Good afternoon, and welcome to YIT Capital Markets Day 2021. Today is special. First of all, it is special as we are hosting a live audience after a very long time. This is wonderful as we have lots of new members in our management team who are eager to meet all of you in person. Secondly, today is special. I have just heard that we have a huge audience following our event online, and I would like to warmly welcome all of you also listening to us over the web. Thirdly, today is special as we will be introducing YIT's new strategy. At YIT, we want to deliver predictable market-leading results. We will be driving growth in our housing segment and unlock significant productivity improvements across our businesses.
We also want to be the industry forerunner in sustainability, and we are taking decisive steps in ESG, more decisive than ever before. How are we going to do this? This question will be answered today by our CEO, Markku Moilanen, and his management team. But before we get started, let's go through a couple of practical details. First of all, safety. Safety is the top priority at YIT. If you hear a fire alarm, it is real, then please proceed to the exits on your right side and then to the meeting point outside. We will be hosting two Q&A sessions today. First of them will be after the two presentations by our CEO and CFO, and another Q&A then will be at the end of the day, in the afternoon after all the segment presentations.
In both Q&As, we will be taking questions from live audience here, as well as from the webcast. Please note that you can send your questions also during the presentations through the webcast platform. Markku Moilanen started as the President and CEO of YIT last April. Markku has taken determined actions to strengthen YIT's performance, and next, Markku will take us through how we are creating sustainable success through sustainable living. Please welcome Markku Moilanen.
Thank you for joining. It's really great to see all of you here face to face at the great Mall of Tripla, and welcome all of you behind the scenes on the webcast as well. We in YIT are in a business of creating sustainable success through sustainable living. So let's have a look how are we going to do that. But before starting, there are three things I would like you to remember from this session. Firstly, we will grow in housing. Secondly, we will focus around our great core competencies to deliver predictable market-leading results. And thirdly, we'll step up in ESG and in sustainability in particular. During the last few months, we have worked hard, looked at our businesses, and defined clear strategies for YIT as a group, but for each of our business segments as well. We have defined targets specifically for each of them.
We are well-positioned to deliver predictable market-leading results as well. We have defined a clear direction when it comes to sustainability, which we see a big opportunity for us. Our planet has a challenge. Sustainable living is something which is a big challenge and a big opportunity for all of us. If we think of the mega trends, there are two mega trends that are affecting our industry and YIT in particular. The first one is urbanization. There are more and more people moving to the growing cities, and that gives a lot of demands to the built environments. The second one is climate change and sustainable development. Climate change means that we need to rethink how resources are used, and it means that life cycle thinking is becoming more critical as well. YIT will turn 110 years next year.
Throughout these years, we have been in a business of creating better living environments. Being customer-focused, we have a clear purpose to deliver better built environments. Today, we have a strong position to build our company and our strategy. We have a strong brand. We have talented people. Over the last months when I have visiting the sites, the construction sites, it's so great to see our people who have a winning team spirit over there. Of course, we have the great people in the offices as well. We have satisfied customers. We are measuring customer satisfaction in each of our segments, but then there are external bodies which gives us highest ranked customer satisfaction as well. Then we have strong local presence as well. Everywhere where we are, we know the market, we know the clients, we know how the market works.
However, it's evident that during the last times, our performance has not been satisfactory. We have been looking at really behind the scenes, finding the root causes of our performance. The first one is that we have had an inconsistent focus. We have been searching growth on areas where we haven't really been competitive. That has led to non-optimal capital allocation. In addition, we have had issues in a few projects when delivering them. Finally, after mergers and acquisitions, our operating model has turned out to be inefficient. Now it's time to launch a new strategy, a way forward during the coming years, 2022- 2025. Our strategy has three components. Firstly, we have redefined and clarified our business model with a clear focus and role of each of the business segments. Secondly, we have three strategic priorities through which we will implement the strategy.
Then we have our targets and KPIs, and as a group, our goal is to reach an EBIT margin of 6%. Let's start from the first one, the business model. Like I told in the beginning, we will grow in housing. Housing is our largest and most profitable business unit, business segment, and the market is very good. The growing city, there's more need for new homes. It will be our growth engine. It has its own customer base. It's consumer business, which we know very well as well. Housing is a process, whereas infrastructure is project business. There, the role of infrastructure is to leverage the core competencies to generate strong profits and a stable cash flow. Like infrastructure, business premises is also project business. It will focus moving forward on core project types to generate strong profits and a stable cash flow.
Both of these segments have their own customer base. Infrastructure serving mostly public sector, but together building the foundations of the great houses or schools or hospitals we are building in business premises as well. In the past, some of you have been asking about our partnership properties segment. I have to say, when I joined YIT, I was asking, if I may, so what kind of animal is this? We will dissolve that segment, but we will build a new segment called property development. As the name says, it will concentrate on property development, and the role as part of a group is to fuel the growth in housing and then increase the profitability of the other segments by adding the property development margin on top of the construction margin that we are doing in the construction segments.
The second element of our strategy are the three strategic priorities. Like I mentioned, each of the business segments have their own focus areas, and the heads of the segments will elaborate those much more in detail. In a big picture, yes, we are growing in housing and part of that, like we have informed yesterday, we are evaluating our strategic options in Russia, which would release significant amount of capital to be used in the other growing areas. You might ask, what is different in this new strategy compared to the old or existing one? In the old strategy, we defined four areas that we are doing, construction, development, ownership, and services. In this new one, we will concentrate on what we are really good at, and that is construction and development, and the ownership and the services are no more in focus.
It is our goal to divest the non-core assets as well. The second priority, strategic priority, is productivity. The first one in a big picture is the transformation that we are already doing in infrastructure and business premises. We started the turnaround in 2020 in business premises, and now this year in infrastructure. Now they will turn to a transformation which will improve their profitability. Again, the segment heads will open that a bit more in detail. We will drive efficiency in our production. Through lean construction, we will utilize our economies of scale in supply chain or procurement. Thirdly, we will implement the new operational model that we have designed this year, and we will gain the cost efficiency through that as well.
The third priority is ESG, where we, as we informed, announced Friday last week, as the first Finnish construction industry company are committing to the 1.5% global warming goal according to the Paris Agreement. We will continue our rigorous work to decrease our accident frequency. What is important, we will demand that everybody in our supply chain, so all subcontractors, have to qualify with the same criteria as we will as YIT. All of these will take us to the 6% EBIT from last year's 2.1 level. Our CFO, Tuomas Mäkipeska, will open you the numbers and the journey later today a bit more in detail. Let us now next have a look at quickly on each of these different segments. Like I mentioned, the segment heads will open that, elaborate a bit more in detail.
In housing, they will really focus on the growing cities, looking at the market where the growth is really happening in those geographies we are in. They are the Helsinki capital area, the Tampere, the Turku in Finland. It is Warsaw and Gdańsk in Poland. It is Prague in Czech Republic, and then it is Bratislava in Slovakia. We already have a strong plot reserve, which enables us to build 44,000 new homes. With releasing capital throughout this strategy period means that we will invest additional EUR 200 million in attractive plots in order to build additional 5,000 homes. Each of the segments will have and have their productivity programs. In housing, this means that our goal is to reduce lead times, production times by 20% by 2025. All in all, we are targeting a 20% revenue goal and an EBIT margin over 10%, which is a market-leading level.
Business premises, which is building both public and private buildings, is focusing on their core projects. I've been in project business more than 15 years, and there are two phases where you can fail or where you can succeed. The first one is the project selection and the tendering phase. In the past, like I said, our risk management has been inadequate on that area. The second part is when we are delivering the business, and we are tackling, and we have started to tackle this already this year in business premises. So we will increase the share of the project types like our self-developed project together with our property development segment, life cycle projects like schools, kindergartens, and competence-based projects as well. This year, 2021, we have already said no to EUR 500 million worth of projects which we would have tendered before.
EUR 500 million project we have said no because they are not fulfilling our criteria. At the same time, we have a very high order book. So it's about selection. Then it's about the delivery, and over one year, we have worked hard on our project management program to improve the delivery part as well. All in all, with these actions, we are targeting above 4% market leading margin. Infrastructure, which is building the backbone of sustainable societies, will focus around the core competencies. Again, Pasi Tolppanen is opening, explaining this a bit more. In a similar way, when the project fulfill the technical and the financial and the contractual drivers, we'll go for that. We'll continue our project portfolio renewal and ensure that we follow the project management processes, practices, reports, forums that we have defined during the past year.
We are sure that we will get to over 4% market-leading margins. Our property development segment then, their focus is to start one to three self-developed projects to generate gross margin for entire YIT. So it's not only the property development margin or construction margin, but it's the combination that we are striving for. Whereas in the past, we have been targeting a wide set of really large projects. Going forward, we will only go for them when we have a clear competitive advantage, when we can manage the risks, and our capital employment is optimal. When it comes to profitability, we have gathered all the major project directors, managers in the same organization to ensure that we have an endless delivery from the early phases of development, even urban development, towards the delivery of the building work we are doing.
Their role is also to take care of our investment portfolio, rightsize it, and divest the non-core assets. The KPI for this segment is the return capital employed, and their target is to be on above 10% level. To summarize the goals, we are targeting an EBIT margin of 6% while maintaining a solid balance sheet, and that's important for us moving forward. Our gearing target will be below 50%. Of course, it's our shareholders, we want to ensure a stable growth in dividend for them. Let's go back to the sustainability. Why are we focusing on sustainability? Buildings are generating almost 40% of annual global CO2 emissions. We need to do something, and we can do something. That's the reason that we have committed to the science-based targets. Let's have a look at how are we going to do it.
Let's open the ESG by capital. On the environmental side, on E, it is about the goals in the science-based targets. Again, we are now defining that together with a science-based organization, and there are a few scopes. The scopes one and two are the emissions from our own operations, and we continue to have a goal to halve them. The second one is our indirect emissions. It's like the materials that we are using in the buildings or infrastructure or the energy we are using there as well. On the social side, I want to highlight that we are really building the social infrastructure, being it the hospitals, the schools, the homes, the transport we are doing. That's important role for us.
It's about our people as well, and we will continue to decrease our accident frequency on our construction site, and overall as a company, we really have an ambition to have a zero-harm workplace. When it comes to G, the good governance, we continue to have a zero tolerance when it comes to gray economy, corruption, labor exploitation, and discrimination. On governance side, again, I want to repeat that it's important that we'll make sure that everybody on our side, every subcontractor will have to fulfill the same strict criteria. Let's summarize. We have defined clear strategies and targets for our businesses. In a while after the break, you will hear more about the details. The big thing is really the growth in housing. The market is good.
There's need for new homes, new apartments that we are doing by ourselves and together with our partners as well. The second one is that we really want and will deliver predictable market-leading results. Our group EBIT margin goal is 6%, which is a result of the components of each segment. Going forward, we will report the results of each segment as well. It is the sum of the segments that we are reaching, above 10% in housing and above 4% in business premises and infrastructure as well. Thirdly, we have a clear direction what we are going to do in ESG. The big thing, really, where we want to show the way is the commitment to 1.5% global warming as well. As a company, as a CEO, as a management team, we are now ready to build a better tomorrow for all of our key stakeholders.
We want to be the most reliable and high-quality company for our customers. Customer-centric in everything we are doing will remain. We are the ideal employer among both professionals and students in Finland, and we want to keep that position by enabling individual growth for our people. It is about the team spirit and the winning teams that we want to support moving forward. Of course, it is our shareholders through the profitable performance that we will do in the coming quarters and years. Now it is time to deep dive a bit more to the numbers. The next speaker will be our new Chief Financial Officer, Tuomas Mäkipeska. Tuomas, please, the floor is yours.
Thank you, Markku. Good afternoon on my behalf as well. We will take a step change in our financial performance, and that is the number one priority in our strategy. Let us first revisit the financial targets. First of all, we are targeting the 6% EBIT margin, which is nearly tripling our current financial performance. We are also targeting, as Markku mentioned, less than 50% gearing in order to manage risks and keep our balance sheet healthy in order to maneuver in the changing situations in the market. Thirdly, of course, we will increase our shareholder value by paying out stably growing dividends.
We have taken the 6% EBIT target to serve as a financial target because it is suitable for the group level since the ROCE, the return on capital employed, differs so much between the segments since we have in some of the segments negative capital employment and in other ones more heavy capital employment. On a group level, it is more wise to follow and target relative profitability in terms of EBIT margin 6%. Let us now look at the means how these targets will be reached. There are basically three key means to reach this step change in financial performance. First of all, the productivity in terms of profitability improvement. Secondly, more wise capital allocation. Thirdly, a rigorous strategy execution. We will start with the productivity improvement. Markku already opened this up from a segment point of view, how will the productivity and profitability improvement be reached by segment?
Here you can see the same thing split to different components. First of all, as mentioned, we are nearly tripling our relative profitability. The biggest and the strongest lever in doing so is the productivity leap. Secondly, there is the investment returns and growth in housing business. The productivity leap is the biggest lever, and I will elaborate on each of these a bit more. First of all, the operating model that we have been designing during this year, it is more customer-centric, it is more agile, it is more empowering, and it is more cost-efficient. We are targeting EUR 15 million-EUR 20 million annual savings of the new operating model by year 2023. We are already gaining benefits from this next year, but at full speed in gaining these benefits we are in 2023. The benefit sources in our operating model comes basically from efficiency in our administration.
We have increased, and we will increase our span of controls. At some instances, we have reduced one organizational level. We will reduce bureaucracy and we will increase digitalization in our processes. These are the main sources to cost efficiencies in our operating model in future. The second topic is our project management. Markku already in his presentation told you that there's two phases where you can succeed or fail in project business. As mentioned, we have said no to worth of half a billion euros projects that would have been engaged in history. We have put in place clear and strict criteria, which kind of project we are entering in, and we have focused our capabilities in tendering phase of the projects. Even more importantly, we've been focusing to the delivery phase of the projects.
We've started an excellence program in building capabilities throughout our organization in every level, how to minimize and reduce deviations against the original plan in our projects. We've worked already now heavily on this topic, but since this is a fundamental change which goes throughout the organization, it will require some time to get in full speed. Therefore, we are by year 2024, we are at full speed in gaining this annual profitability impact of EUR 50 million. The third component in profitability improvement is supply chain management. In supply chain management and procurement, including procurement, we are both targeting direct cost savings by properly using our purchasing power.
Moreover, we are targeting indirect cost savings, both from administrative processes by automating and digitalizing our administrative processes, and most importantly, we are targeting lean in our construction sites. Just to give you an example on a material rebars that we use. It's typically a material which is ordered from site and since the delivery times are a bit too long, it is often, it is often kind of taken into account that we order a bit too much so that it definitely is enough. Therefore, the rebars, they might lie there on the ground on the site, which will have a negative impact on the site logistics. It will increase the risk of accidents. It will reduce, or it has reduced our productivity on site.
If we take this and turn it around, build the operating model where we can deliver just the right amount of rebars at the right time and at the right price. This will have both a direct impact on our project margins, but also it will have an indirect impact in accidents and productivity at site. Supply chain management as an area, we are digging deeper right now, analyzing the full potential and we will define targets for ourselves also on that area. Moving forward to the next component in improving our profitability. It is the investment returns. We are right-sizing our portfolio to achieve a step-up also in investment returns. We will divest non-core assets.
Here it is pointed out that Mall of Tripla, where we are, is a business which is actually doing pretty well right now. But since we have suffered from COVID-19 last year and this year, the exit is a bit delayed. We are targeting to exit Mall of Tripla in 2024. My colleague, Ilkka Tomperi, will elaborate on this a bit more later today. Going forward, we are targeting to have less than EUR 200 million investment portfolio, which has a clear criteria, ownerships less than 50% and less than EUR 30 million equity stakes in the projects we are. Again, to manage risk and select where we have competitive advantage.
Third component for profitability improvement was the growth. We are targeting growth in our housing segment, both in Finland and in CEE countries, in the growing cities, 20% during the strategy period. Also targeting EBIT improvement and more than 10% at the end of the strategy period. This will have a positive impact on our EBIT, both in relative and in absolute terms on a group level. Also about this, my colleague, Antti Inkilä, will elaborate a bit more in his presentation. Moving on to the second key mean of improving our financial performance is the capital allocation. Markku already described our new business model and the roles of different segments in our group. If we look at the same thing from capital employment perspective, we already now have a negative capital employment in business premises, and the capital employment in infrastructure segment is also modest.
But still, from both of these segments, we are targeting to release capital. As already mentioned, from property development, we will release capital. The capital will be used to gear growth in our housing segment, as mentioned. One key thing in releasing capital was the thing that Markku already mentioned was Russian operations. As informed yesterday, we are evaluating our strategic options in Russia. Currently, we have a bit more than EUR 180 million capital employed in Russia. We have been able to reduce our risks there. So far, we have been able to reduce the capital employed during the last quarters. But this is the current situation as a basis that we are evaluating our options there. If we lift up the capital allocation back to the group level.
In a big picture, the free cash from the operations after investments and the capital from the divestments will be used to, of course, increase our shareholder value, paying out constantly growing dividends. It will be used to strengthen our balance sheet, as mentioned, targeting less than 50% gearing, and it will be used to gear growth in housing segment and keep investing in property development. So this is in a big picture how the allocation is going forward. For this capital allocation, we have clear criteria and strict rules how to make decisions. The third topic in improving our financial performance is the strategy execution. Of course, it starts with balance sheet. Does the balance sheet give us room to operate? Yes, it does. We have a solid balance sheet.
Since we have been able to create solid cash flows during the last quarters, we have been able to lower our net interest-bearing debt, and we have done it sustainably. Also, the sustainability view is taken into account in our finances since, as you already know, we launched our green finance framework during the spring. We also issued a EUR 300 million green bond during the spring, and now going forward, we are reporting according the EU taxonomy of this year, and we are, for the first time also, reporting against the green finance framework during the spring. The sustainability point is also taken into account in our finances. The strategy execution. This is now extremely important. There are two takeaways here. First of all, if we look at our situation and our segments, they are a bit different phases in terms of maturity.
If we look at Housing is in a good shape. It is delivering stable returns, and we are ready to start growing there. We will accelerate our growth in housing starting year 2023. As you already know, we have been lowering our startups because of the COVID-19, but now we are again accelerating. Business premises and infrastructure. In both segments, we are going through a transformation which will take and require some time. This will lead to a situation we are in business premises a bit further, almost ready to accelerate in generating profitable cash. In infrastructure, we have just started the transformation. It will require next year to be completed. After which, we are ready to grow profitably. In property development, as already mentioned, we have a clean table and a new role in our group.
This means that in year 2023 and onwards, we will be able to accelerate in profitability improvement. That was the first takeaway. The second and most important takeaway here is the rigorous strategy execution, which will be enabled by integrated performance management. Meaning that we will break up our strategic targets, set them throughout the organization in every level, incentivize them, have a frequent follow-up processes in every level of the organization, taking immediate corrective actions in order to keep on the path. This is a thing where we are going to take a step change as well. This also gives us confidence that we are able to reach our financial targets. To conclude, as I mentioned, there are three key means in improving a step change in financial performance.
First of all, the productivity and the potential that we have there, and the potential that we are realizing. Secondly, the capital allocation. Thirdly, the rigorous strategy execution. By these, we are confident that we will reach our strategic targets. Thank you. Now, I think we have the first Q&A session coming up.
Yes, indeed. Thank you, Tuomas. Thank you, Markku, for your presentations. We are now ready for the first Q&A session. I will start. We have some questions already from the webcast platform. Regarding the ESG, what timelines are set to reach this target? We are talking about the scope one and two and three targets, I guess.
Yep. Thank you for the question. According to the science-based target, the target is up till 2030. We will of course break it down, like Tuomas explained, in an annual target for ourselves. But the ultimate target is by 2030.
The second question, at the CMD in 2019, business premises EBIT margin and infrastructure project EBIT margin had a target named good performance level of over 5%. What has been the main reason for the long-term target of 4% instead?
Yeah. We are, of course, doing the benchmarks in the market. Like I said, these are really on the market leading level. We are in a competition, and that is defining what does good look like.
Indeed. Do we have any questions from the audience here? I can see Olli, I think, was the first one. Or we could go with Svante first.
Okay.
Since you have the microphone already.
Thank you. Svante Krokfors, Nordea. A couple of questions. First one regarding your targets. You have an EBIT target on group level and divisional level growth target for the housing segment. What should we expect from business premises and infra top line going forward? Should we expect a shrinking one or?
Looking forward, I would like to refer to Tuomas' presentation, where we are in different phases. Growth is not the target, it is more the profitability. But looking at the phase, we expect that after 2023, yes, if there are opportunities, we would move to a growth path on both ones as well.
Okay, thank you. Regarding, you mentioned that business premises and infra should be cash cows for supporting housing. How does that fit into the business leaders for infra and business premises? How do they feel about being cash cows?
Well, they provide strong cash flow. They are actually proud of that. That is part of their business model doing that. It is about the core competencies, which our people are and we are proud of, which is the key here. The cash flow is the role of their business as well.
Thank you. Regarding the co-ownerships in future projects, I think you mentioned that it is EUR 10 million-EUR 30 million equity stakes. That is quite small compared to what you have, for example, in Mall of Tripla. Does that mean that you will not participate as a significant owner in the larger project that you have in the pipeline?
Yeah, I would say that this is the role of the property development. We are using it to fuel the growth in housing and the profitability in the two other segments. It is not the long-term investment. Yeah, we might take a share, sometimes even bigger, but then we want to get rid of it sooner than we have planned in the old strategy.
If I may add, our colleague Ilkka Tomperi, he will elaborate on this in his presentation after the Q&A session. If there are questions after his presentation, we will get back to that in the latter Q&A session.
Thanks. The last one from me is regarding your profit guidance for 2021 that you specified today. Could you elaborate a bit on the EUR 50 million additional margin write-downs that you make? This is purely for Q4, and is this a kitchen sink operation now?
Yeah. Just shortly on that one. Yes, we are looking at some legacy projects, and we want to really clean the desk, so to say. We have evaluated them this year to have a stable position moving forward. There are projects which are no longer in the focus according to the strategy, which are part of that one as well.
Thanks. Then Olli.
Thank you for taking my question. Olli Koponen from Inderes. Good questions already. I have a few more left, mainly on the financial targets side. Your profitability target seems quite careful, I would say, if we look at all the savings you highlighted and if we look at the segment targets that you said. Do you see this EBIT target as a ceiling for you or as a floor or as a reasonably stable profitability level going forward?
Yeah, I can answer that. In a big picture, as already mentioned, we see our strategic targets really reachable. It is not a floor. It is a really reachable target for us. So in a sense, it is also possible to go over. But I think for us to get steady improvements in our financial performance, 6% EBIT is ambitious also. We are nearly tripling our profitability.
Okay, thanks. On the housing side, you seek to grow the revenues by 20% during the strategy. Just to clarify, what is the starting level here? Is it counted as Finland, CEE, and Russia or only Finland and CEE?
The starting point here is Finland and CEE for the 20% growth during the strategy period.
Okay, thanks. On the housing to continue, can you comment on the mix between investors and consumers going forward? Is it going to change or how do you see it?
Again, I would refer to Antti Inkilä's presentation. He will elaborate on those, and we will have Q&A sessions on that afterwards as well.
Okay, thanks. On infra and business premises side, this 4% EBIT margin or close to that has been your target level for years now, but you haven't been able to achieve it. Can you give some more light on what is different this time around? How can you achieve it?
Well, like I explained, we have been seeking more growth and profitability. Our project and risk selection has been not on the level that it's today, and then the delivery part as well. Now we have done and will do, as Tuomas explained, actions on those to ensure that we gain our target levels.
Okay. One last question, that is also regarding the guidance that you released today. Can you give any kind of clarification on the EUR 50 million cost overruns, and in which segment do these cost overruns come from? Because it would be quite helpful to see if it is an old project in infra, old project in business premises, or is it Russia, or where does it come from?
At this stage, we are not opening that. That is our estimate. Of course, after Q4, we will then release the results in much more detail.
Okay. Thank you.
Thanks, Olli. Couple of questions from the webcast again. The dividends, stable growth, what is the base for the growth? The base year, because there is comment that there has been some volatility with the dividend over the recent years. So where is the base for the dividend?
Well, the base is this year's dividends, EUR 0.14.
Yes, indeed. Then second question, how will you finance the property development segment? How shall we think on growth versus group debt level targets for this new division?
Well, as mentioned, on a group level, we are targeting less than 50% gearing. That's kind of a gives a guidance of our balance sheet and how are we operating, and of course, also in property development. We are keeping that guidance also in that division. But we are not disclosing divisional level gearing.
Another question regarding the Russian business. The ruble, why to sell the business if the business is booming?
Well, I would firstly highlight that the sale is only one option. We are looking at the different options as part of the big picture and the group. On the other hand, I would say that in a good market, profitable business, a running machine, I think it is time to look at that option as well.
Any questions from here? Here, Markku.
Yes. Hi. Markku Moilanen from OP. Regarding the Housing Russia divestment, what is the timetable on that and are you still going to report it as a separate segment in Q4, or are you going to combine it to the housing?
Yeah. It is still our business. Again, divestments, I am repeating myself, is only one option. Q4, we will continue reporting. When it comes to the timeline, we will tell you more in the coming months as we move forward in our evaluation.
Any more questions from the audience? Samu?
Hi, Samu Wilhelmsson from Nordea Markets. On the behalf of CREATE-Research, I would be interested to know that you mentioned that you are going to maintain the strong balance sheet structure and the current gearing level you presented in Q3, it is within the target. Would you see that, for example, with the capital release from the non-core operations, would you use that to strengthen your balance sheet further, or are you happy with the current leverage level and capital structure, for example?
Yes. Thank you for the question. As I mentioned in the presentation, we are using the capital which are going to be released from the segments. We are using it firstly to pay out growing dividends, and we are using it also strengthening our balance sheet in order to maneuver in changing situations in the market. Also we are using it to gear growth in housing segment.
Just as a summary to clarify that the proceeds that you might get with cost savings and possible divestments, they are not fully earmarked to the housing, but to the entire balance sheet.
Exactly.
Okay. Thank you.
Thanks. A couple of questions from the webcast again. You mentioned that you will grow your housing business by 20% by end of 2025. Is the starting point for this calculation in 2020 or in 2021?
It is 2020.
Exactly. The next question. You stated housing segment plot investments up to EUR 200 million. This seems to yield only 20% revenue growth based on comments. Does this mean you expect ROCE in housing to fall?
No, we don't. We want to keep the level that we are today.
Any questions from the audience here? All right. Let's continue with the webcast questions. How fast will partnership properties be dissolved? Also, what can you say about levels of expected restructuring cost effects?
Well, actually, that is part of our operating model. From 1st of January 2021, we will have the new property development. We are well on our way. The details are part of the operational model work as well as the restructuring costs.
Then we continue with the property development. Will it also be JV based or development own based balance sheet, according to IFRS 15?
Well, we will have both, and so we will continue doing attractive JVs. It is a good combination for us to do both.
Next question. How well is today's order backlog supporting the EBIT targets? Or is it needed to get even more profitable orders to get to margin targets? If so, time before we see results externally. Summer time.
Good question, and I will refer to the coming presentations from the business premises and infrastructure businesses because they are opening that a bit more, and we can come back to that if needed later.
Great. Any more questions from the audience here? Svante again.
Svante Krokfors, Nordea. Perhaps a question regarding your plot reserve. What kind of quality do you see in that? You said that you have 44,000 apartments you could build on that, and that probably gives a top line of EUR 5 billion-EUR 10 billion roughly estimated. Do you think you can use that entirely? Are you satisfied with the current plot reserves, or do you see any risks there?
Well, we are satisfied. We have a good plot reserve, and Antti can comment that later in the discussions, but we are happy.
Thanks. Another question from the webcast. In housing, the EBIT margin target in 2019 was over 10%. What is different this time? How much will the 20% revenue growth depend on market growth in this forecast? Is the growth based on market growth or market share gain or targets? What markets will deliver the growth?
Again, referring to Antti here, who will elaborate it a bit more, but it is our selection of these markets that I mentioned, the growing cities in Finland, Poland, Czech Republic, and Slovakia, which are growing even more than what is our target.
Great. Any further questions from the audience here? It seems that at this point we have no further questions, so we will have a short break, and then we will continue at 2:30 sharp. See you in a bit.
[Break]
The program continues now with the segment presentations. We will hear now first all four segment presentations. Then after that, we will host a joint Q&A for all the presenters. As a reminder, you can send your questions over the webcast platform, also during the presentations. Antti Inkilä is a true veteran of YIT. He has been with the company since 1994, and he has a very strong background in construction. Antti is currently leading our housing segment, and as we have been talking about, housing is the growth engine for the company over the coming years. Antti Inkilä, please welcome.
Yes. Thank you, Tommi. I guess we could say that I am some kind of old-timer in our management team. Anyway, it is pleasure to be here today. As Markku and Tuomas already told, our task in housing is looking for growth. Let me introduce you how we are going to do that and how to be profitable in that sense also. We design and build homes for our customers to help make their living easy. Therefore, it is essential for us to understand customers' needs now and in the future. Essential for us is buy apartment from us. In residential business, there is a saying that there are three things when customer wants to buy apartment from us. First is location, second is location, and third is location.
There is a truth in that sense, but I will come to our plot portfolio later, and let's go that more precisely through. Another important thing is customer experience. We have worked on that already several years and trained our people throughout the organizations in service-minded and quality-centric thinking. We have developed a digitalized customer journey. It started from the sales opportunities, and it will last as long as the customers are living in our house or in her or his home with our YIT Plus portal. We have a solid track record of being appreciated and valued brand among our customers. We have excellent customer satisfaction rate. As an example, in spring 2021, in EPSI Rating survey, we were the number one customer choice in Finland. So the customer insight is crucial for us. We have strong sales offices everywhere we operate.
We actually sell almost all of our apartments through our own sales. So the market insights of trend changes are at our arm's length. For example, during the COVID time, we have increased our average size of apartments by 3.5 sq m . Now we see that the sustainability team will be one key thing when our customers are making decisions in the future. Yes, we definitely want to be the number one choice what comes to the customers also in the future. When it comes to the YIT strategy, we have selected three items or key areas. Firstly, we will focus on growth on cities of economic growth and stability. Secondly, we will continue our work to develop our productivity. Thirdly, we will strive to enable sustainable lifestyle for our customers. So let's move on to these themes in more detail.
During the strategy period, we aim to grow our revenue by 20% compared to year 2020. One third of the growth is targeted to come from Finland and two third from Central Europe, from Poland, Slovakia, and Czech Republic. Our target is to achieve EBIT margin more than 10%, and the main factor in order to improve that is to increase our productivity. I will come back to that later. Our track record has been quite good. We have been able to increase our EBIT level from 7.4% in 2019 to 8.4% in 2020. In order to improve our productivity to the level of 10%, we have already all requirements in-house. We have strong brand, we have skillful people, strong processes, and good portfolio. Let's go a bit more in detail our growth plans and where to grow in the future.
In housing, we are bringing more geographical focus on our housing operations according to growth of local market. It means that we will see growth in those economic growth areas. In Finland, this means Helsinki, Turku, Tampere area, and in Central Europe, we are speaking about Prague, Bratislava, Warsaw, and Gdańsk . We have been able to create an excellent brand already in those, let's say, if compared to me, new YIT cities. Nowadays, we have already a solid foundation to grow in those areas. Of course, we don't want to lose our market share in other part of Finland and in Baltics. We don't want to give that to our competitors. Urbanization and demographic changes continue to support housing market and also our growth ambitions. In Finland, 85% of populations are living in urban areas, and the level is same in other Nordic countries.
The forecast state that the population growth by 2040 in Finland is expected to be highest in the southern part of Finland, and it means Helsinki, Tampere, Turku, Vantaa, Espoo area. In addition to that, forecast state that we will need more than 700,000 more apartments by the year 2040. So it means that the average demand for apartments is 35,000 apartments in a year. We can say that despite the economical cycles, there is a demand for long-term apartments. In Central European countries, the rate of urban population is lower than in Finland. We can see that people will move to cities more, and the actual urbanization will accelerate. In addition to that, in these cities where we are operating, the economic growth rates and high economic activity supports our growth plans.
Actually, as you can see, in our operating cities in Central Europe, the GDP per capita is higher than in Helsinki. In those Central Europe cities, we have already very strong local teams and their network to find good plots and run business according our common housing process. Also, Nordic design and Finnish reliability in those countries and cities are great assets to us and our customers. I see that we have really huge possibilities to grow in those countries. If we then have a short look for our plot portfolio. We already have a good plot portfolio for future needs. In Finland, we have more than 2.2 million square meters , which means that we have plots for 33,000 apartments in our coming portfolio, 1.6 million square meters are ready to build, and 600,000 sq m are in zoning phase.
The total reserve in Finland, what we have in our portfolio is 33,000 apartments. In Central Europe, we have plots for 11,000 apartments. To boost our growth ambitions, we are investing EUR 200 million more in those growing areas, which means that in the strategy period, we are able to increase our offering with more than 5,000 apartments. But of course, it is not worth of investing in something if we do not understand the business, the local market, and even differences of micro locations of plots. We are aware of that, and we can deal with that. Like I already mentioned, we have strong local teams with excellent knowhow and group wide procedure to evaluate business cases plot by plot. I guess we could move to the productivity side. In addition to growth target, we will also improve our productivity in order to achieve our profitability target level.
We are already following very closely what are our lead times in our projects. Our target is to shorten our construction time by 5% in a year during the strategy period. What that actually means? General cost in project are about EUR 30,000- EUR 50,000 in a week. In our volumes, it means that we will get more than EUR 3 million savings in a year, and when we are at the end of the strategy period, the savings will be more than EUR 10 million. We have started those measures already, and we will accelerate our actions further to cut down those turnaround times. We have used lean production methods like takt time, and we have already received good results about that. We are using prefabricate modules in bathrooms. More than one-third of our bathrooms are made of modules.
We have also piloted wooden module construction in two projects in Tampere in order to shorten construction time, but also to understand wooden construction and what are the possibilities in that business area. In general, taking in use lean production method means that we have to manage our supply chain better and also take the better grip from our pre-planning. The result is that we will achieve savings related to waste. What I mean with waste, I mean materials, time, and costs. Excellent and thorough pre-planning always pays back. All the actions to improve productivity will be very interesting journey for us engineers like I am, and we have started that already, and I am sure that we are somehow enjoying the journey. We will definitely do that to the end of this story. But let us now move on to environmental issues.
Our aim is to enable sustainable lifestyle for our customers. As Markku told us earlier, built environment is responsible for more than 40% of global CO2 emissions. The main emission source is concrete. 8% of world's CO2 emissions are coming from concrete or actually, cement. Therefore, it is really important for us to do everything we can to minimize the environmental impacts of our operations. We have calculated all our self-developed projects already since 2020, what are their CO2 emissions level. We have got information and knowledge about that, and we will use that information in our coming actions to minimize CO2 emissions. Materials represent large share of building life cycle emissions. To lower these emissions, we have to find ways to utilize low carbon materials. This requires really a close cooperation with our suppliers and subcontractors.
We have done quite close cooperation with Consolis, who is prefabricate manufacturer, and we have been able with them, or actually they have, but we have been also involved to decrease CO2 emission by 40% in hollow-core slabs. We have piloted also low emission concrete, so-called green concrete, with Rudus, and also recycled concrete. Recycled means that there is no natural stone in concrete. It is replaced with crushed concrete. With green concrete, it is possible to even decrease CO2 emission by 60%. There is lots of piloting ongoing, and I am happy that our partners are eager to make actions to lower CO2 emissions also in a material part of the life cycle of building. Of course, like Markku said already, it is our duty as a forerunner to enhance reduction of CO2 emissions among all suppliers and subcontractors.
It seems that there is a real willingness to do that in our network. Another CO2 emission impact comes from the use phase of building, especially related to energy used for heating, cooling, or water heating. That is the reason why we want to increase the share of geothermal heat in our projects. We have already used geothermal heating in some projects, and we will increase that. We have also, already a couple of years ago, geothermal cooling of water in our project in Merenkulkijanranta in Lauttasaari. When it comes to the construction phase and our own operations, there are a couple of things which have major impacts of CO2 emissions. We can use renewable energy, what we are using already today. We can maximize waste and sorting and recycling, and we have to optimize our machinery. We should aim for fossil-free and mixed waste free sites.
Also in these, piloting is ongoing, and I see green light, let's say, over there. Let me recap the main strategy topics of housing. We will focus our growth on cities of economic growth in Finland and in Central Europe by investing more than EUR 200 million more to the plots. We will continue to increase productivity by decreasing turnaround time by 20%. Thirdly, we will enable more sustainable lifestyle for our customers. With commitment to science-based targets, we will do our share, and also as a forerunner enhance sustainability among our partner network. We have a good track record in housing. Also grow with profitable way. We have talented and skillful people. We have strong and common housing process, and we also have 45,000 plot. We also have 45,000 apartments in our plot portfolio already.
These are the reasons why I am confident that we will achieve our target during the strategy period. Thank you. Now it's time to ask my colleague, Tom Ekman, to the stage. Tom is responsible for business premises. Tom, come on the stage, please.
Thank you, Antti, and good afternoon also on my behalf. During my presentation, I will walk you through what we have done in the business premises and what we will do to achieve the EBIT target that was mentioned in Markku's presentation. We have had quite a journey and a transformation, but as I see it today, we are good on the way. We are making our way towards the EBIT target in a quite good manner so that we can have a profitable and very cash flow-bringing business at the end of this strategy period. What do we do in Business Premises? We pretty much build any kind of building that is overground. The underground building, we leave to the Infra segment, and own development housing, we leave to the Housing segment. We are also quite good at renovating old, valuable buildings.
The latest example that we have renovated is the iconic hotel in Turku, the Hamburger Börs. A couple of years ago, we renovated the parliament building here in Helsinki and are very successful in also that kind of construction business. We are present in Finland, Estonia, Lithuania, and Slovakia. Here in Finland, we are the biggest player in the business premises field. In Lithuania, we are amongst the biggest players, doing both contracting and real estate development. Also in Estonia, we do both. We do contracting and real estate development, and in Slovakia, we follow the housing. When they are changing city zones, there is always a possibility also for real estate development and we follow very closely what the housing is doing also now in Poland, looking for possibilities also in the real estate development area there
In everything we do, we try to make sure that the usability, sustainability of the build premises and spaces are in place the entire life cycle, and try to add value to our customers using our core competencies that we know we are good at. We have the past year, 2020, and this year been very selective in what kind of project we will enter into. The first question we ask when we get a request for proposal from the market is, does this look like a YIT project? If it doesn't, we won't participate. We want to use our core competencies in each project so that we can add value, true value to our customers. Some of our enlightened customers, even on the public side at this moment, are moving away from only price-driven competition towards RFQs, where also sustainability and usability over the time life cycle matters.
As a matter of fact, we have won a couple of projects during this year with the highest price, but with great sustainability and usability in the projects. This is a key factor that we are looking into. We want to be in the front line when it comes to sustainability and usability to make sure that our customers and users get the right kind of premises that they should. A year ago, in the autumn of 2020, we launched a project management program, PRO. Probably most of you have heard about it. We have trained our people in three big matters that have a very large impact on how we do businesses and deliver our projects. We looked into the management of procurement contracts, very big issue in my segment.
We took the management of our additional and modification works, went through those and told our people how we want our people to work in that field. Also took a very thorough look into how we do the project forecasting so it can be totally transparent and we know how our project portfolio looks like. As you can see from this slide, we have ridden quite a roller coaster the past years when it comes to the EBIT result. We have taken learnings from these unfortunate projects and made changes to our operating model on to how we conduct projects in the future. These learnings were the base for the earlier mentioned PRO program that we developed during 2020 and continued during this 2021 year.
Looking at the EBIT target at the end of the strategic period, in the segment management team, we feel very confident about the fact that we are able to deliver what we promise. Some of you asked if that's the floor, definitely not. We have done it before, most of us in the segment management team, and we feel confident about that we are capable of doing at least the 4% EBIT in the future also. When it comes to the selection criterias of the project that we will enter into, we have looked very thoroughly into the process how we tender our projects. If we don't feel confident, for example, with the contractual terms, we have no problem in making a no-go decision.
We don't participate if we don't feel that the contractual terms, when it comes to, let's say, obligations and responsibilities and possibilities, if those are not in balance, then we will make a no-go decision. As Markku already told you, during this year, up to the end of October, we have put away EUR 0.5 billion worth of revenue approximately, when we looked into the project and we were not happy with either the contractual terms, financial terms, or otherwise it was technically a risky project. When it comes to the financial part, we do not finance our clients' project debts.
Of course, we are now targeting this 4% profitability at the end of the strategic period. Like I mentioned, that we still have some of those legacy low-margin projects in our portfolio, and those are following us for the next couple of years still.
Like you can see, even in 2021, we have more kind of one-fourth of the project portfolio still kind of a low margin. I don't say those are loss-making, but those can be little bit lower profitability than it should be. Kind of a deviation for the expectation in the beginning is totally different. At the same time, we already started the journey to go to better projects with the profitable ones. We are backing our order books with the more profitable ones, and you can see that we will build that in throughout the next few years. But we have to fix those projects. We are doing that. We know where they are. We do the cleaning things, and we go for the better project in the future. How that will happen? Tom was already mentioned few items how they are doing the actions.
We have similar actions here. We also have this PMO project management officers. We are more selective, we are more tolerant what we are going to offer in the future. It is really about making a selection. We want to go from a price-driven to value-adding portfolio. Selection criteria need to be that it is technical and financial and contractually feasible for us. Not either/or, but and. This is actually the mistake what we have done in the past. That is how it looks like. Portfolio, we want to move from price-driven to more for value-adding. You can see from the curves here, all these circles here, that is kind of a price-driven has been more in agenda. That is typically in a public procurement project where the price is really the affecting parameter when selecting the contractor.
But today there is more of this kind of open book alliance model project, and we are really good in that. We want to have more of those. We still have this infra maintenance in our portfolio. That means road maintenance, which has been a profitable business for us, and we want to continue on that. Also we want to have this self-development project portion to be bigger in the future. Because that also give us a possibility to be more kind of competent what we do, doing together with the colleagues, the good project portfolio. It is nothing rocket science, it is really to be selective, focus on our core competencies and shoot for that. If a little bit give you insight about the market, actually it looks like that the government want us to go to the rails.
That is of course good for us because we are really good in the rail construction. There is more than 30 project in the future coming or in the pipeline of Ministry of Transport and Communications for the rail or tram projects. Of course, we are targeting for those. We are doing already several. We already there in the Tampere Tram. We are already there in Jokeri Light Rail around Helsinki. We are in Crown Bridges Tram and more to come. This is really something for us. Also the regular rail projects where they are upgrading the rail to get more capacity on the track.
Also the wind park. We all know wind parks, and those are increasing in the future. We are also there. We are developing by ourselves, but we are also contracting, doing the geotechnical or doing the road construction or doing the whole infrastructure for those wind park projects. Those are actually really sustainable. I am actually coming to the third topic of strategic priorities with these projects. I already mentioned a couple of examples that we already did this Tramway. It was open for the public now in August. We have been there since the beginning, and actually project is still ongoing, even though the main track is in use, but there is some prolongation of the tram coming and going, and we are doing that as well. There is more than 30,000 commuters using this track daily basis with renewable energy. Also this Crown Bridges I also mentioned.
The people who live in Helsinki or this region, you know, actually, you could read even from Helsingin Sanomat this morning about the tram project in the vicinity of Helsinki. This is one of the biggest coming. There will be a new bridge, and then there will be a tram line over the bridge towards the east from Helsinki city, from the downtown. Close to 14,000 new residents can use the public transportation in the future. These are sustainability for me at least, or for my team, going to sustainability issues and topics through the projects. The third element I want to mention here is this Blominmäki Wastewater Treatment Plant. We have been there since the beginning. We did all the excavation first, and now we are doing the construction inside the treatment plant.
It is underground utility, which actually gives the clean water for 400,000 people, let us say, the western part of the capital area, more or less. There is more than 150,000 m³ wastewater going through daily basis. Actually it utilize the heat of the wastewater and also the heat from the processes to heat the rest of the plant as well. Also it takes the biogas from the process and also the solar panels at the outside area to making the electricity for the plant. It is really the zero emission plant that they want to be in the future. I think this is really the example of the sustainability and what we can develop and create in the infrastructure world. This is about the projects of, let us say, the sustainable projects. Also we have to go for our own operation to be sustainable there as well.
Antti was nicely showing about the graph of kind of a life cycle of the project and where we can really affect by our own work. Of course, we are following that curve as well, I do not make a repetition what Antti was saying. We, of course, there as well. We have to analyze the carbon footprint of our sites, which is not really typical in infra business, actually. It is just building up. But we are already there. We are already doing the calculation in some of our sites. We, of course, want to go to fossil-free sites in the future, the recycling and this kind of sorting and this kind of that. It is kind of a daily base thing on the site already, but more to come.
But one element, what we have a bit kind of different to my colleagues is that we also done the CEEQUAL certifications. We have experts, for example, in Sweden who already get one certificate from the CEEQUAL system to our site in Stockholm. This is also actually requirements for the Crown Bridges in Helsinki. The CEEQUAL is more than just sorting and utilizing the fossil-free fuels, but it is about the logistic. It is about what kind of a material you are using. It is about the communication to the surrounding people, what we do on the site. It is really a bigger package, what comes for the sustainability certificate and statements. We are already there. There is a lot of elements, a lot of examples, what we really can do through the projects, get a better sustainable surrounding, and also with our own activities.
That was more or less what kind of elements we have in a strategy in a journey forward and how we are going to tackle this 4% profitability road in the next coming years. It is all about the focus. It is all about the selection, what we are going to do, and we do it in a sustainable way. Yes, somebody was asking about the cash cow. I am happy to be the cash cow in this company because if we can deliver the cash on the table, I would say that our projects are really healthy. Happy to be there. That is from my side. Thank you all for listening. Now I give the floor to Ilkka Tomperi, who is our property development guy. Welcome, Ilkka.
Thank you, Pasi. Good afternoon, ladies and gentlemen. It is very nice to be here in front of you. For me as well, the first Capital Markets Day at YIT. I started in the beginning of August, so it is about the same time as Pasi has been spending with the firm. Obviously, quite big news as well in regards to the segment property development. As Markku was introducing initially today a little bit of those changes that we have done, and I am also one of those who had a little bit of hard time to understand partnership properties and its role for and within YIT. Hopefully, this decision makes it a little bit clearer for sure.
The focus of the PD going forward is in urban and project development, in selected value-added real estate life cycle services, and in the use of YIT's equity in a smart way to enable growth and profitability of our projects and in order to generate attractive development returns. This could not be done without our clients or customers. Obviously, when we are working with property development, the key is that we do understand our customers. Who is our customer? I like to tell everybody that we actually have three types of clients. Number one maybe are those investors. The investors who are buying the properties that we are developing or who are willing to invest alongside with us in our joint ventures to make money and earn on properties. We need to look what their requirements are. These requirements are changing very rapidly at the moment.
Other group of clients, which is also extremely crucial to be successful in property development, these are tenants, occupiers of our buildings. We should not be developing anything that our tenants or prospective tenants would not like to occupy. Again, that means that whenever we are thinking about developing something new, we need to look that it is attractive enough for the certain target group that we are doing it for. Finally, ultimately, all these properties built environment is used by people. Those people who are living there, working there, playing there, and we need to make sure that the user experience of our buildings is top-notch in addition to all the other aspects. Only if we are able to fulfill the requirements of these three groups of customers, I think we are able to be successful in property development going forward.
The ways how we can fuel the growth and profitability of YIT, the cornerstones linked to the revised strategy of YIT are listed here. ESG is obviously an area where in property development and self-started projects, we are playing a very crucial role because we are actually dictating all the choices we have in developing the properties. We can play a significant role in making our developments greener, and this is, of course, a requirement from our clients, investors, and occupiers alike. This is at the core of the strategy. We need to be able to feed high-margin projects to our constructing segments. You've been listening to three presentations before me from the three colleagues who are working on the constructing segments, housing, business premises, and infrastructure.
Our role, as shown in the pictures earlier, is actually to support these three other segments to be successful as well. All the self-started development projects are very likely to generate higher margins for our constructing segments. Of course, in addition to that, we are supposed to be able to deliver attractive development returns above those returns. Finally, we need to rightsize our investment portfolio. We need to be more efficient in the use of YIT's capital going forward, and I'm spending quite a bit of time on explaining how this will be done in the future. These three areas are the ways how we are linked mostly through the revised strategy. From here, I'm actually moving to ESG and environmental-related issues where I said that we are playing a key role within YIT as well.
40% of the CO2 emissions on global basis are created by buildings when they are built or when they are operated. They all kind of life cycle emissions and so on. Obviously, we play a big role, as I explained, in property development. We can be deciding out of which materials the buildings are going to be built. We are making the choices. What are the energy sources that are used in our properties that we are developing? We can be making decisions on any other aspects that are affecting the life cycle, emissions of these buildings that we are developing. It's not only energy. We can also look into creating buildings where we take into account opportunities to do change of use conversions when the original purpose for which the building has been built is no more valid.
If the structure is right, you can also convert and repurpose the buildings. There, of course, we are saving a lot of, again, emissions because you don't need to knock down the entire building, but you can actually repurpose it for something else. There are good examples of that as well. Of course, in our business premises segment, we are doing those type of projects for our clients all the time. In addition to the materials and the solutions to minimize the embodied carbon and the carbon emissions during the life cycle of the properties, we need to look into smart technology and well-being and health of those people who are actually working in those premises or using the premises. This is actually becoming even more important after the COVID-19 as well, air quality, user experience and other things are really important for our occupiers and clients.
Those people obviously use the buildings. Finally, the green finance requirements are becoming much tougher all the time. Most institutional investors have been making decisions on allocations for green portfolios. They have strict rules on what sort of buildings they actually can hold and invest and own going forward. So actually one could say that the platinum is the new gold standard and the requirements are really increasing rapidly. Of course, we need to be following those trends, otherwise we are not meeting the requirements of our clients. So, over the next couple of slides, I am going through the key areas of business that property development will be doing going forward. These are urban and project development, selective value-adding lifecycle services, including the Workr+ Space- as- a- Service concept that we have.
Finally, smart equity, the use of YIT's equity to boost our projects to make attractive investment returns as well. So, if I begin with the hardcore of property development really being the property development itself, the keys to develop sustainable, long-lasting, attractive environments to our clients and their staff and any other visitors. As said in the beginning of today's presentations, in numbers, we try to kick off 1-3 projects per year. That is enough so that we are having a right-sized volume going forward. As said as well, we need to be focused on projects that are really in the sweet spot of our strategy. Not too small, not necessarily too large or complex, but something that is sizable enough, but is also doable, where we can manage the risk in a proper way.
The pipeline we have, and we will be maintaining and building up, will be consisting of all types of properties, obviously commercial properties mainly. So it includes offices, it will include logistics, that we have been doing logistics recently as well. We are doing mixed-use projects, especially when we are in dense urban areas next to a metro station, railway station. This is typically the way how you can be building something new. Social infrastructure, schools, daycare centers, healthcare properties, obviously extremely attractive to investors. Also there is the linkage to our lifecycle services on the property management side. Finally, but obviously not least important, are wind power parks. Wind power used to be part of our infrastructure segment, and the construction of those still is, but the development of wind parks will be moved under the responsibility of PD going forward.
We have a good pipeline there, and this is an area where we believe we will be very successful going forward as well. There are good proof of our skills in that part of the business shown already. So another theme related to property development is really the responsibility of the end-to-end process. So really from the early days, which might be the urban development part, through the execution to the completion and exit. We need to be capable in making sure that this linkage is fully covered with our staff, and we are having a good grip of the projects from the early days through execution to the end. That way we can safely drive growth in property development, we can be supporting the constructing segments, and we can really make sure that we are also having a great connection with urban development and project development.
I strongly believe that there are great opportunities. If you think about the underlying markets, there have been huge changes. We are today actually in the Mall of Tripla. I do not believe that there necessarily needs to be too many big shopping centers being built in Finland or in the Helsinki capital area going forward. There is need for new modern offices, even if the use of offices is changing a lot and we are looking into the low occupancy ratios of offices. Most office tenants are really screamingly thinking about what are the solutions, how we can actually attract and retain talent, and actually how we need to repurpose our offices to meet the requirements of the new way of work. I do believe that as property developers, we have a lot to do there and we are well connected there.
Logistics obviously in addition to residential is another hot segment. Of course, we need to be proactive in trying to identify opportunities to create products that our investor clients are looking for. If I then move to the services side. We will continue having services, but as I said, we will be strictly focusing into these two areas where we truly see a strong linkage to our other main businesses. That said, real estate management services, which are the lifecycle services that we are having in, for example, the public private partnership projects, the schools and others. There is extremely good linkage to the constructing segment.
This is also a reason why we have been very successful in this segment, because we can actually offer our clients, the cities, municipalities, for example, the full package where we are building something, and we are also taking care of it for the next 20 or 40 years. These contracts are extremely long. They provide us very steady, safe cash flows as well. It is a value-adding business that perfectly suits us. The other area where we have a good connection with our business is obviously space as a service, the Workr+. We are currently having four of these co-working spaces operational. Of course, the linkage to our office developments is clear.
In the future, I do believe that in most multi-tenanted office buildings, there will be probably 20%-30% of the space that is actually operated as co-working, where you have shared meeting rooms, shared offices, where you have office space for smaller tenants, and also kind of readily decorated offices, even for larger tenants, that are offered on flexible lease terms. This is a great way for us to stay kind of connected with our office tenants and occupiers and learn about the changing needs of office occupiers as well. This is it. That is for the services. Finally, if I move into the smart equity. Smart equity to us means that first of all, during the beginning of the strategy period, we will be rightsizing our portfolio.
As you see from the chart, the pie on the left-hand side, that is our current portfolio of joint ventures and investments. It is about EUR 260 million of net asset value in total. As you can see, Mall of Tripla is a significant part of that, a bit over EUR 180 million of NAV as we speak. We have been publicizing that our idea and plan is to dispose our ownership in Mall of Tripla by 2024. COVID-19, of course, has been postponing the process of disposing Mall of Tripla from what the thoughts probably have been initially. The center is doing very well. Of course, it has proven that it is well located, it is well functioning. We have high occupancy rates, so the visitor numbers turnovers are very good and have been recovering nicely.
Of course, we need to make sure that it is fully stabilized and so on before we move out from the ownership. The rest of the portfolio is well diversified. We do have a number of rental housing investments in our portfolio, a plot fund, and some other investments. These investments are performing as expected. We have already shown during the past couple of years that we have been able to recycle capital. We have been exiting some of these joint venture positions, and we have been returning capital that has been invested elsewhere. Going forward, the idea is that we will have maybe a bit under EUR 200 million of investments in our portfolio. It will be much more equally distributed. This picture here on the right-hand side, this is more like an illustration how it might look like.
The key takeaway from that is that we are not going to make any oversized investments. It will be much more equally spread. It does not necessarily look exactly like that, but we will have different sectors there, and we will have probably 15- 25 investments, each being around EUR 10 million- EUR 30 million. There might be some investments which are a bit smaller, some investments which are a bit larger. On average, this is the way how we see that this portfolio will be working. The typical ownership period that we are targeting is probably ranging somewhere between, say, 3-5 years max, which means that then we are able to make a couple of new joint ventures and co-investments per year, and then we are exiting a couple of investments on annual basis.
This enables us then to boost our development projects, but also to support the growth of housing. There is a strong linkage to the growth plans we have in housing, because these type of plot funds and rental housing funds obviously are also enablers to boost our housing production. For YIT, it is a great way to have the benefit of the ultimate exit where the portfolios are sold after they have been leased out and stabilized. We are not only selling the buildings to someone else who is leasing out them, taking the benefit of the final stabilization in the value uplift. I feel that this is the right way to operate the portfolio going forward.
If we look into the KPIs, obviously the best way to measure our success and performance is the return on capital employed, where we are targeting a return above 10% going forward. I will just recap what I have been going through here. Again, just to remind you of the key takeaways. The ways how we are contributing to the strategy YIT is going to have during the next strategy period. These are ESG matters where we are going to play a very big significant role. Feeding the growth and profitability of the other segments as well, in addition to making good development margins and investment returns with our equity portfolio. Then finally, rightsizing the portfolio so that we have a well-diversified portfolio going forward. Thank you very much. Next, we are going to move to the second Q&A session of the day.
I will just let my colleagues join me. Thank you.
Thank you very much for all the segments, for the very interesting presentations. We are now ready to start the second Q&A. After the Q&A, there still will be final words from our CEO, Markku Moilanen, so it is worth staying tuned until the very end. Again, we will be taking questions from both the webcast and the live audience here. Perhaps we start again from the webcast questions. There is a few that came already. First, I think, goes to property development. Will wind park gain in Q4 be in Infra or PD? Actually, give it to Tuomas again.
Tuomas.
Tuomas.
The gain
Gain, yeah.
from the Lestijärvi. It will be in the group numbers, and this is something that we need to get back to you where, in which segment it is shown.
Will you consider splitting Housing Finland and CEE to Housing Finland and Housing CEE to improve visibility on profits and ensure better correlation between KPIs and profits?
If I may start. Of course, we are continuously looking at our organizations, but as you heard Antti Inkilä describing, we are really utilizing the same capabilities and competencies that we have in housing. Growing now the Central European countries is a natural way to do it. But again, we are evaluating the situation on an annual basis moving forward.
Then any questions from the audience here? Svante again.
Yes, Svante Krokfors, Nordea. I have actually questions to all divisions. If I start with housing, could you, Antti, elaborate a bit on the difference in profitability between Finland and CEE? Also regarding the differences in market dynamics between Finland and CEE when it comes to regulation and compliance and so on.
Well, if I start with the profitability, at the moment it seems that it is possible to have a better EBIT level in CEE countries than in Finland, but at the same time, return on capital employed is a little bit challenging. So it is like balancing all the time. The another one was what is the market situation or what was the Sorry.
A bit about the operating environment in CEE compared to Finland. What do you have to think of when it comes to political risks or compliance issues?
Yes, at the moment, it is not just coincidence that we are in those countries when we have entered those countries. We have studied different countries, and the result was that these countries are suitable for us what comes to the governance side. The market environment and circumstances are quite similar than in Finland. But also in those countries it take quite a long time, for instance, what come to permitting and zoning. In that sense, we could say that the situation is quite similar than in Finland.
Thanks. Then on the EUR 200 million that you will use for plots, will that be two-thirds in CEE and one-third in Finland, similar to the growth contribution?
Not exactly. We shall see what kind of possibilities we will have, and also we have to recall that or remember that in Finland, the price level is higher. We are looking for growth, 2/3 from CEE countries and one-third from Finland, but anyway, the plots in Finland are still higher. So I guess what comes to the new investment, the dimension can be a little bit different.
Thank you. Then business premises, and a question to Tom regarding, I think part of your problem has been also choice of partners when executing on the projects in business premises. What have you learned from this, and could that also limit your opportunities in what kind of projects you will participate in going forward?
We haven't blacklisted any of our subcontractors at this moment. Of course, when it comes to the gray economy, we are looking very thoroughly through that we stay on the white side. We do not accept any gray economy on our sites and be very cautious to not have that kind of subcontractors on our sites. We have had difficult discussions with a lot of our subcontractors, but we managed to close the projects with them in a manner that makes it possible also to cooperate in the future.
Thank you. Then on Infrastructure and a question to Pasi. Could you repeat a bit what has been done wrong in selecting the approach? Is it only project selection or is it something about contractual things that have been done wrong, thinking of going forward and what you have learned?
It's about the selection. As I mentioned in my presentation, it's about the selection and actually also in some kind of a bit too optimism in the pricing and this risk-taking in the some of the projects. That goes also to the kind of contract models also because we have had a bit tough contract in couple of those projects. So it's not the kind of a clear evidence of that one of those topics are really the key driver of the issues what we have had in the project, but I can see the elements of many of those in the many projects. So we really have to focus what we're going to do and really be more selective and take those project what we really can deliver and are feasible and also contractually are interesting and feasible for us.
Thanks. Could you perhaps repeat also what will you continue to do in Infrastructure and what segments will you not continue with? I guess tram is definitely something.
Yes, definitely tram and the rail as a whole. If it is a kind of a regular rail train or is it the tram, of course, we want to go for those. But maybe one to mention not to go is if you go for Central Finland for some kind of a smaller or mid-size road project, for example. It is no usage to go there because the price is really low and competitive is really high. So that is one example. Or go for non-urban area for harbors or things like that. So those we need to be really careful.
Thanks. Then a couple of questions to Ilkka. Given that you have now clearly defined model of Mall of Tripla on non-core asset, how do you look at the investor market, especially on the shopping center side what we expect about yields, rents going forward?
Yes. If I just comment on the market in general, of course, we know that retail assets have not been that popular during the past couple of years. If we look into the statistics on how much of the total commercial property transactions have taken place in the retail segment, so it has been coming down, and of course, we can probably see that there are some signs of a comeback for that segment as well. I think when things are stabilizing, the market will get a bit more active as well. In general, I think that I am just making a reference to the data points that are publicly available and where the rents and yields have been moving, and I do not have any other information myself.
Thanks. Then a question to Markku regarding the EBIT target of 6% on group level. Does that include property development expected kind of EUR 20 million EBIT contribution annually?
Yeah, that's the sum of all the segments. That's what it is.
Thank you.
Thank you. Then a couple of questions again from the online audience. Do I understand correctly that since you are growing the role of rental housing in property development, that you are not planning to sell your share in those housing funds? They are at the moment. How many flats there are in those funds altogether?
Yes. Most of those funds, or I guess all of them, are actually closed-ended vehicles technically. So we have a due date there. As I said, in typical co-investments that we have or club funds, we typically have a lifetime which may be ranging from five years up to, say, eight years and so on. Ultimately, all these will be liquidated.
Are we going to see any diversity or inclusion actions taken as ESG is in such a huge role in the new strategy?
Definitely we are looking at that as part of ESG as well. Diversity for us is several things. I am actually very proud of this team, even if we are all male. But the background is diverse, so it is different backgrounds bringing more diversity as well. When it comes to gender, overall, we are 24% women compared to men, but office personnel, it is 50/50. We are, of course, looking at that as bringing value to us. Then it is different backgrounds on which countries people are coming. We are definitely following that closely as part of our ESG program.
Few years back in YIT Moscow CMD, I asked how seriously we should take the external financial targets. The reply from Vice CEO was that the targets are partly intended for YIT internal purposes to have strict stretching goals. I would like to understand better the mindset with YIT's new financial targets. Are those cautious and fact-based or challenging with clear risk?
Well, they are clear that the internal and the external goals are the same. I am sure that you heard that we are, as a team, committed behind those. Again, we have explained in detail that we are committed to deliver them as well.
Questions from the live audience. Matias.
Hi. Matias Rautionmaa from Danske Bank. How do you see the current market situation in housing Finland? According to at least some market studies, demand might be already peaked in Finland. What is your view on the market?
We gave our last market, let's say, prediction, in interim report last time, and I do not see that there has been any big changes related to that.
I continue with the question about infra. How can you ensure your competitiveness if you participate only minimally to this price competition projects, which are like the so-called bread and butter business? Can you be competitive if you do only those large projects?
I didn't say that we do only large project. We want to more go for a competence-based project and also on this own development project with the colleagues. Of course, those are better for us. So, of course, this price-driven project like a public tendering, it will be there, that's for sure, and we will be bidding, but we have to be more selective where to go, like I said about this Central Finland road project, et cetera. So that we have to do. So those will be there, but in a more smaller portion in the future.
Can you clarify what would be the margin in infra segment if you would only do these price competition projects? What is the effect?
If I only do those? That's impossible to answer because actually in those projects, there's a more severe competition as well. It's impossible to answer what will be the profit after doing only those, because we won't go to that direction.
Okay, thanks. Then this one goes to Tom. About the margin in this business premises segment, should we expect gradual increase in margin? Because I imagine that this increased cost level might have some impact on margins. How do you see the situation there?
We have been quite good at tackling the cost increase that we have seen during Q2, Q3, and partly also here in Q4. We do not see any big issues. We have annual contracts with our material suppliers, can take the full usage of those at this moment. Looking also into the order book at this stage, we feel confident that the gross margin level will move towards the target for the strategic period. Even looking into having a couple of project from our PD segment will also help us reaching the targets.
Okay, thanks. Then this one goes to Ilkka, and thank you explained well the PD segment. That was very understandable. But I still struggle to see what is the change here compared to the earlier one.
Yes. The main changes are obviously that we have been cutting away a lot of these service development projects we have had. Again, I do not necessarily want to go into those anymore, but we have had in our past strategy quite a lot of emphasis on these. There we decided to choose only these two which have a strong linkage. Property development, of course, has been part of the strategy and the doings in the past as well, but the role of it will be grown, and I think that obviously when it is taking a bigger chunk of the segment's business, it will be more visible. There is more emphasis on that. In regards to investments, the biggest change is really the way how we see the use of equity going forward.
I explained, it is really a tool that enables us to kickstart projects, and there is much more focus on recycling the capital, also rather quickly. Maybe my background, again, as an investor is brought into the way how we are seeing it going forward.
Thank you very much.
Thanks.
The next question, is it fair to assume that the group EBIT level in 2022 is not likely to grow meaningfully from 2021, and that you expect a more visible improvement in 2023?
The point is that it is really the margin which we are targeting and explaining how we are increasing. It is really what we are rigorously following up, that we are improving the margin year after year.
What kind of return on capital employed level would you be satisfied with on a group level?
Well, like Tuomas alluded to, return of capital employed on a group level with so different businesses, that doesn't really make sense. We will not be summing that up.
How much of the margin improvement will be from avoiding the rotten egg effect, or is it an overall portfolio improvement on a wider front?
I think we have a good question of rotten eggs. Yes, we are avoiding that, but it's concentrating around our core competencies where we are competitive as well. It's a combination of both then.
Any questions from the live audience? Thank you. I think we are running out of time at this point. I would like to hand over to you, Markku, for the final thoughts.
Yes. Thank you, everybody, for joining. Thank you for good questions, good discussions during the break as well. Let me sum up what we have heard today. From where I started, yes, we will grow in housing. As you have heard, we know the market very well. We understand where and why and how we are going to grow. Secondly, you heard the presentations on how are we going to deliver predictable market leading results in business premises, and in infrastructure. It is really about utilizing our core competencies, selecting projects, and then delivering them. You heard the commitment that we have in the team. You heard about our new property development segment that is fueling up the growth in housing and the profitability in business premises and infrastructure as well.
You heard about the understanding that we have about the property markets and the different subsegments over there. Last but not least, we explained to you about how are we going to do our commitments when it comes to ESG and sustainability in particular. You might ask, yes, 2025 comes soon, but what is after that? What is YIT turning 110 years next year going to be beyond 2025? Certainly, we want to be the most reliable and high-quality partner for our customers. We want to remain to be the ideal employer for our people. If I am looking at YIT and the whole construction industry, there are items on our current strategy which will impact the whole industry. It is about productivity, and it is about sustainability.
Those actions and steps we are taking now around productivity when it comes to lean construction, when it comes to digital tools, we have not talked about that, but it is that everyday life for us to use digital tools as well. I see actually that we will be leading ecosystems around the construction industry, which will mean that after 2025, the whole industry will take a leap in productivity. This is combined with sustainability as well. I see that in this ecosystem, we will have the material producers to create low-carbon concrete, low-carbon steel, wooden structures, timber structures. We all will do that together. I see startups on these areas. I see startups on digital areas, serving then the end customers, being the homeowners or being the offices as well.
Beyond 2025, we will go for more productive, more sustainable world where certainly YIT will have a leading role. I invite you all to follow us to the journey to the next five years and beyond. Thank you very much.
Thank you, Markku. Thank you very much for the online audience for following our event over the webcast. This concludes the webcast.