Kreate as an investment

Kreate is one of Finland’s leading infrastructure sector companies focusing on demanding infrastructure construction. Kreate’s offering consists of transport infrastructure construction, including railway, road and street construction, as well as engineered structures, including bridge construction and repair, foundation and concrete engineering, ground engineering and rock engineering. In addition, the company provides services related to the circular economy.

Kreate’s strengths include a stable and countercyclical market, in-demand expertise, impressive references, satisfied customers, competent and motivated personnel, as well as strong profitability.

During the strategy period 2024-2027, Kreate will focus especially on improving profitability. Sustainable profitability is sought, among other things:

• With even more selective offering – we focus on challenging infrastructure and leave the bulk to others
• Continuing to operate with a light balance sheet and excellent net working capital and cash flow management
• By keeping ourselves agile, our cost structure flexible and our risk management processes in order

• Revenue: annual growth of 5-10 % in 2025-2027;
• EBITA margin of above 5 % and
• Net debt to EBITDA below 2.5x.
• Distribute at least half of Kreate’s annual net profit as dividends, taking into account Kreate’s financial position, cash flows and growth opportunities

The construction sector has faced several crises in recent years: the coronavirus pandemic, Russia’s war of aggression and subsequent increases in material and energy prices, as well as general cost inflation and economic downturn. However, Kreate has withstood crises and sees a bright future development in the operating environment.

Five megatrends have a significant impact on our operating environment

Green transition projects mean industrial investments. In April 2024, the portal of the Confederation of Finnish Industries will contain companies’ various investment plans worth nearly EUR 260 billion. For Kreate, green transition projects offer opportunities in the form of groundwork for large data centers, for example.

Finland’s NATO membership and the prevailing geopolitical situation increase the need and significance of rail, road and port infrastructure to the north and western borders and, for example, airport infrastructure from the perspective of Finland’s security of supply and accessibility.

As a result of urbanisation, the infrastructure construction market is concentrated in the largest cities. At the same time, the complexity of infrastructure projects increases, as space is limited in the dense urban environment that has already been built. In addition, construction in urban environments is characterised by demanding soil conditions, construction underground or high above the ground.

The growth of public transport infrastructure is a consequence of both urbanisation and the green transition. The aim is to provide urban dwellers living increasingly densely with an efficient and environmentally friendly public transport system running on rails. Many cities have significant rail investment plans at different stages.

Of the five megatrends, labour shortages are the only ones that do not support Kreate’s business. Kreate’s good reputation as an employer helps recruit the best experts in the field, and the company also cooperates closely with educational institutions in the field. Every year, Every year, Kreate has dozens of students for an internships and also actively recruits them permanently.

Kreate operates in an infrastructure market that is stable by nature and offers historically safe growth. Kreate’s operations emphasise superior technical expertise combined with financially sustainable operations. A strong cash position and balance sheet create conditions for rewarding shareholders with an increasing dividend.

Growth company in a stable and countercyclical market
We specialize in demanding infrastructure construction, which is stable and countercyclical in nature. The more demanding the infrastructure construction project is, the less sensitive the investment decision is to the momentary level of inflation and interest rates. More than half of our net sales come from the public sector, which effectively evens out fluctuations in demand due to economic cycles. In 2022, we expanded into the Swedish infrastructure market, which diversified our offering and improved risk management, reducing our dependence solely on the development of the Finnish market. Historically, infrastructure construction has grown by about 2% per year. Kreate has grown much faster than the market – for the past 7 years we have grown at an annual rate of 12%.

Strong technical expertise with great prospects
We carry out even the most challenging infrastructure projects with great professionalism and listening to the customer. We aim for above-average profitability in the industry with the help of skilled and motivated personnel, significant references and satisfied customers. We also pay special attention to risk management and financially sustainable operations. Instead of growth, we are primarily looking for better profitability. We look to the future and think carefully about what projects we offer and on what terms. Urbanisation, the green transition and the growth of public transport are examples of megatrends that will support our growth in the future.

Good dividend yield
We want to be a stable and reliable dividend payer over economic cycles. Our strong cash flow and good balance sheet position create conditions for both growth and dividends. Our target is to distribute at least half of our annual net profit as dividends, taking into account our financial position, cash flows and growth opportunities. For 2023, the company will pay an increasing dividend again, for the fourth year in a row. The dividend of EUR 0.48 per share corresponds to a dividend yield of 6.6% per share.