19.7.2024 08:30:03 EEST | Consti Oyj | Half Year financial report
CONSTI PLC HALF-YEAR FINANCIAL REPORT 19 JULY 2024, at 8.30 a.m.
Consti Plc Half-Year Financial Report for January - June 2024
NET SALES GREW, OPERATING RESULT AT PAR WITH PREVIOUS YEAR
4-6/2024 highlights (comparison figures in parenthesis 4-6/2023):
- Net sales EUR 82.9 (75.7) million; growth 9.4%
- EBITDA EUR 4.0 (3.9) million and EBITDA margin 4.8% (5.1%)
- Operating result (EBIT) EUR 3.0 (3.0) million and EBIT margin 3.6% (4.0%)
- Order backlog EUR 261.2 (297.9) million; change -12.3 %
- Order intake EUR 90.8 (106.5) million; change -14.8%
- Free cash flow EUR 1.2 (4.1) million
- Earnings per share EUR 0.27 (0.29)
1-6/2024 highlights (comparison figures in parenthesis 1-6/2023):
- Net sales EUR 148.4 (144.7) million; growth 2.6%
- EBITDA EUR 5.3 (5.3) million and EBITDA margin 3.6% (3.7%)
- Operating result (EBIT) EUR 3.2 (3.7) million and EBIT margin 2.2% (2.5%)
- Order intake EUR 127.1 (165.2) million; change -23.1%
- Free cash flow EUR 0.7 (3.1) million
- Earnings per share EUR 0.27 (0.33)
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) | 4-6/ | 4-6/ | Change % | 1-6/ | 1-6/ | Change % | 1-12/ |
Net sales | 82,853 | 75,747 | 9.4 % | 148,379 | 144,675 | 2.6 % | 320,607 |
EBITDA | 3,998 | 3,871 | 3.3 % | 5,282 | 5,344 | -1.2 % | 15,940 |
EBITDA margin, % | 4.8 % | 5.1 % | 3.6 % | 3.7 % | 5.0 % | ||
Operating result (EBIT) | 2,994 | 3,020 | -0.9 % | 3,209 | 3,677 | -12.7 % | 12,345 |
Operating result (EBIT) margin, % | 3.6 % | 4.0 % | 2.2 % | 2.5 % | 3.9 % | ||
Profit/loss for the period | 2,141 | 2,204 | -2.9 % | 2,106 | 2,508 | -16.1 % | 9,014 |
Order backlog | 261,224 | 297,870 | -12.3 % | 270,021 | |||
Free cash flow | 1,210 | 4,095 | -70.5 % | 693 | 3,125 | -77.8 % | 13,104 |
Cash conversion, % | 30.3 % | 105.8 % | 13.1 % | 58.5 % | 82.2 % | ||
Net interest-bearing debt | 3,901 | 6,949 | -43.9 % | -934 | |||
Gearing, % | 9.6 % | 20.6 % | -2.3 % | ||||
Return on investment, ROI % | 21.9 % | 20.9 % | 20.8 % | ||||
Number of personnel at period end | 1,087 | 1,052 | 3.3 % | 1,008 | |||
Earnings per share, undiluted (EUR) | 0.27 | 0.29 | -6.9 % | 0.27 | 0.33 | -18.2 % | 1.17 |
CEO Esa Korkeela's comment
"Consti's solid performance continued in the second quarter. Our second-quarter net sales increased by 9.4 percent and were EUR 82.9 (75.7) million. Our net sales grew strongly in the Public Sector and Building Technology business areas but contracted in the Housing Companies business area. Net sales for our Corporations business area remained almost at the same level with the previous year.
Our operating result for April-June was EUR 3.0 (3.0) million, representing 3.6 (4.0) percent of net sales. Operationally, the second quarter of the year proceeded in line with our expectations, with projects progressing predominantly as planned. Profitability remained stable compared to the corresponding period. Our relative profitability in the second quarter was mainly affected by changes in the relative net sales shares of business areas in comparison with the reference period, and also partly by allocation of resources in tendering and negotiation activities to secure our order backlog. Our balance sheet and liquidity position at the end of the review period remained at a good level.
During April-June, our order intake amounted to EUR 90.8 (106.5) million, which means a decrease of 14.8 percent relative to the strong benchmark period. In April-June, we continued our active but disciplined tendering activities. Although the tightened competition and weakened demand affected our order intake, we are satisfied with the total amount and quality of orders received. The distribution of orders between business areas and units was not optimally realised during the review period. The majority of our order intake in the second quarter consists of several smaller projects. Our order backlog at the end of the review period decreased by 12.3 percent year-on-year and was EUR 261.2 (297.9) million.
We published our updated strategy in February 2024. The implementation of our updated strategy is now underway, and our work to deploy the strategy is progressing by business area according to our plans. During the review period, we continued our long-term investments in the growth of our Building Technology business area and achieved growth of 58.7 percent compared to the corresponding period. Our operational efficiency improvement initiatives focused on ensuring the performance of our business in the prevailing operating environment, with an emphasis on, among other things, tendering and improving the efficiency of our production, as well as achieving a more consistent performance level of our project deliveries.
Based on our current market outlook, we expect demand for renovation and building technology services to weaken in 2024. According to forecasts, renovation is expected to contract by about 0.4 percent in 2024. The strong weakening of demand for new construction has clearly increased competition for renovation projects and building technology contracts.
In the first half of 2024, the readiness of housing companies and the public sector for renovation investments has remained at a reasonable level in our operating areas, but private real estate investment companies have been cautious about launching new construction projects. However, we believe that the prevailing market conditions favour a versatile construction and building technology expert like Consti, which has a strong financial position and the ability to deliver diverse projects ranging from small service contracts to extensive construction projects.
The demand outlook for construction is weakened by persistently high construction costs, rapidly increased interest rates and tighter availability of financing, and we do not anticipate significant improvement during the third quarter of the year. Supported by a healthy order backlog, we aim to continue delivering solid results and focus on implementing our updated strategy."
Operating environment
Construction market 2024-2025
Construction market research institute Euroconstruct estimated in its June 2024 report that the volume for Building construction output will decline by 6.4% in 2024. According to Euroconstruct's forecast, the new construction volume is estimated to decline by around 12.5 percent and the renovation volume by 0.4 percent in 2024.
For the year 2025, Euroconstruct predicts that renovation volumes will increase by 0.5 percent. The report estimates that there is potential for even higher growth due to the needs-based nature of renovation, as factors that slow down demand ease.
The renovation market in general
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.
Approximately one-fifth of all renovation is maintenance and upkeep, with a higher-than-average share in non-residential properties.
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
In 2024, the Building construction output in Finland is estimated to decrease by approximately 6.4 percent from the previous year. New construction is predicted to decline by approximately 12.5 percent and renovation by 0.4 percent in 2024.
Consti anticipates a decline in demand for renovation and building technology services in 2024. The significant weakening in demand for new construction has notably intensified competition for renovation projects and building technology contracts. In the first half of 2024, the readiness of housing companies and the public sector for renovation investments has remained at a reasonable level in Consti's operating areas, but private real estate investment companies have been cautious about initiating new construction projects.
The demand outlook for construction is weakened by persistently high construction costs, rapidly increased interest rates and tighter availability of financing, and Consti does not anticipate significant improvement during the third quarter of the year.
Despite the market conditions, Consti aims to continue its solid performance supported by a healthy order backlog in 2024.
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 19 July 2024, at 10:00 a.m. (EET). The meeting will be hosted by CEO Esa Korkeela and CFO Anders Löfman.
Analysts, portfolio managers and media representatives are kindly requested to register for the meeting no later than Thursday 18 July 2024 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 18 July 2024.
Financial communication in 2024
Consti Plc shall publish one more interim report during 2024:
- Interim report 1-9/2024 published 25 October 2024
CONSTI PLC
Further information:
Esa Korkeela, CEO, Consti Plc, Tel. +358 40 730 8568
Anders Löfman, CFO, Consti Plc, Tel. +358 40 572 6619
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
