YIT announces new strategy and financial targets for 2025-2029, introduces a new segment structure
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- Stock Exchange Release
- 28.07.2015 07:00 CET
Interim Report January 1–June 30, 2015: Net debt target reached ahead of schedule, order backlog turned to growth
STOCK EXCHANGE RELEASE JULY 28, 2015 AT 8:00 A.M.
Interim Report January 1–June 30, 2015: Net debt target reached ahead of schedule, order backlog turned to growth
Unless otherwise noted, the figures in brackets refer to the corresponding period in the previous year.
April-June 2015 (Segment reporting, POC)
- Revenue decreased by 8% to EUR 416.1 (451.4) million. At comparable exchange rates, revenue decreased by 5%.
- Operating profit amounted to EUR 18.6 (34.7) million and operating profit margin was 4.5% (7.7%).
- Order backlog increased by 19% from the end of March, amounting to EUR 2,573.5 million.
- Operating cash flow after investments amounted to EUR 113.3 (-16.4) million.
January-June 2015 (Segment reporting, POC)
- Revenue decreased by 7% to EUR 791.0 (854.5) million. At comparable exchange rates, revenue decreased by 2%.
- Operating profit amounted to EUR 39.1 (61.5) million and operating profit margin was 4.9% (7.2%).
- Operating cash flow after investments amounted to EUR 128.4 (-28.7) million.
Guidance for 2015 unchanged (segment reporting, POC)
The Group revenue growth is estimated to be in the range of -5 – 5% at comparable exchange rates.
The operating profit margin excluding non-recurring items is estimated to be below the level of 2014.
Kari Kauniskangas, President and CEO:
One of our most important ambitions for the ongoing strategy period has been to increase the financial operating space. Our cash flow was again very strong in the second quarter of 2015, and we reached our net debt target – set for the end of 2016 – well ahead of schedule. Our order backlog turned to growth in each segment. Actions to increase the financial operating space weigh on our profitability in the short term, but stronger balance sheet, improving the capital efficiency of our business model and solid order backlog enable profitable growth in the coming years.
In the second quarter, we progressed well also in our other strategic focus areas. In the Business Premises and Infrastructure segment, we secured contracts that require special expertise and co-operation projects worth over EUR 400 million. In June, we signed a contract together with Meridiam on the E18 Hamina-Vaalimaa motorway project, and a consortium comprising of YIT, VR Track and Pöyry was selected to carry out the Tampere light rail alliance project.
We are also pleased with the development of our business in the CEE countries. Strong growth saw the CEE countries account for already 11% of our revenue in the second quarter, and a steady improvement in profitability meant that the CEE countries accounted for an even larger share of the operating profit.
In Finnish housing, residential start-ups were on a good level. In addition to securing new investor projects, we increased start-ups for consumers from previous quarters’ levels.
In Russia, housing demand has decreased from last year’s level, but YIT’s decrease in sales has been lower than that of our most significant competitors. However, we are not satisfied with the segment’s current profitability level. We will continue adjusting our operations and strengthening our competitiveness.
Our profitability has also been burdened by capital release measures and changes in the Finnish sales mix but, at the same time, these measures have helped strengthen our balance sheet. We will continue our efforts to improve the capital efficiency, but we will also shift our focus to improving profitability.
We have invested in the future also by hiring more than 500 enthusiastic and committed trainees this year. By investing in trainees, we ensure that YIT will have the necessary competencies and expertise also in the decades to come.
Key figures
Segment reporting, POC
| EUR million | 4–6/15 | 4–6/14 | Change | 1–6/15 | 1–6/14 | Change | 1–12/14 |
| Revenue | 416.1 | 451.4 | -8% | 791.0 | 854.5 | -7% | 1,801.2 |
| Housing Finland and CEE | 207.6 | 187.0 | 11% | 391.2 | 359.9 | 9% | 726.5 |
| Housing Russia | 69.6 | 116.8 | -40% | 140.9 | 225.4 | -37% | 474.1 |
| Business Premises and Infrastructure | 139.0 | 147.0 | -5% | 259.1 | 268.1 | -3% | 599.3 |
| Other items | -0.1 | 0.6 | -0.3 | 1.2 | 1.4 | ||
| Operating profit | 18.6 | 34.7 | -46% | 39.1 | 61.5 | -37% | 114.0 |
| Operating profit margin, % | 4.5% | 7.7% | 4.9% | 7.2% | 6.3% | ||
| Operating profit excluding non-recurring items |
18.6 | 34.7 | -46% | 39.1 | 61.5 | -37% | 126.4 |
| Housing Finland and CEE | 16.2 | 16.2 | 0% | 30.3 | 32.9 | -8% | 63.7 |
| Housing Russia | 2.3 | 13.8 | -84% | 8.5 | 25.9 | -67% | 55.8 |
| Business Premises and Infrastructure | 3.9 | 6.9 | -43% | 7.0 | 7.1 | -1% | 20.4 |
| Other items | -3.8 | -2.1 | -6.8 | -4.4 | -13.5 | ||
| Operating profit margin, % excluding non-recurring items | 4.5% | 7.7% | 4.9% | 7.2% | 7.0% | ||
| Housing Finland and CEE | 7.8% | 8.6% | 7.8% | 9.2% | 8.8% | ||
| Housing Russia | 3.2% | 11.8% | 6.0% | 11.5% | 11.8% | ||
| Business Premises and Infrastructure | 2.8% | 4.7% | 2.7% | 2.6% | 3.4% | ||
| Profit before taxes | 11.2 | 25.7 | -56% | 21.5 | 43.9 | -51% | 75.0 |
| Profit for the review period1 | 8.4 | 20.0 | -58% | 16.3 | 34.2 | -53% | 56.6 |
| Earnings per share, EUR | 0.07 | 0.16 | -58% | 0.13 | 0.27 | -53% | 0.45 |
| Operating cash flow after investments | 113.3 | -16.4 | 128.4 | -28.7 | 151.9 | ||
| Return on investment (last 12 months), % |
6.4% | 9.6% | 6.4% | 9.6% | 7.7% | ||
| Equity ratio at end of period, % | 36.0% | 36.4% | 36.0% | 36.4% | 32.4% | ||
| Net interest-bearing debt at end of period |
544.9 | 776.3 | -30% | 544.9 | 776.3 | -30% | 616.6 |
| Order backlog at end of period | 2,573.5 | 2,923.9 | -12% | 2,573.5 | 2,923.9 | -12% | 2,125.9 |
1 Attributable to equity holders of the parent company
Group reporting, IFRS
| EUR million | 4–6/15 | 4–6/14 | Change | 1–6/15 | 1–6/14 | Change | 1–12/14 |
| Revenue | 462.9 | 353.7 | 31% | 856.8 | 756.9 | 13% | 1,778.6 |
| Operating profit | 24.6 | 8.3 | 195% | 51.7 | 31.5 | 64% | 94.8 |
| Operating profit margin, % | 5.3% | 2.4% | 6.0% | 4.2% | 5.3% | ||
| Operating profit excluding non-recurring items |
24.6 | 8.3 | 195% | 51.7 | 31.5 | 64% | 107.3 |
| Operating profit margin, % excluding non-recurring items |
5.3% | 2.4% | 6.0% | 4.2% | 6.0% | ||
| Profit before taxes | 22.5 | 3.5 | 542% | 44.9 | 22.3 | 102% | 74.3 |
| Profit for the review period1 | 17.7 | 2.7 | 559% | 35.2 | 17.3 | 104% | 55.9 |
| Earnings per share, EUR | 0.14 | 0.02 | 559% | 0.28 | 0.14 | 104% | 0.44 |
| Operating cash flow after investments |
113.3 | -16.4 | 128.4 | -28.7 | 151.9 | ||
| Order backlog at end of period | 2,914.6 | 3,480.3 | -16% | 2,914.6 | 3,480.3 | -16% | 2,507.1 |
| Invested capital at end of period | 1,311.0 | 1,594.9 | -18% | 1,311.0 | 1,594.9 | -18% | 1,431.0 |
| Return on investment (last 12 months), % |
8.1% | 5.2% | 8.1% | 5.2% | 6.4% | ||
| Effective tax rate, % | 21.8% | 25.0% | 21.9% | 22.8% | 24.9% |
1 Attributable to equity holders of the parent company
| 6/15 | 6/14 | Change | 6/15 | 3/15 | Change | 12/14 | |
| Net interest-bearing debt, EUR million |
587.3 | 860.2 | -32% | 587.3 | 678.0 | -13% | 696.0 |
| Gearing ratio, % | 98.7% | 130.4% | 98.7% | 117.3% | 129.9% | ||
| Equity ratio, % | 33.8% | 32.2% | 33.8% | 32.1% | 29.2% |
Events after the review period
In July, residential sales to consumers are estimated to be around 90 units in Finland, around 60 units in the CEE countries and around 200 units in Russia.
Outlook for 2015
Guidance (segment reporting, POC)
The Group revenue growth is estimated to be in the range of -5 – 5% at comparable exchange rates.
The operating profit margin excluding non-recurring items is estimated to be below the level of 2014.
In addition to the market outlook, the guidance is based on the following factors: At the end of June, 48% of YIT’s order backlog was sold. Projects already sold and signed pre-agreements are estimated to contribute over 50% of the Q3-Q4 revenue. The rest of the revenue estimate is based on estimated new sales during the remainder of the year and capital release actions.
In addition to the demanding market situation especially in Russia, operating profit margin excluding non-recurring items will be burdened by the following factors: The share of revenue coming from residential sales to investors, which has lower margin than consumer sales, and contracting are estimated to increase in Finland. Over half of the over EUR 380 million capital release program, started in autumn 2013, had been carried out in the end of June. The execution of the program will continue actively in 2015, and the capital release actions are estimated to have a negative effect on the operating profit margin.
Market outlook
Finland
In Finland, the macroeconomic uncertainty is estimated to affect the residential and business premises markets also in 2015.
Consumers are cautious, and the demand is expected to focus on small apartments in growth centres, whereas the investor demand is expected to remain good. Residential price development is estimated to be polarized especially between small and large apartments. Access to mortgage financing is estimated to remain good.
In Finland, the demand for business premises is estimated to remain modest. The real estate investors’ interest is estimated to remain on a moderate level with focus on prime locations in the capital region. Opportunities are seen in contracting, but there will be fewer large projects in the tendering phase compared to the beginning of the year.
Russia
The visibility is weak in Russia and economic uncertainty is estimated to continue to have a negative impact also on the residential market. The construction costs are estimated to increase, while residential price development involves uncertainties. The demand is estimated to focus especially on small apartments that are either close to completion or completed.
The mortgage rates for new apartments are expected to remain stable thanks to the government’s mortgage subsidy program.
The CEE countries
In the CEE countries the residential and business premises markets are expected to be supported by the improved economic situation. Access to mortgage financing is estimated to remain good and residential prices to increase moderately.
News conference for investors and media
YIT will arrange a news conference on July 28, 2015 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 noon (EEST) at the same address.
Conference call
The news conference can be participated also through a conference call. Conference call participants arerequested to dial in at least five minutes prior to the start of the conference, at 9:55 a.m. (EEST), to number +44 20 319 405 52.
During the webcast and conference call, all questions should be presented in English. At the end of the event, the media has the opportunity 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 and M&A, 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 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 taking care of our customers, partners and personnel. We have nearly 6,000 employees in seven countries. In 2014, our revenue amounted to around EUR 1.8 billion. Our share is listed on NASDAQ OMX Helsinki. www.yitgroup.com