Bli medlem
Bli medlem

Du är här

2021-10-28

SRV Yhtiöt Oyj: SRV's interim report January-September 2021: Balance sheet strengthened and indebtedness decreased further, result burdened by the significantly weaker margin of a single project

SRV GROUP PLC     INTERIM REPORT     28 OCTOBER 2021      8:30 EET

SRV's interim report January-September 2021: Balance sheet strengthened and indebtedness decreased further, result burdened by the significantly weaker margin of a single project

January-September 2021 in brief:

  • Revenue declined by 12.7 per cent to EUR 596.3 million (683.0 1−9/2020).
  • Operative operating profit amounted to EUR 9.9 (10.5) million.
  • Operating profit was EUR 9.8 (9.5) million.
  • The result before taxes was EUR -0.8 (-13.4) million.
  • Cash flow from business and investment activities totalled EUR 14.0 (33.6) million.

  • The equity ratio was 27.0 (23.8) per cent and gearing was 147.5 (177.4) per cent. Excluding the impact of IFRS 16, the equity ratio was 34.0 (29.6) per cent and gearing was 75.5 (98.4) per cent. The equity ratio in accordance with the loan covenant calculation was 37.7 per cent.

  • At period-end, the order backlog stood at EUR 1,038.2 (1,280.3) million. New agreements valued at EUR 427.9 (566.3) million were signed in January-September. The sold share of the order backlog was 92.1 (86.9) per cent.
  • Earnings per share were EUR -0.01 (-0.11). The comparison figure has been adjusted for share issues.
  • On 13 September 2021, SRV signed a letter of intent to sell the shopping centre Pearl Plaza in St Petersburg.
  • SRV revises its outlook for revenue and operative operating profit in 2021. Revenue is expected to amount to EUR 900-1,000 million (previously EUR 900-1,050 million) and operative operating profit to EUR 16-21 million (previously EUR 16-26 million).

July-September 2021 in brief: 

  • Revenue in July-September amounted to EUR 191.1 (209.9) million.
  • Operative operating profit amounted to EUR -0.6 (5.6) million.
  • Operating profit was EUR -1.6 (1.7) million.
  • Cash flow from business and investment activities totalled EUR 10.1 (-15.6) million.
  • New agreements valued at EUR 166.6 (154.4) million were entered into the order backlog.

Events after the period

  • On 18 October 2021, SRV announced that the company had signed an implementation phase agreement to construct the Matinkylä upper secondary school in Espoo. SRV's contract is valued at EUR 37.5 million and the project will be recognised in SRV's order backlog for October.
  • On 13 October 2021, SRV announced that it had signed an implementation phase agreement and will start the construction of a multipurpose shipbuilding hall at RMC's Rauma Shipyard in November. SRV's contract amounts to around EUR 19 million and the project will be recognised in SRV's order backlog for October.

CEO's review

The third quarter of the year was challenging as we anticipated. The rise in prices of materials and the postponement of the startup of some projects due to material availability problems as well as the weak financial development of the Tampere Arena project had a significant negative impact on third quarter earnings. As a result, we revised our outlook for 2021. The completion of Tampere Arena still involves risks related to schedule and final costs during the rest of the year, although our site staff has been able to solve many challenges during the autumn.

Most importantly, we continued to make good progress towards our strategic goals, especially with respect to strengthening our balance sheet and reducing indebtedness. This development is expected to remain strong also in the fourth quarter, when e.g. Loisto will be recognised, with practically all of its residential units sold. The number of lifecycle-wise projects is growing, and concept development is advancing rapidly.

The profitability of the project portfolio has continued to develop positively, with the exception of designated projects, and our efficiency programmes are producing results, which creates strong belief in the future. Also in tower construction, controllability has improved significantly with the lessons learned from the completed Majakka and Loisto, as well as Lumo One, which is under construction. For the next tower projects, for which we aim for one transaction by the end of the year, the developed design and engineering solutions will significantly improve cost-efficiency. Our work on project development has started yielding good new project prospects. For instance, we will seek to start up significantly more developer-contracted housing projects next year.

Despite the good development in many areas, next year's performance is still somewhat overshadowed by certain projects based on old contracts. We expect that the effectiveness of development programmes and next year's developer-contracted projects will fully accelerate earnings development especially from 2023 onwards.

We entered new projects valued at about EUR 428 million into the order backlog in January-September, including both housing projects and the construction and renovation of business premises. Our major successes during the review period include the EUR 82 million agreement with DWS on the construction of residential units in accordance with our lifecycle-wise strategy. However, our order backlog is smaller than in the comparison period.

We are investing in project development and sales both in housing projects and business premises construction, and these new project startups will enable us to reach our strategic goals in the coming years.  The most significant project we announced this year - which will contribute to our order backlog only in the future - is the Laakso Joint Hospital. After the review period, we signed an implementation phase agreement to construct the Matinkylä upper secondary school in Espoo and made an agreement to build a multipurpose shipbuilding hall at Rauma Shipyard.

Our housing sales have remained brisk and we have only eight completed unsold units. In the future, we'll step up the number of good developer-contracted projects alongside projects sold to investors in a controlled manner - this will ensure that our housing construction is diverse and well-balanced and will serve to bolster our order backlog.

Favourable trends in sales at Russian shopping centres have continued this year, with sales even exceeding 2019 levels (which is a more relevant comparison year than the pandemic year of 2020). However, the worrying development of the pandemic creates uncertainty to the outlook of the shopping centres. In September, we signed a letter of intent on the divestment of the Pearl Plaza shopping centre and aim to complete the sale this year. In September, we inaugurated the store building we constructed for Decathlon in Mytishchi. The parking garage we built next to Okhta Mall in St Petersburg will be opened in October.

As part of our corporate responsibility governance, we have long developed operating methods to combat the grey economy and ensure the manageability, transparency and legality of the operating chain. Preventing labour exploitation has been identified as an important theme. Going forward, we require all third-country nationals working on the company's construction sites to have a Finnish-issued residence permit that entitles them to work.

After several changes, our Corporate Executive Team and our whole organisation have found an active touch in developing our operations and building a stronger future. This is a good place to continue forward.

Saku Sipola, President and CEO

Overall review

[][]
Group key figures 1-9/ 1-9/ change, 7-9/ 7-9/ 1-12/ Previous
(IFRS, EUR 2021 2020 change % 2021 2020 2020 12
million) months
Revenue 596.3 683.0 -86.8 -12.7 191.1 209.9 975.5 888.8
Construction 594.3 678.1 -83.8 -12.4 188.0 209.1 970.0 886.3
Investments 6.2 3.9 2.3 58.5 4.2 1.1 4.8 7.1
Other operations -4.2 1.1 -5.3 -497.3 -1.1 -0.3 0.7 -4.6
and eliminations
Operative 9.9 10.5 -0.6 -5.9 -0.6 5.6 15.8 15.2
operating
profit[1)]
Construction 15.4 16.6 -1.2 -7.1 1.6 3.7 25.1 23.9
Investments -2.8 -3.8 1.0 -2.5 -0.7 -5.7 -4.7
Other operations -2.7 -2.3 -0.4 -0.6 0.3 -3.5 -4.0
and eliminations
Operative 1.7 1.5 -0.3 2.7 1.6 1.7
operating profit,
%
Operating profit 9.8 9.5 0.3 2.9 -1.6 1.7 1.5 1.7
Construction 15.4 18.7 -3.3 -17.6 1.6 5.2 27.4 24.1
Investments -2.9 -6.9 4.0 -2.6 -3.8 -22.4 -18.4
Other operations -2.7 -2.3 -0.4 -0.6 0.3 -3.5 -4.0
and eliminations
Operating profit, 1.6 1.4 -0.8 0.8 0.2 0.2
%
Financial income -10.6 -22.9 12.4 -2.8 -8.8 -29.4 -17.1
and expenses,
total
Profit before -0.8 -13.4 12.6 -4.4 -7.0 -28.0 -15.3
taxes
Net profit for the -0.4 -14.5 14.1 -4.0 -6.9 -25.1 -11.0
period
Net profit for the -0.1 -2.1 -2.1 -3.3 -2.6 -1.2
period, %
Order backlog 1038.2 1 280. -242.1 -18.9 1 153. 911.3
(unrecognised)[2)]
3 4
New agreements 427.9 566.3 -138.4 -24.4 166.6 154.4 707.1 568.6

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 1-9/ 1-9/ change, 1-12/
figures                 
(IFRS, EUR million) 2021 2020 change, % 2020
Equity ratio, % 27.0 23.8 22.6
Equity ratio, %, excl. IFRS 34.0 29.6 27.8
16 [1)]
Net interest-bearing debt 269.0 341.7 -72.8 -21.3 289.1
Net interest-bearing debt, 142.1 194.9 -52.8 -27.1 152.9
excl. IFRS 16[1)]
Net gearing ratio, % 147.5 177.4 159.7
Net gearing ratio, %, excl. 75.5 98.4 82.1
IFRS 16[1)]
Return on investment, % 3.4 0.9 -0.8
Capital employed 502.4 605.0 -102.5 -16.9 566.8
Construction 389.6 417.4 -27.9 -6.7 386.8
Investments 177.0 181.1 -4.1 -2.3 171.9
Other operations and -64.2 6.4 -70.6 -1097.2 8.1
eliminations
Capital employed, excl. IFRS 381.5 463.5 -82.0 -17.7 436.0
16[1)]
Return on equity, % -0.3 -10.5 -14.1
Earnings per share, EUR [2)] -0.01 -0.11 0.10 -93.5 -0.15
Share price at end of period 0.58 0.53 0.05 9.4 0.59
Weighted number of shares at 262.2 144.3 173.9
end of period, millions[ 2)]

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-September 2021

Revenue from Construction declined to EUR 594.3 million (678.1 1-9/2020) in the January-September period. This fall in revenue...

Författare Cision