Consti Plc Interim Report for January – September 2023
CONSTI PLC INTERIM REPORT 27 OCTOBER 2023, at 8.30 a.m.
Consti Plc Interim Report for January – September 2023
NET SALES GREW AND PROFITABILITY IMPROVED
7–9/2023 highlights (comparison figures in parenthesis 7–9/2022):
- Net sales EUR 89.9 (79.0) million; growth 13.8%
- EBITDA EUR 5.7 (4.2) million and EBITDA margin 6.3% (5.3%)
- Operating result (EBIT) EUR 4.8 (3.3) million and EBIT margin 5.3% (4.2%)
- Order backlog EUR 247.3 (210.5) million; growth 17.5 %
- Order intake EUR 23.2 (38.4) million; change -39.4%
- Free cash flow EUR 7.1 (5.8) million
- Earnings per share EUR 0.47 (0.32)
1–9/2023 highlights (comparison figures in parenthesis 1–9/2022):
- Net sales EUR 234.5 (212.0) million; growth 10.7%
- EBITDA EUR 11.0 (9.3) million and EBITDA margin 4.7% (4.4%)
- Operating result (EBIT) EUR 8.4 (6.6) million and EBIT margin 3.6% (3.1%)
- Order intake EUR 188.4 (174.6) million; growth 7.9%
- Free cash flow EUR 10.3 (7.6) million
- Earnings per share EUR 0.79 (0.62)
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) | 7-9/ | 7-9/ | Change % | 1-9/ | 1-9/ | Change % | 1-12/ |
Net sales | 89,872 | 79,005 | 13.8 % | 234,547 | 211,953 | 10.7 % | 305,217 |
EBITDA | 5,705 | 4,167 | 36.9 % | 11,049 | 9,253 | 19.4 % | 14,927 |
EBITDA margin, % | 6.3 % | 5.3 % |
| 4.7 % | 4.4 % |
| 4.9 % |
Operating result (EBIT) | 4,760 | 3,330 | 42.9 % | 8,437 | 6,601 | 27.8 % | 11,428 |
Operating result (EBIT) margin, % | 5.3 % | 4.2 % |
| 3.6 % | 3.1 % |
| 3.7 % |
Profit/loss for the period | 3,627 | 2,488 | 45.8 % | 6,135 | 4,753 | 29.1 % | 8,491 |
Order backlog |
|
|
| 247,287 | 210,499 | 17.5 % | 246,650 |
Free cash flow | 7,143 | 5,839 | 22.3 % | 10,269 | 7,587 | 35.4 % | 18,000 |
Cash conversion, % | 125.2 % | 140.1 % |
| 92.9 % | 82.0 % |
| 120.6 % |
Net interest-bearing debt |
|
|
| -2,703 | 12,844 |
| 3,871 |
Gearing, % |
|
|
| -7.2 % | 39.7 % |
| 10.7 % |
Return on investment, ROI % |
|
|
| 23.1 % | 15.7 % |
| 18.3 % |
Number of personnel at period end |
|
|
| 973 | 988 | -1.5 % | 975 |
Earnings per share, undiluted (EUR) | 0.47 | 0.32 | 46.9 % | 0.79 | 0.62 | 27.4 % | 1.10 |
CEO Esa Korkeela’s comment
"Consti’s business operations progressed favourably during the third quarter of the year. Our net sales for the third quarter increased by 13.8 percent and amounted to EUR 89.9 (79.0) million. Our net sales for January-September grew by 10.7 percent, amounting to EUR 234.5 (212.0) million.
Our operating result for July-September was EUR 4.8 (3.3) million, representing 5.3 (4.2) percent of our net sales. The third quarter proceeded as expected, and our projects predominantly progressed according to plan. The gain recognised from the sale of our property-related relining business at the end of the reporting period supported our profitability in the third quarter. Our operating result for January-September was EUR 8.4 (6.6) million, which is 3.6 (3.1) percent of our net sales.
As a result of improved profitability and released working capital, our free cash flow for July-September improved compared to the previous year, reaching EUR 7.1 (5.8) million. The positive cash flow development also strengthened our balance sheet and liquidity position during the third quarter. At the end of the reporting period, our balance sheet was net debt-free. This gives us good opportunities to develop our business and strengthen our position as our customers’ number one partner.
During July-September, our order intake was EUR 23.2 (38.4) million, which means a decrease of 39.4 percent compared to the comparison period. The seasonal nature of our business typically results in lower order intake in the third quarter. In addition, our order intake during the reporting period was affected by intensified competition, our disciplined tendering activities, and reduced demand, particularly in the private real estate investment company market. Despite the decrease in order intake, our order backlog at the end of the reporting period was EUR 247.3 (210.5) million, which is 17.5 percent higher than in the comparison period.
Throughout the reporting period, we continued to implement our strategy and take measures to ensure the performance of our business in the prevailing operating environment. Our efforts were primarily focused on tendering, enhancing the efficiency of our production, and achieving an even more consistent level of performance in our project deliveries. In the reporting period, we successfully executed the sale of our property-related relining business, which was a part of our Building Technology business area. The annual net sales of the divested business were approximately EUR 5.4 million, and it employed 45 people. This transaction was in line with our strategy, as our goal is to increase the relative share of our building technology real estate services within our overall operations. The change in ownership of the property-related relining business allows us to channel our investments into our chosen building technology segments.
Based on our current market outlook, we expect the demand for renovation and building technology services to remain at a reasonable level in the areas relevant to Consti in 2023. According to forecasts, the renovation sector is expected to decline by approximately 4 percent in 2023, while new construction is expected to decline by approximately 19 percent in 2023. The weakened prospects for new construction will intensify competition for renovation projects. Additionally, rising financing costs and significant inflation are postponing some construction projects in the short term. In January-September 2023, the readiness for renovation investments in housing companies and the public sector has remained at a reasonable level, but private real estate investment companies have been cautious about launching new construction projects. In the longer term, renovation growth will be supported not only by the age of Finland’s building stock and global megatrends, but also by 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 improved performance put us in a good position to continue our solid development in the final quarter of the year.”
Operating environment
Construction market 2023-24
In its September reporting of market conditions, the Confederation of Finnish Construction Industries RT estimates that the total volume of construction is expected to contract by approximately 10 percent in 2023 from the previous year. According to RT’s forecast, in 2023, the renovation market is projected to contract by around 4 percent, and new housing construction by about 38 percent. In 2024, the total volume of construction is anticipated to decrease by approximately 2 percent. In 2024, the renovation market is expected to decrease by 1 percent, and new housing construction is forecasted to decrease by around 9 percent.
The outlook for renovation is weakened by rapidly rising construction costs and interest rates, mirroring the trends in new construction. However, renovation is needs-oriented and less cyclical than new construction. The long-term growth of renovation is supported by factors such as the age of the building stock, global megatrends, and sustainable development goals, such as the requirements of the EU’s Energy Efficiency Directive.
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. The accelerated increase in costs and the growing challenges in financing are contributing to a slight decline in the generally steady growth of renovation in 2023. However, the needs-oriented nature of renovation and its lower sensitivity to economic cycles than new construction create good conditions for the renovation sector to return to its steady growth path.
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.
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 the 2023
In 2023, the volume of housing construction in Finland is anticipated to contract by approximately 12 percent compared to the previous year. The renovation market is expected to decrease by about 4 percent, and new construction by approximately 19 percent. According to the current market outlook, demand for renovation and building technology services is expected to remain at a reasonable level in Consti’s relevant market areas in 2023. In January–September 2023, the readiness of housing companies and the public sector for renovation investments has remained at a reasonable level, but private real estate investment companies have been cautious about launching new construction projects. The outlook for renovation is weakened by rapidly rising construction costs and interest rates, mirroring the trends in new construction. The weakened prospects for new construction will intensify competition for renovation projects. However, renovation is needs-oriented and less cyclical than new construction.
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 during the rest of the year 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 27 October 2023, at 10:00 a.m. (EET). The meeting will be hosted by CEO Esa Korkeela and CFO Joni Sorsanen.
Financial communication in 2024
Consti Plc’s Financial Statements for 2023 will be published 2 February 2024.
The electronic version of the annual report, which includes the full financial statements for 2023, will be published in week 11/2024.
Consti Plc’s Annual General Meeting for 2024 is scheduled to take place on Wednesday, 3 April 2024 in Helsinki.
Consti Plc shall publish three interim reports during 2024:
- Interim report 1-3/2024 published 25 April 2024
- Half-year financial report 1-6/2024 published 19 July 2024
- Interim report 1-9/2024 published 25 October 2024
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