AI assistant
SRV Yhtiöt Oyj — Interim / Quarterly Report 2014
May 7, 2014
3343_rns_2014-05-07_bf27ded7-534b-41a5-8935-4c88764233d1.pdf
Interim / Quarterly Report
Open in viewerOpens in your device viewer
SRV
SRV GROUP PLC
INTERIM REPORT 7 MAY 2014, at 8:30 AM
1 (31)
SRV REPORTS STRONG GROWTH IN ORDER BACKLOG AND CONTINUED IMPROVEMENT IN PROFITABILITY: SRV'S INTERIM REPORT 1 JANUARY–31 MARCH 2014
Reporting period 1 January–31 March 2014 in brief:
- SRV's revenue was EUR 138.5 million (EUR 158.4 million 3/2013), change -12.6%
- Operating profit was EUR 4.4 million (EUR 1.2 million), change +269%
- Profit before taxes was EUR 2.2 million (EUR 0.7 million), change +208%
- Earnings per share were EUR 0.01 (EUR -0.03)
- The order backlog at the close of the review period was EUR 880.2 million (EUR 726.7 million), change +21.1%.
- Equity ratio was 39.0 per cent (34.3%)
SRV's outlook for 2014 remains unchanged. The Group's full-year revenue is expected to be on a par with the previous year (EUR 679.4 million 1-12/2013) and profit before taxes to amount to EUR 10–20 million (EUR 22.8 million 1-12/2013).
This interim report has been prepared in accordance with IAS 34. The disclosed information is unaudited.
CEO Jukka Hienonen comments on SRV's result:
During the early part of 2014, the construction market overall in Finland has contracted and sector volume is projected to decline by around 1% compared with the previous year. A flexible operating model is SRV's strength and in these conditions we have focused on improving profitability. SRV's revenue declined by 13%, but at the same time our profitability improved – operating profit more than tripled. Behind this is our determined focus on higher value added projects, in which SRV has been able to increase its own-development share. The order backlog has strengthened both from March last year and since the turn of the year. In a contracting market, this can be considered a good achievement.
A particularly good trend was evident in the profitability of Domestic Operations. Although revenue declined by just under 8%, profitability nearly doubled. No exceptional items assisted in this; the improved profitability was based on disciplined action and a business structure in line with our strategy.
Housing sales have remained subdued for a second year. Demand dropped sharply in March last year when a badly timed increase in capital transfer tax put the brakes on housing sales just as consumer confidence faltered.
When comparing this quarter with the first quarter of last year, it is important to remember that last year housing sales returned record figures in January–February, so the comparison period was very strong. The housing sales for consumers remain sluggish and in these conditions SRV has not, for example, started a single new housing project directed at consumers in the Helsinki Metropolitan Area for a year. A significant part of housing demand currently comes from housing funds, for which new projects continue to be launched.
SRV
2 (31)
Despite the news overshadowing the Russian economy, our International Operations have made good progress. Visitors to the Pearl Plaza shopping centre, which opened last August, are rising steeply. Both retailers and consumers consider the centre to be a great success. Construction, which began in late summer last year, at the site of the Okhta Mall shopping centre has proceeded according to plan. Although we have had to restructure the project's financing solutions, we are very comfortable with current plans.
The uncertainty created by events in Ukraine has not been significantly reflected in our operations in Russia, but we naturally must be prepared for a change in the situation. The weaker rouble has in the short term even had a positive impact on our situation, as our construction costs are calculated in roubles and business premises rents in euros. Our biggest threats relate to the changing operating environment as a result of sanctions as well as a long-term downward trend in the rouble.
We are continuing to develop our projects in Russia long term, and in Finland are preparing for the launch of our large projects while at the same time attending to the disciplined and profitable management of around 80 other construction sites.
SRV GROUP PLC'S INTERIM REPORT 1 JANUARY–31 MARCH 2014
| Group key figures
(IFRS, EUR million) | 1-3/2014 | 1-3/2013 | change,
MEUR | change,
% | 1-12/2013 |
| --- | --- | --- | --- | --- | --- |
| Revenue | 138.5 | 158.4 | -19.9 | -12.6 | 679.4 |
| Operating profit | 4.4 | 1.2 | 3.2 | 269.2 | 26.4 |
| Financial income and expenses,
total | -2.3 | -0.5 | -1.8 | | -3.6 |
| Result before taxes | 2.2 | 0.7 | 1.5 | 208.2 | 22.8 |
| Order backlog | 880.2 | 726.7 | 153.6 | 21.1 | 825.8 |
| New agreements | 184.7 | 40.0 | 144.7 | 361.6 | 600.7 |
| Operating profit, % | 3.2 | 0.8 | | | 3.9 |
| Net profit, % | 1.0 | 0.1 | | | 2.7 |
| Equity ratio, % | 39.0 | 34.3 | | | 36.4 |
| Net interest-bearing debt | 225.3 | 277.7 | -52.4 | -18.9 | 215.8 |
| Gearing, % | 103.0 | 135.6 | | | 97.1 |
| Return on investment, % | 3.4 | 1.7 | | | 5.4 |
| Return on equity, % | 2.6 | 0.3 | | | 8.4 |
| Earnings per share, EUR | 0.01 | -0.03 | 0.04 | | 0.39 |
| Equity per share, EUR | 4.88 | 4.50 | 0.38 | 8.4 | 4.99 |
| Share price at end of period, EUR | 3.76 | 3.36 | 0.40 | 11.9 | 4.05 |
| Weighted average number of
shares outstanding, millions | 35.5 | 35.5 | | 0.0 | 35.5 |
Overall review
SRV's order backlog and the value of new agreements showed clear year-on-year growth. The Group's order backlog amounted to EUR 880.2 million (EUR 726.7 million 3/2013) and the value of new agreements to EUR 184.7 million (EUR 40.0 million 1-3/2013).
SRV
Due to a decline in revenue from both domestic and international operations, the Group's revenue decreased by 12.6 per cent to EUR 138.5 million (EUR 158.4 million 1-3/2013). The Group's operating profit improved to EUR 4.4 million (EUR 1.2 million) following continued positive developments in the profitability of domestic construction. The operating profit margin was 3.2 per cent (0.8%). Several factors contribute to the quarterly variation in the 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 project development nature of operations. The Group's profit before taxes was EUR 2.2 million (EUR 0.7 million). Financial income for the comparison period was increased by interest income from SVR's associated company Etmia II, which during Q2/2013 refinanced its construction funding obtained from SRV with a long-term project loan of about EUR 33 million. Interest expenses for the review period increased due to the fixed-interest bond issued in December 2013.
The Group's equity ratio was 39.0 per cent (34.3%). Profitability improvement, together with the decrease in total assets, contributed to the increase in equity ratio.
The revenue of domestic operations declined to EUR 124.4 million (EUR 135.0 million 1-3/2013) due to a fall in developer-contracted housing volumes. Operating profit totalled EUR 6.6 million (EUR 3.4 million), generating an operating profit margin of 5.3 per cent (2.5%). The increase in profitability was driven by improved construction margin management, more efficient purchasing and higher development project volumes. On the other hand, the level of operating profit was affected by the fact that the commercial development order backlog recognised as income mainly consisted of low-margin contracting. The domestic order backlog was EUR 721.5 million (EUR 686.9 million). In order to improve profitability, the company has shifted the focus of operations to increasing developer contracting, development projects and negotiated contracts.
SRV sold a total of 160 units (223 1-3/2013) to consumers and investors as weaker consumer sales affected total sales. In housing construction, the focus has been shifted to rental housing development projects, and the volume of developer contracting has been scaled down. SRV had 1,185 rental and owner-occupied units under construction (1,633 on 31 March 2013), of which 171 were developer-contracted. 91 per cent of housing units under construction have been sold, and 86 per cent of production consists of rental and right-of-occupancy units. The volume of housing contracting has been reduced, and 62 per cent of production (51%) consisted of developer-contracted production or rental housing development projects sold to investors.
Revenue from International Operations declined to EUR 14.2 million (EUR 23.5 million). Construction of the Okhta Mall shopping centre generated most of the revenue. Operating profit was EUR -0.6 million (EUR -0.8 million). Cost savings measures contributed to the improvement in operating profit.
Of SVR's major international projects, the Pearl Plaza shopping centre in St. Petersburg was opened in August 2013, and the number of visitors has outperformed the target level. All of the shopping centre's premises have either been leased or a lease is in the final stages of negotiation. At the Okhta Mall shopping centre in St. Petersburg, preliminary lease agreements have been signed, or negotiations for preliminary lease agreements are under way, for over half of the retail space. The construction of Okhta Mall is proceeding according to plan.
SRV
SRV's large-scale project's in Finland, the Kalasatama Centre's, or REDI's, tenant negotiations are under way for 70 per cent of the premises. This highlights the attractiveness of this SRV-developed project to shopping centre operators. Co-ownership-based investor negotiations for the REDI shopping centre and car park are at the final stage, and SRV intends to maintain a 40–50 per cent holding in the project. In connection with the successful conclusion of the investor and project financing negotiations, a contractor agreement of approximately EUR 350 million will be signed for Phase I of the REDI project.
SRV's own project development operations are paving the way for substantially increasing operating volumes in Finland. These projects require long-term development work and are carried out over the course of several years. Many of SRV's projects are so-called landmark projects – innovative new solutions for the needs of sustainable regional construction. Such projects include, for example, the Keilaniemi Towers housing project, the Kalasatama Centre, or REDI, in Helsinki, and a project to develop the area adjacent to the Niittykumpu metro station in Espoo. In St. Petersburg and Moscow, SRV will from now on focus on the development of shopping centre projects. SRV will harness the investment potential of the Russia Invest investment company in order to support the financing of these projects.
Key figures for the segments
| Revenue (EUR million) | 1-3/2014 | 1-3/2013 | change, MEUR | change, % | 1-12/2013 |
|---|---|---|---|---|---|
| Domestic Operations | 124.4 | 135.0 | -10.6 | -7.9 | 574.8 |
| International operations | 14.2 | 23.5 | -9.3 | -39.6 | 104.7 |
| Other operations | 4.9 | 3.3 | 1.5 | 46.7 | 13.0 |
| Eliminations | -4.9 | -3.4 | -1.6 | -13.1 | |
| Group, total | 138.5 | 158.4 | -19.9 | -12.6 | 679.4 |
| Operating profit (EUR million) | 1-3/2014 | 1-3/2013 | change, MEUR | change, % | 1-12/2013 |
| Domestic Operations | 6.6 | 3.4 | 3.2 | 93.1 | 21.4 |
| International operations | -0.6 | -0.8 | 0.3 | 10.0 | |
| Other operations | -1.6 | -1.4 | -0.2 | -5.0 | |
| Eliminations | 0.0 | 0.0 | 0.0 | 0.0 | |
| Group, total | 4.4 | 1.2 | 3.2 | 269.2 | 26.4 |
| Operating profit, (%) | 1-3/ 2014 | 1-3/ 2013 | 1-12/ 2013 | ||
| --- | --- | --- | --- | ||
| Domestic Operations | 5.3 | 2.5 | 3.7 | ||
| International operations | -4.0 | -3.6 | 9.5 | ||
| Group, total | 3.2 | 0.8 | 3.9 | ||
| Order backlog (EUR million) | 3/2014 | 3/2013 | change, EUR million | change, % | 12/2013 |
| --- | --- | --- | --- | --- | --- |
| Domestic Operations | 721.5 | 686.9 | 34.6 | 5.0 | 645.8 |
| International operations | 158.8 | 39.8 | 119.0 | 299.0 | 180.1 |
| Group, total | 880.2 | 726.7 | 153.6 | 21.1 | 825.8 |
| - sold order backlog | 698 | 532 | 166 | 31.1 | 618 |
| - unsold order backlog | 182 | 194 | -12 | -6.3 | 208 |
SRV
5 (31)
Earnings trends of the segments
| Domestic Operations (EUR million) | 1-3/2014 | 1-3/2013 | change, MEUR | change, % | 1-12/2013 |
|---|---|---|---|---|---|
| Revenue | 124.4 | 135.0 | -10.6 | -7.9 | 574.8 |
| - business construction | 69.0 | 67.5 | 1.5 | 2.2 | 319.2 |
| - housing construction | 55.4 | 67.5 | -12.1 | -17.9 | 255.5 |
| Operating profit | 6.6 | 3.4 | 3.2 | 93.1 | 21.4 |
| Operating profit, % | 5.3 | 2.5 | 3.7 | ||
| Order backlog | 721.5 | 686.9 | 34.6 | 5.0 | 645.8 |
| - business construction | 477.2 | 389.9 | 87.3 | 22.4 | 392.8 |
| - housing construction | 244.2 | 296.9 | -52.7 | -17.7 | 253.0 |
The Domestic Operations segment consists of SRV's property development and construction operations in Finland. Operations are divided into housing construction and business construction, which comprises retail, office, logistics, earthworks, and rock construction operations.
Revenue for Domestic Operations totalled EUR 124.4 million (EUR 135.0 million 1-3/2013), and accounted for 90 per cent of the Group's revenue (85%). Operating profit totalled EUR 6.6 million (EUR 3.4 million), generating an operating profit margin of 5.3 per cent (2.5%). The fall in revenue was attributable to declining consumer sales in developer-contracted housing projects. Growth in operating profit was driven by improved construction margin management, more efficient purchasing and higher development project volumes. The order backlog rose to EUR 721.5 million (EUR 686.9 million 3/2013).
Business construction
Revenue from business construction totalled EUR 69.0 million (EUR 67.5 million). The order backlog was EUR 477.2 million (EUR 389.9 million). Competition for new contracts has remained tight.
Projects completed during the review period include the Änekoski health centre, a Biltema department store in Vaasa, the basic renovation of Chemicum C for the University of Helsinki and Phase II of the Brondankulma renovation project. During the review period, new contractor agreements worth EUR 135.7 million were signed with external clients. SRV signed project management contracts with Tapiolan Keskuspsääöinti Oy for the construction of the Tapiola central parking facility, with Länsimetro Oy for the construction of the Koivusaari metro station, with the University of Jyväskylä for the basic renovation of the C building, and with VTT Technical Research Centre of Finland for the construction of RESinfra in Espoo. Furthermore, SRV will build a Nuclear Safety House for VTT Technical Research Centre of Finland as an alliance-based project.
Construction work began on one of SRV's development projects, a logistics centre of approximately 30,000 of floor area in Tuusula. The property developer and investor is pension company Ilmarinen, while Stockmann will be the tenant with a long-term lease. Construction work for the will be completed during year 2015.
In the Perkkaa district of Espoo, SRV owns a developer-contracted commercial project which consists of three office buildings with a total floor area of 20,000 m2. Phase I of the project was completed in August 2012, and the last two office buildings in June 2013. Among other tenants, the buildings house the head offices of Siemens Osakeyhtiö and SRV. Over 90 per cent of the premises
SRV
have already been leased. SRV estimates that annual rental income from the project will amount to about EUR 4.3 million once it has been fully leased out. Sales efforts are currently under way.
Housing construction
Revenue from housing construction totalled EUR 55.4 million (EUR 67.5 million). The order backlog was EUR 244.2 million (EUR 296.9 million). At the end of the review period, SRV had a total of 1,185 units (1,633) under construction. Of the residential units under construction, 91 per cent were contracted housing units or own sold production.
Projects for external clients that were completed during the review period included 58 units built for VVO on Klariksentie in Espoo and 133 units for Sato in Kalasatama. Furthermore, a total of 100 (104) developer-contracted housing units were completed during the review period.
During the period, SRV launched the construction of 22 (35) developer-contracted housing units forming part of the RS system in the Telakkaranta area of Turku. During the review period, contracts worth EUR 36.6 million were signed with external clients for the construction of 165 housing units. SRV signed a contractor agreement with Sato for the construction of 77 units in the Tõõlõ area of Helsinki. SRV's development projects include the construction of 44 housing units for Lähi-Tapiola in the Nihtisilta area of Espoo, and another 44 units for Ice-Capital in the adjacent plot.
During the review period, SRV sold 160 (223) housing units. In total, 72 (135) of the developer-contracted housing units that fall within the scope of the RS system were sold during the review period and 88 (88) units were sold to investors under negotiated contracts.
At the end of the review period, SRV had a total of 1,185 units (1,633) under construction, 91 per cent of which had been sold. A total of 171 (517) housing units for the consumer market were under construction, of which 112 (280) had not yet been sold. The number of completed but unsold housing units was 198 (75). Based on the current schedules, SRV estimates that a total of 186 developer-contracted housing units included in the RS system will be completed in 2014, none of which are scheduled for completion in the second quarter.
| Housing production in Finland (units) | 1-3/2014 | 1-3/2013 | change, units | 1-12/2013 |
|---|---|---|---|---|
| Housing sales, total | 160 | 223 | -63 | 701 |
| - sales, developer contracting | 72 | 135 | -63 | 297 |
| - sales, negotiation contracts 2) | 88 | 88 | 0 | 404 |
| Developer contracting | ||||
| - start-ups | 22 | 35 | -13 | 202 |
| - completed | 100 | 104 | -4 | 539 |
| - completed and unsold 1) | 198 | 75 | 123 | 182 |
| Under construction, total 1) | 1,185 | 1,633 | -448 | 1,054 |
| - construction contracts 1) | 455 | 795 | -340 | 334 |
| - negotiation contracts 1) 2) | 559 | 321 | 238 | 471 |
| - developer contracting 1) | 171 | 517 | -346 | 249 |
| - of which sold 1) | 59 | 237 | -178 | 71 |
| - of which unsold 1) | 112 | 280 | -168 | 178 |
1) at the end of the period 2) investor sales under negotiation contracts
SRV
7 (31)
The order backlog for housing construction was EUR 244 million (EUR 297 million 3/2013). The order backlog for contracts and negotiated contracts was EUR 130 million (EUR 120 million), accounting for 53 per cent (40%) of the total order backlog. Of the housing production order backlog, EUR 143 million (EUR 176 million) was sold. The completed but unsold order backlog was EUR 74 million (EUR 21 million). The developer-contracted unsold order backlog under construction totalled EUR 27 million (EUR 99 million).
| Order backlog, housing construction in Finland (EUR million) | 31.3.14 | 31.3.13 | change, MEUR | 31.12.13 |
|---|---|---|---|---|
| Negotiation and construction contracts | 130 | 120 | 10 | 122 |
| Under construction, sold developer contracting | 13 | 56 | -43 | 14 |
| Under construction, unsold developer contracting | 27 | 99 | -72 | 60 |
| Completed and unsold developer contracting | 74 | 21 | 53 | 57 |
| Housing construction, total | 244 | 297 | -53 | 253 |
Development of Domestic Operations
SRV continued to participate in the Model Nova work package of the RYM PRE research programme, led by Senate Properties, which will continue until spring 2014. The programme seeks to create a business model and operational culture that utilise information modelling and support sustainable development for the built environment. SRV is a participant in two projects conducted as part of the Aalto University's Energizing Urban Ecosystems (EUE) programme, which seeks to identify operating models and solutions to the challenges and opportunities involved in urbanisation. In 2012, SRV joined the Nordic Built Charter initiative, a Nordic trade and industry policy programme aiming at green growth. The programme runs from 2012 to 2014. In the case of building systems, SRV focused particularly on energy-efficient solutions and has already introduced energy consumption monitoring at several sites.
| International Operations (EUR million) | 1-3/2014 | 1-3/2013 | change, MEUR | change, % | 1-12/2013 |
|---|---|---|---|---|---|
| Revenue | 14.2 | 23.5 | -9.3 | -39.6 | 104.7 |
| Operating profit | -0.6 | -0.8 | 0.3 | 10.0 | |
| Operating profit, % | -4.0 | -3.6 | 9.5 | ||
| Order backlog | 158.8 | 39.8 | 119.0 | 299.0 | 180.1 |
International Operations comprises SRV's construction and property development business in Russia and Estonia. In addition, SRV aims to expand its business in Russia into shopping centre management.
Revenue from International Operations totalled EUR 14.2 million (EUR 23.5 million), and accounted for 10 per cent of the Group's revenue (15%). Operating profit was EUR -0.6 million (EUR -0.8 million). Construction of the Okhta Mall shopping centre generated most of the revenue. A proportion of the profit margin for construction, equivalent to the proportion under the ownership of SRV, is eliminated from the operating profit. Cost savings measures contributed to the improvement in operating profit. The order backlog was EUR 158.8 million (EUR 39.8 million). The order book grew following the signing of project management contractor agreements for the Okhta Mall shopping centre in June 2013, which are valued at a total of over EUR 160 million.
SRV
8 (31)
Russia
SRV has been developing the extensive Okhta City project in the Okhta area of St. Petersburg for several years. The project covers a total of 8.5 hectares. The plans for the area include constructing a commercial complex measuring over 400,000 m², which will house a shopping centre, office and business premises, as well as premises for hotel, restaurant, and entertainment services. The project will be implemented in several phases. Phase I of the project commenced when the Russia Invest investment company owned by SRV, Ilmarinen, Sponda, Etera and Onvest made a decision to invest in the Okhta Mall shopping centre project. Under agreements signed in June 2013, Russia Invest acquired a 55 per cent holding in the shopping centre from SRV, and will invest approximately EUR 50 million in the project. In addition to its direct ownership of the remaining 45 per cent, SRV owns part of the project through its holding in Russia Invest. According to the investment decision, SRV will invest about EUR 44 million into the project while it is under construction. SRV maintains a 100 per cent holding of the other phases in the extensive Okhta City project.
Okhta Mall will be opened in spring 2016 and it will have about 144,000 m² of floor area, with leasable space of about 75,000 m². The centre will feature two underground parking levels, a hypermarket and four aboveground levels. Located close to the heart of St. Petersburg, Okhta Mall will be the first shopping centre in the downtown area with a hypermarket. Leasing of the project has progressed according to plan. Preliminary BTS (Business Term Sheet) lease agreements have already been signed for around a third of the leasable premises, while BTS negotiations are under way for around a quarter of such premises. The target for annual rental income from the shopping centre continues to be around EUR 33 million. The shopping centre investment was originally valued at a total of around EUR 250 million. However, SRV expects to achieve significant savings in building costs due to the weakening of the rouble. If the current forecasts, which suggest that the rouble will remain at its current level, hold true, the value of the overall investment will be reduced. SRV intends to acquire bank financing for this project in summer 2014, when the impact of lower construction costs on the investment budget has been ascertained.
Slightly over half of the EUR 95.5 million investment capacity of the Russia Invest investment company has been earmarked for the Okhta Mall project. In the short-term, arriving at new investment decisions will be challenging due to the Ukrainian crisis, and it is unlikely that the investment company will make any investments in new projects during 2014.
The Pearl Plaza shopping centre, owned jointly by SRV and the Shanghai Industrial Investment Company, was opened to public on 24 August 2013. The number of visitors has outperformed the target level. The centre's anchor tenants are Prisma, Hennes & Mauritz, Sportmaster, M.Video, Detsky Mir, Kinomir-21 and Sculptors. Other international brands such as McDonalds, Adidas, Lindex, Seppälä and the Inditex Group's Bershka youth fashion chain also have outlets in the centre. Pearl Plaza is also the first shopping centre managed by SRV in Russia. Total investment in the project amounts to approximately EUR 140 million. SRV's ownership in the joint venture is 50 per cent, and SRV has invested roughly EUR 22 million in the project. In addition to investment from the owners, bank financing has been secured with a EUR 95 million financing agreement with a partner from China. In line with the project management contract agreements, SRV was responsible for planning, constructing, developing and leasing out the site. About 93 per cent of the premises have been leased and it is estimated that the premises will be fully leased by the time of the shopping centre's first anniversary. The target for annual rental income from the shopping centre is about EUR 18 million.
SRV
The design of Phase II of the Pearl Plaza shopping centre has begun and, according to preliminary plans, construction of Phase II can be launched towards the end of this year. Preliminary lease reservations have been made for about 30 per cent of the Phase II premises.
The new commercial concept plan for the Mytishi shopping centre project in the Moscow region has been completed. Reservation agreements have been signed for over 50 per cent of the premises. The majority owner of the project is the Finnish real-estate investment company Vicus, which holds a 75 per cent stake. SRV owns 25 per cent of the shopping centre project and its total investments amount to EUR 7.5 million. Negotiations are currently under way on investor and bank financing arrangements. Earthworks on the site have begun.
The existing office premises in the Etmia II office and car park project in downtown Moscow have been leased out in their entirety. Net rental income for 2014 is estimated at about EUR 4 million. SRV is a co-owner in the project with a 50 per cent stake, and was also responsible for its construction as the project management contractor. Sales efforts are under way with the aim of selling the project to investors during 2014.
SRV has invested EUR 6.3 million in a property fund, which acquired an office and logistics property in Moscow in autumn 2011. The property is fully leased out. Development of the St Petersburg Eurograd logistics area has been temporarily suspended due to the local partner's financing difficulties. SRV has a 49 per cent holding in the Russian company that owns a 24.9 hectare land area located north of St Petersburg, in the immediate vicinity of the Ring Road.
Three apartments in the Papula residential area project in Vyborg were sold during the review period (5, 1-3/2013). At the end of the period, 3 completed units remained unsold (18). Construction of the next two buildings, which have a total of 111 units, has been temporarily suspended due to the weakening of the rouble, but will be continued as soon as the market situation improves.
Estonia
SRV began the construction of 48 developer-contracted housing units in Tartu. At the end of the period, one completed housing unit remained unsold (5) in Estonia.
| Other operations, (EUR million) | 1-3/2014 | 1-3/2013 | change, MEUR | change, % | 1-12/2013 |
|---|---|---|---|---|---|
| Revenue | 4.9 | 3.3 | 1.5 | 46.7 | 13.0 |
| Operating profit | -1.6 | -1.4 | -0.2 | -5.0 |
Other Operations mainly comprise the SRV Group Plc and SRV Kalusto Oy businesses.
Revenue from Other Operations totalled EUR 4.9 million (EUR 3.3 million) and the operating profit was EUR -1.6 million (EUR -1.4 million). Revenue grew thanks to higher operating volumes. During the period, development costs expensed for SRV's projects totalled EUR 0.6 million (EUR 0.5 million).
SRV
10 (31)
REDI – Kalasatama Centre
The city plan for SRV's large-scale REDI project – the Kalasatama Centre – entered into force in June 2013. The Administrative Court of Helsinki had dismissed a complaint regarding the city plan, and in June the Supreme Administrative Court rejected the appellants' request to appeal against the ruling. In March, the Helsinki City Building Control Department granted SRV a building permit for the REDI shopping centre and the adjacent two residential towers.
REDI will consist of six residential towers, and a tower housing a hotel and offices. The towers will have 20–35 stories, with the highest tower reaching 126 metres. According to the plans, the towers will have 1,200 housing units with floor space of about 100,000 m² for approximately 2,000 residents, 10,000 m² of office space and a 10,000 m² hotel. A 64,000 m² commercial centre and a car park with around 2,000 parking spots will be built next to the towers. As part of the implementation of the Kalasatama Centre, SRV and the City of Helsinki have agreed that SRV will build a 10,000 m² social and health services centre in Kalasatama and lease it to the city. REDI will be built in phases by 2021, accounting for the market situation. For the most part, the other public premises planned for the Kalasatama Centre have already been built, as the underground waste station and new metro bridge commissioned by the City of Helsinki reached completion in summer 2013.
The City of Helsinki and SRV have negotiated on changes to the city plan so that the City of Helsinki's social and health services centre can be built on the north side of the Kalasatama Centre. This would make it possible to further develop the scope of the station, the implementation schedule and the functionality of the premises to better match the city's plan to centralise social services. The Social Services and Healthcare Committee of the City of Helsinki has for its own part approved the revised plan. The City Council will take the final decision on the approval of the revised plan.
Phase I of the private-sector part of the project consists of the construction of the REDI shopping centre and a car park with a total of 2,000 parking spaces, which will also serve park-and-ride commuters at Kalasatama. The REDI shopping centre will have about 64,000 m² of leasable space. SRV aims to open the first sections of the shopping centre in 2017. The plans for the shopping centre include two daily consumer goods stores and a wide selection of services and brands, all located in the intersection of the city's best traffic connections and its most densely populated area. REDI will be Finland's first shopping centre that can be easily reached by public bus, metro, tram, car, bicycle, walking – and even by boat. 500,000 people live within a 15 minutes' drive from REDI and 1.1 million within 30 minutes. Each day, more than 100,000 cars use the three main roads that pass through Kalasatama, and the Helsinki city centre is only six minutes away by metro.
REDI leasing negotiations are under way with anchor tenants and a wide range of potential tenants. If the ongoing lease negotiations lead to agreements, 70% of the retail space would be leased out. SRV estimates that the lease agreements signed by the end of the year account for about 25-30% of the retail space.
Investor sales and financing negotiations for the REDI shopping centre and car park are likewise ongoing. The investor negotiations concern a co-ownership structure, as SRV intends to keep a 40-50% holding in the project. The total value of the shopping centre and car park investment will be approximately EUR 450 million, depending on the planned scope. Financing for project construction will be secured both as investments from the owners and as project loans. On the basis of the ongoing financing negotiations, SRV estimates that project financing will account for about 50% of
SRV
11 (31)
the total value of the investment, and thus SRV's investment in the project could amount to about EUR 90-120 million. SRV seeks to complete the investor and financing negotiations during the first half of 2014. At the same time, SRV intends to sign a contractor agreement valued at around EUR 350 million for the implementation of the shopping centre and car park, and to begin construction work.
Group project development
The Keilaniemi residential towers, a project developed by SRV, is progressing. Complaints had been filed against the city plan approved by the Espoo City Council. The Administrative Court of Helsinki dismissed these complaints. The appellants then sought leave to appeal from the Supreme Administrative Court, but this was not granted. The city plan of the project entered into force on 28 November 2013. The project's total scope is approximately 72,000 m² of floor area of housing units in four residential towers. SRV has a planning reservation for the area. Project progress hinges on a tunnel for a section of Ring Road I, the cost level of the investments in tunnelling and traffic arrangements and extensive traffic arrangements. The Finnish Transport Agency approved a general plan for Ring Road I in spring 2013. A complaint has been lodged in the Administrative Court of Helsinki against the approval of the general plan. Road planning has been delayed by this complaint. The aim is to begin construction in early 2016.
SRV, Mutual Pension Insurance Company Varma and SATO Corporation are progressing with their project to develop the Niittykumpu district in Espoo. The city plan for the area entered into force in December 2013. In addition, the Espoo City Council has taken its decision on the construction of the Niittykumpu metro station. The aim is to launch the construction of Phase I of the metro station, measuring around 20,000 m², in spring 2015, once construction work for the metro line so permits.
SRV, Mutual Pension Insurance Company Ilmarinen and SATO Corporation are progressing with their project to develop their jointly owned area in the Perkkaa district of Espoo. The Espoo City Planning Committee approved the proposed city plan for viewing on 12 June 2013. The scope of the project is being confirmed at about 110,000 m² of housing building rights, of which SRV's share is approximately one third. The aim is to launch housing construction during 2015.
Building permit planning for the Airut eco-quarter, which will be built in the Jätkäsaari district of Helsinki, is under way. Construction can probably begin in autumn 2014, once the building permit has been secured. The project comprises a total of 22,000 m² of floor area, including a rental apartment building for VVO and SRV's four market-financed owner-occupied apartment buildings, of which two will be built in accordance with HITAS terms. The design of the eco-quarter is based on a multipurpose concept that seeks to offer residents a wide range of services. The project focuses on energy monitoring and reporting on apartments' energy consumption, which enables the residents to optimise their energy use and uphold the principles of sustainable development in their daily lives.
SRV, Stora Enso Oyj and the Helsinki Housing Production Department (ATT) have a joint reservation for a quarter in the Jätkäsaari district granted by the Helsinki City Council. It is intended that a project showcasing industrial wood construction will be built in this quarter – named Wood City, it will consist of office, housing, hotel and commercial buildings. The total size of the quarter is approximately 27,000 m² of floor area, of which a third will be housing units. Based on the winning entry of an architectural competition held in 2012, the design of the project, the marketing of the premises and investor negotiations have been continued. In addition, the preparation of city plan changes for the quarter has continued. Approval of the city plan is expected in summer 2014. In
SRV
the tender held by ATT for design-and build apartment buildings for the quarter, SRV and Stora Enso submitted the most competitive proposal. The aim is to begin the construction of housing in the quarter and the office building during 2014, once investor and lease agreements so permit. The quarter is slated for completion in 2016.
SRV has organised an invitational architecture competition on the development of the block located at Lapinmăentie 1, in Munkkivuori in Helsinki, in collaboration with the building owner, W. P. Carey Inc. The competition result will be announced in May 2014. The starting point for the competition phase is that a major part of the existing buildings will be disassembled. The preliminary plan of the amount of new construction is approximately 50,000 m2 of floor area.
Financing and financial position
Net operational cash flow was EUR -8.2 million (EUR -9.2 million 1-3/2013) as inventories and trade and other receivables increased during the review period. The Group's inventories stood at EUR 431.4 million (EUR 433.4 million), of which land areas and plot-owning companies accounted for EUR 159.4 million (EUR 188.0 million). The Group's invested capital totalled EUR 467.7 million (EUR 498.6 million).
At the end of the review period, the Group's financing reserves totalled EUR 162 million with the Group's cash assets amounting to EUR 24 million, and open-ended account limits, committed undrawn financing reserves and loans to EUR 138 million. The financial covenant for SRV's loans is its equity ratio, which is also reported to financiers for developer contracting projects as a ratio based on percentage of completion. SRV's equity ratio based on percentage of completion was 39.2 per cent (on 31 March 2014).
Capital committed to SRV's developer-contracted housing and business construction projects in Finland, both under construction and completed, totals EUR 195.3 million, of which about EUR 44 million is tied up in infrastructure construction in the Kalasatama Centre. SRV estimates that the completion of these projects (excl. the Kalasatama Centre) requires another EUR 20 million. Undrawn housing corporation loans and receivables for housing construction projects and undrawn commercial construction financing totalled EUR 33 million. Capital committed to completed international projects amounts to EUR 1.5 million, of which EUR 0.1 million relates to unsold housing projects in Estonia and EUR 1.4 million to unsold housing projects in Vyborg. Capital committed to completed projects involving associated companies includes EUR 22.0 million related to the Pearl Plaza shopping centre and EUR 1.7 million related to the Etmia office project. SRV's investment commitments amounted to EUR 10.3 million (EUR 15.0 million).
Equity ratio stood at 39.0 per cent (34.3% on 31 March 2013). Profitability improvement, together with the decrease in total assets, contributed to the increase in equity ratio. The Group's shareholders' equity totalled EUR 218.8 million (EUR 204.8 million). The Group's net interest-bearing liabilities totalled EUR 225.3 million (EUR 277.7 million). Net financing expenses were EUR -2.3 million (EUR -0.5 million). Return on investment was 3.4 per cent (1.7%) and return on equity 2.6 per cent (0.3%).
SRV
13 (31)
Investments
The Group's investments totalled EUR 1.3 million (EUR 0.6 million), and mostly consisted of investments in unlisted shares in Russian real estate projects and the acquisition of machinery and equipment.
Unbuilt land areas, land acquisition commitments and land development agreements
| Land reserves
31 March 2014 | Business
construction | Housing
construction | International
operations | Total |
| --- | --- | --- | --- | --- |
| Unbuilt land areas and land acquisition commitments | | | | |
| Building rights, m² | 227,708 | 356,309 | 758,000 | 1,342,017 |
| Land development
agreements | | | | |
| Building rights, m² | 150,900 | 256,750 | 52,000 | 459,650 |
- Building rights also include the estimated building rights/construction volume of unzoned land reserves and land areas covered by agreements in projects that are wholly or partly owned by SRV.
Group structure
SRV is one of Finland's leading project management contractors. SRV builds, develops and owns commercial and business premises, housing units, and infrastructure projects. In addition to Finland, the company operates in Russia and Estonia. SRV Group Plc, the Group's parent company, is responsible for the Group's management, treasury, finance and administrative functions. The Property Development and Building Systems units support and serve all of the Group's business operations.
SRV's business segments are Domestic Operations, International Operations, and Other Operations. The Domestic Operations segment consists of property development and domestic construction operations led by SRV Construction Ltd. Domestic Operations are divided into housing construction and business premises construction, which includes business, office, logistics, earth and rock construction functions. International Operations comprises SRV's business activities in Russia and Estonia. Other Operations consists primarily of the SRV Group Plc and SRV Kalusto Oy's operations.
Personnel
SRV had an average payroll of 896 (935) employees, of whom 684 (708) were salaried employees. The parent company had an average staff of 56 (53) salaried employees. At the close of the review period, the Group had 895 (924) employees, of whom 57 (53) were employed by the parent company. 167 (161) employees were employed by international subsidiaries. SRV's Domestic Operations employed a total of 36 (38) trainees (students on work placements and students working on their thesis or diploma). SRV offers summer jobs to students and a wide range of trainee opportunities, particularly to those studying construction. Systematic cooperation with educational institutions and universities fosters continuity for SRV's own trainee programme, enabling young people to combine studying and work as naturally as possible.
SRV's human resources strategy is designed to ensure continued competence and leadership development, and to secure the availability and high motivation of personnel. In early 2014,
SRV
14 (31)
systematic investments were continued in order to provide training in contract law and in the management of additional work and alterations.
| Personnel by segment | 31.3.2014 | 31.3.2013 | Percentage of Group personnel, 31.3.2014 |
|---|---|---|---|
| Domestic Operations | 636 | 669 | 71.0 |
| International operations | 172 | 168 | 19.2 |
| Other operations | 87 | 86 | 9.7 |
| Group, total | 895 | 923 | 100.0 |
On 13 February 2014, the Board of Directors of SRV Group Plc approved a new share-based incentive scheme for the Group's key personnel. The purpose of the scheme is to align the objectives of shareholders and key personnel in order to increase the company's value, and to enhance key personnel's commitment to the company. The scheme covers 26 key SRV personnel. The key indicators for the scheme's performance period 2014–2016 are the Group's cumulative operating profit margin and return on equity. In addition, other business-specific indicators specified for 2014–2016 will affect the bonus earned. Personnel covered by the scheme must hold at least half of the shares received on the basis of the scheme until 31 December 2017 and at least half until 31 December 2018. If a key employee's employment ends during the above restriction period, he/she must hand over all shares to the company without compensation.
When the indicators are fulfilled, the bonus will be paid, partly in the company's shares and partly in cash. This scheme allows the conveyance, without consideration, of a maximum of 588,000 SRV Group Plc shares, to key employees, and a cash payment for tax purposes corresponding to the value of the conveyed shares. The total recognised IFRS value of shares conveyed over the lifetime of the incentive scheme, 2014–2018, will be approximately EUR 2.8 million, to which the cash payments will be added. The Black & Scholes model, applied in the pricing of options, is used to calculate the theoretical market value of the shares, with the following assumptions: share price EUR 4.00, risk-free interest rate 0.86 per cent and volatility 32 per cent.
Outlook for construction
The outlook for the world economy has turned slightly more optimistic, with developed countries leading the slow recovery. The Finnish economy also shows faint signs of improvement: the GDP growth estimate for 2014 is slightly positive. In the construction sector, the weak business cycle continues for the third consecutive year. Total construction volumes are expected to decline by approximately one per cent from 2013 levels. The number of building construction start-ups is forecast to show a slight improvement. The rise in building costs has levelled out.
The poor economic situation and consumer uncertainty have contributed to the slowdown in housing production. The construction of about 27,800 housing units was begun in Finland in 2013, and the forecast for 2014 is about 26,500. Sales of new housing units have slackened, especially outside the Helsinki Metropolitan Area. Business with housing funds has partly compensated for weaker sales to individual households. Demand for housing is affected by major uncertainty. In the longer term, trends such as migration to population growth centres and the smaller size of households will maintain the need for housing construction in Finland.
While commercial and office real-estate markets have shown small signs of recovery, the slow pace of economic growth has kept the number of empty offices high. However, there is a need for
SRV
15 (31)
modern premises with good transport connections. The number of commercial and office construction start-ups is expected to take an upward turn in 2014.
Stable growth is forecast in renovation construction. An increase in building stock, the ageing of existing buildings, and modernisation requirements will also support renovation construction in the future. The situation in infrastructure construction has weakened due to the decline in new building construction work and the contraction of investments in highway construction and maintenance.
In Russia, GDP growth has continued to slacken, while the weakening of the rouble and the Crimean crisis have put the economy under even greater pressure. An increase in the reference interest rate is slowing down the issuance of credit, as well as domestic consumption which has supported economic growth in Russia. Russia will be subject to major uncertainty in 2014, which will hold estimated GDP growth down to 0.0–0.5 per cent. It is estimated that the Estonian economy will grow by 1–2 per cent.
Risks, risk management and corporate governance
The general business cycle and changes in customers' business environments have immediate effects on the construction and property markets, and this may, for example, alter the volume of SRV's order backlog and the profitability of operations. It may also lead to an increased amount of capital being tied up in projects for a longer time. A change in the general level of interest rates has direct impacts on both SRV's cash flow from operating activities and financing costs. The general economic climate is unstable, and the international country-level financial crisis adds to the economic uncertainty. SRV develops, owns and operates shopping centres in Russia. The Crimean crisis is affecting both the Russian economy and the availability of financing from investors and for projects. The decline in the rouble's exchange rate is impacting on consumer purchasing power and may weaken the rent-paying ability of tenants in shopping centres. Furthermore, the crisis is affecting the economies of Russia's major trading partners. General economic uncertainty and difficulties in securing financing are keeping the volume of property transactions low and delaying the start-up of new large-scale projects in particular. Demand for property investments has remained weak.
Stricter banking regulation will affect the availability of financing from banks, the length of loan periods and loan margin levels. Despite the extremely low interest rates, financing costs will grow as loan margins rise. If the international financial crisis escalates, it may further increase the cost of financing and weaken its availability. If the availability of financing for clients continues to weaken, client receivables may grow and SRV will face tighter liquidity.
In developer-contracted projects, recognition of income is largely based on the completed contract method, and recognition depends on the percentage of sold premises in delivered projects. The delivery schedules of developer-contracted projects can have a material impact on the development of both quarterly and full-year revenue and earnings. Factors that affect project sales include the occupancy rate of the project and the availability of financing for buyers. When sales are delayed, the recognition of revenue and operating profit are likewise postponed. To accelerate sales, the sales prices of slow-turnover projects might have to be lowered. Postponed start-ups in developer-contracted projects increase development expenses, which are recognised as costs.
Slower sales increase sales and marketing costs and interest expenses in developer-contracted housing production. In Finland, housing sales in the Helsinki Metropolitan Area have been performing reasonably well thanks to sales to investors, but economic uncertainty and tax
SRV
increases, both implemented and planned, have weakened the outlook and volume in consumer sales. Key risks affecting demand for housing include changes in consumer confidence in the future, the availability of financing, and a strong rise in interest rates.
Construction is subject to significant cost risks relating to subcontracting and procurements. Long-term planning is vital to keep these risks under control. SRV's operating model requires an adequate supply of skilled and competent personnel. A weak economic climate increases the financial risks relating to subcontractors. The construction sector has implemented a reverse value added tax policy, which, as a method, requires greater administrative accuracy. Post-construction warranty and liability obligations can last up to ten years after the handover. The rise in building costs has levelled out and the building cost index remained fairly steady in the early months of 2014.
SRV's revenue is generated by construction projects, and the company's result depends on the profitability and progress of individual projects. Competition for new orders in the construction sector is fierce, and this might affect the volume and profitability of SRV's new order backlog. Contractor agreements in the construction industry are substantial in value. Their terms and conditions require all parties to achieve the agreed targets within a set timetable, and to adhere to agreed working methods. In particular, carrying out additional works and alterations may involve financial risks that increase in a poor economic climate. Project receivables can involve additional work and alterations that are subject to complaints or disputes over payment liability. Segment management estimates the provisions required for receivables; however, these provisions may prove to be insufficient. If no mutual agreement on payment liability is reached during the final financial analysis of a project, SRV may have to instigate legal proceedings against the client. The outcomes of legal proceedings involve uncertainties. In 2013, SRV initiated legal proceedings against clients with respect to two completed projects involving client complaints or disputes over payment liability for additional work and alterations. SRV's claims amount to around EUR 11 million (VAT 0%). SRV's management believes that these cases and their outcomes will not have a significant impact on SRV's financial position.
In addition to land acquisition risks, property projects face other risks, such as those related to the outcome of zoning, soil conditions, financing, the liquidity of funding based on financing commitments, the commercialisation of the project, implementation schedules and agreements, partners, the geographical location, and the type of project. In line with IFRS requirements, SRV measures its land reserves at acquisition cost. If the acquisition cost plus construction costs is lower than the sale value of the planned project, the value of the plot will be reduced. In accordance with its strategy, SRV has developed developer-contracting projects and invested in land acquisition in Finland and especially in Russia. The availability of property financing affects start-up decisions and the progress of development projects. SRV aims to carry out large-scale development projects in cooperation with real estate investors using project funding. SRV's investment commitments in projects entail maintaining sufficient liquidity and financing capacity. A decline in the availability of investor and project funding may increase SRV's own share of project funding, and this would lower the Group's equity ratio and weaken both the Group's liquidity and the availability of other funding.
The financial risks involved in SRV's operations are interest rate, currency, liquidity, capital structure, and contractual party risks. These are presented in more detail in the Notes to the 2013 Financial Statements. Currency risks are divided into transaction risks and translation risks. Transaction risks are related to currency-denominated business and financing cash flows. Translation risks encompass investments made in foreign subsidiaries, the accounting effects of
SRV
17 (31)
which are recorded in the translation differences for shareholders' equity in the consolidated figures.
Liquidity risks may have an effect on the Group's earnings and cash flow if the Group is unable to ensure sufficient financing for its operations. SRV maintains adequate liquidity through efficient management of cash flows and related solutions, such as binding lines of credit that are valid until further notice. The company has a long-term binding liquidity arrangement (EUR 100 million), which will mature in December 2015. The company's financing agreements are subject to customary terms and conditions. The financial covenant is the company's equity ratio, which is also reported to banks for developer contracting projects as a ratio based on percentage of completion.
Capital structure risks may adversely affect the availability of financing for the Group if the company's equity ratio falls too low. The Group does not have a public credit rating issued by a credit institution. In order to maintain its capital structure, the Group may adjust its dividend payment, issue new shares or float equity bonds. In order to maintain its equity ratio, the Group may be forced to downscale its business operations and use of capital. The equity ratio is affected by factors such as the profitability of business operations, postponements in the sale and handover of developer-contracted projects, plot investments, and other balance sheet growth. The Group monitors its capital structure using its equity ratio. The Group seeks to keep its share of the balance sheet total less advances received accounted for by shareholders' equity at no less than 30 per cent. On 28 December 2012, SRV issued a EUR 45 million domestic hybrid bond (equity bond). The bond has no maturity, but the company has the right to redeem it in four years' time. The interest payable on the bond will increase after the first redemption date.
The Group's risk management is carried out in line with the Group's operations system, and control is exercised in accordance with the Group strategy approved by the Board of Directors of the Group's parent company. SRV also makes every effort to cover operational risks by means of insurance and contractual terms.
A more detailed account of SRV's risks, risk management and corporate governance policies has been published in the 2013 Annual Report and Notes to the Financial Statements.
Corporate governance and resolutions of general meetings
The Annual General Meeting (AGM) of SRV Group Plc was held on 26 March 2014. The AGM adopted the Financial Statements and granted release from liability to the members of the Board of Directors and the President and CEO for the financial year 1 January–31 December 2013. As proposed by the Board of Directors, a dividend of EUR 0.12 per share was declared. The dividend was paid on 7 April 2014. Mr Ilpo Kokkila was elected chairman of the Board of Directors and Ms Minna Alitalo, Mr Arto Hiltunen, Mr Olli-Pekka Kallasvuo, Mr Timo Kokkila, and Mr Risto Kyhälä were elected to seats on the Board. The firm of public accountants, PricewaterhouseCoopers Oy, was elected as the company's auditor for the next term of office. Samuli Perälä, authorised public accountant, acts as the principal auditor.
The AGM authorised the Board of Directors to decide on the acquisition of the company's own shares, using the company's unrestricted equity. The Board was authorised to acquire a maximum of 3,676,846 of the company's own shares in such a manner that, when combined with the shares already owned by the company and its subsidiary, the number of shares acquired on the basis of this authorisation will not at any given time exceed 3,676,846 shares, or 10 per cent of all shares of the company. Based on this authorisation, the Board may acquire a maximum of 3,676,846 shares
SRV
18 (31)
in public trading arranged by Nasdaq OMX Helsinki Oy at a market price valid at the moment of acquisition, as well as a maximum of 200,000 shares issued on the basis of incentive schemes to individuals employed by SRV Group without consideration, or for no more than the price at which an individual within the sphere of an incentive scheme is obliged to convey a share, such that the maximum number of acquired shares nevertheless remains at 3,676,846. The aforementioned authorisations include the right to acquire shares other than in proportion to the holdings of shareholders. Shares acquired on the basis of this authorisation may be acquired in one or several instalments.
The company's own shares can be acquired for use e.g. as payment in corporate acquisitions, when the company acquires assets relating to its business, as part of the company's incentive programmes or to be otherwise conveyed, held or cancelled. The authorisations as described above shall be in force for 18 months from the decision of the general meeting and cancel the authorisation granted by the Annual General Meeting to the Board of Directors on 20 March 2013. The Board of Directors shall decide on other terms relating to the acquisition.
The Board of Directors of SRV Group Plc held its organisation meeting on 26 March 2014. Minna Alitalo was elected as Chair of the Audit Committee, and Olli-Pekka Kallasvuo and Timo Kokkila as members. Ilpo Kokkila was elected as Chairman of the Nomination and Remuneration Committee, and Arto Hiltunen and Risto Kyhälä as members. Olli-Pekka Kallasvuo serves as Vice Chairman of the Board of SRV Group Plc.
Shares and shareholders
SRV Group Plc's share capital is EUR 3,062,520. The share has no nominal value and the number of registered shares is 36,768,468. The company has one class of shares. SRV had a total of 6,189 shareholders on 31 March 2014.
The share closing price at OMX Helsinki at the end of the review period was EUR 3.76 (EUR 4.05 on 31 December 2013, change -7.2%). The highest share price in the review period was EUR 4.38 and the lowest EUR 3.73. SRV's equity per share at the end of the review period amounted to EUR 4.88 (EUR 4.99 on 31 December 2013). During this period, the all-share index of the Helsinki Stock Exchange (OMX Helsinki) changed by 0.2 per cent, and the OMX Construction and Materials index by -14.8 per cent.
At the end of the review period, the company had a market capitalisation of EUR 133.5 million, excluding the Group's treasury shares. 1.6 million shares were traded during the period with a trade volume of EUR 6.7 million. At the end of the review period, SRV Group Plc held 1,273,539 SRV Group Plc shares (3.5 per cent of the total number of the company's shares and combined number of votes). On 6 May 2014, the Group held 1,273,539 shares (3.5 per cent of the total number of the company's shares and combined number of votes).
Financial targets
On 13 February 2014, SRV's Board of Directors confirmed the Group's strategic goals for 2014-2018. The following strategic targets were set as follows:
- During the strategic period, SRV will focus on improving profitability rather than on growth.
- The average annual revenue of International Operations will rise to more than EUR 150 million
- The operating profit margin will reach 6 per cent.
- The return on equity will be at least 15 per cent.
SRV
19 (31)
- The equity ratio will remain above 30 per cent.
- A dividend payment equalling 30 per cent of the annual result, taking into account the capital needs of business operations.
For the set targets to be achieved, the number of developer-contracted projects must be stepped up substantially.
Outlook for 2014 remains unchanged
The quarterly variation and development of revenue and result in 2014 will be affected by several factors, 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, the development of the order backlog's profit margins, the sales volume of developer-contracted housing and the completion schedules of the properties, the number of new contracts, the start-up of own projects, the project development nature of operations, and the realisation of planned project sales. Investor demand for commercial properties in Finland is estimated to remain muted and the outlook for 2014 does not include the sale of the Derby Business Park property. The construction of the REDI shopping centre that SRV is developing in Kalasatama is expected to start in 2014. Based on current completion schedules, SRV estimates that a total of 186 developer-contracted housing units will be completed during 2014.
SRV estimates that its developer-contracting volume will increase in 2014. The recognition of revenue and earnings in 2014 will be affected by the recognition of income upon delivery and the elimination of a share equivalent to SRV's holding from profit margins. The Group's full-year revenue is expected to be on a par with the previous year (EUR 679.4 million 1-12/2013) and profit before taxes to amount to EUR 10-20 million (EUR 22.8 million 1-12/2013).
Espoo, 6 May 2014
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
Jukka Hienonen, President and CEO, +358 (201) 455 213
Hannu Linnoinen, Executive Vice President, CFO, +358 (201) 455 990, +358 (50) 523 5850
Taneli Hassinen, Vice President, Communications, +358 (201) 455 208, +358 (40) 504 3321
SRV
20 (31)
Key figures:
| 1-3/2014 | 1-3/2013 | 1-12/2013 | ||
|---|---|---|---|---|
| Revenue | EUR million | 138.5 | 158.4 | 679.4 |
| Operating profit | EUR million | 4.4 | 1.2 | 26.4 |
| Operating profit, % of revenue | % | 3.2 | 0.8 | 3.9 |
| Profit before taxes | EUR million | 2.2 | 0.7 | 22.8 |
| Profit before taxes, % of revenue | % | 1.6 | 0.4 | 3.4 |
| Net profit attributable to equity holders of the parent company | EUR million | 0.2 | -0.9 | 14.0 |
| Return on equity, % 1) | % | 2.6 | 0.3 | 8.4 |
| Return on investment, % 1) | % | 3.4 | 1.7 | 5.4 |
| Invested capital | EUR million | 467.7 | 498.6 | 528.0 |
| Equity ratio | % | 39.0 | 34.3 | 36.4 |
| Net interest-bearing debt | EUR million | 225.3 | 277.7 | 215.8 |
| Gearing ratio | % | 103.0 | 135.6 | 97.1 |
| Order backlog | EUR million | 880.2 | 726.7 | 825.8 |
| New agreements | EUR million | 184.7 | 40.0 | 600.7 |
| Personnel on average | 896 | 935 | 949 | |
| Property, plant and equipment investments | EUR million | 1.3 | 0.6 | 9.9 |
| Property, plant and equipment investments, % of revenue | % | 1.0 | 0.4 | 1.5 |
| Earnings per share | EUR | 0.01 | -0.03 | 0.39 |
| Earnings per share (diluted) | EUR | 0.01 | -0.03 | 0.39 |
| Equity per share | EUR | 4.88 | 4.50 | 4.99 |
| Dividend per share | EUR | 0.12 | 0.06 | 0.12 |
| Dividend payout ratio | % | 1 200.0 | -200.0 | 30.8 |
| Dividend yield | % | 3.2 | 1.8 | 3.0 |
| Price per earnings ratio | 376.0 | -112.0 | 10.4 | |
| Share price development | ||||
| Share price at the end of the period | EUR | 3.76 | 3.36 | 4.05 |
| Average share price | EUR | 4.10 | 3.42 | 3.75 |
| Lowest share price | EUR | 3.73 | 3.29 | 2.95 |
| Highest share price | EUR | 4.38 | 3.55 | 4.72 |
| Market capitalisation at the end of the period | EUR million | 133.5 | 119.3 | 143.8 |
| Trading volume | 1 000 | 1 633 | 441 | 3 364 |
| Trading volume, % | % | 4.6 | 1.2 | 9.5 |
| Weighted average number of shares outstanding during the period | 1 000 | 35 495 | 35 497 | 35 495 |
| Weighted average number of shares outstanding during the period (diluted) | 1 000 | 35 599 | 35 530 | 35 595 |
| Number of shares outstanding at the end of the period | 1 000 | 35 495 | 35 495 | 35 495 |
1) In calculating the key ratio, only the profit for the period has been annualized.
SRV
21 (31)
Calculation of key figures:
| Gearing ratio, % | = 100 x | Net interest-bearing debt |
|---|---|---|
| Total equity | ||
| Return on equity, % | = 100 x | Total comprehensive income for the period |
| Total equity, average | ||
| Return on investment, % | = 100 x | Result before taxes + interest and other financial expenses |
| Invested capital, average | ||
| Equity ratio, % | = 100 x | Total equity |
| Total assets – advances received | ||
| Invested capital | = | Total assets – non-interest bearing debt – deferred tax liabilities – provisions |
| Net interest-bearing debt | = | Interest bearing debt – cash and cash equivalents |
| Earnings per share attributable to equity holders of the parent company | = | Result for the period – non-controlling interest |
| – hybrid bond interest | ||
| Average number of shares (share-issue adjusted) | ||
| Earnings per share attributable to equity holders of the parent company (diluted) | = | Result for the period – non-controlling interest |
| – hybrid bond interest | ||
| Average number of shares (share-issue adjusted, diluted) | ||
| Shareholders' equity | = | Shareholders' equity attributable to equity holders of the parent company |
| Average number of shares at end of period (share-issue adjusted) | ||
| Price per earnings ratio (P/E-ratio) | = | Share price at end of period |
| Earnings per share | ||
| Dividend payout ratio, % | = 100 x | Dividend per share |
| Earnings per share | ||
| Dividend yield, % | = 100 x | Dividend per share |
| Share price at end of period | ||
| Average share price | = | Number of shares traded in euros during the period |
| Number of shares traded during the period | ||
| Market capitalisation at the end of the period | = | Number of shares outstanding at the end of the period x share price at the end of the period |
| Trading volume | = | Number of shares traded during the period and their percentage of the weighted average number of shares outstanding |
SRV
22 (31)
SRV Group Plc Interim Report, 1 January–31 March 2014: Tables
APPENDIXES
1) Consolidated Group interim report information: income statement, balance sheet, cash flow statement, statement of changes in equity, commitments and contingent liabilities and derivative contracts liabilities
2) Quarterly development
3) Segment information, inventories and related-party transactions
4) Events after the reporting period
1. Interim Report 1 January–31 March 2014
This interim report has been prepared in accordance with the IAS standard 34, Interim Financial Reporting. In preparing this interim report, SRV has applied the same accounting principles as in its year-end financial statements for 2013. However, as of 1 January 2014, the Group began to apply the new or revised IFRS standards and IFRIC interpretations published by IASB, specified in the accounting principles of SRV's year-end financial statements for 2013. These new or revised standards and interpretations had no impact on the figures presented for this review period.
The calculation principles of key figures and the related calculation formulas remained unchanged as presented in SRV's year-end financial statements for 2013. The figures in this interim report have been rounded up to millions of euros, so the sum total of individual figures may deviate from the sum total presented.
The information disclosed in this interim report is unaudited.
SRV's reporting segments comprise Domestic Operations, International Operations, and Other Operations. The operating segment figures are disclosed in accordance with IFRS 8, following the accounting principles applied in the consolidated financial statements.
SRV
23 (31)
| Consolidated income statement (EUR million) | 1-3/2014 | 1-3/2013 | change, MEUR | change,% | 1-12/2013 |
|---|---|---|---|---|---|
| Revenue | 138.5 | 158.4 | -19.9 | -12.6 | 679.4 |
| Other operating income | 1.3 | 1.0 | 0.3 | 30.2 | 4.1 |
| Change in inventories of finished goods and work in progress | 0.8 | 8.4 | -7.6 | -90.3 | 18.7 |
| Use of materials and services | -115.9 | -146.6 | 30.6 | -20.9 | -594.8 |
| Employee benefit expenses | -16.1 | -15.8 | -0.3 | 1.6 | -63.6 |
| Share of results of associated companies | 0.0 | -0.1 | 0.1 | -115.5 | -2.0 |
| Depreciation and impairments | -0.7 | -0.7 | 0.0 | -6.4 | -3.1 |
| Other operating expenses | -3.5 | -3.4 | -0.1 | 2.9 | -12.3 |
| Operating profit | 4.4 | 1.2 | 3.2 | 269.2 | 26.4 |
| Financial income | 0.0 | 1.0 | -1.0 | -99.4 | 1.8 |
| Financial expenses | -2.3 | -1.5 | -0.8 | 55.5 | -5.4 |
| Financial income and expenses, total | -2.3 | -0.5 | -1.8 | 356.0 | -3.6 |
| Profit before taxes | 2.2 | 0.7 | 1.5 | 208.2 | 22.8 |
| Income taxes | -0.7 | -0.6 | -0.2 | 30.7 | -4.5 |
| Net profit for the period | 1.4 | 0.1 | 1.3 | 904.9 | 18.3 |
| Attributable to | |||||
| Equity holders of the parent company | 0.2 | -0.9 | 14.0 | ||
| Hybrid bond investors | 1.1 | 1.1 | 4.3 | ||
| Non-controlling interests | 0.2 | 0.0 | 0.0 | ||
| Earnings per share attributable to equity holders of the parent company | 0.01 | -0.03 | 0.39 | ||
| Earnings per share attributable to equity holders of the parent company (diluted) | 0.01 | -0.03 | 0.39 | ||
| Statement of comprehensive income (EUR million) | 1-3/2014 | 1-3/2013 | 1-12/2013 | ||
| --- | --- | --- | --- | ||
| Net profit for the period | 1.4 | 0.1 | 18.3 | ||
| Other comprehensive income | |||||
| Other comprehensive income to be reclassified to profit or loss in subsequent periods: | |||||
| Gains and losses arising from translating the financial statements of a foreign operation | -0.7 | 0.0 | 0.0 | ||
| Other comprehensive income for the period, net of tax | -0.7 | 0.0 | 0.0 | ||
| Total comprehensive income for the period | 0.7 | 0.1 | 18.3 | ||
| Attributable to | |||||
| Equity holders of the parent company | -0.6 | -0.9 | 14.0 | ||
| Hybrid bond investors | 1.1 | 1.1 | 4.3 | ||
| Non-controlling interests | 0.2 | 0.0 | 0.0 |
SRV
24 (31)
| Consolidated balance sheet (EUR million) | 31.3.14 | 31.3.13 | change, % | 31.12.13 |
|---|---|---|---|---|
| ASSETS | ||||
| Non-current assets | ||||
| Property, plant and equipment | 12.0 | 13.6 | -11.8 | 12.6 |
| Goodwill | 1.7 | 1.7 | 0.0 | 1.7 |
| Other intangible assets | 0.7 | 0.6 | 22.0 | 0.8 |
| Other financial assets | 19.1 | 10.9 | 74.8 | 18.2 |
| Receivables | 6.1 | 0.6 | 956.8 | 5.1 |
| Loan receivables from associated companies and joint ventures | 23.8 | 11.9 | 100.1 | 23.8 |
| Deferred tax assets | 7.3 | 5.7 | 27.7 | 7.5 |
| Non-current assets, total | 70.7 | 45.0 | 57.2 | 69.7 |
| Current assets | ||||
| Inventories | 431.4 | 433.4 | -0.5 | 425.4 |
| Trade and other receivables | 88.8 | 122.7 | -27.6 | 75.0 |
| Loan receivables from associated companies and joint ventures | 1.1 | 33.8 | -96.7 | 1.1 |
| Current tax receivables | 3.6 | 2.4 | 46.6 | 1.8 |
| Cash and cash equivalents | 23.6 | 16.1 | 46.8 | 90.0 |
| Current assets, total | 548.6 | 608.4 | -9.8 | 593.3 |
| ASSETS, TOTAL | 619.3 | 653.4 | -5.2 | 663.0 |
| Consolidated balance sheet (EUR million) | 31.3.14 | 31.3.13 | change, % | 31.12.13 |
| EQUITY AND LIABILITIES | ||||
| Equity attributable to equity holders of the parent company | ||||
| Share capital | 3.1 | 3.1 | 0.0 | 3.1 |
| Invested free equity fund | 92.2 | 92.2 | 0.0 | 92.2 |
| Translation differences | -0.8 | 0.0 | 0.0 | |
| Fair value reserve | 0.0 | 0.0 | 0.0 | |
| Retained earnings | 78.8 | 64.3 | 22.5 | 81.7 |
| Equity attributable to equity holders of the parent company, total | 173.3 | 159.6 | 8.6 | 177.0 |
| Non-controlling interests | 0.8 | 0.6 | 44.1 | 0.6 |
| Hybrid bond | 44.6 | 44.6 | 0.0 | 44.6 |
| Equity, total | 218.8 | 204.8 | 6.8 | 222.2 |
| Non-current liabilities | ||||
| Deferred tax liabilities | 2.7 | 1.4 | 93.0 | 2.7 |
| Provisions | 6.6 | 4.7 | 39.7 | 4.0 |
| Interest-bearing liabilities | 151.6 | 118.9 | 27.5 | 179.1 |
| Other liabilities | 1.5 | 0.9 | 70.4 | 1.4 |
| Non-current liabilities, total | 162.5 | 126.0 | 29.0 | 187.1 |
| Current liabilities | ||||
| Trade and other payables | 134.2 | 143.8 | -6.6 | 118.9 |
| Current tax payables | 3.2 | 0.9 | 268.8 | 2.3 |
| Provisions | 3.3 | 3.2 | 2.8 | 5.7 |
| Interest-bearing liabilities | 97.3 | 174.9 | -44.3 | 126.7 |
| Current liabilities, total | 238.0 | 322.7 | -26.2 | 253.6 |
| Liabilities, total | 400.5 | 448.6 | -10.7 | 440.8 |
| EQUITY AND LIABILITIES | 619.3 | 653.4 | -5.2 | 663.0 |
SRV
25 (31)
Consolidated cash flow statement
(EUR million)
| | 1-3/2014 | 1-3/2013 | 1-12/2013 |
| --- | --- | --- | --- |
| Cash flows from operating activities | | | |
| Net profit for the period
(excluding non-controlling interests) | 1.2 | 0.2 | 18.3 |
| Adjustments: | | | |
| Depreciation and impairments | 0.7 | 0.7 | 3.1 |
| Non-cash transactions | 1.0 | -4.1 | 10.5 |
| Financial income and expenses | 2.3 | 0.5 | 3.6 |
| Capital gains on sales of tangible and intangible assets | 0.0 | 0.0 | 0.0 |
| Income taxes | 0.7 | 0.6 | 4.5 |
| Adjustments, total | 4.6 | -2.4 | 21.7 |
| Changes in working capital: | | | |
| Change in loan receivables | -1.1 | 0.8 | 18.5 |
| Change in trade and other receivables | -13.9 | 4.8 | 47.7 |
| Change in inventories | -5.9 | -4.7 | -2.1 |
| Change in trade and other payables | 8.9 | -8.2 | -30.4 |
| Changes in working capital, total | -11.9 | -7.3 | 33.8 |
| Interest paid | -1.1 | -2.0 | -14.0 |
| Interest received | 0.0 | 0.7 | 3.3 |
| Income taxes paid | -1.1 | 1.5 | -0.7 |
| Net cash flow from operating activities | -8.2 | -9.2 | 62.3 |
| Cash flow from investing activities | | | |
| Purchase of property, plant and equipment | -0.4 | -0.6 | -2.1 |
| Purchase of intangible assets | 0.0 | 0.0 | -0.3 |
| Purchase of other financial assets | -0.9 | 0.0 | -7.4 |
| Sale of property, plant and equipment and intangible assets | 0.0 | 0.0 | 0.3 |
| Sale of financial assets | 0.0 | 0.0 | 0.2 |
| Net cash used in investing activities | -1.3 | -0.5 | -9.4 |
| Cash flows from financing activities | | | |
| Proceeds from loans | 0.2 | 0.0 | 86.6 |
| Repayments of loans | -0.6 | -13.9 | -75.8 |
| Hybrid bond | 0.0 | 0.0 | 0.0 |
| Change in loan receivables | 0.0 | 0.0 | 0.0 |
| Change in housing corporation loans | -13.8 | -9.1 | -17.0 |
| Change in credit limits | -42.5 | 15.7 | 12.4 |
| Purchase and sale of treasury shares | 0.0 | 0.0 | 0.0 |
| Dividends paid | 0.0 | 0.0 | -2.2 |
| Net cash from financing activities | -56.8 | -7.2 | 4.0 |
| Net change in cash and cash equivalents | -66.3 | -17.0 | 56.9 |
| Cash and cash equivalents at the beginning of period | 90.0 | 33.1 | 33.1 |
| Cash and cash equivalents at the end of period | 23.6 | 16.1 | 90.0 |
SRV
26 (31)
| Equity attributable to the equity holders of the parent company | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Statement of changes in Group equity 1 January –31 March 2014 (EUR million) | Share capital | Invested free equity fund | Translation differences | Fair value reserve | Retained earnings | Total | Non-controlling interests | Hybrid bond | Total equity |
| Equity on 1 January 2014 | 3.1 | 92.2 | 0.0 | 0.0 | 81.7 | 177.0 | 0.6 | 44.6 | 222.2 |
| Total income and expenses for the period | 0.0 | 0.0 | -0.8 | 0.0 | 1.2 | 0.5 | 0.2 | 0.0 | 0.7 |
| Dividends paid | 0.0 | 0.0 | 0.0 | 0.0 | -4.2 | -4.2 | 0.0 | 0.0 | -4.2 |
| Share-based incentive plan | 0.0 | 0.0 | 0.0 | 0.9 | 0.9 | 0.0 | 0.0 | 0.9 | |
| Purchase of treasury shares | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Sale of treasury shares | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Hybrid bond | 0.0 | 0.0 | 0.0 | 0.0 | -0.8 | -0.8 | 0.0 | 0.0 | -0.8 |
| Other changes | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | ||
| Equity on 31 March 2014 | 3.1 | 92.2 | -0.8 | 0.0 | 78.8 | 173.3 | 0.8 | 44.6 | 218.8 |
| Equity attributable to the equity holders of the parent company | |||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Statement of changes in Group equity 1 January –31 March 2013 (EUR million) | Share capital | Invested free equity fund | Translation differences | Fair value reserve | Retained earnings | Total | Non-controlling interests | Hybrid bond | Total equity |
| Equity on 1 January 2013 | 3.1 | 92.2 | 0.0 | 0.0 | 68.9 | 164.2 | 3.5 | 44.6 | 212.3 |
| Total income and expenses for the period | 0.0 | 0.0 | 0.0 | 0.0 | 0.2 | 0.2 | 0.0 | 0.0 | 0.1 |
| Dividends paid | 0.0 | 0.0 | 0.0 | 0.0 | -2.1 | -2.1 | 0.0 | 0.0 | -2.1 |
| Share-based incentive plan | 0.0 | 0.0 | 0.0 | 0.6 | 0.6 | 0.0 | 0.0 | 0.6 | |
| Purchase of treasury shares | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Sale of treasury shares | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Hybrid bond | 0.0 | 0.0 | 0.0 | 0.0 | -0.8 | -0.8 | 0.0 | 0.0 | -0.8 |
| Other changes * | 0.0 | 0.0 | 0.0 | 0.0 | -2.4 | -2.4 | -2.9 | 0.0 | -5.3 |
| Equity on 31 March 2013 | 3.1 | 92.2 | 0.0 | 0.0 | 64.3 | 159.6 | 0.6 | 44.6 | 204.8 |
| Equity attributable to the equity holders of the parent company | |||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Statement of changes in Group equity 1 January –31 December 2013 (EUR million) | Share capital | Invested free equity fund | Translation differences | Fair value reserve | Retained earnings | Total | Non-controlling interests | Hybrid bond | Total equity |
| Equity on 1 January 2013 | 3.1 | 92.2 | 0.0 | 0.0 | 68.9 | 164.2 | 3.5 | 44.6 | 212.3 |
| Total income and expenses for the financial year | 0.0 | 0.0 | 0.0 | 0.0 | 18.3 | 18.3 | 0.0 | 0.0 | 18.3 |
| Dividends paid | 0.0 | 0.0 | 0.0 | 0.0 | -2.1 | -2.1 | 0.0 | 0.0 | -2.1 |
| Share-based incentive plan | 0.0 | 0.0 | 0.0 | 0.0 | 2.0 | 2.0 | 0.0 | 0.0 | 2.0 |
| Purchase of treasury shares | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Sale of treasury shares | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Hybrid bond | 0.0 | 0.0 | 0.0 | 0.0 | -3.2 | -3.2 | 0.0 | 0.0 | -3.2 |
| Other changes * | 0.0 | 0.0 | 0.0 | 0.0 | -2.2 | -2.2 | -2.9 | 0.0 | -5.1 |
| Equity on 31 December 2013 | 3.1 | 92.2 | 0.0 | 0.0 | 81.7 | 177.0 | 0.6 | 44.6 | 222.2 |
*Other changes include the loss of acquisition of non-controlling interests EUR 2.9 million.
SRV
27 (31)
| Commitments and contingent liabilities | ||||
|---|---|---|---|---|
| (EUR million) | 31.3.14 | 31.3.13 | change, % | 31.12.13 |
| Collateral given for own liabilities | ||||
| Real estate mortgages given 1) | 201.4 | 296.1 | -32.0 | 212.4 |
| Pledges given | 0.0 | 0.0 | 0.0 | |
| Other commitments | ||||
| Guarantees given for liabilities on uncompleted projects | 0.0 | 0.0 | 0.0 | |
| Investment commitments given | 10.3 | 15.0 | -31.0 | 14.0 |
| Plots purchase commitments | 145.5 | 121.2 | 20.0 | 157.8 |
1) Real estate mortgages include the total amount of mortgages given as collateral for developer contracting housing production against the housing corporation loans of uncompleted and unsold completed projects.
| Fair and nominal values of derivative instruments | 3/2014 | 3/2013 | 12/2013 | |||
|---|---|---|---|---|---|---|
| (EUR million) | Fair Values | Fair Values | Fair Values | |||
| Hedge accounting not applied | Positive | Negative | Positiv. | Negativ. | Positiv. | Negativ. |
| Foreign exchange forward contracts | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Interest rate swaps | 0.0 | 0.2 | 0.0 | 1.0 | 0.0 | 0.4 |
| Nominal values of derivative instruments | 3/2014 | 3/2013 | 12/2013 | |||
| Foreign exchange forward contracts | 0.0 | 0.0 | 0.0 | |||
| Interest rate swaps | 30.0 | 30.0 | 30.0 |
The fair values of derivative instruments are based on market prices at the end of the reporting period.
Open foreign exchange forward contracts are hedging the financing cash flow.
2. Group and Segment information by quarter
| SRV konserni (milj. eur) | 1-3/14 | 10-12/13 | 7-9/13 | 4-6/13 | 1-3/13 |
|---|---|---|---|---|---|
| Revenue | 138.5 | 171.6 | 170.0 | 179.4 | 158.4 |
| Operating profit | 4.4 | 4.6 | 6.9 | 13.7 | 1.2 |
| Financial income and expenses, total | -2.3 | -1.0 | -1.7 | -0.4 | -0.5 |
| Profit before taxes | 2.2 | 3.6 | 5.2 | 13.3 | 0.7 |
| Order backlog 1) | 880.2 | 825.8 | 911.5 | 959.2 | 726.7 |
| New agreements | 184.7 | 68.3 | 107.9 | 384.5 | 40.0 |
| Earnings per share, EUR | 0.01 | 0.01 | 0.06 | 0.35 | -0.03 |
| Equity per share, EUR 1) | 4.88 | 4.99 | 4.95 | 4.86 | 4.50 |
| Share closing price, EUR 1) | 3.76 | 4.05 | 4.41 | 3.28 | 3.36 |
| Equity ratio, % 1) | 39.0 | 36.4 | 39.3 | 35.2 | 34.3 |
| Net interest-bearing debt 1) | 225.3 | 215.8 | 227.1 | 245.0 | 277.7 |
| Gearing, % 1) | 103.0 | 97.1 | 102.8 | 112.5 | 135.6 |
1) at the end of the period
| Revenue (EUR million) | 1-3/14 | 10-12/13 | 7-9/13 | 4-6/13 | 1-3/13 |
|---|---|---|---|---|---|
| Domestic Operations | 124.4 | 155.8 | 155.0 | 128.9 | 135.0 |
| - business construction | 69.0 | 89.1 | 88.1 | 74.6 | 67.5 |
| - housing construction | 55.4 | 66.8 | 66.9 | 54.3 | 67.5 |
| International Operations | 14.2 | 15.7 | 15.1 | 50.4 | 23.5 |
| Other operations | 4.9 | 3.8 | 2.9 | 3.0 | 3.3 |
| Eliminations | -4.9 | -3.8 | -2.9 | -3.0 | -3.4 |
| Group, total | 138.5 | 171.6 | 170.0 | 179.4 | 158.4 |
SRV
28 (31)
| Operating profit (EUR million) | 1-3/14 | 10-12/13 | 7-9/13 | 4-6/13 | 1-3/13 |
|---|---|---|---|---|---|
| Domestic Operations | 6.6 | 8.0 | 7.3 | 2.7 | 3.4 |
| International Operations | -0.6 | -1.7 | 0.2 | 12.3 | -0.8 |
| Other operations | -1.6 | -1.7 | -0.6 | -1.3 | -1.4 |
| Eliminations | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Group, total | 4.4 | 4.6 | 6.9 | 13.7 | 1.2 |
| Operating profit (%) | 1-3/14 | 10-12/13 | 7-9/13 | 4-6/13 | 1-3/13 |
| --- | --- | --- | --- | --- | --- |
| Domestic operations | 5.3 | 5.1 | 4.7 | 2.1 | 2.5 |
| International operations | -4.0 | -10.7 | 1.1 | 24.5 | -3.6 |
| Group, total | 3.2 | 2.7 | 4.0 | 7.6 | 0.8 |
| Order backlog (EUR million) | 31.3.14 | 31.12.13 | 30.9.13 | 30.6.13 | 31.3.13 |
| --- | --- | --- | --- | --- | --- |
| Domestic operations | 721.5 | 645.8 | 727.8 | 771.6 | 686.9 |
| - business construction | 477.2 | 392.8 | 451.1 | 458.7 | 389.9 |
| - housing construction | 244.2 | 253.0 | 276.6 | 312.9 | 296.9 |
| International operations | 158.8 | 180.1 | 183.7 | 187.6 | 39.8 |
| Group, total | 880.2 | 825.8 | 911.5 | 959.2 | 726.7 |
| - sold order backlog | 698 | 618 | 704 | 746 | 532 |
| - unsold order backlog | 182 | 208 | 207 | 213 | 194 |
| Order backlog, housing construction in Finland | |||||
| --- | --- | --- | --- | --- | --- |
| (EUR million) | 31.3.14 | 31.12.13 | 30.9.13 | 30.6.13 | 31.3.13 |
| Negotiation and construction contracts | 130 | 122 | 119 | 121 | 120 |
| Under construction, sold | 13 | 14 | 31 | 52 | 56 |
| Under construction, unsold | 27 | 60 | 87 | 117 | 99 |
| Completed and unsold | 74 | 57 | 40 | 24 | 21 |
| Housing construction, total | 244 | 253 | 277 | 313 | 297 |
| Invested capital (EUR million) | 31.3.14 | 31.12.13 | 30.9.13 | 30.6.13 | 31.3.13 |
| --- | --- | --- | --- | --- | --- |
| Domestic operations | 275.3 | 274.8 | 286.5 | 291.2 | 292.7 |
| International operations | 181.7 | 177.9 | 171.7 | 179.0 | 195.4 |
| Other operations and eliminations | 10.7 | 75.4 | 8.7 | 40.6 | 10.5 |
| Group, total | 467.7 | 528.0 | 466.9 | 510.9 | 498.6 |
SRV
29 (31)
| Housing production in Finland (units) | 1-3/14 | 10-12/13 | 7-9/13 | 4-6/13 | 1-3/13 |
|---|---|---|---|---|---|
| Housing sales, total | 160 | 117 | 183 | 178 | 223 |
| - sales, developer contracting | 72 | 29 | 69 | 64 | 135 |
| - sales, negotiation contracts 2) | 88 | 88 | 114 | 114 | 88 |
| Developer contracting | |||||
| - start-ups | 22 | 0 | 25 | 142 | 35 |
| - completed | 100 | 151 | 175 | 109 | 104 |
| - completed and unsold | 198 | 182 | 128 | 89 | 75 |
| Under construction, total 1) | 1 185 | 1 054 | 1 398 | 1 525 | 1 633 |
| - construction contracts 1) | 455 | 334 | 550 | 560 | 795 |
| - negotiation contracts 1) 2) | 559 | 471 | 448 | 415 | 321 |
| - developer contracting 1) | 171 | 249 | 400 | 550 | 517 |
| - of which sold 1) | 59 | 71 | 139 | 206 | 237 |
| - of which unsold 1) | 112 | 178 | 261 | 344 | 280 |
1) at the end of the period 2) investor sales under negotiation contracts
SRV
30 (31)
- Segment information
| Assets
(EUR million) | 31.3.14 | 31.3.13 | change,
MEUR | change,
% | 31.12.13 |
| --- | --- | --- | --- | --- | --- |
| Domestic operations | 396.1 | 416.7 | -20.6 | -4.9 | 383.2 |
| International operations | 205.8 | 220.5 | -14.7 | -6.7 | 209.1 |
| Other Operations | 335.6 | 309.1 | 26.5 | 8.6 | 389.7 |
| Eliminations | -318.3 | -292.9 | -25.3 | | -319.0 |
| Group, total | 619.3 | 653.4 | -34.1 | -5.2 | 663.0 |
| Liabilities
(EUR million) | 31.3.14 | 31.3.13 | change,
MEUR | change,
% | 31.12.13 |
| Domestic operations | 254.2 | 362.4 | -108.3 | -29.9 | 326.7 |
| International operations | 135.7 | 228.8 | -93.1 | -40.7 | 199.0 |
| Other Operations | 158.6 | 123.2 | 35.5 | 28.8 | 207.0 |
| Eliminations and other adjustments | -148.0 | -265.8 | 117.8 | | -291.9 |
| Group, total | 400.5 | 448.6 | -48.1 | -10.7 | 440.8 |
| Invested capital
(EUR million) | 31.3.14 | 31.3.13 | change,
MEUR | change,
% | 31.12.13 |
| Domestic operations | 275.3 | 292.7 | -17.3 | -5.9 | 274.8 |
| International operations | 181.7 | 195.4 | -13.6 | -7.0 | 177.9 |
| Other and eliminations | 10.7 | 10.5 | 0.1 | 1.4 | 75.4 |
| Group, total | 467.7 | 498.6 | -30.8 | -6.2 | 528.0 |
| Return on investment % | 1-3/14 | 1-3/13 | 1-12/13 | | |
| Domestic operations | 9.3 | 5.1 | 7.3 | | |
| International operations | -1.5 | -0.6 | 6.3 | | |
| Group, total | 3.4 | 1.7 | 5.4 | | |
| Inventories
(MEUR) | 31.3.14 | 31.3.13 | change,
MEUR | | 31.12.13 |
| Land areas and plot-owning companies | 159.4 | 188.0 | -28.5 | | 151.3 |
| Domestic operations | 88.9 | 87.0 | 1.9 | | 83.1 |
| International operations | 70.5 | 100.9 | -30.4 | | 68.2 |
| Work in progress | 70.0 | 154.5 | -84.6 | | 92.1 |
| Domestic operations | 67.4 | 152.4 | -84.9 | | 87.8 |
| International operations | 2.5 | 2.2 | 0.4 | | 4.3 |
| Shares in completed housing corporations and real estate companies | 129.3 | 51.4 | 77.9 | | 114.8 |
| Domestic operations | 127.8 | 46.1 | 81.7 | | 112.9 |
| International operations | 1.5 | 5.3 | -3.8 | | 1.9 |
| Other inventories | 72.7 | 39.5 | 33.2 | | 67.2 |
| Domestic operations | 8.9 | 7.6 | 1.3 | | 8.4 |
| International operations | 63.8 | 31.9 | 31.9 | | 58.9 |
| Inventories, total | 431.4 | 433.4 | -2.0 | | 425.4 |
| Domestic operations | 293.0 | 293.1 | 0.0 | | 292.2 |
| - share of associated companies and joint ventures | 3.1 | 1.7 | 1.4 | | 2.6 |
| International operations | 138.4 | 140.3 | -1.9 | | 133.2 |
| - share of associated companies and joint ventures | 60.4 | 29.9 | 30.5 | | 57.9 |
SRV
31 (31)
| Related party transactions
(EUR million) | Salaries and compensation | Sale of goods and services | Purchase of goods and services | Receivables | Liabilities |
| --- | --- | --- | --- | --- | --- |
| 31.3.2014 | | | | | |
| Management and the Board of Directors | 0,7 | 0,0 | 0,0 | 0,0 | 0,0 |
| Joint ventures | 0,0 | 0,2 | 0,0 | 4,3 | 0,0 |
| Associated companies | 0,0 | 12,7 | 0,0 | 16,0 | 3,0 |
| Other related parties | 0,0 | 0,0 | 0,0 | 0,0 | 0,0 |
| Total | 0,7 | 12,9 | 0,0 | 20,4 | 3,0 |
| 31.3.2013 | | | | | |
| Management and the Board of Directors | 0,7 | 1,5 | 0,0 | 0,0 | 0,0 |
| Joint ventures | 0,0 | 18,6 | 0,0 | 35,4 | 8,4 |
| Associated companies | 0,0 | 0,0 | 0,0 | 15,3 | 0,0 |
| Other related parties | 0,0 | 0,0 | 0,0 | 0,0 | 0,0 |
| Total | 0,7 | 20,1 | 0,0 | 50,8 | 8,4 |
| 31.12.2013 | | | | | |
| Management and the Board of Directors | 2,6 | 3,0 | 0,0 | 0,0 | 0,0 |
| Joint ventures | 0,0 | 57,8 | 0,1 | 5,6 | 0,1 |
| Associated companies | 0,0 | 7,8 | 0,0 | 15,9 | 3,6 |
| Other related parties | 0,0 | 0,0 | 0,0 | 0,0 | 0,0 |
| Total | 2,6 | 68,7 | 0,1 | 21,5 | 3,7 |