Yit Oyj · OMXHEX:YIT
Yit Oyj — Non-Deal Roadshow (February 2016)
80 slides from Yit Oyj's roadshow presentation, February 2016
Slide 1: YIT – solid foundation for future growth
YIT – solid foundation for future growth Roadshow USA and Canada February 8 – 11, 2016 yitgroup.com Kari Kauniskangas, President & CEO Sanna Kaje, VP, Investor Relations and M&A
Slide 2: Contents
Contents 1 YIT in brief 3 2 Strategy and business model 14 3 Housing Finland and CEE 22 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, February 2016
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: An innovative project developer and high-quality construction company
YIT – An innovative project developer and high-quality construction company Key investment propositions Operations in 8 countries, 5,300 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 2015E, units create a need for new apartments YIT, Housing Finland and CEE: • In Finland, the estimated long-term need for 3,885 start-ups new apartments is around
Slide 8: Fundamental need for new apartments in Russia
Fundamental need for new apartments in Russia Market size in 2015E, units • Several fundamentals support strong YIT, Housing Russia: demand 2,542 start-ups • Internal migration to growth centres • Poor quality of existing building stock • Decreasing household-size Russia: 1,100,000 completions; • Li
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 2015E, volume of construction creates a need for new infrastructure and YIT, Business Premises and Infrastructure: hybrid construction Revenue EUR 607 million • Subst
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 CAGR International Construction Services Construction Services Finland 5.5% Construction Services 1,929 1
Slide 11: 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 12: Experienced Group Management Board
Experienced Group Management Board Group Management Board Kari Kauniskangas Tero Kiviniemi Timo Lehtinen President and CEO EVP, Head of Business CFO Premises and Infrastructure In the Group’s employ: 1997-2000 and 2001 In the Group’s employ: 2006 In the Group’s employ: 1996 Share ownership:17,
Slide 13: YIT's competitive edges
YIT’s competitive edges • High-quality brand and reputation as a reliable company “Best developer in Finland”, • Innovative concepts and effective design Euromoney Real Estate Survey 2015 management • Strong plot reserve “Developer of the year 2014” • Own sales network in all operating countries in
Slide 14: Strategy and business model
2 Strategy and business model Konepaja residential area Helsinki, Finland
Slide 15: Strategic roadmap
Strategic roadmap Focus on Focus shifted Focus back cash flow towards profitability on growth Temporarily lower growth acceptable 2017 End of 2016 More balanced geographical footprint Partial Solid foundation demerger for future growth Higher share of End of 2013 projects with high Foundation for
Slide 16: Strategic focus areas
Strategic focus areas Improving profitability Growth initiatives Raising capital efficiency • Optimising the business mix • Secured major projects and • Completing the capital high value added projects release program • Cost adjustments in Russia • Accelerating growth in CEE, • Further increasing th
Slide 17: 2015: Strong cash flow, balance sheet strengthened
2015: Strong cash flow, balance sheet strengthened • Short term targets abandoned after reaching the net debt target ahead of schedule Long-term financial targets 2015 2014 Revenue growth -8%, -3%, 5 - 10% annually on average -3% at comp. exchange rates 2% at comp. exchange rates Return on investmen
Slide 18: Clearly higher EBIT needed to reach the targeted ROI
Clearly higher EBIT needed to reach the targeted ROI Increasing volume and higher margin Stabilisation in the order Optimising the of real Cost backlog of business mix in residential adjustments Business housing prices in Premises and Russia Infrastructure Dependence on market development YIT | 18 |
Slide 19: 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 20: Business model – Self-developed housing
Business model – Self-developed housing Finland Russia DD & market Plot DD & market • Zoning • 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 21: Business model in Business Premises and Infrastructure
Business model in Business Premises and Infrastructure: Focus on high value added projects Contracting and co-operation projects Self-developed projects • Schools, hospitals, offices, route • Commercial centres, offices, care projects, rail and metro, power plants, facilities, wind farms, parking et
Slide 22: Housing Finland and CEE
3 Housing Finland and CEE Koti Hyacint Prague, the Czech Republic
Slide 23: Operating environment in Finland in Q4
Housing Finland and CEE: Operating environment in Finland in Q4 • Consumer confidence weakened • Good demand for small, • Mortgage interest rates stayed on in Q4 affordable apartments in the a low level and margins continued growth centres to decrease • Good investor demand continued • Price pressur
Slide 24: Operating environment in the CEE countries in Q4
Housing Finland and CEE: Operating environment in the CEE countries in Q4 • Positive macro development • Prices of new apartments • Interest rates of mortgages have supported the residential market remained relatively stable in the remained on a low level CEE countries • The market was especially st
Slide 25: Exploiting opportunities in Poland – local unit established
Exploiting opportunities in Poland – local unit established Large population Why Poland? Population in Poland’s largest cities A population of around 40 million and growing economy Need to improve living conditions Tri-City Opportunity to leverage YIT’s housing process 750,000 Utilising expe
Slide 26: Housing Finland and CEE: long-term development
Housing Finland and CEE: long-term development 2008 2009 2010 2011 2012 2013 2014 2015 • Weakening • Focus on • Focus turned • Focus on • Favourable • Soft consumer • Good • Strong sales in market investor deals to consumer consumer residential demand in development CEE in Finland sales in sales in
Slide 27: Impact of the mix in Finnish housing
Impact of the mix in Finnish housing • Target to increase the share of consumer sales by improving affordability of the apartments Higher consumer sales would reduce the need to use bundle deals to manage the Consumer inventory of unsold apartments projects EBIT-% Investor • High invested capital pr
Slide 28: Sales and start-ups in Finland in Q4
Housing Finland and CEE: Sales and start-ups in Finland in Q4 Sold apartments (units) • Consumer sales (units) at 2014: 2,515 2015: 3,192, 27% y-o-y the level of the comparison period 1,100 653 665 715 718 659 • 50% of units sold to 576 621 726 investors in Q4/2015 339 332 232 297 444 441 330 (Q4/20
Slide 29: Sales and start-ups in the CEE countries in Q4
Housing Finland and CEE: Sales and start-ups in the CEE countries in Q4 Sold apartments (units) • Sales (units) grew by 2014: 734 2015: 1,023, 39% y-o-y 53% y-o-y in Q4/2015 275 290 256 207 189 83 202 • High number of start-ups, 180 158 especially in the Czech Republic, Estonia and 192 Lithuania Q1
Slide 30: The production volume continued to grow in Q4
Housing Finland and CEE: The production volume (units) continued to grow in Q4 • Number of unsold Apartment inventory (units) completed apartments decreased to 302 in 5,441 5,593 5,415 5,389 Finland (12/2014: 450) 686 4,975 4,994 4,916 5,047 633 679 447 4,907 579 562 611 573 4,942 • 63% of units und
Slide 31: Housing Russia
4 Housing Russia Manevrovaya Baltym Park Yekaterinburg, Yekaterinburg, Russia Russia
Slide 32: Housing Russia: Operating environment in Q4
Housing Russia: Operating environment in Q4 • The ruble weakened again • Demand focused especially on • Mortgage interest rates for new during the quarter small apartments and apartments unchanged at apartments close to completion around 11-12% due to government’s mortgage subsidy • Residential pric
Slide 33: Housing Russia: long-term development
Housing Russia: long-term development 2008 2009 2010 2011 2012 2013 2014 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 good
Slide 34: Reorganisation of YIT's Russian operations
Reorganisation of YIT´s Russian operations • Operations continue in all current Structure of YIT´s Russian operations as of January 1, 2016 locations • Reorganisation to increase flexibility and Housing Russia segment to ensure cost efficiency and competitiveness St. Moscow Russian Petersburg region
Slide 35: Housing Russia: Sales and start-ups in Q4
Housing Russia: Sales and start-ups in Q4 Sold apartments (units) and share of sales financed with a mortgage (%) • Sales (units) decreased by 2014: 4,817 (41%*) 2015: 3,129 (50%), -35% y-o-y 56% y-o-y from the record level in Q4/2014 1,641 • Increase of 7% q-o-q 1,132 1,061 983 967 130 47 769 672 7
Slide 36: Housing Russia: Apartment inventory in the end of Q4
Housing Russia: Apartment inventory in the end of Q4 • High number of Apartment inventory (units) completions 12,195 11,966 10,808 257 354 10,014 9,350 9,718 9,619 346 11,938 11,612 403 311 8,584 • Completed unsold 10,462 9,611 378 9,407 243 9,376 484 8,972 apartments increased 8,100 but still on a
Slide 37: Defensive mode, maintaining ability to ramp up
Defensive mode, maintaining ability to ramp up “New normal” Significant deterioration in the operating environment Plot Carefully selected Stop plot acquisitions acquisitions plot acquisitions Maintain at least critical volume in all Start-ups units High selectivity Slowdown, however filling contrac
Slide 38: Business Premises and Infrastructure
5 Business Premises and Infrastructure Tripla Helsinki, Finland
Slide 39: Business Premises and Infrastructure: Operating environment in Q4
Business Premises and Infrastructure: Operating environment in Q4 • Slight positive signs in the office • Slight increase in end-user • Positive macro outlook supported and commercial premises markets demand, but competition for the business premises market in tenants was intense the CEE countries •
Slide 40: Business Premises and Infrastructure, long-term development
Business Premises and Infrastructure, long-term development 2008 2009 2010 2011 2012 2013 2014 2015 • Good • Weakening • Signs of • Infra Services • Stable • Weak • Weak • Revenue development business improvement weak in H1, development business business stable, some in Business premises in the busi
Slide 41: Strong order backlog – solid foundation for future growth
Strong order backlog – solid foundation for future growth Order backlog of Business Premises and Infrastructure, EUR million • Last years spent on investing into the future, relative share of fixed costs temporarily high Tampere light rail project • Major high value added projects secured: and Tripl
Slide 42: 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 43: Tripla project: Pasila in the future
Tripla project: Pasila in the future YIT | 43 | Investor presentation, February 2016
Slide 44: Tripla project – a letter of intent signed to establish a JV
Tripla project – a letter of intent signed to establish a JV • Letter of intent signed in December 2015 to establish a joint venture to implement the Mall of Tripla and the parking facility • The aim is to sign the final project agreements in early 2016 • YIT’s share of ownership 35%, Etera’s 35% an
Slide 45: Solid execution of major projects
Solid execution of major projects E18 Hamina-Vaalimaa motorway PPP The Tripla project Tampere light rail alliance project project • EUR 260 million* • EUR ~1 billion • EUR ~100 million* • Construction started 6/2015 and • Zoning confirmed and permit • Development phase started in to be opened for tr
Slide 46: Key financials
6 Key financials
Slide 47: Key figures
Key figures EUR million 10-12/2015 10-12/2014 Change 1-12/2015 1-12/2014 Change Revenue 468.5 461.0 2% 1,651.2 1,801.2 -8% 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% Ope
Slide 48: EBIT – bridge 2014 – 2015
EBIT – bridge 2014 – 2015 • Profitability burdened by Housing Russia segment’s low revenue and weakened project margins as well as the actions to ensure strong cash flow EBIT, excluding non-recurring items (EUR million), change 2014 – 2015: -40% 4.5 -12.2 126.4 -14.0 -26.5 0.3 1.2 0.7 -4.4 76.0 YIT
Slide 49: Strong cash flow in 2015
Strong cash flow in 2015 Operating cash flow after investments(EUR million) Invested capital and ROI (EUR million, %) 2014: EUR 152 million 2015: EUR 184 million 309 280 1,604 1,554 1,563 179 184 1,403 1,344 152 1,308 1,196 88 10.2% 1,132 9.6% 9.1% 140 7.7% 7.5% 113 6.4% 41 15 12 43 5.1% 5.3% -12 -1
Slide 50: Net debt decreased further
Net debt decreased further Interest-bearing debt (EUR million), IFRS • Strong liquidity buffer • Cash and cash equivalents of 920 936 909 895 EUR 122.2 million 80 75 91 797 199 716 • Overdraft facilities of EUR 64.5 million of which EUR 119 663 651 63.2 million unused 129 88 122 • Undrawn committed
Slide 51: Minor improvement in financial key ratios
Minor improvement in financial key ratios • Positive development from the decrease in net debt was offset by weakening of the ruble • Excess cash weakened the equity ratio by around 1.5 pp Gearing (%) Equity ratio (%) Net debt/EBITDA (Multiple, x) 132.1 130.4 127.2 129.9 9.1 117.3 36.4 35.8 106.1 10
Slide 52: Ruble weakened in Q4
Ruble weakened in Q4 Revenue split 2015 • The Russian ruble depreciated in Q4 • Average EUR/RUB rate in 2015: 67.99 RUB (2014: 51.04) 16% • Quarter-end EUR/RUB rate: 80.67 (Q3/2015: 73.24) Other 2% Principles of managing currency risks: • Sales and project costs typically in same EUR currency, all f
Slide 53: Good progress in capital release
Good progress in capital release Target for capital release Actions in Q4/2015 Cumulative progress since 9/2013 Reducing the inventory of unsold • Active sales to investors covering a wide completed apartments in Finland • EUR ~31 million variety of apartments, value EUR ~17 million >EUR 50 million
Slide 54: Good financial flexibility
Good financial flexibility Housing start-ups 2000-2015 (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 6427 existing plot reserve provides a good base 5,164 for the com
Slide 55: Proposal to AGM: Dividend of EUR 0.22
Proposal to AGM: Dividend of EUR 0.22 Dividend / share (EUR) Note: Historical figures prior to 2013 are YIT Group pre demerger 138% 0.80 0.75 0.70 0.65 0.65 0.55 0.50 75% 73% 60% 0.40 56% 56% 0.38 0.35 55% 48% 48% 51% 43% 0.30 43% 44% 45% 38% 40% 40% 40% 0.22 0.23 0.22 29% 27% 0.19 0.18 0.15 0.11 0.
Slide 56: Looking ahead and conclusions
7 Looking ahead and conclusions
Slide 57: Market outlook, expectations for 2016
Market outlook, expectations for 2016 Finland • Consumers cautious, demand to focus on small and affordable apartments in growth centres • Investor activity to remain on a good level but even more focus will be paid on the location • Price polarisation, especially between small and large apartments
Slide 58: Guidance for 2016
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). • Around half of 2016 revenue from sold projects and signed
Slide 59: Concluding remarks
Concluding remarks • Strong market position and long track record in healthy profitability and solid execution through economic cycles • Good progress in improving capital efficiency and increasing financial operating space • Improving profitability, growth initiatives and raising the capital effici
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, February 2016
Slide 62: 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 Plot reserves in the balance sheet 12/2015, EUR 500 million Use of plot reserves in 2015, EUR 109 million Housing Finland and CEE 64 Finland 55 The CEE countries 9 Housing Russia** 29 175 247 134 113 Business Premises and Infrastruct
Slide 64: Consolidated balance sheet
Consolidated balance sheet December 31, 2015 (EUR million) Revenue* Assets - Inventories, WIP in particular, account for a major share Equity and liabilities 1,967 1,967 118 Non-current assets 1,732 75 Equity 204 523 673 (33%) Non-current borrowings 500 266 2,036 Inventories 1,528 Current borrowings
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: Housing indicators
II Housing indicators
Slide 68: Finland – Start-ups expected to increase in 2015
Finland – Start-ups expected to increase 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 26,100 26,700 26,200 26,500 12,104 15,671 22,903 22,415 11,032 14,466 9,237 7,953 6,000 6,00
Slide 69: Housing indicators have weakened slightly in Finland
Housing indicators have weakened slightly in Finland Unsold completed units (residential development projects) Residential 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
Slide 70: The Baltic countries – Residential construction is expected to level off
The Baltic countries – Residential construction is expected to level off Residential completions in Estonia, units Residential completions in Latvia, units 5,300 8,100 1,100 2,000 3,400 3,500 3,500 3,000 2,756 4,200 1,100 1,000 1,000 2,300 1,000 1,918 1,990 2,079 4,200 976 1,800 2,662 2,631 800 6,10
Slide 71: The Czech Republic, Slovakia and Poland – Start-ups forecasted to increase
The Czech Republic, Slovakia and Poland – Start-ups forecasted to increase Residential start-ups in the Czech Republic, units Residential start-ups in Slovakia, units 43,500 28,400 37,300 28,200 27,500 20,300 25,100 26,700 27,700 13,800 20,700 23,800 24,400 25,400 16,200 16,900 17,000 16,500 22,100
Slide 72: Russia – Housing indicators
Russia – Housing indicators House prices in primary markets, thousand RUB per sq. m. (1/2009-9/2015) New residential construction volume, EUR billion 110 220 65 100 200 90 180 60 80 160 70 140 55 60 120 50 100 50 40 80 30 60 45 20 40 40 Yekaterinburg Rostov-on-Don Kazan 2010 2011 2012 2013 2014 2015
Slide 73: Business premises and infrastructure construction indicators
III Business premises and infrastructure construction indicators
Slide 74: 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, EUR / sq. m. / year Source: Catella Property
Slide 75: 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 76: Infrastructure construction in Finland
Infrastructure construction in Finland – market expected to decrease slightly in 2015 Infrastructure market in Finland, EUR million Infrastructure sectors in Finland (2014), total volume EUR 6,621 million 7,000 Other 12% 6,000 5,000 Roads 36% 4,000 Energy & water works 24% 3,000 2,000 1,000 0 Teleco
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 January 31, 2016 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 4,710,180 3.70 4. Mandatum Life Insurance Company Ltd. 4,286,675 3.37 5. OP funds 3,943,776 3.10 6. Elo Mutual Pen
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.