YIT sells its businesses in Russia
- About YIT
- Housing development
- Construction services
YIT’s Interim report January—March 2021 Group’s adjusted operating profit improved to EUR 21 million. Gearing at target level.
Nordic paving and mineral aggregates businesses sold on 1 April 2020, are reported as discontinued operations. Unless otherwise noted, the figures in brackets refer to the corresponding period in the previous year.
“YIT’s first quarter adjusted operating profit was EUR 21 million (8), a clear improvement compared to the previous year. The performance in the housing segments in particular was excellent, and the Business premises’ result continued to stabilise. Infrastructure posted a loss being negatively impacted by a seasonally slower market, as well as margin reductions in certain projects.
The issuances of two green bonds and a green hybrid bond were certainly a highlight of the quarter. The launch of the Green Finance Framework supports our efforts in reaching our climate and sustainability targets. As a result of the issue of the hybrid bond and a solid first-quarter operating cash flow after investments of EUR 70 million (-48), our net debt decreased to EUR 439 million (942) and our gearing to 44% (105). This is first time that YIT achieved its gearing target of below 50%.
Since the merger with Lemminkäinen, YIT has done good work in harmonising its processes, driving cultural integration, and strengthening its financial position. However, deviations in project performance and earnings volatility show that these improvements have not been enough. We need to become much more resilient in our operational performance to unlock the full potential of the business and to secure stable profitability development. After reviewing our operations, I am confident about what we need to do to improve the performance and competitiveness of YIT.
We will immediately take swift and precise measures to address three areas: project management, our operating model, and infrastructure business. Problems in project management have led to significant losses in various projects over the past couple of years. To stabilise performance, the company has already taken decisive actions to develop and implement new project management and leadership practices. The results have been promising particularly in the Business premises segment. Our clear goal now is to make sure those practices are implemented throughout the organisation. In parallel, we will take a close look on how we operate. In that work, we will make sure that our resources are allocated in an optimal way and that our organisation becomes more efficient. Finally, we will do a thorough review of the Infrastructure segment’s strategy. The performance of the segment has been unsatisfactory, and it is clear that changes are needed.
I believe that the core of YIT’s strategy, sustainable urban development with a strong emphasis on self-developed and competence-based projects, remains key for future success. However, I see a clear need to sharpen our strategy and to make our key objectives more tangible. We will also have renewed vigour in sustainability. Our clear target is to achieve top level sustainability performance in the industry, which not only provides us with a notable competitive advantage but is also our license to operate. Important part of this is occupational health and safety, which will be our number one priority in everything that we do.
My first weeks as the YIT CEO have only strengthened my belief in this company. The competence, professionalism and passion of our people, and their outstanding team spirit are a strong foundation to build upon. The quality of work at our construction sites is among the best in the industry. Our overall customer satisfaction is at a very good level and the YIT brand is highly appreciated. We will now move into an era of steady operational performance with an efficient cost structure. This will give us the power to successfully perform in any market condition and enable us to create value for our shareholders.”
At the end of the first quarter 2021, YIT’s order book amounted to EUR 3,716 million (31 Dec 2020: 3,528). The order book remained stable in the Partnership properties segment and increased in all other segments. At the end of the quarter, 80% of the order book was sold (31 Dec 2020: 82).
The Group’s revenue was EUR 606 million (708). Revenue decreased in the Business premises, Housing Russia and Infrastructure segments. In Housing Russia, the corresponding period included a positive impact of EUR 57 million from the change in revenue recognition over time. In Housing Finland and CEE and the Partnership properties, revenue increased.
The Group’s adjusted operating profit amounted to EUR 21 million (8) and the adjusted operating profit margin to 3.5% (1.2). The result improved in the Business premises and Housing Finland and CEE segments, but weakened in Housing Russia, Infrastructure and the Partnership properties.
YIT’s operating profit was EUR 14 million (-3). The adjusting items amounted to EUR 7 million (12) including operating profit from operations to be closed. During the comparison period, the adjusted items included, among others, a goodwill impairment in the Housing Russia segment.
In Housing Finland and CEE, housing completions in 2021 are expected to decrease compared to 2020 and volatility between the quarters is expected to be high. Compared to the first quarter of 2021, the number of completions is expected to increase in the second quarter but then decrease clearly in the third quarter. The fourth-quarter completions are expected to be at a high level.
For the full year, Housing Russia’s solid underlying performance is estimated to continue. In Business premises, performance is expected to stabilise. Project management issues in the Infrastructure segment are burdening earnings but those issues are expected to be resolved as the year progresses. In Partnership properties, portfolio development is expected to continue.
YIT expects its full-year 2021 adjusted operating profit to be higher than in 2020 (EUR 85 million).
The result is dependent on certain project completions and contract closings towards the end of the year. Temporary shutdowns or slower progress on construction sites and delayed completions due to the COVID-19 pandemic could lead to the postponement of revenue and profit from one quarter or year to another. Changes in market yields or estimated future cash flows may have impacts on the fair value of the investments.