximately 1.5% in 2021 and the growth is expected to pick up to two percent in 2022. In 2021 and 2022 renovation growth is expected in both residential and commercial buildings, due to improved health safety brought about by vaccination coverage, the positive development of the economy, low interest rates, the repair needs generated by the lively housing and leisure housing trade, and pent-up repair needs.
According to the Confederation of Finnish Construction Industries RT, the rapid rise in construction costs and the challenges related to the availability of materials and personnel are risk factors in the construction industry’s economic outlook.
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.
According to a renovation market analysis, which was conducted for Rakennuslehti magazine by Forecon, the volume of renovation construction tripled in Finland between 1980 and 2020. Forecon estimates that repairs increased by approximately 3 billion euro in the 2010s and will continue to grow by approximately 2 billion euro in the 2020s. Growth is expected to slow down as the industry grows, but renovations have better growth prospects than new construction does when looking at the entire 2020s.
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. Forecon estimates that in the 21st century, the growth of building technology renovations has been about 4–5 percent per year, while renovation growth has been about 1–2 percent per year on average. In recent years, building technology has accounted for almost half of all renovations in housing companies and about 40 percent of the total renovation of the housing stock.
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 and regional differences in growth are expected to strengthen even more in future.
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 the 2021
The volume of construction is estimated to grow in 2021 by about 1.5 percent from the previous year. The busiest phase of construction is estimated to take place in the second half of 2021 and the first half of 2022. The renovation market is estimated to grow by about one percent in 2021 and the growth is expected to rise to 2.0 percent in 2022.
Uncertainty in the operating environment towards the end of the year is intensified in particular by the rising costs of construction materials and possible availability problems. The increase in the price level and availability of construction materials did not have a significant impact on Consti's business in January-September. The impact was limited due to the labour-intensive nature of renovation, the timing of procurement in ongoing projects, and the contract models in the project portfolio. In the fourth quarter, the impact is estimated to be somewhat higher for ongoing projects where a rapid increase in material costs has not been sufficiently considered at the tendering phase. In addition, the coronavirus pandemic continues to cause uncertainty in the operating environment.
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 27 October 2021, at 10:00 a.m. (EET). The meeting will be hosted by CEO Esa Korkeela and CFO Joni Sorsanen.
Financial communication in 2022
Consti Plc’s Financial Statements for 2021 will be published 4 February 2022.
The electronic version of the annual report, which includes the full financial statements for 2021, will be published in week 11/2022.
Consti Plc’s Annual General Meeting for 2022 is scheduled to take place on Tuesday, 5 April 2022 in Helsinki.
Consti Plc shall publish three interim reports during 2022:
- Interim report 1-3/2022 published 29 April 2022
- Half-year financial report 1-6/2022 published 22 July 2022
- Interim report 1-9/2022 published 27 October 2022
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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