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- Stock Exchange Release
- 10.02.2006 07:00 CET
YIT?s financial statement bulletin for 2005: STRONG EARNINGS GROWTH STILL ON TRACK
1 YIT CORPORATION STOCK EXCHANGE RELEASE Feb. 10, 2006 8:00
YITs financial statement bulletin for 2005: STRONG EARNINGS GROWTH STILL ON TRACK
In 2005, YITs revenue and profit before taxes rose to record levels. All the business segments improved their operating profit and profitability. Building Systems focused on improving profitability. The business segments operating profit rose to a satisfactory 4.1 per cent of revenue. Construction Services racked up excellent earnings in all business areas, with operating profit representing 11.0 per cent of revenue. Demand for residences in Finland remained solid and other construction activity was also brisk. Residential construction in Russia, Estonia, Latvia and Lithuania was stepped up rapidly. Thanks to its high capacity utilization ratio and developed operations control, Industrial and Network Services posted a good result. The operating profit margin was 9.8. The Groups outlook for 2006 is favourable.
Revenue grows by 9 per cent
In 2005, the YIT Groups revenue saw organic growth of 9 per cent and was EUR 3,023.8 million (2004: EUR 2,780.1 million).
Of the revenue, 56 per cent (57%) came from Finland, 32 per cent (32%) from the other Nordic countries, 7 per cent (6%) from Lithuania, Latvia and Estonia and 4 per cent (3%) from Russia.
The share of revenue accounted for by the maintenance and servicing business increased to EUR 1,135.0 million (EUR 1,036.9 million), representing 38 per cent (37%) of total revenue.
Profit before taxes grows by 53 per cent
The Groups operating profit amounted to EUR 227.7 million (EUR 157.4 million) and the operating profit margin was 7.5 per cent (5.7%). Profit before taxes was 53 per cent better than in the previous year, having risen to EUR 214.8 million (EUR 140.0 million). Return on investment was 26.4 per cent (19.1%).
Earnings per share increased by 56 per cent and amounted to EUR 2.52 (EUR 1.62). Equity per share rose to EUR 8.97 (EUR 7.20). The equity ratio was 36.3 per cent (31.0%). The financial position strengthened. The gearing ratio declined to 45.1 per cent (80.7%).
Proposed dividends: EUR 1.10
The Board of Directors will propose to the Annual General Meeting that a dividend of EUR 1.10 be paid per share (EUR 0.70) for the 2005 financial year, representing 43.7 per cent of earnings per share. YIT is now increasing the dividend for the eleventh year running.
Order backlog grows
The Groups uninvoiced backlog of orders was 3 per cent higher at the end of 2005 than a year earlier, having risen to EUR 1,878.8 million (EUR 1,823.4 million). Due to their nature, part of the Groups maintenance and servicing operations are not included in the order backlog.
Number of employees 21,300
In 2005, the Group employed 21,194 (21,884) people on average. At the end of the year, the Group had 21,289 employees (21,680). Of YITs employees, 52 per cent work in Finland, 37 per cent in the other Nordic countries and 7 per cent in Lithuania, Latvia and Estonia and 4 per cent in Russia.
Market situation remains stable
Financial research institutions estimate that the national economies of the Nordic countries will develop at a stable rate of 2-3 per cent in 2006 and 2007, outpacing growth in the EU by about one percentage point. Russia and Norway benefit from the high price of oil. The rate of growth in the economies of Russia, Estonia, Latvia and Lithuania is about twice as fast as in the Nordic countries. Euro interest rates are seeing moderate growth.
The positive trend in incomes and the improving employment situation bolster the confidence of households. The record-high population shift within Finland increases the need for residences, and housing sales remain brisk. Strong demand for housing in Russia makes it possible to expand residential construction over the long term, too. Growth in exports and industrial output increases the need for industrial investments and maintenance in the Nordic countries.
Outlook for 2006
We estimate that the pre-tax result for 2006 will be better than in the previous year.
Annual General Meeting
YIT Corporations Annual General Meeting will be held on Monday, March 13, 2006, 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 10, 2006.
Annual Report 2005 and Interim Reports in 2006
The Annual Report for 2005 will be published in Finnish and English during week 9/2006. Interim Reports will be released on April 27, July 28 and October 27, 2006. 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
Hannu Leinonen Group CEO
For additional information, contact: Hannu Leinonen, Group CEO, +358 20 433 3301, hannu.leinonen@yit.fi Sakari Toikkanen, Executive Vice President, +358 20 433 2336, sakari.toikkanen@yit.fi Esko Mäkelä, Executive Vice President, Investor Relations, +358 20 433 2258, esko.makela@yit.fi Petra Thorén, Vice President, Investor Relations, +358 20 433 2635, petra.thoren@yit.fi Veikko Myllyperkiö, Vice President, Corporate Communications, +358 20 433 2297, veikko.myllyperkio@yit.fi
Distribution: Helsinki Stock Exchange, principal media, www.yit.fi
Information sessions on February 10, 2006
A briefing for analysts and portfolio managers will be held at 10:00 (Finnish time) at YITs head office. The address is Panuntie 11, 00620 Helsinki, Finland. The briefing will be followed by a press conference 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 for 2005 are presented in Finnish and English by Group CEO Hannu Leinonen.
REPORT OF THE BOARD OF DIRECTORS, JAN. 1 - DEC. 31, 2005
STRONG EARNINGS GROWTH STILL ON TRACK
In 2005, YITs revenue and profit before taxes rose to record levels. All the business segments improved their operating profit and profitability. Building Systems focused on improving profitability. The business segments operating profit rose to a satisfactory 4.1 per cent of revenue. Construction Services racked up excellent earnings in all business areas, with operating profit representing 11.0 per cent of revenue. Demand for residences in Finland remained solid and other construction activity was also brisk. Residential construction in Russia, Estonia, Latvia and Lithuania was stepped up rapidly. Thanks to its high capacity utilization ratio and developed operations control, Industrial and Network Services posted a good result. The operating profit margin was 9.8. The Groups outlook for 2006 is favourable.
YITS GROUP STRUCTURE
YITs business segment structure was firmed up on June 1, 2005, by merging Services for Industry and Data Network Services to form a single business segment: Industrial and Network Services. YITs business operations are now divided into three business segments: Building Systems, Construction Services and Industrial and Network Services.
The Industrial and Network Services business segments comparative figures for 2004 have been calculated by combining the financial figures of the Services for Industry and Data Network Services business segments.
IFRS STANDARDS
YIT changed over to IFRS (International Financial Reporting Standards) on January 1, 2005. The financial statement bulletin for 2005 is drafted in accordance with IFRS recognition and measurement policies. The comparative figures for 2004 presented in the bulletin are also in line with IFRS.
YITS STRATEGIC TARGET LEVELS ARE REVISED
YIT Corporations Board of Directors amended the Groups financial target levels on September 21, 2005. The revised financial target levels correspond to the strategic emphases set for business operations. The revenue growth target was bolstered from 5-10 per cent to 10 per cent annually on average. The target level for return on investment was raised from 20 to 22 per cent. The target for the dividend payout ratio was increased from 30-50 to 40-60 per cent. The target level for the equity ratio was kept at 35 per cent.
The Board of Directors decision to revise the target levels was published as a stock exchange bulletin on September 21, 2005.
REVENUE GROWS BY 9 PER CENT
In 2005, the YIT Groups revenue exclusive of acquisitions rose to EUR 3,023.8 million (2004: EUR 2,780.1 million), representing growth of 9 per cent compared with the previous year. The strategic target for revenue growth is 10 per cent annually on average.
Revenue by business segment (EUR million)
Jan-Dec/ Jan-Dec/ Change, % Share of 2005 2004 the Groups revenue Jan- Dec/2005 Building Systems 1,398.4 1,321.2 6 46% Construction Services 1,298.3 1,147.2 13 43% Industrial and Network Services 398.8 359.0 11 13% Other items -71.7 -47.3 52 -2% YIT Group, total 3,023.8 2,780.1 9 100%
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. Part of the Groups revenue comes from its property, industrial, telecom network and traditional infrastructure maintenance and servicing business. In 2005, the share of revenue accounted for by the upkeep business rose to EUR 1,135.0 million (EUR 1,036.9 million), representing 38 per cent (37%) of total revenue.
As from the beginning of 2006, business operations will be monitored in accordance with the new structure. Services for households will be tracked separately. In the case of services for companies and institutions, the trend in the shares accounted for by long-term service agreements and development projects will be monitored. YITs strategic objective is to increase the relative share of revenue accounted for by consumer services and long-term service agreements.
Of the revenue, 56 per cent (57%) came from Finland, 32 per cent (32%) from the other Nordic countries, 7 per cent (6%) from Lithuania, Latvia and Estonia and 4 per cent (3%) from Russia.
YITs strategy is to bolster its construction services in the Baltic countries and Russia, building system services in the Nordic and Baltic countries as well as industrial and network services in its operating countries.
PROFIT BEFORE TAXES GROWS BY 53 PER CENT
The Groups operating profit amounted to EUR 227.7 million (EUR 157.4 million), and the operating profit margin was 7.5 per cent (5.7%).
Operating profit by business segment (EUR million)
Jan-Dec/ Jan-Dec/ Change, % Share of 2005 2004 the Groups operating profit Jan- Dec/2005 Building Systems 56.8 34.1 67 25% Construction Services 143.1 102.2 40 63% Industrial and Network Services 39.1 27.5 42 17% Other items -11.3 -6.4 77 -5% YIT Group, total 227.7 157.4 45 100%
Profit before taxes was 53 per cent better than in the previous year, having risen to EUR 214.8 million (EUR 140.0 million).
Profit after taxes was EUR 156.9 million (EUR 100.5 million).
Return on investment was 26.4 per cent (19.1%). The strategic target level for return on investment is 22 per cent.
EARNINGS PER SHARE INCREASE BY 56 PER CENT
Earnings per share increased by 56 per cent and amounted to EUR 2.52 (EUR 1.62). Equity per share rose to EUR 8.97 (EUR 7.20). The equity ratio was 36.3 per cent (31.0%). The strategic target level for the equity ratio is 35 per cent.
PROPOSED DIVIDENDS: EUR 1.10
The Board of Directors will propose to the Annual General Meeting that a dividend of EUR 1.10 be paid per share (EUR 0.70) for the 2005 financial year, representing 43.7 per cent (43.2%) of earnings per share. YIT is now increasing the dividend for the eleventh year running. The strategic target for the dividend payout is 40-60 per cent of annual earnings after taxes and minority interest.
The Board of Directors proposal on the use of profits is presented at the end of the Report of the Board of Directors.
ORDER BACKLOG GROWS
The Groups market position is strong. The uninvoiced backlog of orders was 3 per cent higher at the end of 2005 than a year earlier, having risen to EUR 1,878.8 million (EUR 1,823.4 million). 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/ Dec/ Change, % Share of 2005 2004 the Groups order backlog Dec/2005 Building Systems 492.0 557.8 -12 26% Construction Services 1,242.6 1,066.4 17 66% Industrial and Network Services 173.3 199.2 -13 9% Other items -29.1 - - -1% YIT Group, total 1,878.8 1,823.4 3 100%
The order backlog rose in Construction Services due to the good demand for residences and especially the expansion of housing production in Russia and the Baltic countries. The decline in the order backlog of Building Systems was due to the more precise selection of projects in order to improve profitability and the focusing of operations on the maintenance and servicing business. The order backlog was down 13 per cent in Industrial and Network Services due to the lower volume forecasts received from network service customers and progress on the Diesel project at Neste Oils Porvoo refinery.
THE GROUPS FINANCIAL POSITION STRENGTHENS
The Groups financial position strengthened in 2005. Interest- bearing liabilities amounted to EUR 335.0 million (EUR 395.5 million) at the end of the period and liquid assets to EUR 80.6 million (EUR 36.1 million). Net debt was EUR 254.4 million (EUR 359.4 million). At the end of the review period, the gearing ratio was 45.1 per cent (80.7%).
Financial income during the period amounted to EUR 1.9 million (EUR 1.8 million), exchange rate gains to EUR 2.0 million (EUR 1.1 million) and financial expenses to EUR 16.8 million (EUR 18.1 million). Net financial expenses were EUR 12.9 million (EUR 17.4 million), or 0.4 per cent (0.6%) of revenue.
The proportion of fixed-interest loans in the Groups entire loan portfolio was 49 per cent (52%). Loans raised directly on the capital and money markets represented 39 per cent (46%) of the loan portfolio.
The construction-stage contract receivables sold to financing companies totalled EUR 268.2 million (EUR 199.7 million) at the end of the period. Of this amount, EUR 109.4 million (EUR 101.6 million) is included in interest-bearing liabilities in the balance sheet and the remainder comprises off-balance sheet items as per IAS 39. The interest on sold receivables paid to financing companies, EUR 5.3 million (EUR 5.7 million), is included in financial expenses in its entirety.
Participations in the housing corporation loans of unsold completed residences, EUR 15.3 million (EUR 16.8 million), are also included in interest-bearing liabilities, but the interest on them is booked in project expenses, as said interest is included in housing corporation maintenance charges.
Interest-bearing liabilities included EUR 5.1 million in leasing commitments (EUR 10.2 million).
CAPITAL EXPENDITURES AND ACQUISITIONS
Gross capital expenditures on non-current assets included in the balance sheet totalled EUR 30.1 million (EUR 35.6 million) during the financial year, representing 1.0 per cent (1.3%) of revenue.
Investments in construction equipment amounted to EUR 11.8 million (EUR 8.1 million) and investments in information technology to EUR 2.7 million (EUR 3.7 million). Other production investments came in at EUR 1.6 million (EUR 1.9 million). Other investments amounted to EUR 14.0 million (EUR 21.9 million).
In Construction Services, YIT Construction Ltd signed an agreement in April to found the joint venture ZAO YIT CityStroi in Moscow.
The companys field of business is the developer contracting of housing in the City of Moscow. YITs holding in the new company is 65 per cent, and that of Russian private shareholders is 35 per cent.
In Building Systems, YIT Building Systems Oy acquired a majority holding in the Estonian electrical contracting and servicing company A/S Emico in August. In Norway, YIT acquired Nortelco System-Teknik, which provides audiovisual systems and video conference services.
YITs property maintenance business in the Greater Helsinki Area was sold to Sol Palvelut Oy on September 1, 2005. By means of this transaction, YIT phased out the maintenance of the external areas of properties and building superintendent services. In the property services provided by YIT itself, the company will from now on focus on works related to the technical systems of properties.
MAJOR RISKS AND RISK MANAGEMENT
YITs risk management policy aims to identify the major risk fac tors, taking the special characteristics of YITs business opera tions and environment into consideration, and optimally manage them so that the company achieves its strategic and financial objectives. Risk management seeks to take all of the Groups major risk factors into consideration so that its total risk exposure is optimally managed in accordance with the strategic and financial objectives.
YITs major risks are divided into strategic and administrative risks. YIT will continue pursuing its strategy of profitable growth. Major strategic risk factors include the management of growth, acquisitions, capital management, the availability of skilled employees, growth in international operations, project management and financial development. In the case of administrative risks, attention is paid to maintaining the continuity of the companys successful management system and both developing and firmly establishing a consistent management system and operating procedures in different countries and business segments as well as harmonizing languages and culture.
YITs risk management is an integral part of the Groups management, monitoring and reporting systems. Regular reporting and monitoring are performed both at the Group and division levels. The identification of business risks and preparations for them are primarily carried out in the units, divisions and busi ness segments. The Group CEO holds overall responsibility for risk management, including strategic risks as well as risks related to the corporate and operating culture, the organization and key employees. The Board of Directors approves the risk management policy and its objectives, and both directs and supervises the planning and implementation of risk management.
An account of YITs risk management policy and the management of individual risks has been published in the 2003 and 2004 Annual Reports, and will also appear in the 2005 Annual Report.
CHANGES IN THE GROUP MANAGEMENT
At its meeting on April 11, 2005, YIT Corporations Board of Directors decided to appoint YIT Primatel Ltds Managing Director Hannu Leinonen, M.Sc. (C.E.), as YIT Corporations Group CEO and YIT Building Systems Oys Executive Vice President Sakari Toikkanen, Lic. (Tech.), as executive vice president and the deputy to the Group CEO. The new executives assumed their positions on January 1, 2006, when current Group CEO Reino Hanhinen retired. As of the beginning of 2006, Hanhinen became the chairman of YITs Board of Directors. The former chairman of the Board, Ilkka Brotherus, assumed the vice chairmanship of the Board. Esko Mäkelä will continue to serve as senior vice president until December 31, 2006, with responsibility for investor relations.
Petra Thorén, Manager, Investor Relations, was appointed YIT Corporations Vice President, Investor Relations as of January 1, 2006, from which date on Thorén has also been a member of YIT Corporations Management Board.
CHANGES IN THE GROUP STRUCTURE
YITs business segment structure was firmed up on June 1, 2005, by merging Services for Industry and Data Network Services to form a single business segment: Industrial and Network Services.
Pekka Frantti, M.Sc. (Eng.), division director at YIT Kiinteistötekniikka Oy, was appointed as the president of the new business segment. The structure of the business segment will be gradually streamlined in 2006 by merging YIT Primatel Oy, YIT Service Oy and YIT Industria Oy into the parent company YIT Industrial and Network Services Oy. At the beginning of 2006, industrial electricity, automation and HEPAC operations were transferred to the business segment from YIT Kiinteistötekniikka Oy. The business functions that will be transferred had revenue of EUR 58.9 million in 2005.
An independent country group was set up from Building Systems business functions in the Baltic countries and Russia as from the beginning of 2006. These business functions were previously part of the same corporate entity as Finnish functions. The revenue of the Russian and Baltic business functions was EUR 38.7 million in 2005.
YIT BS Latvia SIA, which provides building system services in Latvia, was renamed YIT Tehsistem SIA. YIT Construction Ltds Estonian subsidiary AS FKSM was renamed AS YIT Ehitus.
NUMBER OF EMPLOYEES 21,300
In 2005, the Group employed 21,194 (21,844) people on average. At the end of the year, the Group had 21,289 employees (21,680). Of YITs employees, 52 per cent work in Finland, 37 per cent in the other Nordic countries and 7 per cent in Lithuania, Latvia and Estonia and 4 per cent in Russia.
Personnel by business segment, Dec. 31, 2005 No. Share of the Groups employees Building Systems 11,731 55% Construction Services 5,115 24% Industrial and Network Services 4,126 20% Corporate Services 317 1% YIT Group, total 21,289 100%
Personnel by country, Dec. 31, 2005 No. Share of the Groups employees Finland 11,159 52% Sweden 4,143 20% Norway 2,485 12% Denmark 1,103 5% Lithuania, Latvia, Estonia 1,492 7% Russia 907 4% YIT Group, total 21,289 100%
The development of personnel and operating systems comprises part of business operations. The Groups financial outlays on development efforts in 2005 amounted to about EUR 19.0 million (EUR 18.0 million), representing 0.6 per cent (0.6%) of revenue.
RESOLUTIONS PASSED AT THE ANNUAL GENERAL MEETING
YIT Corporations Annual General Meeting was held on March 16, 2005. The Annual General Meeting adopted the 2004 financial statements and discharged the members of the Board of Directors and the President and CEO from liability. It was confirmed that a dividend of EUR 0.70 would be paid per share (EUR 0.60 for 2003), or a total of EUR 42.9 million (EUR 36.6 million). March 21, 2005, was set as the record date and March 30, 2005, as the payout date.
The Annual General Meeting confirmed that the number of Board members shall be set at five. The following persons were re- elected to seats on the companys Board of Directors: Ilkka Brotherus, Eino Halonen, Reino Hanhinen, Antti Herlin and Teuvo Salminen. At its organization meeting on March 30, 2005, the Board of Directors elected Ilkka Brotherus as its chairman and Eino Halonen as its vice chairman. Ilkka Brotherus was elected as the chairman of the Audit Committee, and Eino Halonen and Teuvo Salminen as its members. At the Board meeting held on April 11, 2005, it was decided that Reino Hanhinen would assume chairmanship of the Board of Directors as from the beginning of January 2006, with Ilkka Brotherus the vice chairman.
The Annual General Meeting re-elected PricewaterhouseCoopers Oy, Authorized Public Accountants, as the companys auditor to audit the administration and accounts during the present financial period. PricewaterhouseCoopers Oy appointed Göran Lindell, M.Sc.
(Econ.), Authorized Public Accountant, as chief auditor.
The Annual General Meeting unanimously decided to purchase a minimum of 200 to a maximum of 2,000,000 of the companys own shares with distributable shareholders equity in accordance with the proposal by the Board of Directors. In addition, it authorized the Board of Directors to decide on the disposal of a maximum of 2,000,000 of the companys own shares which will be acquired for the company on the basis of the decision of the Annual General Meeting in such a manner and for such purposes as are meant in the proposal by the Board of Directors. The Boards proposal concerning share buyback and disposal was made public in a stock exchange release on February 15, 2005.
SHARE CAPITAL AND SHARES
YIT Corporations share capital was EUR 61,292,854 at the beginning of 2005 and the number of shares outstanding was 61,292,854. On the basis of shares subscribed for with the Series C and Series D share options from 2002, the share capital was increased by a total of EUR 1,104,498 in four lots. At the end of 2005, the share capital was EUR 62,397,352 and the number of shares was 62,397,352.
Authorizations to increase the share capital
In 2005, 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 100 per cent
The closing rate of YITs share on the last day of trading in 2005 was EUR 36.13 (2004: EUR 18.36). The price grew by 96.8 per cent during the report year. Including the 2004 dividends, the share yield was 100.6 per cent (41.0%). The trend in YITs share price has significantly outclassed general share price trends on the Helsinki Stock Exchange, because, as measured by the OMXH all- share index, prices were 31.1 per cent higher at the end of 2005 than at the turn of the previous year. Measured with the weight- limited OMXHCAP portfolio index, prices rose by 30.1 per cent during the report year.
The highest share price in 2005 was EUR 36.50 (EUR 18.84) and the lowest was EUR 17.90 (EUR 13.51). The average price was EUR 27.97 (EUR 15.92). Market capitalization at the end of the year was EUR 2,254.4 million (EUR 1,125.3 million), up 100.3 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 2005 amounted to 60,184,308 (45,579,537) shares and the value of share turnover to EUR 1,697.3 million (EUR 725.8 million). The average daily turnover of the shares was 237,883 (180,156). The figures have been converted to correspond to the number of shares following the halving of the nominal value of the shares (split) in 2004.
Own shares
YIT Corporations Annual General Meeting held on March 16, 2005, decided to buy back a minimum of 200 to a maximum of 2,000,000 of the companys own shares and authorized the Board of Directors to decide on the disposal of these shares. In December 2005, YIT Corporation purchased 200 of the companys own shares at an average price of EUR 35.25 per share. Subsidiaries did not own any shares in the parent company in 2005.
Number of shareholders grows substantially
In 2005, the number of registered shareholders grew from 7,456 to 9,368, up 25.6 per cent. The number of private investors grew by over 1,800.
International investors owned a total of 27.9 per cent of the shares at the beginning of the year and 39.9 per cent at years end.
SHARE OPTION PROGRAMMES FROM 2002 AND 2004
The 2002 Annual General Meeting decided to grant a maximum total of 450,000 Series C share options and a maximum total of 950,000 Series D share options for subscription to the Groups management and key employees. Each Series C and D share option from 2002 entitles its holder to subscribe for two YIT Corporation shares having a nominal value of one euro. As a result of the subscriptions, the share capital can be increased by a maximum of EUR 2,800,000.
In 2002, about 110 members of the Groups management and key employees named by the Board of Directors subscribed for 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 on a staggered basis from 2003-2005 on the basis of the achievement of the profitability and growth targets set in the share option programme. By the end of 2005, a total of 427,740 Series C and 698,520 Series D share options had been distributed to members of the Groups management and key employees. By November 30, 2005, 1,350,602 shares had been subscribed for with the Series C and D share options. Shares can be subscribed for annually from April 1 November 30. The subscription period with the Series C share options began on April 1, 2004, and with the Series D share options on April 1, 2005. The subscription period with both series ends on November 30, 2006.
During the period from April 1, 2005 to November 30, 2005, a total of 422,876 shares were subscribed for on the basis of the Series C share options and 681,622 shares on the basis of the Series D share options. The resulting increases in the share capital, totalling EUR 1,104,498, were entered in the trade register in four instalments. During the report year, 312,165 Series C share options were traded at an average price of EUR 34.17 and 372,895 Series D share options at an average price of EUR 41.55.
The 2004 Annual General Meeting decided that a maximum of 180,000 Series E share options and a maximum of 420,000 Series F share options be granted for subscription to the management and key employees of the new YIT Building Systems business segment. The share option programme covers about 65 people who are not part of the 2002 share option programme. Each share option entitles its holder to subscribe for one YIT Corporation share having a nominal value of one euro. As a result of the subscriptions, the share capital can be increased by a maximum of EUR 600,000.
The Series E share options were issued in summer 2004. YIT Construction Ltd subscribed for the Series F share options and will distribute them on a staggered basis to the management and key employees of the Building Systems business segment in 2005- 2007 if the objectives set for the business segments result (EBITA-%) are achieved. Shares can be subscribed for with the Series E share options from April 1 November 30, 2006 and April 1 November 30, 2007, and with the Series F share options from April 1 November 30, 2007.
The full terms and conditions of the share options are available on the companys Internet site at www.yit.fi/investors.
MARKET SITUATION REMAINS GOOD IN NORTHERN EUROPE
The Nordic countries are still booming. Financial research institutions estimate that the national economies of the Nordic countries will develop at a stable rate of about 2.5-3 per cent in 2006-2008, outpacing growth in the EU by approximately one percentage point. The good trend in incomes and the improving employment situation support household consumption. The Nordic construction market represents 8 per cent of the Western European construction market. The Nordic construction market will grow by 3 per cent during the present year. In 2007 and 2008, growth will slacken. The moderate growth rate of euro interest rates supports the calm trend in investments and housing demand. Housing sales in Finland continue to be brisk. Growth in exports and industrial output increases the need for industrial investments and maintenance in the Nordic countries. Russia and Norway benefit from the high prices of oil. The rate of growth in Russia, Estonia, Latvia and Lithuania is twice as fast as in the Nordic countries.
Finland
In November, the Research Institute of the Finnish Economy ETLA estimated that Finlands GDP will rise by 3.6 per cent this year and 3.1 per cent in 2007. The improvement in the employment count, the good trend in incomes and the low interest rate level support household consumption and demand for housing. ETLA states that annual growth in fixed investments will be about 5 per cent both this year and the next. Investments in machinery and equipment will swing to growth of 6 per cent this year and 10 per cent the next. According to the business cycle report published by the Confederation of Finnish Construction Industries RT in November, the volume of construction will grow by 3 per cent both this year and the next. Residential construction and repair works will remain brisk. Housing construction permits in the January-November period increased by 9 per cent compared with the corresponding period of the previous year. Prices of old residences rose by 9 per cent on average during the year. Construction of industrial and commercial premises will also be on the up and office construction has now passed its low point. Annual growth in renovation works will be 2-3.5 per cent during the present decade.
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). The market for industrial, property and infrastructure maintenance will expand as the outsourcing trend progresses. Telecom operators are expected to keep outsourcing their field functions in the future. Growth in the number of broadband connections will also continue. On the other hand, investments to expand the fixed and mobile phone networks will remain slight.
Sweden
At the end of December, the Swedish National Institute of Economic Research KI estimated that Swedens GDP will grow by 3.6 per cent this year and 3.1 per cent in 2007. The factors underlying this positive trend are the high capacity utilization ratio in industry, solid earnings, the positive incomes trend enjoyed by households and the low interest rates. Growth is on a broad footing. In 2006, exports will increase by 7.9 per cent due to international demand and the effect of the relatively weak Swedish kronor. Fixed investments will increase by 6.7 per cent this year, but will slacken to 4.7 per cent the next. Growth in fixed investments by industry will slow down to 5.1 per cent this year, and further to 3 per cent in 2007. Investments by the service sector are growing about two percentage points faster than those of industry. KI states that growth in housing investments will continue at a rate of 10.4 per cent this year and by 8.9 per cent the next. According to the business cycle barometer KI released in January, the order backlogs of construction companies have increased, and these companies expect to see further growth in production. Almost 60 per cent of construction firms estimate that construction activity will be on the up this year. Over 30 per cent of construction companies have reported that there is a shortage of skilled labour. The Swedish Construction Federation BI predicts that the construction of 32,000 new residential units will be started up this year and that total construction investments will increase by 4 per cent. Industrial construction will decline.
Norway
According to the forecast released by Statistics Norway in December, economic growth will hold steady at slightly over 2 per cent annually in 2006 2009. Growth in domestic consumption will continue at a rate of 3 per cent during the whole forecast period.
The vigorous growth in fixed investments that got under way in 2004 will still continue at 6 per cent this year, but the completion of large oil and gas investments will depress investments into a decline of 2 per cent in 2007. Interest rates are low, but are swinging to moderate growth, the international economy is recovering and the prices of Norwegian export products are riding high. Housing investments are still high, but growth will already begin to slip off this year. It is estimated that residential start-ups numbered 28,000 last year, or 2,000 less than in the two previous years. According to Statistics Norway, the construction of 27,309 residences was started up in the January-November period, representing 1.2 per cent more floor area than in the corresponding period of the previous year. The amount of other building start-ups during the first 11 months of the report year was 1.4 per cent higher than in the corresponding period of the previous year. Demand for business and industrial buildings is expected to grow slightly in 2006 - 2009.
Euroconstruct estimated in November that the construction of new buildings will decline by 2.1 per cent this year and further by 1.6 and 1.1 per cent in 2007 and 2008, respectively. In 2006 2008, renovation would see growth of 2.5, 2.9 and 2.5 per cent. On the whole, building construction will remain at the high level that was achieved last year.
Denmark
The outlook for the Danish economy is good. In November, the Copenhagen Institute for Future Studies anticipated that annual GDP growth would amount to 2.5 per cent in 2005-2008. Export growth gathered steam last year, and is expected to continue at a rate of 4.5 per cent over the next few years. Private consumption is expected to rise by 2.5 per cent annually thanks to a positive incomes trend and stimulatory economic policy. Growth in investments is stable at around 3 per cent annually. The value of new housing construction will grow by 5 per cent both this year and the next, coming to a halt in 2008. In November, Euroconstruct estimated that the number of new residential start-ups will be 26,000 this year and 27,000 in both 2007 and 2008. Housing renovation will not see growth in these years. The construction of other types of new buildings will increase by 3.5 per cent both this year and the next. In 2008, growth will slacken to 1.3 per cent. The value of the production of industrial buildings will rise at a rate of 8 per cent and that of office buildings 5 per cent both this year and the next. Annual growth in repairs of office buildings is about one per cent.
Baltic countries
Growth in investments and GDP in the Baltic countries significantly outpaces growth in the Nordic countries, and is expected to remain at a level of 5.5-8 per cent during the next few years. The growth of these economies is supported by the high educational level in the area and the EU membership of Estonia, Latvia and Lithuania. Growth in investments this year and the next will be around 6 per cent in Estonia, 8 per cent in Lithuania and 10 per cent in Latvia. In 2006-2008, the growth rate of construction investments will be in the double digits. Inflation in Estonia and Lithuania is 2-3 per cent; in Latvia, too, inflation will decline from its current level of 6 per cent to 3.5 per cent in 2008. Real interest rates have been negative in all three countries, but the slowing down of inflation will quickly swing them to zero. The interest rate spread with the euro will narrow as the countries seek EMU membership. Estonia and Lithuania will most likely achieve EMU entry in 2007, with Latvia following suit a year later. EMU membership might be delayed by the high inflation of these countries. Affordable borrowing, economic growth and the greater affluence of the population have increased demand for new residences and renovation. VTT estimates that this year 4,000 residential units will be completed in Estonia, 4,500 in Latvia and 8,000 in Lithuania.
Russia
The high price of oil supports Russian economic growth. Following GDP growth of over 7 per cent in 2003 and 2004, the forecast for GDP growth this year is 5-6 per cent and about 5 per cent for the next two years. The slight slackening of growth is due to the slowdown of growth in investments and industrial output. Inflation was 10.9 per cent last year and according to the Russian Ministry of Finance will slow down to no more than 8-9 per cent this year.
Growth in investments has begun to lose momentum in spite of the high price of oil and the high capacity utilization ratio, but remains slightly above the EU and Nordic average. Thanks to the good incomes trend, household consumption has become the primary engine of growth. The greater affluence of the middle class has strengthened demand for residences in large cities such as Moscow and St Petersburg.
EARNINGS TRENDS OF THE BUSINESS SEGMENTS
BUILDING SYSTEMS
In 2005, Building Systems revenue grew by 6 per cent on the previous year and amounted to EUR 1,398.4 million (EUR 1,321.2 million). The breakdown of revenue by country was as follows: Sweden, 38 per cent, Norway, 22 per cent, Denmark, 9 per cent, Finland, 28 per cent, and the Baltic countries and Russia, 3 per cent. The share of the revenue of the business segment accounted for by the maintenance and servicing business rose to 60 per cent, or EUR 840.7 million. The share of revenue generated by this business was 52 per cent in Sweden, 75 per cent in Norway, 58 per cent in Denmark, and 60 per cent in Finland, the Baltic countries and Russia.
Operating profit grew by 67 per cent to EUR 56.8 million (EUR 34.1 million). The operating profit margin improved to 4.1 per cent (2.6%). It was 5.2 per cent in the fourth quarter. Return on investment in 2005 was 22.0 per cent.
The order backlog at the end of the period was EUR 492.0 million (EUR 557.8 million). The breakdown of the backlog by country was: Sweden, 29 per cent, Norway, 19 per cent, Denmark, 17 per cent, and Finland, Lithuania, Latvia, Estonia and Russia, 35 per cent.
The decline in the order backlog by 12 per cent on the previous year was due to steps taken to improve profitability and focus operations on the maintenance and servicing business.
At the end of the period, the business segment had 11,731 employees (12,194). Of them, 4,130 worked in Sweden, 2,485 in Norway, 1,103 in Denmark, 3,424 in Finland, and 589 in the Baltic countries and Russia.
The market situation for building system services was good in 2005. Operations developed steadily in all of YITs business countries. Property refurbishing and modernization works increased. The market for maintenance and servicing grew, especially due to the greater amount and diversity of technical systems as well as the outsourcing of services. The construction markets of Sweden and Denmark revived after a long sedate period.
Construction remained brisk in Finland, Russia and the Baltic countries, and the market for new investments in building equipment systems improved. In Norway, housing construction continued apace and public construction was at a good level in the whole country.
CONSTRUCTION SERVICES
In 2005, Construction Services revenue rose by 13 per cent compared with the previous year and amounted to EUR 1,298.3 million (EUR 1,147.2 million). The maintenance business accounted for 3 per cent of revenue, or EUR 42.3 million. Of the revenue, 77 per cent was generated in Finland, 9 per cent in Russia, and 14 per cent in Lithuania, Latvia and Estonia.
Both the demand for construction services and earnings were good in all business areas. Operating profit was up 40 per cent to EUR 143.1 million (102.2). The operating profit margin improved to 11.0 per cent (8.9%). Return on investment was 25.8 per cent.
The uninvoiced backlog of orders was 17 per cent higher than in the previous year, having risen to EUR 1,242.6 million (EUR 1,066.4 million). The margin of the order backlog is good.
The business segment had 5,115 employees (5,102) at the end of the period.
In spite of abundant vacancies, new business premise projects were started up in Finland. Demand for commercial and logistics premises remained good. The backlog of works in civil engineering, water supply and environmental construction remained good.
Demand for residences in Finland remained solid during the whole year. In the Russian and Baltic markets, demand for housing remained strong, and residential construction was stepped up in line with the strategy. In April 2005, YIT Construction Ltd bolstered its position in the housing market of Moscow by founding the joint venture ZAO YIT CityStroi with local private shareholders.
During the past 12 months, the selling prices of the residences built by YIT in Russia and the Baltic countries have averaged slightly less than one-third of the prices of market-financed residences sold in Finland.
Residential construction in 2005 (2004), number of residences Finland Russia Estonia, Latvia, Lithuania Market- State- Total Total Total financed financed, rental housing and tender- based Sold 3,094 - 3,094 1,535 848 (2,311) (2,311) (722) (414) Start-ups 2,993 328 3,321 2,263 1,111 (2,515) (202) (2,717) (3,173) (700) Under construct 3,417 153 3,570 5,350 1,530 ion at (2,826) (158) (2,984) (3,539) (615) years end Completed 2,577 158 2,735 466 237 (2,908) (266) (3,174) (225) (341) Completed and 110 - 110 1 0 unsold at (189) (189) (13) (1) years end
Developer-contracted housing construction requires good plot reserves. In land management, outlays were made on good plot reserves and their rapid turnover.
Plot reserves, December 31, 2005 (December 31, 2004), Building rights and zoning potential, 1,000 m2 of floor area
Finland Russia Estonia, Latvia, Lithuania Residential plots 1,733 (1,367) 587 (286) 215 (254) Business premise plots 676 (852) 26 (-) 33 (-) Total 2,409 (2,219) 613 (286) 248 (254) Capital tied into plot reserves, EUR million 268.9 (278.1) 32.5 (11.6) 24.7 (11.4)
Plot reserves include plots that have been zoned and an estimate of the potential building rights on areas that are under zoning.
Building rights provided by regional development agreements made with landowners are not included in YITs balance sheet until the zoned sections are each in turn slated for construction.
INDUSTRIAL AND NETWORK SERVICES
The Industrial and Network Services business segment was created on June 1, 2005, by merging Services for Industry and Data Network Services. The Industrial and Network Services business segments comparative figures for 2004 have been calculated by combining the financial figures of these business segments. At the beginning of 2006, industrial electricity, automation and HEPAC operations in Finland were transferred to the Industrial and Network Services business segment from YIT Kiinteistötekniikka Oy. The transferred business functions had revenue of EUR 58.9 million in 2005.
The revenue of Industrial and Network Services grew by 11 per cent to EUR 398.8 million (EUR 359.0 million). Maintenance and business based on long-term customer agreements accounted for 77 per cent of revenue, or EUR 305.4 million. Operations in countries other than Finland generated 7 per cent.
Operating profit increased by 42 per cent to EUR 39.1 million (EUR 27.5 million). The operating profit margin improved to 9.8 per cent (7.7%). Return on investment was 63.3 per cent.
The order backlog at the end of the year amounted to EUR 173.3 million (EUR 199.2 million). The order backlog was down 13 per cent on the previous year due to the lower volume forecasts received from network service customers and progress on the Diesel project at Neste Oils Porvoo refinery. The order backlog in network services is based on forecasts from customers which extend until the end of the calendar year.
At the end of the year, the business segment had 4,126 employees (4,275).
Demand for the maintenance services offered to industry remained good in 2005, as did their outsourcing. The strike and labour lockout in the forest industry hindered industrial operations in the summer. In the case of investments by industry, a great deal of mechanical engineering output was exported. During the report year, investments were also started up in Finland, increasing demand for engineering products and installation works.
In the telecom sector, competition between operators remained severe, which led them to further transfer the responsibility for installation services into the hands of external service providers. There was steady growth in the number of broadband connections and YITs installation services were in brisk demand.
EVENTS AFTER THE END OF THE REVIEW PERIOD
YIT Construction Ltds Lithuanian subsidiary AB YIT Kausta sold its structural steel plant in Kaunas to the Finnish company Peikko Group. The ship electrification operations of the Telesilta business unit part of YIT Industrial and Network Services was sold to a soon-to-be-formed company that will be named Telesilta Oy.
OUTLOOK FOR 2006
We estimate that the pre-tax result for 2006 will be better than in the previous year.
BOARD OF DIRECTORS PROPOSAL FOR THE DISTRIBUTION OF PROFIT
According to consolidated balance sheet at December 31, 2005, the Groups distributable equity according to IFRS-standards is EUR 392.894.000. The distributable equity of YIT Corporation according to Finnish accounting standards, shown in the balance sheet at December 31, 2005, is EUR 230.798.224,21, which is made up as follows: - Retained earnings 167.706.964,22 - Profit for the financial period 63.091.259,99 230.798.224,21
The Board of directors proposes that the profit be disposed of as follows: - Payment of a dividend of 110 % of the nominal value or EUR 1,10 per share to shareholders 68.636.867,20 - Transfer to retained earnings 162.161.357,01 230.798.224,21 ==============
Helsinki, February 9, 2006
Reino Hanhinen Ilkka Brotherus Chairman Vice chairman Eino Halonen Antti Herlin
Teuvo Salminen Hannu Leinonen President and CEO
CONSOLIDATED FINANCIAL STATEMENTS, DECEMBER 31, 2005 (Figures in the financial statement bulletin are unaudited.)
Business segment structure
YITs business segment structure was firmed up on June 1, 2005, by merging Services for Industry and Data Network Services to form a single business segment: Industrial and Network Services. YITs business operations are now divided into three business segments: Building Systems, Construction Services and Industrial and Network Services. The Industrial and Network Services business segments comparative figures for 2004 have been calculated by combining the financial figures of the Services for Industry and Data Network Services business segments.
IFRS standards
YIT changed over to IFRS (International Financial Reporting Standards) on January 1, 2005. Prior to the adoption of IFRS, YITs financial reporting was based on Finnish Accounting Standards (FAS).
The financial statements for 2005 are drafted in accordance with IFRS recognition and measurement policies. The comparative figures for 2004 are in line with IFRS.
YIT Corporations IFRS comparative information for the 2004 financial year and a summary of the major changes were published as a stock exchange release on April 6, 2005. Due to revisions to IFRS standards, the comparative figures presented in the financial statement bulletin differ in some respects from the figures presented in the stock exchange release published on April 6.
Due to changes in IFRS norms, the financial information has been adjusted prior to its inclusion as comparative information in the Groups first IFRS financial statements drafted for the financial year ending on December 31, 2005.
CONSOLIDATED INCOME STATEMENT (EUR million)
IFRS IFRS Change, % Jan-Dec/2005 Jan-Dec /2004 Revenue 3,023.8 2,780.1 9 - of which activities outside Finland 1,326.6 1,183.2 12 Operating income and expenses -2,772.9 -2,600.7 7 Shares in associated companies 0.7 0.3 *) Depreciation and write-downs -23.9 -22.3 7 Operating profit 227.7 157.4 45 - % of revenue 7.5 5.7 - Financial income 1.9 1.8 6 Exchange rate differences 2.0 -1.1 *) Financial expenses -16.8 -18.1 -7 Profit before taxes 214.8 140.0 53 - % of revenue 7.1 5.0 Income taxes -57.9 -39.5 47 Profit for the period 156.9 100.5 56 - % of revenue 5.2 3.6 - Attributable to: Equity holders of the company 155.5 99.1 57 Minority interest 1.4 1.4 - Earnings per share attributable to the equity holders of the parent company Earnings per share, EUR, basic 2.52 1.62 56 Earnings per share, EUR, diluted 2.46 1.60 54
*) Change over 100%
The revenues and profit margin on developer contracting projects are recognized as revenue on the basis of the percentage of degree of completion and the degree of sale.
CONSOLIDATED INCOME STATEMENT (the fourth quarter of 2005 compared with the fourth quarter of 2004, EUR million)
IFRS IFRS Change, % Jan-Dec/2005 Jan-Dec /2004 Revenue 860.0 722.1 19 - of which activities outside Finland 405.6 325.1 25 Operating income and expenses -787.8 -681.4 16 Shares in associated companies 0.2 0.3 -33 Depreciation and write-downs -7.2 -6.4 13 Operating profit 65.2 34.6 88 - % of revenue 7.6 4.8 58 Financial income 0.6 0.6 Exchange rate differences -0.6 -1.0 -40 Financial expenses -4.0 -4.5 -11 Profit before taxes 61.2 29.7 *) - % of revenue 7.1 4.1 73 Income taxes -17.7 -7.1 *) Profit for the period 43.5 22.6 92 - % of revenue 5.1 3.1 62 Attributable to: Equity holders of the company 42.8 22.2 93 Minority interest 0.7 0.4 75 Earnings per share attributable to the equity holders of the parent company Earnings per share, EUR, basic 0.69 0.36 92 Earnings per share, EUR, diluted 0.68 0.35 94
*) Change over 100%
CONSOLIDATED BALANCE SHEET (EUR MILLION)
IFRS IFRS Change, % Dec 31, 2005 Dec 31, 2004 ASSETS Non-current assets Tangible assets 77.1 81.0 -5 Goodwill 248.8 248.8 - Other intangible assets 13.4 13.1 2 Shares in associated companies 1.8 1.2 50 Other investments 3.0 3.0 Receivables 9.4 7.7 22 Deferred tax receivables 23.6 26.1 -10 Current assets Inventories 685.2 629.3 9 Trade and other receivables 545.2 469.9 16 Cash and cash equivalents 80.6 36.1 *) Total assets 1,688.1 1,516.2 11 EQUITY AND LIABILITIES Equity attributable to the equity holders of the company Share capital 62.4 61.3 2 Other equity 497.4 380.0 31 Minority interest 3.7 4.1 -10 Total equity 563.5 445.4 27 Non-current liabilities Deferred tax liabilities 36.5 19.9 83 Pension liabilities 11.6 9.8 18 Provisions 30.1 26.5 14 Interest -bearing liabilities 172.4 224.0 -23 Other liabilities 4.4 3.7 19 Current liabilities Trade and other payables 691.2 591.8 17 Provisions 15.8 23.6 -33 Interest-bearing current liabilities 162.6 171.5 -5 Total equity and 1,688.1 1,516.2 11 liabilities
*) Change over 100%
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (EUR million)
Share Share Legal Other Cumu- Fair Trea- Retai- Mino- capi- pre- re- re- lative value sury ned rity tal mium serve serve trans- re- sha- ear- inte- re- lation serve res nings rest serve diffe- rences Equity on Dec 31, 2004 61.3 71.5 0.7 1.6 -1.4 - 307.4 4.1 445.4 Transition effect of IAS 32 and 39 - - - - - -0.4 -0.3 - -0.7 Equity on Jan 1, 2005 61.3 71.5 0.7 1.6 -1.4 -0.4 307.2 4.1 444.7 Shares subscribed with options 1.1 5.7 - - - - - - - Change in the fair value of derivatives - - - - - 0.3 - - - Change in translation differences - - - - -1.6 - - - - Employee share option scheme - - - 0.9 - - 0.1 - - Net profit for the financial year - - - - - - 155.5 - - Dividend paid - - - - - - -42.9 - - Other change - - - - - - 0.1 - - Equity on Dec 31, 2005 62.4 77.2 0.7 2.5 -3.0 -0.1 420.0 3.7 563.5 Share Share Legal Other Cumu- Fair Trea- Retai- Mino- capi- pre- re- re- lative value sury ned rity tal mium serve serve trans- re- sha- ear- inte- re- lation serve res nings rest serve diffe- rences Equity on Jan 1, 2004 61.0 70.2 0.7 0.7 - - 245.1 3.9 381.7 Shares subscribed with options 0.2 1.4 - - - - - - - Reclassifica- tions - - - - - - -0.1 - - Change in translation differences - - - - -1.4 - - - - Employee share option scheme - - - 0.9 - - -0.1 - - Net profit for the financial year - - - - - - 99.1 - - Dividend paid - - - - - - -36.6 - - Equity on Dec 31, 2004 61.3 71.5 0.7 1.6 -1.4 - 307.4 4.1 445.4
RECONCILIATION OF PROFIT FOR THE PERIOD (EUR MILLION)
Jan-Dec /2004 Net profit for the period according to FAS 84.0 IFRS adjustments Minority interest 1.4 Recognition of revenue by reference to the stage of completion (IAS 11) -2.9 Deferred taxes (IAS 12) -6.4 Provisions (IAS 37) -6.8 Goodwill amortization (IAS 38) 30.4 Other items 1) 0.8 Total IFRS adjustments 16.5 Net profit for the period according to IFRS 100.5
1) Other items affecting the determination of net profit include finance leasing, options and affiliates that become subsidiaries.
RECONCILIATION OF SHAREHOLDERS EQUITY (EUR MILLION)
Dec 31, Jan 1, 2004 2004 Equity according to FAS 457.2 408.3 IFRS adjustments Minority interest 4.1 3.9 Recognition of revenue by reference to the stage of completion (IAS 11) -17.8 -14.9 Deferred taxes (IAS 12) 7.1 13.5 Provisions (IAS 37) -33.8 -27.0 Goodwill amortization (IAS 38) 25.6 -4.8 Other items 2) 3.0 2.7 Total IFRS adjustments -11.8 -26.6 Equity according to IFRS 445.4 381.7
2) Other items affecting the determination of shareholders equity include finance leasing, options and pension liabilities.
CONSOLIDATED CASH FLOW STATEMENT (EUR million)
IFRS IFRS Change, Jan-Dec/2005 Jan-Dec % /2004 Cash flows from operating activities Net profit for the period 156.9 100.5 56 Reversal of 94.4 77.8 21 accrual-based items Change in working capital -26.8 -67.1 -60 Interest paid -20.8 -20.6 1 Interest received 1.3 1.1 23 Taxes paid -37.0 -32.5 14 Net cash generated from operating activities 3) 168.0 59.2 *) Cash flows from investing activities Acquisition of subsidiaries, net of cash -4.7 -7.0 -33 Purchase of property, plant and equipment -23.1 -21.2 9 Purchase of intangible assets -1.8 -3.4 -47 Increases in investments -0.5 -0.1 *) Proceeds from sale of property, plant and equipment 5.1 3.7 38 Proceeds from sale of intangible assets 0.1 0.2 -50 Decreases in other investments 0.4 2.7 -85 Net cash used in investing activities -24.5 -25.1 - Cash flow from financing activities Proceeds from share issues 6.8 1.6 *) Decrease in loan receivables - 2.1 *) Proceeds from borrowings - 37.9 *) Repayments of borrowings -58.0 -58.6 -1 Payments of financial leasing debts -5.1 -4.3 19 Dividends paid -42.9 -36.6 17 Net cash used in financing activities 3) -99.2 -57.9 71 Net change in cash and cash equivalents 44.3 -23.8 *) Cash and cash equivalents at the beginning of the financial year 36.1 61.5 -41 Change in the fair value of the cash equivalents 0.2 -1.6 *) Cash and cash equivalents at the end of the financial year 80.6 36.1 *)
*) Change over 100%
3) The change in the treatment of balance sheet items in developer contracting affects the classification of the cash flow statement compared with FAS.
KEY FIGURES
IFRS IFRS Change, 2005 2004 % Earnings per share, EUR, basic 2.52 1.62 56 Earnings per share, EUR, diluted 2.46 1.60 54 Eguity per share, EUR 8.97 7.20 25 Average share price during the period, EUR 27.97 15.92 76 Share price at the end of period, EUR 36.13 18.36 97 Market capitalization at the end of period, EUR million 2,254.4 1,125.3 *) Weighted average share-issue adjusted number of shares outstanding, thousands 61,772 61,123 1 Weighted average share-issue adjusted number of shares outstanding, thousands, diluted 63,261 61,823 2 Share-issue adjusted number of shares outstanding at the end of period, thousands 62,397 61,293 2 Net interest- bearing debt at the end of period, EUR million 254.4 359.4 -29 Return on investment, % 26.4 19.1 38 Return on equity,% 31.1 24.3 Equity ratio, % 36.3 31.0 - Gearing ratio,% 45.1 80.7 - Gross capital expenditures on non-current assets, EUR million 30.1 35.6 -15 - % of revenue 1.0 1.3 - Order backlog at the end of period, EUR million 4) 1,878.8 1,823.4 3 - of which international orders 752.4 645.0 17 Average number of personnel 21,194 21,884 -3
*) Change over 100%
4) Portion of binding orders not recognized as income.
COMMITMENTS AND CONTINGENT LIABILITIES ( EUR million)
IFRS IFRS Change, Dec 31, Dec 31, % 2005 2004 Collateral given for own commitments - Corporate mortgages 29.3 29.3 - - Pledged shares 1.6 2.5 -36 Other commitments - Repurchase commitments 266.8 179.0 49 - Operating leases 189.2 159.2 19 - Rental guarantees for clients 3.8 7.1 -46 - Other contingent liabilities 0.4 0.9 -56 Liability under derivative contracts - Value of underlying instruments -- Interest rate options, purchased 28.4 - - -- Interest rate swaps 60.0 70.0 -14 -- Foreign currency forward contracts 70.5 56.7 24 - Market value -- Interest rate options, purchased 29.0 - - -- Interest rate swaps 59.9 69.2 -13 -- Foreign currency forward contracts 69.7 54.4 28
*) Change over 100%
REVENUE BY BUSINESS SEGMENT (EUR million)
IFRS IFRS Change, Jan-Dec Jan-Dec % /2005 /2004 Building Systems 1,398.4 1,321.2 6 Construction Services 1,298.3 1,147.2 13 Industrial and Network Services 398.8 359.0 11 Other items -71.7 -47.3 52 YIT Group, total 3,023.8 2,780.1 9
OPERATING PROFIT BY BUSINESS SEGMENT (EUR MILLION)
IFRS IFRS Change, Jan-Dec Jan-Dec % /2005 /2004 Building Systems 56.8 34.1 67 Construction Services 143.1 102.2 40 Industrial and Network Services 39.1 27.5 42 Other items -11.3 -6.4 77 YIT Group, total 227.7 157.4 45
ORDER BACKLOG BY BUSINESS SEGMENT AT END OF PERIOD (EUR MILLION)
IFRS IFRS Change, Dec/2005 Dec/2004 % Building Systems 492.0 557.8 -12 Construction Services 1,242.6 1,066.4 17 Industrial and Network Services 173.3 199.2 -13 Other items -29.1 - - YIT Group, total 1,878.8 1,823.4 3
QUARTERLY FIGURES, 2004-2005
IFRS IFRS IFRS IFRS IFRS IFRS IFRS IFRS Q1/ Q2/ Q3/ Q4/ Q1/ Q2/ Q3/ Q4/ 2004 2004 2004 2004 2005 2005 2005 2005 Revenue, MEUR 669.9 729.2 658.9 722.1 663.9 745.1 754.8 860.0 Operating profit,MEUR 37.5 37.9 47.4 34.6 40.1 55.7 66.7 65.2 - % of revenue 5.6 5.2 7.2 4.8 6.0 7.4 8.8 7.6 Financial income, MEUR 0.4 0.5 0.3 0.6 0.3 0.4 0.6 0.6 Exhange rate differences, MEUR 0.2 0.3 -0.6 -1.0 1.5 0.6 0.5 -0.6 Financial expenses, MEUR -4.7 -4.9 -4.0 -4.5 -4.5 -4.1 -4.2 -4.0 Profit before taxes, MEUR 33.4 33.8 43.1 29.7 37.4 52.6 63.6 61.2 - % of revenue 5.0 4.6 6.5 4.1 5.6 7.1 8.4 7.1 Total balance sheet assets, 1,465.3 1,514.0 1,508.2 1,621.4 MEUR 1,506.1 1,516.2 1,612.2 1,688.1 Earnings per share, EUR 0.36 0.36 0.54 0.36 0.46 0.63 0.74 0.69 Equity per share, EUR 5.96 6.32 6.85 7.2 6.95 7.53 8.28 8.97 Share price at the end of period 15.40 16.74 15.85 18.36 21.84 27.60 35.30 36.13 Market capitalization at the end of period, 940.1 969.7 1,338.6 2,193.2 EUR million 1,023.8 1,125.3 1,711.2 2,254.4 Return on investment, rolling 12 months, % 2) 2) 2) 19.1 19.7 21.8 23.7 26.4 Equity ratio, % 26.7 27.6 30.2 31.0 30.1 31.8 34.6 36.3 Net interest- bearing debt at the end of period, MEUR 379.1 397.4 370.0 359.4 368.1 313.6 271.8 254.4 Gearing ratio, % 103.1 101.7 87.5 80.7 85.6 66.6 52.3 45.1
Gross capital expenditures, EUR million 7.3 19.0 24.3 35.6 7.0 14.1 22.3 30.1 Order backlog at the end of 1,585.2 1,708.2 1,909.4 1,881.4 period,MEUR 1,722.2 1,823.4 1,999.2 1,878.8 Personnel at the end of year 21,654 21,952 22,021 21,680 21,096 21,297 21,468 21,289 1) Includes results of affiliates.
2) Comparative IFRS information is not available.
REVENUE BY BUSINESS SEGMENT (EUR million)
IFRS IFRS IFRS IFRS IFRS IFRS IFRS IFRS Q1/ Q2/ Q3/ Q4/ Q1/ Q2/ Q3/ Q4/ 2004 2004 2004 2004 2005 2005 2005 2005 Building Systems 316.1 335.7 310.9 358.5 319.5 348.0 327.2 403.7 Construction Services 288.3 315.5 266.0 277.4 272.0 313.8 339.5 373.0 Industrial and Network Services 74.8 90.2 93.1 100.9 85.6 100.7 105.0 107.5 Other items -9.3 -12.2 -11.1 -14.7 -13.2 -17.4 -16.9 -24.2 YIT Group, total 669.9 729.2 658.9 722.1 663.9 745.1 754.8 860.0
OPERATING PROFIT BY BUSINESS SEGMENT (EUR million)
IFRS IFRS IFRS IFRS IFRS IFRS IFRS IFRS Q1/ Q2/ Q3/ Q4/ Q1/ Q2/ Q3/ Q4/ 2004 2004 2004 2004 2005 2005 2005 2005 Building Systems 4.5 7.4 8.5 13.7 8.2 14.3 13.3 21.0 Construction Services 32.7 25.4 27.9 16.2 29.4 34.2 44.1 35.4 Industrial and Network Services 1.4 6.5 11.9 7.7 6.3 9.3 12.3 11.2 Other items -1.1 -1.4 -0.9 -3.0 -3.8 -2.1 -3.0 -2.4 YIT Group, total 37.5 37.9 47.4 34.6 40.1 55.7 66.7 65.2
ORDER BACKLOG BY BUSINESS SEGMENT AT END OF PERIOD (EUR million)
IFRS IFRS IFRS IFRS IFRS IFRS IFRS IFRS Q1/ Q2/ Q3/ Q4/ Q1/ Q2/ Q3/ Q4/ 2004 2004 2004 2004 2005 2005 2005 2005 Building Systems 557.2 566.5 564.6 557.8 574.0 602.6 575.7 492.0 Construction 842.6 940.0 1,131.0 1,193.8 Services 963.0 1,066.4 1,263.3 1,242.6 Industrial and Network Services 185.4 192.7 203.6 199.2 234.4 187.3 158.3 173.3 Other items - - - - -30.0 -54.0 -46.4 -29.1 YIT Group, 1,585.2 1,708.2 1,909.4 1,881.4 total 1,722.2 1,823.4 1,999.2 1,878.8