Listing prospectus for YIT’s EUR 100 million secured green notes is available and the amendments to the terms of EUR 100 million green notes 2026 have become effective
STOCK EXCHANGE RELEASE Feb. 15, 2005 8:00
YITs financial statement bulletin for 2004: YIT POSTS ITS BEST-EVER RESULT IN 2004
In 2004, YITs net sales, profit before taxes and order backlog rose to record levels. After its successful integration stage, Building Systems transitioned to normal business operations. In the final quarter, the business segments operating profit before amortization of goodwill and goodwill on consolidation represented as much as 4.0 per cent of net sales. Housing production in Russia, Estonia, Latvia and Lithuania was stepped up briskly.
Towards the end of the year, residential production stabilized at a good level in Finland and, on the whole, Construction Services result was good. The order backlog of Services for Industry doubled. The cost-effectiveness of Data Network Services and the buoyant growth in broadband installation generated good earnings.
The outlook for 2005 is favourable.
Net sales top EUR 3 billion
In 2004, the YIT Groups net sales grew by 27 per cent to EUR 3,033.4 million (2003: EUR 2,389.7 million). A substantial share of the net sales growth was due to the integration of the Building Systems business into the Group on August 29, 2003. The business was acquired from ABB and it offers property, technical building system and industrial services in the Nordic countries, Baltic countries and Russia. Net sales were also increased by the growth in residential production in Russia and the Baltic countries.
The share of the Groups net sales accounted for by its international operations grew from 28 to 40 per cent. Of the net sales, 60 per cent (72%) came from Finland, 30 per cent (19%) from the other Nordic countries, 5 per cent (5%) from the Baltic countries and 3 per cent (3%) from Russia.
The share of net sales accounted for by the maintenance and servicing business increased to EUR 1,010.2 million (EUR 643.5 million), representing 33 per cent (27%) of total net sales.
Profit before taxes grows by 40 per cent
The Groups operating profit before amortization of goodwill and goodwill on consolidation (EBITA) amounted to EUR 165.7 million (EUR 118.7 million), or 5.5 per cent (5.0%) of net sales.
Operating profit (EBIT) was EUR 135.1 million (EUR 98.6 million) and the operating profit margin was 4.5 per cent (4.1%). Profit before taxes was 40 per cent better than in the previous year, having risen to EUR 118.2 million (EUR 84.4 million). Return on investment was 19.6 per cent (16.8%).
Earnings per share amounted to EUR 1.37 (EUR 0.82). Equity per share rose to EUR 7.46 (EUR 6.69). The equity ratio was 31.1 per cent (28.3%).
Ten years of rising dividends
The Board of Directors will propose to the Annual General Meeting that a dividend of EUR 0.70 be paid per share (EUR 0.60) for the 2004 financial year, representing 51.1 per cent of earnings per share. YIT is now increasing the dividend for the tenth year running.
The largest order backlog in YITs history
The Groups uninvoiced backlog of orders was 8 per cent higher at the end of 2004 than a year earlier, having risen to EUR 1,604.9 million (EUR 1,490.1 million). The Groups backlog for international orders grew by 9 per cent to EUR 621.0 million (EUR 569.5 million). Due to their nature, part of the Groups maintenance and servicing operations are not included in the order backlog.
Number of employees 22,000
In 2004, the Group employed 21,884 (16,212) people on average. At the end of the year, the Group had 21,680 employees (21,939). Of YITs employees, 53 per cent work in Finland, 37 per cent in the other Nordic countries and 10 per cent in the Baltic countries and Russia.
Market situation remains stable in Northern Europe
Financial research institutions estimate that the national economies of the Nordic countries will develop at a stable rate of 2-3 per cent in 2005 and 2006, outpacing growth in the EU by about one percentage point. The trend in euro interest rates will remain moderate, supporting investments and demand for residences. Growth in exports and industrial output increase the need for industrial investments and maintenance in the Nordic countries. Russia and Norway benefit from the high price of oil. The rate of growth in Russia, Estonia, Latvia and Lithuania is about twice as fast as in the Nordic countries.
Outlook for 2005
We estimate that the pre-tax result for 2005 will be better than in the previous year.
Annual General Meeting
YIT Corporations Annual General Meeting will be held on Wednesday, March 16, 2005, from 15:00 onwards at Finlandia Hall, Mannerheimintie 13 e, 00100 Helsinki, Finland. The full notice of meeting, including the Board of Directors proposals to the Annual General Meeting, will be published as a separate stock exchange release on February 15, 2005.
Annual Report 2004 and Interim Reports in 2005
The Annual Report for 2004 will be published in Finnish during week 9/2005 and in English and Swedish during week 10/2005.
Interim Reports will be released on May 4, August 5 and November 4, 2005. Financial reports and other investor information can be read at our site, www.yit.fi/investors.
The Report of the Board of Directors and a summary of the financial statement information are provided as an annex. No auditors report on the financial statement bulletin has been submitted.
YIT CORPORATION
Reino Hanhinen Group CEO
For additional information, contact: Reino Hanhinen, Group CEO, +358 20 433 2454, reino.hanhinen@yit.fi Esko Mäkelä, Executive Vice President, +358 20 433 2258, esko.makela@yit.fi Veikko Myllyperkiö, Vice President, Corporate Communications, +358 20 433 2297, veikko.myllyperkio@yit.fi Petra Thorén, Manager, Investor Relations, +358 20 433 2635, petra.thoren@yit.fi
Distribution: Helsinki Stock Exchange, principal media, www.yit.fi
Information sessions on February 15, 2005
A press conference will be held at 10:00 (Finnish time) at YITs head office. The address is Panuntie 11, 00620 Helsinki, Finland.
The press conference will be followed by a briefing for analysts and portfolio managers at 13:00 (Finnish time) on the same premises.
A web casting presentation can be viewed at YITs site, www.yit.fi. The financial results are presented in Finnish by Group CEO Reino Hanhinen, in English by Executive Vice President Esko Mäkelä and in Swedish by Juhani Pitkäkoski, President of YIT Building Systems Ltd.
A telephone conference will be arranged on February 15, 2005 at 15:00 Finnish time (GMT 13:00). The number of the Finnish line is +358 (0)800 112 497, the number of the international line is +44 (0)20 7070 5423 and the number of USA line is +1 866 4327 186. The telephone conference will be available for replay for one week through the dial in number +44 207 081 9440, with account number 825711 and recording number 657454.
REPORT OF THE BOARD OF DIRECTORS, JAN. 1 - DEC. 31, 2004
YIT POSTS ITS BEST-EVER RESULT IN 2004
In 2004, YITs net sales, profit before taxes and order backlog rose to record levels. After its successful integration stage, Building Systems transitioned to normal business operations. In the final quarter, the business segments operating profit before amortization of goodwill and goodwill on consolidation represented as much as 4.0 per cent of net sales. Housing production in Russia, Estonia, Latvia and Lithuania was stepped up briskly.
Towards the end of the year, residential production stabilized at a good level in Finland and, on the whole, Construction Services result was good. The order backlog of Services for Industry doubled. The cost-effectiveness of Data Network Services and the buoyant growth in broadband installation generated good earnings.
The outlook for 2005 is favourable.
YITS GROUP STRUCTURE
Once the Building Systems acquisition had been carried out, the Groups operations were divided into four business segments at the beginning of September 2003: Building Systems, Construction Services, Services for Industry and Data Network Services.
The Construction Services business segment was formed from YIT Construction Ltd together with its subsidiaries and the Data Network Services business segment from YIT Primatel Ltd. The former YIT Installation was divided into two new business segments. The Services for Industry business segment was formed from YIT Industria Ltd and YIT Service Ltd, which were part of YIT Installation, as well as the associated company Oy Botnia Mill Service Ab.
The Building Systems business segment was formed from the acquired Building Systems business and YIT Installations Scandinavia and Building Systems divisions. In addition, YIT Rapido Property Management Services Ltd from YIT Construction Ltd and the property network business from YIT Primatel Ltd were integrated into the Building Systems business segment as from the beginning of 2004.
The acquired Building Systems business functions had net sales of EUR 335.1 million during the period from August 29 to December 31, 2003. YIT Rapido Property Management Services had net sales of EUR 27.7 million in 2003 and the property network business had net sales of EUR 11.4 million.
In the case of Building Systems and Services for Industry, the net sales, operating profit and order backlog figures presented below for 2003 are pro forma calculations.
YITS FINANCIAL TARGET LEVELS ARE REVISED
On September 23, 2004, YIT Corporations Board of Directors amended its financial target levels for the 2005 - 2007 strategic period. The target level for return on investment was raised from 18 to 20 per cent. The target level for the equity ratio was lowered from 40 to 35 per cent. The raising of the target level for return on investment was based on the lower need for capital following the change in the business segment structure as well as on the objectives set for the strategic period. The equity ratio target is a better fit for the risk level of YITs current business structure and the higher share of net sales accounted for by the maintenance and servicing business.
NET SALES TOP EUR 3 BILLION
The YIT Groups net sales in 2004 rose to EUR 3,033.4 million (2003: EUR 2,389.7 million), representing growth of 27 per cent compared with the previous year. The strategic target for net sales growth is 5-10 per cent annually on average.
Net sales by business segment (EUR million)
Jan- Jan- Change Share of the Dec/2004 Dec/2003 Groups net sales Jan-Dec/2004 Building Systems 1,331.5 681.0 96% 44% Construction 1,427.3 1,398.5 2% 47% Services Services for 195.1 209.7 -7% 6% Industry Data Network 127.0 130.0 -2% 4% Services Other items -47.5 -29.5 61% -1% YIT Group, total 3,033.4 2,389.7 27% 100%
YITs service chain spans the entire life cycle of investments.
YIT employs a life cycle strategy to seek better service capabilities, business growth and a steadier flow of income. A growing share of the Groups net sales come from its industrial, property, telecom network and traditional infrastructure maintenance and servicing business. In 2004, the share of the Groups net sales accounted for by the upkeep business rose to EUR 1,010.2 million (EUR 643.5 million), representing 33 per cent (27%) of total net sales.
The share of the Groups net sales accounted for by its international activities was EUR 1,212.7 million (EUR 672.5 million), or 40 per cent (28%). Of the Groups net sales, 60 per cent (72%) came from Finland, 30 per cent (19%) from the other Nordic countries, 5 per cent (5%) from the Baltic countries and 3 per cent (3%) from Russia.
YITs strategy is to bolster its construction services in the Baltic countries and Russia and, in addition to these services, strengthen its building system and data network services in all the Nordic countries.
PRE-TAX RESULT UP 40 PER CENT
The Groups operating profit before amortization of goodwill and goodwill on consolidation (EBITA) amounted to EUR 165.7 million (EUR 118.7 million), or 5.5 per cent (5.0%) of net sales.
Operating profit (EBIT) was EUR 135.1 million (EUR 98.6 million) and the operating profit margin was 4.5 per cent (4.1%).
Operating profit before amortization of goodwill and goodwill on consolidation (EBITA) by business segment (EUR million)
Jan- Jan- Change Share of the Dec/2004 Dec/2003 Groups EBITA Jan-Dec/2004 Building Systems 33.6 -7.1 - 20% Construction 111.6 111.1 - 67% Services Services for 6.8 9.7 -30% 4% Industry Data Network 19.7 14.0 41% 12% Services Other items -6.0 -9.0 -33% -3% YIT Group, total 165.7 118.7 40% 100%
Operating profit (EBIT) by business segment (EUR million)
Jan- Jan- Change Share of the Dec/2004 Dec/2003 Groups operating profit Jan-Dec/2004 Building Systems 9.0 -19.7 - 7% Construction 109.4 107.8 1% 81% Services Services for 6.3 8.8 -28% 5% Industry Data Network 16.4 10.7 53% 12% Services Other items -6.0 -9.0 -33% -5% YIT Group, total 135.1 98.6 37% 100%
Profit before extraordinary items and taxes was 40 per cent better than in the previous year, having risen to EUR 118.2 million (EUR 84.4 million). Profit after taxes was EUR 84.0 million (EUR 48.4 million). Return on investment was 19.6 per cent (16.8%). The strategic target level for return on investment is 20 per cent.
EARNINGS PER SHARE INCREASE BY 67 PER CENT
Earnings per share amounted to EUR 1.37 (EUR 0.82). Equity per share rose to EUR 7.46 (EUR 6.69). The equity ratio was 31.1 per cent (28.3%). The strategic target level for the equity ratio is 35 per cent.
TEN YEARS OF RISING DIVIDENDS
The Board of Directors will propose to the Annual General Meeting that a dividend of EUR 0.70 be paid per share (EUR 0.60) for the 2004 financial year, representing 51.1 per cent (73.2%) of earnings per share. YIT is now increasing the dividend for the tenth year running. The strategic target for the dividend payout is 30-50 per cent of annual earnings after taxes and minority interest.
THE ADMINISTRATIVE COURTS RULING ON YITS RESIDUAL TAXES
In its ruling on May 27, 2004, the Helsinki Administrative Court ruled that YIT shall pay the EUR 10.9 million in residual taxes for 1997, which were levied from the company in March 2002, along with the consequences for delay. In accordance with the ruling, EUR 11.9 million was paid in June. The tax refund paid to YIT at the beginning of 2003 by a decision of the Tax Correction Board of the Tax Office for Major Corporations has not been recorded in YIT Corporations financial results for either 2002 or 2003. YIT has sought a leave to appeal the decision of the Helsinki Administrative Court from the Supreme Administrative Court.
LARGEST-EVER ORDER BACKLOG
The Groups market position is strong. The uninvoiced backlog of orders was 8 per cent higher at the end of 2004 than a year earlier, having risen to EUR 1,604.9 million (EUR 1,490.1 million). The Groups backlog for international orders grew to EUR 621.0 million (EUR 569.5 million), representing 39 per cent of the entire backlog (38%). The margin of the order backlog is good. Due to their nature, part of the Groups maintenance and servicing operations are not included in the order backlog.
Order backlog by business segment (EUR million)
Dec/2004 Dec/2003 Change Share of the Groups order backlog Dec/2004 Building Systems 557.8 502.3 11% 35% Construction 847.9 817.7 4% 53% Services Services for 116.5 67.2 73% 7% Industry Data Network 82.7 102.9 -20% 5% Services YIT Group, total 1,604.9 1,490.1 8% 100%
The major factor underlying the 73 per cent growth in the order backlog of Services for Industry was a large delivery and installation contract received from Fortums Diesel project.
THE GROUPS FINANCIAL POSITION REMAINS GOOD
The Groups financial position remained good during 2004. Interest- bearing liabilities amounted to EUR 261.5 million (EUR 264.7 million) at the end of the period and net debt to EUR 226.6 million (EUR 204.4 million). Net financial expenses were EUR 16.8 million (EUR 14.2 million), or 0.6 per cent (0.6%) of net sales.
At the end of the review period, liquid assets amounted to EUR 34.9 million (EUR 60.3 million). The gearing ratio was 49.2 per cent (49.6%) at the end of the year.
The proportion of fixed-interest loans in the Groups entire loan portfolio was 77 per cent (72%). Loans raised directly on the capital and money markets amounted to 69 per cent (70%).
The construction-stage contract receivables sold to financing companies totalled EUR 199.7 million (EUR 212.0 million) at the end of the year. The interest paid on them to the financing companies, EUR 5.7 million (EUR 5.1 million), is included in net financial expenses.
Total assets in the consolidated balance sheet amounted to EUR 1,590.3 million (EUR 1,555.5 million) at the end of the year.
CAPITAL EXPENDITURES AND ACQUISITIONS
Gross capital expenditures on non-current assets included in the balance sheet totalled EUR 31.0 million (EUR 232.9 million) during the financial year, representing 1.0 per cent (9.7%) of net sales.
Investments in construction equipment amounted to EUR 8.1 million (EUR 10.3 million) and investments in information technology to EUR 3.7 million (EUR 6.5 million). Other production investments came in at EUR 1.9 million (EUR 1.3 million). Other investments, including the goodwill on consolidation of acquired companies, amounted to EUR 17.3 million (EUR 214.8 million). EUR 17.9 million in goodwill arising from the acquisition of ABBs Building Systems business functions was amortized during the report period; its tax effect was EUR 5.1 million. EUR 1.6 million in non-tax deductible goodwill on consolidation was amortized, as was EUR 10.7 million in goodwill on consolidation arising from other acquisitions.
In May 2004, YIT increased its stake in ZAO YIT Ramenje to 51 per cent. The latter companys business is residential construction in the environs of Moscow.
In June 2004, YIT Kiinteistötekniikka Oy agreed to purchase from Kvaerner Masa-Yards its 40 per cent holding in YIT Shipins Oy. YIT Shipins Oy was established in 1997 by ABB Installaatiot Oy, which held a 60 per cent stake, and Kvaerner Masa-Yards Oy, which had a 40 per cent holding. ABB sold its shares in Shipins to YIT in connection with the sale of the Building Systems business in the summer of 2003.
In November 2004, YIT and Kuopion Puhelin Oyj (Kuopio Telephone Group) agreed on the transfer of the latters installation business to YIT Data Network Services. The agreement pertained to the installation business of Kuopion Puhelin Oyj, KPY Verkot Oy and KPY Palvelut Oy. 48 employees transferred to YIT. The transfer of business operations took place on January 1, 2005.
CHANGES IN THE GROUP STRUCTURE
On March 31, 2004, YIT Installation Ltd was divided into two companies: YIT Industry Ltd and YIT Building Systems Ltd. YIT Industry Ltd comprised the parent company of the Services for Industry business segment and YIT Building Systems Ltd the parent company of the Building Systems business segment.
Within the Building Systems business segment, YIT Building Systems AB and YIT Calor AB, the Swedish subsidiaries of YIT Building Systems Ltd, jointly formed a company named YIT Sverige AB as from October 1, 2004. YIT Rapido Property Management Services Ltd merged into YIT Kiinteistötekniikka Oy on August 30, 2004, and YIT Safetytec Ltd followed suit on October 1, 2004.
Within the Construction Services business segment, YIT Latvija SIA and TOP Maja SIA, the Latvian subsidiaries of AS FKSM, were merged into the subsidiary SIA FKSM on August 31, 2004, and the company was renamed YIT Celtnieciba SIA. YIT Construction Ltd thus operates in Latvia through YIT Celtnieciba SIA.
Within the Services for Industry business segment, the Varkaus- based ETT-Teollisuusautomaatio Oy, a fully-owned subsidiary of YIT Service Ltd, was merged into YIT Service Ltd on March 1, 2004.
NUMBER OF EMPLOYEES 22,000
In 2004, the Group employed 21,844 (16,212) people on average. At the end of the year, the Group had 21,680 employees (21,939). Of YITs employees, 53 per cent work in Finland, 37 per cent in the other Nordic countries and 10 per cent in the Baltic countries and Russia.
Personnel by business segment, Dec. 31, 2004 No. Share of the Groups employees Building Systems 12,194 56% Construction Services 5,102 24% Services for Industry 2,760 13% Data Network Services 1,328 6% Corporate Services 296 1% YIT Group, total 21,680 100%
Personnel by country, Dec. 31, 2004 No. Share of the Groups employees Finland 11,540 53% Sweden 4,236 20% Norway 2,507 12% Denmark 1,136 5% Estonia, Latvia and 1,151 5% Lithuania Russia 1,110 5% YIT Group, total 21,680 100%
DECISIONS TAKEN BY THE ANNUAL GENERAL MEETING
YIT Corporations Annual General Meeting was held on March 18, 2004. The Annual General Meeting adopted the 2003 financial statements and discharged the members of the Board of Directors and president from liability. The meeting confirmed that a dividend of EUR 1.20 would be paid per share (EUR 0.90 for 2002), to a total of EUR 36.6 million (EUR 26.3 million). It was decided that the record date would be March 23, 2004, and that the dividend payout would begin on March 30, 2004.
The Annual General Meeting confirmed that the number of Board members shall be set at six. The following persons were elected as members of the Board of Directors: Ilkka Brotherus, managing director of Sinituote, Eino Halonen, managing director of Suomi Mutual Life Assurance Company, Reino Hanhinen, Group CEO of YIT Corporation, Asmo Kalpala, president of the Tapiola Insurance Group, and Teuvo Salminen, deputy CEO of Jaakko Pöyry Group, with Antti Herlin, chairman of the Board of Directors of Kone Corporation, as a new member, replacing Mikko Kivimäki, the president and CEO of Rautaruukki Corporation. At its organization meeting on March 24, 2004, the Board of Directors elected, from amongst its number, Ilkka Brotherus as its chairman and Eino Halonen as its vice chairman. Ilkka Brotherus was elected as the chairman of the Board of Directors Audit Committee and Eino Halonen and Teuvo Salminen as its members.
The Annual General Meeting elected PricewaterhouseCoopers Oy, Authorized Public Accountants, to audit the administration and accounts in 2004. PricewaterhouseCoopers Oy appointed Pekka Nikula, M.Sc. (Econ.), Authorized Public Accountant, as chief auditor.
A decision was taken to amend the Articles of Association such that the nominal value of the share was changed from two euros to one euro (split), doubling the number of shares. The terms and conditions of the 2002 share option programme were amended correspondingly. In addition, a decision was made to grant new share options to members of management and key employees who are either in the employ of or will be hired into the employ of the new Building Systems business segment.
SHARE CAPITAL AND SHARES
YIT Corporations share capital was EUR 61,046,750 at the beginning of 2004 and the number of shares outstanding was 30,523,375. Following the resolution of the Annual General Meeting, the nominal value of the share was changed from two euros to one euro (split) on March 26, 2004, thereby doubling the number of shares. On the basis of shares subscribed for with the Series C share options from 2002, the share capital was increased by a total of EUR 246,104 in four lots. At the end of 2004, the share capital was EUR 61,292,854 and the number of shares was 61,292,854.
Authorizations to increase the share capital
In 2004, no share issues were organized and convertible bonds or bonds with warrants were not floated. At the end of the year, the Board of Directors did not have valid share issue authorizations or authorizations to issue convertible bonds or bonds with warrants.
Market capitalization grows by 37 per cent
The closing rate of YITs share on the last day of trading in 2004 was EUR 18.36 (2003: EUR 13.45). The price grew by 36.5 per cent during the report year. Including the dividend paid in spring 2004, the share yield was 41.0 per cent (65.6%). The trend in YITs share price has significantly outclassed general share price trends on the Helsinki Stock Exchange, because, as measured by the HEX all-share index, prices were 3.3 per cent higher at the end of 2004 than at the turn of the previous year. Measured with the weight-limited HEX portfolio index, prices rose by 14.6 per cent during the report year.
The highest share price in 2004 was EUR 18.84 (EUR 13.85) and the lowest was EUR 13.51 (EUR 7.01). The average price was EUR 15.92 (EUR 10.35). Market capitalization at the end of the year was EUR 1,125.3 million (EUR 821.1 million), up 37.0 per cent on the previous year.
YITs share turnover also increased significantly compared with the previous year. Share turnover on the Helsinki Stock Exchange during 2004 amounted to 45,579,537 (29,279,338) shares and the value of share turnover to EUR 725.8 million (EUR 303.0 million).
The average daily turnover of the shares was 180,156 (117,117).
The figures have been adjusted to match the number of shares after the halving of the nominal value of the share (split).
Own shares
During 2004, the company did not own any of its own shares and had no valid authorizations to acquire its own shares. During the financial year, no shares in the parent company were owned by subsidiaries.
Number of shareholders grows substantially
In 2004, the number of registered shareholders grew from 4,928 to 7,456, up 51.3 per cent. The number of private investors grew by over 2,200.
International investors owned a total of 22.1 per cent of the shares at the beginning of the year and 27.9 per cent at years end.
On May 3, 2004, Fidelity International Limited announced that its and its subsidiaries holding in YIT had declined to 4.92 per cent on April 28. The Tapiola Insurance Group announced on June 23, 2004, that the Groups holding in YIT had declined to 4.98 per cent on June 22. The Tapiola Insurance Group includes Tapiola General Mutual Pension Insurance Company (3.43%), Tapiola Mutual Life Insurance Company (1.21%) and Tapiola Corporate Life Insurance Company (0.34%).
SHARE OPTION PROGRAMMES FROM 2002 AND 2004
Following the resolution of the Annual General Meeting to halve the nominal value of the share, a decision was made to amend the terms of the Series C and D share options from 2002 accordingly such that each Series C and D share option entitles its bearer to subscribe for two YIT Corporation shares having a nominal value of one euro. The share capital may be raised by a maximum amount of EUR 2,800,000 as a result of the subscriptions.
In 2002, about 210 members of the Groups management and key employees named by the Board of Directors subscribed for the Series C share options. The subsidiary YIT Construction Ltd subscribed for all the Series D share options for distribution to members of the Groups management and key employees in 2003-2005, provided that the profitability and growth objectives set forth in the share option programme are achieved. By the end of 2004, a total of 211,740 Series D share options had been distributed to members of the Groups management and key employees. Shares can be subscribed for annually in the period from April 1 to November 30.
The subscription period with the Series C share options began on April 1, 2004. With the Series D share options, the subscription period will begin on April 1, 2005. Both subscription periods end on November 30, 2006.
In the period from April 1, 2004, to November 30, 2004, a total of 246,104 shares were subscribed for with the Series C share options. The resulting increases in the share capital, totalling EUR 246,104, were entered in the Trade Register in four instalments. A maximum of 653,896 shares can still be subscribed for with the Series C share options. During the report year, 382,435 Series C share options were traded at an average price of EUR 19.48.
The Annual General Meeting decided to grant a maximum of 180,000 Series E share options and a maximum of 420,000 Series F share options for subscription to members of the new Building Systems business segments management and its key employees. The share option programme includes about 65 people who are not covered by the 2002 share option programme. Each share option entitles its bearer to subscribe for one YIT Corporation share having a nominal value of one euro. On the basis of the subscriptions, the share capital may be raised by a maximum amount of EUR 600,000.
The Series E share options were distributed in the summer of 2004.
YIT Construction Ltd subscribed for the Series F share options and will distribute them to the new Building Systems business segments management and key employees in 2005-2007, provided that the objectives set for the business segments result (EBITA-%) are achieved. Shares can be subscribed for in the period from April 1 to November 30, 2006, and from April 1 to November 30, 2007, with the Series E share options, and from April 1 to November 30, 2007, with the Series F share options.
The terms and conditions of the share options are posted in full on the companys Internet site, www.yit.fi/investors > YITs share.
ADOPTION OF IAS/IFRS
The YIT Group started up preparations for adopting International Accounting Standards (IAS) in its financial statements in December 2001. The project that was initiated at that time assessed the differences between the Finnish accounting policies used by the Group and IAS and prepared a new accounting policy for drafting the consolidated financial statements in line with International Financial Reporting Standards (IFRS). The training of accounting personnel commenced in the spring of 2003 and a system project for the calculation of conversions was started up in November. The first conversions from the financial statements drafted in accordance with Finnish accounting practices to IFRS financial statements were performed on December 31, 2004.
YIT will start reporting in line with IAS/IFRS as from the beginning of 2005. As preparatory measures, IFRS comparison figures have been calculated during the first and second quarters of 2004, in line with the currently valid standards, from the opening balance sheet dated January 1, 2004. By the end of the year, the Interim Reports for 2004 had also been converted to match IFRS.
YIT will release a stock exchange release on the transition to IFRS on April 6, 2005. The release will include the opening balance sheet, with shareholders equity presented using the "bridge approach", as well as quarterly comparison information on the consolidated income statement and balance sheet for the 2004 financial year in line with IFRS and FAS. The Interim Report for the January-March period of 2005 will be published in accordance with IFRS on May 4, 2005.
Effects of the changes in the accounting principles on January 1, 2004
Developer contracting One of the major changes in the accounting policy is the treatment of developer contracting, whereby established housing and property companies are treated as part of the consolidated balance sheet.
Net sales from the sale of shares in own production (double net sales) will be eliminated, with operating profit remaining unchanged. Net sales from the sale of shares amounted to about EUR 203 million on January 1 - December 31, 2004 (Jan. 1 - Dec. 31, 2003: EUR 243 million).
Income from developer contracting comprises the unencumbered selling prices of the shares and the expenses comprise the acquisition cost of plots and the actual costs of construction.
Developer contracting will be recognized on the basis of the percentage of completion in accordance with IAS 11. The percentage of completion is derived with the formula: degree of the completion of construction multiplied by the degree of sale. The change in the booking practice will slow down earnings accrual compared to the present practice, in which the project margin has been recorded as revenue in the income statement on the basis of the degree of completion or the degree of sale, whichever is lower. This accounting change will reduce shareholders equity in the balance sheet by about EUR 15 million at the time of transition.
In IFRS, 10-year construction commitments are recorded as provisions having an effect on earnings, whereas they are presently recorded as expenses on the basis of their realization.
This accounting change will reduce shareholders equity in the balance sheet and increase provisions by about EUR 18 million.
The changes in the treatment of developer contracting will also affect the elimination of internal items in the balance sheet and sold contract receivables. In the case of unsold shares, sold contract receivables will be restated in full as current interest- bearing liabilities, and in the case of sold shares, to the extent they exceed the degree of completion. These accounting changes will increase current interest-bearing liabilities in the opening balance sheet by about EUR 140 million.
On the whole, the changes in the treatment of developer contracting projects will reduce the balance sheet total by about EUR 100 million.
Occupational disability portion of statutory entitlement pensions (TEL) On December 22, 2004, the Ministry of Social Affairs and Health approved an amendment to Finlands occupational pension system, whereby the occupational disability portion of statutory entitlement pensions will be treated as a payment-based system in IFRS financial statements. The occupational disability portion of statutory entitlement pensions, including the deferred taxes thereon, has neither been booked to reduce shareholders equity or to increase pension liabilities and deferred tax assets. The total effect would reduce shareholders equity in the balance sheet by about EUR 37 million.
Financial leasing agreements Leasing agreements in which the Group has a substantial share of the risks or benefits of ownership have been classified as financial leasing agreements and recorded as fixed assets and interest-bearing liabilities. The effect of the leasing agreements is to increase the balance sheet by about EUR 40 million.
Goodwill and goodwill on consolidation The amortization of goodwill and goodwill on consolidation according to plan will be discontinued after the 2003 financial year and replaced with value impairment tests. Goodwill and goodwill on consolidation have been tested in the opening balance sheet. On the basis of the tests, there were no grounds for recognizing impairment. In 2004, the amortization of goodwill and goodwill on consolidation amounted to EUR 30.6 million.
Tax effects Deferred tax assets and liabilities have been calculated from the permanent differences between the IFRS financial statements and taxation. Their net effect is to increase the balance sheet and shareholders equity in the balance sheet by about EUR 13 million.
MARKET SITUATION REMAINS STABLE IN NORTHERN EUROPE
Financial research institutions estimate that the national economies of the Nordic countries will develop at a stable rate of 2-3 per cent in 2005 and 2006, outpacing growth in the EU by about one percentage point. According to the current money market indicators predicting interest rate levels, rates in the euro area will remain at a relatively low level for a few years, supporting investments and demand for housing. Growth in exports and industrial output increase the need for industrial investments and maintenance in the Nordic countries. Russia and Norway benefit from the high price of oil. The rate of growth in Russia, Estonia, Latvia and Lithuania is about twice as fast as in the Nordic countries.
Finland
In December 2004, the Research Institute of the Finnish Economy ETLA predicted that Finlands GDP will rise by 3 per cent this year and 2.3 per cent the next. According to ETLAs December review, investments will increase by 3.7 per cent in Finland this year. During the next five years, investment growth will average 3.5 per cent annually. The industrial investment survey that was published in January indicates that the downturn in investments ended last year. During the present year, fixed investments by industry will increase by 7 per cent. The market for industrial, property and infrastructure maintenance will expand as the outsourcing trend progresses. The outsourcing of telecom operators field functions is also expected to increase in the future. Installation of broadband connections will remain brisk.
According to the business cycle report published by the construction cycle group of the Ministry of Finance in January 2005, the volume of building construction will grow by 3-4 per cent this year. Demand for housing and business premises for commercial services will remain brisk in Finlands growth centres.
Industrial building start-ups swung to growth last year and office construction has begun to recover. Civil engineering is expected to grow by one per cent in 2005 due to the large number of projects nearing completion. Renovation will increase at an annual rate of 2-3.5 per cent during the present decade. The Research Institute of the Finnish Economy ETLA predicts that total construction output will grow at an average annual rate of 2.7 per cent from 2003 to 2008, that is, faster than in the previous five- year period. Growth in new construction and renovation maintains demand in the construction and building system markets (heating, plumbing, air-conditioning, electrical and automation contracting, and maintenance).
Sweden
At the end of last December, the Swedish National Institute of Economic Research KI estimated that Swedens GDP had grown by 3.8 per cent last year, and forecast growth of 3.2 and 2.8 per cent for 2005 and 2006, respectively. The engines of growth are consumption and the rapid growth in investments. The real disposable income of households will grow by 2.9 per cent in 2005 and by 2.4 per cent in 2006. Investment growth is broad-based, covering industry, the service sector and housing investments.
Fixed investments will grow by 8 per cent this year and by 7.7 per cent in 2006. Fixed investments by industry will increase by 14 per cent this year and 10.6 per cent in 2006. The factors underlying growth are the high capacity utilization ratio, low interest rates and good profitability. According to the business cycle barometer published at the end of January, the business climate for industry had improved in the last quarter of the year, but growth was slower than at the beginning of the year. The industrial confidence indicator had risen slightly and remained at a high level. Industrial companies expect the number of new orders to rise further in the first quarter of the present year.
Construction grew towards the end of the year and even more new orders have come in. The number of employees has been increased and one half of construction companies expect that construction will grow during the year. Residential investments increased by 17.6 per cent last year; growth will continue at a rate of 7.2 and 7.3 per cent in 2005 and 2006, respectively. Last December, Euroconstruct estimated that the value of new residential construction will increase by 4.2, 7.7 and 2.4 per cent in 2005, 2006 and 2007. The corresponding growth forecasts for renovation are 3.1, 2.8 and 2.5 per cent. Civil engineering is anticipated to see growth of 3.9, 4.9 and 3.1 per cent during these years.
Norway
In 2004, Norways GDP grew by 2.8 per cent due to strong household consumption and rising investments. The prices of residences increased by 10 per cent last year. Low interest rate levels, good trends in salaries and wages, and tax cuts will lead to greater domestic consumption during the present year and the next as well.
Housing construction remains brisk and investments by the oil sector will stay at a high level. GDP will grow by 2.6 per cent in both 2005 and 2006. According to Statistics Norway, net sales from construction rose by 7.9 per cent in the January-October period of last year, and net sales of electrical installation works increased by 7 per cent. On the basis of the business cycle barometer released in the last quarter of the previous year, the production volume is expected to rise yet again in the first quarter of 2005. The fact that company managers intend to make more investments suggests that the business climate outlook will remain positive in the longer term, too. The outlook for the forest, metal and chemical industries in particular has improved.
Production volume and the capacity utilization ratio are continuing to grow and the increase in new orders in both the export and domestic markets leads to growth in order backlogs.
Norwegian State Railways is starting up a ten-year railway investment programme valued at NOK 26.4 billion (USD 4.2 billion).
Euroconstruct estimates that the construction of new buildings will see annual growth of only one per cent this year and the next, followed by a decline of 2.3 per cent in 2007. Renovation would grow by 3.5, 3.0 and 2.5 per cent in 2005, 2006 and 2007, respectively.
Denmark
The rapid growth of Denmarks GDP in the first half of last year slowed down in the third quarter and picked up again towards the end of the year; full-year growth amounted to 2.2 per cent.
Consumption and investments continued to grow at a brisk rate, but slower exports and greater imports cut into production growth.
Exports will continue to grow only at a moderate rate due to the slow recovery of Germany, an important export country for Denmark, and the stronger euro. GDP growth is expected to amount to 2.3 and 2.4 per cent in 2005 and 2006, respectively. Household consumption and housing investments are expected to increase rapidly in 2005 and 2006 thanks to a stimulatory economic policy, low interest rates and housing loans with repayment-free periods. The Danish Construction Association estimates that residential production has good growth potential in 2005. Growth in demand has raised the prices of older apartments to a higher level than those of new residences, and thus new construction is affordable. High prices also increase the profitability of repair works on the old housing stock. As the end of the year approached, the balance figures of the construction business cycle indicator inched upwards month by month. The Danish Construction Association anticipates that the output and profitability of construction companies will improve in 2005. Work to repair the damage wreaked by the storm in early January increases the volume of construction and repair works during the more sedate winter season. Euroconstruct predicts that construction output will grow by 1.5 per cent in both 2005 and 2006 and by 3-4 per cent in 2007.
Baltic countries and Russia
Growth in investments and GDP in the Baltic countries and Russia significantly outpaces growth in the Nordic countries. Growth is expected to remain at a level of 5-8 per cent during the next few years. The high educational level in the area, the EU membership of Estonia, Latvia and Lithuania, and Russias income from oil support the growth of these economies. Investments are on the rise at a rate of around 10 per cent. In the next few years, the growth rate of construction investments will be in the double digits. The greater affluence of the middle class has strengthened demand for market-financed residences in large cities such as Moscow, St Petersburg, Tallinn and Vilnius.
EARNINGS TRENDS OF THE BUSINESS SEGMENTS
BUILDING SYSTEMS
The net sales of the business segment amounted to EUR 1,331.5 million in 2004 (EUR 681.0 million). The maintenance and servicing business accounted for 56 per cent of the net sales. The breakdown of net sales by country was as follows: Sweden, 38 per cent, Finland, the Baltic countries and Russia, 32 per cent, Norway, 21 per cent, and Denmark, 9 per cent. Building Systems operating profit before amortization of goodwill and goodwill on consolidation (EBITA) amounted to EUR 33.6 million (EUR -7.1 million). Amortization of goodwill and goodwill on consolidation on the Building Systems acquisition amounted to EUR 19.5 million and amortization of goodwill and goodwill on consolidation on prior acquisitions to EUR 5.1 million. The business segments operating result (EBIT) rose into the black in 2004 and amounted to EUR 9.0 million (EUR -19.7 million). Return on investment was 5.1 per cent.
The Danish units result for the period includes a loss provision of EUR 4 million due to an electrification project on two ships for the Royal Danish Navy. The project was transferred from ABB as part of the Building Systems acquisition. One of the ships has been completed and handed over, while the other will be completed in June 2005. The loss on the entire project - that is, both of the ships - has been recorded in the result for the third quarter of 2004.
After its successful integration stage, YITs Building Systems has transitioned to normal operations in all its business countries and its earnings trend has been turned into growth. In the final quarter, its operating profit before amortization of goodwill and goodwill on consolidation (EBITA) represented as much as 4.0 per cent of net sales.
The order backlog at the end of the year was EUR 557.8 million (EUR 502.3 million). The breakdown of the backlog by country was: Sweden, EUR 163.2 million, Finland, EUR 213.8 million, Norway, EUR 61.7 million, and Denmark, EUR 119.1 million. At the end of the year, the business segment had 12,194 employees (11,812). Of them, 4,225 worked in Sweden, 3,864 in Finland, 2,507 in Norway, 1,136 in Denmark and 462 in the Baltic countries and Russia.
The balance sheet of the Building Systems business which was acquired in the comparison period was included in the consolidated balance sheet for the first time on December 31, 2003. The first four-month period of its business operations that was booked began on August 29, 2003, and is recorded in the figures for the fourth quarter of 2003.
The trend in the market for building system services was favourable in 2004 thanks to the good demand for housing construction and maintenance as well as the starting up of investments by industry. Steps were taken to improve the profitability of the business segment, whereby its operational efficiency was increased and both project management and cooperation were developed. To upgrade operational efficiency, fixed costs were examined by country, and the necessary cost cuts and personnel downsizing measures were implemented locally. The largest individual efficiency-boosting measure was carried out at the beginning of 2004 in Sweden, when the payroll of the acquired Building Systems business was reduced by 320 persons. In addition, the two companies operating in Sweden were merged on October 1, 2004, with a view to achieving higher efficiency in the management and control of operations.
CONSTRUCTION SERVICES
The net sales of Construction Services amounted to EUR 1,427.3 million (EUR 1,398.5 million) in 2004. Net sales include double net sales (sale of shares in own production) of EUR 203.1 million (EUR 243.1 million), which will be discontinued as from 2005 when the company changes over to IFRS. International operations accounted for 18 per cent (14%) of net sales. Operating profit amounted to EUR 109.4 million (EUR 107.8 million). Exclusive of non-recurring items in the comparison period (EUR 24.3 million), operating profit grew by 31 per cent. Return on investment was 26.9 per cent (28.2%).
The uninvoiced order backlog at the end of the year was EUR 847.9 million (EUR 817.7 million). At the end of 2004, the business segment had 5,102 employees (5,268).
In the early year, housing sales in Finland hit a record peak, and then returned to their ordinary level in the second half of the year. Sales of residences went well during the whole year in the municipalities surrounding the Greater Helsinki Area and the other growth centres. In 2004, a total of 2,311 (2003: 2,453) residential units were sold in Finland. 3,174 (2,996) residential units were completed during the report year and the construction of 2,717 (3,108) was started up. At years end, 2,984 (3,446) residential units were under construction. There were 189 (65) unsold completed residences at the end of the year.
YIT continued to strongly step up its residential construction in Russia and the Baltic countries. Housing production was started up in the municipalities surrounding Moscow (Moscow Oblast), where YIT established the joint venture ZAO YIT Ramenje at the end of 2003 to attend to developer-contracted residential construction.
YIT acquired its first residential plot in the City of Moscow during the last quarter of the year. In 2004, a total of 1,136 (2003: 606) residential units were sold in Russia and the Baltic countries. 566 (214) residential units were completed during the report year and the construction of 3,873 (351) was started up. At years end, 4,154 (855) residential units were under construction.
There were 14 (5) unsold completed residences at the end of the year.
The high number of vacant business premises meant that the market situation for business premise construction remained challenging in Finland, both in new projects and renovation. Towards the end of the year, demand for industrial construction recovered slightly. Demand for commercial and logistics premises remained moderate in 2004. In infrastructure construction - that is, civil engineering - the market as a whole was slightly larger than in the previous year.
SERVICES FOR INDUSTRY
In 2004, the net sales of Services for Industry amounted to EUR 195.1 million (EUR 209.7 million). The share of net sales accounted for by the maintenance business was 69 per cent (57%).
The share accounted for by international operations amounted to EUR 19.0 million (EUR 26.3 million), representing 10 per cent (13%) of total net sales. Operating profit was EUR 6.3 million (EUR 8.8 million). Return on investment was 32.9 per cent (pro forma).
At the end of the year, Services for Industrys order backlog amounted to EUR 116.5 million (EUR 67.2 million). Of the backlog, EUR 10.3 million (EUR 1.9 million) represented foreign orders. The number of employees at years end was 2,760 (3,117).
The Services for Industry business segment was formed in September 2003, after the Building Systems acquisition, and thus the net sales, operating profit and order backlog figures presented for 2003 are pro forma calculations.
The net sales of Services for Industry were lower than in the previous year mainly due to the decline in investments. For the most part, the investments that were made comprised maintenance and modernization investments. There was a clear turn for the better during the report year, and investments were greenlit. One of the major factors underlying the buoyant growth in the order backlog comprises the orders YIT landed for the Diesel project at Fortums refinery in Porvoo. Another major investment from YITs perspective is Finlands fifth nuclear power plant, which will be built in Olkiluoto. In addition to these large projects, numerous major forest industry investments began in the Nordic countries.
Market trends remained favourable in industrial maintenance.
Industrys low investment level - with industry even refraining from replacement investments - forced companies to make outlays on the maintenance of their old stock of machinery and equipment.
Numerous shutdown works were performed for the forest industry and at nuclear power plants during the report year. Demand remained steady in the outsourcing of services.
DATA NETWORK SERVICES
In 2004, the net sales of Data Network Services amounted to EUR 127.0 million (EUR 130.0 million). Of the net sales, 70 per cent (61%) were generated by long-term service agreements and 30 per cent (39%) by project production. The business segments operating profit grew by 53 per cent compared with the previous year and amounted to EUR 16.4 million (EUR 10.7 million). Return on investment was 45.8 per cent (26.8%).
The order backlog at years end was EUR 82.7 million (EUR 102.9 million). At the end of the year, Data Network Services had 1,328 employees (1,463).
The earnings trend in its business operations was stronger than in the previous year due to the brisker market situation as well as its measures to develop and boost the efficiency of its operations.
The major factors underlying net sales growth were new operator customer accounts, the rising number of broadband connections and demand for IT installation services as part of these connection deliveries. Broadband-related demand also enlarged the order backlog. The significant decline in mobile network projects and the shifting of service demand to smaller-scale maintenance and conversion works increased the share of net sales generated by long-term customer agreements.
In 2004, development efforts focused on coming up with new service packages in technical helpdesk services and on measures supporting the opening up of the installation market in both helpdesk services and telecom networks.
OUTLOOK FOR 2005
We estimate that the pre-tax result for 2005 will be better than in the previous year.
Board of Directors
CONSOLIDATED FINANCIAL STATEMENTS, DECEMBER 31, 2004 (No auditors report has been issued in respect of the financial statements.)
INCOME STATEMENT (EUR million)
Jan- Jan- Change, % Dec/2004 Dec/2003 Net sales 3,033.4 2,389.7 27 - of which international activities 1,212.7 672.5 80 - sale of shares in own production 203.1 243.1 -16 Operating income and expenses -2,850.6 -2,253.3 27 Depreciation and write-downs -17.1 -17.7 -3 Operating profit before amortization of goodwill and 165.7 118.7 40 goodwill on consolidation (EBITA) % of net sales 5.5% 5.0% - Amortization of goodwill and -30.6 -20.1 52 goodwill on consolidation Operating profit (EBIT) 135.1 98.6 37 % of net sales 4.5% 4.1% - Financial income and expenses, net -16.8 -14.2 18 Profit before extraordinary items 118.2 84.4 40 % of net sales 3.9% 3.5% - Extraordinary income 0 0 - Extraordinary expenses 0 0 - Profit before taxes 118.2 84.4 40 % of net sales 3.9% 3.5% - Profit for the report period 84.0 48.4 74 % of net sales 2.8 2.0% -
Projects have been booked in the income statement on the basis of the degree of completion or the degree of sale, whichever is lower. After the changeover to IAS, partial credits to account will be carried out using the principle of degree of completion multiplied by degree of sale as from the beginning of 2005.
Deferred tax liabilities and the minority share of depreciation difference have been taken into account in the profit for the review period.
INCOME STATEMENT (the fourth quarter of 2004 compared with the fourth quarter of 2003)
Oct- Oct- Change, % Dec/2004 Dec/2003 Net sales 809.5 954.0 -15 - of which international 337.1 381.0 -12 activities - sale of shares in own production 59.9 74.7 -20 Operating income and expenses -759.2 -925.1 -18 Depreciation and write-downs -4.4 -5.4 -19 Operating profit before amortization of goodwill and 45.9 23.5 95 goodwill on consolidation (EBITA) % of net sales 5.7 2.5 - Amortization of goodwill and -8.0 -10.7 -25 goodwill on consolidation Operating profit (EBIT) 37.9 12.8 *) % of net sales 4.7% 1.3% - Financial income and expenses, net -4.7 -3.8 24 Profit before extraordinary items 33.2 9.0 *) % of net sales 4.1% 0.9% - Extraordinary income 0 0 - Extraordinary expenses 0 0 - Profit before taxes 33.2 9.0 *) % of net sales 4.1% 0.9% - Profit for the report period 25.2 -1.8 - % of net sales 3.1% -0.2% -
*) Change over 100%
BALANCE SHEET (EUR million)
Dec/2004 Dec/2003 Change, % ASSETS Intangible assets - Goodwill 152.1 168.9 -10 - Other intangible assets 12.3 11.8 4 Goodwill on consolidation 72.1 78.0 -8 Tangible assets 68.4 66.8 2 Investments - Other investments 6.8 7.9 -14 Inventories 421.6 380.8 11 Receivables 822.1 781.0 5 Marketable securities 0.7 11.9 -94 Cash and cash equivalents 34.2 48.4 -29 Total assets 1,590.3 1,555.5 2 LIABILITIES Share capital 61.3 61.0 - Other shareholders equity 395.9 347.3 14 Minority interests 3.6 3.4 6 Provisions 26.0 27.3 -5 Non-current liabilities 229.7 210.9 9 Current liabilities 873.8 905.6 -4 Total shareholders equity and 1,590.3 1,555.5 2 liabilities
CONSOLIDATED CASH FLOW STATEMENT (EUR million)
Jan- Jan- Change, % Dec/2004 Dec/2003 Cash flow from operating activities Profit before extraordinary items 118.2 84.4 40 Adjustments, total 58.1 30.7 89 Cash flow before change in net 176.3 115.1 53 working capital Change in net working capital -89.7 25.4 *) Cash flow from operations before financial items and taxes 86.6 140.5 -38 Interest paid -20.0 -14.7 36 Dividends received - 0.3 - Interest received 1.0 2.7 -63 Taxes paid -32.2 -31.2 3 Net cash from operating activities 35.4 97.6 -64 Cash flow from investing activities Capital expenditure on tangible and intangible assets -30.9 -230.5 -87 Proceeds from sale of tangible and intangible assets 3.8 37.5 -90 Investments in other assets -0.1 -2.4 -96 Proceeds/losses from sale of -1.6 1.4 - investments Net cash used in investing -26.2 -194.0 -86 activities Cash flow from financing activities Rights issue 1.6 9.5 -83 Purchase/sale of own shares - 12.4 - Change in loan receivables 2.1 0.1 *) Change in short-term debt 0.4 23.6 -98 Borrowing of long-term debt 38.0 117.7 -68 Repayment of long-term debt -39.9 -19.2 *) Dividends paid -36.6 -26.3 40 Net cash used in financing -34.6 117.8 *) activities Change in liquid assets -25.4 21.4 *) Liquid assets at beginning of 60.3 38.9 55 period Liquid assets at end of period 34.9 60.3 -42
*) Change over 100%
KEY FIGURES 2004 2003 Change, % Earnings per share, EUR 1.37 0.82**) 67 Earnings per share, EUR, diluted 1.36 0.82**) 66 Equity per share, EUR 7.46 6.69**) 12 Average share price during the 15.92 10.35**) 54 period, EUR Share price at end of period, EUR 18.36 13.45**) 37 Market capitalization at end of 1,125.3 821.1 37 period, EUR million Weighted average share-issue adjusted number of shares 61,123 59,104**) 3 outstanding, thousands Weighted average share-issue adjusted number of shares outstanding, thousands, diluted 61,823 59,248**) 4 Share-issue adjusted number of shares outstanding at end of period, 61,293 61,047**) - thousands Net interest-bearing debt at end of 226.6 204.4 11 period, EUR million Return on investment, from the last 19.6% 16.8% - 12 months, % Return on equity, % 19.6% 12.5% - Equity ratio, % 31.1% 28.3% - Gearing ratio, % 49.2% 49.6% - Gross capital expenditures on non- 31.0 232.9 -87 current assets, EUR million -% of net sales 1.0% 9.7% - Order backlog at end of period, EUR 1,604.9 1,490.1 8 million 1) - of which international orders 621.0 569.5 9 Average personnel 21,884 16,212 35
**) The doubling of the number of shares, which came into effect March 26, 2004, has been taken into account.
1) Portion of binding orders not recognized as income.
CONTINGENT LIABILITIES (EUR million)
Dec/2004 Dec/2003 Change, % Mortgages given as security for loans - For own commitments 29.3 29.8 -2 Other collateral given for own commitments - Securities pledged - 0.2 - Leasing commitments 40.2 50.7 -21 Other commitments - Purchase commitments 176.8 7.3 *) - Rental liabilities 7.1 - - - Responsibility for external debts of companies held in inventories 55.2 44.5 24 - Other commitments 0.6 1.2 -50 Guarantees - On behalf of associated companies 0.7 0.7 - - On behalf of others 2.5 9.0 -72 Mortgages given by companies held in inventories; for commitments of 4.6 2.1 *) Group companies and for own commitments Liability under derivative contracts 2) - Value of underlying instruments -- Interest rate swaps 70.0 20.0 *) -- Foreign currency forward 56.7 70.8 -20 contracts - Fair value -- Interest rate swaps 69.2 19.7 *) -- Foreign currency forward 54.4 72.1 -25 contracts
*) Change over 100% 2) Derivative contracts have been taken out mainly to hedge foreign currency loans and foreign currency cash flows from projects.
NET SALES BY BUSINESS SEGMENT (EUR million)
At the beginning of September 2003, the YIT Groups operations were divided into four business segments: Building Systems, Construction Services, Services for Industry and Data Network Services. The Construction Services business segment was formed from YIT Construction Ltd together with its subsidiaries and the Data Network Services business segment from YIT Primatel Ltd.
Former YIT Installation was divided into two new business segments: Building Systems and Services for Industry. In the case of Building Systems and Services for Industry, the net sales, operating profit and order book figures presented for 2003 are pro forma calculations. The balance sheet of the acquired Building Systems business was included in the consolidated balance sheet for the first time on December 31, 2003. The first four-month period of its business operations that was booked began on August 29, 2003, and is recorded in the figures for the fourth quarter of 2003.
Jan-Dec/2004 Jan- Change, % Dec/2003 Building Systems 1,331.5 681.0 96 Construction Services 1,427.3 1,398.5 2 Services for Industry 195.1 209.7 -7 Data Network Services 127.0 130.0 -2 Other items -47.5 -29.5 61 YIT Group, total 3,033.4 2,389.7 27
OPERATING PROFIT BEFORE AMORTIZATION OF GOODWILL AND GOODWILL ON CONSOLIDATION (EBITA) BY BUSINESS SEGMENT (EUR million)
Jan-Dec/2004 Jan- Change, % Dec/2003 Building Systems 33.6 -7.1 - Construction Services 111.6 111.1 - Services for Industry 6.8 9.7 -30 Data Network Services 19.7 14.0 41 Other items -6.0 -9.0 -33 YIT Group, total 165.7 118.7 40
OPERATING PROFIT (EBIT) BY BUSINESS SEGMENT (EUR million)
Jan- Jan- Change, % Dec/2004 Dec/2003 Building Systems 9.0 -19.7 - Construction Services 109.4 107.8 1 Services for Industry 6.3 8.8 -28 Data Network Services 16.4 10.7 53 Other items -6.0 -9.0 -33 YIT Group, total 135.1 98.6 37
ORDER BACKLOG BY BUSINESS SEGMENT AT END OF PERIOD (EUR million)
Dec/2004 Dec/2003 Change, % Building Systems 557.8 502.3 11 Construction Services 847.9 817.7 4 Services for Industry 116.5 67.2 73 Data Network Services 82.7 102.9 -20 YIT Group, total 1,604.9 1,490.1 8
GROUP'S DEVELOPMENT QUARTERLY 2003-2004
Q1/ Q2/ Q3/ Q4/ Q1/ Q2/ Q3/ Q4/ 2003 2003 2003 2003 2004 2004 2004 2004 Net sales, MEUR 431.5 500.6 503.6 954.0 713.1 791.3 719.5 809.5 Operating profit (EBIT), 6.9 51.0 27.9 12.8 28.0 32.2 37.0 37.9 MEUR % of net sales 1.6 10.2 5.5 1.3 3.9 4.1 5.1 4.7 Financial income and expenses, net, MEUR -3.6 -2.8 -4.0 -3.8 -3.7 -3.6 -4.8 -4.7 Profit before taxes, MEUR 3.3 48.2 23.9 9.0 24.3 28.6 32.2 33.1 % of net sales 0.8 9.6 4.7 0.9 3.4 3.6 4.5 4.1 Balance sheet total at end of period, MEUR 1,067.7 1,176.7 1,323.9 1,555.5 1,520.0 1,587.6 1,618.7 1,590.3 Earnings/share, EUR **) 0.03 0.58 0.25 -0.04 0.27 0.30 0.39 0.41 Equity/share, EUR **) 5.85 6.43 6.73 6.69 6.36 6.66 7.05 7.46 Share price at end of period, EUR **) 7.35 8.50 11.00 13.45 15.40 16.74 15.85 18.36 Market capitalization at end of period, MEUR 428.6 497.1 662.6 821.1 940.1 1,023.8 969.7 1,125.3 Cash flow from operating activities, MEUR 12.5 -40.7 58.3 67.5 20.2 -12.4 -3.7 31.3 Return on investment from the last 12 months, % 17.0 20.4 18.5 16.8 20.8 16.5 15.8 19.6 Equity ratio, % 34.7 34.8 33.2 28.3 27.7 28.1 29.5 31.1 Net interest-bearing debt at end of period, MEUR 122.4 139.5 246.9 204.4 220.5 243.1 251.4 226.6 Gearing ratio, % 35.6 36.9 60.6 49.6 56.3 59.1 57.8 49.2 Gross capital expenditures, MEUR 5.1 9.1 173.4 45.3 6.1 10.9 4.4 9.6 Order backlog at end of period, MEUR 1,008.3 1,091.8 1,416.5 1,490.1 1,478.2 1,569.8 1,521.0 1,604.9 Personnel at end of period 12,459 13,087 22,144 21,939 21,654 21,952 2 2,013 21,680
**) The doubling of the number of shares, which came into effect March 26, 2004, has been taken into account.
NET SALES BY BUSINESS SEGMENT (EUR million)
Q1/ Q2/ Q3/ Q4/ Q1/ Q2/ Q3/ Q4/ 2003 2003 2003 2003 2004 2004 2004 2004 Building Systems 80.8 75.7 85.4 439.1 316.9 336.0 316.4 362.2 Construction 280.6 343.8 337.0 437.1 338.3 387.7 329.6 371.7 Services Services for 48.4 55.4 50.0 55.9 42.7 49.2 49.4 53.8 Industry Data Network 25.5 30.9 36.6 37.0 24.4 30.8 35.2 36.6 Services Other items -3.8 -5.2 -5.4 -15.1 -9.2 -12.4 -11.1 -14.8 Group total 431.5 500.6 503.6 954.0 713.1 791.3 719.5 809.5
The figures presented for Building Systems and Services for Industry for the first three quarters of 2003 are pro forma calculations. The figure for Building Systems fourth quarter includes the net sales of the acquired business operations over a four-month period.
OPERATING PROFIT (EBIT) BY BUSINESS SEGMENT (EUR million)
Q1/ Q2/ Q3/ Q4/ Q1/ Q2/ Q3/ Q4/ 2003 2003 2003 2003 2004 2004 2004 2004 Building Systems -1.3 1.6 0.7 8.0 -19.7***) Construction 9.5 47.8 21.6 28.9 30.1 26.8 26.0 26.5 Services Services for 8.8***) -0.1 2.4 3.0 1.0 Industry Data Network -1.7 2.4 5.5 4.5 0.6 2.9 8.0 4.9 Services (YIT 1.8 3.7 1.8 Installation) Other items -2.7 -2.9 -1.0 -2.4 -1.3 -1.5 -0.7 -2.5 Group total 6.9 51.0 27.9 12.8 28.0 32.2 37.0 37.9
***) During the three first quarters of 2003 MEUR 7.3 is included in the operating profit of YIT Installation.
ORDER BACKLOG BY BUSINESS SEGMENT AT END OF PERIOD (EUR million)
Q1/ Q2/ Q3/ Q4/ Q1/ Q2/ Q3/ Q4/ 2003 2003 2003 2003 2004 2004 2004 2004 Building Systems 33.5 145.6 419.9 502.3 557.2 566.5 564.6 557.8 Construction Services 99.3 784.9 868.7 817.7 735.6 810.6 752.8 847.9 Services for Industry 81.0 71.3 62.6 67.2 76.0 73.5 115.5 116.5 Data Network Services 94.5 90.0 65.3 102.9 109.4 119.2 88.1 82.7 Group total 1,008.3 1,091.8 1,416.5 1,490.1 1,478.2 1,569.8 1,521.0 1,604.9
8.2 1,569.8 1,521.0 1,604.9