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 May 4, 2004 8:00
YITs Interim Report, January 1 - March 31, 2004: Net sales and earnings grow substantially
Net sales up 65 per cent
The YIT Groups net sales in the January-March period grew by 65 per cent compared with the previous year and amounted to EUR 713.1 million (1-3/2003: EUR 431.5 million). A major reason underlying net sales growth was the acquisition of the Building Systems business from ABB. Building Systems offers property, building systems and industrial services in the Nordic countries, Baltic countries and Russia. The business was integrated into the YIT Group on August 29, 2003. 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 operations grew from 20 to 37 per cent. Of the net sales, 63 per cent came from Finland, 30 per cent from the other Nordic countries, 4 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 25 to 34 per cent.
Operating profit grows substantially
Construction Services and Data Network Services were in the black.
The operating result of Building Systems and Services for Industry still remained slightly in the red after the amortization of goodwill. Operating profit before amortization of goodwill and goodwill on consolidation (EBITA) amounted to EUR 35.3 million (EUR 9.7 million), or 5.0 per cent (2.3%) of net sales. Operating profit (EBIT) was EUR 28.0 million (EUR 6.9 million) and the operating profit margin was 3.9 (1.6%). Profit before extraordinary items and taxes was EUR 24.3 million (EUR 3.3 million). Return on investment at the end of the 12-month period ending at the conclusion of the review period was 20.8 per cent (17.0%).
Earnings per share amounted to EUR 0.27 (EUR 0.03). Equity per share was EUR 6.36 (EUR 5.85). The equity ratio was 27.7 per cent (34.7%).
Order backlog at 1.5 billion
The Groups uninvoiced backlog of orders was 47 per cent higher at the end of the review period than a year earlier, having risen to EUR 1,478.2 million (EUR 1,008.3 million). In the beginning of the year the backlog of orders was EUR 1,490.1 million. The Groups backlog for international orders more than doubled to EUR 580.4 million (EUR 257.9 million). Due to their nature, part of the Groups maintenance and servicing operations are not included in the order backlog.
Integration of the Building Systems business progressing in line with plans
"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.
SThe integration process has progressed in line with plans in all the countries. The result of the Building Systems business segment remained negative in the first quarter, as expected, but it is anticipated that the business segment will have a positive effect on YITs full-year earnings.
"Construction Services racked up a record-breaking operating result in the first quarter. The efficient production and service chain for residential construction, which has been systematically developed over many years, generated good earnings as the demand for market- financed residences remained 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 supports consumption and this, coupled with low interest rates, shores up demand for residences. It is estimated that exports and investments will pick up towards the end of the 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 during the upcoming years. 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 will become members of the EU at the beginning of May, further improving the growth prospects of their economies.
Outlook for 2004
YITs net sales will see substantial growth, as the Building System 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.
It is expected that the Building Systems business segment will have a positive effect on YITs full-year result for 2004.
Publication on May 4 and subsequent Interim Reports
An event for investment analysts and portfolio managers will be held at 13:00 (Finnish time) on Tuesday, May 4, at YITs head office. The address is Panuntie 11, 00620 Helsinki.
The Interim Report for the January-June period will be published on August 5, 2004, and the Interim Report for the January-September period 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, FI-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 - March 31, 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 - MAR. 31, 2004
New business segment division
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. 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 up 65 per cent
The YIT Groups net sales in the January-March period rose to EUR 713.1 million (1-3/2003: EUR 431.5 million), representing growth of 65 per cent compared with the previous year. Of the net sales, 44 per cent were generated by Building Systems, 47 per cent by Construction Services, 6 per cent by Services for Industry and 3 per cent by Data Network Services.
Net sales by business segment (EUR million)
1-3/2004 1-3/2003 Change, % Building Systems 316.9 80.8 292 Construction 338.3 280.6 21 Services Services for Industry 42.7 48.4 -12 Data Network Services 24.4 25.5 -4 Other items -9.2 -3.8 142 YIT Group, total 713.1 431.5 65
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 the upkeep business rose to EUR 239.6 million (EUR 108.4 million), representing 34 per cent (25%) of total net sales.
The share of the Groups net sales accounted for by its international operations was EUR 267.2 million (EUR 84.5 million), or 37 per cent (20%). Of the net sales, 63 per cent came from Finland, 30 per cent from the other Nordic countries, 4 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 grows substantially
Operating profit before amortization of goodwill and goodwill on consolidation (EBITA) amounted to EUR 35.3 million (EUR 9.7 million), or 5.0 per cent (2.3%) of net sales. Operating profit (EBIT) was EUR 28.0 million (EUR 6.9 million) and the operating profit margin was 3.9 (1.6%).
The operating profit for the comparison period is 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.
Operating profit (EBIT) by business segment (EUR million)
1-3/2004 1-3/2003 Change, % Building Systems -1.3 - Construction 30.1 9.5 217 Services Services for Industry -0.1 - Data Network Services 0.6 -1.7 (YIT Installation) - 1.8 Other items -1.3 -2.7 -52 YIT Group, total 28.0 6.9 306
Profit before extraordinary items and taxes was EUR 24.3 million (EUR 3.3 million). Profit after taxes was EUR 16.4 million (EUR 1.6 million). Return on investment at the end of the 12-month period ending at the conclusion of the review period was 20.8 per cent (17.0%).
Earnings per share amounted to EUR 0.27 (EUR 0.03). Equity per share was EUR 6.36 (EUR 5.85). The equity ratio was 27.7 per cent (34.7%).
Order backlog at 1.5 billion
The Groups market position is strong. The uninvoiced backlog of orders was 47 per cent higher at the end of the review period than a year earlier, having risen to EUR 1,478.2 million (EUR 1,008.3 million). In the beginning of the year the backlog of orders was EUR 1,490.1 million. The Groups backlog for international orders more than doubled to EUR 580.4 million (EUR 257.9 million), representing 39 per cent (26%) of the entire backlog. 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) 3/2004 3/2003 Change, % Building Systems 557.2 133.5 317 Construction 735.6 699.3 5 Services Services for Industry 76.0 81.0 -6 Data Network Services 109.4 94.5 16 YIT Group, total 1,478.2 1,008.3 47
The Groups financial position remains good
The Groups financial position remained good during the review period. Interest-bearing liabilities amounted to EUR 273.6 million (EUR 154.8 million) at the end of the period and net debt to EUR 220.5 million (EUR 122.4 million). The growth in net debt was due to the Building Systems acquisition, with EUR 191 million being paid to ABB. Net financial expenses were EUR 3.7 million (EUR 3.6 million), or 0.5 per cent (0.8%) of net sales. At the end of the review period, liquid assets amounted to EUR 53.1 million (EUR 32.4 million).
The proportion of fixed-interest loans in the Groups entire loan portfolio was 58 per cent (96%). Loans raised directly on the capital and money markets amounted to 66 per cent (57%).
The construction-stage contract receivables sold to financing companies totalled EUR 216.2 million (EUR 138.1 million) at the end of the period. The interest paid on them to the financing companies, EUR 1.5 million (EUR 1.2 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 1,520.0 million (EUR 1,067.7 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 6.1 million (EUR 5.1 million) during the January-March period, representing 0.9 per cent (1.2%) of net sales.
Investments in construction equipment amounted to EUR 1.4 million (EUR 1.2 million) and investments in information technology to EUR 1.3 million (EUR 0.9 million). Other production investments came in at EUR 0.8 million (EUR 0.2 million). Other investments, including the goodwill on consolidation of acquired companies, amounted to EUR 2.6 million (EUR 2.8 million). EUR 4.4 million in goodwill arising from the acquisition of the Building Systems business functions was amortized during the report period, along with EUR 0.4 million in goodwill on consolidation.
Changes in the Group structure
The Varkaus-based ETT-Teollisuusautomaatio Oy, a fully-owned subsidiary of YIT Service Ltd, was merged into YIT Service Ltd on March 1, 2004.
On March 31, 2004, YIT Installation Ltd was divided into two companies: YIT Industry Ltd and YIT Building Systems Ltd. YIT Industry Ltd comprises the parent company of the Services for Industry business segment and YIT Building Systems Ltd the parent company of the Building Systems business segment.
Number of employees
During the review period, the YIT Group employed 21,625 (12,478) people on average. At the end of the period, the Group had 21,654 employees (12,459). Of YITs employees, 55 per cent work in Finland, 37 per cent in the other Nordic countries and 8 per cent in the Baltic countries and Russia.
Personnel by business segment, March 31, 2004
No. Share of the Groups employees Building Systems 12,530 58% Construction Services 4,693 22% Services for Industry 2,824 13% Data Network Services 1,335 6% Corporate Services 272 1% YIT Group, total 21,654 100%
Personnel by country, March 31, 2004
No. Share of the Groups employees Finland 11,796 55% Sweden 4,388 20% Norway 2,655 12% Denmark 1,057 5% Baltic countries 1,057 5% Russia 701 3% YIT Group, total 21,654 100%
Resolutions passed at the Annual General Meeting
YIT Corporations Annual General Meeting was held on March 18, 2004.
The Annual General Meeting adopted the 2003 financial statements and discharged the members of the Board of Directors and the President and CEO from liability. It was confirmed that a dividend of EUR 1.20 would be paid per share (EUR 0.90 for 2002), or a total of EUR 36.6 million (EUR 26.3 million). March 23, 2004, was set as the record date and March 30, 2004, as the payout date.
The Annual General Meeting confirmed that the number of Board members shall be set at six. The following persons were re-elected to seats on the company's Board of Directors: Ilkka Brotherus, Eino Halonen, Reino Hanhinen, Asmo Kalpala and Teuvo Salminen. Antti Herlin was elected as a new member. At its organization meeting on March 24, 2004, the Board of Directors elected Ilkka Brotherus as its chairman and Eino Halonen as its vice chairman.
The Annual General Meeting re-elected PricewaterhouseCoopers Oy, Authorized Public Accountants, as the company's auditor to audit the administration and accounts during the present financial period.
PricewaterhouseCoopers Oy appointed Pekka Nikula, M.Sc. (Econ.), Authorized Public Accountant, as chief auditor.
A decision was made to amend Article 3 of the Articles of Association such that the nominal value of the share was changed from two euros to one euro (split), thereby doubling the number of shares in proportion to the holding of shareholders and without raising the share capital.
A decision was made to amend the terms of the Series C and D share options from 2002 accordingly such that each Series C and D share option entitles its bearer to subscribe for two YIT Corporation shares having a nominal value of one euro. A maximum total of 2,800,000 shares can be subscribed for and the companys share capital may be raised by a maximum amount of EUR 2,800,000.
In addition, the Annual General Meeting decided to grant a maximum of 180,000 Series E share options and a maximum of 420,000 Series F share options for subscription by the members of the management and key employees who are either in the employ of or will be hired into the employ of the new Building Systems business segment. The subscription period of the share options is May 14 to June 15, 2004.
Each share option entitles its bearer to subscribe for one YIT Corporation share having a nominal value of one euro. On the basis of the subscriptions, the share capital may be raised by a maximum amount of EUR 600,000. The shares can be subscribed for during the period from April 1 - November 30, 2006, and from April 1 - November 30, 2007, with the Series E share options and during the period from April 1 - November 30, 2007, with the Series F share options. The subscription price of the shares subscribed for on the basis of the share options was set at EUR 15.40 per share. The subscription price of the Series E share options will be lowered in 2005 and 2006 by the amount of dividends per share paid and the price of the Series F share options in 2005 - 2007 by the amount of dividends per share paid. The terms of the share option programme are provided in full on YITs Internet site.
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. The share capital was not raised during the review period. Following the resolution of the Annual General Meeting, the nominal value of the share was changed from two euros to one euro (split), thereby doubling the number of shares. The number of shares at the end of the period was 61,046,750.
The doubling of the number of shares decided on by the Annual General Meeting was entered in the Trade Register on March 26, 2004, and public trading in the new shares began on Helsinki Exchanges on March 29, 2004.
Authorizations to increase the share capital
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 more than doubles in one year
The average share price during the review period was EUR 15.08 (EUR 7.98), with a high of EUR 17.53 (EUR 8.90) and a low of EUR 15.19 (EUR 7.01). The closing rate was EUR 15.40 (EUR 7.35). The figures have been converted to correspond with the doubled number of shares.
Share turnover during the period amounted to EUR 166.0 million (EUR 43.4 million), with 5,504,383 (2,656,854) shares being traded. Market capitalization at the end of the period was EUR 940.1 million (EUR 428.6 million).
Strong growth in the number of shareholders
The number of registered shareholders was 4,928 (3,271) at the beginning of the review period and 6,008 (3,421) at its end. The number of private investors grew by one thousand.
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 20.7 per cent (21.1%) at the end. Other foreign ownership at the end of the review period amounted to 2.2 per cent (2.8%); thus, a total of 22.9 per cent (23.9%) of the companys shares outstanding were owned by international investors.
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 will be calculated during the first two 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 IAS, 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 IAS, 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. A more detailed account of the other changes will be presented in the next annual financial statement bulletin.
The major issue that has not been resolved yet comprises statutory employment pensions (TEL) under the Finnish occupational pension system. If the interpretation that the occupational disability portion is based on benefits is upheld, the policy applied in such pensions will lead to the booking of non-current liabilities that will reduce the companys shareholders equity. The size of the liabilities will be determined eventually using actuarial calculations. For a labour-intensive company like YIT, this is a significant change.
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 rate of growth in GDP and investments in the Baltic countries and Russia is twice as fast as in the Nordic countries.
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.
According to the business cycle report published the Confederation of Finnish Construction Industries RT in April, construction will begin to grow by 2 - 2.5 per cent this year and the next. Growth is maintained by brisk construction of residential and commercial premises. 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 RT, renovation will also grow. At the end of March, the Research Institute of the Finnish Economy ETLA estimated that construction output in Finland will grow by 2.4 per cent this year and by 3.6 per cent next year. 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 forecast made by ETLA in March, investments in machinery and equipment declined by 6.4 per cent last year.
Investments in machinery and equipment will still decline by 1.5 per cent during the present year and see growth of 4 per cent next year.
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 ETLA, GDP will grow by 2.9 per cent this year and by 3.1 per cent the next. Demand for residences will remain brisk thanks to the good trend in household incomes and the still-low interest rate level.
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 or the next year, but growth is expected in the outsourcing of operators field functions in the future.
Sweden
At the beginning of January, the Swedish Construction Federation BI predicted that construction investments in Sweden will decline by four per cent this year. The incipient upswing will bring the decline in construction investments to a halt next year. There is growth in small houses, while the construction of blocks of flats is declining.
Construction in the Stockholm region fell significantly last year, whereas trends have been stable in the rest of the country, with particular growth in small house construction. According to the business cycle barometer published by the Swedish National Institute of Economic Research KI in April, the business climate for construction remains bleak, but signs of stabilization are already evident. In KIs barometer, the construction industry assessed that construction and employment will remain unchanged during the second quarter. In its business cycle report published in March, KI predicts that GDP will grow by 2.5 and 2.6 per cent this year and the next, respectively. KI forecasts that exports will grow by 6.7 per cent this year and 6.1 per cent the next. Fixed investments will begin, delayed, at a rate of 1.4 per cent this year and 6.4 per cent next year. Decisions to start up numerous large industrial investments have already been made.
Norway
The decline in Norges Banks key interest rate ("sight deposit rate") from 7 to 2 per cent during the year now ended supports consumption and investments. According to Statistics Norways (SSB) economic survey published in March, there has been an upswing in the Norwegian economy since last summer. During the last three quarters, the annual GDP growth rate has been 3.6 per cent in mainland Norway. Consumption by households has risen at an annual rate of 4.6 per cent and the production output of companies by 5 per cent. SSB expects consumption and investments in residences to grow at a rate of 4 - 5 per cent in the next few years. As exports and investments by companies will grow during the same period, GDP growth in mainland Norway will rise by 3.6 per cent this year and by 2.8 per cent the next. Investments by companies in mainland Norway were 20 per cent lower last year than in 2001. An investment survey indicates that investments in industry and the energy infrastructure will swing into slight growth. No growth is expected in office construction due to the high vacancy rate. On the other hand, equipment investments in the service sector will 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.
The survey does not include the Ormen Lange gas terminal project, which is valued at NOK 65 million. According to the Federation of Norwegian Construction Industries BNL, the number of residential start-ups in 2003 remained at the previous years level and amounted to 22,500 residential units. The prices of residences rose by 7.5 per cent on average during the first quarter of the present year. The largest growth was seen in Bergen, Stavanger and Trondheim. 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
Nordea assesses that Denmarks economy is growing moderately, with private consumption and domestic demand as the engines of growth. The average GDP growth forecasts by financial research institutions for this and the next year are 2.2 and 2.3 per cent. Disposable income will increase thanks to tax relief in 2004 - 2007. Investments will grow by 3.3 this year and 3.7 per cent the next. Growth in exports is also forecast to strengthen during the upcoming two years. Dansk Byggeri, the Danish Construction Association, assesses the outlook for the present and the next year as stable. According to the association, construction will decline by one per cent during both years. The floor area of the residential buildings being started up will decrease by 4 per cent this year. Market-financed residential construction maintains residential production at a stable level thanks to the favourable trend in household incomes and the low interest rates. Over 23,000 residential units will be started up during the present year and the next. Office and industrial facility construction will decline. Renovation will remain stable. 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 9 per cent during the present year and by 6 per cent the next. The greater affluence of the middle class has strengthened demand for residences in large cities such as Moscow, St Petersburg, Tallinn and Vilnius.
Earnings trends of the business segments
Building Systems
The net sales of Business Systems amounted to EUR 316.9 million (EUR 80.8 million). The maintenance and servicing business accounted for 61 per cent of the net sales of the business segment. The breakdown of net sales by country was as follows: Finland, the Baltic countries and Russia, 33 per cent, Sweden, 36 per cent, Norway, 24 per cent, and Denmark, 8 per cent.
The business segment posted an operating result of EUR -1.3 million.
The result was reduced by EUR 6 million as amortization of goodwill.
The order backlog at the end of the period was EUR 557.2 million (EUR 133.5 million). The breakdown of the backlog by country was: Finland (including the Baltic countries and Russia), EUR 200.6 million, Sweden, EUR 176.3 million, Norway, EUR 88.5 million, and Denmark, EUR 91.8 million. At the end of the year, the business segment had 12,530 employees. Of them, 4,053 worked in Finland, 4,377 in Sweden, 2,655 in Norway, 1,057 in Denmark and 388 in the Baltic countries and Russia.
Net sales in Finland doubles
YIT Kiinteistötekniikka Oys net sales in Finland, the Baltic countries and Russia more than doubled compared with the comparison period of the previous year, rising to EUR 103.3 million (EUR 31.6 million). The share of net sales accounted for by the maintenance and servicing business was 73 per cent. The order backlog amounted to EUR 200.6 million (EUR 53.9 million). The backlog remained at the same level during the entire review period.
The decline in office and industrial construction has heated up competition in the building systems market. The construction of new residences has remained strong, and will most likely remain so, which is also the case in the refurbishing of residences. Commercial premises are being built at a brisk rate, but the demand for offices and public premises is slight. Capital investments by industry and demand for electrification in the ship industry have remained at a low level but it is estimated that demand will turn to the rise towards the end of the year.
The market for the repair and maintenance of residential, commercial, business premise and industrial properties has continued to be stable. We believe that life cycle deliveries of building systems will increase in the public sector.
Buoyant economic growth in the Baltic countries and Russia improves the outlook for building systems. The need to modernize the building stock and the rapid increase in new construction will lead to growth in the building system markets of these countries in the long term as well.
During the report period, the works that were started up included HEPACE works at Kvaerner Masa Yards section manufacture hall in Turku, HEPAC works for Valio Dairy in Oulu, HEPACE works at the Kiviniitty school in Kokkola, the replacement of the electrical and marine navigation systems of the patrol ships of the Finnish Frontier Guard and electrification and cabling works on the Color Line cruise ship. In Moscow, we participated in the building equipment system works of the Krylatskoe speed skating centre.
A YIT Centre was completed in Oulu as a joint project of the YIT Group, and YIT Centres are under construction in Rovaniemi and Jyväskylä. Other cooperative projects included the follow-up projects in the Etu-Lyötty area in Oulu, numerous residential sites in the Greater Helsinki area, Lahti, Tampere, and Turku as well as the Leppävirta hotel and ski tunnel project. Significant sites on which work continued were the construction of business premises for TietoEnator in the Klovi area of Espoo as well as the construction of business premises for the Finnish Meteorological Institute and the Finnish Institute of Marine Research in Helsinki. In Estonia, we are building a Citymarket in Pärnu in association with AS FKSM, which is part of the YIT Group.
Service concepts for the needs of different customer segments are developed in Group-wide YIT teams. During the report period, Building Systems joined the "Ympäristöosaamisella lisäarvoa kiinteistöliiketoimintaan" ("Added Value for the Property Business From Environmental Expertise") development project, which is led by the Helsinki University of Technology, and the "Kauppakeskusten turvallisuusjohtaminen" ("Security Management of Shopping Centres") project, which is led by the Finnish Council of Shopping Centres.
Integration process in Sweden progresses in line with plans
The combined net sales of YIT Building Systems AB and YIT Calor AB, which operate in Sweden, amounted to EUR 112.5 million. The share of net sales accounted for by the maintenance and servicing business was 50 per cent. The order backlog was EUR 176.3 million.
The Swedish market is muted and construction has declined, as a result of which price competition has become tighter (Konjukturbarometer business cycle barometer, April 2004). The market for maintenance and upkeep services is growing and slight growth is also on the horizon in services for industry.
The integration process in Sweden has progressed in line with plans.
During the review period, YIT landed an order from Alstom Power Sweden AB in Sweden for the replacement of draw-off pipes at the Forsmark nuclear power plant. The works will continue until September 2006. YIT will carry out electrical and air-conditioning installation works for the Lund Institute of Technologys KemiCentrum. Both of YITs Sweden-based companies are involved in the installation works of the paper machine investment at Stora Ensos Kvarnsveden plant in Borlänge.
YIT Building Systems and YIT Calor are engaged in close cooperation to improve cost-efficiency and project management. Customer service is beefed up by means of joint offers and the development of new business concepts.
Seeking growth potential in the Norwegian maintenance and servicing market
YIT Building Systems ASs net sales amounted to EUR 75.6 million. The share of net sales accounted for by the maintenance and servicing business was 73 per cent. The order backlog was EUR 88.5 million.
The Norwegian construction market is contracting slightly. The number of commercial premise start-ups in 2004 has been forecast to fall about five per short of the previous year, while residential buildings will fall about seven per cent short. The volume of renovation works accounted for by residential buildings is expected to remain at the previous years level, while growth is expected in commercial premises. On the whole, the market is forecast to decline by slightly under one per cent compared with 2003 (Prognossenteret forecasting centre). In line with its strategy,YIT is seeking growth potential in the maintenance and servicing market.
An agreement to supply electrotechnical solutions for the nine kilometre long railway tunnel that will be built between Sandvika and Asker was made with Jernbaneverket, the Norwegian National Rail Administration. In cooperation with Telenor, YIT is responsible for the implementation of the AV solutions of the St. Olavi hospital in Trondheim. The order comprises the hospitals auditoriums and meeting rooms. The Swedish YIT Calor is also a partner in the project. YIT will deliver illumination and sound technology for the new football stadium in Ålesund.
Avantor ASA, a major YIT customer, is building the Nydalen campus for the Norwegian School of Management. In this project, YIT is implementing the electrotechnical installation works using ClimaCeil, an integrated electricity and air-conditioning system developed by the company, as well as telecom networks. YIT will deliver a total technical solution for the SAS pilot training centre project at the Gardemoen Airport in Oslo. The delivery includes electrotechnical installation works, the integrated electricity and air-conditioning system ClimaCeil and piping works.
YIT seeks to expand the use of the patented ClimaCeil electricity and air-conditioning system throughout the entire YIT Group. Six events for industrial customers will be held in various parts of Norway. YIT Building Systems AS and the Services for Industry business segment will meet 600 - 1,000 customers.
Growth in demand expected in Denmark during the present year
YIT A/Ss net sales amounted to EUR 25.5 million. The share of net sales accounted for by the maintenance and servicing business was 33 per cent. The order backlog was EUR 91.8 million.
The market situation appears to have levelled off in Denmark. Growth is expected towards the end of the year, particularly in residential construction. The number of vacant business premises remains high and it is believed that this segment will remain depressed. The start-up of large investments has been pushed back in industry due to the low exchange rate of the US dollar. Competition in project operations is still tight. The market for property services and maintenance (Facility Management) has picked up clearly, as companies are seeking cost-savings and outsourcing their services. On the whole, it is believed that demand will grow slightly during the present year.
Major agreements for property services and maintenance were made during the review period with companies such as Kolding Kommune, Teknos Technology, Danish Crown, Storstrømmens Sygehus Næstved, J&B Entreprise, Davidsen Partneren, Texas Instruments and Dressmann.
Framework agreements for mechanical and electrical projects were made with regular customers such as Sonofon, Eltra and Seas, and an agreement on the implementation of an air-conditioning solution was made with Novo Nordisk. YIT has landed new electrotechnical works in the Danida development cooperation project being implemented in Maputo, Mozambique. An air-conditioning technology agreement has been signed with F.L. Smidth. In the marine and shipyard industry, an agreement for two tugboats was made in March.
A management training programme was initiated during the first quarter and outlays are also being made on personnel development by means of programmes focusing on sales work and project management. An international player can offer customers better service than local companies, especially in property services and management, and YITs units in different countries have started up cooperation projects in this field. Cooperation opportunities in Lithuanian ship construction projects are being assessed in association with the Services for Industry business segment.
Construction Services
The net sales of Construction Services grew by 21 per cent during the first quarter compared with the previous year and amounted to EUR 338.3 million (EUR 280.6 million). The maintenance business accounted for 2 per cent of this figure (3%) and international operations were valued at 14 per cent of net sales. Net sales include double net sales (sale of condominium shares in own production) of EUR 64.1 million.
Operating profit more than tripled compared with the previous year and amounted to EUR 30.1 million (EUR 9.5 million). The order backlog was 5 per cent higher than in the previous year, having risen to EUR 735.6 million (EUR 699.3 million). At the end of the period, the business segment had 4,693 employees.
During the quarter, 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 Finland, the Baltic countries and Russia.
Buoyant residential construction in the entire market area
Sales of residences remained brisk in all of Finland, being at the same level as in the latter half of 2003. During the review period, 775 market-financed non-rental residential units were sold. Demand was upheld by consumers confidence in their own finances and the still-low interest rates.
The construction of 437 market-financed non-rental residences (1- 3/2003: 479) and 61 state-supported residential units was started up during the review period in Finland. At the end of the period, 3,006 (2,258) residences were under construction. 652 (415) market-financed non-rental residences were completed during the period. There were 122 completed unsold residences at the end of the period.
In its international operations, Construction Services continued to expand its residential construction vigorously in line with its strategy. The construction of 1,767 (51) residences was started up in Russia and the Baltic countries during the review period. 54 (0) residences were completed during the period and at its end 2,380 (774) were under construction. During the review period, the construction of 1,536 (0) residences began in St Petersburg. The joint venture YIT Ramenje - which was established at the turn of the year 2004 to attend to the residential market of the outer ring of Moscow - started up the construction of its first residential site during the review period. A total of 229 (98) residences were sold in Russia and the Baltic countries during the review period, with 10 (0) completed residences remaining unsold.
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. This establishes a good market outlook for residential construction in all of YITs residential market areas. The company can meet demand thanks to its good plot reserves.
Other building construction
Due to the high vacancy rate of business premises in Finland, the market for business premise construction remained challenging.
Competition for new business premise construction and renovation contracts was tight. The scarcity of investments by industry kept the volume of production facilities construction low.
Major new competitive contracts landed during the review period in the neighbouring area included the Senukai shopping centre in Vilnius, Lithuania, the expansion and refurbishing of Fords storage and production facilities in Vsevolodsk, Russia, the Narva power plants peak and backup boiler plant in Estonia, the design and construction of AS Elcoteqs new production plant in Tallinn, Estonia, the delivery of machinery and equipment for the zone heating project of the City of Zhangye, China, and the zone heating project of the City of Xiang Yang, China.
Growing market for infrastructure construction and maintenance
The total volume of the market for infrastructure construction and maintenance saw slight growth, but competition for contracts was heated. However, as large infrastructure projects have been started up, the competition situation is becoming healthier. The programme of ongoing works is more profitable than before. A decision has been made to build the E18 motorway between Lohja and Muurla using a life cycle model and YIT has made an agreement with the National Road Administration under which the parties will participate, as a consortium, in the pre-selection procedures of the project.
New competitive infrastructure construction contracts landed during the review period included an underpass tunnel for a parallel natural gas pipeline in Kymijoki for Gasum Oy, an underground parking lot for Sato-Taso Oy on the southern shore of Turku as well as the expansion at a waste water treatment plant for the City of Riihimäki, which is being implemented in association with YIT Environment Ltd.
The most important plot acquisition in YITs history is carried out in Vallila, Helsinki
YIT made the most significant plot acquisition in its history during the quarter under review when YIT Construction and VR Corporation made an agreement, on February 5, 2004, whereby YIT Construction will acquire from VR Corporation the Pasila Konepaja area in Vallila, Helsinki. The deal will be consummated stage by stage as zoning and construction progress. The deal includes plots zoned for the construction of over one thousand residential units and a development, marketing and acquisition agreement concerning about 70,000 square metres of floor area in building rights for commercial and business premises in the area.
Development projects
Expanding the YIT Home brand to international operations and starting up brand development in the St Petersburg market were major development projects ongoing during the review period. In addition, outlays were especially made on expertise in project management, developing life cycle implementation models for public sector customers and public-private partnership models and the deployment and mobilization of the new YIT Pro product model.
Services for Industry
Due to the weak investment situation, the net sales of Services for Industry contracted by 12 per cent to EUR 42.7 million (EUR 48.4 million). The maintenance business accounted for 63 per cent of net sales. The value of international operations rose to EUR 2.1 million, representing 4.9 per cent of total net sales.
The operating result was EUR -0.1 million. The decline in operating profit was due to the low level of investments and the low general market price level as well as the extensive personnel layoffs caused by these factors.
The order backlog at the end of the period was lower than in the previous year, amounting to EUR 76.0 million (EUR 81.0 million). Of this amount, EUR 4.4 million represented deliveries and projects implemented abroad. At the end of the period, the business segment had 2,824 employees.
Investment projects are being started up in industry
The outlook for investments by industry is challenging in the short term. In future, however, numerous large-scale projects will be started up, such as the construction of Finlands fifth nuclear power plant, large investments at Fortums refinery in Porvoo, and investments by the forest industry in Finland and especially in Sweden. Large projects are also being started up in the oil and gas business in both Sweden and Norway.
YIT is playing a strong part in the preparations for Finlands fifth nuclear power plant. In the case of mechanical installations, the first invitations to tender are expected in early autumn.
The enlargement of the EU and the related easing of the mobility of labour are expected to lead to tighter competition in the next few years.
The recent growth in demand for metal products in China has caused uncertainty on the market. The strong growth in the prices of nickel and molybdenum has significantly increased the prices of acid- resistant materials in particular.
New orders in the energy industry
In the case of the energy industry, Services for Industry has been kept busy by soda recovery boiler- related deliveries for the Wisa 800 REC project and the replacement of the backup cooling system of Fortums nuclear power plant in Loviisa. Demand in the marine industry has been low. The largest order that has been delivered comprised piping prefabs for Kvaerner Masa-Yards Oys Ultra Voyager cruise ship.
The first months of the year in the process industry were taken up with various maintenance and small projects. The capacity utilization ratio has remained quite low, as a result of which employee layoffs have been necessary. The largest contracts were a piping delivery for the ground wood plant of Stora Ensos WARMA project in Varkaus and piping for the Elegant projects bleaching plant in Kemi.
Major new orders from the energy industry included the design, manufacture and installation of main steam piping support replacements for Teollisuuden Voima Oy and the delivery and installation of main steam piping for Siemens AG in Riga, Latvia.
The largest tank orders comprised a gas storage facility measuring 3,000 m3 for AGA-Cryo AB in Porvoo and a tank for UPM-Kymmene in Changshu, China.
Steady demand in the outsourcing of maintenance
Considering the time of year, industrial maintenance operations have been at their ordinary level; in other words, operations have been muted, as is typical. Demand for the outsourcing of services has been steady.
During the first quarter, YIT made an agreement with Altia Corporation to provide maintenance services for its plants in Rajamäki. The agreement comprises mechanical, electrical and automation maintenance, property maintenance works and the direction of services in support of operations. The duration of the agreement is three years and it covers the work input of about 20 maintenance workers. During the review period, YIT was also handed the responsibility for the maintenance of PPTH Norden Oys plants in Peräseinäjoki and Alavus.
YIT has made a maintenance agreement with Fortums power plant in Loviisa. This five-year agreement comprises maintenance services for the power plants reactor and valves. YIT is one of the largest providers of maintenance services for Fortums power plants. YIT has made a multi-year automation and instrumentation agreement for small- scale installation works at Fortums refinery in Porvoo.
Existing partnership agreements with companies such as Valio, Ekokemi, Hartwall, Neste and Shell were renewed.
During the report period, YIT Service Ltd sold the business operations, machinery and equipment of the Kokkola engineering workshop to Metalmec Oy, a company set up by the employees of the workshop.
Data Network Services
2004 got off to a better start for Data Network Services than the previous year. Net sales in the January-March period amounted to EUR 24.4 million (EUR 25.5 million; comparable figure: EUR 22.8 million).
About 77 per cent of net sales (60%) were based on long-term customer agreements and 23 per cent (40%) on project production. Operating profit was EUR 0.6 million (EUR -1.7 million; comparable figure: EUR -1.2 million). The order backlog at the end of the period amounted to EUR 109.4 million (EUR 94.5 million). At the end of the period, the business segment had 1,335 employees.
The most significant factor underlying net sales growth has been the increase in the number of broadband connections and the delivery- related demand for IT installation services. Demand related to the broadband trend has also increased the order backlog. The number of broadband connections in Finland has doubled since last autumn and is now 700,000. The trend in net sales in turn has been weakened by the lower than expected amount of orders from mobile network operators.
The earnings trend in business operations is better than in the previous year thanks to both the brisker market situation and the measures implemented to develop and upgrade the efficiency of the segments own operations.
Growth in broadband connections generates demand Data Network Services market situation remains muted. The only development is taking place in broadband connections and the related services that have been elaborated for them. The trend in connections is expected to continue in a similar fashion in the near future, opening up opportunities for the development of new additional IT services. Demand for broadband connections also slightly increases network investments both in urban and sparsely populated areas. In future, growth in broadband connections will also increase the need for network maintenance services.
The mobile communications network market is depressed due to tough competition between operators and the ongoing sweeping changes in technology. Volume growth can be expected only when 3G network investments increase and their effect will only become evident in 2005. Competition will continue to heat up in telecom networks. This will have a knock-on effect on the installation market in the form of pressures to reduce prices.
Supporting the opening up of the installation market
In their operations, both operators and IT system suppliers are seeking solutions that would support the development of the installation market. Some new arrangements in installation functions are expected during the present year, but these changes will have a significant effect on the market only after several years.
YITs Data Network Services seeks to support the opening up of the installation market and thus create a better competition environment.
During the first months of the year, development efforts have focused not only on measures supporting the opening up of the installation market, but also on the development of new service packages in technical helpdesk services, firming up cooperation with educational institutions to ensure the availability of labour and the modernization of the IT platform. The management of joint customer accounts has been developed together with YITs other business segments and public administration has been a particular focus area during the first months of the year.
Events after the end of the review period
The Series C share options issued in 2002 went into trading on the Main List on Helsinki Exchanges as from April 1, 2004.
Outlook for 2004
YITs net sales will see substantial growth, as the Building System 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.
It is expected that the Building Systems business segment will have a positive effect on YITs full-year result for 2004.
Helsinki, May 3, 2004
Board of Directors
CONSOLIDATED FINANCIAL STATEMENTS, MARCH 31, 2004 (Unaudited)
INCOME STATEMENT (EUR million) Jan-Mar/ Jan-Mar/ Change, Jan-Dec/ 2004 2003 % 2003 Net sales 713.1 431.5 65 2,389.7 - of which 267.2 84.5 216 672.5 international activities - sale of shares in 64.1 52.6 22 243.1 own production Operating income and -673.8 -417.7 61 -2,253.3 expenses Depreciation and write- -8.4 -4.1 105 -23.4 downs Amortization of -2.9 -2.8 4 -14.4 goodwill Operating profit 28.0 6.9 306 98.6 % of net sales 3.9% 1.6% 4.1% Financial income and expenses, net -3.7 -3.6 3 -14.2 Profit before extraordinary items 24.3 3.3 636 84.4 % of net sales 3.4% 0.8% 3.5% Extraordinary income 0 0 0 Extraordinary expenses 0 0 0 Profit before taxes 24.3 3.3 636 84.4 % of net sales 3.4% 0.8% 3.5% Profit/loss for the 16.4 1.6 925 48.4 report period % of net sales 2.3% 0.4% 2.0%
Projects have been booked in the income statement on the basis of the degree of completion or the degree of sale, whichever is lower. After the changeover to IAS, partial credits to account will be carried out using the principle of degree of completion multiplied by degree of sale as from the beginning of 2005.
Deferred tax liabilities and the minority share of depreciation difference have been taken into account in the profit for the review period. Income 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 first quarter of 2004 compared with the last quarter of 2003)
EUR mill. Jan-Mar/ Jan-Mar/ Change 2004 2003 % Net sales 713.1 954.0 -25 - of which international 267.2 381.0 -30 activities Operating income and -673.8 -925.1 -27 expenses Depreciation and write-downs -8.4 -11.1 -24 Amortization of goodwill -2.9 -5.0 -42 Operating profit 28.0 12.8 119 % of net sales 3.9% 1.3% Financial income and -3.7 -3.8 -3 expenses, net Profit before extraordinary 24.3 9.0 170 items % of net sales 3.4% 0.9% Extraordinary income 0 0 Extraordinary expenses 0 0 Profit before taxes 24.3 9.0 170 % of net sales 3.4% 0.9% Profit/loss for the report 16.4 -1.8 period % of net sales 2.3% -0.2%
BALANCE SHEET (EUR million) Mar/2004 Mar/2003 Change, Dec/2003 % ASSETS Intangible assets 176.8 9.7 1,723 180.7 Goodwill on consolidation 75.2 69.1 9 78.0 Tangible assets 64.3 61.0 5 66.8 Investments - Own shares 0 7.2 -100 - Other investments 8.0 7.1 13 7.9 Inventories 362.1 337.8 7 380.8 Receivables 780.6 543.3 44 781.0 Marketable securities 12.9 15.1 -15 11.9 Cash and cash equivalents 40.1 17.4 130 48.4 Total assets 1,520.0 1,067.7 42 1,555.5 LIABILITIES Share capital 61.0 59.5 3 61.0 Other shareholders equity 327.2 288.9 13 347.3 Minority interests 3.5 2.8 25 3.4 Provisions 23.6 9.6 146 27.3 Non-current liabilities 244.5 118.2 107 210.9 Current liabilities 860.2 588.7 46 905.6 Total shareholders equity 1,520.0 1,067.7 42 1,555.5 and liabilities
CONSOLIDATED CASH FLOW STATEMENT (EUR million) Jan-Mar/ Jan-Mar/ Change, Jan-Dec/ 2004 2003 % 2003 Cash flow from operating activities Profit before extraordinary 24.3 3.3 636 84.4 items Adjustments, total 7,7 5.5 40 30.7 Cash flow before change in net working capital 32,0 8.8 264 115.1 Change in net working -2.4 13.7 -118 25.4 capital Cash flow from operations before financial items and 29.6 22.5 32 140.5 taxes Interest paid -4.0 -4.2 -5 -14.7 Dividends received 0 0 0 0.3 Interest received 1.2 0.6 100 2.7 Taxes paid -6.6 -6.4 3 -31.2 Net cash from operating 20.2 12.5 62 97.6 activities Cash flow from investing activities Capital expenditure on tangible and intangible -6.1 -5.2 17 -230.5 assets Proceeds from sale of tangible and intangible 4.1 0.7 486 37.5 assets Investments in other assets -0.3 0 .. -2.4 Proceeds/losses from sale 0.8 0 .. 1.4 of investments Net cash used in investing -1.5 -4.5 -67 -194.0 activities Cash flow from financing activities Rights issue 0 0 9.5 Purchase of own shares 0 0 12.4 Change in loan receivables 1.8 0.1 1,700 0.1 Change in short-term debt 3.4 -0.2 -1,800 23.6 Borrowing of long-term debt 36.3 16.2 124 117.7 Repayment of long-term debt -30.8 -4.3 616 -19.2 Dividends paid -36.6 -26.3 39 -26.3 Net cash used in financing -25.9 -14.5 79 117.8 activities Change in liquid assets -7.2 -6.5 11 21.4 Liquid assets at beginning 60.3 38.9 55 38.9 of period Liquid assets at end of 53.1 32.4 64 60.3 period
KEY FIGURES Mar/2004 Mar/2003 Change, Dec/2003 % Earnings per share, EUR 0.27 0.03*) 800 0.82*) Earnings per share, EUR, 0.27 0.03*) 800 0.82*) diluted Equity per share, EUR 6.36 5.85*) 9 6.69*) Average share price during the 15.08 7.98*) 89 10.35*) period, EUR Share price at end of period, 15.40 7.35*) 110 13.45*) EUR Market capitalization at end of period, EUR million 940.1 428.6 119 821.1 Weighted average share-issue adjusted number of shares 61,047 58,358** 5 59,104** outstanding, thousands ) ) Weighted average share-issue adjusted number of shares outstanding, thousands, 61,627 58,788** 5 59,248** diluted ) ) Share-issue adjusted number of shares outstanding at end of 61,047 58,358** 5 61,046** period, thousands ) ) Net interest-bearing debt at end of period, EUR million 220.5 122.4 80 204.4 Return on investment, % 20.8% 17.0% 16.8% Equity ratio, % 27.7% 34.7% 28.3% Gearing ratio, % 56.3% 35.6% 49.6% Gross capital expenditures on non-current assets, EUR 6.1 5.1 20 232.9 million - % of net sales 0.9% 1.2% 9.7% Order backlog at end of period, EUR million 1) 1,478.2 1,008.3 47 1,490.1 - of which international 580.4 257.9 125 569.5 orders Average personnel 21,625 12,478 75 16,212
*) Due to the doubling of the number of shares, which came into effect during the review period, the indicators concerning share value in the comparison periods have been divided by two.
**) Due to the doubling of the number of shares, which came into effect during the review period, the figures concerning the number of shares in the comparison periods have been multiplied by two.
1) Portion of binding orders not recognized as income.
CONTINGENT LIABILITIES (EUR million) Mar/2004 Mar/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 0.2 0.2 0 0.2 Leasing commitments 49.6 21.9 126 50.7 Other commitments - Repurchase commitments 168.6 90.2 87 7.3 - Responsibility for external debts of companies held in 28.2 44.5 inventories - Other commitments 0.5 0.6 -17 1.2 Guarantees - On behalf of associated 0.8 1.1 -27 0.7 companies - On behalf of others 2.1 5.9 -64 9.0 Mortgages given by companies held in inventories; for commitments of Group companies 2.2 3.4 -35 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 21.4 16.1 33 70.8 contracts - Market value -- Interest rate swaps 19.4 19.7 -- Foreign currency forward 19.8 16.3 21 72.1 contracts
2) Derivative contracts have been taken out mainly to hedge foreign currency loans and foreign currency cash flows from projects.
NET SALES BY DIVISION (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. Services for Industry was formed from YIT Industria Ltd and YIT Service Ltd, which were part of YIT Installation, and 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.
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-Mar/ Jan-Mar/ Change, Jan-Dec/ 2004 2003 % 2003 Building Systems 316.9 80.8 292 681.0 Construction Services 338.3 280.6 21 1,398.5 Services for Industry 42.7 48.4 -12 209.7 Data Network Services 24.4 25.5 -4 130.0 Other items -9.2 -3.8 142 -29.5 YIT Group, total 713.1 431.5 65 2,389.7
OPERATING PROFIT BY DIVISION (EUR million) Jan-Mar/ Jan-Mar/ Change, Jan-Dec/ 2004 2003 % 2003 Building Systems -1.3 - -19.7 Construction Services 30.1 9.5 217 107.8 Services for Industry -0.1 - 8.8 Data Network Services 0.6 -1.7 10.7 (YIT Installation) - 1.8 Other items -1.3 -2.7 52 -9.0 YIT Group, total 28.0 6.9 306 98.6
ORDER BACKLOG BY DIVISION AT END OF PERIOD (EUR million) Mar/2004 Mar/2003 Change, Dec/2003 % Building Systems 557.2 133.5 317 502.3 Construction Services 735.6 699.3 5 817.7 Services for Industry 76.0 81.0 -6 67.2 Data Network Services 109.4 94.5 16 102.9 YIT Group, total 1,478.2 1,008.3 47 1,490.1
QUARTERLY FIGURES, Q1/2001 - Q1/2003 (EUR million) Q1/ Q2/ Q3/ Q4/ Q1/ 2003 2003 2003 2003 2004 Net sales, MEUR 431.5 500.6 503.6 954.0 713.1 Operating profit, MEUR 6.9 51.0 27.9 12.8 28.0 - % of net sales 1.6 10.2 5.5 1.3 3.9 Financial income and expenses, net, MEUR -3.6 -2.8 -4.0 -3.8 -3.7 Profit before taxes, MEUR 3.3 48.2 23.9 9.0 24.3 - % of net sales 0.8 9.6 4.7 0.9 3.4 Balance sheet total, MEUR 1,067.7 1,176.3 1,323.9 1,555.5 1 520.0 Earnings/share, EUR *) 0.03 0.58 0.25 -0.04 0.27 Equity/share, EUR *) 5.85 6.43 6.73 6.69 6.36 Share price at end of 7.35 8.50 11,00 13.45 15.40 Market capitalization, MEUR 428.6 497.1 662.6 821.1 940.1 Cash flow from operating activities, MEUR 12.5 -40.7 58.3 67.5 20.2 Return on investment from the last 12 months, % 17.0 20.4 18.5 16.8 20.8 Equity ratio, % 34.7 34.8 33.2 28.3 27.7 Net interest-bearing debt, 122.4 139.5 246.9 204.4 220.5 MEUR Gearing ratio, % 35.6 36.9 60.6 49.6 56.3 Brutto Gross capital expenditures, 5.1 9.1 173.4 45.3 6.1 MEUR Order backlog, MEUR 1,008.3 1,091.8 1,416.5 1,490.1 1,478.2 Personnel at end of period 2,459 13,087 22,144 21,939 21,654 *) Due to the doubling of the number of shares, which came into effect during the review period, the indicators concerning share value in the comparison periods have been divided by two.
NET SALES BY DIVISION (EUR million) Q1/ Q2/ Q3/ Q4/ Q1/ 2003 2003 2003 2003 2004 Building Systems 80.8 75.7 85.4 439.1 316.9 Construction Services 280.6 343.8 337.0 437.1 338.3 Services for Industry 48.4 55.4 50.0 55.9 42.7 Data Network Services 25.5 30.9 36.6 37.0 24.4 Other items -3.8 -5.2 -5.4 -15.1 -9.2 Group total 431.5 500.6 503.6 954.0 713.1
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 BY DIVISION (EUR million) Q1/ Q2/ Q3/ Q4/ Q1/ 2003 2003 2003 2003 2004 Building Systems - -1.3 19.7*) Construction Services 9.5 47.8 21.6 28.9 30.1 Services for Industry 8.8*) -0.1 Data Network Services -1.7 2.4 5.5 4.5 0.6 (YIT Installation) 1.8 3.7 1.8 Other items -2.7 -2.9 -1.0 -2.4 -1.3 Group total 6.9 51.0 27.9 12.8 28.0
*) During the three first quarters of 2003 MEUR 7.3 is included in the operating profit of YIT Installation.
ORDER BACKLOG BY DIVISION IOD (EUR million) Q1/ Q2/ Q3/ Q4/ Q1/ 2003 2003 2003 2003 2004 Building Systems 133.5 145.6 419.9 502.3 557.2 Construction Services 699.3 784.9 868.7 817.7 735.6 Services for Industry 81.0 71.3 62.6 67.2 76.0 Data Network Services 94.5 90.0 65.3 102.9 109.4 Group total 1,008.3 1,091.8 1,416.5 1,490.1 1,478.2