CEO’s review

Interim Report 1-9/2019, 31 October 2019

In terms of earnings, the January-September period was disappointing due to impairments of our investments in Russia and weaker margins of two projects being completed this year. On the other hand, slightly more residential units were completed and recognised as income than in the comparison period.  Due to these reasons, we expect that operative operating profit for 2019 will be in the red. We recognised EUR 123 million in new projects in order backlog during the third quarter.

We strengthened our financial position in the spring and early summer. This has facilitated the development of our operations, earnings performance and other financing. However, it goes without saying that these steps alone will not be enough to put the company on a profitable track.

As previously expected, housing start-ups will decline both this year and the next. Demand for housing is waning outside the Greater Helsinki Area compared to previous years. Apartments in good locations – particularly small units – are selling well and investor demand remains strong. At the end of August, we signed a cooperation agreement valued at EUR 120 million with Kojamo. The agreement is for six housing sites built as development projects with a total of 527 rental housing units in the Greater Helsinki Area. The first of these housing projects was completed and recognised as income during the review period.

Occupancy rates, visitor numbers and sales at the Russian shopping centres grew. We are working to improve the attractiveness of the shopping centres and to find the best tenant mix. We are satisfied with the development of all our shopping centres, although the positive development needs to be speeded up.

I believe that SRV has been successful in urban development. We are heading in the right direction: urbanisation will continue. Kalasatama will play a stronger role in the Helsinki city centre this autumn when residents will be able to move into Majakka. Construction of the second residential tower, Loisto, utilises tower construction knowledge and is proceeding according to the plan.

Our challenges are clearly limited to certain parts of our activities, but the depth of the challenges has a wide impact on the entire company. However, with determined measures, the company’s trend can be reversed. We will therefore immediately begin a recovery programme aiming at strengthening financial position and performance and improving profitability.

Saku Sipola

President and CEO
SRV Group Plc