Yit Oyj · OMXHEX:YIT
Yit Oyj — Non-Deal Roadshow (September 2015)
81 slides from Yit Oyj's roadshow presentation, Sep 8, 2015
Slide 1: YIT – solid foundation for future growth
YIT – solid foundation for future growth Roadshow Oslo, September 8, 2015 yitgroup.com Timo Lehtinen, CFO Iida Lähdemäki, IR Specialist
Slide 2: Contents
Contents 1 YIT in brief 3 2 Strategy and business model 15 3 Housing Finland and CEE 24 4 Housing Russia 31 5 Business Premises and Infrastructure 38 6 Key financials 46 7 Looking ahead and conclusions 56 8 Appendices 60 YIT | 2 | Investor presentation, September 2015
Slide 3: YIT in brief
1 YIT in brief Merenkulkijanranta residential area Helsinki, Finland
Slide 4: Over 100 years of experience in Finland, over 50 in Russia
Over 100 years of experience in Finland, over 50 in Russia Allmänna Ingeniörsbyrån Ab Operations in YIT becomes Finland's Expansion to the Nordics and Central Europe in (AIB) establishes office in Russia begin No.1 construction building services, and to the Baltics and CEE in Helsinki company constr
Slide 5: YIT – An innovative project developer and high-quality construction company
YIT – An innovative project developer and high-quality construction company Key investment propositions Operations in 7 countries, 5,800 employees • Strong market position and extensive experience in the main markets Finland Russia Share of Share of • Market leader in Finland, the largest foreign re
Slide 6: Balanced business portfolio
Balanced business portfolio Business Premises Housing Finland and CEE Housing Russia and Infrastructure Business Focus on self-developed Only self-developed projects, Tender-based and self-developed apartment buildings projects, mostly apartment buildings projects: offices, shopping malls, selective
Slide 7: Urbanisation drives demand in the residential markets in Finland and CEE
Urbanisation drives demand in the residential markets in Finland and CEE • Internal migration and changing demographics Market sizes in 2014, units create a need for new apartments YIT, Housing Finland and CEE: • In Finland, the estimated long-term need for 2,901 start-ups new apartments: 24,000-29,
Slide 8: Fundamental need for new apartments in Russia
Fundamental need for new apartments in Russia Market size in 2014, units • Several fundamentals support strong YIT, Housing Russia: demand 3,545 start-ups • Internal migration to growth centres • Poor quality of existing building stock • Decreasing household-size Russia: 1,000,000 completions; • Liv
Slide 9: Opportunities for growth in business premises and infra services
Opportunities for growth in several areas in business premises and infra services • The condensing of urban structure Market sizes in 2014, volume of construction creates a need for new infrastructure and YIT, Business Premises and Infrastructure: hybrid construction Revenue EUR 599 million • Substa
Slide 10: Revenue growth and healthy profitability through economic cycles
Revenue growth and healthy profitability through economic cycles Revenue development (EUR million) by business segment Business Premises and Infrastructure Housing Russia Housing Finland and CEE International Construction Services Construction Services Finland CAGR Construction Services +7% 1,929 1,
Slide 11: YIT a significant player on European level in housing
YIT a significant player on European level in housing Housing sales (units) in 2014 20,166 EBIT-% in Housing business in 2014 14,838 18.4% 18.9% 13,509 17.7% 18.9% 17.9% 12,454 12,270 14.3% 13.0% 9,045 8,066 10.0% 9.1% 6,047 7.1% 5.1% 3,274 3,195 2,871 LSR Barratt Persimmon Taylor W Pik Etalon YIT N
Slide 12: Board of Directors
Board of Directors Versatile expertise on board work, finance, construction industry and Russia Reino Hanhinen Kim Gran Satu Huber Erkki Järvinen Juhani Pitkäkoski Teuvo Salminen Chairman Vice Chairman Board Member Board Member Board Member Board Member Born 1943 Born 1954 Born 1958 Born 1960 Born 1
Slide 13: Experienced Group Management Board
Experienced Group Management Board Group Management Board as of January 1, 2015 Kari Kauniskangas Tero Kiviniemi Timo Lehtinen President and CEO EVP, Head of Business CFO Premises and Infrastructure In the Group’s employ: 1997 In the Group’s employ: 2006 In the Group’s employ: 1996 Share ownership:1
Slide 14: YIT's competitive edges
YIT’s competitive edges • High-quality brand and reputation as a reliable company • Innovative concepts and effective design management • Strong plot reserve • Own sales network in all operating countries • Broad special expertise and strong references • Ability to construct demanding projects that
Slide 15: Strategy and business model
2 Strategy and business model Konepaja residential area Helsinki, Finland
Slide 16: Strategic roadmap
Strategic roadmap Focus back on Focus on cash flow, growth capital and cost efficiency, temporarily lower growth acceptable 2017 Partial demerger 2016 More balanced End of geographical footprint 2013 Solid foundation for Higher share of future growth projects with high Foundation for value added n
Slide 17: Strategy for 2015-2017: Solid foundation for future growth
Strategy for 2015-2017: Solid foundation for future growth Wider financial operating space Releasing capital by normalizing inventory and improving capital turnover Increasing utilization of partnerships Ensuring competitiveness and differentiation Affordable and attractive product Excellent custome
Slide 18: Financial targets
Financial targets Long term targets Status in 2014 • In the short term, the focus has been -3%, on cash flow and improving capital Revenue 5 - 10% annually growth on average 2% at comp. and cost efficiency rather than growth exchange rates Return on 20% 7.7% investment • The development of business
Slide 19: Capital release and the competitiveness program support reaching the targets
Capital release and the competitiveness program support reaching the targets ROI: 10%, ROI: 15% ROI: 20% Net debt: EUR 860 million Net debt: < EUR 600 million Fixed Market Lower cost normalisation Pricing variable control EBIT costs 6/2014 2016 Invested capital Higher capital Plot co- turnover Inven
Slide 20: Focused development to improve profitability and strengthen the forerunner position
Focused development to improve profitability and strengthen the forerunner position Group-wide development programs Centralized coordination, decentralized development Housing development • New housing concepts • Area development – ”creating better living environments” ”Best living • Best customer e
Slide 21: Value creation: Long value chain with key competences in-house
Value creation: Long value chain with key competences in-house Assets Outputs Project and Land bank risk management Skilled employees Market knowledge Excellent brand Plot Pricing skills Shareholder value management and sales Specialized equipment tactics Sustainable living environment: Own sales ne
Slide 22: Business model – Self-developed housing
Business model – Self-developed housing Finland Russia DD & market Plot • Zoning DD & market • Zoning analysis analysis development • Permitting • Permitting • Design • Social infra and management utilities planning • Design mgmt Construction • Duration 12-15 months • Duration 14-20 months • 1 phase
Slide 23: Business model in Business Premises and Infrastructure
Business model in Business Premises and Infrastructure: Focus on high value added projects Business Premises Infrastructure • Contracting and co-operation • Contracting and co-operation projects projects • Schools, hospitals, offices etc. • E.g. route projects, rail and metro, • Very low capital emp
Slide 24: Housing Finland and CEE
3 Housing Finland and CEE Koti Hyacint Prague, the Czech Republic
Slide 25: Housing Finland and CEE: Operating environment in Finland
Housing Finland and CEE: Operating environment in Finland • Consumers still cautious in • Good demand for small, • Mortgage interest rates on a low purchase decisions affordable apartments in the level growth centres • Good investor demand continued • The volume of new housing loans • Price pressure
Slide 26: Housing Finland and CEE: Operating environment in the CEE countries
Housing Finland and CEE: Operating environment in the CEE countries • Positive macro development • Prices of new apartments • Interest rates of mortgages have supported the residential market relatively stable on average remained on a low level • The market in the Czech Republic • Consumers’ access
Slide 27: Housing Finland and CEE: long-term development
Housing Finland and CEE: long-term development 2008 2009 2010 2011 2012 2013 2014 1-6/2015 • Weakening • Focus on • Focus turned • Focus on • Favourable • Soft consumer • Good • Strong market investor deals to consumer consumer residential demand in development residential in Finland sales in sales
Slide 28: Housing Finland and CEE: Sales and start-ups in Finland
Housing Finland and CEE: Sales and start-ups in Finland Sold apartments (units) • Consumer sales (units) 2014: 2,515 1-6/2015: 1,815 grew by 12% y-o-y in Q2 1,100 • Several investor projects 653 665 715 under the earlier signed 576 621 726 pre-agreements started 339 332 232 297 444 • Units sold to i
Slide 29: Housing Finland and CEE: Sales and start-ups in the CEE countries
Housing Finland and CEE: Sales and start-ups in the CEE countries Sold apartments (units) • Sales (units) grew by 2014: 734 1-6/2015: 531 37% y-o-y in H1/2015 275 256 • Start-ups increased from 207 189 83 180 the low level of previous 158 quarters. Higher start-ups 192 expected still in the coming q
Slide 30: Housing Finland and CEE: Sales rate remains high
Housing Finland and CEE: Sales rate remains high • Several completions in Apartment inventory (units) Finland in Q2 • Number of unsold 5,441 5,593 5,415 completed apartments 686 4,975 4,994 4,916 increased slightly in 633 679 Q2/2015 4,907 579 562 611 4,808 4,736 4,396 4,432 4,305 • 59% of units und
Slide 31: Housing Russia
4 Housing Russia Manevrovaya Baltym Park Yekaterinburg, Yekaterinburg, Russia Russia
Slide 32: Housing Russia: Operating environment
Housing Russia: Operating environment • The ruble has weakened again • Residential prices have • Mortgage interest rates for new recently remained stable, but decreased apartments at around 12% due in real terms to government’s mortgage subsidy program launched in late March 2015 Prices of new apart
Slide 33: Housing Russia: long-term development
Housing Russia: long-term development 2008 2009 2010 2011 2012 2013 2014 1-6/2015 • Prices • Housing prices • Slight • Prices • Prices • Stable • Increased • Profitability declined stabilising in increases in increased increasing and residential uncertainty and burdened by H2 residential (regional g
Slide 34: Housing Russia: Sales and start-ups
Housing Russia: Sales and start-ups Sold apartments (units) and share of sales financed with a mortgage (%) • Consumer sales (units) 2014: 4,817 (41%*) 1-6/2015: 1,736 (45%) decreased by 16% y-o-y in 1,641 H1/2015 100% 90% 1,132 1,061 967 80% • Share of sales financed 983 769 70% 130 47 60% with mor
Slide 35: Housing Russia: Inventory
Housing Russia: Inventory • Completed unsold Apartment inventory (units) apartments still on a 12,195 11,966 10,808 257 354 10,014 low level 346 11,938 11,612 403 9,350 9,718 311 10,462 378 9,611 8,972 9,407 39% 40% 39% 43% 42% 43% • Sales rate stable on a high level Q1 Q2 Q3 Q4 Q1 Q2 2014 2015 Unde
Slide 36: Plans for alternate scenarios in Russia
Plans for alternate scenarios in Russia Normalized Continuing Escalation Large-scale situation uncertainty of crisis conflict Plot Increase plot acquisitions Continue strategic plot Only critical plot Stop plot acquisitions acquisitions acquisitions acquisitions Increase start-ups Continue strategic
Slide 37: Capital efficiency improving in Russia
Capital efficiency improving in Russia Cash conversion cycle before Capital invested and Housing Russia revenue, EUR million Selling of apartments Plot acquisition Construction after the 577 545 558 541 547 completion 486 496 More than 5 years 460 463 474 413 393 372 307 317 297 279 Cash conversion
Slide 38: Business Premises and Infrastructure
5 Business Premises and Infrastructure Tripla Helsinki, Finland
Slide 39: Business Premises and Infrastructure: Operating environment
Business Premises and Infrastructure: Operating environment • Office and commercial premises • End-users cautious, especially in • Positive macro outlook supported markets soft the retail sector, but signs of a the business premises market in slight increase in demand the CEE countries • Opportuniti
Slide 40: Business Premises and Infrastructure, long-term development
Business Premises and Infrastructure, long-term development 2008 2009 2010 2011 2012 2013 2014 1-6/2015 • Good • Weakening • Signs of • Infra Services • Stable • Weak • Weak • Revenue development business improvement weak in H1, development business business decreased in Business premises in the bus
Slide 41: Tripla project supports growth in the coming years
Tripla project supports growth in the coming years Tripla project • EUR 1 billion hybrid project consisting of offices, shopping and congress center, hotels, public transport terminal and apartments • Combines the breadth of YIT know-how in different areas of construction • Project length ~ 10 years
Slide 42: Tripla project: Pasila in the future
Tripla project: Pasila in the future YIT | 42 | Investor presentation, September 2015
Slide 43: Tripla project proceeding as scheduled
Tripla project proceeding as scheduled • City plan regarding the project became legally valid in March 2015 • Enables progress in negotiations with potential investors • After the investor/ investors have been confirmed, construction of the shopping mall expected to start in the end of 2015 • Very g
Slide 44: E18 Hamina-Vaalimaa PPP, an important project for Infra Services
E18 Hamina-Vaalimaa PPP, an important project for Infra Services • A consortium formed by YIT and Meridiam Infrastructure II S.á.r.l was selected as the preferred bidder for E18 Hamina-Vaalimaa PPP motorway project • Final contract signed and EUR 260 million recorded in the order backlog • YIT has p
Slide 45: Business Premises and Infrastructure: Major ongoing projects
Business Premises and Infrastructure: Major ongoing projects Significant projects The largest ongoing self-developed business premises projects secured/started in 2015: Project, location Value, Project Completion Estimated Sold/ Leasable EUR million type rate, % completion for sale area, sq. m. • E1
Slide 46: Key financials
6 Key financials
Slide 47: Key figures
Key figures EUR million 4-6/2015 4-6/2014 Change 1-6/2015 1-6/2014 Change Revenue 416.1 451.4 -8% 791.0 854.5 -7% Operating profit 18.6 34.7 -46% 39.1 61.5 -37% Operating profit margin, % 4.5% 7.7% 4.9% 7.2% Operating profit, excluding non-recurring items 18.6 34.7 -46% 39.1 61.5 -37% Operating prof
Slide 48: EBIT-bridge Q2/2014 – Q2/2015
EBIT-bridge Q2/2014 – Q2/2015 • Several factors weakened the operating profit in Q2/2015 • In Russia, lower revenue and lower project margins burdened profitability Operating profit, excluding non-recurring items (EUR million), change Q2/2014 – Q2/2015: -46% 34.7 1.8 -1.8 -2.7 -8.0 -0.4 -2.6 18.6 -1
Slide 49: Strong cash flow during recent quarters
Strong cash flow during recent quarters Operating cash flow after investments(EUR million) Invested capital and ROI (EUR million, %) 1-6/2015: 2014: EUR 152 million Short term target by the end of 2016: ROI 15% EUR 128 million 309 1,604 1,554 1,563 179 1,403 152 1,344 1,308 88 10.2% 9.6% 9.1% 140 7.
Slide 50: Net debt target reached ahead of schedule
Net debt target reached ahead of schedule • Strong liquidity buffer Interest-bearing debt (EUR million), IFRS • Cash and cash equivalents of EUR 129.0 million 920 936 909 895 80 75 797 • Overdraft facilities of EUR 65.2 million of which EUR 91 199 716 64.5 million unused 119 129 • Undrawn committed
Slide 51: Financial standing continued to improve in Q2, gearing below 100%
Financial standing continued to improve in Q2, gearing below 100% • Positive development due to the decrease in net debt and the stabilisation of the ruble against euro Gearing (%) Equity ratio (%) Net debt/EBITDA (Multiple, x) 132.1 130.4 129.9 9.1 127.2 117.3 36.4 35.8 35.2 36.0 7.5 35.0 6.9 98.7
Slide 52: Ruble remained stable in Q2
Ruble remained stable in Q2 Revenue split 1-6/2015 • The Russian ruble remained stable in Q2 • Average EUR/RUB rate in 1-6/2015: 64.52 RUB (1-6/2014: 48.02) 18% • Quarter-end EUR/RUB rate: 62.36 (Q1/2015: 62.44) Other 3% Principles of managing currency risks: • Sales and project costs typically in s
Slide 53: Satisfactory progress in capital release
Satisfactory progress in capital release Target for capital release Actions in Q2/2015 Cumulative progress since 9/2013 Reducing the inventory of unsold • Active sales to investors covering a wide completed apartments in Finland • No net progress variety of apartments >EUR 50 million Selling self-de
Slide 54: Good financial flexibility
Good financial flexibility Housing start-ups 2000-2014 (units) • Good ability to manage cash flow • Start-ups adjusted according to demand 8,239 8,873 8,305 7,590 7,406 • Opportunity to adjust plot investments; 6,590 6,695 7,257 6,446 existing plot reserve provides a good base 5,164 for the coming y
Slide 55: Dividend payout target 40-60% of net profit for the period
Dividend payout target 40-60% of net profit for the period Dividend / share (EUR) Note: Historical figures prior to 2013 are YIT Group pre demerger 0.80 0.75 0.70 75% 73% 0.65 0.65 60% 0.55 0.50 56% 56% 55% 51% 48% 48% 44% 45% 0.40 43% 43% 0.38 40% 40% 40% 38% 0.35 0.30 29% 27% 0.22 0.23 0.19 0.18 0
Slide 56: Looking ahead and conclusions
7 Looking ahead and conclusions
Slide 57: Market outlook, expectations for 2015
Market outlook, expectations for 2015 Finland • Consumers cautious and investors active in the residential market, demand to focus on small apartments in growth centres • Price polarisation, especially between small and large apartments • Availability of mortgages good • Modest demand for business p
Slide 58: Guidance for 2015 unchanged (segment reporting, POC)
Guidance for 2015 unchanged (segment reporting, POC) The 2015 guidance is based on the following: The Group revenue growth is estimated to be in the range of -5 – 5% at comparable exchange rates • Demanding market outlook, especially in Russia • More than 50% of Q3-Q4/2015 revenue from sold projects
Slide 59: Concluding remarks
Concluding remarks Growth from self-developed and co-operation projects, shifting towards a more balanced geographical footprint Solid track record in profitability and execution through economic cycles Strong market position and long experience from Finland and Russia Current focus on cash flow and
Slide 60: Appendices
8 Appendices Tripla Konepaja residential area Pasila, Helsinki, Finland Helsinki, Finland
Slide 61: Appendices
Appendices I. Additional financial information II. Housing indicators III. Business premises and infrastructure construction indicators IV. Ownership Wilhelm Helsinki, Finland YIT | 61 | Investor presentation, September 2015
Slide 62: I Additional financial information
I Additional financial information
Slide 63: Solid plot portfolio, a basis for growth and financial flexibility
Solid plot portfolio, a basis for growth and financial flexibility Capital invested in plot reserves 6/2015, EUR 538 million Use of plot reserves in 2014, EUR 104 million Housing Finland and CEE 48 Finland 33 The CEE countries 15 Housing Russia** 48 215 148 Business Premises and Infrastructure 8 228
Slide 64: Consolidated balance sheet
Consolidated balance sheet as of June 30, 2015 (EUR million) Revenue* Assets - Inventories, WIP in particular, account for a major share Equity and liabilities 2,216 2,216 125 Non-current assets 67 1,879 236 595 Equity 673 568 Non-current borrowings 288 (33%) 1,729 2,036 Inventories Current borrowin
Slide 65: YIT's cost base in 2014
YIT’s cost base in 2014 External services account for a major share of YIT’s costs IFRS, EUR million (% of cost base before EBITDA) Indicative cost structure of a Finnish residential project Total cost base of EUR 1,439 million 10-15% Margin on EBIT-level <10% Fixed costs and marketing 1,779 14 14 2
Slide 66: Construction stage financing
Construction stage financing Financing of construction in a typical residential During construction: development project in Finland: YIT Customers • YIT’s subsidiary YIT Construction sells the contract receivables from Housing corporations (also owned by YIT) to financial institutions Customer • Due
Slide 67: II Housing indicators
II Housing indicators
Slide 68: Finland – Start-ups expected to bottom out in 2015
Finland – Start-ups expected to bottom out in 2015 Residential start-ups, units Consumer confidence - Views on economic situation in one year Balance 30 33,503 32,833 30,175 31,091 Own economy 28,334 27,271 20 25,000 25,500 26,000 26,500 12,104 15,671 22,903 22,415 11,032 14,466 9,237 7,953 7,300 10
Slide 69: Housing indicators in Finland
Housing indicators in Finland Unsold completed units (residential development projects) Reidential building permits, start-ups and completions, million m3 Construction cost index (2005=100) Construction confidence 130 Balance 40 125 20 120 0 115 -20 110 -40 105 -60 100 95 -80 2005 2006 2007 2008 200
Slide 70: The Baltic countries – Growth expected in residential construction
The Baltic countries – Growth expected in residential construction Residential completions in Estonia, units Residential completions in Latvia, units 9,400 7,100 8,100 5,100 5,300 5,900 4,200 3,000 3,100 3,000 3,000 2,756 2,300 1,918 1,990 2,079 2,662 2,631 2,800 2,400 2,700 1,900 2,087 2,237 2006 2
Slide 71: The Czech Republic and Slovakia – Start-ups forecasted to increase
The Czech Republic and Slovakia – Start-ups forecasted to increase Residential start-ups in the Czech Republic , units Residential prices in the Czech Republic and Prague CZK/ sq. m. 70,000 43,70043,800 43,500 65,000 37,300 60,000 55,000 28,200 27,500 28,500 50,000 26,700 23,800 24,400 25,400 22,100
Slide 72: Russia – Housing indicators
Russia – Housing indicators House prices in primary markets, thousand RUB (1/2009-6/2015) New residential construction, EUR billion 110 220 65 100 200 90 180 60 80 160 70 140 55 60 120 50 100 40 80 50 30 60 20 40 45 40 Yekaterinburg Rostov-on-Don Kazan 2010 2011 2012 2013 2014 2015E 2016E 2017E St.
Slide 73: III Business premises and infrastructure construction indicators
III Business premises and infrastructure construction indicators
Slide 74: Non-residential construction forecasted to pick up slightly in Finland and Slovakia
Non-residential construction forecasted to pick up slightly in Finland and Slovakia New non-residential construction volumes, index New non-residential construction in Finland, EUR million 200 2,500 180 2,000 160 140 1,500 120 1,000 100 80 500 60 0 40 2010 2011 2012 2013 2014 2015E 2016E Finland Est
Slide 75: Finland – Prime yields expected to decrease slightly
Finland – Prime yields expected to decrease slightly Prime yields in Helsinki Metropolitan Area, % Vacancy rates in Helsinki Metropolitan Area Office yields in Helsinki Metropolitan Area, % Rental levels of office premises (excl. VAT), new agreements Source: Catella Property Market Trends Finland, F
Slide 76: The Baltic countries – Yields are expected to decrease
The Baltic countries – Yields are expected to decrease Prime office yields in the Baltic countries, % Prime office rents in the Baltic countries, % and EUR / sq. m. / year Prime retail yields in the Baltic countries, % Prime retail rents in the Baltic countries, % and EUR / sq. m. / year Source: New
Slide 77: Infrastructure construction in Finland – Market expected to decrease slightly in 2015
Infrastructure construction in Finland– Market expected to decrease slightly in 2015 Infrastructure market in Finland, EUR million Infrastructure sectors in Finland (2014) 7,000 Other 11% 6,000 5,000 Roads 36% 4,000 Energy & water works 24% 3,000 2,000 1,000 0 Telecom- Railways munications Other tra
Slide 78: Ownership
Sn: Pam agin rSsagaacwu © See e see » @ Een omni Teaco LD | ) Lass Speen pul Ownership
Slide 79: YIT's major shareholders
YIT’s major shareholders July 31, 2015 Shareholder Shares % of share capital 1. Varma Mutual Pension Insurance Company 12,000,000 9.43 2. Structor S.A. 6,620,000 5.20 3. Herlin Antti 4,610,180 3.62 4. Mandatum Life Insurance Company Ltd. 4,286,675 3.37 5. Elo Mutual Pension Insurance Company 3,335,4
Slide 80: Disclaimer
Disclaimer This presentation has been prepared by, and the information contained herein (unless otherwise indicated) has been provided by YIT Corporation (the “Company”). By attending the meeting where this presentation is made, or by reading the presentation slides, you agree to be bound by the fol
Slide 81: Together we can do it.
Together _ we can do it.