YIT announces new strategy and financial targets for 2025-2029, introduces a new segment structure
Back
- Stock Exchange Release
- 29.10.2015 07:00 CET
Interim Report January 1–September 30, 2015: Net debt continued to decrease, focus shifted towards profitability
STOCK EXCHANGE RELEASE OCTOBER 29, 2015 AT 8:00 A.M.
Interim Report January 1–September 30, 2015: Net debt continued to decrease, focus shifted towards profitability
Unless otherwise noted, the figures in brackets refer to the corresponding period in the previous year.
July-September 2015 (Segment reporting, POC)
- Revenue decreased by 19% to EUR 391.7 (485.7) million. At comparable exchange rates, revenue decreased by 13%.
- Operating profit excluding non-recurring items amounted to EUR 20.3 (33.5) million and operating profit margin excluding non-recurring items was 5.2% (6.9%).
- Non-recurring items amounted to EUR -10.4 million.
- Order backlog decreased by 10% from the end of June, amounting to EUR 2,314.6 million.
- Operating cash flow after investments amounted to EUR 11.9 (40.7) million.
January-September 2015 (Segment reporting, POC)
- Revenue decreased by 12% to EUR 1,182.7 (1,340.2) million. At comparable exchange rates, revenue decreased by 6%.
- Operating profit excluding non-recurring items amounted to EUR 59.4 (95.1) million and operating profit margin excluding non-recurring items was 5.0% (7.1%).
- Non-recurring items amounted to EUR -10.4 million.
- Operating cash flow after investments amounted to EUR 140.3 (12.0) million.
Guidance for 2015 specified (segment reporting, POC)
The Group revenue growth is estimated to be in the range of -5–0% at comparable exchange rates.
The operating profit margin excluding non-recurring items is estimated to be in the range of 4–5%.
Previously, YIT estimated that the Group revenue growth would be in the range of -5 – 5% at comparable exchange rates, and the operating profit margin excluding non-recurring items to be below the level of 2014.
Kari Kauniskangas, President and CEO:
In September, we published our updated strategic focus areas: profitability, growth initiatives and further improving the capital efficiency. Continued strong cash flow and reaching the targeted net debt level have allowed a gradual shift of focus to profitability and growth. The third quarter was the fifth consecutive quarter of positive operating cash flow after investments, and net debt continued to decrease.
In Housing Finland and CEE, strong growth continued in the CEE countries during the third quarter. I consider it important for the future that we were able to start two new significant area development projects in the Czech Republic and Slovakia. We aim to accelerate growth in the CEE countries further by establishing a new unit in Poland and by continuing active plot acquisitions in the area. In Finland, the big picture of the economy is largely unchanged. Consumers are still cautious, but good activity among investors continues. In Finland, we will increasingly seek growth in the Helsinki metropolitan area. In addition, we will focus on the affordability of the apartments in many ways. The high share of investor deals continues to burden the profitability of the business segment. However, the number of completed, unsold apartments decreased notably in Finland.
In Housing Russia, both demand and the development of prices have continued to bring about challenges. We reorganise and adjust our operations to better match the current situation, and with the measures announced now and in January, we are aiming at savings of approximately EUR 10 million in fixed costs.
In Business Premises and Infrastructure, revenue and profits started to grow again, and the strong order backlog and significant projects not yet included in it, such as Tripla and the Tampere light rail project, provide a good foundation for future growth. The E18 Hamina-Vaalimaa motorway project has got off to a good start, and intensive negotiations on the Tripla project continue.
Key figures
Segment reporting, POC
| EUR million | 7–9/15 | 7–9/14 | Change | 1–9/15 | 1–9/14 | Change | 1–12/14 |
| Revenue | 391.7 | 485.7 | -19% | 1,182.7 | 1,340.2 | -12% | 1,801.2 |
| Housing Finland and CEE | 165.8 | 177.4 | -7% | 557.0 | 537.2 | 4% | 726.5 |
| Housing Russia | 63.9 | 119.0 | -46% | 204.8 | 344.4 | -41% | 474.1 |
| Business Premises and Infrastructure | 161.9 | 188.8 | -14% | 421.1 | 456.9 | -8% | 599.3 |
| Other items | 0.1 | 0.5 | -0.1 | 1.7 | 1.4 | ||
| Operating profit | 10.0 | 33.5 | -70% | 49.0 | 95.1 | -48% | 114.0 |
| Operating profit margin, % | 2.6% | 6.9% | 4.1% | 7.1% | 6.3% | ||
| Operating profit excluding non-recurring items |
20.3 | 33.5 | -39% | 59.4 | 95.1 | -38% | 126.4 |
| Housing Finland and CEE | 12.3 | 13.3 | -8% | 42.6 | 46.3 | -8% | 63.7 |
| Housing Russia | 1.7 | 11.7 | -85% | 10.2 | 37.7 | -73% | 55.8 |
| Business Premises and Infrastructure | 7.5 | 10.3 | -27% | 14.5 | 17.3 | -16% | 20.4 |
| Other items | -1.2 | -1.8 | -8.0 | -6.3 | -13.5 | ||
| Operating profit margin, % excluding non-recurring items | 5.2% | 6.9% | 5.0% | 7.1% | 7.0% | ||
| Housing Finland and CEE | 7.4% | 7.5% | 7.7% | 8.6% | 8.8% | ||
| Housing Russia | 2.7% | 9.9% | 5.0% | 10.9% | 11.8% | ||
| Business Premises and Infrastructure | 4.7% | 5.4% | 3.5% | 3.8% | 3.4% | ||
| Profit before taxes | -0.7 | 22.6 | 20.9 | 66.5 | -69% | 75.0 | |
| Profit for the review period1 | -0.8 | 16.8 | 15.5 | 51.0 | -70% | 56.6 | |
| Earnings per share, EUR | -0.01 | 0.13 | 0.12 | 0.41 | -70% | 0.45 | |
| Operating cash flow after investments | 11.9 | 40.7 | 140.3 | 12.0 | 151.9 | ||
| Return on investment (last 12 months), % |
5.1% | 9.1% | 5.1% | 9.1% | 7.7% | ||
| Equity ratio at end of period, % | 35.5% | 35.8% | 35.5% | 35.8% | 32.4% | ||
| Net interest-bearing debt at end of period |
529.2 | 741.6 | -29% | 529.2 | 741.6 | -29% | 616.6 |
| Order backlog at end of period | 2,314.6 | 2,736.0 | -15% | 2,314.6 | 2,736.0 | -15% | 2,125.9 |
1 Attributable to equity holders of the parent company
Group reporting, IFRS
| EUR million | 7–9/15 | 7–9/14 | Change | 1–9/15 | 1–9/14 | Change | 1–12/14 |
| Revenue | 363.8 | 492.4 | -26% | 1,220.6 | 1,249.3 | -2% | 1,778.6 |
| Operating profit | 1.5 | 28.1 | -95% | 53.2 | 59.6 | -11% | 94.8 |
| Operating profit margin, % | 0.4% | 5.7% | 4.4% | 4.8% | 5.3% | ||
| Operating profit excluding non-recurring items |
11.8 | 28.1 | -58% | 63.5 | 59.6 | 7% | 107.3 |
| Operating profit margin, % excluding non-recurring items |
3.3% | 5.7% | 5.2% | 4.8% | 6.0% | ||
| Profit before taxes | -5.1 | 21.3 | 39.8 | 43.6 | -9% | 74.3 | |
| Profit for the review period1 | -4.0 | 16.3 | 31.2 | 33.5 | -7% | 55.9 | |
| Earnings per share, EUR | -0.03 | 0.13 | 0.25 | 0.27 | -7% | 0.44 | |
| Operating cash flow after investments |
11.9 | 40.7 | 140.3 | 12.0 | 151.9 | ||
| Order backlog at end of period | 2,649.0 | 3,278.5 | -19% | 2,649.0 | 3,278.5 | -19% | 2,507.1 |
| Invested capital at end of period | 1,204.1 | 1,551.6 | -22% | 1,204.1 | 1,551.6 | -22% | 1,431.0 |
| Return on investment (last 12 months), % |
6.6% | 6.1% | 6.6% | 6.1% | 6.4% | ||
| Effective tax rate, % | 20.8% | 23.9% | 22.1% | 23.3% | 24.9% |
1 Attributable to equity holders of the parent company
| 9/15 | 9/14 | Change | 9/15 | 6/15 | Change | 12/14 | |
| Net interest-bearing debt, EUR million |
574.6 | 817.9 | -30% | 574.6 | 587.3 | -2% | 696.0 |
Gearing ratio, % |
106.1% | 127.2% | 106.1% | 98.7% | 129.9% | ||
| Equity ratio, % | 33.1% | 31.9% | 33.1% | 33.8% | 29.2% |
Events after the review period
In October, residential sales to consumers are estimated to be over 100 units in Finland (10/14: around 150), around 80 units in the CEE countries (10/14: around 70) and around 200 units in Russia (10/14: around 400). In Russia, the number of signed preliminary sales agreements in October exceeds the mentioned number by around 100 units, but YIT has not been able to register part of the agreements. The problems in registrations stem from tightened requirements on insurances protecting consumers in accordance with the law 214.
Outlook for 2015
Guidance specified (segment reporting, POC)
The Group revenue growth is estimated to be in the range of -5–0% at comparable exchange rates.
The operating profit margin excluding non-recurring items is estimated to in the range of 4–5%.
In addition to the market outlook, the guidance is based on the following factors: At the end of September, 48% of YIT’s order backlog was sold. Projects already sold and signed pre-agreements are estimated to contribute close to 60% of the Q4 revenue. The rest of the revenue estimate is based on estimated new sales during the last quarter and capital release actions.
In Russia, the tightened requirements on insurances to the law 214 that came into effect on October 1, 2015 have temporarily stopped registrations on sales agreements in projects that have received the building permit after January 1, 2014. The issue is expected to be solved during the remainder of the year.
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. Around EUR 230 million of the EUR 380 million capital release program, started in autumn 2013, had been carried out in the end of September. 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 prices are estimated to remain stable. 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 interest rate subsidy program.
The issue related to tightened requirements on insurances that impacts the registration of sales contracts is expected to be solved during the remainder of the year.
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 October 29, 2015 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 noon (EET) 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. (EET), 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 |
||
| 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 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, Slovakia and Poland. 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 eight countries. In 2014, our revenue amounted to around EUR 1.8 billion. Our share is listed on NASDAQ OMX Helsinki. www.yitgroup.com