Yit Oyj · OMXHEX:YIT
Yit Oyj — Non-Deal Roadshow (May 2015)
80 slides from Yit Oyj's roadshow presentation, May 8, 2015
Slide 1: YIT – solid foundation for future growth
YIT – solid foundation for future growth Investor presentation, 8 May 2015 Roadshow Frankfurt Kari Kauniskangas, CEO yitgroup.com Iida Lähdemäki, IR Specialist
Slide 2: Contents
Contents 1 YIT in brief 3 2 Strategy and business model 14 3 Housing Finland and CEE 23 4 Housing Russia 30 5 Business Premises and Infrastructure 37 6 Key financials 45 7 Looking ahead and conclusions 55 8 Appendices 60 YIT | 2 | Investor presentation, May 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 Market sizes in 2014, units • Internal migration and changing demographics create a need for new YIT, Housing Finland and CEE: apartments 2,901 start-ups • In Finland, the estimated long-term need for 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 demand YIT, Housing Russia: 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 hybrid construction YIT, Business Premises and Infrastructure: 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 capital and growth cost efficiency, temporarily lower growth acceptable 2017 Partial demerger 2016 End of More balanced 2013 geographical footprint Solid foundation for Higher share of future growth projects with high Foundation for value added new YIT laid
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 will be on -3%, improving capital and cost efficiency Revenue 5 - 10% annually growth on average 2% at comp. rather than growth exchange rates Return on 20% 7.7% investment • The development of business will Operating
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 Plot co- Higher operation capital Inve
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 Taxes and other contributions to society Own
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 in Q1/2015
Housing Finland and CEE: Operating environment in Finland in Q1/2015 • Consumer confidence has • Good demand for small, • Mortgage interest rates stayed improved, however consumers affordable apartments in the on a low level and margins still cautious in purchase growth centres continued to decrease
Slide 26: Housing Finland and CEE: Operating environment in the CEE countries in Q1/2015
Housing Finland and CEE: Operating environment in the CEE countries in Q1/2015 • Despite of geopolitical tensions, • Positive development in the • Interest rates of mortgages have consumer confidence improved macro economy supported the remained on a low level residential market • 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 • Weakening • Focus on investor • Focus turned to • Focus on • Favourable • Soft consumer • Good market deals in Finland consumer sales in consumer sales in residential sales demand in development in Finland Finland co
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 demand on 2014: Total of 2,515 a low level, start-ups in line with sales 653 665 715 576 621 332 • In April, sales to 339 232 297 444 consumers at around 314 333 344 324 271 140 units (4/2014: Q1 Q2 Q3 Q4 Q1 a
Slide 29: Housing Finland and CEE: Sales and start-ups in CEE
Housing Finland and CEE: Sales and start-ups in CEE Sold apartments (units) • Sales (units) grew by 2014: Total of 734 53% y-o-y in Q1 275 207 189 83 • Start-ups temporarily 180 158 low, higher start-ups 192 expected in the coming quarters Q1 Q2 Q3 Q4 Q1 2014 2015 • A plot for close to 900 Consumer
Slide 30: Completed unsold apartments have decreased in Finland
Housing Finland and CEE: Completed unsold apartments have decreased in Finland • Number of unsold Apartment inventory (units) completed apartments 5,593 continued to decrease 5,441 5,415 in Finland in Q1 686 4,975 4,994 633 679 579 562 • 61% of units under construction already 61% sold moderating th
Slide 31: Housing Russia
4 Housing Russia Manevrovaya Yekaterinburg, Russia
Slide 32: Housing Russia: Operating environment in Q1/2015
Housing Russia: Operating environment in Q1/2015 • The ruble recovered from the • Demand focused especially on • The mortgage stock has weak levels seen in the end of small apartments and continued to grow 2014 apartments close to completion • Mortgage interest rates • Residential prices stable decr
Slide 33: Housing Russia: long-term development
Housing Russia: long-term development 2008 2009 2010 2011 2012 2013 2014 • Prices declined • Housing prices • Slight increases • Prices increased • Prices • Stable • Increased stabilising in H2 in residential (regional increasing and residential uncertainty and • Profitability hit prices differences
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 (%) • Share of cash buyers 2014: Total of 4,817 (41%*) continued to increase 1,641 100% in Q1, share of 90% mortgages on a good 1,132 1,061 80% 983 967 70% level considering the 130 47 60% 931 936
Slide 35: Housing Russia: Inventory
Housing Russia: Inventory • A lot of project Apartment inventory (units) completions combined 12,195 11,966 10,808 257 354 10,014 with low start-ups has 346 11,938 11,612 403 9,350 10,462 378 decreased the 9,611 8,972 production volume 39% 40% 39% 43% 42% • Completed unsold Q1 Q2 Q3 Q4 Q1 apartments
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 in Q1/2015
Business Premises and Infrastructure: Operating environment in Q1/2015 • Office and commercial premises • End-users cautious, especially in • Positive macro outlook supported markets remained soft the retail sector the business premises market in the CEE countries • Opportunities in contracting • Si
Slide 40: Business Premises and Infrastructure, long-term development
Business Premises and Infrastructure, long-term development 2008 2009 2010 2011 2012 2013 2014 • Good • Weakening • Signs of • Infra Services • Stable • Weak business • Weak business development in business improvement in weak in H1, development in premises market premises market Business premises m
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, May 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 • A building permit for the first phase (parking facility) will be applied for in June 2015 • After the investor/ investors have bee
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 • The Finnish Transport Agency has a contract authorisation of approx. EUR 660 millio
Slide 45: Business Premises and Infrastructure: Major ongoing projects
Business Premises and Infrastructure: Major ongoing projects The largest ongoing self-developed business premises projects Examples of projects Value, Project Completion Estimated Sold/ Leasable Project, location EUR million type rate, % completion for sale area, sq. m. won in Q1/2015: BW Tower, Lah
Slide 46: Key financials
6 Key financials
Slide 47: Key figures from Q1/2015
Key figures from Q1/2015 EUR million 1-3/2015 1-3/2014 Change 1-12/2014 Revenue 374.9 403.1 -7% 1,801.2 Operating profit 20.5 26.9 -24% 114.0 Operating profit margin, % 5.5% 6.7% 6.3% Operating profit, excluding non-recurring items 20.5 26.9 -24% 126.4 Operating profit margin, %, excluding non-recur
Slide 48: EBIT-bridge Q1/2014 – Q1/2015
EBIT-bridge Q1/2014 – Q1/2015 • Operating profit weakened due to the higher share of investor deals, lower profitability in Russia and the weakening of the ruble y-o-y Operating profit, excluding non-recurring items (EUR million), change Q1/2014 – Q1/2015: -24% 26.9 1.0 -3.6 -0.4 -2.7 2.9 -0.7 -2.9
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, %) 2014: EUR 152 million Short term target by the end of 2016: ROI 15% 179 152 1,604 1,554 1,563 1,403 1,344 88 140 10.2% 9.6% 9.1% 41 15 7.7% 7.50% -12 -16 -34 -95 Q1 Q2
Slide 50: Net debt decreasing towards the EUR 600 million target
Net debt decreasing towards the EUR 600 million target Interest-bearing debt (EUR million), IFRS • Strong liquidity buffer • Cash and cash equivalents of EUR 118.6 million 920 936 909 895 80 75 91 797 • Overdraft facilities of EUR 63.3 million 199 119 • Undrawn committed revolving credit facility of
Slide 51: Financial key ratios improved in Q1/2015
Financial key ratios improved in Q1/2015 • Positive development as the RUB-stress diminished and net debt decreased • Equity ratio positively impacted also by the normalisation of cash reserves 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.
Slide 52: Ruble impact in Q1/2015
Ruble impact in Q1/2015: Positive translation difference of close to EUR 50 million Revenue split Q1/2015 • The Russian ruble has recovered from the 2014 end RUB 19% Principles of managing currency risks: • Sales and project costs typically in same Other currency, all foreign currency items hedged 3
Slide 53: 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 54: Satisfactory progress in capital release
Satisfactory progress in capital release Target for capital release Actions in Q1/2015 Cumulative progress since 9/2013 Reducing the inventory of unsold • Active sales to investors covering a wide completed apartments in Finland • EUR 9 million variety of apartments >EUR 50 million Selling self-deve
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: Key priorities in 2015
Key priorities in 2015 1 Maintaining strong cash flow • Cash flow focus in sales • Capital release continues 2 Competitiveness program • • Excellent execution Cost efficiency in design and operations 3 Best customer experience • Development of concepts and affordable products continues • Improved pe
Slide 58: 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 59: Guidance for 2015 unchanged
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 • ~40% of Q2-Q4/2015 revenue from sold projects and signed The operating profi
Slide 60: 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 61: Appendices
8 Appendices Tripla Konepaja residential area Pasila, Helsinki, Finland Helsinki, Finland
Slide 62: Appendices
Appendices I. Additional financial information II. Housing indicators III. Business premises and infrastructure construction indicators IV. Ownership Wilhelm Helsinki, Finland YIT | 62 | Investor presentation, May 2015
Slide 63: I Additional financial information
I Additional financial information
Slide 64: 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 3/2015, EUR 557 million Use of plot reserves in 2014, EUR 104 million Housing Finland and CEE 48 Finland 33 226 234 152 82 The Baltic countries, the Czech Republic and Slovakia 15 97 Housing Russia**
Slide 65: Consolidated balance sheet
Consolidated balance sheet as of March 31, 2015 (EUR million) Revenue* Assets - Inventories, WIP in particular, account for a major share Equity and liabilities 2,219 2,219 125 Non-current assets 85 216 578 1,769 Equity 555 673 Non-current borrowings 374 (33%) 1,744 2,036 Inventories Current borrowi
Slide 66: 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 67: 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 68: II Housing indicators
II Housing indicators
Slide 69: Market fundamentals in YIT´s operating countries
Market fundamentals in YIT´s operating countries House price index, 2010 = 100 Households debt to GDP (%) 150 90 140 80 70 130 60 120 50 110 40 100 30 90 20 2010 2011 2012 2013 2014 2010 2011 2012 2013 European Union The Czech Republic Estonia Latvia Lithuania Slovakia Finland Sweden Norway House pr
Slide 70: Finland – Start-ups expected to bottom out in 2015
Finland – Start-ups expected to bottom out in 2015 Residential start-ups, units Unsold completed units (residential development projects) 33,503 32,833 30,175 31,091 28,334 27,271 12,104 24,500 23,500 25,500 15,671 22,903 22,415 11,032 14,466 9,237 7,953 5,200 5,800 5,000 11,255 8,915 20,729 20,059
Slide 71: The Baltic countries – Growth is expected in residential construction
The Baltic countries – Growth is 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 2,500 2,600 2,700 2,300 1,900 2,000 2,700 2,600 2,900 2,900 1,900 2,100 2,200 2006 2007 2008
Slide 72: 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 43,700 43,800 43,500 65,000 37,300 60,000 55,000 28,200 27,500 50,000 23,800 24,300 24,800 25,400 22,100 45,00
Slide 73: Russia – Housing indicators
Russia – Housing indicators House prices in primary markets, thousand RUB (1/2009-3/2015) New residential construction, EUR billion 110 220 80 100 200 90 180 75 80 160 70 70 140 60 120 65 50 100 40 80 60 30 60 20 40 55 50 Yekaterinburg Rostov-on-Don Kazan 2010 2011 2012 2013 2014E 2015E 2016E St. Pe
Slide 74: III Business premises and infrastructure construction indicators
III Business premises and infrastructure construction indicators
Slide 75: 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 Prime yields in Helsinki Metropolitan Area, % 200 180 160 140 120 100 80 60 40 2010 2011 2012 2013 2014E 2015E 2016E Finland Estonia Latvia Lithuania Slovakia Vacancy r
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: Ownership
Sn: Pam agin rSsagaacwu © See e see » @ Een omni Teaco LD | ) Lass Speen pul Ownership
Slide 78: YIT’s major shareholders
YIT’s major shareholders April 30, 2015 Shareholder Shares % of share capital 1. Structor S.A. 12,750,000 10.02 2. Varma Mutual Pension Insurance Company 11,492,100 9.03 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 3,33
Slide 79: 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 80: Together we can do it.
Together _ we can do it.