CONSTI GROUP PLC CARNEGIE CONSTRUCTION SEMINAR CEO Esa Korkeela 23 AUGUST 2019
CONTENTS Q2 2019 in brief 1. Turnaround program 2. Market environment and competitive landscape 3. Appendix 4. 1 23 August 2019 Consti Group Plc / Carnegie Construction Seminar
Highlights of the second quarter of 2019 Net sales grew, EBIT turned positive EUR EUR EUR +3.5m -1.5m +0.5m y-o-y y-o-y y-o-y NET SALES: EBIT: FREE CASH FLOW: EUR +0.1m EUR +2.7m EUR 81.2m EUR EUR No. +3.6m -59.4m -56 y-o-y y-o-y y-o-y NET DEBT: ORD. BACKLOG: PERSONNEL: EUR 22.0m EUR 226.8m 1,097 2 23 August 2019 Consti Group Plc / Carnegie Construction Seminar
Quarterly performance overview Net sales grew by 10.5%, order intake and order backlog declined year-on-year QUARTERLY NET SALES (EUR m) QUARTERLY ORDER INTAKE (EUR m) QUARTERLY ORDER BACKLOG (EUR m) FY’17 NET SALES: FY’18 NET SALES: FY’17 ORD. INTAKE: FY’18 ORD. INTAKE: EUR 300.2m EUR 315.8m EUR 278.1m EUR 228.5m 286,2 270,1 H1/18: H1/19: H1/18: H1/19: +10.5% -18.8% 104,9 140.0 154.7 161.4 131.0 250,2 96,8 237,8 227,9 226,8 225,7 225,1 88,7 86,3 212,9 83,0 81,2 198,8 78,8 78,9 77,8 77,8 73,5 73,5 72,7 62,3 59,5 57,3 57,4 39,3 30,7 27,9 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Q2/18 Q3/18 Q4/18 Q1/19 Q2/19 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Q2/18 Q3/18 Q4/18 Q1/19 Q2/19 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Q2/18 Q3/18 Q4/18 Q1/19 Q2/19 3 23 August 2019 Consti Group Plc / Carnegie Construction Seminar
EBIT development Q2 2019 EBIT turned positive Quarterly EBIT development Q1/2017 – Q2/2019 (EUR m) Comments 8 8% ■ Q2/19 EBIT amounted to EUR 0.1 (1.7) million, or - FY 2017 EBIT: FY 2018 EBIT: 0.1% (2.1%) of net sales EUR -0.4m EUR -2.1m Quarterly EBIT (EUR million, bar graph) 6 6% – EBIT improved from previous quarter and turned Quarterly EBIT margin (line graph) positive 4 4% 3,4 % – During the period, profitability development was mostly positive 2,1 % 2 2% – However, the operating result was still materially 2,7 0,5 % affected by execution of the remaining performance 1,7 0,1 % -0,8 obligations of a building purpose modification 0,3 0 0,1 0% -0,4 project related to a high-value property -1,4 -2,2 -0,2 -2,6 -0,5 % – Excluding the negative impact of the project in -1,0 % -2 -2% -1,8 % question, April-June EBIT would have improved -0,3 % -2,2 % significantly year-on-year -3,0 % -4 -4% Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Q2/18 Q3/18 Q4/18 Q1/19 Q2/19 ■ H1/19 EBIT amounted to EUR -0.3 (1.5) million, or - 0.2% (1.0%) of net sales EBIT (left axis) EBIT margin (right axis) 4 23 August 2019 Consti Group Plc / Carnegie Construction Seminar
Quarterly balance sheet structure Q2 financial position improved compared to Q1 thanks to positive cash flow in April-June Quarterly net debt, equity ratio and gearing Q1/2017 – Q2/2019 Comments ■ Financial position as per 30 June 2019 improved from 30 100% 92,0 % 88,9 % previous quarter-end thanks to positive cash flow in Q2 90% 85,2 % 83,6 % 80,5 % ■ In addition to operating profitability, change in NWC plays 25 80% and important role in development of Consti’s cash flow 69,7 % 3,5 and therefore also net debt 70% 3,5 20 ■ NWC was at EUR -7.8m at the end of Q2/2019 60% 55,0 % 49,7 % 48,6 % 47,7 % ■ Q2/2019 net debt at EUR 22.0m (18.5m), of which EUR 15 50% 3.5m is attributable to IFRS 16 related lease liabilities 40% ■ Q2/2019 equity ratio at 27.2% (29.3%) 10 37,2 % 30% 32,9 % 31,9 % – Adoption of IFRS 16 decreased Q2 2019 equity ratio by 30,9 % 29,3 % 28,6 % 28,3 % 27,7 % 27,2 % 20% 25,4 % 1.0 percentage points 5 10% ■ Q2/2019 gearing at 85.2% (69.7%) 15,0 15,5 13,4 12,1 20,3 18,5 22,5 19,6 20,5 18,5 0 0% – Adoption of IFRS 16 increased Q2 2019 gearing by Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Q2/18 Q3/18 Q4/18 Q1/19 Q2/19 13.5 percentage points ■ Excluding IFRS 16, Q2 2019 financial position virtually Net debt (excl. IFRS 16 impact) IFRS 16 impact on Net debt comparable to that of Q2 2018 Equity ratio (right axis) Gearing (right axis) 5 23 August 2019 Consti Group Plc / Carnegie Construction Seminar
Maturity distribution of interest-bearing debt (30 June 2019) No significant bank loan redemptions in 2019-2021. Turnaround plays an important role in development of financial position Maturity profile of interest-bearing debt 1) as per 30 June 2019 (EUR m) Comments ■ Consti’s gross interest-bearing debt at EUR 23.8 million 30 (excluding IFRS 16) at the end of Q2 2019 0,0 0,0 3,6 25 1,9 5,4 ■ Virtually all of the interest-bearing debt consist of bank loans 20 ■ Majority of Consti’s bank loans have maturity in 2022, i.e. Majority of the amount relates no significant bank loan redemptions in 2019-2021, which 16,9 to revolving supports the implementation of the change program and credit facility 15 that can be 27,4 actions to improve profitability rolled over 23,8 22,0 ■ Of note, however, is that hybrid bond of EUR 3.2m has its 10 first call date in 2021 (non-call period of 2 years) 1,8 1,9 ■ Through high cash conversion rate inherent to Consti’s 5 business, improvement in profitability would directly 5,1 support company’s financial position 0 2019 2020 2021 2022 2023 2024 Calculated (excl. IFRS 16) Lease liabilities Gross debt (IFRS) Cash and cash Net debt ■ Consti’s long-term financial target is to achieve cash interests equivalents Gross debt (IFRS 16) conversion ratio in excess of 90 percent (Free cash flow divided by EBITDA) Maturity profile 1) Both calculated interest payments and repayments of the principal included in maturity profile values 6 23 August 2019 Consti Group Plc / Carnegie Construction Seminar
CONTENTS Q2 2019 in brief 1. Turnaround program 2. Market environment and competitive landscape 3. Appendix 4. 7 23 August 2019 Consti Group Plc / Carnegie Construction Seminar
Overview of Consti’s turnaround program and activities The main focus in 2019 is on implementing the new organisation structure 1 • Group level • Reorganization of • Chief Legal changes in Technical Building Officer Targeted Service and Services business area appointed reorganisations & HR mgmt new organisation • New customer-oriented organization structure effective as of 18 February 2019 structure • Reorganization of • Cost savings expected to materialize in 2019, and to take effect fully from the Housing repair unit beginning of 2020 onwards 2 • Improvements in pipeline renovation business sales and tendering process • Improvements in technical installations business sales and tendering process Disciplined tendering process • Internal project tendering process and risk management developed, internal project approval limits lowered • Cut out building purpose modification projects which do not meet Consti’s risk / profit targets 3 • Continued implementation of harmonized project management processes Implementation of strategic • Implementation of performance management principles on all organisational levels initiatives (esp. Profitable and competitive • Enhanced implementation of strategic initiatives in the new organizational structure operations) • Implementation of new project management system throughout the Group H2 H1 H2 H1 H2 2017 2018 2019 8 23 August 2019 Consti Group Plc / Carnegie Construction Seminar
1 Consti Group consists of four complementary operating segments New organisation effective as of 18 February 2019 HOUSING BUILDING CORPORATIONS PUBLIC SECTOR 28% COMPANIES TECHNOLOGY 39% 33% • Renovation services for • Renovation services for • Renovation services for • Building technology housing companies corporations and the public sector installations and investors maintenance • Renovation of building • Renovation of schools, • Comprehensive • Technical installations to envelopes (facades, hospitals and other public roofs, windows, remodelling and overhaul service buildings non-residential properties balconies, etc.) projects in residential and and public buildings • Renovation of public non-residential properties • Pipeline renovations of • Service & maintenance rental apartment for corporations and housing companies buildings investors • Service & maintenance • Service & maintenance • Service & maintenance SERVICE BUSINESS • 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 9 23 August 2019 Consti Group Plc / Carnegie Construction Seminar
1 New organisation structure to bring multiple benefits for Consti TARGETED BENEFITS OF THE NEW ORGANISATION CONSTI’S NEW ORGANISATION STRUCTURE Enhanced strategy implementation throughout the CONSTI 1 GROUP PLC Group COMMON SUPPORT FUNCTIONS New organisation drives customer-centric, effective 2 and efficient operations New operating CONSTI segments RENOVATION Enables centralisation of expertise and flexibility in 3 resourcing HOUSING PUBLIC BUILDING CORPORA- COMPANIES SECTOR TECHNOLOGY TIONS Improves risk management and agility of the 4 organisation Technical Service install. 5 Targeted annual cost savings of EUR ~2m, fully effective as of 2020 10 23 August 2019 Consti Group Plc / Carnegie Construction Seminar
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