SRV’s financial statement release, January–December 2016: Revenue, operating profit and order backlog grow
January-December 2016 in brief:
October-December 2016 in brief:
Events after the end of the review period:
Outlook for 2017
This interim report has been prepared in accordance with IAS 34, and the disclosed information is unaudited.
“The order backlog peaked at more than EUR 2 billion in 2016 and remained at a record high all year. Growth was driven particularly by business construction projects in Finland. Order backlog growth bolsters our position as one of Finland’s major urban centre developers. Although we didn’t receive any major new orders in the last months of 2016, our order backlog remains at a record high and we’re expecting more interesting new entries in our order book in 2017.
In addition to our order backlog, the trend in our revenue has also been positive. In 2016, we posted revenue of over EUR 800 million for the first time – and in the years ahead we intend to aim even higher. Despite strong revenue growth SRV`s main goal is to improve profitability according to our strategical objectives.
In 2016, in the growing market, we focused on the implementation of development projects and prudently engaged in tender-based contracting. Furthermore, in the housing business, we stepped up our developer-contracted units, which has contributed to our earnings.
The lengthy recession in Russia is naturally being reflected in our operations, for example, in temporary rent discounts granted to shopping centre tenants. In view of the circumstances, our shopping centres in St Petersburg are performing excellently. This was particularly evident in visitor numbers at the end of 2016 and also in early 2017.
Measures to achieve the strategic objectives are progressing as planned, and we have many concrete examples showing we are on the right course. For this, a big thank you is due to our highly dedicated personnel”, says CEO Juha Pekka Ojala.
| Group key figures
(IFRS, EUR million)
|1-12/ 2016||1-12/ 2015||change||change, %||10-12/ 2016||10-12/ 2015|
|Financial income and expenses, total*)||-11.3||-6.8||-4.5||3.2||-2.1|
|Profit before taxes||16.4||17.6||-1.2||-7.1||19.4||14.9|
|Operating profit, %||3.1||3.4||4.9||7.5|
|Net profit, %||1.6||1.9||5.0||5.4|
|*) – of which accounted for by derivatives||-4.7||-3.3||-1.4||3.1||-0.5|
In January-December 2016, the Group’s order backlog rose to EUR 1,758.5 (1,583.4) million (up 11.1%). The largest new projects announced in 2016 included a new central hospital in Central Finland, the Ring Road I tunnel project, a contractor agreement for the second phase of the expansion of Tapiola city centre, as well as the construction of a new campus building for Aalto University and retail premises in the Metro Centre, both in Otaniemi, Espoo. The order backlog saw growth in operations in Finland in particular, largely in the second quarter. No significant new orders were announced in October-December with the exception of the agreement of Aleksintori in Kerava.
The Group’s revenue rose by 23 per cent to EUR 884.1 (719.1) million. Growth in revenue was driven by large business construction projects in Finland and particularly by the developer-contracted housing units completed and sold in the latter part of the year. The major business premises projects agreed on during the spring have entered the construction phase and are now generating revenue. The recognition of income from 499 (323) developer-contracted housing units contributed to revenue growth.
The Group’s operating profit rose to EUR 27.7 (24.4) million, primarily due to improved profitability and higher revenue in SRV’s operations in Finland. The operating profit was weakened by a rise in the costs of certain projects under construction and by expenses incurred in the aftermath of some completed projects.
Operating profit from International Operations decreased to EUR -4.2 (-0.1) million. The rouble exchange rate improved operating profit by a net amount of EUR 1.3 million. Operating profit was weakened by temporary rent discounts granted to tenants, depreciation according to plan and amortisation of EUR 2.5 million.
Operating profit and its relative level are also lowered by the elimination of a share equivalent to SRV’s ownership from the profit margins of shopping centre projects under construction (Okhta Mall, 4Daily and REDI), which will be recognised as income only when the investment is sold.
The Group’s profit before taxes was EUR 16.4 (17.6) million. The result was weakened by higher interest expenses and a EUR -4.7 million fair value revaluation of a ten-year interest rate hedge.
The Group’s earnings per share were EUR 0.15 (EUR 0.25). Earnings per share were impacted by the relative increase in the number of shares due to a share issue as well as the non-recurring cost of repaying the hybrid bond.
Variation in SRV’s operating profit and operating profit margin is 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 stood at 38.3 per cent (42.5, 12/2015) and the gearing was 83.4 per cent (83.3, 12/2015). The changes in equity ratio and gearing were due to an increase in interest-bearing debt. Net debt totalled EUR 246.3 (230.8) million and liquid assets EUR 54.6 (35.0) million.
In October-December, the Group’s revenue rose to EUR 328.7 (226.6) million. Growth in revenue was driven by ongoing large business construction projects as well as 389 developer-contracted housing units that were largely recognised as income in December.
The Group’s operating profit was EUR 16.2 (17.0) million. The operating profit was weakened by a rise in the costs of certain projects under construction and by expenses incurred in the aftermath of some completed projects. Operating profit from International Operations was EUR -2.8 (-0.6) million. The rouble exchange rate improved operating profit by a net amount of EUR 1.3 million. Operating profit was weakened by temporary rent discounts granted to tenants, depreciation according to plan and the amortisation of one property (EUR 2.5 million).
The Group’s profit before taxes was EUR 19.4 (14.9) million. The result was increased by a EUR 3.1 million fair value revaluation of a ten-year interest rate hedge, but burdened by higher interest expenses.
| Group key figures
(IFRS, EUR million)
|1-12/ 2016||1-12/ 2015||change||change, %|
|Equity ratio, %||38.3||42.5|
|Net interest-bearing debt||246.3||230.8||15.5||6.7|
|Gearing ratio, %||83.4||83.3|
|Return on investment, %||6.1||5.9|
|Return on equity, %||5.0||5.6|
|Earnings per share, EUR *)||0.15||0.25||-0.10||-40.6|
|Equity per share, EUR *)||4.25||3.90||0.35||9.0|
|Share price at end of period, EUR||5.43||3.10||2.33||75.2|
|Weighted average number of shares outstanding, millions *)||59.3||42.6|
Proposal for the distribution of profits
The parent company’s distributable funds on 31 December 2016 are
of which the loss for the financial year is
The Board of Directors proposes to the Annual General Meeting that distributable funds be disposed of as follows:
A dividend of EUR 0.10 per share be paid to shareholders, or
The amount to be transferred to shareholders’ equity is
No material changes have taken place in the company’s financial position after the close of the financial year. The company’s liquidity is good and, in the view of the Board of Directors, the proposed dividend payout does not compromise the company’s solvency.
Annual General Meeting
SRV Group Plc’s Annual General Meeting will be held on Thursday, 23 March 2017. The General Meeting will deal with the matters specified in Article 11§ of the Articles of Association and any other proposals made by the Board of Directors. The Board will decide on the notice of meeting and its proposals at a later date.
Invitation to a press conference: SRV’s financial statement 2016
The financial statement release will be presented to the media and analysts at the press conference which will take place on Thursday 2 February at 14.00. at Living Lab -test environment, 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.
The report can be found for example on the company’s website www.srv.fi/en/investors.
A live webcast of the press conference will be available on the company’s website www.srv.fi/en/investors. The webcast will be in Finnish. The presentation material will be published both in Finnish and English at the company’s website after the press conference.
Espoo, 2 February 2017
Board of Directors
All forward-looking statements in this review are based on management’s current expectations and beliefs about future events, and actual results may differ materially from the expectations and beliefs such statements contain.
For further information, please contact
Juha Pekka Ojala, CEO, +358 (0)40 733 4173, email@example.com
Ilkka Pitkänen, CFO, +358 (0)40 667 0906, firstname.lastname@example.org
Päivi Kauhanen, SVP, Communications, +358 (0)50 598 9560, email@example.com
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