YIT announces new strategy and financial targets for 2025-2029, introduces a new segment structure
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- Stock Exchange Release
- 24.07.2014 07:00 CET
Interim Report January 1 – June 30, 2014: Growth in Housing, progress in capital release
INTERIM REPORT JULY 24, 2014 AT 8:00 A.M.
Interim Report January 1 – June 30, 2014: Growth in Housing, progress in capital release
Unless otherwise noted, the figures in brackets refer to the corresponding period in the previous year.
April–June 2014 (Segment reporting, POC)
- Revenue increased by 5% to EUR 451.4 (430.9) million. At comparable exchange rates, revenue increased by 9%.
- Operating profit amounted to EUR 34.7 (38.3) million and operating profit margin was 7.7% (8.9).
- The order backlog increased by 8% from the end of March, amounting to EUR 2,923.9 million.
- Operating cash flow after investments amounted to EUR -16.4 (-76.9) million.
January–June 2014 (Segment reporting, POC)
- Revenue decreased by 3% to EUR 854.5 (882.9) million. At comparable exchange rates, revenue increased by 1%.
- Operating profit amounted to EUR 61.5 (74.2) million and operating profit margin was 7.2% (8.4).
- Operating cash flow after investments amounted to EUR -28.7 (-82.2) million.
Guidance for 2014 specified
The Group revenue based on segment reporting is estimated to grow by 0–5% at comparable exchange rates. The operating profit margin based on segment reporting is estimated to be in the range of 7.5–8.0% excluding non-recurring items.
Continuing uncertainty over the general macroeconomic development impacts YIT’s business operations and customers. Prolongation and escalation of the Ukrainian crisis would probably have a negative effect on YIT’s business operations.
Previously, YIT estimated that the Group revenue based on segment reporting would grow by 0–10% at comparable exchange rates, and the operating profit margin based on segment reporting was estimated to be in the range of 7.5–8.5% excluding non-recurring items.
Kari Kauniskangas, President and CEO:
I am satisfied with the result we achieved in the second quarter, taking into account the continued challenging market situation in Finland and the impact of capital release on profitability.
In the Housing segment, revenue grew in Finland, the Baltic countries and Central Eastern Europe, and also in Russia at comparable exchange rates, although the growth slowed down in Russia after the exceptionally strong beginning of the year.
The result of the Business Premises and Infrastructure segment improved, as expected, from the weak level seen in the first quarter after infrastructure projects regained full speed. Our most significant projects progressed according to plan. We also signed new road maintenance agreements and won contracts that supported our order backlog. We also took promising steps in leasing business premises and sales to investors.
We carried on our efforts to improve capital efficiency: we continued active sales and signed for example a EUR 50 million agreement on plot cooperation to be implemented in 2014. We expect our measures to release capital to produce results in the second half of 2014. Cash flow in the second quarter remained slightly negative, but we target positive cash flow after investments and dividends on a full-year level. Our priorities remain unchanged for the second half of the year, and we will thus continue our efforts to improve customer focus, cost-efficiency, cash flow and capital efficiency.
Key figures
Segment reporting, POC
| EUR million | 4–6/14 | 4–6/13 | Change | 1–6/14 | 1–6/13 | Change | 1–12/13 |
| Revenue | 451.4 | 430.9 | 5% | 854.5 | 882.9 | -3% | 1,858.8 |
| Housing | 303.8 | 247.9 | 23% | 585.1 | 534.1 | 10% | 1,152.2 |
| Finland, the Baltic countries and Central Eastern Europe | 187.0 | 131.6 | 42% | 359.9 | 320.2 | 12% | 656.2 |
| Russia | 116.8 | 116.3 | 0% | 225.4 | 214.0 | 5% | 496.0 |
| Business Premises and Infrastructure | 147.0 | 177.0 | -17% | 268.1 | 335.7 | -20% | 688.9 |
| Other items | 0.6 | 6.1 | 1.4 | 13.1 | 17.8 | ||
| Operating profit | 34.7 | 38.3 | -9% | 61.5 | 74.2 | -17% | 152.8 |
| Operating profit margin, % | 7.7% | 8.9% | 7.2% | 8.4% | 8.2% | ||
| Operating profit excluding non-recurring items | 34.7 | 38.3 | -9% | 61.5 | 74.2 | -17% | 154.0 |
| Housing | 30.0 | 30.6 | -2% | 58.9 | 65.6 | -10% | 136.3 |
| Finland, the Baltic countries and Central Eastern Europe | 16.2 | 13.7 | 18% | 32.9 | 36.1 | -9% | 66.2 |
| Russia | 13.8 | 17.0 | -19% | 25.9 | 29.5 | -12% | 70.2 |
| Business Premises and Infrastructure | 6.9 | 9.9 | -31% | 7.1 | 13.0 | -46% | 31.0 |
| Other items | -2.1 | -2.2 | -4.4 | -4.4 | -13.4 | ||
| Operating profit margin, % excluding non-recurring items | 7.7% | 8.9% | 7.2% | 8.4% | 8.3% | ||
| Housing | 9.9% | 12.3% | 10.1% | 12.3% | 11.8% | ||
| Finland, the Baltic countries and Central Eastern Europe | 8.6% | 10.4% | 9.2% | 11.3% | 10.1% | ||
| Russia | 11.8% | 14.6% | 11.5% | 13.8% | 14.1% | ||
| Business Premises and Infrastructure | 4.7% | 5.6% | 2.6% | 3.9% | 4.5% | ||
| Profit before taxes | 25.7 | 29.8 | -14% | 43.9 | 60.4 | -27% | 122.8 |
| Profit for the review period1 | 20.0 | 23.0 | -13% | 34.2 | 46.4 | -26% | 93.9 |
| Earnings per share, EUR | 0.16 | 0.18 | -11% | 0.27 | 0.37 | -27% | 0.75 |
| Operating cash flow after investments | -16.4 | -76.9 | -28.7 | -82.2 | -87.9 | ||
| Return on investment (last 12 months), % |
9.6% | 13.9% | 9.6% | 13.9% | 10.3% | ||
| Equity ratio at end of period, % | 36.4% | 38.5% | 36.4% | 38.5% | 37.8% | ||
| Order backlog at end of period | 2,923.9 | 2,810.8 | 4% | 2,923.9 | 2,810.8 | 4% | 2,713.7 |
1 Attributable to equity holders of the parent company
Group reporting, IFRS
| EUR million | 4–6/14 | 4–6/13 | Change | 1–6/14 | 1–6/13 | Change | 1–12/13 |
| Revenue | 353.7 | 437.1 | -19% | 756.9 | 882.7 | -14% | 1,743.0 |
| Operating profit | 8.3 | 32.3 | -74% | 31.5 | 63.3 | -50% | 104.0 |
| Operating profit margin, % | 2.4% | 7.4% | 4.2% | 7.2% | 6.0% | ||
| Profit before taxes | 3.5 | 28.2 | -88% | 22.3 | 58.5 | -62% | 95.0 |
| Profit for the review period1 | 2.7 | 22.0 | -88% | 17.3 | 44.9 | -62% | 70.3 |
| Earnings per share, EUR | 0.02 | 0.18 | -89% | 0.14 | 0.36 | -61% | 0.56 |
| Operating cash flow after investments | -16.4 | -76.9 | -28.7 | -82.2 | -87.9 | ||
| Order backlog at end of period | 3,480.3 | 3,176.0 | 10% | 3,480.3 | 3,176.0 | 10% | 3,184.6 |
| Invested capital at end of period | 1,594.9 | 1,492.5 | 7% | 1,594.9 | 1,492.5 | 7% | 1,556.2 |
| Return on investment (last 12 months), % |
5.2% | 12.6% | 5.2% | 12.6% | 7.0% | ||
| Effective tax rate, % | 25.0% | 22.8% | 22.8% | 23.3% | 26.1% |
1 Attributable to equity holders of the parent company
| 6/14 | 6/13 | Change | 6/14 | 3/14 | Change | 12/13 | |
| Net interest-bearing debt, EUR million |
860.2 | 764.4 | 13% | 860.2 | 840.3 | 2% | 781.7 |
| Gearing ratio, % | 130.4% | 109.8% | 130.4% | 132.1% | 112.0% |
Events after the review period
In July, YIT’s residential sales in Finland have been at previous year’s level. Respectively, sales have increased in the Baltic countries and Central Eastern Europe. In Russia, residential sales have been below the previous year’s level in July.
Market outlook for 2014
Housing
In the long term, residential demand in Finland will be supported by migration to growth centres. Furthermore, the population and the number of households will increase with continued migration and the increasing number of one-person households. YIT estimates that the demand for small apartments, in particular, will remain good.
Apartment start-ups are expected to decrease in Finland. According to RT’s (Confederation of Finnish Construction Industries) June 2014 estimate, the construction of 26,500 apartments will start in Finland during 2014. According to a report published by VTT Technical Research Centre of Finland in January 2012, the annual need for the production of new apartments amounts to 24,000–29,000 apartments.
YIT estimates that housing prices in Finland will remain stable on average in 2014, but the regional divergence of prices will continue. The increase in construction costs is expected to be moderate. The interest rates of mortgages are forecasted to remain low. However, the macroeconomic uncertainty and consumer confidence being below the long-term average are expected to continue to affect the Finnish housing market.
Residential demand in the Baltic countries is expected to be supported by economic growth. Furthermore, the poor condition of residential buildings creates a need for new, high-quality apartments. The volume of residential construction is estimated to grow in the Baltic countries and Slovakia (Forecon and Euroconstruct, June 2014). Euroconstruct (June, 2014) estimated that residential start-ups will decline slightly in the Czech Republic. YIT estimates that housing prices will increase slightly in the Baltic countries and Central Eastern Europe.
In Russia, the volume of residential construction is estimated to remain unchanged from the previous year (Forecon, June 2014). YIT estimates that housing prices in Russia will remain stable and that interest rates on mortgages will increase in the second half of 2014. The weakened macroeconomic outlook in Russia may have a negative effect on the housing market. Prolongation and escalation of the Ukrainian crisis would probably have a negative effect on YIT’s business operations.
The long-term outlook for Russian residential construction is good. Living space per person is still clearly lower than in Western Europe and housing is in poor condition, which creates the need for new, high-quality housing. Furthermore, the middle class is expected to grow in proportion to the population and the number of households is expected to increase. The development of the mortgage market in Russia has also contributed to the expansion of the potential buyer base. YIT has promoted the availability of mortgages to consumers through extensive cooperation with partner banks.
Business Premises and Infrastructure
The demand for business premises is expected to remain weak in Finland. Retail construction is expected to increase by 17%, while office construction is expected to contract by 13% in 2014 (Euroconstruct, June 2014). Real estate investors’ interest in good projects in prime locations is expected to be good, and long-term tenants are appreciated.
In the Baltic countries, business premises construction is estimated to increase by 9% in 2014 (Forecon, June 2014). In Slovakia, business premises construction is expected to decrease by 8% in 2014 (Euroconstruct, June 2014).
Infrastructure construction in Finland is estimated to decrease slightly in comparison with 2013 (Euroconstruct, June 2014). The competition is expected to remain tight, especially for smaller contracts. The government is expected to initiate further investment into the rail network in the capital region (west metro extension).
News conference for investors and media
YIT will arrange a news conference on July 24, 2014 at 10:00 a.m. Finnish time (EEST) at YIT's head office, Panuntie 11, 00620 Helsinki, Finland. The event is in English and targeted for analysts, portfolio managers and the media.
Webcast
The news conference and presentation by the President and CEO of YIT Corporation Kari Kauniskangas can also be followed through a live webcast at www.yitgroup.com/webcast. The live webcast starts at 10:00 a.m. (EEST) and a recording of the webcast will be available at approximately 12:00 p.m. (EEST) at the same address.
Conference call
The news conference can be participated also through a conference call. Conference call participants are requested to dial in at least five minutes prior to the start of the conference, at 9:55 a.m. (EEST), to number +44 207 660 2079.
During the webcast and conference call, all questions should be presented in English. At the end of the event the media has the possibility to ask questions also in Finnish.
Schedule in different time zones
| Interim Report published | The investor and analyst event, conference call and live webcast |
Recorded webcast available |
|
| EEST (Helsinki) | 08:00 | 10:00 | 12:00 |
| CEST (Paris, Stockholm) | 07:00 | 09:00 | 11:00 |
| BST (London) | 06:00 | 08:00 | 10:00 |
| US EDT (New York) | 01:00 | 03:00 | 05:00 |
For additional information, please contact:
Timo Lehtinen, Chief Financial Officer, YIT Corporation, tel. +358 45 670 0626, timo.lehtinen@yit.fi
Sanna Kaje, Vice President, Investor Relations, YIT Corporation, tel. +358 50 390 6750, sanna.kaje@yit.fi
YIT CORPORATION
Kari Kauniskangas
President and CEO
Distribution: NASDAQ OMX, principal media, www.yitgroup.com
YIT is a construction industry leader. We create better living environments in Finland, Russia, the Baltic countries, the Czech Republic and Slovakia. Over 100 years of experience have secured for us a strong market position: We are the largest housing developer and one of the largest business premises and infrastructure developers in Finland, and the most significant foreign housing and area developer in Russia. Our vision is to stay one step ahead – while caring for our customers, partners and personnel. We have more than 6,000 employees in seven countries. In 2013, our revenue amounted to nearly EUR 1.9 billion. Our share is listed on Nasdaq OMX Helsinki. www.yitgroup.com