2007-07-27 07:00:01 CEST
2007-07-27 07:00:01 CEST
REGULATED INFORMATION
YIT - Quarterly report
YIT'S INTERIM REPORT, JANUARY 1 - JUNE 30, 2007: REVENUE AND OPERATING PROFIT CONTINUE TO GROW
YIT CORPORATION COMPANY RELEASE QUARTERLY REPORT JULY 27, 2007 AT 8:00
YIT'S INTERIM REPORT, JANUARY 1 - JUNE 30, 2007: REVENUE AND OPERATING PROFIT
CONTINUE TO GROW
The YIT Group's revenue and operating profit continued to rise in the first half
of 2007. Revenue rose by 12 per cent and operating profit by 23 per cent
compared with the previous year. The Group's order backlog strengthened yet
again.
Building Systems forged ahead with improving profitability and focused on
revenue growth. The business segment's operating profit was up 41 per cent and
rose to 5.7 per cent of revenue (Jan-June/2006: 4.7%). Revenue was up 15 per
cent. The order backlog grew by 24 per cent.
Profitability remained excellent in Construction Services. Operating profit was
11.8 per cent (11.3%) of revenue. Revenue was up 9 per cent. The order backlog
grew by 71 per cent.
Industrial and Network Services' operating profit rose by 5 per cent. The
operating profit margin was 4.5 per cent (4.6%). The remainder of the costs of
the downscaling measures carried out in the Network Services business unit in
2006 - EUR 1.0 million - were booked in operating profit in the first quarter.
The order backlog rose by 2 per cent.
“Overall demand for our services has remained good in our whole business
territory. Building Systems' concerted efforts to improve profitability yielded
strong earnings improvements. We also kicked off substantial revenue growth in
the business segment,” says Group CEO Hannu Leinonen.
“All in all, the outlook for 2007 is still favourable. Great need for housing in
the large cities of Russia enables us to expand our residential production over
the long term, too. Thanks to our robust order backlog and the good market
situation, we are well-poised to forge ahead with profitable growth in line with
our plans,” adds Leinonen.
Revenue growth 12 per cent
The YIT Group's revenue for the January-June period grew by 12 per cent without
major acquisitions and amounted to EUR 1,772.8 million (Jan-June/2006: EUR
1,586.8 million). Revenue in Russia grew by 5 per cent to EUR 114.7 million (EUR
109.6 million). Of YIT's revenue, 54 per cent came from Finland, 33 per cent
from the other Nordic countries, 7 per cent from Russia and 6 per cent from the
Baltic countries.
The share of revenue generated by the maintenance and servicing business was 36
per cent (36%), or EUR 645.3 million (EUR 563.6 million).
Operating profit growth 23 per cent
Operating profit grew by 23 per cent on the previous year and amounted to EUR
139.7 million (EUR 113.8 million). The operating profit margin was 7.9 per cent
(7.2%). Earnings per share were up 22 per cent to EUR 0.73 (EUR 0.60). Return on
investment for the 12-month period ending at the conclusion of the review period
was 25.7 per cent (28.2%).
Financial position remains stable
Invested capital in Russia increased due to growth in business operations, the
acquisition of plots and growth in ongoing production. At period's end, 28 per
cent, or EUR 359 million, of the Group's invested capital was tied up in Russia.
At the end of 2006, these figures were 23 per cent and EUR 279 million. Net debt
rose to EUR 548.9 million (EUR 342.5 million). The gearing ratio was 79.8 per
cent (59.5%). Net financial expenses amounted to EUR 15.1 million (EUR 8.4
million), representing 0.9 per cent (0.5%) of revenue. The equity ratio was 32.4
per cent (34.5%). The balance sheet total at the end of the report period was
EUR 2,346.1 million (EUR 1,847.2 million).
Order backlog growth 52 per cent
The Group's uninvoiced backlog of orders strengthened once again. It was 52 per
cent higher at the end of the period than a year earlier, having risen to EUR
3,275.2 million (EUR 2,151.3 million). The margin of the backlog is good.
Personnel strength rises
In the review period, the Group employed 22,712 (21,346) people on average. At
the end of the period, the Group had 23,474 employees (21,873). Of YIT's
employees, 51 per cent work in Finland, 35 per cent in the other Nordic
countries, 7 per cent in the Baltic countries and 7 per cent in Russia.
YIT's business territory still booming
The boom in the Nordic countries peaked last year, but economic growth will
continue during the next few years, outpacing the euro zone by about one
percentage point. Russia and Norway still benefit from the high prices of oil.
The rate of growth in the Russian, Estonian, Latvian and Lithuanian economies is
over twice as fast as in the Nordic countries. The good earnings trend and the
improvement in the employment count bolster household confidence in all of YIT's
business countries. The construction of business premises is growing at a faster
pace than housing production. Growth in exports and industrial output increases
the need for industrial investments and maintenance in all the Nordic countries.
YIT estimates that it will start up more residences than last year
YIT estimates that this year it will start up the construction of about 2,700
market-financed residential units in Finland (start-ups in 2006: 2,818), about
4,500 in Russia (3,699) and about 700 in the Baltic countries (887).
Outlook for 2007
We estimate that revenue and operating profit (EBIT) in 2007 will increase
compared to the previous year.
The outlook for revenue growth is supported by the strong order backlog, the
continuing boom and YIT's major investments in the Russian market. The healthy
margin of the order backlog and the company's own profitability improvement
measures underlie our expectations of growth in operating profit.
Events and webcast presentation
An event for investment analysts and portfolio managers will be held at YIT's
head office at 10:00 (Finnish time) on Friday, July 27, followed by a press
conference at 13:00. The address is Panuntie 11, 00620 Helsinki, Finland.
A webcast presentation of the January-June 2007 results by Group CEO Hannu
Leinonen can be viewed at http://webcast.magneetto.com/yit/en
YIT CORPORATION
Hannu Leinonen
Group CEO
For additional information, contact:
Sakari Toikkanen, Executive Vice President, tel. +358 20 433 2336,
sakari.toikkanen@yit.fi
Petra Thorén, Vice President, Investor Relations, tel. +358 40 764 5462,
petra.thoren@yit.fi
ATTACHMENT: Interim Report, January 1 - June 30, 2007
Distribution: OMX Nordic Exchange in Helsinki, principal media, www.yitgroup.com
YIT CORPORATION'S INTERIM REPORT, JANUARY 1 - JUNE 30, 2007
REVENUE GROWTH 12 PER CENT
The YIT Group's revenue for the January-June period grew by 12 per cent without
major acquisitions and amounted to EUR 1,772.8 million (Jan-June/2006: EUR
1,586.8 million). Revenue in Russia grew by 5 per cent to EUR 114.7 million (EUR
109.6 million). Of YIT's revenue, 54 per cent came from Finland, 33 per cent
from the other Nordic countries, 7 per cent from Russia and 6 per cent from the
Baltic countries.
Revenue by business segment, EUR million
--------------------------------------------------------------------------------
| | Jan-June/ | Jan-June/ | Change, % | Share of the |
| | 2007 | 2006| | Group's |
| | | | | revenue, |
| | | | | Jan- |
| | | | | June/2007, % |
--------------------------------------------------------------------------------
| Building Systems | 778.0 | 674.0 | 15 | 44 |
--------------------------------------------------------------------------------
| Construction | 785.5 | 718.9 | 9 | 44 |
| Services | | | | |
--------------------------------------------------------------------------------
| Industrial and | 240.3 | 224.6 | 7 | 14 |
| Network Services | | | | |
--------------------------------------------------------------------------------
| Other items | -31.0 | -30.7 | 1 | -2 |
--------------------------------------------------------------------------------
| YIT Group, total | 1,772.8 | 1,586.8 | 12 | 100 |
--------------------------------------------------------------------------------
YIT's service chain spans the entire life cycle of investments. The life cycle
strategy seeks to achieve better service capability, growth in our business
operations and a steady stream of profits. Part of the Group's revenue comes
from its industrial, property, telecom network and traditional infrastructure
maintenance and servicing business. In the review period, the revenue generated
by this business was EUR 645.3 million (EUR 563.6 million), representing 36 per
cent (36%) of total revenue.
YIT also keeps track of trends in the shares of revenue generated by consumer
services, long-term service agreements, project development and contracting. In
the January-June period, consumer services accounted for 22 per cent of revenue,
long-term service agreements for 28 per cent, project development for 12 per
cent and contracting for 38 per cent. YIT's strategic objective is to increase
the relative share of revenue accounted for by consumer services, long-term
service agreements and project development.
The YIT Group's strategic target for revenue growth is 10 per cent annually on
average. In addition, YIT has set itself the goal of increasing its revenue in
Russia by an average of 50 per cent annually during the 2006-2009 period.
OPERATING PROFIT GROWTH 23 PER CENT
Operating profit grew by 23 per cent on the previous year and amounted to EUR
139.7 million (EUR 113.8 million). The operating profit margin was 7.9 per cent
(7.2%).
Operating profit by business segment, EUR million
--------------------------------------------------------------------------------
| | Jan-June/ | Jan-June/ | Change, % | Share of the |
| | 2007 | 2006| | Group's |
| | | | | operating |
| | | | | profit, |
| | | | | Jan-June/2007|
| | | | | , % |
--------------------------------------------------------------------------------
| Building Systems | 44.4 | 31.5 | 41 | 32 |
--------------------------------------------------------------------------------
| Construction Services | 92.7 | 81.2 | 14 | 66 |
--------------------------------------------------------------------------------
| Industrial and | 10.8 | 10.3 | 5 | 8 |
| Network Services *) | | | | |
--------------------------------------------------------------------------------
| Other items | -8.2 | -9.2 | -11 | -6 |
--------------------------------------------------------------------------------
| YIT Group, total | 139.7 | 113.8 | 23 | 100 |
--------------------------------------------------------------------------------
Operating profit margin by business segment, %
--------------------------------------------------------------------------------
| | Jan-June/2007| Jan-June/2006 | Jan-Dec/2006 |
| | | | |
--------------------------------------------------------------------------------
| Building Systems | 5.7 | 4.7 | 6.2 |
--------------------------------------------------------------------------------
| Construction Services | 11.8 | 11.3 | 11.8 |
--------------------------------------------------------------------------------
| Industrial and Network | 4.5 | 4.6 | 3.8 |
| Services *) | | | |
--------------------------------------------------------------------------------
| YIT Group, total | 7.9 | 7.2 | 7.9 |
--------------------------------------------------------------------------------
*) The operating profit of the Industrial and Network Services business segment
in January-March
2007 includes the final costs of the downsizing of Network Services carried out
in 2006, EUR 1.0
million. The first part of the downsizing costs, EUR 5.1 million, was booked in
operating profit for July-September/2006.
Return on investment for the 12-month period ending at the conclusion of the
review period was 25.7 per cent (28.2%). Earnings per share amounted to EUR 0.73
(EUR 0.60), up 22 per cent on the previous year.
YIT has set itself the target of increasing its operating profit to 9 per cent
of revenue in the 2007-2009 strategic period. The strategic target level for
return on investment is 22 per cent.
ORDER BACKLOG GROWTH 52 PER CENT
The Group's market position is strong. At period's end, the uninvoiced backlog
of orders had strengthened further. It was 52 per cent higher at the end of the
period than a year earlier, having risen to EUR 3,275.2 million (EUR 2,151.3
million). The margin of the backlog is good. Due to their nature, part of the
Group's maintenance and servicing operations are not included in the order
backlog.
Order backlog by segment, EUR million
--------------------------------------------------------------------------------
| | June/2007 | June/2006 | Change, % | Share of the |
| | | | | Group's order |
| | | | | backlog, |
| | | | | June/2007, % |
--------------------------------------------------------------------------------
| Building Systems | 721.8 | 584.1 | 24 | 22 |
--------------------------------------------------------------------------------
| Construction | 2,378.3 | 1,391.8 | 71 | 73 |
| Services | | | | |
--------------------------------------------------------------------------------
| Industrial and | 213.6 | 208.4 | 2 | 6 |
| Network Services | | | | |
--------------------------------------------------------------------------------
| Other items | -38.5 | -33.0 | 17 | -1 |
--------------------------------------------------------------------------------
| YIT Group, total | 3,275.2 | 2,151.3 | 52 | 100 |
--------------------------------------------------------------------------------
THE GROUP'S FINANCIAL POSITION REMAINS STABLE
Invested capital in Russia increased due to growth in business operations, the
acquisition of plots and growth in ongoing production. At period's end, 28 per
cent, or EUR 359 million, of the Group's invested capital was tied up in Russia.
At the end of 2006, these figures were 23 per cent and EUR 279 million.
Interest-bearing liabilities at the end of the period amounted to EUR 599.6
million (EUR 369.8 million) and liquid assets to EUR 50.7 million (EUR 27.3
million). Net debt rose to EUR 548.9 million (EUR 342.5 million). The gearing
ratio was 79.8 per cent (59.5%) at period's end. The equity ratio was 32.4 per
cent (34.5%). A total of EUR 82.6 million in dividends were paid during the
report period (EUR 68.9 million).
The target level for the equity ratio is 35 per cent. The strategic dividend
payout target is 40-60 per cent of annual earnings after taxes and minority
interest.
Short-term credit was converted into long-term credit by means of two EUR 50
million private placement bonds in March.
Financial income during the period amounted to EUR 1.1 million (EUR 1.7
million), exchange rate losses to EUR 1.7 million (EUR 1.2 million) and
financial expenses to EUR 14.5 million (EUR 8.9 million). Net financial expenses
were EUR 15.1 million (EUR 8.4 million), or 0.9 per cent (0.5%) of revenue.
The proportion of fixed-interest loans in the Group's entire loan portfolio was
55 per cent (44%). Loans raised directly on the capital and money markets
amounted to 63 per cent (44%).
The construction-stage contract receivables sold to financing companies totalled
EUR 243.5 million (EUR 268.0 million) at the end of the period. Of this amount,
EUR 94.5 million (EUR 93.5 million) is included in interest-bearing liabilities
in the balance sheet and the remainder comprises off-balance sheet items as per
IAS 39. The interest on sold receivables paid to financing companies, EUR 5.2
million (EUR 4.6 million), is included in financial expenses in its entirety.
Participations in the housing corporation loans of unsold completed residences,
EUR 36.4 million (EUR 19.0 million), are also included in interest-bearing
liabilities, but the interest on them, EUR 0.8 million (EUR 0.3 million), is
booked in project expenses, as said interest is included in housing corporation
maintenance charges.
Interest-bearing liabilities included EUR 2.2 million in leasing commitments
(EUR 4.0 million).
The balance sheet total at the end of the report period was EUR 2,346.1 million
(EUR 1,847.2 million).
CAPITAL EXPENDITURES AND ACQUISITIONS
Gross capital expenditures on non-current assets included in the balance sheet
totalled EUR 21.5 million (EUR 18.7 million) during the January-June period,
representing 1.2 per cent (1.2%) of revenue. Investments in construction
equipment amounted to EUR 7.6 million (EUR 6.6 million) and investments in
information technology to EUR 3.1 million (EUR 2.4 million). Other investments
including acquisitions amounted to EUR 10.8 million (EUR 9.7 million). Acquired
business functions are disclosed in the notes to the January-June/2007 Interim
Report. No businesses were divested during the period.
CHANGES IN GROUP MANAGEMENT
Sakari Ahdekivi (44), M.Sc. (Econ.), was appointed as CFO of YIT Corporation and
as a member of the Group's Management Board as from September 1, 2007. He will
report to Group CEO Hannu Leinonen. In addition to financial matters, his
responsibilities will include other centralized corporate services. As from the
beginning of September, Executive Vice President Sakari Toikkanen will focus on
the Group's strategic planning and acquisitions.
MAJOR NEAR-TERM BUSINESS RISKS AND UNCERTAINTIES
YIT has specified the Group's major risks as well as means of managing strategic
and administrative risks. The financial risks related to the YIT Group's
business are liquidity, interest rate, foreign exchange and credit risks.
Project-specific insurance coverage has been taken out for accident risks. The
risks have not changed significantly after the financial statement date.
YIT's major strategic risk factors are related to growing both organically and
through acquisitions, capital management, managing tender-based contracts,
ensuring the availability and competence of employees and general economic
development. In the case of administrative risks, the company focuses on the
further development of its successful corporate culture and management system.
A more detailed account of YIT's risk management policy, the major risks and
their management has been published in the 2006 financial statements and Annual
Report. Information is also available from www.yitgroup.com. An account of the
financial risks is presented in the notes to the 2006 financial statements and
in the notes to the January-June/2007 Interim Report.
NUMBER OF EMPLOYEES 23,500
In the review period, the Group employed 22,712 (21,346) people on average. At
the end of the period, the Group had 23,474 employees (21,873). Of YIT's
employees, 51 per cent work in Finland, 35 per cent in the other Nordic
countries, 7 per cent in the Baltic countries and 7 per cent in Russia.
Personnel by business segment
--------------------------------------------------------------------------------
| | June/2007 | June/2006 | Share of the |
| | | | Group's |
| | | | employees, |
| | | | June/2007, % |
--------------------------------------------------------------------------------
| Building Systems | 12,007 | 11,102 | 51 |
--------------------------------------------------------------------------------
| Construction Services | 6,371 | 5,534 | 27 |
--------------------------------------------------------------------------------
| Industrial and Network | 4,755 | 4,914 | 20 |
| Services | | | |
--------------------------------------------------------------------------------
| Corporate Services | 341 | 323 | 2 |
--------------------------------------------------------------------------------
| YIT Group, total | 23,474 | 21,873 | 100 |
--------------------------------------------------------------------------------
Personnel by country
--------------------------------------------------------------------------------
| | June/2007 | June/2006 | Share of the |
| | | | Group's |
| | | | employees, |
| | | | June/2007, % |
--------------------------------------------------------------------------------
| Finland | 11,814 | 11,673 | 51 |
--------------------------------------------------------------------------------
| Sweden | 4,220 | 3,928 | 18 |
--------------------------------------------------------------------------------
| Norway | 2,730 | 2,487 | 12 |
--------------------------------------------------------------------------------
| Denmark | 1,253 | 1,182 | 5 |
--------------------------------------------------------------------------------
| Russia | 1,733 | 1,102 | 7 |
--------------------------------------------------------------------------------
| Estonia, Latvia, Lithuania | 1,724 | 1,501 | 7 |
--------------------------------------------------------------------------------
| YIT Group, total | 23,474 | 21,873 | 100 |
--------------------------------------------------------------------------------
SHARES, OPTIONS AND OWNERSHIP
The company has one series of shares. Each share carries one vote at general
meetings and confers an equal right to a dividend.
In 2007, YIT Corporation shares can be subscribed for with the Series E and F
options issued in 2004 and the Series K and L options issued in 2006.
Share capital and number of shares
YIT Corporation's share capital was EUR 63,388,536.00 at the beginning of the
review period and the number of shares outstanding was 126,777,072.
In accordance with the resolution of the Annual General Meeting, the company's
share capital was increased by EUR 82,822,459.92 with a reserve fund transfer on
March 30, 2007. No new shares were issued in connection with the increase.
In the first half of the year, 121,834 shares were subscribed for on the basis
of the Series E and F share options from 2004 and the Series K and L share
options from 2006. On the basis of the share subscriptions, the share capital
was increased by EUR 477,848.00 on April 30, 2007 and by EUR 305,047.40 on June
26, 2007.
At the end of the period, the share capital amounted to EUR 146,993,891.32 and
the number of shares to 126,898,506.
Authorizations to increase the share capital
During the review period, no share issues were organized and convertible bonds
or bonds with warrants were not floated. At the end of the period, the Board of
Directors did not have valid share issue authorizations or authorizations to
issue convertible bonds or bonds with warrants.
Own shares
At the beginning of 2007, YIT Corporation held 400 of its own shares,
representing 0.0 per cent of the company's shares. YIT Corporation's Board of
Directors decided to annul the YIT shares in the company's possession, and the
annulment was entered in the Trade Register on April 10, 2007.
At the end of the review period, YIT Corporation did not hold any of its own
shares. The Board of Directors of the parent company did not have authorizations
to purchase or dispose of YIT's own shares. Subsidiaries did not own shares in
the parent company during the period.
Trading in shares
The average share price in the January-June period was EUR 24.52 (EUR 20.48).
The highest share price in the period was EUR 27.90 (EUR 23.88) and the lowest
was EUR 19.81 (EUR 16.65). The closing rate at the end of the period was EUR
23.35 (EUR 19.17).
The value of share turnover during the review period amounted to EUR 2,843.6
million (EUR 1,712.1 million) and the number of shares traded to 116,127,102
(83,314,935). Market capitalization at the end of the period was EUR 2,963.1
million (EUR 2,406.7 million).
Trading in share options
The Series F share options issued in 2004 and the Series K and L share options
issued in 2006 went into trading on the OMX Nordic Exchange in Helsinki as from
April 2, 2007.
During the report period, 67,494 Series E share options were traded at an
average price of EUR 36.28/option, 100,758 Series F share options at an average
price of EUR 39.62/option,
29,950 Series K share options at an average price of
EUR 6.31/option and 73,885 Series L share options at an average price of EUR
6.36/option.
Growth in share of non-Finnish ownership
The number of registered shareholders was 14,364 (9,368) at the beginning of the
period and 13,957 (11,340) at its end.
A total of 45.9 per cent (39.9%) of YIT's total shares outstanding were owned
by nominee-registered or non-Finnish investors at the beginning of the year and
52.7 per cent (47.8%) at the end of the period.
Sampo Life Insurance Company announced on May 3, 2007 that its holding in YIT's
shares had fallen below 5 per cent. On May 1, 2007, Schroder Investment
Management Compliance Limited sent an announcement that its shareholding in YIT
had risen to 5.36 per cent.
BOOM CONTINUES IN YIT'S MARKET IN NORTHERN EUROPE
The outlook for the global economy is good. Economic growth is holding steady in
Europe and Japan. China and India, the new industrial countries of Asia, are
still seeing extremely fast growth with low inflation. Economic growth in the US
is expected to experience a controlled slowdown this year and to gather momentum
again next year. The boom in the Nordic countries peaked last year, but will
continue during the next few years, outpacing growth in the euro zone by about
one percentage point. Russia and Norway still benefit from the high prices of
oil. The rate of growth in the Russian, Estonian, Latvian and Lithuanian
economies is still over twice as fast as in the Nordic countries. Euro interest
rates will in all likelihood rise during the present year. The favourable
earnings trend and the improvement in the employment count bolster household
confidence in all of YIT's business countries. The record-high population shift
in Finland is continuing, maintaining stable need for the construction of new
housing and leading to growth in repair works on old housing. Great need for
housing in the large cities of Russia enables the company to expand residential
production over the long term, too. In the Nordic countries, growth in the
construction of business premises outpaces housing production. Growth in exports
and industrial output increases the need for industrial investments and
maintenance in all the Nordic countries.
Finland
In June, the Ministry of Finance estimated that Finland's GDP will grow by 4.3
per cent this year and 3.2 per cent the next. The improvement in the employment
count, the positive trend in incomes and the still moderate interest rate level
support household consumption and demand for housing. Growth in the index of
wage and salary earnings will rise to 3.0 per cent this year and to 5.0 per cent
the next. This change will be reflected in household consumption. Investments
will grow by 5.0 per cent, with growth next year amounting to 3 per cent. The
business cycle report published by the Confederation of Finnish Construction
Industries RT in April states that the volume of construction will grow by 3.5
per cent this year and 3 per cent the next. Residential construction will stay
at a good level. Repair works will remain brisk. According to the housing
production report RT released in June, 33,000 residential units will be started
up this year, while the number of start-ups was 34,000 last year. In June,
Euroconstruct estimated that residential construction will decline by 2.4 per
cent this year, while other types of building construction will see growth of
13.1 per cent. Euroconstruct predicts a decline of 0.9 per cent and 0.5 per cent
during the subsequent two years, with production volumes remaining high in
relation to the resources available. Civil engineering will grow slightly in
2007 - 2009. According to the business cycle bulletin that was released by the
Finnish Association of Building Owners and Construction Clients RAKLI in June,
office construction will be on the up, especially in the Greater Helsinki Area.
Construction of commercial premises will also remain brisk. Annual growth in
renovation works will be 2-3.5 per cent during the present decade. Growth in new
construction and renovation maintains demand in the construction and building
system markets (heating, plumbing, air-conditioning, electrical and automation
contracting, and maintenance). The investment survey the Confederation of
Finnish Industries EK released in June indicates that the value of the fixed
investments of industrial companies will grow to almost EUR 3.9 billion this
year, representing an increase of slightly over eight per cent on the previous
year. The market for industrial, property and infrastructure maintenance will
expand as the outsourcing trend progresses. Growth in the number of broadband
connections has slackened and investments to expand the mobile phone network
will remain slight.
Sweden
In June, the Swedish National Institute of Economic Research KI estimated that
Sweden's GDP will grow by 3.6 per cent this year, 3.7 per cent in 2008 and 3 per
cent in 2009. The factors underlying this positive trend are the high capacity
utilization ratio in industry, solid earnings, and the positive incomes trend
enjoyed by households. Wages and salaries will increase by 4.3, 4.7 and 4.8 per
cent in 2007 - 2009. The unemployment rate will decline from the present year's
figure of 4.7 per cent to 3.7 per cent in 2009. Inflation will accelerate to
over 2.5 per cent. KI expects that the Riksbank, Sweden's central bank, will
keep raising its policy rate to 4.75 per cent in 2009. In 2007, exports will
increase by 5.9 per cent and next year by 6.5 per cent due to international
demand and the effect of the relatively weak Swedish kronor. Fixed investments
will see growth of 10.6 per cent this year, but growth will slacken to 5.5 per
cent next year. Fixed investments by industry will increase by 11.8 per cent
this year and by 3.9 per cent the next. Investments by the service sector are
higher than those of industry, with growth amounting to 8.8 per cent this year
and to 7.5 per cent the next. According to the business cycle barometer KI
released in June, the order backlogs of construction companies have increased,
employment has improved, and companies expect to see further production growth.
Almost 80 per cent of construction companies reported that the shortage of
skilled labour slows down production growth, and a third expect tender prices to
rise. At the end of June, the Swedish Construction Federation BI predicted that
residential investments will grow by 10 per cent this year and by 2 per cent the
next. Production of other types of buildings will see growth of 7 per cent this
year and 4 per cent in 2008. The elimination of state subsidies from the
beginning of the present year and changes in housing taxation artificially
inflated housing start-ups to 42,100 units last year. The Prognoscentret market
research institute in Sweden estimates that start-ups this year and the next
will be correspondingly lower, 30,000 and 32,000 residential units,
respectively. The labour shortage has been alleviated with foreign labour and a
vigorous drive to develop productivity.
Norway
Norway's boom continues. According to the forecast released by Statistics Norway
at the end of May, GDP will grow by 2.9 per cent this year and by 4.0 per cent
the next. The GDP growth figures for continental Norway are 4.1 and 3.4 per
cent, respectively. Household consumption will grow by 4.7 per cent this year
and by 3.9 per cent the next. The vigorous growth in fixed investments that got
under way in 2004 will slacken to 7.3 per cent this year on the heels of the
slowdown in the growth of housing investments to 5.3 per cent this year due to
capacity problems, and correspondingly to 1.5, 1.4 and 0.8 per cent in
2008-2010. Fixed investments by business and industry will rise by 8.1 per cent
this year and by 3.4, 2.3 and 2.5 per cent during the next three years.
Investments by the oil and gas sector will gain momentum again as from the
beginning of next year, with annual growth of about 10 per cent. The
construction of 33,300 residential units was started up last year. In June, the
Prognosesenteret market research institute in Norway estimated that the
construction of 35,000 new residential units would be started up this year and
33,500 the next. Construction of new buildings will grow by a total of 8.3 per
cent this year and renovation by 2.5 per cent. Building construction during the
next two years will remain high, but a capacity shortage will put the brakes on
production growth. Statistics Norway expects that in the space of one year
Norges Bank's key interest rate (“sight deposit rate”) will rise such that the
three-month money market interest rate will settle at 5.25 per cent and remain
at that level until 2010. Higher interest rates, stronger currency and a labour
shortage slow down growth in many sectors of the economy. Statistics Norway
nevertheless expects the boom to continue until at least 2010 and the
unemployment rate to drop to 2.5 per cent.
Denmark
The outlook for the Danish economy is still good. In May, Nordea anticipated
that GDP growth will amount to 1.9 per cent this year. Growth will slacken to
1.4 per cent in 2008. Export growth gathered steam last year, and will continue
at a rate of 6 per cent this year and 5.6 per cent the next. Growth in private
consumption is estimated to slacken to 1.9 per cent this year. Investments will
increase by 5.6 per cent during the present year. Housing prices rose by 23.9
per cent last year. The rapid rise in prices has increased the supply of
housing, as a result of which the housing market is returning to normal. The
risk of a decline in prices has also grown. At the beginning of April, the
Danish Construction Association estimated that the number of new residential
start-ups will be 30,500 this year and 28,500 the next, compared to 33,000 last
year. Growth in real incomes and full employment have strengthened the
confidence of households in their own finances, which means that opportunities
in the demand for housing will remain good. Housing renovation will not see
growth in 2007-2009. According to Euroconstruct, the construction of other types
of new buildings will increase by 4.7 per cent this year, and by 5.6 and 5.0 per
cent in 2008 and 2009, with renovation works on such buildings rising by 2 per
cent annually. Construction will remain buoyant during the next few years -
maintaining it at a high level will entail greater use of labour from the new EU
countries and Germany.
Baltic countries
GDP and investments grow at a significantly faster rate in Latvia, Lithuania and
Estonia than in the Nordic countries. According to VTT's estimate in June, the
aggregate GDP of the Baltic countries amounted to EUR 53 billion and the value
of construction to EUR 7.2 billion in 2006. In May, Nordea predicted that
Latvia's GDP will grow by 9.2 per cent this year and by 7.7 per cent in 2007.
GDP growth in Estonia would be 7.9 and 8.3 per cent, respectively, and in
Lithuania 6.8 and 8.5 per cent. Inflation in Estonia is double the EMU average,
and it is triple in Latvia. Growth in investments this year will be 13 per cent
in Estonia, 14 per cent in Latvia and 10.6 per cent in Lithuania. In 2008,
investments will continue to grow at a rate of about 10 per cent in these
countries, and by 11.6 per cent in Lithuania. Affordable borrowing, economic
growth and the greater affluence of the population have increased demand for new
residences and renovation in recent years. VTT estimates that a total of about
22,000 residential units will be completed in the Baltic countries this year.
Building permits have been granted for twice as many residences as have been
completed. According to the estimates collected by VTT, 30 per cent more
residences and other buildings were completed in Estonia last year than in 2005.
The number of residences completed in Latvia grew by 50 per cent and the
capacity of other types of buildings by 40 per cent. Residences and other
buildings completed in Lithuania saw growth of 20 per cent. The value of the
mortgage stock in Estonia has risen to 33 per cent relative to the value of GDP,
which is on a par with Finland. The same figure is 29 per cent in Latvia and
only 13 per cent in Lithuania.In Estonia the rapidly increased apartment prices
and rise of interest rates have diminished the demand for mortgages during the
first part of the year.
Russia
The high price of oil supports Russian economic growth. In May, Nordea estimated
that Russia's GDP will grow by 6.9 per cent this year and by 6.5 per cent in
2008. Russia has recently tapped its oil funds to accelerate the repayment of
the government debt. Considering its currency reserves, Russia is now in
practice a debt-free country. Last year, inflation was 9.7 per cent; according
to Nordea's estimate, it will slow down to 8.1 per cent this year and 7.2 per
cent the next.The rate of growth in investments will rise to 18 per cent this
year and continue at a rate of 12 per cent the next, still remaining
significantly faster than the EU and Nordic average over the next few years. A
significant share of investments is earmarked for residential construction.
Thanks to the good incomes trend, household consumption has become the primary
engine of growth. Private consumption will rise by 15 per cent this year,
comprising half of GDP. The greater affluence of the middle class has
strengthened demand for market-financed residences in large cities such as
Moscow and St Petersburg. Last year, the prices of residences in some large
cities saw an exceptional rise of 60-100 per cent due to the decline in supply,
weakening home purchasing ability. At the beginning of this year, the rate of
growth in housing prices has slackened.
DEVELOPMENT BY BUSINESS SEGMENT
BUILDING SYSTEMS
Building Systems continued to improve its profitability and focused on revenue
growth. The business segment's revenue in the January-June period was up 15 per
cent to EUR 778.0 million (Jan-June/2006: EUR 674.0 million). The share of the
business segment's revenue accounted for by the maintenance and servicing
business was 63 per cent (62%).
Operating profit grew by 41 per cent to EUR 44.4 million (EUR 31.5 million). The
operating profit margin improved to 5.7 per cent (4.7%). The operating profit
margin in Q2 2007 was 6.2 per cent (5.7%).
By period's end, the order backlog had grown by 24 per cent to EUR 721.8 million
(EUR 584.1 million).
The business segment had 12,007 employees (11,102) at the end of the period.
Revenue of the Building Systems business segment by country, EUR million
--------------------------------------------------------------------------------
| | Jan-June/2007| Jan-June/2006 | Change, % | Share of the |
| | | | | business |
| | | | | segment's |
| | | | | revenue, |
| | | | | Jan-June/2007, |
| | | | | % |
--------------------------------------------------------------------------------
| Sweden | 284.8 | 255.9 | 11 | 37 |
--------------------------------------------------------------------------------
| Norway | 209.6 | 165.5 | 27 | 27 |
--------------------------------------------------------------------------------
| Finland | 182.6 | 161.8 | 13 | 23 |
--------------------------------------------------------------------------------
| Denmark | 76.6 | 69.7 | 10 | 10 |
--------------------------------------------------------------------------------
| Estonia, | 24.4 | 21.1 | 16 | 3 |
| Latvia, | | | | |
| Lithuania | | | | |
| and Russia | | | | |
--------------------------------------------------------------------------------
| Total | 778.0 | 674.0 | 15 | 100 |
--------------------------------------------------------------------------------
Brisk demand in Sweden
On the whole, the market for building system services grew during the first part
of the year. Many new construction projects have been carried out, especially in
the public sector, and there has been growth in the construction of commercial
premises. Demand for repair and maintenance works rose. Industrial activity is
brisk and a great many investments are being carried out this year.
During the report period, an agreement was made with Bombardier for HEPACE
deliveries for a new train servicing facility. Complete piping installation
works as well as sprinkler systems will be provided for the project to modernize
the turbines of the Ringhals nuclear power plant.
An energy saving agreement was signed with Locum with a view to reducing the
energy consumption and costs of the Danderyd and Jakobsberg hospitals as well as
improving air quality. A three-year service agreement was made with the Swedish
Road Administration, covering the maintenance of four tunnels in Gothenburg, the
Älvsborgs bridge and several roadside rest areas.
Market growth in Norway
The market for building system services saw growth in the first part of the year
compared with the previous year. New construction increased, especially in
commercial and business premises. Demand for renovation remained good. Piping
deliveries have been a particular growth area in YIT's operations as the
business operations have been strengthened with four small acquisitions.
Maintenance and servicing agreements from the ServiFlex concept have been well
received by numerous partners both in the private and public sector.
An agreement was made with the Rikshospitalet-Radiumhospitalet university
hospital in Oslo for a large-scale total technical solution to be installed in a
new research building. A delivery for school and cultural premises was agreed on
in Eid. A total technical solution will be implemented for the Aftenbladet
newspaper's new office building in Stavanger.
Buoyant demand for services in Finland
Growth in the building systems market held steady. Demand increased on the heels
of the brisk construction of commercial and business premises, especially in the
Greater Helsinki Area. Growth in the market for property services and property
management services outpaces investments in construction and building equipment
systems. The energy efficiency and environmental friendliness of properties and
their building equipment systems have become increasingly important
considerations in the planning of whole city quarters and large sites.
Long-term service agreements for property upkeep, superintending and management
were made with parties such as Tamro and TeliaSonera Finland. The upkeep and
preventative servicing agreement with UPM was extended to cover the company's
Valkeakoski properties as well.
An office building that had been built and supplied with building systems by YIT
was handed over to Ahlstrom in Ruoholahti, Helsinki. YIT made an agreement with
Alfred. A. Palmberg for HEPACE deliveries for Business Center Visio, developed
by Fennia in Pasila, Helsinki. An agreement was made for the implementation of
the full building equipment systems of the congress and exhibition centre
developed in Levi by Levin Luontokeskus Oy.
Construction remains brisk in Denmark
The economy continued to develop well and construction remained brisk. The
country's unemployment figures declined to an all-time low. The construction
industry seeks to facilitate the mobility of labour from Germany and Eastern
European countries. Demand for building system services and installation works
held firm in both industry and the construction of commercial facilities and
public premises. Corporate interest in the outsourcing of technical services
increased.
A service agreement was made with Syd Energi Net for telecom connections to be
installed in single-family houses in southern Jutland. An agreement was made
with Energi Randers Produktion for modernization works at a thermal power plant;
YIT has carried out works at this plant ever since it was built in 1982.
Electrical installation works will be provided for a high-quality hotel in
Vejle. A new air-conditioning system will be supplied for an old building that
will be used by the municipal court of Viborg. An agreement was made with
Energinet.dk for the provision of a new emergency system to safeguard the
national energy supply.
Good market situation in Estonia, Latvia, Lithuania and Russia
The market for building system services remained favourable in the Baltic
countries and especially in Russia. Construction and western investments grew,
increasing demand for building system projects and servicing.
In Russia, a delivery comprising the design and installation of ice rink
technology was started up for the Pol'yot Sport Complex in Rybinsk, as was a
refrigeration technology design and installation delivery for the Paramonovo
bobsled track in the Moscow Oblast. In St Petersburg, the installation of
building equipment systems commenced both at an office building YIT built for
its own use and at two apartment buildings. Technical servicing got under way at
Valio's production plant in Lobnya.
An agreement was signed in Estonia for the electrification of the University
Clinic in Tartu. A construction automation project for the Hesburger chain
continued in Latvia; the project enables the remote supervision of sites over
the Internet from Finland. A two-year property management and servicing
agreement covering a residential area was signed in Vilnius, Lithuania, and a
major technical servicing agreement concerning the Akropolis shopping centre was
forged in Kaunas.
CONSTRUCTION SERVICES
In the first part of the year, the revenue of Construction Services grew by 9
per cent on the previous year and amounted to EUR 785.5 million (EUR 718.9
million). The share of revenue accounted for by the maintenance business was 3
per cent (3%). Of the revenue, 74 per cent came from Finland, 13 per cent from
Russia, 12 per cent from Estonia, Latvia and Lithuania, and less than one per
cent from other countries.
Operating profit was up 14 per cent to EUR 92.7 million (EUR 81.2 million). The
operating profit margin remained excellent, 11.8 per cent (11.3%).
The order backlog grew by 71 per cent to EUR 2,378.3 million (EUR 1,391.8
million).
The business segment had 6,371 employees (5,534) at the end of the period.
Housing demand remains good
Demand for new housing remained at a good level in Finland and the prices of
residences saw moderate growth. Both the need for and interest in new housing
have remained strong in Russia, but due to factors such as the surge in prices
in 2006, YIT sold fewer residential units in the first part of 2007 than last
year. In 2006, the prices of residences in some large cities saw an exceptional
rise of 60-100 per cent due to the decline in supply, weakening home purchasing
ability. At the beginning of this year, the rate of growth in housing prices has
slackened. Of the Baltic countries, housing demand remained good in Lithuania
and moderate in Latvia. Demand weakened in Estonia.
In April-June, the average selling price of the residences YIT built in Russia
was about 43 per cent (April-June/06: 35%) of the average selling price of the
market-financed residences sold by YIT in Finland, and in the Baltic countries
about 61 per cent (62%).
In June, YIT expanded its operations in line with its strategy to Rostov-na-Donu
in Russia by setting up a joint venture in the city with five private
shareholders. The investment rights to two plots were transferred to the new
joint venture. The aim is to start up construction on the first site -
comprising 270 residential units - by the end of 2007. In Russia, YIT builds
housing in St Petersburg, Moscow, the Moscow Oblast, Yaroslavl and
Yekaterinburg. YIT also started up residential construction in Kazan in July.
In Finland, YIT and the City of Rovaniemi forged a cooperation agreement for the
implementation of the Fenix project in the city centre. YIT will build about 500
new residences there during the years ahead. YIT bought a plot in the Leppäsuo
area from the City of Helsinki; about 50 high-quality residences will be built
on this plot. Construction of leisure-time residences and centres proceeded as
planned, and negotiations to acquire new areas continued. The most significant
agreement signed was the cooperation agreement covering the Pickala area in
Siuntio.
YIT estimates that it will start up more residences than last year
YIT estimates that this year it will start up the construction of about 2,700
market-financed residential units in Finland (start-ups in 2006: 2,818), about
4,500 in Russia (3,699) and about 700 in the Baltic countries (887).
The market outlook for the developer contracting of housing is estimated to
remain solid on the whole in YIT's market areas. Housing demand in Finland is
maintained by the improvement in the employment count, the population shift,
consumers' positive outlook on the development of their own finances and the
still moderate interest rates. In Russia and the Baltic countries, strong
economic growth, the positive trend in household earnings and the need to
improve housing quality uphold the demand for residences.
At the end of June, YIT had 291 completed unsold residential units in Finland.
There were 16 completed unsold apartments in Russia and none in the Baltic
countries.
Residential construction in Jan-June/2007 (Jan-June/2006), number of residences
--------------------------------------------------------------------------------
| | Finland | Finland | Finland | Russia | Estonia, |
| | | | | | Latvia, |
| | | | | | Lithuania |
--------------------------------------------------------------------------------
| | Market- | State- | Total | Total | Total |
| | financed | financed,| | | |
| | (incl. | rental | | | |
| | leisure | housing | | | |
| | residences)| and | | | |
| | | tender- | | | |
| | | based | | | |
--------------------------------------------------------------------------------
| Sold | 1,278 | - (-) | 1,278 | 692 | 264 (370) |
| | (1,303) | | (1,303) | (1,171) | |
--------------------------------------------------------------------------------
| Start-ups | 1,218 | 156 (104) | 1,374 | 1,141 | 350 (195) |
| | (1,602) | | (1,706) | (754) | |
--------------------------------------------------------------------------------
| Under | 2,862 | 272 | 3,134 | 7,315 | 1,898 |
| construc- | (3,462) | (177) | (3,639) | (5,768) | (1,485) |
| tion at | | | | | |
| period's | | | | | |
| end | | | | | |
--------------------------------------------------------------------------------
| Completed | 1,566 | 70 (80) | 1,636 | 894 (314) | 325 (238) |
| | (1,552) | | (1,632) | | |
--------------------------------------------------------------------------------
| Completed | 291 (147) | - (-) | 291 | 16 (5) | - (-) |
| and unsold | | | (147) | | |
| at | | | | | |
| period's | | | | | |
| end | | | | | |
--------------------------------------------------------------------------------
The recording of the status of residential units in Russia has changed.
Apartments are deemed to have been completed three months after the authorities
have performed the inauguration inspection. Previously an apartment was
designated as being completed only when the homebuyer had registered it with the
authorities. The figures for residences under construction, completed, and
completed and unsold in the January-June/2007 and January-June/2006 periods have
been presented in line with the new practice.
Plot reserves, June 30, 2007 (June 30, 2006)
Building rights and zoning
potential, 1,000 m2 of floor area
--------------------------------------------------------------------------------
| | Finland | Russia | Estonia, Latvia, |
| | | | Lithuania |
--------------------------------------------------------------------------------
| Housing plots | 1,685 (1,771) | 2,345 (723) | 394 (274) |
--------------------------------------------------------------------------------
| Business premise | 855 (674) | 415 (444) | 35 (33) |
| plots | | | |
--------------------------------------------------------------------------------
| Total | 2,540 (2,445) | 2,760 (1,167) | 429 (307) |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Capital tied into | 322.0 (321.7) | | 64.8 (33.3) |
| plot | | 133.4 (52.8) | |
| reserves, EUR | | | |
| million | | | |
--------------------------------------------------------------------------------
Plot reserves include plots that have been zoned and an estimate of the
potential building rights on areas that are under zoning. Building rights
provided by regional development agreements made with landowners are not
included in YIT's balance sheet until the zoned sections are each in turn slated
for construction.
Many commercial and business premise sites completed and sold in the first half
of the year
The outlook for the construction of office, retail and logistics premises in
Finland remained favourable in the first part of the year. Demand for offices
stayed good in the Greater Helsinki Area. Construction investments by industry
remained slight. Growth was seen in repairs of specific building sections.
The construction of the Grandis Retail Centre in Vantaa, the Entresse Shopping
Centre in Espoo and the Matkakeskus Travel Centre in Riihimäki were kicked off
in the April-June period. In the case of business premise projects, the
construction projects that began in the first part of the year were the
extension of YIT's head office and the Duetto Business Park in Helsinki. The
tender-based contracts that were started up included the major renovation of the
Kiljava Hospital and the construction of Ahlsell's logistics centre.
During the spring, YIT sold all the aforementioned property development
projects. The Grandis Retail Centre was sold to the Finnish property fund FEA,
Entresse to the Finnish company CapMan and the UK company RBS Nordisk Renting,
the Atomi Shopping Centre in Riihimäki to the English property investor
Boultbee, YIT's head office to RBS Nordisk Renting and Duetto Business Park to
the German fund company Union Investment.
In Russia, YIT and Evli Bank's real estate equity fund EPI (Evli Property
Investments) Russia signed the final agreement on the implementation of office
and logistics facility projects valued at about EUR 100 million on YIT's plots
in St Petersburg.
Phases 1 and 2 of the FEZ logistics project were completed in Lithuania. They
were leased to tenants and handed over to Genesta. Construction of phase 3
continued.
Good demand in infrastructure construction
Demand remained good in infrastructure construction. YIT made agreements with
the City of Helsinki to build the Koskelantie highway interchange as well as
handle the preconstruction of the Toukoranta 3 area. An agreement was signed
with Lahden Urheiluhalliyhdistys ry for the construction of the Laune ice arena,
which will be used for training purposes.
When the Finnish Road Administration called for bids on the maintenance of
public roads, YIT landed the seven- and five-year Nummi and Rovaniemi contracts.
YIT received two three-year street area maintenance contracts from the City of
Lahti.
An agreement was made for the delivery of equipment to the City of Wuwei's
district-heating project in China.
INDUSTRIAL AND NETWORK SERVICES
The revenue of Industrial and Network Services grew by 7 per cent to EUR 240.3
million (EUR 224.6 million). The share of revenue accounted for by the
maintenance business was 58 per cent (61%). Of the revenue, 91 per cent came
from Finland and 9 per cent from other countries.
The business segment's operating profit was up 5 per cent to EUR 10.8 million
(EUR 10.3 million). The operating profit margin was 4.5 per cent (4.6%). The
remainder of the costs of the downscaling measures carried out in the Network
Services business unit in 2006 - EUR 1.0 million - were booked in operating
profit in the first quarter.
The order backlog at the end of the period amounted to EUR 213.6 million (EUR
208.4 million). The order backlog in Network Services is based on forecasts from
customers, which declined since the previous year.
At the end of the period, the business segment had 4,755 employees (4,914).
Market for services for industry remains good
The market situation for maintenance and investment services for industry
remained favourable. Demand is supported by large-scale maintenance shutdowns -
for instance, in the Kilpilahti area and at nuclear power plants in Finland and
Sweden - and investments by the energy and process industry.
During the first part of the year, all the major end-to-end maintenance
agreements with partners were updated. During the report period, maintenance
shutdowns were carried out for, among others, Teollisuuden Voima in Olkiluoto,
Borealis in Porvoo, Forchem in Rauma and AGA in Harjavalta. YIT and
Metsä-Botnia's joint venture Botnia Mill Service carried out the maintenance
shutdowns at Botnia's pulp mills in Rauma, Joutseno and Äänekoski in their
entirety.
Exporting deliveries for industrial investments
Demand for capital investment projects by industry remained good. Exports were
particularly brisk. In Finland, tank and piping deliveries as well as electrical
automation and ventilation works were carried out for UPM's Kymi REC 08 project
in Kuusankoski. New agreements for this project were also signed. Steel and pipe
fitting works were implemented on behalf of Aker Yards in the machine rooms of
the Color Line ferry company's day ferries.
Agreements were made with Ahlstrom for tank and machinery installation
deliveries for a glassfibre tissue mill in Tver, Russia. In Sweden, piping
deliveries were agreed on with Alstom Industrial Turbine for the PILS project of
the Oskarsham nuclear power plant.
Agreements were forged with Metso Power for the design of a soda recovery boiler
and piping deliveries for the RAPP project in Indonesia and with Kemsley Mill
Ltd for tank deliveries to the UK.
Market for network services is still tight
The market situation in field services for teleoperators continued to be tight.
Growth in the relative share of investment-related works can be expected in
mobile networks. An agreement was made with Elisa Corporation for the
construction of the 3G base station equipment of Elisa's mobile phone networks
all over Finland.
In the case of electricity networks, the partnership agreement made with
Vattenfall Verkko Oy has started in line with expectations. Vattenfall's
electricity network maintenance, repair and construction works were handed over
to YIT at the beginning of the year and about 100 people transferred into YIT's
employ.
OUTLOOK FOR 2007
We estimate that revenue and operating profit (EBIT) in 2007 will increase
compared to the previous year.
The outlook for revenue growth is supported by the strong backlog, the
continuing boom and YIT's major investments in the Russian market. The healthy
margin of the order backlog and the company's own profitability improvement
measures underlie our expectations of growth in operating profit.
Helsinki, July 26, 2007
The Board of Directors
INTERIM REPORT JAN 1 - JUN 30, 2007: TABLES
The information presented in the Interim Report has not been audited.
1. Key figures of YIT Group
Key figures
YIT Group figures by quarter
Segment information by quarter
2. Consolidated financial statements Jan 1 - Jun 30, 2007
Consolidated income statement Jan 1 - Jun 30, 2007
Consolidated income statement Apr 1 - Jun 30, 2007
Consolidated balance sheet
Consolidated statement of changes in equity
Consolidated cash flow statement
3. Notes
Accounting principles of the Interim Report
Financial risk management
Segment information
Unusual items affecting operating profit
Acquired businesses
Changes in property, plant and equipment
Inventories
Notes on equity
Interest-bearing liabilities
Change in contingent liabilities and assets and commitments
Transactions with associated companies
1. KEY FIGURES OF YIT GROUP
KEY FIGURES
--------------------------------------------------------------------------------
| | 6/2007 | 6/2006 | Change, | 12/2006 |
| | | | % | |
--------------------------------------------------------------------------------
| Earnings per share, EUR | 0.73 | 0.60 | 22 | 1.36 |
--------------------------------------------------------------------------------
| Diluted earnings per share, EUR | 0.72 | 0.60 | 20 | 1.35 |
--------------------------------------------------------------------------------
| Equity per share, EUR | 5.38 | 4.54 | 19 | 5.29 |
--------------------------------------------------------------------------------
| Average share price during the | 24.52 | 20.48 | 20 | 19.24 |
| period, EUR | | | | |
--------------------------------------------------------------------------------
| Share price at end of period, | 23.35 | 19.17 | 22 | 20.95 |
| EUR | | | | |
--------------------------------------------------------------------------------
| Market capitalization at end of | 2,963.1 | 2,406.7 | 23 | 2,656.0 |
| period, MEUR | | | | |
--------------------------------------------------------------------------------
| Weighted average share-issue | 126,803 | 124,951 | 1 | 125,357 |
| adjusted number of shares | | | | |
| outstanding, thousands | | | | |
--------------------------------------------------------------------------------
| Weighted average share-issue | 127,385 | 126,821 | 0 | 126,773 |
| adjusted number of shares | | | | |
| outstanding, thousands, diluted | | | | |
--------------------------------------------------------------------------------
| Share-issue adjusted number of | 126,899 | 125,543 | 1 | 126,777 |
| shares outstanding at end of | | | | |
| period, thousands | | | | |
--------------------------------------------------------------------------------
| Net interest-bearing debt at | 548.9 | 342.5 | 60 | 506.5 |
| end of period, MEUR | | | | |
--------------------------------------------------------------------------------
| Return on investment, from the | 25.7 | 28.2 | -9 | 24.8 |
| last 12 months, % 1) | | | | |
--------------------------------------------------------------------------------
| Equity ratio, % | 32.4 | 34.5 | -6 | 34.5 |
--------------------------------------------------------------------------------
| Gearing ratio, % | 79.8 | 59.5 | 34 | 75.1 |
--------------------------------------------------------------------------------
| Gross capital expenditures, | 21.5 | 18.7 | 15 | 50.4 |
| MEUR | | | | |
--------------------------------------------------------------------------------
| % of revenue | 1.2 | 1.2 | 1 | 1.5 |
--------------------------------------------------------------------------------
| Order backlog at end of period, | 3,275.2 | 2,151.3 | 52 | 2,802.3 |
| MEUR 2) | | | | |
--------------------------------------------------------------------------------
| of which order backlog outside | 1,730.9 | 925.7 | 87 | 1,490.0 |
| Finland | | | | |
--------------------------------------------------------------------------------
| Average number of personnel | 22,712 | 21,346 | 6 | 21,846 |
--------------------------------------------------------------------------------
1) Calculated for the period from July 1, 2006 - June 30, 2007, using the
balance sheet figures at June 30, 2006 and June 30, 2007.
2) Portion of binding orders not recognized as income.
YIT GROUP FIGURES BY QUARTER
--------------------------------------------------------------------------------
| | I/2006|II/2006|III/2006|IV/2006 | I/2007 | II/2007|
| | | | | | | |
--------------------------------------------------------------------------------
| Revenue, MEUR | 768.8 | 818.0 | 789.5 | 908.1 | 833.5 | 939.3 |
--------------------------------------------------------------------------------
| Operating profit, MEUR | 53.7 | 60.1 | 58.6 | 86.4 | 61.2 | 78.5 |
--------------------------------------------------------------------------------
| % of revenue | 7.0 | 7.3 | 7.4 | 9.5 | 7.3 | 8.4 |
--------------------------------------------------------------------------------
| Financial income, MEUR | 1.3 | 0.4 | 0.6 | 0.3 | 0.6 | 0.5 |
--------------------------------------------------------------------------------
| Exchange rate | -0.6 | -0.6 | -0.6 | -0.9 | -0.1 | -1.6 |
| differences, MEUR | | | | | | |
--------------------------------------------------------------------------------
| Financial expenses, MEUR | -4.3 | -4.6 | -5.9 | -5.7 | -6.9 | -7.6 |
--------------------------------------------------------------------------------
| Profit before taxes, | 50.1 | 55.3 | 52.7 | 80.1 | 54.8 | 69.8 |
| MEUR | | | | | | |
--------------------------------------------------------------------------------
| % of revenue | 6.5 | 6.8 | 6.7 | 8.8 | 6.6 | 7.4 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Balance sheet total, | 1,722 | 1,847 | 1,925. | 2,117. | 2,155. | 2,346. |
| MEUR | .0 | .2 | 5 | 8 | 9 | 1 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Earnings per share, EUR | 0.29 | 0.31 | 0.28 | 0.48 | 0.31 | 0.42 |
--------------------------------------------------------------------------------
| Equity per share, EUR | 4.23 | 4.54 | 4.83 | 5.29 | 4.95 | 5.38 |
--------------------------------------------------------------------------------
| Share price at end of | 22.38 | 19.17 | 18.27 | 20.95 | 25.80 | 23.35 |
| period, EUR | | | | | | |
--------------------------------------------------------------------------------
| Market capitalization at | 2,792 | 2,406 | 2,294. | 2,656. | 3,270. | 2,963. |
| end of period, MEUR | .9 | .7 | 4 | 0 | 8 | 1 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Return on investment, | 28.1 | 28.2 | 25.2 | 24.8 | 25.4 | 25.7 |
| from the last 12 months, | | | | | | |
| % | | | | | | |
--------------------------------------------------------------------------------
| Equity ratio, % | 33.5 | 34.5 | 34.6 | 34.5 | 31.8 | 32.4 |
--------------------------------------------------------------------------------
| Net interest-bearing | 334.2 | 342.5 | 416.8 | 506.5 | 540.9 | 548.9 |
| debt at end of period, | | | | | | |
| MEUR | | | | | | |
--------------------------------------------------------------------------------
| Gearing ratio, % | 62.7 | 59.5 | 68.1 | 75.1 | 85.6 | 79.8 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Gross capital | 9.1 | 18.7 | 29.9 | 50.4 | 15.8 | 21.5 |
| expenditures, MEUR | | | | | | |
--------------------------------------------------------------------------------
| Order backlog at end of | 2,007 | 2,151 | 2,246. | 2,802. | 2,995. | 3,275. |
| period, MEUR | .2 | .3 | 2 | 3 | 4 | 2 |
--------------------------------------------------------------------------------
| Personnel at end of | 21,14 | 21,87 | 22,188 | 22,311 | 22,418 | 23,474 |
| period | 0 | 3 | | | | |
--------------------------------------------------------------------------------
SEGMENT INFORMATION BY QUARTER
Revenue by business segment (EUR million)
--------------------------------------------------------------------------------
| | I/2006|II/2006|III/2006|IV/2006 | I/2007 |II/2007 |
| | | | | | | |
--------------------------------------------------------------------------------
| Building Systems | 325.6 | 348.4 | 335.2 | 405.9 | 367.7 | 410.3 |
--------------------------------------------------------------------------------
| Construction Services | 350.8 | 368.1 | 337.0 | 396.3 | 369.2 | 416.3 |
--------------------------------------------------------------------------------
| Industrial and Network | 107.7 | 116.9 | 128.3 | 124.0 | 110.7 | 129.6 |
| Services | | | | | | |
--------------------------------------------------------------------------------
| Other items | -15.3 | -15.4 | -11.0 | -18.1 | -14.1 | -16.9 |
--------------------------------------------------------------------------------
| YIT Group, total | 768.8 | 818.0 | 789.5 | 908.1 | 833.5 | 939.3 |
--------------------------------------------------------------------------------
Operating profit by business segment (EUR million)
--------------------------------------------------------------------------------
| | I/2006|II/2006|III/2006|IV/2006 | I/2007 | II/2007|
| | | | | | | |
--------------------------------------------------------------------------------
| Building Systems *) | 11.7 | 19.8 | 21.1 | 35.0 | 18.8 | 25.6 |
--------------------------------------------------------------------------------
| Construction Services | 40.7 | 40.5 | 39.6 | 50.0 | 41.2 | 51.5 |
--------------------------------------------------------------------------------
| Industrial and Network | 5.3 | 5.0 | 2.5 | 5.2 | 5.0 | 5.8 |
| Services **) | | | | | | |
--------------------------------------------------------------------------------
| Other items | -4.0 | -5.2 | -4.6 | -3.8 | -3.8 | -4.4 |
--------------------------------------------------------------------------------
| YIT Group, total | 53.7 | 60.1 | 58.6 | 86.4 | 61.2 | 78.5 |
--------------------------------------------------------------------------------
*) In the October-December/2006 period, Building Systems released provisions for
certain contractual obligations that had come to an end. This had a positive
impact of EUR 7.2 million on operating profit.
**) The operating profit of the Industrial and Network Services business segment
in July-September/2006 includes EUR 5.1 million and in January-March/2007 EUR
1.0 million in costs for the downsizing of Network Services carried out in 2006.
Order backlog by business segment at end of period (EUR million)
--------------------------------------------------------------------------------
| | I/2006|II/2006|III/2006| IV/2006| I/2007 | II/2007|
| | | | | | | |
--------------------------------------------------------------------------------
| Building Systems | 517.6 | 584.1 | 582.7 | 601.7 | 670.3 | 721.8 |
--------------------------------------------------------------------------------
| Construction Services | 1,296 | 1,391 | 1,524. | 2,053. | 2,137. | 2,378. |
| | .5 | .8 | 4 | 5 | 9 | 3 |
--------------------------------------------------------------------------------
| Industrial and Network | 219.5 | 208.4 | 180.3 | 184.0 | 228.8 | 213.6 |
| Services | | | | | | |
--------------------------------------------------------------------------------
| Other items | -26.4 | -33.0 | -41.2 | -36.9 | -41.6 | -38.5 |
--------------------------------------------------------------------------------
| YIT Group, total | 2,007 | 2,151 | 2,246. | 2,802. | 2,995. | 3,275. |
| | .2 | .3 | 2 | 3 | 4 | 2 |
--------------------------------------------------------------------------------
2. CONSOLIDATED FINANCIAL STATEMENTS JAN 1 - JUN 30, 2007
CONSOLIDATED INCOME STATEMENT JAN 1 - JUN 30, 2007 (EUR million)
--------------------------------------------------------------------------------
| | 1-6/2007 | 1-6/2006 | Change, | 1-12/2006 |
| | | | % | |
--------------------------------------------------------------------------------
| Revenue | 1,772.8 | 1,586.8 | 12 | 3,284.4 |
--------------------------------------------------------------------------------
| of which activities outside | 816.9 | 693.0 | 18 | 1,477.4 |
| Finland | | | | |
--------------------------------------------------------------------------------
| Operating income and expenses | -1,621.0 | -1,462.0 | 11 | -3,002.8 |
--------------------------------------------------------------------------------
| Share of results of associated | 0.6 | 0.4 | 50 | 1.3 |
| companies | | | | |
--------------------------------------------------------------------------------
| Depreciation and write-downs | -12.7 | -11.4 | 11 | -24.1 |
--------------------------------------------------------------------------------
| Operating profit | 139.7 | 113.8 | 23 | 258.8 |
--------------------------------------------------------------------------------
| % of revenue | 7.9 | 7.2 | 9 | 7.9 |
--------------------------------------------------------------------------------
| Financial income | 1.1 | 1.7 | -35 | 2.6 |
--------------------------------------------------------------------------------
| Exchange rate differences | -1.7 | -1.2 | 42 | -2.7 |
--------------------------------------------------------------------------------
| Financial expenses | -14.5 | -8.9 | 63 | -20.5 |
--------------------------------------------------------------------------------
| Profit before taxes | 124.6 | 105.4 | 18 | 238.2 |
--------------------------------------------------------------------------------
| % of revenue | 7.0 | 6.6 | 6 | 7.3 |
--------------------------------------------------------------------------------
| Income taxes 3) | -32.1 | -27.5 | 17 | -62.8 |
--------------------------------------------------------------------------------
| Profit for the report period | 92.5 | 77.9 | 19 | 175.4 |
--------------------------------------------------------------------------------
| % of revenue | 5.2 | 4.9 | 6 | 5.3 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Attributable to | | | | |
--------------------------------------------------------------------------------
| Equity holders of the parent | 92.0 | 75.6 | 22 | 171.0 |
| company | | | | |
--------------------------------------------------------------------------------
| Minority interests | 0.5 | 2.3 | -78 | 4.4 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Earnings per share attributable | | | | |
| to the equity holders of the | | | | |
| parent company | | | | |
--------------------------------------------------------------------------------
| Earnings per share, EUR | 0.73 | 0.60 | 22 | 1.36 |
--------------------------------------------------------------------------------
| Diluted earnings per share, EUR | 0.72 | 0.60 | 20 | 1.35 |
--------------------------------------------------------------------------------
3) Income taxes have been accounted for as a share of the estimated taxes for
the entire financial year, calculated in proportion to the result for the review
period.
CONSOLIDATED INCOME STATEMENT APR 1 - JUN 30, 2007 (EUR million)
--------------------------------------------------------------------------------
| | 4-6/2007 | 4-6/2006 | Change, % |
--------------------------------------------------------------------------------
| Revenue | 939.3 | 818.0 | 15 |
--------------------------------------------------------------------------------
| of which activities outside Finland | 445.0 | 366.1 | 22 |
--------------------------------------------------------------------------------
| Operating income and expenses | -854.7 | -752.6 | 14 |
--------------------------------------------------------------------------------
| Share of results of associated | 0.4 | 0.4 | 0 |
| companies | | | |
--------------------------------------------------------------------------------
| Depreciation and write-downs | -6.5 | -5.7 | 14 |
--------------------------------------------------------------------------------
| Operating profit | 78.5 | 60.1 | 31 |
--------------------------------------------------------------------------------
| % of revenue | 8.4 | 7.3 | 14 |
--------------------------------------------------------------------------------
| Financial income | 0.5 | 0.4 | 25 |
--------------------------------------------------------------------------------
| Exchange rate differences | -1.6 | -0.6 | *) |
--------------------------------------------------------------------------------
| Financial expenses | -7.6 | -4.6 | 65 |
--------------------------------------------------------------------------------
| Profit before taxes | 69.8 | 55.3 | 26 |
--------------------------------------------------------------------------------
| % of revenue | 7.4 | 6.8 | 9 |
--------------------------------------------------------------------------------
| Income taxes 3) | -17.4 | -15.1 | 15 |
--------------------------------------------------------------------------------
| Profit for the report period | 52.4 | 40.2 | 30 |
--------------------------------------------------------------------------------
| % of revenue | 5.6 | 4.9 | 14 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Attributable to | | | |
--------------------------------------------------------------------------------
| Equity holders of the parent company | 52.4 | 39.2 | 34 |
--------------------------------------------------------------------------------
| Minority interests | 0.0 | 1.0 | *) |
--------------------------------------------------------------------------------
| | | | |
--------------------------------------------------------------------------------
| Earnings per share attributable to | | | |
| the equity holders of the parent | | | |
| company | | | |
--------------------------------------------------------------------------------
| Earnings per share, EUR | 0.42 | 0.31 | 35 |
--------------------------------------------------------------------------------
| Diluted earnings per share, EUR | 0.41 | 0.31 | 32 |
--------------------------------------------------------------------------------
*) Change over 100%.
3) Income taxes have been accounted for as a share of the estimated taxes for
the entire financial year, calculated in proportion to the result for the review
period.
CONSOLIDATED BALANCE SHEET (EUR million)
--------------------------------------------------------------------------------
| | 6/2007 | 6/2006 | Change, | 12/2006 |
| | | | % | |
--------------------------------------------------------------------------------
| ASSETS | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Non-current assets | | | | |
--------------------------------------------------------------------------------
| Property, plant and equipment | 92.6 | 82.8 | 12 | 91.8 |
--------------------------------------------------------------------------------
| Goodwill | 248.8 | 248.8 | 0 | 248.8 |
--------------------------------------------------------------------------------
| Other intangible assets | 19.6 | 15.0 | 31 | 15.6 |
--------------------------------------------------------------------------------
| Shares in associated companies | 3.2 | 2.2 | 45 | 2.9 |
--------------------------------------------------------------------------------
| Investments | 2.9 | 3.0 | -3 | 3.0 |
--------------------------------------------------------------------------------
| Receivables | 18.6 | 11.0 | 69 | 13.4 |
--------------------------------------------------------------------------------
| Deferred tax assets | 25.6 | 21.9 | 17 | 21.1 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Current assets | | | | |
--------------------------------------------------------------------------------
| Inventories | 1,157.2 | 797.4 | 45 | 1,006.4 |
--------------------------------------------------------------------------------
| Trade and other receivables | 726.9 | 637.8 | 14 | 688.9 |
--------------------------------------------------------------------------------
| Cash and cash equivalents | 50.7 | 27.3 | 86 | 25.9 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Total assets | 2,346.1 | 1,847.2 | 27 | 2,117.8 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| EQUITY AND LIABILITIES | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Equity attributable to equity | | | | |
| holders of the parent company | | | | |
--------------------------------------------------------------------------------
| Share capital | 147.0 | 62.8 | *) | 63.4 |
--------------------------------------------------------------------------------
| Other equity | 536.3 | 507.5 | 6 | 607.1 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Minority interests | 4.5 | 5.8 | -22 | 3.9 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Total equity | 687.8 | 576.1 | 19 | 674.4 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Non-current liabilities | | | | |
--------------------------------------------------------------------------------
| Deferred tax liabilities | 61.7 | 40.0 | 54 | 52.5 |
--------------------------------------------------------------------------------
| Pension liabilities | 8.4 | 11.0 | -24 | 11.6 |
--------------------------------------------------------------------------------
| Provisions | 34.1 | 33.3 | 2 | 32.2 |
--------------------------------------------------------------------------------
| Interest-bearing liabilities | 400.8 | 166.7 | *) | 275.8 |
--------------------------------------------------------------------------------
| Other liabilities | 3.0 | 13.8 | -78 | 8.4 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Current liabilities | | | | |
--------------------------------------------------------------------------------
| Trade and other payables | 931.3 | 786.9 | 18 | 788.0 |
--------------------------------------------------------------------------------
| Provisions | 20.2 | 16.3 | 24 | 18.3 |
--------------------------------------------------------------------------------
| Interest-bearing current | 198.8 | 203.1 | -2 | 256.6 |
| liabilities | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Total equity and liabilities | 2,346.1 | 1,847.2 | 27 | 2,117.8 |
--------------------------------------------------------------------------------
*) Change over 100%.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (EUR million)
--------------------------------------------------------------------------------
| | Share| Share| Legal|Other| Cumula-| Fair | Retai-| Mino- | Total |
| | capi-| pre- | re- |re- | tive | value | ned | rity | equity|
| | tal | mium | serve|serve| trans- | re- | ear- | inte- | |
| | | re- | | | lation | serve | nings | rest | |
| | | serve| | | diffe- | | | | |
| | | | | | rences | | | | |
--------------------------------------------------------------------------------
| Equity | 63.4 | 83.8 | 0.8 | 13. | -4.5 | 1.0 | 512.3 | 3.9 | 674.4 |
| on Jan | | | | 7 | | | | | |
| 1, 2007 | | | | | | | | | |
--------------------------------------------------------------------------------
| Bonus | 82.8 | -82. | - | - | - | - | - | - | - |
| issue | | 8 | | | | | | | |
--------------------------------------------------------------------------------
| Shares | 0.8 | - | - | - | - | - | - | - | - |
|subscribed| | | | | | | | | |
| with | | | | | | | | | |
| options | | | | | | | | | |
--------------------------------------------------------------------------------
| Change | - | - | - | - | - | 2.0 | - | - | - |
| in the | | | | | | | | | |
| fair | | | | | | | | | |
| value of | | | | | | | | | |
| interest | | | | | | | | | |
| deriva- | | | | | | | | | |
| tives | | | | | | | | | |
--------------------------------------------------------------------------------
| Change | - | - | - | - | -1.4 | - | - | - | - |
| in | | | | | | | | | |
| trans- | | | | | | | | | |
| lation | | | | | | | | | |
| diffe- | | | | | | | | | |
| rences | | | | | | | | | |
--------------------------------------------------------------------------------
| Employee | - | - | - | - | - | - | 1.8 | - | - |
| share | | | | | | | | | |
| option | | | | | | | | | |
| scheme | | | | | | | | | |
--------------------------------------------------------------------------------
| Net | - | - | - | - | - | - | 92.0 | - | - |
| profit | | | | | | | | | |
| for the | | | | | | | | | |
| period | | | | | | | | | |
--------------------------------------------------------------------------------
| Dividend | - | - | - | - | - | - | -82.5 | - | - |
| paid | | | | | | | | | |
--------------------------------------------------------------------------------
| Other | - | -1.0 | 0.2 | 0.9 | - | 0.0 | 0.0 | - | - |
| change | | | | | | | | | |
--------------------------------------------------------------------------------
| Equity | 147. | 0.0 | 1.0 | 14. | -5.9 | 3.0 | 523.6 | 4.5 | 687.8 |
| on June | 0 | | | 6 | | | | | |
| 30, 2007 | | | | | | | | | |
--------------------------------------------------------------------------------
| | Share| Share| Legal| Ot- | Cumu- | Fair | Retai-| Mino- | Total |
| | capi-| pre- | re- | her | lative | value | ned | rity | equity|
| | tal | mium | serve| re- | trans- | re- | ear- | inte- | |
| | | re- | |serve lation | serve | nings | rest | |
| | | serve| | | diffe- | | | | |
| | | | | | rences | | | | |
--------------------------------------------------------------------------------
| Equity | 62.4 | 77.2 | 0.7 | 2.5 | -3.0 | -0.1 | 420.0 | 3.7 | 563.5 |
| on Jan | | | | | | | | | |
| 1, 2006 | | | | | | | | | |
--------------------------------------------------------------------------------
| Shares | 0.4 | 2.2 | | | | | | | |
|subscribed| | | | | | | | | |
| with | | | | | | | | | |
| options | | | | | | | | | |
--------------------------------------------------------------------------------
| Change | - | - | - | - | - | 0.5 | - | - | - |
| in the | | | | | | | | | |
| fair | | | | | | | | | |
| value of | | | | | | | | | |
| interest | | | | | | | | | |
| deriva- | | | | | | | | | |
| tives | | | | | | | | | |
--------------------------------------------------------------------------------
| Change | - | - | - | - | -0.3 | - | - | - | - |
| in | | | | | | | | | |
| trans- | | | | | | | | | |
| lation | | | | | | | | | |
| diffe- | | | | | | | | | |
| rences | | | | | | | | | |
--------------------------------------------------------------------------------
| Employee | | | | 12. | | | -11.3 | | |
| share | | | | 1 | | | | | |
| option | | | | | | | | | |
| scheme | | | | | | | | | |
--------------------------------------------------------------------------------
| Net | - | - | - | - | - | - | 75.6 | | - |
| profit | | | | | | | | | |
| for the | | | | | | | | | |
| period | | | | | | | | | |
--------------------------------------------------------------------------------
| Dividend | - | - | - | - | - | - | -68.6 | - | - |
| paid | | | | | | | | | |
--------------------------------------------------------------------------------
| Other | - | - | 0.1 | - | - | - | -0.1 | - | - |
| change | | | | | | | | | |
--------------------------------------------------------------------------------
| Equity | 62.8 | 79.4 | 0.8 | 14. | -3.3 | 0.4 | 415.6 | 5.8 | 576.1 |
| on June | | | | 6 | | | | | |
| 30, 2006 | | | | | | | | | |
--------------------------------------------------------------------------------
| | Share| Share| Legal| Ot- | Cumu- | Fair | Retai-| Mino- | Total |
| | capi-| pre- | re- | her | lative | value | ned | rity | equity|
| | tal | mium | serve| re- | trans- | re- | ear- | inte- | |
| | | re- | |serve| lation | serve | nings | rest | |
| | | serve| | | diffe- | | | | |
| | | | | | rences | | | | |
--------------------------------------------------------------------------------
| Equity | 62.4 | 77.2 | 0.7 | 2.5 | -3.0 | -0.1 | 420.0 | 3.7 | 563.5 |
| on Jan | | | | | | | | | |
| 1, 2006 | | | | | | | | | |
--------------------------------------------------------------------------------
| Shares | 1.0 | 5.6 | - | - | - | - | - | - | - |
|subscribed| | | | | | | | | |
| with | | | | | | | | | |
| options | | | | | | | | | |
--------------------------------------------------------------------------------
| Change | - | - | - | - | - | 0.9 | - | - | - |
| in the | | | | | | | | | |
| fair | | | | | | | | | |
| value of | | | | | | | | | |
| interest | | | | | | | | | |
| deriva- | | | | | | | | | |
| tives | | | | | | | | | |
--------------------------------------------------------------------------------
| Change | - | - | - | - | - | 0.2 | - | - | - |
| in the | | | | | | | | | |
| fair | | | | | | | | | |
| value of | | | | | | | | | |
| other | | | | | | | | | |
| invest- | | | | | | | | | |
| ments | | | | | | | | | |
--------------------------------------------------------------------------------
| Change | - | - | - | - | -1.5 | - | -0.3 | - | - |
| in | | | | | | | | | |
| trans- | | | | | | | | | |
| lation | | | | | | | | | |
| diffe- | | | | | | | | | |
| rences | | | | | | | | | |
--------------------------------------------------------------------------------
| Employee | - | 1.0 | - | 11. | - | - | -9.6 | - | - |
| share | | | | 2 | | | | | |
| option | | | | | | | | | |
| scheme | | | | | | | | | |
--------------------------------------------------------------------------------
| Net | - | - | - | - | - | - | 171.0 | - | - |
| profit | | | | | | | | | |
| for the | | | | | | | | | |
| period | | | | | | | | | |
--------------------------------------------------------------------------------
| Dividend | - | - | - | - | - | - | -68.9 | - | - |
| paid | | | | | | | | | |
--------------------------------------------------------------------------------
| Other | - | - | 0.1 | - | - | - | 0.1 | - | - |
| change | | | | | | | | | |
--------------------------------------------------------------------------------
| Equity | 63.4 | 83.8 | 0.8 | 13. | -4.5 | 1.0 | 512.3 | 3.9 | 674.4 |
| on Dec | | | | 7 | | | | | |
| 31, 2006 | | | | | | | | | |
--------------------------------------------------------------------------------
CONSOLIDATED CASH FLOW STATEMENT (EUR million)
--------------------------------------------------------------------------------
| | 1-6/2007 | 1-6/2006 | Change, | 1-12/2006 |
| | | | % | |
--------------------------------------------------------------------------------
| Cash flows from operating | | | | |
| activities | | | | |
--------------------------------------------------------------------------------
| Net profit for the period | 92.5 | 76.7 | 21 | 175.4 |
--------------------------------------------------------------------------------
| Reversal of accrual-based items | 60.3 | 47.3 | 27 | 106.8 |
--------------------------------------------------------------------------------
| Change in working capital | | | | |
--------------------------------------------------------------------------------
| Change in trade and other | -37.6 | -86.8 | -57 | -140.0 |
| receivables | | | | |
--------------------------------------------------------------------------------
| Change in inventories | -149.7 | -112.8 | 33 | -319.5 |
--------------------------------------------------------------------------------
| Change in current liabilities | 123.6 | 93.7 | 32 | 105.6 |
--------------------------------------------------------------------------------
| Change in working capital, | -63.7 | -105.9 | -40 | -353.9 |
| total | | | | |
--------------------------------------------------------------------------------
| Interest paid | -7.9 | -7.5 | 5 | -24.9 |
--------------------------------------------------------------------------------
| Interest received | 1.1 | 1.8 | -39 | 2.4 |
--------------------------------------------------------------------------------
| Taxes paid | -26.1 | -20.9 | 25 | -54.1 |
--------------------------------------------------------------------------------
| Net cash generated from | 56.2 | -8.5 | *) | -148.3 |
| operating activities | | | | |
--------------------------------------------------------------------------------
| | | | | |
--------------------------------------------------------------------------------
| Cash flows from investing | | | | |
| activities | | | | |
--------------------------------------------------------------------------------
| Acquisition of subsidiaries, | -5.1 | 0.9 | *) | -11.1 |
| net of cash | | | | |
--------------------------------------------------------------------------------
| Acquisition of shares in | 0.0 | -0.2 | *) | - |
| associated companies | | | | |
--------------------------------------------------------------------------------
| Proceeds from sale of shares in | 0.5 | 0.0 | 0 | 0.0 |
| associated companies | | | | |
--------------------------------------------------------------------------------
| Purchase of property, plant and | -12.7 | -15.8 | -20 | -33.8 |
| equipment | | | | |
--------------------------------------------------------------------------------
| Purchase of intangible assets | -2.7 | -3.0 | -10 | -3.1 |
--------------------------------------------------------------------------------
| Disposals of subsidiaries and | 0.0 | 2.6 | *) | 2.5 |
| businesses | | | | |
--------------------------------------------------------------------------------
| Proceeds from sale of property, | 2.3 | 2.1 | 10 | 3.0 |
| plant and equipment | | | | |
--------------------------------------------------------------------------------
| Proceeds from sale of other | 0.0 | 0.1 | *) | 0.5 |
| investments | | | | |
--------------------------------------------------------------------------------
| Net cash used in investing | -17.7 | -13.3 | 33 | -42.0 |
| activities | | | | |
--------------------------------------------------------------------------------
| | | | | |
--------------------------------------------------------------------------------
| Cash flow from financing | | | | |
| activities | | | | |
--------------------------------------------------------------------------------
| Proceeds from share issues | 0.8 | 2.6 | -69 | 6.6 |
--------------------------------------------------------------------------------
| Decrease in loan receivables | 0.1 | 0.1 | 0 | 0.1 |
--------------------------------------------------------------------------------
| Change in current liabilities | -54.9 | 69.5 | *) | 61.9 |
--------------------------------------------------------------------------------
| Proceeds from borrowings | 128.5 | 0.0 | *) | 175.0 |
--------------------------------------------------------------------------------
| Repayments of borrowings | -4.6 | -33.7 | -86 | -37.4 |
--------------------------------------------------------------------------------
| Payments of financial leasing | -1.0 | -1.0 | 0 | -1.9 |
| debts | | | | |
--------------------------------------------------------------------------------
| Dividends paid | -82.6 | -68.9 | 20 | -68.9 |
--------------------------------------------------------------------------------
| Net cash used in financing | -13.7 | -31.4 | -56 | 135.4 |
| activities | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Net change in cash and cash | 24.8 | -53.2 | *) | -54.8 |
| equivalents | | | | |
--------------------------------------------------------------------------------
| Cash and cash equivalents at | 25.9 | 80.6 | -68 | 80.6 |
| the beginning of the period | | | | |
--------------------------------------------------------------------------------
| Change in the fair value of the | 0.0 | -0.1 | *) | 0.1 |
| cash equivalents | | | | |
--------------------------------------------------------------------------------
| Cash and cash equivalents at | 50.7 | 27.3 | 86 | 25.9 |
| the end of the period | | | | |
--------------------------------------------------------------------------------
*) Change over 100%.
3. NOTES
ACCOUNTING PRINCIPLES OF THE INTERIM REPORT
YIT Corporation's Interim Report for January 1 - June 30, 2007 has been drafted
in line with IAS 34: Interim Financial Reporting. YIT has applied the same
accounting policy in the drafting of the Interim Report as in its annual
financial statements for 2006. The information presented in the Interim Report
has not been audited.
Application of amended IFRS standards or interpretations as from January 1, 2007
The Group has applied the following amendments to the standards or new
interpretations as from January 1, 2007:
IFRS 7 Financial Instruments: Disclosures. The standard mainly affects the scope
of the notes to the financial statements.
IAS 1 (Amendment) Presentation of Financial Statements - Capital Disclosures.
The amendment of the standard did not have an effect on this Interim Report.
IFRIC 10 Interim Financial Reporting and Impairment. The application of the
interpretation did not have an effect on this Interim Report.
FINANCIAL RISK MANAGEMENT
In the January-March/2007 period the Board of Directors amended the management
of foreign exchange risk such that YIT Group's shareholders' equity in the home
currency is no longer hedged against changes in foreign exchange rates. Foreign
exchange positions are reported to the Audit Committee ones per year.
SEGMENT INFORMATION
YIT's business operations are divided into three business segments: Building
Systems, Construction Services and Indsustrial and Network Services
Revenue by business segment (EUR million)
--------------------------------------------------------------------------------
| | 1-6/2007 | 1-6/2006 | Change, | 1-12/2006 |
| | | | % | |
--------------------------------------------------------------------------------
| Building Systems | 778.0 | 674.0 | 15 | 1,415.1 |
--------------------------------------------------------------------------------
| Construction Services | 785.5 | 718.9 | 9 | 1,452.2 |
--------------------------------------------------------------------------------
| Industrial and Network Services | 240.3 | 224.6 | 7 | 476.9 |
--------------------------------------------------------------------------------
| Other items | -31.0 | -30.7 | 1 | -59.8 |
--------------------------------------------------------------------------------
| YIT Group, total | 1,772.8 | 1,586.8 | 12 | 3,284.4 |
--------------------------------------------------------------------------------
Operating profit by business segment (EUR million)
--------------------------------------------------------------------------------
| | 1-6/2007 | 1-6/2006 | Change, | 1-12/2006 |
| | | | % | |
--------------------------------------------------------------------------------
| Building Systems | 44.4 | 31.5 | 41 | 87.6 |
--------------------------------------------------------------------------------
| Construction Services | 92.7 | 81.2 | 14 | 170.8 |
--------------------------------------------------------------------------------
| Industrial and Network Services | 10.8 | 10.3 | 5 | 18.0 |
--------------------------------------------------------------------------------
| Other items | -8.2 | -9.2 | -11 | -17.6 |
--------------------------------------------------------------------------------
| YIT Group, total | 139.7 | 113.8 | 23 | 258.8 |
--------------------------------------------------------------------------------
Order backlog by business segment at end of period (EUR million)
--------------------------------------------------------------------------------
| | 6/2007 | 6/2006 | Change, | 12/2006 |
| | | | % | |
--------------------------------------------------------------------------------
| Building Systems | 721.8 | 584.1 | 24 | 601.7 |
--------------------------------------------------------------------------------
| Construction Services | 2,378.3 | 1,391.8 | 71 | 2,053.5 |
--------------------------------------------------------------------------------
| Industrial and Network Services | 213.6 | 208.4 | 2 | 184.0 |
--------------------------------------------------------------------------------
| Other items | -38.5 | -33.0 | 17 | -36.9 |
--------------------------------------------------------------------------------
| YIT Group, total | 3,275.2 | 2,151.3 | 52 | 2,802.3 |
--------------------------------------------------------------------------------
UNUSUAL ITEMS AFFECTING OPERATING PROFIT (EUR million)
--------------------------------------------------------------------------------
| | 1-6/2007 | 1-6/2006 | 1-12/2006 |
--------------------------------------------------------------------------------
| Building Systems | | | |
--------------------------------------------------------------------------------
| Released provisions | - | - | 7.2 |
--------------------------------------------------------------------------------
| Industrial and Network Services | | | |
--------------------------------------------------------------------------------
| Rearrangements | -1.0 | - | -5.1 |
--------------------------------------------------------------------------------
| YIT Group, total | -1.0 | - | 2.1 |
--------------------------------------------------------------------------------
In the October-December/2006 period, Building Systems released provisions for
certain contractual obligations that had come to an end. This had a positive
impact of EUR 7.2 million on operating profit.
The operating profit of the Industrial and Network Services business segment in
July-September/2006 includes EUR 5.1 million and in January-March/2007 EUR 1.0
million in costs for the downsizing of Network Services carried out in 2006.
ACQUIRED BUSINESSES (EUR million)
On April 2, 2007, YIT Industrial and Network Services Oy acquired T. Kanerva Oy,
the only Finnish supplier of special seals used in the process and energy
industry.
In January-March/2007 period, the business operations were strengthened within
Building Systems business segment with four small acquisitions of companies in
Sweden and Norway.
--------------------------------------------------------------------------------
| | The fair value | Seller's |
| | in balance | carrying amount |
| | sheet | before the |
| | | consolidation |
--------------------------------------------------------------------------------
| The effect on balance sheet assets an | | |
| liabilities: | | |
--------------------------------------------------------------------------------
| Property, plant and equipment | 1 | 1 |
--------------------------------------------------------------------------------
| Intangible assets | 4 | 0 |
--------------------------------------------------------------------------------
| Inventories | 1 | 1 |
--------------------------------------------------------------------------------
| Trade and other receivables | 2 | 2 |
--------------------------------------------------------------------------------
| Cash and cash equivalents | 1 | 1 |
--------------------------------------------------------------------------------
| Other liabilities | -4 | -4 |
--------------------------------------------------------------------------------
| Acquired net assets | 6 | 1 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Total consideration | 6 | |
--------------------------------------------------------------------------------
| Goodwill | 0 | |
--------------------------------------------------------------------------------
| | | |
--------------------------------------------------------------------------------
| The effect on cash flow: | | |
--------------------------------------------------------------------------------
| Paid in cash | 6 | |
--------------------------------------------------------------------------------
| Cash and cash equivalents in acquired | -1 | |
| entity | | |
--------------------------------------------------------------------------------
| Cash flow on acquisitions | 5 | |
--------------------------------------------------------------------------------
CHANGES IN PROPERTY, PLANT AND EQUIPMENT (EUR million)
--------------------------------------------------------------------------------
| | 1-6/2007 | 1-6/2006 | Change, | 1-12/2006 |
| | | | % | |
--------------------------------------------------------------------------------
| Carrying value at the beginning | 91.8 | 77.1 | 19 | 77.1 |
| of period | | | | |
--------------------------------------------------------------------------------
| Increase | 13.0 | 15.4 | -16 | 33.6 |
--------------------------------------------------------------------------------
| Increase through acquisitions | 0.9 | 1.0 | -10 | 2.4 |
--------------------------------------------------------------------------------
| Decrease | -1.4 | -1.6 | -13 | -2.6 |
--------------------------------------------------------------------------------
| Decrease through disposals | 0.0 | -0.3 | *) | -0.3 |
--------------------------------------------------------------------------------
| Depreciation and value | -9.6 | -8.9 | 8 | -18.6 |
| adjustments | | | | |
--------------------------------------------------------------------------------
| Reclassification | -2.1 | 0.1 | *) | 0.2 |
--------------------------------------------------------------------------------
| Carrying value at the end of | 92.6 | 82.8 | 12 | 91.8 |
| period | | | | |
--------------------------------------------------------------------------------
*) Change over 100%.
INVENTORIES (EUR million)
--------------------------------------------------------------------------------
| | 6/2007 | 6/2006 | Change, | 12/2006 |
| | | | % | |
--------------------------------------------------------------------------------
| Raw materials and consumables | 25.8 | 19.1 | 35 | 19.5 |
--------------------------------------------------------------------------------
| Work in progress | 493.3 | 295.4 | 67 | 378.2 |
--------------------------------------------------------------------------------
| Land areas and plot owing | 520.2 | 398.7 | 30 | 500.0 |
| companies | | | | |
--------------------------------------------------------------------------------
| Shares in completed housing and | 66.1 | 53.0 | 25 | 64.9 |
| real estate companies | | | | |
--------------------------------------------------------------------------------
| Advance payments | 47.4 | 25.5 | 86 | 35.3 |
--------------------------------------------------------------------------------
| Other inventories | 4.4 | 5.7 | -23 | 8.6 |
--------------------------------------------------------------------------------
| Total inventories | 1,157.2 | 797.4 | 45 | 1,006.4 |
--------------------------------------------------------------------------------
NOTES ON EQUITY (EUR million)
--------------------------------------------------------------------------------
| Share capital and share | Number of | Share | Share | Treasury| Total |
| premium reserve | shares, | capital | premium | shares| |
| | 1000 | | reserve | | |
--------------------------------------------------------------------------------
| Jan 1, 2007 | 126,777,0 | 63.4 | 83.8 | 0.0 | 147.2 |
| | 72 | | | | |
--------------------------------------------------------------------------------
| Bonus issue | - | 82.8 | -82.8 | - | 0.0 |
--------------------------------------------------------------------------------
| Reclassification | - | - | -1.0 | - | -1.0 |
--------------------------------------------------------------------------------
| Annulment of treasury | -400 | - | - | 0.0 | 0.0 |
| shares | | | | | |
--------------------------------------------------------------------------------
| Share subscription with | 121,834 | 0.8 | - | - | 0.8 |
| options | | | | | |
--------------------------------------------------------------------------------
| Jun 30, 2007 | 126,898,5 | 147.0 | 0.0 | 0.0 | 147.0 |
| | 06 | | | | |
--------------------------------------------------------------------------------
INTEREST-BEARING LIABILITIES (EUR million)
Bonds
--------------------------------------------------------------------------------
| | Fair | Carrying | Nominal |
| | value | value | value |
--------------------------------------------------------------------------------
| Bonds in financial statements | 275.5 | 275.0 | 275.0 |
| December 31, 2006 | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Valuation of the above bonds on June | 275.6 | 275.0 | 275.0 |
| 30, 2007 | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Bonds raised during the review period | | | |
--------------------------------------------------------------------------------
| (1) 1/2007-2014, interest rate | 50.0 | 49.9 | 50.0 |
| 4.670%, EUR | | | |
--------------------------------------------------------------------------------
| (2) 2/2007-2012, interest rate | 50.5 | 50.0 | 50.0 |
| 4.564%, EUR | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Total bonds June 30, 2007 | 376.1 | 374.9 | 375.0 |
--------------------------------------------------------------------------------
Terms of the bonds raised during the revenue period in brief
1) Loan period March 26, 2007 - March 26, 2014, interest payments by quarter in
arrear, starting on June 26, 2007. The bond is unsecured. ISIN code
FI0003024216. Interest rate is 3 months Euribor + 0.51%. (Private placement)
1) Loan period March 29, 2007 - March 29, 2012, interest payments by quarter in
arrear, starting on June 29, 2007. The bond is unsecured. ISIN code
SE0001991068. Interest rate is 3 months Euribor + 0.40%. (Private placement)
Interest rate risk management connected to loans
Interest rate swaps are designated as hedges of floating rate loans: 3 month
Euribor-linked loan with carrying value of EUR 225 million and 6 month
Euribor-linked loan with carrying value of EUR 45 million. These hedges qualify
for effective hedging requirements and changes in fair value are, according to
company accounting principles, recognized in fair value reserve. The weighted
average rate of the whole loan portfolio is decreased by 0.182 percentage point
via interest rate swaps.
The duration of long term loans and derivative instruments hedging these loans
was 1.39 years at the end of the review period (1.52 years on December 31,
2006). A change of one percentage point in the interest level would June 30,
2007 have affected the annual net financial expenses by EUR 3,2 million (EUR 4.1
million on Dec 31, 2006).
CHANGE IN CONTINGENT LIABILITIES AND ASSETS AND COMMITMENTS (EUR million)
--------------------------------------------------------------------------------
| | 6/2007 | 6/2006 | Change, | 12/2006 |
| | | | % | |
--------------------------------------------------------------------------------
| Collateral given for own | | | | |
| commitments | | | | |
--------------------------------------------------------------------------------
| Corporate motrgages | 29.3 | 29.3 | 0 | 29.3 |
--------------------------------------------------------------------------------
| Pledged shares | 1.5 | 2.0 | -25 | 1.5 |
--------------------------------------------------------------------------------
| Other commitments | | | | |
--------------------------------------------------------------------------------
| Repurhase commitments | 231.8 | 286.0 | -19 | 252.5 |
--------------------------------------------------------------------------------
| Operating leases | 259.0 | 191.2 | 35 | 202.1 |
--------------------------------------------------------------------------------
| Rental quarantees for clients | 8.6 | 2.3 | *) | 6.5 |
--------------------------------------------------------------------------------
| Other contingent liabilities | 0.8 | 0.6 | 33 | 0.8 |
--------------------------------------------------------------------------------
| Liability under derivative | | | | |
| contracts | | | | |
--------------------------------------------------------------------------------
| Value of underlying instruments | | | | |
--------------------------------------------------------------------------------
| Interest rate options, purhased | 28.1 | 28.4 | -1 | 28.4 |
--------------------------------------------------------------------------------
| Interest rate swaps | 270.0 | 95.0 | *) | 145.0 |
--------------------------------------------------------------------------------
| Foreign currency forward | 181.9 | 64.9 | *) | 202.7 |
| contracts | | | | |
--------------------------------------------------------------------------------
| Market value | | | | |
--------------------------------------------------------------------------------
| Interest rate options, purhased | 1.4 | 1.0 | 40 | 0.8 |
--------------------------------------------------------------------------------
| Interest rate swaps | 3.8 | 0.5 | *) | 1.2 |
--------------------------------------------------------------------------------
| Foreign currency forward | -1.0 | -1.7 | -41 | 1.7 |
| contracts | | | | |
--------------------------------------------------------------------------------
| Contingent assets | | | | |
--------------------------------------------------------------------------------
| Legal processes | 11.1 | 11.1 | 0 | 11.1 |
--------------------------------------------------------------------------------
*) Change over 100%.
TRANSACTIONS WITH ASSOCIATED COMPANIES (EUR million)
--------------------------------------------------------------------------------
| | 1-6/2007 | 1-6/2006 | Change, | 1-12/2006 |
| | | | % | |
--------------------------------------------------------------------------------
| Sales to associated companies | 0.5 | 0.4 | 25 | 1.2 |
--------------------------------------------------------------------------------
| Purchases from associated | 2.0 | 0.0 | *) | 0.4 |
| companies | | | | |
--------------------------------------------------------------------------------
| Trade and other receivables | 0.0 | 2.6 | *) | 2.6 |
--------------------------------------------------------------------------------
| Trade and other liabilities | 0.5 | 0.1 | *) | 0.0 |
--------------------------------------------------------------------------------
*) Change over 100%.
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