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  • SRV’s financial statements release January-December 2021: Gearing target reached, strong cash flow and good earnings trend in the projects with the exception of Tampere Arena

SRV’s financial statements release January-December 2021: Gearing target reached, strong cash flow and good earnings trend in the projects with the exception of Tampere Arena

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SRV’s financial statements release January-December 2021: Gearing target reached, strong cash flow and good earnings trend in the projects with the exception of Tampere Arena

January-December 2021 in brief:

  • Revenue declined by 4.4 per cent to EUR 932.6 million (975.5 1−12/2020).
  • Operative operating profit amounted to EUR 5.3 (15.8) million.
  • Operating profit was EUR -1.7 (1.5) million.
  • The result before taxes was EUR -20.3 (-28.0) million.
  • Cash flow from operating and investment activities totalled EUR 76.2 (73.0) million.
  • The equity ratio was 27.4 (22.6) per cent and gearing was 103.0 (159.7) per cent. Excluding the impact of IFRS 16, the equity ratio was 32.8 (27.8) per cent and gearing was 47.5 (82.1) per cent. The equity ratio in accordance with the loan covenant calculation was 34.3 per cent.
  • At period-end, the order backlog was EUR 872.3 (1,153.4) million. New agreements valued at EUR 588.6 (707.1) million were signed in January–December. The sold share of the order backlog was 91.5 (86.4) per cent.
  • Earnings per share were EUR -0.08 (-0.15). The comparison figure has been adjusted for share issues.

October-December 2021 in brief: 

  • Revenue in October-December amounted to EUR 336.3 (292.5) million.
  • Operative operating profit amounted to EUR -4.6 (5.3) million.
  • Operating profit was EUR -11.5 (-8.0) million.
  • Cash flow from operating and investment activities totalled EUR 62.1 (39.3) million.
  • New agreements valued at EUR 160.7 (140.7) million were entered into the order backlog.

Events after the reporting period

  • On 24 January 2022, SRV and the City of Uusikaupunki signed an agreement to start up the implementation phase of the new Wintteri education and well-being centre under a lifecycle model. The value of the contractor agreement is EUR 59.7 million and that of the lifecycle service period EUR 28.2 million.
  • In December, SRV announced that it had made an agreement to build a residential tower in Kalasatama, Helsinki with rental housing and daycare facilities for PATRIZIA. The agreement is valued at around EUR 101 million. The deal was completed in January 2022. This project will be entered in the order backlog in the first quarter of 2022.

Outlook for 2022

During 2022, SRV's revenue and result will be affected by several factors in addition to general economic trends, such as: the timing and amount of income recognition for SRV's own projects, which are recognised as income upon delivery; the order backlog's profit margins and trends in the order backlog’s profit margins; the start-up of new contracts and development projects; and the rouble exchange rate and the development of the Russian economy. Revenue in 2022 will mainly be generated by cooperative contracting and development projects sold to investors. In 2022, the share of revenue accounted for by developer-contracted housing production will still remain relatively low.

The impacts of the coronavirus pandemic have been moderate on the whole, but its effects on the construction market remain unclear and cause uncertainty regarding the outlook for the future. Material costs and the availability of materials pose uncertainty to the development of SRV’s revenue and earnings. Geopolitical tensions impact on the general development of the Russian economy and the exchange rate of the rouble, which might have a significant effect on SRV’s earnings trend and asset valuation.

  • Group’s revenue for 2022 is expected to amount to EUR 800–950 million (revenue in 2021: EUR 932.6 million).
  • Operative operating profit is expected to improve on 2021 (operative operating profit in 2021: EUR 5.3 million).

CEO's review

The year 2021 was strongly divisible. Our result was disappointing, especially due to the Tampere Arena project. On the other hand, we made vigorous progress towards our strategic objectives – the average profitability of our projects improved, and we continued to strongly revitalise our balance sheet.  We entered our strategic target level for gearing. We started 2022 with a smaller, but significantly healthier backlog of projects and a reduced loan portfolio with healthy maturities. Furthermore, in practice, no completed apartments remained unsold.

The last quarter of the year – and the whole of 2021 – ended with weak earnings performance, especially due to the Tampere Arena project. In addition, we were challenged by the increase in material prices and availability of materials at the end of the year. However, going forward, it is significant that the average profitability and controllability of our projects have developed well.

In the spring, we completed significant financing arrangements. In the arrangements, the most important point was the extension of the maturity. The strengthening of our balance sheet remained firmly on track during the last quarter. Net interest-bearing debt (IFRS 16 –adjusted) decreased by EUR 72 million during the year due to positive cash flow. Thanks to this, gearing (IFRS 16 –adjusted) declined to 47.5 per cent and we entered our strategic target level for gearing. Loisto was fully sold and recognised as income mainly in the last quarter. This played a major role in achieving the target. The sale of the Pearl Plaza shopping centre shifted from 2021 to this year. Our aim is to be able to announce the transaction before the year is over.

Our order backlog has continued to shrink, but our average project profitability has improved. We have no identified high-risk projects in our backlog. Our goal of restoring our leading position in the business premises market by strengthening our customer work is gradually producing results. Our major successes during the review period include our agreements for the construction of a multipurpose ship construction hall for RMC at the Rauma shipyard area, the construction of a warehouse and logistics building with geothermal heating in Lieto for a fund managed by VVT Kiinteistösijoitus, and the construction of a school building for 800 pupils in Kangasala. A subcontracting alliance agreement for infrastructure work for the Laakso Joint Hospital is another win. The subcontracting alliance covers the development and implementation phases and is valued at EUR 180 million. Its division between SRV and Destia will be specified further during the development phase. SRV Infra is responsible for the underground infrastructure work. In December, we also announced our EUR 101 million agreement with PATRIZIA to build the fourth tower building in Kalasatama. This project will be entered in the order backlog in the first quarter of 2022. At the end of the year, we signed an agreement to lease Wood City II office for headquarters to a Finnish company, contrary to earlier planned hotel purpose. After the end of the review period, we signed implementation phase agreement for the construction of an education and well-being campus Wintteri, in Uusikaupunki, which will be conducted as a life-cycle project.

Our housing sales have remained brisk and we had only 9 completed unsold units at the end of the year. Loisto, our second tower building that was completed in September, has been fully sold, as has Tampereen Divaani, which is under construction. Thanks to our stronger financial position, we are well-poised to accelerate startups of developer-contracted housing projects in addition to projects sold to investors. This enables us to ensure diversity in our housing construction – that is, to diversify our business risks while strengthening our order backlog. The new startups will be reflected in higher startup-related costs in 2022, as these projects will be largely recognised as income upon completion in 2023 and 2024.

The recent evolution of the coronavirus pandemic ushers in uncertainty about the progress of projects and the development of shopping centres in Russia. Higher infection figures may lead to widespread sickness absences and the further weakening of the availability of labour and materials, which would hinder our operations extensively. This might cause the temporary closure of certain sites. However, so far we have been able to keep our sites going with comprehensive coronavirus measures.

The tightening geopolitical situation poses uncertainty, especially with respect to operations in Russia. The most significant risk is the trend in the value of the rouble, which is directly reflected in the value of our holdings in Russia.

During the year, we promoted measures in line with our strategy in lifecycle-wise business premises and housing projects. For instance, the Siuntio education and well-being campus, currently under construction, is a lifecycle project in which we are taking on responsibility for the maintenance and upkeep of the new property for 20 years. One example of our housing construction projects is Espoon Neuvokas, which is being planned in Niittykumpu, Espoo. It will focus especially on energy solutions and enabling more sustainable everyday life. As part of our lifecycle-wise strategy, we took a major step when we decided, as the first large Finnish construction company, to make all our construction sites emission-free as of the beginning of 2022. According to this decision, all the electricity used on SRV’s sites will be carbon-neutral, that is, renewable or emission-free energy. We will always use carbon-neutral heating when it is available. We will compensate for other emissions during construction by planting the equivalent amount of trees.

I would like to thank our personnel, customers, shareholders and other stakeholders for good cooperation in 2021. We have entered 2022 as a stronger company. I believe that the effective strategic development programmes we have implemented and our healthy backlog of projects will boost our earnings momentum in 2022, and especially from 2023 onwards.

Saku Sipola, President and CEO

Overall review

Group key figures                   1-12/ 1-12/ change, 10-12/ 10-12/
(IFRS, EUR million) 2021 2020 change % 2021 2020
Revenue 932.6 975.5 -43.0 -4.4 336.3 292.5
Construction 930.1 970.0 -39.9 -4.1 335.8 292.0
Investments 6.8 4.8 2.0 42.0 0.6 0.9
Other operations and eliminations -4.4 0.7 -5.1 -0.2 -0.3
Operative operating profit 1) 5.3 15.8 -10.5 -66.5 -4.6 5.3
Construction 14.1 25.1 -10.9 -43.7 -1.3 8.5
Investments -4.6 -5.7 1.2 -1.7 -1.9
Other operations and eliminations -4.3 -3.5 -0.7 -1.5 -1.3
Operative operating profit, % 0.6 1.6 -1.4 1.8
Operating profit -1.7 1.5 -3.2 -11.5 -8.0
Construction 14.1 27.4 -13.3 -48.5 -1.3 8.7
Investments -11.6 -22.4 10.8 -8.6 -15.4
Other operations and eliminations -4.3 -3.5 -0.7 -1.5 -1.3
Operating profit, % -0.2 0.2 -3.4 -2.8
Financial income and expenses, total -18.6 -29.4 10.8 -8.1 -6.5
Profit before taxes -20.3 -28.0 7.6 -19.6 -14.5
Net profit for the period -19.9 -25.1 5.2 -19.5 -10.6
Net profit for the period, % -2.1 -2.6 -5.8 -3.6
Order backlog (unrecognised) 2) 872.3 1 153.4 -281.1 -24.4
New agreements 588.6 707.1 -118.4 -16.7 160.7 140.7
  1. The reconciliation calculation for operative operating profit can be found underneath the “Key figures” table.
  2. The Group’s order backlog consists of the Construction business.
Group key figures                   1-12/ 1-12/ change, 1-12/
(IFRS, EUR million) 2021 2020 change, % 2020
Equity ratio, % 27.4 22.6 22.6
Equity ratio, %, excl. IFRS 16 1) 32.8 27.8 27.8
Net interest-bearing debt 170.0 289.1 -119.1 -41.2 289.1
Net interest-bearing debt, excl. IFRS 16 1) 81.0 152.9 -72.0 -47.1 152.9
Net gearing ratio, % 103.0 159.7 159.7
Net gearing ratio, %, excl. IFRS 16 1) 47.5 82.1 82.1
Return on investment,  % -0.6 -0.8 -0.8
Capital employed 403.0 566.8 -163.7 -28.9 566.8
Construction 195.8 386.8 -191.0 -49.4 386.8
Investments 167.3 171.9 -4.6 -2.7 171.9
Other operations and eliminations 40.0 8.1 31.9 394.4 8.1
Capital employed, excl. IFRS 16 1) 319.4 436.0 -116.5 -26.7 436.0
Return on equity, % -11.5 -14.1 -14.1
Earnings per share, EUR -0.08 -0.15 0.07 -46.2 -0.15
Share price at end of period 0.53 0.59 -0.06 -10.2 0.59
Weighted number of shares at end of period, millions 2) 262.2 173.9 173.9
  1. The figure has been adjusted to remove the impacts of IFRS 16.
  2. The comparison figures have been adjusted to reflect share issues.

Construction January-December 2021

Revenue from Construction decreased to EUR 930.1 million (970.0 1–12 2020) in the January–December period. This decrease in revenue was due to the smaller volume of business premises contracting. Revenue from housing construction increased. The second residential tower in Kalasatama, Loisto, was recognised as income and contributed substantially to growth in revenue from housing construction.

Construction’s operating profit declined to EUR 14.1 (27.4) million. The decrease in operating profit was significantly affected by the negative earnings impact of about EUR 20 million caused by the Tampere Arena construction project. Decreased volume in business premises contracting also had a negative impact on operating profit. The recognition of Loisto in Kalasatama – a project with a low margin – as income weakened the relative profitability trend of developer-contracted housing production. On the other hand, the earnings trend was positive in housing contracting carried out as development projects.

Construction’s order backlog stood at EUR 872.3 (1,153.4) million and 91.5 (86.4) per cent of the order backlog has been sold. New agreements valued at EUR 588.6 (707.1) million were recognised in the order backlog in January–December.

Construction’s capital employed totalled EUR 195.8 (368.8) million. Capital employed decreased mainly due to the recognition of Loisto as income.

October-December 2021

Revenue from Construction totalled EUR 335.8 (292.0) million in October–December. Operating profit was EUR -1.3 (8.7) million. New agreements entered into the order backlog in October-December amounted to EUR 160.7 (140.7) million.

Investments January-December 2021

Investments’ revenue totalled EUR 6.8 (4.8) million in the January–December period. Revenue was primarily generated by shopping centre management and the recognition of sales income from the Decathlon project. In accordance with SRV’s operating model, revenue from associated companies’ projects and joint ventures is reported under the Construction segment.

The operative operating profit totalled EUR -4.6 (-5.7) million. In addition to SRV’s Group companies, the result contains shares of the results of the associated companies that own the Okhta Mall and Pearl Plaza shopping centres, including not only their operating margin, but also depreciation, financial expenses and taxes.

Investments’ operating profit was EUR -11.6 (-22.4) million. Operating profit was negatively impacted by the recognition of EUR -2.9 million in minority interest and translation differences due to the sale of the Russian plot-owning company Eurograd, EUR -5.1 million impairment of Russian plots and a EUR -0.5 million change in the value of the additional sales price receivable of the REDI shopping centre. This receivable has no balance sheet value after recognition. On the other hand, operating profit was positively influenced by a change in the exchange rate of the rouble, which had a net impact of EUR 1.5 (-4.4) million. The exchange rate impact, which largely had no effect on cash flow, was caused by the valuation of the euro-denominated loans of associated companies in roubles, currency hedging expenses and changes in the market value of currency hedges.

Capital employed totalled EUR 167.3 million (171.9 12/2020). Capital employed was reduced by the EUR 6.2 million write-down of the 4Daily shopping centre in the fourth quarter, the sale of the Russian plot-owning company Eurograd for EUR 1.7 million and EUR 5.1 million impairments of Russian plot-owning companies. During the review period, capital employed was increased by a EUR 2.6 million investment in Voimaosakeyhtiö SF, a EUR 1.1 million investment in the Arena hotel in Tampere, and the strengthening rouble exchange rate.

The return on investment was -8.1 (-14.3) per cent. When calculating the return on investment, the income from interest on loans granted to associated companies and changes in the value of loans are also taken into consideration.

In spite of the coronavirus pandemic, shopping centre operations recovered during the first quarter. Shopping centres remained open in January–March, but the coronavirus restrictions continued to have an impact on the business of some of the tenants. However, restrictions had to be tightened again towards the end of the second quarter as a consequence of the worsening coronavirus situation. Restrictions were still in place during the third and fourth quarters. In spite of the restrictions, the shopping centres increased their sales.

October-December 2021

Investments’ revenue totalled EUR 0.6 million in the October–December period (0.9 10–12/2020). Revenue was generated by shopping centre management.

Operative operating profit amounted to EUR -1.7 (-1.9) million.

Financial objectives

SRV’s strategy and all of its operations are guided by the 2021–2024 strategic financial objectives that were approved in February 2021:

  • Operative operating profit: 6 per cent by the end of the period.
  • Gearing excluding the impact of IFRS 16: 40-60 per cent by the end of the period.
  • As the company gradually reduces its indebtedness, SRV expects that it will pay dividends in accordance with its dividend policy no earlier than for the 1 January–31 December 2023 financial year. The longer-term objective is to distribute dividend of 30-50 per cent of the annual result, taking into account the capital needs of business operations.

Proposal for the distribution of profits

The parent company’s distributable funds on 31 December 2021 are EUR 253,424,080.53, of which net profit for the financial year is EUR -8,741,753.60. The Board of Directors proposes to the General Meeting that no dividend be paid for the 2021 financial year.

Annual General Meeting

SRV Group Plc’s Annual General Meeting is planned to be held on Monday, 28 March 2022 at 4.00 pm. The Board of Directors will convene the meeting separately in due course.

Espoo, 3 February 2022

Board of Directors

All forward-looking statements in this review are based on management’s current expectations and beliefs about future events. The company’s actual results and financial position may differ materially from the expectations and beliefs such statements contain due to a number of factors that have been presented in this interim report, and in particular the ongoing coronavirus pandemic.

Financial results briefing

A briefing for analysts, fund managers, investors and media representatives will be held on 3 February 2022, starting at 11:00 EET as a webcast. The webcast can be followed live at www.srv.fi/en/investors. The recording will be available on the website after the presentation. The materials will also be made available on the website.

For further information, please contact:
Saku Sipola, President & CEO, tel. +358 (0)40 551 5953, saku.sipola@srv.fi 
Jarkko Rantala, CFO, tel. +358 (0)40 674 1949, jarkko.rantala@srv.fi 
Miia Eloranta, Senior Vice President, Communications and Marketing, tel. +358 (0)50 441 4221, miia.eloranta@srv.fi   

Nasdaq Helsinki


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SRV in brief

SRV is a Finnish developer and innovator in the construction industry. We are building a more sustainable and responsible urban environment that fosters economic value and takes into consideration the wellbeing of both the environment and people. We call this approach lifecycle wisdom. Our genuine engagement and enthusiasm for our work comes across in every encounter – and listening is one of our most important ways of working. We believe that the only way to change the world is through discussion.

Our company, established in 1987, is listed on the Helsinki Stock Exchange. We operate in growth centres in both Finland and Russia. In 2021, our revenue totalled EUR 932.6 million. In addition to about 1,000 SRV employees, we have a network of around 3,600 partners.

SRV – Building for life