YIT’s renewed strategy: Urban development as the engine of growth

YIT Corporation Stock Exchange Release September 26, 2016 at 1:35 p.m.

YIT’s Board of Directors has confirmed YIT’s renewed strategy for the next three-year period. The engine for growth and profitability is urban development involving partners. The company wants to differentiate itself by caring for customers, visionary urban development, passionate execution and inspiring leadership.  

The implementation of the strategy is supported by three development programmes: Living services, Renovation services and Performance Leap. The renewal of the company to reflect the changing business environment is accelerated by changing internal processes, building partnerships, deepening customer work and investing in such innovations that help YIT to accelerate its renewal and further enhance its competitiveness. YIT’s vision is to create “More life in sustainable cities”.   

Profitability improvement  

In the Housing segments, profitability will be improved by increasing consumer sales and supply of affordable apartments in growth centres. Smartti housing concept innovations will be utilised also in more traditional housing production. Profitability of the Business Premises and Infrastructure segment will be improved by increasing the amount of projects with longer value-chain, both in self-developed and tender-based business.

Performance Leap development programme aims at reducing waste in current processes and ways of working. The target is a significant reduction of production costs through closer cooperation between design management, procurement and production. The use of pre-fabricates will be increased, production lead time will be shortened and central areas of expertise will be reinforced. 

In the different parts of the Group, YIT has achieved excellent results in improving customer experience, quality as well as work safety and wellbeing. The development will continue further and the best practices will promptly be spread out throughout the Group. 

Enhancement of growth 

YIT will further enhance the project development in growth centres and expand its co-operation with partners to innovate, finance and execute projects. The company has established a new unit focusing on innovating long-term development projects in the whole Group as well as a joint venture company called Regenero in the Helsinki metropolitan area.  

YIT’s order backlog in Finland and in CEE is now record high. The projects under planning give a strong foundation for the growth in the next three-year period. The success of the projects requires taking good care of the strengths of the corporate culture and competent personnel.  

Living services and Renovation services development programs increase the new business. The growth is sought by generating new business models and concepts.  

The speed of transformation in Russian business will be accelerated  

The strategic targets of YIT’s Housing Russia segment are to continue releasing capital by improving the rotation of capital and accelerate the improvement of profitability. The company announced earlier that it will book a cost of approximately EUR 27 million in the book value of plots located in Russia. The target is to decrease the invested capital in Russia by approximately RUB 6 billion (approx. EUR 80 million) by the end of 2018.  

The company continues its business operations in all the current operating regions. Plots will be acquired selectively and the focus will be on such plots that have higher expected profitability and return on investment than earlier. YIT will utilise cooperation models and partnerships in new area projects in order to reduce the amount of invested capital. Until the sufficient level of profitability is reached, the volume of construction will be lower than it historically has been. Customer base and service offering will be expanded in the growing Service business.  

The capital release program will be completed  

The capital release program set for the current strategy period, worth approximately EUR 380 million, will be completed, and the targets for some parts of the programme will be exceeded. The improvement of the capital turnover will continue as a part of normal business. Starting from the beginning of next year, it is not expected to have a significant impact on the profitability development. Capital will be released from Russia and invested in growth centres in Finland and the CEE countries. 

The company specifies its cash flow target, other long-term targets unchanged  

The company’s Board of Directors confirmed also the financial targets and specified the cash flow target. Going forward, the cash flow target is operating cash flow after investment sufficient for paying dividends. Previously, the company has communicated that the target is to have sufficient operating cash flow after investment for paying dividends and reducing debt. However, the aim is not to increase the net debt level. The surplus of cashflow will be used to accelerate the growth. At the same time, the improvement of the key figures is expected to be realised primarily through improvement of the company’s profitability and operative result. Other long-term targets remain unchanged.

YIT’s business operations are lead through the long-term targets (POC): 

• Annual revenue growth 5–10 per cent on average
• Return on investment of 15 per cent
• Operating cash flow after investments sufficient for paying dividends (changed)
• Equity ratio of 40 per cent
• Dividend payout of 40 to 60 per cent of net profit for the period
  
   

YIT’s strategy and financial targets will be described in more detail at YIT’s Capital Markets Day, which will be arranged on September 29, 2016, in Bratislava, Slovakia. For additional information, please visit YIT’s Investors site at www.yitgroup.com/investors.

For additional information, please contact: 

Kari Kauniskangas, President and CEO, YIT Corporation, tel. +358 40 570 1313, kari.kauniskangas@yit.fi
Hanna Jaakkola, Vice President, Investor Relations, YIT Corporation, tel. +358 40 5666 070 hanna.jaakkola@yit.fi 

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

YIT creates sustainable cities and better living environment by developing and 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. In 2015, our revenue amounted to nearly EUR 1.7 billion, and we employ about 5,300 employees. Our share is listed on Nasdaq Helsinki. www.yitgroup.com