SRV Yhtiöt Oyj - Interim report (Q1 and Q3)

SRV Interim Report 1-3/2024: Revenue and operative operating profit increased, the order backlog remains strong

SRV GROUP PLC     INTERIM REPORT      25 APRIL 2024    AT 08.30 EEST
SRV Interim Report 1-3/2024: Revenue and operative operating profit increased,
the order backlog remains strong


January-March 2024 in brief

  · Revenue amounted to EUR 167.0 (138.3) million (+20.7%). Revenue increased
due to growth in business construction revenue. Revenue declined correspondingly
in housing construction.
  · Operative operating profit amounted to EUR 1.3 (-2.0) million with an
operating profit of EUR 1.3 (-2.0) million. Operative operating profit improved
thanks to the higher volume in business construction.
  · The result before taxes was EUR 0.5 (-4.4) million. The result was positive
because the volume grew and financial expenses were lower than in the comparison
period.
  · Earnings per share were EUR -0.0 (-0.2).
  · Equity ratio was 33.9 per cent (35.0% 3/2023) and gearing was 80.5 per cent
(82.2% 3/2023). Excluding the impact of IFRS 16, the equity ratio was 47.5
(49.2) per cent and gearing was 2.4 (4.1) per cent.
  · At period-end, the order backlog stood at EUR 1,020.4 (871.0) million. New
agreements valued at EUR 136.4 (149.9) million were signed in January-March. The
sold share of the order backlog was 92.5 (91.0) per cent.
  · At the end of March, emission intensity (scope 1 and 2) was 2.6 (4.6)
tCO2/million euros of revenue. One of the factors contributing to the decrease
in emission intensity was the greater use of biofuels.

Outlook 2024
During 2024, SRV's revenue and result will be affected by several factors in
addition to general economic trends, such as: the margin of the order backlog
and its development; the start-up of new contracts and development projects;
geopolitical risks, including their related direct and indirect effects, such as
material costs and the availability of materials and labour; and changes in
demand. Higher interest rates and weaker availability of financing have a
negative impact on demand for housing and business premises among consumers and
investors, and thus pose uncertainty with respect to the estimated start-ups of
new projects.

In 2024, revenue will mainly consist of relatively low-margin - yet also low
-risk - cooperative contracting and, to a lesser extent, of development projects
sold to investors as well as competitive and negotiated contracts for housing
construction. Developer-contracted housing production will account for only a
small percentage of revenue, as no developer-contracted housing projects are
scheduled for completion during the year.

  · Full-year consolidated revenue for 2024 is expected to grow compared with
2023 (revenue in 2023: EUR 610.0 million).
  · Operative operating profit is expected to improve compared with 2023
(operative operating profit in 2023: EUR 1.1 million).


Significant events after the period

There were no significant events after the end of the review period.

President & CEO's review

“In the early months of 2024, the economy has remained in a recession and no
significant changes have occurred in the general market situation. However, even
in this challenging business environment, we have been able to systematically
forge ahead with strong growth in business construction, especially in
cooperative contracting. Due to the prevailing high interest levels, demand for
the new properties in both the consumer and real estate investor markets is
currently at a low level, which has a substantial impact on our opportunities to
start new projects. The controllability of our production is robust and our
realised project margins are in line with plans in both housing and business
construction. We believe that strong development will begin immediately once the
market provides opportunities to restructure our project portfolio in accordance
with our strategy.

In spite of the economic climate in the construction industry, our business
developed in a favourable direction in the first quarter, as expected. Our
stronger order backlog is starting to show in our revenue, which saw year-on
-year growth of around 20 per cent. Our operative operating profit also
outperformed the comparison period thanks to the higher volume in business
construction.

At the end of the review period, our order backlog was EUR 1,020.4 million, up
17 per cent year-on-year. The order backlog will lead to increased revenue when
projects get up to full speed. In the first quarter, we transferred several
projects into our order backlog, among them the Käkikellokortteli residential
block in Nihti, Kalasatama for the City of Helsinki's housing production service
as well as underground facilities and the second stage of infrastructure work
for Laakso Joint Hospital. This order is part of an approximately EUR 800
million agreement for the Laakso Joint Hospital project, of which about half has
been entered into our order backlog to date. The remaining phases will be
entered into our order backlog in stages during 2024-2030. In addition,
previously won contracts and projects under preliminary contracts will be
recognised in our order backlog, with a value of around EUR 933 million.

In the current market situation, it is extremely important that our balance
sheet is strong and our financing is in good shape. The total number of unsold
completed residential units is low at 96, and the company has not committed a
significant amount of its own capital into unsold housing. With respect to
financing, in April, after the review period, we agreed with our main financier
banks to exercise the one-year extension option of our current EUR 40 million
committed revolving credit facility, which is tied to sustainability targets. In
accordance with the exercised extension option, the revolving credit facility is
valid until April 2026.

In February, we concluded the change negotiations we had initiated in January
with a view to adjusting our costs to the ongoing challenging market situation.
These negotiations resulted in slightly smaller personnel cuts and layoffs than
anticipated, a total of 19 person-years. We managed to transfer roles and
personnel from housing construction to business premises projects, and thereby
retained solid expertise within the company.

We do not expect any changes in the market situation — a significant improvement
is not foreseen until towards the end of the year at the earliest. Nevertheless,
we expect that our revenue and earnings will improve in 2024 thanks to our
strong order backlog in cooperative contracting. In addition, we believe that it
will be possible to start up selected development or developer-contracted
projects in the latter part of the year — the contributing factors are lower
construction costs, forecast reductions in interest rates and gradual rent
inflation, which support the investment decisions of our customers.”
Saku Sipola


Key Figures

[][][][]
                                            1-3/                              1
-3/                                                                        1-12/
(IFRS, milj.                                2024
2023                           change  change,
2023
eur)
%
Revenue                                    167.0
                                                                 20.7
                           610.0
                                                                             138.
3                             28.7
Operative


operating                                    1.3
-2.0                              3.2
1.1
profit
Operative                                    0.8
-1.4                              2.2
0.2
operating
profit, %
Operating


profit                                       1.3
-2.0                              3.2
-6.8
Operating                                    0.8
-1.4                              2.2
-1.1
profit, %
Profit before


taxes                                        0.5
-4.4                              5.0
-15.7
Net profit for


the                                          0.5
-3.1                              3.6
-15.1
period
Net profit for                               0.3
-2.3                              2.6
-2.5
the
period, %
Earnings per                                -0.0
-0.2                              0.2
-1.0
share
[1)]
Order backlog                             1020.4
871.0                                      17.2
1048.6
(unrecognised)
149.5
Equity ratio,                               33.9
35.0                             -1.1
34.4
%
Equity ratio,                               47.5
49.2                             -1.7
48.0
%, excl.
IFRS 16 [2)]
Net interest

                             99.4
-bearing                                   112.1
117.4                             -5.3
debt
Net interest


-bearing                                     3.5
6.1                             -2.7                                        -6.3
debt, excl.
IFRS 16
[2)]
Net gearing                                 80.5
82.2                             -1.7
71.7
ratio, %
Net gearing                                  2.4
4.1                             -1.7                                        -4.3
ratio, %,
excl. IFRS 16
[2)]
Financing
                                                                  29.8
                             78.6
reserves                                    68.2
52.6                             15.7

1. The figure has been calculated excluding the hybrid bond interest, tax
adjusted

2. The figure has been adjusted to remove the impacts of IFRS 16

Espoo, 25 April 2024
Board of Directors
All forward-looking statements in this interim report are based on management's
current expectations and beliefs about future events. The company's actual
results and financial position may differ materially from the expectations and
beliefs such statements contain due to a number of factors that have been
presented in this interim report.
Briefing, webcast and presentation materials

A briefing for analysts, investors and media representatives will be held as a
webcast on 25 April 2024, starting at 11:00 EEST. The webcast can be followed
live at www.srv.fi/en/investors. The recording will be available on the website
after the presentation. The materials will also be made available on the
website.
For further information, please contact:

Saku Sipola, President & CEO, tel. +358 (0)40 551 5953, saku.sipola@srv.fi
Jarkko Rantala, CFO, tel. +358 (0)40 674 1949, jarkko.rantala@srv.fi
Miia Eloranta, Senior Vice President, Communications and Marketing, tel. +358
(0)50 441 4221, miia.eloranta@srv.fi

Distribution:
Media
www.srv.fi

You can also find us on the social media:

Facebook (https://www.facebook.com/srv.fi)   LinkedIn (https://www.linkedin.com/c
ompany/srv)   X (https://twitter.com/SRVYhtiot)   Instagram (https://instagram.co
m/srvfinland/)


SRV in brief

SRV is a Finnish developer and innovator in the construction industry. We are
building a more sustainable and responsible urban environment that fosters
economic value and takes the wellbeing of both the environment and people into
consideration. We call this approach lifecycle wisdom. Our genuine engagement
and enthusiasm for our work comes across in every encounter - and listening is
one of our most important ways of working. We believe that the only way to
change the world is through discussion.

Our company, established in 1987, is listed on the Helsinki Stock Exchange. We
operate in growth centres in Finland. In 2023, our revenue totalled EUR 610
million. In addition to approximately 800 in-house staff, we had a network of
around 3,300 partners.

SRV - Building for life

Attachments:

04247393.pdf