2.2.2024 08:30:02 EET | Consti Oyj | Financial Statement Release
CONSTI PLC FINANCIAL STATEMENTS BULLETIN 2 FEBRUARY 2024, at 8.30 a.m.
Consti Plc Financial Statements Bulletin for January - December 2023
GOOD FINANCIAL YEAR IN A CHALLENGING MARKET
10-12/2023 highlights (comparison figures in parenthesis 10-12/2022):
- Net sales EUR 86.1 (93.3) million; change -7.7 %
- EBITDA EUR 4.9 (5.7) million and EBITDA margin 5.7 % (6.1 %)
- Operating result (EBIT) EUR 3.9 (4.8) million and EBIT margin 4.5 % (5.2 %)
- Order backlog EUR 270.0 (246.7) million; growth 9.5 %
- Order intake EUR 91.6 (109.1) million; change -16.0%
- Free cash flow EUR 2.8 (10.4) million
- Earnings per share EUR 0.37 (0.49)
1-12/2023 highlights (comparison figures in parenthesis 1-12/2022):
- Net sales EUR 320.6 (305.2) million; growth 5.0 %
- EBITDA EUR 15.9 (14.9) million and EBITDA margin 5.0 % (4.9 %)
- Operating result (EBIT) EUR 12.3 (11.4) million and EBIT margin 3.9 % (3.7 %)
- Order intake EUR 280.0 (283.7) million; change -1.3%
- Free cash flow EUR 13.1 (18.0) million
- Earnings per share EUR 1.17 (1.10)
- The Board of Directors proposes a dividend of EUR 0.70 per share. The Board proposes that the dividend be paid in two instalments. The first instalment of EUR 0.40 per share be paid in April 2024 and the second instalment of EUR 0.30 per share be paid in October 2024.
Guidance on the Group outlook for 2024:
Consti estimates that its operating result for 2024 will be in the range of EUR 9-12 million.
KEY FIGURES (EUR 1,000) | 10-12/ | 10-12/ | Change % | 1-12/ | 1-12/ | Change % |
Net sales | 86,060 | 93,264 | -7.7 % | 320,607 | 305,217 | 5.0 % |
EBITDA | 4,891 | 5,674 | -13.8 % | 15,940 | 14,927 | 6.8 % |
EBITDA margin, % | 5.7 % | 6.1 % | 5.0 % | 4.9 % | ||
Operating result (EBIT) | 3,908 | 4,827 | -19.0 % | 12,345 | 11,428 | 8.0 % |
Operating result (EBIT) margin, % | 4.5 % | 5.2 % | 3.9 % | 3.7 % | ||
Profit/loss for the period | 2,879 | 3,739 | -23.0 % | 9,014 | 8,491 | 6.2 % |
Order backlog | 270,021 | 246,650 | 9.5 % | |||
Free cash flow | 2,835 | 10,413 | -72.8 % | 13,104 | 18,000 | -27.2 % |
Cash conversion, % | 58.0 % | 183.5 % | 82.2 % | 120.6 % | ||
Net interest-bearing debt | -934 | 3,871 | ||||
Gearing, % | -2.3 % | 10.7 % | ||||
Return on investment, ROI % | 20.8 % | 18.3 % | ||||
Number of personnel at period end | 1,008 | 975 | 3.4 % | |||
Earnings per share, undiluted (EUR) | 0.37 | 0.49 | -24.5 % | 1.17 | 1.10 | 6.4 % |
CEO Esa Korkeela's comment
"In 2023, the total market for housebuilding is estimated to have contracted by approximately 11 percent from the previous year. Although renovation is significantly less sensitive to economic fluctuations than new construction, renovation growth also halted.
Despite the market conditions, we successfully capitalised on attractive growth opportunities during the fiscal year. Our full-year net sales grew by 5.0 percent, reaching EUR 320.6 (305.2) million. Our actions to improve the profitability of our business continued, resulting in a full-year operating result of EUR 12.3 (11.4) million, representing 3.9 (3.7) percent of net sales. Measured in euros, our operating profit was the highest in our history.
Our net sales for October-December decreased by 7.7 per cent and were EUR 86.1 (93.3) million. Among our business areas, Public Sector was the only one able to increase its net sales in the fourth quarter, supported by ongoing school projects. Net sales in the fourth quarter were negatively impacted by both intra-year fluctuations in net sales, and low order intake in the third quarter.
Our October-December operating result was 3.9 (4.8) million euros, representing 4.5 (5.2) percent of net sales. Operationally, the final quarter of the year proceeded as expected, and our projects predominantly progressed according to plan. The decline in operating result was mainly due to a decrease in volume and partly due to changes in the relative net sales shares of our business areas compared to the previous year.
During the year, our order intake amounted to EUR 280.0 (283.7) million, which is almost at last year's level. Our order intake for October-December totalled EUR 91.6 (109.1) million, which means a decrease of 16.0 percent year-on-year. Order intake during the review period was affected by intensified competition, our disciplined tendering activities, and reduced demand, particularly in the private real estate investment company market. Our order intake received a positive boost thanks to a significant order valued at approximately EUR 26 million for our Building Technology business area. This order pertained to the northern part of the main building of Laakso Joint Hospital. As a result, our order backlog for the Building Technology business area exceeded EUR one hundred million by the end of the review period. As a whole, our order backlog increased by 9.5 percent and was EUR 270.0 (246.7) million.
Towards the end of the review period, we started work to renew our strategy for the strategy period 2024-2027. In accordance with our new strategy, we will grow in construction and building technology by responding to the demand created by the ageing building stock, urbanisation, and climate change. Our business area specific strategy emphasises taking advantage of attractive growth opportunities in both construction and building technology. We will also continue our actions to increase customer value, improve production efficiency, and develop our personnel and leadership. We have also updated our sustainability themes and mapped out our most important development targets on the way to becoming a responsible forerunner in our field. By the end of the strategy period, we aim to have four equally strong business areas, with total net sales amounting to approximately EUR 400 million. Our profitability target remains unchanged, which means an operating profit margin of five percent based on the current market outlook.
Economic uncertainty continues to pose challenges to the demand outlook for construction and building technology. Visibility for the financial year 2024 is limited, and we do not anticipate significant improvements in the first half of the year. Supported by a strong order backlog, we aim to continue our solid performance also during 2024 and focus on implementing our new strategy and advancing the impact of our sustainability work.
I would like to thank all our customers and partners for the good cooperation, and all Consti employees for their committed and determined contribution to achieving improved occupational safety and strong financial results."
Strategy 2024-2027
Consti's strategy update for the period 2024-2027 was launched in the fourth quarter of 2023. The Group strategy was formed by first drawing up strategies for Consti's four business areas, in which the broad participation of the business areas was central. Finally, the Group strategy was compiled on the basis of finalised business area strategies.
Consti's vision remains to be "Our customer's number one partner and expert in multiple types of construction". Consti's mission is to improve the value of Finnish buildings and promote climate change mitigation with outstanding expertise in construction and building technology. The updated strategy for 2024-2027 is based on achieving growth in construction and building technology by responding to the demand created by the ageing building stock, urbanisation, and climate change.
Consti seeks faster growth than the market in both the construction and building technology markets. By the end of the strategy period, the aim is to have four equally strong business areas with total net sales amounting to approximately EUR 400 million. The profitability target remains unchanged, which means an operating profit margin of five percent based on the current market outlook.
In both construction and building technology, growth is based on the development of current business operations. In the construction business areas, Consti aims to strengthen and expand its special expertise in, for example, groundworks and facade repairs. Growth opportunities are also seen among industrial customers. In building technology, the aim is to increase building technology contracting as well as comprehensive energy solutions. Building technology was strengthened already at the end of 2023 with the acquisition of Sähkö-Huhta Oy, which operates in the Helsinki metropolitan area, and correspondingly by divesting the property-related relining business.
The goal is to further utilise Consti's expertise more extensively throughout the construction value chain, from project development to maintenance. Changes in construction legislation and tightening energy efficiency requirements increase the developer's responsibilities, and this is expected to emphasise the role of the main contractor, especially in project development and planning. Consti aims to strengthen its position also in the planning phase of building technology projects.
In developing sustainability, Consti focuses on promoting occupational safety and well-being at work and mitigating climate change. Climate change mitigation is increasingly becoming the starting point for renovation, either through improving energy efficiency or as an alternative to demolition. According to studies, repairing and improving a building produces a smaller carbon footprint in the long term than replacing an existing building with a new building of similar size.
Alongside energy renovations, Consti is developing its services to even better accommodate requirements brought forth by climate change, for example requirements regarding maintenance and the outer envelope of buildings. Consti's goal is to be a forerunner in sustainability.
Consti has defined the focus areas of its strategy, which are:
- Growth in construction
- Growth in building technology and technical real estate services
- Customers and partnerships
- Operational efficiency
- Personnel and leadership
- Sustainability
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
In 2023, the total market for housebuilding is estimated to have contracted by approximately 11 percent compared to the previous year. Although renovation is considerably less sensitive to economic fluctuations than new construction, renovation growth has also halted.
The demand for renovation has been steady in Finland for a long time, and the market value of renovation is almost the same as that of new construction. In 2023, the value of residential building renovation remained on level with the previous year, i.e. around EUR 9 billion. The value of other renovation was still around EUR 6 billion.
Nearly two-thirds of renovation involve residential properties, with over half of them being professional renovation. In residential renovation, there is a notable emphasis on building technology, constituting around 40 percent of the total value of renovation.
The renovation market encompasses not only technical repairs related to building age but also significant building purpose modifications, for example, converting old, underutilised office properties into hotels or apartments, or improving usability by renewing layouts.
Housebuilding experienced a significant contraction in 2023. In its December economic outlook, Euroconstruct revised its earlier estimates from summer 2023 significantly downward, stating that new residential construction decreased by 37 percent instead of the initially projected 25 percent. Euroconstruct also adjusted renovation growth estimates, now projecting a decrease of 0.8 percent, compared to the 0.8 percent growth estimated in June.
In its September reporting of market conditions, the Confederation of Finnish Construction Industries RT estimated the market development for renovation to be -4 per cent and that of new housing construction -38 percent in 2023.
The sharp decline in housebuilding is primarily a consequence of the slowdown in residential construction following an exceptionally intense period of housing production. The rise in interest rates has particularly dampened demand for completed homes.
Non-residential new construction decreased by only 2.6 percent according to Euroconstruct. Commercial space construction declined significantly, but construction of, for example, industrial and warehouse spaces, as well as green investments, increased. The demand for warehouse and logistics facilities is driven by e-commerce. Office construction continued to grow strongly in the Helsinki metropolitan area, despite relatively low office occupancy rates. In public construction, school construction has continued to grow steadily, and several new hospital projects are underway. The most significant hospital project nationally was the start of Laakso Joint Hospital.
According to Euroconstruct's estimate, renovation of residential buildings contracted by around 1.3 percent. This decline is attributed to the sharp increase in living expenses, such as property maintenance costs and rising interest rates, which began affecting the demand for residential renovations already in 2022. It has been estimated that in 2023, renovation of non-residential buildings remained almost on level with the previous year. However, renovation decreased in absolute numbers, because according to Statistics Finland, renovation prices rose by 12 per cent in spring 2023.
Approximately one-fifth of all renovation is maintenance and upkeep, with a higher-than-average share in non-residential properties.
Renovation market is expected to remain stable in 2024. According to Euroconstruct's forecast, the renovation market is expected to remain at the 2023 level in 2024. RT predicts a decline of about one percent in renovation. Euroconstruct anticipates a slight increase in the value of residential renovation, accompanied by a slight decrease in the value of other renovation.
The construction of new residential buildings is expected to decrease by 9-15 per cent in 2024. Non-residential construction is forecasted to grow by 3-7 percent. Residential construction is expected to return to normal levels in 2025-2026.
Both new construction and renovation prospects are hindered by the rise in construction costs and interest rates, with additional cost increases in renovation due to higher property maintenance expenses. Both housing companies and institutional landlords have postponed significant renovations in the past couple of years.
In needs-based renovation, facade repairs and pipeline renovation are the largest projects for residential buildings. The number and value of pipeline renovation have been growing faster than other renovation for a long time, and this growth is expected to continue for a few more years. The growth is sustained by the large number of residential buildings that have reached the age when pipeline renovation are required. For a long time, apartment buildings built in the 1960s had the most building technology renovation. Now, properties built in the 1970s, which have the largest number of dwellings in terms of floor area, and partly properties from the 1980s, which are the most numerous due to e.g., the large number of terraced house construction, have reached renovation age. In addition to addressing technical repair needs, building technology enhancements improve living comfort.
Together with pipeline renovation, the increase in heating costs and the green transition contribute to growth in the building technology market. While energy efficiency has so far been primarily addressed alongside other renovation, the rising cost of energy and carbon neutrality goals have increased interest in separate energy renovation.
Besides building technology renovation, many housing companies have a growing need for facade renovation, which have often been neglected due to financial reasons in favour of pipeline renovation. Climate change significantly increases the demand for facade renovation and related maintenance services. The importance of roofs, eaves, cladding, and intact facades grows as winters become wetter, slanting rainfall increases and extreme weather phenomena intensify. The need for facade renovation is also heightened by the large number of residential buildings from the 1970s and 1980s reaching the renovation age.
In addition to renovation related to building technology and environmental goals, the need for renovation in commercial and office premises is increased by changes in space needs.
The need for renovation is sustained by both the aging building stock and global megatrends such as urbanisation, an aging population, changes in working habits and retail, and sustainability goals. Renovation play a crucial role in reducing the carbon footprint of the built environment, as the number of new buildings increases by only about one percent annually.
In Finland, both new construction and renovation are still strongly concentrated in growth centres.
Outlook for 2024
According to forecasts, the renovation market is likely to remain unchanged in 2024. Euroconstruct estimates that the renovation market will remain at the 2023 level in 2024. RT expects a decline of about one percent in renovation. Euroconstruct predicts a slight increase in the value of residential building renovation and, correspondingly that the value of other renovation will decrease slightly.
The construction of new residential buildings is estimated to decrease by 9-15 percent in 2024. Non-residential new construction is predicted to increase by 3-7 percent. Residential construction is expected to return to normal levels in 2025-2026.
Economic uncertainty continues to pose challenges to the demand outlook for construction and building technology. Visibility for the fiscal year 2024 is limited, and significant improvements are not expected in the first half of 2024.
Supported by a strong order backlog, Consti aims to maintain solid performance throughout 2024 while focusing on implementing the new strategy.
Consti estimates that its operating result for 2024 will be in the range of EUR 9-12 million.
Press conference
Microsoft Teams meeting for analysts, portfolio managers and media representatives, will take place 2 February 2024, at 10:00 a.m. (EET). The meeting will be hosted by CEO Esa Korkeela and CFO Joni Sorsanen.
Financial reporting in 2024
Consti will publish its Financial Statements, Board of Directors' Report, Auditors' Report, and Corporate Governance Statement on the company website during week 11/2024.
Consti Plc's Annual General Meeting shall be arranged on Wednesday 3 April 2024 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 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
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 2023, Consti Group's net sales amounted to 321 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
