New large-scale projects increased SRV’s revenue and order backlog by one fifth
Thanks to SRV’s large-scale projects – REDI in Kalasatama and the Niittykumpu metro centre – the Group’s order backlog soared by 20 per cent at the end of the first half of 2015, hitting an all-time high of EUR 1.3 billion.
“In addition to our order backlog, we also broke records in signing new contractor agreements. In July, after the end of the review period, we signed a project management agreement for the implementation of new Tampere University Hospital buildings. Valued at EUR 170 million, this is one of the largest contractor agreements in our history. Moreover, the decicion that was made yesterday about SRV’s role as project manager in Fennovoima’s nuclear power plant construction and as investor in Fennovoima is a significant addition to our operations and further strenghtens our position as a pioneer of project management contracting in Finland. This is clearly a major agreement package in the company’s history,” says Juha Pekka Ojala, President & CEO of SRV.
In the January-June period, the Group’s revenue grew by 20 per cent to EUR 340 million. The start-up of the REDI shopping centre and parking facility project contributed to a rise in revenue, as work completed prior to the official decision to start the project was recognised as revenue in accordance with the level of completion. Operating profit in turn declined from EUR 9.3 million to EUR 3.4 million.
“Operating profit was weakened mainly by a fall in revenue from developer-contracted residential construction and the higher share accounted for by business contracting with low profit margins. In addition, many of our large-scale projects were started up. This, naturally, increases our construction volume and thereby our fixed costs. In addition to REDI, our large shopping centre projects Okhta Mall and Daily in Russia, in which we are in the role of owner, tie up both personnel and financial resources,” says Ojala.
90 per cent of SRV’s revenue is generated by Operations in Finland, where revenue was up 19 per cent to EUR 300 million, but operating profit declined to half of what it was in 2014, amounting to EUR 5.7 million.
“The decline in revenue from residential development and developer-contracted housing projects weakened earnings in Operations in Finland. In addition, the number of developer-contracted housing units completed during the first half of 2015 fell to almost a fifth in comparison to last year. These units are recognised as revenue only upon completion and sale. However, we have over 1,600 housing units under construction, of which 75 per cent is already sold. Judging from the good situation in housing start-ups and successful housing sales, such as our new sales record of almost 150 units in June, we are well-poised to perform well in the years ahead,” says Ojala.
The revenue of International Operations, which largely comprises business in Russia, rose by 26 per cent to EUR 33 million, representing about 10 per cent of SRV’s total revenue. Operating profit rose into the black, EUR 0.7 million.
“Although the general situation in Russia is subject to major uncertainty, our ongoing projects are proceeding as planned, and under the circumstances we have been very successful in our project financing negotiations. Construction of the Okhta Mall in St Petersburg is on track and the roofing ceremony will be held in September. It is intended that the shopping centre will open its doors in summer 2016. Our other important project in St Petersburg, the Pearl Plaza shopping centre, is performing well. First-half visitor numbers were up by 23 per cent and sales by 37 per cent on the corresponding period of 2014,” says Ojala.
The outlook for the entire Group in the second half of the year is mildly optimistic. SRV will not revise its profit forecast for 2015.
“Thanks to our new large-scale projects, record-breaking order backlog and numerous housing start-ups, we’ll have plenty of work to do in the latter half of 2015, too,” says Ojala.
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