Kreate Group Plc Interim Report January-September 2022
This release is a summary of Kreate Group’s Interim Report January–September 2022. The complete Interim Report is attached, and also available on the company’s website at https://kreate.fi/en/investor/releases-and-reports/reports/.
Kreate's Interim Report: Revenue and order backlog grew to record levels – cost inflation brought down operating profit
July–September in brief
- Order backlog amounted to
EUR 284.2 (202.8) million - Revenue grew compared to the reference period, amounting to EUR 73.3 (70.6) million
- Year-on-year change in revenue was 3,9% (8,0%)
- EBITDA was EUR 4.2 (5.1) million, amounting to 5.7 (7.2) per cent of revenue
- EBITA was EUR 3.0 (4.1) million, amounting to 4.1 (5.8) per cent of revenue
-
Earnings per share were
EUR 0.23 (0.34) -
Free cash flow from operating activities was
EUR -10.1 (-0.2) million - Interest-bearing net debt was EUR 46.8 (28.1) million
-
Guidance updated 30th of September: Revenue will grow and amount to EUR 250–260 million. EBITA will decrease to a level of
EUR 8 .5–9.5 million.
January–September in brief
- Revenue grew compared to the reference period, amounting to EUR 190.8 (161.8) million
- Year-on-year change in revenue was 17,9% (-6,6%)
- EBITDA was EUR 9.8 (10.1) million, amounting to 5.2 (6.3) per cent of revenue
- EBITA was EUR 6.5 (7.5) million, amounting to 3.4 (4.6) per cent of revenue
-
Earnings per share were
EUR 0.49 (0.52) -
Free cash flow from operating activities was
EUR -11.7 (-3.8) million
Development of the operating environment
In its October assessment, the
With the changes in the operating environment and the degraded outlook, construction is expected to decline by two per cent in 2023. The slowing down of multi-storey construction, delays in infrastructure investments and the downturn in the economy of the government and municipalities will, in particular, contribute to the decline. However,
In January–September, the construction industry and project profitability were affected by availability constraints and price challenges in terms of materials as well as the growing energy, fuel and raw material costs. On the other hand, towards the end of H1, there were clear positive signals of the material price levels stabilising. Even though the prices remain at a high level, the development and cyclicity of costs continued to stabilise during the third quarter, while also increasing predictability in tendering.
Early in the year, the government and largest cities continued to launch projects as in previous years, but the cuts made in the
Despite the weaker government economy and outlook of infrastructure construction, the National Transport System Plan is expected to continue bring long-term developments exceeding individual governments’ terms in office to the development of the transport network. However, the municipalities’ growing share of construction costs remains problematic; this may mean that projects are not executed and the condition of the road and street network and railways as well as the light rail network will continue to deteriorate. At the moment, the market outlook is that only the largest cities will continue their investments in construction. An economic downturn does not support the rapid increase of construction needs or the reduction of the maintenance backlog. The construction industry remains ready to drive economic growth, but the demand for construction is also largely affected by the stakeholders’ ability to renew themselves and the tolerance of the government’s economy.
Any possible stimulus activities from the public sector and the transition away from fossil fuels towards renewable energy alternatives will also create markets and opportunities for infrastructure actors. The infrastructure projects subjected to cuts in the near future are likely to start in the longer term, as the maintenance backlog keeps growing. Urbanisation, the infrastructure maintenance backlog and public sector projects are expected to continue to drive growth.
In its strategy, Kreate has chosen its business functions according to areas of structural engineering and transport infrastructure construction that will grow in the long term in line with the megatrends. Specialisation in demanding and versatile infrastructure is significantly more sustainable across business cycles and downturns than focusing on basic infrastructure construction. The regularly starting projects in the private sector, especially in the fields of industry and trade, create demand for an actor like Kreate. Furthermore, Kreate’s expansion into
Despite the slowdown in public sector tendering during the third quarter, Kreate estimates that the overall market for suitable structural construction and transport infrastructure construction in 2022 will remain around the level of the previous year.
Key figures
EUR million | 7–9/2022 | 7–9/2021 | 1–9/2022 | 1–9/2021 | 1–12/2021 |
Order backlog |
|
| 284.2 | 202.8 | 202.8 |
Revenue | 73.3 | 70.6 | 190.8 | 161.8 | 237.6 |
Year-on-year change in revenue, % | 3.9 | 8.0 | 17.9 | -6.6 | 1.0 |
EBITDA | 4.2 | 5.1 | 9.8 | 10.1 | 14.2 |
EBITDA, % | 5.7 | 7.2 | 5.2 | 6.3 | 6.0 |
EBITA | 3.0 | 4.1 | 6.5 | 7.5 | 10.5 |
EBITA, % | 4.1 | 5.8 | 3.4 | 4.6 | 4.4 |
Operating profit | 2.9 | 4.1 | 6.3 | 7.3 | 10.4 |
Operating profit, % | 4.0 | 5.8 | 3.3 | 4.5 | 4.4 |
Result for the period | 2.1 | 3.1 | 4.4 | 4.5 | 6.9 |
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Capital employed |
|
| 88.0 | 66.7 | 62.0 |
Return on capital employed, % |
|
| 12.1 | 15.3 | 17.8 |
Return on equity, % |
|
| 17.0 | 15.6 | 20.4 |
Net investments in operating activities | -0.8 | -0.6 | -3.7 | -3.5 | -4.9 |
Free cash flow from operating activities | -10.1 | -0.2 | -11.7 | -3.8 | 4.0 |
Net working capital |
|
| 17.0 | 3.8 | -0.0 |
Net debt |
|
| 46.8 | 28.1 | 20.9 |
Net debt/EBITDA, rolling 12 months |
|
| 3.4 | 2.1 | 1.5 |
Net debt/EBITDA, rolling 12 months pro forma |
|
| 3.1 |
|
|
Equity ratio, % |
|
| 29.7 | 32.3 | 38.6 |
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Earnings per share, € | 0.23 | 0.34 | 0.49 | 0.52 | 0.80 |
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Personnel at the end of the period |
|
| 450 | 392 | 385 |
Personnel on average | 428 | 398 | 403 | 392 | 392 |
President & CEO Timo Vikström:
“In the third quarter, we took systematic and efficient steps on our strategic path to growth. In September, we both executed a business acquisition and extended our expertise in railway construction with electric railway and safety device business areas. The business acquisition reinforces our foothold in
At the end of the reporting period, we reported that we are lowering our EBITA guidance for the current financial year and specifying our revenue growth forecast. Even though our strong order backlog, specialisation in demanding construction and the stable infrastructure construction market have supported the company’s revenue and order backlog as expected, the impacts of cost inflation within our operating environment are partially unavoidable. Long-term projects started in earlier years that are not bound to an index and, in particular, the increase in fuel costs and energy prices will impact the development of EBITA and relative profitability more than estimated during the current financial year. However, for the projects started this year, we have been able to account for changes in the cost level better than earlier, and cost inflation is not expected to affect the next year’s results in the long-term projects.
Kreate’s net sales of the third quarter rose to a higher level compared to the comparison period, and the operating result decreased. Revenue for the January–September was
Our order backlog grew by
At the moment, the impact of external factors on the development of the construction market is stronger than it has been in decades. The increase of interest rates, high level of inflation, an imbalance in the public finances and many other factors have made Finland’s position more difficult in the international competition for investments and slowed down public sector tendering activities domestically. For years, the construction industry has been the driver of growth in the Finnish economy, and it continues to hold the keys to continuing the positive development in the future. In order to ensure this, however, all stakeholders in the construction cluster need to make an effort.
Where there is a will, there is also a way to improve the situation. Fluent zoning, functional legislation and an enabling financial market can keep housing costs in check even in a declining housing market. A sufficient level of housing production would also reflect positively on the foundation and special foundation construction markets. Finland’s logistics capabilities, safety and competitiveness, for their part, can be ensured by creating functional financing models for large traffic investments and ensuring a sufficient level of investment for basic transport infrastructure maintenance. The increase in energy efficiency and reduction in emissions required by the green transition are popular topics, and in construction, they can be achieved by means of the circular economy, smart land use and investments in energy-efficient repair construction.
With the right mindset and genuine cooperation, construction can continue to act as a growth driver in the Finnish economy. Despite the uncertainty on the global stage, our outlook on the future is positive: The projects regularly starting on the private sector provide opportunities for a company like us that specialises in demanding infrastructure construction, and our strong expertise gives us fairly good prerequisites for succeeding even on a more challenging market.”
Result guidance for 2022 (published on 30 September 2022)
Kreate estimates that the company’s revenue (2021:
Justifications:
Kreate’s strong order backlog and specialisation in demanding construction as well as the stable infrastructure construction market have supported the company’s revenue and order backlog as expected. The Highway 180 Kirjalansalmi and Hessundinsalmi bridge renovation project, which will launch in Q4, is already increasing the revenue for 2022 and is an excellent example of Kreate’s strong expertise and competitiveness.
The changes in the operating environment due to cost inflation, which are particularly reflected in increased fuel costs and energy prices, as well as the earlier long-term projects that are not bound to an index will impact the development of EBITA and relative profitability more than estimated during the 2022 financial year. Long-term projects or general cost inflation are not expected to impact the result in 2023. In the contracts signed in 2022, attempts have been made to take the changes in the cost level into account better than before through contractual means.
Furthermore, the company’s accelerated strategic expansion to the electric railway and safety device business, which was announced in September, will result in one-time costs in 2022. However, the investments made at this time will enable the more effective implementation of growth plans in railway construction in the coming years.
Previous result guidance for 2022 (published on
Kreate estimates that its revenue (2021:
Justifications:
Kreate’s strong order backlog and specialisation in demanding construction as well as the stable infrastructure construction market support the company’s strategic growth forecast.
Kreate Group’s financial reporting
The planned publication date for Kreate Group Plc’s financial statements bulletin in 2023
Financial statement bulletin for 2022:
Webcast event for analysts and media
A live webcast for analysts and media will be held today,
Communications Manager
Distribution: Nasdaq Helsinki, key media, kreate.fi/en
Contacts
Mikko Laine , CFO, Kreate Group Oyj, +358 50 599 9201, mikko.laine@kreate.fi- Timo Vikström, President & CEO, Kreate Group Oyj, +358 400 740 057, timo.vikstrom@kreate.fi
About Kreate Group Oyj
Attachments
- Download announcement as PDF.pdf
Kreate Group Interim Report Q3-2022.pdf
© STT Info Finland, source