YIT’s Interim Report, January 1 - March 31, 2007: Revenue and operating profit continue to rise
YIT CORPORATION STOCK EXCHANGE RELEASE April 26, 2007 at 8:00
The YIT Group’s revenue and operating profit continued to rise in Q1 2007. Revenue rose by 8 per cent and operating profit by 14 per cent compared with the previous year. The Group’s order backlog is at an all-time high.
Building Systems forged ahead with improving profitability and focused on revenue growth. The business segment’s operating profit as a share of revenue rose to 5.1 per cent (Jan-Mar/2006: 3.6%). Revenue was up 13 per cent. The order backlog grew by 30 per cent to EUR 670.3 million (EUR 517.6 million).
Profitability remained excellent in Construction Services. Operating profit was 11.2 per cent (11.6%) of revenue. The order backlog was 65 per cent higher than last year, having risen to EUR 2,137.9 million (EUR 1,296.5 million).
Industrial and Network Services’ operating profit declined due to the weak market for network services and the final completion of the downscaling measures carried out in 2006. EUR 1.0 million in downscaling expenses were booked in operating profit during the period. The operating profit margin was 4.5 per cent (4.9%). The order backlog grew by 4 per cent to EUR 228.8 million (EUR 219.5 million).
“On the whole, construction and demand for building system services have remained solid in our whole business territory. Demand for new housing has stayed good in Finland. The number of residences YIT sold in Russia decreased compared to the previous year, but the value of sales stayed the same. Trends in Industrial and Network Services were favourable in industrial projects and maintenance. The market for network services has remained challenging,” says Group CEO Hannu Leinonen.
“All in all, the outlook for 2007 is still favourable. Strong need for housing in the large cities of Russia enables us to expand our residential production over the long term, too. Thanks to our exceptionally robust order backlog and the good market situation, we are well-poised to forge ahead with profitable growth in line with our plans,” adds Leinonen.
Revenue growth 8 per cent
The YIT Group’s revenue for the January-March period grew by 8 per cent on the previous year without major acquisitions and amounted to EUR 833.5 million (Jan-Mar/2006: EUR 768.8 million). Revenue in Russia remained on last year’s level during the first months of the year and amounted to EUR 48.1 million (EUR 50.3 million). Of the revenue, 55 per cent came from Finland (57%), 33 per cent from the other Nordic countries (31%), 6 per cent from Russia (7%) and 6 per cent from the Baltic countries (5%).
The share of revenue generated by the maintenance and servicing business was 36 per cent (35%), or EUR 299.7 million (EUR 269.8 million).
YIT also keeps track of trends in the shares of revenue generated by consumer services, long-term service agreements, project development and contracting. In the January-March period, consumer services accounted for 26 per cent of revenue, long-term service agreements for 28 per cent, project development for 9 per cent and contracting for 37 per cent. YIT’s strategic objective is to increase the relative share of revenue accounted for by consumer services, long-term service agreements and project development.
Operating profit growth 14 per cent
Operating profit grew by 14 per cent on the previous year and amounted to EUR 61.2 million (EUR 53.7 million). The operating profit margin was 7.3 per cent (7.0%). Profit before taxes rose by 9 per cent to EUR 54.8 million (EUR 50.1 million). Earnings per share were up 7 per cent to EUR 0.31 (EUR 0.29). Equity per share was EUR 4.95 (EUR 4.23). Return on investment for the 12-month period ending at the conclusion of the review period was 25.4 per cent (28.1%).
Financial position remains stable
Invested capital in Russia increased due to growth in business operations, the acquisition of plots and ongoing volume growth in production. At period’s end, 26 per cent, or EUR 314 million, of the Group’s invested capital was tied up in Russia. At the end of 2006, these figures were 23 per cent and EUR 279 million. The Group’s financial position remained stable. Net debt was EUR 540.9 million (EUR 334.2 million). The gearing ratio rose to 85.6 per cent (62.7%). The equity ratio was 31.8 per cent (33.5%). The balance sheet total at the end of the report period was EUR 2,155.9 million (EUR 1,722.0 million).
Order backlog growth 49 per cent
The Group’s uninvoiced backlog of orders rose to a record high. It was 49 per cent higher at the end of the period than a year earlier, having risen to EUR 2,995.4 million (EUR 2,007.2 million). At the end of 2006, the order backlog was EUR 2,802.3 million. The margin of the backlog is good. Due to their nature, part of the Group’s maintenance and servicing operations are not included in the order backlog.
Number of employees 22,400
YIT’s number of employees has risen since the previous year. In the review period, the Group employed 22,444 (21,131) people on average. At the end of the period, the Group had 22,418 employees (21,140). Of YIT’s employees, 51 per cent work in Finland, 36 per cent in the other Nordic countries, 7 per cent in the Baltic countries and 6 per cent in Russia.
Northern Europe still booming
The boom in the Nordic countries peaked last year, but will continue during the upcoming years, with growth outpacing the euro zone by about one percentage point. Russia and Norway still benefit from the high prices of oil. The rate of growth in the Estonian, Latvian and Lithuanian economies is almost three times as fast as in the Nordic countries, while it is double in Russia. Especially in Russia and Latvia, fast growth has also resulted in rapid inflation.
Euro interest rates are seeing moderate growth.The positive earnings trend and the improvement in the employment count bolster household confidence in all of YIT’s business countries. The record-high population shift in Finland is continuing, maintaining stable need for the construction of new housing and increasing renovation works on old housing. Growth in the construction of business premises outpaces housing production. Strong demand for housing in the large cities of Russia enables the company to expand residential production over the long term, too. Growth in exports and industrial output increases the need for industrial investments and maintenance in all the Nordic countries.
YIT estimates that it will start up more residences than last year
YIT estimates that this year it will start up the construction of about 2,700 market-financed residential units in Finland (start-ups in 2006: 2,818), about 4,500 in Russia (3,699) and about 900 in the Baltic countries (887).
Outlook for 2007
We estimate that revenue and operating profit (EBIT) in 2007 will increase compared to the previous year.
The outlook for revenue growth is supported by the record-high order backlog, the continuing boom and YIT’s major investments in the Russian market. The healthy margin of the order backlog and the company’s own profitability improvement measures underlie our expectations of growth in operating profit.
Publication on April 26 and subsequent Interim Reports
An event for investment analysts and portfolio managers will be held at YIT’s head office at 10:00 on Thursday, April 26. The address is Panuntie 11, 00620 Helsinki, Finland. A press conference will be held at the same venue at 13:00.
A webcast presentation of the January-March 2007 results can be viewed at YIT’s site. The results will be presented in Finnish and English by Group CEO Hannu Leinonen. The link to the webcast presentation is: http://webcast.magneetto.com/yit/en.
The Interim Report for the January-June period will be published on July 27, 2007, and the Interim Report for the January-September period on October 26, 2007. YIT observes a three-week silent period before the publication of profit and loss bulletins. During this period, the company’s representatives do not comment on the company’s financial position or meet capital market representatives.
Interim Reports are published as stock exchange releases and on the company’s site at www.yitgroup.com. Copies of Interim Reports can be ordered from the company’s site, by emailing InvestorRelations@yit.fi or by telephoning +358 20 433 2467.
YIT CORPORATION
Hannu Leinonen
Group CEO
For additional information, contact:
Sakari Toikkanen, Executive Vice President, tel. +358 20 433 2336, sakari.toikkanen@yit.fi
Petra Thorén, Vice President, Investor Relations, tel. +358 20 433 2635, petra.thoren@yit.fi
