YIT Corporation’s financial reporting and Annual General Meeting in 2021
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YIT Corporation Stock Exchange Release 30 October 2020 at 9.00 a.m.
YIT's interim report 1 January -30 September 2020
Third quarter of 2020
Good results in housing segments supported by strong apartment sales. Group profitability negatively impacted by Business premises
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.
|Operating profit margin, %||-2.4||2.3||-0.9||-0.7||2.4|
|Adjusted operating profit||16||26||29||45||165|
|Adjusted operating profit margin, %||2.4||3.2||1.4||2.0||4.9|
|Result before taxes||-27||7||-52||-47||40|
|Result for the period, continuing operations||-26||6||-44||-54||5|
|Result for the period||-26||27||-12||-58||15|
|Earnings per share, EUR||-0.12||0.13||-0.06||-0.28||0.07|
|Operating cash flow after investments||-9||-27||190||-81||51|
|Net interest-bearing debt||740||983||740||983||862|
|Gearing ratio, %||84||101||84||101||81|
|Equity ratio, %||31||31||31||31||34|
|Return on capital employed, % (ROCE, rolling 12 months)||8.9||9.0||8.9||9.0||11.1|
Antti Inkilä, Interim President and CEO
“Our third quarter told two stories. On one hand, apartment sales were strong in all of our operating countries and demonstrated our ability to adjust to a changing market environment and utilise our strong market position. However, as we announced earlier, our third-quarter profitability was burdened by an EUR 18 million margin reduction in revenue and cost estimates of the Tripla project. In addition, we made an inventory write-down of EUR 7 million related to the sale of a business premise in line with our strategic measures to increase capital efficiency. Consequently, the Business premises segment’s result turned to a loss, and the Group’s adjusted operating profit was unsatisfactory at EUR 16 million.
The Business premises segment’s year has been difficult due to the financial settlements in three challenging projects, but the outlook for the segment is positive. Those challenging projects have been completed, the segment’s order book is at a good level and upcoming projects are healthy.
In the third quarter, results particularly in the housing segments were nonetheless excellent. In the Baltic and Central European countries, the development was favourable after the difficulties caused by the coronavirus pandemic earlier this year, and apartment sales were higher compared to the corresponding period last year. In Russia, the number of apartments sold was the second highest ever.
We have also continued our actions to improve profitability, increase capital efficiency and strengthen the balance sheet. In addition to speeding up the sales process of the above-mentioned business premise, we started preparations to close down our loss-making infrastructure business in Norway, and we signed conditional contracts to sell significant plots in Russia in the units to be closed down. These actions led to write-downs in the third quarter, but they will strengthen our cash flow by over EUR 50 million and improve our capital efficiency by the end of 2021.
Our outlook for the rest of this year has clarified supported by strong apartment sales, good reservation levels, as well as construction sites progressing according to plans. Therefore, we reinstated our result guidance for 2020 earlier this month: we expect full-year Group adjusted operating profit to be in the range of EUR 90-110 million.
Going forward, strengthening financial performance remains our primary target. To reduce the amount of negative surprises, we will improve project management. To achieve this, we will continue to promote an open culture which entails disciplined and common ways of working, as well as sharing best practices between the segments. We are committed to our strategy and we continue to focus even more strongly on the most profitable businesses, sustainable urban development and property investments.
We are confident with our outlook for 2021. The Group’s order book is at a good level and we have been more selective in bidding processes. Our project pipeline is promising, and measures to improve capital efficiency have supported our balance sheet. Our strong balance sheet, unique plot reserve and diverse business portfolio ensure our success in even the most challenging market conditions. As a Group, we have also proven our capability to adapt quickly to a changing environment during the coronavirus pandemic.”
At the end of the third quarter 2020, YIT’s order book amounted to EUR 3,831 million, lower than EUR 4,764 million at the end of the corresponding period. In the third quarter of 2019, the Tripla project had a positive impact of EUR 239 million on the order book. At the end of the third quarter of 2020, 79% of the order book was sold (78).
The Group’s revenue was EUR 687 million (808). Revenue decreased in Business premises and in Infrastructure projects. In Housing Finland and CEE, revenue was relatively flat, whereas revenue increased in the Housing Russia and the Partnership properties.
The Group’s adjusted operating profit decreased to EUR 16 million (26) and the adjusted operating profit margin to 2.4% (3.2) due to significantly lower result in Business premises. The segment’s profitability was negatively impacted by an EUR 18 million margin reduction in revenue and cost estimates of the Tripla project and an inventory write-down of EUR 7 million. These negative impacts were partly offset by a strong improvement in the Housing Russia segment. The adjusted operating profit in the Housing Finland and CEE and Partnership properties segments also improved. The result of Infrastructure projects segment weakened slightly.
YIT’s operating profit was EUR -16 million (18). The adjusting items amounted to EUR 32 million (7) including, among others, a write-down of EUR 12 million related to the decision to close down Infrastructure operations in Norway and a write-down of EUR 13 million related to plots to be sold in Russia.
The Group’s revenue amounted to EUR 2,094 million (2,239). The Business premises segment’s revenue decreased by 22% 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 clearly year-on-year due to the good apartment sales level, as well as a change in revenue recognition. The Infrastructure projects’ revenue was at the level of the corresponding period.
The Group’s adjusted operating profit was EUR 29 million (45) and the adjusted operating profit margin 1.4% (2.0). The strategic steps taken have improved profitability in Housing Russia and Partnership properties. The adjusted operating profit was relatively flat in Infrastructure projects and decreased in Housing Finland and CEE. In Business premises, the financial settlements in three problematic projects, margin reduction in revenue and cost estimates of the Tripla project and an inventory write-down have led to significantly weaker profitability year-on-year.
YIT’s operating profit was EUR -20 million (-17).
Guidance for full-year 2020
YIT reinstated its full-year guidance for 2020 on 19 October as the outlook has clarified supported by strong apartment sales, good reservation levels, as well as the construction sites progressing according to plans.
YIT expects its full-year Group adjusted operating profit to be in the range of EUR 90-110 million (2019: EUR 165 million).
During the rest of the year, YIT expects its projects to be completed on schedule despite the second wave of the coronavirus pandemic. However, possible decisions by authorities, such as closing down construction sites widely or slow acceptance processes in completion, may lead to temporary shutdowns and cause postponements of revenue and profit into 2021.
News conference for investors and media
YIT will arrange a news conference on Friday, 30 October 2020 at 10.00 a.m. Finnish time (EET, at 8.00 a.m. GMT). The results will be presented by Harri-Pekka Kaukonen, Chairman of the Board, Antti Inkilä, Interim President and CEO and Ilkka Salonen, CFO of YIT Corporation. The news conference will be a webcast that can be followed on the company’s web site at www.yitgroup.com/webcast.
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
The participants will be asked to provide the following confirmation code: 6730376.
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 is targeted for analysts, portfolio managers and the media. Welcome!
For further information, please contact:
Tommi Järvenpää, Vice President, Investor Relations, YIT Corporation, tel. +358 (0)40 576 0288, firstname.lastname@example.org
Ilkka Salonen, CFO, YIT Corporation, tel. +358 (0)45 359 4434, email@example.com
Vice President, Investor Relations
Distribution: NASDAQ Helsinki, major media, www.yitgroup.com
YIT is the largest Finnish and significant North European construction company. 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 operate in 10 countries: Finland, Russia, Sweden, Norway, the Baltic countries, the 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