YIT announces new strategy and financial targets for 2025-2029, introduces a new segment structure
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- 30.10.2014 07:00 CET
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Interim Report January 1 – September 30, 2014: Active investor sales boosted cash flow and revenue
INTERIM REPORT OCTOBER 30, 2014 AT 8:00 A.M.
Interim Report January 1 – September 30, 2014: Active investor sales boosted cash flow and revenue
Unless otherwise noted, the figures in brackets refer to the corresponding period in the previous year.
July–September 2014 (Segment reporting, POC)
- Revenue increased by 7% to EUR 485.7 (454.7) million. At comparable exchange rates, revenue increased by 10%.
- Operating profit amounted to EUR 33.5 (37.4) million and operating profit margin was 6.9% (8.2).
- The order backlog decreased by 6% from the end of June, amounting to EUR 2,736.0 million.
- Operating cash flow after investments amounted to EUR 40.7 (-82.0) million.
January–September 2014 (Segment reporting, POC)
- Revenue remained at previous year’s level and was EUR 1,340.2 (1,337.6) million. At comparable exchange rates, revenue increased by 4%.
- Operating profit amounted to EUR 95.1 (111.6) million and operating profit margin was 7.1% (8.3).
- Operating cash flow after investments amounted to EUR 12.0 (-164.2) million.
Guidance for 2014 lowered in October
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 6.5–7.3% excluding non-recurring items.
Increased uncertainty over the general macroeconomic development impacts YIT’s business operations and customers.
Kari Kauniskangas, President and CEO:
Active investor sales and efforts to strengthen cash flow started to bear fruit in the third quarter. This was reflected in increased revenue, strong operating cash flow and net debt beginning to decrease.
The result of the Business Premises and Infrastructure segment improved in the third quarter, supported by the sales of self-developed business premises projects. Our strategy of increasing the number of cooperation projects also progressed successfully, as we signed agreements on new alliance contracts. In the Housing segment, revenue grew but profitability declined.
We lowered our guidance for 2014 regarding the operating profit margin in October. Sales in Russia are estimated to fall below the previously projected level, and the operating profit margin is also weighed down by actions implemented throughout the Group to ensure strong cash flow for the remainder of the year. We will continue our efforts to improve project profitability and cash flow within the framework of a new Group-wide competitiveness programme, and our goal is to increase return on investment to 15 per cent and reduce net debt to under EUR 600 million by the end of 2016 in accordance with our new short-term targets.
Our strategic focus areas were kept unchanged as a result of our annual strategy work. However, the significance of financial operating space is emphasised in a changing operating environment, and in order to even out cyclicality, the weighting of Central Eastern Europe will be increased as the third geographic pillar in parallel with Finland and Russia.
Our success depends on continuously improving the customer experience and producing a high added value for the customer. One example of success was YIT project finishing second in the public vote at the Jyväskylä Housing Fair in Finland, which was the highest ranking ever achieved by an apartment building project in voting at the fair.
Key figures
Segment reporting, POC
| EUR million | 7–9/14 | 7–9/13 | Change | 1–9/14 | 1–9/13 | Change | 1–12/13 |
| Revenue | 485.7 | 454.7 | 7% | 1,340.2 | 1,337.6 | 0% | 1,858.8 |
| Housing | 296.4 | 270.4 | 10% | 881.4 | 804.5 | 10% | 1,152.2 |
| Finland, the Baltic countries and Central Eastern Europe | 177.4 | 140.0 | 27% | 537.2 | 460.2 | 17% | 656.2 |
| Russia | 119.0 | 130.4 | -9% | 344.4 | 344.3 | 0% | 496.0 |
| Business Premises and Infrastructure | 188.8 | 181.4 | 4% | 456.9 | 517.2 | -12% | 688.9 |
| Other items | 0.5 | 2.8 | 1.9 | 15.9 | 17.8 | ||
| Operating profit | 33.5 | 37.4 | -10% | 95.1 | 111.6 | -15% | 152.8 |
| Operating profit margin, % | 6.9% | 8.2% | 7.1% | 8.3% | 8.2% | ||
| Operating profit excluding non-recurring items | 33.5 | 37.4 | -10% | 95.1 | 111.6 | -15% | 154.0 |
| Housing | 25.1 | 34.8 | -28% | 84.0 | 100.4 | -16% | 136.3 |
| Finland, the Baltic countries and Central Eastern Europe | 13.3 | 14.7 | -9% | 46.3 | 50.8 | -9% | 66.2 |
| Russia | 11.7 | 20.1 | -42% | 37.7 | 49.6 | -24% | 70.2 |
| Business Premises and Infrastructure | 10.3 | 8.0 | 29% | 17.3 | 21.0 | -17% | 31.0 |
| Other items | -1.8 | -5.4 | -6.3 | -9.8 | -13.4 | ||
| Operating profit margin, % excluding non-recurring items | 6.9% | 8.2% | 7.1% | 8.3% | 8.3% | ||
| Housing | 8.5% | 12.9% | 9.5% | 12.5% | 11.8% | ||
| Finland, the Baltic countries and Central Eastern Europe | 7.5% | 10.5% | 8.6% | 11.0% | 10.1% | ||
| Russia | 9.9% | 15.4% | 10.9% | 14.4% | 14.1% | ||
| Business Premises and Infrastructure | 5.4% | 4.4% | 3.8% | 4.1% | 4.5% | ||
| Profit before taxes | 22.6 | 29.9 | -24% | 66.5 | 90.3 | -26% | 122.8 |
| Profit for the review period1 | 16.8 | 23.1 | -27% | 51.0 | 69.6 | -27% | 93.9 |
| Earnings per share, EUR | 0.13 | 0.18 | -28% | 0.41 | 0.55 | -25% | 0.75 |
| Operating cash flow after investments | 40.7 | -82.0 | 12.0 | -164.2 | -87.9 | ||
| Return on investment (last 12 months), % | 9.1% | 12.3% | 9.1% | 12.3% | 10.3% | ||
| Equity ratio at end of period, % | 35.8% | 37.0% | 35.8% | 37.0% | 37.8% | ||
| Net interest-bearing debt at end of period | 741.6 | 774.4 | -4% | 741.6 | 774.4 | -4% | 707.6 |
| Order backlog at end of period | 2,736.0 | 2,813.4 | -3% | 2,736.0 | 2,813.4 | -3% | 2,713.7 |
Group reporting, IFRS
| EUR million | 7–9/14 | 7–9/13 | Change | 1–9/14 | 1–9/13 | Change | 1–12/13 |
| Revenue | 492.4 | 363.0 | 36% | 1,249.3 | 1,245.7 | 0% | 1,743.0 |
| Operating profit | 28.1 | 11.7 | 140% | 59.6 | 75.0 | -20% | 104.0 |
| Operating profit margin, % | 5.7% | 3.2% | 4.8% | 6.0% | 6.0% | ||
| Profit before taxes | 21.3 | 8.8 | 143% | 43.6 | 67.2 | -35% | 95.0 |
| Profit for the review period1 | 16.3 | 7.6 | 114% | 33.5 | 52.5 | -36% | 70.3 |
| Earnings per share, EUR | 0.13 | 0.06 | 117% | 0.27 | 0.42 | -36% | 0.56 |
| Operating cash flow after investments | 40.7 | -82.0 | 12.0 | -164.2 | -87.9 | ||
| Order backlog at end of period | 3,278.5 | 3,259.5 | 1% | 3,278.5 | 3,259.5 | 1% | 3,184.6 |
| Invested capital at end of period | 1,551.6 | 1,602.9 | -3% | 1,551.6 | 1,602.9 | -3% | 1,556.2 |
| Return on investment (last 12 months), % | 6.1% | 9.8% | 6.1% | 9.8% | 7.0% | ||
| Effective tax rate, % | 23.9% | 13.5% | 23.3% | 22.0% | 26.1% |
1 Attributable to equity holders of the parent company
| 9/14 | 9/13 | Change | 9/14 | 6/14 | Change | 12/13 | |
| Net interest-bearing debt, EUR million | 817.9 | 857.3 | -5% | 817.9 | 860.2 | -5% | 781.7 |
| Gearing ratio, % | 127.2% | 123.7% | 127.2% | 130.4% | 112.0% |
Events after the review period
In October, residential sales to consumers are estimated to be around 150 units in Finland, around 70 units in the Baltic countries and Central Eastern Europe and around 400 units in Russia.
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) October 2014 estimate, the construction of 25,000 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 residential prices in Finland will remain stable on average in 2014, but the polarisation 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. The weakened macroeconomic outlook in Russia is expected to have an effect also on the Baltic economies.
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 on average and that interest rates on mortgages will increase towards the end of the year. The weakened macroeconomic outlook in Russia may have a negative effect on the housing market.
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. Commercial construction is expected to remain unchanged year-on-year, while office construction is slowed down by high vacancy rates (RT, October 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 year-on-year (RT, October 2014). 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 October 30, 2014 at 10:00 a.m. Finnish time (EET) 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. (EET) and a recording of the webcast will be available at approximately 12:00 p.m. (EET) 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. (EET), to number +44 20 3194 0550.
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 | |
| EET (Helsinki) | 08:00 | 10:00 | 12:00 |
| CET (Paris, Stockholm) | 07:00 | 09:00 | 11:00 |
| GMT (London) | 06:00 | 08:00 | 10:00 |
| US EDT (New York) | 02:00 | 04:00 | 06:00 |
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