SRV’s interim report january–september 2015: revenue and order backlog continue to rise – full-year outlook remains unchanged
January–September 2015 in brief:
• SRV’s revenue was EUR 492.5 (490.6, 1-9/2014) million. The trend in revenue was affected by the start-up of the construction of the REDI shopping centre and parking facility.
• Operating profit declined to EUR 7.5 (15.3) million, primarily due to the decrease in revenue from developer-contracted housing production, the rise in the share accounted for by low-margin business contracting and the increase in fixed costs.
• Result before taxes was EUR 2.7 (11.3) million. The result was affected by a EUR -2.8 million fair value revaluation of a ten-year interest rate hedge in July.
• Earnings per share were EUR -0.02 (0.18)
• The order backlog at period-end was EUR 1,517.5 (944.1) million. The order backlog rose to an all-time high level mainly thanks to the start-up of REDI and several other large-scale projects.
• Equity ratio was 41.6 (38.9) per cent.
July–September 2015 in brief:
• SRV’s revenue totalled EUR 155.1 million (EUR 209.0 million 7-9/2014). Revenue decreased year-on-year due to the sale of Derby Business Park.
• Operating profit was EUR 4.1 (6.0) million
• Result before taxes was EUR 0.1 (5.7) million
• Earnings per share were EUR -0.03 (EUR 0.13)
• New order intake amounted to EUR 389.9 (90.3) million
• Rights offering succeeded excellently and was subscribed by 114 percent.
The Group retains the full year result outlook unchanged. The Group revenue is expected to increase from year-on-year (EUR 684.4 million). The result before taxes is expected to be in the range of EUR 10-20 (18.5) million.
This interim report has been prepared in accordance with IAS 34, and the disclosed information is unaudited.
President & CEO Juha Pekka Ojala
The third quarter went along the same lines as the first half of the year. Our order backlog and revenue are continuing to grow. New order intake was more than four times larger than year ago. All in all, our order backlog has already exceeded a staggering EUR 1.5 billion. However, the result unavoidably reflects the fact that no developer-contracted housing units were completed in the third quarter, as compared to 86 units a year ago. We will, however, be seeing an upswing from late 2015 onwards – 225 homes will be completed by Christmas, and this will also bring up positive tone for our near-term outlook. We also believe that investor sales will pick up towards the end of the year, which will improve our result and increase revenue for the coming years. Another positive fact is that a larger share of the almost 1,900 housing units we have under construction are higher-margin developer-contracted projects.
Our investments in ongoing major projects, such as REDI, Niittykumpu Metro Centre and our Russian shopping centre projects, can still only be seen as a rise in fixed costs.
However, a number of projects have also reached favourable stages during the third quarter. August’s rights offering was completed in September. It was a great success, demonstrating the firm confidence shown in our company by almost 7,000 shareholders. Our projects in Russia are also progressing according to schedule in spite of the challenging conditions in the country. We celebrated the topping out of the Okhta Mall in St Petersburg in September and, although there’s still a year to go before the shopping centre opens in autumn 2016, 46 per cent of its premises have already been reserved or leased.
The Helsinki cityscape continues to change day by day, as the REDI centre in Kalasatama begins to rise. REDI’s cornerstone was laid at a ceremony in early September, and excavation work is already entering the final stages. The volume of rock quarried from the site is equivalent to six Parliament Houses. Foundation and structural work has now begun, and the New Year will see a major step forward when the pre-marketing of residentials in the first towers is launched in earnest. Lidl supermarket chain is just one of the shopping centre’s new tenants.
We’re also making progress in preparations and negotiations for the Fennovoima`s Hanhikivi-1 nuclear power plant project that was announced in August. It’s been great to see how the large scale of this project has awakened so much interest both in our subcontractor network and among our own personnel.
Some slight signs of recovery are still being seen in housing construction, although there are considerable regional variations. SRV currently has a total of almost 1,900 housing units under construction, the majority of which are scheduled for completion during 2017, when they will also begin to generate noticeable income.
The most significant new project since the end of the review period is the development of Kerava city-centre. Five apartment blocks and a retail centre will significantly alter Kerava’s cityscape. In Vantaa, we’re also involved in developing a corporate campus concept in Vantaankoski in cooperation with Sanoma and the City of Vantaa.
The outlook remains challenging, but positive signs can be seen in both construction in general and in our own earnings performance, as our ongoing projects progress and when incomplete residences are finished and recognised as income. All of this, combined with attractive new projects still at the tender stage, guarantees that SRV will continue to enjoy one of the richest and most interesting eras in its history.
| Group key figures
(IFRS, EUR million)
|1-9/ 2015||1-9/ 2014||change, MEUR||change, %||7-9/ 2015||7-9/ 2014||1-12/ 2014|
|Financial income and expenses, total||-4.7||-4.0||-0.7||-4.0||-0.2||-6.4|
|Result before taxes||2.7||11.3||-8.6||-75.8||0.1||5.7||18.5|
|Operating profit, %||1.5||3.1||2.6||2.9||3.6|
|Net profit, %||0.3||2.1||-0.2||2.9||2.2|
|Equity ratio, %||41.6||38.9||43.0|
|Net interest-bearing debt||248.3||255.1||-6.9||-2.7||206.1|
|Return on investment, %||3.2||4.4||5.4|
|Return on equity, %||0.9||6.0||6.9|
|Earnings per share, EUR||-0.02||0.18||-0.21||-0.03||0.13||0.30|
|Equity per share, EUR||3.80||4.59||-0.79||-17.2||4.51|
|Share price at end of period, EUR||2.53||3.67||-1.14||-31.1||2.83|
|Weighted average number of shares outstanding, millions||37.0||39.8||-7.0||39.8|
*) Comparative data is share issue adjusted.
Outlook for 2015
In addition to general economic trends, SRV’s revenue and result will be affected by several factors in 2015, such as: SRV’s own projects are recognised as income upon delivery; the part of the order backlog that is continuously recognised as income mainly consists of low-margin contracting; trends in the order backlog’s profit margins; the sales volume of developer-contracted housing and the completion schedules of the properties; and the launch of new contracts and development projects. SRV’s largest project is the REDI project in the Kalasatama district of Helsinki, which was launched in April. Based on current schedules, SRV estimates that a total of 247 developer-contracted housing units will be completed during 2015.
The Group revenue is expected to increase from year-on-year (684.4) and the result before taxes is forecast to be in the range of EUR 10-20 million (18.5).
Press conference to the media and investors
The result will be presented to the media and analysts at the press conference which will take place on Thursday 5 November at 11.00 a.m. at the new Living Lab –test environment that presents REDI project, Kalasatama area and the housing to be constructed, 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.
A live webcast of the press conference will be available on the company’s website www.srv.fi/en/investors. The presentation material will be published at the company’s website after the conference.
For further information, please contact:
Juha Pekka Ojala, CEO, +358 (40) 733 4173
Ilkka Pitkänen, CFO, +358 (40) 667 0906
Päivi Kauhanen, Vice President, Communications, +358 (50) 598 9560