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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 7 1 1 1 |
| -9/2016 -9/2015 -9/2016 -9/2015 -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 million 8.3 8.5 19.3 12.7 21.2 |
| |
| Order backlog at period end, EUR million 258.5 176.0 258.5 176.0 195.0 |
| Earnings per share, EUR 0.16 0.20 0.37 0.29 0.52 |
| Cash and other liquid assets, EUR million 66.6 27.7 66.6 27.7 24.6 |
| Interest-bearing liabilities, EUR million 22.1 19.7 22.1 19.7 17.0 |
| 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.

| -9/2016 -9/2015 -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.


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

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

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 for sale 0.0 1.0 0.0 |
| 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.


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 ...

Författare Hugin

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