Financial Statements Bulletin 2015: Cash flow strengthened by improved capital efficiency
STOCK EXCHANGE RELEASE FEBRUARY 5, 2016 AT 8:00 A.M.
Financial Statements Bulletin 2015: Cash flow strengthened by improved capital efficiency
Unless otherwise noted, the figures in brackets refer to the corresponding period in the previous year.
October-December 2015 (Segment reporting, POC)
- Revenue increased by 2% to EUR 468.5 (461.0) million. At comparable exchange rates, revenue increased by 4%.
- Operating profit excluding non-recurring items amounted to EUR 16.6 (31.4) million and operating profit margin excluding non-recurring items was 3.6% (6.8%).
- In October-December 2015, there were no non-recurring items (10–12/14: EUR -12.4 million)
- Order backlog decreased by 6% from the end of September, amounting to EUR 2,172.9 million.
- Operating cash flow after investments amounted to EUR 43.4 (139.9) million.
January-December 2015 (Segment reporting, POC)
- Revenue decreased by 8% to EUR 1,651.2 (1,801.2) million. At comparable exchange rates, revenue decreased by 3%.
- Operating profit excluding non-recurring items amounted to EUR 76.0 (126.4) million and operating profit margin excluding non-recurring items was 4.6% (7.0%).
- Non-recurring items were EUR -10.4 (-12.4) million.
- Operating cash flow after investments amounted to EUR 183.7 (151.9) million.
- Board of Directors proposes a dividend of EUR 0.22 (0.18) per share, 137.8% (40.0%) of earnings per share.
Guidance for 2016 (segment reporting, POC)
The Group revenue growth is estimated to be in the range of 0–10% at comparable exchange rates.
The adjusted operating profit* is estimated to grow from the level of 2015 (2015: EUR 76.0 million).
* The adjusted operating profit does not include material reorganisation costs or impairment.
Kari Kauniskangas, President and CEO:
The year 2015 was characterised by major changes in demand and our operating volume. The Business Premises and Infrastructure segment’s order backlog and residential sales in Finland and the CEE countries grew by a third, in spite of the continued decline of consumer demand in Finland. In Russia, however, the ruble was significantly weaker than in the previous year, and residential sales declined by approximately a third. Adapting to these changes required rapid renewal in all of our business segments. Our response to the changes included the development of new affordable solutions for our customers. We also continued our long-term effort to achieve the best customer experience in each of our segments.
We achieved excellent results with regard to cash flow and capital efficiency, and our net debt decreased from EUR 696 million to EUR 529 million during the year. Cash flow was supported by our capital release programme, in which we made significant progress particularly with regard to plot co-operation and the sales of business premises projects. We also significantly reduced our capital tied up in completed unsold apartments in Finland.
The most significant successes in our business operations were achieved in the Business Premises and Infrastructure segment. The order backlog grew and its margin content improved due to the increased share of high value-added projects. In addition, the letter of intent signed regarding the implementation of the Mall of Tripla represents a significant step towards ensuring positive development in the coming years.
The situation in the Housing Finland and CEE segment was polarised. In Finland, an exceptionally high proportion of revenue came from investor sales, which was reflected in weaker profitability. In the CEE countries, sales growth was strong and profitability improved from the previous year. We continued to focus on growth in the CEE region by investing in new plots and establishing a new business unit in Poland.
In Russia, we restructured and adjusted our operations to a significantly lower volume than previously, as we do not expect the market environment to improve in 2016. Our goal is to achieve a positive operating result and cash flow in Russia, even under the prevailing circumstances.
Our main focus this year will be on improving profitability, strengthening our growth initiatives and further improving our capital efficiency. We expect to see results in these areas within the year.
I would like to thank our customers for their trust in our operations, and our personnel for their uncompromising and enthusiastic work to support our renewal and achieving our goals.
Segment reporting, POC
| EUR million | 10–12/15 | 10–12/14 | Change | 1–12/15 | 1–12/14 | Change |
| Revenue | 468.5 | 461.0 | 2% | 1,651.2 | 1,801.2 | -8% |
| Housing Finland and CEE | 220.8 | 189.2 | 17% | 777.8 | 726.5 | 7% |
| Housing Russia | 61.6 | 129.7 | -52% | 266.4 | 474.1 | -44% |
| Business Premises and Infrastructure | 186.0 | 142.4 | 31% | 607.1 | 599.3 | 1% |
| Other items | 0.0 | -0.4 | -0.1 | 1.4 | ||
| Operating profit | 16.6 | 19.0 | -12% | 65.7 | 114.0 | -42% |
| Operating profit margin, % | 3.6% | 4.1% | 4.0% | 6.3% | ||
| Operating profit excluding non-recurring items | 16.6 | 31.4 | -47% | 76.0 | 126.4 | -40% |
| Housing Finland and CEE | 13.4 | 17.5 | -24% | 56.0 | 63.7 | -12% |
| Housing Russia | 0.7 | 18.1 | -96% | 10.9 | 55.8 | -80% |
| Business Premises and Infrastructure | 7.4 | 3.0 | 145% | 21.9 | 20.4 | 8% |
| Other items | -4.8 | -7.2 | -12.8 | -13.5 | ||
| Operating profit margin, % excluding non-recurring items | 3.6% | 6.8% | 4.6% | 7.0% | ||
| Housing Finland and CEE | 6.0% | 9.2% | 7.2% | 8.8% | ||
| Housing Russia | 1.2% | 14.0% | 4.1% | 11.8% | ||
| Business Premises and Infrastructure | 4.0% | 2.1% | 3.6% | 3.4% | ||
| Profit before taxes | 6.1 | 8.5 | -29% | 27.0 | 75.0 | -64% |
| Profit for the review period1 | 4.6 | 5.5 | -17% | 20.0 | 56.6 | -65% |
| Earnings per share, EUR | 0.04 | 0.04 | -17% | 0.16 | 0.45 | -65% |
| Earnings per share excluding non-recurring items, EUR | 0.04 | 0.12 | -70% | 0.23 | 0.53 | -57% |
| Operating cash flow after investments | 43.4 | 139.9 | -69% | 183.7 | 151.9 | 21% |
| Return on investment (last 12 months), % | 5.3% | 7.7% | 5.3% | 7.7% | ||
| Equity ratio at end of period, % | 35.5% | 32.4% | 35.5% | 32.4% | ||
| Net interest-bearing debt at end of period | 460.8 | 616.6 | -25% | 460.8 | 616.6 | -25% |
| Order backlog at end of period | 2,172.9 | 2,125.9 | 2% | 2,172.9 | 2 ,125.9 | 2% |
1 Attributable to equity holders of the parent company
Group reporting, IFRS
| EUR million | 10–12/15 | 10–12/14 | Change | 1–12/15 | 1–12/14 | Change |
| Revenue | 511.6 | 529.3 | -3% | 1,732.2 | 1,778.6 | -3% |
| Operating profit | 28.4 | 35.2 | -19% | 81.6 | 94.8 | -14% |
| Operating profit margin, % | 5.5% | 6.7% | 4.7% | 5.3% | ||
| Operating profit excluding non-recurring items | 28.4 | 47.6 | -40% | 91.9 | 107.3 | -14% |
| Operating profit margin, % excluding non-recurring items | 5.5% | 9.0% | 5.3% | 6.0% | ||
| Profit before taxes | 21.4 | 30.7 | -30% | 61.3 | 74.3 | -18% |
| Profit for the review period1 | 16.0 | 22.4 | -28% | 47.2 | 55.9 | -15% |
| Earnings per share, EUR | 0.13 | 0.18 | -28% | 0.38 | 0.44 | -15% |
| Operating cash flow after investments | 43.4 | 139.9 | -69% | 183.7 | 151.9 | 21% |
| Order backlog at end of period | 2,467.3 | 2,507.1 | -2% | 2,467.3 | 2,507.1 | -2% |
| Invested capital at end of period | 1,174.3 | 1,431.0 | -18% | 1,174.3 | 1,431.0 | -18% |
| Return on investment (last 12 months), % | 6.4% | 6.4% | 6.4% | 6.4% | ||
| Effective tax rate, % | 24.4% | 27.1% | 22.9% | 24.9% |
1 Attributable to equity holders of the parent company
| 12/15 | 12/14 | Change | 12/15 | 9/15 | Change | |
| Net interest-bearing debt, EUR million | 529.0 | 696.0 | -24% | 529.0 | 574.6 | -8% |
| Gearing ratio, % | 101.1% | 129.9% | 101.1% | 106.1% | ||
| Equity ratio, % | 32.9% | 29.2% | 32.9% | 33.1% |
Events after the review period
In January, residential sales to consumers were around 70 units in Finland (1/15: around 80), around 50 units in the CEE countries (1/15: around 40) and around 200 units in Russia (1/15: around 370). In Russia, the sales in the comparison period were exceptionally strong.
Outlook for 2016
Guidance (segment reporting, POC)
The Group revenue growth is estimated to be in the range of 0–10% at comparable exchange rates.
The adjusted operating profit* is estimated to grow from the level of 2015 (2015: EUR 76.0 million).
* The adjusted operating profit does not include material reorganisation costs or impairment.
In addition to the market outlook, the 2016 guidance is based on the following factors: At the end of 2015, 49% of YIT’s order backlog was sold. Projects already sold and signed pre-agreements are estimated to contribute around half of the 2016 revenue, assuming that large projects such as Tripla progress as planned. The rest of the revenue estimate is based on estimated new sales during 2016 and capital release actions.
In Business Premises and Infrastructure, the growing volume and the improved margin content of the order backlog are estimated to support the segment’s adjusted operating profit. The demanding market situation in Russia is expected to keep the profitability of Housing Russia on a low level. Similarly to the year 2015, the investor projects’ share of revenue is estimated to remain high in Housing Finland and CEE, which will impact the segment’s adjusted operating profit margin negatively. The execution of the capital release program started in autumn 2013 will continue actively in 2016, and the capital release actions are expected to have a negative effect on the adjusted operating profit margin.
In 2016, the first quarter is estimated to be the weakest quarter in terms of the adjusted operating profit.
Market outlook
Finland
In Finland, the macroeconomic uncertainty is estimated to affect the residential and business premises markets also in 2016.
Consumer demand is estimated to remain stable and consumers to be cautious in their purchase decisions. However, the demand for small apartments in growth centres is estimated to remain good. Residential price development is estimated to be polarized especially between small and large apartments. Access to mortgage financing is estimated to remain good. The investor activity is estimated remain on a good level but even more focus will be paid on the location.
In Finland, the tenants’ demand for business premises is estimated to remain modest. The real estate investors’ activity is expected to remain on a good level with focus on prime locations in the capital region. Business premises contracting is estimated to pick up slightly. Infrastructure market is expected to remain stable.
Russia
The visibility is weak in Russia and economic uncertainty is estimated to continue to have a negative impact also on the residential market. The construction costs are estimated to increase, while nominal residential prices are estimated to remain stable. The demand is estimated to focus especially on small apartments that are either close to completion or completed.
There is uncertainty regarding the mortgage market due to the unpredictable future of the government mortgage subsidy program.
The CEE countries
In the CEE countries, the demand in the residential and business premises markets is expected to be supported by the improved economic situation. Residential prices are estimated to increase in the Czech Republic, Slovakia and Lithuania, and to remain stable in Poland, Estonia and Latvia. Access to mortgage financing is expected to remain good and interest rates to remain on a low level.
Board of Directors’ proposal for the distribution of distributable equity
The parent company’s distributable equity on December 31, 2015 was EUR 303,743,378.12, of which the net profit for the financial year was EUR 4,480,908.50.
The Board of Directors proposes to the Annual General Meeting that a dividend of EUR 0.22 per share be paid, resulting in a total amount of proposed dividends of EUR 27,627,345.02.
After the distribution of dividends, the remaining profits will be left in the company's distributable assets.
No significant changes have taken place in the company’s financial position after the end of the financial year. The company’s liquidity is good and, in the view of the Board of Directors, the proposed dividend payout does not jeopardise the company’s solvency.
News conference for investors and media
YIT will arrange a news conference on February 5, 2016 at 10:00 a.m. Finnish time (EET) at YIT's head office, Panuntie 11, 00620 Helsinki, Finland. The event is in English and targeted for analysts, portfolio managers and the media.
Webcast
The news conference and presentation by the President and CEO of YIT Corporation Kari Kauniskangas can also be followed through a live webcast at www.yitgroup.com/webcast. The live webcast starts at 10:00 a.m. (EET) and a recording of the webcast will be available at approximately 12 noon (EET) at the same address.
Conference call
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), to number +44 20 300 89 801.
During the webcast and 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.
Schedule in different time zones:
| Financial Statements Bulletin published | The investor and analyst event, conference call and live webcast | Recorded webcast available | |
| EET (Helsinki) | 8:00 | 10:00 | 12:00 |
| CET(Paris, Stockholm) | 7:00 | 9:00 | 11:00 |
| GMT (London) | 6:00 | 8:00 | 10:00 |
| EST (New York) | 1:00 | 3:00 | 5:00 |
Annual Report and Financial Statements
YIT Corporation's Annual Report and Financial Statements for 2015 will be published on the company's website on week 8.
Annual General Meeting 2016
YIT Corporation’s Annual General Meeting 2016 will be held on Tuesday, March 15, 2016 starting at 10 a.m. in the congress wing of Finlandia Hall, Helsinki.
The notice of the General Meeting, which contains the Board of Directors’ proposals to the Annual General Meeting, will be published in its entirety as a separate stock exchange release on February 5, 2016.
For additional information, please contact:
Timo Lehtinen, Chief Financial Officer, YIT Corporation, tel. +358 45 670 0626, timo.lehtinen@yit.fi
Sanna Kaje, Vice President, Investor Relations and M&A, YIT Corporation, tel. +358 50 390 6750,sanna.kaje@yit.fi
YIT CORPORATION
Kari Kauniskangas
President and CEO
Distribution: NASDAQ OMX, principal media, www.yitgroup.com
YIT is a construction industry leader that creates sustainable urban environments by constructing housing, business premises, infrastructure and entire areas. We focus on providing a first-class customer experience, high quality and continuous development of our diverse expertise. Our operating area covers Finland, Russia, the Baltic countries, the Czech Republic, Slovakia and Poland. Our vision is to stay one step ahead – while caring for our customers, partners and personnel. We have over 5,300 employees in eight countries. In 2015, our revenue amounted to nearly EUR 1.7 billion. Our share is listed on Nasdaq OMX Helsinki. www.yitgroup.com