Consti Plc Half-Year Financial Report for January – June 2023
CONSTI PLC HALF-YEAR FINANCIAL REPORT 21 JULY 2023, at 8.30 a.m.
Consti Plc Half-Year Financial Report for January – June 2023
SOLID DEVELOPMENT CONTINUED, ORDER BACKLOG INCREASING
4–6/2023 highlights (comparison figures in parenthesis 4–6/2022):
- Net sales EUR 75.7 (73.1) million; growth 3.6%
- EBITDA EUR 3.9 (3.7) million and EBITDA margin 5.1% (5.1%)
- Operating result (EBIT) EUR 3.0 (2.9) million and EBIT margin 4.0% (4.0%)
- Order backlog EUR 297.9 (240.8) million; growth 23.7 %
- Order intake EUR 106.5 (98.7) million; growth 7.9%
- Free cash flow EUR 4.1 (2.6) million
- Earnings per share EUR 0.29 (0.28)
1–6/2023 highlights (comparison figures in parenthesis 1–6/2022):
- Net sales EUR 144.7 (132.9) million; growth 8.8%
- EBITDA EUR 5.3 (5.1) million and EBITDA margin 3.7% (3.8%)
- Operating result (EBIT) EUR 3.7 (3.3) million and EBIT margin 2.5% (2.5%)
- Order intake EUR 165.2 (136.3) million; growth 21.2%
- Free cash flow EUR 3.1 (1.7) million
- Earnings per share EUR 0.33 (0.29)
Guidance on the Group outlook for 2023:
The Company estimates that its operating result for 2023 will be in the range of EUR 9.5-13.5 million.
KEY FIGURES (EUR 1,000) | 4-6/ | 4-6/ | Change % | 1-6/ | 1-6/ | Change % | 1-12/ |
Net sales | 75,747 | 73,118 | 3.6 % | 144,675 | 132,947 | 8.8 % | 305,217 |
EBITDA | 3,871 | 3,729 | 3.8 % | 5,344 | 5,086 | 5.1 % | 14,927 |
EBITDA margin, % | 5.1 % | 5.1 % |
| 3.7 % | 3.8 % |
| 4.9 % |
Operating result (EBIT) | 3,020 | 2,912 | 3.7 % | 3,677 | 3,271 | 12.4 % | 11,428 |
Operating result (EBIT) margin, % | 4.0 % | 4.0 % |
| 2.5 % | 2.5 % |
| 3.7 % |
Profit/loss for the period | 2,204 | 2,154 | 2.3 % | 2,508 | 2,265 | 10.7 % | 8,491 |
Order backlog |
|
|
| 297,870 | 240,756 | 23.7 % | 246,650 |
Free cash flow | 4,095 | 2,577 | 58.9 % | 3,125 | 1,747 | 78.8 % | 18,000 |
Cash conversion, % | 105.8 % | 69.1 % |
| 58.5 % | 34.4 % |
| 120.6 % |
Net interest-bearing debt |
|
|
| 6,949 | 17,880 | -61.1 % | 3,871 |
Gearing, % |
|
|
| 20.6 % | 60.0 % |
| 10.7 % |
Return on investment, ROI % |
|
|
| 20.9 % | 15.6 % |
| 18.3 % |
Number of personnel at period end |
|
|
| 1,052 | 997 | 5.5 % | 975 |
Earnings per share, undiluted (EUR) | 0.29 | 0.28 | 3.6 % | 0.33 | 0.29 | 13.8 % | 1.10 |
CEO Esa Korkeela’s comment
“Consti continued its solid development in the second quarter of the year. Our net sales in the second quarter increased by 3.6 per cent to EUR 75.7 (73.1) million. Our net sales grew in all business areas engaged in the construction business. The net sales of our Building Technology business area grew in service business but declined in contracting business. In the first half of the year, our net sales increased by 8.8% to EUR 144.7 (132.9) million.
Our operating result for April-June was EUR 3.0 (2.9) million, or 4.0 (4.0) percent of net sales. The second quarter advanced as expected and our projects progressed largely as planned. Our profitability remained stable compared to the comparison period, although cost inflation had a negative impact on our results. Our operating result for the first half of the year was EUR 3.7 (3.3) million, or 2.5 (2.5) percent of net sales.
Due to solid profitability and released working capital, our free cash flow for April-June improved year-on-year and was EUR 4.1 (2.6) million. Thanks to the positive cash flow development, our balance sheet and liquidity positions at the end of the reporting period remained at a good level.
During April-June, our order intake amounted to EUR 106.5 (98.7) million, which represents an increase of 7.9% compared to the comparison period. Our most significant orders in the second quarter were the comprehensive renovation and extension project of the Helsingin Uusi yhteiskoulu school, the large-scale renovation works of the Jumbo-Flamingo shopping centre, and the modernisation project of the GLO Hotel Kluuvi into Hobo Helsinki. The total value of the contracts is approximately 45 million euros. The remainder of our order intake for April-June consists of several smaller projects and is evenly spread across our business areas. Thanks to the strong order intake, our order backlog at the end of the reporting period increased by 23.7 per cent compared to the comparison period and amounted to EUR 297.9 (240.8) million. Our order backlog at the end of the reporting period is at a record high level.
During the reporting period, we continued to implement our strategy and take measures to ensure the performance of our business in the current operating environment. Our actions focused on developing our customers' projects, tender activities, and improving our production efficiency, as well as achieving a more consistent level of performance in our project delivery. We also continued to invest in our personnel. At the beginning of the year, we have hired more talent to support our growth and invested more in expanding the skills of our personnel.
Based on our current market outlook, we expect demand for renovation and building technology services to remain at a reasonable level in 2023. According to forecasts, the renovation market is expected to grow by around 0.8% in 2023. The forecasts reflect the needs-orientated nature of renovation. New construction, on the other hand, is estimated to decline by around 10.7% in 2023. The poor demand outlook for new construction is increasing competition for renovation projects. In addition, rising financing costs and strong inflation will postpone some construction projects in the short term. In early 2023, the willingness of housing companies and the public sector to invest in renovation has remained at a reasonable level, but private real estate investment companies have been cautious in launching new construction projects. In the longer term, the growth of renovation construction is supported by the age of Finland's building stock and global megatrends, as well as sustainable development goals such as the requirements of the EU's Energy Efficiency Directive.
Our strong order backlog, the progress of our strategic projects, and our steadily improving performance put us in a good position to continue our solid development in 2023.”
Operating environment
Construction market 2023
Construction market research institute Euroconstruct estimated in its June 2023 report that the entire market for housebuilding will decline by 5.5% in 2023. According to Euroconstruct's forecast, the new construction market is estimated to decline by around 10.7 percent in 2023. The renovation market on the other hand is estimated to grow by 0.8 percent in 2023. Euroconstruct predicts growth for both residential and non-residential renovation. In residential renovation, professional renovation and energy efficiency renovation are expected to grow but consumer renovations (DIY) are expected to decrease.
The renovation market in general
In recent years, the Finnish house building market has been divided almost equally between new construction and renovation. Renovation has grown relatively steadily for the last 20 years. Growth is projected to remain steady for years to come, as renovation is more need-based and less sensitive to economic cycles than new construction.
Nearly two-thirds of renovation is conducted in residential buildings, and more than half of this volume is estimated to be professional renovation. Just over one third of all renovation is conducted in non-residential buildings.
In the renovation of residential buildings, the emphasis is still on building technology, which accounts for approximately 40 percent of the value of renovation. It has been estimated that building technology renovation will increase more strongly than other renovation also in the next few years. The growth of building technology renovation is maintained by the large number of residential buildings that have reached the age where they require pipeline renovation.
The higher prices of heating and the green transition will also bring growth to the building technology market. Until now, energy efficiency has been improved largely in connection with other renovation, but rapidly rising energy prices have made energy renovation profitable as independent projects as well. Energy efficiency and a building’s ability to withstand increasing extreme weather conditions are improved with building technology and construction solutions such as facade renovation. Renovation plays a central role in reducing the carbon footprint of the built environment, as the number of new buildings is growing by only about one per cent per year.
In addition to building technology renovation, many housing companies have a growing need for facade renovation, which they have postponed due to financial reasons, to make way for pipeline renovation. Approximately one fifth of all renovation projects are maintenance and repair projects. In the building technology market, Consti also operates in all other areas of new construction apart from housing construction.
The age of Finland’s building stock is a primary driver of the need for renovation. Housing construction was at its peak in the 1970s, and the building technology and structures of that time now require thorough renovation. Along with the need for building technology renovation, expectations for living comfort have risen. In addition, the need for renovation in business premises is also driven by changes in space needs.
The rise of the price of financing and strong inflation will postpone some renovation projects in the short term. In early 2023, the willingness of housing companies and the public sector to invest in renovation has remained at a reasonable level, but private real estate investment companies have been cautious in launching new construction projects.
In addition to the age of the building stock, renovation needs are increased by many phenomena named as megatrends, such as urbanisation, the aging of the population, changes in working methods, the growth of e-commerce and climate change. Both new construction and renovation remain heavily concentrated in growth centres.
Outlook for 2023
In 2023, the amount of house construction in Finland is estimated to decrease by approximately 5.5 percent from the previous year. New construction is predicted to decline by approximately 10.7 percent, but it is expected that renovation will continue on a growth path of approximately 0.8 percent in 2023. The current market outlook suggests that the demand for renovation and building technology services will remain at a reasonable level in 2023. The forecasts reflect the need-oriented nature of renovation. Poor demand prospects for new construction will increase competition for renovation projects. Additionally, rising financing costs and strong inflation will postpone some construction projects in the short term. In early 2023, the willingness of housing companies and the public sector to invest in renovation has remained at a reasonable level, but private real estate investment companies have been cautious in launching new construction projects.
Consti's strong order backlog, progress in strategic projects, and its steadily improved performance provide a good foundation for the company to continue its solid development in 2023.
The Company estimates that its operating result for 2023 will be in the range of EUR 9,5-13,5 million.
Press conference
Microsoft Teams meeting for analysts, portfolio managers and media representatives, will take place 21 July 2023, 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 20 July 2023 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 20 July 2023.
Financial communication in 2023
Consti Plc shall publish one more interim report during 2023:
- Interim report 1-9/2023 published 27 October 2023
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
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 2022, Consti Group’s net sales amounted to 305 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