Yit Oyj Unsp/Adr

Good morning and welcome to YIT's first quarter 2021 earnings webcast. My name is Tommi Järvenpää. I'm the head of YIT's investor relations. Our first quarter profitability improved from last year. This was driven by solid performance in the housing segments and stabilizing result in the business premises. In the beginning of the second quarter, Markku Moilanen started as the new CEO of YIT. Next, we will hear Markku's first thoughts about YIT, and then Markku and our CFO Ilkka Salonen will go through the Q1 results in details. After the presentation, we will be taking questions from the conference call lines. At this point, I would like to hand over to Markku. Please go ahead.

Thank you, Tommy. Good morning on my behalf as well. Before starting by sharing my first impressions as the CEO of YIT, I would like to give a big thanks to Antti Inkilä. He did an excellent job as an interim CEO, and of course to the whole management team. Due to their great work, we have achieved these good results that Tommy was alluding to. I'm very happy to announce as well, as we told earlier this morning, that we are strengthening the YIT's management team. So we have a new member, Ilkka Tomperi will join us. He's currently working at Varma Mutual Pension Insurance Company as the investment director. head of real estate. He has a long international experience in real estate development and investment. So welcome Ilkka. So let's go further. And I would like to show you a bit of my first weeks as a CEO. And I have to say that I'm really impressed on our people. Their competence, their professionalism and passion. And we certainly have outstanding team spirit here at YIT. I already knew before joining YIT that YIT's brand is highly recognized, but now after discussing with our clients and customers and our stakeholders, my view has only been strengthened. We have a highly appreciated and recognized brand. Thirdly, Our quality of work in construction is the best in the industry. We know how to build houses, schools, tunnels, bridges and so on. And that's, of course, important because that's the core of what we are doing. And finally, we have been very successful with our customers and clients. Our customer satisfaction score in our housing business in private customers reached this spring the highest score in the industry in the EPSI rating. So we reached a score of 81, which is a very high score. And our group NPS is at a good level at 51 as well. Overall, looking at the company, We have been doing work on harmonizing the processes, driving cultural integration and strengthening our financial position. However, it's clear that our project performance and earnings volatility have been not on a good level. There's been too many deviations. So therefore, we need to become more resilient in our performance, in our operational performance. Based on the findings, we have now initiated immediate actions in three areas. in project management, in our operating model, and then in our strategy starting from infrastructure. In project management, where we have had the issues or the volatility in some of the projects, we already at the end of last year initiated a detailed program to improve our project management. What we are doing there is, of course, the very practical things, looking at the processes, the practices and our reporting as well. In addition, we are taking a more rigorous look of our culture to ensure that we have transparency and discipline and consequent management so that we follow the rules and the principles that we have commonly agreed. We can already see promising results in the business premises segment. Since Tom Ekman took over the leadership of business premises May 2020, we can see a continuous improvement, and the first quarter certainly is a good result of that. Secondly, we have started to look at our operating model, to look at where do we have resources to clarify our responsibilities, removing overlaps in order to have an efficient operating model moving forward. And thirdly, we have started to look at our strategy. And the natural first step that we have already now initiated is infrastructure. We have had, as you know, unsatisfactory performance and project deviations in the infrastructure segment. And on management side, now when Antti Inkilä took the role as the interim director, we have a strong leader in that business, and we are looking at the behavior on that business. But we are certainly looking at the strategy as well. And we are doing that in a very traditional way, looking at the market, situation, the market opportunities, the competitive situation. Then we are looking at our own internal capabilities, our differentiators, and based on that, looking at where do we want to do business in the long run. This infrastructure strategy is the first step of looking at the overall YIT strategy. I'm quite sure that the core of our strategy, that we want to be a sustainable urban developer, remains at the core. However, we need to sharpen our strategy to define more clearly where we want to play, where we are really successful, and we want to make our objectives more tangible. Secondly, we'll have a renewed vigor in sustainability. For example, the green finance framework that we are telling later a bit more today is first big step in that area. And finally, in order to ensure our long-term competitiveness, we'll take a more rigorous look at health and safety. It is and it will be number one for us in everything we do. During the last year, we have, of course, been fighting against the COVID-19 pandemic, and the results are good. So we have taken successful, proactive actions. For example, the mandatory masks on the sites, and we are using them at the offices as well, using the docks to identify the infections and so on. We have been able to keep the sites open and the infection levels low. And as in the whole society, in those geographies where we are, the overall infection rates are going down. But we have to remember the pandemic is not yet open. So we have to be following the rules over there to ensure that we can safeguard our people, our subcontractors, people, and of course, our business as well. Looking on the other hand, health and safety performance, it's been stagnant for some time, and we need improvement that. We have a key KPI, the combined lost time injury frequency, and our short-term target is to bring it to below nine. Currently, the level is 9.9. And we have already an action plan in place, really from the leading indicators, increasing management attention, increasing management safety walks. And we see that that is leading to higher number of safety observation and finally to lower level of accidents. We certainly want to have a respecting life attitude in everything we do. So let's have a look at our first quarter results in a nutshell. Overall, our adjusted operating profit ended up to be 21 million euros, and our gearing was at target level. We had a solid quarter, and we had excellent performance in the housing segment, actually in all the geographies that we are, in Finland, in the sea countries, and in Russia as well. As I was alluding to earlier, our business premises business was stabilized, and we can see that in the results during Q1 as well. Secondly, we had a strong cash flow, which was supported by strong apartment sales and decreased capital employed in Housing Finland and CEE. Actually, we had record high Q1 cash flow, 70 million euros this year. Thirdly, a key item during Q1 was our launch of our green finance network. which is supporting our overall climate and sustainability targets. We issued three GRE bonds, totally 300 million euros. Ilkka will share you a bit more details on that area. And finally, our balance sheet was strengthened due to the improved cash flow and the hybrid bond issuance. And our gearing reached our target level, which is below 50%. Our gearing during the first quarter was 44%. Why do we need a strong balance? That's important for us because construction is a cyclical business. And we want to have a strong balance sheet and a low gearing level, because that allows us to do business development and investment in any market situation and pay dividends to our shareholders as well. So Ilkka Salonen, our CFO, will now walk you through the Q1 results in detail.

Go ahead, Ilkka. Thank you, Markku, and good morning, everyone. uh if we look at the q1 q1 uh revenue as well as about the order book or in the generally it was a solid solid quarter and in the revenue even it seems that we have 100 million lower revenue than last year it's good to remind that last year we made the Changing our revenue recognition in Russia, where it was one of item roughly about 60 million. And then we had the Keilaniemi eight hour sales last year, which was a one of item. So more or less at the same level, the operational side. Then in the order book, If we look at from the end of last year, all the segments actually increased their order book, which is good. If we look at compared to the last year, there we see ups and downs. And in the housing side, in both segments, actually the reason is that we had a stop in our startups in the spring due to the coronavirus. And then in infrastructure side, we are finalizing big projects at the moment, and the new ones are in the design phase when there is not too much in the order books. Adjusted operating profit 21 compared to 8 million last year. That is a good improvement. And then if you look at from the segment side, it's easy to see that housing has done a good job. I'll come to that a little bit later. And business premises turned to be profitable. infrastructure slightly lower than the previous year, and then the partnership properties five compared to 14 last year. And then if we look at a little bit that where those items are actually coming from or where the delta is coming from compared to the last year. Housing Finland, clearly strong sales. Housing Russia, minus one. But once again, it's good to remind that last year we changed the revenue recognition over there, which had a five million euro impact. So in the real life, the underlying performance in the Russian operations was roughly about four million better. And in business premises side, very much driven by the fact that the deviations last year were huge. And this year, the negative deviations are not over there. As you remember, Myllipuro as well as Tripla had an impact for last year. Then infrastructure slightly weaker than last year. And then the partnership properties, that's almost fully described by the fact that last year we sold a tower in Keilaniemi this year. Keilalampi and the deviation is pretty much close to 10 million euros. So that's shortly housing. did a very good job in operations, business premises stabilized, infra pretty much the same than last year, and in the partnership properties, timing of the asset sales. And as Markku said, the cash flow was on the good level, actually record high for the Q1, 70 million last year, minus 48. And if we look at the time when YIT and Lemming Cannon was merged, actually Q1 over there was almost close to 200 million, negative. And that has been one of the major driver just what comes to the operations, the cash flow. So where we have spent the cash flow, The plot investments were lower than, let's say, normally, but it's more or less about the timing of the plot investments, and we are for sure willing to invest for the plots as we have done in the previous years as well. So there is no changes in that attitude. And yes, we had the green ponds in the in the first quarter, and we have established a green finance net framework internally. And there are those five categories where we are actually impacting to the environment and sustainability. And the biggest one in our case is the green and energy efficient buildings. That is the biggest part in our operations. But of course, renewable energy, just like wind power, clean transportation and technologies like trams, what we are doing, pollution prevention, just like water treatment in Helsinki capital area as well as in Stockholm and the climate change adoption how for example how we can help the cities to handle the raining waters which is probably increasing in the future due to the climate change how we can help the the cities handle those ones so there are those five categories we reach the life and that's pretty much or that's fully the reason is that the biggest one is the first one where we have the light adoption the others are medium or dark but we are very happy that we were able to establish them and and and also we were able to raise the 300 million euro green bonds there are three transits two senior bonds and one hybrid, and the maturities are three to five years. And also our financial costs are lower than previously. Then to the net interest bearing debt, actually that's minus 53% compared to the last year. And yes, hybrid was one topic over there, that 100, but that's only 100 over there. The biggest impact is from the sales of paving last year. That's about 300 million. But even you take those two ones, we have also able to generate gas flow from our operations clearly better than in the previous years. And after the transaction, the maturity structure of interest-bearing debt is uh very favorable we are we have been able to longer our our maturity and then as as mark mentioned about the gearing target now we are in the target level thanks to the the cash flow from operations, thanks for the hybrid bonds, and thanks for the paving sails. Now we are under 50%. And it's good to mention over here that if we haven't had that hybrid, which was a strategic decision, our gearing would have been around 60%. And the equity ratio, 37. and also the net debt to adjusted EBITDA ratio, as well as interest cover ratio, both are improving. Then back to Markku, please tell us what comes to the outlook.