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Published:
2016-05-04 07:30:00 CEST
SRV Yhtiöt Oyj
Interim report

SRV´s interim report January-March 2016: first-quarter result bland as expected, order backlog at record high

Full-year result outlook unchanged

Espoo, Finland, 2016-05-04 07:30 CEST (GLOBE NEWSWIRE) --
SRV GROUP PLC     INTERIM REPORT     4 MAY 2016, AT 8:30

SRV´s interim report January-March 2016: first-quarter result bland as expected, order backlog at record high - full-year result outlook unchanged

  
January-March 2016 in brief


• Revenue amounted to EUR 143.8 (172.9 1-3/2015) million. Slight decrease in revenue, as quarrying and other infrastructure work completed at the REDI site was recognised in revenue in 2015.
• Operating profit was EUR 0.0 (2.5) million. Operating profit weakened primarily due to the low number of residential units recognised as revenue.
• The result before taxes was EUR -5.5 (3.3) million. A EUR -4.3 million fair value revaluation of a 10-year interest rate hedge contributed to the weakening of the result.
• Earnings per share were EUR -0.11 (0.05).
• The order backlog at period-end stood at EUR 1,572.1 (1,179.8) million. The order backlog remained at an all-time high thanks to new agreements.
• Equity ratio was 36.7 (39.8) per cent. Gearing was 87.5 (101) per cent. The change in equity ratio is explained by a EUR 100 million bond as well as a hybrid bond issued in March 2016. These also increase cash assets to an exceptionally high EUR 123 million.

Events after the period

• In April, SRV announced that it was selected as the further developer of a hospital project valued at about EUR 300 million in Central Finland. If the project goes ahead, it will be the largest contract in SRV’s history that does not include the company’s own equity.

Outlook

• The outlook for earnings in 2016 remains unchanged. Full-year revenue for 2016 is expected to grow and operating profit to improve compared with 2015 (revenue EUR 719 million and operating profit EUR 24.4 million 12/2015).
• Due to the completion schedules of SRV's developer-contracted housing projects, a significant proportion of the company's operating profit will be made in the second half of the year.
• Due to growth of interest-bearing debt, financing expenses increased compared with 2015.

This interim report has been prepared in accordance with IAS 34, and the disclosed information is unaudited.

 

CEO comment

“The result for the early part of the year was bland as expected, but the order backlog developed strongly. New contracts valued at just over EUR 100 million were entered in the order backlog. And what’s best, our order backlog appears to be holding steady. An excellent example of our ongoing record-breaking performance is our role to further develop the last week we announced almost EUR 300 million new hospital project in Central Finland. Our first quarter earnings trend is in line with expectations, as we knew that only a small number of residential units would be recognised as revenue in the early months of the year. However, that number will surge: we expect to complete more than 500 units during the entire year, of which a significant share has already been sold. We are powering ahead in 2016. In accordance with our strategy, which we updated early this year, we will develop city centres and assess new projects in transport hubs.” Juha Pekka Ojala, President and CEO

 Overall review 1 Jan.-31 Mar. 2016

 
Group key figures
(IFRS, EUR million)
1-3/ 2016 1-3/ 2015 change change, % 1-12/ 2015
Revenue 143.8 172.9 -29.1 -16.8 719.1
Operating profit 0.0 2.5 -2.5 -99.0 24.4
Financial income and expenses, total -5.6 0.8 -6.4   -6.8
Profit before taxes -5.5 3.3 -8.9   17.6
Order backlog 1,572.1 1,179.8 392.3 33.3 1,583.4
New agreements 126.5 489.1 -362.6 -74.1 1,393.5
Operating profit, % 0.0 1.5     3.4
Net profit, % -3.3 1.6     1.9

 

*) Comparative data is share issue adjusted.

 

In the January-March period of 2016, the Group’s order backlog was again on a record high level, EUR 1,572.1 (1,179.8) million. The order backlog remained at an all-time high in spite of the completion of numerous contracts thanks to the great number of new agreements and preliminary agreements signed in the first months of the year, which were valued at a total of EUR 126 (489,1) million. The largest new projects announced in early 2016 included the new Otaniemi campus building for Aalto University and commercial premises in the Metro Centre, valued at about EUR 100 million.

The Group’s revenue was EUR 143.8 (172.9) million. Revenue saw a year-on-year decrease due to the recognition of income from the REDI shopping centre. In January-March 2015, quarrying and other infrastructure work completed at the REDI site prior to the official start-up decision was recognised in revenue in accordance with the level of completion. In addition, revenue was affected by growth in the share of operations accounted for by low-margin business contracting and the fact that sales to investors fell short of the figures for early 2015.


The Group’s operating profit was EUR 0.0 (2.5) million. The operating profit was affected by growth in the proportion of low-margin business premises contracting, the low number of housing units recognised as income, and the lower earnings contribution of Russia associated companies. SRV’s fixed costs also saw a year-on-year increase in January-March 2016 due to numerous development projects.


The Group's profit before taxes was EUR -5.5 (3.3) million. In addition to the low number of residences recognised as income, the result was weakened by a EUR -4.3 million fair value revaluation of a 10-year interest rate hedge.


The Group’s earnings per share were EUR -0.11 (0.05). Earnings per share were weakened by the cost of repaying the hybrid bond.

Operating profit and its relative level are reduced by the elimination of a share equivalent to SRV's ownership from the profit margins of three shopping centre projects that are under construction (Okhta Mall, 4Daily and REDI), which will be recognised as income only when the investment is sold.


SRV's operating profit and operating profit margin quarterly variation was affected by several factors.  SRV’s own projects are recognised as income upon delivery; the part of the order backlog that is continuously recognised as income based on the level of completion mainly consists of low-margin contracting; and the nature of the company's operations (project development).

The Group’s equity ratio was 36.7 (39.8) per cent. Gearing was 87.5 (101) per cent. The change in equity ratio is explained by a EUR 100 million bond as well as a hybrid bond issued in March 2016.

 

Group key figures
(IFRS, EUR million)
1-3/ 2016 1-3/ 2015 change change, % 1-12/ 2015
Equity ratio, % 36.7 39.8     42.5
Net interest-bearing debt 247.2 228.5 18.7 8.2 230.8
Gearing, % 87.5 101.0     83.3
Return on investment, % 0.5 4.7     5.9
Return on equity, % -6.8 4.9     5.6
Earnings per share, EUR *) -0.11 0.05 -0.16   0.25
Equity per share, EUR *) 3.71 4.53 -0.82   3.90
Share price at end of period, EUR 3.53 3.39 0.14   3.10
Weighted average number of shares outstanding, millions *)  
59.3
 
39.8
     
42.6

 

 

*) Comparative data is share issue adjusted.

 

Invitation to a press conference: SRV Group Plc’s Q1 2016 result

SRV Group Plc will publish its Q1 2016 interim report on Wednesday, 4 May 2015, at 8.30 am Helsinki time. The report can be found for example on the company's website www.srv.fi/en/investors.

The interim report will be presented to the media and analysts at the press conference which will take place on Wednesday 4 May at 11.00 a.m. at the Living Lab –test environment that presents REDI project, Kalasatama area and the housing to be constructed, address Kaasutehtaankatu 1, rakennus 6, 3rd floor, 00540 Helsinki. The press conference will be held in Finnish.


CEO Juha Pekka Ojala and CFO Ilkka Pitkänen will be present.

 

Espoo, 3 May 2016

Board of Directors

All forwarding-looking statements in this report are based on management’s current expectations and beliefs about future events, and actual results may differ significantly from the expectations and beliefs such statements contain.

 

 

For further information, please contact:
Juha Pekka Ojala, President & CEO, tel. +358 201 455 213, jp.ojala@srv.fi
Ilkka Pitkänen, CFO, +358 40 667 0906, ilkka.pitkanen@srv.fi
Päivi Kauhanen, SVP, Communications, tel. +358 50 598 9560, paivi.kauhanen@srv.fi

www.srv.fi

 

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0504_Osavuosikatsaus Q1_E_FINAL.pdf