Consti Plc Interim Report for January – March 2024

CONSTI PLC INTERIM REPORT 25 APRIL 2024, at 8.30 a.m.                           

Consti Plc Interim Report for January – March 2024                                  

SOLID PERFORMANCE IN A CHALLENGING MARKET

1–3/2024 highlights (comparison figures in parenthesis 1–3/2023):

• Net sales EUR 65.5 (68.9) million; change -4.9%
• EBITDA EUR 1.3 (1.5) million and EBITDA margin 2.0% (2.1%)
• Operating result (EBIT) EUR 0.2 (0.7) million and EBIT margin 0.3% (1.0%)
• Order backlog EUR 244.4 (253.8) million; change -3.7%
• Order intake EUR 36.3 (58.6) million; change -38.0%
• Free cash flow EUR -0.5 (-1.0) million
• Earnings per share EUR -0.00 (0.04)

                               

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)	1-3/ 2024	1-3/ 2023	Change %	1-12/ 2023
Net sales	65,525	68,928	-4.9 %	320,607
EBITDA	1,284	1,473	-12.8 %	15,940
EBITDA margin, %	2.0 %	2.1 %		5.0 %
Operating result (EBIT)	214	657	-67.3 %	12,345
Operating result (EBIT) margin, %	0.3 %	1.0 %		3.9 %
Profit/loss for the period	-36	304		9,014
Order backlog	244,371	253,756	-3.7 %	270,021
Free cash flow	-517	-970	46.8 %	13,104
Cash conversion, %	n/a	n/a		82.2 %
Net interest-bearing debt	1,299	5,661	-77.0 %	-934
Gearing, %	3.1 %	15.8 %		-2.3 %
Return on investment, ROI %	20.6 %	19.3 %		20.8 %
Number of personnel at period end	1,031	1,020	1.1 %	1,008
Earnings per share, undiluted (EUR)	-0.00	0.04		1.17

 

CEO Esa Korkeela’s comment

”In line with our expectations, 2024 started with declining net sales. Our seasonally low net sales in January-March contracted by 4.9 per cent to EUR 65.5 (68.9) million. Our net sales grew in the Public Sector and Building Technology business areas but decreased in the Housing Companies and Corporations business areas.

Our operating result for January-March was EUR 0.2 (0.7) million, representing 0.3 (1.0) percent of net sales. Operationally, the first quarter of the year proceeded as expected, with projects progressing predominantly as planned. Our profitability in the first quarter was impacted by the lower net sales level than in the comparison period and changes in the relative net sales shares of business areas compared to the corresponding period. Our balance sheet and liquidity position at the end of the reporting period remained at a good level.

During January-March, our order intake amounted to EUR 36.3 (58.6) million, which is a 38.0 percent decrease year-on-year. In January-March, we continued our disciplined tendering activities, which together with intensified competition and weaker demand, impacted our order intake for the reporting period. Our order intake for the first quarter does not include individual projects of significant size but consists of several smaller projects. Our order backlog at the end of the reporting period decreased by 3.7 percent year-on-year and was EUR 244.4 (253.8) million.

We published our updated strategy during the reporting period in February. 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 reporting period, we continued to invest in, among other things, the expansion of our technical real estate services and strengthened our expertise to achieve the goals we have set for the 2024-2027 strategy period. Additionally, we continued our sustainability work by focusing on selected sustainability themes: mitigating climate change, promoting occupational safety and well-being, and developing responsible practices in the industry.

Based on our current market outlook, we anticipate a decline in demand for renovation and building technology services in 2024. Forecasts suggest that renovation is expected to contract by approximately 1.0 percent in 2024. The significant weakening in demand for new construction has notably intensified competition for renovation projects and building technology contracts. In early 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 initiating 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 second 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

In its March business cycle report, the Confederation of Finnish Construction Industries (CFCI) estimated that the entire construction market will contract by about 5 percent in 2024. According to CFCI’s forecast, the renovation market is expected to decline by about 1 percent in 2024, while new residential construction is projected to decline by as much as 22 percent.

In its March economic outlook, CFCI states that the weak economic situation and the cessation of energy subsidies will burden renovation in 2024. CFCI predicts that pent-up demand will turn the renovation market towards a modest growth of around 1 percent next year.

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 its March business cycle report, the Confederation of Finnish Construction Industries (CFCI) estimated that the entire construction market will contract by about 5 percent in 2024. According to CFCI’s forecast, the renovation market is expected to decline by about 1 percent in 2024, while new residential construction is projected to decline by as much as 22 percent. In its March economic outlook, CFCI states that the weak economic situation and the cessation of energy subsidies will burden renovation 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 early 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 second 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 25 April 2024, 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 Wednesday 24 April 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 Wednesday 24 April 2024.

Financial communication in 2024

Half-year report 1-6/2024 will be published 19 July 2024

Interim report 1-9/2024 will be 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