Consti Oyj — Interim / Quarterly Report 2018

Oct 26, 2018

Consti Group Plc Interim Report for January - September 2018

Consti Group Plc Interim Report for January - September 2018

CONSTI GROUP PLC HALF-YEAR FINANCIAL REPORT 26 OCTOBER 2018, at 8.30 a.m.

Consti Group Plc Interim Report for January - September 2018

NEGATIVE OPERATING RESULT, ORDER BACKLOG GREW

7-9/2018 highlights (comparison figures in parenthesis 7-9/2017):
* Net sales EUR 78.9 (77.8) million; growth 1.4%
* EBITDA EUR -1.0 (-0.2) million and EBITDA margin -1.3% (-0.3%)
* Operating profit/loss (EBIT) EUR -1.4 (-0.8) million and EBIT margin -1.8%
(-1.0%)
* Order backlog EUR 270.1 (198.8) million; growth 35.9 %
* Free cash flow EUR -3.5 (2.9) million
* Earnings per share EUR -0.17 (-0.10)

1-9/2018 highlights (comparison figures in parenthesis 1-9/2017):
* Net sales EUR 219.0 (213.9) million; growth 2.4%
* EBITDA EUR 1.3 (3.8) million and EBITDA margin 0.6% (1.8%)
* Operating profit (EBIT) EUR 0.0 (2.2) million and EBIT margin 0.0% (1.0%)
* Free cash flow EUR -9.1 (6.4) million
* Earnings per share EUR -0.05 (0.16)

Guidance on the Group outlook for 2018:
The Company estimates that its operating result for 2018 will grow compared to
2017.

+----------------------+------+------+--------+-------+-------+--------+-------+
|KEY FIGURES (EUR | 7-9/ | 7-9/ |Change %| 1-9/ | 1-9/ |Change %| 1-12/ |
|1,000) | 2018 | 2017 | | 2018 | 2017 | | 2017 |
+----------------------+------+------+--------+-------+-------+--------+-------+
|Net sales |78 942|77 824| 1,4 %|218 983|213 903| 2,4 %|300 203|
+----------------------+------+------+--------+-------+-------+--------+-------+
|EBITDA |-1 030| -214|-382,0 %| 1 285| 3 764| -65,9 %| 1 714|
+----------------------+------+------+--------+-------+-------+--------+-------+
|EBITDA margin, % |-1,3 %|-0,3 %|  | 0,6 %| 1,8 %|  | 0,6 %|
+----------------------+------+------+--------+-------+-------+--------+-------+
|Operating profit/loss |-1 437| -760| -89,0 %| 27| 2 215| -98,8 %| -375|
|(EBIT) | | | | | | | |
+----------------------+------+------+--------+-------+-------+--------+-------+
|Operating profit/loss |-1,8 %|-1,0 %|  | 0,0 %| 1,0 %|  | -0,1 %|
|(EBIT) margin, % | | | | | | | |
+----------------------+------+------+--------+-------+-------+--------+-------+
|Profit/loss for the |-1 311| -793| -65,3 %| -404| 1 220|  | -1 074|
|period | | | | | | | |
+----------------------+------+------+--------+-------+-------+--------+-------+
|Order backlog |  |  |  |270 072|198 759| 35,9 %|225 721|
+----------------------+------+------+--------+-------+-------+--------+-------+
|Free cash flow |-3 510| 2 852|  | -9 082| 6 354|  | 8 936|
+----------------------+------+------+--------+-------+-------+--------+-------+
|Cash conversion, % | n/a| n/a|  | n/a|168,8 %|  |521,4 %|
+----------------------+------+------+--------+-------+-------+--------+-------+
|Net interest-bearing |  |  |  | 22 460| 13 402| 67,6 %| 12 070|
|debt | | | | | | | |
+----------------------+------+------+--------+-------+-------+--------+-------+
|Gearing, % |  |  |  | 88,9 %| 48,6 %|  | 47,7 %|
+----------------------+------+------+--------+-------+-------+--------+-------+
|Return on investment, |  |  |  | -5,3 %| 14,0 %|  | -0,7%|
|ROI % | | | | | | | |
+----------------------+------+------+--------+-------+-------+--------+-------+
|Number of personnel at|  |  |  | 1 104| 1 117| -1,2 %| 1 079|
|period end | | | | | | | |
+----------------------+------+------+--------+-------+-------+--------+-------+
|Earnings per share, | -0,17| -0,10| -64,4 %| -0,05| 0,16|  | -0,14|
|undiluted (EUR) | | | | | | | |
+----------------------+------+------+--------+-------+-------+--------+-------+

CEO Esa Korkeela's comment

"Our net sales for the third quarter grew 1.4 per cent and amounted to 78.9
million euro. The development of net sales was particularly positive in our
Renovation Contracting business. However, despite net sales growth, our result
in July-September was negative. Our weaker operating result was due to lower-
than-expected profitability in project deliveries of the technical installations
business included in Technical Building Services business area and the housing
repair business included in Building Facades business area. The profitability
issues concern a limited number of projects launched in 2016 and early 2017.
These projects will be completed this year, with the exception of a few housing
repair projects that will be handed over in 2019.

During the reporting period, we continued our activities to improve project
performance, maintaining a focus on implementing operating models to improve
project steering and monitoring. These actions have been steps in the right
direction, and we have seen them have a positive impact on new project
deliveries that are underway. However, during the reporting period we had to
note that our corrective actions have not yet been fully put into practice in
all Consti Group business areas. In order to ensure performance improvement in
projects, the whole organisation needs to take a step closer to worksite
execution.

During the reporting period, we immediately began targeted actions to restore
the performance of low-profitability units. In addition to personnel changes and
clarifying responsibilities in the line organisation, we further tightened our
tendering criteria. For example, in the future we will no longer take on
building purpose modification projects in which the project delivery method is
not balanced with the risks and profit potential of the project. Our operating
result for January-September 2018 was significantly weakened by two demanding
building purpose modification projects, which had a negative impact of EUR 4.0
million on the result. I believe that successfully implementing the ongoing
corrective actions will make Consti a stronger and better performing company, in
both the short and long term.

The market environment continued to be predominantly good during the third
quarter. Between July and September, we received new orders amounting to 39.3
million euro, which is a 28.0 per cent increase on the comparison period. The
increase in new orders was particularly strong in facade renovations in the
Greater Helsinki area. Thanks to the growth in new order intake, our order
backlog in September, 270.1 million euro, was 35.9 per cent larger than in the
comparison period. The positive development of our order backlog puts us in a
good position to return to a path of profitable growth. At the same time,
however, we note that our unresolved risks include a significant disagreement
concerning the Hotel St. George construction project. More detailed information
on the progress of this dispute has been disclosed during the reporting period.
Our estimation is still that this issue will not affect Consti's guidance for
2018.

Our current market and business outlook leads us to believe that demand for
renovations and technical building services will remain at a good level towards
the end of the year. I expect our strong order backlog and our profitability-
improving actions to enhance our performance in the last quarter of the year."

Operating environment and outlook for the 2018

In Finland, nearly six per cent of GDP is spent on renovations, which is
significantly more than the European average. Professional renovation
construction amounted to approximately 13.1 million euro in 2017, and its share
of the total construction market has increased steadily in recent years. Due to
the age of the building stock, growth in Finland has been faster than in the
rest of Europe. The ageing building stock will uphold the demand for renovation
construction in years to come. As buildings get older, they will need more
technical repairs, increasing the demand for, inter alia, pipeline and facade
renovations.

The Confederation of Finnish Construction Industries RT (CFCI) estimated in its
October review of market conditions that construction will continue to grow this
year at almost the same rate as last year. Total building construction in 2018
is forecast to increase by approximately 4 per cent on the previous year.
Renovation construction is estimated to increase by 1.5 per cent and new
building by 6 per cent compared to 2017.

Residential building renovations in expanding cities are expected to drive most
renovation construction growth. Renovation prospects are also improved by the
more systematic renovations of public buildings and the conversion of outdated
office buildings for new uses when financially justified.

A shortage of skilled labour, however, remains a challenge hindering renovation
construction growth. According to CFCI, small apartment buildings have comprised
a large proportion of new construction, which has led to more competition
between new construction and renovation construction for the same workforce.

Despite the growth challenges, CFCI notes that barometers forecasting the
development of housing renovations anticipate a positive trend for next year. In
its September review of the current economic situation, the Finnish Association
of HPAC Technical Contractors maintained its assessment of the market conditions
for construction as good, and set to remain positive until next spring, despite
a minor slowdown on the market. The review also mentioned that even if no new
projects are started, ongoing projects and order backlogs will provide work well
into next year.

The general economic climate has a significantly smaller impact on renovations
and technical building services than it does on new construction. The majority
of respondents to the Finnish Real Estate Federation's renovation barometer said
that the general economic climate does not affect decisions on undertaking
renovation projects.

The coming years will see stricter energy efficiency requirements, urbanisation,
the need to adapt buildings to new uses, the development of building automation
and the ageing population's need for accessible buildings. When these trends are
combined with the ageing building stock, we can predict sustained demand for
renovations, technical building services and building technology maintenance
services.

The company estimates that its operating result for 2018 will grow compared to
2017.

Press conference

A press conference for analysts, portfolio managers and media will be arranged
on Friday 26 October 2018 at 10.00 at Hotel Scandic Simonkenttä's Bulsa
-conference room, at Simonkatu 9, Helsinki. The conference is hosted by CEO Esa
Korkeela and CFO Joni Sorsanen.

Financial communication in 2019

Consti Group Plc's Financial Statements for 2018 will be published 7 February
2019.

The electronic version of the annual report, which includes the full financial
statements for 2018, will be published in week 11/2019.

Consti Group Plc's Annual General Meeting for 2019 is scheduled to take place on
Tuesday, 2 April 2019 in Helsinki.

Consti Group Plc shall publish three interim reports during 2019:

* Interim report 1-3/2019 published 26 April 2019
* Half-year financial report 1-6/2019 published 26 July 2019
* Interim report 1-9/2019 published 25 October 2019

CONSTI GROUP PLC

Further information:

Esa Korkeela, CEO, Consti Group Plc, Tel. +358 40 730 8568
Joni Sorsanen, CFO, Consti Group 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 building technology, pipeline renovation,
renovation contracting, façade renovation and other demanding construction and
maintenance services for residential and commercial buildings. In 2017, Consti
Group's net sales amounted to 300 million euro. It employs over 1000
professionals in renovation construction and building technology.

Consti Group Plc is listed on Nasdaq Helsinki. The trading code is CONSTI.
www.consti.fi

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