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Consti Plc Financial Statements Bulletin for January – December 2020

CONSTI PLC FINANCIAL STATEMENTS BULLETIN 5 FEBRUARY 2021, at 8.30 a.m.

Consti Plc Financial Statements Bulletin for January – December 2020

PROFITABILITY CONTINUED TO IMPROVE

10–12/2020 highlights (comparison figures in parenthesis 10–12/2019):
·Net sales EUR 78.1 (78.3) million; change -0.2 %
·EBITDA EUR 3.7 (3.6) million and EBITDA margin 4.8 % (4.7 %)
·Operating profit/loss (EBIT) EUR 3.0 (2.8) million and EBIT margin 3.8 % (3.6 %)
·Order backlog EUR 177.9 (185.8) million; change -4.3 %
·Free cash flow EUR 3.6 (5.1) million
·Earnings per share EUR 0.27 (0.25)

1–12/2020 highlights (comparison figures in parenthesis 1–12/2019):
·Net sales EUR 274.6 (314.8) million; change -12.8 %
·EBITDA EUR 11.4 (8.1) million and EBITDA margin 4.2 % (2.6 %)
·Operating profit/loss (EBIT) EUR 8.2 (4.6) million and EBIT margin 3.0 % (1.5 %)
·Free cash flow EUR 18.3 (4.0) million
·Earnings per share EUR 0.70 (0.30)
·The Board of Directors proposes a dividend of EUR 0.40 per share
                               
Guidance on the Group outlook for 2021:
The Company estimates that its operating result for 2021 will be in the range of EUR 7-11 million. The range for 2021 profit guidance is wide due to the uncertainties related to the Covid-19 pandemic.

KEY FIGURES (EUR 1,000)10-12/
2020
10-12/
2019
Change %1-12/
2020
1-12/
2019
Change %
Net sales78,09878,259-0.2 %274,646314,801-12.8 %
EBITDA3,7293,6432.4 %11,4408,13740.6 %
EBITDA margin, %4.8 %4.7 % 4.2 %2.6 % 
Operating profit/loss (EBIT)2,9542,8224.7 %8,2374,63277.8 %
Operating profit/loss (EBIT) margin, %3.8 %3.6 % 3.0 %1.5 % 
Profit/loss for the period2,1421,9569.5 %5,6752,676112.0 %
Order backlog   177,857185,820-4.3 %
Free cash flow3,6415,111-28.8 %18,3343,977360.9 %
Cash conversion, %97.7 %140.3 % 160.3 %48.9 % 
Net interest-bearing debt   4,73718,880-74.9 %
Gearing, %   14.1 %64.4 % 
Return on investment, ROI %   13.6 %8.9 % 
Number of personnel at period end   927990-6.4 %
Earnings per share, undiluted (EUR)0.270.258.0 %0.700.30133.3 %
 



CEO Esa Korkeela’s comment

"Consti’s solid development continued in the last quarter of the year. Our net sales for October-December were 78.1 (78.3) million euro, ending up nearly at last year’s level. Our net sales for fiscal year 2020 decreased 12.8 percent and were 274.6 (314.8) million euro.

Our operating result for the accounting period improved each quarter towards the end of the year and was clearly better than during the comparison period. Our operating result for October-December was 3.0 (2.8) million euro, which is 3.8 (3.6) percent of the net sales. Our operating result for fiscal year 2020 was 8.2 (4.6) million euro, which is 3.0 (1.5) percent of our net sales. All of our business areas had profitable operating results for fiscal year 2020. Our performance was supported by the implementation of the new organisation structure and change program that was carried out during the previous year, as well as the flexibility of operating costs in relation to changes in volume.

Due to improved profitability and released working capital, our cash flow in the reporting period improved considerably compared to the previous year. In fiscal year 2020 our free cash flow was 18.3 (4.0) million euro. The positive profitability and cash flow development also continued strengthening our balance sheet and liquidity position.

During the year 2020, our order intake was 214.3 million euro, which is a 0.2 percent decline from the comparison period. Our order backlog at the end of the reporting period was 177.9 (185.8) million euro. Despite the good order intake during the fourth quarter 54.3 (46.8) million euro, our order backlog for the end of the year fell short 4.3 percent from the order backlog at the end of the previous year.

Rising uncertainty owing to the coronavirus pandemic (COVID-19) reflected on the development of both our net sales and order intake. As a result of the corona crisis some planned renovation projects were postponed. In the housing company market, projects were moved to the future due to postponed decision-making. In business premises renovation and alteration projects, demand has decreased particularly in those industries that have suffered most from corona. During the year, Consti had approximately 700 ongoing projects. Despite risen uncertainty in our operating environment, our projects predominantly advanced as planned, and we were able to ensure that work progressed at our work sites without interruptions during the reporting period.

At the end of the reporting period, we started work to renew our strategy. Our new strategy for 2021-2023 is founded on utilising the full potential of our customer focused organisation structure. Our vision is to be "Our customer’s number one partner and expert in multiple types of construction". Our strategy is drawn up according to business areas. It emphasises the utilisation of attractive growth opportunities in our existing businesses and increasing the value we create for our customers. In order to answer customer needs more comprehensively, we will also offer selected new construction services in the future. We will continue actions to develop production efficiency, our personnel and management. Corporate social responsibility and sustainable development will rise to a key part in our strategy. We have updated our corporate social responsibility themes and mapped the most important development areas on our journey to become our industry’s responsible frontrunner.

The coronavirus pandemic continues to cause uncertainty to the short-term demand outlook of construction and building technology. In 2021, we will focus on ensuring our performance and implementing our new strategy. The visibility for fiscal year 2021 is limited, but we aim to continue solid performance in 2021 as well."

Strategy 2021-2023

Consti’s strategy update for 2021-2023 was commenced in the last quarter of 2020. Using scenario planning, strategies were first drawn up for Consti’s four business areas. The broad-scale partaking of business areas was central to this work phase. The group-level strategy was then comprised based on these business area strategies.

The new strategy for 2021-2023 is based on utilising the full potential of Consti’s customer focused organisation structure. Consti’s vision is to be "Our customer’s number one partner and expert in multiple types of construction". To realise its vision and goals, Consti has defined strategic focus areas, which are:

  • Growth in current businesses: controlled and profitable growth in attractive renovation and building technology segments
  • New businesses: comprehensively answering customer needs by growing in attractive new construction projects
  • Improving relative profitability by expanding value created for customers and the active management of the business portfolio
  • Improving production efficiency: Consti’s goal is to have the industry’s most efficient production and a steady level of performance in project deliveries
  • Personnel and management: supporting profitable growth by investing in the implementation of the Consti Way, expanding competence, adding diversity, and adopting LEAN principles
  • Corporate social responsibility and sustainable development as key themes of the strategy: concentrating on updated responsibility themes, which are environmentally friendly business, work safety and well-being at work, supply chain and customer satisfaction

The company’s long-term financial goals remain unchanged:

  • Growth: net sales growing faster than the market
  • Profitability: EBIT margin exceeding 5 percent
  • Free cash flow: Cash conversion ratio exceeding 90 percent
  • Balance sheet structure: Net debt to adjusted EBITDA ratio of less than 2.5x
  • The Company’s aim is to distribute as dividends at least 50 percent of the Company’s annual net profit

Operating environment

Steady growth is expected to continue in renovations. Although the corona pandemic slowed down renovation growth in 2020, the growth expectations for upcoming years remain positive.

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. In 2020, the renovation market grew about 0.5 percent. It is estimated that the new construction market simultaneously decreased as much as five percent. Renovations’ share of all construction was approximately 47 percent in the past year.

Corona postponed decision making in housing companies. The renovation market is need-driven, and the general economic situation has a smaller impact on renovations and building technology services than it has on new construction. In 2020, however, the corona pandemic had a greater impact on renovations than new construction, especially because part of the larger housing companies postponed decision making regarding renovation projects.

Estimations indicate that the demand for business premise renovations has also decreased owing to corona. The predictability of business premise renovation needs after the pandemic has also weakened, due to uncertainty regarding changes in business premise needs. In other premises, renovations are expected to start growing again already in 2021.

At worksites, pandemic restrictions have somewhat affected the mobility of foreign workforce and increased the need for actions to ensure the safety of both personnel and people using the premises. The safety of premise users is especially emphasised in renovations where the buildings are fully or partly in customer use throughout the renovation.

In new construction, the corona pandemic has mainly postponed the start of office and hotel construction projects. The Confederation of Finnish Construction Industries RT estimates that other reasons led to the new construction market decreasing about five percent, while Euroconstruct estimates that the decline was approximately half a percent. The market shift was principally due to the decrease of residential construction, but there was also a decline in the start of new public service facility construction projects, as well as commercial and office construction projects.

The Confederation of Finnish Construction Industries RT estimates that the entire construction market declined a total of 1.1 percent in 2020. RT’s assessment of the development of construction in 2020 was divided, with the decline in new construction of residential buildings being 8.0 percent, and business premises 4.0 percent, while building renovation growth was estimated to be 0.5 percent and civil engineering works 5.0 percent from the previous year.

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. They have made up nearly half of all housing company renovations in recent years. About 70 percent of building technology renovations are pipeline renovations. 

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.

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.

The Confederation of Finnish Construction Industries RT and Euroconstruct estimate that renovation markets will grow about one percent in 2021. Euroconstruct estimates that the annual renovation growth will stay at approximately 1.5 percent in 2022 and 2023. It estimates that the whole market for residential construction will decline -4.4 percent in 2021, and according to both the Confederation of Finnish Construction Industries RT and Euroconstruct, the decline in residential new construction will be as much as -12 percent in 2021.

Outlook for 2021

The coronavirus pandemic continues to cause uncertainty to Consti’s operating environment. Although market research institutes expect the renovation market to grow in 2021, new waves of the pandemic and lockdowns remain possible. The most significant short-term impacts of the corona crisis have to do with both the company’s ability to carry out existing projects and also short-term demand outlook. Uncertainty pertaining to handling existing projects relate to workforce availability, possible illnesses, material availability and official regulations. The short-term demand outlook is still uncertain due to some projects currently in the negotiation stage that may possibly be postponed, as well as delayed decision making. In 2021 Consti will concentrate on ensuring the performance of its business and implementing its new strategy. The company estimates that it has good opportunities for continuing solid performance in 2021 as well.

The Company estimates that its operating result for 2021 will be in the range of EUR 7-11 million. The range for 2021 profit guidance is wide due to the uncertainties related to the Covid-19 pandemic.

Press conference

Microsoft Teams meeting for analysts, portfolio managers and media representatives, will take place 5 February 2021, at 10:00 a.m. (EET). The meeting will be hosted by CEO Esa Korkeela and CFO Joni Sorsanen.

Financial reporting in 2021

Consti will publish its Financial Statements, Board of Directors’ Report, Auditors’ Report, and Corporate Governance Statement on the company website during week 11/2021

Consti Plc’s Annual General Meeting shall be arranged on Wednesday 7 April 2021 in Helsinki. Invitation to the Annual General Meeting will be published later as a separate Stock Exchange release.

Consti Plc shall publish three interim reports during 2021:

  • Interim report 1-3/2021 published 30 April 2021
  • Half-year financial report 1-6/2021 published 23 July 2021
  • Interim report 1-9/2021 published 27 October 2021

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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