Lehto Group Plc: Losses in the first half of the year decline Lehto’s financial outlook for the year 2019

Lehto Group Plc
Stock exchange release
6 August, 2019 at 8.00 a.m.

Lehto estimates that the Group’s net sales for 2019 will be at level of 2018 or lower than on year 2018 (EUR 721.5 million in 2018) and that full year 2019 operating profit will be negative due to strongly negative first half of 2019 (operating profit EUR 37.2 million in 2018).

The net sales outlook is weakened due to delays in start of Business Premises projects. The main reason for decrease in the estimated operating profit is due to losses in complete renovation projects which are significantly larger than estimated. The operating profit outlook is also weakened by single loss-making projects in Social Care and Educational Premises and Business Premises service areas and slightly declined sales prices of the apartments.

The operating profit of the first half is burdened by approximately EUR 15 million losses from complete renovation business and approximately EUR 6 million losses from Swedish operations. Losses from complete renovation business and from one project in Sweden have been taken into account in the full year financial outlook.

The outlook is based on the information on the progress of ongoing construction projects and the company’s estimate of construction projects to be started and sold in 2019, and the development of the apartment sales markets.

The main risks associated with the development of net sales and operating profit are related to declined demand of apartments, delays in care home and school projects and business premises projects as well as increase of costs to complete projects.

Lehto’s CEO Hannu Lehto:

“The strong growth in past years and concurrent expansion on many areas have resulted losses for the current year. Some business decisions and projects made during the growth period have turned out to be wrong and poorly fitting in Lehto’s strategy. Although we have already taken the corrective actions, the impacts for the results are visible in delay.

Most of our business is healthy and profitable and is based on our strategic competitive advantages that are: design control, standardized solutions and factory-production. On those areas that are based on strategic competitive advantages our business is financially healthy too. On these we will focus more clearly in the future.

For the second half of the year we expect a clear turnaround on the profitability since the long-lasting loss-making projects are completed.”

The previous outlook, published on 9 May 2019 was as follows:

Lehto estimates that the Group’s net sales for 2019 will be at level of 2018 (EUR 721.5 million in 2018) and that operating profit will be 2–6% of net sales (5.2% in 2018).

Additional information

Hannu Lehto, CEO, tel. +358 500 280 448

Veli-Pekka Paloranta, CFO, tel. +358 400 944 074