TRIPLA PROJECT HELSINKI, FINLAND Half-year Report January-June 2019 Kari Kauniskangas, President and CEO
Contents 1 Key strategic steps in Q2/2019 2 Group development in Q2/2019 3 Segment reviews 4 Discontinued operations 5 Financial position and key ratios 6 Outlook and guidance 7 Appendices All 2018 figures are restated pro forma and Q1/2019 figures are restated reported. Please see slide 35 for additional information. Figures in brackets refer to restated pro forma figures of the comparison period unless otherwise stated. REDING TOWER 2 2 Half-year Report January-June 2019 BRATISLAVA, SLOVAKIA
Q2/2019 1 Key strategic steps in 3 Half-year Report January-June 2019
Nordic paving and mineral aggregates YIT to sell Nordic paving and mineral aggregates businesses to Peab SCOPE OF THE TRANSACTION FINANCIAL IMPACT NOT INCLUDED IN THE TRANSACTION Closing of the deal Jan 1, 2020 Paving and mineral aggregates Paving in Russia (est.). businesses in Finland, Sweden, Strategic options to divest or close the Norway and Denmark. business are under evaluation. Transaction price EUR 280 million. Capital gain EUR 40 million. Respective assets and Road maintenance in Finland personnel working with the Will be reported under Infrastructure Cash flow impact approx. EUR 240 divisions. projects segment within YIT. million. Paving in the Baltic countries Continues in Infrastructure projects segment as today. 4 Half-year Report January-June 2019
Nordic paving and mineral aggregates Deal rationale ACCELERATE STRATEGY 1 • Capital allocation to urban development projects and other non-cyclical businesses, like services EXECUTION SHARPEN CUSTOMER AND Unified business portfolio with common core • 2 • Reduced operating model complexity OPERATIONAL FOCUS Positive impact to the group financial position and • FINANCIALLY SOLID reduced earnings volatility during the year 3 TRANSACTION • Several years’ paving’s expected cash flow in one go RESPONSIBLE INDUSTRIAL Paving business is in the core of Peab’s business 4 • portfolio BUYER 5 Half-year Report January-June 2019
Russia S ignificant steps to reduce capital and enhance profitability EVROPEISKI RESIDENTIAL COMPLEX YEGORIEVSK, RUSSIA FOCUS IN THE FUTURE, SCOPE OF THE ACTIONS FINANCIAL IMPACT NOT INCLUDED IN THE ACTIONS Expected positive net cash flow impact Discontinue residential construction in EUR ~50 million 2019 – 2021. Moscow, the Moscow region and Rostov- Residential construction business in St. on-Don. Petersburg, Kazan, Yekaterinburg and Tyumen. One-time write-off EUR 35 million on Closing contracting unit. balance sheet values and provision of Living services . EUR 9 million. Exit the paving business either by closing down or by selling the Expected release of capital employed operations. EUR ~100 million 2019-2021. 6 Half-year Report January-June 2019
YIT Strategy 2019-2021 - Performance through cycles Profitable and financially stable YIT STRATEGIC PRIORITIES CORNERSTONES OF SUCCESS STRATEGIC PRIORITIES CORNERSTONES OF SUCCESS TOP PERFORMANCE • Synergies EUR 46-50 million • Focus on productivity improvement URBAN DEVELOPMENT Sustainable Focus in self-developed, longer CAPITAL EFFICIENCY urban value chain and negotiation based development • Leaner operating model in Russia projects • Annual free cashflow EUR +150 million SUCCESS WITH CUSTOMERS AND PARTNERS NON-CYCLICAL BUSINESSES PARTNERSHIP • Improving customer experience and NPS PAVING PROPERTIES • Deeper partnerships, higher value, more speed Annual EBIT EUR >100 million from NON-CYCLICAL OFFERING: non-cyclical businesses from 2019 on SERVICES, RENOVATION, PAVING, OWNERSHIP HAPPY PEOPLE Unchanged . The share of paving business is estimated to be replaced • Common culture, open and involving way to lead with other businesses within 3 years. • Most preferred employer in the field 7 Half-year Report January-June 2019
Q2/2019 2 Group development in KONEPAJA AREA DEVELOPMENT PROJECT 8 Half-year Report January-June 2019 HELSINKI, FINLAND
Recent structural changes and changes in reporting Continuing operations Discontinued operations Housing Business Infrastructure Partnership Discontinued Housing Russia Other FI&CEE premises projects properties operations Original structure of Original structure of Residential Original structure of Original structure of Paving in Finland Partnership Original structure of Infrastructure construction in St. Housing FI&CEE Business premises properties Other items projects Petersburg, Kazan, segment segment segment segment Yekaterinburg and Paving in Sweden Tyumen Road maintenance in Finland Paving in Norway Living services Paving in Denmark Excluded from adjusted Residential operating profit. Paving in Russia construction in Moscow, Moscow Mineral aggregates region and Rostov- on-Don Contracting in Russia Former Paving segment 9 Half-year Report January-June 2019
Q2 in brief Good Strong institutional Strategic profitability investor and steps in Strong order in Housing stable Paving 1 and backlog Finland and consumer Russia CEE sales in Finland ~300 4.7 10.2% 1,481 EUR million positive cash EUR billion order backlog Adjusted EBIT Sold apartments in flow impact 2019-2021 on June 30 margin Finland (Jun 30, 2018: 4.8) (Jun 30, 2018: 9.6%) (Q2/2018: 1,018) 1 Occured after the review period, on July 4, 2019 10 Half-year Report January-June 2019
Improved operating profit and strong order backlog ADJUSTED OPERATING PROFIT, EUR million, % REVENUE PER SEGMENT, EUR million ORDER BACKLOG PER SEGMENT, EUR million 99.3 * 4,806 4,773 4,652 4,400 4,286 4,302 1,128 8.8% 757 759 734 675 31.4 579 28.5 20.3 4.3% 3.8% 2.7% -3.3% -9.7 -1.4% Q1/18 Q2/18 Q3/18 Q4/18 Q1/19 Q2/19 Q1/18 Q2/18 Q3/18 Q4/18 Q1/19 Q2/19 -19.0 Housing FIN & CEE Housing Russia Housing FIN & CEE Housing Russia Q1/18 Q2/18 Q3/18 Q4/18 Q1/19 Q2/19 Business premises Infra projects Business premises Infra projects Adjusted operating profit Partnership properties Partnership properties Adjusted operating profit % *Order backlog of discontinued operations excluded. Q2/19 discontinued operations order backlog EUR 300 million (296). 11 Half-year Report January-June 2019
Performance by segment in Q2 REVENUE PER SEGMENT, EUR million ADJUSTED OPERATING PROFIT PER SEGMENT, EUR million, % 50.0 10.2% (9.6) 40.0 Q2/2018 Q2/2019 Q2/2018 Q2/2019 317 30.4 330 29.1 Adjusted operating profit% 30.0 in Q2/19 (Q2/18) 286 280 2.1% 20.0 247 (2.5) 212 230 10.0 5.3 5.2 2.8 193 176 0.0 180 -0.2 -0.6 -0.8 -2.7 -10.0 -7.3 1.5% 130 (-0.5) -7.8% -20.0 (-13.7) 80 53 -30.0 35 30 -40.0 Housing FIN & Housing Russia Business Infrastructure Partnership -20 -50.0 CEE premises projects properties Housing FIN & Housing Russia Business Infrastructure Partnership CEE premises projects properties 12 Half-year Report January-June 2019
Synergies and integration costs CUMULATIVE SYNERGIES INTEGRATION COSTS 2 MAIN SOURCES OF SYNERGIES Cumulative integration costs Measures done EBIT impact 60 60 Automati External 1 sation services 46-50 46-50 46 Harmoni 45 Overlaps sation 40 40 40 40 34 15 25 25 IT 23 22 19 6 20 20 19 19 19 Premises 0 0 Actual (2018) Actual Actual Target (2020) Actual (2018) Actual Actual Estimate (Q1/2019) (Q2/2019) (Q1/2019) (Q2/2019) (2020) Additional synergy benefits expected from refinancing 1 According to the original target, full EBIT improvement potential per annum by the end of 2020, original target was set in June 2017. The target was raised in connection with Interim Report January – March 2018. 2 Integration costs for 2017, EUR 4 million included in the cumulative figure 13 Half-year Report January-June 2019
Market outlook for the next 12 months Housing Finland Business Infrastructure Partnership and CEE Housing Russia premises projects properties Finland Russia The CEE countries The Baltic countries The Czech Republic, Slovakia, Poland Scandinavia Sweden Norway Weakened outlook compared to the past Improved outlook compared to the past Unchanged outlook compared to the past 12 months’ development 12 months’ development 12 months’ development 14 Half-year Report January-June 2019
Sustainability targets set for 2019 4 SIGNIFICANCE FOR 1 5 STAKEHOLDERS 6 2 3 SIGNIFICANCE OF IMPACTS YIT’s sustainability targets for 2019 • based on the materiality matrix to guide YIT’S SUSTAINABILITY TOPICS AND TARGETS YIT’s sustainability work. 1. 2. Targets approved by Group Management • • Circular economy potential • Responsible business principles • Sustainable urban development KPI’s • Fighting corruption and transparent Team and published as part of actions Sustainability Review 2018 in May. Full list of YIT’s sustainability targets in • YIT Sustainability Review 2018. 3. 4. • Preventive occupational safety targets • Positive work athmosphere • Reactive occupational safety targets • Supervisory work • Human rights 5. 6. • Audits and harmonising procurement • Energy and material efficiency processes • Carbon calculations • Increasing transparency • Recycling and reuse of materials 15 Half-year Report January-June 2019
3 Segment reviews HENRIKSDAL WASTE WATER TREATMENT PLANT 16 Half-year Report January-June 2019 STOCKHOLM, SWEDEN
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