Executive Vice President 8.5.2018 YIT’s Interim Report January-September/2003 Executive Vice President Esko Mäkelä October 30, 2003 YIT-YHTYMÄ OYJ
YIT’s Interim Report January-September/2003 YIT Group’s Financials Strategy and Strategic Target Levels Future Outlook YIT Share Building Systems Acquisition and Integration Appendices 30 October 2003 | YIT CORPORATION
YIT Group’s Financials YIT’s Interim Report January-September 2003 YIT Group’s Financials 30 October 2003 | YIT CORPORATION
Major events* Net sales growth of 14% amounting to EUR 1 435.7 million (1-9/2002: EUR 1258.1 million). Order backlog growth was 66% amounting to EUR 1416.5 million (853,6 MEUR). Return on investment at strategic target level 18,5 % (18,2%). The share of net sales accounted for by service and maintenance operations was 23% (23%). Earnings per share amounted to EUR 1.72 (1.32 exclusive of residual tax). Financial position remained good thanks to good cash flow generation from operations and the capital gains from the sale of Makroflex. Gearing ratio was 61 % (40%). Following the Building Systems acquisition on 4 July 2003, YIT became the leading company providing Building Systems services in the Nordic countries measured in terms of net sales. The integration process in different countries has progressed in line with plans. Measures to identify and harness synergy benefits have been initiated. At the beginning of October, an action programme was started up to pull the acquired Building Systems business into the black in Sweden as well from 2004 onwards. *) The figures for the acquired Building Systems business for the period from August 29 to September 30, 2003, have not been consolidated into the YIT Group in the third quarter. They will be included in the 2003 financial statements. 30 October 2003 | YIT CORPORATION
Consolidated income statement MEUR Jan-Sep/ 2003 2002 Change Jan-Dec/ Net sales 1 435.7 1 258.1 14% 1,763.0 share of international activities 291.5 274.3 6% 386.9 Operating income and expenses -1 328.2 -1172.0 13% -1,643.5 Depreciation and write-downs -12.3 -12.4 -1% -16.9 Amortization of goodwill -9.4 -8.7 8% -12.8 Operating profit 85.8 65.0 32% 89.8 % of net sales 6.0% 5.2% .. 5.1% Financial income and expenses, net -10.4 -9.1 -12.2 Profit before extraordinary items 75.4 55.9 35% 77.6 Extraordinary income Extraordinary expenses Profit before taxes Profit for the report period 50.2 27.1*) 85% 43.0*) *) The result was burdened by residual tax of MEUR 10.9. 30 October 2003 | YIT CORPORATION
Consolidated balance sheet MEUR Sep/2003 Sep/2002 Change Dec/2002 ASSETS Intangible assets 148.3 8.5 1 645% 9.7 Goodwill on consolidation 66.2 74.7 -11% 71.8 Tangible assets 57.9 72.7 -20% 61.9 Investments Own shares 7.2 .. Other investments 35.3 6.6 435% 7.1 Inventories 395.4 306.1 29% 338.1 Receivables 585.9 505.2 17% 503.5 Marketable securities 9.4 3.6 161% 10.7 Cash and cash equivalents 25.5 18.8 36% 28.2 Total assets 1,323.9 1,000.4 32% 1,038.2 30 October 2003 | YIT CORPORATION
Consolidated balance sheet MEUR Sep/2003 Sep/2002 Change Dec/2002 SHAREHOLDERS´ EQUITY AND LIABILITIES Share capital 60.2 59.3 2% 59.5 Other shareholders’ equity 345.1 296.6 16% 313.7 Minority interests 2.4 2.8 -14% 2.9 Provisions for liabilities and charges 8.8 11.5 -23% 14.2 Non-current liabilities 113.5 134.9 -16% 138.2 Current liabilities 793.9 495.3 60% 509.7 Total shareholders’ equity and liabilities 1,323.9 1,000.4 32% 1,038.2 30 October 2003 | YIT CORPORATION
Key figures Return on investment 18.5 %*) 18.2%**) .. 17.8% Sep/2003 Sep/2002 Change Dec/2002 Return on investment 18.5 %*) 18.2%**) .. 17.8% Equity ratio 33.2% 38.0% 38.2% Net interest-bearing debt, MEUR 246.9 140.0 76% 104,1 Gearing ratio 60.6% 39.8% 28.2% Earnings/share, EUR 1.72 0.94 83% 1.49 Earnings/share, EUR, excl. residual tax 1.32 1.86 Equity/share, EUR 13.46 12.00 12% 12.54 Average share price, EUR 18.53 16.46 13% 16.40 Share price at end of period, EUR 22.00 15.39 43% 16.79 Gross capital expenditures, MEUR 187.6 57.4 227% 60.6 Order backlog, MEUR 1,416.5 853.6 66% 938.8 Average personnel 13,846 11,743 18% 11,990 *) October 1, 2002 – September 30, 2003 **) October 1, 2001 – September 30, 2002 30 October 2003 | YIT CORPORATION
Net sales by division MEUR Jan-Sep/ 2003 2002 Change Oct/2002- Jan-Dec/ Building Construction 603,9 451,0 34 % 772,3 619,4 Property Services 135,5 147,0 -8 % 195,3 206,8 Infraservices 85,6 84,4 1 % 120,0 118,8 International Operations 137,1 114,4 20 % 191,1 168,4 Other items (YIT Construction) -0,7 -1,2 -42 % -1,1 -1,6 YIT CONSTRUCTION 961,4 795,6 21 % 1 277,6 1 111,8 YIT INSTALLATION 395,7 434,8 -9 % 542,6 581,7 YIT PRIMATEL *) 93,0 49,3 89 % 139,5 95,8 Other items (Group) -14,4 -21,6 -33 % -19,1 -26,3 YIT GROUP 1 435,7 1 258,1 14 % 1 940,6 1 763,0 *) On June 1, 2002, into the YIT Group. 30 October 2003 | YIT CORPORATION
Operating profit by division MEUR Jan-Sep/ 2003 2002 Change Oct/2002- Sep/2003 Jan-Dec/ Building Construction 43,3 36,8 18 % 55,8 49,3 Property Services 4,7 9,7 -52 % 8,1 13,1 Infraservices 1,9 3,2 -41 % 2,8 4,1 International Operations 31,9 897 % 34,9 6,2 Other items (YIT Construction) -2,9 -3,4 -15 % -1,9 -2,4 YIT CONSTRUCTION 78,9 49,5 59 % 99,7 70,3 YIT INSTALLATION 7,3 15,9 -54 % 12,5 21,1 YIT PRIMATEL *) 5,6 11 % 6,6 6,0 Other items (Group) -6,6 -6,0 10 % -8,2 -7,6 YIT GROUP 85,8 65,0 32 % 110,6 89,8 *) On June 1, 2002, into the YIT Group. 30 October 2003 | YIT CORPORATION
Order backlog by quarter MEUR at end of period 1,416.5* *The acquired Building Systems business accounted for EUR 266,3 million of the order backlog. 30 October 2003 | YIT CORPORATION
Operative cash flow before taxes MEUR Jan-Sep/2003 includes MEUR 169.2 of the Building Systems Acquisition. Operative cash flow before taxes = Cash flow from operating activities + Change in net working capital + Cash flow from investing activities. 30 October 2003 | YIT CORPORATION
Strategy and Strategic Target Levels YIT’s Interim Report January-September 2003 Strategy and Strategic Target Levels 30 October 2003 | YIT CORPORATION
YIT’s main strategy and strategic focus YIT’s main strategy is profitable growth Strategic focus in near future is cash flow generation and cost efficiency 30 October 2003 | YIT CORPORATION
Strengthening the market position on strategical business areas 8.5.2018 Strengthening the market position on strategical business areas In terms of net sales, YIT is the market leader in all of its segments in Finland. In Building Systems, YIT is the leading company in the Nordic countries. In Sweden, YIT is the market leader in industrial piping. Construction markets in the Baltic countries and Russia are YIT´s strategic expansion areas. BUILDING SYSTEMS YIT Building Systems (Sweden) Net sales 2002 about MEUR 570 Personnel 9/2003 4 380 Local offices 159 YIT Kiinteistötekniikka Oy (Finland) 1 Net sales 2002 about MEUR 510 Personnel 9/2003 3 880 Local offices 79 YIT Building Systems AS (Norway) Net sales 2002 about MEUR 340 Personnel 9/2003 2 730 Local offices 63 YIT A/S (Denmark) Net sales 2002 about MEUR 100 Personnel 9/2003 980 Local offices 13 CONSTRUCTION SERVICES DATA NETWORK SERVICES Baltic States - AS FKSM, Tallinn - AB Kausta, Kaunas - YIT Latvija SIA, Riga Russia - ZAO Lentek, St. Petersburg - ZAO YIT Genstroi, Moscow Net sales 2002 about MEUR 170 - Personnel about 1 300 1Includes the Baltic and Russian operations YIT-YHTYMÄ OYJ
YIT’s strategic target levels Average annual growth in net sales 5–10% Return on investment 18% Equity ratio 40% Dividend payout 30–50% of net profit for the year after taxes and minority interests 30 October 2003 | YIT CORPORATION
Net sales and operating profit Net sales, MEUR Operating profit, MEUR 1-9 1-9 1-9 1-9 Strategic target level: annual growth 5-10% 30 October 2003 | YIT CORPORATION
Return on investment and equity ratio Return on investment, % Equity ratio, % 9/02 9/03 9/02 9/03 Strategic target level: 18% Strategic target level: 40% 30 October 2003 | YIT CORPORATION
Earnings per share and equity per share Earnings per share, EUR Equity per share, EUR *) *) * Excl. residual tax of MEUR 10.9 9/02 9/03 9/02 9/03 30 October 2003 | YIT CORPORATION
30–50% of annual profit after taxes and minority interests Dividend payout Dividend per share, EUR Dividend payout % of annual profit *) *)Excl. residual tax of MEUR 10.9 Strategic target level: 30–50% of annual profit after taxes and minority interests 30 October 2003 | YIT CORPORATION
Future Outlook YIT’s Interim Report January-September 2003 30 October 2003 | YIT CORPORATION
YIT’s corporate structure as of September 1, 2003 YIT Corporation Reino Hanhinen Corporate Management, Corporate Services, Corporate Communications Building Systems Juhani Pitkäkoski Construction Services Ilpo Jalasjoki Services for Industry Raimo Poutiainen Data Network Services Hannu Leinonen Building Systems Automation and security Property maintenance services Housing Business environments Infrastructure Piping and tanks Maintenance Fixed networks Mobile networks Net sales 2002 MEUR 1,520 Personnel 9/2003 11,970 Net sales 2002 MEUR 1,086 Personnel 9/2003 5,259 Net sales 2002 MEUR 230 Personnel 9/2003 3,202 Net sales 2002 MEUR 78 *) Personnel 9/2003 1,441 *) Primatel incl. in the YIT Group as from June 1, 2002 30 October 2003 | YIT CORPORATION
Migration between municipalities in Finland persons 1-9/2003: 213 700 1-9/2002: 217 700 Source: Statistics Finland, October 21, 2003 30 October 2003 | YIT CORPORATION
Housing loans and interest rates in Finland MEUR % Source: Bank of Finland, October 7, 2003 30 October 2003 | YIT CORPORATION
Number of start-ups in YIT’s housing production in Finland 3 278 3 169 2 944 2 791 2 634 2 509 2 006 30 October 2003 | YIT CORPORATION
Future Outlook The strong order backlog and the integration of the new Building Systems business into the Group will significantly increase net sales in the last quarter. The result for the rest of the year will be weakened by the integration costs of Building Systems and the costs of downscaling measures in Sweden. Due to the integration costs and the costs of overhauling operations in Sweden, the result of the Building Systems business segment for the period from August 29 to December 31, 2003, is estimated to be in the red. Full-year pre-tax earnings is estimated to improve on last year’s figure. The Building Systems acquisition is expected to have a positive effect on earnings per share from 2004 onwards. YIT’s equity ratio declined due to the debt financing of the Building Systems acquisition. The aim is to return the equity ratio to its strategic target level of 40 per cent by 2006 at the latest. 30 October 2003 | YIT CORPORATION
YIT Share YIT’s Interim Report January-September 2003 30 October 2003 | YIT CORPORATION
Building Systems acquisition YIT share and HEX portfolio indexed development 1.11.2002 – 28.10.2003 YIT +58% 4.7.2003 July 4, 2003 Announcement of Building Systems acquisition HEX Portfolio Source: Reuters 28.10.2003 30 October 2003 | YIT CORPORATION
Average daily volume of YIT share January - October 2003 Nr July 4, 2003 Announcement of Building Systems acquisition January February March April May June July August September October 27 30 October 2003 | YIT CORPORATION
Principal Shareholders Oct. 24, 2003 No. % 1. Suomi Group 2,937,370 9.75 2. Sampo Life Insurance Company Ltd 2,667,780 8.86 3. Tapiola Group 2,075,545 6.89 4. Varma-Sampo Mutual Pension Ins.Co 2,033,352 6.75 5. Pohjola Group 1,271,200 4.22 6. Ilmarinen Mutual Pension Ins.Co 979,000 3.25 7. Kaleva Mutual Insurance Company 766,000 2.54 8. Local Government Pensions Inst. 600,000 1.99 9. Security Trading Ltd 562,000 1.87 10. State Pension Fund 360,000 1.20 Nominee-registered 6,221,918 20.66 Other shareholders 9,643,681 32.02 Total 30,117,846 100.00 Total number of shareholders 4,137. Nominal value of the share 2 euros. Share capital EUR 60,235,692. 30 October 2003 | YIT CORPORATION
Number of YIT Shareholders 9/02 9/03 24.10.03 30 October 2003 | YIT CORPORATION
Nominee-registered shareholders + other international ownership as percentage of equity 1999 2000 2001 2002 2003 30 October 2003 | YIT CORPORATION
Building Systems Acquisition and Integration YIT’s Interim Report January-September 2003 Building Systems Acquisition and Integration 30 October 2003 | YIT CORPORATION
Building Systems Acquisition YIT purchased from ABB, by an agreement signed on July 4, 2003, its Building Systems operations offering building systems, property and industrial services in Finland, Sweden, Norway, Denmark, the Baltic countries and Russia. The acquired business had net sales in 2002 of about EUR 1,130 million and approximately 9,100 employees. In terms of net sales, YIT became the largest Nordic company offering building system services whose network of business locations covers all of the Nordic countries. The acquisition was consummated on August 29, 2003, when the transaction price of EUR 169.2 million was paid and the business functions were transferred to YIT1. 1 The cash amount was determined in accordance with the deal agreement signed by YIT and ABB, such that the negative difference of the assets and liabilities of the balance sheet items being transferred in the asset purchase transactions was subtracted from the transaction value. The transaction price will be finalized by the end of the year, when the audited balance sheet calculations concerning the situation at the end of August have been completed. 30 October 2003 | YIT CORPORATION
YIT Building Systems YIT Building Systems President Juhani Pitkäkoski Executive Vice President Sakari Toikkanen YIT Kiinteistö- tekniikka Oy Finland 1 President Antti Rantanen Executive Vice President Pekka Hämäläinen YIT Building Systems Sweden President Kari Kallio YIT Building Systems AS Norway President Arne Malonæs YIT A/S Denmark President Leo G Sørensen Building Systems Facility Management Security Industrial Piping Telecom Building Systems Facility Management Security Industrial Electricity Building Systems Facility Management Security Industrial Electricity Industrial Piping Telecom Building Systems Facility Management Security Industrial Electricity Industrial Piping Telecom Net sales 2002 MEUR 570 Personnel 9/2003 4,380 Net sales 2002 MEUR 510 Personnel 9/2003 3,880 Net sales 2002 MEUR 340 Personnel 9/2003 2,730 Net sales 2002 MEUR 100 Personnel 9/2003 980 1 Includes the Baltic and Russian operations 30 October 2003 | YIT CORPORATION
Building Systems INTEGRATION The integration process will in the first phase be a 100-day intensive program. The process has been going forward according to plans. The goal is to have the functions mainly integrated by the end of 2003. In 2004 the economic- and IT systems will be integrated by full. The real work is done in country based integration teams. Integration teams in each country are responsible for the measures required due to the merger in their own responsibility areas (such as customers, marketing, suppliers, IT, finance, personnel administration, business premises and communications. One of the major subareas of the integration is the orientation and commitment of personnel. For example, in Finland a YIT days road show consisting of 21 personnel events around the country began in the second half of September. 30 October 2003 | YIT CORPORATION
Building Systems SYNERGY BENEFITS YIT estimates that the acquisition will yield annual synergy benefits of about EUR 10 million from 2004 onwards. Measures to identify and harness synergy benefits have been initiated on many areas such as purchasing local offices and administration IT and transfer of technology and busness models between former and current divisions telephone services cars and fuel travel services insurance. Synergies from business operations are aimed between different segments as well as through regional co-operation. Customer-oriented synergies are aimed between segments as well as inside the Building Systems division. 30 October 2003 | YIT CORPORATION
BUSINESS OPERATIONS IN SWEDEN Building Systems BUSINESS OPERATIONS IN SWEDEN At the beginning of October, an action programme was started up to pull the acquired Building Systems business into the black in Sweden as well from 2004 onwards. The main aspects of the action programme are the reduction of fixed costs and downscaling operations to match demand in loss-making areas. The reduction of fixed costs mainly pertains to white-collar employees, the rental costs of business premises and IT and administrative systems. The action programme will affect a total of about 400 people, of which about 250 are white-collar employees. This year, the costs of downscaling measures will be about EUR 10 million. They aim is to achieve cost-savings totalling about EUR 20 million per year and will come into full effect in 2005. 30 October 2003 | YIT CORPORATION
www.yit.fi More information on our site at Petra Thorén Manager, Esko Mäkelä Executive Vice President tel. +358 20 433 2258 fax +358 20 433 3725 E-mail: esko.makela@yit.fi Veikko Myllyperkiö Vice President, Corporate Communications tel. +358 20 433 2297 mobile +358 40 840 2500 fax +358 20 433 3746 E-mail: veikko.myllyperkio@yit.fi Petra Thorén Manager, Investor Relations tel. +358 20 433 2635 mobile +358 40 764 5462 fax +358 20 433 3725 E-mail: petra.thoren@yit.fi 30 October 2003 | YIT CORPORATION
Appendices YIT’s Interim Report January-September 2003 30 October 2003 | YIT CORPORATION
Order Backlog by Business Segments MEUR Sep/2003 Sep/2002 Change Building Systems 419,9 122,4 243 % Construction Services 868,7 613,6 42 % Services for Industry 62,6 80,3 -22 % Data Network Services 65,3 37,3 75 % YIT Group 1 416,5 853,6 66 % 30 October 2003 | YIT CORPORATION
Backlog by Business Segments September 30, 2003 Building Systems MEUR 419,9 30 % Data Network Services MEUR 65,3 5 % Services for Industry MEUR 62,6 4 % Construction Services MEUR 868,7 61 % YIT Group’s backlog MEUR 1 416,5. Backlog for international orders MEUR 291,9 30 October 2003 | YIT CORPORATION
YIT Group Net sales by subgroup Jan-Sep/2003 (year 2002) YIT Construction 66 % (62 %) YIT Primatel*) 7 % (5 %) YIT Installation 27 % (33 %) Net sales MEUR 1 435,7 (1 763,0) *) Primatel incl. in the YIT Group as from June 1, 2002 30 October 2003 | YIT CORPORATION
Building Construction Net sales by division Jan-Sep/2003 Building Construction MEUR 603,9 (42 %) YIT Primatel MEUR 93,0 (7 %) Property Services MEUR 135,5 (9 %) Infraservices MEUR 85,6 (6 %) YIT Installation MEUR 395,7 (27 %) International Operations MEUR 137,1 (9 %) Total MEUR 1 435,7 share of international activities MEUR 291,5 30 October 2003 | YIT CORPORATION
YIT Construction Net sales by division Jan-Sep/2003 (year 2002) Building Construction 63 % (56 %) - Residential construction 53 % (46 %) International Operations 14 % (15 %) Infraservices 9 % (11 %) - Other building construction 10 % (10 %) Property Services 14 % (18 %) Net sales MEUR 961,4 (1 111,8) 30 October 2003 | YIT CORPORATION
Distribution of net sales YIT Primatel Distribution of net sales Jan-Sep/2003 (June-Dec/2002) International operations 2 % (1 %) Maintenance, repairs and subscriber deliveries 59 % (59 %) Project operations 39 % (40 %) Net sales MEUR 93,0 M€ (95,8) 30 October 2003 | YIT CORPORATION
Operating profit MEUR 85,8 (89,8) YIT Group Operating profit by subgroup Jan-Sep/2003 (year 2002) YIT Primatel*) 7 % (6 %) YIT Construction 85 % (72 %) YIT Installation 8 % (22 %) Operating profit MEUR 85,8 (89,8) *) Primatel incl. in the YIT Group as from June 1, 2002 30 October 2003 | YIT CORPORATION
Operating profit by division Jan-Sep/2003 Building Construction MEUR 43,3 (45 %) YIT Primatel MEUR 6,2 (7 %) YIT Installation MEUR 7,3 (8 %) Property Services MEUR 4,7 (5 %) Infraservices MEUR 1,9 (2 %) International Operations 31,9 M€ (33 %) Total MEUR 85,8 30 October 2003 | YIT CORPORATION
Net sales by quarter MEUR 30 October 2003 | YIT CORPORATION
Operating profit by quarter MEUR 30 October 2003 | YIT CORPORATION
Gross capital expenditures MEUR % of net sales Year 2001 includes the acquisition of YIT Calor and year 2002 the acquisition of YIT Primatel. Jan-Sep/2003 includes the YIT Building Systems acquisition. 30 October 2003 | YIT CORPORATION
Personnel by country after the acquisition Finland 12 220 55 % Russia 620 3 % Denmark 976 4 % Baltic states 1 203 6 % Norway 2 730 12 % Sweden 4 395 20 % September 30, 2003 total 22 144 employees 30 October 2003 | YIT CORPORATION
Saldo (%-share of positive answers - %-share of negative answers Consumers’ confidence in their own household’s and Finland’s economy within the next 12 months Saldo (%-share of positive answers - %-share of negative answers Own economy Finland’s economy Source: Statistics Finland’s Consumer Survey, September 30, 2003 30 October 2003 | YIT CORPORATION
Industrial investments in Finland 1980 - 2003 EUR billion, current prices TT’s investment survey Tangible investments/ Statistics Finland Sources: TT and Statistics Finland, June 18, 2003 30 October 2003 | YIT CORPORATION