YIT Oyj · OMXHEX:YIT
YIT Oyj — Investor Day (November 2021)
81 slides from YIT Oyj's investor day presentation, Nov 23, 2021
Slide 1: YIT Capital Markets Day 2021
YIT Capital Markets Day 2021 23 November, 2021 Helsinki
Slide 2: Program
Program TIME TOPIC PRESENTER PAGE 1:00 p.m. Opening remarks Tommi Järvenpää / VP, Investor Relations 1:05 p.m. Creating sustainable success through sustainable living Markku Moilanen / President and CEO 7 1:30 p.m. Sustainable success will deliver our financial targets Tuomas Mäkipeska / CFO 31 1:50
Slide 3: Presenters
Presenters Markku Moilanen Tuomas Mäkipeska President & CEO CFO Markku joined the company Tuomas joined the company in April 2021. in November 2021. Antti Inkilä Tom Ekman EVP, Housing EVP, Business Premises Antti has been with Tom has been with the company since 1994. the company since 1998. 3
Slide 4: Presenters
Presenters Pasi Tolppanen Ilkka Tomperi EVP, Infrastructure EVP, Property Development Pasi joined the company Ilkka joined the company in August 2021. in August 2021. Tommi Järvenpää Juha Kostiainen VP, Investor Relations EVP, Urban Development Tommi has been with Juha has been with the company sinc
Slide 5: Follow the event on social media
Follow the #YITCMD21 event on social media 5
Slide 6: 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 or event where this presentation is made, or by reading the presentation slides, you agree to be bound b
Slide 7: Creating success through sustainable living
It’s time to build a better Creating sustainable tomorrow. success through sustainable living Now. Markku Moilanen – President and CEO 7
Slide 8: Creating sustainable success through sustainable living
Creating sustainable success through sustainable living We have defined We are now We have a clear clear strategies and well positioned to direction to leverage targets for our deliver predictable, opportunities in businesses market-leading sustainability results 8
Slide 9: Sustainable living is a key challenge for our planet and our opportunity
Sustainable living is a key challenge for our planet – and our opportunity Urbanisation Sustainable development Urbanization increases the pressure to build in growing cities, Climate change requires us to rethink setting higher requirements on how resources are used. Lifecycle built environments. t
Slide 10: Creating better living environments
We have a strong customer focus and a clear purpose Creating better living environments With over a hundred years’ expertise ...we make sustainable living easy from building foundations for better living… for people, business and our society. 10
Slide 11: We have a solid foundation
We have a Strong brand solid foundation with best-in-class Talented people competence and Satisfied customers strong market position… Strong local presence 11
Slide 12: However, our recent performance has not been satisfactory
Inconsistent focus …however, our recent Nonoptimal capital allocation performance has not been Project delivery issues satisfactory Inefficient operating model 12
Slide 13: We are launching a new strategy for 2022-2025
Redefined and clarified So, we are business model with clear focus launching a new strategy Execution through for 2022-2025 3 strategic priorities to deliver predictable results Solid path to reach EBIT of 6% 13
Slide 14: We have redefined and clarified our business model
Drive growth in growing cities We have Focus on core project redefined and types to generate HOUSING Leverage competencies to generate strong clarified our strong profit and stable profit and stable cash flow cash flow business BUSINESS PREMISES INFRA- STRUCTURE model Fuel growth in housing and prof
Slide 15: Sustainable success through 3 strategic priorities
FOCUS • Grow in housing • Evaluate strategic options in Russia • Service business no longer in focus Sustainable • Divest non-core assets success PRODUCTIVITY through • Execute transformation in Infrastructure and Business Premises • Drive efficiency in production and scale in supply chain 3 strateg
Slide 16: We will drive growth and transformation to reach a 6% EBIT
Growth Transformation 20% 80% 6% We will drive growth and transformation 3.6% to reach a 2.1% 6% EBIT HOUSING BUSINESS INFRA- PROPERTY 2020* LTM* PREMISES STRUCTURE DEVELOPMENT 2025 16 * Adj. EBIT excl. Housing Russia, management estimates
Slide 17: Housing
Housing We build functional and sustainable homes and environments in growing cities, making sustainable living easy. 17
Slide 18: Housing: drive growth in growing cities
FOCUS • Grow in selected cities in Finland, Poland, Czech Republic and Slovakia • Our plot reserve enables 44,000 new homes • We will invest additional €200 million in attractive urban plots to build 5,000 homes for our customers Housing Drive growth PRODUCTIVITY in growing cities • Reduce lead time
Slide 19: Business Premises
Business Premises We build and renovate schools, hospitals, commercial and public spaces to ensure optimal usability over the life cycle. 19
Slide 20: Business Premises: focus on core types of project
FOCUS • Reinforce focus on project selection and tendering • Increase share of self-developed, life cycle and Business competence-based projects Premises Focus on PRODUCTIVITY core types of project • Utilise rigorous risk management to generate • Improve project execution efficiency strong profit an
Slide 21: Infrastructure
Infrastructure We build railroads, bridges, tunnels, structures and facilities in demanding environments to enable a smoother flow of sustainable living for people, businesses and society. 21
Slide 22: Infrastructure: leverage competencies
FOCUS • Concentrate on core competencies • Be selective based on technical, financial, Infra- and contractual drivers structure PRODUCTIVITY Leverage • Continue project portfolio renewal competencies to • Improve project delivery generate strong profit and stable cash flow TARGET EBIT > 4% 22
Slide 23: Property Development
Property Development We develop future-proof urban environments, catering for changing needs of sustainable living for people, businesses and society. 23
Slide 24: Property Development: fuel growth and profitability
FOCUS • Start 1-3 self-developed projects per year to generate gross margin for entire YIT • Target large projects only when we have a clear competitive advantage, manageable risk, and optimal capital employment Property Development PRODUCTIVITY Fuel growth • Improve customer focused end-to-end proj
Slide 25: EBIT of 6% will be achieved with solid balance sheet and growing dividend
EBIT of 6% will be achieved with EBIT GEARING DIVIDEND solid balance Stable sheet and 6% < 50% growth growing dividend 25
Slide 26: Why we focus on sustainable living
Why we focus on sustainable living Buildings generate almost 40% of annual °C 1.5 global CO2 emissions. We commit to Science Based Targets (SBTi) to contribute to goals set in the Paris Agreement. 26
Slide 27: How we focus on sustainable living
How we focus on sustainable living e • Halve emissions from own s • Continue offering better living g • Continue zero tolerance in operations (Scopes 1 & 2) environments for the society grey economy, corruption, labour exploitation and • Reduce indirect emissions • Decrease accident frequency discri
Slide 28: Creating sustainable success through sustainable living
Creating sustainable success through sustainable living We have defined We are now We have a clear clear strategies and well positioned to direction to leverage targets for our deliver predictable, opportunities in businesses market-leading sustainability results HOUSING EBIT COMMITMENT GROWTH TO 20
Slide 29: We are ready to build a better tomorrow
We are For customers through reliability and high quality ready to For employees by enabling individual growth and build a better empowering winning teams For shareholders tomorrow. through profitable performance 29
Slide 30: Now.
Now. : Vir
Slide 31: Sustainable success will deliver our financial targets
Sustainable success will Tuomas Mäkipeska deliver our Chief Financial Officer financial targets 31 Konepaja, Helsinki, Finland
Slide 32: Our success is measured by updated financial targets for 2025
6% 5.2% EBIT 2.1% 6% 2019* 2020* Target Our success is measured GEARING 81% 68% <50% by updated financial < 50% 2019 2020 Target targets 0.40 for 2025 DIVIDEND 0.27 Stable 0.14 growth 2019 2020 2021 Target * Adj. EBIT excl. Housing Russia, management estimates 32 Tampere light rail, Tampere, Finland
Slide 33: Sustainable success will deliver our financial targets
Sustainable success will deliver our financial targets Our measures to Our capital Our value improve productivity allocation supports generation is enabled unlock significant growth with by rigorous strategy potential manageable risk execution 33 Konepaja, Helsinki, Finland
Slide 34: Our focus on productivity and profitable growth will nearly triple our EBIT margin
6% Our focus on productivity and profitable growth will 3.6% nearly triple our 2.1% EBIT margin 2020* LTM* Produc- Investment Growth 2025 tivity returns * Adj. EBIT excl. Housing Russia, management estimates 34
Slide 35: Our measures to improve productivity unlock significant potential
OPERATING MODEL Annual savings of Our measures € 15-20 million by 2023* to improve productivity PROJECT MANAGEMENT t unlock >€50 million by 2024* significant potential FURTHER POTENTIAL Supply chain management *Baseline 2020 35
Slide 36: We are rightsizing our asset portfolio
DIVEST NON-CORE ASSETS • Mall of Tripla We are rightsizing our asset portfolio KEEP PORTFOLIO SIZE MODERATE to achieve Total investment portfolio of a step-up in <€200 million investment returns FOCUS ON MINORITY OWNERSHIPS • Ownerships of <50% • Equity stakes of €10-30 million 36 Mall of Tripla, He
Slide 37: Our focus on Housing drives profitable growth
GROW HOUSING REVENUE BY >20%* Our focus • Focus on selected cities on Housing • Additional plot investments of €200 million by 2025 drives profitable ACHIEVE HOUSING EBIT OF growth >10% • Lead time reduction of 20% by 2025 37 Merenkulkijanranta, Helsinki, Finland *Baseline 2020
Slide 38: Our capital allocation supports growth with manageable risk
CAPITAL EBIT TARGET EMPLOYED >10% €598 million CAPITAL Our capital EMPLOYED €-34 million allocation HOUSING supports EBIT TARGET CAPITAL EMPLOYED >4% €34 million growth with BUSINESS PREMISES INFRA- STRUCTURE manageable EBIT TARGET >4% PROPERTY risk DEVELOPMENT CAPITAL ROCE TARGET EMPLOYED >10% €337
Slide 39: Russia: de-risking of operations and allocating capital to growth areas
CAPITAL EMPLOYED IN RUSSIA Russia: € million 294 De-risking 186 184 of operations 2019 2020 3Q21 and allocating capital to NON-BALANCE SHEET ITEMS growth areas Russian escrow accounts €106 million at 3Q21 39 Suomen ranta, Yekaterinburg, Russia
Slide 40: Our updated financial targets and clear criteria steer capital allocation
CAPITAL CASH ALLOCATION GENERATION PRIORITIES 2022-2025 2022-2025 Our updated Dividends Free financial cash flow Strong targets and before growth investments balance clear criteria sheet steer capital Capital release allocation from non-core Housing growth operations Investment portfolio 40 Royal Pa
Slide 41: Our value generation is enabled by solid and sustainable balance sheet
OPERATING CASH FLOW GEARING AFTER INVESTMENTS 336 302 81% 68% Our value 40% € million 51 generation is enabled by 2019 2020 LTM 2019 2020 3Q21 solid and NET INTEREST- EQUITY RATIO sustainable BEARING DEBT balance 862 628 34% 33% 40% sheet… € million 411 2019 2020 3Q21 2019 2020 3Q21 41
Slide 42: ... and rigorous strategy execution
Execute transformation and implement systematic performance management … and HOUSING PROFITABLE GROWTH >20% rigorous BUSINESS strategy PREMISES TRANSFOR- MATION GENERATE CASH PROFITABLY execution INFRA- GENERATE CASH TRANSFORMATION STRUCTURE PROFITABLY PROPERTY DEVELOP MORE BALANCED DEVELOPMENT INVE
Slide 43: Sustainable success will deliver our financial targets
Sustainable success will deliver our financial targets Our measures to Our capital Our value improve productivity allocation supports generation is enabled unlock significant growth with by rigorous strategy potential manageable risk execution 43 Konepaja, Helsinki, Finland
Slide 44: Driving growth in growing cities
Driving growth in Housing Antti Inkilä growing Executive Vice President cities 45 Merenkulkijanranta, Helsinki, Finland
Slide 45: Housing
Housing We build functional and sustainable homes and environments in growing cities, making sustainable living easy. 46 Merenkulkijanranta, Helsinki, Finland
Slide 46: Driving growth in growing cities
Driving growth in growing cities We improve We focus on We are enabling productivity by cities of economic a sustainable decreasing growth and lifestyle for our construction stability customers lead times 47 Merenkulkijanranta, Helsinki, Finland
Slide 47: We are aiming for substantial growth, profitably
We are aiming for substantial growth, profitably GROW REVENUE… …WITH EBIT > 20%* > 10% +20% >10% 1,240 1,286 7.4% 8.4% € million 2019 2020 2025 2019 2020 2025 *Baseline 2020 48 All figures Housing Finland & CEE
Slide 48: We focus our growth on cities of economic growth and stability
Grow in selected cities We focus our Maintain market position growth on cities of Finland Tampere economic growth Capital to be released Turku Helsinki Russia and stability Estonia Latvia Lithuania Gdansk Warsaw Poland Prague Czech Republic Slovakia Bratislava 49 Piliakalnis, Kaunas, Lithuania
Slide 49: Urbanisation and demographic changes support housing market demand
Urbanisation and demographic changes continue to support housing market demand FINLAND CZECH REPUBLIC SLOVAKIA POLAND URBAN URBAN URBAN URBAN POPULATION POPULATION POPULATION POPULATION 85% * 74% * 53% * 60% * in 2020 in 2020 in 2020 in 2020 GDP per capita in 2019** 84,000 77,000 60,000 70,000 ~40,0
Slide 50: A strong plot reserve enables growth
OUR CURRENT PLOT RESERVE A strong 2,268,000 m2 = 753,000 m2 = plot reserve ~33,000 apartments ~11,000 apartments enables growth – we will invest GROWTH AREAS Estonia additional Poland Latvia €200 million 2,268,000 Slovakia 753,000 in new plots m2 m2 by 2025 REST OF FINLAND Czech Lithuania Republic Z
Slide 51: Productivity improvements strengthen profitability and customer satisfaction
Our productivity improvements will strengthen our profitability, support customer satisfaction and benefit the environment Construction • Lean production methodology lead times • Industrial construction: modules and pre-fabricated products -20% • Better scheduling with takt-timing • More efficient l
Slide 52: We are the sustainable choice for our customers
We are the sustainable choice for our customers SHARE OF BUILDINGS’ LIFE CYCLE EMISSIONS REPAIR & USE PHASE DEMOLITION & MATERIALS CONSTRUCTION (ENERGY) CONVERSION 40% 6% 46% 8% Low-carbon Sorting and Geothermal Efficient cooling materials recycling heating systems Renewable Waste heat Pre-fabricate
Slide 53: Driving growth in growing cities
Driving growth in growing cities We improve We focus on We are enabling productivity by cities of economic a sustainable decreasing growth and lifestyle for our construction stability customers lead times 54 Merenkulkijanranta, Helsinki, Finland
Slide 54: Focusing on core types of project
Focusing on core types of project Business to generate Premises Tom Ekman strong profit Executive Vice President and stable cash flow 55 Keravanjoki school, Kerava, Finland
Slide 55: Business Premises
Business Premises We build and renovate schools, hospitals, commercial and public spaces to ensure usability, sustainability and adaptability over the life cycle. 56 Keravanjoki school, Kerava, Finland
Slide 56: Focusing on core types of project to generate strong profit and stable cash flow
Focusing on core types of project to generate strong profit and stable cash flow We reinforce our We answer to We are focus on project customer needs improving selection and through sustainable project delivery tendering offering 57 Serpentine House, Helsinki, Finland
Slide 57: Our transformation started in 2020 and is progressing well
EBIT & EBIT-MARGIN >4% Our 7 € million transformation -0.6% 1.1% started in -7 2020 and is -5.8% progressing well to >4% EBIT -44 2019* 2020* LTM* 2025 *Adj.EBIT 58
Slide 58: We are moving from a price-driven to a value adding portfolio
OUR SELECTION CRITERIA Contractual Financial Resources We are moving from a price-driven OUR PROJECT PORTFOLIO BY ORDER BOOK to a value Self-developed Price- adding Price- driven Self-developed portfolio driven in Life by cycle Life 2021 2025 cycle Competence- Competence- based based 59
Slide 59: Precise project delivery is essential for productivity and profitability
Ensure accurate cost estimation and tender management Precise project delivery is essential for Minimise net deviations in project delivery productivity and profitability Assure efficient organisation and improvements sufficient project resources 60 Pradiaren, Bratislava, Slovakia
Slide 60: We offer sustainable solutions for our customers
Mansikkala The H Building University of wooden school, of the Vaasa Helsinki main Imatra Central Hospital building We offer sustainable HEALTHY AND INSPIRING SAFE AND HEALTHY PREMISES TO SERVE RENOVATING HISTORICALLY solutions LEARNING ENVIRONMENT FOR 326,000 SIGNIFICANT BUILDING FROM for our 1,350
Slide 61: Focusing on core types of project to generate strong profit and stable cash flow
Focusing on core types of project to generate strong profit and stable cash flow We reinforce our We answer to We are focus on project customer needs improving selection and through sustainable project delivery tendering offering 62 Serpentine House, Helsinki, Finland
Slide 62: Leveraging competencies to generate strong profit and stable cash flow
Leveraging competencies to Infrastructure generate strong Pasi Tolppanen Executive Vice President profit and stable cash flow 63 Crown Bridges, Helsinki, Finland
Slide 63: Infrastructure
Infrastructure We build railroads, bridges, tunnels, structures and facilities in demanding environments to enable a smoother flow of sustainable living for people, businesses and society. 64 Crown Bridges, Helsinki, Finland
Slide 64: Leveraging competencies to generate strong profit and stable cash flow
Leveraging competencies to generate strong profit and stable cash flow We are more We are building We have started focused on project foundations for our transformation selection based a sustainable to profitability on our core society competences 65 Kaupokalda, Tallinn, Estonia
Slide 65: We have started our transformation to >4% EBIT
EBIT & EBIT-MARGIN >4% 15 13 We have 1.9% 1.6% started our € million transformation to >4% EBIT -1.7% -11 2019* 2020* LTM* 2025 *Adj.EBIT 66 Töölönlahti parking garage, Helsinki, Finland
Slide 66: Improving order book points our way to profitability
REVENUE SHARE OF LEGACY PROJECTS Improving 2021 2022 2023 2024 2025 order book points our ~24% ~15% ~9% ~2% ~1% way to profitability Legacy low-margin projects Profitable projects 67 Hiekkaharju water tower, Vantaa, Finland
Slide 67: We are moving from a price-driven to a value adding portfolio
OUR SELECTION CRITERIA Technical Financial Contractual We are moving from a price-driven OUR PROJECT PORTFOLIO BY ORDER BOOK to a value adding Self-developed Price- Self-developed driven portfolio Price- driven in Infra maintenance by Infra 2021 2025 maintenance Competence- Competence- based based 6
Slide 68: Investments in sustainable infrastructure support the entire market
Investments in sustainable infrastructure support the entire market >30 new rail and tram >200 wind park projects projects under development under development in Finland in Finland 69 Tampere light rail, Tampere, Finland
Slide 69: We are building foundations for a sustainable society
Blominmäki The Crown Tampere wastewater Bridges tramway treatment We are CLEAN WATER FOR CONNECTING building 30,000 400,000 13,500 DAILY COMMUTERS foundations PEOPLE NEW RESIDENTS TO PUBLIC WITH RENEWABLE ENERGY for a TRANSPORTATION sustainable society OUR OPERATIONS • Carbon footprint calculation •
Slide 70: Leveraging competencies to generate strong profit and stable cash flow
Leveraging competencies to generate strong profit and stable cash flow We are more We are building We have started focused on project foundations for our transformation selection based a sustainable to profitability on our core society competences 71 Kaupokalda, Tallinn, Estonia
Slide 71: Fueling growth and profitability
Fueling Property growth and Development Ilkka Tomperi profitability Executive Vice President 73 Raaden hammas, Keilaniemi, Finland
Slide 72: Property Development
Property Development We develop future-proof urban environments, catering for changing needs of sustainable living for people, businesses and society. 74 Raaden hammas, Keilaniemi, Finland
Slide 73: Fueling growth and profitability
Fueling growth and profitability We minimise Our new business environmental model will feed high- We are rightsizing impacts during the margin projects for our investment building’s entire construction portfolio life cycle segments 75 Skogås, Sweden
Slide 74: The design phase is key in minimising environmental impacts
• Materials and solutions to reduce embodied carbon and to contribute to reducing emissions during The design the operational life • Smart technology, health and wellbeing in focus phase is the key • Green finance requirements tightening and investors’ in minimising increasing focus on reducing carb
Slide 75: Our new business model will feed high-margin projects for construction segments
Our new business model will feed high-margin projects for construction segments and generate additional development margins and investment returns Urban and project Life cycle Smart equity development services and Workery+ 77 Keilaniemi, Espoo, Finland
Slide 76: 1-3 self-developed projects per year
1-3 self-developed projects per year We develop sustainable, Development pipeline includes offices, high-quality logistics, mixed-use projects, social infra and wind parks urban environments Centralised development capabilities to for our end • Drive growth customers • Support construction segments
Slide 77: We will only offer services that add value
We will only offer services that add value Real estate management Space-as-a-Service: services in life cycle Workery+ projects 79
Slide 78: Divesting non-core assets to rightsize investment portfolio
CURRENT PORTFOLIO1 TARGET PORTFOLIO BY 20252 €260 million <€200 million Mixed-use Other Other Smart equity Plots Mixed-use Offices – divesting Rental housing Mall of Tripla Logistics non-core assets Rental housing to rightsize • 14 investments • 15–25 investments investment • Mall of Tripla: €182 mi
Slide 79: New portfolio focus enables us to achieve >10% ROCE
New portfolio focus enables us to achieve > 10% Return on capital employed 81 Workery+, Helsinki, Finland
Slide 80: Fueling growth and profitability
Fueling growth and profitability We minimise Our new business environmental model will feed high- We are rightsizing impacts during the margin projects for our investment building’s entire construction portfolio life cycle segments 82 Skogås, Sweden
Slide 81: Thank you!
Thank you! Follow us on linkedin.com/ twitter.com/ company/yit YITInvestors 84