SRV Group Plc changes its guidance and specifies the outlook for 2017
SRV Group Plc specifies the outlook for 2017 and changes its guidance for 2017 operating profit due to changes in the rouble exchange rate. In addition, in order to improve comparability, the company introduces the concept of operative operating profit, in which rouble exchange differences have been eliminated.
SRV’s functional currency in Russia was mainly the euro until September 2016. SRV’s leasing has become rouble-denominated to such an extent that, in accordance with IAS 21, the functional currency of SRV’s real-estate business subsidiaries and associated companies in Russia was changed to the rouble as of 1 September 2016.
The rouble exchange rate weakened 6.47% during January-June 2017. The exchange rate impact is primarily caused by the euro-denominated loans of the Russian associated companies. At the end of the reporting period, the loans are the converted into euros, which creates an imputed currency exchange difference to the line Share of associated companies’ profits. The difference has no impact on cash flow.
Due to uncertainties associated with changes of the rouble exchange rate, SRV Group Plc has decided to change its guidance and specify the outlook for 2017 as follows:
Full-year consolidated revenue for 2017 is expected to grow compared with 2016 (revenue EUR 884 million). If the rouble exchange rate remains at the level prevailing the end of the second quarter 2017, operating profit is expected to weaken, but operative operating profit to improve, compared with 2016 (operating profit EUR 27.7 million and operative operating profit EUR 26,3 million). A profitability level in accordance with strategy will not be attained, however, until the end of the strategy period 2019–2020.
SRV Group Plc estimated in its interim report of 27 April 2017 that SRV’s revenue will increase and operating profit improve compared with 2016 (revenue EUR 884 million, operating profit EUR 27.7 million).
Operative operating profit as a concept
In addition, as of 20 July, SRV has adopted the new concept of “operative operating profit”, which differs from the IFRS definition of operating profit in that it eliminates the calculated currency exchange differences included in financial items in Russian operations and their potential hedging impacts.
SRV Group Plc publishes its interim report for January-June on Thursday, 20 July 2017 at 8.30.
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