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  • SRV’s interim report January–March 2021: Positive trend in profitability continued, major financing arrangement initiated during Q1 was implemented in April

SRV’s interim report January–March 2021: Positive trend in profitability continued, major financing arrangement initiated during Q1 was implemented in April

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SRV GROUP PLC     INTERIM REPORT     29 APRIL 2021      8:30 EET

SRV’s interim report January–March 2021: Positive trend in profitability continued, major financing arrangement initiated during Q1 was implemented in April

January–March 2021 in brief:

  • Revenue declined by 10.1 per cent to EUR 187.1 million (208.1 1−3/2020).
  • Operative operating profit amounted to EUR 4.8 (4.3) million.
  • Operating profit was EUR 5.2 (4.5) million.
  • The result before taxes was EUR 1.1 (-6.6) million.
  • Cash flow from business and investment activities totalled EUR -23.3 (19.6) million.
  • The equity ratio was 23.8 (20.4) per cent and gearing was 170.8 (260.2) per cent. Excluding the impact of IFRS 16, the equity ratio was 29.4 (25.8) per cent and gearing was 96.5 (160.2). The equity ratio in accordance with the loan covenant calculation was 30.9 per cent.
  • At period-end, the order backlog stood at EUR 1,061.1 (1,361.5) million. New agreements valued at EUR 85.4 (198.2) million were signed in January–March. The sold share of the order backlog was 87.7 (84.7) per cent.
  • Earnings per share were EUR 0.00 (-0.11). The comparison figure has been adjusted for share issues.
  • On 29 March 2021, the company announced it commences written procedures to amend terms of its senior unsecured notes and negotiates the renewal of its revolving credit facility. Financing arrangements were completed after the review period on 28 April 2021. As a result of the aforementioned arrangements, the maturity structure of the company’s unsecured debts and the company’s equity ratio will both improve significantly.


Events after the period

  • The company’s maturity structure of its unsecured debts and equity ratio improved significantly through the financing arrangement:
    •  On 27 April 2021, the company carried out written procedures to amend the terms and conditions of its two bonds. Under the new terms and conditions, the due dates for the bonds were extended until March 2025, SRV will make a partial early repayment of a total nominal amount of EUR 27.1 million and will undertake to make payments of a total nominal amount of EUR 5 million on each interest payment day. In addition, amendments were made to some other terms and conditions.
    •  On 28 April 2021, the company agreed on the replacement of its current EUR 51 million revolving credit facility and EUR 40 million project financing facility with the syndicate banks; the facilities were replaced with a new EUR 40 million committed revolving credit facility, a EUR 40 million committed project financing facility and a EUR 63 million non-committed project financing facility. EUR 10 million of the new EUR 40 million revolving credit facility will mature in March 2022 and EUR 30 million in April 2023.
  • On 23 April 2021, SRV was chosen to develop and build Laakso Joint Hospital in Helsinki as an alliance project. The clients are the City of Helsinki and the Helsinki and Uusimaa Hospital District. The project is divided into several development and construction phases, with a total value of approximately EUR 730 million.
  • On 22 April 2021, SRV announced the company’s SVP, General Counsel and a member of Corporate Executive Team Johanna Metsä-Tokila has resigned. She will take on a position in another company.
  • On 22 April 2021, SRV announced the company will pay interest on its 2019 hybrid notes on 24 May 2021.


CEO's review

We are getting back on track and progressing as planned towards our strategic targets. Positive developments are being seen in operational activities, start-ups of new developer-contracted projects and success with significant financing arrangements.

The earnings trend in construction remained favourable during the review period and our ongoing projects progressed largely in line with plans. Improving profitability and reducing indebtedness towards our strategic objectives will continue to be important themes. 

In January–March, we entered approximately EUR 85 million worth of new projects into the order backlog. These are mainly housing construction projects. Although the number of new agreements made during the review period was lower than in the previous period, the market remains fairly strong and we anticipate good order intake in the second quarter. In April, SRV announced that the company has been chosen to develop and build Laakso Joint Hospital in Helsinki as an alliance project. The project is divided into several development and construction phases, with a total value of approximately EUR 730 million. The project will be entered in SRV's order backlog in accordance with the phases during the years 2021-2028. The project will not tie up SRV's capital and, if realised, will generate a significant part of SRV's revenue in the coming years. The procurement decision is not yet final. When realised, the project will have a significant impact on SRV’s order backlog.

Housing sales have remained brisk and the number of completed unsold units has stayed low. There are currently 46 unsold housing units in Finland. The sale of Loisto in Helsinki is proceeding to plan and over 90 per cent of its apartments have now been sold or reserved. During the review period, we launched the construction of three developer-contracted residential projects in Vantaa, Oulu and Kaarina. These housing units will be recognised as income mainly in 2022. Where possible, we are increasing the number of good developer-contracted projects alongside projects sold to investors in a controlled manner, so that our product offering is a better match for both demand and our financial objectives.

Russian shopping centres were able to stay open during the first quarter. Although the continuing restrictions were still reflected in visitor numbers, good trends were seen in sales volumes, which by March had already exceeded figures for the previous two years on a monthly basis. Favourable developments were also seen in visitor numbers towards the end of the review period.

The significant financing arrangements initiated at the end of the review period, were completed after the period. The written procedure to extend the maturity of our two bonds was successful, and, in addition, we were able to agree on new financing in good cooperation with the banks. With longer loan periods, both solutions bring persistency in the development of business operations and give us more room to manoeuvre in furthering our strategic objectives.

The new strategy that we published at the beginning of February aims to develop long-term competitive advantage, provide an excellent customer experience, tap into opportunities for lifecycle services, improve profitability and reduce indebtedness. We launched our strategic programmes as planned during early 2021. A clear upswing was seen in SRV’s customer satisfaction, and we improved in all areas of the EPSI Rating survey.

Saku Sipola, President and CEO


Overall review

Group key figures(IFRS, EUR million) 1−3/ 2021 1−3/ 2020 change change, % 1-12/2020 Previous 12 months
Revenue 187.1 208.1 -21.0 -10.1 975.5 954.6
Construction 187.8 204.9 -17.0 -8.3 970.0 953.0
Investments 1.0 1.6 -0.6 -38.7 4.8 4.2
Other operations and eliminations -1.7 1.6 -3.3 0.7 -2.6
Operative operating profit1) 4.8 4.3 0.4 9.7 15.8 16.2
Construction 6.9 5.5 1.3 23.6 25.1 26.4
Investments -0.8 -1.0 0.2 -5.7 -5.5
Other operations and eliminations -1.3 -0.2 -1.1 -3.5 -4.7
Operative operating profit, % 2.5 2.1 1.6 1.7
Operating profit 5.2 4.5 0.6 14.0 1.5 2.1
Construction 6.9 6.2 0.7 11.2 27.4 28.1
Investments -0.4 -1.4 1.1 -22.4 -21.3
Other operations and eliminations -1.3 -0.2 -1.1 -3.5 -4.7
Operating profit, % 2.8 2.2 0.2 0.2
Financial income and expenses, total -4.1 -11.1 7.0 -29.4 -22.4
Profit before taxes 1.1 -6.6 7.7 -28.0 -20.3
Net profit for the period 1.6 -7.6 9.1 -25.1 -16.0
Net profit for the period, % 0.8 -3.6 -2.6 -1.7
Order backlog (unrecognised)2) 1,061.1 1,361.5 -300.4 -22.1 1,153.4 853.0 
New agreements 85.4 198.2 -112.9 -56.9 707.1 594.2
  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(IFRS, EUR million) 1−3/ 2021 1−3/ 2020 change change, % 1−12/ 2020
Equity ratio, % 23.8 20.4 22.6
Equity ratio, %, excl. IFRS 16 1) 29.4 25.8 27.8
Net interest-bearing debt 309.5 400.4 -90.9 -22.7 289.1
Net interest-bearing debt, excl. IFRS 161) 180.5 254.1 -73.5 -28.9 152.9
Net gearing ratio, % 170.8 260.2 159.7
Net gearing ratio, %, excl. IFRS 161) 96.5 160.2 82.1
Return on investment, % 4.7 -0.4 -0.8
Capital employed 553.8 593.7 -39.9 -6.7 566.8
Construction 375.1 403.0 -27.9 -6.9 386.8
Investments 173.4 193.1 -19.6 -10.2 171.9
Other operations and eliminations 5.2 -2.3 7.6 8.1
Capital employed, excl. IFRS 161) 430.6 452.0 -21.4 -4.7 436.0
Return on equity, % 3.5 -18.4 -14.1
Earnings per share, EUR 2) 0.00 -0.11 0.11 -0.15
Share price at end of period, EUR) 0.57 0.94 -0.37 -39.4 0.59
Weighted average number of shares outstanding, millions2) 262.2 72.1 173.9
  1. The figure has been adjusted to remove the impacts of IFRS 16.
  2. The comparison figures have been adjusted to reflect share issues.


Earnings trends for the segments

Construction January–March 2021

Revenue from Construction declined to EUR 187.8 million (204.9 1–3/2020) in the January–March period. This decrease in revenue was mainly due to a decline in revenue from business premises contracting.

Construction’s operating profit rose to EUR 6.9 (6.2) million. Favourable earnings trends in both residential development projects and developer-contracted housing had a positive impact on operating profit. However, operating profit was also weakened by reduced volumes in business premises contracting.

Construction’s order backlog stood at EUR 1,061.1 (1,361.5) million. Although the order backlog has declined, it remains at a good level, and 87.7 (84.7) per cent of the order backlog has been sold. New agreements valued at EUR 85.4 (198.2) million were signed in January–March. Three new developer-contracted projects were entered into the order backlog in January–March.

Construction’s capital employed totalled EUR 375.1 (403.0) million.


Investments January–March 2021

Investments’ revenue totalled EUR 1.0 million in the January–March period (1.6 1–3/2020). It mainly consists of revenue from shopping centre management. 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 -0.8 (-1.0) 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 -0.4 (-1.4) million. The net effect of currency exchange fluctuations was EUR 0.4 (-0.4) million, which arose from valuation of the euro-denominated loans of associated companies in roubles and the net impact of currency hedging.

Capital employed totalled EUR 173.4 million (171.9 12/2020). Capital employed was increased by a EUR 0.8 million investment in Voimaosakeyhtiö SF and the strengthening rouble exchange rate.

The return on investment was 1.8.(-13.4 1-3/2020) 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 have recovered well 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.


Outlook for 2021

During 2021, 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 part of the order backlog that is recognised as income over time mainly consists of contracting; 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. To date, the impacts of the pandemic have been moderate on the whole, but its effects on the construction market are unclear and cause uncertainty regarding the outlook for the future. The result for 2021 is also affected by the fact that the company has not been able to start up developer-contracted housing projects in line with the target schedule of the recovery programme. In 2021, the company will continue to focus on reducing indebtedness and seeks strong cash flow.

  • Consolidated revenue for 2021 is expected to amount to EUR 900 – 1,050 million (revenue in 2020: EUR 975.5 million).
  • Operative operating profit is expected to improve on 2020 and to amount to EUR 16-26 million (operative operating profit for 2020 in accordance with the new definition: EUR 15.8 million).


Espoo, 29 April 2021

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 conference for analysts, fund managers, investors and representatives of the media will be held on 29 April 2021 at 12.00 EET as a webcast. The event will be held in Finnish. A live webcast of the conference will begin at 12.00 EET, available through the company’s website www.srv.fi/en/investors. The presentation will be available on the company's 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 developer and innovator in the construction industry. Our objective is a new lifecycle-wise reality where solutions related to construction ensure well-being, financial value and the benefit of users, residents and environment – for years and generations to come. Our genuine cooperation and enthusiasm for our work comes across in every encounter. Sustainability is reflected in all our activities.

Our company, established in 1987, is listed on the Helsinki Stock Exchange. We operate in growth centres in Finland and Russia. In 2020, our revenue totalled EUR 975.5 million. In addition to about 1,000 SRV employees, we employ a network of around 4,200 subcontractors.

SRV - Building for life