Lehto Group Oyj - Interim report (Q1 and Q3)

Lehto Group Plc: Business Review, January- September 2017

Lehto Group Plc's Business Review, January - September 2017

Lehto Group Plc
Stock Exchange release
9 November 2017, 8:00 a.m.

LEHTO GROUP PLC BUSINESS REVIEW, 1 JANUARY-30 SEPTEMBER 2017



         Net sales up by 58.2%, operating profit was 9.1% 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 2017

 Group                            7-9/2017 7-9/2016 1-9/2017 1-9/2016 1-12/2016
-------------------------------------------------------------------------------
 Net sales, EUR million              135.8     91.6    367.3    232.1     361.8

 Change in net sales, %              48.3%    13.9%    58.2%    30.7%     31.3%

 Operating profit, EUR million        13.5     10.4     33.5     24.3      40.4

 Operating profit, % of net sales    10.0%    11.3%     9.1%    10.5%     11.2%

 Profit for the period, EUR           11.2      8.3     26.9     19.3      31.9
 million



 Order backlog at period end, EUR    502.6    258.5    502.6    258.5     309.1
 million

 Earnings per share, EUR              0.19     0.16     0.46     0.37      0.59

 Cash and cash equivalents, EUR       46.9     66.6     46.9     66.6      67.7
 million

 Interest-bearing liabilities,        51.8     22.3     51.8     22.3      16.6
 EUR million

 Equity ratio, %                     53.5%    61.5%    53.5%    61.5%     60.4%

 Net gearing ratio, %                 3.7%   -43.0%     3.7%   -43.0%    -44.2%




Compared to the corresponding period of the previous year, Lehto Group's net
sales for January-September grew by 58.2%, to EUR 367.3 (232.1) million.
Operating profit was EUR 33.5 (24.3) million, or 9.1% (10.5%) of net sales. Net
sales grew in all service areas.



 NET SALES BY SERVICE AREA            1-9/2017 1-9/2016 Change, % 1-12/2016
---------------------------------------------------------------------------
 Business Premises                       108.0     86.4     25.1%     129.5

 Housing                                 131.8     84.8     55.3%     136.0

 Social Care and Educational Premises     77.6     40.3     92.7%      62.1

 Building Renovation                      49.9     20.6    142.0%      34.2
---------------------------------------------------------------------------
 Total                                   367.3    232.1     58.2%     361.8




BUSINESS PREMISES

Net sales in the Business Premises service area grew by 25.1%. A total of 23
business premises were completed across Finland during the reporting period. At
the end of the period, a total of 19 business premises were under construction.

In August, Lehto signed a contract with global logistics company DSV on the
construction of a logistics centre in Vantaa. The construction project comprises
a logistics building of approximately 50,000 m2, a terminal building of 10,000
m2 and an office building of 4,000 m2. The planning for the centre is underway,
and actual construction will begin once the building permit is approved. The
estimated completion of the property is at the end of 2018.

In September, Lehto Group signed a contract with Danish logistics company Frode
Laursen for the construction of a new logistics centre in Kerava. The centre
will have an area of approx. 27,000 m2 and its estimated time of completion is
August 2018.

Lehto continued the development project of the Lippulaiva shopping centre, in
Espoonlahti, together with Citycon Oyj and designers. After the end of the
review period, on 19 October 2017, Lehto and Citycon signed a new main contract
to complete the development phase.

HOUSING

Net sales in the Housing service area grew by 55.3% from the comparison period
to EUR 131.8 (84.8) million. A total of 1,321 apartments were sold in January-
September. At the end of the period, 1,855 new apartments were under
construction, of which 384 had not yet been sold. There were 11 completed,
unsold apartments. Most of the completed and ongoing housing projects are
developer contracting projects located in the Helsinki Metropolitan Area and
other growth centres.

The largest housing developments underway are located in Kaivoksela, Helsinki,
where we are building a total of approximately 550 apartments and Kilo, Espoo,
where we are building around 370 apartments.

SOCIAL CARE AND EDUCATIONAL PREMISES

Growth was extremely strong in the Social Care and Educational Premises service
area, with a 92.7% year-on-year increase in net sales to EUR 77.6 (40.3)
million. A total of 22 new nursing homes for senior citizens, one school and two
day care centres were completed in the reporting period. At the end of the
period, 22 nursing homes and one school were under construction. The care homes
are being built for the needs of private care sector providers, and the buyers
are funds that invest in care sector properties.

Lehto continued to invest in the development of its line of school buildings and
concepts and participated in competitive tenders for the construction of
schools. In July, Lehto won a tender for building a school for 450 pupils in the
municipality of Liminka. The school will have an adjoining preschool for 40
pupils.

BUILDING RENOVATION

Net sales in Building Renovation grew by 142.0% from the comparison period to
EUR 49.9 (20.6) million. The growth in net sales was based on the growth
resulting from the acquisition of Rakennus Oy Wareco in October 2016 and the
completion and income recognition of a developer contracting building renovation
project during the period.

Net sales also grew in the pipeline renovation business year on year. At the end
of the reporting period, Lehto had three developer contracting projects ongoing
in the Building Renovation service area. Two of these are expected to be
completed in 2017. There were three completed unsold apartments at the end of
the period.

FACTORY PRODUCTION

Lehto manufactures a variety of building modules and elements at its own
production facilities, mainly for its own use. Due to strong business growth,
Lehto initiated measures during the period to increase its factory capacity. In
Oulainen, operations were expanded to three new facilities and, in May, Lehto
acquired the production facilities and equipment of the bankrupted Iin Fasadi
Oy.

Capacity will further be increased by acquiring or building new production
facilities, improving production processes and increasing the utilisation rate
of the production facilities.

ORDER BACKLOG

The Group's order backlog grew to EUR 502.6 million (EUR 309.1 million on 31
December 2016). The order backlog of the Business Premises, Housing, and
Building Renovation service areas grew, but declined in the Social Care and
Educational Premises service area.

A construction project is included in the order backlog 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 2017

The economic outlook has remained the same. Lehto estimates that the Group's net
sales for 2017 will grow by 40-50% from the previous year (EUR 361.8 million in
2016) and operating profit is expected to be above 10% of net sales (2016:
11.2%). Most of the operating profit will be accrued in the second half of the
year.

The outlook is based on the information available to the company on the progress
of ongoing construction projects and the company's estimate of construction
projects to be started and sold in 2017.

The most significant risks related to 2017 net sales and operating profit are
the availability of skilled labour, the adequacy of factory capacity and delays
in the launch of projects currently at the negotiation phase. Failure to obtain
labour and increase factory capacity may delay the progress of projects and the
accrual of net sales and operating profit.



Balance sheet and financing

 Consolidated balance sheet, EUR million 30 Sep 2017 30 Sep 2016 31 Dec 2016
----------------------------------------------------------------------------
 Non-current assets                             24.0        17.9        21.5

 Current assets

 Inventories                                   118.4        72.1        77.5

 Current receivables                           133.4        84.4        92.0

 Cash and cash equivalents                      46.9        66.6        67.7

 Total assets                                  322.8       241.0       258.7



 Equity                                        130.3       102.9       115.6

 Financial liabilities                          51.8        22.3        16.6

 Advances received                              79.3        73.7        67.3

 Other payables                                 61.3        42.1        59.2

 Total equity and liabilities                  322.8       241.0       258.7




At the end of the period, the Group's equity ratio was 53.5% (31 Dec.
2016: 60.4%) and net gearing was 3.7% (31 Dec. 2016: -44.2%). The decrease in
cash reserves and growth in financial liabilities was primarily due to the
growth in working capital, which has been financed using the company's own cash
reserves and bank loans. Loans were drawn mainly for acquiring plots and
financing projects during construction in the Housing service area and for
financing projects during construction in the Social Care and Educational
Premises service area.  The financing need in Social Care and Educational
Premises is related to a framework agreement under which Lehto will build
several social care sector premises using its own financing and sell them to
care sector property funds as portfolios consisting of several properties.



Personnel

The average number of personnel during the review period was 961. The number of
personnel at period end was 1,105 (31 Dec 2016: 747). About 51% of the Group's
personnel are salaried employees and 49% employees working at construction
sites.



Other significant events during the third quarter

In August, Lehto Group Plc established a new subsidiary in Sweden with the name
Lehto Sverige AB. Lehto Group Plc holds 88% and four Swedish minority
shareholders hold a total of 12% of the company's shares.

Through the new subsidiary, Lehto will offer economically driven construction of
housing, business premises and social care and educational premises all over
Sweden, and initially in the Stockholm region in particular. At the start, the
company will have seven employees.

Lehto Sverige AB will start its first housing construction project in Märsta,
north of Stockholm, in the beginning of 2018. The project, which is waiting for
zoning plan approval, comprises around 70 apartments, and construction is
planned to take place during 2018-2019.


Significant events after the reporting period

Rakennusliike Lehto Oy ("Lehto") and Citycon Oyj ("Citycon") signed a letter of
intent in March 2016 on the planning and construction of the Lippulaiva shopping
centre and adjacent residential buildings in Espoo. Together with external
designers, the parties have planned the project and sought solutions to meet the
operational and financial targets of both parties.

On 19 October 2017, Lehto and Citycon signed a new main contract to complete the
development phase. According to the main contract, Lehto and Citycon will
continue to develop and plan the project with the aim of signing a final
construction contract agreement for the shopping centre and a housing contract
for the construction of the residential units by 31 March 2018. These final
contracts are contingent on the parties reaching unanimity on the technical
content of the project and the construction schedules; in addition, the Espoo
Cityscape Committee must issue a preliminary statement in favour of the
residential buildings planned to be built adjacent to Lippulaiva shopping
centre.

The main contract now drafted will not automatically lead to a contract
agreement and has no impact on Lehto's financial outlook for 2017.



Kempele, 8 November 2017
Lehto Group Plc
Board of Directors

Further information:
Veli-Pekka Paloranta, Chief Financial Officer
+358 400 944 074
veli-pekka.paloranta@lehto.fi
www.lehto.fi

Lehto Group in brief
Lehto is the fastest growing construction and real estate group. We operate in
four service areas: Business Premises, Housing, Social Care and Educational
Premises, and Building Renovation. We are the innovator and pioneer of the
construction sector. Our economically driven operating model makes construction
more profitable, ensures the quality of construction and brings significant time
and cost savings to the customer. We employ around 1,100 people and our net
sales for 2016 amounted to EUR 362 million.



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Attachments:

Lehto_Q3_2017_-ENG FINAL4.pdf