CONSTI GROUP PLC - Sijoittajat –...
Transcript of CONSTI GROUP PLC - Sijoittajat –...
CONSTI GROUP PLCSEB NORDIC SEMINAR
9 JANUARY 2018
CEO Esa Korkeela
Building renovation specialist | www.consti.fi
Contents
Business and strategy
Market environment and competitive landscape
Guidance and financials in brief
Building renovation specialist | www.consti.fi
Service business
Share of sales 2016 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
Technical Building
Services (“CTT”)
Building
Facades
(“CJU”)
Renovation
Contracting
(“CKU”)
Pipeline renovations
of residential
buildings
Technical
installations to non-
residential properties
and public buildings
Service &
maintenance
Renovation of
building envelopes
(facades, roofs,
windows, balconies,
etc.)
Residential and non-
residential
Renovation of rental
apartment buildings
Service &
maintenance
Renovation
contracting of non-
residential properties
and public buildings
Comprehensive
remodelling and
overhaul projects
Service &
maintenance
Overview of Consti – one of the leading renovation and
technical services provider in Finland
2 Building renovation specialist | www.consti.fi
39%
33%
28%
Consti in brief
Comprehensive service offering covering technical building services, building facades, renovation contracting and maintenance services
Focused on Finnish growth centres
Established in 2008, headquartered in Helsinki, Finland.
08/01/2018
216256 262
187214
3,6 %4,1 % 4,2 %
3,5 % 1,0 %
0,0 %
2,0 %
4,0 %
6,0 %
8,0 %
10,0 %
12,0 %
0
50
100
150
200
250
300
201
4
201
5
201
6
Q3
/201
6 Y
TD
Q3
/201
7 Y
TD
Net sales & Adjusted EBIT margin
Net sales (EURm)
Adjusted EBIT margin1)
Note: 2016 figures if not stated otherwise
1) Adjusted figures excluding items affecting comparability.
15%
Diverse customer mix protects against fluctuations in
the market; presence in Finnish growth centres
3
Diverse customer mix
protects against
fluctuations in the
market
Housing
companies
35 %
Public sector
26 %
Real estate
investors
24 %
Corporations
15%
Net sales realised from one single customer did not exceed
10% of the year’s sales.
Building renovation specialist | www.consti.fi
Net sales by customer groups 2016
08/01/2018
Helsinki &Uusimaa
Tampere &Pirkanmaa
Others
Number of
personnel 9/2017:
1 117
2016
Net sales by geographical area
12%
10%
78%
Consti Group’s project overview – Dispersed project
base with a relatively small median project size
4 Building renovation specialist | www.consti.fi
Project size distribution 2014-2016 (# of projects)
08/01/2018
20%
22%
21%
39%
33%
33%
41%
44%
47%
0 % 20 % 40 % 60 % 80 % 100 %
2014
2015
2016
Project value > €1m Project value €150k - €1m Project value < €150k
Comments
■ In 2016, the company had 806 projects1) with a median project
size of EUR 183 thousand
■ In 2016, net sales was generated from relatively small projects
■ Large projects typically realised in net sales over several years
■ In 2012-2016, net sales realised during one year from one
single project has not exceeded 10% of that year’s sales
79% of the projects in progress in 2016 were valued at EUR 1 million or below
■ 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)
# projects
median
project size
806 183 t€
700 222 t€
670 216 t€Fixed price contract
Design and Build contract
Project management contract
Integrated project delivery (e.g.
Alliance contract)
85%
15%
Projects
Services
Contract type / delivery model
Consti Group’s service overview – Service, repairs
and installations across business areas
5 Building renovation specialist | www.consti.fi
Contract type / delivery model
08/01/2018
■ Service business consists of small
scale service projects as well as
upkeep and maintenance services
■ Services are offered in all business
areas
■ Service business includes e.g.
maintenance, repair and installation
work, non-residential facility
remodelling and energy contracting
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
Service projects
Framework
agreement
Fixed-term service
contract
15%
85%
Services
Projects
Service business
2732
40
13% 13%15%
0,0 %
5,0 %
10,0 %
15,0 %
20,0 %
25,0 %
30,0 %
35,0 %
0
10
20
30
40
50
201
4
201
5
201
6
Service business net sales
& share of total net sales
CAGR +21.9%
Net sales (EURm)
Share of total net sales
6
Consti Group’s strategic themes. Strategy implemented through
strategic initiatives.
Profitable and competitive operations in all projects and
services
─ The best lead time and productivity in renovation construction industry
─ Continuous relative decreasing of fixed and procurement costs
─ Systematic development of the business portfolio
1
Professional employees who enjoy their work and are
proud of their work
─ Efficient recruitment and career path planning
─ The most attractive place to work in renovation construction
─ Best competences in renovation construction in use
─ High level of commitment, job satisfaction and safety
2
Clear service concepts to meet customer needs
─ Customer specific key products and adequate product selection
─ Active renovation & service offering management
3
Efficient sales and customer management
─ Clear customer promise – active care
─ Customer specific services and generating value added
─ Key account management
4
5 Expansion in the renovation value chain
─ We offer all services of a building from renovation to maintenance and from
health to energy efficiency.
Building renovation specialist | www.consti.fi08/01/2018
Active seeking of new business and strategic growth areas
─ We seek growth in all business areas, especially in strategic growth areas,
which are to a large extent the same as before.
─ Additionally, we also want new growth in areas we have not previously
operated in, or in which we have not had a strong enough foothold.
6
Co
nsti
Vis
ion
: # 1
in R
en
ovatio
n
Contents
Business and strategy
Market environment and competitive landscape
Guidance and financials in brief
Building renovation specialist | www.consti.fi
11,0 12,7
35,6 31,9
53,2 52,8
35,7 36,7
17,0
2,6
6,7 6,6
15,518,9
29,434,3
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
8
Source: Statistics Finland
Million
m2
~2017~2025-2035 ~2040
Buildings age of 50 years (approx):
Building renovation specialist | www.consti.fi
Finnish building stock by construction year
Ageing building stock Energy efficiency
Urbanisation
Modifications of the
use of buildings
Increased need for building
technology and automation
08/01/2018
50
60
70
80
90
100
110
120
130
140
150
Jan
-07
Jun
-07
No
v-0
7
Ap
r-0
8
Se
p-0
8
Fe
b-0
9
Jul-
09
De
c-0
9
Ma
y-1
0
Oct-
10
Ma
r-11
Au
g-1
1
Jan
-12
Jun
-12
No
v-1
2
Ap
r-1
3
Se
p-1
3
Fe
b-1
4
Jul-
14
De
c-1
4
Ma
y-1
5
Oct-
15
Mar-
16
Au
g-1
6
Jan
-17
Jun
-17
No
v-1
7
ES
I a
nd
CC
I fo
r F
inla
nd
(Ja
n 2
00
7 -
No
v2017)
Economic SentimentIndicator
Lead indicators for Finnish construction suggest a
favourable market environment going forward
08/01/20189
Note: Mean-adjusted figures
Source: European Commission, November 2017
Building renovation specialist | www.consti.fi
Comments
■ Economic sentiment in Finland
rose above the long-term average
in August 2016
■ 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
end of 2017Long-term
average
Economic Sentiment and Construction Confidence / Finland (2007 – 11/2017)
11,1 11,4 11,5 11,8 12,2 12,6 12,8 13,0 13,2 13,4
14,513,1
11,810,9 10,8
12,913,9 14,1
13,1 12,7
25,624,5
23,422,7 23,0
25,426,7 27,1
26,4 26,2
0
5
10
15
20
25
30
2011A 2012A 2013A 2014A 2015A 2016A 2017E 2018F 2019F 2020O
Stable growth in renovation to continue
10
Finnish new building and renovation market development
Building renovation specialist | www.consti.fi
■ The peak of the economic cycle in
construction sector in progress.
– Challenges in availability of
building technology and
renovation professionals
■ Total construction market forecast for
2017: Euroconstruct +4.8% and
CFCI +4.4%
■ New building forecast for 2017:
Euroconstruct +7.8% and CFCI
+7.3%
■ Renovation forecast for 2017:
Euroconstruct + 1.8% and CFCI
+1.5%
– 1970s apartments’ total
renovations, and renovations for
saving energy, in public sector
schools and hospitals in particular
– Major refurbishments for office
and commercial buildingsSource: Euroconstruct, November 2017
CFCI = The Confederation of Finnish Construction Industries, October 2017
Renovation volume (real)EURmrd New building volume (real)
CAGR
2017-20:
+1.6%
CAGR
2017-20:
-2.8%
08/01/2018
-3.3%
HPAC market estimates improving business conditions
within all sectors (new building, renovation, service)
08/01/201811
* Balanced view = Very good + Good - Weak – Very weak
Source: Finnish Association of HPAC Technical Contractors
Building renovation specialist | www.consti.fi
Very good Good Satisfactory Weak Very weak
New construction
Renovation
Maintenance
0 %
10 %
20 %
30 %
40 %
50 %
60 %
70 %
80 %
90 %
100 %
Nov-1
3
Ap
r-14
Oct-
14
Ma
r-1
5
Nov-1
5
Ap
r-16
Jun
-16
Oct-
16
Ma
r-1
7
Oct-
17
0 %
10 %
20 %
30 %
40 %
50 %
60 %
70 %
80 %
90 %
100 %
Nov-1
3
Ap
r-14
Oct-
14
Ma
r-1
5
Nov-1
5
Ap
r-16
Jun
-16
Oct-
16
Ma
r-1
7
Oct-
17
0 %
10 %
20 %
30 %
40 %
50 %
60 %
70 %
80 %
90 %
100 %
Nov-1
3A
pr-
14
Oct-
14
Ma
r-1
5N
ov-1
5A
pr-
16
Jun
-16
Oct-
16
Ma
r-1
7O
ct-
17
-100%
-80%
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
Nov-1
3
Ap
r-14
Oct-
14
Ma
r-1
5
Nov-1
5
Ap
r-16
Jun
-16
Oct-
16
Ma
r-1
7
Oct-
17
Current business conditions
New building
Current business conditions
Renovation
Current business conditions
Service
Current business conditions
Balance of opinion*
-25
25
75
125
175
225
275
Con
sti
Are
*C
aver
ion*
NC
CS
RV
YIT
Ska
nska
Luja
talo
Lem
min
käin
enF
iraP
eab
Jatk
eB
ravi
da*
Leht
o G
roup
U M
-RR
ak.A
ntti
J.A
hola
VR
J G
roup
Ren
ova
tio
n s
ales
, ME
UR
(20
16)
13 %
5 %3 %
79 %
0
1
2
3
4
5
6
7
8
Total market breakdown(2016 renovation excl. households, BEUR)
Finnish renovation market highly fragmented with plenty
of consolidation potential – Consti was #1 in 2016
08/01/201812
Operators in the Finnish renovation market (TBS specialists estimated)
Building renovation specialist | www.consti.fi
Overall renovation market (excl. households)
Source: Rakennuslehti, Asiakastieto, Consti analysis
* Technical building services specialists estimated on the basis of total Finnish TBS market split: 55% renovation / 45% new building
> 100 MEUR, n=6
> 50 MEUR, n=11
> 30 MEUR, n=17
~7.3 BEUR
Top 6 players
Top 7-11 players
Top 12-17 players
< 30 MEUR sales
Total Finnish renovation market (excl.
households) estimated to total approximately
EUR 7.3 billion in 2016. In recent years, in
general, the share of top ten players has
increased and consolidation is expected to
continue going forward.
Renovation by customer groupRenovation by geography
Finnish renovation market of EUR 12bn is concentrated
in growth centres and residential properties
13
Source: VTT, February 2017
Building renovation specialist | www.consti.fi
1 2
08/01/2018
Helsinki 30%
Renovation market concentrated in the largest cities and growth
centres where majority of building stock is located
Kuopio
2%
Rest of Finland 50%
Strongest need for renovation from residential buildings,
also stemming from the building stock structure
Housing
companies
24%
Rental
apartment
buildings
10%
Corporations
14%
Households and other
42%
Government and
public institutions
1%precence precence
Contents
Business and strategy
Market environment and competitive landscape
Guidance and financials in brief
Building renovation specialist | www.consti.fi
Guidance for 2017
“The Company estimates
that its total annual net
sales for 2017 will grow
compared to 2016 but
operating profit will be
significantly lower than in
2016.”
15 08/01/2018 Building renovation specialist | www.consti.fi
Net sales development:
1-9/2017 net sales up by 14.5%
08/01/201816 Building renovation specialist | www.consti.fi
■ 1-9/2017 net sales EUR 213.9 (186.7) million
• y-o-y sales growth 14.5% (EUR 27.2 million)
• organic growth 10.1% (EUR 18.8 million)
• acquisition growth 4.5 % (EUR 8.4 million)
– In Building Facades, growth of 31.9% due to
good performance in Greater Helsinki area
– In Renovation Contracting, growth of 8.3%
mainly from Greater Helsinki area.
– Technical Building Services growth of 9.4%
from renovating residential buildings and
through acquisitions.
Technical Building Services (TBS)
Renovation Contracting
Building Facades
Eliminations
CommentsNet sales development (FY) Net sales development (YTD)
95,4 102,6 103,9
54,568,7 75,0
70,5
89,288,6
-4,5 -4,3 -5,9
215,9
256,2 261,6
-20
30
80
130
180
230
280
2014 2015 2016
Ne
t sa
les (
EU
R m
illio
n)
77,4 84,6
53,658,1
59,5
78,5
-3,8 -7,3
186,7
213,9
-20
30
80
130
180
230
Q3/2016 YTD Q3/2017 YTD
Ne
t sa
les, Y
TD
(E
UR
mill
ion
)
Adjusted EBIT1 development: Corrective actions for improving
profitability initiated and ongoing (1/2)
08/01/201817
1) Adjusted EBIT = EBIT before items affecting comparability (IAC)
Building renovation specialist | www.consti.fi
Comments
■ 1-9/17 EBIT EUR 2.2m (6.5m), or 1.0% (3.5%) of net
sales
■ Q3/17 EBIT -0.8 (3.7) million, or -1.0% (5.3%) of net
sales
– A detailed project appraisal was carried out in the
Technical Building Services business area, which
covered over two hundred projects that were either
ongoing or at the hand over phase of construction.
As a result project cost assessments were
adjusted.
– Profitability problems in TBS business area
• Problems relating to project management and
execution.
• In part the profitability problems relating to
projects were also due to the staff renewal rate
in project personnel and price competition in the
industry.
EBIT development (FY) EBIT development (YTD)
7,88,4
11,0
0,0
2,1
0,0
7,9
10,511,0
3,6 %
4,1 % 4,2 %
0%
1%
2%
3%
4%
5%
6%
7%
8%
0
2
4
6
8
10
12
2014 2015 2016
Ad
juste
d E
BIT
ma
rgin
(line
gra
ph
)EB
IT, (E
UR
mill
ion, b
ar
gra
ph
) 6,5
2,2
0,0
0,0
6,6
2,23,5 %
1,0 %
0%
1%
2%
3%
4%
5%
6%
7%
8%
0
1
2
3
4
5
6
7
8
Q3/2016YTD
Q3/2017YTD
Ad
juste
d E
BIT
ma
rgin
, YT
D (lin
e g
rap
h)E
BIT
, Y
TD
(E
UR
mill
ion
, b
ar
gra
ph
)
TBS
Adjusted EBIT1 development: Corrective actions for improving
profitability initiated and ongoing (2/2)
08/01/201818 Building renovation specialist | www.consti.fi
Comments (continued)
■ Consti revised its outlook for 2017 on 15th Dec 2017
– During the year's last quarter, the Company has continued to evaluate its
project base. As a result of this evaluation, project cost assessments that
lessen the Group's operating profit in the fourth quarter have been adjusted.
The Company expects operating result for Q4 to be negative.
– The Company's operating profit continues to decrease due to profitability
problems relating to project management and execution.
■ Corrective actions:
– Board of directors appointed new CEO on 21 Dec 2017
– Appointment of new CFO was announced on 3 Jan 2018
– Reorganisation of the Technical Building Services business area
• New Branch level leader in TBS has been hired and multiple changes at
project level executed
• New organisation in place as of 1 Jan 2018
• Implementation of processes ongoing
• Support functions streamlined
• With the reorganisation, our aim is
– to improve the accountability of our businesses and
– ability to response to market needs as well as
– to clarify service offering and to improve project management
New TBS organisation
Technical installations
Service
Pipeline renovations
Three different delivery processes:
■ Technical installations:
– Subcontracting and parallel contracting
■ Pipeline renovations:
– Main contracting
– Main contracting -model related processes
(from RC & BF) to be implemented
■ Service:
– Separate TBS Service unit
Key origination responsibilities Key execution responsibilities
■ Strategic targets
■ Key Account Manager (KAM)
steering and execution
■ Ensure full Consti offering if
possible
■ Standardized project steering
■ Approval of large tenders
■ Detailed monthly monitoring of
projects and forecasts
■ Ensure follow-up / Service sales
■ Project risk assessment
■ Active KAM execution
■ Sales budgets to units
■ Target project margins
■ Standardized project steering
■ Approval of mid-size tenders
■ Approval of project budgets
■ Detailed weekly 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
■ Continuous forecasting of project vs. budget
■ KPIs for project manager bonuses in various project phases
■ Standardized project steering
Consti has a decentralised operating model
08/01/201819
Management sets targets and monitors actively; branch units have accountability
Source: Consti
Group
Management
CTT
mgmt
CJU
mgmt
CKU
mgmt
Service business
Consti organisation
Branch units Branch units Branch units
Building renovation specialist | www.consti.fi
Order backlog and order intake development:
New major orders received during the last quarter of 2017 will
increase order intake
08/01/201820 Building renovation specialist | www.consti.fi
Comments
■ 1-9/2017 order intake EUR 173.2 million already at good level compared to order intake 1-9/2016 EUR 157.0 million (growth 10.3 %).
■ New major orders received during the last quarter of 2017 will increase Q4/2017 order intake:
A contract on the complete renovation of the Hotel Scandic Marski. Value of the contract is approximately EUR 26 million.
An order for the complete renovation of two properties, Oy Ässäkeskus Ab and KOy Vallilan toimisto. The preliminary cost estimate for the
project is approximately EUR 35 million.
Both new major orders fall under Renovation Contracting business area.
Order backlog development
Technical Building Services (TBS) Renovation ContractingBuilding Facades Eliminations
Order intake development
69,1 69,2 70,7
36,557,1 43,5
57,8
55,0 76,6
163,4181,3
190,8
-20
30
80
130
180
230
280
2014 2015 2016
Ord
er
backlo
g (
EU
R m
illio
n)
70,6 70,5
46,1 36,9
68,9 91,4
185,6198,8
-20
30
80
130
180
230
280
Q3/2016 Q3/2017
Ord
er
ba
cklo
g (
EU
R m
illio
n)
88,872,4 85,8
57,9 80,5 40,1
84,4 71,7100,5
-3,9 -11,1 -3,4
227,3213,5
223,1
-20
30
80
130
180
230
280
2014 2015 2016
Ord
er
inta
ke
(E
UR
mill
ion
)
66,0 65,2
27,9 39,7
66,2
78,2
-3,1 -9,9
157,0173,2
-20
30
80
130
180
230
280
Q3/2016YTD
Q3/2017YTD
Ord
er
inta
ke
(E
UR
mill
ion
)
-7,3-7,9
-11,3
-14
-12
-10
-8
-6
-4
-2
0
2
4
2015 2016 Q3/2017
Net
wo
rkin
g c
ap
ita
l at
pe
rio
d-e
nd
(E
UR
mill
ion
)
Asset-light business model supporting strong cash conversion;
project business allows negative NWC
21
1) % of rolling 12 month revenue; 2) 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.
08/01/2018
Negative working capital, 2015-Q3/2017 Strong cash conversion2), 2015-Q3/2017
Building renovation specialist | www.consti.fi
Key balance sheet ratios
Q3 2017
Net debt (EURm) 13.4
Equity ratio % 31.9%
Gearing % 48.6%
-2.9% -3.9%1)
% = % of net sales
-3.0%
85% 83%
169%
0,0 %
20,0 %
40,0 %
60,0 %
80,0 %
100,0 %
120,0 %
140,0 %
160,0 %
180,0 %
2015 2016 Q3/2017
Realisation of Consti’s long-term financial targets Q3/2017 (rolling 12 months)
22
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.
08/01/2018 Building renovation specialist | www.consti.fi
Growth Profitability Cash flow Capital structure Dividends
Average annual
growth in net sales
of at least 10%
Adjusted
EBIT-margin
exceeding 5%
Cash conversion
ratio exceeding
90%1
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
Q3/2017 Q3/2017 Q3/2017 Q3/2017 2016
Target was achieved
in Q3/2017
Target not achieved,
efforts continue to
meet the target level
Target not achieved
although Q3/2017
realization not afar
from target level
Target was achieved
at period end
Dividend of EUR
0.54 per share, or
51.5% of 2016 EPS
10.3% 2.3% 79.3% 1.55 51.5%
Summary
08/01/201823 Building renovation specialist | www.consti.fi
Asset-light business model
Strong cash flow
Well positioned to capitalize market opportunities
Strong order backlog
Steady market growth 1.
2.
3.
4.
5.
08/01/201824 Building renovation specialist | www.consti.fi
CONSTI GROUP PLC
9 JANUARY 2018
THANK
YOU
CONSTI GROUP PLC
HOPEATIE 2
FI-00440, HELSINKI
BUSINESS ID 2203605-05
WWW.CONSTI.FI