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STOCK EXCHANGE RELEASE May 6, 2003 8:30
YITs Interim Report, January 1 March 31, 2003: Net sales see stable growth and order backlog strengthens significantly once again
· The YIT Groups net sales in the January-March period were 12 per cent higher than in the previous year and amounted to EUR 431.5 million (Jan-Mar/2002: EUR 386.4 million). International operations accounted for 20 per cent of the Groups net sales (23%). The share of net sales accounted for by the maintenance and servicing business rose from 23 to 25 per cent.
· Operating profit for the review period was EUR 6.9 million (EUR 14.8 million). The operating profit margin was 1.6 (3.8%). Operating profit was reduced by EUR 5.7 million recorded as a loss by YIT on the basis of a ruling by the Helsinki District Court in February. The Helsinki District Court rejected YIT Corporations claim concerning the conversion and additional works involved in the refurbishing of SOKs former head office building in 1999 as well as the additional expenses caused by the lengthening of the duration of the contract. Instead, the District Court ordered YIT Corporation to pay SOK a total of EUR 2.7 million in late delivery fines and other compensation with interest as well as litigation costs. YIT has appealed the decision. YIT Primatel Ltds budgeted operating loss of EUR 1.7 million during the first quarter also cut into operating profit.
YIT Primatel was not part of the Group in the first quarter of 2002. There is strong seasonal variation in YIT Primatels net sales and earnings and its full-year earnings are expected to be clearly positive.
· Profit before extraordinary items and taxes was EUR 3.3 million (EUR 12.2 million). Profit after taxes was EUR 1.6 million (EUR 3.1 million). The residual taxes levied by the Tax Office for Major Corporations in March 2002, EUR 10.9 million, cut into the result for the comparison period. YIT appealed the decision and the Tax Correction Board of the Tax Office for Major Corporations approved the appeal in December. The matter is still being reviewed in the Administrative Court, and thus the residual taxes repaid to YIT in January 2003 by the Finnish Tax Administration have not been accounted for in the 2002 financial result or the result for the review period.
· Earnings per share amounted to EUR 0.06 (EUR 0.11).
Exclusive of the above mentioned residual taxes, earnings per share amounted to EUR 0.27 in the comparison period. Equity per share rose to EUR 11.70 (EUR 10.96).
· Return on investment for the 12-month period ending at the close of the report period was 17.0 per cent (20.4%). The equity ratio was 34.7 per cent (38.5%).
· The Groups uninvoiced backlog of orders exceeded the milestone of one billion euros for the first time. At the end of the period, the backlog of orders was a third higher than a year earlier, amounting to EUR 1,008.3 million (EUR 763.5 million). The backlog for international orders rose by 51 per cent to EUR 257.9 million (EUR 170.8 million). Due to their nature, part of the Groups maintenance and servicing operations are not included in the order backlog.
Market situation remains stable
The trend in YITs net sales is supported by the continuing brisk demand for residences and premises for commercial and public services in Finlands growth centres. The growth in residential production and renovation in Finland compensates for the decline in office and industrial construction in the construction and building systems markets (heating, water, air-conditioning, electricity and automation contracting and maintenance). According to the business cycle report published by the Confederation of Finnish Construction Industries RT in March, Finlands construction market will remain stable both during the present year and the next. Investments in machinery and equipment in Finland will decline by about three per cent in 2003, but will swing into growth of three per cent in 2004 according to the Research Institute of the Finnish Economy ETLA. The market for industrial, property and infrastructure maintenance will expand as the outsourcing trend progresses. The total market for telecommunications network construction and maintenance will not grow during the present or the next year, but growth is expected in the outsourcing of operators field functions.
At the end of February, the Swedish Construction Federation BI predicted that construction investments in Sweden will decline by three per cent both this year and the next. However, the growth in building repair works compensates for the effect of declining new construction on the building systems market. The Swedish National Institute of Economic Research KI in turn estimates that fixed investments in Sweden will decline by 0.3 per cent during the present year and grow by 4.6 per cent in 2004. The outlook for YIT Installations Scandinavian business depends largely on trends in Swedish investments in building construction and maintenance as well as capital investments by industry.
In the Baltic countries and Russia, growth in investments outpaces growth in the Nordic countries. Demand for market-financed residences in particular has strengthened in St Petersburg, Tallinn and Vilnius.
Good outlook for 2003
Thanks to its strong order backlog, the trend in YITs net sales and earnings will be stable in 2003.
Publication on May 6 and subsequent Interim Reports
An event for investment analysts will be held at YITs head office at 13:00 on Tuesday, May 6, 2003. The address is Panuntie 11, Helsinki, Finland.
The Interim Report for the January-June period will be published on August 1, 2003, and the Interim Report for January-September on October 30, 2003. Interim Reports will not be printed; rather, they will be published as stock exchange releases and on the companys site at www.yit.fi. Copies of Interim Reports can be ordered from YIT Corporation, Corporate Communications, P.O. Box 36, FIN-00621 Helsinki, Finland, fax +358 20 43 33746.
YIT CORPORATION
Reino Hanhinen Group CEO
For additional information, contact: Group CEO Reino Hanhinen, tel. +358 20 433 2454,reino.hanhinen@yit.fi Executive Vice President Esko Mäkelä, tel. +358 20 433 2258,esko.makela@yit.fi Veikko Myllyperkiö, Vice President, Corporate Communications, tel.+358 20 433 2297, veikko.myllyperkio@yit.fi Petra Thorén, Manager, Investor Relations, tel. +358 20 433 2635, petra.thoren@yit.fi
ANNEXES Interim Report, January 1 March 31, 2003 Consolidated income statement, balance sheet, cash flow statement, key figures and contingent liabilities as well as net sales, operating profit, order backlog by division and the Groups quarterly trends
Distribution: Helsinki Exchanges, principal media, www.yit.fi
YIT CORPORATIONS INTERIM REPORT, JANUARY 1 MARCH 31, 2003
Net sales see stable growth
The YIT Groups net sales for the January-March rose to EUR 431.5 million (Jan-Mar/2002: EUR 386.4 million), up 12 per cent on the previous year. Of the net sales, 65 per cent (63%) were generated by the business operations of the YIT Construction subgroup, which offers construction services, and 30 per cent (37%) by those of the YIT Installation subgroup, which provides capital investment and maintenance services for industry as well as building system services. YIT Primatel Ltd, which builds and maintains telecommunications networks, accounted for 5 per cent of net sales. YIT Primatel has been part of the YIT Group since June 1, 2002.
Net sales by subgroup (EUR million) 1-3/2003 1-3/2002 Change YIT Construction subgroup 280.6 249.4 13% YIT Installation subgroup 129.2 144.9 -11% YIT Primatel subgroup 25.5 Other items -3.8 -7.9 -52% YIT Group, total 431.5 386.4 12%
YITs service chain encompasses the entire life cycle of investments. The life cycle strategy seeks to improve service capability, grow business operations and achieve a steadier flow of income. An increasing share of the Groups net sales comes from its industrial, property, telecommunications network and traditional infrastructure maintenance and servicing business.
During the report period, the share of net sales accounted for by these business operations rose to EUR 108.4 million (EUR 87.1 million), or 25 per cent (23%) of all net sales.
The share of the Groups net sales accounted for by international activities was EUR 84.5 million (EUR 89.1 million), or 20 per cent (23%). YITs strategy for international expansion is to bolster the market position of YIT Construction and YIT Primatel in the Baltic countries and Russia and that of YIT Installation in the Nordic countries.
Compensation for the refurbishing of SOKs former head office property reduces operating profit
Operating profit for the review period was EUR 6.9 million (EUR 14.8 million). The operating profit margin was 1.6 (3.8%).
Operating profit was reduced by EUR 5.7 million recorded as a loss by YIT on the basis of a ruling by the Helsinki District Court in February. The Helsinki District Court rejected YIT Corporations claim concerning the conversion and additional works involved in the refurbishing of SOKs former head office building in 1999 as well as the additional expenses caused by the lengthening of the duration of the contract. Instead, the District Court ordered YIT Corporation to pay SOK a total of EUR 2.7 million in late delivery fines and other compensation with interest as well as litigation costs. YIT has appealed the decision.
YIT Primatel Ltds budgeted operating loss of EUR 1.7 million during the first quarter also cut into operating profit. YIT Primatel was not part of the Group in the first quarter of 2002.
There is strong seasonal variation in YIT Primatels net sales and earnings and its full-year earnings are expected to be clearly positive.
Operating profit by subgroup (EUR million) 1-3/2003 1-3/2002 Change YIT Construction subgroup 9.5 12.6 -25% YIT Installation subgroup 1.8 4.2 -57% YIT Primatel subgroup -1.7 Other items -2.7 -2.0 35% YIT Group, total 6.9 14.8 -53%
Profit before extraordinary items and taxes was EUR 3.3 million (EUR 12.2 million). Profit after taxes was EUR 1.6 million (EUR 3.1 million). The residual taxes levied by the Tax Office for Major Corporations in March 2002, EUR 10.9 million, cut into the result for the comparison period. YIT appealed the decision and the Tax Correction Board of the Tax Office for Major Corporations approved the appeal in December. The Finnish Tax Administration repaid the residual taxes with interest on January 16, 2003, to a total of EUR 11.0 million. However, because the tax representative appealed the Helsinki Administrative Court to reverse the decision of the Tax Correction Board within the appeal period, YIT has not accounted for the repaid residual taxes in the 2002 financial result or the result for the review period.
Earnings per share amounted to EUR 0.06 (EUR 0.11). Exclusive of the above mentioned residual taxes, earnings per share amounted to EUR 0.27 in the comparison period. Equity per share rose to EUR 11.70 (EUR 10.96). Return on investment for the 12-month period ending at the close of the report period was 17.0 per cent (20.4%). The equity ratio was 34.7 per cent (38.5%).
Order backlog exceeds a billion euros
The Group has a strong market position. At the end of the period, the uninvoiced backlog of orders was a third higher than a year earlier, having risen to EUR 1,008.3 million (EUR 763.5 million).
The backlog for international orders rose by 51 per cent to EUR 257.9 million (EUR 170.8 million), representing 26 per cent (22%) of the entire backlog. The margin of the order backlog is good.
Due to their nature, part of the Groups maintenance and servicing operations are not included in the order backlog.
Order backlog by subgroup (EUR million)
3/2003 3/2002 Change YIT Construction subgroup 699.3 547.1 28% YIT Installation subgroup 214.5 216.4 -1% YIT Primatel subgroup 94.5 YIT Group, total 1,008.3 763.5 32%
The Groups financial position is good
The Groups financial position remained good during the review period. Interest-bearing liabilities amounted to EUR 154.8 million (EUR 145.3 million) at the end of the period and net debt to EUR 122.4 million (EUR 123.6 million). Net financial expenses were EUR 3.6 million (EUR 2.6 million), or 0.8 per cent (0.7%) of net sales. The increase in financial expenses was due to factors such as the EUR 0.6 million in late interest paid to SOK by order of the Helsinki District Court. At the end of the review period, liquid assets amounted to EUR 32.4 million (EUR 21.6 million).
The construction-stage contract receivables sold to financing companies totalled EUR 138.1 million (EUR 129.7 million) at the end of the period. The interest paid on them to the financing companies, EUR 1.2 million (EUR 1.2 million), is included in net financial expenses.
The proportion of fixed-interest loans in the Groups entire loan portfolio was 96 per cent (83%). Loans raised directly on the capital and money markets amounted to 57 per cent (53%).
Total assets in the consolidated balance sheet amounted to EUR 1,067.7 million (EUR 890.1 million) at the end of the review period.
Capital expenditures and acquisitions
Gross capital expenditures on non-current assets included in the balance sheet totalled EUR 5.1 million (EUR 4.2 million) in the January-March period, representing 1.2 per cent (1.1%) of net sales. Investments in construction equipment amounted to EUR 1.2 million (EUR 2.0 million) and investments in information technology to EUR 0.9 million (EUR 0.7 million). Other production investments came in at EUR 0.2 million (EUR 0.2 million). Other investments, including the goodwill on consolidation of acquired companies, amounted to EUR 2.8 million (EUR 1.3 million).
In January, YIT Service Ltd acquired the business operations of Instrumenttiteknikot Oy, which provides electrical and automation installations and servicing in Turku.
YITs Swedish subsidiary Calor AB acquired AC Luft AB and its subsidiaries Lycksele Rör AB and Vännäs Rör AB in January. In February, Calor Ab acquired the business operations of Loka Rör AB.
Number of personnel rising
During the review period, the Group employed 12,478 (10,554) people on average. The number of personnel was 12,459 (10,686) at the end of the period. Forty-seven per cent of the employees were on the payroll of YIT Installation, while 38 per cent were employed by YIT Construction and 13 per cent by YIT Primatel. Two per cent worked for the parent company and incorporated service units.
At the end of the period, the Groups foreign units employed 23 per cent of all personnel, or 2,877 (2,676) people.
Changes in the corporate structure
The merger of YIT Industry Ltd and YIT Power Ltd entered into force on January 1, 2003, and the new company was named YIT Industria Ltd. It comprises YIT Installations Capital Investment Services for Industry division.
Resolutions passed at the Annual General Meeting
YIT Corporations Annual General Meeting was held on March 13, 2003. The Annual General Meeting adopted the 2002 financial statements and discharged the members of the Board of Directors and the president from liability. It was confirmed that a dividend of EUR 0.90 would be paid per share (EUR 0.85 for the financial year 2001), or a total of EUR 26.3 million (EUR 24.5 million). The record date was set at March 18, 2003, and it was decided that the dividend payout would begin on March 25, 2003.
The Annual General Meeting confirmed that the number of Board members shall be set at six. The following persons were elected to seats on the companys Board of Directors: Ilkka Brotherus, Eino Halonen, Reino Hanhinen, Asmo Kalpala, Mikko Kivimäki and Teuvo Salminen. All of them were members of the Board of Directors during the previous term of office. At its organization meeting on March 19, 2003, the Board of Directors elected Ilkka Brotherus as its chairman and Eino Halonen as its vice chairman.
The Annual General Meeting elected PricewaterhouseCoopers Oy, Authorized Public Accountants, as the companys auditor to audit the companys accounts and administration during the present financial year. PricewaterhouseCoopers Oy appointed Pekka Nikula, Authorized Public Accountant, as chief auditor.
The Annual General Meeting unanimously resolved to authorize the Board of Directors to decide on the disposal of 567,500 YIT shares. The shares will be transferred at least at their market value as determined from their price in public trading on Helsinki Exchanges at the time of the transaction. The authorization is valid one year from the Annual General Meeting onwards.
Shares and share capital
YIT Corporations share capital was EUR 59,492,670 at the beginning of the review period and the number of shares outstanding was 29,746,335. The share capital was not increased during the review period.
The average share price during the review period was EUR 15.95 (EUR 15.39), with a high of EUR 17.80 (EUR 17.00) and a low of EUR 14.01 (EUR 13.20). At the end of the period, the closing share price was EUR 14.69 (EUR 16.50). Share turnover during the period amounted to EUR 43.4 million (EUR 59.0 million), with 2,656,854 shares being traded (3,835,654). YIT Corporations market capitalization at the end of the period was EUR 428.6 million (EUR 475.5 million).
At the beginning of 2003, YIT Corporation held a total of 567,500 of its own shares, representing 1.9 per cent of the companys shares outstanding and the votes conferred by them. The shares had been bought on Helsinki Exchanges at an average price of EUR 12.64 on the basis of decisions taken by Annual General Meetings in previous years. No shares were bought or disposed of during the review period. YITs subsidiaries did not own shares in the parent company.
During the review period, 7,600 Series A share options from 1998 were traded at an average price of EUR 2.51 and 3,400 Series B share options were traded at an average price of EUR 4.35 per share. No shares were subscribed for on the basis of the share options.
At the end of the period, the Board of Directors did not have valid share issue authorizations or authorizations to issue convertible bonds or bonds with warrants.
Close to a quarter of the shares are in foreign ownership
The number of registered shareholders was 3,271 (2,969) at the beginning of the period and 3,421 (3,016) at the end.
According to the nominee registers, 22.1 per cent of the shares (15.0%) were owned by foreigners at the beginning of the period and 21.1 per cent (18.8%) at the end. Other foreign ownership at the end of the review period amounted to 2.8 per cent (2.4%); thus, a total of 23.9 per cent (21.2%) of the companys shares outstanding were owned by foreigners.
Market situation remains stable in YITs main fields of business
Finland
In its business cycle report published in March 2003, the Research Institute of the Finnish Economy ETLA predicts that Finlands GDP will grow by 1.8 per cent in 2003, while growth in 2002 was 1.6 per cent. The two- year nationwide incomes policy agreement concerning wages, salaries and collective agreements as well as the growth in disposable income have upheld the confidence of households in the stable development of their personal finances. Thanks to the growth in disposable income, private consumption will increase by 2.7 and 3 per cent this year and the next, respectively. This year, investments by the national economy will remain at the previous years level, while they will grow by 2.4 per cent next year. Growth in exports will be 1.8 per cent this year, accelerating to 3.9 per cent during 2004. ETLA predicts 3.1 per cent growth in GDP in 2004, exceeding the long-term average growth in the Finnish national economy.
ETLA estimates that Finlands GDP will grow by an average of 3.1 per cent annually until 2006, while industrial output will increase by 4.2 per cent per year. Production by the private service sectors will grow by slightly under 4 per cent, but the growth of the public sector will stall at about 2 per cent per year. According to ETLA, construction will swing into growth of 1.5 per cent this year, increasing by 3 per cent on average per year until 2006.
The trend in YITs net sales is supported by the continuing brisk demand for residences and premises for commercial and public services in Finlands growth centres. The growth in residential production and renovation compensates for the decline in office and industrial construction in the construction and building systems markets (heating, water, air-conditioning, electricity and automation contracting and maintenance). According to the business cycle report published by the Confederation of Finnish Construction Industries RT in March, Finlands construction market will remain stable both during the present year and the next. ETLA predicts that construction production will increase by 1.5 per cent this year and by 2.2 per cent in 2004. Investments in machinery and equipment in Finland will decline by about three per cent in 2003, but will increase by three per cent in 2004 according to ETLA.
The number of vacant industrial and commercial buildings is currently significantly below the normal levels in the growth centres of Finland. On the other hand, the vacancy rate of office buildings has exceeded five per cent in numerous growth centres.
Office building start-ups were already slashed in the second half of 2001, and thus the supply will return to normal at the end of this year. The increase in consumption and services is still causing a need for the construction of additional public and commercial service buildings.
The years-long population shift is maintaining demand for residences in Finlands growth centres. 277,000 people moved from one municipality to another in 2002. They represent over five per cent of Finlands population. According to the preliminary information released by Statistics Finland, a further 52,200 people moved during the first quarter of the present year. The strongest population growth is seen in the Greater Helsinki, Oulu, Tampere, Turku and Jyväskylä areas. Most of the people who move are young, and thus the populations of these areas will also rise due to greater birth rates. As the housing stock is already in full use, additional construction is required.
Sales of residences remained brisk during the first quarter of 2003. The market is well poised to see further moderate growth in the demand for residences. Demand is supported by the relatively stable and low interest rate levels in the EMU area and the increase in the disposable income of households. Last year, the construction of a total of 27,600 residences was started up in Finland. According to RTs predictions, the number of start-ups will rise to 28,500 residential units this year and to 29,000 next year.
According to ETLA, civil engineering will increase by 2 per cent this year and by 3 per cent in 2004. There will be a surge in such investment projects during the years ahead. The infrastructure investments required by the Vuosaari Harbour, the Turku motorway, the Kehä III ring road, the Lahti branch line and the new nuclear power plant will increase civil engineering production for many years to come. The construction of Finlands fifth nuclear power plant will call for a significant volume of construction, building system and industrial piping works. In addition to the power plant, office and social premises, residences and storage facilities will be built in the area. The expertise and capacity of YITs prefabrication factories in Finland and Calors plants in Sweden are suitable for the construction and installation of the power plants process piping, tanks and reservoir lining. In the Nordic countries, YIT is the market leader in the design, production, installation and maintenance of high-pressure piping systems for power plants. In addition to the ordinary building systems required in the properties, ventilation, cooling, fire alarm and fire extinguisher systems for various equipment premises will be installed in the project.
From YITs standpoint, the market potential of the nuclear power plant is about EUR 600-700 million and it rests largely on piping deliveries and HEPACE and automation systems as well as construction works.
According to Statistics Finland, capital investments by Finnish industry declined by 4.8 per cent last year. ETLA predicts that capital investments by Finnish industry, which are important to YIT Installation, will fall by 7 per cent this year and by 2 per cent in 2004.
The stable outlook for the construction industry also supports the demand for building systems contracting, particularly in the growth centres.
The market for industrial, property and infrastructure maintenance will expand as the outsourcing trend progresses. The total market for telecom network construction and maintenance will not yet see growth during the present or the next year, but growth is expected in the outsourcing of operators field functions.
Sweden
According to the report published by the Swedish National Institute of Economic Research KI at the end of March, Swedens GDP growth in 2003 and 2004 will amount to 1.4 and 2.8 per cent, respectively. Exports of goods have begun to recover and it is anticipated that household consumption and exports will pick up in the autumn. The market potential of YIT Installations Swedish subsidiary, Calor AB, is based largely on the trend in building construction investments, building maintenance and investments by industry in Sweden. At the end of February, the Swedish Construction Federation BI predicted that construction investments in Sweden will decline by three per cent both this year and the next. However, the increase in renovation works compensates for the effect that the decline in new construction has on the building systems market. KI in turn has assessed that fixed investments in Sweden will decline by 0.3 per cent in 2003 and by 4.6 per cent in 2004.
Baltic countries and Russia
YIT Constructions strategy for going international is based on the operations of local subsidiaries in the Baltic countries and Russia. In these countries, both GDP and construction grow two percentage points faster than in the Nordic countries. The Baltic countries preparations for EU membership, scheduled for the beginning of April 2004, are already stimulating investments. In addition to infrastructure and business premise construction, demand for market-financed residences has become stronger in St Petersburg, Tallinn and Vilnius. YITs order backlog has grown rapidly in the region thanks to projects based on international funding and the start-up of residential production.
YITs market strategy
YITs main strategy is profitable growth. YIT aims to achieve growth outpacing that of the market and a steadier flow of income, relying on a strategy of pragmatically extending the service chain over the entire life cycle of investment projects, from design and implementation to maintenance, upkeep and operating services.
The market for industrial, property and infrastructure maintenance will expand as the outsourcing trend progresses. The structure of the YIT Groups business areas enables the company to offer capital investment and maintenance services of various scales and content to industrial, energy, property and telecommunications sector customers. The Groups strategic expansion areas are the Scandinavian installation market and the construction markets of the Baltic countries and Russia. YIT has implemented its strategy consistently. The latest examples of this are the acquisition of Calor AB in 2001 and the integration of YIT Primatel into the Group at the beginning of June 2002.
Earnings trends of the subgroups
YIT Construction subgroup
During the first quarter, YIT Constructions net sales grew by 13 per cent on the previous year and amounted to EUR 280.6 million (EUR 249.4 million). Operating profit declined by 25 per cent compared with the previous year and was EUR 9.5 million (EUR 12.6 million). The order backlog was substantially larger than in the previous year, having risen to EUR 699.3 million (EUR 547.1 million), up 28 per cent. The order backlog of the division International Operations registered particularly strong growth, hitting EUR 175.0 million (EUR 78.7 million).
The net sales of Building Construction were 21 per cent higher than in the previous year, coming in at EUR 187.2 million (EUR 154.4 million). Operating profit, EUR 13.7 million (EUR 12.1 million), was up 13 per cent on the previous years figure. The order backlog was 28 per cent higher at the end of the period than in the previous year, amounting to EUR 329.1 million (EUR 256.2 million).
Building Construction is responsible for the Groups residential construction in the entire country. Outside the Greater Helsinki area, its field of business also includes other types of building construction. Sales of residences remained brisk in the Greater Helsinki area and the other growth centres. Apart from the population shift, the factors contributing to the great demand for non-rental housing were the record-low interest rates, the greater income levels of households and consumers belief in the positive development of their finances.
The construction of a total of 547 (Jan-Mar/2002: 579) residences was started up during the review period, of which 479 (187) were market-financed. 641 (559) residences were completed during the review period, of which 415 (194) were market-financed. At the end of the period, a total of 3,240 (3,200) residences were under construction, of which 2,258 (1,331) were market-financed.
Net sales of Property Services amounted to EUR 37.5 million (EUR 41.5 million), down 10 per cent on the previous year. The operating result was a loss of EUR 2.1 million (EUR 1.5 million).
EUR 5.7 million in losses has been booked in the result on the basis of a ruling made in February by the Helsinki District Court on the case concerning the refurbishing of SOKs former head office building. YIT has appealed the decision. At the end of the period, the order backlog was at the previous years level, or EUR 138.4 million (EUR 141.0 million).
Property Services offers property management, maintenance and user services encompassing the entire life cycle of properties in all of Finland. In the Greater Helsinki area and its environs, its field of business also includes project and business facility services and the construction of business facilities and renovation.
In accordance with the agreement signed in February, YIT will build an office building on a plot it owns in Mankkaa, Espoo, into which TietoEnator will move in as a tenant. The office building is the first stage of the Klovi Business Park project.
YIT Construction Ltd and Oy Skandrenting Ab have developed a business premise solution for the public sector in which YIT erects the building on its own plot and, during the construction stage, acts as the renter responsible for project implementation.
When the building is inaugurated, Skandrenting will assume ownership of the property. The first joint project to be implemented will be the facilities of the Kilo social and health care centre in Espoo. The City of Espoo will rent the premises for 20 years. The agreement was made in February.
In March, YIT Construction landed the project management contract for the interior works on Parliaments additional building. YIT has previously acted as the quarrying, tunnelling, earthworks and structural contractor on the project. YIT Huber Ltd was chosen to carry out the HEPACE works.
Infraservices net sales, EUR 21.7 million (EUR 17.6 million), were close to a quarter higher than in the previous year. The operating result was EUR 0.0 million (EUR 0.1 million). The order backlog was EUR 56.8 million (EUR 71.2 million) at the end of the period, falling short of the previous year. However, numerous large infrastructure projects will begin soon, and consequently the fields market is growing.
Infraservices provides infrastructure construction and maintenance services.
The net sales of International Operations division were slightly lower than in the previous year, coming in at EUR 34.4 million (EUR 36.3 million). The operating result was a loss of EUR 0.5 million (EUR 1.0 million). The weakening of the result was affected by the pushing back of large projects that are in the start-up stage in Russia; construction has only got up to speed during the spring season.
At the end of the period, the order backlog was significantly higher than in the previous year, having risen to EUR 175.0 million (EUR 78.7 million). An agreement concerning the construction of a sawmill for UPM-Kymmene in Pestovo, Russia, was signed during the period, along with a contract agreement for a landfill for household wastes to be built in the city of Ventspils, Latvia.
International Operations provides construction and maintenance services in the Baltic countries and Russia.
YIT Installation subgroup
In the first quarter, the net sales of YIT Installation fell 11 per cent short of the previous year, amounting to EUR 129.2 million (EUR 144.9 million). Operating profit, EUR 1.8 million (EUR 4.2 million), was also less than in the previous year. The order backlog at the end of the period was at the same level as in the previous year, coming in at EUR 214.5 million (EUR 216.4 million), of which EUR 81.8 million represented the order backlog of international activities (EUR 98.7 million).
The net sales of the Building Systems division declined by 17 per cent compared with the previous year, amounting to EUR 31.6 million (EUR 38.2 million). The share of net sales accounted for by its servicing and maintenance business was 52 per cent. The result declined compared with the previous year. The order backlog at the end of the period was EUR 53.9 million (EUR 48.8 million).
Building Systems provides heating, water, ventilation, electrical and automation system contracting, maintenance services and end-to- end services for building systems. The divisions range of services also includes sprinklers and other fire extinguisher and alarm systems as well as electronic security services.
Demand for building system works in the construction of new residential buildings grew buoyantly during the period. Demand was also brisk in the construction of commercial premises and remained at a good level in renovation and maintenance functions. However, demand in the construction of business premises was muted. It is estimated that demand in the construction of new residences and commercial premises will remain stable. In the case of renovation and maintenance, demand is expected to remain at the same level or strengthen slightly. The construction of business premises will most likely remain at a low level until the latter half of the year.
The net sales of the Capital Investment Services for Industry division were down by one quarter compared with the previous year, amounting to EUR 31.8 million (EUR 42.8 million). The result declined compared with the previous year. At the end of the period, the order backlog amounted to EUR 38.0 million (EUR 54.6 million).
The division offers piping and boiler deliveries for industrial investments. The projects it implements range from individual works to end-to-end deliveries. Its short-term outlook is challenging, because numerous investments have been pushed back.
However, many large-scale investments are on the horizon during the next few years, including the construction of Finlands fifth nuclear power plant. YITs units have been participating actively in the power plant tendering projects. Directives related to various emissions restrictions also require industry to make investments.
The major projects in the process industry were the process and small-diameter piping delivered to Jämsänkoski as part of UPM- Kymmenes Tarra project. Many boiler components were delivered to the energy industry. The most significant export sites were piping material deliveries for the Valdivia project in Chile and piping system deliveries for the Carrico project in Portugal. Investments were at a low ebb in the marine industry.
The net sales of the Industrial Maintenance division were at the same level as in the previous year and amounted to EUR 23.4 million (EUR 23.8 million). The result was better than in the previous year. The order backlog at the end of the period was significantly higher than in the previous year, having risen to EUR 64.3 million (EUR 39.6 million).
The division offers maintenance services ranging from individual works to comprehensive process operation for industrial production plants. Large-scale development efforts continued during the period with the aim of improving the operational reliability of customers processes and good customer service.
As the significance and requirements of material logistics are growing continuously in the maintenance business, YIT began to carry out a two-year project named KPLOG (models for maintenance material logistics). The project is headed by YIT Service Ltd. The project is being funded by Tekes and the companies that are involved in it. The aim is to produce information on the present state of material logistics and its future needs as well as to find new operating models.
The net sales of the Scandinavia division were at the same level as in the previous year, or EUR 47.9 million (EUR 47.8 million).
The result was at the previous years level. At periods end, the order backlog was EUR 79.6 million (EUR 83.7 million).
The Scandinavia division provides building system services and capital investment and maintenance services for industry in Sweden and Norway. The divisions outlays on its maintenance and servicing business and on repairs and reconstruction have lessened its dependence on fluctuations in the amount of new construction works.
The residential markets of Norway and Sweden have become muted and the markets are uncertain about how the situation will develop.
Residential construction has been rising for many years running, but is expected to decline both this year and the next.
The construction of business and commercial premises is minimal in the Greater Stockholm area, where the vacancy rate of business premises has risen to almost 15 per cent. The public sector is also cutting construction. Industry has been cautious in its investments, but several large projects will be started up in Sweden during the second half of the year. Industrial output in Norway has remained at a good level and the outlook for the rest of the year is stable.
YIT Primatel
In the January-March period, YIT Primatel had net sales of EUR 25.5 million. About 60 per cent of net sales are based on long- term customer agreements and 40 per cent on project production.
The operating result was in the red, EUR 1.7 million. The negative result is due to the seasonal nature of operations.
Earnings include goodwill amortization. At the end of the period, its order backlog was EUR 94.5 million.
Cooperation with operators expanded during the first quarter. The market for local IT services has begun to evolve and joint operations networks are emerging. During the review period, YIT Primatel signed a cooperation agreement with Cygate Networks Oy concerning the nationwide provision of corporate network construction and maintenance services.
Uncertainty is continuing in the telecommunications business. More significant growth in the near future is foreseen in the demand for wireless local networks. The number of broadband networks continues to rise.
Market situation remains stable
The trend in YITs net sales is supported by the continuing brisk demand for residences and premises for commercial and public services in Finlands growth centres. The growth in residential production and renovation in Finland compensates for the decline in office and industrial construction in the construction and building systems markets. According to the business cycle report published by the Confederation of Finnish Construction Industries RT in March, Finlands construction market will remain stable both during the present year and the next. Investments in machinery and equipment in Finland will decline by about three per cent in 2003, but will swing into growth of three per cent in 2004 according to the Research Institute of the Finnish Economy ETLA.
The market for industrial, property and infrastructure maintenance will expand as the outsourcing trend progresses. The total market for telecommunications network construction and maintenance will not grow during the present or the next year, but growth is expected in the outsourcing of operators field functions.
At the end of February, the Swedish Construction Federation BI predicted that construction investments in Sweden will decline by three per cent both this year and the next. The Swedish National Institute of Economic Research KI in turn estimates that fixed investments in Sweden will decline by 0.3 per cent during the present year and grow by 4.6 per cent in 2004. In the Baltic countries and Russia, growth in investments outpaces growth in the Nordic countries. Demand for market-financed residences in particular has strengthened in St. Petersburg, Tallinn and Vilnius.
Good outlook for 2003
Thanks to the strong order backlog, the trend in YITs net sales and earnings will be stable in 2003.
Helsinki, May 5, 2003
The Board of Directors
CONSOLIDATED FINANCIAL STATEMENTS, MARCH 31, 2003 (Unaudited)
INCOME STATEMENT (EUR million) Jan- Jan- Change, Jan- Mar/2003 Mar/2002 % Dec/2002 Net sales 431.5 386.4 12 1,763.0 - of which 84.5 89.1 -5 386.9 international activities Operating income and -417.7 -365.3 14 -1,643.5 expenses Depreciation and write- -4.1 -3.9 5 -16.9 downs Amortization of -2.8 -2.4 17 -12.8 goodwill Operating profit 6.9 14.8 -53 89.8 % of net sales 1.6% 3.8% .. 5.1% Financial income and -3.6 -2.6 38 -12.2 expenses, net Profit before 3.3 12.2 -73 77.6 extraordinary items % of net sales 0.8% 3.2% .. 4.4% Extraordinary income 0 0 .. 0 Extraordinary expenses 0 0 .. 0 Profit before taxes 3.3 12.2 -73 77.6 % of net sales 0.8% 3.2% .. 4.4% Profit/loss for the 1.6 -3.1 .. 43.0 report period
Projects have been booked in the income statement on the basis of the degree of completion or the degree of sale, whichever is lower.
Income taxes constitute a proportion, calculated from the report period on a pro rata basis, of the estimated full-year taxes.
The residual taxes levied by the Tax Office for Major Corporations in March 2002, EUR 10.9 million, cut into profits for the comparison period. YIT appealed the decision and the Tax Correction Board of the Tax Office for Major Corporations approved the appeal in December. The matter is still being reviewed in the Administrative Court, and thus the residual taxes repaid to YIT in January 2003 by the Finnish Tax Administration have not been accounted for in the 2002 financial result or the result for the review period.
BALANCE SHEET (EUR million) Mar/2003 Mar/2002 Change, % Dec/2002 ASSETS Intangible assets 9.7 7.9 23 9.7 Goodwill on consolidation 69.1 44.6 55 71.8 Tangible assets 61.0 68.6 -11 61.9 Investments - Own shares 7.2 7.2 0 7.2 - Other investments 7.1 6.2 15 7.1 Inventories 337.8 251.4 34 338.1 Receivables 543.3 482.6 13 503.5 Marketable securities 15.1 11.8 28 10.7 Cash and cash equivalents 17.4 9.8 78 28.2 Total assets 1,067.7 890.1 20 1,038.2 LIABILITIES Share capital 59.5 58.8 1 59.5 Other shareholders equity 288.9 264.2 9 313.7 Minority interests 2.8 3.3 -15 2.9 Provisions for liabilities 9.6 9.0 7 14.2 and charges Non-current liabilities 118.2 140.5 -16 138.2 Current liabilities 588.7 414.3 42 509.7 Total shareholders equity 1,067.7 890.1 20 1,038.2 and liabilities
CONSOLIDATED CASH FLOW STATEMENT (EUR million)
Jan-Mar/ Jan-Mar/ Change, Jan-Dec/ 2003 2002 % 2002 Cash flow from operating activities Profit before extraordinary 3.3 12.2 -73 77.6 items Adjustments, total 5.5 7.7 -29 42.3 Cash flow before change in net working capital 8.8 19.9 -56 119.9 Change in net working 13.7 14.1 -3 7.0 capital Cash flow from operations before financial items and 22.5 34.0 -34 126.9 taxes Interest paid -4.2 -3.9 8 -13.9 Dividends received 0 0 .. 0.1 Interest received 0.6 0.5 20 1.4 Taxes paid -6.4 -16.6 -61 -37.9 Net cash from operating 12.5 14.0 -11 76.6 activities Cash flow from investing activities Capital expenditure on tangible and intangible assets -5.2 -4.1 27 -60.3 Proceeds from sale of tangible and intangible assets 0.7 1.7 -59 12.4 Investments in other assets 0 -0.1 .. -0.3 Proceeds/losses from sale of investments 0 0 .. -0.4 Net cash used in investing -4.5 -2.5 80 -48.6 activities Cash flow from financing activities Rights issue 0 0 .. 4.3 Purchase of own shares 0 -0.7 .. -0.7 Change in loan receivables 0.1 0.9 -89 0.8 Change in short-term debt -0.2 2.4 -108 -0.3 Borrowing of long-term debt 16.2 0.2 8,000 10.4 Repayment of long-term debt -4.3 -5.2 -17 -16.1 Dividends paid -26.3 -24.5 7 -24.5 Net cash used in financing -14.5 -26.9 -46 -26.1 activities Change in liquid assets -6.5 -15.4 -58 1.9 Liquid assets at beginning 38.9 37.0 5 37.0 of period Liquid assets at end of 32.4 21.6 50 38.9 period
KEY FIGURES Mar/2003 Mar/2002 Change, Dec/2002 % Earnings per share, EUR 1) 0.06 -0.11 .. 1.49 Earnings per share, EUR, 0.06 1.47 diluted Earnings per share, EUR, excluding residual tax 0.27 1.86 Equity per share, EUR 11.70 10.96 7 12.54 Average share price during the period, EUR 15.95 15.39 4 16.40 Share price at end of 14.69 16.50 -11 16.79 period, EUR Market capitalization at end of period, EUR million 428.6 475.5 -10 489.9 Weighted average share- issue adjusted number of shares outstanding, 29,179 28,842 1 28,970 thousands Weighted average share- issue adjusted number of shares outstanding, 29,394 29,257 thousands, diluted Share-issue adjusted number of shares outstanding at 29,179 28,816 1 29,179 end of period, thousands Net interest-bearing debt at end of period, EUR 122.4 123.6 -1 104.1 million Return on investment, % 2) 17.0% 20.4% .. 17.8% Equity ratio, % 34.7% 38.5% .. 38.2% Gearing ratio, % 35.6% 38.7% .. 28.2% Gross capital expenditures on non-current assets, EUR 5.1 4.2 21 60.6 million - % of net sales 1.2% 1.1% .. 3.4% Order backlog at end of period, EUR million 3) 1,008.3 763.5 32 938.8 - of which orders from 257.9 170.8 51 255.0 abroad Average personnel 12,478 10,554 18 11,990
1) The residual tax weakens the comparability of this key indicator in particular.
2) Calculated for the period April 1, 2002 - March 31, 2003 using the balance sheet figures of March 31, 2002 and March 31, 2003.
3) Portion of binding orders not recognized as income.
CONTINGENT LIABILITIES (EUR million) Mar/2003 Mar/2002 Change, Dec/2002 % Mortgages given as security for loans - For own commitments 29.9 33.5 -11 32.8 Pledges given for loans - For own commitments 0 7.3 .. 0 Other collateral given for own commitments - Corporate mortgages 0 0.3 .. 0 - Securities pledged 0.2 0 .. 0.7 - Others 0 0 .. 0.3 Leasing obligations 21.9 14.0 56 18.3 Other commitments - Repurchase commitments 4) 90.2 117.6 -23 91.3 - Other contingent 0.6 0.7 -14 0.6 liabilities Guarantees - On behalf of associated 1.1 0.7 57 0.6 companies - On behalf of others 5.9 7.2 -18 7.2 Mortgages given by companies held in inventories; for 3.4 0 .. 0 commitments of Group companies and for own commitments Liability under derivative contracts 5) - Foreign currency forward contracts -- Value of underlying 16.1 18.6 -13 16.6 assets -- Fair value 16.3 18.6 -12 17.2
4) Repurchase commitments for contract receivables sold to financing companies.
5) Derivative contracts have been taken out mainly to hedge foreign currency loans and foreign currency cash flows from projects.
NET SALES BY DIVISION (EUR million)
Jan-Mar/ Jan-Mar/ Change, Apr/2002- Jan-Dec/ 2003 2002 % Mar/2003 2002 Building 187.2 154.4 21 652.2 619.4 Construction Property Services 37.5 41.5 -10 202.8 206.8 Infraservices 21.7 17.6 23 122.9 118.8 International 34.4 36.3 -5 166.5 168.4 Operations Other items (YIT Construction) -0.2 -0.4 -50 -1.4 -1.6 YIT Construction subgroup, total 280.6 249.4 13 1,143.0 1,111.8 YIT Installation 129.2 144.9 -11 566.0 581.7 subgroup YIT Primatel 25.5 121.3 95.8 subgroup 6) Other items (YIT -3.8 -7.9 -52 -22.2 -26.3 Group) YIT Group, total 431.5 386.4 12 1,808.1 1,763.0
6) On June 1, 2002, into the YIT Group.
OPERATING PROFIT BY DIVISION (EUR million)
Jan-Mar/ Jan-Mar/ Change, Apr/2002- Jan-Dec/ 2003 2002 % Mar/2003 2002 Building 13.7 12.1 13 50.9 49.3 Construction Property Services -2.1 1.5 .. 9.5 13.1 Infraservices 0.0 0.1 .. 4.0 4.1 International -0.5 1.0 .. 4.7 6.2 Operations Other items (YIT Construction) -1.6 -2.1 -24 -1.9 -2.4 YIT Construction subgroup, total 9.5 12.6 -25 67.2 70.3 YIT Installation 1.8 4.2 -57 18.7 21.1 subgroup YIT Primatel -1.7 4.3 6.0 subgroup 6) Other items (YIT -2.7 -2.0 35 -8.3 -7.6 Group) YIT Group, total 6.9 14.8 -53 81.9 89.8
6) On June 1, 2002, into the YIT Group.
ORDER BACKLOG BY DIVISION AT END OF PERIOD (EUR million)
Mar/2003 Mar/2002 Change, Dec/2002 % Building Construction 329.1 256.2 28 292.6 Property Services 138.4 141.0 -2 117.6 Infraservices 56.8 71.2 -20 50.5 International Operations 175.0 78.7 122 158.6 YIT Construction subgroup, 699.3 547.1 28 619.3 total YIT Installation subgroup 214.5 216.4 -1 225.5 YIT Primatel subgroup 6) 94.5 94.0 YIT Group, total 1,008.3 763.5 32 938.8
6) On June 1, 2002, into the YIT Group.
QUARTERLY FIGURES, Q1/2001 Q1/2003 (EUR million)
NET SALES Q1/ Q2/ Q3/ Q4/ Q1/ Q2/ Q3/ Q4/ Q1/ 2001 2001 2001 2001 2002 2002 2002 2002 2003 Building Construction 134.4 146.2 141.5 170.0 154.4 164.4 132.2 168.4 187.2 Property 30.0 60.9 43.7 52.6 41.5 65.4 40.1 59.8 37.5 Services Infraservices 26.6 31.6 32.7 24.6 17.6 31.1 35.7 34.4 21.7 International Operations 17.9 19.9 28.7 53.8 36.3 39.4 38.7 54.0 34.4 Other items (YIT -0.2 -0.1 -0.2 -0.8 -0.4 -0.4 -0.3 -0.4 -0.2 Construction) YIT Construction,208.7 258.5 246.4 300.2 249.4 299.9 246,4 316,2 280.6 total YIT 150.0 175.4 134.9 167.5 144.9 150.7 139,2 146,9 129.2 Installation YIT Primatel 6) 12.5 36,8 46,5 25.5
Other items (YIT Group) -3.3 -3.6 -4.1 -7.5 -7.9 -9.0 -4,8 -4,7 -3.8 YIT Group, 355.4 430.3 377.2 460.2 386.4 454.1 417.6 504.9 431.5 total OPERATING Q1/ Q2/ Q3/ Q4/ Q1/ Q2/ Q3/ Q4/ Q1/ PROFIT 2001 2001 2001 2001 2002 2002 2002 2002 2003 Building Construction 12.2 13.4 9.9 13.6 12.1 12.5 12.2 12.5 13.7 Property 4.7 8.0 6.5 3.5 1.5 5.9 2.3 3.4 -2.1 Services Infraservices 0.5 1.3 1.6 0.9 0.1 1.4 1.7 0.9 0.0 International Operations 0.5 0.8 2.4 3.4 1.0 1.7 0.5 3.0 -0.5 Other items (YIT -1.8 -2.0 -0.3 0.3 -2.1 -1.7 0.4 1.0 -1.6 Construction) YIT Construction, 16.1 21.5 20.1 21.7 12.6 19.8 17.1 20.8 9.5 total YIT 3.2 10.4 5.1 6.2 4.2 5.0 6.7 5.2 1.8 Installation YIT Primatel 6) 2.0 3.6 0.4 -1.7
Other items (YIT Group) 0.2 -2.5 -0.6 -1.7 -2.0 -2.4 -1.6 -1.6 -2.7 YIT Group, 19.5 29.4 24.6 26.2 14.8 24.4 25.8 24.8 6.9 total ORDER Q1/ Q2/ Q3/ Q4/ Q1/ Q2/ Q3/ Q4/ Q1/ BACKLOG 2001 2001 2001 2001 2002 2002 2002 2002 2003 Building Construction 209.4 254.0 257.4 240.6 256.2 283.5 273.8 292.6 329.1 Property 143.6 123.1 138.3 138.9 141.0 129.0 138.7 117.6 138.4 Services Infraservices 57.9 52.7 49.3 51.3 71.2 67.8 58.0 50.5 56.8 International Operations 47.7 60.3 87.5 79.0 78.7 124.3 143.1 158.6 175.0 YIT Construction,458.6 490.1 532.5 509.8 547.1 604.6 613.6 619.3 699.3 total YIT 240.2 227.3 205.2 226.0 216.4 221.7 202.7 225.5 214.5 Installation YIT Primatel 6) 53.6 37.3 94.0 94.5
YIT Group, 698.8 717.4 737.7 735.8 763.5 879.9 853.6 938.8 1,008.3 total
6) On June 1, 2002, into the YIT Group.