Yit Oyj · OMXHEX:YIT
Yit Oyj — Non-Deal Roadshow (February 2017)
79 slides from Yit Oyj's roadshow presentation, February 2017
Slide 1: YIT – More life in sustainable cities, Roadshow USA
YIT – More life in sustainable cities Roadshow USA February 6 -8, 2017 Kari Kauniskangas, President & CEO yitgroup.com Hanna Jaakkola, VP, Investor Relations
Slide 2: Contents
Contents 1 YIT in brief 3 2 Strategy and business model 8 3 Latest highlights 14 4 Housing Finland and CEE 19 5 Housing Russia 29 6 Business Premises and Infrastructure 35 7 Key financials 43 8 Looking ahead and conclusions 51 9 Why invest in YIT? 54 10 Appendices 59 YIT | 2 | Investor presentation,
Slide 3: YIT in brief
1 YIT in brief Merenkulkijanranta residential area Helsinki, Finland
Slide 4: Over 100 years in Finland, over 50 in Russia, growing presence in CEE
Over 100 years in Finland, over 50 in Russia, growing presence in CEE Allmänna YIT becomes Ingeniörsbyrån Finland's No.1 Entry to Expansion to Ab (AIB) Operations construction Poland the Baltics establishes in Russia company and CEE in office in begin construction Helsinki services 1912 1961 1980’s
Slide 5: A real estate developer and construction company with solid track record
A real estate developer and construction company with solid track record Revenue by segment, EUR 1.8 bn 44% 41% Housing Finland and CEE Housing Russia Business Premises and Infrastructure 15% Operating profit* by segment, EUR 80 million Business Premises 38 and Infrastructure Housing Russia 60 Housi
Slide 6: Balanced business portfolio
Balanced business portfolio Business Premises Housing Finland and CEE Housing Russia and Infrastructure We construct and develop apartments We construct and develop apartments We build offices, commercial spaces, and entire residential areas. and entire residential areas, we operate in care faciliti
Slide 7: Our vision – More life in sustainable cities
Our vision – More life in sustainable cities OUR VISION More life in sustainable cities OUR GROWTH ENGINE Urban development involving partners OUR DNA Result- oriented project executor OUR MISSION OUR VALUES CARE A STEP AHEAD COOPERATION PERFORMANCE YIT | 7 | Investor presentation, February 2017
Slide 8: Strategy
2 Strategy Konepaja residential area Helsinki, Finland
Slide 9: 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 5.7% Construction Services 1,929 1
Slide 10: Focus on reforming our operations
Focus on reforming our operations Coach, encourage Improve internal Provide and train people agility easy-to-use services Reduce Build true Improve construction costs partnerships capital efficiency YIT | 10 | Investor presentation, February 2017
Slide 11: Renewed strategy for 2017–2019
Renewed strategy for 2017–2019 More life in sustainable cities INNOVATOR ANNUAL GROWTH FOR LIVING 5–10% in Housing Solutions for urban living Living services e.g. affordable apartments Renovation services Performance Higher value-add for leap customers e.g. hybrids, big infra, alliances GROWTH INNOV
Slide 12: We are making a difference
We are making a difference • Proactive customer experience management CARE FOR • WOW service attitude CUSTOMERS • Digital customer journey • Strengthened long-term city development VISIONARY URBAN • Hybrid and area development DEVELOPMENT • Concepts • Latest knowledge and more diversity PASSIONATE •
Slide 13: 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 | 13 |
Slide 14: Latest highlights
3 Latest highlights Vapo office Vantaa, Finland
Slide 15: Key messages in Q4/2016
Key messages in Q4/2016 • Exceptionally strong residential sales to consumers in new projects in Finland and the CEE countries • Good progress in ongoing projects and a solid order backlog in Business Premises and Infrastructure • Operating profit positive in Russia due to good sales and high number
Slide 16: Group: Revenue grew and profitability improved in Q4
Group: Revenue grew and profitability improved in Q4 • Revenue increased by 10% y-o-y, 9% at comparable exchange rates • Operating profit margin improved y-o-y in all segments • Order backlog remained stable q-o-q, share of sold backlog continued to increase Revenue and adjusted operating profit mar
Slide 17: EBIT-bridge Q4/2015–Q4/2016
EBIT-bridge Q4/2015–Q4/2016 • Positive profitability development in Housing Finland and CEE due to less capital release actions and shift in the sales mix Adjusted operating profit (EUR million), change Q4/2015–Q4/2016: 72% 28.7 1.3 -0.1 2.3 1.4 1.9 0.2 16.6 5.7 -0.7 YIT Group Volume Profitability V
Slide 18: Several successes recently
Several successes recently • Letter of intent signed on the implementation of the Tripla hotel • The implementation agreement on Tampere light rail project signed, ~EUR 110 million booked in the order backlog • Several new projects won in Business Premises and Infrastructure segment • Regenero, a JV
Slide 19: Housing Finland and CEE
4 Housing Finland and CEE Koti Hyacint Prague, the Czech Republic
Slide 20: Operating environment in Finland in Q4
Housing Finland and CEE Operating environment in Finland in Q4 • Consumer confidence improved • Good demand especially for • Mortgage interest rates stayed on in Q4 small, affordable apartments in a low level and margins continued the growth centres to decrease • Investor demand remained on a good l
Slide 21: Sales and start-ups in Finland
Housing Finland and CEE Sales and start-ups in Finland Sold apartments (units) • Strong consumer sales in 2015: 3,192 2016: 2,730 Q4, number of units sold to consumers grew by 88% 1,100 y-o-y 858 715 718 659 705 726 612 555 240 • Share of units sold to 444 441 330 332 consumers in Q4/2016: 72% 298 2
Slide 22: Operating environment in the CEE countries in Q4
Housing Finland and CEE Operating environment in the CEE countries in Q4 • Macro environment remained • Prices of new apartments • Interest rates of mortgages on a positive remained relatively stable or low level increased slightly in the CEE • Residential demand on a good countries • Consumers’ acc
Slide 23: Sales and start-ups in the CEE countries
Housing Finland and CEE Sales and start-ups in the CEE countries Sold apartments (units) • In Q4, number of units sold 2015: 1,023 2016: 1,197 to consumers grew by 10% 560 y-o-y 240 • Apartment building project of 275 256 290 90 apartments was sold to a 202 201 235 201 83 private co-operative in 320
Slide 24: 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 on 5,971 6,152 6,237 a low level 5,863 335 352 5,389 381 352 5,817 5,885 5,047 • Sales rate of the inventory 4,994 4,916 447 5,482 5,619 increased in Q4 d
Slide 25: Revenue, adjusted operating profit and ROI in Q4
Housing Finland and CEE Revenue, adjusted operating profit and ROI in Q4 • Revenue declined by 5% y-o-y due to less capital release actions in Finland, profitability improved due to less capital release actions in Finland and positive change in sales mix • Exceptionally high share of unit sales for
Slide 26: Profitability started to improve in 2016
Housing Finland and CEE Profitability started to improve in 2016 • In 2016, revenue declined by 6% and profitability improved y-o-y due to reduction in capital release actions in Finland and sales mix shifting to consumers from investors • Residential sales to consumers started to pick up in Finland
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: Smartti concept launched and nine projects started in 2016
Smartti concept launched and nine projects started in 2016 • Smartti, a new affordable and flexible housing concept successfully launched in spring 2016 • Affordable, yet stylish homes with standardized modularity and pre-fabrication • Nine Smartti projects started in Finland in H2/2016 according to
Slide 29: Housing Russia
5 Housing Russia Sovremennik Kazan, Russia
Slide 30: Operating environment in Q4 (Russia)
Housing Russia Operating environment in Q4 • The ruble continued to • Demand focused especially on • Mortgage subsidy program was strengthen during the quarter small apartments in effect until the end of 2016 • Residential prices remained • Mortgage interest rates for new stable apartments at around
Slide 31: 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 (%) • Number of sold units 2015: 3,129 (50%) 2016: 3,523 (51%) grew by 28% y-o-y in Q4 967 925 892 880 769 721 826 • Full-year start-ups in the 672 level of 2015 58% 56% 58% 54% 50% 52% 49% 3
Slide 32: Apartment inventory decreased due to high completions
Housing Russia Apartment inventory decreased due to high completions • Exceptionally high Apartment inventory (units) completions in Q4 resulted in decreased inventory 9,350 9,718 9,619 8,584 8,895 9,030 378 311 243 8,255 484 449 345 9,407 9,376 366 7,032 • Sales rate declined due to 8,972 8,100 8,4
Slide 33: Revenue, adjusted operating profit and ROI in Q4
Housing Russia Revenue, adjusted operating profit and ROI in Q4 • Revenue increased by 32% y-o-y at comparable exchange rates due to strong sales and high completion rate of sold apartments, operating profit was positive and profitability continued to improve due to good sales and high completions •
Slide 34: Profitability burdened by lower projects margins in 2016
Housing Russia Profitability burdened by lower projects margins in 2016 • Revenue grew slightly in 2016 due to good sales and high number of completions • Profitability still under pressure, but H2 adjusted operating profit was positive • Target to reduce the operative invested capital by continuing
Slide 35: Business Premises and Infrastructure
6 Business Premises and Infrastructure Tripla Helsinki, Finland
Slide 36: Operating environment in Q4
Business Premises and Infrastructure Operating environment in Q4 • Investor demand stable on a good • The contracting market was • Positive macro outlook supported level active and several large projects the business premises market in were in tendering phase the CEE countries • Several large tenant
Slide 37: Revenue, adjusted operating profit and ROI in Q4
Business Premises and Infrastructure Revenue, adjusted operating profit and ROI in Q4 • Revenue increased by 18% y-o-y, growth due to construction of Mall of Tripla and the sale of Duetto I office premises in Vilnius • Profitability improved y-o-y due to strong performance both in Business Premises
Slide 38: Revenue grew clearly in 2016
Business Premises and Infrastructure Revenue grew clearly in 2016 • Good progress in the segment, increased revenue and improved profitability in 2016 • Solid order backlog, +53% y-o-y, supports growth and profitability improvement • Success in tenders recently CAGR 0% 823 797 777 694 689 9.3% 599 5
Slide 39: Tripla project: Pasila in the future
Tripla project: Pasila in the future YIT | 39 | Investor presentation, February 2017
Slide 40: Tripla project supports growth in the coming years
Tripla project supports growth in the coming years Tripla project in brief Indicative value split • EUR 1 billion hybrid project consisting of offices, shopping and congress center, hotels, public transport terminal and apartments Parking and foundations ~10% • Combines the breadth of YIT know-how i
Slide 41: Mall of Tripla in a nutshell
Mall of Tripla in a nutshell Illustration of revenue recognition* What has been achieved so far? • Valid building permits and required decisions from public authorities obtained • Financing package of ~EUR 300 million secured • Investor deals closed, value ~EUR 600 million • Foundation works, excava
Slide 42: The largest ongoing projects in the segment
The largest ongoing projects in the segment The largest ongoing self-developed business premises projects Value, Estimated Leasable area, Project, location EUR million Project type Completion rate, % completion Sold/ for sale sq.m. YIT’s ownership Mall of Tripla, Helsinki ~600 Retail 23% 2019 38,75%
Slide 43: Key financials
7 Key financials
Slide 44: Key figures
Key figures EUR million 10–12/2016 10–12/2015 Change 1–12/2016 1–12/2015 Change Revenue 513.7 468.5 10% 1,783.6 1,651.2 8% Operating profit 28.7 16.6 72% 52.9 65.7 -19% Operating profit margin, % 5.6% 3.6% 3.0% 4.0% Adjusted operating profit 28.7 16.6 72% 79.9 76.0 5% Adjusted operating profit margi
Slide 45: EBIT-bridge Q4/2015–Q4/2016
EBIT-bridge Q4/2015–Q4/2016 • Positive profitability development in Housing Finland and CEE due to less capital release actions and shift in the sales mix Adjusted operating profit (EUR million), change Q4/2015–Q4/2016: 72% 28.7 1.3 -0.1 2.3 1.4 1.9 0.2 16.6 5.7 -0.7 YIT Group Volume Profitability V
Slide 46: Cash flow and invested capital
Cash flow and invested capital Operating cash flow after investments(EUR million) Invested capital and ROI (EUR million, %) 309 280 1,344 1,308 1,196 1,175 179 184 1,132 1,141 1,131 144 1,103 56 113 22 7.5% 6.4% 15 12 43 26 5.1% 5.3% 5.0% -23 -21 4.7% 4.7% -25 3.6% -43 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
Slide 47: Negative cash flow led to increase in net debt
Negative cash flow led to increase in net debt Interest-bearing debt (EUR million), IFRS • Increase of net debt due to negative cash flow during the year 797 716 • Capital efficiency in focus going forward 663 677 678 700 119 651 629 129 88 122 72 67 66 • Strong liquidity buffer 122 • Cash and cash
Slide 48: Despite the improvement, financial key ratios still on an unsatisfactory level
Despite the improvement, financial key ratios still on an unsatisfactory level • Improvement in key ratios despite of increase in net debt • Positive translation difference in equity of EUR 35 million q-o-q Gearing (%) Equity ratio (%) Net debt/EBITDA (Multiple, x) 13.1 13.0 117.3 118.9 112.3 36.4 1
Slide 49: Ruble strengthened in Q4
Ruble strengthened in Q4 Revenue split 1-12/2016 (POC) • EUR/RUB exchange rates: • Average EUR/RUB rate in 1-12/2016: 74.15 RUB (1-12/2015: 67.99) 15% • Year-end EUR/RUB rate: 64.30 (12/2015: 80.68) Other 2% Principles of managing currency risks: • Sales and project costs typically in same EUR curre
Slide 50: 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 0.80 0.75 0.70 0.65 0.65 0.55 0.50 0.40 0.38 0.35 0.30 0.22 0.23 0.22 0.22 0.19 0.18 0.15 0.11 0.09 0.07 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 200
Slide 51: Looking ahead and conclusions
8 Looking ahead and conclusions
Slide 52: Market outlook, expectations for 2017
Market outlook, expectations for 2017 Finland • Consumer demand to remain on a good level and to focus on small, functional and affordable apartments • Investor activity to decline slightly, even more focus will be paid on the location • Residential price polarisation between growth centres and othe
Slide 53: Guidance for 2017 (segment reporting, POC)
Guidance for 2017 (segment reporting, POC) The Group revenue is estimated to grow by 0%-10%. The adjusted operating profit1 is estimated to be in the range of EUR 90-105 million. In addition to the market outlook, the 2017 guidance is based on the following factors: • At the end of 2016, 60% of the
Slide 54: Why invest in YIT?
9 Why invest in YIT? Kasarmikatu 21 office building Helsinki, Finland
Slide 55: Key investment propositions
Key investment propositions Good track record One of the most profitable construction companies in Europe throughout the business cycle, clearly the most profitable in Finland Getting back to the profitable growth trend EBIT expected to start to improve already in 2016, trends and drivers provid
Slide 56: Our answers: trends and drivers provide long-term growth opportunities
Trends and drivers provide long-term growth opportunities Growing need for new apartments, New business opportunities Divergent economic development services and infrastructure in our operating countries Urbanisation Demographic Digitalisation Poor condition of Positive economic Recession in Changes
Slide 57: Strong market position in all markets
Strong market position in all markets Market sizes in 2016 Euroconstruct and Forecon, estimates YIT Position and 2016 residential start-ups 32,900 residential Market leader start-ups in Finland Infra construction EUR 6,5 bn 2,877 units Business premises EUR 11,4 bn 1,100,000 residential Largest fore
Slide 58: YIT’s competitive edges
YIT’s competitive edges High-quality brand and reputation as a reliable company “Best developer in Finland”, Euromoney Real Estate Survey 2015 Innovative concepts and effective design management Strong plot reserve and development capabilities “Developer of the year 2014” in the Czech Republic
Slide 59: Appendices
10 Appendices Tripla Pasila, Helsinki, Finland Konepaja residential area Helsinki, Finland
Slide 60: Appendices
Appendices I. Additional financial information II. Housing indicators III. Business premises and infrastructure construction indicators IV. Ownership Wilhelm Helsinki, Finland YIT | 60 | Investor presentation, February 2017
Slide 61: I Additional financial information
I Additional financial information
Slide 62: 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 12/2016, EUR 621 million Use of plot reserves in 2016, EUR 91 million Housing Finland and CEE 60 2391 Finland 35 277 1542 124 105 The CEE countries 25 Business Premises and Infrastructure Housing Ru
Slide 63: 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 64: Business model in self-developed housing varies between countries
Business model in self-developed housing varies between countries 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 • Durat
Slide 65: II Housing indicators
II Housing indicators
Slide 66: Start-ups expected to decrease slightly in 2017
Finland Start-ups expected to decrease slightly in 2017 Residential start-ups (units) Consumers’ views on economic situation in one year’s time (balance) 35,573 30 32,033 33,525 32,807 32,900 31,500 Own economy 31,300 29,842 29,900 20 27,778 6,700 26,273 6,200 7,200 16,531 12,477 11,614 23,361 23,38
Slide 67: Housing indicators have improved slightly
Finland Housing indicators have improved slightly Unsold completed units (residential development projects) Residential building permits, start-ups and completions (million m3) Million m3, 12 month sum Permits Completions Starts Construction cost index (2005=100) Construction confidence (balance) 13
Slide 68: 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 4,700 1,100 4,500 4,400 2,000 3,969 1,300 1,400 1,200 3,000 2,756 1,270 4,200 2,300 1,000 1,918 1,990 2,079 4,200 976 1,800 2,662 2,
Slide 69: Start-ups forecasted to grow in the Czech Republic and Poland
The Czech Republic, Slovakia and Poland Start-ups forecasted to grow in the Czech Republic and Poland Residential start-ups in the Czech Republic (units) Residential start-ups in Slovakia (units) 43,500 28,400 37,300 30,600 20,300 19,600 19,000 25,100 28,200 27,500 13,800 26,400 25,700 27,300 17,800
Slide 70: Housing indicators (Russia)
Russia Housing indicators House prices in primary markets (thousand RUB per sq. m.) New residential construction volume (EUR billion*) 110 220 55 100 200 50 90 180 45 80 160 70 140 40 60 120 35 50 100 30 40 80 30 60 25 20 40 20 2013 2014 2015 2016F 2017F Yekaterinburg Rostov-on-Don Kazan *Fixed EUR/
Slide 71: III Business premises and infrastructure construction indicators
III Business premises and infrastructure construction indicators
Slide 72: New non-residential construction forecasted to pick up slightly in the Baltics
New non-residential construction forecasted to pick up slightly in the Baltic countries in 2017 New non-residential construction volumes (index 2012=100) New non-residential construction in Finland (EUR million) 200 1,600 180 1,400 160 1,200 140 1,000 120 800 100 600 400 80 200 60 0 40 2012 2013 201
Slide 73: 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 (%) Vacant office space and the vacancy rate Q2/2016 (thousand sq.m, %) Rental levels of office premises (excl. VAT), new agreements (EUR / sq. m. / year) Sou
Slide 74: Yields are expected decrease slightly
The Baltic countries Yields are expected decrease slightly Prime office yields in the Baltic countries (%) Prime office rents in the Baltic countries, (%, EUR / sq. m. / year) Prime retail yields in the Baltic countries (%) Prime retail rents in the Baltic countries, (%, EUR / sq. m. / year) Source:
Slide 75: Market expected to remain stable in 2017
Infrastructure construction in Finland Market expected to remain stable in 2017 Infrastructure market in Finland (EUR million) Infrastructure sectors in Finland (2016) 7,000 Other 11% 6,000 5,000 Roads 36% 4,000 Energy & water works 3,000 26% 2,000 1,000 0 Telecom- Railways munications Other transpo
Slide 76: Ownership
Sn: Pam agin rSsagaacwu © See e see » @ Een omni Teaco LD | ) Lass Speen pul Ownership
Slide 77: YIT’s major shareholders
YIT’s major shareholders December 31, 2016 Shareholder Shares % of share capital 1. Varma Mutual Pension Insurance Company 12,000,000 9.43 2. Herlin Antti 4,710,180 3.70 3. OP funds 3,556,859 2.80 4. Elo Mutual Pension Insurance Company 3,335,468 2.62 5. The State Pension Fund 2,600,000 2.04 6. Dans
Slide 78: 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 79: Together we can do it.
Together _ we can do it.