CEO’s review

CEO’s review

Interim Report 1-3/2021, 29 April 2021

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
SRV Group Plc