SRV Yhtiöt Oyj - Interim report (Q1 and Q3)

Order backlog boosted by large-scale project start-ups: SRV’s interim report 1 January–31 March 2015

Espoo, Finland, 2015-05-07 07:30 CEST (GLOBE NEWSWIRE) -- SRV GROUP PLC   
INTERIM REPORT     7 MAY 2015, AT 8.30 AM 

Order backlog boosted by large-scale project start-ups: SRV's interim report 1
January-31 March 2015 

Reporting period 1 January-31 March 2015 in brief:
• SRV's revenue was EUR 172.9 million (EUR 138.5 million Q1/2014), change +24.9%
• Operating profit was EUR 2.5 million (EUR 4.4 million), change -42.8%
• Result before taxes was EUR 3.3 million (EUR 2.2 million), change +54.0%
• Earnings per share were EUR 0.05 (EUR 0.01)
• The order backlog at period-end was EUR 1,179.8 million (EUR 880.2 million),
change +34.0% 
• Equity ratio was 39.8 per cent (39.0%)

Thanks to the REDI shopping centre start-up, the Group's full-year revenue for
2015 is expected to increase on 2014 (EUR 684.4 million 1-12/2014) and the
result before taxes is forecast to be in the range of EUR 10-20 million (EUR
18.5 million 1-12/2014). 

This interim report has been prepared in accordance with IAS 34, and the
disclosed information is unaudited. 

President & CEO Juha Pekka Ojala:

A year of large start-ups was immediately evident in the first quarter when two
significant construction projects were launched - the REDI project at
Kalasatama in Helsinki and the Niittykumpu Metro Centre project in Espoo. Both
are area centres located next to metro stations and featuring housing and
commercial services. These large-scale projects raised SRV's order backlog to a
new record level, nearly EUR 1.2 billion. The launch of the REDI project was
also reflected in revenue growth, as work done before the official start-up
decision was recognised as revenue. 

In the annual cycle, the first quarter is generally modest in terms of
financial performance. The fact that no developer-contracted housing units were
completed is evident in the figures for the first quarter of the year. This is
reflected in a decline in the level of operating profit. Completed projects -
and therefore those recognised as revenue - have been contracts that have
structurally a lower margin than developer-contracted production. 

In Finland, in addition to our spearhead projects, we have a number of business
premises and housing projects that we are implementing for our long-term
customers. We have undertaken business premises projects at our own risk only
very selectively, and they are focused mainly on the logistics sector, to which
we have provided multi-purpose premises ranging from production plants to
offices. 

We have also been able to increase developer-contracted housing production, the
fruits of which will be evident in future quarters. The housing market has
recovered from the downturn of a couple of years ago, but we still have to
evaluate carefully the locations and the target groups of housing production.
SRV's housing production is concentrated close to good transport links, such as
metro stations. 

In Russia, our shopping centre projects in St Petersburg and Moscow are
proceeding mostly according to plan. The Russian market is overshadowed by
uncertainty factors resulting from the political situation. Based on projects
at different stages of completion, however, we have a good grasp of the market
in Russia and we are proceeding there according to plan. For example, customer
numbers at the Pearl Plaza shopping centre, which has been open for one and a
half years, have grown as the centre has established its position in the St
Petersburg shopping centre market. The excellence of Pearl Plaza is evident
also in the fact that in April it was granted Russia's best shopping centre
award in its size category. 

We embark on this year in good spirits, because many projects that have been a
long time in preparation have started up at full steam. Due to the resources
committed to the large-scale projects launched, we have laid the groundwork for
steady development in the next few years. Based on our developer and investor
roles, however, we have loaded projects with significant earnings expectations,
which will be realised in the coming years. Now our task is to focus on
high-quality and profitable implementation of projects together with our
partners and personnel. 



Group key figures                     1-3/     1-3/    change,  change,    1-12/
(IFRS, MEUR)                          2015     2014       MEUR        %     2014
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Revenue                              172.9    138.5       34.4     24.9    684.4
Operating profit                       2.5      4.4       -1.9    -42.8     24.9
Financial income and expenses,         0.8     -2.3        3.1              -6.4
 total                                                                          
Profit before taxes                    3.3      2.2        1.2     54.0     18.5
Order backlog                      1 179.8    880.2      299.5     34.0    860.4
New agreements                       489.1    184.7      304.4    164.9    700.3
Operating profit, %                    1.5      3.2                          3.6
Net profit, %                          1.6      1.0                          2.2
Equity ratio, %                       39.8     39.0                         43.0
Net interest-bearing debt            228.5    225.3        3.1      1.4    206.1
Gearing, %                           101.0    103.0                         91.6
Return on investment, %                4.7      3.4                          5.4
Return on equity, %                    4.9      2.6                          6.9
Earnings per share, EUR               0.05     0.01       0.04    381.7     0.33
Equity per share, EUR                 5.07     4.87       0.20      4.1     5.04
Share price at end of period, EUR     3.39     3.76      -0.37     -9.8     2.83
Weighted average number of shares     35.6     35.5                 0.3     35.6
 outstanding, millions                                                          



Overall review 1 January-31 March 2015

The Group's order backlog increased to EUR 1,179.8 million (EUR 880.2 million
3/2014) thanks to new contractor agreements, the largest of which were for the
REDI shopping centre and car park as well as the Niittykumpu Metro Centre. 88
per cent of the order backlog has been sold, a total of EUR 1037 million. The
unsold portion decreased to EUR 142 million (EUR 182 million 3/2014). The value
of the Group's new contracts rose to EUR 489.1 million (EUR 184.7 million
3/2014). 

The Group's revenue increased to EUR 172.9 million (EUR 138.5 million Q1/2014).
The start-up of the REDI shopping centre and parking facility project
contributed to this rise in revenue, as quarrying and other infrastructure work
completed prior to the official decision to start the project was recognised as
revenue in accordance with the level of completion. Revenue from housing
production targeted at Finnish consumers declined as the number of sold units
(74) fell to under half the number during the previous year (160 Q1/2014). No
developer-contracted residential units were completed during the review period
(100 units in Q1/2014). 

The Group's operating profit totalled EUR 2.5 million (EUR 4.4 million),
generating an operating margin of 1.5 per cent (3.2%). This decline in
operating profit is mainly due to a fall in revenue from developer-contracted
residential units and low profit margins in business contracting. The improved
earnings of associated companies and joint ventures also had a favourable
impact on operating profit. 

Several factors contribute to the quarterly variation in SRV's operating profit
and operating profit margin: 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; a share equivalent to the
ownership of SRV's associated companies is eliminated from the profit margins
of construction carried out for these companies; and the nature of the
company's operations (project development). 

The Group's net financial expenses totalled EUR 0.8 million (EUR -2.3 million).
Net financial expenses were improved by a fall in general interest rates,
exchange rate differences resulting from the strengthening rouble, and the
recognition of EUR 1.4 million in credit loss provisions. 

The Group's profit before taxes was EUR 3.3 million (EUR 2.2 million). Net
profit for the review period was EUR 2.8 million (EUR 1.4 million). Income
taxes totalled EUR 0.6 million (EUR 0.7 million). Earnings per share were EUR
0.05 (EUR 0.01). 

The Group's equity ratio was 39.8 per cent (39.0% 31 March 2014). Compared to
31 December 2014, the equity ratio weakened slightly as a result of capital
tied up in construction. 


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 start-up of new
contracts and development projects. Construction of the SRV-developed REDI
project in the Kalasatama district of Helsinki was launched at the beginning of
April. Based on current completion schedules, SRV estimates that a total of 247
developer-contracted residential units will be completed during 2015. 

Thanks to the REDI shopping centre start-up, the Group's full-year revenue for
2015 is expected to increase on 2014 (EUR 684.4 million 1-12/2014) and the
result before taxes is forecast to be in the range of EUR 10-20 million (EUR
18.5 million 1-12/2014). 

Press conference

The interim report will be presented to the media and analysts at a press
conference which will take place on 7 May 2015 at 10.30 a.m. at conference room
Espa at Hotel Scandic Simonkenttä, address Simonkatu 9, Helsinki. The press
conference will be held in Finnish. CEO Juha Pekka Ojala and CFO Ilkka Pitkänen
will be present, among others. 
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 of the press conference will be published in English and
Finnish on www.srv.fi/en/investors after the conference. 

Disclosure procedure

SRV Group Plc follows the disclosure procedure enabled by Standard 5.2b
published by the Finnish Financial Supervision Authority. This is a summary of
SRV's interim report and the complete report is attached as a pdf-file to this
release and is also available on the company website at
www.srv.fi/en/investors. 


Espoo, 6 May 2015

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. 



SRV Group Plc

Taneli Hassinen
SVP, Communications
Tel. +358 40 504 3321
taneli.hassinen@srv.fi

For further information, please contact
Juha Pekka Ojala, President & CEO, +358 (201) 455 213
Ilkka Pitkänen, CFO, +358 (201) 455 200, +358 (40) 6670906

 www.srv.fi

Attachments:

2015 Q1 interim report SRV.pdf