YIT’s Interim report January 1–March 31, 2020
Operationally solid quarter. Group adjusted operating profit increased year-on-year.
- Apartment sales was strong in both housing segments.
- Business premises segment’s result was burdened by progress in financial settlements of previously communicated and already completed three problematic projects, one of them being a EUR -7 million booking related to a final agreement on the Myllypuro Kampus project’s financial closing. As part of the agreement, the client will pay an EUR 8 million withheld payment in April.
- Balance sheet to strengthen further followed by the closing of the sale of the Nordic paving and mineral aggregates businesses. The transaction was completed on April 1 and hence, not reflected in the first-quarter figures. Gearing to lower by approximately 34 percentage points in the second quarter.
- Coronavirus pandemic (COVID-19): anticipatory and mitigating measures taken since February.
- Revenue increased by 4.9% to EUR 708 million (675)
- Adjusted operating profit increased to EUR 8 million (-10), and it includes a EUR -7 million booking in the Business premises segment
- Adjusting items totalled to EUR 12 million including a goodwill impairment in the Housing Russia segment
- Operating loss decreased to EUR -3 million (-12)
- Operating cash flow after investments amounted to EUR -48 million (-3)
- Investments in plots increased to EUR 25 million (16)
- Net interest-bearing debt was EUR 942 million (869)
- Gearing was 105% (88)
- Order book amounted to EUR 3,848 million (4,302)
- Lost time injury frequency increased to 10.2 (8.5)
- Customer satisfaction rate (Net Promoter Score) was 56 (57)
This interim report concerns continuing operations, i.e. the five reported segments: Housing Finland and CEE, Housing Russia, Business premises, Infrastructure projects and Partnership properties. 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 and are of the same unit.
|Operating profit margin, %
|Adjusted operating profit
|Adjusted operating profit margin, %
|Profit before taxes
|Profit for the review period
|Earnings per share, EUR
|Operating cash flow after investments
|Net interest-bearing debt
|Gearing ratio, %
|Equity ratio, %
|Return on capital employed, % (ROCE, rolling 12 months)
More detailed financial information is available in a separate Excel workbook downloadable on YIT’s internet pages.
Kari Kauniskangas, President and CEO:
“YIT’s first quarter was largely in line with our expectations, and the Group’s adjusted operating profit improved to EUR 8 million (EUR -10 million). First quarter was highlighted with typical seasonal slowness in infrastructure projects and housing completions. However, apartment sales were at a strong level in all regions, particularly in Russia. The Partnership properties segment’s profitability was supported by the finalisation of the Espoo Keilaniemi project’s real estate transaction.
The Business premises segment’s result was burdened by progress in financial settlements of three previously communicated and already completed problematic projects, one of them being a EUR -7 million booking related to a final agreement on the Myllypuro Kampus project’s financial closing. As part of the agreement, the client will pay an EUR 8 million withheld payment in April. On a positive note, the Business premises segment’s order book strengthened from year-end thanks to several alliance and life-cycle projects which were won last year and were added to the order book in the first quarter.
At the end of the quarter, the operating environment changed rapidly due to the coronavirus pandemic. At YIT, we initiated anticipatory measures back in February to ensure the safety and health of our staff, the progress of our construction sites and the continuation of the business. To mitigate the impacts of the economic slowdown and to react to the sudden changes in the market, we have also initiated numerous savings measures. As an example, we have decided to temporarily lay off all our fixed white-collar employees for two weeks during the second quarter. Simultaneously, the Group management team and the Board of Director’s have reduced their salaries and fees. We also froze apartment start-ups for a month starting mid-March to evaluate the demand level in this new situation.
As of today, our sites are operating well and there have not been material issues in our operations. In April, a few of our construction sites were shut down temporarily following the decisions of the authorities or customers. However, it has been great to notice how quickly our organisation has adapted new ways of working required by the pandemic. The number of digital remote visits and transactions has also grown rapidly following the successful continuation of digital tool implementations. Customer confidence for YIT has stayed at a high level. Even though residential demand dropped in late-March, it has remained moderate thereafter and hence, we will continue apartment start-ups in the second quarter.
In the midst of market uncertainty, the importance of a strong financial position has further increased. I am pleased that the actions we have taken during the past years to strengthen our balance sheet have generated a solid basis for our business. Our balance sheet has further strengthened in the second quarter after the closing of the paving and mineral aggregates businesses sale on April 1. We will book a capital gain of approximately EUR 40 million in the second quarter which is not part of adjusted operating profit but will support our net profit. The cash proceeds of approximately EUR 285 million from the transaction will enable us to significantly reduce our gearing and consequently, to continue investments in the strategic priority areas: urban development, non-cyclical service businesses and Partnership properties.
Our primary targets for the rest of the year are to ensure the health and safety of our staff, to secure the operations at our construction sites and to secure our operating cash flow. However, during these challenging times, we also continue looking forward. By focusing on our strategic priority areas, as well as productivity and customers, we secure a strong market position and ensure our competitiveness.”
At the end of the first quarter 2020, YIT’s order book amounted to EUR 3,848 million (4,302). At the end of the quarter, 76% of the order book was sold (71).
The Group’s revenue grew slightly from the comparison period and amounted to EUR 708 million (675). The Housing Russia segment’s revenue increased markedly year-on-year due to a change in revenue recognition and good apartment sales level. Revenue increased also in the Infrastructure projects segment. The Housing Finland and CEE segment’s revenue was relatively flat, and the Business premises segments’ revenue decreased compared to the first quarter of 2019.
The Group’s adjusted operating profit increased to EUR 8 million (-10) and the adjusted operating profit margin to 1.2% (-1.4). The Partnership properties segment’s result was supported by the closing of the Espoo Keilaniemi project’s real estate transaction in Finland, and the Housing Russia segment’s adjusted operating profit increased driven by improved operations and a change in the revenue recognition. The positive impacts were partly offset by the weaker result in the Business premises segment, burdened by a booking related to a settlement in the Myllypuro Kampus project’s financial closing.
YIT’s operating profit was EUR -3 million (-12). The adjusting items include, among others, a goodwill impairment in the Housing Russia segment.
Guidance for the second quarter of 2020
The second quarter outlook is blurred by significant market uncertainty because of the coronavirus pandemic. YIT expects apartment sales to be at a low level. Consumer apartment completions are expected to halve in Finland and CEE countries compared to the second quarter of 2019. Based on the current order book, the Business premises segment’s revenue is expected to bottom in the second quarter and start to improve in the following quarters. The Infrastructure projects segment is expected to be impacted by seasonal slowness. In the Partnership properties segment, a rebound in the number of customers of the Mall of Tripla is expected once restrictions have been removed.
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 Thursday, April 30, 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/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:
The participants will be asked to provide the following confirmation code: 7352822.
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:
Tommi Järvenpää, Vice President, Investor Relations, YIT Corporation, tel. +358 40 576 0288, email@example.com
Ilkka Salonen, CFO, YIT Corporation, tel. +358 045 359 4434, firstname.lastname@example.org
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