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At last, several months’ hard work paid off and YIT and Lemminkäinen merged on February 1. Internally, we say that we are now a new YIT, and it describes well what we are aiming for. Our goal is to create a new unified YIT combining the best of both Lemminkäinen and YIT. Creating a new, unified corporate culture is one of the most important priorities in the ongoing integration.
The merger day also saw the publication of the financial results of both companies, the new organisational structure and reporting method, the location of the head office, the new trading code and financing arrangements related to the merger. Shortly after these press releases, news releases related to shareholding were also published as Lemminkäinen shares were converted into YIT shares.
The company’s risks and outlook for 2018 were also published in a separate stock exchange release on February 1. The views given at this stage are generic, and no precise guidance was issued (at least for now) because the companies’ books opened literally on midnight, February 1. In addition, the company will mainly be reporting in accordance with IFRS principles from now on. In IFRS reporting, residential consumer projects are only recognised as income upon project completion. Previously, YIT management has monitored the development of the company’s business in accordance with segment reporting based on percentage of completion (POC), since the self-developed residential business has had such a big impact on the company’s result. In segment reporting, revenue recognition is based on multiplying the degree of completion by the degree of sale in accordance with the so-called percentage of completion principle.
In connection with the guidance it was observed that the adjusted operating profit is expected to fluctuate significantly between quarters. In the construction sector, seasonal fluctuation is typical, and especially the paving business takes place during the summer months. Like last year, we reminded the capital markets that the adjusted operating profit for the first quarter 2018 is expected to be low. In addition to text, the outlook was presented in table format. The idea is to look at the next 12 months in the light of the past 12 months in order to determine whether the development will be better, the same or worse than during the past 12 months. In interpreting the colours in the table, one should bear in mind that the year 2017 was very strong e.g. in terms of domestic residential construction.
The merger of YIT and Lemminkäinen is expected to create significant value for the shareholders of the merged company. The total synergies are estimated to be approximately EUR 40 million annually, and they are expected to materialise in full by the end of 2020. The company’s objective is to report accrued synergies and to adjust the synergies timetable in connection with the first-quarter interim report and to report developments on a regular basis after that. In mid-February, the company announced the launch of statutory cooperation negotiations.