Consti - Unfortunate one-off earnings hit

Arbitration proceedings to an end
The arbitration proceedings between Consti’s subsidiary Consti Korjausrakentaminen Oy and Kiinteistö Oy Yrjönkatu 13 relating to the Hotel St. George construction project came to a conclusion. Compensations amounted to EUR 0.7m for the former and EUR 0.9m for the latter, along with penalty interest. The net receivable related to the project in Consti’s balance sheet was approximately EUR 3m at the end of Q1/2021. Costs relating to the arbitral award will be recorded in Consti’s Q2/2021 results. The positive impact on cash flow is approximately EUR 2m. As a result of the arbitral award Consti lowered its operating result estimate range for 2021 to EUR 4-8m from the previous 7-11m.

Operating result estimate for 2021 down by EUR 3m
With the net compensation close to even the impact on the operating result will be around EUR 3m due to the cancellation of receivables in Consti’s balance sheet. The income statement will be partly effected through revenue and partly costs and we have revised our Q2/2021 estimate for revenue and operating result to EUR 68.5m (EUR 70.5m) and EUR -0.4m (EUR 2.6m). Our revisions solely reflect the outcome of the arbitration proceedings, as operational performance appears to have remained in line with expectations. The outcome, although unfortunate, is essentially a one-off item and ultimately did have a positive cash flow impact.

HOLD with a target price of EUR 13.0
We make no adjustments to our target price or rating based on the outcome of the arbitration proceedings due to the one-off nature. Our target price of EUR 13.0 values Consti at 16.6x 2021 P/E (excl. arbitration proceedings items).