YIT’s strategic focus in profitability, growth initiatives and further improving the capital efficiency

YIT’s strategic focus in profitability, growth initiatives and further improving the capital efficiency

YIT’s Board of Directors has confirmed YIT’s updated strategic focus areas. Reaching the targeted net debt level ahead of schedule allows a gradual shift of focus back to profitability and investing in growth initiatives. As one of the growth initiatives YIT has established a new unit in Warsaw to tap into the opportunities in Poland. Work to improve capital efficiency continues enabling in its part financing of the growth.

The Board of Directors has also decided to revise YIT’s long-term return on investment (ROI) target to 15% from the earlier 20% due to lower weight of Russia in invested capital and future capital allocation. Other long term financial targets remain unchanged. Separate short term targets are abandoned now that the net debt target has been reached.

Improving profitability

In Housing Finland and CEE, the key measures to improve profitability are shifting sales gradually towards consumers in Finland and accelerating profitable growth in the CEE countries. To enable the shift in current operating environment in Finland, YIT strives to increase the amount of affordable apartments for sale. Similarly in Housing Russia, YIT works to improve the affordability of the apartments, but due to the deterioration in the operating environment, also fixed cost adjustments continue to match the decrease in sales and production volumes.

In Business Premises and Infrastructure, growth and healthy margin content of the order backlog provide a good foundation for improving profitability. Solid execution of the recently secured major projects such as the E18 Hamina-Vaalimaa motorway and Tampere light railway as well as the Tripla hybrid project is now important. Growth from the major projects also improves fixed cost absorption. In terms of new projects, the aim is to continue to increase the share of projects where the added value produced by YIT for the customer is high. Concepts, co-operation projects and special expertise play a key role in this regard.

As a result of the competitiveness program launched a year ago, there are also several smaller initiatives to improve profitability.

Growth initiatives

In Housing Finland and CEE, the target is to further increase the weight of the CEE countries. In addition to the Baltic Countries, the Czech Republic and Slovakia, YIT seeks growth now also from Poland. The idea is to grow there organically with a similar business model to YIT Stavo in the Czech Republic, where the company is a pure developer without own construction capacity. YIT is currently negotiating for the first acquisitions of plots in Poland. In Finland the focus of growth is in the capital region. In Housing Russia, YIT continues operations in all current locations with reduced risk level instead of seeking growth, but maintains also readiness to ramp up production.

In Business Premises and Infrastructure, the recently secured major projects provide a good basis for growth for the coming years. The EUR 260 million E18 Hamina-Vaalimaa motorway project was started in June and the EUR 100 million Tampere light railway project is expected to proceed to the implementation phase in 2016. Together with other projects these provide visibility and a good basis for growth in the Infra services division. In Business Premises, the EUR 1 billion Tripla project in the Central Pasila district of Helsinki, Finland, is expected to contribute substantially to revenue from 2016 onwards.

Work to improve capital efficiency continues

The capital release program continues and the aim is to complete it by the end of 2016 enabling in its part financing of the growth. YIT will also strive to further improve its capital efficiency through for example expanding utilization of partnerships in investments. In Russia the target is to reduce the operative invested capital.

ROI target revised, other long term targets unchanged

YIT’s operations will be steered according to the long-term targets (segment reporting):

• Revenue growth 5–10% annually on average
• Return on investment 15% (previously 20%)
• Sufficient operating cash flow after investments for dividend payout and the reduction of debt
• Equity ratio 40%
• Dividend payout 40–60% of net profit for the period

Separate short term targets are abandoned now that the net debt target has been reached.

YIT’s strategy and financial targets will be described in more detail at YIT’s Capital Markets Day, which will be arranged on September 24, 2015, in Helsinki, Finland. For additional information, please visit YIT’s Investors site at www.yitgroup.com/investors.

For additional information, please contact:

Kari Kauniskangas, President and CEO, YIT Corporation, tel. +358 40 570 1313, kari.kauniskangas@yit.fi
Sanna Kaje, Vice President, Investor Relations and M&A, YIT Corporation, tel. +358 50 390 6750, sanna.kaje@yit.fi
 

YIT CORPORATION

Sanna Kaje
Vice President, Investor Relations and M&A

Distribution: NASDAQ OMX, principal media, www.yitgroup.com

YIT is a construction industry leader. We create better living environments in Finland, Russia, the Baltic countries, the Czech Republic and Slovakia. Over 100 years of experience have secured us a strong market position: we are the largest housing developer and one of the largest business premises and infrastructure developers in Finland, and the most significant foreign housing and area developer in Russia. Our vision is to stay one step ahead – while taking care of our customers, partners and personnel. We have nearly 6,000 employees in seven countries. In 2014, our revenue amounted to around EUR 1.8 billion. Our share is listed on NASDAQ OMX Helsinki. www.yitgroup.com