Capital Markets Day: SRV planning to build more shopping centres in Russia and proceeds with major projects in Finland
SRV is holding a Capital Markets Day in Espoo today, 3 December 2013, for analysts and institutional investors. The event will feature management presentations on areas such as SRV’s projects in the Helsinki Metropolitan Area, shopping centre business in Russia and SRV’s financing and capital structure.
SRV is planning to continue to benefit from the St. Petersburg and Moscow shopping centre markets. Plans include the Mytishchi shopping centre in Moscow and Phase II of the Pearl Plaza shopping centre, which opened in St. Petersburg in August. Also in August, SRV started work on a major shopping centre project in the Okhta district of St. Petersburg. The project is expected to be completed in 2016.
SRV’s goal is to have shopping centre projects at different stages of development in order to balance revenue and financial performance in Russia. Due to the shopping centres’ good rental level, owning shopping centres for over three years is also considered possible. Fully leased, the estimated annual rental income of the Pearl Plaza shopping centre is EUR 18 million. SRV’s invested capital amounts to EUR 22 million.
The estimated annual rental income of the Okhta Mall shopping centre, which is under construction, is EUR 33 million. SRV will invest EUR 54 million in the project during its construction. SRV’s share of the EUR 250 million Okhta Mall project totals 60 per cent. SRV owns 45 per cent of the project directly, with the remainder of the project being owned by the real-estate investment company Russia Invest, which consists of Finnish investors. SRV, Ilmarinen and Sponda each own 27 per cent of Russia Invest, with Etera owning 13 per cent and Onvest six per cent.
Of the Russia Invest investment company’s EUR 95.5 million investment capacity, slightly over half is invested in the Okhta Mall shopping centre. The remainder of the capital will be invested when investment targets have been identified and investment decisions have been made. Development projects will be financed in other respects with project-specific bank loans. SRV’s share of Russia Invest’s investment capacity is EUR 26 million.
Russia Invest is an SRV-developed financial cooperation model, intended to be used specifically in the company’s Russian projects to ensure financial scalability. SRV’s objective is to assume the roles of developer, builder and investor in its Russia projects, which will increase earnings significantly compared to the margin obtainable from construction alone. Sharing risk and revenue with investment partners is SRV’s model for controlled growth of revenue and profit in Russia operations. International Operations, which mainly consist of Russian operations, accounted for 18 per cent of SRV’s revenue in January-September this year.
SRV’s domestic projects are focused on growth centres, particularly the Helsinki Metropolitan Area. The company has mega-class projects at Kalasatama in Helsinki and at Keilaniemi, Niittykumpu and Perkkaa in Espoo. The housing and commercial premises construction of area development projects is based on forecasts of population growth in the Helsinki Metropolitan Area. These SRV projects are centred on metro and railway stations.
At the end of September, the Domestic Operations order backlog was just under EUR 730 million, of which housing production accounts for nearly 40 per cent. The remaining 60 per cent consists of commercial premises production. Significant contracts under way are the Ring Rail Line railway station at Helsinki Airport, the HUS logistics centre in Vantaa, the HUS laboratory building at Meilahti in Helsinki, the Opinmäki Campus in Espoo and the renovation of the Presidential Palace in Helsinki.
SRV Group’s capital structure and financial position are strong. SRV’s equity ratio at the end of September was around 40 per cent and the gearing ratio was around 103 per cent. Financial reserves consisting of cash and cash equivalents and undrawn credit facilities totalled EUR 148 million at the end of review period. In addition, the financial position of developer-contracting production is on a strong foundation, because the level of projects’ undrawn credit facilities and trade receivables exceeds the costs of completing the projects.
The event’s presentation material will be published on SRV’s webbsite:
SRV Group Plc
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