YIT’s new strategy and updated financial targets – Performance through cycles

YIT Corporation Stock Exchange Release September 19, 2018 at 08:00 a.m.

YIT’s Board of Directors has confirmed the company’s new strategy for 2019–2021. The target of YIT’s new strategy is to improve profitability and to strengthen financial stability. The company’s strategic priorities, sources of growth and structural profitability, include urban development and non-cyclical businesses. The cornerstones of success supporting these priorities include (1) top performance, (2) capital efficiency, (3) success with customers and partners, and (4) happy people. The Board of Directors has confirmed a 12% or higher return on investment (ROCE) and a gearing ratio of 30–50% as the long-term financial targets of the company. In addition, the company’s target is to increase its dividend annually.  

“I’m extremely enthusiastic about the opportunities opened up by the merger of YIT and Lemminkäinen,” says Kari Kauniskangas, President and CEO. “The keys to the company’s success are our skillful personnel, strong corporate culture, and innovativeness. Our target is to strengthen our position as a leading urban developer and to decrease the impact of economic cycles on our businesses.”

Megatrends urbanisation, sustainability, and digitalisation as a basis for the strategy

Due to urbanisation people move to growth centres and further to the metropolitan areas. Urban structures become more dense near the public transport hubs where cities expand upwards and underground through various versatile projects, instead of expanding horizontally. The importance of sustainability is emphasised as people’s mindset and legislation change. The circular economy gains a stronger foothold, and traditional ownership will be partly replaced by shared ownership and the sharing economy. The demand for renovation construction and services will increase. Digitalisation provides opportunities to improve customer experience and enhance productivity. Collecting, analysing and using data create new business opportunities.

Strategic priorities: urban development and non-cyclical businesses

The development of YIT’s businesses is based on two strategic priorities: urban development and non-cyclical businesses. The company targets to increase these businesses actively both via investments and organically.

For urban development, YIT can fully utilise its strengths: project development, design and planning management, and management and coordination of complex projects. Managing the entire construction value chain from planning to maintenance brings the greatest productivity and customer benefits. Self-developed projects, life-cycle projects, different turnkey contracting models and cooperative projects including alliances, enable a holistic approach to the achievement of benefits.    

Non-cyclical businesses are based on long-term service contracts and lease agreements as well as on demand that is growing steadily or at a trend rate. At YIT, these businesses include paving, mineral aggregates business, road maintenance, renovation projects, real estate investment, property management and living services. The company’s target is to generate an annual, steady, operating profit of approximately EUR 100 million from its non-cyclical businesses from 2019. 

The cornerstones of success support the strategic priorities

The four cornerstones of YIT’s success are: (1) top performance, (2) capital efficiency, (3) success with customers and partners, and (4) happy people.   

Top performance

YIT and Lemminkäinen merged on February 1, 2018. The target of the integration is to gain EUR 40–50 million in total synergy benefits by the end of 2020. Common ways of working are created as part of the integration, and they form a suitable basis for scaling the good practices of productivity pilots. Productivity is sought by decreasing waste and turnaround times, without compromising quality. Targets are set segment-specifically. Productivity is improved through, for instance, planning management, applying lean principles, the use of BIM (Building Information Model), the increased use of prefabricates, and the closer cooperation of planning, procurement and production.

Capital efficiency  

YIT’s target is to decrease its net working capital and to release capital in selected geographical areas by selling slow moving assets on the balance sheet. In Russia, the company will decrease the risk level and develop its business model in a less capital-intensive direction. YIT’s target is to further release capital employed in Russia by approximately EUR 100 million (RUB 8 billion) from the earlier target level. In the Partnership properties segment, invested capital is estimated to increase by approximately EUR 150 million during the strategy period.  

Success with customers and partners

Knowing the customers and understanding their needs help YIT develop improved solutions and better services. To boost innovation, accelerate development, and ensure the implementation of large-scale projects, YIT will continue to expand and strengthen collaboration with its partner companies. The company will improve the customer experience by increasing customer understanding, the use of data, conceptualisation and active daily customer work, and aims for an annually increasing net promoter score (NPS, net promoter score). 

Happy people 

Profitability and continuity are ensured by the most competent people in the field. YIT strives to create a working community where the company culture, management, tools, and atmosphere support commitment and satisfaction. Openness within the working community, working methods that encourage participation, personnel development, and compensation and benefits policies are some of the keys to support the company’s success. YIT’s target is to be the most desired employer in its field among both students and professionals.  

Long-term financial targets 

YIT’s confirmed financial targets depict the company’s view on its opportunities to create additional value in the long term based on the new strategy. Updated long-term financial targets include: 

- over 12% return on investment (ROCE) 

- gearing 30% to 50% 

- annually increasing dividend per share 

The company’s strategy and its implementation will be discussed in more detail in the Capital Markets Day to be held in Helsinki, Finland, on September 27, 2018. The presentations can be followed live on YIT’s website at http://www.yitgroup.com/cmd. 

For more information, please contact:  

Kari Kauniskangas, President and CEO, YIT Corporation, tel. +358 50 560 0855 

Ilkka Salonen, CFO, YIT Corporation, tel. +358 45 359 4434, ilkka.salonen@yit.fi 

Hanna Jaakkola, Vice President, Investor Relations, YIT Corporation, tel. +358 40 566 6070, hanna.jaakkola@yit.fi  

 YIT Corporation 

Hanna Jaakkola 
Vice President, Investor Relations  

Distribution: Nasdaq Helsinki, major media, www.yitgroup.com  

YIT is the biggest construction company in Finland and a major player in Northern Europe. We develop and build apartments, business premises and entire areas. Furthermore, we are specialists in infrastructure construction and paving. Together with our customers, our 10,000 professionals create increasingly functional, appealing and sustainable cities and living environments. We have operations in 11 countries: Finland, Russia, Scandinavia, the Baltic States, the Czech Republic, Slovakia and Poland. The new YIT was created by the merger of YIT Corporation and Lemminkäinen Corporation, both over 100 years old, on February 1, 2018. In 2017, our pro forma revenue totalled over EUR 3.8 billion. YIT Corporation’s share is listed on Nasdaq Helsinki. www.yitgroup.com