Lehto Group Oyj - Interim report (Q1 and Q3)

Lehto Group Plc: Business Review, January-September 2016

Lehto Group Plc's Business Review, January-September 2016

Lehto Group Plc Stock Exchange release 17 November 2016, 8:00 a.m. EET


Net sales up by 30.7%, operating profit was 10.5% of net sales

This is not an interim report as specified in the IAS 34 standard. The company
complies with half-yearly reporting according to the Finnish Securities Markets
Act and discloses business reviews for the first three and nine month periods of
the year, in which key information regarding the company's financial situation
and development will be presented.

The financial information presented in this business review is unaudited.
Figures in brackets refer to the corresponding period of the previous year,
unless otherwise stated.


Financial development January-September 2016

 Group                            7-9/2016 7-9/2015 1-9/2016 1-9/2015 1-12/2015
-------------------------------------------------------------------------------
 Net sales, EUR million               91.6     80.4    232.1    177.6     275.6

 Change in net sales, %              13.9%    86.7%    30.7%    52.9%     61.1%

 Operating profit, EUR million        10.4     10.6     24.3     16.7      27.2

 Operating profit, % of net sales    11.3%    13.2%    10.5%     9.4%      9.9%

 Profit for the period, EUR            8.3      8.5     19.3     12.7      21.2
 million



 Order backlog at period end, EUR    258.5    176.0    258.5    176.0     195.0
 million

 Earnings per share, EUR              0.16     0.20     0.37     0.29      0.52

 Cash and other liquid assets,        66.6     27.7     66.6     27.7      24.6
 EUR million

 Interest-bearing liabilities,        22.1     19.7     22.1     19.7      17.0
 EUR million

 Equity ratio, %                     61.5%    33.8%    61.5%    33.8%     37.2%

 Net gearing ratio, %               -43.3%   -27.6%   -43.3%   -27.6%    -22.9%



Compared to the corresponding period of the previous year, Lehto Group's net
sales for January-September grew by 30.7%, to EUR 232.1 (177.6) million.
Operating profit was EUR 24.3 (16.7) million, or 10.5% (9.4%) of net sales. Net
sales grew in the Business Premises, Housing, and Social Care and Educational
Premises service areas but declined in the Building Renovation service area.


 NET SALES BY SERVICE AREA            1-9/2016 1-9/2015 Change   1-12/2015
--------------------------------------------------------------------------
 Business Premises                        86.4     74.5  16.0%       109.8

 Housing                                  84.8     40.9 107.3%        69.5

 Social Care and Educational Premises     40.3     26.2  53.4%        38.4

 Building Renovation                      20.6     35.9 -42.6%        58.0
--------------------------------------------------------------------------
 Total                                   232.1    177.6  30.7%       275.6



Business Premises

Net sales in the Business Premises service area grew by 16.0% in January-
September. This was attributable to an increase in both the number and value of
projects. In January-September, Lehto Group completed a total of 17 business
premises. Lehto continued the development project of the Lippulaiva shopping
centre, in Espoonlahti, together with Citycon Oyj and designers. The final
agreement on the Lippulaiva contract is expected to be signed in 2017. The
project involves uncertainties which are typical of property development.

Lehto has made certain preparations regarding the Barents Center under planning
in Haparanda, Sweden. In accordance with the contract with the Swedish client,
Lehto will be the contractor of the project, if it is started. Lehto does not
have accurate information on the schedule, extent or funding status of this
potential project.

Housing

The Housing service area more than doubled its net sales year on year.  During
the period, Lehto completed 16 residential projects involving a total of 603
apartments. Altogether 691 apartments were sold in January-September. At the end
of the period, 876 new apartments were under construction, of which 157 had not
yet been sold. The number of unsold finished apartments remained small,
totalling seven at the end of the review period. Most of the completed and
ongoing housing projects are developer contracting projects located in the
Helsinki Metropolitan Area.

In August, Lehto Group Plc's subsidiary Rakennuskartio Ltd signed a contract
with the Joint Stock Company "Concern Titan-2" branch office in Finland to
construct accommodation premises for about 1,000 employees at Pyhäjoki's nuclear
power plant construction site. The project will be delivered as a turn-key
project in which Lehto is responsible for planning and construction in stages,
according to a defined time and payment schedule agreed upon with the customer.
Lehto will use its own developed modular building concept in the project.
Apartment modules will be prefabricated in Lehto's own factory and assembled at
the construction site. The total gross floor area of the project is about
17,000 m² and the first occupants are expected to arrive in April 2017. In
total, it is estimated that the project will be completed in January 2019. The
total value of the construction contract is around EUR 25.3 million, excluding
value-added tax.

Social Care and Educational Premises

Lehto Group also experienced strong growth in its Social Care and Educational
Premises service area, the net sales of which increased by 53.4%. During the
review period, the company completed 17 new care homes that were delivered to
service providers involved in the care of elderly, disabled and mental-health
customers.

Building Renovation

In the Building Renovation service area, net sales from pipeline renovations
increased but net sales from developer contracting-based renovation projects
decreased. Contrary to January-September 2015, no developer contracting-based
renovation projects were completed during the review period. In these projects,
net sales from the sale of shares are not recognised as income until the project
is completed. At the end of the period, Lehto had two developer contracting
projects ongoing. These are expected to be completed in 2017. In the Building
Renovation service area, the number of unsold, finished apartments totalled
seven at the end of the review period.

Order backlog

Lehto Group's order backlog amounted to EUR 258.5 million (30 June 2016: EUR
237.2 million). This was mainly attributable to the EUR 50 million increase in
the order backlog of the Housing service area. Meanwhile, the order backlog of
the other service areas, decreased slightly. Most of the order backlog in the
Housing service area consists of blocks of flats under construction in the
Helsinki Metropolitan Area. A construction project is included in the order book
once the project contract has been signed or, in the case of developer
contracting projects, once the decision to begin construction has been made and
the contract has been signed.


Outlook for 2016

On 11 November 2016, Lehto Group further specified its financial outlook for
2016.

In 2016, it is estimated that growth in net sales will be around 20-25% compared
to 2015 (EUR 275.6 million in 2015) and operating profit will be around 10-11%
of net sales.

Key factors affecting net sales and operating profit include recognition based
on the delivery of developer contracting housing production; as well as the
number of apartments sold, the start-up and sale of social care and educational
premises, and other business premises projects.


Balance sheet and financing

 Group balance sheet, EUR million        30 Sep. 2016 30 Sep. 2015 31 Dec. 2015
-------------------------------------------------------------------------------
 Non-current assets                              17.9         14.6         14.6

 Current assets

 Inventories                                     72.1         58.6         51.3

 Current receivables                             84.4         40.0         47.2

 Cash and cash equivalents                       66.6         27.7         24.6

 Assets held for sale                             0.0          1.9          0.0

 Total assets                                   241.0        142.6        137.6



 Equity                                         102.9         28.8         33.4

 Financial liabilities                           22.1         19.7         17.0

 Prepayment received                             73.7         57.4         47.9

 Other payables                                  42.4         35.7         39.3

 Liabilities associated with assets held          0.0          1.0          0.0
 for sale

 Total equity and liabilities                   241.0        142.6        137.6



The Group's financial position strengthened, mainly due to its successful
listing on the stock exchange. At the end of the period, equity totalled EUR
102.9 million (31 Dec. 2015: EUR 33.4 million), net gearing was -43.3% (31 Dec.
2015: -22.9%) and the equity ratio was 61.5% (31 Dec. 2015: 37.2%).

At the end of the period, Lehto Group's cash and cash equivalents totalled EUR
66.6 million and interest-bearing liabilities totalled EUR 22.1 million.


Personnel

The average number of personnel during the review period was 510. The number of
personnel at period end was 594 (31 Dec. 2015: 423). About 52% of the Group's
personnel are salaried employees and 48% employees working at construction
sites.


Significant events after the reporting period

Lehto Group Plc acquired the entire share capital of Rakennus Oy Wareco by an
agreement signed on 3 October 2016. Wareco is a building renovation company
operating in the Helsinki Metropolitan Area. Its areas of expertise include real
estate renovations, plumbing renovations in housing companies, renovation and
modification projects for facades, as well as accessory and complementary
building. Wareco's key personnel have several decades of experience in building
renovation.

The acquisition supports Lehto's growth targets, enabling it to strengthen and
expand its building renovation business.  The acquisition also brought
additional talented resources to the company in areas such as large renovation
projects and plumbing renovations.

At the time of the acquisition, Wareco employed 70 people. In 2015, its net
sales totalled EUR 28.7 million and its operating profit was EUR 0.7 million.

The purchase price of the shares on a debt and cash free basis was around EUR
2.6 million. The exact purchase price will be confirmed after the interim
financial statements of the time of transaction have been finalised. Lehto will
also pay an additional purchase price on the basis of the profit that Wareco
will achieve in 2016, 2017 and 2018. The purchase price will be paid in cash
from Lehto's cash reserves. The acquisition will not have a significant effect
on the profit or the financial position of Lehto in 2016.



Kempele, 17 November 2016

Lehto Group Plc
Board of Directors

Further information:
Veli-Pekka Paloranta, CFO, +358 400 944 074

veli-pekka.paloranta@lehto.fi,
Lehto Group in brief

Lehto Group is a Finnish construction and real estate company focusing on
economically driven construction. The company's mission is to be the innovator
of the construction sector. The Company has divided its operations into four
service areas: Business Premises, Housing, Social Care and Educational Premises
and Building Renovation. Lehto Group currently operates in Finland and is
geographically concentrated in growth centres, which account for a significant
part of its construction volume. The company's headquarters are located in
Kempele. In 2015, the company's net sales were approximately EUR 276 million and
it had 423 employees at the end of the year.

www.lehto.fi


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Attachments:

Lehto Group_Business Review January-September 2016.pdf