YIT announces new focused strategy to deliver predictable, market-leading results
- About YIT
- Housing development
- Construction services
YIT Corporation Stock Exchange Release April 26, 2019 at 12:00 noon.
YIT’s Interim Report January 1–March 31, 2019
Unless otherwise noted, the figures in brackets refer to the corresponding period in the previous year and are of the same unit. YIT reports in accordance with IFRS principles. YIT and Lemminkäinen merged on February 1, 2018. In this Interim Report, comparison figures are pro forma figures so that the financial statements of merged Lemminkäinen for the financial period January 1‒January 31, 2018 are included in the pro forma figures, and are presented in the table in the columns “Pro forma 1-3/18” and “Pro forma 1‒12/18”.
The IFRS 16 Leases standard was issued in January 2016 and the company started applying the standard on January 1, 2019. The new standard replaces the IAS 17 Leases standard and related interpretations. YIT adopted the new standard based on the modified method, thus the comparison period is not adjusted. The company has published a stock exchange release on April 18, 2019 regarding the adoption of the IFRS 16 standard describing the accounting policies among others. The impact of the IFRS 16 adoption on the first quarter of 2019 can be found in the notes of the Interim report.
1 The adjusted operating profit reflects the result of ordinary course of business and does not include material reorganisation costs, impairment charges or other items affecting comparability. Adjusted operating profit is disclosed to improve comparability between reporting periods. Adjusting items are defined more precisely in note 4 in the tables section.
2 Definitions of financial key performance indicators can be found in the Interim Report’s table section 4.3.
Kari Kauniskangas, President and CEO:
The result for the first quarter improved year-on-year, despite showing a loss. This was however expected due to seasonality and the low number of residential project completions. Overall better performance of the company came from several sources. Order backlog strengthened from the year-end, synergies were realised in the result faster than we had estimated and the cash flow was good, considering seasonality. Our outlook is positive and our guidance for the whole year remains unchanged, and for the second quarter, we see a slight profit improvement.
I am particularly pleased to note that the Paving and Housing Russia segments improved their combined adjusted operating profit by nearly EUR 20 million year-on-year. The improvement in the Paving segment came mainly from Sweden and Norway, where the measures implemented to reduce winter planning costs, for example, had a direct impact on the result. In Russia, we were able to complete two projects earlier than estimated and the contracting business performed better year-on-year.
The Housing Finland and CEE segment’s adjusted operating profit declined due to no hand-overs in the CEE countries and a lower year-on-year number of completed apartments in the Helsinki metropolitan area. In March, YIT and a group of investors established a joint venture that focuses on rental apartments. We also sold a portfolio of fully or nearly completed apartments to the joint venture. This transaction had a weakening impact on the segment’s profitability for the first quarter. However, it strengthened the investments of the Partnership properties segment in rental housing generating stable cash flow. The transaction also enables us to speed up capital turnover, while keeping value upside on the portfolio.
In the Business premises segment, we signed several significant lease agreements, in Tripla among them. Our large projects progressed as planned and the revenue and profit from the renovation services grew in Finland. In the Infrastructure projects segment the quality and profitability of the order backlog improved. However, the result was still burdened by low margin levels of old projects.
In general, construction volume is at a good level in Finland, supported by urbanisation. The residential activity improved in the latter part of the quarter. In our other operating countries, the market outlook is stable. In Finland, the volume of residential construction is returning to a normal level after a few peak years. Residential sales to consumers in good locations has continued at the level seen last autumn, even though the proportion of private investors of all home buyers has declined from last year.
Key figures, IFRS
|EUR million||Reported 1–3/19||Pro forma
|Housing Finland and CEE||256.2||242.9||5%||1,157.9|
|Operating profit margin, %||-4.9%||-8.5%||2.4%|
|Adjusted operating profit||-30.7||-43.2||29%||134.5|
|Housing Finland and CEE||9.3||20.5||-55%||103.3|
|Adjusted operating profit margin, %||-4.4%||-7.2%||3.6%|
|Housing Finland and CEE||3.6%||8.5%||8.9%|
|Profit before taxes||-45.3||-57.8||22%||57.2|
|Profit for the review period2||-38.0||-52.2||27%||33.3|
|Earnings per share, EUR||-0.18||-0.25||-28%||0.16|
|Operating cash flow after investments||-3.2||n/a||n/a|
|Net interest-bearing debt at the end of the period||868.7||813.8||7%||562.9|
|Adjusted net interest-bearing debt at the end of the period3||556.0||n/a||n/a|
|Gearing ratio at the end of the period, %||87.7%||n/a||n/a|
|Adjusted gearing ratio at the end of the period3, %||56.2%||n/a||n/a|
|Equity ratio at the end of the period, %||33.1%||n/a||n/a|
|Adjusted equity ratio at the end of the period3, %||37.0%||n/a||n/a|
|Pro forma return on capital employed (ROCE, rolling 12m), %||n/a||n/a||5.6%|
|Adjusted return on capital employed3 (ROCE, rolling 12m), %||5.4%||n/a||n/a|
|Order backlog, at the end of the period||4,556.2||4,640.8||-2%||4,433.8|
1 Comparisons include pro forma figures with Lemminkäinen’s financial statements for the accounting period of January 1‒January 31, 2018.
2 Attributable to the equity holders of the parent company.
3 Definitions of financial key performance indicators can be found in the table section 4.3.
Guidance for 2019
The Group revenue 2019 is estimated to be in the range of +5% – -5% compared to revenue 2018 (pro forma 2018: EUR 3,759.3 million).
In 2019, the adjusted operating profit1 is estimated to be EUR 170–230 million (pro forma 2018: EUR 134.5 million).
The guidance for 2019 is based on, among others, the completion of Mall of Tripla in the last quarter, the estimated timing of completion of the residential projects under construction and the company’s solid order backlog. At the end of March, 73% of the order backlog was sold.
Significant fluctuation is expected between the quarters due to normal seasonal variation, sales of business premises projects and the timing of completions of residential projects as well as of Mall of Tripla. As in 2018, the last quarter of the year is expected to be clearly the strongest. The company estimates that the adjusted operating profit for second quarter of 2019 will improve slightly from the comparison period (pro forma).
The adoption of IFRS 16 standard does not have an impact on the company’s financial targets or the guidance for 2019.
Factors affecting the guidance
The most significant factors with which YIT can answer the market demand are sales and pricing, project and project risk management, product development and the product offering, measures to reduce production costs, cost management and measures affecting the capital efficiency.
Factors outside of YIT’s sphere of influence are mainly related to global economic development, the functionality of financing markets and the interest rate, the political environment, economic development in areas of operation, changes in demand for apartments and business premises, the availability of resources such as key persons, the functionality of the labour markets, changes in public and private sector investments and changes in legislation, permit and authorisation processes and the duration thereof, as well as the development of foreign exchange rates.
Due to the long-term nature of construction and urban development projects, the changes in demand may be quicker than the company's ability to adapt its offering.
Events after the review period
YIT and ICECAPITAL Housing Fund IV Ky and ICECAPITAL Housing Fund V Ky have signed pre-agreements on the construction of approximately 780 rental apartments in the Helsinki metropolitan area and Tampere. The total value of the pre-agreements is approximately EUR 160 million. The projects will be booked in the order backlog once the individual deals are closed. The projects are estimated to be started gradually mainly during 2019 and the first projects will be completed in 2020.
News conference for investors and media
YIT will arrange a news conference on Friday, April 26, 2019 at 1:00 p.m. Finnish time (EET, at 11:00 a.m. GMT) at YIT's head office, Panuntie 11, 00620 Helsinki, Finland. The event is in English and targeted for analysts, portfolio managers and the media. Welcome!
The news conference and presentation by the President and CEO of YIT Corporation Kari Kauniskangas can also be followed through a live webcast atwww.yitgroup.com/webcast. The live webcast starts at 1:00 p.m. (EET) and a recording of the webcast will be available at the same address later that day.
The news conference can be participated also through a conference call. Conference call participants are requested to dial in at least five minutes prior to the start of the conference, at 12:55 p.m. (EET). Conference call numbers are:
Participants from Finland +358 (0)9 7479 0361
Participants from UK and outside of Nordic countries +44 (0)330 336 9105
Participants from Sweden +46 (0)8 5033 6574
Participants from Norway +47 2100 2610
The participants will be asked to provide the following confirmation code: 1446499.
During the webcast and conference call, all questions should be presented in English. At the end of the event, the media has the opportunity to ask questions also in Finnish.
For further information, please contact:
Hanna Jaakkola, Vice President, Investor Relations, YIT Corporation, tel. +358 40 5666 070, firstname.lastname@example.org
Ilkka Salonen, Chief Financial Officer, YIT Corporation, tel. +358 45 359 4434, email@example.com
Vice President, Investor Relations
Distribution: Nasdaq Helsinki, major media, www.yitgroup.com
YIT is the largest Finnish and significant North European construction company. We develop and build apartments and living services, business premises and entire areas. We are also specialised in demanding infrastructure construction and paving. Together with our customers, our nearly 10,000 professionals are creating more functional, more attractive and more sustainable cities and environments. We work in 11 countries: Finland, Russia, Scandinavia, the Baltic States, the Czech Republic, Slovakia and Poland. The new YIT was born when over 100-year-old YIT Corporation and Lemminkäinen Corporation merged on February 1, 2018. Our pro forma revenue for 2018 was approximately EUR 3.8 billion. YIT Corporation's share is listed on Nasdaq Helsinki Oy. www.yitgroup.com