YIT announces new strategy and financial targets for 2025-2029, introduces a new segment structure
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- Stock Exchange Release
- 26.04.2007 07:00 CET
YIT'S INTERIM REPORT, JANUARY 1 - MARCH 31, 2007: REVENUE AND OPERATING PROFIT CONTINUE TO RISE
The YIT Group's revenue and operating profit continued to rise in Q1 2007. Revenue rose by 8 per cent and operating profit by 14 per cent compared with the previous year. The Group's order backlog is at an all-time high.
Building Systems forged ahead with improving profitability and focused on revenue growth. The business segment's operating profit as a share of revenue rose to 5.1 per cent (Jan-Mar/2006: 3.6%). Revenue was up 13 per cent. The order backlog grew by 30 per cent to EUR 670.3 million (EUR 517.6 million).
Profitability remained excellent in Construction Services. Operating profit was 11.2 per cent (11.6%) of revenue. The order backlog was 65 per cent higher than last year, having risen to EUR 2,137.9 million (EUR 1,296.5 million).
Industrial and Network Services' operating profit declined due to the weak market for network services and the final completion of the downscaling measures carried out in 2006. EUR 1.0 million in downscaling expenses were booked in operating profit during the period. The operating profit margin was 4.5 per cent (4.9%). The order backlog grew by 4 per cent to EUR 228.8 million (EUR 219.5 million).
“On the whole, construction and demand for building system services have remained solid in our whole business territory. Demand for new housing has stayed good in Finland. The number of residences YIT sold in Russia decreased compared to the previous year, but the value of sales stayed the same. Trends in Industrial and Network Services were favourable in industrial projects and maintenance. The market for network services has remained challenging,” says Group CEO Hannu Leinonen.
“All in all, the outlook for 2007 is still favourable. Strong need for housing in the large cities of Russia enables us to expand our residential production over the long term, too. Thanks to our exceptionally robust order backlog and the good market situation, we are well-poised to forge ahead with profitable growth in line with our plans,” adds Leinonen.
Revenue growth 8 per cent
The YIT Group's revenue for the January-March period grew by 8 per cent on the previous year without major acquisitions and amounted to EUR 833.5 million (Jan-Mar/2006: EUR 768.8 million). Revenue in Russia remained on last year's level during the first months of the year and amounted to EUR 48.1 million (EUR 50.3 million). Of the revenue, 55 per cent came from Finland (57%), 33 per cent from the other Nordic countries (31%), 6 per cent from Russia (7%) and 6 per cent from the Baltic countries (5%).
The share of revenue generated by the maintenance and servicing business was 36 per cent (35%), or EUR 299.7 million (EUR 269.8 million).
YIT also keeps track of trends in the shares of revenue generated by consumer services, long-term service agreements, project development and contracting. In the January-March period, consumer services accounted for 26 per cent of revenue, long-term service agreements for 28 per cent, project development for 9 per cent and contracting for 37 per cent. YIT's strategic objective is to increase the relative share of revenue accounted for by consumer services, long-term service agreements and project development.
Operating profit growth 14 per cent
Operating profit grew by 14 per cent on the previous year and amounted to EUR 61.2 million (EUR 53.7 million). The operating profit margin was 7.3 per cent (7.0%). Profit before taxes rose by 9 per cent to EUR 54.8 million (EUR 50.1 million). Earnings per share were up 7 per cent to EUR 0.31 (EUR 0.29). Equity per share was EUR 4.95 (EUR 4.23). Return on investment for the 12-month period ending at the conclusion of the review period was 25.4 per cent (28.1%).
Financial position remains stable
Invested capital in Russia increased due to growth in business operations, the acquisition of plots and ongoing volume growth in production. At period's end, 26 per cent, or EUR 314 million, of the Group's invested capital was tied up in Russia. At the end of 2006, these figures were 23 per cent and EUR 279 million. The Group's financial position remained stable. Net debt was EUR 540.9 million (EUR 334.2 million). The gearing ratio rose to 85.6 per cent (62.7%). The equity ratio was 31.8 per cent (33.5%). The balance sheet total at the end of the report period was EUR 2,155.9 million (EUR 1,722.0 million).
Order backlog growth 49 per cent
The Group's uninvoiced backlog of orders rose to a record high. It was 49 per cent higher at the end of the period than a year earlier, having risen to EUR 2,995.4 million (EUR 2,007.2 million). At the end of 2006, the order backlog was EUR 2,802.3 million. The margin of the backlog is good. Due to their nature, part of the Group's maintenance and servicing operations are not included in the order backlog.
Number of employees 22,400
YIT's number of employees has risen since the previous year. In the review period, the Group employed 22,444 (21,131) people on average. At the end of the period, the Group had 22,418 employees (21,140). Of YIT's employees, 51 per cent work in Finland, 36 per cent in the other Nordic countries, 7 per cent in the Baltic countries and 6 per cent in Russia.
Northern Europe still booming
The boom in the Nordic countries peaked last year, but will continue during the upcoming years, with growth outpacing the euro zone by about one percentage point. Russia and Norway still benefit from the high prices of oil. The rate of growth in the Estonian, Latvian and Lithuanian economies is almost three times as fast as in the Nordic countries, while it is double in Russia. Especially in Russia and Latvia, fast growth has also resulted in rapid inflation.
Euro interest rates are seeing moderate growth.The positive earnings trend and the improvement in the employment count bolster household confidence in all of YIT's business countries. The record-high population shift in Finland is continuing, maintaining stable need for the construction of new housing and increasing renovation works on old housing. Growth in the construction of business premises outpaces housing production. Strong demand for housing in the large cities of Russia enables the company to expand residential production over the long term, too. Growth in exports and industrial output increases the need for industrial investments and maintenance in all the Nordic countries.
YIT estimates that it will start up more residences than last year
YIT estimates that this year it will start up the construction of about 2,700 market-financed residential units in Finland (start-ups in 2006: 2,818), about 4,500 in Russia (3,699) and about 900 in the Baltic countries (887).
Outlook for 2007
We estimate that revenue and operating profit (EBIT) in 2007 will increase compared to the previous year.
The outlook for revenue growth is supported by the record-high order backlog, the continuing boom and YIT's major investments in the Russian market. The healthy margin of the order backlog and the company's own profitability improvement measures underlie our expectations of growth in operating profit.
Publication on April 26 and subsequent Interim Reports
An event for investment analysts and portfolio managers will be held at YIT's head office at 10:00 on Thursday, April 26. The address is Panuntie 11, 00620 Helsinki, Finland. A press conference will be held at the same venue at 13:00.
A webcast presentation of the January-March 2007 results can be viewed at YIT's site. The results will be presented in Finnish and English by Group CEO Hannu Leinonen. The link to the webcast presentation is: http://webcast.magneetto.com/yit/en
The Interim Report for the January-June period will be published on July 27, 2007, and the Interim Report for the January-September period on October 26, 2007. YIT observes a three-week silent period before the publication of profit and loss bulletins. During this period, the company's representatives do not comment on the company's financial position or meet capital market representatives.
Interim Reports are published as stock exchange releases and on the company's site at www.yitgroup.com. Copies of Interim Reports can be ordered from the company's site, by emailing InvestorRelations@yit.fi or by telephoning +358 20 433 2467.
YIT CORPORATION
Hannu Leinonen Group CEO
For additional information, contact: Sakari Toikkanen, Executive Vice President, tel. +358 20 433 2336, sakari.toikkanen@yit.fi Petra Thorén, Vice President, Investor Relations, tel. +358 20 433 2635, petra.thoren@yit.fi
ANNEXES Interim Report, January 1 - March 31, 2007 1) Consolidated financial statements, 2) Notes, 3) Other key figures of YIT Group
Distribution: Helsinki Stock Exchange, principal media, www.yitgroup.com
YIT'S INTERIM REPORT, JANUARY 1 - MARCH 31, 2007 REVENUE GROWTH 8 PER CENT
The YIT Group's revenue for the January-March period grew by 8 per cent on the previous year without major acquisitions and amounted to EUR 833.5 million (Jan-Mar/2006: EUR 768.8 million). Revenue in Russia remained on last year's level during the first months of the year and amounted to EUR 48.1 million (EUR 50.3 million).
Revenue by segment (EUR million)
-------------------------------------------------------------------------------- | | Jan-Mar/ | Jan-Mar/ | Change, % | Share of the | | | 2007 | 2006 | | Group's | | | | | | revenue, | | | | | | Jan | | | | | | -Mar/2007, % | -------------------------------------------------------------------------------- | Building Systems | 367.7 | 325.6 | 13 | 44 | -------------------------------------------------------------------------------- | Construction | 369.2 | 350.8 | 5 | 44 | | Services | | | | | -------------------------------------------------------------------------------- | Industrial and | 110.7 | 107.7 | 3 | 14 | | Network Services | | | | | -------------------------------------------------------------------------------- | Other items | -14.1 | -15.3 | -8 | -2 | -------------------------------------------------------------------------------- | YIT Group, total | 833.5 | 768.8 | 8 | 100 | --------------------------------------------------------------------------------
YIT's service chain spans the entire life cycle of investments. The life cycle strategy seeks to achieve better service capability, growth in our business operations and a steadier stream of profits. Part of the Group's revenue comes from its industrial, property, telecom network and traditional infrastructure maintenance and servicing business. In the review period, the revenue generated by this business was EUR 299.7 million (EUR 269.8 million), representing 36 per cent (35%) of total revenue.
YIT also keeps track of trends in the shares of revenue generated by consumer services, long-term service agreements, project development and contracting. In the January-March period, consumer services accounted for 26 per cent of revenue, long-term service agreements for 28 per cent, project development for 9 per cent and contracting for 37 per cent. YIT's strategic objective is to increase the relative share of revenue accounted for by consumer services, long-term service agreements and project development.
Of the revenue, 55 per cent came from Finland (57%), 33 per cent from the other Nordic countries (31%), 6 per cent from Russia (7%) and 6 per cent from the Baltic countries (5%).
The YIT Group's strategic target for revenue growth is 10 per cent annually on average. In addition, YIT has set itself the goal of increasing its revenue in Russia by an average of 50 per cent annually during the 2006-2009 period.
OPERATING PROFIT GROWTH 14 PER CENT
Operating profit grew by 14 per cent on the previous year and amounted to EUR 61.2 million (EUR 53.7 million). The operating profit margin was 7.3 per cent (7.0%).
Operating profit by segment (EUR million)
-------------------------------------------------------------------------------- | | Jan-Mar/ | Jan-Mar/ | Change, % | Share of the | | | 2007 | 2006 | | Group's | | | | | | operating | | | | | | profit, | | | | | | Jan-Mar/2007 | | | | | | , % | -------------------------------------------------------------------------------- | Building Systems | 18.8 | 11.7 | 61 | 31 | -------------------------------------------------------------------------------- | Construction | 41.2 | 40.7 | 1 | 67 | | Services | | | | | -------------------------------------------------------------------------------- | Industrial and | 5.0 | 5.3 | -6 | 8 | | Network Services *) | | | | | -------------------------------------------------------------------------------- | Other items | -3.8 | -4.0 | -5 | -6 | -------------------------------------------------------------------------------- | YIT Group, total | 61.2 | 53.7 | 14 | 100 | --------------------------------------------------------------------------------
*) The operating profit of the Industrial and Network Services business segment in January-March 2007 includes the final costs of the downsizing of Network Services carried out in 2006, EUR 1.0 million. Previously, YIT estimated that the additional costs that would be booked in early 2007 would amount to no more than about EUR 3 million.
Profit before taxes rose by 9 per cent to EUR 54.8 million (EUR 50.1 million). Profit after taxes was EUR 40.1 million (EUR 37.7 million). Earnings per share were up 7 per cent to EUR 0.31 (EUR 0.29). Equity per share was EUR 4.95 (EUR 4.23). Return on investment for the 12-month period ending at the conclusion of the review period was 25.4 per cent (28.1%).
YIT has set itself the target of increasing its operating profit to 9 per cent of revenue in the 2007-2009 strategic period. The strategic target level for return on investment is 22 per cent.
ORDER BACKLOG GROWTH 49 PER CENT
The Group's uninvoiced backlog of orders rose to a record high. It was 49 per cent higher at the end of the period than a year earlier, having risen to EUR 2,995.4 million (EUR 2,007.2 million). At the end of 2006, the order backlog was EUR 2,802.3 million. The margin of the backlog is good. Due to their nature, part of the Group's maintenance and servicing operations are not included in the order backlog.
Order backlog by segment (EUR million)
-------------------------------------------------------------------------------- | | Mar/2007 | Mar/2006 | Change, % | Share of | | | | | | the Group's | | | | | | order | | | | | | backlog, | | | | | | Mar/2007 | | | | | | , % | -------------------------------------------------------------------------------- | Building Systems | 670.3 | 517.6 | 30 | 22 | -------------------------------------------------------------------------------- | Construction | 2,137.9 | 1,296.5 | 65 | 71 | | Services | | | | | -------------------------------------------------------------------------------- | Industrial and | 228.8 | 219.5 | 4 | 8 | | Network Services | | | | | -------------------------------------------------------------------------------- | Other items | -41.6 | -26.4 | 58 | -1 | -------------------------------------------------------------------------------- | YIT Group, total | 2,995.4 | 2,007.2 | 49 | 100 | --------------------------------------------------------------------------------
THE GROUP'S FINANCIAL POSITION REMAINS STABLE
Invested capital in Russia increased due to growth in business operations, the acquisition of plots and ongoing volume growth in production. At period's end, 26 per cent, or EUR 314 million, of the Group's invested capital was tied up in Russia. At the end of 2006, these figures were 23 per cent and EUR 279 million. The Group's financial position remained stable. Interest-bearing liabilities at the end of the period amounted to EUR 580.3 million (EUR 366.8 million) and liquid assets to EUR 39.4 million (32.6 million). Net debt was EUR 540.9 million (EUR 334.2 million). The gearing ratio rose to 85.6 per cent (62.7%). The equity ratio was 31.8 per cent (33.5%).
The target level for the equity ratio is 35 per cent. The strategic dividend payout target is 40-60 per cent of annual earnings after taxes and minority interest.
Short-term credit was converted into long-term credit by means of two EUR 50 million private placement bonds in March.
Financial income during the period amounted to EUR 0.6 million (EUR 1.3 million), exchange rate losses to EUR 0.1 million (EUR 0.6 million) and financial expenses to EUR 6.9 million (EUR 4.3 million). Net financial expenses were EUR 6.4 million (EUR 3.6 million), or 0.8 per cent (0.5%) of revenue.
The proportion of fixed-interest loans in the Group's entire loan portfolio was 58 per cent (44%). Loans raised directly on the capital and money markets amounted to 65 per cent (35%).
The construction-stage contract receivables sold to financing companies totalled EUR 239.1 million (EUR 274.8 million) at the end of the period. Of this amount, EUR 105.4 million (EUR 117.3 million) is included in interest-bearing liabilities in the balance sheet and the remainder comprises off-balance sheet items as per IAS 39. The interest on sold receivables paid to financing companies, EUR 2.7 million (EUR 2.2 million), is included in financial expenses in its entirety.
Participations in the housing corporation loans of unsold completed residences, EUR 30.6 million (EUR 15.6 million), are also included in interest-bearing liabilities, but the interest on them, EUR 0.4 million (EUR 0.2 million), is booked in project expenses, as said interest is included in housing corporation maintenance charges.
Interest-bearing liabilities included EUR 2.8 million in leasing commitments (EUR 4.4 million). The balance sheet total at the end of the report period was EUR 2,155.9 million (EUR 1,722.0 million).
CAPITAL EXPENDITURES AND ACQUISITIONS
Gross capital expenditures on non-current assets included in the balance sheet totalled EUR 15.8 million (EUR 9.1 million) during the January-March period, representing 1.9 per cent (1.2%) of revenue. Investments in construction equipment amounted to EUR 5.8 million (EUR 5.5 million) and investments in information technology to EUR 1.3 million (EUR 1.1 million). Other investments including acquisitions amounted to EUR 8.7 million (EUR 2.5 million).
MAJOR NEAR-TERM BUSINESS RISKS AND UNCERTAINTIES
YIT's risk management policy aims to identify the major risk factors, taking the special characteristics of YIT's business operations and environment into consideration, and optimally manage the overall risk level so that the company achieves its strategic and financial objectives. YIT's risk management is an integral part of the Group's management, monitoring and reporting systems.
YIT has specified the Group's major risks as well as means of managing strategic and administrative risks. YIT's major strategic risk factors are related to growing both organically and through acquisitions, capital management, managing tender-based contracts, ensuring the availability and competence of employees and general economic development. In the case of administrative risks, YIT focuses on the further development of its successful corporate culture and management system.
The financial risks related to the YIT Group's business are liquidity, interest rate, foreign exchange and credit risks. An account of the financial risks is presented in the notes to the 2006 financial statements and in the notes to the January-March/2007 Interim Report.
The key objective of the management of accident risks is to minimize YIT's losses from identified risks and thereby safeguard the company's financial result and continuity of operations.
A more detailed account of YIT's risk management policy, the major risks and their management has been published in the 2006 financial statements and Annual Report. Information is also available from www.yitgroup.com. The risks have not changed significantly after the financial statement date.
NUMBER OF EMPLOYEES 22,400
YIT's number of employees has risen since the previous year. In the review period, the Group employed 22,444 (21,131) people on average. At the end of the period, the Group had 22,418 employees (21,140). Of YIT's employees, 51 per cent work in Finland, 36 per cent in the other Nordic countries, 7 per cent in the Baltic countries and 6 per cent in Russia.
Personnel by business segment
-------------------------------------------------------------------------------- | | Mar/2007 | Mar/2006 | Share of the | | | | | Group's | | | | | employees, | | | | | Mar/2007, % | -------------------------------------------------------------------------------- | Building Systems | 11,569 | 11,011 | 52 | -------------------------------------------------------------------------------- | Construction Services | 5,734 | 5,118 | 26 | -------------------------------------------------------------------------------- | Industrial and Network | 4,787 | 4,700 | 21 | | Services | | | | -------------------------------------------------------------------------------- | Corporate Services | 328 | 311 | 1 | -------------------------------------------------------------------------------- | YIT Group, total | 22,418 | 21,140 | 100 | --------------------------------------------------------------------------------
Personnel by country
-------------------------------------------------------------------------------- | | Mar/2007 | Mar/2006 | Share of the | | | | | Group's | | | | | employees, | | | | | Mar/2007, % | -------------------------------------------------------------------------------- | Finland | 11,536 | 11,168 | 51 | -------------------------------------------------------------------------------- | Sweden | 3,946 | 3,962 | 18 | -------------------------------------------------------------------------------- | Norway | 2,660 | 2,477 | 12 | -------------------------------------------------------------------------------- | Denmark | 1,259 | 1,147 | 6 | -------------------------------------------------------------------------------- | Estonia, Latvia, Lithuania | 1,662 | 1,448 | 7 | -------------------------------------------------------------------------------- | Russia | 1,355 | 938 | 6 | -------------------------------------------------------------------------------- | YIT Group, total | 22,418 | 21,140 | 100 | --------------------------------------------------------------------------------
RESOLUTIONS PASSED AT THE ANNUAL GENERAL MEETING
YIT Corporation's Annual General Meeting was held on March 16, 2007. The Annual General Meeting adopted the 2006 financial statements and discharged the members of the Board of Directors and the President and CEO from liability. The Annual General Meeting confirmed that a dividend of EUR 0.65 would be paid per share (EUR 0.55 for 2005, taking into account the halving of the nominal value of the share on March 24, 2006), to a total of EUR 82.4 million (EUR 68.6 million). March 21, 2007, was set as the dividend record date, and March 28, 2007, as the dividend payout date.
The Annual General Meeting decided to elect a chairman, vice chairman and three ordinary members to the company's Board of Directors. The meeting resolved to keep the composition of the Board unchanged: Chairman Reino Hanhinen, Vice Chairman Eino Halonen and members Sari Baldauf, Antti Herlin and Teuvo Salminen.
At its organization meeting on March 16, 2007, the Board elected from amongst its number Eino Halonen as the chairman and Teuvo Salminen and Reino Hanhinen as the members of the Audit Committee.
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 Göran Lindell, M.Sc. (Econ.), Authorized Public Accountant, as chief auditor.
The Annual General Meeting decided on amendments to the Articles of Association.
The amendments to the Articles of Association were entered in the Trade Register on March 30, 2007.
A decision was made to amend Article 3 of the Articles of Association such that references to the nominal value of shares and the minimum and maximum share capital were deleted and replaced with a statement that the shares of the company belong to the book-entry securities system.
A decision was made to add two explanatory statements to Article 4 of the Articles of Association to the effect that when the chairman is prevented from discharging his duties, said duties will be discharged by the vice chairman.
Article 6 of the Articles of Association includes a regulation on the signing of the company's business name and powers of procuration. The new Companies Act includes a provision on representing the company. The new Act does not recognize the concept of signing the business name. A decision was made to account for the provisions of the new Act in the wording of the proposal. No changes to the content were made.
A decision was made to add the word “otherwise” to Article 8 of the Articles of Association, which sets forth rules for matters such as the manner in which meetings are to be convened.
A decision was made to amend Article 9 of the Articles of Association such that the list of matters to be dealt with at the Annual General Meeting accounts for the new Companies Act's provisions on meeting agendas.
A decision was made to amend Article 10 of the Articles of Association such that its stipulations concerning the inclusion of the shares in the book-entry securities system were deleted and replaced with a provision stating that disputes on the application of the Companies Act shall be resolved by way of arbitration.
A decision was made to delete Article 11 of the Articles of Association, which set forth regulations on the obligation to redeem the company's shares once a certain shareholding limit is exceeded.
Since the Articles of Association were amended in the manner specified above, a decision was made to account for the discontinuation of the nominal value of the company's shares in the terms and conditions of share subscriptions under the share option programmes, and that the full subscription price shall be entered into the share capital when shares are subscribed for with the share options; therefore, a decision was made to delete the provision in the terms that sets the maximum amount by which the share capital can be increased.
A decision was made to increase the share capital by EUR 82,822,459.92 to EUR 146,210,995.92 by means of a reserve fund transfer, whereby the funds in the share premium reserve, EUR 82,822,459.92, were transferred into the share capital. New shares were not issued when the share capital was increased. The increase was entered in the Trade Register on March 30, 2007.
SHARES AND SHARE CAPITAL
The company has one series of shares. Each share carries one vote at general meetings and confers an equal right to a dividend. YIT Corporation's share capital was EUR 63,388,536.00 at the beginning of the review period and the number of shares outstanding was 126,777,072. Due to the decision by the Annual General Meeting to increase the share capital, the share capital amounted to EUR 146,210,995.92 at period's end. The number of shares was unchanged and was 126,777,072 at the end of the period.
Authorizations to increase the share capital During the review period, no share 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.
Market capitalization rises to almost EUR 3.3 billion
The average share price in the January-March period was EUR 23.73 (EUR 20.52). The highest share price in the period was EUR 27.45 (EUR 23.17) and the lowest was EUR 19.81 (EUR 17.64). The closing rate at the end of the period was EUR 25.80 (EUR 22.38).
The value of share turnover during the review period amounted to EUR 1,597.9 million (EUR 868.8 million) and the number of shares traded to 67,591,489 (42,236,012). Market capitalization at the end of the period was EUR 3,270.8 million (EUR 2,792.9 million).
Own shares
At the beginning of 2007, YIT Corporation held 400 of its own shares, representing 0.0 per cent of the company's shares. YIT Corporation's Board of Directors decided to annul the YIT shares in the company's possession immediately once the amendment to the Articles of Association had been entered in the Trade Register. The annulment of the shares was entered in the Trade Register on April 10, 2007. YIT acquired its own shares in December 2005. At the end of the review period the Board of Directors did not have authorizations to purchase or dispose of YIT's own shares. YIT's subsidiaries did not own shares in the parent company during the period.
International ownership rises to 50 per cent
The number of registered shareholders was 14,364 (9,368) at the beginning of the period and 13,635 (9,928) at its end.
A total of 45.9 per cent of YIT's total shares outstanding (39.9%) were owned by nominee-registered or non-Finnish investors at the beginning of the year and 50.3 per cent (46.1%) at the end of the period.
NORTHERN EUROPE STILL BOOMING
Growth in the global economy got off to a more favourable start early in the year than expected. Growth slackened in the United States, but this was offset by the rebounding of Europe and Japan, while China and India, the new industrial countries of Asia, are still seeing extremely fast growth with low inflation. The boom in the Nordic countries peaked last year, but will continue during the upcoming years, with growth outpacing the euro zone by about one percentage point. Russia and Norway still benefit from the high prices of oil. The rate of growth in the Estonian, Latvian and Lithuanian economies is almost three times as fast as in the Nordic countries, while it is double in Russia. Especially in Russia and Latvia, fast growth has also resulted in rapid inflation. Inflation is the key reason why the EMU entry of the Baltic countries will most likely be pushed back to after 2010.
Euro interest rates are seeing moderate growth. The positive earnings trend and the improvement in the employment count bolster household confidence in all of YIT's business countries. The record-high population shift in Finland is continuing, maintaining stable need for the construction of new housing and increasing renovation works on old housing. Growth in the construction of business premises outpaces housing production. Strong need for housing in the large cities of Russia enables the company to expand residential production over the long term, too. Growth in exports and industrial output increases the need for industrial investments and maintenance in all the Nordic countries.
Finland
In March, the Research Institute of the Finnish Economy ETLA estimated that Finland's GDP will rise by 2.7 per cent this year. In the 2006-2011 period, the average rate of growth would be 2.8 per cent. The improvement in the employment count, the good trend in incomes and the still moderate interest rate level support household consumption and demand for housing. Growth in the disposable incomes of households will rise to 3.7 per cent this year and to 4.3 per cent the next. This change will be reflected in household consumption. Investments in machinery and equipment - exclusive of energy investments - will grow by 2.3 per cent this year and 3 per cent the next. Installation of nuclear power plant equipment will increase the rate of investments in the sector to 13.2 per cent.
The business cycle report published by the Confederation of Finnish Construction Industries RT in April states that the volume of construction will grow by 3.5 per cent this year and 3 per cent the next. Residential construction will stay at a good level. Repair works will remain brisk. According to RT, 33,000 residential units will be started up this year, while the number of start-ups was 33,400 last year. In March, the Ministry of Finance estimated that residential start-ups will number 32,000-33,000 units and forecast total growth of 4-5 per cent in building construction for this year. Office construction will be on the up, especially in the Greater Helsinki Area. Construction of commercial premises will also remain brisk. Annual growth in renovation works will be 2-3.5 per cent during the present decade. Growth in new construction and renovation maintains demand in the construction and building system markets (heating, plumbing, air-conditioning, electrical and automation contracting, and maintenance). The market for industrial, property and infrastructure maintenance will expand as the outsourcing trend progresses. Growth in the number of broadband connections has slackened and investments to expand the fixed and mobile phone networks will remain slight. Sweden In March, the Swedish National Institute of Economic Research KI estimated that Sweden's GDP will grow by 3.9 per cent this year and 3.4 per cent in 2008. The factors underlying this positive trend are the high capacity utilization ratio in industry, solid earnings, the positive incomes trend enjoyed by households and the low interest rates. The unemployment rate will decline to 4.3 per cent. Inflation will accelerate to 2.1 per cent this year and 2.4 per cent the next. The Riksbank, Sweden's central bank, has indicated that it will raise its policy rate to 3.5 per cent in the summer. KI expects that the policy rate will continue to rise to 4.75 per cent in 2009. The growth of the national economy is on a broad footing. In 2007, exports will increase by 7.1 per cent due to international demand and the effect of the relatively weak Swedish kronor. Fixed investments will increase by 9.1 per cent this year, but growth will slacken to 4.7 per cent the next. Fixed investments by industry will increase by 7 per cent during the present year, and next year by 2.9 per cent. Investments by the service sector are higher and growing faster than those of industry, rising by 7.1 per cent this year and 6.6 per cent the next.
According to the business cycle barometer KI released in March, the order backlogs of construction companies have increased, employment has improved, and companies expect to see further production growth. Two-thirds of construction companies reported that the shortage of skilled labour slows down growth, and 40 per cent expect tender prices to rise. At the beginning of April, the Swedish Construction Federation BI predicted that residential investments will grow by 10 per cent this year and by 2 per cent the next. Production of other types of buildings will see growth of 9 per cent this year and 5 per cent in 2008. Construction represented 8 per cent of GDP and accounted for 20 per cent of GDP growth. The labour shortage has been met with foreign labour and strong productivity development.
Norway Norway's boom continues. According to the forecast released by Statistics Norway in February, GDP will grow by 3.3 per cent this year and by 2.6 per cent the next. Household consumption will grow by 3.8 per cent this year and by 3.5 per cent the next. The vigorous growth in fixed investments that got under way in 2004 will slacken to 5.8 per cent on the heels of the slowdown in the growth of housing investments to 4.4 per cent this year due to capacity problems, and correspondingly to 0.3, 0.9 and 3.5 per cent in 2008-2010. The construction of 33,300 residential units was started up last year. However, residential production will remain brisk, as the construction of 6,079 residential units got under way in January-February this year, 21.4 per cent more than in the same period last year. The floor area of business and industry buildings started up in that period was 20.9 per cent higher than in the previous year. Investments by business and industry will grow by 6.6 per cent this year and by about 2.5-3 per cent annually during the next three years.
Statistics Norway expects that Norges Bank's key interest rate (“sight deposit rate”) will rise by a percentage point to 5 per cent this year and that it will remain at that level for quite some time. The interest rate spread with the euro will be about one percentage point at the end of the present year, which will strengthen the Norwegian kroner. Higher interest rates, stronger currency and a labour shortage in many sectors of the economy put the brakes on growth. Statistics Norway nevertheless expects the boom to continue until at least 2010 and the unemployment rate to drop to 3 per cent. Inflation will remain under 2.5 per cent and growth in real incomes over a four-year period will total 15 per cent.
Denmark The outlook for the Danish economy is still good. In January, Nordea anticipated that GDP growth will amount to 2.1 per cent this year. Growth will slacken to 1.5 per cent in 2008. Export growth gathered steam last year, and will continue at a rate of 6 per cent this year and 5.6 per cent the next. Growth in private consumption is estimated to slacken to 2.6 per cent in 2007. Investments will increase by 5.8 per cent during the present year. Housing prices rose by 23.9 per cent last year, but growth will slow down to about 2.8 per cent this year and further the next. The rapid rise in prices has increased the supply of housing, as a result of which the housing market is returning to normal. At the beginning of April, the Danish Construction Association estimated that the number of new residential start-ups will be 30,500 this year and 28,500 the next, compared to 31,000 during the past two years. Growth in real incomes and full employment have strengthened the confidence of households in their own finances, which means opportunities in the demand for housing will remain good. Housing renovation will not see growth in these years. According to Euroconstruct, the construction of other types of new buildings will increase by 3.7 per cent this year, and by 3.8 and 3.9 per cent in 2008 and 2009.
Baltic countries GDP and investments grow at a significantly faster rate in Latvia, Lithuania and Estonia than in the Nordic countries. According to VTT's estimate, the value of construction was EUR 5.8 billion in 2005. In April, IMF pegged Latvia's GDP growth in 2007 at 10.5 per cent. According to the IMF's forecast, GDP growth in Estonia will be 9.9 per cent and 7.9 per cent in 2007 and 2008, respectively, and 7 and 6.5 per cent in Lithuania. Inflation in Estonia is double the EMU average, and it is triple in Latvia. In this region, inflation is at its most moderate in Lithuania - about 3.5 per cent this year and the next. The growth of these economies is supported by their high educational level and the EU membership of Estonia, Latvia and Lithuania. Growth in investments this year will be 14 per cent in Estonia, 18 per cent in Latvia and 15 per cent in Lithuania. In 2008, investments will continue to grow at a rate of over 10 per cent in these countries, and by as much as 17 per cent in Lithuania. Affordable borrowing, economic growth and the greater affluence of the population have increased demand for new residences and renovation in recent years. VTT estimates that a total of about 21,000 residential units will be completed in the Baltic countries this year. Building permits have been granted for over twice as many residences as have been completed.
Russia
The high price of oil supports Russian economic growth. In January, Nordea estimated that Russia's GDP will grow by 6.5 per cent this year and by 6.0 per cent in 2008. At the beginning of April, the Ministry of Economic Development and Trade of the Russian Federation (MERT) nudged its GDP forecasts for 2007-2010 up to 6.5, 6.1, 6 and 6.2 per cent, respectively. Russia has recently tapped its oil funds to accelerate the repayment of the government debt. Considering its currency reserves, Russia is now in practice a debt-free country. Last year, inflation was 9.7 per cent; according to Nordea's estimate, it will slow down to 8.7 per cent this year. Ministry of Finance of the Russian Federation, predicts that inflation will decline to 7.2 per cent this year. The rouble is expected to continue to strengthen. The rate of growth in investments will rise to 18 per cent this year and continue at a rate of 12 per cent the next, remaining significantly faster than the EU and Nordic average over the next few years. A significant share of investments is earmarked for residential construction.
Thanks to the good incomes trend, household consumption has become the primary engine of growth. Private consumption will rise by 15 per cent this year, comprising half of GDP. The greater affluence of the middle class has strengthened demand for market-financed residences in large cities such as Moscow and St Petersburg. Last year, the prices of residences in some large cities saw an exceptional rise of 60-100 per cent due to the decline in supply. According to Rosstroi 50% more apartments were started-up during the first quarter of this year than the first quarter of 2006.
EARNINGS TRENDS OF THE BUSINESS SEGMENTS BUILDING SYSTEMS
Building Systems continued to improve its profitability and focused on revenue growth. The business segment's revenue in the January-March period was up 13 per cent to EUR 367.7 million (Jan-Mar/2006: EUR 325.6 million). The share of the business segment's revenue accounted for by the maintenance and servicing business was 62 per cent (62%), or EUR 226.8 million (EUR 200.7 million).
The business segment's operating profit increased by 61 per cent to EUR 18.8 million (EUR 11.7 million). The operating profit margin improved to 5.1 per cent (3.6%).
The order backlog was at a record high, having grown by 30 per cent on the previous year to EUR 670.3 million (EUR 517.6 million). The business segment had 11,569 employees (11,011) at the end of the period.
Revenue of the Building Systems business segment by country (EUR million)
-------------------------------------------------------------------------------- | | Jan-Mar/2007 | Jan-Mar/2006 | Change, % | Share of the | | | | | | business | | | | | | segment's | | | | | | revenue, | | | | | | Jan-Mar/2007, | | | | | | % | -------------------------------------------------------------------------------- | Sweden | 130.1 | 121.8 | 7 | 35 | -------------------------------------------------------------------------------- | Norway | 102.1 | 81.4 | 25 | 28 | -------------------------------------------------------------------------------- | Finland | 86.6 | 80.2 | 8 | 24 | -------------------------------------------------------------------------------- | Denmark | 36.3 | 33.2 | 9 | 10 | -------------------------------------------------------------------------------- | Estonia, | 12.6 | 9.0 | 39 | 3 | | Latvia, | | | | | | Lithuania | | | | | | and Russia | | | | | -------------------------------------------------------------------------------- | Total | 367.7 | 325.6 | 13 | 100 | --------------------------------------------------------------------------------
Good economic trends held steady in Sweden
The state of the Swedish economy remained solid. Industrial output was on the up and industrial companies are expected to start up major investments in the near future. It is expected that the trend in construction will be steady. Household consumption and the employment situation picked up yet again.
YIT signed agreements with the cities of Ludvika and Strängnäs for energy savings programmes covering city-owned properties. The programmes are geared towards reducing energy costs with total technical solutions.
An agreement was made with AstraZeneca for the assessment and upkeep of the building equipment systems of the Lund research station. Piping and equipment will be installed at the extension of a plant in Köping on behalf of the chemical company Yara.
Market situation remained solid in Norway
The trend in the market for building system services remained favourable in Norway. Construction in the first months of the year was significantly more brisk than last year. However, there are great regional differences in the scale of commercial premise construction. Demand for the modernization and renovation of commercial premises remained solid.
The Norwegian Armed Forces made a three-year agreement with YIT for the upkeep of all its electrical systems in southern Norway. An order came in from Seabrokers Eiendom for a total technical solution for the Statoil office building in Stavanger. A total technical solution will be implemented in the office building of the Nistad group in Bergen.
Demand for total technical solutions increased in Finland
The trend in the Finnish market for building equipment systems was favourable in all types of services. In particular, there was growing demand for total technical solutions and supplementary special technology, such as security and refrigeration technology.
During the review period, a framework agreement was made with Metsä-Botnia for providing building system services for the company's mills in Finland. The agreement covers the servicing and upkeep of building systems as well as the technical maintenance of the building. Numerous agreements were made with UPM, such as for property upkeep, annual system servicing and the preventative servicing of building equipment systems in Lappeenranta, Kuusankoski and Kajaani. YIT made an agreement with the Social Insurance Institution of Finland KELA for the management of electrical equipment operation in six office buildings located around Finland in 2007-2010.
A central building will be implemented for Kiinteistö Oy Ylläs Resort Center in association with YIT Construction Services. HEPACE works will be carried out at the leisure-time site YIT built in Vuokatti. HEPAC works will be performed at the Galleria shopping centre in Lappeenranta, and HEPACE and sprinkler works will be carried out at a Prisma hypermarket in Kuopio.
Outsourcing technical servicing and installation in Denmark
The state of the Danish economy remained good. The development of construction and industry is expected to level off slightly in the first half of the year. Demand for building systems and servicing continued to be solid in the construction of industrial and commercial facilities and in the case of public premises. It is expected that the public sector will start stepping up investments once the changes ushered in by the new regional and municipal divisions have been seen to completion. Outsourcing in the maintenance of the technical systems of properties and production plants is seeing steady growth as companies focus on their core business.
A long-term service agreement was made with Danish State Railways, covering the periodic maintenance and repairs of ventilation and cooling systems at all of the country's railway stations, as well as emergency duties. In Fredericia, Shell outsourced the maintenance and servicing of all its manufacturing equipment systems to YIT. Cooperation with Grundfos was initiated with an agreement on the maintenance of the automated gates of a plant in Bjerringbro.
YIT has agreed on numerous consulting deliveries regarding electrical systems for production facilities with potentially explosive atmospheres with a view to meeting EU directive requirements.
Electrical and communication systems will be supplied for three ships being built in Odense on behalf of the Royal Danish Navy. F.L. Schmidt will be provided with full ventilation systems for manufacturing facilities, which will be transported to Libya for installation. An agreement was also made with Interxion for a large-scale installation delivery for a data room.
Need for building system services raised in Estonia, Latvia, Lithuania and Russia
The market for building system services is still developing buoyantly in the Baltic countries and especially in Russia. International investments are on the rise in YIT's business territories, increasing demand for building equipment systems and property management services.
Long-term service agreements were extended to 2007 at the Mega and Akropolis shopping centres as well as Maxima chain stores in Lithuania, the Rimi office and logistics centre in Riga, Latvia as well as McDonald's restaurants, Rolf car dealerships, the Mega-Chimki shopping centre and the Grundfos production plant in Moscow, Russia.
In Lithuania, building equipment solutions will be implemented for the telco TEO LT's administration building in Vilnius, and HEPACE installation works for the entertainment and shopping centre YIT built in Panevezys. HEPACE and automation works got under way at an apartment building built by YIT in Moscow, Russia.
CONSTRUCTION SERVICES
In the first months of the year, the revenue of Construction Services grew by 5 per cent on the previous year and amounted to EUR 369.2 million (EUR 350.8 million). The share of revenue accounted for by the maintenance business was 4 per cent (4%), or EUR 15.1 million (EUR 12.3 million). Of the revenue, 77 per cent came from Finland, 12 per cent from Russia, 10 per cent from Estonia, Latvia and Lithuania, and less than one per cent from other countries.
Operating profit stayed at last year's level and amounted to EUR 41.2 million (EUR 40.7 million). The operating profit margin remained excellent, 11.2 per cent (11.6%).
The uninvoiced backlog of orders was at a record high. The order backlog was 65 per cent higher than last year, amounting to EUR 2,137.9 million (EUR 1,296.5 million).
The business segment had 5,734 employees at the end of the period (5,118).
Housing demand remained good
Demand for new apartments remained in good level in Finland and the prices of residences saw moderate growth. Prices soared in the Baltic countries and especially in Russia in 2006. The number of residences YIT sold in Russia decreased compared to the previous year, but the value of sales stayed the same.
In January-March, the average selling price of residences in Russia was about 49 per cent (27%) of the average selling price of the market-financed residences sold by YIT in Finland, and in the Baltic countries about 55 per cent (46%).
The construction of leisure-time residences progressed in line with plans. The marketing of the Vuokatti, Tahko, Meri-Teijo and Sappee leisure-time projects was launched during the report period. The development of new leisure centres continued, with a particular focus on southern Finland.
During the review period, YIT made a preliminary agreement with SATO Oyj and YH-Suomi Oy for the sale of 42 residential units in St Petersburg. In addition, YIT sold 51 new apartments in the Greater Helsinki Area to SATO and YH-Suomi for use as rental housing.
YIT estimates that it will start up more residences than last year
YIT estimates that this year it will start up the construction of about 2,700 market-financed residential units in Finland (start-ups in 2006: 2,818), about 4,500 in Russia (3,699) and about 900 in the Baltic countries (887).
The market outlook for the developer contracting of housing is estimated to remain solid in all of YIT's market areas. Factors such as the population shift and the improvement in the employment count maintain demand for housing in Finland. Consumers have a positive outlook on the development of their own finances and firm intentions to purchase housing in spite of the rise in the interest rate level. In Russia and the Baltic countries, strong economic growth, the need to improve housing quality and the positive trend in household earnings uphold the demand for residences. At the end of March, YIT had 244 completed unsold residential units in Finland. There were 5 completed unsold apartments in Russia and none in the Baltic countries.
YIT is stepping up residential construction in Russia by increasing start-ups in its present territories and by expanding to the satellite cities of Moscow. Over the next few years, YIT also aims to expand its operations into other Russian cities with populations in excess of a million.
YIT currently builds housing in St Petersburg, Moscow, the Moscow Oblast, Yaroslavl and Yekaterinburg. The company also aims to start up residential construction in Kazan in 2007.
Residential construction in Jan-Mar/2007 (Jan-Mar/2006), number of residences -------------------------------------------------------------------------------- | | Finland | Finland | Finland | Russia | Estonia, | | | | | | | Latvia, | | | | | | | Lithuania | -------------------------------------------------------------------------------- | | Market | State- | Total | Total | Total | | | -financed | financed, | | | | | | (incl. | rental | | | | | | leisure | housing | | | | | |residences) | and | | | | | | |tender-based| | | | | | | | | | | -------------------------------------------------------------------------------- | Sold | 651 (657) | - (-) | 651 (657) | 289 (628) | 122 (188) | -------------------------------------------------------------------------------- | Start-ups | 234 (444) | 20 (-) | 254 (444) | 637 (280) | 123 (81) | -------------------------------------------------------------------------------- | Under | 2,581 | 136 (153) | 2,717 | 9,018 | 1,771 | | construc- | (3,301) | | (3,454) | (5,630) | (1,612) | | tion at | | | | | | | period's | | | | | | | end | | | | | | -------------------------------------------------------------------------------- | Completed | 863 (560) | 70 (-) | 933 (560) | - (-) | 225 (-) | -------------------------------------------------------------------------------- | Completed | 244 (112) | - (-) | 244 (112) | 5 (-) | - (-) | | and unsold | | | | | | | at | | | | | | | period's | | | | | | | end | | | | | | --------------------------------------------------------------------------------
Plot reserves, March 31, 2007 (March 31, 2006) Building rights and zoning potential, 1,000 m2 of floor area
-------------------------------------------------------------------------------- | | Finland | Russia | Estonia, Latvia, | | | | | Lithuania | -------------------------------------------------------------------------------- | Housing plots | 1,738 (1,790) | 1,814 (545) | 411 (241) | -------------------------------------------------------------------------------- | Business premise | 983 (705) | 400 (26) | 35 (33) | | plots | | | | -------------------------------------------------------------------------------- | Total | 2,721 (2,495) | 2,214 (571) | 446 (274) | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Capital tied into | 333.9 (310.5) | 89.1 (23.6) | 66.8 (23.3) | | plot reserves, EUR | | | | | million | | | | --------------------------------------------------------------------------------
Plot reserves include plots that have been zoned and an estimate of the potential building rights on areas that are under zoning. Building rights provided by regional development agreements made with landowners are not included in YIT's balance sheet until the zoned sections are each in turn slated for construction.
In land management in Finland, outlays were made on good plot reserves and their rapid turnover as well as long-term regional development projects in cooperation with landowners and municipalities. Plot reserves in Russia were bolstered vigorously in 2006 and these reserves were partly put to use during first months of 2007. Plot reserves were also strengthened in Riga, Latvia, and in the Tallinn area and Tartu in Estonia.
Good demand in office, commercial and logistics construction
In Finland, demand for new office premises remained good in the Greater Helsinki Area and the general vacancy rate of premises declined. The market for retail and logistics premises also stayed good. New construction increased during the period. In addition, numerous property owners are converting office properties for other purposes, such as for use as housing and hotels. Construction investments by industry remained slight. In the case of tender-based contracts, the market remained tight, particularly in renovation.
In the first months of the year, YIT started up the construction of the extension of its head office in Käpylä, Helsinki Finland. The extension will be owned by RBS Nordisk Renting. The construction of the Duetto office building also got under way in Käpylä.
Preparatory works for the construction of Atria's production plant began in Gorelovo close to the international airport of St Petersburg. The construction of the last stage of the logistics project agreed with Genesta started up in Lithuania.
Good market situation continues in infrastructure construction
Demand remained good in infrastructure construction. Agreements were made with Helsinki Water for the construction of the back-up connection of the Pitkäkoski water intake plant and with YTV for the construction of leachate equalization basins for the extension of the Ämmässuo landfill. An order came in from the municipality of Tuusula for the construction of the Kievari water tower.
An agreement was made with the Romanian state to rehabilitate a drinking water treatment plant in the city of Drobeta.
After the end of the period, YIT was handed the maintenance of roads in the Kulosaari, Herttoniemi and Laajasalo areas of Helsinki.
INDUSTRIAL AND NETWORK SERVICES
The revenue of Industrial and Network Services grew by 3 per cent to EUR 110.7 million (EUR 107.7 million). The share of revenue accounted for by the maintenance business was 57 per cent (60%), or EUR 63.5 million (EUR 64.4 million). Of the revenue, 93 per cent came from Finland and 7 per cent from other countries.
Operating profit was EUR 5.0 million (EUR 5.3 million) and the operating profit margin was 4.5 (4.9%). Favourable trends were seen in industrial projects and maintenance. The operating profit of the business segment decreased due to weak market for network services and the final completion of the downscaling measures carried out in 2006. The remainder of the costs of the personnel cuts, EUR 1.0 million, was recognized in operating profit in Q1 2007. Previously, YIT estimated that the additional costs that would be booked in early 2007 would amount to no more than about EUR 3 million. The bulk of the cost effects of the personnel cuts - EUR 5.1 million - was recognized in the Industrial and Network Services business segment's Q3 operating profit of 2006.
The order backlog at the end of the period grew by 4 per cent to EUR 228.8 million (EUR 219.5 million). The order backlog in Network Services is based on forecasts from customers, which declined since the previous year. At the end of the period, the business segment had 4,787 employees (4,700).
Demand for industrial maintenance services remained brisk
The utilization rate of industrial production plants has been high and demand for maintenance services remained brisk. YIT seeks growth especially from end-to-end maintenance partnership agreements, in which the company's responsibilities encompass the management and development of maintenance operations as well as operational upkeep.
As from the beginning of the year, the maintenance of Botnia's pulp mills in Rauma and Äänekoski was transferred to YIT and Metsä-Botnia's joint venture Botnia Mill Service. The company now handles the end-to-end maintenance of all of Botnia's mills in Finland. Under the agreement, about 100 people transferred into Botnia Mill Service's employ.
Market for industrial projects was favourable
The market situation for capital investment projects for industry remained favourable. Numerous new deliveries were agreed on in the first months of the year.
In Finland, an order came in from UPM for the delivery of bleaching plant piping for the Tervasaari plants in Valkeakoski. A demanding high-pressure piping and equipment installation project will be carried out for Borealis Polymers Oy as part of the upgrading of ethylene and phenol unit efficiency. An agreement was made with Stora Enso for the implementation of ventilation solutions at the Varkaus mill and with Fortum Sähkönsiirto Oy for electric station modernization in Taalintehdas.
YIT and OAO Svetogorsk, which is owned by International Paper in Russia, agreed on a piping installation project for a PCTMB plant in Svetogorsk. An agreement was forged with Södra Cell in Sweden concerning the soda recovery boiler repair project at the Mörrum pulp mill. Orders came in from Andritz Oy for the delivery of the internal circulation piping of a soda recovery boiler to ENCE in Spain, and from Foster Wheeler for the delivery of high-pressure piping for Votorantim Metais Niquel S.A. in Brazil.
During the review period, the projects for the Kymi REC 08 project at UPM's Kuusankoski plants were started up. In addition to high-pressure and process piping, tanks as well as electrical automation and ventilation works will be supplied for the plant during the present year. Piping for a combined cycle gas power plant was implemented as a turnkey project for Siemens AG in Kårstö, Norway.
Market for network services is still tight
The market situation in field services for teleoperators continued tight. The market is still impacted by the waning demand for broadband connections.
At the beginning of the year, YIT ventured into energy network services by making a partnership agreement with Vattenfall Verkko Oy. Under the agreement, the electricity network maintenance, repair and construction works that had until then been handled by Vattenfall were handed over to YIT. About 100 Vattenfall Verkko employees transferred to YIT. By partnering up with Vattenfall, YIT became a significant player in the growing market for electricity network construction and maintenance.
EVENTS AFTER THE END OF THE REVIEW PERIOD
On April 2, 2007, YIT Industrial and Network Services Oy acquired T. Kanerva Oy, the only Finnish supplier of special seals used in the process and energy industry. T. Kanerva Oy's personnel transferred into YIT's employ under their current terms of employment. Its engineering workshop will continue to operate in Piikkiö.
The Series F share options issued in 2004 and the Series K and L share options issued in 2006 were made available for trading on the Main List of the Helsinki Stock Exchange as from April 2, 2007.
The annulment of the 400 YIT Corporation shares in the company's possession was entered in the Trade Register on April 10, 2007.
OUTLOOK FOR 2007
We estimate that revenue and operating profit (EBIT) in 2007 will increase compared to the previous year.
The outlook for revenue growth is supported by the record-high order backlog, the continuing boom and YIT's major investments in the Russian market. The healthy margin of the order backlog and the company's own profitability improvement measures underlie our expectations of growth in operating profit.
Helsinki, April 25, 2007
Board of Directors
YIT CORPORATION'S INTERIM REPORT, JAN 1 - MAR 31, 2006: TABLES The information presented in the Interim Report has not been audited.
1. Consolidated financial statements, Jan 1 - Mar 31, 2007
Consolidated income statement Consolidated balance sheet Consolidated statement of changes in equity Consolidated cash flow statement
2. Notes
Accounting principles of the Interim Report Financial risk management Interest-bearing liabilities Segment information Acquired businesses Inventories Commitments and contingent liabilities
3. Other key figures of YIT Group
Key figures YIT-Group figures by quarter Segment information by quarter
1. CONSOLIDATED FINANCIAL STATEMENTS, JAN 1 - MAR 31, 2007
CONSOLIDATED INCOME STATEMENT (EUR million)
-------------------------------------------------------------------------------- | | IFRS | IFRS | Change, % | IFRS | | | Jan-Mar/ | Jan-Mar/ | | Jan-Dec/ | | | 2007 | 2006 | | 2006 | -------------------------------------------------------------------------------- | Revenue | 833.5 | 768.8 | 8 | 3 284.4 | -------------------------------------------------------------------------------- | - of which activities | 371.9 | 326.9 | 14 | 1 477.4 | | outside Finland | | | | | -------------------------------------------------------------------------------- | Operating income and | -766.3 | -709.4 | 8 | -3 002.8 | | expenses | | | | | -------------------------------------------------------------------------------- | Share of results of | 0.2 | - | - | 1.3 | | affiliates | | | | | -------------------------------------------------------------------------------- | Depreciation and | -6.2 | -5.7 | 9 | -24.1 | | write-downs | | | | | -------------------------------------------------------------------------------- | Operating profit | 61.2 | 53.7 | 14 | 258.8 | -------------------------------------------------------------------------------- | % of revenue | 7.3 | 7.0 | - | 7.9 | -------------------------------------------------------------------------------- | Financial income | 0.6 | 1.3 | -54 | 2.6 | -------------------------------------------------------------------------------- | Exchange rate differences | -0.1 | -0.6 | -83 | -2.7 | -------------------------------------------------------------------------------- | Financial expenses | -6.9 | -4.3 | 60 | -20.5 | -------------------------------------------------------------------------------- | Profit before taxes | 54.8 | 50.1 | 9 | 238.2 | -------------------------------------------------------------------------------- | % of revenue | 6.6 | 6.5 | - | 7.3 | -------------------------------------------------------------------------------- | Income taxes 1) | -14.7 | -12.4 | 19 | -62.8 | -------------------------------------------------------------------------------- | Profit for the report | 40.1 | 37.7 | 6 | 175.4 | | period | | | | | -------------------------------------------------------------------------------- | % of revenue | 4.8 | 4.9 | - | 5.3 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Attributable to | | | | | -------------------------------------------------------------------------------- | Equity holders of the | 39.6 | 36.4 | 9 | 171.0 | | parent company | | | | | -------------------------------------------------------------------------------- | Minority interests | 0.5 | 1.3 | -62 | 4.4 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Earnings per share | | | | | | attributable to the | | | | | | equity holders of the | | | | | | parent company | | | | | -------------------------------------------------------------------------------- | Earnings per share, EUR | 0.31 | 0.29 | 7 | 1.36 | | **) | | | | | -------------------------------------------------------------------------------- | Diluted earnings per | 0.31 | 0.29 | 7 | 1.35 | | share, EUR **) | | | | | --------------------------------------------------------------------------------
**) The per-share key figures presented in the tables have been adjusted for comparability such that they account for the halving of the nominal value of the share, which came into effect on March 24, 2006 (split).
1) 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.
CONSOLIDATED BALANCE SHEET (EUR million)
-------------------------------------------------------------------------------- | | IFRS | IFRS | Change, % | IFRS | | | Mar/2007 | Mar/2006 | | Dec/2006 | -------------------------------------------------------------------------------- | ASSETS | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Non-current assets | | | | | -------------------------------------------------------------------------------- | Property, plant and | 95.5 | 80.2 | 19 | 91.8 | | equipment | | | | | -------------------------------------------------------------------------------- | Goodwill | 248.8 | 248.8 | - | 248.8 | -------------------------------------------------------------------------------- | Other intangible assets | 17.3 | 12.9 | 34 | 15.6 | -------------------------------------------------------------------------------- | Shares in associated | 3.0 | 2.0 | 50 | 2.9 | | companies | | | | | -------------------------------------------------------------------------------- | Investments | 3.4 | 3.1 | 10 | 3.0 | -------------------------------------------------------------------------------- | Receivables | 14.4 | 10.5 | 37 | 13.4 | -------------------------------------------------------------------------------- | Deferred tax assets | 23.1 | 22.2 | 4 | 21.1 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Current assets | | | | | -------------------------------------------------------------------------------- | Inventories | 967.0 | 717.4 | 35 | 1,006.4 | -------------------------------------------------------------------------------- | Trade and other | 744.0 | 592.3 | 26 | 688.9 | | receivables | | | | | -------------------------------------------------------------------------------- | Cash and cash equivalents | 39.4 | 32.6 | 21 | 25.9 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Total assets | 2,155.9 | 1,722.0 | 25 | 2,117.8 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | EQUITY AND LIABILITIES | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Equity attributable to | | | | | | equity holders of the | | | | | | parent company | | | | | -------------------------------------------------------------------------------- | Share capital | 146.2 | 62.4 | *) | 63.4 | -------------------------------------------------------------------------------- | Other equity | 481.4 | 465.7 | 3 | 607.1 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Minority interests | 4.4 | 5.0 | -12 | 3.9 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Total equity | 632.0 | 533.1 | 19 | 674.4 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Non-current liabilities | | | | | -------------------------------------------------------------------------------- | Deferred tax liabilities | 57.1 | 37.9 | 51 | 52.5 | -------------------------------------------------------------------------------- | Pension liabilities | 10.9 | 10.9 | - | 11.6 | -------------------------------------------------------------------------------- | Provisions | 34.2 | 30.0 | 14 | 32.2 | -------------------------------------------------------------------------------- | Interest-bearing | 374.4 | 170.8 | *) | 275.8 | | liabilities | | | | | -------------------------------------------------------------------------------- | Other liabilities | 10.0 | 8.5 | 18 | 8.4 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Current liabilities | | | | | -------------------------------------------------------------------------------- | Trade and other payables | 814.2 | 719.0 | 13 | 788.0 | -------------------------------------------------------------------------------- | Provisions | 17.2 | 15.8 | 9 | 18.3 | -------------------------------------------------------------------------------- | Interest-bearing current | 205.9 | 196.0 | 5 | 256.6 | | liabilities | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Total equity and | 2,155.9 | 1,722.0 | 25 | 2,117.8 | | liabilities | | | | | --------------------------------------------------------------------------------
*) Change over 100%
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (EUR million)
-------------------------------------------------------------------------------- | | Share| Share|Legal |Other | Cumu- | Fair | Retai-| Mino- | Total | | | capi-| pre- |re- |re- | lative | value | ned rity |equity | | | tal | mium |serve |serve | trans- | re- | ear- | inte- | | | | | re- | | | lation | serve | nings | rest | | | | | serve| | | diffe- | | | | | | | | | | | rences | | | | | -------------------------------------------------------------------------------- | Equity | 63.4 | 83.8 | 0.8 | 13.7 | -4.5 | 1.0 | 512.3 | 3.9 | 674.4 | | on Jan | | | | | | | | | | | 1, 2007 | | | | | | | | | | -------------------------------------------------------------------------------- | Bonus | 82.8 | -82.8| - | - | - | - | - | - | - | | issue | | | | | | | | | | -------------------------------------------------------------------------------- | Change | - | - | - | - | -1.2 | - | - | - | - | | in | | | | | | | | | | | transla-| | | | | | | | | | | tion | | | | | | | | | | | diffe- | | | | | | | | | | | rences | | | | | | | | | | -------------------------------------------------------------------------------- | Employee| - | - | - | - | - | - | 1.0 | - | - | | share | | | | | | | | | | | option | | | | | | | | | | | scheme | | | | | | | | | | -------------------------------------------------------------------------------- | Net | - | - | - | - | - | - | 39.6 | - | - | | profit | | | | | | | | | | | for the | | | | | | | | | | | period | | | | | | | | | | -------------------------------------------------------------------------------- | Dividend| - | - | - | - | - | - | -82.5 | - | - | | paid | | | | | | | | | | -------------------------------------------------------------------------------- | Other | - | -1.0 | 0.2 | 1.0 | - | 0.3 | -0.3 | - | - | | change | | | | | | | | | | -------------------------------------------------------------------------------- | Equity |146.2 | - | 1.0 | 14.7 | -5.7 | 1.3 | 470.1 | 4.4 | 632.0 | | on | | | | | | | | | | | March | | | | | | | | | | | 31, | | | | | | | | | | | 2007 | | | | | | | | | | -------------------------------------------------------------------------------- | | Share| Share| Legal| Other| Cumula-| Fair | Retai-| Mino- | Total | | | capi-| pre- | re- | re- | tive | value | ned | rity | equity| | | tal | mium | serve| serve| trans- | re- | ear- | inte- | | | | | re- | | | lation | serve | nings | rest | | | | | serve| | | diffe- | | | | | | | | | | | rences | | | | | -------------------------------------------------------------------------------- | Equity | 62.4 | 77.2 | 0.7 | 2.5 | -3.0 | -0.1 | 420.0 | 3.7 | 563.5 | | on Jan | | | | | | | | | | | 1, 2006 | | | | | | | | | | -------------------------------------------------------------------------------- | Change | - | - | - | - | - | 0.3 | - | - | - | | in the | | | | | | | | | | | fair | | | | | | | | | | | value | | | | | | | | | | | of | | | | | | | | | | | interest| | | | | | | | | | | deriva- | | | | | | | | | | | tives | | | | | | | | | | | | | | | | | | | | | -------------------------------------------------------------------------------- | Change | - | - | - | - | 0.2 | - | - | - | - | | in | | | | | | | | | | | transla-| | | | | | | | | | | tion | | | | | | | | | | | differ- | | | | | | | | | | | rences | | | | | | | | | | -------------------------------------------------------------------------------- | Net | - | - | - | - | - | - | 36.4 | 1.3 | - | | profit | | | | | | | | | | | for the | | | | | | | | | | | period | | | | | | | | | | -------------------------------------------------------------------------------- | Dividend| - | - | - | - | - | - | -68.6 | - | - | | paid | | | | | | | | | | -------------------------------------------------------------------------------- | Other | - | - | 0.1 | - | - | - | - | - | - | | change | | | | | | | | | | -------------------------------------------------------------------------------- | Equity | 62.4 | 77.2 | 0.8 | 2.5 | -2.8 | 0.2 | 387.8 | 5.0 | 533.1 | | on | | | | | | | | | | | March | | | | | | | | | | | 31, | | | | | | | | | | | 2006 | | | | | | | | | | -------------------------------------------------------------------------------- | | Share| Share| Legal| Other| Cumula-| Fair | Retai-| Mino- | Total | | | capi-| pre- | re- | re- | tive | value | ned | rity | equity| | | tal | mium | serve| serve| trans- | re- | ear- | inte- | | | | | re | | | lation | serve | nings | rest | | | | | serve| | | diffe- | | | | | | | | | | | rences | | | | | -------------------------------------------------------------------------------- | Equity | 62.4 | 77.2 | 0.7 | 2.5 | -3.0 | -0.1 | 420.0 | 3.7 | 563.5 | | on Jan | | | | | | | | | | | 1, 2006 | | | | | | | | | | -------------------------------------------------------------------------------- | Shares | 1.0 | 5.6 | - | - | - | - | - | - | - | | sub- | | | | | | | | | | | scribed | | | | | | | | | | | with | | | | | | | | | | | options | | | | | | | | | | -------------------------------------------------------------------------------- | Change | - | - | - | - | - | 0.9 | - | - | - | | in the | | | | | | | | | | | fair | | | | | | | | | | | value | | | | | | | | | | | of | | | | | | | | | | | inte- | | | | | | | | | | | rest | | | | | | | | | | | deri- | | | | | | | | | | | vatives | | | | | | | | | | -------------------------------------------------------------------------------- | Change | - | - | - | - | - | 0.2 | - | - | - | | in the | | | | | | | | | | | fair | | | | | | | | | | | value | | | | | | | | | | | of | | | | | | | | | | | other | | | | | | | | | | | invest- | | | | | | | | | | | ments | | | | | | | | | | -------------------------------------------------------------------------------- | Change | - | - | - | - | -1.5 | - | -0.3 | - | - | | in | | | | | | | | | | | trans- | | | | | | | | | | | lation | | | | | | | | | | | diffe- | | | | | | | | | | | rences | | | | | | | | | | -------------------------------------------------------------------------------- | Employee| - | 1.0 | - | 11.2 | - | - | -9.6 | - | - | | share | | | | | | | | | | | option | | | | | | | | | | | scheme | | | | | | | | | | -------------------------------------------------------------------------------- | Net | - | - | - | - | - | - | 171.0 | - | - | | profit | | | | | | | | | | | for the | | | | | | | | | | | finan- | | | | | | | | | | cial year | | | | | | | | | | -------------------------------------------------------------------------------- | Dividend| - | - | - | - | - | - | -68.9 | - | - | | paid | | | | | | | | | | -------------------------------------------------------------------------------- | Other | - | - | 0.1 | - | - | - | 0.1 | - | - | | change | | | | | | | | | | -------------------------------------------------------------------------------- | Equity | 63.4 | 83.8 | 0.8 | 13.7 | -4.5 | 1.0 | 512.3 | 3.9 | 674.4 | | on Dec | | | | | | | | | | | 31, | | | | | | | | | | | 2006 | | | | | | | | | | --------------------------------------------------------------------------------
CONSOLIDATED CASH FLOW STATEMENT (EUR million)
-------------------------------------------------------------------------------- | | IFRS | IFRS | Change, % | IFRS | | | Jan-Mar/ | Jan-Mar/ | | Jan-Dec/ | | | 2007 | 2006 | | 2006 | -------------------------------------------------------------------------------- | Cash flows from operating | | | | | | activities | | | | | -------------------------------------------------------------------------------- | Net profit for the period | 40.1 | 37.7 | 6 | 175.4 | -------------------------------------------------------------------------------- | Reversal of accrual-based | 27.6 | 21.6 | 28 | 106.8 | | items | | | | | -------------------------------------------------------------------------------- | Change in working capital | | | | | -------------------------------------------------------------------------------- | - Change in trade and other| -55.0 | -48.2 | 14 | -140.0 | | receivables | | | | | -------------------------------------------------------------------------------- | - Change in inventories | 41.8 | -32.2 | - | -319.5 | -------------------------------------------------------------------------------- | - Change in current | 22.1 | 31.3 | -29 | 105.6 | | liabilities | | | | | -------------------------------------------------------------------------------- | Change in working capital, | 8.9 | -49.1 | - | -353.9 | | total | | | | | -------------------------------------------------------------------------------- | Interest paid | -4.2 | -4.1 | 2 | -24.9 | -------------------------------------------------------------------------------- | Interest received | 0.6 | 1.2 | -50 | 2.4 | -------------------------------------------------------------------------------- | Taxes paid | -10.9 | -10.4 | 5 | -54.1 | -------------------------------------------------------------------------------- | Net cash generated from | 62.1 | -3.1 | *) | -148.3 | | operating activities | | | | | -------------------------------------------------------------------------------- | | | | | | -------------------------------------------------------------------------------- | Cash flows from investing | | | | | | activities | | | | | -------------------------------------------------------------------------------- | Acquisition of | -4.3 | - | - | -11.1 | | subsidiaries, net of cash | | | | | -------------------------------------------------------------------------------- | Acquisition of shares in | - | -0.2 | - | - | | associated companies | | | | | -------------------------------------------------------------------------------- | Purchase of property, | -8.8 | -8.2 | 7 | -33.8 | | plant and equipment | | | | | -------------------------------------------------------------------------------- | Purchase of intangible | -1.9 | -0.7 | *) | -3.1 | | assets | | | | | -------------------------------------------------------------------------------- | Increases in other | -0.5 | - | - | - | | investments | | | | | -------------------------------------------------------------------------------- | Disposals of subsidiaries | - | - | - | 2.5 | | and businesses | | | | | -------------------------------------------------------------------------------- | Proceeds from sale of | 0.4 | - | - | | | shares in associated | | | | | | companies | | | | | -------------------------------------------------------------------------------- | Proceeds from sale of | 0.4 | 1.1 | -64 | 3.0 | | property, plant and | | | | | | equipment | | | | | -------------------------------------------------------------------------------- | Proceeds from sale of | - | - | - | 0.5 | | other investments | | | | | -------------------------------------------------------------------------------- | Net cash used in investing | -14.7 | -8.0 | 84 | -42.0 | | activities | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Cash flow from financing | | | | | | activities | | | | | -------------------------------------------------------------------------------- | Proceeds from share issues | - | - | - | 6.6 | -------------------------------------------------------------------------------- | Decrease in loan | - | 0.1 | - | 0.1 | | receivables | | | | | -------------------------------------------------------------------------------- | Change in current | -50.9 | - | - | 61.9 | | liabilities | | | | | -------------------------------------------------------------------------------- | Proceeds from borrowings | 99.9 | 33.5 | *) | 175.0 | -------------------------------------------------------------------------------- | Repayments of borrowings | - | -1.1 | - | -37.4 | -------------------------------------------------------------------------------- | Payments of financial | -0.3 | -0.7 | -57 | -1.9 | | leasing debts | | | | | -------------------------------------------------------------------------------- | Dividends paid | -82.5 | -68.6 | 20 | -68.9 | -------------------------------------------------------------------------------- | Net cash used in financing | -33.8 | -36.8 | -8 | 135.4 | | activities | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Net change in cash and | 13.6 | -47.9 | *) | -54.8 | | cash equivalents | | | | | -------------------------------------------------------------------------------- | Cash and cash equivalents | 25.9 | 80.6 | -68 | 80.6 | | at the beginning of the | | | | | | period | | | | | -------------------------------------------------------------------------------- | Change in the fair value | -0.1 | -0.1 | - | 0.1 | | of the cash equivalents | | | | | -------------------------------------------------------------------------------- | Cash and cash equivalents | 39.4 | 32.6 | 21 | 25.9 | | at the end of the period | | | | | --------------------------------------------------------------------------------
*) Change over 100%
2. NOTES
ACCOUNTING PRINCIPLES OF THE INTERIM REPORT
YIT Corporation's Interim Report for January 1 - March 31, 2007 has been drafted in line with IAS 34: Interim Financial Reporting. YIT has applied the same accounting policy in the drafting of the Interim Report as in its annual financial statements for 2006. The information presented in the Interim Report has not been audited.
Application of amended IFRS standards or interpretations as from January 1, 2007 The Group has applied the following amendments to the standards or new interpretations as from January 1, 2007: IFRS 7 Financial Instruments: Disclosures. The standard mainly affects the scope of the notes to the financial statements. IAS 1 (Amendment) Presentation of Financial Statements - Capital Disclosures. The amendment of the standard did not have an effect on this Interim Report. IFRIC 10 Interim Financial Reporting and Impairment. The application of the interpretation did not have an effect on this Interim Report.
BUSINESS SEGMENT STRUCTURE YIT's business operations are divided into three business segments: Building Systems, Construction Services and Industrial and Network Services.
FINANCIAL RISK MANAGEMENT
Foreign exchange risk
During the review period the Board of Directors amended the management of foreign exchange risk such that YIT Group's shareholders' equity in the home currency is no longer hedged against changes in foreign exchange rates.
Foreign exchange positions are reported to the Audit Committee ones per year.
INTEREST-BEARING LIABILITIES
Bonds (EUR 1,000) -------------------------------------------------------------------------------- | | Fair | Carrying | Nominal | | | value | value | value | -------------------------------------------------------------------------------- | Bonds in financial statements December | 275,462 | 275,008 | 275,000 | | 31, 2006 | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Valuation of the above bonds on March | 275,870 | 275,007 | 275,000 | | 31, 2007 | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Bonds raised during the review period | | | | -------------------------------------------------------------------------------- | Floating-rate| Interest | Currency | | | | | bonds | rate,% | | | | | -------------------------------------------------------------------------------- | 1/2007-2014 | 4.412 | EUR | 49,999 | 49,938 | 50,000 | | (1) | | | | | | -------------------------------------------------------------------------------- | 2/2007-2012 | 4.309 | EUR | 49,950 | 49,950 | 50,000 | | (2) | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Total bonds March 31, 2007 | 375,819 | 374,895 | 375,000 | --------------------------------------------------------------------------------
Terms of the bonds raised during the review period in brief: 1) Loan-period March 26, 2007 - March 26, 2014, interest payments by quarter in arrear, starting on June 26, 2007. The bond is unsecured. ISIN code FI0003024216. Interest rate is 3 months Euribor + 0.51%. (Private placement) 2) Loan-period February 29, 2007 - March 29, 2012, interest payments by quarter in arrear, starting on June 29, 2007. The bond is unsecured. ISIN code SE0001991068. Interest rate is 3 months Euribor + 0.40%. (Private placement)
Interest rate risk management connected to loans
Interest rate swaps are designated as hedges of floating rate loans: 3 month Euribor-linked loan with carrying value of EUR 225 million and 6 month Euribor-linked loan with carrying value of EUR 45 million. These hedges qualify for effective hedging requirements and changes in fair value are, according to company accounting principles, recognized in fairvalue reserve. The weighted average rate of the whole loan portfolio is raised by 0.057 percentage point via interest rate swaps.
The duration of long term loans and derivative instruments hedging these loans was 1.64 years at the end of the review period (1.52 years on December 31, 2006). A change of one percentage point in the interest level would March 31, 2007 have affected the annual net financial expenses by EUR 2.9 million (EUR 4.1 million on December 31, 2006).
REVENUE BY BUSINESS SEGMENT (EUR million)
-------------------------------------------------------------------------------- | | IFRS | IFRS | Change, % | IFRS | | | Jan-Mar/ | Jan-Mar/ | | Jan-Dec/ | | | 2007 | 2006 | | 2006 | -------------------------------------------------------------------------------- | Building Systems | 367.7 | 325.6 | 13 | 1,415.1 | -------------------------------------------------------------------------------- | Construction Services | 369.2 | 350.8 | 5 | 1,452.2 | -------------------------------------------------------------------------------- | Industrial and Network | 110.7 | 107.7 | 3 | 476.9 | | Services | | | | | -------------------------------------------------------------------------------- | Other items | -14.1 | -15.3 | -8 | -59.8 | -------------------------------------------------------------------------------- | YIT Group, total | 833.5 | 768.8 | 8 | 3,284.4 | --------------------------------------------------------------------------------
OPERATING PROFIT BY BUSINESS SEGMENT (EUR million)
-------------------------------------------------------------------------------- | | IFRS | IFRS | Change, % | IFRS | | | Jan-Mar/ | Jan-Mar/ | | Jan-Dec/ | | | 2007 | 2006 | | 2006 | -------------------------------------------------------------------------------- | Building Systems *) | 18.8 | 11.7 | 61 | 87.6 | -------------------------------------------------------------------------------- | Construction Services | 41.2 | 40.7 | 1 | 170.8 | -------------------------------------------------------------------------------- | Industrial and Network | 5.0 | 5.3 | -6 | 18.0 | | Services **) | | | | | -------------------------------------------------------------------------------- | Other items | -3.8 | -4.0 | -5 | -17.6 | -------------------------------------------------------------------------------- | YIT Group, total | 61.2 | 53.7 | 14 | 258.8 | --------------------------------------------------------------------------------
*) In the October-December/2006 period, Building Systems released provisions for certain contractual obligations that had come to an end. This had a positive impact of EUR 7.2 million on operating profit.
**)The operating profit of the Industrial and Network Services business segment in July-September/2006 includes EUR 5.1 million and in January-March/2007 EUR 1.0 million in costs for the downsizing of Network Services carried out in 2006.
ORDER BACKLOG BY BUSINESS SEGMENT AT END OF PERIOD (EUR million)
-------------------------------------------------------------------------------- | | IFRS | IFRS | Change, % | IFRS | | | Mar/2007 | Mar/2006 | | Dec/2006 | -------------------------------------------------------------------------------- | Building Systems | 670.3 | 517.6 | 30 | 601.7 | -------------------------------------------------------------------------------- | Construction Services | 2,137.9 | 1,296.5 | 65 | 2,053.5 | -------------------------------------------------------------------------------- | Industrial and Network | 228.8 | 219.5 | 4 | 184.0 | | Services | | | | | -------------------------------------------------------------------------------- | Other items | -41.6 | -26.4 | 58 | -36.9 | -------------------------------------------------------------------------------- | YIT Group, total | 2,995.4 | 2,007.2 | 49 | 2,802.3 | --------------------------------------------------------------------------------
ACQUIRED BUSINESSES
In January-March/2007, the YIT Group made four small acquisitions of companies in Sweden and Norway within Building Systems business segment. Their total purchase price was EUR 5.1 million. The acquisitions did not generate unallocated goodwill. Goodwill was allocated to intangible rights. INVENTORIES (EUR million)
-------------------------------------------------------------------------------- | | IFRS | IFRS | Change, % | IFRS | | | Mar/2007 | Mar/2006 | | Dec/2006 | -------------------------------------------------------------------------------- | Raw materials and | 20.4 | 19.3 | 6 | 19.5 | | consumables | | | | | -------------------------------------------------------------------------------- | Work in progress | 325.8 | 279.5 | 17 | 378.2 | -------------------------------------------------------------------------------- | Land areas and plot-owing | 520.3 | 345.3 | 51 | 500.0 | | companies | | | | | -------------------------------------------------------------------------------- | Shares in completed | 62.9 | 47.7 | 32 | 64.9 | | housing and | | | | | | real estate companies | | | | | -------------------------------------------------------------------------------- | Advance payments | 32.1 | 22.1 | 45 | 35.3 | -------------------------------------------------------------------------------- | Other inventories | 5.5 | 3.5 | 57 | 8.6 | -------------------------------------------------------------------------------- | Total inventories | 967.0 | 717.4 | 35 | 1,006.4 | --------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENT LIABILITIES (EUR million)
-------------------------------------------------------------------------------- | | IFRS | IFRS | Change, % | IFRS | | | Mar | Mar | | Dec | | | 2007 | 2006 | | 2006 | -------------------------------------------------------------------------------- | Collateral given for own | | | | | | commitments | | | | | -------------------------------------------------------------------------------- | - Corporate mortgages | 29.3 | 29.3 | - | 29.3 | -------------------------------------------------------------------------------- | - Pledged shares | 1.5 | 1.6 | -6 | 1.5 | -------------------------------------------------------------------------------- | Other commitments | | | | | -------------------------------------------------------------------------------- | - Repurchase commitments | 246.7 | 249.0 | -1 | 252.5 | -------------------------------------------------------------------------------- | - Operating leases | 226.3 | 192.0 | -19 | 202.1 | -------------------------------------------------------------------------------- | - Rental guarantees for | 6.6 | 6.9 | -4 | 6.5 | | clients | | | | | -------------------------------------------------------------------------------- | - Other contingent | 0.8 | 0.4 | *) | 0.8 | | liabilities | | | | | -------------------------------------------------------------------------------- | Liability under | | | | | | derivative contracts **) | | | | | -------------------------------------------------------------------------------- | - Value of underlying | | | | | | instruments | | | | | -------------------------------------------------------------------------------- | -- Interest rate options, | 28.2 | 28.4 | -1 | 28.4 | | purchased | | | | | -------------------------------------------------------------------------------- | -- Interest rate swaps | 270.0 | 60.0 | *) | 145.0 | -------------------------------------------------------------------------------- | -- Foreign currency | 242.6 | 46.7 | *) | 202.7 | | forward contracts | | | | | -------------------------------------------------------------------------------- | - Market value | | | | | -------------------------------------------------------------------------------- | -- Interest rate options, | 0.8 | 0.8 | - | 0.8 | | purchased | | | | | -------------------------------------------------------------------------------- | -- Interest rate swaps | 1.6 | 0.3 | *) | 1.2 | -------------------------------------------------------------------------------- | -- Foreign currency | 0.5 | -0.3 | - | 1.7 | | forward contracts | | | | | -------------------------------------------------------------------------------- | Contingent assets | | | | | -------------------------------------------------------------------------------- | - Legal processes | 11.1 | 11.1 | - | 11.1 | --------------------------------------------------------------------------------
*) Change over 100%
**) YIT has changed over to the presentation of the fair values of derivative contracts in net terms. The figures for the comparison periods have been adjusted accordingly.
3. OTHER KEY FIGURES OF YIT GROUP
KEY FIGURES
-------------------------------------------------------------------------------- | | IFRS | IFRS | Change, % | IFRS | | | Mar/2007 | Mar/2006 | | Dec/2006 | -------------------------------------------------------------------------------- | Earnings per share, EUR | 0.31 | 0.29 | 7 | 1.36 | | **) | | | | | -------------------------------------------------------------------------------- | Diluted earnings per | 0.31 | 0.29 | 7 | 1.35 | | share, EUR **) | | | | | -------------------------------------------------------------------------------- | Equity per share, EUR **) | 4.95 | 4.23 | 17 | 5.29 | -------------------------------------------------------------------------------- | Average share price | 23.73 | 20.52 | 16 | 19.24 | | during the period, EUR | | | | | | **) | | | | | -------------------------------------------------------------------------------- | Share price at end of | 25.80 | 22.38 | 15 | 20.95 | | period, EUR **) | | | | | -------------------------------------------------------------------------------- | Market capitalization at | 3,270.8 | 2,792.9 | 17 | 2,656.0 | | end of period, MEUR | | | | | -------------------------------------------------------------------------------- | Weighted average | 126,777 | 124,794 | 2 | 125,357 | | share-issue adjusted | | | | | | number of shares | | | | | | outstanding, thousands | | | | | | **) | | | | | -------------------------------------------------------------------------------- | Weighted average | 127,361 | 126,695 | 1 | 126,772 | | share-issue adjusted | | | | | | number of shares | | | | | | outstanding, thousands, | | | | | | diluted **) | | | | | -------------------------------------------------------------------------------- | Share-issue adjusted | 126,777 | 124,794 | 2 | 126,777 | | number of shares | | | | | | outstanding at end of | | | | | | period, thousands **) | | | | | -------------------------------------------------------------------------------- | Net interest-bearing debt | 540.9 | 334.2 | 62 | 506.5 | | at end of period, MEUR | | | | | -------------------------------------------------------------------------------- | Return on investment, | 25.4 | 28.1 | - | 24.8 | | from the last 12 months, | | | | | | % 2) | | | | | -------------------------------------------------------------------------------- | Equity ratio, % | 31.8 | 33.5 | - | 34.5 | -------------------------------------------------------------------------------- | Gearing ratio, % | 85.6 | 62.7 | - | 75.1 | -------------------------------------------------------------------------------- | Gross capital | expenditures, MEUR 15.8 | 9.1 | 74 | 50.4 | -------------------------------------------------------------------------------- | -% of revenue | 1.9 | 1.2 | - | 1.5 | | | | | | | -------------------------------------------------------------------------------- | Order backlog at end of | 2,995.4 | 2,007.2 | 49 | 2,802.3 | period, MEUR 3) -------------------------------------------------------------------------------- | - of which order backlog | 1,609.0 | 836.7 | 92 | 1,490.0 | | outside Finland | | | | | -------------------------------------------------------------------------------- | Average number of | 22,444 | 21,131 | 6 | 21,846 | | personnel | | | | | --------------------------------------------------------------------------------
**) The per-share key figures presented in the tables have been adjusted for comparability such that they account for the halving of the nominal value of the share, which came into effect on March 24, 2006 (split).
2) Calculated for the period from April 1, 2006 - March 31, 2007, using the balance sheet figures at March 31, 2006 and March 31, 2007.
3) Portion of binding orders not recognized as income.
QUARTERLY FIGURES, Q1/2006-Q1/2007
-------------------------------------------------------------------------------- | | IFRS | IFRS | IFRS | IFRS | IFRS | | | I/ | II/ | III/ | IV/ | I/ | | | 200 | 2006 | 2006 | 2006 | 2007 | | | 6 | | | | | -------------------------------------------------------------------------------- | Revenue, MEUR | 768.8 | 818.0 | 789.5 | 908.1 | 833.5 | -------------------------------------------------------------------------------- | Operating profit, MEUR | 53.7 | 60.1 | 58.6 | 86.4 | 61.2 | -------------------------------------------------------------------------------- | - % of revenue | 7.0 | 7.3 | 7.4 | 9.5 | 7.3 | -------------------------------------------------------------------------------- | Financial income, MEUR | 1.3 | 0.4 | 0.6 | 0.3 | 0.6 | -------------------------------------------------------------------------------- | Exchange rate | -0.6 | -0.6 | -0.6 | -0.9 | -0.1 | | differences, MEUR | | | | | | -------------------------------------------------------------------------------- | Financial expenses, MEUR | -4.3 | -4.6 | -5.9 | -5.7 | -6.9 | -------------------------------------------------------------------------------- | Profit before taxes, | 50.1 | 55.3 | 52.7 | 80.1 | 54.8 | | MEUR | | | | | | -------------------------------------------------------------------------------- | - % of revenue | 6.5 | 6.8 | 6.7 | 8.8 | 6.6 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Balance sheet total, | 1,722.0 | 1,847.2 | 1,925.5 | 2,117.8 | 2,155.9 | | MEUR | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Earnings per share, EUR | 0.29 | 0.31 | 0.28 | 0.48 | 0.31 | | **) | | | | | | -------------------------------------------------------------------------------- | Equity per share, EUR | 4.23 | 4.54 | 4.83 | 5.29 | 4.95 | | **) | | | | | | -------------------------------------------------------------------------------- | Share price at end of | 22.38 | 19.17 | 18.27 | 20.95 | 25.80 | | period, EUR **) | | | | | | -------------------------------------------------------------------------------- | Market capitalization at | 2,792.9 | 2,406.7 | 2,294.4 | 2,656.0 | 3,270.8 | | end of period, MEUR | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Return on investment, | 28.1 | 28.2 | 25.2 | 24.8 | 25.4 | | from the last 12 months, | | | | | | | % | | | | | | -------------------------------------------------------------------------------- | Equity ratio, % | 33.5 | 34.5 | 34.6 | 34.5 | 31.8 | -------------------------------------------------------------------------------- | Net interest-bearing | 334.2 | 342.5 | 416.8 | 506.5 | 540.9 | | debt at end of period, | | | | | | | MEUR | | | | | | -------------------------------------------------------------------------------- | Gearing ratio, % | 62.7 | 59.5 | 68.1 | 75.1 | 85.6 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Gross capital | 9.1 | 18.7 | 29.9 | 50.4 | 15.8 | | expenditures, MEUR | | | | | | -------------------------------------------------------------------------------- | Order backlog at end of | 2,007.2 | 2,151.3 | 2,246.2 | 2,802.3 | 2,995.4 | | period, MEUR | | | | | | -------------------------------------------------------------------------------- | Personnel at end of | 21,140 | 21,873 | 22,188 | 22,311 | 22,418 | | period | | | | | | --------------------------------------------------------------------------------
**) The per-share key figures presented in the tables have been adjusted for comparability such that they account for the halving of the nominal value of the share, which came into effect on March 24, 2006 (split).
REVENUE BY BUSINESS SEGMENT (EUR million)
-------------------------------------------------------------------------------- | | IFRS | IFRS | IFRS | IFRS | IFRS | | | I/ | II/ | III/ | IV/ | I/ | | | 200 | 2006 | 2006 | 2006 | 2007 | | | 6 | | | | | -------------------------------------------------------------------------------- | Building Systems | 325.6 | 348.4 | 335.2 | 405.9 | 367.7 | -------------------------------------------------------------------------------- | Construction Services | 350.8 | 368.1 | 337.0 | 396.3 | 369.2 | -------------------------------------------------------------------------------- | Industrial and Network | 107.7 | 116.9 | 128.3 | 124.0 | 110.7 | | Services | | | | | | -------------------------------------------------------------------------------- | Other items | -15.3 | -15.4 | -11.0 | -18.1 | -14.1 | -------------------------------------------------------------------------------- | YIT Group, total | 768.8 | 818.0 | 789.5 | 908.1 | 833.5 | --------------------------------------------------------------------------------
OPERATING PROFIT BY BUSINESS SEGMENT (EUR million)
-------------------------------------------------------------------------------- | | IFRS | IFRS | IFRS | IFRS | IFRS | | | I/ | II/ | III/ | IV/ | I/ | | | 200 | 2006 | 2006 | 2006 | 2007 | | | 6 | | | | | -------------------------------------------------------------------------------- | Building Systems *) | 11.7 | 19.8 | 21.1 | 35.0 | 18.8 | -------------------------------------------------------------------------------- | Construction Services | 40.7 | 40.5 | 39.6 | 50.0 | 41.2 | -------------------------------------------------------------------------------- | Industrial and Network | 5.3 | 5.0 | 2.5 | 5.2 | 5.0 | | Services **) | | | | | | -------------------------------------------------------------------------------- | Other items | -4.0 | -5.2 | -4.6 | -3.8 | -3.8 | -------------------------------------------------------------------------------- | YIT Group, total | 53.7 | 60.1 | 58.6 | 86.4 | 61.2 | --------------------------------------------------------------------------------
*) In the October-December/2006 period, Building Systems released provisions for certain contractual obligations that had come to an end. This had a positive impact of EUR 7.2 million on operating profit.
**)The operating profit of the Industrial and Network Services business segment in July-September/2006 includes EUR 5.1 million and in January-March/2007 EUR 1.0 million in costs for the downsizing of Network Services carried out in 2006.
ORDER BACKLOG BY BUSINESS SEGMENT AT END OF PERIOD (EUR million)
-------------------------------------------------------------------------------- | | IFRS | IFRS | IFRS | IFRS | IFRS | | | I/ | II/ | III/ | IV/ | I/ | | | 200 | 2006 | 2006 | 2006 | 2007 | | | 6 | | | | | -------------------------------------------------------------------------------- | Building Systems | 517.6 | 584.1 | 582.7 | 601.7 | 670.3 | -------------------------------------------------------------------------------- | Construction Services | 1,296.5 | 1,391.8 | 1,524.4 | 2,053.5 | 2,137.9 | -------------------------------------------------------------------------------- | Industrial and Network | 219.5 | 208.4 | 180.3 | 184.0 | 228.8 | | Services | | | | | | -------------------------------------------------------------------------------- | Other items | -26.4 | -33.0 | -41.2 | -36.9 | -41.6 | -------------------------------------------------------------------------------- | YIT Group, total | 2,007.2 | 2,151.3 | 2,246.2 | 2,802.3 | 2,995.4 | --------------------------------------------------------------------------------