YIT Corporation Stock Exchange Release July 26, 2018 at 8:00 A.M.
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 half-year
report for
January–June 2018, comparison figures are pro forma figures. To
illustrate the
impacts of the merger on the result of YIT’s operations and its
financial
position and to improve the comparability of the combined company’s
financial
information, YIT has prepared unaudited pro forma financial
disclosures. These
unaudited pro forma financial disclosures reflect the new
segment reporting
structure and reporting practices adopted by YIT on the date
of completing the
merger. The unaudited pro forma financial disclosures are
based on YIT’s and
Lemminkäinen’s IFRS-compliant historical financial data,
adjusted for the
effects of the merger. YIT’s actual results may deviate
materially from the
assumptions used in preparing these audited pro forma
disclosures.
Additional information about the historical financial figures of
YIT or
Lemminkäinen are available in YIT’s and Lemminkäinen’s audited
consolidated
financial statements and unaudited interim reports, available on
YIT’s website
at www.yitgroup.com.
In this half-year report, the figures for
the second quarter and for the first
six months of 2018, the comparison figures
and the figures for year 2017 are
presented as pro forma figures. The pro forma
balance sheet is presented as if
the merger had occurred on December 31, 2017
and as if YIT as the accounting
acquirer had consolidated the acquisition
balance sheet of Lemminkäinen in its
group financial accounts at said time. The
pro forma income statements for the
accounting period ending December 31, 2017
are presented as if the merger had
occurred on January 1, 2017. Pro forma
adjustments that do not have a continuing
impact on YIT’s result are presented
in the income statement for the accounting
period that ended December 31, 2017.
Additional information is available in the
stock exchange release published on
April 4, 2018 and its appendices.
Due to the merger, YIT’s financial
information is also reported in the
explanatory statement of the half-year
report so that the financial statements
of merged Lemminkäinen for the
financial period January 1‒January 31, 2018 are
included in the pro forma
figures for 2018, and the figures are presented in the
tables in the column
“Pro forma 1‒6/18”. Figures including Lemminkäinen’s
financial statements for
the financial period January 1–January 31, 2018 are
used in the discussion in
the explanatory statement and compared to the pro
forma figures January
1–December 31, 2017. In the half-year report tables, the
column ”Reported
1‒6/18” does not include Lemminkäinen’s figures for the
financial period
January 1–January 31, 2018.
Group reporting, IFRS
The result improved in the
second quarter but remained unsatisfactory. Cash flow
and order backlog
strengthened.
April–June
· Operating cash flow after investments amounted
to EUR +129.9 million.
· Order backlog grew by 9% from the level of end of
March and was EUR 5,068.4
million (3/2018: 4,640.8).
· Revenue decreased by
8% to EUR 908.8 million (983.4).
· Adjusted operating profit1 amounted to
EUR 24.4 million (39.5) and adjusted
operating profit margin was 2.7% (4.0).
Adjusting items of EUR 13.2 million
during the reporting period (6.9) are
mainly related to merger related fair
value cost effects, integration costs,
reorganisation of paving operations in
Scandinavia and a loss related to the
capital release action in Russia.
· Operating profit amounted to EUR 11.3
million (32.6) and operating profit
margin was 1.2% (3.3).
· Earnings per
share were EUR -0.02 (0.09).
January–June
· The merger of YIT Corporation
and Lemminkäinen Corporation was completed on
February 1, 2018.
· Revenue
decreased by 10% to EUR 1,511.1 million (1,679.4).
· Adjusted operating
profit1 amounted to EUR -18.9 million (12.4) and
adjusted operating profit
margin was -1.2% (0.7). Adjusting items of EUR 21.1
million during the
reporting period (32.2) are mainly related to merger related
fair value cost
effects, integration costs, reorganisation of paving operations
in Scandinavia
and a loss related to the capital release action in Russia.
· Operating
profit amounted to EUR -39.9 million (-19.8) and operating profit
margin was
-2.6% (-1.2).
· Earnings per share were EUR -0.27 (-0.14).
· Operating
cash flow after investments amounted to EUR -22.8 million.
· Order backlog
grew by 9% from the level of end of March and was EUR 5,068.4
million (3/2018:
4,640.8).
· The company estimates the total annual synergies related to the
merger to
have an impact of EUR 40-50 million by the end of 2020. Of this, EUR
40 million
will be achieved already starting from the first quarter 2020.
Kari
Kauniskangas, President and CEO:
In the second quarter, cash flow and order
backlog developed strongly. The
Group’s result improved clearly from the first
months of the year, but it is not
satisfactory as the segments perform
unevenly. The strong development of the
Housing Finland and CEE segment
continued. In April–June, the segment’s adjusted
operating profit margin was
nearly 10%. The Group result decreased from last
year due to the Infrastructure
projects segment’s weak result. As anticipated,
no projects were completed in
Russia, which is reflected in the low net sales
and operating loss. We expect
the remainder of the year to be strong, driven by
the active paving season, the
sales of business premises projects and the
increasing completion of
residential projects. The positive development is
further supported by the
measures to complete the integration as well as
achieving the synergy
benefits.
The order backlog of the Business premises segment grew
significantly. New
orders in the order backlog include, for instance, the
Tripla office buildings
as well as life-cycle and turnkey projects won in
competitive tendering. In
business premises projects, renting has proceeded
well and, as stated in our
guidance, we expect to sell some business premises,
under construction and with
full or nearly full occupancy, in the Helsinki
region in the fourth quarter.
During the quarter, the Keilaniemenranta area
development project took giant
leaps forward as the city launched further
zoning in the area and the renovation
of the old high-rise building
began.
During the quarter, the consumer housing demand in the Housing Finland
and CEE
segment remained good in Finland and excellent in the CEE countries.
The
segment’s performance was good in general and particularly strong in the
CEE
countries. In Russia, the housing demand has as such remained steadily at
a
rather good level. The price level is still low but stable. Good results
have
been achieved in releasing capital in Russia but the measures taken burden
the
operating profit.
Infrastructure projects’ revenue was low particularly in
Finland, and the result
was weak due to low revenue and the low margin level of
order backlog recognised
as revenue. However, positive developments include,
for instance, successes in
competitive tendering in Scandinavia and the Baltic
countries, as well as in the
competitive tendering for the West Metro
extension, with the Soukka station
recorded in the order backlog during the
review period. The paving season has
got off to a good start and the result,
excluding restructuring costs, was
rather satisfactory. The order backlog of
the Paving segment at the end of June
improved year-on-year.
Integration to
merge YIT’s and Lemminkäinen’s operations has been proceeding
well and will
continue in the near future. I thank the personnel for the good
commitment and
effort in the beginning of the year. Supported by the
implementation of best
practices cash flow improved significantly, and the
gearing ratio decreased. As
part of financing rearrangements, the company issued
two notes, amounting to
EUR 250 million, that extend the maturity of the debt
portfolio. At the same
time, the company repaid earlier notes totalling EUR 150
million. We will
present the company’s new strategy at the Capital Markets Day
that will be
organised in Helsinki in September.
Key figures
Group reporting,
IFRS
+--------------+--------+--------+--------+-------+--------+--------+-----
---+--
------+----------+
|EUR
million |Reported|Pro |Pro |Change |Reported|Pro
|Pro
|Change1 |Pro |
| |4–6/18 |forma |forma |
|1–6/18 |forma |forma |
|forma1–12/|
| | |4–6/18
|4–6/17 | | |1–6/18 |1–6/17 |
| |
| |
| | | | | | |
| |
|
| | | | | | | |
|
|
| | | | | | | |
|
|17
|
+--------------+--------+--------+--------+-------+--------+--------+--------+
--
------+----------+
|Revenue
|908.8 |908.8 |983.4 |-8% |1,441.1 |1,511.1 |1,679.4 |
-10%
|3,862.5
|
+--------------+--------+--------+--------+-------+--------+--------+--------+
--
------+----------+
|Housing
|316.7 |316.7 |298.2 |6% |545.2 |559.6 |556.5
|1%
|1,156.2 |
|Finland and | | | | | |
| |
| |
|CEE | | | | |
| | |
|
|
+--------------+--------+--------+--------+-------+--------+--------+--------+
--
------+----------+
|Housing
|53.2 |53.2 |107.1 |-50% |87.7 |91.5 |175.6 |
-48%
|421.0 |
|Russia | | | | | |
| |
|
|
+--------------+--------+--------+--------+-------+--------+--------+--------+
--
------+----------+
|Business
|212.2 |212.2 |220.1 |-4% |374.7 |395.2 |419.0 |
-6%
|902.2 |
|premises | | | | | |
| |
|
|
+--------------+--------+--------+--------+-------+--------+--------+--------+
--
------+----------+
|Infrastructure|153.8
|153.8 |175.2 |-12% |225.7 |247.5 |297.1 |
-17% |686.0 |
|
projects | | | | | | | |
|
|
+--------------+--------+--------+--------+-------+--------+--------+--------+
--
------+----------+
|Paving
|183.4 |183.4 |202.3 |-9% |225.8 |236.1 |265.0 |
-11%
|768.9
|
+--------------+--------+--------+--------+-------+--------+--------+--------+
--
------+----------+
|Partnership
| | | | | | | |
|
|
|properties | | | | | | |
|
|
|
+--------------+--------+--------+--------+-------+--------+--------+--------+
--
------+----------+
|Other
items |-10.5 |-10.5 |-19.5 |46% |-17.9 |-18.8 |-33.8
|44%
|-71.8
|
+--------------+--------+--------+--------+-------+--------+--------+--------+
--
------+----------+
|Operating
|6.6 |11.3 |32.6 |-65% |-28.0 |-39.9 |-19.8 |
-102%
|77.4 |
|profit | | | | | |
| |
|
|
+--------------+--------+--------+--------+-------+--------+--------+--------+
--
------+----------+
|Operating
|0.7% |1.2% |3.3% | |-1.9% |-2.6 % |-1.2% |
|2.0%
|
|profit margin,| | | | | | |
|
| |
|% | | | | | |
| |
|
|
+--------------+--------+--------+--------+-------+--------+--------+--------+
--
------+----------+
|Adjusted
|24.4 |24.4 |39.5 |-38% |-0.9 |-18.9 |12.4 |
|138.9
|
|operating | | | | | | |
|
| |
|profit | | | | | |
| |
|
|
+--------------+--------+--------+--------+-------+--------+--------+--------+
--
------+----------+
|Housing
|30.4 |30.4 |25.9 |17% |51.7 |50.9 |34.4
|48%
|83.0 |
|Finland and | | | | | |
| |
| |
|CEE | | | | |
| | |
|
|
+--------------+--------+--------+--------+-------+--------+--------+--------+
--
------+----------+
|Housing
|-7.3 |-7.3 |-1.5 |-386% |-20.2 |-21.1 |-6.7 |
-215%
|4.9 |
|Russia | | | | | |
| |
|
|
+--------------+--------+--------+--------+-------+--------+--------+--------+
--
------+----------+
|Business
|5.5 |5.3 |6.8 |-22% |3.3 |3.0 |8.6 |
-65%
|51.5 |
|premises | | | | | |
| |
|
|
+--------------+--------+--------+--------+-------+--------+--------+--------+
--
------+----------+
|Infrastructure|-1.4
|-1.5 |5.2 | |-7.3 |-10.2 |3.9 |
|17.4 |
|
projects | | | | | | | |
|
|
+--------------+--------+--------+--------+-------+--------+--------+--------+
--
------+----------+
|Paving
|4.8 |4.8 |9.1 |-47% |-14.1 |-26.0 |-15.9 |
-63%
|4.7
|
+--------------+--------+--------+--------+-------+--------+--------+--------+
--
------+----------+
|Partnership
|-0.6 |-0.6 |-0.3 |-100% |-0.8 |-0.8 |-0.3 |
-168%
|-0.5 |
|properties | | | | | |
| |
|
|
+--------------+--------+--------+--------+-------+--------+--------+--------+
--
------+----------+
|Other
items |-6.8 |-6.7 |-6.0 |-12% |-13.6 |-14.8 |-11.6 |
-27%
|-22.0
|
+--------------+--------+--------+--------+-------+--------+--------+--------+
--
------+----------+
|Adjusted
|2.7% |2.7 % |4.0 % | |-0.1% |-1.2 % |0.7% |
|3.6%
|
|operating | | | | | | |
|
| |
|profit | | | | | |
| |
| |
|margin, % | | | | |
| | |
|
|
+--------------+--------+--------+--------+-------+--------+--------+--------+
--
------+----------+
|Housing
|9.6% |9.6 % |8.7 % | |9.5% |9.1 % |6.2% |
|7.2%
|
|Finland and | | | | | | |
|
| |
|CEE | | | | | |
| |
|
|
+--------------+--------+--------+--------+-------+--------+--------+--------+
--
------+----------+
|Housing
|-13.7% |-13.7 % |-1.4 % | |-23.1% |-23.1 % |-3.8% |
|1.2%
|
|Russia | | | | | | |
|
|
|
+--------------+--------+--------+--------+-------+--------+--------+--------+
--
------+----------+
|Business
|2.5% |2.5 % |3.1 % | |0.9% |0.8 % |2.1% |
|5.7%
|
|premises | | | | | | |
|
|
|
+--------------+--------+--------+--------+-------+--------+--------+--------+
--
------+----------+
|Infrastructure|-1.0%
|-1.0 % |3.0 % | |-3.2% |-4.1 % |1.3% |
|2.5% |
|
projects | | | | | | | |
|
|
+--------------+--------+--------+--------+-------+--------+--------+--------+
--
------+----------+
|Paving
|2.6% |2.6 % |4.5 % | |-6.2% |-11.0 % |-6.0% |
|0.6%
|
+--------------+--------+--------+--------+-------+--------+--------+--------+
--
------+----------+
|Partnership
| | | | | | | |
|
|
|properties | | | | | | |
|
|
|
+--------------+--------+--------+--------+-------+--------+--------+--------+
--
------+----------+
|Adjusting
|17.8 |13.2 |6.9 |91% |27.1 |21.1 |32.2
|34% |61.5
|
|items | | | | | | |
|
|
|
+--------------+--------+--------+--------+-------+--------+--------+--------+
--
------+----------+
|Profit
before |-5.8 |-1.3 |23.3 | |-48.6 |-59.1 |-34.8 |
-70%
|50.7 |
| | | | | | |
| |
| |
|taxes | | | | |
| | |
|
|
+--------------+--------+--------+--------+-------+--------+--------+--------+
--
------+----------+
|Profit
for |-7.9 |-4.3 |18.3 | |-43.6 |-56.5 |-29.0 |
-95%
|26.3 |
|the review | | | | | |
| |
| |
|period2 | | | | |
| | |
|
|
+--------------+--------+--------+--------+-------+--------+--------+--------+
--
------+----------+
|Earnings
per |-0.04 |-0.02 |0.09 | |-0.22 |-0.27 |-0.14 |
-93%
|0.13 |
|share, EUR | | | | | |
| |
|
|
+--------------+--------+--------+--------+-------+--------+--------+--------+
--
------+----------+
|Operating
cash|129.9 |n/a |n/a | |-22.8 |n/a |n/a |
|n/a
|
|flow after | | | | | | |
|
| |
|investments | | | | | |
| |
|
|
+--------------+--------+--------+--------+-------+--------+--------+--------+
--
------+----------+
|Net
interest |734.0 |734.0 |n/a | |734.0 |734.0 |n/a
|
|668.5 |
|-bearing debt | | | | | |
| |
| |
|at | | | | |
| | |
| |
|end of period | | |
| | | | |
|
|
+--------------+--------+--------+--------+-------+--------+--------+--------+
--
------+----------+
|Gearing
ratio |73.4% |n/a |n/a | |73.4% |n/a |n/a |
|59.9%
|
|at end of | | | | | | |
|
| |
|period, | | | | | |
| |
| |
|% | | | | |
| | |
|
|
+--------------+--------+--------+--------+-------+--------+--------+--------+
--
------+----------+
|Equity
ratio |33.9% |n/a |n/a | |33.9% |n/a |n/a |
|40.2%
|
|at | | | | | | |
|
| |
|end of | | | | | |
| |
| |
| period, % | | | | |
| | |
|
|
+--------------+--------+--------+--------+-------+--------+--------+--------+
--
------+----------+
|Pro
forma |n/a |n/a |n/a | |n/a |n/a |n/a |
|
|
|return on | | | | | | |
|
| |
|capital | | | | | |
| |
| |
|employed | | | |
| | | |
| |
|(ROCE, | | |
| | | | |
| |
|rolling |
| | | | | | |
| |
|12m),
| | | | | | | |
|
|
|% | | | | | | |
|
|
|
+--------------+--------+--------+--------+-------+--------+--------+--------+
--
------+----------+
|Order
backlog,|5,068.4 |5,068.4 |4,617.1 |10%
|5,068.4 |5,068.4 |4,617.1 |10%
|4,218.3 |
|end of | | | | | |
| |
| |
|period | | | | |
| | |
|
|
+--------------+--------+--------+--------+-------+--------+--------+--------+
--
------+----------+
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.
Guidance for 2018
(IFRS)
On June 27, 2018, YIT’s Board of Directors decided to give numerical
guidance
for year 2018 concerning the development of both the Group pro forma
revenue and
adjusted pro forma operating profit. The guidance is
unchanged.
The Group pro forma revenue 2018 is estimated to decrease by -2% –
-6% from pro
forma revenue 2017 (pro forma 2017: EUR 3,862.5 million).
In
2018, the adjusted pro forma operating profit1 is estimated to be in the
range
of EUR 130–160 million (pro forma 2017: EUR 138.9 million).
Guidance
rationale
The guidance for 2018 is based on, among others, the estimated
timing of
completions of residential projects under construction and the
company’s solid
order backlog. At the end of June, 53% of the order backlog was
sold. YIT
estimates that in 2018, approximately 5,300–5,700 apartments in
Finland and CEE,
and approximately 2,400–3,300 apartments in Russia will be
completed, most of
them during the last quarter of 2018.
In the third quarter,
the adjusted pro forma operating profit1 is expected to be
on the good level of
last year, driven especially by the paving season.
During the first months of
the year, YIT has signed several significant, long
-term lease agreements and
the estimate regarding the adjusted operating profit1
includes the divestment
of some of the business premises in the Helsinki
metropolitan area during the
fourth quarter. In the fourth quarter, the adjusted
pro forma operating profit1
is expected to be clearly better than last year.
Estimated completions of
residential projects under construction
units H1/2018,actual Q3/2018,
Q4/2018, Q1/2019, Q2/2019,
Later
estimate
estimate estimate estimate
Finland 1,888 1,519
1,106 315 1,486
2,016
CEE 661 0–200
200–400 0–200 800–1,100
1,173
Russia 233 500–800
1,700–2,100 600–900 400–600
2,073
Total 2,782 2,019–2,519
3,006–3,606 915–1,415 2,686–3,186
5,262
Housing stock under construction,
June 30, 2018: 14,938
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
In July, residential sales
to consumers are estimated to be around 160 units in
Finland (7/17: around
210), around 80 units in the CEE countries (7/17: around
80) and approximately
250 units in Russia (7/17: below 200). Additionally, of
projects previously
sold to the YCE Housing I fund , the fund is estimated to
sell further to
consumers approximately 26 apartments (7/17: 18).
News conference for
investors and media
YIT will arrange a news conference on Thursday, July 26,
2018 at 10:00 A.M.
Finnish time (EEST, at 8:00 A.M. BST) 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!
Webcast
The news
conference and presentation by the President and CEO of YIT Corporation
Kari
Kauniskangas can also be followed through a live webcast
at
www.yitgroup.com/webcast. The live webcast starts at 10:00 A.M. (EEST) and
a
recording of the webcast will be available at approximately 12:00 noon (EEST)
at
the same address.
Conference call
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 9:55
A.M. (EEST). 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:
7890831.
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, hanna.jaakkola@yit.fi
Ilkka Salonen, Chief Financial Officer, YIT
Corporation, tel. +358 45 359 4434,
ilkka.salonen@yit.fi
YIT
CORPORATION
Hanna Jaakkola
Vice President, Investor Relations
Distribution:
Nasdaq Helsinki, major
media,
www.yitgroup.com (https://www.yitgroup.com/en)
YIT is the largest
Finnish and significant North European construction company.
We develop and
build apartments, business premises and entire areas. We are also
specialised
in demanding infrastructure construction and paving. Together with
our
customers our 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 2017 was over EUR 3.8 billion. YIT Corporation's share is
listed on Nasdaq
Helsinki Oy. www.yitgroup.com (https://www.yitgroup.com/en)