President and CEO Kari Kauniskangas to leave YIT Corporation, EVP Antti Inkilä appointed as interim President and CEO
- Stock exchange release
YIT’s half-year report January 1–June 30, 2020
YIT Corporation Stock exchange release July 28, 2020 at 09:00 a.m.
YIT’s half-year report January 1–June 30, 2020
Second quarter of 2020
Operations remained stable during the coronavirus pandemic with strong cash flow
- The Group’s adjusted operating profit decreased to EUR 5 million (28), negatively impacted by financial settlements of EUR 17 million in the Business premises segment.
- Liquidity remained strong supported by better operating cash flow compared to the comparison period, as well as the sale of the Nordic paving and mineral aggregates businesses.
- Apartment sales started to recover towards the end of the quarter after having reached a low point in April. Apartment start-ups remained at a good level.
- Order book increased compared to the first quarter of 2020.
- Revenue decreased by 8% to EUR 700 million (757)
- Adjusted operating profit decreased to EUR 5 million (28)
- Adjusting items amounted to EUR 5 million (51)
- Operating profit increased to EUR 0 million (-23)
- Earnings per share was EUR 0.22 (-0.22)
- Operating cash flow after investments amounted to EUR 247 million (-51)
- Investments in plots amounted to EUR 18 million (18)
- Net interest-bearing debt was EUR 715 million (939)
- Gearing was 73% (99)
- Order book amounted to EUR 4,074 million (4,652)
- Combined lost time injury frequency was 10.0 (March 31, 2020: 10.2)
- Customer satisfaction rate (Net Promoter Score) was 54 (61)
- Revenue decreased by 2% to EUR 1,407 million (1,432)
- Adjusted operating profit decreased to EUR 13 million
- Operating loss decreased to EUR -4 million (-35)
- Earnings per share was EUR 0.06 (-0.40)
- Operating cash flow after investments amounted to EUR 199 million (-54)
Nordic paving and mineral aggregates businesses sold on April 1, 2020, are reported as discontinued operations. Unless otherwise noted, the figures in brackets refer to the corresponding period in the previous year.
|Operating profit margin, %||0.0||-3.0||-0.3||-2.4||2.4|
|Adjusted operating profit||5||28||13||19||165|
|Adjusted operating profit margin, %||0.7||3.8||0.9||1.3||4.9|
|Result before taxes||-8||-32||-25||-55||40|
|Result for the period, continuing operations||-9||-43||-18||-61||5|
|Result for the period||45||-47||13||-85||15|
|Earnings per share, EUR||0.22||-0.22||0.06||-0.40||0.07|
|Operating cash flow after investments||247||-51||199||-54||51|
|Net interest-bearing debt||715||939||715||939||862|
|Gearing ratio, %||73||99||73||99||81|
|Equity ratio, %||33||31||33||31||34|
|Return on capital employed, % (ROCE, rolling 12 months)||9.5||10.0||9.5||10.0||11.1|
Kari Kauniskangas, President and CEO:
“In spite of prevailing uncertainty and demand volatility caused by the coronavirus pandemic, YIT’s operations in the second quarter performed well without major disturbances. The Group’s adjusted operating profit decreased to EUR 5 million (28), negatively impacted by financial settlements of EUR 17 million in the Business premises segment. The rest of our businesses performed according to our expectations. The order book increased from the previous quarter, apartment start-ups continued at a good level, and some significant investor sales were agreed. Cash flow was very strong, supported by stronger operating cash flow compared to the comparison period as well as the sale of the Nordic paving and mineral aggregates businesses in April.
The Business premises’ weak operating profit during the first half of the year has been impacted by the completions of and progress in financial settlements of three challenging projects. Consequently, we have made significant changes to the way we operate. Responsibilities and organisations in the Business premises and Partnership properties segments have been renewed, management resources strengthened, and risk management processes developed further. Going forward, the Business premises segment will focus on project management and productivity improvement in construction. The Partnership properties will be responsible for commercial project development and life-cycle services, as well as investment portfolio management.
Regarding the three challenging projects, Myllypuro Campus was fully settled in the first quarter and Hertsi shopping mall in the second quarter. At the Tripla project, some 1,800 subcontractor contracts had been settled at the end of the second quarter and only few contracts in building systems area are still in progress. Due to disputes, their settlements can take some quarters and may have an impact on our results when agreed. The rest of the business and the order book in the Business premises segment are at a healthy level. We expect the segment to be profitable in the third quarter.
The impact of the coronavirus pandemic on YIT has been moderate. In Housing Finland and CEE, consumer sales dropped markedly in April but demand recovery since then has been encouraging. Residential investor activity has also been high. In Russia, apartment sales have continued at a good level, but decisions made by authorities in a few regions have led to site closures delaying completions with minor financial impact. Strong financial position, advanced digital sales channels and good reputation among clients have supported housing sales and speedy recovery in all countries. In Infrastructure projects, development has been positive, and stimulus packages by the public sector are expected to support demand during upcoming winter and next year. Number of customers in the Mall of Tripla fell in March due to the pandemic but recovery since May has been rapid.
During the second quarter, YIT signed significant leases in upcoming and completed commercial real estate projects. Based on customer feedback, there will be need for new premises even though remote work will become more common. New requirements for safe working environment support demand also in renovation.
Key uncertainties for the rest of this year relate to the possible second wave of the coronavirus pandemic and its implications to apartment sales to consumers and project completion timings at the end of the year. Our liquidity is solid, and we continue to strengthen our operating cash flow to secure our stable position even in the worst scenarios. Our reliable brand and strong order book in all segments give us confidence for positive outlook for the rest of the year and for 2021. We believe that our performance during the rest of the year will be substantially better than during the first half and we are in a solid position for next year.”
At the end of the second quarter 2020, YIT’s order book amounted to EUR 4,074 million, lower than EUR 4,652 million at the end of the corresponding period. The decline was partly related to the Tripla project, which had a positive impact of EUR 322 million in the second quarter 2019 order book. At the end of the second quarter 2020, 76% of the order book was sold (77).
The Group’s revenue decreased to EUR 700 million compared to EUR 757 million in the comparison period as Business premises’ corresponding period included a revenue recognition from the Tripla project. In Housing Finland and CEE, revenue was relative flat, whereas revenue increased in the Housing Russia, the Infrastructure projects and the Partnership properties segments.
The Group’s adjusted operating profit decreased to EUR 5 million (28) and the adjusted operating profit margin to 0.7% (3.8) mainly due to the weaker results in the Business premises and the Housing Finland and CEE segments. In the Business premises segment, the result was negatively impacted by financial settlements, and in the Housing Finland and CEE segment, adjusted operating profit decreased primarily due to a weaker sales mix. The results of the Housing Russia and the Infrastructure projects segments improved.
YIT’s operating profit was EUR 0 million (-23). The adjusting items amounted to EUR 5 million (51) and include, among others, operating profit from operations to be closed.
The Group’s revenue decreased slightly from the comparison period and amounted to EUR 1,407 million (1,432). The Business premises segments’ revenue decreased by 18% as the comparison period included a revenue recognition from the Tripla project. The Housing Finland and CEE segment’s revenue decreased slightly as revenue in the comparison period included a block sale of almost 600 apartments to a joint venture. The Housing Russia segment’s revenue increased markedly year-on-year due to a change in revenue recognition and good apartment sales level. The Infrastructure projects segment’s revenue increased supported by good progress of the Raide-Jokeri light rail project in Helsinki and Espoo, Finland.
The Group’s adjusted operating profit decreased to EUR 13 million (19) and the adjusted operating profit margin to 0.9% (1.3) mainly due to the weaker result in the Business premises and the Housing Finland and CEE segments. The Business premises segment’s adjusted operating profit was negatively impacted by financial settlements of EUR 24 million in three earlier communicated problematic projects. Adjusted operating profit improved in the Housing Russia, Infrastructure projects and Partnership properties segments.
YIT’s operating profit was EUR -4 million (-35).
Guidance for the third quarter of 2020
In the third quarter, consumer apartment completions are expected to remain at a low level in Finland and the CEE countries. In Russia, housing sales and operative performance are expected to remain solid.
The Business premises segment is expected to be profitable in the third quarter, and in the Infrastructure projects segment, operative performance is expected to be on a good level. In the Partnership properties segment, the Mall of Tripla customer behaviour is estimated to continue to normalise.
The full-year outlook is clouded by uncertainty in consumer sales and apartment completion timings at the end of the year due to the coronavirus pandemic. Significant fluctuation is expected to take place between the quarters due to typical seasonality, closing of sales of business premises projects, as well as sales of apartments and completion of residential projects. As in 2019, the last quarter of the year is expected to be the strongest.
News conference for investors and media
YIT will arrange a news conference on Tuesday, July 28, 2020 at 10:00 a.m. Finnish time (EET, at 8:00 a.m. GMT). The results will be presented by Kari Kauniskangas, President and CEO of YIT Corporation. The news conference will be a webcast that can be followed on the company’s web site at www.yitgroup.com/en/investors/reports-and-presentations/webcasts.
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. (EET). Conference call numbers are:
Participants from Finland +46 (0)8 5033 6574
- Participants from Sweden +46 (0)8 5033 6574
- Participants from Norway +47 2100 2610
- Participants from UK and outside of Nordic countries +44 (0)330 336 9105
The participants will be asked to provide the following confirmation code: 3605489.
During the 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.
The event will be in English and targeted for analysts, portfolio managers and the media. Welcome!
For further information, please contact:
Vice President, Investor Relations
Distribution: NASDAQ Helsinki, key media, www.yitgroup.com
YIT is the largest Finnish and a significant North European construction company and urban developer. We develop and build apartments and living services, business premises and entire areas. We are also specialised in demanding infrastructure construction. Together with our customers, our nearly 8,000 professionals are creating more functional, attractive and sustainable cities and environments. We work in 10 countries: Finland, Russia, Sweden, Norway, the Baltic countries, Czech Republic, Slovakia and Poland. Our revenue in 2019 was approximately EUR 3.4 billion. YIT Corporation's share is listed on Nasdaq Helsinki Oy. www.yitgroup.com