CONSTI GROUP PLC DANSKE SMALL & MID CAP SEMINAR 29 MAY 2018

Transcription

1 CONSTI GROUP PLC DANSKE SMALL & MID CAP SEMINAR 29 MAY 2018 CEO Esa Korkeela

2 Contents Consti in brief and Group strategy Q highlights and Group performance Market outlook and guidance

3 Overview of Consti one of the leading renovation and technical services provider in Finland Consti in brief Net sales development Established in 2008 Comprehensive service offering covering technical building services, building facades, renovation contracting and maintenance services Focused on Finnish growth centres Headquartered in Helsinki, Finland. Employs over professionals in renovation and technical building services 78% Net sales (EURm) Large acquisitions FAS Integr. Organic growth IFRS Listed company 2

4 Consti Group comprises three complementary operating segments based in Finland Technical Building Services ( TBS ) Building Facades ( BF ) Renovation Contracting ( RC ) Share of net sales in % 37% 39% 33% 28% 26% Offering Pipeline renovations of residential buildings Technical installations to nonresidential properties and public buildings Service & maintenance Renovation of building envelopes (facades, roofs, windows, balconies, etc.) Residential and non-residential Renovation of rental apartment buildings Renovation contracting of nonresidential properties and public buildings Comprehensive remodelling and overhaul projects Service & maintenance Service & maintenance Service business Share of sales % Wide range of services for HVAC and renovation contracting Building facade cleaning and maintenance painting of building exteriors and staircases Small-scale building repairs including window repairs, renewal of lobbies, inspection of premises 3

5 Diverse customer mix protects against market fluctuations, presence in the Finnish growth centres Net sales by customer groups in 2017 Net sales by geographical area in 2017 Individual housing corporations and their property managers Corporations 15% Real estate investors 17 % Housing companies 32 % 10% 11% % Helsinki & Uusimaa Tampere & Pirkanmaa Others Public sector 35 % Number of personnel 12/2017: 1,079 Net sales realised from one single customer did not exceed 10% of the total annual sales Strong focus on the growth centres, clear majority of the revenue generated from the capital region 4

6 Examples of Consti projects Examples of 2017 projects Scandic Hotel Marski, Helsinki Complete renovation of the hotel property and renewal of technical building services systems Renovation Contracting Technical Building Services Koy Helsingin Satamakatu 3, Helsinki Modifications of old office building into rental apartment use Building Facades Technical Building Services Oy Ässäkeskus Ab and KOy Vallila premises, Helsinki Oy Ässäkeskus Ab s facility modifications and repairs to technical building services systems KOy Vallila premises complete renovation of three buildings Renovation Contracting HOAS Linnoituksentie 10, Helsinki Renovating the bathroom, kitchen and floors using Consti s amenity renovation concept Renovation Contracting 5

7 Examples of Consti projects Projects ongoing or finished during 2017 Korkeavuorenkatu 21, Helsinki Modification of the use of building, where a building serving decades as office space, will be fully refurbished and restored to its original residential use. Building Facades Technical Building Services Espoonlahti church, Espoo Extensive renovation including ia. modernisation of all facilities, renovation of old church roof and its supporting structures. Renovation Contracting Oulu s Liiketalo, Oulu Renovation of facades, stairwells, roof, yard and HVAC. Building Facades Technical Building Services Bostads Ab Parkgatan 9, Helsinki Renewal of facades, sheet metal roof and copper details. Building Facades 6

8 Consti Group s project business Dispersed project base with a relatively small median project size 84% Dispersed project base and a relatively small median project size Project types: payment basis / performance obligation Median project size (LHS) # of projects (RHS) k 222k k 181k Main contract Fixed price Target price (incl. ceiling) With design responsibility Cost + fee (incl. unit price) With design management responsibility Without design responsibility Project size distribution (# of projects) Project value > 1m Project value 150k - 1m Project value < 150k ,6 % 33,4 % 46,0 % ,7 % 32,8 % 46,5 % ,3 % 33,3 % 44,4 % ,0 % 39,0 % 41,0 % 0 % 20 % 40 % 60 % 80 % 100 % Sub- or partial contract With design responsibility With design management responsibility Without design responsibility 1) Number of projects based on management accounts. Project is qualified if it is accounted for according to the POC method and had realised revenue during the financial year. Total number of work tasks performed is larger (including non-poc) 7

9 Consti Group s service business Service, repairs and installations across business areas 16% Service business net sales & share of total net sales Service business & contract types Net sales (EURm) Share of total net sales Consti TBS Consti BF Consti RC ,0 % 30,0 % Service business Fixed-term service contract Frame agreement ,0 % Service projects ,0 % % 16% 13% 13% ,0 % 10,0 % 5,0 % 0,0 % Services are offered in all business areas Wide range of services including HVAC and renovation contracting Building facade cleaning and maintenance painting of building exteriors and staircases Small-scale building repairs including window repairs, renewal of lobbies, inspection of premises 8

10 Good development in personnel KPIs in 2017 Personnel at year end (average) Blue collar / White collar 2017 (2016) Permanent / Fixed term 2017 (2016) (910) 935 (933) (1 088) 58% (57%) 42% (43%) 96% (91%) 4% (9%) Blue collar White collar Fixed term Permanent Permanent personnel turnover (% of employees leaving) 25% Accident rate (accidents per million hours worked) 30 Average absence rate 6% 20% 15% 10% 5% 15,2 % 19,9 % 15,4 % % 4% 3% 2% 1% 4,2 % 3,1 % 3,1 % 0% %

11 10

12 16% Consti s strategic initiatives aim at achieving the Group s long-term goals giving also short-term benefits 1 Strategic initiative Objectives Key projects / activities Profitable and competitive operations Best-in-class lead time and productivity Efficient and agile organization Performance management in place to drive operational excellence Performance management on all org. levels Harmonized project management process Implementation of LEAN methodology Efficient procurement 2 The best customer experience Improved measurement and follow-up of customer experience Efficient key account management increased share of recurring business Renewal of customer feedback system with harmonized KPIs and steering Enhanced incentives for internal cooperation 3 Excellent services and solutions Wide service offering meeting the needs of real estate owners and users New customer-driven services through systematic productization and development Implementation of Consti productization model, roadmap and criteria New categorization of services with clear steering and follow-up 4 The best professionals High personnel well-being and safety Competent and skillful employees Enhanced attractiveness as employer Improvement of recruitment process Renewal of incentive schemes Development of HR function and competence management 5 Renewal and growth Continued growth in existing markets Growth in advanced project types Widening of offering in construction life cycle Active screening of new growth areas and businesses Systematic strengthening of required competences 11

13 Q Highlights and Group Performance 12

14 Highlights of the first quarter of 2018 Highlights of 1-3/2018 (y-o-y comparison in brackets) Number of personnel at the end of March 2018: 1,053 (1,029) Oulu Net sales EUR 62.3 (57.3) million, growth 8.7% EBITDA EUR 0.2 (0.8) million, EBITDA margin 0.4% (1.3 %) EBIT EUR -0.2 (0.3) million, EBIT margin -0.3% (0.5%) Order backlog EUR (212.9) million Free cash flow EUR -7.8 (-0.5) million Gearing 80.5 (49.7) % Net debt EUR 20.3 (15.0) million Earnings per share EUR (0.00) Tampere Turku Hämeenlinna Lahti Guidance for 2018: Consti estimates that its operating result for 2018 will grow compared to Helsinki Porvoo 13

15 Quarterly performance overview Net sales, order intake and order backlog increased y-o-y Quarterly net sales (EUR m) Quarterly order intake (EUR m) Quarterly order backlog (EUR m) Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 30,3 30,7 51,2 51,4 64,8 70,6 74,8 57,3 78,8 77,8 86,3 62,3 75,6 66,1 59,5 83,0 104,9 72,7 191,7 212,6 185,6 190,8 212,9 227,9 198,8 225,7 250,2 14

16 Quarterly net sales development First quarter net sales up by 8.7% Quarterly net sales development Q1/2016 Q1/2018 (EUR m) Comments Q1/2018 net sales EUR 62.3m (57.3 m) Quarterly net sales (EUR million) ,4 64,8 27,6 34,1 29,1 57,3 27,0 20,7 16,9 11,8 20,7 22,8 51,4 70,6 86,3 78,8 77,8 74,8 62,3 21,7 17,2 19,6 21,3 21,4 16,0 16,8 18,1 32,8 28,0 23,7 25,7 26,5 26,0 25,8 31,5 25,0-1,0-1,1-1,7-2,1-1,6-2,3-3,5-3,3-2,5 Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Technical Building Services (TBS) Building Facades (BF) Year-on-year sales growth 8.7% (EUR 5.0m) Organic growth 4.5% (EUR 2.6m) Acquisition growth 4.3% (EUR 2.4m) In Building Facades, net sales grew by 28.6 percent mainly thanks to good development in housing repair business Majority of Renovation Contracting net sales growth (13.3 percent) attributable to the Greater Helsinki area s renovation business as well as the acquisitions completed during the second half of 2017 Technical Building Services net sales decreased by 4.2 percent mainly due to the tightened bidding criteria in pipeline renovations taken into use towards the end of 2017 Renovation Contracting (RC) Eliminations 15

17 Quarterly EBIT development Profitability not yet on a satisfactory level but clear improvement compared to previous quarter Quarterly EBIT development Q1/2016 Q1/2018 (EUR m) 8 8% Comments Q1/18 EBIT amounted to EUR -0.2 (0.3) million, or -0.3% (0.5 %) of net sales Quarterly EBIT (EUR million, bar graph) ,9 % 5,3 % 4,0 % 3,4 % 4,4 0,5 % 0,4 % 3,7 0,2 2,6 0,3 2,7-0,8-2,6-0,2-0,3 % -1,0 % -3,0 % Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 EBIT EBIT margin 6% 4% 2% 0% -2% -4% Quarterly EBIT margin (line graph) Operating result was weakened by the execution of the remaining performance obligations related to certain previously identified low-margin projects During the reporting period, profitability was weakened in particular by a project belonging to the Renovation Contracting business area, which by the end of the reporting period had advanced to the handover phase However, the project still has open risks which have been taken into account in the Q1 result to the best of our ability Consti s business volumes are typically lowest during the first quarter of the year, impacting profitability 16

18 Actions to improve profitability on-going Reorganisation of TBS business area was completed during Q1/2018 New TBS organisation Comments Reorganisation of the Technical Building Services business area New organisation in place as of 1 Jan 2018 Technical installations Pipeline renovations Service Implementation of processes Increased margin requirements Subcontracting and parallel contracting Main contracting Implementation of main contracting model related processes (from Renovation Contracting & Building Facades) Separate TBS Service unit THREE DIFFERENT DELIVERY PROCESSES Realigned requirements for selecting offered worksites With the reorganisation, our aim was to improve the accountability of our businesses, to clarify service offering, and to improve project management Decentralised operating model unchanged 17

19 Actions to improve profitability on-going In Consti s decentralised operating model branch units have accountability. Increased focus on standardized project steering and discipline. Financial reporting responsibilities clarified Consti organisation Group Management Key steering responsibilities Strategic targets Requirements for selecting offered worksites Standardized project steering Key execution and reporting responsibilities Approval of large tenders Detailed monitoring of projects and forecasts Project risk assessment TBS mgmt BF mgmt Service business RC mgmt Target project margins Requirements for selecting offered worksites Standardized project steering Approval of mid-size tenders Approval of project budgets Detailed monitoring of projects and forecasts Project risk assessment Sourcing and selection of projects, ensuring internal resourcing Tender price calculation Approval of small tenders Preparation of project budgets, timetable, resourcing, procurement, etc. Daily implementation Branch units Branch units Branch units Continuous forecasting of project vs. budget KPIs for project manager bonuses in various project phases Reporting to line management as well as directly to group mgmt Standardized project steering 18

20 Quarterly order intake development Strong order inflow continued, Q1 order intake up by 22.2 % y-o-y Quarterly order intake development Q1/2016 Q1/2018 (EUR m) 104,9 Quarterly Order intake (EUR million) 16, ,2 27,6 25,3 14,5 35 9,9 34, ,7 75,6 66,1 30,3 59,5 34,3 33,2 21,0 13,4 13,3 12,2 11,0 83,0 72,7 31,5 58,2 35,9 30,7 19,6 7,6 3,5 32,3 32,0 19,9 18,6 21,0 14,2 14,3 Comments Q1/2018 order intake EUR 72.7 million (59.5m), up by 22.2% y-o-y Order intake increased in all business areas Strongest growth from Renovation Contracting (+77.8% y-o-y) Good growth also in Technical Building Services (+13.0% y-o-y) and Building Facades (+8.3% y-o-y) -5-1,7-0,6-0,8-0,4-3,3-1,8-4,7-1,9-3,9 Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Technical Building Services (TBS) Renovation Contracting (RC) Building Facades (BF) Eliminations 19

21 Examples of new orders received in Q1/2018 TECHNICAL BUILDING SERVICES RENOVATION CONTRACTING BUILDING FACADES Q1/18 order intake: EUR 21.0m (+13.0% yoy) Q1/18 order intake: EUR 19.6m (+77.8 % yoy) Q1/18 order intake: EUR 35.9 m (8.3% yoy) EXAMPLES OF NEW ORDERS: Jätkäsaari elementary school, Helsinki Installation of HVAC and electrical systems Telkkälaakso As Oy, Tampere Improvement of technical building systems As Oy Kaukohaukka, Oulu Pipeline renovation EXAMPLES OF NEW ORDERS: Kasarmikatu 25, Helsinki Renovation of a high value property built in the 19 th century KOy Helsingin Hiilipiha, Helsinki Office modification work Turku Fair and Congress Centre Renewal of Fair and Congress Centre entrance EXAMPLES OF NEW ORDERS: Helsingin kaupungin asunnot, Susitie 2-6, Helsinki Extensive facade and interior renovation in three apartment buildings As Oy Helsingin Halsuantie 5-7, Helsinki Repair of facades, balconies and roofs Luovi Vocational College, Oulu Repairs related to indoor air and replacements of windows 20

22 Quarterly order backlog development Backlog continued to grow, up by 17.5 % y-o-y Quarterly order backlog development Q1/2016 Q1/2018 (EUR m) Comments Quarterly Order backlog (EUR million) ,7 69,5 54,7 67,5 227,9 212,6 212,9 185,6 190,8 79,1 105,9 97,6 68,9 76,6 57,2 44,3 46,1 43,5 41,3 76,3 70,6 70,7 74,0 77,7 225,7 198,8 250,2 91,3 75,0 91,4 78,2 83,6 36,9 70,5 72,5 75,2 Q1/2018 order backlog at EUR million (212.9m) Year-on-year growth +17.5% Up by 10.8% from year-end 2017 Order backlog grew particularly in Renovation Contracting (+102.7% year-on-year) as a result of strong order intake during Q1 as well as due to major new orders received during Q4/2017 In Technical Building Services, order backlog was close to comparison period s level with growth of +1.6% Order backlog in Building Facades decreased by 6.5% year-on-year but increased by 21.8% compared to year-end Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Technical Building Services (TBS) Renovation Contracting (RC) Building Facades (BF) Eliminations 21

23 Q Cash flow and Financial Position 22

24 Quarterly free cash flow development Free cash flow affected by increase in working capital in Q1/2018 Quarterly free cash flow and EBITDA Q1/2016 Q1/2018 (EUR m) Comments Free cash flow and EBITDA (EUR million) ,4 0,6 3,1 0,4 6,6 4,5 4,9 Average cash conversion 1) 80% 0,8 0,5-0,5 4,0 3,2 2,9 2,6-0,2-2,1 0,2 Q1/2018 free cash flow amounted to EUR -7.8m (-0.5m) Increase in working capital during the quarter weakened cash flow Average cash conversion ratio of 80% in the period of Q1/2016 Q1/2018 Consti s long-term target to achieve cash conversion ratio in excess of 90 percent -8-7,8 Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 EBITDA Free cash flow 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 23

25 Quarterly net working capital development Net working capital at EUR -7.8 million at the end of Q1/2018 Quarterly net working capital 1) Q1/2016 Q1/2018 (EUR m) Comments 0 Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Net working capital EUR -7.8m (-7.0m) at the end of Q1/2018 Net working capital at period-end (EUR million) ,0-8,4-11,2-7,9-7,0-7,9-11,3-16,1-7,8 NWC tied up during the first quarter amounted to EUR 8.3m (0.9m) Exceptionally low NWC level at year-end 2017 Seasonality inherent to Building Facades business area One specific project in Renovation Contracting tied up capital in the first quarter However, quarter-end NWC level slightly better than a year earlier -18 1) Net working capital calculated as follows: Inventories + Trade and other receivables + Deferred tax receivables Trade and other payables - Provisions 24

26 Quarterly balance sheet structure Financial position affected by negative free cash flow in the quarter Quarterly net debt, equity ratio and gearing Q1/2016 Q1/ % Comments Q1/2018 net debt at EUR 20.3m (15.0m) 20 76,1 % 80,5 % 90% 80% Q1/2018 equity ratio at 30.9% (37.2%) Q1/2018 gearing at 80.5% (49.7%) ,4 % 44,6 % 40,8 % 49,7 % 55,0 % 48,6 % 47,7 % 70% 60% 50% 40% Cash and cash equivalents at the end of Q1/2018 amounted to EUR 3.5m (6.3m). In addition, the company had undrawn revolving credit facilities amounting to EUR 3.0m 33,4 % 31,5 % 32,5 % 34,5 % 37,2 % 32,9 % 31,9 % 28,6 % 30,9 % 30% ,0 17,8 11,7 12,1 15,0 15,5 13,4 12,1 20,3 Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 20% 10% 0% Net debt (EURm, LHS) Equity ratio (%, RHS) Gearing (%, RHS) 25

27 Market Outlook and Guidance 26

28 Lead indicators for the Finnish economy and construction continue to remain on a good level Economic Sentiment and Construction Confidence / Finland (2007 3/2018) Comments ESI and CCI for Finland (Jan Mar 2018) Long-term average Economic Sentiment Indicator Construction Confidence Indicator Economic sentiment in Finland has steadily improved since it rose above the long-term average in August Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Construction confidence surpassed the long-term average level in summer 2015 and has steadily remained above that level Both indicators at good level in the early 2018 Note: Mean-adjusted figures Source: European Commission, March

29 Stable growth in renovation to continue Finnish new building and renovation market development EURb Renovation volume (real) New building volume (real) 30 26,7 27,1 26,4 25,6 26,2 25,4 24,5 13,9 14, ,1 14,5 23,4 22,7 23,0 12,7 12,9 13,1 11,8 10,9 10, ,1 11,4 11,5 11,8 12,2 12,6 12,8 13,0 13,2 13, A 2012A 2013A 2014A 2015A 2016A 2017E 2018F 2019F 2020O -3.3% CAGR : -2.8% CAGR : +1.6% Comments The peak of the economic cycle in construction sector on-going Challenges in availability of building technology and renovation professionals Total construction market forecast for 2018: Euroconstruct +1.8% and CFCI +2.4% New building forecast for 2018: Euroconstruct +2.0% and CFCI +2.8% Renovation forecast for 2018: Euroconstruct +1.5% and CFCI +2.0% Repairs of residential buildings to increase in growth centres Repairs of office premises to increase driven by economic growth Source: Euroconstruct, November 2017 CFCI = The Confederation of Finnish Construction Industries, March

30 Demand-driven renovation market growth supported by a number of key structural growth drivers Ageing building stock Energy efficiency Million m Finnish building stock by construction year Buildings achieve age of 50 years (approx): ~2017 ~ ,4 ~ ,2 Urbanisation and concentration of renovation in growth centers ,4 19,4 7,1 6,5 11,3 12, ,7 51,2 15,8 19,2 35,9 32, ,8 35,4 53,3 53, ,7 21,9 61,0 24,2 35,8 36, ,5 13,8 22,6 6,7 4,2 2, Others 16 Modifications of the use of buildings Increased need for building technology and automation Source: Statistics Finland Construction year 29

31 Guidance for financial year 2018 The Company estimates that its operating result for 2018 will grow compared to

32 CONSTI GROUP PLC 29 MAY 2018 THANK YOU CONSTI GROUP PLC HOPEATIE 2 FI-00440, HELSINKI BUSINESS ID