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 AUG. 5, 2004, 8:00
YITS INTERIM REPORT, JAN. 1 - JUNE 30, 2004: NET SALES OF EUR 1.5 BILLION IN THE FIRST HALF OF THE YEAR. EARNINGS IMPROVE.
Net sales up 61 per cent
The YIT Groups net sales in the January-June period grew by 61 per cent compared with the previous year and amounted to EUR 1,504.4 million (1-6/2003: EUR 932.1 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 services, technical building system and industrial services in the Nordic countries, Baltic countries and Russia. Net sales were also increased by the growth in market-financed residential construction in Finland.
The share of the Groups net sales accounted for by its international activities grew from 19 to 39 per cent. Of the net sales, 61 per cent came from Finland, 29 per cent from the other Nordic countries, 5 per cent from the Baltic countries and 3 per cent from Russia.
The share of net sales accounted for by the maintenance and servicing business increased from 22 to 32 per cent.
Operating profit improves significantly on the previous year
All the business segments posted positive results. The Groups operating profit before amortization of goodwill and goodwill on consolidation (EBITA) amounted to EUR 75.1 million (EUR 63.5 million), or 5.0 per cent (6.8%) of net sales. Operating profit (EBIT) was EUR 60.2 million (EUR 57.9 million) and the operating profit margin was 4.0 (6.2%). Exclusive of non-recurring items in the comparison period (EUR 24.3 million), operating profit grew by 79 per cent. Profit before extraordinary items and taxes was EUR 52.9 million (EUR 51.5 million). Return on investment at the end of the 12-month period ending at the conclusion of the review period was 16.5 per cent (20.4%).
Earnings per share amounted to EUR 0.57 (EUR 0.61). Equity per share was EUR 6.66 (EUR 6.43). The equity ratio was 28.1 per cent (34.8%).
Order backlog over one and a half billion
The Groups uninvoiced backlog of orders was 44 per cent higher at the end of the review period than a year earlier, having risen to EUR 1,569.8 million (EUR 1,091.8 million). At the turn of the year, the backlog of orders was EUR 1,490.1 million. The Groups backlog for international orders more than doubled to EUR 626.6 million (EUR 256.9 million). Due to their nature, part of the Groups maintenance and servicing operations are not included in the order backlog.
All business segments post positive results
"Thanks to the large strategic acquisition carried out last year, YIT became, in terms of net sales, the largest Northern European company offering building system services," says Group CEO Reino Hanhinen. "The integration process has progressed in line with plans in all the countries. The result of the Building Systems business segment for the first half of the year rose into the black and it is expected that this favourable trend will continue.
The companies operating in Sweden will combine at the beginning of October and form a company named YIT AB.
"The operating result of Construction Services grew significantly compared with the previous year. The efficient service and production chain for residential construction, which has been systematically developed over many years, generated good earnings as the demand for residences remains strong both in Finland and the Baltic countries and Russia," says Hanhinen.
Market situation
According to financial forecast institutions, the rate of GDP growth will accelerate to 2.5-3 per cent in all of the Nordic countries this year and the next. The positive trend in the disposable income of households, coupled with low interest rates, shores up private consumption and demand for residences. Exports have begun to grow sedately and it is estimated that investments will pick up towards the end of the present year and next year.
Numerous large traffic infrastructure projects will begin in the Nordic countries both this year and the next, along with petrochemical and energy sector investment projects in which YITs Building Systems and Services for Industry may potentially participate. Finlands fifth nuclear power plant is the most significant investment project in the energy sector in the years ahead. Growth in GDP and investments in the Baltic countries and Russia is twice as rapid as in the Nordic countries. Economic growth has strengthened the middle class in these countries and increased demand for modern housing. The Baltic countries became members of the EU at the beginning of May, improving the growth prospects of their economies.
Over 60 per cent of the net sales of YITs Building Systems, Services for Industry and Data Network Services are generated by maintenance and servicing operations, which evolve steadily in spite of cyclical market swings. YITs Construction Services are more investment-intensive and residential construction, especially in Finland, benefits from the prevailing euro interest rate system.
Outlook for 2004
YITs net sales will see substantial growth, as the Building Systems business segment will enlarge net sales during the entire year, the demand for residences will remain strong in both Finland and Russia, and the outlook for investments by industry in the Nordic countries will strengthen towards the end of the year.
Profit before extraordinary items and taxes is estimated to improve significantly compared with 2003. It is expected that the Building Systems business segment will have a positive effect on YITs full-year earnings per share for 2004.
Publication on August 5 and the next Interim Report
A press conference will be held at 10:00 (Finnish time) on Thursday, August 5, and an event for investment analysts and portfolio managers will be held at 13:00 at YITs head office. The address is Panuntie 11, 00620 Helsinki.
The Interim Report for the January-September period will be published on November 2, 2004. Interim Reports will not be printed; rather, they will be published as stock exchange releases and on the companys site at www.yit.fi. Copies of Interim Reports can be ordered from YIT Corporation, Corporate Communications, P.O. Box 36, FIN-00621 Helsinki, Finland, or fax +358 20 433 3746.
YIT CORPORATION
Reino Hanhinen Group CEO
For additional information, contact:
Group CEO Reino Hanhinen, tel. +358 20 433 2454, reino.hanhinen@yit.fi Executive Vice President Esko Mäkelä, tel. +358 20 433 2258, esko.makela@yit.fi Veikko Myllyperkiö, Vice President, Corporate Communications, tel. +358 20 433 2297, veikko.myllyperkio@yit.fi Petra Thorén, Manager, Investor Relations, tel. +358 20 433 2635, petra.thoren@yit.fi
ANNEXES Interim Report, January 1 - June 30, 2004 Consolidated income statement, balance sheet, cash flow statement, key figures and contingent liabilities as well as net sales, operating profit and order backlog by business segment and the Groups quarterly trends.
Distribution: Helsinki Exchanges, principal media, www.yit.fi
YIT CORPORATIONS INTERIM REPORT, JAN. 1 - JUNE 30, 2004
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 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 and order backlog figures presented below for 2003 are pro forma calculations. The figures include the acquired Building Systems business as from August 29, 2003.
NET SALES OF ONE AND A HALF BILLION EUROS IN THE FIRST PART OF THE YEAR
The YIT Groups net sales in the January-June period rose to EUR 1,504.4 million (1-6/2003: EUR 932.1 million), representing growth of 61 per cent compared with the previous year. Of the net sales, 43 per cent were generated by Building Systems, 47 per cent by Construction Services, 6 per cent by Services for Industry and 4 per cent by Data Network Services.
Net sales by business segment (EUR million)
1-6/2004 1-6/2003 Change, % Building Systems 652.9 156.5 *) Construction Services 726.0 624.4 16 Services for Industry 91.9 103.8 -11 Data Network Services 55.2 56.4 -2 Other items -21.6 -9.0 *) YIT Group, total 1,504.4 932.1 61
*) Change over 100%
YITs service chain spans the entire life cycle of investments.
YIT employs a life cycle strategy to seek better competitiveness, 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. During the review period, the share of net sales accounted for by this business rose to EUR 481.6 million (EUR 205.9 million), representing 32 per cent (22%) of total net sales.
The share of the Groups net sales accounted for by its international activities was EUR 581.8 million (EUR 181.6 million), or 39 per cent (19%). Of the net sales, 61 per cent came from Finland, 29 per cent from the other Nordic countries, 5 per cent from the Baltic countries and 3 per cent 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.
OPERATING PROFIT IMPROVES SIGNIFICANTLY ON THE PREVIOUS YEAR
Operating profit before amortization of goodwill and goodwill on consolidation (EBITA) amounted to EUR 75.1 million (EUR 63.5 million), or 5.0 per cent (6.8%) of net sales. Operating profit (EBIT) was EUR 60.2 million (EUR 57.9 million) and the operating profit margin was 4.0 (6.2%).
The operating profit for the comparison period was increased by EUR 30.0 million in capital gains from the sale of Makroflex and reduced by EUR 5.7 million in losses booked as a result of a ruling by the Helsinki District Court in February 2003. The claim concerned the conversion and additional works on the refurbishing of SOKs former head office property that was completed in 1999.
YIT has appealed the decision. Exclusive of non-recurring items in the comparison period, operating profit grew by 79 per cent.
Operating profit (EBIT) by business segment (EUR million)
1-6/2004 1-6/2003 Change, % Building Systems 0.3 - Construction Services 56.9 57.3 -1 Services for Industry 2.3 - Data Network Services 3.5 0.7 *) (YIT Installation) - 5.5 Other items -2.8 -5.6 -50 YIT Group, total 60.2 57.9 4
*) Change over 100%
Profit before extraordinary items and taxes was EUR 52.9 million (EUR 51.5 million). Profit after taxes was EUR 35.0 million (EUR 35.5 million). Return on investment at the end of the 12-month period ending at the conclusion of the review period was 16.5 per cent (20.4%).
Earnings per share amounted to EUR 0.57 (EUR 0.61). Equity per share was EUR 6.66 (EUR 6.43). The equity ratio was 28.1 per cent (34.8%).
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.
ORDER BACKLOG OVER ONE AND A HALF BILLION
The Groups market position is strong. The uninvoiced backlog of orders was 44 per cent higher at the end of the review period than a year earlier, having risen to EUR 1,569.8 million (EUR 1,091.8 million). At the turn of the year the backlog of orders was EUR 1,490.1 million. The Groups backlog for international orders more than doubled to EUR 626.6 million (EUR 256.9 million), representing 40 per cent of the entire backlog (24%). 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)
6/2004 6/2003 Change, % Building Systems 566.5 145.6 *) Construction Services 810.6 784.9 3 Services for Industry 73.5 71.3 3 Data Network Services 119.2 90.0 32 YIT Group, total 1,569.8 1,091.8 44
*) Change over 100%
THE GROUPS FINANCIAL POSITION REMAINS GOOD
The Groups financial position remained good during the review period. Interest-bearing liabilities amounted to EUR 279.8 million (EUR 170.1 million) at the end of the period and net debt to EUR 243.1 million (EUR 139.5 million). The growth in net debt was due to the Building Systems acquisition, for which EUR 191 million was paid to ABB. Net financial expenses were EUR 7.3 million (EUR 6.4 million), or 0.5 per cent (0.7%) of net sales. At the end of the review period, liquid assets amounted to EUR 36.8 million (EUR 30.6 million).
The proportion of fixed-interest loans in the Groups entire loan portfolio was 56 per cent (86%). Loans raised directly on the capital and money markets amounted to 68 per cent (64%).
The construction-stage contract receivables sold to financing companies totalled EUR 212.3 million (EUR 145.3 million) at the end of the period. The interest paid on them to the financing companies, EUR 2.9 million (EUR 2.4 million), is included in net financial expenses. The growth in sold contract receivables was due to the vigorous increase in market-financed residential construction.
Total assets in the consolidated balance sheet amounted to EUR 1,587.6 million (EUR 1,176.3 million) at the end of the period.
Factors contributing to the growth of the balance sheet were the acquisition of Building Systems as well as the strong increase in developer contracting in residential construction and the related purchases of plots.
CAPITAL EXPENDITURES AND ACQUISITIONS
Gross capital expenditures on non-current assets included in the balance sheet totalled EUR 17.0 million (EUR 14.2 million) during the January-June period, representing 1.1 per cent (1.5%) of net sales. Investments in construction equipment amounted to EUR 3.1 million (EUR 3.7 million) and investments in information technology to EUR 2.9 million (EUR 2.1 million). Other production investments came in at EUR 1.4 million (EUR 0.5 million). Other investments, including the goodwill on consolidation of acquired companies, amounted to EUR 9.6 million (EUR 7.9 million). EUR 8.9 million in goodwill arising from the acquisition of the Building Systems business functions was amortized during the report period, along with EUR 0.8 million in goodwill on consolidation.
On June 22, 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 summer 2003. YIT Shipins field of business comprises end-to- end deliveries of electrical installation projects for ships. The companys annual net sales amount to about EUR 10 million and it has approximately 130 employees.
In May, YIT increased its stake in ZAO YIT Ramenje to 51 per cent.
The latter companys business is building construction in the environs of Moscow.
CHANGES IN THE GROUP STRUCTURE
YIT Building Systems AB and YIT Calor AB, the Swedish subsidiaries of YIT Building Systems Oy, will form a company named YIT AB. The business combination will be seen to completion by September 30, 2004.
NUMBER OF EMPLOYEES
During the review period, the YIT Group employed 21,700 (12,606) people on average. At the end of the period, the Group had 21,952 employees (13,087). Of YITs employees, 55 per cent work in Finland, 36 per cent in the other Nordic countries and 9 per cent in the Baltic countries and Russia.
Personnel by business segment, June 30, 2004
No. Share of the Groups employees Building Systems 12,310 56% Construction Services 5,030 23% Services for Industry 2,925 13% Data Network Services 1,386 6% Corporate Services 301 2% YIT Group, total 21,952 100%
Personnel by country, June 30, 2004
No. Share of the Groups employees Finland 12,171 55% Sweden 4,163 19% Norway 2,547 12% Denmark 1,090 5% Baltic countries 1,177 5% Russia 804 4% YIT Group, total 21,952 100%
SHARE CAPITAL AND SHARES
YIT Corporations share capital was EUR 61,046,750 at the beginning of the review period 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. Share subscriptions carried out on the basis of the Series C share options from 2002 increased the share capital by EUR 35,130 on May 6, 2004, and by EUR 78,060 on June 28, 2004. The share capital was EUR 61,159,940 at the end of the period and the number of shares was 61,159,940.
During the review period, 222,855 of the Series C share options from 2002 were traded at an average price of EUR 19.48 each.
During the review period, no shares issues were organized and convertible bonds or bonds with warrants were not floated. At the end of the period, the Board of Directors did not have valid share issue authorizations or authorizations to issue convertible bonds or bonds with warrants.
The company did not own any of its shares during the report period nor did it have a valid authorization to purchase its own shares.
The subsidiaries did not own shares in the parent company.
MARKET CAPITALIZATION RISES TO OVER ONE BILLION EUROS
The average share price during the review period was EUR 15.68 (EUR 8.01), with a high of EUR 17.53 (EUR 8.90) and a low of EUR 13.51 (EUR 7.01). The closing rate was EUR 16.74 (EUR 8.50). Share turnover during the period amounted to EUR 356.6 million (EUR 85.0 million), with 22,740,475 (10,617,014) shares being traded. The figures have been converted to correspond with the doubled number of shares.
Market capitalization more than doubled in the space of a year and amounted to EUR 1,023.8 million (EUR 497.1 million) at the end of the period.
NUMBER OF SHAREHOLDERS GROWS STRONGLY
The number of registered shareholders was 4,928 (3,271) at the beginning of the review period and 6,613 (3,540) at its end. The number of private investors grew by about 1,500 during the first half of the year.
According to the nominee registers, 19.9 per cent of the shares (22.1%) were owned by foreigners at the beginning of the period and 24.3 per cent (20.2%) at the end. Other foreign ownership at the end of the review period amounted to 1.5 per cent (3.3%); thus, a total of 25.8 per cent (23.5%) of the companys shares outstanding were owned by international investors.
Fidelity International Limiteds holding in YITs share capital and votes declined to 4.92 per cent on April 28, 2004. The Tapiola Groups holding declined to 4.98 per cent on June 22, 2004.
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 spring 2003 and a system project for the calculation of conversions was started up in November.
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 will have been converted to match IFRS.
The major changes in the accounting policy are the elimination of double net sales in developer contracting as well as changes in partial credits to account and the recording of 10-year commitments. In IFRS, income and expenses are in no respects recorded twice; rather, a developer-contracting project is treated as a single entity. Partial credits to account will be carried out using the principle of degree of completion multiplied by degree of sale, whereas according to the current practice the project margin has been booked in the income statement on the basis of the degree of completion or the degree of sale, whichever is lower. In IFRS, 10-year commitments are recorded as obligatory provisions in the balance sheet, whereas they are presently recorded as expenses on the basis of their realization. The changes in the recording of developer-contracting projects will increase interest-bearing liabilities in the balance sheet, but reduce the balance sheet total. The imputed non-current liabilities arising from the entitlements of the occupational disability portion of statutory employment pensions (TEL) are accounted for in the opening balance sheet dated January 1, 2004, reducing the companys shareholders equity. A more detailed account of the other changes will be presented in the next annual financial statement bulletin.
MARKET SITUATION
The global economy has begun to grow and it is forecast that this will also turn Nordic exports and investments into growth. The total annual growth of GDP in the Nordic countries in 2004 - 2006 will rise to 2 - 3 per cent, that is, it will be faster than in the entire euro zone. The rate of growth in GDP and investments in the Baltic countries and Russia is twice as fast as in the Nordic countries. The risks for economic development primarily comprise the inflation risk arising from the rapid price trend in oil and certain raw materials, which would impact on interest rate levels, as well as the slowing down of European economic development if the US dollar weakens.
Finland
The trend in YITs net sales is supported by the continuing brisk demand for residences and premises for commercial services in Finlands growth centres. The growth in residential production, the construction of commercial premises and renovation in Finland compensates for the decline in office and industrial construction in the construction and building system markets (heating, water, air-conditioning, electricity and automation contracting and maintenance). The strong contraction in investments by industry, which has continued for two years, will end during the present year, and it is anticipated that investments will rise both towards the end of the present year and next year on the heels of a moderate cyclical upswing. The strengthening of the euro at the beginning of the year dampens the upswing.
VTT, which represents Finland in Euroconstruct, anticipates that building construction will grow by 4.5 per cent this year and by 2.9 per cent the next. According to VTT, residential investments will increase by 10.5 per cent during the present year, while other building construction investments will remain at the previous years level. In 2005, the volume of residential investments will remain at this years level, and the number of start-ups will rise to 33,000 residences. Other building construction investments will grow by 4 per cent. VTT anticipates that a rise in interest rates will reduce the number of residential start-ups to 30,500 units in 2006. Civil engineering will also increase thanks to numerous ongoing large projects.
Public service construction and the construction of offices will continue to contract this year. According to VTT, renovation will grow at an annual rate of 3 - 4 per cent over the next ten years.
The Research Institute of the Finnish Economy ETLA predicts that construction output will grow by 3.4 per cent on average each year from 2004 to 2008, that is, at a faster rate than in the previous five-year period. The growth in civil engineering outpaces that of building construction thanks to large-scale traffic and energy infrastructure projects.
According to the business cycle barometer published by the Confederation of Finnish Industries EK in June, the cyclical outlook for industry has improved further. Order backlogs are already at the normal level and are expected to strengthen further. According to the investment survey published in June, investments by the manufacturing industry will decline by 1.5 per cent this year. According to the business cycle review published by the Ministry of Finance in May, total investments declined by 2.3 per cent last year; they will grow by 1.8 per cent this year and by 2.5 per cent the next. ETLA predicts that investments in the national economy will increase by 3.7 per cent annually on average during the next five years. According to the Ministry of Finance, GDP will grow by 2.5 per cent this year and by 2.8 per cent the next.
The market for industrial, property and infrastructure maintenance will expand as the outsourcing trend progresses. The total market for telecom network construction and maintenance will not expand during the present year. The outsourcing of operators field functions is expected to continue in the future, increasing YITs market potential.
Sweden
The Swedish economy has begun to grow, with exports as the engine of growth. Exports grew by 5.9 per cent last year. Nordea predicts that growth in exports will amount to 7.6 per cent and 6.8 per cent this year and the next, respectively. According to the forecast, GDP will grow by 2.7 per cent this year and by 3 per cent next year. Euroconstruct estimated in June that residential start-ups in Sweden will remain at last years level of 23,000 residences, growing to 25,000 residences during the next two years. Other building construction will bottom out this year and then swing to growth at years end. Start-ups of industrial and educational buildings already saw slight growth last year.
Building renovation works continue to increase at a steady rate of about 2 per cent. According to Euroconstruct, the value of building construction output will grow by 1.3 per cent and 3.5 per cent this year and the next, respectively.
In Statistics Swedens investment survey, companies reported that they will step up their investments by 10 per cent during the present year. Nordea predicts that growth in total investments will amount to 3.5 per cent this year and to 6.5 per cent next year. According to the business cycle barometer published by the Swedish National Institute of Economic Research KI at the end of June, the business climate for industry will continue to improve.
The industrial confidence indicator is at its highest level in three and a half years. The business climate for construction has entered a phase of incipient recovery. New orders have increased and the field anticipates that orders will increase further in the next few months. In its business cycle report published in June, KI predicts that GDP will grow by 2.9 and 2.7 per cent this year and the next, respectively. KI forecasts that exports will grow by 7.3 per cent this year and 7.0 per cent the next. Fixed investments will grow by 2.1 per cent this year and 6.8 per cent next year. Decisions to start up numerous large industrial investments have already been made. Industrys high capacity utilization rate and good financing opportunities support growth in investments. The beginning of growth in construction investments will be delayed until the latter half of the year.
Norway
According to Statistics Norways (SSB) economic survey 1/2004, which was published in March, there has been an upswing in the Norwegian economy since last summer. The Norwegian Ministry of Finance has raised its GDP forecast for mainland Norway to 3.2 per cent for this year and expects growth to continue in a similar manner in 2005 as well. Investments will grow at the same rate as GDP and growth in private consumption is at 5 per cent. The decline in Norges Banks key interest rate ("sight deposit rate") from 7 to 1.75 per cent during the past two years supports consumption and investments. Prognosesenteret estimates that the key interest rate will rise no higher than 2.5 per cent by the end of 2005. The moderate interest rate trend is supported by the slowing down of inflation to 2.5 per cent this year and to 2 per cent the next. On the basis of SSBs investment survey, investments in industry and the energy infrastructure are expected to swing to slight growth. Equipment investments in the service sector will also grow. On the basis of its investment survey, SSB estimates that annual growth in oil and gas investments will amount to 4 per cent in 2004 - 2006.
According to Prognosesenteret, which represents Norway in Euroconstruct, the number of residential start-ups this year will remain at the previous years level of about 23,000 and grow to 24,200 residences next year. At the end of July, SSB reported that as many as 10,306 residences had been started up by the end of May this year, or 1,800 more than in the corresponding period of the previous year. Building construction works totalling 2.7 million square metres of floor area have been started up, or 14.5 per cent more than in the five first months of the previous year. The floor area of non-residential start-ups was 17.1 per cent higher than in the corresponding period of the previous year. According to SSBs order backlog statistics, the order backlog of building construction companies was 9 per cent higher than a year earlier.
The order backlog of residential buildings was 26 per cent higher than a year earlier, whereas the order backlog of other types of buildings had contracted. On the other hand, the backlog of repair and maintenance works had grown by close to 30 per cent. In April, Statistics Norways business cycle barometer showed a positive development outlook in exports and a growing order backlog in industry manufacturing investment goods.
Denmark
In its review in June, Nordea assessed that Denmarks economy has entered an upswing, with private consumption and fixed investments as the engines of growth. Disposable income will increase thanks to tax relief in 2004 - 2007. The average GDP growth forecasts by financial research institutions for this and the next year are 2.2 and 2.4 per cent. Private consumption will grow by 3.4 per cent and 2.8 per cent this year and the next, respectively.
Euroconstruct estimates that fixed investments will grow at a rate of 4 per cent on average in 2004 - 2006. Growth in exports is also forecast to strengthen during the upcoming two years. In June, Dansk Byggeri, the Danish Construction Association, assessed the outlook for the present and the next year as stable. The floor area of the residential buildings being started up will grow by 3 per cent this year and the next. Market-financed residential construction maintains residential production at a stable level thanks to the favourable trend in household incomes and the low interest rates. 23,500 and 24,500 residential units will be started up during the present year and the next, respectively.
Office and industrial facility construction will decline.
Renovation will grow by 3 per cent this year, while it will only see minor growth next year. Activity is centred around Copenhagen and other large cities.
Baltic countries and Russia
Growth in GDP and investments in the Baltic countries and Russia significantly outpaces the Nordic countries. The Baltic countries entry into the EU in May will maintain a double-figure investment growth rate both during the present and the next year. EU subsidies and the benefits imparted by EU membership will strengthen the economic growth of the new member countries for many years to come. Nordea predicts that investments in Russia will grow by 15 per cent during the present year and by 12 per cent the next. The greater affluence of the middle class has strengthened demand for market-financed residences in Moscow region, St Petersburg, Tallinn and Vilnius.
EARNINGS TRENDS OF THE BUSINESS SEGMENTS
BUILDING SYSTEMS
The net sales of Business Systems amounted to EUR 652.9 million (EUR 156.5 million). The maintenance and servicing business accounted for 59 per cent of the net sales of the business segment. The breakdown of net sales by country was as follows: Sweden, 36 per cent, Finland, the Baltic countries and Russia, 33 per cent, Norway, 23 per cent, and Denmark, 8 per cent.
Building Systems operating profit before amortization of goodwill and goodwill on consolidation (EBITA) amounted to EUR 12.4 million. Amortization of goodwill and goodwill on consolidation on the Building Systems acquisition amounted to EUR 9.7 million. The business segments operating profit (EBIT) amounted to EUR 0.3 million.
The order backlog at the end of the period was EUR 566.5 million (EUR 145.6 million). At the end of the period, the business segment had 12,310 employees. Of them, 4,152 worked in Sweden, 4,111 in Finland, 2,547 in Norway, 1,090 in Denmark and 410 in the Baltic countries and Russia.
Companies operating in Sweden will form YIT AB
The combined net sales of YIT Building Systems AB and YIT Calor AB, which operate in Sweden, amounted to EUR 239.0 million. The share of net sales accounted for by the maintenance and servicing business was 49 per cent. The order backlog was EUR 193.6 million.
The Swedish economy has begun to grow, with exports as the engine of growth. Decisions to start up numerous large industrial investments have already been made. Industrys high capacity utilization rate and good financing opportunities support growth in investments. The business climate for construction has entered a phase of incipient recovery. New orders have increased and the field anticipates that orders will increase further in the next few months. According to forecasts, residential start-ups in Sweden will remain at last years level of 23,000 residences, growing to 25,000 residences during the next two years. Other building construction will bottom out this year and then swing to growth at years end.
The post-acquisition integration process progressed in line with plans and has now been seen to completion. YIT Building Systems AB and YIT Calor AB will form a company named YIT AB by September 30, 2004. After the business combination, all operations in Sweden will be carried out under the YIT AB name. The companies have engaged in close cooperation to improve cost-efficiency and project management, and have beefed up customer service by means of joint offers and the development of new business concepts.
In the second quarter, YIT received an order for a new security system for the Parliament of Swedens buildings in Stockholm.
Stringent security requirements have been set for this project.
The YIT solution OnGuard will be employed.
YIT landed an order from NCC to deliver water and ventilation installations and gas installations for the extension of the Linköping University Hospital. The works will continue until autumn 2006. Thanks to its long-term cooperation with NCC, YIT also received an order for all the technical installation works of a thermal power plant in Ryaverken.
YIT will deliver piping installations and insulation for Stora Ensos new plant in Skoghall. The replacement of the illumination system of the Landvetter airport will be supplied to Luftfartsverket, the Swedish aviation authority. Both works will continue until autumn 2005.
Residential renovation and Facility Management brisk in Finland
YIT Kiinteistötekniikka Oys net sales in Finland, the Baltic countries and Russia amounted to EUR 215.1 million during the period. The share of net sales accounted for by the maintenance and servicing business was 66 per cent. The order backlog amounted to EUR 205.9 million. After remaining at the same level in the first months of the year, the backlog began to see slight growth during the report period.
No major changes took place in the Finnish market situation compared with the first months of the year. The general situation was tight and rapid changes are not expected. Business premises were built, but the demand for offices and public premises continued to be low. The construction of new residences has remained strong, and will most likely remain so, which is also the case in the refurbishing of residences. The market for property repairs and maintenance has been brisk in all segments. We believe that life cycle deliveries will increase in the public sector.
The markets of the Baltic countries are developing thanks to continuing economic growth and the stability imparted by the EU.
The Russian building systems market is developing favourably.
During the second quarter, building system deliveries were started up for sites such as the Turku City Hospital and Osuuskauppa Keskimaas Aleksandra Hotel in Jyväskylä. Agreements were signed for the electrification works of Outokumpu Stainless Oy, Stora Enso Oyjs Summa plants and a Birka Line cruise ship as well as the modernization of the Finnjet cruise ship. In addition, Facility Management agreements were made with Citycon Oyj, Tapiola Oy and Pilkington Oy. A building system agreement was made with VP Market in Lithuania for the extension of the Akropolis shopping centre in Vilnius. After the completion of the extension works, it will be the largest such centre in the Baltic countries. YIT also has a maintenance agreement with VP Market covering 140 shopping centres around the country.
Major sites that were completed during the report period include the building system works on the additional Parliament building in Helsinki and air-conditioning works for LEIPA Georg Leinfelder GmbH in Germany. As a joint project, YIT completed TietoEnator Corporations business premises in the Klovi area of Espoo.
The internal joint projects that were started up include the Kartanonkoski school in Vantaa, which is being carried out as a design and build project in which the client purchases the full implementation of the project. In Nordic cooperation, YIT started up Stora Ensos Kvarnsveden project in Sweden. Building systems cooperation in building production got under way with Construction Services in St Petersburg.
Ongoing projects include the construction of YIT Centres in Rovaniemi, Jyväskylä and Turku and numerous residential sites around Finland, including the Ylläs Chalets apartment hotel. One of the major ongoing joint projects is the construction of business premises for the Finnish Meteorological Institute and the Finnish Institute of Marine Research in Helsinki.
Maintenance market growing in Norway
YIT Building Systems ASs net sales amounted to EUR 148.4 million.
The share of net sales accounted for by the maintenance and servicing business was 73 per cent. The order backlog was EUR 80.2 million.
According to Prognosesenteret, which represents Norway in Euroconstruct, the number of residential start-ups this year will remain at the previous years level of about 23,000 and grow to 24,200 residences next year. The market for new commercial premises is 6 per cent smaller than in 2003. The construction of business premises remains slight, as the vacancy rate is high. In Oslo, 10 per cent of business premises, representing close to one million square metres, are vacant.
The market for modernization and reconditioning works is on the rise, particularly due to public sector projects. Modernization projects focus on life-cycle costs. There is significant growth potential in the maintenance market, which supports YITs strategy.
Agreements were made in the second quarter for the technical deliveries of the extension of Framo Engineerings head office and the electrical installation works of a customs building that will be erected in Svinesund on the border of Norway and Sweden. The international Foster Wheeler Company ordered a new steam boiler from YIT, including its construction and additional equipment. YIT will deliver ventilation and electrical systems for Prior, Norways leading supplier of eggs and poultry.
YIT made progress in expanding the use of the patented ClimaCeil electrical and ventilation system throughout the entire Group, particularly in Denmark. The events held for industrial customers in association with YITs Services for Industry were seen to completion. Cooperation continued with parties such as Carnegie Mellon University.
Denmarks economy has entered an upswing
YIT A/Ss net sales amounted to EUR 51.3 million. The share of net sales accounted for by the maintenance and servicing business was 35 per cent. The order backlog was EUR 86.8 million.
In its review in June, Nordea assessed that Denmarks economy has entered an upswing, with private consumption and fixed investments as the engines of growth. Both the interest rate level and inflation are low, the government has lightened taxation and new types of loans have been brought to market. The international economy is also growing. The economy is expected to improve significantly in 2004 and 2005. The high price of oil causes a certain degree of uncertainty in household finances. It is also uncertain whether large industrial projects will be started up due to the poor exchange rate against the US dollar.
The floor area of buildings started up in the first quarter grew by 7 per cent. In the case of residences and commercial premises, growth amounted to 5 per cent, and in the case of cultural and educational premises to 16 per cent (Dansk Byggeri). There has also been growth in the private construction of single-family houses. The market for property services and maintenance (Facility Management) is still developing, as companies are seeking cost- savings and outsourcing their services.
In April, YIT landed an order from Århus Shipyard to provide electrical installation works for three 146-metre yachts. A new framework agreement was made with the mobile communications operator Orange. Another ventilation order was received from the pharmaceutical company Novo Nordisk.
YITs internal cooperation within Facility Management services has been tightened. The management training programme progressed in line with plans.
CONSTRUCTION SERVICES
The net sales of Construction Services grew by 16 per cent compared with the previous year and amounted to EUR 726.0 million (EUR 624.4 million). The maintenance business accounted for 2 per cent of this figure (3%) and international operations were valued at 17 per cent of net sales (13%). Net sales include double net sales (sale of condominium shares in own production) of EUR 107.8 million (EUR 111.2 million).
Operating profit amounted to EUR 56.9 million (EUR 57.3 million).
Operating profit for the comparison period included EUR 24.3 million in non-recurring items. The order backlog was 3 per cent higher than in the previous year, having risen to EUR 810.6 million (EUR 784.9 million). At the end of the period, the business segment had 5,030 employees.
During the report period, the business segment continued to shift the focus of its operations from tender-based contracting to developer-based residential construction, where the order backlog saw especially strong growth in international operations.
Good demand for residences in the entire market area
Towards the end of the period, sales of residences in Finland levelled off from the record-level seen in the first months of the year, in line with regular seasonal variation. Demand remained good in the entire country. Sales of residences remained brisk in all of Finland, especially in the municipalities surrounding the Greater Helsinki area. During the review period, 1,382 market- financed non-rental residential units were sold, or 312 more than in the corresponding period of the previous year. Demand was upheld by consumers firm confidence in their own finances and the still-low interest rates.
The construction of 1,453 market-financed non-rental residences (1,503) was started up during the review period in Finland. At the end of the period, 3,115 (2,706) residences were under construction. 1,551 (991) market-financed non-rental residences were completed during the period. There were 134 completed unsold residences at the end of the period.
In international operations, growth in residential construction continued in line with the strategy. The construction of 2,821 (247) new market-financed residences was started up in Russia, Estonia, Latvia and Lithuania during the review period. 110 (0) residences were completed during the period and at its end 3,562 (973) market-financed residences were under construction. A total of 538 (203) residences were sold in Russia and the Baltic countries during the review period. There were three completed unsold residences at the end of the period.
The prices of residences have risen significantly in Russia during the year. In the Moscow area and St Petersburg, prices have increased by about one-third.
It is expected that the population shift from one municipality to another, consumers belief in the positive development of their own finances and the low interest rate level will continue in Finland. Likewise, it is anticipated that strong economic growth and the brisk demand for new residences will continue in Russia and the Baltic countries. It is estimated that the market outlook for residential construction will remain good in all of YITs market areas. The company can meet demand thanks to its good plot reserves.
YITs plot reserves, June 30, 2004
Building rights Capital tied into and zoning plot reserves, potential, EUR million 1,000 m2 of floor area Finland Residential plots 1,362 224 Business premise 847 54 plots Total 2,209 278 Baltic countries and Russia Residential plots 489 19 Total 2,698 297
Other building construction
The high vacancy rate of business premises in Finland continued to slow down the start-up of business premise projects. Demand remained reasonable in the case of commercial and logistics premises. Competition for new business premise construction and renovation contracts was tight. The scarcity of investments by industry kept the volume of production facilities construction at a low level.
New competitive contracts landed during the second quarter included the extension of VTI Technologies Oys business premises and the third stage of Technopolis in Vantaa, the extension of the Näsi social and health care centre in Porvoo, the renovation of a health care centre in Kerava, the construction of the new Asunto Oy Oulun Lyötynportti building for TA-Asunnot Oy and the fifth stage of the Laukalne sawmill for Stora Enso in Latvia.
The YIT Centre deal was consummated in the second quarter; YIT sold properties in Rovaniemi, Oulu, Jyväskylä, Kouvola and Lappeenranta to the Suomi Group, staying on as a tenant in these properties.
Greater volume of infrastructure construction than in the previous year
The total volume of the market for civil engineering during the report period was greater than in the previous year, but price competition remained heated. The trend in the market situation for tunnelling and underground construction is estimated to be positive, as large projects are entering the tendering stage.
New competitive construction contracts landed during the review period included stabilization works at the Vuosaari Harbour, the Kujala composting centre, the subterranean structures of the penitentiary of Southwestern Finland, and the piling, earth and foundation works of the Kaaritalo building for Senate Properties.
YIT strengthened its position as the market leader among private players in public road maintenance. YIT manages nine road maintenance contracts for the Finnish Road Enterprise.
Preparations were started up with the National Road Administration under which the parties will participate, as a consortium, in the pre-selection procedures of the project to build the E18 motorway using a private financing model.
Development projects
Major development projects and measures started up during the review period included developing and reorganizing procurements, implementing an electronic customer feedback system as well as strengthening the YIT Home service concept and expanding the brand to international operations. In infrastructure construction, new training programmes in tunnelling and underground construction and maintenance were started up to respond to the labour shortage threatening the field; the programmes will lead to YIT Constructions own vocational diplomas.
SERVICES FOR INDUSTRY
The net sales of Services for Industry amounted to EUR 91.9 million (EUR 103.8 million). Net sales were down 11 per cent compared with the previous year, mainly due to the decline in investments by industry. The market trend in maintenance was favourable. The maintenance business accounted for 65 per cent of net sales. The value of international operations rose to 7 per cent of net sales.
The operating result was EUR 2.3 million. The order backlog at the end of the period was EUR 73.5 million (EUR 71.3 million). Of this amount, EUR 8.5 million represents the international backlog of works. At the end of the period, the business segment had 2,925 employees.
Smaller-scale maintenance and modernization projects provide work in the domestic market
Due to the low level of investments, project operations were on the whole quite slight during the report period. Operations focused on small-scale maintenance-related works. However, demand for investments by industry will rise significantly in the latter part of the year thanks to projects that have already been announced.
The largest projects seen to completion in the wood processing industry were Stora Ensos VEPA 2003 at the Veitsiluoto plant and a piping delivery for Stora Ensos WARMA ground wood plant rebuild project.
Numerous maintenance shutdowns took place at Teollisuuden Voimas nuclear power plants. To TVO, YIT supplied three significant project deliveries, the Lauhde, TIMO and Kannake modernization projects as well as maintenance works billed by the hour.
The major deliveries for the marine industry comprised piping prefabs for the Color vehicle ferry and the Fesco icebreaker, which are under construction at Kvaerner Masa-Yards Oys shipyards in Turku and Helsinki.
Steady demand in maintenance
Industrial maintenance operations have remained at their ordinary seasonal level. Numerous shutdown works were carried out for the forest industry and at nuclear power plants during the report period. Demand for the outsourcing of services has been steady.
In the second quarter, a partnership agreement was made with Vacon Plc for equipment maintenance and servicing of frequency converters. The parties have cooperated since 1998. On the basis of a prior cooperation agreement, YIT has Vacon frequency converter maintenance and servicing outlets in Imatra, Jyväskylä, Kemi, Lahti, Pori, Turku, Vantaa and Varkaus. Under the new agreement, Vacon equipment servicing expanded to Vaasa and Tampere as from June 1, 2004.
A maintenance partnership agreement was made with Raisio Chemicals, covering its plants in Lapua and Kaipiainen. Total responsibility for the maintenance and development of Raisio Chemicals plants will be handed over to YIT on September 1, 2004, in the case of the Kaipiainen plant, and continue at the Lapua plants under the new agreement.
A nationwide framework agreement on piping maintenance was extended with UPM-Kymmene and regional annual agreements were continued with Stora Enso. In addition, annual maintenance agreements were made with other major clients.
Orders for investment projects that are being started up
Of the largest investment projects that are being started up, YIT has landed an order for underground piping for Fortums Diesel project, the PM2 piping project for Stora Ensos mills in Summa that began in June, and piping for the pipe rack of M-reals BTCMP plant in Kaskinen.
Orders for power plant projects have come in from Sweden in particular. Piping will be delivered to Alstom Power Sweden Ab in connection with the replacement of a high-pressure turbine in 2004 - 06. Piping for a combined cycle gas power plant will be supplied to Demag Delaval Industrial Turbomachinery Ab (SIEMENS) in Riga, and piping pressure component replacements will be carried out for Billerud Karlsborg AB, Stora Enso Norrsundets Bruk and SCA Packaging Obbola AB in Sweden.
Other significant export orders were the design and delivery of internal circulation piping and high-pressure piping for a soda recovery boiler for Andritz Oy in Cacia, Portugal, ring chambers and high-pressure piping components for Kvaerner Power Oy in the USA and Brazil, and internal circulation piping for Foster Wheeler Oy in China.
Development work for upcoming projects
The preparatory work on tenders for the fifth nuclear power plant continued intensively during the entire spring and the first large invitations to tender are coming in for tender calculation.
Preparations have been made for possible deliveries for Olkiluoto 3 by stepping up the pre-fabrication capacity for high-pressure piping.
Development efforts focused on automated welding and increasing the effectiveness of the project control system.
During the spring, "Together We Can Do It" events were held for Botnia Mill Services employees all over Finland. The events follow up on development work aiming to forge, at the various business locations, effective working communities that can pull together.
DATA NETWORK SERVICES
The first half of 2004 was an improvement on the previous year.
Net sales in the January-June period amounted to EUR 55.2 million (EUR 56.4 million; comparable figure: EUR 50.7 million). In comparable terms, net sales were 9 per cent higher than in the previous year. About 75 per cent of net sales (60%) were based on long-term customer agreements and 25 per cent (40%) on project production. Operating profit was EUR 3.5 million (EUR 0.7 million). The order backlog at the end of the period amounted to EUR 119.2 million (EUR 90.0 million). At the end of the period, the business segment had 1,386 employees.
The most significant factor underlying growth in net sales and the order backlog has been the increase in the number of broadband connections and the related demand for IT installation services.
Mobile network investment construction gave way to small-scale conversion works, increasing the share of net sales accounted for by operations based on long-term customer agreements.
The earnings trend was better than in the previous year thanks to both the larger workload and the measures implemented to develop and upgrade the efficiency of the segments own operations.
Penetration of broadband connections continues
Demand for broadband connections and related technical helpdesk services is growing and this trend is expected to continue unabated in the near future.
Following the broadband trend, investments in the fixed telecom network have also increased slightly. Growth in connections will also increase the need for network maintenance services. It is forecast that this need will already be somewhat evident in the next period.
Installation service orders on the rise
New partnership agreements were made with teleoperators during the report period. The new agreements expand the customer base and thereby increase YITs order volume in installation services.
Severe competition among telecom players is guiding operators to focus on their core business. In the longer term, this will open up the installation market to service providers. To date, maintenance works have not been outsourced; however, the heating up of competition is expected to stimulate the outsourcing trend.
In our estimation, operators and IT system providers will carry out new arrangements during the present year which will impact on the installation market. The changes will have a significant effect on the open market only several years from now when the grace periods usually related to such arrangements come to an end.
Mobile communications network market depressed
The mobile communications network market is depressed due to tough price competition between operators and the ongoing sweeping changes in technology. No great peak is expected in 3G network investments. The trend will continue as network evolution - as a slow transformation guided by service development and the need for network capacity.
New service packages and greater operational efficiency
During the first half of the year, development efforts focused on the development of new service packages in technical helpdesk services and on measures supporting the opening up of the telecom network installation market.
YITs internal cooperation has zeroed in on developing the harnessing of joint customer accounts. During the first half of the year, YIT focused on customers operating in numerous localities and on public administration. Development work is performed both at the corporate and local levels.
The IT platform of YIT Data Network Services has been modernized to achieve greater efficiency in service processes and improve the service level. A project has been started up in association with Tekes to seek efficiency in the production control and logistics of field services. Cooperation with educational institutions has been firmed up to ensure that enough labour is available in the years ahead.
We are also involved in a project started up by the universities of Lapland and Oulu and Tekes. The project seeks to increase the use of wireless and wired communications aids in the care of the elderly and thus enable them to live in their own homes as long as possible.
OUTLOOK FOR 2004
YITs net sales will see substantial growth, as the Building Systems business segment will enlarge net sales during the entire year, the demand for residences will remain strong in both Finland and Russia, and the outlook for investments by industry in the Nordic countries will strengthen towards the end of the year.
Profit before extraordinary items and taxes is estimated to improve significantly compared with 2003. It is expected that the Building Systems business segment will have a positive effect on YITs full-year earnings per share for 2004.
Helsinki, August 4, 2004
Board of Directors
CONSOLIDATED FINANCIAL STATEMENTS, JUNE 30, 2004 (Unaudited)
INCOME STATEMENT (EUR million)
Jan-Jun/ Jan-Jun/ Change, Jan-Dec/ 2004 2003 % 2003 Net sales 1,504.4 932.1 61 2,389.7 - of which 581.8 181.6 *) 672.5 international activities - sale of shares in own production 107.8 111.2 -3 243.1 Operating income and -1,421.0 -860.3 65 -2,253.3 expenses Depreciation and value adjustments -8.3 -8.3 -17.7 Operating profit before amortization of goodwill and goodwill 75.1 63.5 18 118.7 on consolidation (EBITA) % of net sales 5.0% 6.8% 5.0% Amortization of -14.9 -5.6 *) -20.1 goodwill and goodwill on consolidation Operating profit 60.2 57.9 4 98.6 (EBIT) % of net sales 4.0% 6.2% 4.1% Financial income and expenses, net -7.3 -6.4 14 -14.2 Profit before extraordinary items 52.9 51.5 3 84.4 % of net sales 3.5% 5.5% 3.5% Extraordinary income 0 0 0 Extraordinary expenses 0 0 0 Profit before taxes 52.9 51.5 3 84.4 % of net sales 3.5% 5.5% 3.5% Profit for the report 35.0 35.5 -1 48.4 period % of net sales 2.3% 3.8% 2.0%
*) Change over 100%
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 taxes have been accounted for as a share of the estimated taxes for the entire financial year, calculated in proportion to the result for the review period.
INCOME STATEMENT (the second quarter of 2004 compared with the first quarter of 2004)
Apr-Jun/2004 Jan-Mar/2004 Change,% Net sales 791.3 713.1 11 - of which international 314.6 267.2 18 activities - sale of shares in own 43.7 64.1 -32 production Operating income and -747.2 -673.8 11 expenses Depreciation and write-downs -4.3 -4.0 8 Operating profit before amortization of goodwill and 39.8 35.3 13 goodwill on consolidation (EBITA) % of net sales 5.0% 5.0% Amortization of goodwill -7.6 -7.3 4 and goodwill on consolidation Operating profit (EBIT) 32.2 28.0 15 % of net sales 4.1% 3.9% Financial income and -3.6 -3.7 -3 expenses, net Profit before extraordinary 28.6 24.3 18 items % of net sales 3.6% 3.4% Extraordinary income 0 0 Extraordinary expenses 0 0 Profit before taxes 28.6 24.3 18 % of net sales 3.6% 3.4% Profit for the report period 18.6 16.4 13 % of net sales 2.4% 2.3%
BALANCE SHEET (EUR million)
Jun/2004 Jun/2003 Change,% Dec/2003 ASSETS Intangible assets - Goodwill 159.7 0.5 *) 168.9 - Other intangible assets 12.4 8.7 43 11.8 Goodwill on consolidation 77.9 69.3 12 78.0 Tangible assets 65.2 57.1 14 66.8 Investments - Own shares 0 7.2 0 - Other investments 8.5 7.4 15 7.9 Inventories 402.3 396.5 1 380.8 Receivables 824.8 599.0 38 781.0 Marketable securities 0.9 10.7 -92 11.9 Cash and cash equivalents 35.9 19.9 80 48.4 Total assets 1,587.6 1,176.3 35 1,555.5 LIABILITIES Share capital 61.2 59.6 3 61.0 Other shareholders equity 346.2 323.3 7 347.3 Minority interests 3.6 2.2 64 3.4 Provisions 22.8 8.8 *) 27.3 Non-current liabilities 240.9 114.6 *) 210.9 Current liabilities 912.9 667.8 37 905.6 Total shareholders equity 1,587.6 1,176.3 35 1,555.5 and liabilities
*) Change over 100%
CONSOLIDATED CASH FLOW STATEMENT (EUR million)
Jan-Jun/ Jan-Jun/ Change, Jan-Dec/ 2004 2003 % 2003 Cash flow from operating activities Profit before extraordinary 52.9 51.5 3 84.4 items Adjustments, total 21.9 -12.2 30.7 Cash flow before change in net working capital 74.8 39.3 90 115.1 Change in net working -41.8 -46.7 -10 25.4 capital Cash flow from operations before financial items and 33.0 -7.4 140.5 taxes Interest paid -9.4 -9.0 4 -14.7 Dividends received 0 0 0.3 Interest received 1.5 0.9 67 2.7 Taxes paid -17.3 -12.7 36 -31.2 Net cash from operating 7.8 -28.2 97.6 activities Cash flow from investing activities Capital expenditure on tangible and intangible -16.8 -15.4 9 -230.5 assets Proceeds from sale of tangible and intangible 4.1 33.5 -88 37.5 assets Investments in other assets -0.6 0 -2.4 Proceeds/losses from sale of investments 0.8 0.1 *) 1.4 Net cash used in investing -12.5 18.2 -194.0 activities Cash flow from financing activities Rights issue 0.7 0.7 9.5 Purchase of own shares 0 0 12.4 Change in loan receivables 1.9 0.1 *) 0.1 Change in short-term debt 12.2 19.6 -38 23.6 Borrowing of long-term debt 45.4 15.1 *) 117.7 Repayment of long-term debt -42.3 -7.6 *) -19.2
Dividends paid -36.8 -26.3 40 -26.3 Net cash used in financing -18.9 1.6 117.8 activities Change in liquid assets -23.6 -8.4 *) 21.4 Liquid assets at beginning 60.3 38.9 55 38.9 of period Liquid assets at end of 36.7 30.5 20 60.3 period
*) Change over 100%
KEY FIGURES
Jun/2004 Jun/2003 Change, Dec/2003 % Earnings per share, EUR 0.57 0.61**) -7 0.82**) Earnings per share, EUR, diluted 0.57 0.61**) -7 0.82**) Equity per share, EUR 6.66 6.43**) 4 6.69**) Average share price during the 15.68 8.01**) 96 10.35**) period, EUR Share price at end of period, 16.74 8.50**) 97 13.45**) EUR Market capitalization at end of period, EUR million 1,023.8 497.1 *) 821.1 Weighted average share-issue adjusted number of shares 61,058 58,362**) 5 59,104**) outstanding, thousands Weighted average share-issue adjusted number of shares outstanding, thousands, diluted 61,622 58,890**) 5 59,248**) Share-issue adjusted number of shares outstanding at end of 61,160 58,478**) 5 61,047**) period, thousands Net interest-bearing debt at end of period, EUR million 243.1 139.5 74 204.4 Return on investment, from the last 12 months,% 16.5% 20.4% 16.8% Equity ratio,% 28.1% 34.8% 28.3% Gearing ratio,% 59.1% 36.9% 49.6% Gross capital expenditures on non-current assets, EUR million 17.0 14.2 20 232.9 -% of net sales 1.1% 1.5% 9.7% Order backlog at end of period, EUR million 1) 1,569.8 1,091.8 44 1,490.1 - of which international orders 626.6 256.9 *) 569.5 Average personnel 21,700 12,606 72 16,212
*) Change over 100% **) 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)
Jun/2004 Jun/2003 Change,% Dec/2003 Mortgages given as security for loans - For own commitments 29.3 29.9 -2 29.8 Other collateral given for own commitments - Securities pledged 0 0.2 0.2 Leasing commitments 49.0 18.5 *) 50.7 Other commitments - Purchase commitments 166.6 107.4 55 7.3 - Responsibility for external debts of companies held in 35.0 0 44.5 inventories - Other commitments 0.6 0.5 20 1.2 Guarantees - On behalf of associated 0.8 1.1 -27 0.7 companies - On behalf of others 2.1 8.5 -75 9.0 Mortgages given by companies held in inventories; for commitments of Group companies 2.1 2.1 2.1 and for own commitments Liability under derivative contracts 2) - Value of underlying instruments -- Interest rate swaps 20.0 20.0 -- Foreign currency forward 48.3 14.2 *) 70.8 contracts - Fair value -- Interest rate swaps 19.7 0 19.7 -- Foreign currency forward 47.9 14.3 *) 72.1 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 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 and order book figures presented for 2003 are pro forma calculations. The figures in the following tables include the acquired Building Systems business as from August 29, 2003.
Jan-Jun/ Jan-Jun/ Change, Jan-Dec/ 2004 2003 % 2003 Building Systems 652.9 156.5 *) 681.0 Construction Services 726.0 624.4 16 1,398.5 Services for Industry 91.9 103.8 -11 209.7 Data Network Services 55.2 56.4 -2 130.0 Other items -21.6 -9.0 *) -29.5 YIT Group, total 1,504.4 932.1 61 2,389.7
*) Change over 100%
OPERATING PROFIT BEFORE AMORTIZATION OF GOODWILL AND GOODWILL ON CONSOLIDATION (EBITA) BY BUSINESS SEGMENT (EUR million)
Jan-Jun/ Jan-Jun/ Change, Jan-Dec/ 2004 2003 % 2003 Building Systems 12.4 -7.1 Construction Services 57.8 58.3 -1 111.1 Services for Industry 2.6 9.7 Data Network Services 5.1 2.3 *) 14.0 (YIT Installation) 8.5 Other items -2.8 -5.6 -50 -9.0 YIT Group, total 75.1 63.5 18 118.7
*) Change over 100%
OPERATING PROFIT (EBIT) BY BUSINESS SEGMENT (EUR million)
Jan-Jun/ Jan-Jun/ Change, Jan-Dec/ 2004 2003 % 2003 Building Systems 0.3 - -19.7 Construction Services 56.9 57.3 -1 107.8 Services for Industry 2.3 - 8.8 Data Network Services 3.5 0.7 *) 10.7 (YIT Installation) - 5.5 Other items -2.8 -5.6 -50 -9.0 YIT Group, total 60.2 57.9 4 98.6
*) Change over 100%
ORDER BACKLOG BY BUSINESS SEGMENT AT END OF PERIOD (EUR million)
Jun/2004 Jun/2003 Change,% Dec/2003 Building Systems 566.5 145.6 *) 502.3 Construction Services 810.6 784.9 3 817.7 Services for Industry 73.5 71.3 3 67.2 Data Network Services 119.2 90.0 32 102.9 YIT Group, total 1,569.8 1,091.8 44 1,490.1
*) Change over 100%
QUARTERLY FIGURES, Q1/2003 - Q2/2004 (EUR million)
Q1/ Q2/ Q3/ Q4/ Q1/ Q2/ 2003 2003 2003 2003 2004 2004 Net sales, MEUR 431.5 500.6 503.6 954.0 713.1 791.3 Operating profit (EBIT), 6.9 51.0 27.9 12.8 28.0 32.2 MEUR -% of net sales 1.6 10.2 5.5 1.3 3.9 4.1 Financial income and expenses, net, MEUR -3.6 -2.8 -4.0 -3.8 -3.7 -3.6 Profit before taxes, MEUR 3.3 48.2 23.9 9.0 24.3 28.6 -% of net sales 0.8 9.6 4.7 0.9 3.4 3.6 Balance sheet total at end of period, MEUR 1,067.7 1,176.3 1,323.9 1,555.5 1,520.0 1,587.6 Earnings/share, EUR **) 0.03 0.58 0.25 -0.04 0.27 0.30 Equity/share, EUR **) 5.85 6.43 6.73 6.69 6.36 6.66 Share price at end of 7.35 8.50 11,00 13.45 15.40 16.74 period, EUR **) Market capitalization at end of period, MEUR 428.6 497.1 662.6 821.1 940.1 1,023.8 Cash flow from operating activities, MEUR 12.5 -40.7 58.3 67.5 20.2 -12.4 Return on investment from the last 12 months,% 17.0 20.4 18.5 16.8 20.8 16.5 Equity ratio,% 34.7 34.8 33.2 28.3 27.7 28.1 Net interest-bearing debt at end of period, ME 122.4 139.5 246.9 204.4 220.5 243.1 Gearing ratio,% 35.6 36.9 60.6 49.6 56.3 59.1 Gross capital 5.1 9.1 173.4 45.3 6.1 10.9 expenditures, MEUR 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 Personnel at end of 12,459 13,087 22,144 21,939 21,654 21,952 period
**) 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/ 2003 2003 2003 2003 2004 2004 Building Systems 80.8 75.7 85.4 439.1 316.9 336.0 Construction Services 280.6 343.8 337.0 437.1 338.3 387.7 Services for Industry 48.4 55.4 50.0 55.9 42.7 49.2 Data Network Services 25.5 30.9 36.6 37.0 24.4 30.8 Other items -3.8 -5.2 -5.4 -15.1 -9.2 -12.4 Group total 431.5 500.6 503.6 954.0 713.1 791.3
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/ 2003 2003 2003 2003 2004 2004 Building Systems -19.7***) -1.3 1.6 Construction Services 9.5 47.8 21.6 28.9 30.1 26.8 Services for Industry 8.8***) -0.1 2.4 Data Network Services -1.7 2.4 5.5 4.5 0.6 2.9 (YIT Installation) 1.8 3.7 1.8 Other items -2.7 -2.9 -1.0 -2.4 -1.3 -1.5 Group total 6.9 51.0 27.9 12.8 28.0 32.2
***) 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/ 2003 2003 2003 2003 2004 2004 Building Systems 133.5 145.6 419.9 502.3 557.2 566.5 Construction Services 699.3 784.9 868.7 817.7 735.6 810.6 Services for Industry 81.0 71.3 62.6 67.2 76.0 73.5 Data Network Services 94.5 90.0 65.3 102.9 109.4 119.2 Group total 1,008.3 1,091.8 1,416.5 1,490.1 1,478.2 1,569.8