YIT announces new strategy and financial targets for 2025-2029, introduces a new segment structure
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- Stock Exchange Release
- 28.10.2009 07:00 CET
YIT'S INTERIM REPORT, JANUARY 1 - SEPTEMBER 30, 2009: PROFITABILITY IMPROVED IN THE THIRD QUARTER - THE INCREASE IN OPERATING PROFIT IS ESTIMATED TO CONTINUE
INTERIM REPORT OCTOBER 28, 2009 at 8:00 a.m.
YIT'S INTERIM REPORT, JANUARY 1 - SEPTEMBER 30, 2009: PROFITABILITY IMPROVED IN THE THIRD QUARTER - THE INCREASE IN OPERATING PROFIT IS ESTIMATED TO CONTINUE
Important in July-September: - YIT Group's revenue for July-September was 4 per cent lower than for April-June. - Operating profit was 20 per cent higher and profit before taxes 19 per cent higher than in April-June. - Profitability improved and the operating profit margin was 5.6 per cent (4-6/09: 4.5%). - Operating cash flow after investments remained good and amounted to EUR 29.5 million (4-6/09: EUR 27.8 million). - Demand for service and maintenance services developed steadily, accounting for 35 per cent of the Group revenue. - In Finland, residential sales remained stable and YIT sold 380 residential units directly to consumers during the quarter. The construction of 537 residential units aimed directly at consumers was started up in the form of development projects during the quarter. - In Russia, residential sales strengthened and YIT sold 829 residential units during the quarter. The first new residential site in Russia since the summer 2008 was started up. - YIT Corporation estimates that in 2009 the Group revenue will decrease clearly compared to 2008, but profit before taxes will be clearly positive. It is estimated that the operating profit will improve in the last quarter of 2009. (Outlook for the last quarter of 2009 has been specified.)
Juhani Pitkäkoski, President and CEO:
The Group's profitability and operating profit have improved during each quarter of this year. We estimate that the operating profit will improve also in the last quarter of 2009.
We have managed to keep the profitability of business operations in Building and Industrial Services stable. The business segment has steadily posted about EUR 28 million in operating profit every quarter, but a ruling by the court of arbitration in the third quarter decreased operating profit by EUR 3.2 million. The share of service and maintenance services increased during the third quarter, representing 55 per cent of the business segment's revenue. Our target is to increase our service and maintenance services.
The profitability of Construction Services Finland has remained good and its operating profit margin for January-September was 8.3 per cent. The order backlog continued to grow in the third quarter. On the whole, the segment's business has developed steadily. Residential sales picked up in the spring and remained stable in July-September. We increased the number of residential development start-ups in the third quarter. Construction of business premises has been at a lower level than last year. Infrastructure construction developed at a somewhat steady rate in spite of the weakening of municipal finances.
In January-September in Finland, YIT sold a total of 1,057 residential units built as development projects aimed directly at consumers and 1,257 rental housing units for investors. In 2009, YIT has started up the construction of a total of 2,195 residential units in Finland, of which 954 were development projects aimed directly at consumers.
The operating profit of International Construction Services turned positive in the third quarter. Our residential sales in Russia have strengthened as the year has progressed: we sold 323 residential units during the first quarter, 494 units during the second and 829 during the third. The high need for housing has continued in Russia, but the market supply has diminished as the residential sales have proceeded and there has been a lack of start-ups. We started our first new residential project since the summer 2008 in Zhukovsky, one of the cities surrounding Moscow. In the Baltic countries, the market remained weak. We have made agreements for small-scale contract work and decreased the number of our unsold residential units. So far in the year, we have sold 250 residential units in the Baltic countries, and only 46 remained unsold at the end of September.
We aim to keep boosting the efficiency of our operations and use of capital as well as seek profitable growth. We have raised the Group's strategic target for annual revenue growth to 5-10 per cent on average.
Group key figures: -------------------------------------------------------------------------------- | | 7-9/0 | 4-6/0 | 1-3/0 | | 1-9/09 | 1-9/08 | Change | | | 9 | 9 | 9 | | | | 1-9/0 | | | | | | | | | 8 | | | | | | | | | -1-9/0 | | | | | | | | | 9 | -------------------------------------------------------------------------------- | Revenue, MEUR | 815.0 | 853.1 | 823.7 | | 2,491. | 2,889. | -14% | | | | | | | 8 | 0 | | -------------------------------------------------------------------------------- | Operating profit, | 45.6 | 38.1 | 22.1 | | 105.8 | 212.2 | -50% | | MEUR | | | | | | | | -------------------------------------------------------------------------------- | Operating profit | 5.6 | 4.5 | 2.7 | | 4.2 | 7.3 | - | | margin, % | | | | | | | | -------------------------------------------------------------------------------- | Profit before taxes, | 29.9 | 25.2 | 2.2 | | 57.4 | 187.8 | -69% | | MEUR | | | | | | | | -------------------------------------------------------------------------------- | Earnings/share, EUR | 0.15 | 0.12 | 0.02 | | 0.29 | 1.02 | -72% | -------------------------------------------------------------------------------- | Return on investment | 9.8 | 11.4 | 14.3 | | 9.8 | 21.9 | - | | (from the last 12 | | | | | | | | | months), % | | | | | | | | -------------------------------------------------------------------------------- | Gearing ratio at end | 83.8 | 90.6 | 88.5 | | 83.8 | 82.5 | - | | of period, % | | | | | | | | -------------------------------------------------------------------------------- | Operating cash flow | 29.5 | 27.8 | 10.3 | | 67.6 | -80.7 | - | | after investments, | | | | | | | | | MEUR | | | | | | | | -------------------------------------------------------------------------------- | Order backlog at end | 2,800 | 2,916 | 3,045 | | 2,800. | 3,964. | -29% | | of period, MEUR | .8 | .4 | .0 | | 8 | 9 | | -------------------------------------------------------------------------------- | Personnel at end of | 24,00 | 24,76 | 25,23 | | 24,003 | 26,688 | -10% | | period | 3 | 3 | 9 | | | | | --------------------------------------------------------------------------------
Segment key figures: -------------------------------------------------------------------------------- | | 7-9/0 | 4-6/0 | 1-3/0 | | 1-9/09 | 1-9/08 | Change | | | 9 | 9 | 9 | | | | 1-9/08 | | | | | | | | | - | | | | | | | | | 1-9/09 | -------------------------------------------------------------------------------- | Building and | | | | | | | | | Industrial Services | | | | | | | | -------------------------------------------------------------------------------- | Revenue, MEUR | 483.9 | 529.2 | 537.9 | | 1,551. | 1,683. | -8% | | | | | | | 0 | 0 | | -------------------------------------------------------------------------------- | Operating profit, | 24.9 | 28.2 | 28.6 | | 81.7 | 116.0 | -30% | | MEUR | | | | | | | | -------------------------------------------------------------------------------- | Operating profit | 5.1 | 5.3 | 5.3 | | 5.3 | 6.9 | - | | margin, % | | | | | | | | -------------------------------------------------------------------------------- | Construction | | | | | | | | | Services Finland | | | | | | | | -------------------------------------------------------------------------------- | Revenue, MEUR | 246.3 | 253.0 | 239.8 | | 739.1 | 879.3 | -16% | -------------------------------------------------------------------------------- | Operating profit, | 20.8 | 19.9 | 20.9 | | 61.6 | 92.9 | -34% | | MEUR | | | | | | | | -------------------------------------------------------------------------------- | Operating profit | 8.4 | 7.9 | 8.7 | | 8.3 | 10.6 | - | | margin, % | | | | | | | | -------------------------------------------------------------------------------- | International | | | | | | | | | Construction | | | | | | | | | Services | | | | | | | | -------------------------------------------------------------------------------- | Revenue, MEUR | 97.6 | 87.4 | 61.4 | | 246.4 | 397.1 | -38% | -------------------------------------------------------------------------------- | Operating profit, | 3.7 | -5.2 | -23.8 | | -25.3 | 18.2 | - | | MEUR | | | | | | | | -------------------------------------------------------------------------------- | Operating profit | 3.8 | -5.9 | -38.7 | | -10.3 | 4.6 | - | | margin, % | | | | | | | | --------------------------------------------------------------------------------
Information session, webcast and conference call YIT will hold an information session on the Interim Report for investors, analysts and the media on Wednesday, October 28, 2009 at 10:00 a.m. (Finnish time, EEST) at YIT's head office, address Panuntie 11, 00620 Helsinki, Finland. The information session will be held in English. At the end of the session, representatives of the media can also ask questions in Finnish. The presentation materials are available in English and Finnish.
The information session can be viewed live at YIT's web site, www.yitgroup.com/webcast. The webcast replay will be available at the same address starting at approximately 12:00 noon. Participants are asked to call the assigned number +44 (0)20 7162 0077 at 9:55 a.m. (Finnish time, EEST) at the latest, i.e. a minimum of 5 minutes before the conference call begins.
Schedule in different time zones: -------------------------------------------------------------------------------- | | Interim Report | Information | Recorded webcast | | | published | session, | available | | | | conference call | | | | | and webcast | | -------------------------------------------------------------------------------- | EEST (Helsinki) | 08:00 | 10:00 | 12:00 | -------------------------------------------------------------------------------- | CEST (Paris, | 07:00 | 09:00 | 11:00 | | Stockholm) | | | | -------------------------------------------------------------------------------- | BST (London) | 06:00 | 08:00 | 10:00 | -------------------------------------------------------------------------------- | US EDT (New York) | 02:00 | 04:00 | 06:00 | --------------------------------------------------------------------------------
Financial reports and other investor information are available at YIT's website, www.yitgroup.com/investors. The materials may be ordered via the Internet site, by sending an e-mail to InvestorRelations@yit.fi or by telephone at +358 20 433 2467.
YIT CORPORATION
Juhani Pitkäkoski President and CEO
For further information, please contact: Timo Lehtinen, Chief Financial Officer, +358 45 670 0626, timo.lehtinen@yit.fi Petra Thorén, Senior Vice President, Investor Relations, +358 40 764 5462, petra.thoren@yit.fi
Distribution: NASDAQ OMX Helsinki, main media, www.yitgroup.com YIT CORPORATION'S INTERIM REPORT, JANUARY 1 - SEPTEMBER 30, 2009
REVENUE EUR 2,492 MILLION
YIT Group's revenue for January-September amounted to EUR 2,491.8 million (1-9/2008: EUR 2,889.0 million). Revenue decreased by 14 per cent on the previous year's corresponding period. In local currency terms, the decrease in Group revenue was 9 per cent.
Building and Industrial Services, covering all countries in which YIT operates, generated the majority of the revenue. Finland accounted for 46 per cent of consolidated revenue (1-9/2008: 49%), other Nordic countries for 32 per cent (33%), Central Europe for 11 per cent (2%), Russia for 9 per cent (11%) and the Baltic countries for 2 per cent (5%).
YIT Group's revenue for July-September 2009 was 4 per cent lower than for April-June. Revenue decreased in Building and Industrial Services. The revenue of Construction Services Finland remained relatively steady. International Construction Services revenue increased compared to the previous quarter.
Revenue by segment (MEUR)
-------------------------------------------------------------------------------- | | 7-9/0 | 4-6/0 | 1-3/0 | | 1-9/09 | 1-9/08 | Change | | | 9 | 9 | 9 | | | | 1-9/0 | | | | | | | | | 8 - | | | | | | | | | 1-9/09 | -------------------------------------------------------------------------------- | Building and | 483.9 | 529.2 | 537.9 | | 1,551. | 1,683. | -8% | | Industrial Services | | | | | 0 | 0 | | | 1) | | | | | | | | -------------------------------------------------------------------------------- | Construction | 246.3 | 253.0 | 239.8 | | 739.1 | 879.3 | -16% | | Services Finland | | | | | | | | -------------------------------------------------------------------------------- | International | 97.6 | 87.4 | 61.4 | | 246.4 | 397.1 | -38% | | Construction | | | | | | | | | Services | | | | | | | | -------------------------------------------------------------------------------- | Other items | -12.8 | -16.4 | -15.5 | | -44.7 | -70.4 | -37% | -------------------------------------------------------------------------------- | YIT Group, total | 815.0 | 853.1 | 823.7 | | 2,491. | 2,889. | -14% | | | | | | | 8 | 0 | | --------------------------------------------------------------------------------
1) The building system service operations acquired from Central Europe were transferred to YIT on August 1, 2008.
YIT's service chain for customers covers investments, servicing and maintenance as well as the modernisation of premises' purpose of use. The extensive service chain aims at better service capability, business growth and steady income flow.
Service and maintenance of buildings, industry and traditional infrastructure accounts for a significant proportion of the Group's revenue.
In January-September, service and maintenance operations generated EUR 874.3 million (1-9/2008: EUR 1,012.7 million), in other words 35 per cent (35%) of total revenue. The Building and Industrial Services segment accounted for the majority of service and maintenance operations; 54 per cent (59%), or EUR 833.9 million (EUR 986.4 million), of its revenue was generated by service and maintenance operations. OPERATING PROFIT EUR 106 MILLION
The Group's operating profit decreased by 50 per cent on last year's comparison period to EUR 105.8 million (1-9/2008: EUR 212.2 million). Operating profit amounted to 4.2 per cent (7.3%) of the Group's revenue. Return on investment was 9.8 per cent (21.9%).
The profitability of Building and Industrial Services weakened compared to the previous year due to the decline in customers' new investments and the tighter competitive situation. In Construction Services Finland, operating profit decreased compared to the previous year due to the substantial decline in the construction of business premises and residential sales focusing on rental housing during the first months of the year. In International Construction Services, the operating profit was weakened on account of the volume of residential sales in the first part of the year falling short of the previous year, apartment prices being at a lower level than last year and the Baltic market being weak. The project margin forecasts of the business segment were weakened during the first quarter and write-downs of approximately EUR 5 million were recognised during the second quarter, mainly for the plot reserves in Latvia.
During the third quarter, the Group's operating profit and profitability improved compared to the previous quarter. Operating profit for July-September 2009 was 20 per cent higher than for April-June. The profitability of Building and Industrial Services business operations remained stable, but a ruling issued by the court of arbitration in the third quarter reduced the segment's operating profit by EUR 3.2 million. The profitability of Construction Services Finland remained good. The operating profit of International Construction Services turned positive.
Operating profit by segment (MEUR)
-------------------------------------------------------------------------------- | | 7-9/0 | 4-6/0 | 1-3/0 | | 1-9/09 | 1-9/08 | Change | | | 9 | 9 | 9 | | | | 1-9/0 | | | | | | | | | 8 - | | | | | | | | | 1-9/09 | -------------------------------------------------------------------------------- | Building and | 24.9 | 28.2 | 28.6 | | 81.7 | 116.0 | -30% | | Industrial Services | | | | | | | | | 1) | | | | | | | | -------------------------------------------------------------------------------- | Construction | 20.8 | 19.9 | 20.9 | | 61.6 | 92.9 | -34% | | Services Finland | | | | | | | | -------------------------------------------------------------------------------- | International | 3.7 | -5.2 | -23.8 | | -25.3 | 18.2 | - | | Construction | | | | | | | | | Services | | | | | | | | -------------------------------------------------------------------------------- | Other items | -3.8 | -4.8 | -3.6 | | -12.2 | -14.9 | -18% | -------------------------------------------------------------------------------- | YIT Group, total | 45.6 | 38.1 | 22.1 | | 105.8 | 212.2 | -50% | --------------------------------------------------------------------------------
Operating profit margin by segment
-------------------------------------------------------------------------------- | | 7-9/09 | 4-6/09 | 1-3/09 | | 1-9/09 | 1-9/08 | -------------------------------------------------------------------------------- | Building and Industrial | 5.1% | 5.3% | 5.3% | | 5.3% | 6.9% | | Services 1) | | | | | | | -------------------------------------------------------------------------------- | Construction Services | 8.4% | 7.9% | 8.7% | | 8.3% | 10.6% | | Finland | | | | | | | -------------------------------------------------------------------------------- | International | 3.8% | -5.9% | -38.7% | | -10.3% | 4.6% | | Construction Services | | | | | | | -------------------------------------------------------------------------------- | YIT Group, total | 5.6% | 4.5% | 2.7% | | 4.2% | 7.3% | --------------------------------------------------------------------------------
1a) The building system service operations acquired from Central Europe were transferred to YIT on August 1, 2008. 1b) On September 30, 2009, the court of arbitration issued its ruling in the dispute concerning the mechanical installation contract YIT carried out for Neste Oil's Porvoo oil refinery. The effect of the ruling on Building and Industrial Services' operating profit for Q3/2009 was EUR -3.2 million.
PROFIT BEFORE TAXES EUR 57 MILLION
Profit before taxes decreased by 69 per cent from the previous year to EUR 57.4 million (1-9/2008: EUR 187.8 million). Earnings per share decreased by 72 per cent to EUR 0.29 (EUR 1.02).
Financial expenses increased on the previous year due to the hedging costs of the ruble.
In the third quarter, the profit before taxes improved on the previous quarter. Profit before taxes amounted to EUR 2.2 million for the first quarter of 2009, EUR 25.2 million for the second quarter and EUR 29.9 million for the third quarter. Earnings per share were EUR 0.02 for the first quarter, EUR 0.12 for the second quarter and EUR 0.15 for the third quarter.
ORDER BACKLOG EUR 2,801 MILLION
The order backlog was EUR 2,800.8 million (EUR 3,964.9 million) at the end of the period, or 29 per cent less than a year before. In local currency terms, the decrease in the Group's order backlog was 24 per cent. The order backlog decreased in all segments compared to last year. The order backlog at the end of September includes the residential projects that were halted in October 2008 in Russia, the value of which in the order backlog at the end of September 2009 was EUR 308.1 million. The order backlog has a normal margin.
The order backlog decreased by 4 per cent compared to the end of June 2009. The order backlog of the Building and Industrial Services segment declined due to the decrease in customers' investments. The order backlog of Construction Services Finland continued to grow due to new residential start-ups and new infrastructure contracts. The order backlog of International Construction Services decreased as ongoing residential projects were recognised as revenue as construction and sales proceeded. Order backlog by segment (MEUR)
-------------------------------------------------------------------------------- | | 9/09 | 6/09 | 3/09 | | 9/08 | Change | | | | | | | | 9/08-9/0 | | | | | | | | 9 | -------------------------------------------------------------------------------- | Building and Industrial | 946.7 | 984.7 | 1,048. | | 1,284.1 | -26% | | Services | | | 3 | | | | -------------------------------------------------------------------------------- | Construction Services | 909.9 | 846.9 | 819.8 | | 1,085.9 | -16% | | Finland | | | | | | | -------------------------------------------------------------------------------- | International | 998.4 | 1,126. | 1,239. | | 1,678.2 | -41% | | Construction Services | | 8 | 1 | | | | | 1) | | | | | | | -------------------------------------------------------------------------------- | Other items | -54.2 | -42.0 | -62.1 | | -83.3 | -36% | -------------------------------------------------------------------------------- | YIT Group, total | 2,800. | 2,916. | 3,045. | | 3,964.9 | -29% | | | 8 | 4 | 0 | | | | --------------------------------------------------------------------------------
1) In October 2008, YIT halted the construction of certain residential projects in the start-up phase in Russia. The sales of these projects had not yet begun. The projects have 2,485 residential units and accounted for EUR 308.1 million in the order backlog at the end of September 2009.
The order backlog includes that portion of customer orders and ongoing development projects that has not been recognised as revenue. Contracted projects are recognised as income based on the percentage of completion. Residential development projects are recognised as income by multiplying the percentage of completion by percentage of sale. Commercial real estate development projects are recognised as income using the principle percentage of completion multiplied by percentage of sale multiplied by occupancy rate.
In commercial and residential development projects, YIT assumes the responsibility for the sales of the residential units or the site. Commercial real estate development projects are usually sold to investors either prior to construction or during an early phase thereof.
The order backlog of Building and Industrial Services mainly comprises contract orders and service and maintenance agreements. Part of the segment's maintenance and servicing operations are immediately performed assignments that are not included in the order backlog. In Construction Services Finland, approximately half of the order backlog is projects and contracts without sales risk and half residential and business premises projects with sales risk. Nearly the entire order backlog of International Construction Services consists of residential development with sales risk. In Russia, projects are long and their value is high.
THE GROUP'S FINANCIAL POSITION REMAINED STABLE
Operating cash flow remained good. Operating cash flow after investments amounted to EUR 67.6 million (1-9/08: EUR -80.7 million) in January-September. Operating cash flow after investments was EUR 10.3 million in January-March, EUR 27.8 million in April-June and EUR 29.5 million in July-September. Cash reserves at the end of the period amounted to EUR 243.2 million (EUR 48.1 million) whereas at the end of June they amounted to EUR 182.3 million. Dividends of EUR 62.8 million (EUR 102.0 million) were paid during the second quarter.
Of YIT's business operations, building and industrial services as well as infrastructure and contract construction require little capital. Capital is particularly tied to the plot reserves, their development and ongoing production. At the end of September, the Group's invested capital amounted to EUR 1,650.7 million (EUR 1,590.3 million). At the end of June, the Group's invested capital amounted to EUR 1,601.1 million. At the end of September, 36 per cent (37%), or EUR 589.9 million (EUR 583.6 million), of the Group's invested capital was tied up in Russia. The corresponding figures for the end of June were 36 per cent and EUR 572.5 million. The devaluation of the ruble decreased the amount of capital invested in Russia by EUR 106.8 million compared to September 2008. However, the amount of capital invested in Russia was increased by capital tied up in unfinished production. At the end of September, EUR 261.8 million of the capital tied up in Russia comprised debt investments and EUR 328.1 million were equity investments or similar fixed net investments. Investments are calculated by deducting non-interest bearing liabilities from the balance sheet total. The balance sheet total at the end of September was EUR 2,845.9 million (EUR 2,868.5 million).
The gearing ratio was 83.8 per cent (82.5%) at the end of September. The gearing ratio was 90.6 per cent at the end of June. Net financing debt decreased on the previous year to EUR 640.4 million (EUR 697.0 million). At the end of June, net financing debt amounted to EUR 671.4 million. The equity ratio was 29.7 per cent (33.4%) while at the end of June it was 29.3 per cent.
Net financial expenses increased to EUR 48.4 million (EUR 24.4 million), or 1.9 per cent (0.8%) of the Group's revenue. The exchange rate losses included in the net financial expenses, totalling EUR 22.5 million (exchange rate gains of EUR 2.6 million), were comprised nearly entirely of costs of hedging debt investments in Russia.
The value of the loan portfolio was EUR 886.2 million at the end of September (EUR 745.1 million), and its average interest rate was 3.3 per cent (5.0%). The loan portfolio amounted to EUR 859.9 million at the end of June, and its average interest rate was 3.6 per cent. Fixed-interest loans accounted for 53 per cent (45%) of the Group's entire loan portfolio. Of the loans, 55 per cent (55%) had been raised directly on the capital and money markets. The maturity distribution of the loans is balanced. EUR 65.8 million in non-current loans will mature during the rest of the year. The capital structure was reinforced by converting EUR 60.0 million in short-term loans to long-term loans during the first quarter. In addition, factoring financing for Nordic trade receivables was arranged during the review period, increasing available sources of finance by about EUR 100 million.
The construction-stage contract receivables sold to financing companies totalled EUR 86.1 million (EUR 373.5 million) at the end of September. Of this amount, EUR 80.2 million (EUR 135.0 million) is included in interest-bearing liabilities in the balance sheet and the remainder comprises off-balance sheet items in accordance with IAS 39. Interest expenses on receivables sold to financing companies amounted to EUR 1.5 million (EUR 11.8 million) during the review period and they are fully included in the financial expenses of the reported period.
Participations in the housing corporation loans of unsold completed residential units, EUR 39.5 million (EUR 37.7 million), are included in interest-bearing liabilities. The interest on them, EUR 2.0 million (EUR 1.5 million), is booked in project expenses, as it is included in housing corporation charges.
CAPITAL EXPENDITURES AND ACQUISITIONS
Gross capital expenditures on non-current assets included in the balance sheet totalled EUR 15.7 million (EUR 76.9 million) during January-September, representing 0.6 per cent (2.7%) of revenue. Investments in construction equipment amounted to EUR 5.0 million (EUR 11.3 million) and investments in information technology to EUR 5.0 million (EUR 4.2 million). Other investments amounted to EUR 5.7 million (EUR 61.4 million).
No acquisitions or significant divestments were made during the review period. During the third quarter, YIT increased its holding in YIT Kausta in Lithuania to 97.5 per cent and in the joint venture YIT Uralstroi in Yekaterinburg to 91.1 per cent.
GROWTH TARGET FOR THE STRATEGIC PERIOD WAS INCREASED
YIT Corporation's Board of Directors confirmed the Group's strategy for 2010-2012 on August 19, 2009. The main target is profitable growth. The Group's annual revenue growth target was increased to 5-10 per cent on average. Previously, the target was positive growth in revenue. The Group's other strategic target levels remain unchanged, and they are: return on investment of 20 per cent, operating cash flow after investments must be sufficient for dividend payout and reduction of debt, equity ratio of 35 per cent and dividend payout of 40 to 60 per cent of net profit for the period.
RESOLUTIONS PASSED AT THE ANNUAL GENERAL MEETING
YIT Corporation's Annual General Meeting was held on March 11, 2009. The Annual General Meeting adopted the 2008 financial statements, discharged the members of the Board of Directors and the President and CEO from liability, confirmed the dividend as proposed by the Board of Directors, confirmed the composition of the Board of Directors, decided on the Board of Directors' fees and elected the auditor. The Annual General Meeting decided to authorise the Board of Directors to purchase the company's shares and to dispose of them, as proposed by the Board of Directors.
In its organisational meeting on March 11, 2009, the Board elected the chairmen and members of the audit committee and the nomination and rewards committee from among its number.
YIT Corporation published stock exchange releases on the resolutions passed at the Annual General Meeting and the organisation of the Board of Directors on March 11, 2009. The stock exchange releases, the Board of Directors' proposals to the Annual General Meeting and a presentation of the members of the Board of Directors are available on YIT's Internet site, www.yitgroup.com.
LEGAL PROCEEDINGS
The court of arbitration issued its award in the dispute between YIT Industrial and Network Services and Neste Oil Corporation on September 30, 2009. The dispute concerned the mechanical installation contract of production line 4 at Neste Oil's Porvoo oil refinery carried out by YIT between 2004 and 2006. The court of arbitration ordered Neste Oil to compensate YIT with EUR 8.7 million on contracting works and YIT to compensate Neste Oil with EUR 7.4 million on postponement and other compensation. The effect of the ruling on Building and Industrial Services' operating profit for Q3/2009 was EUR -3.2 million. YIT published stock exchange releases concerning the matter on April 1, 2008, September 1, 2008 and October 1, 2009.
NUMBER OF EMPLOYEES
In January-September 2009, the Group employed 24,787 (1-9/08: 24,278) people on average. At the end of the period, the Group employed 24,003 (26,688) people. Of YIT's employees, 39 per cent worked in Finland (40%), 37 per cent (34%) in the other Nordic countries, 11 per cent (13%) in Russia, 9 per cent in Central Europe (8%) and 4 per cent (5%) in the Baltic countries.
The largest segment by personnel was Building and Industrial Services, employing 75 per cent (72%) of YIT's personnel. Construction Services Finland employed 12 per cent (13%), International Construction Services 12 per cent (14%) and Corporate Services 1 per cent (1%) of the personnel.
During 2009, the number of personnel on the whole has decreased. Due to the weakened general market conditions, it was agreed to terminate the employment of about 1,200 people in the Group towards the end of 2008. During January-September 2009, YIT agreed to terminate the employment of a total of about 1,000 people. In addition, the Group has used lay-offs in adjusting the number of personnel.
Personnel by business segment
-------------------------------------------------------------------------------- | | 9/09 | 6/09 | 3/09 | 12/08 | | 9/08 | Change | | | | | | | | | 9/08-9/0 | | | | | | | | | 9 | -------------------------------------------------------------------------------- | Building and | 17,84 | 18,20 | 18,52 | 18,88 | | 19,219 | -7% | | Industrial Services | 9 | 8 | 7 | 8 | | | | -------------------------------------------------------------------------------- | Construction | 2,971 | 3,208 | 3,119 | 3,271 | | 3,408 | -13% | | Services Finland | | | | | | | | -------------------------------------------------------------------------------- | International | 2,841 | 2,965 | 3,214 | 3,277 | | 3,717 | -24% | | Construction | | | | | | | | | Services | | | | | | | | -------------------------------------------------------------------------------- | Corporate Services | 342 | 382 | 379 | 348 | | 344 | -1% | -------------------------------------------------------------------------------- | YIT Group, total | 24,00 | 24,76 | 25,23 | 25,78 | | 26,688 | -10% | | | 3 | 3 | 9 | 4 | | | | --------------------------------------------------------------------------------
Personnel by country
-------------------------------------------------------------------------------- | | 9/09 | 6/09 | 3/09 | 12/08 | | 9/08 | Change | | | | | | | | | 9/08-9/ | | | | | | | | | 09 | -------------------------------------------------------------------------------- | Finland | 9,311 | 9,905 | 9,843 | 10,180 | | 10,608 | -12% | -------------------------------------------------------------------------------- | Sweden | 4,242 | 4,288 | 4,438 | 4,523 | | 4,516 | -6% | -------------------------------------------------------------------------------- | Norway | 3,259 | 3,207 | 3,257 | 3,280 | | 3,283 | -1% | -------------------------------------------------------------------------------- | Russia | 2,759 | 2,895 | 3,064 | 3,089 | | 3,403 | -19% | -------------------------------------------------------------------------------- | Central Europe | 2,172 | 2,144 | 2,139 | 2,094 | | 2,114 | 3% | -------------------------------------------------------------------------------- | Denmark | 1,293 | 1,367 | 1,399 | 1,448 | | 1,361 | -5% | -------------------------------------------------------------------------------- | Baltic countries | 967 | 957 | 1,099 | 1,170 | | 1,403 | -31% | -------------------------------------------------------------------------------- | YIT Group, total | 24,00 | 24,76 | 25,23 | 25,784 | | 26,688 | -10% | | | 3 | 3 | 9 | | | | | --------------------------------------------------------------------------------
CHANGES IN GROUP MANAGEMENT
On August 20, 2009, Arne Malonæs was appointed as President of the YIT Building and Industrial Services segment and Timo Lehtinen as Chief Financial Officer of YIT Group. Before these appointments, Arne Malonæs served as the President of YIT's Norwegian subsidiary, with responsibility for the development of the Group's building system services. Timo Lehtinen was Senior Vice President, Finance, with responsibility for both the Construction Services Finland and International Construction Services segments.
DEVELOPMENT BY BUSINESS SEGMENT
BUILDING AND INDUSTRIAL SERVICES
In January-September, Building and Industrial Services' revenue decreased by 8 per cent and operating profit by 30 per cent compared to the previous year. Profitability weakened compared to the previous year due to the decline in customers' new investments and the tighter competitive situation. The order backlog declined compared with the previous year.
When the figures are calculated in local currencies, the revenue for the business segment decreased by 2 per cent and the the order backlog decreased by 24 per cent compared to the previous year. The devaluation of the Swedish krona and Norwegian krone had the most significant currency movement impact on the business segment's figures. The exchange rate changes decreased revenue in the 1-9/09 period by EUR 95.3 million and the order backlog by EUR 24.1 million compared with the previous year. The operations acquired in Central Europe increased revenue in the 1-9/09 period by EUR 262.5 million.
In 2009, the profitability of the business operations remained stable, but a ruling issued by the court of arbitration in the third quarter reduced the segment's operating profit by EUR 3.2 million. The share of revenue accounted for by service and maintenance services grew. They accounted for 52 per cent of the segment's revenue for the first quarter, 54 per cent for the second quarter and 55 per cent for the third quarter.
The Building and Industrial Services segment's business is personnel-based business that requires little capital. Capital invested in the business segment amounted to EUR 395.0 million at the end of September (EUR 367.9 million).
Key figures
-------------------------------------------------------------------------------- | | 7-9/0 | 4-6/0 | 1-3/0 | | 1-9/09 | 1-9/08 | Change | | | 9 | 9 | 9 | | | | 1-9/0 | | | | | | | | | 8 - | | | | | | | | | 1-9/09 | -------------------------------------------------------------------------------- | Revenue, MEUR | 483.9 | 529.2 | 537.9 | | 1,551. | 1,683. | -8% | | | | | | | 0 | 0 | | -------------------------------------------------------------------------------- | - of which service | 266.0 | 286.7 | 281.2 | | 833.9 | 986.4 | -15% | | and maintenance, | | | | | | | | | MEUR | | | | | | | | -------------------------------------------------------------------------------- | Operating profit, | 24.9 | 28.2 | 28.6 | | 81.7 | 116.0 | -30% | | MEUR 1) | | | | | | | | -------------------------------------------------------------------------------- | Operating profit | 5.1 | 5.3 | 5.3 | | 5.3 | 6.9 | - | | margin, % | | | | | | | | -------------------------------------------------------------------------------- | Order backlog at end | 946.7 | 984.7 | 1,048 | | 946.7 | 1,284. | -26% | | of period, | | | .3 | | | 1 | | | MEUR | | | | | | | | -------------------------------------------------------------------------------- | Invested capital at | 395.0 | 371.3 | 347.1 | | 395.0 | 367.9 | 7% | | end of period, MEUR | | | | | | | | | *) | | | | | | | | -------------------------------------------------------------------------------- | Personnel at end of | 17,84 | 18,20 | 18,52 | | 17,849 | 19,219 | -7% | | period | 9 | 8 | 7 | | | | | --------------------------------------------------------------------------------
1) On September 30, 2009, the court of arbitration issued its ruling in the dispute concerning the mechanical installation contract YIT carried out for Neste Oil's Porvoo oil refinery. The effect of the ruling on Building and Industrial Services' operating profit for Q3/2009 was EUR -3.2 million. *) When calculating invested capital in business segments, the interest-bearing financial items have been netted.
Building and Industrial Services' revenue by country, MEUR
-------------------------------------------------------------------------------- | | 7-9/0 | 4-6/0 | 1-3/0 | | 1-9/09 | 1-9/08 | Change | | | 9 | 9 | 9 | | | | 1-9/0 | | | | | | | | | 8 - | | | | | | | | | 1-9/09 | -------------------------------------------------------------------------------- | Finland | 135.4 | 153.5 | 161.2 | | 450.1 | 597.9 | -25% | -------------------------------------------------------------------------------- | Sweden | 116.9 | 135.0 | 122.7 | | 374.6 | 484.6 | -23% | -------------------------------------------------------------------------------- | Norway | 93.4 | 98.9 | 109.8 | | 302.1 | 354.7 | -15% | -------------------------------------------------------------------------------- | Denmark | 30.6 | 38.9 | 39.0 | | 108.5 | 118.2 | -8% | -------------------------------------------------------------------------------- | Germany, Austria, | 93.9 | 88.8 | 87.3 | | 270.0 | 59.7 | 352% | | Poland, the Czech | | | | | | | | | Republic, Hungary, | | | | | | | | | Romania 1) | | | | | | | | -------------------------------------------------------------------------------- | Lithuania, Estonia, | 7.9 | 5.1 | 8.8 | | 21.8 | 45.2 | -52% | | Latvia and Russia | | | | | | | | -------------------------------------------------------------------------------- | Other countries | 5.8 | 9.0 | 9.1 | | 23.9 | 22.7 | 5% | -------------------------------------------------------------------------------- | Total | 483.9 | 529.2 | 537.9 | | 1,551. | 1,683. | -8% | | | | | | | 0 | 0 | | --------------------------------------------------------------------------------
1) The building system service operations acquired from Central Europe were transferred to YIT on August 1, 2008.
The segment structure was adjusted at the beginning of 2009 by merging the Building Systems and Industrial Services segments into a single segment. The revenue of the Industrial Services business segment amounted to EUR 429.7 million in 2008. Industrial Services' revenue is mainly generated in Finland and additionally in Sweden and in export countries. Revenue of the Building and Industrial Services segment is presented based on the customers' location.
Demand for service and maintenance agreements was steady
The demand for building system repair and maintenance work and various service agreements was relatively stable in YIT's area of operations. Municipalities in Finland and Sweden are seeking new solutions for arranging their maintenance and servicing. Demand in the municipal field grew slightly in the third quarter. The demand for industrial maintenance services continued to be relatively steady in Finland. In Sweden, YIT made an agreement with the City of Solna for the maintenance of about 100 buildings. In the Viinikkala Logistics Centre in Finland, YIT is responsible for the building system servicing of DHL Freight (Finland) Oy's business premises as well as service management. In Lithuania, agreements were made for the technical property maintenance of over 20 supermarkets in the RIMI chain and the property management of Swedbank's head office. An agreement was signed for the management of property maintenance services for the Gorigo logistics centre in St Petersburg, Russia. After the end of the review period, a nationwide service agreement was signed whereby YIT will replace the road illumination control system of the Finnish Road Administration and will maintain it until 2019.
YIT carried out annual maintenance works for industry in Finland, e.g. at Fortum's nuclear power plant in Loviisa, Neste Oil's refinery in Porvoo and Outokumpu's steel mill in Tornio. New agreements for technical design services were made, e.g. with the Sappi paper mill in Kirkniemi.
Steady demand for energy-saving services
Demand for energy-saving solutions and services picked up as the spring advanced in the Nordic countries, Austria and Germany. Demand remained steady in the third quarter.
A 10-year energy-saving agreement was made with the Giessen penitentiary in Hessen, Germany. YIT will improve the energy efficiency of the penitentiary by, for example, replacing its heating, illumination and water control systems with energy-saving solutions. YIT will guarantee that the total delivery will yield cost-savings while the agreement is in force and the customer will pay the costs of the project with the savings.
With the support of the Norwegian Water Resources and Energy Directorate, YIT will implement a total technical solution for an office building in Porsgrunn, Norway, and an energy-efficient total technical solution for the Comfort Square Hotel in Stavanger. An energy inspection focusing on automation systems was performed for Senate Properties in Finland. In Sweden, YIT will install a bedrock heat pump and solar panels for hot water production at a property owned by Micasa.
New investments in building equipment decreased
Customers' new investments in building equipment were lower in all market areas than last year. The building system deliveries focused on renovation and reconstruction and public sector investments. The renovation and reconstruction market has picked up thanks to the start-up of public sector stimulus projects.
In Denmark, YIT will deliver a piping and cooling system for the Glostrup Hospital. Agreements in Finland included a ventilation contract for the Lahti Governmental Building. HPAC and electrical works were carried out for numerous schools. In Helsinki, YIT will handle the delivery of a total technical solution for the Prisma hypermarket in Kannelmäki. In Central Europe, YIT landed numerous orders for HPAC deliveries for retail outlets - such as shopping centres - in Austria, Germany and Poland. In Norway, YIT made an agreement with Larsen, Atterås og Brosvik for the delivery of a total technical solution for StatoilHydro's CO2 testing facility.
Industrial investments decreased compared to last year
During the third quarter, investments by the process, forest and steel industries continued to decrease. Demand for investment services focused on the energy industry.
In Finland, agreements were made with Stora Enso for piping and equipment installation work at its mills in Imatra and with Talvivaara for mechanical installation work and piping deliveries for the pumping station of its mine in Sotkamo. Imatran Seudun Sähkösiirto Oy ordered a power station as a turnkey delivery. In Sweden, YIT will deliver piping for Korsnäs AB's new paper mill in Gävle.
Market outlook
The demand for real estate service and maintenance continues to grow slightly. The economic recession will open new opportunities for outsourcing real estate services. The demand for industrial maintenance services will continue to be steadier than investments in Finland and Sweden during the rest of the year.
The demand for energy efficiency services will increase in the years ahead, especially in the Nordic countries, Germany and Austria. The development is supported by public sector support measures and renewed environmental legislation.
Customers' new investments in office and business properties and industry will remain slight. In public sector projects, demand will remain more stable. The increase in the demand for renovation and reconstruction projects will continue with the support of public sector stimulus measures and renovation subsidies.
The demand for industrial project deliveries will decrease and focus on the energy industry. In the process, forest and steel industries, investments will decrease.
CONSTRUCTION SERVICES FINLAND
Construction Services Finland's revenue for January-September decreased by 16 per cent compared to the previous year. Operating profit declined by 34 per cent compared to the previous year due to a substantial decline in the construction of business premises and residential sales focusing on rental housing production during the first months of the year. The order backlog decreased by 16 per cent compared to the previous year. During the comparison period, the Supreme Court issued a ruling that had a positive effect of EUR 3.5 million on the segment's operating profit for Q1/2008.
The revenue of Construction Services Finland remained relatively steady in the third quarter, down 3 per cent on the previous quarter. Profitability remained good. The order backlog of the business segment continued to grow due to new residential start-ups and new infrastructure contracts.
In Construction Services Finland, development production mainly ties up capital in the plot reserves and their development and additionally in production under construction. Infrastructure and contract construction require only little capital. Capital invested in the business segment amounted to EUR 427.4 million at the end of September (EUR 529.2 million).
Key figures
-------------------------------------------------------------------------------- | | 7-9/0 | 4-6/0 | 1-3/0 | | 1-9/09 | 1-9/08 | Change | | | 9 | 9 | 9 | | | | 1-9/0 | | | | | | | | | 8 - | | | | | | | | | 1-9/09 | -------------------------------------------------------------------------------- | Revenue, MEUR | 246.3 | 253.0 | 239.8 | | 739.1 | 879.3 | -16% | -------------------------------------------------------------------------------- | - of which service | 20.2 | 15.2 | 19.5 | | 54.9 | 47.8 | 15% | | and maintenance, | | | | | | | | | MEUR | | | | | | | | -------------------------------------------------------------------------------- | Operating profit, | 20.8 | 19.9 | 20.9 | | 61.6 | 92.9 | -34% | | MEUR | | | | | | | | -------------------------------------------------------------------------------- | Operating profit | 8.4 | 7.9 | 8.7 | | 8.3 | 10.6 | - | | margin, % | | | | | | | | -------------------------------------------------------------------------------- | Order backlog at end | 909.9 | 846.9 | 819.8 | | 909.9 | 1,085. | -16% | | of period, MEUR | | | | | | 9 | | -------------------------------------------------------------------------------- | Invested capital at | 427.4 | 481.2 | 435.5 | | 427.7 | 529.2 | -19% | | end of period, MEUR | | | | | | | | | *) | | | | | | | | -------------------------------------------------------------------------------- | - of which in plot | 340.7 | 354.6 | 363.2 | | 340.7 | 337.5 | 1% | | reserves, MEUR | | | | | | | | -------------------------------------------------------------------------------- | Personnel at end of | 2 971 | 3 208 | 3 119 | | 2 971 | 3 408 | -13% | | period | | | | | | | | --------------------------------------------------------------------------------
*) When calculating invested capital in business segments, the interest-bearing financial items have been netted.
Residential sales remained stable
The number of residential units sold on the whole increased in January-September compared to the corresponding period of the previous year. The price level of housing remained stable.
In January-September, YIT sold a total of 2,314 (1-9/08: 1,326) residential units in Finland. 2,195 (1,126) residential units were started and 1,137 (1,792) were completed. At the end of September, there were 2,946 (2,143) residential units under construction, of which 2,215 (1,180) had been sold. At the end of September, YIT had 997 unsold residential units (1,292), of which 731 (963) were under construction and 266 (329) had been completed.
Residential sales picked up in the spring and remained steady in the third quarter. YIT sold 436 residential units in Finland during the first quarter, 896 during the second quarter and 982 during the third quarter. Of these, YIT sold 276 residential units to consumers during the first quarter, 401 during the second quarter and 380 during the third quarter. The remainder were residential houses sold to investors.
In July-September, YIT launched several new residential development projects aimed at consumers in addition to rental housing projects agreed upon with investors. During the spring and autumn, the focus has been shifted from rental housing to the development of owner-occupied housing. The construction of 239 residential units was started during the first quarter, 817 during the second quarter and 1,139 during the third quarter. Of the residential start-ups, 90 residential units were development production aimed at consumers during the first quarter, 327 during the second quarter and 537 during the third quarter.
Residential development projects aimed at consumers have been started in many parts of Finland. Seven projects were started up in the Helsinki region as YIT's own development; a total of over 200 multi-storey and terraced housing units will be built. At the end of September, YIT announced that it would start up the construction of a total of 70 holiday homes in Vierumäki and Levi.
In August, YIT sold five rental housing projects to ICECAPITAL Housing Fund II for EUR 36.6 million. The projects include a total of about 300 apartments in Nurmijärvi, Mäntsälä, Lahti, Jyväskylä and Kuopio. The agreement is based on a preliminary agreement for the construction of more than 700 new privately financed rental apartments made in November 2008. State-supported ARA housing projects were started up in six cities. In Vantaa, YIT will build right-of-occupancy housing with 50 residential units for Avara as a tender-based project.
Lower volume in business premises construction than in the previous year
The construction of office, retail and logistics premises focused on completing ongoing projects and obtaining leaseholders for new, ongoing and completed sites. Construction of offices and industrial premises declined. Demand for new retail and warehouse premises remained moderate.
During the third quarter, YIT started up the construction of its first low-energy office and commercial building as a development project located in Järvenpää. Its primary tenant will be Helsinki Cooperative Society Elanto and it has been sold to VR Pension Fund.
With regard to tender-based projects, the construction of business premises began for the Porvoo Campus and the refurbishing of premises on Sturenkatu street in Helsinki and the Jakomäki swimming hall in Helsinki got under way. In Espoo, YIT will renovate showroom and production premises for Skanno in a property owned by the Tapiola Group, and will take responsibility for the conceptualisation, marketing and leasing of the site.
Infrastructure construction is steady
Infrastructure construction developed steadily as a whole. The decline in the construction of new housing and business premises has weakened demand for foundation construction. Several infrastructure projects related to basic road and railway maintenance are about to start in Finland in late 2009 and at the beginning of 2010, boosted by state stimulus measures.
In September, YIT and the Finnish Road Administration signed an agreement valued at EUR 17 million for the implementation of a large-scale road project in the centre of the city of Savonlinna, Highway 14 Ruislahti - Miekkoniemi. The project includes the construction of a second composite girder bridge over the Kyrönsalmi strait and four-lane widening. After the end of the review period, YIT and the Finnish Rail Administration signed an agreement valued at EUR 21 million for the implementation of a tunnel contract for the Kehärata ring line project in Vantaa. The contract includes the excavation of the Aviapolis underground station, five shafts and 3.5 kilometres of railway tunnel.
Market outlook
The demand for owner-occupied housing is still supported by an increase in consumer confidence, decreased interest rates, higher rents and the scarcity of supply. The diminishing size of households and the migration maintain the need for new housing. Decreased employment rates may increase insecurity in the housing market in the future. The Finnish housing market focuses on rental housing production, but also the development production has increased during the year.
The volume of business premises construction is estimated to halve compared to the previous year on the whole. Construction of offices and industrial premises will decline. Demand for retail and warehouse premises will remain moderate. The need for renovation is rising steadily. The volume of public sector construction projects will remain stable, supported by state stimulus measures. However, the weakness of municipal finances leads to uncertainty concerning the number of public sector construction projects.
The total volume of infrastructure construction will decline this year and will possibly also decrease in 2010 in spite of state stimulus measures. Capacity underutilisation in infrastructure construction keeps the competitive situation tight.
INTERNATIONAL CONSTRUCTION SERVICES
International Construction Services' revenue for January-September decreased by 38 per cent compared to the previous year. Russia accounted for 83 per cent of revenue and the Baltic countries for 16 per cent. Revenue decreased by 29 per cent in Russia and by 62 per cent in the Baltic countries. Operating profit was negative. The operating profit was weakened on account of the volume of residential sales in the first part of the year falling short of the previous year, apartment prices being at a lower level than last year and the Baltic market being weak. The project margin forecasts of the business segment were weakened during the first quarter and write-downs of approximately EUR 5 million were recognised during the second quarter, mainly for the plot reserves in Latvia. The order backlog decreased by 41 per cent compared to the previous year. The order backlog at the end of September includes the residential projects that were halted in October 2008 in Russia, the value of which in the order backlog at the end of September 2009 was EUR 308.1 million.
When the figures for Russia are calculated in local currency, the change in revenue for the business segment was -27 per cent and the change in the order backlog was -29 per cent compared to the previous year. The ruble exchange rate changes decreased revenue in the 1-9/09 period by EUR 43.0 million and the order backlog by EUR 190.0 million compared with the previous year.
In July-September, International Construction Services' revenue increased and the order backlog decreased when housing projects were recognised as income as construction and sales advanced. Compared to the previous quarter, revenue increased by 18 per cent in Russia and decreased by 17 per cent in the Baltic countries. Operating profit turned positive in the third quarter.
In International Construction Services, capital has been tied mainly to ongoing and halted production and additionally to the plot reserves and their development. Capital invested in the business segment amounted to EUR 677.1 million at the end of September (EUR 710.2 million). The aim is to reduce invested capital and to use capital more efficiently in Russia and the Baltic countries.
The Group's capital tied up in Russia is primarily accounted for by the International Construction Services segment. At the end of September, the Group's capital invested in Russia amounted to EUR 589.9 million (EUR 583.6 million). The devaluation of the ruble decreased the amount of capital invested in Russia by EUR 106.8 million compared to the previous year.
Key figures
-------------------------------------------------------------------------------- | | 7-9/0 | 4-6/0 | 1-3/0 | | 1-9/09 | 1-9/08 | Change | | | 9 | 9 | 9 | | | | 1-9/0 | | | | | | | | | 8 - | | | | | | | | | 1-9/09 | -------------------------------------------------------------------------------- | Revenue, MEUR | 97.6 | 87.4 | 61.4 | | 246.4 | 397.1 | -38% | -------------------------------------------------------------------------------- | Operating profit, | 3.7 | -5.2 | -23.8 | | -25.3 | 18.2 | - | | MEUR | | | | | | | | -------------------------------------------------------------------------------- | Operating profit | 3.8 | -5.9 | -38.7 | | -10.3 | 4.6 | - | | margin, % | | | | | | | | -------------------------------------------------------------------------------- | Order backlog at end | 998.4 | 1,126 | 1,239 | | 998.4 | 1,678. | -41% | | of period, MEUR | | .8 | .1 | | | 2 | | -------------------------------------------------------------------------------- | Invested capital at | 677.1 | 667.9 | 632.8 | | 677.1 | 710.2 | -5% | | end of period, MEUR | | | | | | | | | *) | | | | | | | | -------------------------------------------------------------------------------- | - of which in plot | 244.8 | 235.4 | 218.7 | | 244.8 | 244.0 | - | | reserves, total | | | | | | | | -------------------------------------------------------------------------------- | - of which in plot | 166.9 | 157.8 | 136.1 | | 166.9 | 166.3 | - | | reserves in Russia | | | | | | | | -------------------------------------------------------------------------------- | - of which in plot | 77.7 | 77.6 | 82.6 | | 77.7 | 77.7 | - | | reserves in the | | | | | | | | | Baltic countries | | | | | | | | -------------------------------------------------------------------------------- | Personnel at end of | 2,841 | 2,965 | 3 214 | | 2,841 | 3,717 | -24% | | period | | | | | | | | --------------------------------------------------------------------------------
*) When calculating invested capital in business segments, the interest-bearing financial items have been netted.
International Construction Services' revenue by country, MEUR
-------------------------------------------------------------------------------- | | 7-9/0 | 4-6/0 | 1-3/0 | | 1-9/09 | 1-9/08 | Change | | | 9 | 9 | 9 | | | | 1-9/0 | | | | | | | | | 8 - | | | | | | | | | 1-9/09 | -------------------------------------------------------------------------------- | Russia | 85.2 | 72.3 | 45.9 | | 203.4 | 287.0 | -29% | -------------------------------------------------------------------------------- | Lithuania, Estonia, | 11.6 | 14.0 | 14.7 | | 40.3 | 106.2 | -62% | | Latvia | | | | | | | | -------------------------------------------------------------------------------- | Other countries | 0.8 | 1.1 | 0.8 | | 2.7 | 3.9 | -31% | -------------------------------------------------------------------------------- | Total | 97.6 | 87.4 | 61.4 | | 246.4 | 397.1 | -38% | --------------------------------------------------------------------------------
Residential sales strengthen in Russia in the third quarter
Residential sales continued to strengthen in Russia during the third quarter. YIT sold 323 residential units in Russia during the first quarter, 494 during the second quarter and 829 during the third quarter. A majority of the residential units were sold directly to consumers.
Sales have received a boost from greater consumer confidence in YIT, the company's own marketing and sales measures and a more appealing offering when sites are completed or are nearing completion. In addition to finished residential units, there has also been demand for partially finished residential units. The supply of housing in the Russian market has declined because numerous constructors have halted their projects, thereby increasing YIT's market share in residential sales. Housing prices have continued to decline in 2009, but the rate of decline slowed down in the third quarter.
In order to support sales, YIT agreed on cooperation with Sberbank, whereby YIT customers now have the option to take out a mortgage in St Petersburg under special terms and conditions. Cooperation has started in line with plans and the agreement will be expanded to cover other cities as well.
In January-September, 1,646 (1-9/08: 2,494) residential units were sold in Russia. The first new residential site in Russia since the summer 2008 was started up in September in one of the cities surrounding Moscow, Zhukovsky. In January-September, 105 (3,622) residential units were started up and 2,461 (1,712) were completed. At the end of September, there were 6,080 (11,768) residential units under construction, of which 2,532 (3,730) had been sold. At the end of September, YIT had 4,014 unsold residential units (8,230), of which 3,548 (8,038) were under construction and 466 (192) had been completed. During the third quarter, the number of unsold residential units declined by 733.
The 6,080 residential units under construction will be completed by the end of 2010, and the costs of completing them are estimated to be approximately EUR 196 million. Capital is freed up simultaneously with the sale of residential units.
Changes in the number of residential units may take place after the start of construction due to the division or combination of residences. Due to the uncertain market situation, YIT made a decision in October 2008 to halt the construction of residential projects in the start-up phase in Russia in projects whose sales had not yet begun. These projects have 2,485 residential units. These residential units are not included in the under-construction figures for 9/09, as the restarting of their construction will be handled as new building start-ups.
YIT has ongoing housing development projects in St Petersburg, cities in the Moscow region, Moscow, Yekaterinburg, Rostov-on-Don and Kazan.
The development of new property development projects has continued in Russia, but construction has not been started up. The food plant built in Gorelovo, Russia, has not been put into operation yet. The final costs arising from the delay of the inauguration of the factory will be specified later in accordance with the terms of the agreement made with the customer.
Market situation remains weak in the Baltic countries
The market situation remained weak in the Baltic countries. YIT has shifted the focus of its operations from residential construction to contracting and has won minor construction contracts, with which the rapid decrease in volumes has been halted. Competition for construction projects remained tight and production volumes were low.
No new residential projects were started up in 2009. In January-September, 250 (1-9/08: 689) residential units were sold in Lithuania, Estonia and Latvia. Of these units, 53 were sold during the first quarter, 147 during the second quarter and 50 during the third quarter. During the period, 592 (487) residential units were completed. No residential units were under construction at the end of September (9/08: 841). At the end of September, YIT had 46 (340) unsold residential units. The market price level of housing has dropped on average to almost half of what it was at the end of 2007.
Market outlook
In Russia, the economic situation and consumer behaviour are strongly dependent on the development of the oil price and the ruble exchange rate. In addition, measures to increase the functionality of housing finance, interest rates and inflation and devaluation expectations influence residential sales.
We estimate consumer demand to remain unchanged, provided that the price of oil and the exchange rate of the ruble remain more or less at their current level. The value of the ruble remaining unchanged will support consumer confidence. There is still a great need for housing, and the demand outlook for residential units aimed at YIT's customer segment is unchanged in the long term. Increasing unemployment will weaken the demand for housing.
We estimate that Russian residential production and demand have clearly been cut by more than half from their level a year before. A significant share of residential sites under construction in the market was halted during the autumn and winter 2008-2009. The decreased supply of housing has slackened the pressure to lower selling prices.
Retail and industrial companies that develop property onto their own balance sheets and to their own use are still operating in the retail and business premises market. Underutilisation rates are increasing in the office market, and no new premises are being built. The decline in industrial output has levelled out after the spring.
In the Baltic countries, the construction market has reached a very low level. Due to the extensive impact of the recession, no significant recovery of the market conditions can be expected in the near future.
SHARES, SHARE OPTIONS AND SHAREHOLDERS
The company has one series of shares. Each share carries one vote and confers an equal right to a dividend.
Shares can be subscribed for in 2009 under the Series M and N share options issued in 2006 between April 1 and November 30.
Share capital and number of shares YIT Corporation's share capital was EUR 149,216,748.22 at the beginning of the review period (EUR 149,104,766.72), and the number of shares outstanding was 127,223,422 (127,217,872). The share capital and number of shares did not change during the review period. Own shares and authorisations of the Board of Directors
In accordance with the Companies Act, the General Meeting decides on the buyback and conveyance of shares, as well as any decisions leading to changes in the share capital.
At the beginning of 2009, YIT Corporation held 1,425,000 of its own shares, purchased based on the authorisation given by the General Meeting of October 6, 2008.
The Annual General Meeting of YIT Corporation resolved on March 11, 2009, to authorise the Board of Directors to purchase the company's shares and to dispose of them, as proposed by the Board of Directors. The authorisation granted to the Board of Directors covers the acquisition of a maximum of 10,100,000 company shares, purchased with the company's unrestricted equity, and the assignment of a maximum of 12,700,000 of the shares bought back for and held by the company. The authorisation reversed the authorisation to purchase and divest the company's own shares issued by the Extraordinary General Meeting on October 6, 2008.
Between February 10 and February 23, 2009, YIT purchased 720,000 of its own shares at an average price of EUR 5.6. At the end of the third quarter, YIT Corporation held 2,145,000 of its own shares. During the period, no shares in the parent company were owned by subsidiaries.
There were no share issues during the period and the company did not float convertible bonds or bonds with warrants. At the end of the period, the parent company's Board of Directors did not have valid share issue authorisations or authorisations to issue convertible bonds or bonds with warrants.
Trading in the shares and share options
The average share price in January-September was EUR 7.34 (1-9/08: EUR 13.76). The highest share price during the period was EUR 13.47 (EUR 19.99), the lowest EUR 4.31 (EUR 7.17). At the end of the period, trading closed at EUR 13.01 (EUR 7.30).
The value of share turnover during the review period was EUR 1,122.4 million (EUR 2,729.3 million), and share turnover was 152,930,248 (198,834,114) shares. Market capitalisation at the end of the period was EUR 1,627.3 million (EUR 928.7 million).
No Series M or N share options issued in 2006 were traded in January-September.
Number of shareholders increases
The number of registered shareholders was 25,515 (15,265) at the beginning of the review period and 30,127 (19,338) at the end of the period. The number of households among the owners increased by more than 4,400 during January-September.
At the beginning of the year, a total of 36.5 per cent (52.9%) of the shares were owned by nominee-registered and non-Finnish investors, while this figure was 37.9 per cent (49.8%) of the total number of YIT shares at the end of the period.
During January-September 2009, one so-called flagging notification of change in ownership in YIT Corporation was made in accordance with Chapter 2, Section 9 of the Securities Market Act. Suomi Mutual Life Assurance Company notified that its holdings have decreased to below 5 per cent of YIT Corporation's shares and votes following a share transaction on April 3, 2009. The company held a total of 6,184,119 YIT shares, which equals 4.86 per cent of YIT Corporation's shares.
No flagging notifications were made during the third quarter.
MAJOR BUSINESS RISKS AND UNCERTAINTIES IN THE NEAR FUTURE
The most significant short-term business risks and uncertainties are connected with the development of residential sales and foreseeing and reacting to changes in the operating environment. In Russia, the most important changes in the operating environment are the oil price, which has a strong impact on the economic situation in Russia, and consumer confidence. In Finland, residential demand is impacted the most by consumer confidence, which has strengthened during the current year. In September, consumer confidence was stronger than it was a year earlier, and only slightly weaker than the long-term average. The consumer confidence continued to strengthen in October. At the end of September, the number of residential units that are completed or under construction but unsold totalled 4,014 in Russia, 997 in Finland and 46 in the Baltic countries. In addition, the construction of 2,485 residential units was suspended at the foundation stage in Russia in October 2008. YIT manages sales risk by matching the number of housing start-ups with the estimated residential demand and the number of unsold residential units. A more detailed account of the structure of the order backlog is presented above under Order Backlog. An account of housing production and related measures can be found under Development by business segment.
There is a currency risk related to investments ruble terms. At the end of September, the Group's invested capital in Russia amounted to EUR 589.9 million.
The equities of the Russian subsidiaries are unhedged in accordance with the finance policy, and the devaluation of the ruble has a negative impact equal to the amount of equity on the Group's shareholders' equity. As of the turn of the year, net equity investments in Russia were increased by classifying a part of the loans given to the subsidiaries as fixed net investments. The amount of equity investments was EUR 328.1 million at the end of September. Debt investments amounted to EUR 261.8 million at the end of September and this position was hedged in full.
The variation in the ruble exchange rate changes the costs of completing the apartments that are under construction in euro terms and has an effect on YIT's revenue and earnings development in euro terms. In addition, the high interest rate of the ruble increases hedging expenses and net financial expenses. Net equity investments in Russia decrease the impact of fluctuations in the exchange rate of the ruble on financial expenses.
The food plant built in Gorelovo, Russia, has not been put into operation yet. The final costs arising from the delay of the inauguration of the factory will be specified later in accordance with the terms of the agreement made with the customer.
YIT tests the value of its plots as required by the IFRS accounting principles. Plot reserves are measured at acquisition cost and the value is impaired when it is estimated that the building being constructed on the plot will be sold at a price lower than the sum of the price of the plot and the construction costs. A write-down of approximately EUR 5 million was made to the Latvian plot reserves in April-June. YIT's risk management policy defines the Group's most significant risks and methods of managing them from the point of view of the entire Group. A more detailed account of YIT's risk management policy and the most significant risks is published in the Annual Report 2008. Financing risks are described in the notes to the financial statements for 2008.
SHORT-TERM AND LONG-TERM TARGETS
In the short term, YIT's operations will focus on accelerating sales, lowering production costs, boosting cash flow and management of capital. The Group has implemented measures that have already cut fixed costs by approximately EUR 60 million on annual level.
The target in Building and Industrial Services is to increase the service and maintenance operations faster than other operations, both organically and through business acquisitions. The sales focus has been shifted from new buildings to renovations and modernisations, from the private sector to the public sector, and from project operations to maintenance.
In Construction Services Finland, YIT's aim is to reinforce its position in all of its three key construction segments - housing, business premises and infrastructure. With regard to residential construction, development projects will be increased so that the turnover of capital is accelerated. In business premises, the focus will be on developing and repairing existing properties during the beginning of the 2010-2012 strategy period. In infrastructure services, the market position will be reinforced and maintenance activity will be increased.
In International Construction Services, YIT seeks to boost the use of capital, profitability and controlled growth in Russia. The use of capital will be made more effective with an extensive action programme that has been initiated. The strong need for housing has not decreased, and the demand outlook for residential units aimed at YIT's customer segment is favourable in the long term, which provides opportunities for growth. In the Baltic countries, the focus of operations has been shifted from housing construction to tender-based projects. In the Baltic countries and Central Eastern Europe, YIT will aim to take advantage of emerging market opportunities.
YIT Corporation's Board of Directors confirmed the Group's strategy for 2010-2012 on August 19, 2009. The Group's strategic target levels are: average annual revenue growth of 5-10 per cent, return on investment of 20 per cent, operating cash flow after investments must be sufficient for dividend payout and reduction of debt, equity ratio of 35 per cent and dividend payout of 40 to 60 per cent of net profit for the period.
OUTLOOK FOR 2009
The outlook for the last quarter of 2009 has been specified after the publishing of last Interim Report.
YIT Corporation estimates that in 2009 the Group revenue will decrease clearly compared to 2008, but profit before taxes will be clearly positive. It is estimated that the operating profit will improve in the last quarter of 2009.
In Building and Industrial Services, revenue and operating profit are estimated to decrease and the profitability to weaken somewhat compared to 2008. The business segment's revenue for January-September was EUR 1,551.0 million (1-9/08: EUR 1,683.0 million), its operating profit was EUR 81.7 million (EUR 116.0 million) and its operating profit margin was 5.3 (6.9%).
In Construction Services Finland, revenue and operating profit are estimated to decrease clearly compared to 2008. Profitability is at a good level. The business segment's revenue for January-September was EUR 739.1 million (1-9/08: EUR 879.3 million), its operating profit was EUR 61.6 million (EUR 92.9 million) and its operating profit margin was 8.3 (10.6%).
In International Construction Services, revenue is estimated to decrease clearly compared to 2008 and operating profit is estimated to remain negative. The business segment's revenue for January-September was EUR 246.4 million (1-9/08: EUR 397.1 million), its operating profit was EUR -25.3 million (EUR 18.2 million) and its operating profit margin was -10.3 (4.6%).
Helsinki, October 27, 2009
Board of Directors
INTERIM REPORT JAN 1 - SEP 30, 2009: TABLES The information presented in the Interim Report has not been audited.
1. Key figures of YIT Group
Key figures YIT Group figures by quarter Segment information by quarter
2. Consolidated financial statements Jan 1 - Sep 30, 2009
Consolidated income statement January 1 - September 30, 2009 Statement of comprehensive income January 1 - September 30, 2009 Consolidated income statement July 1 - September 30, 2009 Consolidated balance sheet Consolidated statement of changes in equity Consolidated cash flow statement
3. Notes
Accounting principles of the Interim Report Financial risk management Segment information Unusual items affecting operating profit Acquired and divested businesses Changes in property, plant and equipment Inventories Notes on equity Interest-bearing liabilities Change in contingent liabilities and assets and commitments Transactions with associated companies
1. KEY FIGURES OF YIT GROUP
KEY FIGURES
-------------------------------------------------------------------------------- | | 9/2009 | 9/2008 | change, | 12/2008 | | | | | % | | -------------------------------------------------------------------------------- | Earnings per share, EUR | 0.29 | 1.02 | -72 | 1.05 | -------------------------------------------------------------------------------- | Diluted earnings per share, EUR | 0.29 | 1.02 | -72 | 1.05 | -------------------------------------------------------------------------------- | Equity per share, EUR | 6.09 | 6.61 | -8 | 6.38 | -------------------------------------------------------------------------------- | Average share price during the | 7.34 | 13.76 | -54 | 10.89 | | period, EUR | | | | | -------------------------------------------------------------------------------- | Share price at end of period, | 13.01 | 7.30 | 78 | 4.58 | | EUR | | | | | -------------------------------------------------------------------------------- | Market capitalization at end of | 1,627.3 | 928.7 | 75 | 576.2 | | period, MEUR | | | | | -------------------------------------------------------------------------------- | Weighted average share-issue | 125,196 | 127,220 | -2 | 127,104 | | adjusted number of shares | | | | | | outstanding, thousands | | | | | -------------------------------------------------------------------------------- | Weighted average share-issue | 125,196 | 127,220 | -2 | 127,104 | | adjusted number of shares | | | | | | outstanding, thousands, diluted | | | | | -------------------------------------------------------------------------------- | Share-issue adjusted number of | 125,078 | 127,223 | -2 | 125,798 | | shares outstanding at end of | | | | | | period, thousands | | | | | -------------------------------------------------------------------------------- | Net interest-bearing debt at | 640.4 | 697.0 | -8 | 644.5 | | end of period, MEUR | | | | | -------------------------------------------------------------------------------- | Return on investment, from the | 9.8 | 21.9 | -55 | 17.5 | | last 12 months, % | | | | | -------------------------------------------------------------------------------- | Equity ratio, % | 29.7 | 33.4 | -11 | 30.7 | -------------------------------------------------------------------------------- | Gearing ratio, % | 83.8 | 82.5 | 2 | 79.8 | -------------------------------------------------------------------------------- | Gross capital expenditures, | 15.7 | 76.9 | -80 | 85.2 | | MEUR | | | | | -------------------------------------------------------------------------------- | % of revenue | 0.6 | 2.7 | -77 | 2.2 | -------------------------------------------------------------------------------- | Order backlog at end of period, | 2,800.8 | 3,964.9 | -29 | 3,233.7 | | MEUR 1) | | | | | -------------------------------------------------------------------------------- | of which order backlog outside | 1,664.8 | 2,581.7 | -48 | 2,118.9 | | Finland | | | | | -------------------------------------------------------------------------------- | Average number of personnel | 24,787 | 24,278 | -5 | 25,057 | --------------------------------------------------------------------------------
1) Portion of binding orders and own development projects not recognized as income.
YIT GROUP FIGURES BY QUARTER
-------------------------------------------------------------------------------- | | I/200 | II/20 | III/2 | IV/20 | I/200 | II/200 | III/20 | | | 8 | 08 | 008 | 08 | 9 | 9 | 09 | -------------------------------------------------------------------------------- | Revenue, MEUR | 927.0 | 991.2 | 970.8 | 1,050 | 823.7 | 853.1 | 815.0 | | | | | | .7 | | | | -------------------------------------------------------------------------------- | Operating profit, | 78.6 | 70.5 | 63.1 | 48.4 | 22.1 | 38.1 | 45.6 | | MEUR | | | | | | | | -------------------------------------------------------------------------------- | % of revenue | 8.5 | 7.1 | 6.5 | 4.6 | 2.7 | 4.5 | 5.6 | -------------------------------------------------------------------------------- | Financial income, | 3.2 | 0.6 | 0.9 | 1.2 | 1.3 | 0.4 | 0.9 | | MEUR | | | | | | | | -------------------------------------------------------------------------------- | Exchange rate | -0.8 | -2.6 | 6.0 | -27.6 | -9.6 | -5.1 | -7.8 | | differences, MEUR | | | | | | | | -------------------------------------------------------------------------------- | Financial | -10.7 | -8.0 | -13.0 | -16.7 | -11.6 | -8.2 | -8.8 | | expenses, MEUR | | | | | | | | -------------------------------------------------------------------------------- | Profit before | 70.3 | 60.5 | 56.9 | 5.3 | 2.2 | 25.2 | 29.9 | | taxes, MEUR | | | | | | | | -------------------------------------------------------------------------------- | % of revenue | 7.6 | 6.1 | 5.9 | 0.5 | 0.3 | 3.0 | 3.7 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Balance sheet | 2,525 | 2,605 | 2,868 | 2,973 | 2,839 | 2,837. | 2,845. | | total, MEUR | .8 | .5 | .5 | .9 | .7 | 9 | 9 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Earnings per | 0.40 | 0.33 | 0.29 | 0.03 | 0.02 | 0.12 | 0.15 | | share, EUR | | | | | | | | -------------------------------------------------------------------------------- | Equity per share, | 5.97 | 6.32 | 6.61 | 6.38 | 5.70 | 5.90 | 6.09 | | EUR | | | | | | | | -------------------------------------------------------------------------------- | Share price at end | 17.97 | 15.98 | 7.30 | 4.58 | 5.05 | 7.40 | 13.01 | | of period, EUR | | | | | | | | -------------------------------------------------------------------------------- | Market | 2,286 | 2,033 | 928.7 | 576.2 | 631.6 | 925.6 | 1,627. | | capitalization at | .1 | .0 | | | | | 3 | | end of period, | | | | | | | | | MEUR | | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Return on | 28.1 | 25.6 | 21.9 | 17.5 | 14.3 | 11.4 | 9.8 | | investment, from | | | | | | | | | the last 12 | | | | | | | | | months, % | | | | | | | | -------------------------------------------------------------------------------- | Equity ratio, % | 33.3 | 34.5 | 33.4 | 30.7 | 28.3 | 29.3 | 29.7 | -------------------------------------------------------------------------------- | Net | 462.7 | 625.2 | 697.0 | 644.5 | 635.2 | 671.4 | 640.4 | | interest-bearing | | | | | | | | | debt at end of | | | | | | | | | period, MEUR | | | | | | | | -------------------------------------------------------------------------------- | Gearing ratio, % | 60.6 | 77.2 | 82.5 | 79.8 | 88.5 | 90.6 | 83.8 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Gross capital | 11.8 | 14.0 | 51.1 | 8.3 | 6.7 | 3.9 | 5.1 | | expenditures, MEUR | | | | | | | | -------------------------------------------------------------------------------- | Order backlog at | 3,627 | 3,670 | 3,964 | 3,233 | 3,045 | 2,916. | 2,800. | | end of period, | .0 | .4 | .9 | .7 | .0 | 4 | 8 | | MEUR | | | | | | | | -------------------------------------------------------------------------------- | Personnel at end | 23,64 | 24,97 | 26,68 | 25,78 | 25,23 | 24,763 | 24,003 | | of period | 4 | 8 | 8 | 4 | 9 | | | --------------------------------------------------------------------------------
SEGMENT INFORMATION BY QUARTER
Revenue by business segment (EUR million)
-------------------------------------------------------------------------------- | | I/200 | II/20 | III/2 | IV/20 | I/200 | II/200 | III/20 | | | 8 | 08 | 008 | 08 | 9 | 9 | 09 | -------------------------------------------------------------------------------- | Building and | 507.8 | 589.1 | 586.1 | 713.0 | 537.9 | 529.2 | 483.9 | | Industrial | | | | | | | | | Services 1) | | | | | | | | -------------------------------------------------------------------------------- | Construction | 284.9 | 308.6 | 285.8 | 268.6 | 239.8 | 253.0 | 246.3 | | Services Finland | | | | | | | | -------------------------------------------------------------------------------- | International | 154.3 | 119.5 | 123.3 | 96.4 | 61.4 | 87.4 | 97.6 | | Construction | | | | | | | | | Services | | | | | | | | -------------------------------------------------------------------------------- | Other items | -20.0 | -26.0 | -24.4 | -27.3 | -15.5 | -16.4 | -12.8 | -------------------------------------------------------------------------------- | YIT Group, total | 927.0 | 991.2 | 970.8 | 1 | 823.7 | 853.1 | 815.0 | | | | | | 050.7 | | | | --------------------------------------------------------------------------------
1) The building system operations acquired from Central Europe transferred to YIT on August 1, 2008. The revenue of these operations for August-December 2008 amounted to EUR 182.6 million.
Operating profit by business segment (EUR million)
-------------------------------------------------------------------------------- | | I/200 | II/20 | III/2 | IV/20 | I/200 | II/200 | III/20 | | | 8 | 08 | 008 | 08 | 9 | 9 | 09 | -------------------------------------------------------------------------------- | Building and | 31.5 | 41.0 | 43.5 | 46.0 | 28.6 | 28.2 | 24.9 | | Industrial | | | | | | | | | Services 1) | | | | | | | | -------------------------------------------------------------------------------- | Construction | 35.4 | 29.4 | 28.1 | 18.8 | 20.9 | 19.9 | 20.8 | | Services Finland | | | | | | | | | 2) | | | | | | | | -------------------------------------------------------------------------------- | International | 16.1 | 6.1 | -4.0 | -9.2 | -23.8 | -5.2 | 3.7 | | Construction | | | | | | | | | Services | | | | | | | | -------------------------------------------------------------------------------- | Other items | -4.4 | -6.0 | -4.5 | -7.1 | -3.6 | -4.8 | -3.8 | -------------------------------------------------------------------------------- | YIT Group, total | 78.6 | 70.5 | 63.1 | 48.5 | 22.1 | 38.1 | 45.6 | --------------------------------------------------------------------------------
Operating profit margin by business segment (%)
-------------------------------------------------------------------------------- | | I/200 | II/20 | III/2 | IV/20 | I/200 | II/200 | III/20 | | | 8 | 08 | 008 | 08 | 9 | 9 | 09 | -------------------------------------------------------------------------------- | Building and | 6.2% | 7.0% | 7.4% | 6.5% | 5.3% | 5.3% | 5.1% | | Industrial | | | | | | | | | Services 1) | | | | | | | | -------------------------------------------------------------------------------- | Construction | 12.4% | 9.5% | 9.8% | 7.0% | 8.7% | 7.9% | 8.4% | | Services Finland | | | | | | | | | 2) | | | | | | | | -------------------------------------------------------------------------------- | International | 10.4% | 5.1% | -3.2% | -9.5% | -38.7 | -5.9% | 3.8% | | Construction | | | | | % | | | | Services | | | | | | | | -------------------------------------------------------------------------------- | YIT Group, total | 8.5% | 7.1% | 6.5% | 4.6% | 2.7% | 4.5% | 5.6% | --------------------------------------------------------------------------------
1a) The building system operations acquired from Central Europe transferred to YIT on August 1, 2008. 1b) On September 30, 2009, the court of arbitration issued its ruling in the dispute concerning the mechanical installation contract YIT carried out for Neste Oil's Porvoo oil refinery. The effect of the ruling on Building and Industrial Services' operating profit for Q3/2009 was EUR -3.2 million. 2) The Supreme Court issued its ruling on disputes connected with the renovation of SOK's former head office building on March 10, 2008. The ruling had a positive effect of EUR 3.5 million on the Construction Services Finland operating profit for 1-3/2008.
Order backlog by business segment at end of period (EUR million)
-------------------------------------------------------------------------------- | | I/200 | II/20 | III/2 | IV/20 | I/200 | II/200 | III/20 | | | 8 | 08 | 008 | 08 | 9 | 9 | 09 | -------------------------------------------------------------------------------- | Building and | 1,048 | 1,021 | 1,284 | 1,050 | 1,048 | 984.7 | 946.7 | | Industrial | .0 | .3 | .1 | .2 | .3 | | | | Services 1) | | | | | | | | -------------------------------------------------------------------------------- | Construction | 1,306 | 1,264 | 1,085 | 874.2 | 819.8 | 846.9 | 909.9 | | Services Finland | .4 | .8 | .9 | | | | | -------------------------------------------------------------------------------- | International | 1,381 | 1,483 | 1,678 | 1,369 | 1,239 | 1,126. | 998.4 | | Construction | .7 | .7 | .2 | .3 | .1 | 8 | | | Services 2) | | | | | | | | -------------------------------------------------------------------------------- | Other items | -109. | -99.4 | -83.3 | -60.0 | -62.1 | -42.0 | -54.2 | | | 1 | | | | | | | -------------------------------------------------------------------------------- | YIT Group, total | 3,627 | 3,670 | 3,964 | 3,233 | 3,045 | 2,916. | 2,800. | | | .0 | .4 | .9 | .7 | .0 | 4 | 8 | --------------------------------------------------------------------------------
1) The business operations acquired from Central Europe transferred to YIT on August 1, 2008. The order backlog of these operations amounted to EUR 265.6 million at the end of 2008. 2) YIT has halted the construction of certain residential projects in the start-up phase in Russia. The sales of these projects had not yet begun. These projects have 2,485 residential units and they accounted for EUR 308.1 million in the order backlog at the end of September 2009. 2. CONSOLIDATED FINANCIAL STATEMENTS JAN 1 - SEP 30, 2009
CONSOLIDATED INCOME STATEMENT JAN 1 - SEP 30, 2009 (EUR million)
-------------------------------------------------------------------------------- | | 1-9/2009 | 1-9/2008 | change, | 1-12/2008 | | | | | % | | -------------------------------------------------------------------------------- | Revenue | 2,491.8 | 2,889.0 | -14 | 3,939.7 | -------------------------------------------------------------------------------- | of which activities outside | 1,342.7 | 1,486.1 | -10 | 2,072.9 | | Finland | | | | | -------------------------------------------------------------------------------- | Operating income and expenses | -2,360.4 | -2,653.6 | -11 | -3,647.4 | -------------------------------------------------------------------------------- | Share of results of associated | -0.4 | 0.0 | - | -0.1 | | companies | | | | | -------------------------------------------------------------------------------- | Depreciation and write-downs | -25.2 | -23.2 | 9 | -31.8 | -------------------------------------------------------------------------------- | Operating profit 1) | 105.8 | 212.2 | -50 | 260.6 | -------------------------------------------------------------------------------- | % of revenue | 4.2 | 7.3 | -42 | 6.6 | -------------------------------------------------------------------------------- | Financial income 2) | 2.6 | 4.7 | -45 | 5.9 | -------------------------------------------------------------------------------- | Exchange rate differences | -22.5 | 2.6 | -965 | -25.0 | -------------------------------------------------------------------------------- | Financial expenses | -28.5 | -31.7 | -10 | -48.4 | -------------------------------------------------------------------------------- | Profit before taxes | 57.4 | 187.8 | -69 | 193.1 | -------------------------------------------------------------------------------- | % of revenue | 2.3 | 6.5 | -65 | 4.9 | -------------------------------------------------------------------------------- | Income taxes 3) | -21.4 | -56.2 | -62 | -58.8 | -------------------------------------------------------------------------------- | Profit for the report period | 36.0 | 131.6 | -73 | 134.3 | -------------------------------------------------------------------------------- | % of revenue | 1.4 | 4.6 | -68 | 3.4 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Attributable to | | | | | -------------------------------------------------------------------------------- | Equity holders of the parent | 36.6 | 130.3 | -72 | 132.9 | | company | | | | | -------------------------------------------------------------------------------- | Minority interests | -0.6 | 1.3 | -146 | 1.4 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Earnings per share attributable | | | | | | to the equity holders of the | | | | | | parent company | | | | | -------------------------------------------------------------------------------- | Earnings per share, EUR | 0.29 | 1.02 | -72 | 1.05 | -------------------------------------------------------------------------------- | Diluted earnings per share, EUR | 0.29 | 1.02 | -72 | 1.05 | --------------------------------------------------------------------------------
1) The operating profit 7-9/2009 includes EUR -3.2 million due to the ruling issued by the court of arbitration on September 30, 2009 concerning the mechanical installation contract YIT carried out for Neste Oil's Porvoo oil refinery. The operating profit 1-3/2008 includes EUR 3.5 million due to the ruling of the Supreme Court of disputes over the refurbishing of SOK's former head office in Finland. 2) The financial income of the 1-3/2008 period includes EUR +2.2 million due to the ruling of the Supreme Court of disputes over the refurbishing of SOK's former head office in Finland. 3) Taxes of the review period are based on the taxes for the whole financial year 2009. During 1-9/2009 the Group's tax rate was 37.3 per cent (1-9/2008: 29.9%). Increase in tax rate was mainly due to negative profits in several companies in Baltic countries and Russia. STATEMENT OF COMPREHENSIVE INCOME JAN 1 - SEP 30, 2009 (EUR million)
-------------------------------------------------------------------------------- | | 1-9/2009 | 1-9/2008 | -------------------------------------------------------------------------------- | Profit for the report period | 36.0 | 131.6 | -------------------------------------------------------------------------------- | Other comprehensive income | | | -------------------------------------------------------------------------------- | - Change in the fair value of interest | -1.0 | -0.5 | | derivatives | | | -------------------------------------------------------------------------------- | -- Deferred tax | 0.3 | 0.1 | -------------------------------------------------------------------------------- | -- Transferred to income statement | 1.8 | 0.0 | -------------------------------------------------------------------------------- | - Change in translation differences | -13.5 | -4.8 | -------------------------------------------------------------------------------- | - Other change | -0.3 | -0.4 | -------------------------------------------------------------------------------- | Other comprehensive income, total | -12.7 | -5.6 | -------------------------------------------------------------------------------- | Total comprehensive income | 23.3 | 126.0 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Attributable to | | | -------------------------------------------------------------------------------- | Equity holders of the parent company | 24.6 | 125.0 | -------------------------------------------------------------------------------- | Minority interests | -1.3 | 1.0 | --------------------------------------------------------------------------------
CONSOLIDATED INCOME STATEMENT JUL 1 - SEP 30, 2009 (EUR million)
-------------------------------------------------------------------------------- | | 7-9/2009 | 7-9/2008 | change, % | -------------------------------------------------------------------------------- | Revenue | 815.0 | 970.8 | -16 | -------------------------------------------------------------------------------- | of which activities outside Finland | 439.8 | 509.4 | -14 | -------------------------------------------------------------------------------- | Operating income and expenses | -761.1 | -899.4 | -15 | -------------------------------------------------------------------------------- | Depreciation and write-downs | -8.3 | -8.3 | - | -------------------------------------------------------------------------------- | Operating profit | 45.6 | 63.1 | -28 | -------------------------------------------------------------------------------- | % of revenue | 5.6 | 6.5 | -14 | -------------------------------------------------------------------------------- | Financial income 1) | 0.9 | 0.9 | 13 | -------------------------------------------------------------------------------- | Exchange rate differences | -7.8 | 6.0 | -230 | -------------------------------------------------------------------------------- | Financial expenses | -8.8 | -13.0 | -32 | -------------------------------------------------------------------------------- | Profit before taxes | 29.9 | 56.9 | -47 | -------------------------------------------------------------------------------- | % of revenue | 3.7 | 5.9 | -37 | -------------------------------------------------------------------------------- | Income taxes 2) | -11.2 | -19.5 | -43 | -------------------------------------------------------------------------------- | Profit for the report period | 18.7 | 37.4 | -50 | -------------------------------------------------------------------------------- | % of revenue | 2.3 | 3.8 | -40 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Attributable to | | | | -------------------------------------------------------------------------------- | Equity holders of the parent company | 18.9 | 37.1 | -49 | -------------------------------------------------------------------------------- | Minority interests | -0.2 | 0.3 | -167 | -------------------------------------------------------------------------------- | | | | | -------------------------------------------------------------------------------- | Earnings per share attributable to | | | | | the equity holders of the parent | | | | | company | | | | -------------------------------------------------------------------------------- | Earnings per share, EUR | 0.15 | 0.29 | -48 | -------------------------------------------------------------------------------- | Diluted earnings per share, EUR | 0.15 | 0.29 | -48 | --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET (EUR million)
-------------------------------------------------------------------------------- | | 9/2009 | 9/2008 | change, | 12/2008 | | | | | % | | -------------------------------------------------------------------------------- | ASSETS | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Non-current assets | | | | | -------------------------------------------------------------------------------- | Property, plant and equipment | 96.2 | 102.2 | -6 | 104.6 | -------------------------------------------------------------------------------- | Goodwill | 291.0 | 289.6 | 1 | 291.0 | -------------------------------------------------------------------------------- | Other intangible assets | 32.9 | 36.2 | -9 | 35.1 | -------------------------------------------------------------------------------- | Shares in associated companies | 3.4 | 4.0 | -15 | 3.8 | -------------------------------------------------------------------------------- | Investments | 2.3 | 2.7 | -15 | 2.5 | -------------------------------------------------------------------------------- | Receivables | 13.0 | 15.2 | -15 | 12.7 | -------------------------------------------------------------------------------- | Deferred tax assets | 39.6 | 32.6 | 22 | 34.6 | -------------------------------------------------------------------------------- | | | | | | -------------------------------------------------------------------------------- | Current assets | | | | | -------------------------------------------------------------------------------- | Inventories | 1,357.7 | 1,433.6 | -5 | 1,509.9 | -------------------------------------------------------------------------------- | Trade and other receivables | 764.0 | 904.3 | -16 | 778.0 | -------------------------------------------------------------------------------- | Cash and cash equivalents | 245.8 | 48.1 | 411 | 201.7 | -------------------------------------------------------------------------------- | | | | | | -------------------------------------------------------------------------------- | Total assets | 2,845.9 | 2,868.5 | -1 | 2,973.9 | -------------------------------------------------------------------------------- | | | | | , | -------------------------------------------------------------------------------- | EQUITY AND LIABILITIES | | | | , | -------------------------------------------------------------------------------- | | | | | | -------------------------------------------------------------------------------- | Equity attributable to equity | | | | | | holders of the parent company | | | | | -------------------------------------------------------------------------------- | Share capital | 149.2 | 149.2 | - | 149.2 | -------------------------------------------------------------------------------- | Other equity | 612.1 | 691.2 | -11 | 653.9 | -------------------------------------------------------------------------------- | | | | | | -------------------------------------------------------------------------------- | Minority interests | 3.2 | 4.8 | -33 | 4.6 | -------------------------------------------------------------------------------- | | | | | | -------------------------------------------------------------------------------- | Total equity | 764.5 | 845.2 | -10 | 807.7 | -------------------------------------------------------------------------------- | | | | | | -------------------------------------------------------------------------------- | Non-current liabilities | | | | | -------------------------------------------------------------------------------- | Deferred tax liabilities | 68.5 | 75.2 | -9 | 68.4 | -------------------------------------------------------------------------------- | Pension liabilities | 19.4 | 15.8 | 23 | 19.7 | -------------------------------------------------------------------------------- | Provisions | 49.1 | 53.7 | -9 | 45.0 | -------------------------------------------------------------------------------- | Interest-bearing liabilities | 516.5 | 386.7 | 34 | 516.2 | -------------------------------------------------------------------------------- | Other liabilities | 3.6 | 1.7 | 112 | 4.0 | -------------------------------------------------------------------------------- | | | | | | -------------------------------------------------------------------------------- | Current liabilities | | | | | -------------------------------------------------------------------------------- | Trade and other payables | 1,009.3 | 1,105.3 | -9 | 1,140.8 | -------------------------------------------------------------------------------- | Provisions | 45.3 | 26.6 | 70 | 42.0 | -------------------------------------------------------------------------------- | Interest-bearing current | 369.7 | 358.3 | 3 | 330.1 | | liabilities | | | | | -------------------------------------------------------------------------------- | | | | | | -------------------------------------------------------------------------------- | Total equity and liabilities | 2,845.9 | 2,868.5 | -1 | 2,973.9 | --------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (EUR million)
-------------------------------------------------------------------------------- | | Shar | Lega | Othe | Cumul | Fair | Trea | Retain | Minor | Total | | | e | l | r | ative | valu | sury | ed | ity | equit | | | capi | rese | rese | trans | e | shar | earnin | inter | y | | | tal | rve | rve | latio | rese | es | gs | est | | | | | | | n | rve | | | | | | | | | | diffe | | | | | | | | | | | rence | | | | | | | | | | | s | | | | | | -------------------------------------------------------------------------------- | Equity | 149. | 1.4 | 13.9 | -35.2 | -1.7 | -6.6 | 682.1 | 4.6 | 807.7 | | on Jan | 2 | | | | | | | | | | 1, 2009 | | | | | | | | | | -------------------------------------------------------------------------------- | Dividend | - | - | - | - | - | - | -62.5 | - | -62.5 | | paid, | | | | | | | | | | | EUR | | | | | | | | | | | 0.50/sha | | | | | | | | | | | re | | | | | | | | | | -------------------------------------------------------------------------------- | Purchase | - | - | - | - | - | -4.0 | - | - | -4.0 | | of | | | | | | | | | | | treasury | | | | | | | | | | | shares | | | | | | | | | | -------------------------------------------------------------------------------- | Shares | - | - | - | - | - | - | - | - | - | | subscrib | | | | | | | | | | | ed with | | | | | | | | | | | options | | | | | | | | | | -------------------------------------------------------------------------------- | Employee | - | - | -2.3 | - | - | - | 2.3 | - | 0.0 | | share | | | | | | | | | | | option | | | | | | | | | | | scheme | | | | | | | | | | -------------------------------------------------------------------------------- | Transfer | - | 0.3 | - | - | - | - | -0.3 | - | 0.0 | | from | | | | | | | | | | | retained | | | | | | | | | | | earnings | | | | | | | | | | -------------------------------------------------------------------------------- | Other | - | - | - | -14.7 | 1.1 | - | 38.2 | -1.3 | 23.3 | | comprehe | | | | | | | | | | | nsive | | | | | | | | | | | income, | | | | | | | | | | | total | | | | | | | | | | -------------------------------------------------------------------------------- | Equity | 149. | 1.7 | 11.6 | -49.9 | -0.6 | -10. | 659.8 | 3.3 | 764.5 | | on Sept | 2 | | | | | 6 | | | | | 30, 2009 | | | | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Equity | 149. | 1.0 | 13.9 | -9.0 | 2.0 | - | 657.6 | 3.8 | 818.4 | | on Jan | 1 | | | | | | | | | | 1, 2008 | | | | | | | | | | -------------------------------------------------------------------------------- | Dividend | - | - | - | - | - | - | -101.8 | 0.0 | -101. | | paid, | | | | | | | | | 8 | | EUR | | | | | | | | | | | 0.80/sha | | | | | | | | | | | re | | | | | | | | | | -------------------------------------------------------------------------------- | Purchase | - | - | - | - | - | - | - | - | - | | of | | | | | | | | | | | treasury | | | | | | | | | | | shares | | | | | | | | | | -------------------------------------------------------------------------------- | Shares | 0.1 | - | - | - | - | - | - | - | 0.1 | | subscrib | | | | | | | | | | | ed with | | | | | | | | | | | options | | | | | | | | | | -------------------------------------------------------------------------------- | Employee | - | - | - | - | - | - | 2.5 | - | 2.5 | | share | | | | | | | | | | | option | | | | | | | | | | | scheme | | | | | | | | | | -------------------------------------------------------------------------------- | Transfer | - | 0.4 | - | - | - | - | -0.4 | - | 0.0 | | from | | | | | | | | | | | retained | | | | | | | | | | | earnings | | | | | | | | | | -------------------------------------------------------------------------------- | Other | - | - | - | -3.0 | -0.4 | - | 128.4 | 1.0 | 127.2 | | comprehe | | | | | | | | | | | nsive | | | | | | | | | | | income, | | | | | | | | | | | total | | | | | | | | | | -------------------------------------------------------------------------------- | Equity | 149. | 1.4 | 13.9 | -12.0 | 1.6 | - | 686.3 | 4.8 | 845.2 | | on Sept | 2 | | | | | | | | | | 30, 2008 | | | | | | | | | | --------------------------------------------------------------------------------
CONSOLIDATED CASH FLOW STATEMENT (EUR million)
-------------------------------------------------------------------------------- | | 1-9/2009 | 1-9/2008 | change, | 1-12/2008 | | | | | % | | -------------------------------------------------------------------------------- | Cash flows from operating | | | | | | activities | | | | | -------------------------------------------------------------------------------- | Net profit for the period | 35.9 | 131.6 | -73 | 134.3 | -------------------------------------------------------------------------------- | Reversal of accrual-based items | 125.8 | 99.9 | 26 | 197.1 | -------------------------------------------------------------------------------- | Change in working capital | | | | | -------------------------------------------------------------------------------- | Change in trade and other | 53.6 | -71.4 | -175 | 4.5 | | receivables | | | | | -------------------------------------------------------------------------------- | Change in inventories | 87.0 | -165.1 | -153 | -318.2 | -------------------------------------------------------------------------------- | Change in current liabilities | -158.1 | 39.3 | -502 | 132.4 | -------------------------------------------------------------------------------- | Change in working capital, | -17.5 | -197.2 | -91 | -181.3 | | total | | | | | -------------------------------------------------------------------------------- | Interest paid | -26.0 | -26.1 | 50 | -45.4 | -------------------------------------------------------------------------------- | Realised exchange rate gain or | -2.6 | 8.8 | - | 2.7 | | losses | | | | | -------------------------------------------------------------------------------- | Interest received | 2.9 | 4.6 | -37 | 5.7 | -------------------------------------------------------------------------------- | Taxes paid | -31.1 | -41.4 | -25 | -65.3 | -------------------------------------------------------------------------------- | Net cash generated from | 87.4 | -19.8 | -541 | 47.8 | | operating activities | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Cash flows from investing | | | | | | activities | | | | | -------------------------------------------------------------------------------- | Acquisition of subsidiaries, | -7.5 | -45.6 | -84 | -38.9 | | net of cash | | | | | -------------------------------------------------------------------------------- | Acquisition of shares in | - | - | - | -0.2 | | associated companies | | | | | -------------------------------------------------------------------------------- | Purchase of property, plant and | -11.2 | -24.8 | -55 | -33.5 | | equipment | | | | | -------------------------------------------------------------------------------- | Purchase of intangible assets | -4.5 | -0.1 | 4400 | -4.1 | -------------------------------------------------------------------------------- | Increases in other investments | -0.1 | -0.1 | - | - | -------------------------------------------------------------------------------- | Disposals of subsidiaries and | 0.0 | 5.3 | - | 4.2 | | businesses | | | | | -------------------------------------------------------------------------------- | Proceeds from sale of fixed | 3.3 | 4.2 | -21 | 4.7 | | assets | | | | | -------------------------------------------------------------------------------- | Proceeds from sale of other | 0.2 | 0.2 | - | 0.6 | | investments | | | | | -------------------------------------------------------------------------------- | Net cash used in investing | -19.8 | -60.9 | -67 | -67.2 | | activities | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Operating cash flow after | 67.6 | -80.7 | -184 | -19.4 | | investments | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Cash flow from financing | | | | | | activities | | | | | -------------------------------------------------------------------------------- | Proceeds from share issues | 0.0 | 0.1 | - | 0.1 | -------------------------------------------------------------------------------- | Change in current liabilities | 4.5 | 134.3 | -97 | 103.3 | -------------------------------------------------------------------------------- | Proceeds from borrowings | 60.0 | 40.0 | -7894 | 265.0 | -------------------------------------------------------------------------------- | Repayments of borrowings | -21.6 | -3.4 | 535 | -97.5 | -------------------------------------------------------------------------------- | Payments of financial leasing | -0.1 | -0.4 | -75 | -0.5 | | debts | | | | | -------------------------------------------------------------------------------- | Purchase of treasury shares | -4.0 | - | - | -6.6 | -------------------------------------------------------------------------------- | Dividends paid | -62.8 | -102.0 | - | -102.0 | -------------------------------------------------------------------------------- | Net cash used in financing | -24.0 | 68.6 | -135 | 161.8 | | activities | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Net change in cash and cash | 43.6 | -12.1 | -460 | 142.4 | | equivalents | | | | | -------------------------------------------------------------------------------- | Cash and cash equivalents at | 197.7 | 60.2 | 228 | 59.2 | | the beginning of the period | | | | | -------------------------------------------------------------------------------- | Change in the fair value of the | 1.9 | 0.0 | - | -3.9 | | cash equivalents | | | | | -------------------------------------------------------------------------------- | Cash and cash equivalents at | 243.2 | 48.1 | 406 | 197.7 | | the end of the period | | | | | --------------------------------------------------------------------------------
3. NOTES
ACCOUNTING PRINCIPLES OF THE INTERIM REPORT
YIT Corporation's Interim Report for January 1 - September 30, 2009 has been drafted in line with IAS 34: Interim Financial Reporting. YIT has applied the same accounting policy and IFRS standards and interpretations in the drafting of the Interim Report as in its annual financial statements for 2008. The information presented in the Interim Report has not been audited.
Impact of new standards effective 2009
The following new or revised standards effective from January 1, 2009 have impact on YIT Group's financial reporting:
IAS 23 Borrowing costs: Borrowing costs attributable to construction projects that begin on January1, 2009 or later, will be capitalised in the balance sheet and are recognised to Profit and loss account when project revenue is recognised. Due to the transition period, adopting this revised standard had only poor impact during the review period.
IFRS 8 Operating Segments: According to standard, the segment figures presented must be based on the internal reports regularly reviewed by the entity's management. Adopting this standard does not change significantly Group's segment reporting, as already previously published segment information was based on internal reporting structure.
IAS1 Presentation of Financial Statements: From the beginning of year 2009 Group shows separately both the income statement and the comprehensive income statement
Evaluation of the future impact of new interpretations
IFRIC 15 Agreements for the Construction of Real Estate: The interpretation provides guidance on when to account for revenue from the construction of real estate based on the percentage of completion and when based on the delivery. The implementation of this interpretation will mainly change YIT Group's revenue recognition of housing developer contracting to take place at the time of delivery, while so far revenue has been recognised based on the percentage of completion method. EU Commission has enforced the interpretation in July 2009 and it will be applied to the financial period starting on January 1, 2010.
Currency exchange rates used in the Interim Report
-------------------------------------------------------------------------------- | | | Average rate | Balance sheet rate | | | | 1-9/2009 | September 30, 2009 | -------------------------------------------------------------------------------- | 1 EUR = | SEK | 10.7089 | 10.2320 | -------------------------------------------------------------------------------- | | NOK | 8.8416 | 8.4600 | -------------------------------------------------------------------------------- | | DKK | 7.4476 | 7.4443 | -------------------------------------------------------------------------------- | | EEK | 15.6466 | 15.6466 | -------------------------------------------------------------------------------- | | LVL | 0.7028 | 0.7028 | -------------------------------------------------------------------------------- | | LTL | 3.4528 | 3.4528 | -------------------------------------------------------------------------------- | | RUB | 44.3164 | 43.9800 | -------------------------------------------------------------------------------- | | HUF | 283.58 | 269.70 | -------------------------------------------------------------------------------- | | CZK | 26.608 | 25.164 | -------------------------------------------------------------------------------- | | PLN | 4.3785 | 4.2295 | --------------------------------------------------------------------------------
FINANCIAL RISK MANAGEMENT
The principles described in the annual financial statements 2008 have been applied in the management of financial risks.
Financial risks include liquidity, interest rate, currency and credit risk, and their management is a part of the Group's financing policy. The Board of Directors has approved the Corporate Finance Policy. The Group's Finance Department is responsible for the practical implementation of the policy in association with the business segments.
The Group's strategic financial targets guide the use and management of the Group's capital. Achieving the strategic targets is supported by maintaining an optimum Group capital structure. Capital structure is mainly influenced by controlling the amount of working capital tied to business operations.
A more detailed account of financial risks has been published in the notes to the financial statements for 2008.
SEGMENT INFORMATION
As of the beginning of 2009, the operations of YIT Group have been divided into three business segments: Building and Industrial Services, Construction Services Finland and International Construction Services. The segment structure was adjusted at the beginning of the year by merging the Building Systems and Industrial Services segments into a single segment, Building and Industrial Services.
The figures for 2008 are comparison figures calculated as the business segment structure changed on January 1, 2009. YIT published the comparison figures for 2008 according to the new segment structure in a stock exchange release on March 23, 2009.
The chief operating decision-maker has been identified as the YIT Group's Management Board, which review the Group's internal reporting in order to assess performance and allocate resources to the segments.
Revenue by business segment (EUR million)
-------------------------------------------------------------------------------- | | 1-9/2009 | 1-9/2008 | change, | 1-12/2008 | | | | | % | | -------------------------------------------------------------------------------- | Building and Industrial | 1,551.0 | 1,683.0 | -8 | 2,396.0 | | Services 1) | | | | | -------------------------------------------------------------------------------- | - Group internal | 42.4 | 65.8 | -36 | 90.2 | -------------------------------------------------------------------------------- | - external | 1,508.6 | 1,617.2 | -7 | 2,305.8 | -------------------------------------------------------------------------------- | Construction Services Finland | 739.1 | 879.3 | -16 | 1,147.9 | -------------------------------------------------------------------------------- | - Group internal | 1.3 | 2.6 | -50 | 3.7 | -------------------------------------------------------------------------------- | - external | 737.8 | 876.7 | -16 | 1,144.2 | -------------------------------------------------------------------------------- | International Construction | 246.4 | 397.1 | -38 | 493.5 | | Services | | | | | -------------------------------------------------------------------------------- | - Group internal | 2.5 | 3.8 | -34 | 6.4 | -------------------------------------------------------------------------------- | - external | 243.9 | 393.3 | -38 | 487.0 | -------------------------------------------------------------------------------- | Other items | 1.5 | 1.8 | -17 | 2.6 | -------------------------------------------------------------------------------- | YIT Group -external | 2,491.8 | 2,889.0 | -14 | 3,939.7 | --------------------------------------------------------------------------------
1) The building system operations acquired from Central Europe transferred to YIT on August 1, 2008. The revenue of these operations for August-December 2008 amounted to EUR 182.6 million.
Operating profit by business segment (EUR million)
-------------------------------------------------------------------------------- | | 1-9/2009 | 1-9/2008 | change, | 1-12/2008 | | | | | % | | -------------------------------------------------------------------------------- | Building and Industrial | 81,7 | 116,0 | -30 | 162,0 | | Services 1) | | | | | -------------------------------------------------------------------------------- | Construction Services Finland | 61,6 | 92,9 | -34 | 111,7 | | 2) | | | | | -------------------------------------------------------------------------------- | International Construction | -25,3 | 18,2 | -239 | 9,0 | | Services | | | | | -------------------------------------------------------------------------------- | Other items | -12,2 | -14,9 | -18 | -22,0 | -------------------------------------------------------------------------------- | YIT Group, total | 105,8 | 212,2 | -50 | 260,7 | --------------------------------------------------------------------------------
1a) The building system operations acquired from Central Europe transferred to YIT on August 1, 2008. 1b) On September 30, 2009, the court of arbitration issued its ruling in the dispute concerning the mechanical installation contract YIT carried out for Neste Oil's Porvoo oil refinery. The effect of the ruling on Building and Industrial Services' operating profit for 7-9/2009 was EUR -3.2 million. 2) The Supreme Court issued its ruling on disputes connected with the renovation of SOK's former head office building on March 10, 2008. The ruling had a positive effect of EUR 3.5 million on the Construction Services Finland operating profit for 1-3/2008.
Order backlog by business segment at end of period (EUR million)
-------------------------------------------------------------------------------- | | 9/2009 | 9/2008 | change, | 12/2008 | | | | | % | | -------------------------------------------------------------------------------- | Building and Industrial | 946.7 | 1,284.1 | -26 | 1,050.2 | | Services 1) | | | | | -------------------------------------------------------------------------------- | Construction Services Finland | 909.9 | 1,085.9 | -16 | 874.2 | -------------------------------------------------------------------------------- | International Construction | 998.4 | 1,678.2 | -41 | 1,369.3 | | Services 2) | | | | | -------------------------------------------------------------------------------- | Other items | -54.2 | -83.6 | -36 | -60.0 | -------------------------------------------------------------------------------- | YIT Group, total | 2,800.8 | 3,964.6 | -29 | 3,233.7 | --------------------------------------------------------------------------------
1) The business operations acquired from Central Europe transferred to YIT on August 1, 2008. The order backlog of these operations amounted to EUR 265.6 million at the end of 2008. 2) YIT has halted the construction of certain residential projects in the start-up phase in Russia. The sales of these projects had not yet begun. These projects have 2,485 residential units and they accounted for EUR 308.1 million in the order backlog at the end of September 2009.
UNUSUAL ITEMS AFFECTING OPERATING PROFIT (EUR million)
-------------------------------------------------------------------------------- | | 1-9/2009 | 1-9/2008 | -------------------------------------------------------------------------------- | Building and Industrial Services 1) | -3.2 | - | -------------------------------------------------------------------------------- | Construction Services Finland 2) | - | 3.5 | -------------------------------------------------------------------------------- | YIT Group, total | -3.2 | 3.5 | --------------------------------------------------------------------------------
1) On September 30, 2009, the court of arbitration issued its ruling in the dispute concerning the mechanical installation contract YIT carried out for Neste Oil's Porvoo oil refinery. The effect of the ruling on Building and Industrial Services' operating profit for 7-9/2009 was EUR -3.2 million.
2) The Supreme Court issued its ruling on disputes connected with the renovation of SOK's former head office building on March 10, 2008. The ruling had a positive effect of EUR 3.5 million on the Construction Services Finland operating profit for 1-3/2008.
ACQUIRED AND DIVESTED BUSINESSES (EUR million)
During the review period there were no acquisitions or major divestments. The cash flow effect of the business acquired in 2008 was EUR -7.5 million for the review period.
CHANGES IN PROPERTY, PLANT AND EQUIPMENT (EUR million)
-------------------------------------------------------------------------------- | | 1-9/2009 | 1-9/2008 | change, | 1-12/2008 | | | | | % | | -------------------------------------------------------------------------------- | Carrying value at the beginning | 104.6 | 92.5 | 13 | 92.5 | | of period | | | | | -------------------------------------------------------------------------------- | Increase | 11.7 | 23.6 | -50 | 33.2 | -------------------------------------------------------------------------------- | Increase through acquisitions | 0.0 | 6.9 | -100 | 6.2 | -------------------------------------------------------------------------------- | Decrease | -2.6 | -3.2 | -19 | -3.4 | -------------------------------------------------------------------------------- | Depreciation and value | -17.4 | -15.8 | 10 | -24.6 | | adjustments | | | | | -------------------------------------------------------------------------------- | Reclassification | -0.1 | -1.8 | -94 | 0.7 | -------------------------------------------------------------------------------- | Carrying value at the end of | 96.2 | 102.2 | -6 | 104.6 | | period | | | | | --------------------------------------------------------------------------------
INVENTORIES (EUR million)
-------------------------------------------------------------------------------- | | 9/2009 | 9/2008 | change, | 12/2008 | | | | | % | | -------------------------------------------------------------------------------- | Raw materials and consumables | 18.1 | 22.7 | -20 | 20.1 | -------------------------------------------------------------------------------- | Work in progress | 586.8 | 644.0 | -9 | 690.5 | -------------------------------------------------------------------------------- | Land areas and plot owing | 585.4 | 581.5 | 1 | 579.3 | | companies | | | | | -------------------------------------------------------------------------------- | Shares in completed housing and | 123.7 | 92.8 | 33 | 135.9 | | real estate companies | | | | | -------------------------------------------------------------------------------- | Advance payments | 43.0 | 92.5 | -54 | 83.7 | -------------------------------------------------------------------------------- | Other inventories | 0.7 | 0.1 | 600 | 0.4 | -------------------------------------------------------------------------------- | Total inventories | 1,357.7 | 1,433.6 | -5 | 1,509.9 | --------------------------------------------------------------------------------
NOTES ON EQUITY (EUR million)
-------------------------------------------------------------------------------- | Share capital and share premium | Number of | Share | Treasury | | reserve | shares, | capital | shares | | | 1000 | | | -------------------------------------------------------------------------------- | Jan 1, 2009 | 125,798,422 | 149.2 | -6.6 | -------------------------------------------------------------------------------- | Purchase of own shares | -720,000 | - | -4.0 | -------------------------------------------------------------------------------- | Sep 30, 2009 | 125,078,422 | 149.2 | -10.6 | --------------------------------------------------------------------------------
INTEREST-BEARING LIABILITIES (EUR million)
No new long-term bonds were issued during the review period.
CHANGE IN CONTINGENT LIABILITIES AND ASSETS AND COMMITMENTS (EUR million)
-------------------------------------------------------------------------------- | | 9/2009 | 9/2008 | change, | 12/2008 | | | | | % | | -------------------------------------------------------------------------------- | Collateral given for own | | | | | | commitments | | | | | -------------------------------------------------------------------------------- | - Corporate mortgages | 29.3 | 29.3 | - | 29.3 | -------------------------------------------------------------------------------- | - Real estate mortgages | - | - | - | - | -------------------------------------------------------------------------------- | - Other mortgages | 133.0 | - | - | - | -------------------------------------------------------------------------------- | Other commitments | | | | | -------------------------------------------------------------------------------- | - Repurchase commitments | 120.1 | 170.1 | -29 | 139.1 | -------------------------------------------------------------------------------- | - Operating leases | 329.7 | 290.6 | 13 | 352.2 | -------------------------------------------------------------------------------- | - Rental guarantees for clients | 10.7 | 8.8 | 22 | 11.0 | -------------------------------------------------------------------------------- | - Other contingent liabilities | 0.6 | 3.8 | -84 | - | -------------------------------------------------------------------------------- | - Other guarantees | - | 0.5 | -100 | - | -------------------------------------------------------------------------------- | Liability under derivative | | | | | | contracts | | | | | -------------------------------------------------------------------------------- | - Value of underlying | | | | | | instruments | | | | | -------------------------------------------------------------------------------- | -- Interest rate derivatives | 260.2 | 306.6 | -15 | 239.2 | -------------------------------------------------------------------------------- | -- Foreign currency forward | 97.8 | 301.5 | -68 | 213.7 | | contracts | | | | | -------------------------------------------------------------------------------- | - Market value | | | | | -------------------------------------------------------------------------------- | -- Interest rate forward | -6.9 | 3.2 | -316 | -5.3 | | contracts | | | | | -------------------------------------------------------------------------------- | - Foreign currency forward | -4.7 | -0.6 | 683 | 26.8 | | contracts | | | | | --------------------------------------------------------------------------------
TRANSACTIONS WITH ASSOCIATED COMPANIES (EUR million)
-------------------------------------------------------------------------------- | | 1-9/2009 | 1-9/2008 | change, | 1-12/2008 | | | | | % | | -------------------------------------------------------------------------------- | Sales to associated companies | 5.2 | 2.3 | 74 | 3.6 | -------------------------------------------------------------------------------- | Purchases from associated | 2.4 | 3.2 | -50 | 14.4 | | companies | | | | | -------------------------------------------------------------------------------- | Trade and other receivables | 0.1 | 0.0 | - | 0.1 | -------------------------------------------------------------------------------- | Trade and other liabilities | 0.0 | 0.0 | - | 0.5 | --------------------------------------------------------------------------------