SRV as an investment
SRV - a builder with a difference
SRV dares to differ from the ordinary, and its projects in Finland and Russia are often large and farsighted. SRV produces value for investors by developing, building and commercialising not only individual properties but whole areas. SRV's operating model can thrive in any business climate, and its focus on own development projects, shopping centre expertise in Russia and growth centres in Finland clearly distinguishes SRV from traditional construction companies. SRV is not only a builder; it is also a real estate developer and investor. In Russia, moreover, it is a shopping centre operator. SRV's varied roles expand its business opportunities and enable it to offer comprehensive solutions for the built environment.
SRV's profitability developed positively in 2013, a consequence of the strategic focus adopted by the company; the emphasis has shifted from competitive contracting to own-development projects, where the added value, and therefore the return, generated by SRV's own project development is greater. Russia is SRV's most important growth area, where SRV is focusing on the shopping centre market in St. Petersburg and Moscow. The market is driven by strong retail growth as well as a demand in Russia for modern shopping centres with a good concept. SRV fulfils these needs with its strong core expertise in the retail sector.
In addition to construction, SRV's roles as shopping-centre developer, operator and investor have created a foundation for long-term profitable business. Shopping centre projects at different stages of maturity contribute to more uniform revenue streams. Russian operations have been boosted by the Pearl Plaza Shopping Centre, which opened successfully in August 2013, and by construction work on Okhta Mall Shopping Centre that started on the same day. Other new shopping centres are also being planned.
New financing solutions, such as the real estate investment company Russia Invest, will broaden SRV's shoulders in Russia and facilitate the launch of large projects with shared risk. Russia Invest is a partner in the Okhta Mall project and this has also proved to be an effective model for application in future projects.
In Finland, SRV's business focus is on building in the vicinity of good transport connections in the Helsinki Metropolitan Area and growth centres, particularly on the rail transport network. Megatrends, such as urbanisation, increased migration to growth centres, population ageing and increasing wealth, act as drivers for SRV's domestic projects. SRV's spearhead projects, REDI in Kalasatama, Helsinki, and the Keilaniemi towers in Espoo, will revolutionise the traditional view of housing and create a new community-oriented residential culture with good services near metro stations.
The construction industry is cyclical in nature and fluctuations in economic conditions are clearly reflected in demand. SRV's capacity to withstand adverse economic conditions is in a class of its own in the construction industry, and its customer-oriented business model is flexible and scalable to different stages of business cycle. SRV is able to react quickly both to business opportunities and decline in construction volume. This is the way SRV has operated throughout its history, and SRV has recorded a profit for every one of its 26 years in the business. Although the economic outlook for construction is not particularly rosy right now, SRV will benefit from its strong order backlog and scalable business model once again in 2014.
In SRV's project management model, the company assumes overall responsibility for project planning and coordination, but specialist tasks such as architectural design and building work are put out to competitive tender among construction partners. The business model means that SRV has significantly fewer employees than competitors and that the company’s cost structure is more resilient against the ups and downs of the economy. Scalability is also important in a rising market; SRV can take on very large projects even at short notice, because most of the labour required is sourced from partners.
SRV's long-term operations in Finland and Russia provide diversification across various segments as well as the continuity necessary to endure fluctuations in economic conditions. Spearhead projects offer excellent business opportunities for SRV both in the present decade and the next.