CONSTI GROUP PLC - Sijoittajat – Constiinvestor.consti.fi/~/media/Files/C/Consti-IR/documents/... · Highlights of the first quarter of 2016 – Net sales and order backlog continued

CONSTI GROUP PLCINTERIM REPORT

1.1.2016 – 31.3.2016

CEO Marko HolopainenCFO Esa Korkeela

Building renovation specialist | www.consti.fi

Contents

� Highlights and Group performance

� Cash flow and financial position

� Market outlook and guidance


Highlights of the first quarter of 2016 – Net sales and order backlog continued to grow

2 11/05/2016 Building renovation specialist | www.consti.fi

Oulu

Turku

Helsinki

Lahti

HämeenlinnaTampere

Number of

personnel

3/2016: 904

� Net sales EUR 51.4 (47.5) million, growth +8.2%

� EBITDA EUR 0.6 (0.6) million, EBITDA margin 1.2% (1.2%)

� Adjusted EBITDA EUR 0.7 (0.9) million, adjusted EBITDA margin 1.3% (1.9%)

� EBIT EUR 0.2 (0.1) million, EBIT margin 0.4% (0.1%)

� Adjusted EBIT EUR 0.2 (0.4) million, adjusted EBIT margin 0.4% (0.8%)

� Order backlog EUR 191.7 (179.9) million, up by +6.6% year-on-year and +5.7% from year-end 2015

� Free cash flow EUR 3.4 (2.2) million, up by 55.4%

� Net interest-bearing debt EUR 15.0 (43.3) million

� Gearing at 61.4%

� Earnings per share EUR -0.01 (-0.26)

Highlights of 1-3/2016 (y-o-y comparison in brackets)

Porvoo

Performance by business segment – Growth in net sales, order intake and order backlog in Q1/2016

11/05/20163 Building renovation specialist | www.consti.fi

Quarterly net sales (EUR m) Quarterly order intake (EUR m) Quarterly order backlog (EUR m)

Technical Building Services Renovation Contracting Building Facades Eliminations

21,825,4 25,1

30,323,7

14,3

15,8 17,9

20,7

16,8

12,5

23,4

28,1

25,2

11,8

-1,2 -1,2 -0,7 -1,2 -1,0

47,5

63,4

70,474,9

51,4

Q1/15 Q2/15 Q3/15 Q4/15 Q1/16

21,517,2

12,3

21,417,7

11,5

34,3

6,9

27,7

9,9

20,5

23,6

9,6

18,0

25,3

-6,7-0,7 -0,3

-3,5 -1,7

46,8

74,5

28,5

63,6

51,2

Q1/15 Q2/15 Q3/15 Q4/15 Q1/16

73,5 70,3 66,5 69,2 67,5

37,457,0

48,057,1 54,7

68,9

72,6

57,855,0 69,5

179,9

199,8

172,3181,3

191,7

Q1/15 Q2/15 Q3/15 Q4/15 Q1/16

169,6163,4

179,9

199,8

172,3181,3

191,7

0

50

100

150

200

250

Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16

Ord

er

backlo

g a

nd

R12m

Ord

er

inta

ke (

EU

R m

illio

n)

Order backlog Order intake (Rolling 12 months)

Consti quarterly order backlog and intake development –Backlog up by 6.6% y-o-y and +5.7% from year-end 2015

11/05/20164

Quarterly order backlog and R12m order intake Q3/2014 – Q1/2016 (EUR m)


Comments

■ Q1/2016 order backlog at EUR 191.7m

(179.9m), y-o-y growth +6.6%

– Backlog up by 5.7% from year-end

2015

– Order backlog grew particularly in

Renovation Contracting (+46% year-

on-year)

■ Q1/2016 order intake up by 9.2% y-o-y

– Order intake was especially good in

Building Facades during the period

– The amount of tender requests has

increased positively in the beginning of

the year

Realisation of Consti’s long-term financial targets inQ1/2016 (follow-up on a rolling 12-month basis)

5

1) Cash conversion defined as free cash flow divided by EBITDA. Free cash flow equals operating cash flow before net financial items and taxes less investments in tangible and intangible assets

2) While taking other factors such as financial position, cash flow and growth opportunities into consideration.


Growth Profitability Cash flow Capital structure Dividends

Average annual

growth in net sales

of at least 10%

Adjusted EBIT-

margin exceeding 5

percent

Cash conversion

ratio exceeding 90

percent1

Net debt to adjusted

EBITDA ratio of less

than 2.5x while

maintaining an

efficient capital

structure

The Company’s aim

is to distribute as

dividends at least 50

percent of the

Company’s annual

net profit2

Q1/2016 realisation Q1/2016 realisation Q1/2016 realisation Q1/2016 realisation FY 2015 realisation

� Growth continued in

Q1/16, target was

achieved on a R12m

basis

� Solid margin

development in

Q1/16, efforts

continue to meet the

target level

� NWC was released

in Q1/2016. Target

was achieved on a

R12m basis

� Target was clearly

achieved on a rolling

12-month basis

� AGM resolved

dividend of EUR

0.39 per share, or

64% of 2015 EPS

��

+13.1% 4.0% 95.9% 1.2x 63.8%

64,3

69,9

47,5

63,4

70,4

74,9

51,4

0

10

20

30

40

50

60

70

80

90

Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16

Quart

erly N

et sale

s (

EU

R m

illio

n)

Consti quarterly net sales development – Growth continued in the first quarter

11/05/20166

Quarterly net sales development Q3/2014 – Q1/2016 (EUR m)


Comments

■ Q1/2016 net sales EUR 51.4m (47.5m),

y-o-y sales growth +8.2%

– Net sales growth was strong in

Renovation Contracting and Technical

Building Services

■ In Renovation Contracting, growth of

17.3% thanks to good order intake and

order backlog in late 2015. Growth was

strong in the Greater Helsinki area as

well as in Turku area

■ In Technical Building Services, growth of

8.8% supported by good demand in

service business and non-residential

sector

■ In Building Facades, decline of 5.6% in

its seasonally slowest quarter

3,3 3,1

0,1

2,33,0 3,1

0,2

0,0

0,3

0,0

0,2

1,6

0,0

3,3 3,1

0,4

2,4

3,2

4,6

0,2

5,1 %

4,5 %

0,8 %

3,7 %

4,5 %

6,2 %

0,4 %

0%

1%

2%

3%

4%

5%

6%

7%

8%

0

1

2

3

4

5

6

7

8

9

10

Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16

Quarte

rly a

dju

ste

d E

BIT

marg

in (lin

e g

raph)Q

uart

erly E

BIT

(E

UR

mill

ion, bar

gra

ph)

Reported EBIT Impact of NRIs Adjusted EBIT margin

Consti quarterly adjusted EBIT1 development – Solid development in the seasonally slowest first quarter

11/05/20167

Quarterly EBIT development Q3/2014 – Q1/2016 (EUR m)

1) Adjusted EBIT = EBIT before items affecting comparability (IAC)


Comments

■ Q1/16 adjusted EBIT before IAC1

amounted to EUR 0.2 (0.4) million, or

0.4% (0.8%) of sales

■ Q1/16 EBIT after IAC EUR 0.2 (0.1)

million, or 0.4% (0.1%) of sales

– In Q1/16, IAC of EUR 0.02m related to

preparation and execution of the IPO

■ Consti’s business volumes are typically

lowest during the first quarter of the year,

when changes in fixed costs reflect more

on the result than during other quarters

– In Q1/16, fixed costs were increased

by an acquisition as well as resourcing

and investments necessary for

operations as a stock-listed company

Cash Flow and Financial Position


3,2

6,8

2,2

4,9

0,1

1,8

3,43,8 3,7

0,6

2,8

3,6 3,5

0,60

1

2

3

4

5

6

7

8

Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16

Fre

e c

ash

flo

w a

nd

EB

ITD

A (

EU

R m

illio

n)

Free cash flow EBITDA

Consti quarterly cash conversion development – Strong free cash flow for the first quarter

11/05/20169

Quarterly free cash flow and EBITDA Q3/2014 – Q1/2016 (EUR m)


Comments

■ Q1/2016 free cash flow amounted to

EUR 3.4m (2.2m), up by +55.4% y-o-y

– Cash conversion ratio of 533% (373%)

in the first quarter

– Cash flow from release of net working

capital improved year-on-year

■ Average cash conversion ratio of 120% in

the period of Q3/2014 - Q1/2016

– Consti’s long-term target to achieve

cash conversion ratio in excess of 90

percent

1) The cash conversion is the amount of free cash flow divided by EBITDA. Free cash flow means net cash flow from operating activities before financial items and taxes, less capital used for purchase of intangible assets and property, plant and

equipment

Average cash conversion1) 120%

-1,2

-5,4

-7,7

-10,5

-8,0

-7,3

-10,0

-12

-10

-8

-6

-4

-2

0Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16

Ne

t w

ork

ing

ca

pita

l a

t p

eri

od

-en

d (

EU

R m

illio

n)

Consti quarterly net working capital development – NWC was released in the first quarter

11/05/201610

Quarterly net working capital1) Q3/2014 – Q1/2016 (EUR m)


Comments

■ Net working capital EUR -10.0m (-7.7m)

at the end of Q1/2016

– NWC EUR 2.3m lower compared to

end of Q1/2015

– Release of NWC from year-end 2015

EUR 2.6m (2.3m)

1) Net working capital calculated as follows: Inventories + Trade and other receivables + Deferred tax receivables – Trade and other payables - Provisions

49,144,2 43,3

38,5

19,4 17,4 15,0

-0,7 % 0,6 % -0,7 %1,8 %

30,6 % 31,4 % 33,4 %

88,6 %

70,9 %

61,4 %

-20%

0%

20%

40%

60%

80%

100%

0

10

20

30

40

50

60

Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16

Net debt (EURm, LHS) Equity ratio (%, RHS) Gearing (%, RHS)

Consti quarterly balance sheet structure – Balance sheet continued to strengthen in the first quarter

11/05/201611

Quarterly net debt, Equity ratio and Gearing Q3/2014 – Q1/2016


Comments

■ Q1/2016 net debt decreased from year-

end 2015 and was EUR 15.0m (43.3m)

– In September 2015, Consti changed

its capital structure and refinanced its

indebtedness which decreased

financing costs in 2015

– The impact will be seen especially in

2016

■ Q1/2016 equity ratio 33.4% (-0.7%)

■ Q1/2016 gearing at 61.4%

Market Outlook and Guidance


50

60

70

80

90

100

110

120

130

140

150

Jan-0

7M

ar-

07

Ma

y-0

7Jul-

07

Se

p-0

7N

ov-0

7Jan-0

8M

ar-

08

Ma

y-0

8Jul-

08

Se

p-0

8N

ov-0

8Jan-0

9M

ar-

09

Ma

y-0

9Jul-

09

Se

p-0

9N

ov-0

9Jan-1

0M

ar-

10

Ma

y-1

0Jul-

10

Se

p-1

0N

ov-1

0Jan-1

1M

ar-

11

Ma

y-1

1Jul-

11

Se

p-1

1N

ov-1

1Jan-1

2M

ar-

12

Ma

y-1

2Jul-

12

Se

p-1

2N

ov-1

2Jan-1

3M

ar-

13

Ma

y-1

3Jul-

13

Se

p-1

3N

ov-1

3Jan-1

4M

ar-

14

Ma

y-1

4Jul-

14

Se

p-1

4N

ov-1

4Jan-1

5M

ar-

15

Ma

y-1

5Jul-

15

Se

p-1

5N

ov-1

5Jan-1

6M

ar-

16

ES

I an

d C

CI

for

Fin

lan

d (

Ja

n 2

00

7 -

Ap

r 2

01

6)

Economic Sentiment Indicator

Construction Confidence Indicator

Lead indicators for the Finnish construction suggest a strengthening market environment going forward

11/05/201613

Economic Sentiment and Construction Confidence in Finland (2007 – 4/2016)

Note: Mean-adjusted figures

Source: European Commission, May 2016


Comments

■ Economic sentiment in Finland remains

still below long-term average, but

moderate improvement since Q2/2015

■ Construction confidence has been

improving recently, surpassing long-term

average level in H2/2015

– Construction market is inherently late-

cyclical and should benefit from the

improved outlook with a certain delay

■ The Finnish Association of HPAC

Technical Contractors estimated in their

April review of business conditions that

the economic situation should improve for

technical building services by autumn

Long-term

average

Long-term

average

-6%

-5%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

0% 1% 2% 3% 4% 5% 6% 7%

CA

GR

20

07

-15

Estimated growth for 2016

Stable growth in renovation to continue going forward, new building also to return to growth track in 2016

11/05/201614

Finnish building market split and growth statistics


Comments

■ Stable growth in renovation expected to

continue in 2016 at a rate of 2.5%

■ Thanks to stable growth in the past,

renovation spending exceeded the value

of new building for the first time in 2013,

and has remained larger since then

■ Renovation’s share of the total Finnish

building market amounted to

approximately 54% in 2015

■ Improved outlook for new building in

2016 expected to benefit Consti

– Positive impact on the competitive

environment in general

– New growth opportunities for Technical

Building Services � to be materialised

with a certain delay

– For instance, Consti will provide

technical building services to REDI

projectSource: Rakennusteollisuus RT, April 2016 and Euroconstruct, December 2015

Renovation54% of total

New building46% of total

11,0 12,7

35,6 31,9

53,2 52,8

35,7 36,7

17,02,6

6,7 6,6

15,5 18,9

29,4 34,3

21,3 23,0

9,4

4,4

0

20

40

60

80

100

-1920 1921-39

1940-59

1960-69

1970-79

1980-89

1990-99

2000-09

2010-14

Other

Residential

Non-residential

Renovation market growth supported by a number of key structural growth drivers

11/05/201615

Source: Statistics Finland

Million

m2

~2015 ~2025-2035 ~2045

Buildings achieve age of 50 years (approx):

Construction year


Finnish building stock by construction year

Ageing building stock Energy efficiency

Urbanisation and concentration of

renovation in growth centers

Modifications of the use of buildings

Increased need for building

technology and automation

Active screening of M&A candidates - Consti’s knock-out criteria used to shortlist potential M&A targets

11/05/201616

Consti Group’s strategy


Relevant M&A targets

N = X-Y-ZN = X-YN = X N = ~50

Demonstrated financial track record

Good organisational fit

■ Expansion in Finland’s

growth centers

■ Strengthening of the

offering

■ Growth in Service

business

■ Established strong local

presence with good

customer relations and

healthy order backlog

■ Access to reliable

financial data

■ No specific limitations in

terms of size (net sales)

■ Minimised overlap with

Consti’s current

businesses

■ Committed management

with clear future roles

and responsibilities

■ Smooth integration to

attain scalable value

■ For instance:

– Roof renovation and

glass construction

companies

– Service businesses

– Pipeline renovation

and building

automation specialists

– New geograph. areas


Consti Group’s strategic themes

Exploit market position and expand full offering to Finland’s growth centers─ Grow in businesses where Consti has long experience and a

strong position

─ Expand full offering to the growth centers of Finland

─ Acquisitions to support growth

1

Strengthen the offering and continuously grow in Service business─ Strengthen and complement the service offering with

supplementary capabilities (building automation, roof renov.)

─ Further grow the service business

─ Acquisitions to support growth

2

Continue to strengthen customer relationships and innovation leadership─ Cross-selling across business areas and development of KAM

─ Growth in advanced project types

─ Modern renovation methods and technological innovations

3

Maintain and further improve operational excellence─ Development and optimisation of sales mix

─ Project management and procurement

─ Fixed expense control

─ Strengthening of HR operations

4

Guidance for 2016 reiterated


“The Company estimates that its total annual sales

for 2016 will grow compared to 2015.”

“The Company estimates that its total annual sales

for 2016 will grow compared to 2015.”


INTERIM REPORT

1-3/2016

CONSTI GROUP PLC

Q1CONSTI GROUP PLC

HOPEATIE 2

FI-00440, HELSINKI

BUSINESS ID 2203605-05

WWW.CONSTI.FI

Documents

CONSTI GROUP PLC - Sijoittajat – Constiinvestor.consti.fi/~/media/Files/C/Consti-IR/documents/... · Highlights of the first quarter of 2016 – Net sales and order backlog continued