Consti Oyj : Half Year Financial Report January - June 2021

CONSTI'S HALF-YEAR FINANCIAL REPORT JANUARY - JUNE 2021 23 July 2021 at 8:30 am

ADJUSTED EBIT IMPROVED, ORDER BACKLOG STRENGTHENED

4-6/2021 highlights (comparison figures in parenthesis 4-6/2020):

• Net sales EUR 70.9 (69.3) million; growth 2.3 %
• EBITDA EUR 0.3 (3.2) million and EBITDA margin 0.4 % (4.6 %)
• Adjusted operating result (EBIT) EUR 2.9 (2.7) million and Adjusted EBIT margin 4.1 % (3.9 %)
• Operating result (EBIT) EUR -0.5 (2.4) million and EBIT margin -0.7 % (3.4 %)
• Order backlog EUR 236.2 (211.8) million; growth 11.5 %
• Order intake EUR 98.5 (66.8) million; growth 47.4%
• Free cash flow EUR -1.4 (8.1) million
• Earnings per share EUR -0.09 (0.21)

1-6/2021 highlights (comparison figures in parenthesis 1-6/2020):

• Net sales EUR 130.2 (128.3) million; growth 1.4 %
• EBITDA EUR 1.2 (4.5) million and EBITDA margin 0.9 % (3.5 %)
• Adjusted operating result (EBIT) EUR 3.4 (3.3) million and Adjusted EBIT margin 2.6 % (2.6 %)
• Operating result (EBIT) EUR -0.4 (2.8) million and EBIT margin -0.3 % (2.2 %)
• Order intake EUR 168.3 (129.0) million; growth 30.5%
• Free cash flow EUR -4.3 (10.1) million
• Earnings per share EUR -0.11 (0.22)

Guidance on the Group outlook for 2021:

The Company estimates that its operating result for 2021 will be in the range of EUR 4-8 million.

	KEY FIGURES (EUR 1,000)		4-6/			4-6/			Change		1-6/			1-6/			Change			1-12/
		2021			2020			%		2021			2020			%			2020
Net sales	70,902		69,306	2.3 %	130,185		128,346		1,4 %	274,646
EBITDA	276		3,181	-91.3 %	1,154		4,462		-74,1 %	11,440
EBITDA margin, %	0.4 %		4.6 %				0.9 %		3.5 %					4.2 %
Adjusted operating result (EBIT)	2,918		2,721	7.2 %	3,400		3,324		2,3 %	9,478
Adjusted EBIT margin, %	4.1 %		3.9 %				2.6 %		2.6 %					3.5 %
Operating result (EBIT)	-531		2,368				-429		2,830					8,237
Operating result (EBIT) margin, %	-0.7 %		3.4 %				-0.3 %		2.2 %					3.0 %
Profit/loss for the period	-721		1,711				-806		1,839					5,675
Order backlog									236,191		211,838		11,5 %	177,857
Free cash flow	-1,356		8,107				-4,285		10,093					18,334
Cash conversion, %	n/a		254.8 %				n/a		226.2 %					160.3%
Net interest-bearing debt									20,404		11,272		81,0 %	4,737
Gearing, %									76.3 %		37.9 %					14.1 %
Return on investment, ROI %									8.5 %		13.7 %					13.6 %
Number of personnel at period end									1,003		999		0,4 %	927
Earnings per share, undiluted (EUR)	-0.09		0.21				-0.11		0.22					0.70

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CEO's review

"During the second quarter of 2021, our net sales were 70.9 (69.3) million euro. Our net sales grew 2.3 percent to the comparison period.

Our Adjusted operating result (EBIT) for April-June before items affecting comparability was 2.9 (2.7) million euro, which is 4.1 (3.9) percent of our net sales. Operationally the second quarter advanced as expected and our projects largely progressed as planned. Our operating result (EBIT) for the second quarter was -0.5 (2.4) million euro, which is -0.7 (3.4) percent of our net sales. During the reporting period we received an arbitral award from the arbitral tribunal in the dispute relating to the construction project for Hotel St. George. As a result of the decision, we recognised a non-recurring loss of 3.4 million euro for the period, mainly due to the write-down of net receivable on our balance sheet. The arbitral award will have a positive cash flow impact of approximately 2 million euro in the third quarter of the year.

In April-June our order intake was 98.5 (66.8) million euro, which is a 47.4 percent increase to the comparison period. Due to the good order intake, our order backlog at the end of the reporting period grew to

236.2 (211.8) million euro, which is 11.5 percent higher than in the comparison period. During the reporting period we recorded ia. in line with our new strategy the first orders related to new construction services into our order backlog. In the first project we will build two new office buildings targeting a Gold level LEED classification in Ilmalanrinne, Helsinki, and in the second project we will build a new school and sports premises for Järvenpää City. The strong order intake during the second quarter is a good indication of how well our customers have received our new strategy focusing on customer orientation, sustainability, and the expansion into the new construction services.

The negative impact that the coronavirus pandemic (COVID-19) had on our ability to advance projects according to plans was smaller than in the first quarter and it lessened toward the end of the reporting period. Despite the pandemic, demand for renovations remained at an adequate level. The housing company market has now returned near to normal levels regionally as well. However, demand for renovation and modification work in commercial premises has remained lower than normal especially in those industries that have suffered most from the coronavirus pandemic. Construction material price increases and material availability did not have a significant impact on our business during the second quarter.

During the second half or the year we will concentrate on ensuring our business performance and implementing our strategy. Our strengthened order backlog puts us in a good position to continue positive solid development in the second half of the year as well."

Operating environment

Construction market 2021

European construction market research institution Euroconstruct estimates in its June 2021 report that the entire house building market will grow 1.9 percent in 2021. According to Euroconstruct's assessment, renovation markets will grow 1.1 percent and new construction markets will grow 2.6 percent in 2021.

Although renovation construction is expected to grow in 2021, the coronavirus pandemic continues to cause uncertainty to the short-term demand outlook of renovation. The pandemic is expected to return in some form during autumn, in which case restrictive actions may be unavoidable. So far, the impact of restrictive actions has, however, remained quite moderate, because construction sites have predominantly been able to continue work despite the pandemic.

In housing companies, the corona crisis delayed decision making and renovation project plans during 2020, but if the corona situation allows it, the pent-up renovation needs are expected to boost demand in apartment renovations. According to Euroconstruct, the corona crisis has had both positive and negative effects on the renovations of commercial and public properties, but the overall impact has remained negative. There have been delays in starting work at new renovation sites, but on the other hand activity levels have been even better than normal at work sites where customers or users of the buildings have not been present due to corona restrictions.

According to Statistics Finland's most recent figures, construction material costs continued to rise rapidly in June. Building costs rose by 4.2 percent in June 2021 from the previous year. The prices of materials went up by 5.5 percent and labour costs by 3.5 percent. The prices of services remained unchanged from the previous summer. Prices rose for nearly all building materials, but the price development of steel products and timber has accelerated particularly for several months already. The Confederation of Finnish

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Construction Industries RT's June housing construction survey indicates that housing construction may slow down during the latter part of the year, because raw material shortages and raw material prices both escalated in the beginning of the year, and labour shortages are also increasing.

The renovation market in general

The value of professional renovations in total was nearly 14 billion euro in 2020, with residential building renovations' share amounting to 8.0 billion euro. Most renovations are conducted in apartment buildings and row houses.

Professional renovation has grown nearly continuously in Finland for the past 20 years. Renovations' share of all construction was approximately 47 percent in 2020.

Public service construction, especially schools and hospitals, has grown rapidly in recent years. New construction of schools is estimated to continue active, but on the whole public construction is expected to decline in upcoming years. This will have a considerable impact on the volume development of construction.

The need for facade renovations is growing, mainly due to the age of the building stock in Finland. Residential construction was at its heights in the 1970s and the building technology, facades and structures from that time now require major renovations. However, housing companies from the 1960s have still been renovated most when looking at the value of the renovations in proportion to the net floor area. Housing companies from the 1960s are clearly the largest group especially in building technology renovations.

Building technology renovations are the fastest growing area of renovations, including for example pipeline renovations, heating, ventilation, cooling and electrical renovations. They have made up nearly half of all housing company renovations in recent years. About 70 percent of building technology renovations are pipeline renovations.

Structures and facades are the second largest group, making up nearly 40 percent of all renovations. For financial reasons, facade renovations have had to be postponed in many housing companies to make room for pipeline renovations. According to the Finnish Real Estate Federation's renovation barometer, there is currently almost the same number of facade and pipeline renovations ongoing in housing companies. The barometer estimates that in upcoming years renovation needs will focus increasingly on facades.

Approximately one fifth of renovations are repair and maintenance renovations.

The demand for renovation is maintained by the large building stock of residential buildings from the 1970s and also renovation needs in commercial and office buildings. In the 1980s commercial and office building construction was especially large-scale in Finland, and in the 1990s and early 2000s more commercial and office buildings were built than residential buildings. Premises from that era do not necessarily meet present- day needs. In addition, the growing amount of remote work and online shopping due to the corona pandemic add new challenges to the efficient use of premises.

Megatrends such as aging population, urbanisation and climate change also add to renovation needs. Like new construction, renovation is also estimated to continue concentrating to growth centres.

Climate change mitigation requires for instance improved energy efficiency in buildings, as stipulated in the EU's energy efficiency directive. This is fostered for example with building technology and facade renovations. Adaption to weather variations caused by climate change necessitates meticulous maintenance of facades in particular.

Group structure

Consti is one of Finland's leading companies focused on renovation contracting and technical building services. Consti offers comprehensive renovation and building technology services and selected new construction services to housing companies, corporations, investors and the public sector in Finland's growth centres.

Consti has four business areas: Housing Companies, Corporations, Public Sector and Building Technology. All these also contain Servicing and maintenance services which is not reported as its own business area. Consti however reports its Service operations' sales per financial year. Consti's Service business includes service contracting as well as technical repair and maintenance services to contract customers.

Business areas are reported in one segment. In addition, Consti reports net sales for each business area.

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The Group's parent company is Consti Plc. The business areas operate in two subsidiaries completely owned by the parent company: Consti Korjausrakentaminen Oy (Housing Companies, Corporations and Public Sector) and Consti Talotekniikka Oy (Building Technology).

Long term goals

Consti's mission is to improve the value of the building stock and people's quality of life. Consti's vision is to be "Our customer's number one partner and expert in multiple types of construction". To achieve its vision and goals, Consti has defined strategic focus areas, which are: growth in current businesses, new businesses, improving relative profitability, improving production efficiency, people and management and corporate social responsibility and sustainable development.

The company's long-term financial goals are to achieve:

• Growth: net sales growing faster than the market
• Profitability: EBIT margin exceeding 5 percent
• Free cash flow: Cash conversion ratio exceeding 90 percent
• Balance sheet structure: Net debt to adjusted EBITDA ratio of less than 2.5x
• The Company's aim is to distribute as dividends at least 50 percent of the Company's annual net profit

Net sales, operating result and order backlog

4-6/2021

Consti Group's April-June net sales increased 2.3 percent and were 70.9 (69.3) million euro. Housing Companies net sales were 21.7 (24.8), Corporations net sales were 26.0 (21.6) Public Sector net sales were 8.5 (10.3) and Building Technology net sales were 17.8 (16.5) million euro.

Of the business areas engaged in the construction business, net sales grew in Corporations but decreased in Housing Companies and Public Sector. Net sales in Corporations business area grew in Greater Helsinki area as well as in other areas. In Housing Companies business area activity remained at previous year's level in Greater Helsinki area but due to weaker demand than in previous year, decreased in other areas. The net sales of Building Technology business area increased mainly due to the volume increase in building technology installations business in Tampere area and in Greater Helsinki area.

Operating result (EBIT) for April-June was -0.5 (2.4) million euro. Operating result from net sales was -0.7 (3.4) percent. Adjusted operating result (EBIT) for April-June was 2.9 (2.7) million euro. Adjusted operating result from net sales was 4.1 (3.9) percent. Operationally April-June advanced as expected and projects largely progressed as planned. Due to the arbitral award from the arbitral tribunal in the dispute regarding the construction project of Hotel St. George, an adjusted operating result was taken into use in reporting to show the operating result before items affecting comparability. Items affecting comparability in the reporting period and comparison periods relate to the arbitral tribunal's award received in June 2021, and the legal costs of the procedures.

The order backlog at the end of the reporting period increased 11.5 percent and was 236.2 (211.8) million euro. Order intake value during April-June increased 47.4 percent and was 98.5 (66.8) million euro. The order intake value during April-June was increased inter alia by Public Sector Business Area's new orders related to new construction services totalling EUR 45 million.

1-6/2021

Consti Group's January-June net sales increased 1.4 percent and were 130.2 (128.3) million euro. Housing Companies net sales were 35.1 (41.2), Corporations net sales were 47.8 (42.4) Public Sector net sales were 16.0 (19.6) and Building Technology net sales were 37.0 (31.9) million euro.

Of the business areas engaged in the construction business, net sales grew in Corporations but decreased in Housing Companies and Public Sector. Net sales in Corporations business area grew in Greater Helsinki area as well as in other areas. In Housing Companies business area activity remained at previous year's level in Greater Helsinki area but due to weaker demand than in previous year, decreased in other areas. The net sales of Building Technology business area increased mainly due to the volume increase in building technology installations business in Tampere area and in Greater Helsinki area.

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Operating result (EBIT) for January-June was -0.4 (2.8) million euro. Operating result from net sales was -0.3 (2.2) percent. Adjusted operating result (EBIT) for January-June was 3.4 (3.3) million euro. Adjusted operating result from net sales was 2.6 (2.6) percent. Operationally January-June advanced as expected and projects largely progressed as planned. Due to the arbitral award from the arbitral tribunal in the dispute regarding the construction project of Hotel St. George, an adjusted operating result was taken into use in reporting to show the operating result before items affecting comparability. Items affecting comparability in the reporting period and comparison periods relate to the arbitral tribunal's award received in June 2021, and the legal costs of the procedures.

The order backlog at the end of the reporting period grew 32.8 percent compared to the end of the previous financial year and was 236.2 million euro. The order intake value during January-June increased 30.5 percent and was 168.3 (129.0) million euro. The order intake value during January-June was increased inter alia by Public Sector Business Area's new orders related to new construction services totalling EUR 45 million.

Investments and business combinations

Investments into intangible and tangible goods in April-June were 0.5 (0.4) million euro, which is 0.7 (0.5) percent of the company's net sales. Investments into tangible and intangible assets in January-June were

0.7 (0.7) million euro, which is 0.6 (0.5) percent of net sales. The largest investments were made into property, plant and equipment which primarily include machinery and equipment purchases. Investments into right-of-use assets (IFRS 16) during January-June were EUR 3.9 (0.5) million. The majority of investments into right-of-use assets during the reporting period were related to new headquarters in Helsinki.

Cash flow and financial position

The operating cash flow in April-June before financing items and taxes was -0.9 (8.5) million euro. Free cash flow was -1.4 (8.1) million euro. The cash flow in April-June was affected by tied up working capital during the reporting period. The arbitral award related to Hotel St. George construction project had no impact on the cash flow from operating activities during the second quarter of 2021. The arbitral award will have approximately EUR 2 million positive cash flow impact during the third quarter of 2021.

The January-June operating cash flow before financing items and taxes was -3.5 (10.8) million euro. Free cash flow was -4.3 (10.1) million euro. The cash flow in January-June was affected by tied up working capital during the reporting period. Working capital was tied up as the financial position of project portfolio changed during the reporting period as a few large comprehensive renovation projects progressed towards the handover phase.

Consti Group's cash and cash equivalents on 30 June 2021 were 13.0 (18.7) million euro. In addition, the company has undrawn revolving credit facilities and unused credit limits amounting to 8.0 million euro in total. The Group's interest bearing debts were 33.4 (30.0) million euro. External loans are subject to two financial covenants based on the ratio of the Group's net debt to adjusted EBITDA and gearing. On the balance sheet date, the interest bearing net debt was 20.4 (11.3) million euro and the gearing ratio 76.3 (37.9) percent. At the balance sheet date 30 June 2021, the Group's interest-bearing net debt to adjusted EBITDA ratio was under the covenant's maximum level according to the confirmed calculation principles.

During the half-year reporting period, Consti Plc redeemed the EUR 3.2 million hybrid bond issued on March 2019 in accordance with its terms and conditions. The interest paid on the hybrid bond during the half-year reporting period, EUR 0.4 million in total, was in part paid to persons in managerial positions in the company. The interest on the hybrid bond is recognised as deduction from Group's equity.

The balance sheet total on 30 June 2021 was 113.7 (122.9) million euro. At the end of the reporting period tangible assets in the balance sheet were 8.2 (5.8) million euro. The amount of tangible assets increased as a result of the recording of the right-of-use assets (IFRS 16) related to new headquarters in Helsinki. Equity ratio was 26.9 (31.0) percent.

Within the framework of the EUR 50 million domestic commercial paper program initiated in October 2019, Consti may issue commercial papers with maturity of under one year. During January-June 2021, Consti issued new commercial papers with maturity of under one year amounting to EUR 9.0 million. During the same period, matured total of EUR 8.0 million earlier issued commercial papers.

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